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Manufacturing in Africa can be profitable and developmental

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Tuesday, 29 March 2011

Manufacturing in Africa can be profitable and developmental

Investing in beneficiation of raw materials is crucial for the development of the African continent. Some foreign entrepreneurs have created food-processing businesses in Africa and are making good money, despite an occasionally difficult business environment. "A vibrant SME (small and medium enterprise) sector is key for employment, increased income, economic diversification, exports and foreign direct investment," asserts Mohamed-Lamine Dhaoui of UNIDO, the United Nations Industrial Development Organisation. "But, in Africa, manufacturing contributes only to 10 percent of gross domestic product," adds Dhaoui, who is director of business, investment and technology services at UNIDO. Raw commodities, like fuel, metals and unprocessed foods, form the most important part of African exports. In contrast, manufacturing export is limited to 29 percent of exports - low compared to other regions. But the development of the private sector in Africa faces major challenges: a difficult business environment, inadequate technical support services, poor infrastructure and weak technological development, with high costs for processing and electrification. Advantages of the African business environment include low labour costs, even though the labour force sometimes needs professional training. "And agriculture is one of the key sectors for manufacturing, with its agro- industry, cash crops and food industries," Dhaoui notes. Some foreign investors have taken up the challenge of manufacturing agricultural products directly in Africa. They are adding value locally, thereby contributing to local development while making good money.