Manufacturing potentials

 Cote d’Ivoire, Ghana and Nigeria account for 71 percent of global cocoa production. But raw cocoa and other ingredients make up one-tenth of the retail price of chocolate. In addition, the tariff on dried cocoa imported into Europe is 1 percent. For processed cocoa, the charge is a steep 30 percent, a disincentive for adding value or exporting to Europe. Even though cocoa is processed into paste and butter, energy costs and limited scale are challenges to exploring other markets. 

Increasingly, the thinking is that African economies have to look within, to their growing cities, domestic markets and rising middle class to scale the challenges of their mono-cultural economies.

Besides, the continent, now referred to as the last frontier, is teeming with unemployed youth. Either jobs are provided for these young men and women or they will become the willing recruits, or victims, of militants, terrorists, drug peddlers, human traffickers, etc.

Adopting a new approach to regional integration, spurred by policies, investment, R&D and regional infrastructure (an expressway from Abidjan to Lagos?) could make trade in products like cocoa complementary and competitive. This approach to intra-regional trade is what the United Nations Conference on Trade and Development (UNCTAD) calls “developmental regionalism”; the Greater Mekong sub-region project in South East-Asia is a concrete example of “developmental regionalism”. Through public-private partnerships, Cambodia, the Lao’s Democratic Republic, Myanmar, Thailand and Vietnam are cooperating to promote economic linkages.

Leaders of African governments have often spoken of promoting trade by reducing barriers. It’s time to walk the talk. It all comes down to sticking to policy, working as a team, thinking value chains, locally and regionally. Growing labour-intensive light manufacturing should be the cornerstone of restructuring Africa’s economy, transforming its informal subsistent sectors and ramping up low-production levels.

Acting on “developmental regionalism”, with assistance from the Africa Development Bank (AfDB), will serve as some kind of forward guidance that assures would-be investors and businesspeople that every naira invested will yield a decent return.

Granted, poor governance and infrastructure (physical and social) are slowing down the development and structural transformation of the economy. China is still struggling with some of these issues but has managed to transform a former agrarian economy into the factory of the world and lift 680 million people out of poverty in 19 years. In the 1970s China corrected its structural imbalance by concentrating on agriculture and light manufacture of consumer goods.

For a country of Nigeria’s size, manufacturing is depressingly underwhelming. Manufacturing contributes a paltry 4 percent to the economy. On the bright side, securing the $1 billion Eurobond with the intention to invest the proceeds in power transmission, gas-to-power projects, etc, and the aggressive push to reignite agribusiness are some of the promising signals that light manufacturing can take off.

But there are other constraints. These constraints are different from country to country, subsector to subsector and, in terms of size, from company to company. Thus, different targeted interventions are required to make light manufacturing work.

A World Bank report has identified the major constraints to light manufacturing in Africa. These include input costs and quality; access to industrial land; access to finance; lack of technical and managerial entrepreneurial skills; lack of skilled workers; and trade logistics.