Africa is a continent full of growth opportunities. One of the vehicles to propel development in Africa is a robust manufacturing sector. An industry widely viewed as a path to economic growth on the continent. Manufacturing creates jobs, and jobs fuel spending, and spending fuels the economy. That is why the African Continental Free Trade Area was launched in 2018. Many African countries are planning to participate in this $3.4 trillion market. Nigeria took a while to sign up for the agreement. Manufacturing holds potential as Africa navigates the path to recovery post-pandemic. Experts project that the sector could hit $666.4 billion by 2030. That is over $200 billion more than it did in 2015.

More than 50 years after the African era of independence, challenges to manufacturing remain, and the focus on how the continent can best stimulate value-added production is intensifying. Today, 50% of the entire manufactured goods output from the continent comes from South Africa. North African countries like Morocco, Tunisia, and Egypt already have developed manufacturing sectors and proven production capabilities. The island of Mauritius is known and highly regarded as a hub for clothing manufacturing. East African countries, especially Ethiopia, Kenya, and to a lesser extent, Uganda and Tanzania, have been identified as suitable manufacturing destinations. To maximize and accelerate these opportunities, the various stakeholders (buyers, governments, and investors) need to collaborate to improve business conditions in the region.

Mostly, manufacturing across the continent is concentrated in the low-skilled, labor-intensive echelons of production. Most products are produced for local consumption, although a few items are made for export to capitalize on Africa’s comparatively low (vis-a-vis global standards) wage levels. More broadly, other items produced on the continent include automotive parts and vehicles (South Africa, Kenya, and Egypt), electric motors, tractors, coal, rubber, and metal goods. Although Algeria and South Africa are the leading producers, most countries have cement factories. Bottling and food processing exist in almost all of the continent’s markets.

The Covid-19 pandemic accelerated the rise of SMEs and drove the growth of entrepreneurship in the already expanding gig economy as people searched for new ways to make money due to changes in personal circumstances such as job losses and salary reductions. As the rise of SMEs and the gig economy continues, they offer a large customer base opportunity for both issuers and acquirers to tap into.

There are approximately 52 million Small and Medium Enterprises (SMEs) across South Africa, Nigeria, and Kenya. These SMEs are predominantly micro-enterprises (i.e., 98% of SMEs in Kenya and 99% in Nigeria are micro-enterprises). Trade/Retail is the dominant sector for SMEs in Nigeria (42.3%), Kenya (63%), and South Africa (39%). Commercial payments flow across Sub-Saharan Africa is estimated at $2 trillion, primarily driven by South Africa at $594bn.

A paper titled The Rise of Small and Medium-Sized Enterprises (SMEs) shows that commercial payment volume in Nigeria is $425 billion and $80 billion in Kenya. SMEs in Sub-Saharan Africa (SSA) contribute significantly to GDP and the labor force. For example, in South Africa, the contribution of SMEs to GDP and the labor force is 34% and 68%, respectively. In Nigeria, SME contribution to GDP and the labor force is 50% and 76%, respectively. In Kenya, labor force contribution from SMEs is as high as 93%, and contribution to GDP is 40%. The opportunity to serve the SME market across Sub-Saharan Africa is huge.

Africa can also offer the global ‘rag trade’ a fresh start. There’s an opportunity to get it right from the beginning, building a circular model of manufacturing that prioritizes profit on the same level as people and the environment. The decision for global fashion brands to move their end-process manufacturing to the continent has become both a viable and ethical consideration. Of course, this has its challenges, but there are some compelling reasons to do so.

One of the biggest reasons is the tax break it affords companies, owing to the renewal of the African Growth and Opportunity Act (AGOA), which gives certain countries in sub-Saharan Africa duty-free access to the US market. The sub-continent is also blessed with a massive and cost-effective labor pool, ready to be engaged. The United Nations projects that by 2035, the working-age population in sub-Saharan Africa is expected to be as large as China’s today — more than 900 million people.

Intra-regional trade has been an important bi-product in the growth of Africa’s manufacturing prowess and the growing focus that the African Union and AU Development Agency (AUDA) – NEPAD have placed on the importance of regional integration and strong, functioning Regional Economic Communities (RECs). The biggest beneficiaries of this trend and these policies have been South Africa in Southern Africa, Algeria, Egypt, Morocco in North Africa, and Kenya and Ethiopia in East Africa. Cameroon is the most industrialized nation in Central Africa and supplies the region.

Export promotion, increasing product quality and efficiency, and market access are key areas of focus among African government leaders as they work to use automation and value-added production in their countries to increase jobs and stimulate economic growth. Key supporters of the growth of the African manufacturing sector include the United Nations Industrial Development Organization (UNIDO) and the World Bank. The OECD, the World Economic Forum, and the United Nations Conference on Trade and Development have prepared important studies on African competitiveness.

The African Union Agenda 2063 recognizes the significant role of a robust manufacturing sector in driving socio-economic growth and development in Africa. The emphasis on industrialization has gained further momentum with the establishment of the African Continental Free Trade Area (AfCFTA), which aims to establish a unified market for goods and services across the continent, thereby unlocking manufacturing potential and accelerating industrialization to promote and fostering sustainable growth and employment opportunities in Africa. Modern industries are enhancing both human and physical capital. They provide relatively well-paying jobs, particularly for undereducated but skilled individuals who may not have had access to formal employment in the public sector. Employment in the private sector leads to increased household income and, subsequently, driving domestic demand. Moreover, the growth of industries generates extensive backward and forward linkages, creating numerous opportunities for suppliers, distributors, retailers, and business services, thereby fostering a dynamic economic ecosystem.

Some of the key products manufactured in Africa include:

Integrated iron and steel

Produced in Algeria, Egypt, Tunisia, and Zimbabwe;

Petrochemicals

 Produced in Algeria, Egypt, Ghana, Kenya, Libya, Morocco, Nigeria, Senegal, South Africa, Sudan, Tunisia, and Zimbabwe;

Cement

 Produced in Algeria, South Africa;

Textiles/Apparels

 Produced in Mauritius, Lesotho, South Africa, Kenya, Zimbabwe, Egypt, and Nigeria;

Food/Beverages

 Produced in South Africa, Kenya, Tanzania, Egypt, Nigeria, Cote d’Ivoire;

Furniture

 Produced in South Africa, Nigeria, Kenya, Algeria, Egypt, and Ghana.