Time to reset Africa’s manufacturing

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Time to reset Africa’s manufacturing


tech-company
bitangendemo-ima

Summary

  • Covid-19 has wreaked havoc on many economies across the world.
  • It has also disrupted global and domestic supply chains of essential products. And despite the many problems caused by the pandemic, it has also brought with it great opportunities.
  • One such opportunity it has created is for Africa to reset its manufacturing sector.

Covid-19 has wreaked havoc on many economies across the world. It has also disrupted global and domestic supply chains of essential products. And despite the many problems caused by the pandemic, it has also brought with it great opportunities.

One such opportunity it has created is for Africa to reset its manufacturing sector. An opportunity like this that forces the production to evolve differently only comes once in a lifetime. It’s time for Africa to start manufacturing some essential products locally to sustain livelihoods in times of crisis.

Currently, sub-Saharan Africa (SSA) is totally dependent on expensive imported oxygen.

The crisis, however, has put the continent in a precarious position, with patients dying for lack of oxygen as the pandemic moves into the third wave that has proven to be more deadly than the previous two. And many countries in Africa do not have the right infrastructure to cheaply store oxygen.

Whilst in other parts of the world bulk liquid oxygen is stored in tanks then converted into gas and directly piped into hospital beds, SSA is in subsistence production and storage in small cylinders. As a result, a recent investigation by Bureau of Investigative Journalism (BIJ) established that the cost has escalated to as much as five times it is in other parts of the world.

The disruption in supply chain coupled with the increased demand for oxygen has forced many hospitals to scamper for manufacturing facilities. This has created an opportunity for the continent to reassess its crisis response and to begin to manufacture essential products within their respective countries. This is because many of the imports, including medical supplies, are things that can be easily manufactured locally.

For example, to manufacture bulky intravenous fluids — made of sodium chloride and water locally — could be cheaper than importing it. Local production could also drive employment creation.

But there are many roadblocks that either deliberately or inadvertently facilitate foreign countries to produce goods, pay for expensive freight cost, make profit and still be more competitive than locally manufactured goods. And how this is happening in a continent with surplus labour and resources to produce the same goods is a million-dollar question.

There are four reasons the continent is facing such challenges. These include the fact that trade policies favour importation, tax regimes are punitive rather than supportive, State enterprises in key areas like energy are ineffective and perhaps the greatest burden, the legal and regulatory environment is burdensome. Assemblers of goods in Africa will attest to the fact that the duties on imported final goods are lower than that for the imported kits for local assembly. Local assembly is not just another business but a key component to developing local manufacturing capability. But crony capitalist importers and State interference in enterprises ensures that they always have the last laugh at the expense of national development and improvement of people’s livelihoods.

In many African countries, the tax component in total price of petrol is between 40 and 70 percent. Yet, fuel is central to transportation, agricultural production and energy production just to name a few of manufacturing inputs. There are also other taxes layered between manufacturing and the end consumer.

Recently in Kenya, the environmental regulatory authority woke up one morning and closed several manufacturing facilities without any notice. Thousands of people lost incomes. The matter could have been settled with informed dialogue and education rather than use of brute force.

Many of these problems can be sorted out if Africa embraced Adam Smith’s simple economic rules. What can pull the continent out of poverty is to let “individuals act in their self-interest”, but on one condition that the individual must be truly virtuous and “embody the qualities of prudence, justice, beneficence and self-command.”

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