Manufacturing in Africa? Could be

As reported on Machinery's website in July, Haas machine tools has opened its first North African Haas Factory Outlet, in Morocco, and it has plans to open more, in Tunisia and Algeria, as soon as possible - once it finds the right partners. In Morocco, the company expects compound sales growth of 25%. Mori Seiki and Gildemeister AG's sales and service operation, DMG, opened a Cairo, Egypt, facility in January this year. At the annual DMG Pfronten gathering in 2010, Gildemeister AG's top man, Dr Rüdiger Kapitza, enthused about Africa. It was, he said, a machine tool market worth almost €450 million in 2009, but was under €330 million in 2005. It should be noted that Gildemeister has more than machine tools in its sights, however, as the company also supplies energy storage technology, having acquired a majority stake in Austrian energy storage technology company Cellstrom GmbH. Power disruption is common in parts of Africa. But is the continent of Africa at large about to start sustained progress along a manufacturing path? Well, in a 2010 report, 'A continent on the move', McKinsey said of the 1 billion people continent: "After decades of stagnation, the continent's economies experienced a marked acceleration in growth during the past 10 years, with real GDP increasing by 4.9% annually between 2000 and 2008, compared with 2.4% in the 1990s. The magnitude of this growth story, while broadly understood, is startling in its specifics and the opportunity it presents." While the largest component of Africa's growth from 2002-2007 was claimed by resources, 9% was attributed to manufacturing, although, admittedly, there has been a reducing trend over recent years. Manufacturing is not equally spread, of course. Egypt, Morocco, South Africa, and Tunisia are already broadly diversified, with manufacturing and services together totalling 83% of their combined GDP, says McKinsey. Hence the moves by the already mentioned machine tool firms. But the report suggests there are external forces at work. Even if real wages in China rise by only some 7% a year, which is modest given the country's GDP growth, they are likely to double over the next decade, it says. "The rising cost of manufacturing there will translate into an opportunity for sub-Saharan Africa," the report goes on. And it also says of the offshoring of labour-intensive manufacturing from the OECD countries to Asia has occurred over the past three decades: "During the next decade, expect the same process to begin shifting these activities from Asia to Africa". In fact, the rise of manufacturing in Africa is a major need, in order to reduce poverty, according to a newly published major UN report, 'Economic development in Africa'. "Africa now accounts for about 1% of global manufacturing, and cannot realistically hope to reduce widespread poverty if its governments don't take effective measures to expand this vital economic sector," says the report by the UN Industrial Development Organisation (UNIDO) and the UN Conference on Trade and Development (UNCTAD). The report grades each of the countries into one of five categories – forerunners (includes Egypt, Tunisia, Seychelles and Namibia); achievers (includes South Africa, Mauritius, Libya and Morocco); catching-up (includes Lesotho, Angola and Mozambique); falling behind (Algeria, Cameroon, Botswana and Cape Verde); and infant stage (includes Rawanda, Liberia, Malawi). Achievers and forerunners already possess noteworthy manufacturing bases, says the report. The UN recommends industrial policy as a means to drive manufacturing growth, going in to much detail about how this might be realised. So, a combination of external and internal forces may, indeed, come together to see Africa rising. First published in Machinery, August 2011