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About Light Manufacturing in Africa

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About Light Manufacturing in Africa

While light manufacturing is not the only alternative to low-productivity agriculture, it has been historically, and still is, an important source of growth and productive employment in economies abundantly endowed with less-skilled labor and a comparative advantage in labor-intensive sectors.

In almost every country the transformation from traditional agriculture toward a modern economy began with light manufacturing—cotton and silk textiles in Japan; textiles, food processing, and a host of labor-intensive consumer products in Taiwan, China; and so on—because of its potential to absorb a large pool of less-skilled workers rapidly from agriculture into new occupations that substantially increased their productivity without imposing steep capital requirements.

So, just as rising costs of labor and land diminished the comparative advantage of light industry in Taiwan, China, and Hong Kong SAR, China, during the 1970s, opening the door to rapid expansion of China’s production of labor-intensive export goods beginning in the 1980s, the rapid cost escalation now facing China’s export-oriented light manufacturing sector creates opportunities that could jump-start Sub-Saharan Africa’s structural transformation in the near future because it is well endowed with inexpensive, low-skilled labor, a key ingredient in the initial industrialization of a long list of Asian economies.

For Ethiopia and many other nations of Sub-Saharan Africa, the light manufacturing sector offers an attractive choice for making optimal use of its abundant labor and natural resources to create better-paying jobs fairly rapidly for its vast pool of less-skilled labor in agriculture and the informal sector. This is also evident in East Asian and South Asian countries, where light industries continue to employ vast numbers of unskilled workers, especially in India.

Light manufacturing can be important even in countries with no clear comparative advantage in it. In such countries, while it may not be a viable export industry, light manufacturing could still replace imports and serve the domestic market. The overt dependence of many Sub-Saharan African countries on aid-financed imports of light manufactures could be reduced by development of a light manufacturing sector that uses domestic raw materials and less-skilled labor, conserving foreign exchange.

 

Learning From and Competing with Asia (Mouse over the countries to view more information)

 

This study aims to develop practical insights to help some African countries to become competitive in light manufacturing. This requires understanding why light manufacturing has been slow to grow in African countries but has taken off in other countries with similar development levels and investment climate indicators. It also requires understanding what strategies have been pursued by successful countries that not too long ago were at a similar development level and how such strategies could be adapted to African countries while fully recognizing their special circumstances.

The study aims to answer the following questions:

  • Is there potential for light manufacturing in Africa? And if so, why, under generally similar constraints, are light manufacturing products that require fairly simple technologies and less-skilled labor produced and even exported by countries in all regions of the world except Africa, where they are not even produced for the domestic market?
  • What are the critical constraints facing the African firms? How have firms devised institutions and arrangements to circumvent some of these constraints?
  • What are some practical policies that other countries have used to help firms to overcome the identified constraints, jumpstart light manufacturing, and facilitate their transformation into modern economies?

The study focuses on five light manufacturing industries that are basic, simple, and labor intensive: agribusiness, leather goods, wood processing and wood products, simple metal products, and apparel.

CHINA

China offers many possible solutions for Africa: from plug-and-play industrial parks to improving entrepreneurial skills and trade logistics.

VIETNAM

In recent years the share of light manufactures in Vietnam has expanded, signaling the sector’s enormous potential in low-income countries.

ETHIOPIA

Ethiopia has the potential to become globally competitive in large segments of light manufacturing and, if successful, could create millions of productive jobs in the process.

ZAMBIA

Zambia’s corrugated tin roof industry is an example of how more official efforts to disseminate basic knowledge about markets and suppliers may unleash new industries.

TANZANIA

Tanzania has attracted some foreign direct investment in agroprocessing by offering better industrial land in certain zones.




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