Role Of Manufacturing In Development

Published Date: 02 Nov 2017

1. INTRODUCTION

1.1 RESEARCH BACKGROUND

Africa as a continent is the second largest in the world in size, occupying about 30.2 million km2 (11.7 million sq. mi) of which includes adjacent islands, which means it covers 6% of the total surface area of the Earth and about 20.4% of its total land area(Sayre, 1999). According to population figures from the United Nations, Africa boasts a population of about 1.1 billion which amounts to about 14.72% of the world’s total population(UnitedNations, 2011).

The figures stated above can be translated to the following:

Huge land mass – this might mean the availability of large quantities of natural resources with a vast amount still undiscovered.

The Large Population – this can translate to the presence of a potentially large workforce in the event of setting up a manufacturing endeavour.

Figures like this coupled with the fact that amongst regions in the world including China; Africa still has a comparatively lower minimum wage, which can be an advantage in keeping down the cost of production because it will cost less to pay workers, this availability of cheap labour can enable the continent compete in order to position the continent as a hub for manufacturing. Although it is also important to state that employing cheap labour as a competitive advantage might not be sustainable in the long term mainly because, price of labour tends to increase over time, though it can be used for the short term goal of establishing the manufacturing credentials of the region.

Africa as an emerging market and a potential manufacturing has to deal with issues such as, poor transport infrastructure, supply chain issues, epileptic power supply, corruption, imperialism and many other issues in other to stand a chance to compete with other products from other already established manufacturing centres around the world.

1.2 RESEARCH MOTIVATION

REGION

MANUFACTURING GROSS DOMESTIC PRODUCT(GDP) ($)

AFRICA

173,301,930,136.365

ASIA

5,143,274,478,617.9

EUROPE

2,913,156,813,982.68

NORTH AMERICA

2,082,331,118,594.82

OCEANIA

148,119,399,234.205

SOUTH AMERICA

856,309,598,350.218

WORLD

11,316,493,338,916

From the figure and table above examining the GDP generated by the world from manufacturing, we can deduce that Africa generated only about 2% of the world total manufacturing GDP, although it holds 14.72% of the world’s population. Oceania being the only region with a smaller manufacturing GDP outstrips Africa in performance as it holds only about 0.54% of the world’s total population. This imbalance in manufacturing GDP figures shows that Africa as a continent lags far behind in manufacturing and adequate steps have to be taken to address this imbalance. Steps for tackling this imbalance should begin with making Africa more attractive to manufacturers and investors alike in order to boost their manufacturing capacity.

This dissertation will analyse Manufacturing in Africa in detail and investigate the factors hindering manufacturing in Africa and consider potential ways to reduce over-dependence on importation and encourage local manufacturers.

1.3 RESEARCH OBJECTIVES

The objectives of this dissertation are to:

Research the issues surrounding the current state of manufacturing in the continent and proffer possible solutions.

Research the potential for manufacturing to boost development in the continent

Review industrialization policies and why they have not been successful.

Put forth recommendations for boosting manufacturing in Africa.

1.4 RESEARCH METHODOLOGY

The Methodology used in achieving these objectives involves a descriptive analysis of data gotten from various databases across Africa and international bodies. This paper will also make use case studies of some manufacturing companies in their endeavours to carve out a portion of the market in the competitive manufacturing business.

1.5 LIMITATION OF THE STUDY

The first limitation of this study is that it looks at Manufacturing in Africa from a really broad view. Another issue is that most of the data supplied come from online databases and some working papers which mean it was difficult to source. Some of the firms considered initially for the case studies were uncooperative due to fears of releasing important information to potential competitors. Another limitation is the size of the Subject in review, Africa as a continent contains 54 countries therefore fully reviewing all the systems available on the continent in the limited time available for this study will be difficult.

1.6 SOURCE OF LITERATURE MATERIALS AND DATA

The literature materials in this dissertation are sourced from books (Textbooks, Journal publications, Conference papers etc.) and online media (working papers, blogs, news and white papers).

1.7 STRUCTURE OF THE DISSERTATION

This project is structured as follows:

Chapter 1- This chapter introduces the topic, creating a starting point for the reader, it introduces the motivation for the research, research methodology and objectives.

Chapter 2- this chapter reviews some of the literature available on the subject, it also takes a look at the role of manufacturing in development, the state of manufacturing in Africa and Africa’s position on manufacturing.

Chapter 3- this chapter looks at the issues experienced by manufacturing in Africa, looking at issues like Supply chain issues, transportation, dumping and other issues.

Chapter 4- this chapter previews some African manufacturers, taking looks at the problems encountered and measures taken to combat those issues.

Chapter 5- chapter 5 reviews industrialization policies implemented in other area of the world and reasons African policies have not worked.

Chapter 6-

2. LITERATURE REVIEW

2.1 INTRODUCTION

In order to fully grasp the state of manufacturing in Africa, this chapter will include a brief overview of manufacturing, covering areas such as the economics of manufacturing, costs of manufacturing, and the technologies involved amongst others with a view of relating them to Africa where applicable. The problems experience in manufacturing will also be indicated. This chapter will also review development and the role of manufacturing in development.

2.2 IDENTIFICATION OF RESEARCH AREA

Manufacturing involves the conversion of raw materials into finished goods. This is a process that makes use of machines, tools and labour and/or with the aid of biological or chemical processes in the transformation of raw materials into product of value. This definition although mainly applied in reference to industrial production, may be seen as slightly biased because, processes requiring complete human activity like the production of handcraft can also be referred to as manufacturing. Manufacturing as a process does not end with creating products of value, for manufacturing to be regarded as complete in input of the customer has to be gotten, and this aspect is gauged by the performance of the product in the market.

http://solidoss.com/yahoo_site_admin/assets/images/Develpment_Cycle_Process.4051654_std.JPG

Figure 2.1 Basic Manufacturing Cycle

Figure 2.1 shows a basic picture of the manufacturing cycle, basic because manufacturing involves other steps including, quality management, storage, and setting goals. The consumer remains the focal point of every manufacturing endeavor, because a product without a consumer base is usually regarded as a failed product. The seeming inability of products manufactured in Africa to compete with products from outside the continent is an issue which has aided in hindering the advancement of manufacturing in Africa. This and other factors will be discussed in detail in subsequent chapters.

With Duty-free access and quota-free access to US and EU markets available to Africa supposedly a competitive advantage(Bouët et al., 2010), Africa has an opportunity move from a mainly raw material export based economy, to a value-added product manufacturing oriented economy. This research focuses on ways to improve manufacturing capacity to cater especially for local consumption before looking towards competing in external markets.

2.2 ROLE OF MANUFACTURING IN DEVELOPMENT

For the sake of this dissertation, the term ‘Industrialization’ will be used interchangeably with the word ‘Manufacturing, with development described as a state of growth or improvement.

Taking into account that the industrialization of Britain in the 19th century making them the first industrialized nation, this meant that Britain became the technological leader in the world economy. This was mainly because, the economic growth witnessed post-industrialization made other countries look up to their model of industrialization, thereby triggering the ‘Industrial Revolution’. Towards the end of the 19th century, the United States of America (USA) had overtaken Britain in technological advancement and remains the leader till date.

Objectively considering the nature of international competition and the presence of already established manufacturing centres like China, backing Africa to catch up in the market of manufactured value-added products can be seen as backing a three legged horse, in a race of fully fit horses. Notwithstanding the stated factors, we cannot underestimate the importance of manufacturing in development, especially economic development. Instances of this correlation between manufacturing and development can be seen in how, industrial growth in the West triggered demand for primary products/raw materials from developing countries. This alone brought about colonialism which helped create trade links between developed regions and the less developed regions of the world.

According to (Szirmai, 2009), pre 1950 the GDP of non-industrialized nations was growing at between 1.4% to 1.9% per year, but with attempts at industrialization after the 1950’s GDP growth of between 5-9% was witnessed. He also states that another reason why manufacturing has an effect on development is its ability to create new knowledge and a new class of educated people. In (Guisan, 2008), the Author opines that there exists an inter-sectorial relationship between the manufacturing sector and the service sector, therefore an increase in a regions manufacturing activities can translate to a need to expand the service sector which in turn has a direct impact on growth especially in the area of creating job for various skill levels of the labour force. {Guisan, 2008, Manufacturing and Economic Development: Inter-sectoral relationships in Europe`, America`, Africa and Asia-Pacific`, 1999-2006}

2.3 STATE OF MANUFACTURING IN AFRICA

The Colonial and early colonial period was largely about producing subsistence goods for local use via primitive methods(Schatzl, 1973). Towards the ending of the colonial era when most countries in Africa were gaining their independence around the 1960’s, the continent experienced a period of rapid and sustained development and according to(Riddell and Coughlin, 1990), that decade was dubbed the ‘development decade’ which was achieved through industrialization. As of the 1970’s although there was in increase in export volume, the GDP per capita dipped, and the rapid development witnessed a slowdown. Political instability and wars did not also help matters, because from there things got worse and by the 1990’s the industrialization had witnessed stagnation.

According to (Riddell and Coughlin, 1990) part of the reasons for the slowdown in industrialization, were the contradicting opinions on development policies emanating from within the continent and those coming from outside Africa. With most African economic policies emphasising industrialization, external economic policies favoured resource production mainly agriculture. In the joint report by the World Bank and UNDP(WorldBank and UnitedNationsDevelopmentProgramme, 1989) it was stated that industrialization should not be forced, instead emphasis should be paid to agriculture. In the book Manufacturing Africa, Riddell goes on to say that although the report did not explicitly state that industrialization should be ignored, but the report hardly talked about industry especially in the chapters discussing policy reforms and the impact of those reforms.

Another reason put forward was that in the a separate report (WorldBank, 1986) the World Bank suggested that Africa’s attempt to help itself would amount to nought as it would take a significant amount of new financial resources to carry out industrial development programmes.

The major issues associated with those resource based policies were, in the end the economies of countries on the continent were mostly affected by external price fluctuations as witnessed by Ghana’s descent into a recession when the global prices of cocoa plummeted(Deaton, 1999), it could also be seen as in the case of Nigeria which experienced a downturn in economic fortunes with the end of the Gulf-War oil boom(Husain and Faruqee, 1994). Although this situation has witnessed a slight turnaround, especially with the acknowledgement of the UN in the report by UNIDO and UNCTAC where it stated that, "Africa cannot realistically hope to reduce poverty if its governments don’t take effective measures to expand it vital economic sector"(UNIDO and UNCTAD, 2011), with the same report stating that share of Africa in manufacturing value-added (MVA) for labour intensive manufacturing, which is the main category of manufacturing in Africa dropped from about 23% in 2000 to 20% in 2008.

Figures from the UN report obviously point to the fact that Africa is backward in terms of manufacturing, although most of those figures don’t represent every region in the continent, with South Africa posting better MVA’s per capita than other countries in Africa, and Angola experiencing an improvement in their manufacturing sector. Africa’s total GDP from manufacturing is about 0.61% when the figures of South Africa is taken out of the equation, and 0.7% of the world’s total GDP generated from exports and without South Africa this drops to 0.3% of the World’s GDP originating from exporting manufactured goods(Sanjaya, 2005). Currently, most manufacturing done in Africa is for primary goods such as textiles and leather amongst others, with a few cases of high-tech manufacturing, that notwithstanding Africa is still import driven due to the availability of cheaper alternatives from other countries, especially China.

2.4 AFRICA’S POSITION ON MANUFACTURING AND DEVELOPMENT

The global position on the Millennium Development Goals (MDGs) especially points 1 and 3 which emphasise on tackling poverty and gender equality, manufacturing can serve as a means of job creation to help tackle some of those problems, as a boost in manufacturing activities translates to job opportunities in both the manufacturing sector and the service sector(Guisan, 2008). With MDGs as the target African leaders tend to favour the route of industrialization to aid in development of the continent. This position can be noted in (UnitedNations, 2012) where the African Union (AU) states "trade expansion, investment and industrialization will facilitate the process of structural transformation of African countries into dynamically growing, investing and trading economies". This position is also seen in the commitment of African leaders towards achieving the aims outlined in the New Partnership for Africa’s Development (NEPAD) especially the points of capacity building, and improving market access for African products. With the importance of manufacturing accepted by leaders in Africa, various policies have be put in place with varying levels of success recorded, some of these policies will be reviewed in subsequent chapters.

2.5 CONCLUSION

This chapter presented a review of manufacturing in Africa, reviewing manufacturing in Africa from the pre-colonial period to the present; a comparison of the manufacturing capacity of Africa against other regions of the world was made. The role of manufacturing in development was reviewed with the opinion of African leaders as regards the role of manufacturing in development also taken into account. The studies reviewed in this chapter all captured a lot of issues plaguing manufacturing on the continent; this dissertation will consider most of this points in carrying out a broad research on manufacturing in Africa.

3. PROBLEMS OF MANUFACTURING IN AFRICA

3.1 INTRODUCTION

Carrying out a successful manufacturing endeavour requires taking into account a lot of issues right from the planning stages to the final stage where customer feedback can be received. Issues ranging from supply chain management and logistics to having a readily available market for the product have to be addressed. Africa’s apparent inability to achieve an improved manufacturing capacity stems from its inability to address these issues and other issues. This chapter will review the issues that have affected and need to be addressed to improve Africa’s manufacturing capacity.

3.2 PROBLEMS

3.2.1 SUPPLY CHAIN ISSUES

Supply chain has been defined as "a network linking different companies, producing, handling and/or distributing a particular product". In the case of manufacturing, the supply chain may refer to every entity that comes in contact with a particular product. For instance, the supply chain for a computer manufacturing company may include, a chip manufacturing firm, plastic moulding firm, transporting/haulage companies and retail stores. Therefore the effective co-ordination for the purpose of improving the long-term performance of the various components of the chain can be referred to as Supply Chain Management (SCM) (Mentzer, 2004). Due to fierce competition for market shares experienced these days, the more profitable companies tend to be the ones with good SCM, because SCM can be a tool to help drive down production costs. Large firms in places like the US and Europe carry out production in China or other locations and transport the products back for sale, because of the availability of cheaper labour which has an effect on the price of the product. This is an effective profit making ploy although; producing close to the source of the resource is the best way to keep down prices.

3.2.2 Poor Transportation Facilities

This is one of the major issues plaguing manufacturing in Africa because; transport prices have a direct relationship with the total cost of the finished product. The quality of vehicles available in most parts of Africa are really low in comparison to those found in other parts of the world, thereby this can be a safety hazard. Another issue with transportation can be attributable to the quality of roads available in the continent and according to (CIA, 2013b) only about 26.6% of the roads available are paved, with about 46.38% of the paved roads located in North Africa. The distribution of paved roads available in Africa is shown in Table 3.1.

COUNTRIES (KM)

PAVED ROADS (KM)

UNPAVED ROADS (KM)

TOTAL (KM)

PERCENT PAVED (%)

CENTRAL AFRICA

10,019

260,257

270,276

3.7

Cameroon

5,000

45,000

50,000

10

Central African Republic

N/A

N/A

20,278

N/A

Chad

206

39,794

40,000

0.5

Congo Brazzaville

864

16,425

17,289

5

Democratic Republic of Congo

2,794

150,703

153,497

1.8

Equatorial Guinea

N/A

N/A

2,880

N/A

Gabon

937

8,233

9,170

10.2

São Tomé and Príncipe

218

102

320

68

EASTERN AFRICA

50,847

365,199

416,046

12.2

Burundi

1,286

11,036

12,322

10.4

Comoros

673

207

880

76.5

Djibouti

1,226

1,839

3,065

40

Eritrea

874

3,136

4,010

21.8

Ethiopia

6,980

29,489

36,469

19.1

Kenya

11,197

149,689

160,886

6.96

Rwanda

2,662

11,346

14,008

19

Seychelles

490

18

508

96.5

Somalia

2,608

19,492

22,100

11.8

Tanzania

6,579

84,471

91,049

7.2

Uganda

16,272

54,474

70,746

29.9

NORTH AFRICA

248,774

119,343

368,117

67.58

Algeria

87,605

26,050

113,655

77.1

Egypt

47,500

17,550

65,050

73.02

Libya

57,214

42,810

100,024

57.2

Morocco

39,480

18,776

58,256

67.77

South Sudan

N/A

N/A

7,000*

N/A

Sudan

4,320

7,580

11,900

36.3

Tunisia

12,655

6,577

19,232

65.8

SOUTHERN AFRICA

154,467

667,069

821,536

18.8

Angola

5,349

46,080

51,429

10.4

Botswana

6,116

11,800

17,916

34.14

Lesotho

1,401

5,687

7,091

19.76

Madagascar

7,617

58,046

65,663

11.6

Malawi

6,956

8,495

15,451

45.21

Mauritius

2,066

8,100

11,066

18.67

Mozambique

6,303

24,028

30,331

20.78

Namibia

5,477

58,712

68,189

8.03

South Africa

73,506

288,593

362,099

20.3

Swaziland

1,078

2,516

3,594

29.99

Zambia

20,117

71,326

91,440

22

Zimbabwe

18,481

78,786

97,267

19

WEST AFRICA

72,308

424,363

496,671

14.56

Benin

1,400

14,600

16,000

8.75

Burkina Faso

N/A

N/A

15,272

N/A

Cape Verde

932

418

1,350

69.03

Cote D’Ivoire

6,500

73,500

80,000

8.13

Ghana

9,955

52,266

62,221

16

Guinea Bissau

965

2,490

3,455

27.93

Guinea Conakry

4,342

40,006

44,348

9.79

Liberia

657

9,943

10,600

6.2

Mali

3,597

15,315

18,912

19.02

Mauritania

2,966

8,100

11,066

26.8

Niger

3,912

15,037

18,949

20.65

Nigeria

28,980

164,220

193,200

15

Senegal

4,099

9,909

14,008

29.26

Sierra Leone

904

10,396

11,300

8

The Gambia

723

3,019

3,742

19.32

Togo

2,376

5,144

7,520

31.6

TOTAL

536,415

1,836,231

2,372,646

22.6

WORLD

102,260,304

N/A: Not Available; Note: countries with incomplete figures were not used in determining the final outcome; figures used are from between year 2005-2010.

Table 3.1 Percentage of paved roads to total road in Africa(CIA, 2013b)

From Table 3.1 Africa occupying 20.4% of the world’s total land mass has only about 2.3% of world roads. The limited availability of paved roads is an anomaly despite road transportation being the most important mode of transportation on the continent, with total railway length available being only about 86,760kmtranslating to 7.6% of the world’s total rail length(CIA, 2013a). comparing Africa to other developing regions of the world, (UNECA, 2009) estimates Africa as having a road inventory of 6.84km per Square kilometre compared to Latin America’s 12km/sq. km and Asia at 18km/sq. km. According to (Abuhamoud et al., 2011) the geographical nature of Africa is a major factor in the improper road networking. The hills, valleys, loose soil and rainfall implies that, either the roads are too expensive to build or too difficult to maintain. The poor conditions of the roads translate to a higher cost of transportation. The state of roads in a region can be tied to economic development, according to (Herbst, 2000) "road conditions are a determinant of economic development because, roads link the resources to the production centres and urban centres".

This limitation in transportation infrastructure can be seen as a hindrance to manufacturing competitiveness, in (UNECA, 2009) the Author holds that, the problems of inefficient transportation due to lack of integration in some landlocked African countries makes cost associated with transportations as high as 76.7% of the value of exports, putting them at a disadvantage in terms of competing in international markets.

The state of the transport infrastructure has an effect on prices, according to (UNECA, 2009) "the price of transporting goods by rail is twice as high in Africa as it is in Asia and one-and-a-half times as high as in Latin America" with the same report stating that "costs of air transportation are four times as high on the continent as they are in Asia, while the cost of a container passing through African ports can be twice as high as the same container passing through an European port".

3.2.3 Poor Electricity Supply

The invention of electricity for use is arguably the most important in the industrial revolution; this invention helped make cities modern and aided more inventions. As such, electricity supply can help in the operation of machines required manufacturing, it is also important for storage in terms of refrigeration. With reliable power supply, cost attributable to alternative sources of power generation by manufacturers can be eliminated and help reduce final cost of production to boost competitiveness.

The area of power supply continues to baffle most external observers considering that the continent is endowed in fossil fuels. The proper generation of electricity can help boost various sectors of the economy, not limited to manufacturing, but transportation and agriculture which can create jobs in order to boost development. As of 2009 Africa’s power generating capacity was put at 597.745billion kwh(RealClearWorld, 2012). The following table compares the power generation capacity of Africa against other regions of the world.

REGION

POWER GENERATION CAPACITY(billion kwh)

Africa

597.745

Asia/Oceania

7000.49

Central America/South America

1037.69

Eurasia

1348.87

Middle East

766.422

North America

4784.29

Table 3.2 Power generation by Continent(RealClearWorld, 2012)

If the level of industrialization is accessed based on power generation capacity, the table will point to the main reason why lags behind in manufacturing. Africa’s low levels of electrical consumption according to (Karekezi and Waeni, 2003) is characterized by, low access levels, low capacity utilisation, lack of availability, poor maintenance, high transmission and distribution losses.

Sub-Region

Percentage Capacity (%)

Northern Africa

31

Rest of Africa

24

South Africa

45

Table 3.3 Distribution of production capacity in Africa(Karekezi and Waeni, 2003)

Of the total generation capacity in the continent, one country being South Africa generates 45% of the continents’ total capacity with North Africa generating 31% of the total capacity(Karekezi and Waeni, 2003). These figures show that the rest of Africa which contains 80% of the population has 25% of its power production capacity. The low capacity and unreliable supply of electricity is a factor limiting competitiveness of African manufacturers with backup generators providing about 17% of West Africa’s electricity consumption needs(Foster and Briceño-Garmendia, 2010). Running and maintaining those generators will be expensive, with fuel price fluctuations affecting the final price of the product. The cost of power generation and tariffs charged in Africa also increase production cost, according to {Foster, 2010, Africa's Infrastructure: A Time for Transformation}(Foster and Briceño-Garmendia, 2010) the costs were described as "exceptionally high" at about $0.18 per kwh for production with an average tariff of $0.14 per kwh, when compared against tariffs of about $0.04 per kwh in South Asia and $0.07 in East Asia. This implies that electricity consumption for manufacturers in Africa will cost from about two times to three-and-a-half time more than their counterparts in Asia. The costs mentioned do not include costs acquired from replacing and maintaining parts damaged due to unreliable power supply, all these tend to count towards increasing the cost of manufacturing, meaning that products from Africa will me more expensive than others in the open market.

3.2.4 LIMITED SKILL LEVEL OF LOCAL POPULACE

The availability of a huge workforce although important in achieving large scale industrialization for development, will not factor in in terms of staying competitive. In order to stay competitive in manufacturing, adopting the use of precision machinery, high-tech tooling and computer modelling is required to improve product quality and manufacturing speed. This change alone is a deviation from the traditional assembly line model of manufacturing which relies heavily on a low to medium skilled manpower, to a highly skilled workforce. To build a highly skilled workforce, literacy is a major factor because; an educated workforce has the ability to absorb new technology and methods more effectively than their lesser educated counterparts. An evidence of the impact of education in manufacturing productivity can be seen where the author of (ESA, 2011) states "United States (US) labour productivity in manufacturing has increased by about 12.3% since the start of the economic downturn through the year 2010" this means that it takes only about 87.5% of the total worker hours to produce the same output as 3years earlier than the period in consideration. The Author attributes this improved efficiency to "up-skilling". The term "up-skilling" refers to building a labour force of higher-educated and higher-skilled workers(ESA, 2011). The low literacy rates across Africa greatly impede its ability to undertake high tech manufacturing endeavours which requires highly skilled workers.

The level of education in Africa according to the UNESCO Institute for Statistics is really low with a literacy rate lower than the average literacy rate of developing countries(UNESCO, 2012).

REGION

LITERACY RATE (% Aged 15 and Above)

Africa

64.1

Asia

82.3

Europe

99.2

North America

95.7

Oceania

91 (78.8% without Australia)

South America

92.4

Developing Countries

78.8

World

84.1

Table 3.4 Literacy rates between 2005 - 2010 of world regions vs. Africa(UNESCO, 2012)

Literacy being a factor in determining the development indexes puts Africa as the least developed region in the world considering it is the least educated region in the world, with the 10 countries with the lowest literacy rates being from the continent(Unesco, 2010). This area puts Africa’s manufacturers on the back foot because they have to rely more on low to medium skilled workers while their competitors have access to more skilled workers. In cases where African manufactures desire to implement high-tech manufacturing, they have to rely on expatriates or foreign workers which effectively drives up the cost of production. As stated in previous sections of this dissertation, a higher production cost, translates to a more expensive finished product with impedes the chances of a product competing on the open market.

3.2.5 DUMPING

This factor, though a tad controversial has been blamed as the reason for the poor state of manufacturing in Africa. The World Trade Organization (WTO) describes dumping as "a type of Predatory Pricing that occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market competition"(WTO, 2013).

This author refers to dumping as controversial because, although it is condemned by the WTO, it is not prohibited, unless it causes or threatens material injury to a domestic industry in the importing country(Van Den Bossche, 2005). This in itself means that because in most cases as relates to Africa, the local manufacturing capacity cannot cope with the demand, there is a dependence on importation to meet up with local demand; so the influx of foreign products may not be regarded as dumping although said foreign products may put products from local manufacturers at a disadvantage when it comes to pricing. This is mainly because most products hitting African shores come from regions of the world with better manufacturing capabilities therefore, their ability to improve manufacturing efficiency means lower production costs therefore cheaper products.

This factor alone implies that in order for local products to compete, they have to be sold at lower prices, sometimes lower than the cost of production, eventually running the local manufacturer out of business. An instance of this can be seen in the flooding of African markets with products from China, the products from China are normally of lower prices than other products available in the market. The preference for lower priced foreign products probably of higher quality due to the foreign manufacturers having better capabilities means, local manufacturers cannot gain the necessary experience to match the competition.

3.2.6 LITTLE MIDDLE CLASS / POVERTY ISSUES

A loose definition of middle class is "a social group, who have good jobs and are neither poor nor rich". This group has been described as the most important section of every economy, especially as the group with the biggest spending power (the upper class) constitute a very small proportion of the world’s total population. The belief amongst economists is that "a strong middle class can be a source of economic growth"(Madland, 2011). (Keynes, 2006) advances that the main link between the middle class and economic growth is the investment spur a stable middle class consumption triggers. The presence of a large middle class automatically translates to an increase in demand which means a large target market for a potential manufacturer. This particular factor can be attributed as a reason for ‘dumping’ as discussed in a previous section of this dissertation because according to the law of demand, "people will buy more of a product at a lower price than at a higher price, if nothing changes". This law means that, even though a product is available consumers tend to buy substitutes to that product at a cheaper rate. The practice of looking for cheaper alternatives (in Africa’s case, imported products) can be attributed to the level of poverty on the continent. This poverty means that the will exist a very little middle class especially with a large proportion of the continent living below the poverty line. This comes as the World Bank describes extreme poverty as living on less than $1.25 per day. This can be seen in Africa with Sub-Saharan Africa being the worst hit by poverty with about 41.5% of the population living on less than $1.25 a day. Another troubling statistic is that 32 of the 48 poorest countries are located in Africa.

REGION

Percentage of population at less than $1.25 (%)

Percentage of population at less than $2 (%)

East Asia & Pacific

14.3

33.2

Europe & Central Asia

0.5

2.2

Latin America & Caribbean

6.5

12.4

Middle East & North Africa

2.7

13.9

South Asia

36.0

70.9

Sub-Saharan Africa

41.5

69.2

Table 3.5 Poverty Rates of regions of the world(WorldBank, 2012b)

The high proportion of the population living in extreme poverty means that, manufacturers producing for local consumption face a challenge to keep their production price low in order to turn out lower priced high quality products to stay competitive considering the limited spending power of the local populace. For African manufacturers to make a meaningful turnover there is a need to venture into external markets, which on its own is a difficult prospect. The global perception of quality is such that, an upstart in an already established market is usually seen as inferior or of low quality. This alone means that a manufacturer based in Africa might not stand up well to competition.

3.2.7 BUSINESS ENVIRONMENT

The issues of unrest across various areas of Africa mean that attracting investment, especially foreign investment is a difficult prospect. Regular government disruptions can mean that foreign entities entering into Joint-ventures with governments could mean loss of capital invested into any endeavour. For any manufacturing establishment to thrive there has to be a good business environment for potential investors because it helps build investor confidence.

The World Bank considers the following when determining the ease of doing business in any region:

Ease of dealing with Construction permits

Ease of starting a business

Ease of registering a property

Ease of paying taxes

Ease of trading across borders

Enforcing Contracts

Ease of getting credit

Resolving Insolvency

Although Africa has improved in most of these areas by the implementation of new regulation by various governments, the Continent still holds the lowest average ranking amongst all the regions of the world.

Figure 3.0 Average Ranking of world regions on sets of Doing Business Indicators(WorldBank, 2012a)

From figure 3.0 Africa excluding the countries in North Africa still possesses the lowest average rank meaning that, it is more difficult to run a business and more expensive too in comparison to other regions of the world. Therefore the business environment can be considered as one of the factors hindering manufacturing on the continent, due to the fact that ratings like that are not encouraging to potential manufacturing investors.

3.2.8 QUALITY/BRAND APPRECIATION

The proliferation of foreign made goods in Africa has brought about a craving for foreign products, even for products where the local manufacturing capacity sufficiently covers. This situation is such that, even local products of higher quality are ignored for lower quality or inferior products. In order for a manufacturer to create confidence for a product on the foreign market, a local consumer base is normally important. This situation means that local production is not encouraged meaning manufacturers do not make any serious impact on their local markets. For local manufacturers, product perception is necessary, in Africa, most locally made products are considered by the local populace as inferior therefore most times those products have low patronage.

3.2.9 RELIANCE ON PRIMARY COMMODITY EXPORTS FOR INCOME

The United Nation holds that, about 95 of the 141 developing countries depend on exporting primary commodities for at least 50percent of their export earnings. Primary commodities in this case refers to "material in a raw or unprocessed state, such as ore, fresh fruit, which is extracted or harvested and requires minimal processing before being used"(businessdictionary.com, 2013). This dependence means that price movements of those primary commodities on the international market can mean inconsistencies in export revenues which cause instability in foreign exchange reserves. The fact that most governments make budgets and plans based on foreign revenues means that any plans to industrialize end up being shelved due to those inconsistences.

COUNRTY

EXPORT COMMODITIES

INCOME ($) 2008 estimate

Algeria

Petroleum, Petroleum products 97% and Natural gas

60.5 Billion

Angola

Crude oil, Diamonds, Refined Petroleum Products, Coffee, Sisal, Fish and fish products, Timber, Cotton

67.2 Billion

Benin

Cotton, Cashews, Shea Butter, Textiles, Palm products, Seafood

894 Million

Botswana

Diamonds, Copper, Nickel, Soda ash, Meat, Textiles

4.9 Billion

Burkina Faso

Cotton, Livestock, Gold

544 Million

Burundi

Coffee, Tea, Sugar, Cotton, Hides

79 Million

Cameroon

Crude Oil and Petroleum Products, lumber, Cocoa beans, Aluminium, Coffee, Cotton

4.82 Billion

Cape Verde

Fuel, Shoes, Garment, Fish, Hides

99 Million

Central African Republic

Diamonds, Timber, Cotton, Coffee, Tobacco

147 Million

Chad

Oil, Cattle, Cotton, Gum Arabic

4.5 Billion

Comoros

Vanilla, Ylang-Ylang (perfume essence), Cloves, Copra

32 Million

Congo Democratic Republic

Diamonds, Gold, Copper, Cobalt, Wood products, Crude Oil, Coffee

6.1 Billion

Cote D’Ivoire

Cocoa, Coffee, Timber, Petroleum, Cotton, Bananas, Pineapple, Palm oil, Fish

10.4 Billion

Djibouti

Re-exports, Hides and Skins (in transit)

340 Million

Egypt

Crude Oil and Petroleum products, Cotton, Textiles, Metal products, Chemicals

24.5 Billion

Equatorial Guinea

Petroleum, Methanol, Timber, Cocoa

13 Billion

Eritrea

Livestock, Sorghum, textiles, Food and small manufactures

13 Million

Ethiopia

Coffee, Qat, Gold, Leather products, Live animals, Oilseeds

1.55 Billion

Gabon

Crude oil 70%, Timber, Manganese, Uranium

9.33 Billion

The Gambia

Peanut products, Fish, Cotton lint, Palm kernel, Sawn lumber

85 Million

Ghana

Gold, Cocoa, Timber, Tuna, Bauxite, Aluminium, Manganese ore, Diamonds, Horticulture

5.24 Billion

Guinea

Bauxite, Alumina, Gold, Diamonds, Coffee, Fish, Agricultural products

1.39 Billion

Guinea Bissau

Cashew nuts, Shrimp, Peanuts, Palm kernel, Sawn lumber

133 Million

Kenya

Tea, Horticultural Products, Coffee, Petroleum products, Fish, Cement

4.96 Billion

Lesotho

Manufactures 75% (Clothing, Footwear, Road vehicles), Wool, Mohair, Food and Live animals

1.01 Billion

Liberia

Rubber, Timber, Iron, Diamonds, Cocoa, Coffee

1.20 Billion

Libya

Crude oil, Refined petroleum products, Natural gas, Chemicals

43 Billion

Madagascar

Coffee, Vanilla, Shell fish, Sugar, Cotton cloth, Chromite, Petroleum products

1.16 Billion

Malawi

Tobacco 53%, Tea, Sugar, Cotton, Coffee, Peanuts, Wood products, Apparel

830 Million

Mali

Cotton, Gold, Livestock

1.87 Billion

Mauritania

Clothing and Textiles, Sugar, Cut Flowers, Molasses, Fish

2.23 Billion

Mauritius

Iron ore, Fish and Fish products, Gold, Copper, Petroleum

1.4 Billion

Morocco

Clothing and Textiles, Electric components, Inorganic chemicals, Transistors, Crude minerals, Fertilizers (including Phosphates), Petroleum products, Citrus fruits, Vegetables, Fish

12.8 Billion

Mozambique

Aluminium, Prawn, Cashews, Cotton, Sugar, Citrus, Timber, Bulk electricity

2.41 Billion

Namibia

Diamonds, Copper, Gold, Zinc, Lead, Uranium, Cattle, Processed fish, Karakul Skin

2.92 Billion

Nigeria

Petroleum and Petroleum products 95%, Cocoa, Rubber

61.8 Billion

Rwanda

Coffee, Tea, Hides, Tin Ore

610 Million

Sao Tome and Principe

Cocoa 80%, Copra, Coffee, Palm oil

9 Million

Seychelles

Canned tuna, Frozen Fish, Cinnamon bark, Copra, Petroleum Products(re-exports)

1 Billion

Sierra Leone

Diamonds, Rutile, Cocoa, Coffee, Fish

216 Million

South Africa

Gold, Diamonds, Platinum, other metals and minerals, Machinery and Equipment

76.2 Billion

South Sudan

Crude Oil

N/a

Sudan

Oil and Petroleum products, Cotton, Sesame, Livestock, Groundnuts, Gum Arabic, Sugar

12.15 Billion

Swaziland

Soft Drink concentrates, Sugar, Wood Pulp, Cotton yarn, Refrigerators, Citrus and Canned Fruit

1.93 Billion

Tanzania

Gold, Coffee, Cashew nuts, Manufactures, Cotton

2.41 Billion

Togo

Re-exports, Cotton, Phosphates, Coffee, Cocoa

782 Million

Tunisia

Clothing, Semi-finished goods and textiles. Agricultural products, Mechanical goods, Phosphates and Chemicals, Hydrocarbons and Electrical equipment

15.2 Billion

Uganda

Coffee, Fish and Fish products, Tea, Cotton, Flowers, Horticultural products, Gold

1.69 Billion

Zambia

Copper/Cobalt 64%, Cobalt, Electricity, Tobacco, Flowers, Cotton

4.82 Billion

Zimbabwe

Platinum, Cotton, Tobacco, Gold, Ferroalloys, Textile/Clothing

3.6 Billion

Table 3.6 Major Exports of African Countries

Most countries in Africa rely mainly on Exporting primary commodities for a bulk of their revenue, a ready example of this case in Nigeria. Nigeria was on the verge of an Agro-industrial transition triggered mainly by the Gulf War oil boom. At the end of the war with oil prices returning to normal, most plans were shelved for lack of funds, and as of recently, at least 95% of all export earnings and about 83% of the Federal Government revenue is gotten from oil exports, with oil generating about 40% 0of the country’s GDP. A reliance on primary commodity exports tends to remove the focus of many other sectors of the economy, of which manufacturing consists.

3.2.10 CIVIL UNREST

The spate of civil unrest around Africa is a hindering factor for manufacturing. Asides the potential for infrastructural damage unrests can trigger, possible disruptions in trade links, diversion of government attention and resources, as well as the diversion of donor aid from investment in infrastructure and long term development can also be fallouts from civil disturbances(Lawrence, 2000). The spill over of unrest over borders is another issue to contend with, according to (Collier et al., 2006) a country’s growth rate can increase by as much as 0.4% if all its neighbours grow by 1%, in the same vein, a country’s growth rate can take a hit if there is unrest in one of its neighbours. Regional stability could create sustained growth which has a positive effect on manufacturing. Bank closures due to civil unrests tend to freeze financial flow, which can hurt manufacturing due to lack of funds.

3.3 CONCLUSION

Low cost of Labour can be a factor for keeping manufacturing prices low in Africa, but other issues like poor networking, effectively means that prices of local goods are usually higher than imports, most of the factors plaguing manufacturing in Africa have been detailed in this chapter. Subsequent chapters will review possible solutions to those issues.

4. CASE STUDY

4.1. INTRODUCTION

Over time, numerous problems have been mentioned concerning manufacturing in Africa, despite the problems stated some manufacturers have begun on a quest to carve a niche for themselves in those difficult conditions. Those manufactures have gone on to prove that despite the tough conditions, manufacturing in Africa can be Profitable and not the gloomy picture that has been painted.

This section reviews a couple of cases, from the efforts of Innoson Vehicle Manufacturing Company Limited (IVM) to become Africa’s largest indigenous car maker, and the Packaging Industry Malawi Limited’s (PIM) struggle to run a profitable business model despite transportation, electricity and customs challenges.

4.2 ROAD VEHICLE MANUFACTURING AND INNOSON VEHICLE MANUFACTURING COMPANY LIMITED (IVM)

4.2.1 OVERVIEW

As of writing this paper, the road vehicle industry in Nigeria is dominated by foreign brands with Toyota leading the way with a market share of about 38% and others following with very little local representation. To meet up with local demand some producers have invested in local assembly plants.

Innoson Vehicle Manufacturing Company Limited (IVM) as incorporated in 2007 is a subsidiary of the larger entity called the Innoson Group. From little beginnings the company originally known as Innoson Nigeria Limited as incorporated in 1981 started with the sales of motorcycle parts and accessories before delving into the bulk importation of products (in this case motorcycles) from China which eventually positioned the company in good stead. By 1994 the company entered into business agreements with Chinese manufacturers to set up a facility in Nnewi in South-East Nigeria with a view of domesticating such production with substantial local input. The benefits of the move were immediate and by 1995 a shift from the manual assembly initially installed to a fully automated assembly line was achieved. This agreement coupled with the full automation of the plant, triggered a revolution in the Nigerian motorcycle industry which at that time witnessed a high preference for imported second-hand motorcycles which sold at about ninety thousand Naira (N90,000)as opposed to new motorcycles which were sold for over a hundred thousand Naira (N100,000), locally producing motorcycles, crashed the prices of new motorcycles to between fifty thousand Naira (N50,000) to seventy-five thousand naira(N75,000) effectively making the market for foreign used motorcycles unprofitable and unattractive.

In a bid to conquer new areas, Innoson has entered into collaborations with Chinese auto manufacturers. IVM has set itself the target of being the first indigenous automobile manufacturer to produce truly Nigerian vehicles, not only at affordable rates, but of high reliability. By 2010 IVM had commissioned an auto manufacturing plant in Nnewi, Anambra state employing about one thousand, six hundred (1600) workers.

http://1.bp.blogspot.com/-em23kvNj0yg/T1EB0rGz4hI/AAAAAAAAABY/bWyudVep2S0/s1600/innoson.jpeg

Figure 5.1 INNOSON MANUFACTRING IN PICTURES

4.2.2 MOVING FORWARD

As of this point, IVM still has a long way to go in becoming a standout brand in Nigeria, being an upstart in an auto industry already dominated by established brands like Ford, Toyota, Nissan, and Mercedes amongst others. Contrary to opinions that IVM’s Nnewi plant is mainly an assembly plant, IVM maintains that the site is a full production site where cars are made based on the standards and conditions of the Nigerian consumer needs. Although some of the parts are gotten from China, IVM believes that lower prices can be achieved by local production and customizations based on customer requirements.

4.2.3 COMPETITION

IVM intends to challenge other products by offering local customers the opportunity to specify their requirement in other to manufacture to their taste, as is the case with the IVM6540.

innoson-suv-ivm6490A

Figure 5.2 IVM6540

Buses of this specification with a seating capacity of between 13-17 passengers popularly referred to as "Hummer Bus" in Nigeria has been produced for various types of customers ranging from transporters who normally demand between 15-17 seats to business organizations and private buyers who require less seats for more comfort. The IVM6540 with a 2.7litre petrol engine boasts of possessing every component its competitors possesses is on sale at over two million Naira (N2,000,000) less than it closest competitor in price. This factor alone means that it enjoys patronage from a lot of local transporters in the country. Asides local manufacturing in order to take vehicle importation costs of the hands of customers, Innoson Group in collaboration with private investors commissioned a tyre manufacturing plant, to cover the tyre need of the vehicle plant

The prolonged relationship with Chinese auto manufacturers also means that a good supply chain link has been formed, as China is a source of cheap production parts. The provision of aftersales servicing and support is also a factor to entice potential customers.

4.2.4 CONCLUSION

As of writing this paper, IVM not only produces the "hummer bus" but also SUV’s, trucks, refuse compactors, and other buses for mass transit. The initial success has gotten IVM some recognition within the country to a certain extent. As of January 2008 at the unveiling of the of the new mass transit scheme by the Federal Government of Nigeria, IVM has cemented itself as a major supplier to the Nigerian transport sector by supplying six thousand (6,000) buses to the Federal Government for the scheme.

4.2.5 DISCUSSION

Most of the results recorded by IVM are as a result of proper planning with little to zero government intervention. The creation of a proper understanding with suppliers of parts means that production will remain on schedule. Producing the tyres close to the manufacturing site means that the high cost associated with transporting tyres to the manufacturing plant is minimized. With an improvement in the electric power generation capacity of Nigeria and an improvement in the iron-steel industry, IVM is poised for even more efficient manufacturing, which will translate to more competitive prices for customers.

4.3 PACKAGING INDUSTRIES MALAWI (PIM) LIMITED

4.3.1 OVERVIEW

Originally established in 1969, Packaging Industries Malawi (PMI) Limited is the largest paper packaging manufacturing company in Malawi. PIM became listed as a public company in 1998 with NAMPAK Packaging Company, South Africa holding a sixty percent (60%) stake in the company. PIM’s investment in a wide range of paper packaging technologies means it is the leading packaging supplier to a number of multinationals like, Unilever Malawi, Limbe Leaf Tobacco Company, Chibuku Products, Lafarge Cement, Alliance One International and local companies such as, Candlex and Southern Bottlers amongst others.

4.3.2 BARRIERS ENCOUNTERED

Shortage of Foreign Exchange: business with a heavy reliance on imported inputs for their manufacturing as is the case with PIM tend to run into this problem. The problem of foreign exchange shortage is not alien to Malawi with the Reserve Bank Of Malawi (RBM) turning to rationing whenever a scarcity is experienced(Masina, 2011). With PIM sourcing materials from the US, Canada, Europe and South Africa to manufacture packaging for companies with operations in Malawi, the shortage means that the RBM must approve foreign exchange requests for imports worth in the excess of US$50,000 from the private sector.

Cost of Transportation: as stated in an earlier section of this paper, "cost associated with transportation can be as high as 76% the value of exports for landlocked countries in Africa". The cost of transporting inputs required for manufacturing by PMI is significantly higher because Malawi is a landlocked country. With landlocked countries goods from outside the continent have to shipped to seaports of adjoining countries, as in Malawi’s case, the ports in South Africa or Mozambique, and transported the rest of the distance overland with the use of trucks. During a fuel crisis this mode of transportation becomes more expensive and complex. PIM also finds it difficult to get return loads for trucks going to the ports. Due to the fact that the rail lines are in dire need of rehabilitation, therefore, PIM avoids using them because the transit times are too long.

Electricity and Water Supply: this issue is a consistent issue plaguing the continent, PMI is especially hit by this occurrence because, the manufacture of paper packing requires large volumes of water and constant electricity, both of which are in limited supply in Malawi.

Access to Skills: due to the shortage of investment in technical training and education in Malawi means that only a limited pool of skilled artisans is available. This therefore means that, finding the technical skills required to expand the business is a challenge for PMI, thereby hindering their competitiveness.

Tax and Customs Procedures: The low capacity and poor competency level of the Malawi Revenue Authority (MRA) implies low efficiency. This situation coupled with the narrow sector of formalized tax-compliant companies, means that the few tax-compliant companies in Malawi of which PIM is included, tend to be the focus for revenue collection and are often penalized.

A standing rebate system where taxes and duties on importing manufacturing inputs are not charged means that PIM benefits, but changes to the tax regime in2011/2012 costs the business about twenty-seven million Malawian Kwacha (MK27,000,000).

A new policy added to the customs added to the customs procedure forcing companies to use a designated clearing and forwarding agent at the border, now costs PIM $100 per truckload which is significantly higher than what was paid when PIM had the freedom to choose its agent.

International Standards and Certifications: due to lack of funds and lack of government allocation to the Malawi Bureau of Standards (MBS), it has failed to be certified as an internationally accredited body. The lack of testing facilities, initiative and skills at the MBS puts the PIM at a disadvantage when targeting international markets because the MBS fails to meet its mandate as a trade facilitating organization.

Fair Competition in the Market: the lack of fair competition in the market characterised by corrupt practices in supply tenders where final decisions have most often been pre-determined puts the company on the back foot. Another area where the PMI face strong competition is from Asian competitor products, because their competitors enjoy massive subsidies.

4.3.3 IMPACTS OF BARRIERS

Shortage of Foreign Exchange: the shortage of foreign exchange implies that the credit worthiness of PIM takes a hit. With strong cash flows in the local currency the Malawian Kwacha but an inability to purchase foreign exchange, servicing international debtors becomes a difficulty. This therefore has made PMI witness a decrease in stock levels, decreased production levels, an increase in the volume of working capital required to run the factory which has affected the profitability of the company. The foreign exchange shortage also means that, extra cost and time is expended in the process of getting the RBM to approve large forex requests for businesses like PIM with a huge reliance on large scale imports for manufacturing.

Cost of Transportation: the cost of transporting imported manufacturing inputs alone, takes up between 25-40% of the overall cost acquired by PMI. With less expensive transportation, PMI stands to be more competitive.

Electricity and Water Supply: the limited supply of water and electricity power has meant that PMI over time has had to invest in water storage infrastructure to hold large reserves of water, and a generator. Asides the initial costs involved with setting up a power generator (which includes getting a license as is the case in Malawi), the additional cost of diesel to run the generator sets PMI back around MK700,000 per month which is 1.75 times the usual energy bill gotten from the Electricity Supply Corporation of Malawi (ESCOM) at about MK400,000.

Access to Skills: the lack of skills due to insufficient technical training and education in Malawi creates a difficulty in filling up gaps that arise in the workforce.

Tax and Customs Procedures: the increased tax burden on PIM is a severe drain on the company’s resources; this drain is a hindrance to new investments by the company, and facilitation of exports by providing their services to other potential exporting companies.

International Standards and Certifications: due to the ineffectiveness of the MBS, PIM has to rely on resources and knowledge supplied by NAMPAK in South Africa. If the MBS could provide internationally recognised certification it would be more cost effective for PIM.

Fair Competition in the Market: the unequal pricing in the domestic market means that Malawian products are at a disadvantaged in terms of pricing.

4.3.4 PIM’s RESPONSE TO BARRIERS, INCLUDING INTERACTION WITH POLICY MAKERS

In order to tackle the electricity supply issue, PIM volunteered its Managing Director to be on the steering committee of the Millennium Challenge Fund. The fund was setup to challenge the electricity supply unreliability in Malawi, with a view to improve the reliability of the electricity supply. Due to funding and political barriers up against this project, the MD doubts the ability of the Fund to sustain any improvements in the supply of electricity.

A collaborative effort between PIM, TEVETA (Technical, Entrepreneurial and Vocational, Education and Training Authority) and other companies, has commenced funding a Malawi Industrial Training Association (MITA) to address the limited skill base in Malawi. The presence of this TEVETA supported training has eliminated the need for any training that the PIM might have considered funding. The funding of training for artisans mean that they benefit from the skilled artisans because they remain in the country, as opposed to the situation where graduates from academic institutions leave the country once they are done with their studies.

PIM encourages lobbying and private sector forums with Government and policy makers in a bid to address barriers relating to lack of investment from the Government.

4.3.5 CONCLUSION AND SUGGESTIONS

The main trigger of the foreign exchange shortage which Malawi is the exchange rate which is held steady by artificial means. This means that the exchange rate does not reflect the market rate. According to the International Monetary Fund (IMF) and Malawi Confederation of Chambers of Commerce and Industry (MCCCI), for Malawi to become a strong export driven economy, the Government must let a market related exchange rate prevail. This has finally been put in place by the government, and Malawi has witnessed a halt to the shortage of foreign exchange.

In order to boost manufacturing and private sector development to position Malawi as an export-driven economy, there is a need for more affordable transportation which can be achieved by government investment in roads and rehabilitating the dilapidated rail lines, also investment in ensuring the efficient and reliable supply of electricity and water, guaranteeing that skills which are transferable to industrial work is included in the curriculum in places of learning.

The Government has to improve the ease of doing business in the country so as to get more companies to formalize so as to widen the tax base. A reduction of the tax burden for export facilitating companies, introduction of tax incentives, improving customs regulations and streamlining export documentation will help boost domestic manufacturing and businesses. Also improving the capacity of the MRA will improve the efficiency of tax collection.

Adequate funding of the MBS coupled with assistance will enable it attain international recognition which will in turn boost the international reputation of Malawian products.

The Government needs to encourage openness and fair competition in the market place.

Proper funding for the Malawi Expo