Is “Made in Africa” the next big thing?

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Africa as a continent is made up of 54 countries, inhabiting more than 1.2 billion people together. The Eastern and Western Africa are the most populated regions, accounting for 60% of the total population of the continent. In terms of population, Nigeria, Egypt, Ethiopia, and South Africa are the biggest countries. By 2050, the IMF predicts the total population of Africa to reach up to 2.4 billion[1]

The young population, consumer class, and an educated workforce, all are seeing a growth spurt in Africa, especially in the East African region. Made up of Kenya, Uganda, Ethiopia, Tanzania, Burundi and Rwanda all showcase a growing geopolitical and economic importance on the global platform. Africa is experiencing a strong GDP growth, better governance and infrastructure, and most importantly a burgeoning middle class, which is attracting more investors to the region, across industries.

Why Africa?       

Every industry is on a lookout for the next China, or the next Asia, the next big emerging market. Sub-Saharan Africa is gaining fast gaining traction in this context in multiple industries.

  • Economic Growth
    Blessed with abundant natural resources, Africa is a massive continent, with a huge population which is young, (40% of the African population is under the age of 17 [3]). Africa has what it takes to be portrayed as potentially the biggest emerging market in the world, and rightfully so. A recent IMF research has shown that 7 out of the 10 fastest growing economies in the world are located in Africa. The SSA Region has the second fastest growing economy in the world [4], as per a Moody’s survey. Both urbanization and technological transformation have moved Africa towards a new socio-economic reality in the past decades.
  • Urbanization
    Africa is urbanizing at a rate nearly double that of China, and as per the African Development Bank data, over 500 million people are expected to move into cities in the next 35 years. Lagos, Nigeria’s commercial capital is experiencing urbanization at a quadrupled rate than the global average. [4] This is positively impacting both the young labour force availability (read productivity) for industries in Africa, and the general access to educational, medical and sanitation facilities. This is also leading to a boost in urban infrastructure investments, both by government bodies and private investors.

Africa has seen a steady growth in its middle-class city dwellers in the past decade. By 2030, around half the Sub-Saharan Region population will be living in cities [1], which may directly impact the manufacturing sectors in the region. Also, deeper Internet penetration, GDP boost, and growing retail sector are putting Africa as a dominant player on the global industrial map

  • Technology Up gradation
    Technological advancements are also driving Africa’s growth. It has substantially reduced the transaction costs and eased social interactions across the continent. By 2020, it is predicted that 200 million people in Africa will be using some form of the social media network. Also, the young workforce in the urban areas has the potential to drive new IT development in their areas.
  • FDI Inflow
    The UN Conference on Trade and Development’s (UNCTAD) World Investment Report, 2015 highlighted 5% growth in FDI, especially in the sub-Saharan Region, in the financial year, when the global inflow experienced a fall as big as 16%. [2] The major inflow of FDI as per the report was into the strong mineral sectors of the eastern countries of Tanzania and Uganda, which has oil and gas industry dominating their economies. FDI in services and manufacturing has also seen a growth spurt. Countries are also trying to together make East Africa as the cooperative trading corridor.
  • AGOA
    The African Growth and Opportunity Act (AGOA)
    , approved by US Congress in 2000, with the sole focus of assisting Sub-Saharan Economies and improving their economic and trade relations with the US, which is evidently of the major global buyers has proven a boon for African industry. It currently stands valid till 2025. AGOA allows preferential trade and duty-free access for certain African products within the US. Textile and Apparel industry within Africa has substantially benefitted through this trade deal, which has led to tremendous growth in the South and East African textile and apparel industries.
Textile & Garment Sector in Africa

South Africa alone produces around 40000 tons of cotton every year, to feed its textile value chain. South African textile and apparel industry contributes 14% to the country’s manufacturing employment, 9% to its GDP and serves as the second largest tax revenue source to the South African government. [5]

Now if we take a look at East Africa, East African countries, specifically Kenya and Ethiopia have already gained significant attention in the global textile and apparel trade. Many big players in the field, like Primark, H&M, Tesco, etc. are already sourcing their apparel from Ethiopia. The AGOA enabled duty-free access to the lucrative US market is an added advantage that these countries are capitalizing on.

Chinese apparel production is now seeing a downward trend, owing to its rising cost, labor, and environmental practices, and most importantly in the light of the recent US sanctions. China with other Asian players like Bangladesh, Vietnam, and India, still hold the baton in the global scenario, but African countries are speedily taking over, and are expected to pay a major role in the apparel manufacturing industry in the coming years.

The UN projects that the SSA region will have the working-age population, as big as current day China by 2035.[6] This labor pool is catching a lot of attention for many industries. Apparel manufacturing is a labor-intensive industry, makes Sub-Saharan Africa a prime contender in the future.

We have already seen how Ethiopia, Egypt, and Kenya are dominating the global arena in our previous articles in depth. In this article, we can touch upon the other potential players in Africa.

  • Tanzania
    Tanzania is another East African country to watch out for. It has had a growth rate of above 7% for the past few years and it cherishes one of the best performing economies in Africa. Although the government in Tanzania identifies tourism, transport and real estate as their prime focus areas currently. [2]
  • Uganda
    Uganda is endowed with an abundance of natural resources and possesses the potential to feed the whole of Africa if commercially farmed.Uganda is a member of WTO and General Agreement on Tariffs and Trade, which gives it a trade advantage over many competitors. Since 1995, Uganda has also seen an economic growth owing to Structural adjustments in its governance which make it a potential player for the future.
  • Mauritius & Lesotho
    Mauritius and Lesotho are countries with high levels of literacy rate (88.2% in Mauritius and 73.7% in Lesotho) and huge population to support a skilled labor pool, which makes them attractive for apparel manufacturers around the world.

Africa is rapidly becoming a niche market for the industry, especially owing to their free-trade agreements with the US and the EU. Volatility in their political environments, and currencies and equity markets, does restrict their growth. Irrespective of the global and local turmoil, Africa is set to become the new sourcing hub for apparel manufacturers. The basic requisite for the sustainable growth of the apparel industry in Africa is the collaboration of all the stakeholders.

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