China and India increasingly are outsourcing their manufacturing…to Africa.
Between 2005 and 2014, manufacturing production on the continent more than doubled from $73 billion to $157 billion. Countries like Uganda, Tanzania, and Zambia have been growing at more than 5% a year.
Manufacturing exports from sub-Saharan Africa nearly tripled, to more than $140 billion. Many of these exports are flowing to China and India.
Adding to Africa’s comparative advantages is a workforce that is growing faster than its population as fertility rates drop — a powerful, if temporary, “demographic dividend.” That means the share of the working-age population is increasing relative to economically dependent children and the elderly, which (all other things being equal) drives economic growth.
Many African countries have preferential market access through initiatives such as the African Growth and Opportunity Act, now extended to 2025.
Africa is seeking to pivot from mining and agriculture to manufacturing. But Africa’s manufacturing sector needs significant reform to withstand future economic shocks, says a recent IMF report.
Manufacturing still only accounts for about 10% of GDP. Better infrastructure, regulatory structures that will open foreign markets and higher “value-add” could create more and better jobs. Access to quality education and training and investments in new tech and R&D will help Africa deliver on the African Union’s goals under Agenda 2063.
Investment to create Africa’s transcontinental highways and improved port and railway connections is a $90 billion a year investment opportunity, for at least the next decade.