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Why Africa?
Cost-effective and Profitable Locations for Manufacturing
Africa provides an unrivalled and largely untapped opportunity for manufacturing operations, combining first-rate labour availability, highly competitive labour and overall operating costs, fast-growing economies, access to major markets and business environments which are welcoming to investment.
Highly Available and Employable Workforce
Many African countries are highly rated for recruitment potential, workforce (skills application, on-the-job learning and application and accumulation of work skills) and labour participation, including engagement of women and young people in the labour market. These factors are reflected in the WEF Human Capital Deployment Index, where four countries participating in the UK-AIS Manufacturing Event are in the top 30 countries globally1. This compares to the USA at 43rd and India at 118th.
Highly Competitive Labour Costs
The cost of employing this readily available and highly trainable labour force are highly competitive. For example, the total labour cost for a manufacturing operation employing 300 people, based on an average of some of the African countries attending the event, is only 34% of the corresponding cost in China and less than 12% for the UK2.
Value for Money Utility Costs
As with labour costs, the cost of power also represents excellent value for money. Many of the African countries attending the event can offer, on average, utility costs which are 70% of those in China or the UK3.
Realistic Operating Costs
Overall operating costs for many of the African countries attending the event indicate an opportunity to achieve a rapid and profitable return on investment. For a 300-person manufacturing facility, operating costs (labour and utility costs) may be around 40% of corresponding costs in China and around 16% of those in the UK4.
Access to Markets
Access to large markets in Africa – e.g. EAC (175 million) and COMESA (529 million) and trade agreements e.g. AGOA (US) and EBA (Europe).
Excellent Potential for Early-Mover Advantage
Africa offers excellent opportunities to access a still largely untapped workforce for manufacturing operations with little competition for labour and low risk of labour market over-heating. In the African countries represented at the event only 16.5% of their workforces were engaged in manufacturing in 2018, compared to 28.6% in China and 24.7% in India5.
Dynamically Growing Economies
The economies of the countries represented at the AIS manufacturing event have experienced average annual GDP growth rates of 4.2% to 5.3% over the past three years, with future growth forecast to rise to 5.5% by 2020. This compares very favourably with global GDP growth at around 3% and forecast growth of only 2.7%6. This represents a strong economic environment for manufacturing industry to flourish.
Sources:
1 WEF Human Capital Report, 2017
2 Customized manufacturing benchmarking model, fDi Benchmark database from Financial Times Ltd.
3 Customized manufacturing benchmarking model, fDi Benchmark database from Financial Times Ltd.
4 Customized manufacturing benchmarking model, fDi Benchmark database from Financial Times Ltd.
5 World Bank Data Sets, 2019
6 Source: World Bank, Global Economic Prospects, June 2019
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