Page 43 - Logistics News - Issue 01 - 2024.indd

OP I N I ON

AfCFTA can unlock economic growth in Africa

By Mervyn Naidoo, Group Chief Executive Officer at
ACTOM and Chairman of the Manufacturing Circle

The African Continental Free Trade Agreement (AfCFTA) can support the development of
local OEMs and unlock economic growth on the continent.

n most African countries, local manufacturers tend to look Hence, the reasons for African countries to actively
towards imported equipment when choosing an original look at using the existing demand for equipment
I equipment manufacturer (OEM), often selecting imports manufacturing to stimulate regional economies and create
from the Far East due to the lower costs associated with these jobs, as opposed to importing goods and benefiting other
products. This is mainly because many African countries lack economies, are compelling.
the capabilities and manufacturing capacity to locally produce
equipment across various industry segments, which often While the generally lower cost positioning of equipment
makes the procurement of equipment in-country difficult and imported from the East does make it tough for African
expensive. manufacturers to compete, it is not impossible. African
manufacturers need to look aggressively at how to
This means that, by default, many African manufacturing position themselves to be competitive against foreign
companies turn to the West, Europe or most commonly the OEMs and the key to this will be to leverage the benefits of
East – particularly China – to source equipment. However, the AfCFTA.
benefits of lower upfront costs are generally negated by the life
cycle costs of the imported products. Incentivise trade
The reduction in tariffs under AfCFTA will automatically
On the other hand, equipment manufactured by local OEMs contribute to promoting the use of locally manufactured
has the benefit of being backed up by local competence and goods on the continent as it will introduce an element of
intellectual property, providing equipment owners with support increased competitiveness and open borders to facilitate
and maintenance throughout the product’s life cycle. As is often trade between countries. At the same time, governments
the case, imported equipment can quickly become useless and will have to play their part to incentivise trade between
obsolete due to a lack of spare parts and expertise to maintain it. African countries, which will ultimately stimulate regional
economies across the continent.
Economic stimulus
Additionally, developing a local vertical supply chain that can One of the key outcomes that must flow from AfCFTA
support equipment from cradle to grave brings wider economic is that African countries must effectively meet the
benefits to a country, including an economic stimulus that demands of manufacturers on the continent by effectually
ultimately leads to the expansion of industry, job creation and exploiting the readily available raw materials needed for
increased gross domestic product. Typically, manufacturing equipment manufacturing. Many of the resources required
multiplies employment – for every job created, many more are to produce these products are found on the continent and
created in the vertical supply chain. these should be beneficiated locally to add value.

As many African countries grapple with high unemployment The establishment of local manufacturing plants and
rates, developing and growing local and regional OEM capabilities factories will, in turn, stimulate economic growth and
would see more people become economically active, which ensure sustainability in terms of cradle-to-grave life cycle
would drive greater demand for resources such as electricity, support for locally manufactured equipment. This will
water, data and service. An economically active population also unlock economic growth in Africa. If done wisely, AfCFTA
creates demand for infrastructure growth and services, in turn can help to boost African economies and change the plight
boosting demand for locally manufactured equipment. of many countries on the continent. •

www .l o g ist i csn e w s .c o .z a I S S UE 01 – 2024 41