Manufacturing the key to arouse Africa

I recently travelled to Senegal and Guinea on holiday and I returned more driven than ever to promote the need for intraregional trade in Africa.

Part of this urge was fuelled by a friend's purchase of nappies for her daughter, from a French store in Dakar. My friend was not being lavish - nappies are imported in Senegal. Those she bought were the same price they would have been in France.

I joke that if I had left a rock in the middle of the street in Conakry four years ago, during my previous visit, it would probably still be there, because Guinea is still terribly underdeveloped. There have been some notable changes, such as the construction of hotels, but the country still lacks basic infrastructure.

Guinea is rich in mineral wealth, especially bauxite - an ore used mainly for aluminium production. But once again, as is typical on the continent, foreign companies mine bauxite, load it onto freight trains to the port of Conakry and ship it to countries such as the Ukraine, where aluminium is produced and sold back to Guinea.

There are many such anecdotes on the continent but, sadly, discussions about the need for a manufacturing sector become prevalent mainly when commodity prices have fallen and suddenly the emperor has no clothes.

Despite experiencing regional economic growth in recent years, Africa commands a meagre 1.5% share of the world's total manufacturing output. This compares with a 21.7% share for the Asia Pacific region, 17.2% for East Asia and 22.4% for North America.

Few countries have been able to grow and accumulate wealth without investing in their manufacturing sector, and a thriving one usually precipitates industrialisation.

In fact, over the past 200 years, the path to development for economies that have made the transition to high incomes has often involved the development of significant manufacturing industries.

South Korea, China, Malaysia, India and Japan have all witnessed this transition. They industrialised because of policies that oriented their private corporate sectors to rapidly raise the level and diversity of manufacturing products. Support included protection from foreign competition in the domestic market, incentives to export and the extension of various forms of concessional finance.

The share of manufacturing in both intra-Africa and extra-regional trade has been falling over the past decade, due to a process of de-industrialisation.

African companies are not competitive enough compared to, say, those in China. The continent has the lowest per capita energy-generating capacity, and supplementary generation equipment is expensive. Indeed, the boom in commodity prices in recent years and competition have led to the fall in intraregional trade. But perhaps the slump in commodity prices, slower demand for Africa's raw materials and subdued global growth will help us identify the opportunities on the continent.

Intra-Africa trade will have significant implications for manufacturing sectors in African economies. Cross-border value chains will allow the development of specialised domestic sectors, while the availability of intermediate goods will further support manufacturing development.

As we have recently seen with the slump in commodity prices, economies that rely on commodity exports are highly susceptible to global price movements.

A strong manufacturing sector contributes to the development of the private sector, which increases an economy's resilience to external shocks.

Leoka is an economist