03 Nov. 2014 Economic News

 .

Sub-Saharan Africa Manufacturing: Where To Build A Factory?

.

chinaleather

.

VENTURES AFRICA – Sub-Saharan Africa is ‘on the rise’. There are growing GDPs and an emerging middle class. Sub-Saharan Africans are buying more and exciting investors in the consumer good space from all corners of the globe.

Manufacturing accordingly is a ‘buzz’ word as investors imagine local producing machines that could satisfy a growing market at home and an always consuming market abroad. The African Growth and Opportunity Act (AGOA), which ensures that several products produced in over 45 African countries do not have to pay import duties in the US, is joined by similar acts in Europe and Asia. All in all, local manufacturers who can conquer the barriers in sub-Saharan Africa could tap an ever burgeoning global market.

This week’s article picks the top three countries for building a factory and manufacturing locally:

 

Ethiopia

Ethiopia is a “mix-bag” of opportunities and challenges. The country offers a large, young worker and consumer base by way of sub-Saharan Africa’s second largest population. Monthly wages for unskilled labourers remains extremely competitive in the average range of $38-$60, compared to $355-$410 in China. Swedish clothing retailer H&M recently joined British supermarket chain Tesco and Ireland-based discount textile maker Primark in choosing to manufacture products in Ethiopia, largely based on the attractiveness of the aforementioned numbers.

Ethiopia houses one of Africa's biggest textile industries

Strong economic growth fuels local energy projects, including hydro-electric dams, such that Ethiopia could become a net energy exporter in the near term. The local energy price at $0.065/kWh stands out compared to $0.20+/kWh in Kenya and Tanzania at peak hours. A proven commitment to manufacturing by the government includes one up-and-running manufacturing hub near Addis Ababa and a planned three more in the construction pipeline over the next decade.

The shine on the surface is however moderated by the entrenched challenges that come with finding reasonably priced material inputs, or at least a sensibly priced route to importing the material inputs. Continued access to the Doraleh container port in Djibouti greatly benefits landlocked Ethiopia but not at a cheap price. Inland transportation and port handling fees still hover near a combined $1500 per 20-foot container and will take some time to come down, as infrastructure (i.e., roads) will not arrive overnight. But the fees associated with customs clearance and documentation (including letters of credit), which hover near $1000 (more than 3x the fees in China) could be addressed immediately, provided the political will and openness from government leaders.

All signs and past behaviours signify that the government will address these issues and more. The manufacturing outlook is very positive.

 

Zambia

Zambia is a surprising country to this list largely because its fellow member countries in the Southern Africa Development Community (SADC) generally fail to compete with South Africa in manufacturing. Neighbouring Mozambique and Malawi reveal this troubling story as middle class locals head for Nelspruit and Johannesburg on the weekends to buy goods, either offered at an exorbitant price or not locally offered altogether in the Mozambican capital Maputo and the Zambian capital Lusaka.

Zambia manufactures a respectable percentage of the goods sold at home in Lusaka and beyond under the branding of South African supermarkets and stores. This small fact is befitting to the quickly (but quietly) booming landlocked country. An aggressive infrastructure plan by the Zambian government is backed by a booming mining sector. A recent tax law to capture a greater share of sector was expected to have dramatic detrimental effects on the economy but has been no where damaging as economists predicted months back.

Manufacturing contributes a comparatively low 8.7% to GDP. But the growing interest in the Zambia’s Multi-Facility Economic Zones is soon to change that statistic. Raw materials and land are abundant to support these zones. Monthly labor wages do not outperform Ethiopia (but who does at this moment) from a manufacturer’s point of view but are still relatively inexpensive at $165-$200.

Electricity prices may currently offset the benefits of the labor fees. Peak prices have been quoted north of $0.25/kWh in pockets of the country, particularly when accounting for power outages. But the prices and power shortages will decrease in the near term as the country gets over the hump with its energy infrastructure plan and, for the short term, eases pressure on the electricity grid during peak hours.

High transport costs are a catch-22 as they are the reason for local production by foreign branded sellers but also an inhibiting factor to export. Regardless a commitment from the current president (in words and action) to address these issues should ease investor concern.

The manufacturing outlook is positive with great potential depending on government decisions in the near term.

 

Nigeria

Nigeria is on many lists for many things and rightfully so again for this article on manufacturing in sub-Saharan Africa. Similar to Ethiopia, it is a “mix-bag” of opportunities and challenges. The country is sub-Saharan Africa’s most populous state and its biggest economy. The country is youthful, educated and entrepreneurial. And the Nigerian Diaspora is excited to return home and invest.

Nigeria is one of the continent's leading markets for cement manufacturing

Monthly wages for unskilled labourers remains competitive in the average range of $150-$195. At the same time, the cost for skilled labourers is very much on the high end in Africa as demand (and subsequent competition) for skilled talent has sky-rocketed with new company entries into the market from abroad and at home. Energy prices depend on the electricity grid and location and can get up to $0.24/kWh. Recent changes in the market and better investment will bring that cost done.

The economic growth and massive population also puts Nigeria in a different stratosphere. Selling processed foods in Nigeria and Ethiopia is night and day in many instances as spending power in Nigeria dictates higher prices to the consumers and greater volumes purchased. Most investors accordingly approach the country with high aspirations as a good percentage of fees (up to 95 percent in some cases) above normalized prices for the country can be passed to the consumer, consequently ensuring most business generate profits above what their productivity dictates but not making them more efficient.

Transport and logistics fees can be passed to the consumer but their effects do not go unnoticed. Importing is a ‘drag’ on business as getting things to Lagos is costly, with estimates up to $2300 when accounting for both inland transport and port handling fees as well as customs clearance and documentation (including letters of credit). But, as government officials opine to locals, this issue shall be solved too.

Once under fire for their ability to build a trade zone, officials reference Lekki Free Trade Zone as a success with numerous others in place and/or in the pipeline for construction over the next decade. Despite the jokes, criticisms and concerns, the manufacturing outlook in Nigeria is still a net positive.

 

Honorable Mentions:

Tanzania: Moderate wages, growing consumer base, and port access are the positives. Energy prices and transport fees are the challenges.

Cote d’Ivoire: Port access, strong transport network and access to the western African consumer base. Energy consistency and political stability are the challenges.

http://www.ventures-africa.com/2014/11/sub-saharan-africa-manufacturing-where-to-build-a-factory/

.

Ethiopia-Egypt trade deals to ease River Nile row

.

Diversion ceremony at the Blue Nile in Guba, Ethiopia. 28 May 2013
Ethiopian government says the multi-billion dollar water project poses no threat to Egypt’s share of the Nile
.

Egypt and Ethiopia have signed a series of trade agreements which could help smooth diplomatic tensions over use of the River Nile waters.

The countries fell out over Ethiopia’s plans to construct a $4.3bn (£3.4bn) hydroelectric dam on the river.

Egypt was apparently caught by surprise when Ethiopia started diverting the Blue Nile to build the Grand Renaissance Dam in 2013.

The river is a tributary of the Nile, on which Egypt is heavily dependent.

Ministers from both countries signed more than 20 bilateral on deals on trade, health and education at a meeting in Ethiopia’s capital, Addis Ababa.

At the signing ceremony, senior government officials vowed to continue talks on how to resolve a three-year dispute over the dam, which remains a sensitive issue, says the BBC Emmanuel Igunza in Addis Ababa.

Egypt’s Foreign Minister Sameh Shoukry said discussions would aim to achieve a win-win situation for all countries.

Despite reassurances from the Ethiopian government that their water project poses no threat to Egypt’s share of the Nile, Egyptians are asking what effect it will have on their already depleting water resources, our correspondent says.

At the height of the tensions last year, Egyptian authorities were said to be considering military action over the dam.

They have however agreed to commission a team of international experts to assess the impact of the project on the water levels of Africa’s longest river.

http://www.bbc.com/news/world-africa-29878714

.

Ethiopia and Ireland signed agreements on transport and trade

.

Ethiopian Prime Minister Hailemariam Desalegn with President of Ireland Michael D Higgins in Addis Ababa , 3 November 2014

.

Addis Ababa – President of Ireland Michael D Higgins has witnessed the signing of three significant bilateral treaties between Ireland and Ethiopia.

The three agreements were signed this morning by Minister of State for Development, Trade Promotion and North South Co-operation Sean Sherlock.

The signing followed this morning’s meeting between President Higgins and Ethiopian Prime Minister Hailemariam Desalegn.

A double taxation agreement will encourage the growth of trade and investment between Ireland and Ethiopia.

A bilateral transport agreement will clear the way for direct flights by Ethiopian airlines from June 2015 between Dublin and Addis Ababa.

It will be the first-ever direct scheduled route between Ireland and Africa.

A bilateral co-operation agreement will provide a framework for a five-year development partnership, estimated to be worth €136m, focused on health, nutrition, agriculture and governance.

Speaking after the signing of the treaties, President Higgins said they would act as a catalyst in moving forward to a whole new set of achievements in different areas.

He also said the bilateral treaties would now provide a framework for ever more contact between Ireland and Ethiopia.

http://diplomat.so/2014/11/03/ethiopia-and-ireland-signed-agreements-on-transport-and-trade/

.

EU to support horn of Africa

.

Horn of Africa seen from space. Photo: NASA / Wikipedia

–  Support is aimed at regional development and peacekeeping

The EU has confirmed that they will continue their support to the Horn of Africa, with an investment of €3 billion over the course of the six year budget up to 2020.

The move was announced ahead of the planned meeting between the deputy director general of the European Commission’s Directorate for Development and Cooperation, Marcus Cornaro, and European Union Special Representative for the Horn of Africa, Alexander Rondos.

They will be joined by UN Secretary General Ban Ki-moon, World Bank Group President Jim Yong Kim, and African Union Commission Deputy Chair Erastus Mwencha in a high level joint operation to strengthen the partnership between the EU and Africa.

All of the development leaders will visit Ethiopia, Djibouti and Kenya, where they will seek the opinions of heads of state, government ministers, and leaders of civil society groups, to figure out how progress can be made on cooperation in what is still a troubled region.

“The EU stands ready to further deepen its long-standing partnership with the Horn of Africa, by helping to build robust and accountable political structures, enhancing trade and economic cooperation, financing peace keeping activities and providing humanitarian assistance and development cooperation,” said Andris Piebalgs, European Commissioner for Development.

“Our support will help the people of the Greater Horn on their path to much needed peace, stability, resilience and growth,” he added.

The new EU support will be funded by the from the 11th European Development Fund (EDF), where the main tranches of the money will be funneled to Ethiopia, Eritrea, Uganda, Somalia, Djibouti and Kenya, with some of the funding  parts will to be allocated for regional organizations.

The Commission has released figures of what is expected to be spent on some of the targeted countries, with Ethiopia to receive €745 million, Kenya €435 million, Somalia €286 million, and Djibouti €105 million.

The strategic approach of the EU to the Horn of Africa was born from a framework that was created in 2011.

It was decided that the main areas of focus would be on political dialogue, trade, regional integration and economic cooperation, crisis response and crisis management, the financing of peace keeping missions and initiatives for development partnerships.

Also highlighted by the framework was assistance on security matters, lending support to the Somali security forces as part of a state building process, and the African peace keeping force AMISOM.

Fighting piracy in the Western Indian Ocean through an EU naval force was also viewed as a priority to reduce organized crime.

Better energy and transport connections between Horn of Africa countries were also to be promoted.

According to Commission figures, the economic value of the Horn of Africa is increasing, in 2013 total exports from the EU reached €4.8 billion, and imports €2.3 billion.

http://new.praguepost.com/eu-news/42377-eu-to-support-horn-of-africa

 .

Egypt, Ethiopia study possibility for establishing industrial zone: Abdel Nour

.

–  Both countries seeking to increase volume of trade to $5bn, says minister of industry and foreign trade

.

Minister of Trade and Industry Mounir Fakhry Abdel Nour

Minister of Trade and Industry Mounir Fakhry Abdel Nour

.

A potential Egyptian-Ethiopian industrial zone is being studied, Minister of Industry and Foreign Trade Mounir Fakhry Abdel Nour said on Sunday. The minster added that the Ethiopian government is welcoming the development.

According to state-run news agency MENA, the minister’s statements came during a press conference held with Egyptian reporters in Ethiopia.

The minister pointed out that the targeted trade volume between both countries is over $5bn, which not a large figure is considering the capabilities of both countries. He added that Ethiopia exports meat and coffee to Egypt, while Egypt has a competitive advantage in the fields of chemical, fertilisers, automotive, and engineering industries.

Between 2004 and 2013, the volume of trade increased by 21%, edging up from $41m to $165m. He added that Egypt’s share of the trade is around 77.5%.

Abdel Nour said that Egypt is prepared to offer any assistance to Ethiopia to develop its small and medium enterprises.

The foreign trade minister said that around 60 projects are owned by solely Egyptians in Ethiopia while 43 are partnerships between Egyptians and Ethiopians.

Officials from 11 Egyptian ministries headed to Addis Ababa, Ethiopia to attend the fifth Egyptian-Ethiopian commission meetings earlier this week, including the ministers of investment, electricity, culture and education.

http://www.dailynewsegypt.com/2014/11/02/egypt-ethiopia-study-possibility-establishing-industrial-zone-abdel-nour/

.

Ethio-Egyptian Economic Forum held in Addis Ababa on November 2nd

.

Ethio-Egyptian Economic Forum held in Addis Ababa on November 2nd

.

The Ethio-Egyptian Economic Forum gathered 40 Egyptian and 65 Ethiopian Business delegates for a highly constructive and brotherly exchange on November 2nd 2014 in Addis Ababa. The Forum aimed at further strengthening the commercial ties and making economic partnership at the center of the cooperation between the two countries.

Opening the forum, Kebede Chane, Ethiopia’s Minister of Trade noted that Ethiopia was deeply committed to make business cooperation as a driving force for the mutual advancement of the two countries and peoples overall relations. He also emphasized on the centuries-old historical, political, commercial and religious ties that defined Egypt’s and Ethiopia’s long-standing bilateral relations.
Egypt’s Minister of Industry, Trade and SMEs, H.E. Mounir Fakhry Abdel Nour, on his wonderful and unifying speech also stressed out Egypt’s determination to revive the political, commercial, religious and historical relations of the two friendly countries. He also noted that the Economic Forum was the first step to opening a new page of economic partnership between the two people.
Solomon Afework, President of Ethiopian Chamber of Commerce and Sectorial Association and Chairperson of the Ethiopian Side of the Business Council, pledged his full support to the forum stating that Ethiopia had made strides in making phenomenal economic success which is a result of right economic policies as well as favorable investment environment. He also urged the business communities of the two countries to be the drivers for the continued growth of this bilateral relation.
This very first Ethio-Egypt Economic Forum was also attended by Egypt’s Minister of Foreign Affairs, Sami Shoukri, Ethiopia’s state Minister of Industry, Taddesse Haile, and Director-General of Ethiopia’s Investment Agency, Fitsum Arega.

http://www.andalem.com/news-and-insights/item/165-ethio-egyptian-economic-forum-held-in-addis-ababa-november-second

.

Locally Produced Custom Fertilizers Will Help Farmers Double Yields in Ethiopia

USAID Ethiopian State Minister of Agriculture Mitiku Kassa and Oromia Regional State Vice President Abdulaziz Mohamed cut the ribbon to officially open a new fertilizer blending facility.
.

In June 2014, Ethiopia’s Ministry of Agriculture inaugurated the country’s first-ever fertilizer blending factory as part of the government’s effort to support in-country production of local fertilizer blends customized for Ethiopia’s soil. Three more similar factories will soon open in other regions of Ethiopia, making these custom fertilizers available to more than 11 million smallholder farmers.

While many farmers take fertilizer and other agricultural inputs for granted as part of the process of maximizing crop production, poor smallholder farmers often lack access to these important tools. Locally produced fertilizers from these new factories will reduce costs for local farmers who could purchase only imported fertilizer previously, and the new custom blends have the potential to help farmers increase yields by up to 100 percent compared to conventional fertilizer application.

The new factory in Ethiopia’s Oromia region was backed by the Agricultural Transformation Agency, which provides innovative and results-oriented support to a range of partners in the Ethiopian agriculture sector, as well as the U.S. Agency for International Development (USAID), which awarded a $1.2 million Feed the Future innovation grant for construction. Local partner Becho-Woliso Farmers’ Cooperative Union collaborated on the development of the Oromia factory’s operational plan, and all four fertilizer blending sites will rely on farmer cooperatives to run the factories on a commercial basis with support from regional government officials.

“Improved inputs, such as fertilizer and seeds, are a proven factor in agricultural productivity,” USAID Mission Director Dennis Weller said at the inauguration event in Oromia. “The U.S. Feed the Future initiative has awarded over $4 million in grants for improved inputs to help transform Ethiopian agriculture and benefit smallholder farmers.”

In concert with Feed the Future, the Government of Ethiopia has conducted more than 40,000 new fertilizer demonstrations in the four target regions to facilitate adoption by smallholder farmers. The Ministry of Agriculture is working with other partners to open factories in the Amhara, Tigray, and Southern Nations, Nationalities, and Peoples’ regions of Ethiopia following the inauguration of the Oromia factory.

Tekalign Mamo, State Minister of Agriculture, who oversees the national soil fertility survey, believes the establishment of this new factory signals a new future for Ethiopia’s agribusiness sector. “It’s a dream come true,” he says.

http://feedthefuture.gov/article/locally-produced-custom-fertilizers-will-help-farmers-double-yields-Ethiopia

.

Tags: , , , , , , , , , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: