Almost all quality improvements comes via simplification of design, manufacturing layout, processes and procedures – Tom Peters
The pressure on global performance of the manufacturing sector has drawn significant attention over the last few years. On the one end we have the West with sluggish industrial engines, Africa still playing the catch –up game and the East partly stagnant yet, maintaining ground. All in all, the sector that creates the mega number of jobs over many decades, has a limp.
Let’s get some perspective on not only the reality, but also the history behind the seesaw effect of the sector. In 2010 the manufacturing sector employed more than 476 million people, sliding to (including manufacturing related services). This contributed 16.6 percent to global employment. By excluding other related services, this figure becomes 391 million people. The share of manufacturing activities and employment as it relates to Gross Domestic Product (GDP) continues to drop globally, and is now at 17 percent, compared to 27 percent in 1970. Over the last 40 years manufacturing employment, as a proportion of total employment, fell from 18.7 percent in 1970 to around 16.6 percent in 2010.
Several developed economies have seen their own proportion decline swiftly, impacting the United States at 12 percent in 2010, while China has seen moderate decline, at 33 percent for the same year. This underlines the enormous productivity of the manufacturing sector, reminiscent of the agricultural sector, where fewer workers are able to provide for a growing output.
More relevant is the scenario of Africa. The ILO estimates as a sample of 24 African countries – 49 percent of the working young population live on less than $1.25 a day and 73 percent live on less than $2 a day. We then also ought to consider food insecurity. Viewing the situation across 22 countries, about 41 percent of young people working are food insecure. The implication is that Africa across the continent has tremendous pockets of not only poverty stricken communities but food insecure working and unemployed.
It is with this background in mind that we look at Africa’s future needs for industrial activity through manufacturing. In 2012 382 million people in Africa formed the labour force market. Out of the entire continents population, let alone workforce, only 11 percent we in the manufacturing sector. Africa though has begun to create wage paying jobs that are necessary to meet the needs of the expanding labour pool, a total of 37 million over the last decade.
Africa desperately needs to strengthen their pillars of manufacturing, these being;
- Factors (of Labour): Labour, land, infrastructure, resources/energy, technology, capital, market
- Standards: Safety, security, quality, interoperability, reliability and consistency
- Costs: Input, regulatory financial and distribution
The nature of manufacturing itself is built on a layered backbone. Generally speaking you have the OEM (original equipment manufacturer), and then you get level one, two and three tier suppliers. In this case tier 1 suppliers are the main suppliers in terms of infrastructure, innovation capability, asset turnover and workforce. Tier two and three suppliers in the “food” chain either supply smaller scale components or they supply the tier one supplier.
The cyclical and pressure on Africa’s manufacturing capability is straining development. Couple that with areas of concern in the factors such as unskilled labour, lack of infrastructure, lack of liquidity in the market to fend against the reduced impact of slowed growth in South Africa and the market shifts in SADC lend towards the strains that Africa feels at this present time.
Without moving North, South Africa’s security in the mining sector as an example and labour unrest across sectors is also cause for concern, especially with a R10 billion tax shortfall, insignificant growth forecast and a double downgrade of the banks and the country’s credit rating impose on development in manufacturing.
As babies of the industrial scene, Africa keeps its eyes on the international front. In a way, many of the industrial companies on the continent are foreign companies anyway. Most of the innovation comes from abroad and thus Africa’s dilemma lies in the ability to keep up. Is it best to leave innovation and focus on policy that will best benefit Africa’s workforce? Or, is it best to take the longer road and instead of cheap unskilled labour as a statistic to illustrate job creation, focus on attracting research and development with a string focus on niche development for African innovation – international companies ploughing back into the continents high skills development programme?
No one will disagree that technological innovations have changed how goods are created, transported, distributed and consumed. Globally, manufacturing landscape is being transformed by disruptive information technologies as well as economic processes linked to the exploitation of the comparative prices of labour, resources and energy right across the continent.
So we understand where Africa lies in terms of manufacturing status quo. Whatever the plans are, African leaders will need to balance the three pillars weaknesses and strengths on the growth scale of each country, based on their competitiveness rates, international standing, FDI, international trade capability, currency fluctuations, international credit ratings, trade deficits, sovereign debt and security.
For example, many companies in the MENA region that take the risk of investment in their countries are at this point in time well politically connected and thus have access to the protectionism of the ruling powers.
Towards this feat of growing the manufacturing sectors in Africa, there has been a strong tendency to shift the value add to industrializing countries. Primarily this has been due to the lower rate of labour and the much lower rates associated with starting up in such countries. In many Asian countries though, child labour and complete lack of suitable industry laws do little prevent abuse of labour. Many top global brands have had similar problems in Asia as a result of shifting their processes to the East to take advantage of the lower cost of labour.
The question remains now, does Africa want to attract disruptive technologies or create them from a based of innovative development packages to attract FDI?
