Made in Africa: an Overview

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Made in Africa: an Overview
 
Africa is a vast and rapidly changing continent. Two of its most critical problems include erratic power supplies and inadequate and poor transportation services, which result in significant cost and convenience issues for the manufacturing sector. Add ambiguities in regulations, cultural, tribal and language barriers, political instability and the bureaucracies of more than 50 countries and you have some big challenges.

Tenacity required
Organisations with broad shoulders, deep pockets and staying power are moving in. Among the most active are fast-moving consumer goods (FMCG) led by Unilever, Kimberly-Clark, Coca-Cola, SABMiller and Diageo. Most global automobile manufacturers are present, as well as original equipment manufacturers (OEMs) and other businesses that support the mining and engineering sectors. Buyers in many of these companies, such as BMW, have access to worldwide best practice and established policies and the mood is upbeat. According to The Economist: “Manufacturing’s share of GDP in sub-Saharan Africa has held steady at 10-14 per cent in recent years. Industrial output in what is now the world’s fastest-growing continent is expanding as quickly as the rest of the economy. The evidence, big and small, is everywhere.”

Transportation and logistics
Moving goods through customs can be slow, tedious and rife with corruption. Border delays are frustrating, poor roads are a hazard and technology is limited. Recently it reportedly took seven weeks to move heavy mining equipment from South Africa to Liberia. Many multinationals outsource to lead logistics providers to manage their supply chains, so procurement professionals need to be able to manage high-spend outsourced contracts. These supply partnerships provide comfort as well as expertise; with transporters considered the eyes and ears of the manufacturer.

Kenya
Kenya, the hub of East Africa, has a well-developed manufacturing sector dominated by food, drink and consumer goods. Agro-processing of wheat flour and maize meal milling and sugar refining are the next main sub-sectors and Kenyan-based companies have a strong capacity for innovation, partly thanks to a good education system and a relatively workable transport infrastructure. While the government is not totally stable, it has ambition. President Uhuru Kenyatta said: “We want to make Kenya Africa’s gateway, manufacturing and technology hub and a home to millions of entrepreneurs.” He aims to reach double-digit growth by 2018 and trigger an “industrial revolution” to become a middle-income country by 2030 and has launched e-procurement for the government to “more or less eliminate abuse of our system”. Coca-Cola and its African bottling partners are investing heavily, as is Pepsi, funding new manufacturing lines and creating jobs and East African Breweries, a market leader and a division of Diageo, embraces environmentally sustainable procurement.

Ethiopia and Mauritius
Both have a growing textile manufacturing sector with Swedish clothing retailer H&M increasing its presence in Ethiopia, along with Tesco and Walmart. Mauritius has special trade zones, reduced barriers to manufacturing and favourable tax options.
Both have a growing textile manufacturing sector with Swedish clothing retailer H&M increasing its presence in Ethiopia, along with Tesco and Walmart. Mauritius has special trade zones, reduced barriers to manufacturing and favourable tax options.

Nigeria
Nigeria has a serious shortage of electricity, a poor infrastructure, frequent regulatory changes and political instability. Despite all that, procurement professionals are surprisingly cheerful and optimistic.

Leonard Ebute, head of supply chain for West Africa at Kimberly-Clark, has reportedly said: “Ignore CNN, find credible local partners... look at the growth rate, the awesome demography, the sheer size of the market and most of all, the resilience of the Nigerian people.”

The automobile manufacturing and cement sectors enjoy strong government support and automakers there include Nissan, Mercedes-Benz and Skoda. Procurement skill levels also compare well with more developed markets like South Africa. General Electric, an American conglomerate, is building a $250 million plant to make electrical gear and companies like Nestlé, Unilever and Kimberly-Clark are active.

South Africa
Africa’s biggest manufacturing hub exports to many countries on the continent. The automotive sector leads in supply chain best practice and there are more than 200 automotive OEMs and component makers. Most of the major players, including Volkswagen, BMW, Nissan, Mercedes and Toyota, are present and the sector contributes more than 7 per cent of the country’s gross domestic product. Since 2013 certain sectors have been designated for local sourcing, challenging sourcing teams. These include: rail rolling stock; steel power pylons; bus bodies; canned/processed vegetables; textiles, pharmaceutical products and power and telecommunication cables.

Tunisia and Morocco
Conflicts demonstrate how easily political risk can disrupt supply chains with Egypt and Libya facing daily disruptions. However, Morocco and Tunisia have established manufacturing sectors, good infrastructures, and reasonably skilled labour forces which attract European manufacturing companies. Renault opened a new plant in Tangiers, which assembed 156,000 vehicles in 2013 making Morocco Africa’s second largest supplier of vehicles after South Africa. Tunisia is strong in the mechanical and electrical industries and has a healthy export market.

Maturity levels
The World Bank is improving accountability and building capacity within procurement, as is CIPS and many of the manufacturers in Africa appeared in Gartner’s Supply Chain Top 25 last year. Companies such as Unilever, Coca-Cola, Kimberly-Clark, Caterpillar, Cummins and Johnson & Johnson employ world-class practices and transfer skills to local teams. Across the continent, procurement managers have to work within and around limitations, keeping businesses running whether the lights are on or not. This demands creative thinking, integrity and improvisation, even with limited resources.
 

Contibuted by: Elaine Porteous, freelance writer and procurement specialist