Consultant’s Insight: Africa aims to take ‘factory of the world’ crown

Africa has been known for years as a great potential location for outsourced manufacturing and domestic economic growth investments. Still, infrastructure challenges and internal cross-border movements have hindered development in many areas across the continent. Much of Africa is rich in critical minerals and metals. As many areas attempt to diversify from mining, the continent has become a focal point of technology-intensive industries such as pharmaceuticals, electronics and electrical equipment. This pits Asia and the United States against each other, as both race to secure the necessary minerals and metals to meet the growing demand for such goods. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] Instead of downplaying its mining industries, Wamkele Mene , secretary-general of the African Continental Free Trade Area , is pitching Africa as a “factory of the world” that combines its need to diversify with its rich deposits of minerals and metals “If you combine the abundance of the minerals — critical minerals — with low wages and a young population, I think that all of those are perfect ingredients for competitiveness,” Mene told an Australian publication. The African Continental Free Trade Area (AfCFTA), approved in 2018, covers 47 African countries. It is the world’s second-largest trade agreement after the World Trade Organization . The AfCFTA aims to embrace open skies, open borders between African countries and infrastructure investments, including updated airports, seaports, roads, warehouses and more, to support its goal of replacing China as the factory of the world. “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development,” banking group Standard Chartered Chair Jose Vinals said in a company release. “It will enable higher value-add supply chains and more diversified exports, allowing member states to reduce historical commodity dependence and achieve meaningful progress towards multiple sustainable development goals.” Indeed, according to Standard Chartered’s “Future of Trade: Africa” report, annual exports from Africa could grow to $952 billion by 2035 from $645 billion currently, and the free-trade agreement has the potential to boost that number by 29% once fully implemented. Increasing trade Africa is seeing an increase in trade, mainly with Asia. Containerized imports into Africa in the first seven months of this year grew by 10.1% in comparison to the corresponding period in 2019, according to shipbroking service provider Maersk Broker . The main driver of this increase has been trading from Asia into Africa’s west coast. The trade volume on this lane has grown by 20.9% compared to last year. Volumes from the Middle East and South America into West Africa have also contributed to the increase. The Asia-Africa market is the strongest growing Asian export market in 2023, according to data from Container Trade Statistics . August’s year-to-date volume growth increased 19.6% year over year. However, Asia-Africa trade only accounts for 3.2% of the global ocean volumes year to date, compared with the 17.9% market share of Asia-North America or 14.7% of Asia-Europe. Led by Ethiopian Airlines , air cargo traffic for African carriers was 5.5% higher in the second quarter of 2023 than in Q2 2019 and only 1.8% below Q2 2022 levels, a result mainly driven by the strong performance of the Asia-Africa trade lane in April and May, according to IATA . Outlook Geopolitical issues and China Plus One sourcing trends may place Africa in a special position as new trade lanes emerge, and the successful implementation of the AfCFTA will result in the ability to work more openly and cost-effectively with the African market. The China Plus One strategy encourages companies to diversify their operations by expanding into other countries while maintaining a presence in China. This strategy aims to build resilience into the market.

Consultant’s Insight: Africa aims to take ‘factory of the world’ crown

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