PAMA mulls Africa need reform architecture to industrialise at scale
There has been paradigm shift in global supply chains and global production in three decades, with a rare opportunity opening for new manufacturing hubs, yet Africa has rarely been better positioned to claim a share of global industrial activity — yet rarely has the outcome depended so directly on the credibility of reform, writes Editor Gentechnews, Tony Nwakaegho
The search for diversified, resilient, and cost-competitive production bases has reopened space for new entrants, yet Africa has rarely been better positioned to claim a share of global industrial activity — yet rarely has the outcome depended so directly on the credibility of reform, according to the Pan- Africa Manufacturers Association (PAMA) December 2025 news bulletin.
The news bulletin noted that Africa’s economic has a demographic curve unmatched anywhere in the world, an expanding urban market, abundant natural resources, and a continental free trade area that, if fully operationalised, would be the largest integrated market created in the past three decades.
However, it noted that the continent of Africa remains on the margins of global value chains, as manufacturing’s share of GDP has stagnated around 10–12% for two decades, well below the 20–30% observed during East Asia’s industrial ascent.
According to the PAMA news bulletin as 2026 approaches—with escalating geopolitical fragmentation, rising climate financing commitments, and renewed investor appetite for frontier markets—the real question is not whether Africa has industrial potential, it is whether African governments can avoid squandering it through a convergence moment that may be emerging—but it is not guaranteed.
It mulled that three accelerating shifts define the opportunity — and the risk for African economies: “First, global manufacturers are diversifying. The “China plus-one” recalibration has driven multinational firms to search for new production bases with cost-efficient labour, access to raw materials, and stable policy environments.
“Africa could capture segments of electronics assembly, apparel, automotive components, fertilizer production, and low carbon industrial inputs— if countries can reduce investment risk and eliminate policy friction.
“Second, the energy transition is reshaping comparative advantage. Africa hosts over 30% of the world’s critical mineral reserves —cobalt, manganese, graphite, rare earths. Demand for these inputs is projected to rise sharply by 2050.Yet without domestic refining and midstream processing, the continent risks repeating the historical cycle — exporting raw minerals and importing finished goods at a premium.
“Third, AfCFTA is gradually altering continental market dynamics. Tariff reductions, rules-of-origin protocols, and digital trade frameworks, when implemented with consistency, can create a unified production space capable of supporting scale, efficiency, and regional value chains.”
According to the news bulletin, the global economy rewards countries that remove friction, reduce uncertainty, and ensure competitive production environments, and argued that in much of Africa, however, governments are pursuing ambitions of the coming years with policy instruments designed for the 1990s.
It stated that Africa’s outlook for 2026 must be understood because the continent is at a decisively crucial point where the quality, credibility, and sequencing of policy reforms will determine whether manufacturing becomes an engine of structural change or remains an aspirational narrative.
It explained that a number of conditions matter particularly in this context with the first condition being institutional stability in industrial policy, stressing that across the continent, private fixed investment as a share of GDP has remained below 20%, compared to 30– 35% in fast-industrialising economies.
“The gap is not simply one of capital scarcity; it reflects investor perceptions of policy volatility. Manufacturing investment is capital-intensive, slow-yielding, and sensitive to regulatory volatility. Machinery lifecycles span 7–15 years; supply contracts often run 3–5 years; financing is structured over decades.
“Yet in many African markets, industrial policy changes every 18–24 months— sometimes with retroactive application. No investor — domestic or foreign — can commit to multi-cycle production strategies in an environment where tariffs shift unpredictably, sector incentives are routinely revised, and industrial policies are treated as political declarations rather than macroeconomic commitments,” it added.
It revealed that countries that anchor policy within medium term frameworks and insulate industrial decisions from administrative turnover signal a level of credibility that capital markets recognise immediately, adding that in the absence of such discipline, countries face a widening credibility gap—an unyielding penalty that ultimately constrains their industrial prospects.
It cited nations that have industrialised at scale such as Vietnam, Indonesia, Mexico, China, Bangladesh, stressing that the path to be industrialised at scale is neither mysterious nor untested, but they did so by combining long-term policy consistency with sustained investment in competitiveness.
“Africa’s advantage is not that it needs to re-invent the wheel; it needs to adopt, adapt, and execute with clarity and continuity in its policy choices,” it added.
The news bulletin bemoaned the tax system that ought to follow naturally as the most visible interface between the state and the firm, adding “In several African economies, firms face effective tax burdens exceeding statutory rates up to the range of 15–30% due to multiple levies, compliance ambiguities, and non-harmonised subnational taxes. This unpredictability suppresses reinvestment ratios, which remain below 15% of gross operating surplus in many manufacturing sectors.”
Additionally, it stated that when taxation is unpredictable and the burden is high, compliance becomes discretionary and investment becomes defensive and when it is stable, transparent, and economically rational, firms invest in scale, reinvest profits, and integrate more deeply into domestic value chains.
It described predictable taxation as not merely a fiscal instrument; but a confidence instrument, hence n economies seeking industrial expansion, that distinction is critical.
“Yet predictability alone cannot compensate for the structural vulnerability at the heart of African manufacturing, namely, the sector’s excessive dependence on imported raw materials, machinery, and intermediate goods.
“No region has industrialised sustainably while sourcing the majority of its inputs abroad. Africa’s current production structure exposes firms to FX volatility, global price shocks, and supply disruptions that erode competitiveness.
“The strategic imperative is clear — deepen domestic supply networks, develop intermediate input industries, and cultivate regional value chains that reduce the import content of production. This is not a nationalist argument; it is an economic one. Competitive manufacturing systems emerge from ecosystems, not enclaves. Foreign exchange reforms sit at the centre of this ecosystem.
“African currencies have depreciated at an average around14.8% annually and cumulatively by about 51% since 2020, with wide variations. Africa’s FX challenges are often misinterpreted as purely monetary failures when, in fact, they are structural outcomes driven by narrow export bases and elevated import requirements.
“Manufacturers do not require a strong currency; they need a predictable one. They require FX markets that are transparent rather than discretionary, rules-based rather than opaque, and integrated with real-sector reforms rather than pursued in isolation. Successful FX regimes are built on credibility — and credibility is built on sequencing.
“Reform begins with fundamentals, not with gestures. These foundations — policy stability, predictable taxation, domestic supply-chain development, and credible FX reform—define whether African economies will be in a position to benefit from the most consequential reconfiguration of global production since China’s WTO accession.”
Africa’s labour force, geography, and market size, reportedly should give it natural advantages when compared to rising Asian labour costs, as global risk diversification, and geopolitical realignment have created a window for new manufacturing locations.
It affirmed that investors increasingly distinguish between potential and preparedness as survey evidence from development finance institutions indicates that over 65% of manufacturing investors rate regulatory predictability and FX transparency as decisive factors in investment decisions, above even electricity prices and logistics costs.
The question multinationals now ask, it noted, is not whether Africa can industrialise, but whether its reform agenda is sufficiently credible to justify long-term industrial commitments. In other words, the credibility of reforms matters as much as cost competitiveness.
It harped on the need for institutionalisation of evidence-based policymaking, because industrial policy succeeds when it is governed by data, disciplined by evaluation, and adjusted in response to measurable results.
“Too many African policy cycles remain aspirational rather than empirical, characterised by broad visions rather than targeted, costed, and measurable interventions. Industrial policy without evidence devolves into policy without impact. Evidence is the mechanism by which reforms gain durability and by which credibility is earned.
“Taken together, these elements form a single argument: Africa’s manufacturing moment will not be determined by global trends but largely by domestic choices. The question is not whether Africa has the potential to industrialise — it does.
“The decisive question is whether governments will sustain the coherence, credibility, and continuity of policy reforms necessary to translate potential into structural transformation.
“The stakes are high. If the continent fails to build competitive domestic production capacity, the African Continental Free Trade Area — a historic achievement — could become a channel for deeper import dependence, benefiting external economies more than African producers.
“If reforms succeed, AfCFTA becomes an industrial platform capable of shifting Africa from the periphery of global value chains to a meaningful node within them.
“Industrialisation is not destiny; it is discipline. And reform discipline— credible, coherent, and sustained — will define Africa’s industrial future
“The question multinationals now ask is not whether Africa can industrialise, but whether its reform agenda is sufficiently credible to justify long-term industrial commitments. In other words, the credibility of reforms matters as much as cost competitiveness,” it emphasized.