Africa urged to leverage on AfCFTA, local investment, others to boost manufacturing Sector

Following some persistent challenges faced by the manufacturing sector from 2024 which are expected to linger amid rising new hurdles, the global outlook shows that there are signs of performance improvement and better strategic opportunities for Africa’s manufacturing sector in 2025, supported by growing investment in local production, deeper regional market integration through tighter implementation of initiatives like the AfCFTA, and broader adoption of human-machine collaboration.

According to the Manufacturing Global News Bulletin – January 2025 Edition “the manufacturing sector is expected to grow moderately in 2025, driven by increased regional integration buy-in, technological upscaling, increased investor confidence, growing investment interest in local production, and a renewed push for zero-defect manufacturing to reduce waste and improve efficiency.

“While Africa will remain among the least exposed to the emergence of the protectionism wave in US international trade policy, we strongly expect the US-China trade tensions to fuel foreign investment inflows in Africa, with a focus on automotive, textiles, and electronics manufacturing.

“We expect Africa’s cross-border value chains to expand, particularly in agro-processing, textiles, metallics, and automotive.

“Many countries, including Egypt, Rwanda, Nigeria, and Angola are likely to experience upward trajectories, with manufacturing growth rates projected to be strongly positive throughout the year on overhauled investment policies and improved regulatory reforms. But, we expect slower manufacturing growth in countries facing severe conflict, including the DRC.

“Also, export price inflation of manufactures is expected to decline significantly especially in the second half of the year as global disinflation continues to feed deeply into the system.

“However, persistent inflationary pressures in countries like Zimbabwe (projected at 35%) and Nigeria (around 24.5%) could continue to erode purchasing power and demand for manufactured goods.

“Additionally, countries such as Nigeria, Egypt, and Ghana may continue to report elevated borrowing costs above 25%, limiting access to financing for capital investments particularly by the Small and Medium-size industries.

“FDI inflows into Africa’s manufacturing sector are projected to grow modestly by around 4% in 2025, as global investors seek opportunities amid improving economic conditions and the potential spillover effect of the trade shift in the West towards Africa. However, the geopolitical landscape and ongoing conflicts will still pose risks that could deter potential investors to key sectors of interest.

“We expect sea freight prices to rise above 2024 on the rising risk of shipping activities in key international sea routes, including the Red Sea due to escalating geopolitical conflicts and terrorism.  However, the spillover effect of the anticipated decline in global energy and commodity prices may moderate its effect on Africa’s manufacturers.”

It also proffered policy tips African government should apply to boost the manufacturing sector to include: “strengthen regional integration and industrial policies vis-à-vis: intensify efforts in addressing non-tariff barriers, improve customs procedures, and harmonise trade regulations.

“Provide incentives for manufacturers to invest in digital technologies, automation, and AI-driven production to boost competitiveness.

“Increase investment in cross-border infrastructure, such as roads, railways, and digital connectivity, to facilitate trade.

“Ensure they foster a conducive environment for private sector investments in the industrial sector.

“Address inflationary pressures and high borrowing costs by: enhance production, stabilise the exchange rate, and efficiently link rural to urban to aid low-cost raw materials supply to industries.

“Strengthen central bank policies to control inflation in high-risk countries like Nigeria and Zimbabwe, and establish low-interest loan schemes for SMEs in the manufacturing industries.

“Attract Foreign Direct Investment (FDI). Create a favourable investment climate by improving ease of doing business, offering tax incentives, and providing guarantees against political risks to attract global investors.

“Diversify trade routes and invest in alternative transportation infrastructure to reduce dependence on high-risk sea routes like the Red Sea. Also, scaling up the regional air freight and rail networks to complement sea freight.

“Prioritize infrastructure improvements, particularly in transportation and energy, to support efficient manufacturing operations.

“Pool resources together to provide targeted support to countries facing severe conflict, such as the Democratic Republic of Congo (DRC), to stabilize their economies and revive manufacturing activities.

“Provide export subsidies and tax rebates for key manufacturing sectors and offer incentives for companies relocating production facilities to Africa.

“Additionally, Africa’s manufacturers should leverage the African Continental Free Trade Area (AfCFTA) framework to reduce dependency on imported raw materials that can be sourced within the African market.”