PAMA Advocates for Greater Intra-African Trade To Tackle Rising Dollar-Priced Imports

The Pan African Manufacturers Association (PAMA) has advocated that greater intra-African trade in components, packaging, chemicals, processed materials, and machinery services will help to tackle dependence on distant supply chains and dollar priced imports.

For manufacturers, however, it noted that the more important reality sits beneath headline exchange rates because African industry is exposed not to a single currency cycle but to a layered external cost structure, with dollar-priced commodities and freight, euro-denominated industrial equipment and chemicals, and renminbi-linked machinery and components sourced from China. Revenues, meanwhile, remain overwhelmingly domestic.

It is also germane to note that for manufacturers, costs increasingly arrive through multiple currency channels, including dollar pricing for oil, fuel, freight, and many commodities; euro pricing for chemicals, industrial equipment, pharmaceuticals, and engineering systems from Germany, Italy, and wider European Union suppliers; renminbi linked pricing for machinery, components, electronics, tools, and factory lines sourced from China; and transaction exposures in sterling, the Indian rupee, and selected Gulf currencies across specific trade corridors.

Consequently, it emphasized that the outcome is not continental convergence but fragmentation as the Nigeria’s naira has seen periods of relative stability, supported by improved liquidity and portfolio inflows, Kenya’s shilling has remained broadly steady, Uganda’s shilling has benefited from export receipts, while Zambia’s kwacha has strengthened intermittently on firmer copper prices and corporate FX flows.

The Association underscored that across much of Africa, manufacturing remains heavily dependent on imported raw materials, machinery, spare parts, chemicals, packaging inputs, and industrial technology, adding that this means exchange rate movements feed directly into production costs.

“For manufacturers, the real test of stability is not found in daily exchange rate movements. It is reflected in whether firms or companies can source inputs predictably, price goods competitively, finance expansion affordably, import machinery efficiently, and sustain margins in the face of external shocks while still planning beyond the short term.

“By this standard, much of Africa continues to face a competitiveness challenge rather than a currency success story,” it stated.

On what manufacturers should expect next, PAMA explained that for African manufacturers, the present relative currency calm was better viewed as a temporary operating window than the beginning of lasting stability.

According to the Association, the next phase will be determined less by headline exchange rates than by the interaction of global financial conditions, energy markets, and domestic reform trajectories.

PAMA said: “Firstly, US monetary policy will remain central. If Federal Reserve easing is delayed, global yields remain elevated, or investors revert to dollar safety, recent FX relief in several African markets could unwind. Manufacturers should therefore plan for renewed pressure rather than extrapolate recent calm.

“Secondly, euro and renminbi exposures will become more commercially visible. As machinery replacement cycles resume and industrial imports recover, movements in the euro and in the renminbi linked to China will increasingly shape factory capex, procurement costs, and supplier contracts alongside the US dollar.

“Thirdly, geopolitical risk in the Middle East could reshape costs even without direct currency effects. Higher fuel prices, insurance premiums, and freight charges can compress margins despite nominal exchange rate stability. Manufacturers will need to monitor logistics costs as closely as FX markets.

“Fourthly, domestic reform quality will increasingly differentiate outcomes. Countries that improve power reliability, customs efficiency, FX market transparency, industrial finance, and logistics execution are more likely to convert temporary currency calm into durable production gains.”

Fifthly, operational discipline would become a strategic advantage, adding that “manufacturers that diversify suppliers, strengthen inventory buffers, embed currency clauses, regionalise sourcing, and protect cash flow will be better positioned than those relying on macro stability to preserve margins.

On what policymakers should do? The PAMA hinted, “where temporary exchange rate relief exists, governments should treat it as a window for reform rather than evidence of arrival.

“Priority actions include rebuilding foreign exchange buffers, accelerating imports of capital equipment and industrial technology, supporting local production of intermediate inputs, improving port, power and logistics efficiency, expanding access to affordable industrial finance, and deepening regional sourcing under the African Continental Free Trade Area.”

On why factories feel the difference first, the Association mooted: “Across much of Africa, manufacturing remains heavily dependent on imported raw materials, machinery, spare parts, chemicals, packaging inputs, and industrial technology.

“This means exchange rate movements feed directly into production costs. When currencies strengthen, imported inputs become cheaper in theory. But in practice, benefits are often delayed by supply contracts, weak logistics, limited FX access, and market inefficiencies.

Most importantly, greater intra-African trade in components, packaging, chemicals, processed materials, and machinery services would reduce dependence on distant supply chains and dollar-priced imports.

PAMA argued that the recent exchange-rate relative stability or appreciation in African currencies is being misinterpreted as evidence of economic recovery stressing that it represents a temporary, externally driven repricing of exchange rates that is not underpinned by gains in domestic industrial strength or production capacity transformation and until that underlying reality changes, currency calm will remain cyclical rather than structural.

It maintained that exchange rate stability will remain shallow and vulnerable to external shocks until factories rely less on imported inputs, earn more foreign exchange through exports, and operate within more competitive industrial ecosystems.