Manufacturing success: How to secure Africa's industrial future

Industrialisation has long dominated Africa’s development agenda. However, in the decades since independence, only a handful of African countries have managed to meaningfully expand their manufacturing base and integrate into global value chains. The majority have struggled to make progress, contributing to the slow and uneven pace of industrialisation witnessed across most parts of the continent. “Despite growing policy attention and a renewed momentum in industrial strategies across the continent, Africa’s industrial transformation continues to progress at a slow pace,” the African Development Bank (AfDB) notes in the Africa Industrialisation Index 2025, which tracked industrial development across 54 countries from 2010 to 2024. The report reveals that the value of manufacturing value‑added goods produced in Africa rose from $285bn in 2020 to $351bn in 2025. While this represents a 24% increase, the continent’s manufacturing output remains small compared with global benchmarks. The continent continues to account for less than 2% of global manufacturing output and only 1.4% of global manufacturing exports. The manufacturing sector’s contribution to the continent’s GDP sits at 10.8%, well below the global average of 16.5%. At $351bn, the value of Africa’s total manufacturing output last year was slightly less than the €321.9bn ($366bn) that German automaker Volkswagen generated in annual sales over the same period. Morocco overtakes South Africa North Africa and Southern Africa dominate the continent’s industrial landscape, accounting for most of its manufacturing output, export sophistication and industrial competitiveness. Morocco in particular has emerged as an industrial powerhouse in recent years, overtaking South Africa for the first time in the index. On a range of 0 (worst) to 1 (best), Morocco scored 0.8415 in 2024 and South Africa 0.8396. The index assesses a broad range of indicators spanning the value of manufactured goods produced and exported in a country, the level of capital investments the manufacturing sector has attracted from foreign and domestic sources, the number of skilled jobs it sustains, the business environment for manufacturers, the state of infrastructure and broader macroeconomic ability. “In the report’s most striking finding, Morocco has overtaken South Africa as the continent’s leading industrial economy, driven by sustained industrial upgrading, export diversification and strong industrial policy. South Africa remains a continental powerhouse, but its competitiveness has declined steadily,” the AfDB said when announcing it. Most countries in the North region of Africa are among the top-ranked group, excluding Libya (0.5552) and Mauritania (0.2712). In Southern Africa, Mauritius (0.6731), Eswatini (0.6509) and Namibia (0.6295) follow South Africa in the top-ranked countries. In West Africa, Senegal (0.6368), Côte d’Ivoire (0.6173), Nigeria (0.5914) and Ghana (0.5735) are the advanced countries in industrial development. Kenya (0.6058), Uganda (0.5822) and Tanzania (0.5530) stand as the best in East Africa, whereas Central Africa is led by Gabon (0.6021) followed by the Democratic Republic of Congo (0.5987), Equatorial Guinea (0.5767) and Cameroon (0.5547). Kenya: the battle for competitiveness Africa’s industrial ambitions have long been hindered by structural constraints, including weak infrastructure, limited access to finance and technology, small and fragmented markets and persistent gaps in human capital. These constraints make African manufacturers less competitive in both global and domestic markets. Jaswinder Bedi, managing director of Bedi Investments in Kenya, has been involved in textile manufacturing since the 1980s and employs more than 2,000 workers in his factories, supporting over 16,000 cotton farmers through the company’s supply chains. He tells African Business that Kenya has over the years become progressively less competitive as a manufacturing destination. “In the 90s, the manufacturing sector’s contribution to GDP was about 15%. In 2010 manufacturing’s contribution came down to 11% and today the manufacturing contribution to GDP in Kenya is 7.2%,” he says. Over this period several major manufacturers have shut down their operations in Kenya. These include prominent multinationals such as GSK (formerly GlaxoSmithKline), Bayer and Mondelez. They are still present in the market but have opted to import their products from factories in other countries instead of producing them locally. Electricity is the most important utility for manufacturers, with both reliability and cost being critical. Kenya has improved on reliability but the cost of power remains a major concern, Bedi says. Kenya’s average industrial power tariff is between $0.18 and $0.23 per kWh, far above industrial leaders Morocco ($0.09 to $0.12) and South Africa ($0.09 to $0.19) as well as regional peers like Ethiopia ($0.01 to $0.02), Tanzania ($0.12 to $0.15) and Uganda ($0.10 to $0.13). “If you look at large manufacturing economies like China and India, they are lower than us. Even the US is lower than us. How do we compete when it costs more to produce here?” Bedi argues that sluggish growth in labour productivity is undermining the competitiveness of manufacturers not only in Kenya but across the continent. “Policymakers focus too much on the minimum wage, but nobody is talking about productivity,” he says, explaining that the conversation often centres on promoting destinations as low‑cost labour hubs even when workers produce far less than workers in similar industries elsewhere around the world. “Take our new minimum wage of $150 a month announced in May. The unit cost of production at $150 is still far higher than that of a Chinese worker earning $450, because the Chinese worker produces so much more in the time. We need to stop paying for time spent at work and start paying for output. Labour laws must evolve to reward productivity.” Rethinking special economic zones Special economic zones (SEZs) were introduced to tackle entrenched challenges in Africa’s manufacturing sector and boost competitiveness. Their number has grown from about 20 in 1990 to an estimated 230 legally established across 43 countries by 2025, reflecting strong government interest in the model. SEZs are designated areas where business and trade laws differ from national frameworks. They typically offer regulatory, fiscal and administrative advantages – as well as access to labour, infrastructure and utilities – to enhance and create a favourable environment for investment. Their establishment generally pursues four objectives: attracting domestic and foreign investment; diversifying exports; generating employment; and serving as laboratories for new policies or reforms. In Morocco, the Tanger Med Zones have emerged as a major SEZ, hosting more than 1,200 international companies and driving growth in the automotive, aerospace and logistics sectors. Mauritius, through its Freeport, has built one of Africa’s oldest and most structurally stable SEZ frameworks, consistently praised for its business environment across financial services, logistics and textiles. Ethiopia’s Hawassa Industrial Park, meanwhile, has become a flagship for the country’s industrial ambitions. Specialising in textiles, apparel and agribusiness, the country’s 13 industrial parks employ more than 80,000 people and are successfully integrated into national rail and energy networks. But with the exception of these, and a few more success stories, SEZs in Africa have largely under-performed. “While special economic zones and industrial parks have expanded rapidly across Africa and contributed to export performance, their broader impact remains limited due to weak strategic alignment, insufficient integration with local economies and persistent governance gaps,” the report notes. Utilisation rates remain below expectation, with a recent survey revealing that over 40% of 39 zones studied had filled less than a quarter of their capacity. Only 15% were operating at full capacity. Contributing factors include overly optimistic demand projections, shortages of local skills, limited private sector interest and governance challenges. A 2024 survey by the United Nations Industrial Development Organisation (UNIDO) and the Africa Economic Zones Organisation (AEZO) recommends measures to improve performance: leveraging strategic locations, prioritising infrastructure, scaling up zone sizes, choosing appropriate sectoral focuses, boosting environmental, social and governance (ESG) standards, ensuring financial viability and strengthening investment promotion. The report also urged governments to reconsider their role in managing SEZs. “Contrary to most of the rest of the world, where SEZs tend to be privately owned and managed, nearly half of Africa’s zones are in public ownership,” it notes. AfCFTA crucial amid trade tensions Africa’s challenge is not just production of manufactured goods but access to global markets. African manufacturers often face systemic barriers exporting to world markets. The geopolitical environment has compounded the problem. Rising trade tensions have led many countries to adopt protectionist measures, including higher tariffs and new non‑tariff barriers. The African Continental Free Trade Area (AfCFTA) offers a potential solution by opening up duty‑free trade across the continent for goods produced in Africa. “AfCFTA is a big opportunity. We really need to focus on scale, and scale comes with market access because individually we are small, together we are a big market. But this can only work if that market is synchronised and functions with predictability, certainty and real access,” says Bedi. African countries currently trade more with the world than they do with each other. Intra‑African trade accounted for just 14.4% of total trade between 2022 and 2024, compared with 60% in Asia and 57% in Europe. Reversing this trend – which the AfCFTA promises to do – could help create a larger domestic market for Africa’s manufactured products. Bedi insists that while political support for the AfCFTA remains strong on paper, countries must act in good faith to ensure its full implementation. He points to the continued use of non‑tariff barriers by some governments to shield domestic industries. Non‑tariff barriers – ranging from customs procedures to technical and sanitary measures – are estimated to restrict intra‑African trade three times more than tariffs. Bedi also warns that Africa’s manufacturing sector faces mounting pressure from cheap imports, particularly from India and China, which have gained market share in recent years. “It is scary. These imports from Asia are coming in at dumping prices and some of them enjoy generous export subsidies. We have no mechanisms to control this, and it hurts our domestic industry. We need to ring‑fence some of our manufacturers until they are big enough to compete,” he says. Import substitution – replacing foreign imports with domestically produced alternatives – was a hallmark of African industrial policy in the 1970s and 80s. Although governments shielded fledgling industries from foreign competition through the use of tariffs, quotas and subsidies, most factories relied on imported machinery and inputs to operate. When commodity prices collapsed and debt costs soared in the 1980s, states ran out of foreign currency to sustain imports. The model quickly unravelled, forcing cash-strapped nations into structural adjustment programmes and trade liberalisation initiatives that opened the door to cheaper imports; and it limited subsidies for local industries. Industrialisation stalled in many parts of Africa. With access to export markets increasingly uncertain today amid flaring trade tensions, import substitution is making a comeback in Africa – albeit in a new form. This time, the model is being led by private capital and is firmly anchored in local sourcing to guarantee the security of manufacturers’ supply chain. Dangote steps up At the forefront of this shift is Nigeria’s Aliko Dangote, Africa’s richest man. He was among the first industrialists on the continent to pioneer backward integration by investing in domestic limestone mining to secure raw materials for his cement manufacturing operations in Nigeria. The strategy enabled him to rapidly scale the business and turned Nigeria into a net exporter. Dangote’s strategy is straightforward: identify essential goods Africa consumes in large volumes, build mega‑factories to produce them locally, and capture the margins lost to shipping and logistics. He has applied this logic to the $20bn Dangote Petroleum Refinery in Lekki, Nigeria. For decades, Nigeria exported crude oil only to spend billions importing refined petroleum products. With a capacity of 650,000 barrels per day, the plant is producing enough refined products to satisfy domestic demand, with surplus volumes available for export. Dangote is now replicating the model across the continent, including a planned refinery in Lamu, Kenya, designed to source crude from Uganda, South Sudan and the DRC. Dangote’s blueprint is increasingly being applied to Africa’s critical minerals. The continent holds roughly 30% of global reserves of cobalt, lithium and graphite – vital for the green energy transition. Countries such as Zimbabwe, Namibia and Ghana have banned raw exports and now require local processing. This is expected to stimulate industrial growth, and reduce importation of finished goods and put a stop to the extraction of Africa’s resources without corresponding development. “Let nobody convince us that someone needs to take our raw materials to produce elsewhere and bring finished products here. We must learn how to build self‑sufficiency,” Dangote told participants at the Africa We Build Summit hosted by the Africa Finance Corporation in Nairobi in April. “In the past we have been relying on foreign investors. This was a mistake. They will not come without the leadership of domestic investors. We must take the risk and initiative,” he added.