Slow man­u­fac­tur­ing sec­tor drag­ging down Africa, says re­port

GDP grew at an an­nual av­er­age of 3.3 per cent be­tween 2010 and 2015, slower than the 5.4 per cent be­tween 2000 and 2010

The Star (Kenya) - - News Business - BY RICHARD MUNGAI @Richiy­mungai

Africa’s over­all eco­nomic growth slowed in the past six years due to a weak man­u­fac­tur­ing sec­tor, strug­gling to tap into vi­brant do­mes­tic de­mand for com­modi­ties.

This is ac­cord­ing to a new eco­nomic re­port by con­sul­tancy firm McKin­sey which in­di­cates that the con­ti­nent’s real Gross Do­mes­tic Prod­uct grew at an an­nual av­er­age of 3.3 per cent be­tween 2010 and 2015, con­sid­er­ably slower than the 5.4 per cent re­alised be­tween 2000 and 2010.

“When McKin­sey first looked in de­tail at Africa’s di­verse economies six years ago, al­most all of them were ex­pe­ri­enc­ing ac­cel­er­at­ing growth,” the global con­sul­tancy firm said in the re­port ti­tled ‘Lions on the move II: Re­al­is­ing the po­ten­tial of Africa’s economies’.

“The pic­ture to­day is more mixed, but the over­all out­look is pos­i­tive, with pro­jec­tions by the In­ter­na­tional Mon­e­tary Fund that Africa will be the world’s sec­ond-fastest grow­ing re­gion in the pe­riod to 2020.”

Ac­cord­ing to McKin­sey, Africa’s man­u­fac­tur­ing sec­tor has the po­ten­tial to nearly dou­ble its out­put from Sh50.50 tril­lion ($500 bil­lion) to­day to Sh93.93 bil­lion ($930 bil­lion) by 2025, but this will only hap­pen if African coun­tries take charge and im­prove op­er­at­ing en­vi­ron­ment for man­u­fac­tur­ers.

“Africa’s economies are no longer a story about ex­port­ing com­modi­ties— but about tap­ping into vi­brant do­mes­tic de­mand. Three-quar­ters of this po­ten­tial could come from Africa-based com­pa­nies meet­ing fast grow­ing de­mand within Africa,” McKin­sey re­port states.

This growth, the re­port in­di­cates, will be sup­ported by in­creased spend­ing by con­sumers and busi­nesses in Africa, which stands at an es­ti­mated Sh404 tril­lion ($4 tril­lion). By 2025, the to­tal could be Sh565.6 tril­lion ($5.6 tril­lion), states the eco­nomic re­port.

House­hold con­sump­tion is ex­pected to grow by 3.8 per cent a year to 2025 to reach Sh212.10 tril­lion ($2.1 tril­lion), while busi­ness spend­ing is ex­pected to reach Sh353.50 tril­lion ($3.5 tril­lion).

McKin­sey says tap­ping into the con­sumer mar­kets will re­quire man­u­fac­tur­ers to have a de­tailed un­der­stand­ing of in­come, geo­graphic and cat­e­gory trends.

FILE

Kenya As­so­ci­a­tion of Man­u­fac­tur­ers im­me­di­ate for­mer chair­man Pradeep Paun­rama and CEO Phyl­lis Waki­aga.

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