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