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Nation’s manufacturing sector wins kudos

Nation’s manufacturing sector wins kudos

- Basic services still “lacking”

A delegation of Overseas Development Institute (ODI), an independent UK-based think-tank, earlier this week included Ethiopia among nine African countries propitious for manufacturing development.  

A two-day forum, dubbed “Sustainable Economic Transformation (SET),” which flagged Africa’s manufacturing sector via the African Center for Economic Transformation (ACET), was held in Addis Ababa early this week to highlight the growth potentials and promising economic outcomes of nine African countries.

Dirk Willem te Velde (PhD), a senior research fellow and head of the International Economic Development Group at ODI and Neil Balchin, research fellow at ODI, presented a background note of analytical studies in Africa where out of the nine countries highlighted, Ethiopia, Kenya, Mozambique, Nigeria and Zambia were found to be well positioned to attract manufacturing foreign direct investments (FDIs). “Our analysis highlights five promising countries that are relatively well positioned to attract manufacturing FDI: Ethiopia, Kenya, Mozambique, Nigeria and Zambia.”

According to the researchers, the manufacturing FDI Potential Index they devised calculates a total score for each of the nine countries based on their rankings on a number of key factors that influence FDI. Hence, past manufacturing FDI stock as a percentage of gross domestic product, recent performance in manufacturing exports, domestic value addition in manufacturing, manufacturing value addition per capita, economic complexity, labor productivity in manufacturing, population, quality of the business climate and infrastructure, education and cost and reliability of electricity are the yardsticks used to rank the countries surveyed. 

Based on that, Ethiopia’s overall ranking was fourth, behind Zambia, Nigeria and Kenya. Ethiopia’s advances, among other endeavors, in the garment and footwear, horticulture, agro-processing, automobile assembly, have been considered as enablers of the manufacturing sector.

Nonetheless, Ethiopia has been found to be less favorable when it comes to certain areas that would have incentivized manufacturers. Even though it has been praised for the availability of cheap electricity, this very service has been found to be unreliable owing to frequent outages that hamper businesses, according to Neil. Despite the abundance of cheap labor in the country, it being mostly low skill has been identified as an area for further improvement, the think-thank noted.

Along this line, quality of business climate at which Rwanda is the most favored in Africa is where Ethiopia still needs to buckle up for change. Trade logistics and infrastructure also require improvement in Ethiopia and the rest of the countries, Neil and Dirk suggested. Adding to that, sustaining the gains together with securing much-needed funds are daunting tasks the nine countries have to contend with, Neil told The Reporter.

Satisfied with the outcomes of the study, Arkebe Oqubay (PhD), with the rank of minister in charge of economic planning effectiveness, said that despite the recurrent outages of electric power, Ethiopia has been able to generate some 4,000 MW, mostly from hydro sources with cost-effective investments. Arkebe argues that the investment cost to build Gilgel Gibe III, which generates 1,870MW, is one example requiring half the investment made by other countries to produce a comparable amount of energy.

He mentioned German-inspired Technical and Vocational Education and Training (TVETs) institutions have been the trending skill development centers that feed the manufacturing sector along with the universities. Currently, there are some 1,300 TVETs enrolling tens of thousands of high-school graduates in the country, Aekebe said.

Improvements in standard of living, life expectancy, infrastructural projects such as rail, road and highways are among the advances Arkebe mentioned his government is capitalizing on to hinge the country as a leading light manufacturing hub in Africa in the coming ten years.  Weighing the facts, that ambition seemed to have been endorsed by the researchers.