Inadequate infrastructure investment in African countries is denying the continent a better position as a global supply chain destination, United Nations Conference on Trade and Development (UNCTAD) now says.
This, among other highlights that the body says in its 2023 Africa economic development report, need to be prioritised to bolster Africa’s play in the supply chain, noting its potential to becoming a key link in the global supply market.
“With abundant resources and growing consumer market, Africa can become a prominent manufacturing destination, for instance, in tech-intensive industries,” the report reads.
"African countries also have to focus more on advancing their energy supply chains and financing."
Additionally, the body says African countries should focus on value addition of their natural resources such as mining of minerals.
It says Africa's abundance of critical minerals and metals, including aluminum, cobalt, copper, lithium and manganese, which are vital components in technology-intensive industries, positions the continent as an attractive destination for manufacturing.
This amidst recent upheavals caused by trade turbulence, geopolitical events and economic uncertainty that are compelling manufacturers to diversify their production locations.
According to UNCTAD Secretary General Rebeca Grynspan, it is essential that African states secure better mining contracts and exploration licences for metals used in high-tech products and supply chains.
“This would strengthen domestic industries, enabling local firms to design, procure, manufacture and supply the necessary components,” Grynspan said.
“It is also an opportunity for the countries to strengthen their emerging industries, foster economic growth and create jobs for millions of its people.”
She was speaking during the launch of the 2023 Africa Economic Development report in Nairobi.
The report further highlights that creating an environment conducive to technology-intensive industries would help raise country wages on the continent.
Currently, according to the body, the average wage is set at a minimum of $220 (Sh31,691) per month, compared to an average of $668 (Sh96,225) in developed nations.
“Deeper integration into global supply chains would also diversify African economies, boosting their resilience to future shocks,” the report says.
In addition towards the energy sector, the body reiterates that African countries need more investment in renewable energy to help bridge the significant investment gap and tackle other obstacles to the manufacturing of solar panels.
Currently, only about two per cent of global investments in renewable energy go to Africa, UNCTAD says in part.
Further calls for better financing solutions to offer African countries and businesses affordable capital and liquidity to invest in strengthening their supply chains.
Says African small and medium-sized enterprises need more supply chain finance, which would help bridge the payment time gap between buyers and sellers, improve access to working capital and reduce financial strain.
According to the report, the value of the African supply chain finance market rose by about 40 per cent between 2021 and 2022, reaching $41 billion (Sh5.9 trillion).
However the trade body says this is not enough.
"The continent can mobilise more funds by removing barriers to supply chain finance, including regulatory challenges, high-risk perception and insufficient credit information," the body says.
Nevertheless, it underlines the need for debt relief to offer African countries fiscal space to invest in strengthening their supply chains.
On average, African countries pay four times more for borrowing than the United States, and eight times more than European economies.
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