Posted on August, 22, 2017 at 10:30 am
A new report has called for increased efforts to boost industrial development in the region, particularly through design and implementation of well-ground strategies and action plans, in order to achieve industrialisation objectives at both regional and East Africa Community (EAC) partner state level.
Exploiting opportunities offered a the dynamic EAC market, and diversifying and upgrading through realistic, well-defined and comprehensive strategies are some of the relevant and concrete policy recommendations listed in a new regional industrial competitiveness report.
Others are: strengthening of forward and backward linkages to boost industrial and overall economic growth, and supporting development of key industrial drivers to boost production and exports.
The draft of the first regional Industrial Competitiveness report which is set to be officially made public in October by the EAC Secretariat is a joint initiative with the UN Industrial Development Organisation (UNIDO), aimed at tracking industrial development performance in the region.
Alphonse Kwizera, the assistant executive director of Rwanda Association of Manufacturers (RAM), was a member of the team of experts from partner states that compiled the report.
He said it was developed to provide a compass to help the region navigate its way towards the industrialisation goals of the Community.
Kwizera said: “It shows the competitiveness of our industries, as an entire region, and also highlights how countries trade; which products are mostly exported… and all this is to help industries to strategise.
“It will help us determine what additional strategies can be used to increase competitiveness in the region. It will, specifically, help policy making.”
On exploiting the opportunities in the EAC market, the report indicates that the EAC has significantly larger capacity to produce manufactured goods than to export them ($69 per capita and $38 per capita in 2014/2015, respectively).
It is noted that EAC provides a dynamic market where demand for manufactured goods is growing annually at 16 per cent, and at double digits for all the 20 most demanded products of the region.
The report explains that a fast-growing market increases the possibility of enlarging production scale. Currently, it is noted, the Partner States are together losing market share of manufactured goods from over nine per cent in 2010 to below six per cent in 2014.
Some of the products for which EAC provides plenty of opportunities given their dynamic demand trends are: fixed vegetable oils, medicaments and pharmaceuticals, iron and steel products, fertilisers, cement, cotton apparel, leather footwear and heavy petroleum.
Richard Ndahiro, a Rwandan economist, said the fact that the Southern African Development Community bloc grew double more than EAC shows that there is potential for EAC to grow further.
“We just need to get things right,” Ndahiro said.
According to Ndahiro, the fact that EAC firms lost market share on the most demanded products like cement, pharmaceuticals, iron steel and fertilisers, means that the production of EAC firms could not grow to the level of demand growth and hence losing ground to foreign companies.
“Across EAC countries, it is clear that infrastructure and agricultural development are key priorities; and one would expect our manufacturing sector to take full advantage of this and set out to take full advantage of this demand,” he said.
“Unlike other sectors where one would think that manufacturers are shying away because they are not assured of demand, construction or infrastructure and agriculture have well predictable demand over which EAC companies would have a competitive advantage.”
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Export capacity shows a mixed performance
Meanwhile, in terms of manufactured exports, authors of the EAC Industrial Competitiveness Report 2017 find that, much like the EAC as a whole, each of the partner states have a higher capacity to produce manufactured goods than to export them.
Accordingly, this signals that EAC countries’ industries are catering predominantly for their domestic markets or their industries have not entered the manufactured export business due to an inability to compete at the global level.
In the case of Manufacturing Value Added (MVA), the report says individual growth rates have not resulted in the desired path of structural change.
When considering manufactured export capacity, the high growth rates succeeded in increasing the share of manufactured goods in the total export basket of each country between 2000 and 2014, says the report.
Rwanda boasted the highest share both in 2000 and in 2014, in addition to a remarkable increase from 40 per cent to 64 per cent, mostly since 2010.
Accordingly, the shares of manufacturing in total exports for Rwanda, Kenya and Tanzania were almost identical in 2010. Kenya was unable to increase its share beyond 2010 while Tanzania experienced a decline to 42 per cent.
On the contrary, Uganda and Burundi witnessed a continuous increase in the share of manufactured products in their export basket, reaching 40 per cent and 33 per cent, respectively.
“With only Rwanda having more manufactured exports than primary products– and that only most recently – there is an urgent need to increase manufactured exports faster in each of these economies,” reads part of the report.
“This is particularly important for Tanzania and Kenya, although they also have large domestic markets capable of absorbing manufactured goods.”
Publication of the first EAC Industrial Competitiveness Report 2017 will take place as the EAC winds up its first Industrialisation Action Plan (2012-2017) with the bloc looking at EAC Industrialisation Policy 2012-2032.
Source: The New Times