By Ebimo Amungo
As the world honkers down in the midst of the corona virus pandemic, construction on a $17 billion petrochemical complex plodders on in Lagos State, Nigeria. The complex, comprising a fertilizer plant and a 650, 000 barrel per day petroleum refinery, is the crowning glory of the industrial conglomerate, Dangote Industries, owned by Africa’s richest man, the billionaire Aliko Dangote. Already, the fertilizer plant, the second largest in Africa, has been commissioned to produce 3 million tonnes of urea yearly. The refinery would be the largest single train refinery in the world when completed and is designed to service the Nigerian and West African markets, where almost 100 percent of petroleum products consumed is imported.
In Egypt, a $4.5-billion refinery built at the outskirts of Cairo started producing petroleum products in 2019. The refinery was built over seven years through the dogged effort of Egyptian investment firm, Qalaa Holdings. The refinery converts low value fuel oil into middle and light distillates Egyptian domestic consumption.
All across Africa, there is an industrial renaissance taking place as the volume of value-added manufacturing has started to climb upwards after several years of decline. African founded companies are constructing petroleum refineries; fertilizer, steel, and cement plants; vegetable oil refineries; integrated sugar mills; vast cereal mills and textile ginneries and apparel manufacturing operations all across the continent.
In my new book, The Rise of the African Multinational Enterprise, which was recently published by Springer of Switzerland. I outlined the contributions of these African Multinational Enterprises in myriad ways to the development of Africa. The book was released under the Management of Professionals series of Springer, who are one of the largest publishers of academic and professional books and journals in the world. The book is a 310-page ode to Africa’s private sector enterprises. In the book, I explained the contributions of these African Multinational Enterprises, which I call the African Lions, to the various economic sectors and enumerate how these contributions are accelerating the development of Africa.
Industrial output in Africa had taken a precipitous fall in the decades between 1970 to 2010. A bold import substitution policy initiated by almost all of Africa’s sovereign states to stimulate local production fell quite short of the expectations of policy makers and rather left several countries with debilitating debts as state owned industries and monopolies, built by governments as part of that policy, were mismanaged and mostly moribund by the 1980s.
Manufacturing output declined from contributing 17 percent to GDP in 1985 to a mere 4 percent to GDP by 2010. Today, that contribution has inched up to 11 percent of GDP. Comparatively, the World Bank notes that manufacturing contributes 25 percent of GDP in Asia, and 24 percent in Latin America and 13 percent in North America. This low level of manufacturing output means Africa has a high dependency on imports for most of its consumer, commercial and industrial goods. Even worse, only a handful of countries are part of the global supply chain.
Meanwhile, at a time when African countries were in the strangle hold of debts and balance of payment constraints in the 1980s, demand for manufactured goods increased sharply as several African countries experienced rapid population growth and shearing rise in urbanization. African entrepreneurs moved in to fill the demand gap with their investment as the continent suffered a long period of drought of global capital flows. While European and American companies invested in Asian and South American countries like South Korea, China, Brazil and Chile, UNCTAD noted that Africa was essentially shunned all through the 1980s and 1990s. Foreign direct investments dried up and even multinationals corporations like Unilever, Lafarge, Danone and Nestle with a long history of operations in Africa stopped investing in new factories and capacity. Even now, Africa only attracts less than 5% of global capital flows.
African entrepreneurs established firms that first imported consumer goods and later ventured into local manufacturing. Across the continent, firms like Bidco Africa in Kenya, Bahkresa in Tanzania, Madhvani in Uganda, Cevital in Algeria, Dangote in Nigeria and Elsewedy in Egypt all have mercantile roots. Today, they are among Africa’s largest conglomerates and manufacturers. The investments by these African Lions is having a significant impact on the ability of Africans to feed, clothe and house themselves.
A report by Overseas Development Institute noted that manufacturing production in Sub-Saharan Africa, SSA, doubled from $73 billion in 2005 to $157 billion in in 2014. It also pointed out that SSA countries are increasingly exporting manufactured goods to each other even as FDI in African manufacturing has been increasing. The World Bank believes that manufacturing contributed $175 Billion to African GDP by 2018. This growth in manufacturing output is due to the investments of several actors including Chinese, Indian, American and European multinational corporations, but it was the African Multinational Enterprises that kickstarted the manufacturing renaissance on the continent.
African Multinational Enterprises usually undertake large capital projects and invest mainly in sectors that have linkages to local economies through associated investments in backward and vertical integration. These African Lions have developed extensive supply chains that benefit local communities and their investments cut across several sectors.
In the agribusiness value chain, companies like Morocco’s OCP and Egypt’s OCI have built multi-billion-dollar fertilizer plants in several countries that is improving access to this vital input of agricultural production. In the same vein, investments in food processing by Tiger Brand of South Africa, Mukwano of Uganda and Nigeria founded Olam has improved domestic processing of sugar, cereals, vegetable oil, reduced post-harvest loses and improved food security in several African states.
With operations in 42 countries, Kenya’s Comcast is a significant producer of steel and roofing products. In the same breath, Egypt’s Elsewedy produces electrical products in over 15 countries mainly within the Northern African and Middle Eastern regions. Nigerian’s Dangote Cement, with subsidiaries in 14 African countries is the second largest producer of cement on the continent.
Algerian and Angolan state-owned firms, Sonatrach and Sonangol are by far the largest oil and gas companies in Africa with operations including refineries, petrochemical plants and extensive distribution infrastructure across Africa and Europe. The scope of their operations extends to several sectors.
Most of these African Lions were founded, nurtured into domestic growth and international expansion by Africa’s new age entrepreneurs. These are men and women who looked beyond Africa’s limitation and challenges to found some of the largest corporate entities on the continent. The process of growing small and medium enterprises into large firms is daunting all over the world but in Africa the process is more onerous. African countries occupy the lower rungs of the Ease of Doing Business Index of the World Bank and the Country Competitiveness Index of the World Economic Forum. Africa also rank poorly on the Corruption Perception Index. The Heritage Foundation captures Africa’s poor ranking in the Economic Freedom access. These indexes lay bare the herculean obstacles entrepreneurs have to overcome to become successful in Africa.
Today, African Lions have made significant contributions to stemming the tide of de-industrialization of the continent. Through their investments some countries are becoming self-sufficient in food and agricultural production, building materials, petroleum products, textile and apparel, and even automobile production. Some African Lions are integrating the continent into the global value chain as companies like Tanzania’s METL and Zimbabwe’s Alliance Ginneries are exporters of processed cotton while Mauritius’s Ciel and are exporters of textile and apparels.
African Multinationals Enterprises continue to increase their capacity as their success prompts them to expand across the continent. Some are even expanding outside the region. In all, these investments have sparked a new era of industrialization in Africa.
The African Lions are leading the re-industrialization of the continent.
Ebimo Amungo is the author of The Rise of The African Multinational Enterprise and the Managing Partner of Amungo Consulting Limited