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Opinion | Manufacturers pulling out of China should consider Africa to diversify their supply chain
- Africa, with its rapidly growing working-age population, newly formed free-trade single market and cost competitiveness, is poised for an exponential economic expansion in the coming decades
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China’s manufacturing domination, with its share of global manufacturing at 28 per cent, has given it considerable economic power. Covid-19 has laid bare China’s willingness to use this power for geopolitical ends and brought home the very real risks of overreliance on any single source for critical supplies. There is a growing sense of urgency for supply chains to become more diversified, which begs the question: who can fill the void?
Rising labour and land costs, and the arbitrary nature in which China has dealt with foreign firms, combined with disappointing results for many in the Chinese domestic market, had already led many multinational companies to question their China strategy. While other Asian economies stand to expand their market share in manufacturing as a result, Africa could become an even better low-cost alternative with an attractive domestic market.
The combination of a desire of many multinational companies to diversify manufacturing away from China, the rapidly growing working-age population of Africa, and the creation of the African Continental Free Trade Area (AfCFTA) could drive rapid economic expansion in the African continent over the coming decades.
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About 17 per cent of the world’s population live in Africa. Sub-Saharan Africa is expected to add about 1.1 billion people to its population by 2050 and by the end of the century, 40 per cent of the world’s population will live in Africa, putting it on a par with all of Asia, if forecasts prove correct.
One demographic factor holding back economic growth in sub-Saharan Africa is the small percentage of population aged between 25 and 65 years. This prime working-age segment accounted for about one-third of sub-Saharan Africa’s population in the last 40 years, while in rapidly growing Asian economies, it accounts for more than half.
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This situation will change in the coming decades as Asian populations, particularly China’s, ages, and the younger cohort of Africans reaches working age. Along with India, sub-Saharan Africa will account for nearly all the growth in the working-age population between 2020 and 2050. This has the potential to drive significant growth in per capita gross domestic product in sub-Saharan Africa, as a larger percentage of the population can meaningfully contribute to economic activity.
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