The dismal performance of East Africa’s manufacturing sector in 2017 has left regional policy makers scratching their heads to find new ways of boosting industrial production, which is under threat from Chinese and Indian products.
The EAC Treaty requires member states to enhance their economic performance through their manufacturing sectors.
The EAC Industrialisation Strategy (2012-2032) commits members to diversifying their manufacturing bases and raise their manufacturing value added to 40 per cent by 2032.
A regional summit held in Kigali, Rwanda, urged partner states to increase their budgetary allocations to manufacturing.
However, the share of manufacturing in the regional economy is contracting, hampering the extent to which the sector can impact economic development.
The dismal performance is largely due to the high cost of production which has made goods manufactured in the region uncompetitive in the international market.
Firms in the EAC have lost market share in 22 out of the 25 most sought after goods, including cement, pharmaceuticals, fertiliser, iron and steel products, cotton and leather products.
The region’s ability to export manufactured products hovers is above half of its capacity.
“To reverse this trend the EAC will need to accelerate manufacturing sector growth in the coming years,” the EAC industrial competitiveness report 2017 says.
China exports a wide range of products to the EAC including footwear, telecommunication equipment, apparel, electronics and engineering plants while India exports mainly heavy petroleum and drugs.
Other economies gaining market share in the EAC are Malaysia, the UAE, Saudi Arabia, Belgium, Republic of Korea and Taiwan.
China’s trade with Africa has tremendously grown over the past 14 years making the Asian nation Africa’s single largest trading partner, surpassing both the EU and the United States.
This is having a detrimental effect on the infant industries in East Africa which still require protection against imports.
Since 2010 EAC’s manufactured export capacity has been on the decline due to a drop in the production of items such as fertilisers, alcoholic beverages, sugar confectionary, drugs, apparel and footwear.
Kenya had the highest manufacturing value added in the region at $5.4 billion in 2015 followed by Tanzania ($3 billion), Uganda ($2.1 billion), Rwanda ($402 million), and Burundi ($204 million).
EAC firms are unable to compete on the international stage and focus more for domestic consumption.
On average 32 per cent of manufactured products exported by the EAC countries are traded within the regional bloc.