An abundance of natural resources and a rapidly growing consumer market well positions sub-Saharan Africa’s prospects of becoming a prominent manufacturing destination, and a key player in global supply chains.
This recent report from PREO, ‘Made in Africa: Impact of local manufacturing on profits, people and products. Insights from the off-grid energy sector in sub-Saharan Africa’, analyses the opportunity to capture the local ‘share of value’ while accelerating energy access in the off-grid sector. The report states that ‘local manufacturing and assembly can increase profitability by 10% to 40% by avoiding import duties, retaining supplier margins and reducing shipping costs’.
As the energy access and off-grid sector faces rapid growth, incentives and enabling policies around domestic manufacturing can increase local activity leading to further expansion. Over the course of two years, the PREO programme ran a Value Addition and Employment Creation (VA&EC) challenge that set out to support five companies in assessing the viability of import substitutions. The challenge enabled the five sub–Saharan African companies to explore upstream segments of the off-grid energy value chain in their respective sectors, including local research and development (R&D), testing, manufacturing and assembly of products.
The learnings from the VA&EC challenge demonstrate what benefits can be realised from increasing local manufacturing capacity and the added value across the upstream value chain and increase in job creation to improve livelihoods. A key finding that came out of the challenge is that products manufactured and assembled locally in Africa can be of higher quality than imported products, resulting in rejection rates falling by up to 70%. This report features in-depth case studies on each of the five companies detailing their findings.