The African Export-Import Bank (Afreximbank) has listed unreliable electricity supply, poor transportation networks, and insufficient water and sanitation facilities as part of the barriers against Industrial Parks’ development and functionality in Africa.
This is according to a new report by Afreximbank Research tagged “Industrial Parks and Industrial Development in Africa,” posted via its X page on Tuesday.
The report states that one of the most prominent challenges facing industrial parks across the African continent is infrastructural deficiencies, even though significant progress has been made in developing physical infrastructure.
Constraints facing industrial parks in Africa
- According to the report, infrastructural deficiencies can disrupt manufacturing activities, increase transportation costs, and delay the movement of goods, ultimately affecting the competitiveness and growth potential of businesses within these parks.
“Inadequate infrastructure, such as unreliable electricity supply, poor transportation networks, and insufficient water and sanitation facilities, still pose significant barriers to the efficient operation of industrial parks.
“In Nigeria, the Calabar Free Trade Zone suffers from frequent power outages, which significantly disrupt manufacturing activities.
“Similarly, in Kenya, the Athi River Export Processing Zone is hampered by poor road conditions that increase transportation costs and delay the movement of goods.
“Ethiopia’s Bole Lemi Industrial Park grapples with insufficient water supply, which affects operations, particularly in the textile and garment industries,” the report added.
- Furthermore, the report revealed that most of the industrial parks have been designed to house foreign investors, giving little room to indigenous industrialists.
- It added that while foreign companies might serve as a springboard for the development of competitive domestic industries, they can also impede progress by neglecting to pass technology to domestic businesses and to establish reciprocal relationships within the national economy
“This problem is worsened when IPs are designed in a manner that further reduces the proximity between foreign-owned firms and indigenously owned firms, as it was in Ethiopia, for example, ” the report added.
- The report added that policy designs to support IP development have tended to ignore long-term gains while favourable IP regulations and policies are inconsistent.
“The short-term gains of IP development include employment creation, stimulation of exports, and foreign exchange earnings.
“Long-term gains include the effects on the country’s economic transformation in terms of technology transfers, forward and backward linkages, demonstration effects, and other spillovers,” the report added.
Way forward
To boost industrial park operations in Africa, the report called forthe strengthening of public-private partnerships (PPPs) in IP development and use.
“Through cooperative investments and subsidies, PPPs can lessen financial barriers that tend to hamstring IPs on the continent.
“Parties are more inclined to contribute to sustainable projects as a result, leading to the growth and development of eco-friendly IPs,” the report added.
The report asked countries to stimulate export-led industrialization, adding that export-oriented IPs are likely to attract foreign industrial investors, even when the domestic market is small, as it is in most low-income economies of Africa.
- It advises stakeholders to accelerate technology adoption to increase efficiency, streamline logistics, upgrade infrastructure, and leverage trade agreements on the continent, including the Africa Continental Free Trade Area.
- The report also urged governments to link IP design to policy reforms that not only incorporate local content but also feed into more comprehensive development plans for African economies.
The report also urged stakeholders to promulgate policy to promote business-to-business linkages in African IPs, adding that available statistics show that most of the private sector enterprises in Africa are MSMEs.
