competition from East and South Asian firms that have a long head start and learning advantages in producing manufactured exports and integrating with GVCs; logistics costs and the quality of trade facilitation both areas in which East Africa lags, strongly impinge on competitiveness; and mid and large sized firms of which there are few in Africa, have a better chance of linking with GVCs and penetrating foreign markets.<sup>69</sup> There are other concerns on the horizon once climate change becomes a larger issue but that is a few decades into the future.<sup>70</sup> There are chinks of light also. FDI especially from China and India is transferring services, light industry and agricultural technology to East African countries, developing the region’s natural resources and upgrading the associated transport facilities.<sup>71</sup> This is being complemented by ODA, FDI and domestically mobilized capital that is helping build badly needed infrastructure, which is integrating the regional economy and allowing the landlocked economies to reduce the costs of shipping goods via coastal outlets. Some observers are of the view that as many as 85 million manufacturing jobs could be transferred to Africa from China by 2030 via FDI thereby enabling the more enterprising African countries to more fully harness the growth potential of manufacturing industries.<sup>72</sup> As noted earlier, the share of manufacturing in GDP in SSA has declined from 19 percent in 1975 to just 10 percent in 2017.<sup>73</sup> It has grown, however, in absolute amounts. Merchandize exports also fell from $364 billion in 2010 to $307 billion in 2017 with exports of manufactures amounting to a fifth of the total.<sup>74</sup> A third of the exports of manufactures are to other African countries,<sup>75</sup> a welcome sign of increasing connectivity and falling costs of facilitation. Such connectivity would be tightened if the fragmentation of African market were to be reduced by making all

> 69 Not only are there few such firms in Africa but also their numbers are not multiplying since the turn of the century (Newman et al 2016). Most started out as trading firms many owned by immigrant entrepreneurs that then diversified into manufacturing.  Sutton (2013-4) <u>http://personal.lse.ac.uk/sutton; IGC (2013) http://www.theigc.org/project/understandingrwandas-agribusiness-and-manufacturing-sectors/</u>

70 The Economist (2015, p.41) rightly observes that successful industrialization by African countries that take the long view and persist will be “more a marathon than a sprint”. 71 UNCTAD (2015) http://unctad.org/en/pages/PressRelease.aspx?OriginalVersionID=250 72 John Page at Brookings (2016) <u>http://www.brookings.edu/research/podcasts/2016/01/made-inafrica.</u> Between 1991 and 2009, Uganda attracted substantial FDI, a third of which found its way into industry – almost $3 billion. Obwona et al (2016) <u>https://www.brookings.edu/wpcontent/uploads/2016/07/L2C_WP9_Obwona-et-al.pdf. Whether millions of jobs are transferred will depend on the pace and the depth of automation as well as the growth of world GDP.</u>

> 73 <u>http://wdi.worldbank.org/table/4.2</u>

> 74 WDI (2018) http://wdi.worldbank.org/table/4.4 The ever optimistic WEF estimates that Africa’s manufacturing output could rise to $1 trillion by 2025 and McKinsey Global projects expenditures of $5.6 trillion by African businesses and consumers by 2025 providing an ample market for production and intra African exports of manufactures. WEF (2016); Balchin et al (2016) <u>http://set.odi.org/developing-export-based-manufacturing-in-sub-saharan-africa/</u> 75 Some of this is entrepot trade with goods imported from overseas being re-exported to other African countries. Most of Rwanda’s exports are to Burundi and the DRC. Gathani, Stoevinga and Savini (2015) <u>http://www.theigc.org/wp-content/uploads/2015/03/Gathani-Et-Al-Policy-Brief.pdf</u>

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