Unlocking the power of local manufacturing in Africa
The latest report from PREO, the Powering Renewable Energy Opportunities programme, delves into the transformative potential of harnessing the local 'share of value' while advancing energy access within the off-grid sector. With a wealth of natural resources and a rapidly expanding consumer market, sub-Saharan Africa is poised to establish itself as a leading manufacturing hub and play a pivotal role in global supply chains.
In this PREO report, titled Made in Africa: Impact of local manufacturing on profits, people and products, a compelling case is made for the advantages of local manufacturing and assembly, which have the potential to enhance profitability by as much as 10% to 40% by circumventing import duties, retaining supplier margins, and reducing shipping costs.
With the off-grid energy sector experiencing unprecedented growth, the implementation of incentives and supportive policies for domestic manufacturing can catalyse local economic activity, leading to further expansion. Over a two-year period, the PREO programme executed a Value Addition and Employment Creation (VA&EC) challenge, aimed at supporting five companies in assessing the viability of import substitution. The challenge enabled the five sub–Saharan African companies to explore the 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 insights gained 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. One key finding from the challenge is that locally manufactured and assembled products in Africa can surpass imported counterparts in terms of quality, resulting in rejection rates falling by up to 70%.
This comprehensive report features in-depth case studies of each of the five companies, providing valuable insights into their findings and experiences.
The Powering Renewable Energy Opportunities (PREO) Programme, supported by the IKEA Foundation and UK aid, and delivered by the Carbon Trust and Energy 4 Impact, stimulates energy demand in rural Africa as a way of creating sustainable jobs and reducing poverty through economic growth and empowering women.