Global trade, the merchandise exports component of which was about US$15.5tn in 2016, according to World Trade Organisation (WTO) data, is expected to shrink by at least half over the next half century due to 3D printing or additive manufacturing (AM). In tandem would be global value chains (GVCs), which were set to give African countries perhaps their last fighting chance at industrialisation. At $346bn in 2016, African merchandise exports were just 2% of the world total. And 32% of these were oil exports.
Still, African manufacturing has actually been on the ascendancy, growing in real terms by 3.5% a year to $157bn in 2014, up from $73bn in 2005, with exports doubling to more than $100bn in the period.
But what is additive manufacturing? Simply put, as the name implies: it is manufacturing by adding. Unlike the conventional manufacturing process, where an object having been designed is put into form by “cutting, drilling, and milling”, “a 3D printer starts with nothing and add stuffs to it”. With the aid of a computer programme, a 3D printer is able to produce a three-dimensional physical form of what was hitherto no more than a virtual representation. However, relative to traditional manufacturing, the additive kind is slow and expensive. In addition, the quality of produced objects can sometimes be doubtful. But it is fast evolving to overcome these constraints.
Bespoke specialist products or prototypes are better suited, therefore. For now. Incidentally, there are indications that improvements could come about faster than expected. Take polymer-based manufacturing, for instance: digital light synthesis pioneered by Carbon, an American producer of 3D printers, allows for a process 100 times faster than conventional printing. And objects produced are of far greater quality and strength. For metal printing, better methods are beginning to emerge as well. An example is “bound-metal deposition”, which produces objects 500 times faster than traditional laser-based ones. Thus, the ascendancy of additive manufacturing to mainstream production is only a matter of time.
African manufacturing trend (2005-14). Source: Overseas Development Institute (ODI)
Manufacturing more and better with less
On the face of it, the economics of additive manufacturing is very appealing, bar the earlier highlighted, but fast disappearing constraints. Altering objects or producing new ones simply require a change of software, for example. Under traditional manufacturing, this would entail the procurement of new equipment, re-training of staff, modifications to value chain activities and so on. Improvements would evolve at different paces for each type of printing, though. For certain kinds, complex and high-end objects like aircraft parts, satellites, racing cars and medical devices, speed is not what really matters. Greater emphasis is placed on quality and precision.
For such, a relatively slower and more expensive additive manufacturing process entail costs that pale in comparison to the potential gains. And since the end-users tend to have the deep pockets and patience for that level of precision and quality, 3D printing is already fast gaining ground for that manufacturing segment. There is evidence of this. American industrial giant, General Electric, is investing a great deal in 3D printing, to produce parts for jet engines, for instance. This is also the case for less space consuming, but equally (if not more so) complex bio-printing, which involves smaller laboratory-type equipment, but require greater care to maintain the sterility and salubrity of produced tissues. These could range from cartilage to more complex organs like hearts, livers and so on.
With automation and 3D printing, high-wage developed economies may no longer be in much need for manufacturers, whether as intermediates or finished goods, from African and other low-wage countries. Short of raw material constraints, any country would in the not-to-far distant future be able to virtually manufacture any good using a 3D printer. And if advances in 3D printing proceed as currently envisaged, it would be possible to do so at about or more than the current speed of traditional manufacturing processes. When that is the case, in about four decades from now, at least according to recent research by ING, a Dutch bank, there might not be that much need for labour-intensive manufacturing, the type African countries need to keep their teeming idle youth populations constructively engaged.
ING’s report suggests about a quarter of world trade could be wiped out by 2060 on the back of advances in 3D printing, especially in car manufacturing. Incidentally, this was the type of manufacturing that African countries were banking on and have actually been recording some progress with. A Chinese-backed car assembly plant in South Africa is expected to start exporting cars in early 2018, for instance. As the first new car plant in South Africa in at least forty years, it represents an expected trend of that kind of manufacturing moving to relatively lower-wage economies from an increasingly pricey Chinese labour market; even though the South African labour market is amongst the most expensive and disruptive on the African continent.
The move probably anticipates the earlier highlighted game-changing automation trends: most of the cars are to be sold in neighbouring countries, which makes sense. It would be cheaper to ship the cars across the border by road and rail, within a region governed by a single tariff regime, that is also relatively borderless, than to ship them all the way from China. Incidentally, the Chinese car manufacturer is following in the footsteps of more experienced and advanced competitors like Germany’s Volkswagen and BMW, Japan’s Toyota and America’s Ford. The Chinese move also pre-empts announced plans by authorities to phase out of fossil fuel cars in France and the United Kingdom (and likely elsewhere in Europe) from 2040, and indeed China itself, in what its authorities termed the near future.
Of course, there are arguments that suggest this likely shrinkage in low-skilled labour-intensive manufacturing and its associated value chains may be grossly exaggerated, especially for developing countries. This is because there are still certain types of manufacturing that robots are not yet skilled at, or if nearly so, they are not cost effective. For example, the textile industry entails certain complications that advances in robotics are yet to master.
3D printing’s impact on world manufacturing production. Source: ING, Oxford Economics; Wohlers report 2017, 3D printing and additive manufacturing, state of the industry, annual progress report, calculations by ING
But that is not to say that even in that sphere of manufacturing, robots are not increasingly taking the place of humans. They are. According to a recent report by The Economist in the UK, one American robotics firm, SoftWear Automation, produces machines that do what seamstresses do in textile factories – not everything yet, though – so-called “Sewbots”, which can already make pillows and bath mats, but would by 2018, if all goes according to plan, be able to produce 1,142 T-shirts per eight-hour shift. This is almost twenty times the output of a human involved in a similar task.
And in the time horizon that recent research suggests 3D printing would become fast and sharp enough to beat current traditional manufacturing processes, automation would well have become far more advanced. These advances are also somewhat egalitarian; China is a dominant buyer of industrial robots. Besides, a third of industrial robots that were shipped in 2015 were destined for middle-income countries; albeit the earlier mentioned Sewbots have only been sold in the US. In fact, such are these advances now, the mystery behind current perennially tepid inflation in developed economies is beginning to be attributed to these developments. Even more groundbreaking, the orthodoxy of how countries are meant to develop is increasingly being challenged; which suggests that economies first make the transition to industry from agrarian agriculture before moving on to services.
China’s evolution is a typical example with its manufacturing jobs moving to other Asian countries (and expectedly African ones in due course), not only because wages have risen, but also due to a focus now on services. With advances in robotics triggering so-called “premature de-industrialisation” in developing countries, as manufacturing jobs move back to advanced economies (which increasingly compare favourably cost-wise due to automation) from cheaper labour jurisdictions, suggestions about leapfrogging the industrial development phase straight into services is beginning to gain resonance. Clearly, current industrial policy and thinking in many African countries would have to be rethought in light of these developments.
Industralisation in Africa
Do African countries still have a chance to industrialise then? Put another way, do they need to? In addressing the question, the time left for any such development must first be countenanced. So, as earlier highlighted, 3D printing would likely become advanced enough to cut international trade by half in about 40 years’ time. That is still a long time in any country’s development. So yes, African countries still have a chance to industrialise and yes, they still need to. But in doing so, they must begin to position themselves to ensure that the acquired competencies could be easily upgraded to ensure relevance in the envisaged future of manufacturing expected to be dominated by automation and 3D printing.
Besides, should African countries focus more of their trade efforts on themselves, they could gain at least another 20 years during which they could still prosper from what may have become redundant competencies outside of the African continent. Better still, African countries should begin to focus on global value chains in the services sector; that is, upstream and downstream value chain activities before and after the processing stage. That way, when manufacturing becomes largely automated, they would still be relevant in what would have become shorter GVCs. As it turns out, services GVCs are also more lucrative.
The thinking has some precedence: the so-called “smile curve” theory, first proposed in 1992 by Stan Shih, founder of Acer, a Taiwanese personal computer (PC) manufacturer. The smile curve concept of GVCs argues there is more value to be added at the product design (upstream) and marketing stages (downstream) of a value chain than at the manufacturing or processing stage.
The smile curve depicting value distribution along a GVC. Source: OECD
In any case, more traditional sectors like agricultural production and its related industries are unlikely to be scathed, though. So, it ought to be accorded greater attention; especially now that it is clear that Africa’s bulging jobless youths would probably only be absorbed substantially by such sectors of the economy. In other words, the solution to the high-unemployment problem that was being sought in labour-intensive manufacturing, should now be aggressively pursued in agriculture.
In this regard, there would be a need to ensure that production is weaned off the elements. Agriculture could not continue to be rain-fed, for instance. That said, there are certain types of manufacturing that would likely be resilient to AM-related and automation disruptions; that fast-moving consumer goods (FMCGs) are likely to continue thriving, for instance.
Other types of manufacturing like crude oil refining, cement production and so on would likely be marginally affected. But these are already largely automated anyway. However, further down their value chains, in distribution and marketing, where humans must necessarily be involved, automation and AM-type innovations are likely to be inconsequential. Even so, African industrial thrusts would likely only be more rewarding and sustaining if they are aimed at domestic and continental consumption. It could also would buy African countries some time as they adapt to some of these advances.
Simply put, there is going to be a need for African countries to protect their markets. This is because even as the externalities of these industrial advances and other Fourth Industrial Revolution developments are yet unknown, there is a greater likelihood they are likely to be negative for less developed economies, African ones especially. It is not far-fetched to reckon that in time, Africans would acquire the necessary experience and skills that they would need to participate actively in what is expected to be a knowledge-based world economy.
But unlike more adaptable technologies in sectors like telecommunications, where in the absence of legacy encumbrances, African countries have been able to leapfrog to mobile telephony and internet technologies from hitherto backward and dysfunctional telecommunication infrastructure, manufacturing and industry are not so easily adaptable or replicable. In the current context, for instance, an African country could not suddenly be able to produce industrial robots or 3D printers or innovate fast enough to compete with advanced economies that are already way ahead. The current and likely future model for developing countries is that these innovations would be procured from such economies. But without an already robust industrial base and a workforce easily upskilled, such as is the case in China, the potential economic gains from such an adaptation could still be a net negative.
Even so, it is not impossible that some 3D printing technologies could emanate from developing countries, including Africa (or be readily accessible to them). But it is almost certain the advanced ones would only be available to them subject to the discretion of authorities in the countries of the original equipment manufacturers (OEMs).
For the former scenario, there is already some evidence. South Africa is already actively engaged in additive manufacturing, especially in jewellery, tooling and prototyping. More heartening is the fact that it is producing the technology at home and its innovations are evolving at almost about the same pace as those in advanced economies. For instance, the Aeroswift machine, produced by Aerosud ITC and the Council for Scientific and Industrial Research (CSIR) National Laser Centre, both in South Africa, is the world’s biggest powder bed fusion additive manufacturing machine, and would be used to produce metal parts for an aircraft programme.
South Africa’s progress has been on the back of support from the government, though, which at the urging of the Rapid Product Development Association of South Africa (RAPDASA), commissioned a roadmap in 2013 dubbed “South African Additive Manufacturing Technology Roadmap” , with the production of parts for the medical and aerospace industries identified as key focus areas. For traditional manufacturing, it was proposed that AM be used to improve efficiency and for repairing what used to be unserviceable parts. Today, South Africa is considered competitive in both polymer-based and metals-based AM.
But there is progress up north as well. In October 2017, Elephab, a Nigerian replacement and emergency parts additive manufacturer, secured funding from an American venture capital firm. It already has continental ambitions, pointing to likely innovation from multiple sources within the continent. Noteworthy though is that the 3D printers to be used by the Nigerian example are to be procured from Germany and the US. So, to that extent, South Africa is more advanced.
It helps of course that South African universities already teach the subject; a wide knowledge gap is one of the other major constraints holding back additive manufacturing in general. African countries could leverage on South Africa’s growing expertise to leapfrog into additive manufacturing as well. What is clear, though, is that there would be something that may still put currently advanced economies ahead, raising the barrier to entry. The emerging scenario is that most African countries would necessarily procure their 3D printers from America and Europe, now and in the future. If African countries must stand a chance then, they would need to protect their markets.
In this regard, it would seem their so-called development partners are already thinking ahead, pushing such supposedly mutually-beneficial preferential trade agreements as the European Economic Partnership Agreements (EPAs) and the American African Growth and Opportunity Act (AGOA). On the face of it, they are not necessarily bad. But when agreed, African countries would have obligations of reciprocity. This is the downside. Because in an environment where a technology is widely available and replicable, comparative advantage would then have to come from being able to do what everyone else is able to do faster. There is no scenario that could possibly be envisaged at the moment that puts African countries in a position to manufacture goods better in the future than their advanced counterparts; that is, even if AM technologies prove to be egalitarian. But if African countries were already entrenched in services GVCs, they would still be able to profit quite well from these advances. Even so, it would be best if they developed their own continental value chains and make other African countries the primary focus of their manufacturing. In that event, the expected shrinkage of global GVCs on the back of automation and additive manufacturing, would be no great matter for them.
Plugging into global value chains took centre stage after the performance of industrial policy in many African countries (predominantly import substitution) proved to be abysmally poor. There was a clear need to change the focus on developing whole value chains to one which leveraged existing cross-border ones by multinational companies (MNCs). But there was a catch. The aspiration of being able to manufacture finished goods for domestic consumption and exports, would have to be abolished. So, take the example of a car. As opposed to the traditional policy of trying to manufacture one, from design to production, the thinking became that it would be more optimal if an African country or other developing ones chose to produce one or more components of the car for which it had a comparative advantage. As for cars, what has happened mostly is that the few African countries who participate in that value chain, have mostly ended up just being assemblers of the cars targeted at domestic and neighbouring markets.
However, in general, the idea of GVCs supposed that value would be added to imported inputs or raw materials domiciled locally, and then the improved intermediate goods would be shipped to more able manufacturers abroad. So, a country with rubber in abundance, say, could produce car tyres for car factories in Detroit, Guangzhou, and elsewhere. And then they would import the finished cars for its local market. Or better still, import other components to add to the ones it produces for domestic assembly. Expected disruptions from automation and additive manufacturing means that whatever progress has been made in this regard, may not be of much value in a few decades. That might be putting it mildly. Cars themselves are evolving so fast that just when developing countries are beginning to gain mastery in the assembly of fossil fuel-based ones, innovations to make batteries smaller and last longer have improved the prospects of electric cars replacing them a great deal.
So, say industrial policy is successful in car manufacturing in an archetypal African country, the acquired competencies and associated value chains may not be of much use in the future. Thus, African industrial policy must begin to anticipate these disruptions if the continent is to stem the tide of its perennial relative backwardness. Incidentally, Asian countries, which beat their African counterparts to become key players in global value chains, have now also started to position themselves for relevance when that time comes.
Depth of integration of SSA countries in GVCs. Source: IMF
In 2014, the African Development Bank (AfDB) compiled an extensive report on how little integrated African countries were with global value chains (GVCs). Global value chains are currently dominated by Europe, North America, and East Asia; together about 85%. The share of East Asian countries has been increasing, though, rising to 16.2% in 2011, from 14.4% in 1995. In contrast, that for Europe and North America have been shrinking; the former to 50.9% from 57.5% and the latter to 11.8% from 13.1% in the period.
What is the extent of Africa’s stake then? About 2.2% in 2011, from 1.4% in 1995. And smaller African countries like Lesotho, Mauritius, the Seychelles, Swaziland, and Tanzania are more plugged into international production networks, among the top-30 participating countries in GVCs. Incidentally, what additive manufacturing portends for even that meagre African participation in GVCs, is quite dire. With an estimated one-billion-strong workforce by 2040, and expectedly more about the time 3D printing is expected to overcome earlier highlighted constraints, and potentially render redundant precisely the type of labour-intensive manufacturing that has long been envisioned would be used to put that labour force to work, the dangers to global security and peace could best be imagined.
Lack of jobs at home is the primary reason young Africans brave stormy seas to illegally migrate to Europe and almost anywhere else outside the African continent. Thus, unless African governments begin to plan for how this many people would find work, value-adding ones at that, they are likely to have a major crisis on their hands. With new production technologies, robotics and 3D printing already engendering so-called “re-shoring”, whereby globally dispersed labour-intensive production stages of GVCs in low-wage economies are increasingly now being returned to what hitherto were considered high-wage headquarter countries.
African governments would need to rethink plugging into GVCs; at least, they would need to be smarter about it. They could focus on industrial sectors that are likely to be minimally affected, for instance. Better still, they could momentarily focus on developing capacities in non-manufacturing activities, upstream and downstream of manufacturing or so-called services GVCs. To this end, policy must be as it was in the Asian case, namely deliberative, proactive and forceful.
Focus on global value chains in the services sector
The foreign content of the exports of developed countries are expected to decline as 3D printing makes high-wage economies competitive again, thereby reducing the need for them to manufacture intermediates and/or assembly finished goods in low-wage economies. This would dash the hopes of low-wage African countries looking to attract cost efficiency-seeking manufacturing foreign direct investment (FDI). Not that there were not already sharp wage disparities between African countries, meaning the impression of homogeneity of cheap wages is somewhat misplaced. Average wages in Kenya of $2,854 are more than three times those in Ethiopia of $807, where the pace of industrial development is quicker.
Would it not be better then for African countries to focus on services-related GVCs, rather than develop capabilities in goods-related ones, only for them to become obsolete? African countries could specialise in upstream activities like research and design and also be key players in downstream activities like marketing and distribution of the finished goods. Put another way, the choice African countries face is whether to develop proficiencies in less than 40% of the share of value-add in world gross exports, but with competencies that would endure, or instead develop capabilities in the remaining 60%, but run the risk that any achievement could easily diminish on the back of automation and additive manufacturing. Studies show such a choice is mutually exclusive, though.
So, a services GVC focus would be at the expense of manufacturing-related ones. But even when that choice is made, the factors responsible for the current low African participation in GVCs are not likely to be any different. Whether the focus is on goods GVCs or services GVCs, reliable power supply, good roads, and efficient ports remain crucial. Economic institutions like the rule of law and property rights are also indispensable. Thus, irrespective of the strategic choice that is eventually made, it must be in tandem with fixing these traditional deficiencies.
Published:26 October 2017