4 popular African countries for expansion in the manufacturing industry

What if the manufacturing industry held the keys to business success in Africa? Ever since the COVID-19 pandemic, many African governments have established local schemes to boost the economy through local production as opposed to depending on imports. These new schemes swing open the door for entry into Africa, and potentially for business success too.

In this article, we take a look at 4 of the most sought-after African countries for expansion in the manufacturing industry.

Nigeria

An investor favourite, Nigeria offers a truly impressive basis for business dealings in the manufacturing industry.

Firstly, there is its status as the most populated country in the continent. With a population of over 200 million people, Nigeria is the largest African market with a consumer base consisting largely of a growing middle class. These considerable demographic numbers are also immensely useful when it comes to hiring and onboarding new staff members to help with your company operations locally.

Beyond this, natural resources are also plentiful: oil, gas, cocoa, cassava, precious stones... Nigeria has the means to sustain production and manufacturing at its heart. The local availability of raw materials also means lower costs and the potential for higher profit margins.

The country’s rich cultural landscape, as well as the growing popularity of regional foods all make Nigeria an opportune location for expansion.

To improve matters for investors, the Nigerian government has introduced programmes like the Economic Recovery & Growth Plan, which promotes local production as opposed to imported goods.

“Made In Nigeria” is looking like an especially good investment for foreign companies at the moment.

Main manufacturing sectors: Beverages, cement, food processing, textiles. It is worth noting that Nigeria is home to the second largest beer industry in Africa after South Africa.

It is important to bear in mind existing industries, because it is easier to expand to those given the availability of existing local infrastructure, knowledge, and skilled talent.

Rwanda

In 2023 in Rwanda, the manufacturing industry accounted for almost a quarter of national GDP, with a 22% contribution from the manufacturing sector, which grew by 10% in this period.

Among the main manufacturing sectors are:

1. Fast-moving consumer goods such as detergents, body care products, paper tissues, plastic goods, papers, chemicals, beverages, textiles, leather and footwear and cosmetics
2. Construction materials such as granite tiles, cement, roofing sheets and tiles and steel bars and light items
3. Laboratory Equipment
4. Manufactured electronics and automobiles, including computers, phones, and car assemblies

Rwanda is also among the top 5 African countries where it is easiest to do business. To this, add the fact that Rwanda can serve as an entry point to Eastern Africa, and a list of fiscal incentives that can make expansion there quite attractive:

1. No corporate income tax for companies looking to relocate their HQ to Rwanda
2. Companies are exempt from capital gains tax
3. Companies in sectors including manufacturing benefit from a 7-year tax holiday when undertaking large projects

South Africa

Known as one of Africa’s prime economies, South Africa is an investment destination that offers ease and peace of mind to businesses. Because the country is already well-established, logistics, amenities for transport, road networks and ports are available, which in turn makes business more smooth sailing. Besides, the local South African market is an attractive one: rapid urbanisation is leading to an increase in the consumption of goods, which in turn, is driving demand for a variety of goods. The rise of the middle class also signifies a need for infrastructure development which requires construction materials and equipment as well as machinery – something that manufacturers in these sectors can greatly benefit from.

 In 2023, the South African manufacturing industry contributed 12.92 % to GDP, up from 12.26% from the previous year, according to the World Bank collection of development indicators.

In South Africa, the main manufacturing sectors are:

1. Petroleum, chemical products, rubber & plastic
2. Food & Beverages (including a thriving beer and spirits market)
3. Transport equipment
4. Metals, metal products, machinery & equipment

South Africa also has a number of incentives in place for businesses, including:

1. The Manufacturing Competitiveness Enhancement Programmes, the capital projects feasibility programme, the automotive investment scheme, the export marketing and investment assistance scheme, the sector‐specific assistance scheme, and the section 12I tax incentive scheme.
2. The AIS (Automotive Investment Scheme) offers a non-taxable cash grant of 20% of the value of qualifying investment in productive assets by original equipment manufacturers (OEMs), and 25% of the value of qualifying investment in productive assets by component manufacturers and tooling companies, as approved by the Department of Trade Industry and Competition.

Kenya

With its strategic location offering entry into Eastern Africa, Kenya is a popular destination for expansion in the manufacturing industry. Besides, the Kenyan government is also promoting industrialisation through initiatives like the “Big Four Agenda,” which focuses on manufacturing, affordable housing, universal healthcare, and agricultural productivity.

Some of the main manufacturing sectors in Kenya include:

• Agro-Processing Industries
• Textile and Apparel Manufacturing
• Construction Materials
• Chemical and Pharmaceutical Manufacturing
• Renewable Energy Equipment Manufacturing
• Plastics and Packaging
• Automotive Assembly and Components
• ICT Hardware Assembly

Investors in the Special Economic Zones enjoy several incentives that include a full investment deduction for buildings and machinery, 10% corporate tax for the first 10 years, and 15% for the next 10 years; as well as a 5% withholding tax on payments made to non-residents.

Africa HR Solutions can help you thrive in the manufacturing industry.

Africa HR Solutions has supported and continues to support companies in the manufacturing industry across 46+ countries in Africa.

As such, we understand all too well your unique issues, roadblocks, and frustrations. Through our EOR offer, we help you overcome administrative obstacles and navigate complex compliance issues with ease – ultimately enabling your success in the industry and in Africa.

Ready to expand to Africa? Our team is here to help.