Reasons Why Every Country Should Manufacture Goods Locally

 

Reasons Why Every Country Should Manufacture Goods Locally

This blog space has been sitting idle on my website for a while, so I thought it would be a good place to share some of my views and opinions instead of being so selective and stiff about what I post here. So, here’s my first post in a long time. Hopefully, there will be more in the coming days and weeks.

Sorry it’s so long, but that’s a bad habit I have—which you already know if you’ve read much of this website.

A long, long time ago, I wrote a list of 12 Reasons Why Governments and Private Investors Should Invest in Manufacturing. I still believe every one of those reasons is valid, but the world has changed quite a bit since I wrote it, so I thought it was time for an update.

One of the things that have shaped my thinking is my experience in the cultured marble and engineered-stone industry.

There are thousands of cultured marble and engineered-stone manufacturers in the United States supplying bath and kitchen construction materials to their local construction markets. A builder will often work with a local manufacturer because that manufacturer can make exactly what the builder needs.

Home builders have architects and designers who create specifications for bathrooms and kitchens. They select colors, materials—marble, onyx, granite, engineered stone, etc.—sizes, designs, styles and much more. These products often aren't something a builder can simply pick up at a big-box store. They need to be manufactured to specific requirements.

Years ago, we spent a great deal of time and effort on Search Engine Optimization (SEO) for our website. It generated thousands of inquiries from all over the world. Many came from entrepreneurial-minded young men and women who were actively looking for opportunities but simply didn't have the financial resources to establish a cultured marble factory.

That's how we came to know so many people from developing countries.

We worked with many of these individuals, developing personalized presentations, business plans and financial spreadsheets for different scenarios. I don't regret that experience for a minute. In fact, it taught us a great deal.

Over the years, we've established factories on every continent and in many countries across South and Central America, Europe, Australia and Asia. One of the most interesting experiences was China, where we found people who recognized a growing opportunity and were eager to build an industry around it.

We provided training so they didn't have to start completely from scratch or "reinvent the wheel." They came, they liked what they saw, they bought the equipment, and we shipped it, traveled to China, helped establish the factories and trained their people.

I've been to virtually every region of China, north to south and east to west. I ate more varieties of Chinese food than I knew existed. I've visited the Forbidden City, the Great Wall, the Hutongs and the Summer Palace. I've walked Tiananmen Square in Beijing, seen the giant Jade Buddha at the Jade Buddha Palace in Anshan, and even had the unforgettable experience of getting to hug and pet a real panda at the Sichuan Wolong National Nature Reserve.

Our clients in China were wonderful hosts, and I have some great memories from those experiences.

But the business experience also got me thinking about something much bigger than cultured marble.

In many parts of the world, we found that establishing local manufacturing could be a relatively straightforward proposition. Africa has been different—not because I believe Africans lack the entrepreneurial ability, talent or ambition. Quite the opposite. I've met many incredibly capable and entrepreneurial people across the continent.

The challenge, in my experience, is that there are often many obstacles between recognizing a manufacturing opportunity and actually getting a factory operating.

At the same time, I continue to hear African leaders talk about the importance of moving away from exporting raw materials and importing finished products. I agree with that objective completely.

In fact, that's really what this article is about.

I believe Africa has an enormous opportunity to build more of its own manufacturing capacity, create jobs, develop local businesses and keep more of the economic value of its resources within African economies.

Here are some of the reasons I believe local manufacturing deserves serious consideration in any country—but particularly in countries where unemployment is high and many manufactured goods are imported.

1. Manufacturing Creates Jobs

There are many reasons manufacturing is important to an economy, but employment is probably the most obvious.

A factory doesn't just employ the people who work inside its four walls. It creates demand for raw materials, transportation, maintenance, packaging, equipment, construction, professional services, food and many other businesses.

This is especially important for countries with large, young populations entering the workforce.

That's one reason my X (formerly Twitter) bio has long said:

"Poor countries that don't manufacture and spend their money on imports will always remain poor."

It's intentionally provocative, but the underlying idea is simple: countries need productive economic activity that creates opportunities for their people.

Here in the United States, employment statistics are watched constantly. Governments, economists and businesses pay close attention to employment, job openings, labor turnover and manufacturing activity.

Other developed countries do the same.

There is a reason for that.

Jobs matter.

And for countries with rapidly growing populations, creating enough productive employment is one of the enormous economic challenges—and opportunities—of the coming decades.

2. Manufacturing Creates a Ripple Effect Throughout the Economy

A factory doesn't operate in isolation.

For example, a manufacturer may need crushed limestone or other raw materials. That creates work at the quarry. Those materials need to be transported, which creates demand for trucks, drivers, fuel and maintenance.

Factory employees earn wages and spend those wages in their communities.

They buy food. They may buy furniture. They pay rent or mortgages. They purchase clothing, transportation and services.

The factory itself needs electricians, mechanics, accountants, computers, packaging, security, cleaning services and countless other products and services.

One manufacturing investment can therefore create economic activity far beyond the factory itself.

That's one of the most powerful aspects of manufacturing.

3. Manufacturing Keeps More Value in the Local Economy

Manufacturing adds value to raw materials.

Instead of exporting a raw material and then buying back a finished product at a higher price, a country can potentially capture more of that value domestically through processing and manufacturing.

That value can show up as wages, business profits, purchases from local suppliers, taxes and investment in additional businesses.

It also contributes to GDP.

Look at Vietnam as an example.

Over the last couple of decades, Vietnam has become an increasingly important manufacturing center, and products marked "Made in Vietnam" are now commonplace around the world.

The broader lesson isn't that every country needs to become the next Vietnam. It's that manufacturing can transform an economy when investment, infrastructure, entrepreneurship, workforce development and government policy come together.

I believe African countries have an opportunity to participate in that same global manufacturing growth.

There is no reason Africa should be limited to supplying raw materials while other parts of the world capture much of the value created from turning those materials into finished products.

4. Local Manufacturing Can Strengthen Supply-Chain Resilience

The past few years have reminded everyone how vulnerable global supply chains can be.

Political conflicts, shipping disruptions, natural disasters, pandemics, trade disputes, port congestion and other unexpected events can interrupt supplies from thousands of miles away.

Local manufacturing doesn't eliminate those risks, but it can reduce dependence on distant suppliers.

Having at least some domestic manufacturing capacity can give a country greater flexibility when international supply chains become disrupted.

5. Manufacturing Can Improve the Trade Balance and Reduce Foreign-Exchange Pressure

Local production can reduce the need to import certain finished goods.

That can be particularly valuable for emerging economies where foreign-exchange reserves and currency stability are important concerns.

When a local currency loses value, imported goods can become dramatically more expensive.

That affects everything from food to construction materials.

And this is where manufacturing becomes more than an economic theory.

Imagine trying to build affordable housing while the cost of imported sinks, bathtubs, shower systems, toilets and other construction products keeps increasing because of currency fluctuations.

Producing some of those products locally could stabilize the cost, make them more accessible, and reduce the risk of them becoming prohibitively expensive.

6. Start With the Products People Actually Need

I often read articles from developing countries about investments in information technology, computing, artificial intelligence and other high-tech industries.

Those industries are important. I'm certainly not arguing otherwise.

But economic development doesn't have to be either/or.

Before—or alongside—the next high-tech initiative, there may be enormous opportunities in manufacturing relatively simple products that people already need every day.

Take something as basic as a sink or wash basin.

You don't need to invent the next semiconductor to create a successful manufacturing business.

Sometimes the opportunity is right in front of us.

Look around and ask:

What products are we importing today that could reasonably be manufactured here?

That question can lead to some surprisingly good businesses.

7. Local Manufacturing Can Improve Product Availability and Quality

I've seen building materials imported into developing markets that aren't necessarily well suited to local needs or conditions.

Some inexpensive acrylic products, for example, can crack, stain or discolor relatively quickly. Ceramic products can be excellent, but they can also be vulnerable to breakage.

The goal shouldn't simply be to replace imports with locally manufactured products.

The goal should be to manufacture good products that customers actually want.

With the right technology, training and quality-control systems, local manufacturers can produce a wide variety of colors, designs, sizes and configurations while adapting products to the needs of their own markets.

Local production also makes it easier for builders, regulators and customers to visit manufacturing facilities, understand how products are made and develop confidence in the quality of what they're buying.

That's a significant advantage.

8. Local Production Can Reduce Transportation Requirements

There is also an environmental consideration.

Moving heavy building materials thousands of miles around the world requires ships, fuel, ports, trucks and additional transportation infrastructure.

A single 40-foot container traveling from China to East Africa represents a significant amount of transportation-related CO₂ emissions, with even longer routes required to reach parts of West Africa.

Local manufacturing can't eliminate the need for international trade—and it shouldn't.

International trade is incredibly valuable.

But where products can be manufactured economically closer to the people who use them, there can be environmental and logistical advantages to doing so.

9. Greater Manufacturing Capacity Gives Countries More Economic Independence

I don't believe countries should try to manufacture everything themselves.

That isn't realistic, and specialization and international trade are important parts of a healthy global economy.

But excessive dependence on foreign suppliers can create vulnerabilities.

Countries that have at least some domestic manufacturing capability have more options when circumstances change.

They may be less exposed to sanctions, export restrictions, sudden changes in foreign government policy, shipping disruptions or other international events.

The objective isn't isolation.

It's resilience.

A country should be able to trade with the world while also having enough productive capacity at home to protect its essential economic interests.

Africa Has an Opportunity

This is ultimately why I'm writing this.

I'm not suggesting that Africa has a lack of ideas, intelligence, entrepreneurs or ambition. The people I've met across Africa have demonstrated plenty of all four.

What I see instead is a tremendous opportunity that hasn't yet been fully realized.

Africa has natural resources, enormous markets, a young and growing workforce, entrepreneurs who want to build businesses and cities that will need enormous amounts of housing and infrastructure in the coming decades.

Those are extraordinary ingredients for manufacturing growth.

The question isn't whether Africa can manufacture.

It can.

The question is how to create the conditions that make it easier for African entrepreneurs and investors to do it successfully.

That means access to capital, reliable electricity, transportation infrastructure, sensible regulations, workforce training, technology, financing and markets.

It also means changing the mindset that manufacturing is somehow something that has to be done somewhere else.

It doesn't.

A sink doesn't have to travel halfway around the world to reach a house being built in Africa.

Neither does a bathtub.

Neither does a shower pan.

Neither do thousands of other products that people use every day.

And those products represent something much more important than the products themselves.

They represent businesses, jobs, skills, wages, tax revenue, entrepreneurs and economic opportunity.

That's what makes manufacturing so important.

I don't think the answer is to shut Africa off from the rest of the world. Quite the opposite.

Africa should trade with the world, learn from the world and compete with the world.

But it should also increasingly manufacture for itself—and eventually manufacture for the world.

I've had the privilege of seeing what happens when a country embraces that opportunity.

I would love to see many more African entrepreneurs get that same opportunity.