While the solar market has been growing quickly in Africa, local manufacturing of off-grid solar products is still limited. The vast majority of equipment is imported from Asia where production is centralized. Yet, it has been demonstrated that the development of local value chains contributes not only to industrial development, but also the wider economic and social development of a country.
Localizing manufacturing offers many tangible benefits.
In the first place, locating the industry close to the market allows to understand the customer’s needs and to adapt the offer to the specific needs of the area. As a result, this model then also allows to provide a better and faster local after-sales service to the customer and thus ensure a greater durability of the products put on the market. Indeed, the repair of products is made possible by the availability of spare parts and a trained local workforce.
In addition, the local presence of a manufacturer also facilitates the sourcing of local small and medium-sized enterprises, building inventory then becomes less risky, ties up less cash because of higher turn-over and in the end becomes more flexible andmore efficient.
Finally, one of the most important benefits of local manufacturing is jobs creation. A study conducted by the Burkinabe research association IFSRA highlighted the socioeconomic impacts of the presence of solar manufacturing workshops in the areas where they are located. It created formal jobs, led to the inclusion of vulnerable people, created training opportunities at the local level, improved the employees’ living conditions, and last but not least it increased the users’ pride in consuming local products.
But manufacturing in Africa still presents major challenges for entrepreneurs.
First, the underdeveloped manufacturing environment results in a lack of local suppliers and value chains. As a result, starting local manufacturing in Africa is comparatively more challenging than in other parts of the world.
Second, even when local manufacturing does exist, the lack of intra-African logistics solutions limits the size of the market accessible from the production plant.
In addition, with the exception of a handful of economic zones recently being developed in selected countries, there is still a lack of concrete action by governments and international institutions to create an environment conducive to the development of a local industry. Local entrepreneurs need tangible support beyond the speeches that increasingly advocate for “Made in Africa”.
And on top of these structural difficulties, there are also cyclical difficulties. For the past two years, industries have been facing tensions over the supply of raw materials, longer supply times and higher transport costs. All of these negative impacts, are further multiplied in a poorly industrialized African environment.
Some recommendations can be made to support the development of local industrialization.
African manufacturers must obtain, for imported components and spare parts, customs conditions that are at least equivalent if not preferential to those for imported finished products . Exoneration of taxes and duties on solar products implemented by some African countries to promote the development of renewable energies should apply for finished solar products but also for components used for the local manufacturing of solar products. Currently, it is difficult to benefit from these exemptions when importing cables, electronic components, screws, etc., and not a finished solar product.
In addition, the implementation of the African continental free trade zone (AfCFTA) would create an enabling environment for local industry to flourish.
Finally, Government institutions, as well as the development programs of international or bilateral institutions, should also integrate local preference criteria into public procurement and support programs for off-grid solar market development.
Excerpt from: Africa Solar Outlook 2023 (AFSIA, 2023)