Secretary-General of the Pan-African Manufacturers Association (PAMA), Segun Ajayi-Kadir, has decried the limited ability of Africa’s manufacturing sector and its structurally weak foreign direct investment (FDI) inflows.

Ajayi-Kadir stated that this occurs despite the continent’s growing market size and recent increases in aggregate investment.

Speaking in the association’s sectoral report, he said that contemporary evidence from the United Nations Conference on Trade and Development (UNCTAD) reveals that FDI in Africa remains highly concentrated in extractive industries and services, with manufacturing underrepresented and neglected.

Recent UNCTAD analyses further indicate that even where some diversification is observed, investment flows remain concentrated in low-technology, low-value-added segments, with minimal penetration into higher-productivity, innovation-driven manufacturing activities.

More importantly, he said, the composition of manufacturing FDI reveals persistent structural limitations. Across the continent, investments are largely confined to low-technology, low-value-added segments, with limited penetration of complex or technology-intensive industries.

“While some diversification is evident, it remains shallow, typically concentrated in agro-processing, basic consumer goods production and final-stage assembly activities. This reflects a broader pattern in which investors prioritise market-seeking and resource-linked opportunities over efficiency-seeking investments that build integrated industrial capacity,” he said.

Recent UNCTAD analysis emphasises that Africa’s role in global manufacturing value chains remains limited, with a focus mainly on upstream, input-based activities. Despite its potential to become a hub for higher-value industries like automotive, pharmaceuticals, and renewable energy technologies, investments often follow resource-based linkages.

For example, food processing is centred in agricultural areas, and mineral processing occurs near extraction sites. This approach hinders the growth of integrated industrial ecosystems and supplier networks.

He also mentioned that structural constraints, including infrastructure deficits, high production costs, regulatory fragmentation, and weak industrial linkages, continue to discourage foreign direct investment in technology-intensive, efficiency-focused manufacturing.

Consequently, investors tend to favour low-risk, low-complexity production models, thereby perpetuating a superficial pattern of industrialisation.

He explained that the challenge extends beyond just the small portion of manufacturing in overall FDI inflows. It also focuses on the quality and depth of the investments. The prevalence of low-value activities has limited Africa’s capacity for industrial progress, integration into global value chains, and job creation, keeping it on the periphery of global manufacturing systems.

The report highlighted that Nigeria attracts the largest share of FDI in West Africa; however, manufacturing investment remains relatively low due to policy inconsistency, infrastructure gaps, and macroeconomic instability.

Although investment inflows have recently improved, manufacturing FDI in Africa still encounters several structural barriers. These issues not only limit the total volume of inflows but also shape their sectoral composition and the lasting developmental effects.

Some of these challenges encompass political instability and conflict risks that significantly impact manufacturing investments. Additionally, there are ongoing issues with energy supply, transport networks, trade logistics, and limitations in skills and productivity. Other difficulties include inconsistent policies, regulatory uncertainty, and administrative bottlenecks, as well as currency volatility, inflationary pressures, and overall macroeconomic instability.

He stated that clear, predictable policies, transparent regulatory systems, and strong protection of investor rights are crucial for building investor confidence and ensuring long-term commitment. He emphasised that policy frameworks should focus particularly on manufacturing, as it generates jobs, promotes technology transfer, and drives economic transformation.