Economic Hubs: The Key to Africa’s Growth and Competitiveness
Economic hubs are clusters of businesses that form around a specific region due to various factors such as proximity to tradelines, access to raw materials and human resources, existing infrastructure and financial institutions, and more. These hubs are critical for the growth and competitiveness of African countries. They also provide job opportunities for youth and add value to the economy.
These hubs are often referred to as the “heart” of the region and promote the development of the area and its constituents. In Africa, developing economic hubs have given the continent an edge in terms of competitiveness and standardization. The value of developing hubs in Africa has increased as the continent’s economies continue to grow. Countries such as South Africa, Nigeria, and Kenya have made clusters the central pillar of their economic growth strategies.
The continent has a great potential to grow by becoming hubs for this sector as Nigeria, South Africa, and Egypt have shown very good performance in this regard. Ghana has also created an environment for business which is now being invaded by foreign investors and small firms from East Africa. The small scale of the country does not stop foreign investors from investing in large-scale projects due to its low cost of doing business.
The Distinction between Trade and Industrial Hubs
Trade hubs, a special category of economic hubs, are designed to handle a massive turnout of physical goods and services, bringing both quality and quantity under one roof. They provide a one-stop destination for buyers and offer customized infrastructure and logistics depending on the commodity type and characteristics. In Africa, trade hubs are being developed by formulating policies that support manufacturing for certain products, such as textile production in Ghana. These hubs ensure the localized development of goods and services by providing premium infrastructure.
Trade hubs are particularly popular infrastructurally as they offer complete integration of all the basic infrastructure such as power, water, and sanitation, in a single place. They also encourage farmers and traders to utilize modern technology and machinery while giving them a common platform where they can sell their goods.
The main benefit of trade hubs is that they bring together the organization of buyers at source and sellers in the market for final goods for more effective business operations. The creation of such hubs attracts a large number of businesses and investors to the region. This plays a strong role in the development of skilled manpower in the region.
Lower costs, reduced time, and better quality: One definite advantage of trade hubs is that they have a low-cost structure compared to traditional markets. The time it takes to transport goods from import to export can be cut by as much as 50% by utilizing trade hubs. In addition, they offer reduced transportation time as compared to traditional markets too.
Because they are composed of several branches, there is the possibility of the goods being insured from any damage that might take place during transport. In addition, trade hubs offer a wide range of facilities to all the stakeholders involved in transactions such as bank accounts for small firms and traders, specialized information on tools and machinery for manufacturers, and transport facilities for transporting goods.
- Proximity to raw materials and human resources: The proximity of trade hubs to raw materials and human resources is another important factor that makes them effective. They enable the ability to export and import goods and services. They are often in the heart of a region and have good transport links with cities, making them very accessible. This helps reduce transportation costs and also makes them very accessible when selecting a trading partner.
- Good logistics: The improved infrastructure of trade hubs is another benefit to the quality of life of traders and manufacturers in Africa. They have easy access to various transportation modes and utilities, as well as good financial institutions to help them with loans and other business affairs.
- Access to markets: With trade hubs being situated at the heart of their region, there is greater ability for importers and exporters to reach out to the primary market for their goods. This reduces the cost of transporting them from one location to another, further boosting competitiveness and profitability.
- Innovation: The presence of trade hubs in the region enhances innovation. The availability of good entrepreneurs, capital and expertise for manufacturers in place allows them to innovate and improve their products. This helps improve the quality of goods that are being sold to wholesalers and retailers.
- Threat from interference from potential competitors: Trade hubs also have a threat from potential competitors as they often face a lot of competition from other emerging markets with similar characteristics. This makes them vulnerable to good competition in their markets and industries. However, trade hubs deal with this by having good policies to protect their owners and small manufacturers.
- Offering openness to foreign investors and tax incentives: The openness of trade hubs allows them to incorporate new technologies, introduce better competitive strategies and improve their existing operations. In addition, as they encourage multinational investment and trade, they also help attract foreign investors. This allows local people to benefit from the technology used in business operations. Trade hubs help promote jobs for youth as many of them offer various training courses for those wishing to work in the sector.
Free trade zones are one of the most important tools for stimulating foreign investment in developing countries. A free trade zone allows the simple and rapid import and export of specific goods with minimum legal requirements. When it comes to moving, processing, or assembling imported products, using a Free-Trade Zone has considerable economic benefits. Situated within the Tema Free Zone Enclave, the Meridian Industrial Park gives importers, manufacturers, and distributors the opportunity to experience these advantages. A Free-Trade Zone (FTZ) is a designated area that is considered outside the customs territory. In an FTZ, domestic and foreign goods can be moved, handled, and assembled without paying the duties and taxes normally required by customs and border protection.
Industrial hubs, on the other hand, are focused on creating value for one or two industries by bringing resources under one roof and aligning them with the existing policy framework in the region. Industrial hubs are also located in the country’s capital and largest towns with good access to key ports, airports and electricity sources. Since industrial hubs focus on only one or two industries, they are less susceptible to competition from other emerging markets that provide the same products. In addition to that, industrial hubs offer tax incentives for exporters and investors, which helps them invest more in the industry. This policy helps improve the competitiveness of firms from that country.
Industrial hubs can be classified into industries sectors according to where they operate. For example, textile hubs, agricultural hubs, etc. In this case, they offer more than just a central location. They also provide best-in-class infrastructure and facilities that are suitable for the sector. This includes access to raw materials, freight handling and logistics as well as access to customers.
- The availability of a skilled workforce: As industrial hubs are usually situated in the center of the nation and are close to various labor markets, they have an easier access to a well-trained labor force. This is particularly useful for companies engaged in manufacturing. In addition to that, they provide good infrastructural facilities to support manufacturing operations. The proximity to residents also helps improve living conditions in this area. This is because there is easy access to health care and other basic amenities.
- Infrastructure: Industrial hubs offer better infrastructure that is suitable for the manufacturing industry. This includes communication networks and facilities, aviation technology and a good transportation system. They also offer good educational institutions, which makes it easy for companies to attract and train employees who can help them with their operations.
- Access to customers: Another advantage of industrial hubs is that they are close to customers who are interested in the products and services being supplied by the companies operating there. This means that the companies are able to directly target their potential customers.
- Proximity to raw materials and human resources: Industrial hubs are also in close proximity to raw materials and people who can be recruited into the labor force. This makes them easy to access and is particularly useful for businesses that import products from abroad. In addition, they are located near the cities, which makes it easy for companies to transport goods and services provided by them. City residents also provide significant support to the companies.
- Good logistics: The good logistics of industrial hubs make it possible for manufacturers to operate with ease. There is access to various technologies and utilities such as electricity, communication and water. In addition, there is also easy access to financial institutions that offer loans to small businesses operating in the region.
- Access to markets: Industrial hubs are located close to where customers live which makes it easy for companies operating there to access them. This improves their profitability and increases competition from other firms with similar products. They also have enhanced opportunities of addressing national or international markets as well.
- The presence of competition: Industrial hubs are no exception when it comes to the presence of competition from other countries. They face stiff competition from emerging markets that have similar characteristics and products, which makes them vulnerable to such challenges. However, they try to counter this by following good policies and creating effective programs for manufacturers.
- Close proximity to major roads and markets: Good logistics are not the only reason why industrial hubs are good locations for manufacturing companies. Good infrastructure, favorable legislation, tax incentives and availability of skilled labor are also important. All of these are influenced by land quality in the area. Therefore, it is crucial that the area in which industrial hubs are located is reliable to provide all these facilities.
The distinction between various economic hubs may not always be explicit. For example, certain hubs may be identified as industrial hubs, but they also lead to the growth of indirect businesses. Regional economic hubs in Africa promote bigger projects, flexible infrastructure solutions, and FDI. They upskill local communities and prepare the groundwork for policy frameworks, enhancing the business ecosystem and investor interest while turning Africa’s growing population into an asset. That notwithstanding, we can look to the Dawa Industrial Zone as an example of an economic hub Ghana’s successful implementation of policy frameworks has attracted significant FDI, enabling the development of economic hubs like the Dawa Industrial Zone and the Meridian Industrial Park. These hubs have immense growth potential and can attract further investments from developed countries.
The Dawa Industrial Zone is a purpose-built 2,000-acre industrial park that accommodates a broad range of light and heavy industries across various sectors, such as Agro-processing, Textiles and Garments, Steel Fabrication, Warehousing and Logistics, among others. When operating at full capacity, it is expected to house over 100 companies and provide fully-serviced infrastructure to support their production and operations within the park.