Interview: Ahmed Osman Guelleh
What potential exists for manufacturing development in Djibouti over the next five years?
AHMED OSMAN GUELLEH: Strategically located, Djibouti has proven to be a beacon of stability and a gateway to more than 100m inhabitants in one of the fastest growing regions in Africa which is not dependent on oil exports. However, the region remains entirely dependent on imports, presenting an enormous opportunity for the manufacturing of all types of consumer goods.
The expansion of the local manufacturing industry will not only reduce the current high consumer prices for imported goods, but also create significant employment and add an important layer of industrial expertise to the country’s workforce. Obstacles that currently inhibit industrial development are high energy costs and low levels of skilled labour.
In what ways can local manufacturers strengthen their competitiveness and tap into the regional consumer market?
GUELLEH: In order to strengthen competitiveness, fiscal incentives for locally manufactured consumer goods would need to be encouraged across the region, to the extent that the manufacturers remain competitively priced against imported finished goods. Imports are generally manufactured for markets with very different affordability levels and retail maturity and thus are often not suited to local markets in Africa. Affordability remains a key issue, and local manufacturers would be well positioned to become more competitive by providing consumer goods in pack sizes more suited to local market affordability and price points.
Local trade remains dominated by informal outlets with limited working capital, which dictate product availability. Implementing further measures in order to cut down on the informal market and reducing the stock-keeping unit costs – by lowering the quantity of units in a carton as well as the size of the pack – immediately creates a good opportunity for the retail sector to stock more products, with higher potential turnover opportunities for the retailer.
At the same time, it is important to adapt newly introduced brands to the familiarity of local consumers as well as their needs. This localisation process includes ensuring the packaging, brand name and aforementioned size appeal to the population, and strengthens marketing and brand awareness. Increasing purchasing parity levels have led to increased demand for mid-range products. It is this market that can be further exploited regionally.
What measures can be taken to improve the domestic supply chain for the distribution of fast-moving consumer goods (FMCG)?
GUELLEH: The development of end-to-end cold-chain facilities will significantly improve the availability of FMCG products and support many manufacturing processes that require refrigerated raw materials. It is important for distribution to be cost-effective and relevant to local market conditions. This can be achieved through more emphasis being placed on direct distribution. Being set up to do frequent customer deliveries will enable retailers to reduce carrying costs whilst operating well within capital constraints and, at the same time, being able to expand available supply offerings to customers. An issue currently facing the supply chain of many enterprises is that, although there is sufficient shipping capacity, there is also a significant lack of availability of trucks. Putting a railway line in place, when operating at sufficient capacity, could serve as an alternative supply chain for products going into Ethiopia and other regional markets.
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