THE NEED TO DISRUPT THE AGRICULTURAL-INDUSTRIAL CLUSTER/PARK CONCEPT|By Idika Aja, ACS

Industry cluster/park also known as business cluster, competitive cluster or Porterian cluster was introduced and popularized by Michael Porter in The Competitive Advantage of Nations (1990). It is having a group of similar and related firms concentrated in a small defined geographic area that shares common markets, technologies, workers, etc.  An industrial cluster/park is an area of land developed as a site for factories and other industrial businesses. It is an area of a place zoned and planned for industrial use rather than residential or commercial needs. It is usually located outside a residential area of a city and provided with good transportation access; road and/or rail, high-power electric supplies, etc. A cluster must consist of interconnected firms in the same fields, specialized suppliers, service providers, firms in related industries and associated institutions.

Concentrating industries and supporting services in a specific geographical location or areas spurs industrial development and a driver of regional and national economic development.  It helps and enables industries, organizations within the cluster to grow organically much faster.  By encouraging or having manufacturers, suppliers, service providers and firms to co-locate, share common facilities, etc., they are able to reduce overhead costs through economies of scale and raise productivity, innovation and global competitiveness

Whether industrial park or business cluster, it can be developed according to composition such as geographical, sectoral, horizontal, vertical or by comparative advantage such as high-tech, historic know-how-based factor endowment, low-cost manufacturing, knowledge services, etc. For instance, an industrial park specializing in biotechnology, energy, cyber parks are known as sectoral/geographical cluster/park. Examples are London Thames Gateway; the Brazilian Shoe Cluster of Snios Valley; Pakistan export oriented industrial cluster; Wilmington Industrial Park in Los Angeles, etc. Back home in Nigeria, we have the Nnewi automotive industrial cluster, Onitsha (Plastics), Otigba (Technology), etc. For low-cost manufacturing parks/clusters, they can be designed into flatted factories, especially, where land is scarce. The factories are similar to flats, but houses individual industries.   Also there are clusters/parks created by policy mandates.  For example, export processing zones and free trade zones, etc.

There have always been plans, policies, intentions and actions concerning setting up and/or reviving industrial, agricultural, enterprise or business parks or clusters in Nigeria. Government plans, intentions, framework, partnership aimed at establishing agro-industrial parks/clusters, free trade zones or special agro-industrial processing zones are not in doubt, but the challenge is the sincerity of purpose in executing these plans.

In 2017, Business Insider-May 11, 2017 reported that the Federal government planned to revive 23 industrial clusters in the country.  According to the paper, the then Minister for Trade and Investment, Mr. Okechukwu Enelemah made the announcement.

In 2018, Punch Newspaper-April 22, 2018 reported FG intention to establish industrial parks throughout Nigeria in order to overcome infrastructure problems faced by local manufacturers and also to promote the cluster effects gained by locating similar manufacturing businesses together.

In 2019, Premium Times, September 19, 2019, reported that the government of President Muhammadu Buhari’s gave an approval to build seven new industrial parks in Lekki, Lagos, Makurdi in Benue, State; Benin, Edo State; Ilorin, Kwara; Sokoto, Gombe and Abakiliki in Ebonyi.

In 2020, precisely February 2, 2020, the Federal government through the Ministry of Agriculture and Rural Development announced its partnership with Global Fortunes Limited to establish Agricultural Industrial parks (APIs) across the Six-Geographical zones of the country in order to create jobs and ensure food sufficiency in the Agricultural value chain.  The partnership is going to be private-public-partnership driven.

Despite these plans, intentions, pronouncements and actions, available statistics hardly support the efficiency and effectiveness of these programs.

Based on data from CBN and NBS, the manufacturing sector’s contribution to GDP has been shrinking, over the years from 21.10%% in 1983 (the highest value for over 37 years) to 9.65% in 2018. The lowest was 6.55% in 2010. In 2019, its contribution to nominal GDP for Q1 2019 was 11.32%, though higher than its contribution in both the first quarter (9.28%) and the fourth quarter (10.11%) of 2018.

For us to actually bridge the gap between policies, intentions, pronouncement and efficient-effective agricultural-manufacturing cluster, so as to increase the sector’s contribution to GDP, and boost economic growth and development, there is need to re-tune and address the basic inherent factors militating against the success of agricultural and industrial clusters. For this, three basic threats/challenges have been identified; work/factory space, energy/electricity and human capital development.

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For work/factory space challenge, the low-manufacturing flatted factories style would be more effective. The private sector, especially the real estate developers/investors have to be involved just like we have in residential real estate development. Under this low-manufacturing method, private developers are to build flatted-factories for outright sale or lease for cottage manufacturing. Creating free trade zones, or calling for expression of interest for investors/off-takers to participate in one scheme or the other arguably have not achieved the desired purpose, based on available statistics.  Most of these small and medium scale enterprises and start-ups in most cases do not have the required funds, structure and cannot be able to borrow to acquire land to build the work/factory space.  There are many platforms that can reliably foster the growth and achievement of this plan, such as Cooperative Societies, Tony Elumelu Entrepreneurship Foundation, etc. As a matter of fact, based on interactions with some of the TEF grantees/Alumni, the major problem they face after receiving the grants, especially the start-ups among them is work/factory space.  Greater percentage of their working capital goes into leasing of factory space, which stifles organic growth of the firms and in some cases, causes diversion of the grant for other purposes outside the original plan.

Another challenge is energy.  This challenge is generic and applicable to all businesses, be it in a cluster or otherwise.  For instance, from a reliable source, the major problem facing the rice mill clusters in Ebonyi State (About 425 mills operating in Abakaliki and some other rice mills at Ikwo Agri-Industrial Cluster) is energy. The mills are not grid connected and operate only with inefficient diesel drives leading to excessive CO2 emission and increased operating cost. Disrupting the subsisting energy supply system becomes imperative.  Incorporating renewable energy (Biomass, Solar, Wind, etc.) as a cardinal component of the industrial cluster is necessary. Such power plants, especially the biomass power plant will not only provide the needed stable electricity to the Park but will rely and use the Park’s agricultural residue/waste, such as maize cobs, rice husks, coffee husks, and cotton stalks; and municipal solid waste as raw materials/stock input to fire the turbines. With the concentration of these micro and cottage production enterprises, the viability of building these renewable energy plants (biomass and solar) becomes greater. The plant/technology providers can even build and manage these plants till they recoup their investment.

With this low-manufacturing flatted-factory space style of industrial cluster, there will be an enhanced human capital development and integration.  The firms will grow organically more rapidly.  There will be more inflow of investment both in terms of skills and capital to establish backward and forward integration, create more employment, which invariably will boost economic growth and development.

Idika Aja, ACS, For comments, kindly send to idikaaja@yahoo.com or 08034003768

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