AFRICA’S need to aggressively pursue the industrialisation path has become more compelling in light of the need to sustain current growth standards.
With carefully developed backward and forward linkages, industrialisation has the potential to diversify economies and reduce exposure to external shocks. We at ECA are working the case for industrialisation and we do not apologise for that. We are convinced it opens doors to address most of Africa’s many challenges, if properly done.
It has the potential for poverty reduction, dealing with inequality provoked by rent seeking practices still persisting in many countries, and it can allow leapfrogging into a green economy model.
Several myths are bandied around for why Africa’s industrialisation has been stunted. Let me address a few fallacies that continue to plague Africa’s industrialisation drive – discussing them and giving reasons why there is no truth in these allegations.
Myth 1: industrialisation is a fashionable developmental word that will soon be forgotten
There continue to be strategic and policy changes in the posture taken by African States regarding development strategies. We remember buzzwords like “structural adjustment”, “trickle down-effect”, “poverty reduction strategies” that influenced national policy direction.
Although industrialisation has always been in development literature, this is the first time it will likely take centre stage.
We see this because the call for industrialisation is now linked to a structural transformation of the state. The Plan of Action for the Accelerated Industrial Development of Africa (AIDA) supported by the AU, ECA, AfDB and NEPAD demonstrate how the link between industrialisation and structural transformation is being taken seriously.
AIDA is based on four pillars – using Africa’s own natural resource endowment as a basis for industrial transformation; developing an infrastructural system including energy and transportation; increasing research and development and the adaptation of technology and promoting private sector development especially the role of small and medium scale enterprises.
It is hoped that these enablers will lead to the structural transformation of the continent’s economies.
Myth 2: industrialisation is all we need to develop
African countries must begin to see industrialisation as a tool for the social and economic transformation of their societies with structural transformation as the end result. I define structural transformation as a significant change in the sectoral composition of Gross Domestic Product (GDP) with the share of the primary sector in employment and output shifting to industry and modern services.
Structural transformation can be realised by giving attention to key developmental elements, one of which is industrialisation.
We have to still deal with a demographic challenge and transform it into a dividend, not to mention social cohesion that should result from less inequality, embracing diversity and increasing human security and inclusive governance.
Myth 3: African countries have tried industrialisation before and it failed, so why now?
In the 1960s, newly independent Africa emulated other regions of the world in undertaking import-substituting industrialisation. This led to some remarkable progress but was ultimately stymied by the limits of the model and global political economy. This is why today Africa should be mindful of a very different global context.
Africa needs alternate models that play to its strengths and satisfies the need for transformation. With up to 90% of Africans still heavily reliant on the agricultural sector, commodity-based industrialisation speaks to our strength.
Commodity based industrialisation also offers immediate scope for value addition and plenty of opportunity for exploiting consequential linkages.
Myth 4: Africa comes too late to industrialise without polluting the environment
The world has changed since the times of the industrial revolution. Coming late to the club gives Africa the opportunity to industrialise differently. It is not about privileging export-oriented or import substitution models. The new industrialisation model must be closer to the commodities production centers, looking at leapfrogging technological potential and with African growth market in mind.
Myth 5: Africa’s current economic growth will lead to job creation
Based on demographic growth projections, Africa will need to create up to 10 million formal jobs annually as more young people enter the job sector. Current economic growth models do not create enough modern jobs.
In fact, the highest growing African economies also have the highest levels of youth unemployment. Although growth is robust in many countries, it is propelled by internal consumption that does not benefit all. To reverse this trend proper planning should focus on modernising the economies though more manufacturing production taken from other parts of the world where unit values are increasing fast and starting by positioning Africa in relation to its natural resources and renewable energy potential assets.
Myth 6: Investors are not attracted by risky Africa
Intra-African investment has, since 2007, been growing at a 32,5% compound rate with South Africa leading with $18 billion invested across several sectors followed closely by Morocco and Nigeria.
This is important because it means Africans are not just asserting themselves in a political narrative. They are also investing more in their own continent. Fortunately others are following. FDI will attain US$ 50 billion this year, a all time high. More realise Africa is not as risky an investment decision as it may appear. In fact it has the best return on investment. Africa needs to better brand and market itself.
In conclusion if the news on growth is good, Africa wants and needs more. It needs to be able to deal with the challenge of having to industrialise and grow when its population and cities are growing quicker than any previous historical experience. It wants more as it realises it will have to be faster than any other region of the world. It needs more because it is high time we turn the “no hope” to “rising” continent story into meaningful change that will prove the skeptics wrong.
This article was published in the United Nations Industrial Development Organisation (UNIDO) online magazine Making it on November 27, 2013