In a constantly evolving and increasingly interdependent world, Africa and its 34 Least Developed Countries (LDCs) urgently need to find the best ways to industrialise their economies to avoid being further marginalised and excluded from the global economy for yet another decade in history.
For over a decade Sub-Saharan African economies have expanded at an average rate of about 5% a year. This was largely spurred on by the commodities boom in China as it rapidly urbanised. But as China’s economic growth has slowed, so has the demand for Africa’s commodities, stifling Africa’s growth trajectory.
One of the main reasons for concern is that Africa’s manufacturing industry has largely missed out on “a boom”.
“The general view is that Africa is de-industrialising and has skipped a vital industrial revolution like Asia experienced in the 1970s; which is critical for job creation,” says Nigel Gwynne-Evans, Chief Director for African Industrial Development with the Department of Trade & Industry (the dti).
“Africa has the lowest global percentage of productivity in manufacturing and the lowest employment rates in the world. The big concern is that we are already jumping to a services-based economy without creating a platform for manufacturing.”
An investigation into Africa’s de-industrialisation by The Economist agrees (November 7th 2015 edition): “To be sure, many countries de-industrialise as they grow richer (growth in service-based parts of the economy, such as entertainment, helps shrink manufacturing’s slice of the total). But many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs”.
“There’s no doubt that what is known as the “4th Industrial revolution” brings advanced technologies to bare in all aspects of life, particularly to consumers in the form of dramatically improved telecommunications, access to faster internet, banking and retail services and services like Uber that add convenience to the consumer’s life. Africa is adopting to these new technologies exceptionally fast, in leap-frogging to a more advanced world. The big but, and it’s a big one, is that without a strong manufacturing sector, these services will largely be provided by global multi-nationals, with an increasing loss by governments of the levers to transforming their economies,” says Gwynne Evans.
The adoption of the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs) as well as the African Union Commission’s 2063 Agenda and the COP 21 Paris climate change agreement in 2015, have given new impetus to the call for industrialisation to transform Africa, especially in its Least Developed Countries.
Why industrialisation matters
Through the adoption of the sustainable development goals (SDGs) – particularly on industry, innovation and infrastructure – the international community has recognised the importance of inclusive and sustainable industrial development for economic growth because of its multiplier effect on all economic sectors.
“Rarely has a country progressed and become developed without sustained structural transformation from an agrarian or resource-based economy towards higher productive agriculture and a sophisticated industrial or service-based economy. Industry, by providing decent jobs and by expanding the fiscal revenues needed for social investments, can boost capacity for inclusive development,” says a 2015 report to the China G-20 Development Working Group by the United Nations Industrial Development Organisations (UNIDO).
Regionally in SADC, the dti and other regional organisations are looking at three main areas of growth: food and agro-processing, mining and metals, and pharmaceuticals.
“These sectors cannot create jobs unless we achieve productive capability and the right environment with larger markets. Africa is currently highly fragmented with small markets and small economies. If we are able to build larger regional markets, through regional integration, then we could create regional trading blocks that have the economies of scale to catalyse industrialisation in various regions. This is the current focus of the regional economic communities like SADC, ECOWAS, and the EAC, and recent initiatives to create a continental-wide Free Trade Agreement,” says Gwynne Evans.
“In addition this requires a dramatically up scaled focus on improved infrastructure of all forms – road, rail, water and energy – to provide the conditions for growth.”