Month: February 2018

Rethinking Africa’s industrialisation

Industrialisation, it is economic development goal of countries around the continent, it is the key that will unlock the doors to mass employment, better standards of living and higher income of hundreds of millions of Africans. Yet this goal has proved elusive, through decades of state led developmental policy, to structural adjustment and market led to development, industrialisation has been stubbornly evasive. There are several culprits that one could blame for this such as corruption, or foreign intervention on the continent, and there is no doubt that they are factors. One of the key culprits and the one that I would like to focus on is the failure of policy, specifically a failure of imagination. African leaders have been focused on replicating Western and East Asian industrialisation. I believe in doing so they have created fundamentally flawed policy, policy that is not grounded in the realities of African economies and societies but on the experiences of others. I firmly believe that if we re-imagine industrialisation, ask ourselves what we have that we can build on, how to harness it and what we want our countries to look like afterwards, we can develop a clear idea of what African industrialisation is and the right policies to pursue it.

Industrialization

What is industrialisation? It is a word that gets thrown around a lot, and far too often it is used in jargon filled economic or policy reports that render the word meaningless such as this from the UN Economic Commission for Africa (UNECA);

‘The big opportunity for Africa in 2016, as a late-comer to industrialization, is in adopting alternative economic pathways to industrialization. This requires governments to take on-board the drivers, challenges, and trade-offs in pushing for a greening of industrialization’[1]

If we are to go for simpler definition of the word you could look at the dictionary, the Oxford dictionary defines it as ‘The development of industries in a country or region on a wide scale’[2] which is unsatisfyingly vague. Wikipedia’s definition is more detailed stating ‘Industrialisation is the period of social and economic change that transforms a human group from an agrarian society into an industrial society, involving the extensive re-organisation of an economy for the purpose of manufacturing.’[3]

Thus, I imagine when African leaders are talking about industrialisation, they are talking about transformation from an agrarian society and economy to an industrialised one, where most Africans work in factories producing goods for the world. This industrialisation is seen as the quickest and best way to mass employment and poverty reduction which Africa desperately needs. To do this, African leaders are building transport and energy infrastructure to bring down the costs of production and investing significant money and effort in attracting foreign investors to build manufacturing industries. However, there are serious issues with this way of thinking which makes a traditional industrialisation policy for Africa unlikely to be effective.

Impediments to industrialisation

The first issue is global, competition. Africa sees its key competitive advantages lying in two factors, a young and cheap labour force and growing population providing a growing market. This is true, but it is not unique. Nations such as India, Bangladesh, Vietnam, Indonesia etc. all have young and growing populations and unlike Africa they are much better integrated into global trade networks, and already have attracted significant manufacturing industries such as textiles and vehicle assembly, in short, we are competing against other regions who are farther down the road than us. Second, infrastructure is not enough. The cost of production (into which the costs of power, labour and transport are big factors) is a significant element in the thinking of potential investors but they also need legal security, the knowledge that their intellectual property, and contracts will be protected and enforced. They require physical security for their facilities, goods and workers and they need stable regulatory and tax regimes. These additional factors are unfortunately not always the focus of government industrialisation policy. Third, automation. As automation decreases the need for labour in manufacturing industries, cheap African labour becomes less and less of a draw to potential industrial investors.

Thus, African leaders and policy makers face a conundrum. The strategy they are pursuing is subject to competition from better placed nations in other regions, the focus on infrastructure is not enough and technology may take the jobs we are hoping to attract.

Reimagining industrialisation

In the face of this Africa needs to get creative, we need to reimagine industrialisation for Africa and there are several ways we can do this.

  • Agriculture as industry

Farming is the primary source of food and income for Africans and provides up to 60 percent of all jobs on the continent. [4] It is impossible to industrialize without the agricultural sector playing a significant role and it is no accident that China, Japan and South Korea all pursued land and agricultural reform as the first step in their industrialisation. Africa’s agriculture sector holds immense potential not just for growing food but for value addition (processing and marketing of agricultural products). Most agricultural products exported from the continent are exported as raw or lightly processed and this is a problem. Every sack of coffee and tea exported elsewhere to be processed and sold, all the cocoa exported elsewhere to be made into chocolate, all the avocados exported to be made into guacamole, palm oil, etc (this list could go on) is millions of jobs of and billions of dollars of income lost. African governments must make a concerted effort to bring these jobs to Africa, put in place tax incentives, tax penalties, regulations and make available funding to ensure that processing into finished products takes place on the continent. Furthermore, African governments need to help agricultural producers and processors understand the markets they want to serve, what sort of production and logistics chain they will need, what trade and safety regulations do they need to obey.  Creating jobs and income in agriculture will have significant impacts on other industries. All those people with jobs and increased income will want to buy goods and services in other industries which would make Africa an even more attractive investment destination for the industries that we are trying to attract. Agriculture, agricultural processing and marketing can be the foundation of industrialisation on the continent and it is high time governments recognised that and gave it the focus and help it needs.

  1. Don’t be afraid to copy

Many countries such as Japan, China even Germany in the 18th century kickstarted their industrial growth by copying others, not their policies but goods. Japanese cars, and Chinese electronics started out being derided as cheap knock offs, today they are global leaders in their industries. African policy makers should search for commonly imported goods that can be made cheaply on the continent and provide incentives and protection for African businesses to make them on the continent. Why import second-hand American clothes when they can be made in Africa, why import expensive medicine when we can set up generic pharmaceutical manufacturing, why import motorcycles that can just as easily be assembled on the continent. This will take some courage from leaders on the continent as they will face resistance from importers and foreign governments but only by being bold can we achieve industrialisation.

  1. Give African investors and entrepreneurs a leg up

In 1958, the USA created the Small Business Investment Company (SBIC) program to facilitate the flow of long-term capital to America’s small businesses. The SBIC partners with private investors to that finance small businesses.[5] Over the course of it is lifetime the SBIC has provided over $60 billion dollars of funding to small businesses and despite many of them not ending up as success stories, the ones that have succeeded (figure 1) are worth much more than all the money that has been lent out over the course of it is history. The biggest is Apple, back in its early days before it had much private investors apple received a loan from the SBIC which was crucial in allowing it to produce it is first products and get additional investment. Today, Apple is worth over $900 billion[6]. African governments must show the same willingness to invest in African businesses as the private sector has not done so yet and we cannot sit around hoping it will. If only one of these investments is half as successful as Apple it can transform the continent.

Figure 1 (source: http://www.sbia.org/?page=success_stories)

  1. Trade with each other.

Intra-African trade is pitifully low (figure 2). And despite much talk and several initiatives on the subject it remains more expensive and much more of a headache for African countries to trade with each other. This must change, initiatives such as the Continental Free Trade Area[7] and regional trading blocs require leadership and concrete policy from the continent not just lip service. Furthermore, it is important that governments make a concerted effort to link African businesses, and traders with markets across the continent. It is not enough to build infrastructure and sign trade agreements, businesses need to know the regulations of other markets and most importantly link up with whom they can work. African governments have embassies and diplomats across the continent, but they do little work in the commercial realm. They can be tasked with identifying opportunities in export markets as well as providing information to businesses in other countries on opportunities, tax and regulatory information and key contacts at home. Jump starting intra-African trade will require a concerted effort to link African businesses to African markets.

Figure 2 Africa’s intraregional trade as a % of the continent total trade 2002-10

Industrialisation African style.

Industrialisation policy on the continent requires a rethink. African leaders and policy makers must recognise that the world has changed, and we cannot simply copy what Asian countries did 40 years ago or western countries did in the 19th century. Africa must forge its own path to industrialisation and development and doing so will require policy that capitalizes on Africa’s own advantages in agriculture. That is bold and aggressive in kick starting industries such as being willing to copy products and processes. It will require African governments to step up to the plate and fund African businesses that will be at the forefront of indigenous industrialisation. And it will require governments to proactively open up and allow Africans to trade with themselves.

If we want to create the millions of jobs that Africa needs, to move our economies into the next stage of development we must be bold and imaginative. We must re-conceive industrialisation to the African context and remake our policy to pursue it. If not, I fear in another 50 years we will still be wondering when if at all Africa can industrialize.

 

[1] https://www.uneca.org/sites/default/files/PublicationFiles/era2016_executive-summary_en-rev6may.pdf

[2] https://en.oxforddictionaries.com/definition/industrialization

[3] https://en.wikipedia.org/wiki/Industrialisation

[4] https://www.brookings.edu/blog/africa-in-focus/2016/01/22/foresight-africa-2016-banking-on-agriculture-for-africas-future/

[5] https://www.sba.gov/sbic

 

[6] http://money.cnn.com/2017/11/03/investing/apple-market-value-900-billion/index.html

[7] https://au.int/en/ti/cfta/about

Development or democracy? A false choice that creates bad policy

“We spoke and acted as if, given the opportunity for self-government, we would quickly create utopias. Instead injustice, even tyranny, is rampant”. – Julius ‘Mwalimu’ Nyerere

There is an ongoing debate fuelled by the perception that democracy has not delivered the development that was promised during the 1990’s and early 2000’s when many African countries bowed to domestic and international pressure and instituted multiparty democracies. The argument centres on the fact that while many countries have seen some economic growth it has not been nearly enough, and the continent continues to be plagued by persistent poverty. That if you look at the fastest growing economies on the continent, such as Rwanda and Ethiopia, they have strong leaders, who can push through big reforms and policy without all the political horse trading and gamesmanship that usually kills them. They then point to East Asia, pointing out that China, South Korea, Taiwan and Singapore all developed under some form of authoritarian regime. In short, the argument is that by putting democracy before development Africa has put politics before development.

This, in my view, is nonsense, development at its core is about improving the conditions of people so that they may live their lives with dignity (I develop this more fully in this post). For that to happen policy and policymakers have to be responsive to the needs of their people and the people need to able to hold those wielding power to account. It is the only way to ensure that development remains the goal rather than the personal goals of the benevolent dictator in charge.

The arguments against democracy, and why they don’t apply

The argument most often trotted out in favour of benevolent dictatorship in the development vs democracy debate is what I call the Lee Kuan Yew argument after the former authoritarian prime minister of Singapore who charted the city state’s extraordinary development path. The argument is; that like Lee Kuan Yew, authoritarian leaders can commit to policies that ensure political stability, the rule of law and economic transformation. My response to this is simple, while Lee was ruling Singapore the vast majority of Africa was being run by a succession of autocrats, dictators, and despots. From Mobutu, to Amin, to Houphouët-Boigny, to Moi etc. (one could go on for quite a while with such a list), none of them brought long-term political stability, rule of law and economic transformation to their nations. Almost all of them were corrupt, saw the law as a suggestion, fostered division rather than national identity and enacted haphazard polices that privileged short-term personal and political interests that slowed, stopped or reversed development. The evidence from authoritarian rulers in Africa, Latin America and Asia shows that Singapore is the exception not the rule and Africa cannot afford to return to that.

The second argument brought to bear is that of East Asia. Many point to South Korea, Taiwan, China and Singapore who all achieved significant development under some form of authoritarian regime. However, this argument ignores the significant differences between these states and their African counterparts. First, apart from Singapore these states are relatively ethnically homogenous with a cultural and national identity that goes back centuries if not millennia, with a common history, culture, identity and language it is easier to forge a national consensus. Secondly South Korea, Taiwan, and Singapore were all key strategic U.S. allies in the cold war. This meant that not only did they get significant economic assistance the West was willing to turn a blind eye to policies that they would have (and have) lobbied against in other countries that were key to the East Asian economic miracle, such as import substitution and the protection of domestic industries. Third, they all had ways of keeping leaders accountable in some way or form, in China for instance one must rise through the party and when in leadership you are accountable to the party. It’s not perfect but it enforces discipline and has broader goals than a singular despot.

Democracy as policy

So, what does democracy have to do with development policy? In my view the link is clear, democracy makes policy makers and political leaders accountable to the people. Thus, to gain and retain political power they must respond to the needs of the people. However, this does not seem to be the case, as voters on the continent are more frequently mobilised by ethnic or religious politics than by debates around the best path to development. However, the answer to this is not to get rid of it, rather it is to make democracy better. For the past 30 years democratic reforms on the continent have tended to focus on the man (it is almost always a man) at the top or the elections themselves, rarely on citizen participation, particularly informed participation. For development policy to meet the needs of people it must be responsive to the people themselves, and the answer to this is to look beyond elections. Elections, the act of regularly choosing our leaders in a fair process, are vitally important to democracy but they should not be the only feature. When that happens, it leads to what we see in Africa today, where the political debate and climate is focused on winning the next elections. Regular citizens tend to be forgotten until the next election campaign comes around. Thus, to my mind what is needed is a way to ground policy in views and needs of the citizenry.

In Botswana they have something called a Kgotla. A public meeting usually headed by the village chief, in which deliberations are conducted and decisions are arrived at by consensus. All residents in a village are entitled to attend and can speak. The results of these deliberations are then used to form the basis of district development plans and the 5-year National Development Plans, which are then passed by parliament as legislation that guides government policy. Since independence Botswana has not only experienced stable democracy but has also been the African economy that has grown the fastest and most consistently since independence. This has been in large part due to good leadership, which holds itself and its policies accountable to the people they govern. Unlike election campaigns where politicians promise things to people and we have to hope they can follow through while in office, this system of citizen participation ensures that the voice of the people, their concerns and their priorities are not only heard but are an integral part of the policy making process.

Vox populi vox dei – the voice of the people is the voice of god

When it comes to the democracy vs development debate, I do not see a debate, I see the wrong question. The question should be, how does Africa improve its democracies to make them more responsive to the needs of her citizens. One clear way to do that is to proactively ground the policy making process in a democratic process. To create a process, which doesn’t just invite people to comment on legislation (which some countries have) but actively seeks the views of the people whom the policy will affect. For instance, if a country wants to come up with a new agricultural policy it will actively go out and seek the views of its farmers from the subsistence farmers to the industrial farmers in an open and deliberative process that allows farmers to explain the challenges that face them and their ambitions for their farms, families and communities. This would help create a policy in which they have a stake and are willing to work for and with. More broadly by grounding the policy process in a democratic process it could make policy in Africa something that is done with, by and for the people rather than to the people, and achieve real development.

Africa can and should have universal healthcare.

WE ALSO COMMIT OURSELVES to take all necessary measures to ensure that the needed resources are made available from all sources and that they are efficiently and effectively delivered. In addition, WE PLEDGE to set a target of allocating at least 15% of our annual budget to the improvement of the health sector – Abuja Declaration 2001

In April 2001, the heads of state of African Union countries met and pledged to set a target of allocating at least 15% of their annual budget to improve the health sector. Yet almost decade later, not only have just a handful of African nations allocated the pledged amount of money to their healthcare systems, but Africa still has the worst health outcomes in the world (figure 1). The poor and vulnerable still have limited access to healthcare, the insurance and coverage schemes that do exist usually miss out those in the informal sector who make up a sizable portion of the African workforce. Despite some marked improvements since 2001 too many Africans are still falling victim to diseases that could be prevented, too many Africans are being made bankrupt paying medical bills for friends and family and far too many Africans are going without the care they need lowering their quality of life.

Figure 1 source: Angus S. Deaton and Robert Tortora, People in Sub-Saharan Africa Rate Their Health And Health Care Among The Lowest In The World 2015, Health Affairs

 

If we are to think of development as being people centred, then the health of the people is crucial. Quality of life (not to mention length of life) improves significantly when everyone has access to quality healthcare at an affordable cost (which is the WHO’s definition of universal healthcare[1]). If Africa is serious about development we must get serious about healthcare, and the best way to do that is through pursuing universal healthcare. Many will say this isn’t possible, it is too expensive, or African countries simply do not have the resources, however both Botswana and Rwanda show that not only can universal healthcare be done in Africa, but there is more than one way to do it. Thus, the question African policy makers should be pursuing is what do we have to do create quality, affordable healthcare with access for all.

Lessons from Botswana and Rwanda

Rwanda and Botswana have slightly different ways of implementing universal healthcare. Botswana operates a fully public system where the governments owns over 95% of healthcare facilities. The system is built around the delivery of primary healthcare which is available through an extensive network consisting of;

  • 844 mobile stops and 338 health posts which deliver primary preventative care to all it is citizens;
  • 272 clinics (101 of which have beds) which provide outpatient and general inpatient care;
  • and finally, there are the district hospitals and the two referral hospitals which provide long term and complex care and procedures.[2]

Almost all services are free except people between the ages of 5 and 65 pay 5 pula (‘USD’ or ‘$’ 0.50) for general check-ups.

Rwanda pursues universal health through a mandatory health insurance system called Mutuelles de Sante. The scheme is community based, residents of a particular area pay about ‘USD’ or ‘$’ 6 into a community insurance pool, richer citizens are charged higher premiums and for those who can pay a 10% service fee is paid for each visit to a health centre or hospital. Like Botswana Rwanda’s system is decentralised and built around providing primary care through;

  • 34 health post which do outreach activities such as immunisations, antenatal care and family planning;
  • 18 dispensaries and 442 health centres which provide preventative and primary care, out and inpatient services and maternity care;
  • 48 district hospitals which provide inpatient and outpatient care and 4 referral hospitals which provide specialised complex care.[3]

In both countries over 90% of the population have access to affordable healthcare whose quality has seen significant improvement over the last decade.

Botswana and Rwanda hold valuable lessons for policy makers on the continent. The first and most important being that universal healthcare is possible. Secondly multiple funding models are available and there is no reason that you cannot mix match payment, insurance and tax revenue to pay for it. Third, to be effective, primary and preventative health must be at the centre of the system. Primary healthcare focuses on people and their communities, by providing preventative and early continuous care and education, treatment of illnesses before they become life threatening and the early identification of serious health issues that require specialist treatment. Fourth you need appropriate infrastructure, specifically clinics, dispensaries and health posts/centres that are situated in communities around the country and are just as important as big hospitals. If you only invest in big hospitals they will end up being crowded with patients who could have been more effectively treated in facilities in their own communities. Investing in community health centres and facilities ensures that everyone has access to healthcare close to home and that large hospitals can take care of those who need the most help. Finally, we need to invest in people, and this strikes me as part of the solution to an existing problem. Africa has far too many young men and women who are educated but unemployed, to me this presents an untapped pool of administrators, doctors, nurses, pharmacists and clinical technicians who would be needed staff a universal health care system.

Health as development

Universal healthcare in Africa is achievable but only if our governments begin to think of healthcare as just as important to development as roads, power, jobs and education. Fundamentally healthier people are happier people. Universal healthcare will significantly improve the quality of life for hundreds of millions of people, it would take away the spectre of going broke because you, or a relative got sick and it could provide millions of meaningful jobs for young men and women who would jump at the prospect.

In 1948 Great Britain was broke and had just come out of two devastating world wars in the space of three decades, yet it was in that year that they launched the National Health Service which was and still is based on 3 principles; ‘That it meet the needs of everyone, that it be free at the point of delivery, and that it be based on clinical need, not ability to pay.’[4] Today, the NHS is the institution that the British are most proud of. Today, like Britain in 1948, Africa is not rich and faces a myriad of challenges, but we can and should dream big, that all Africans should all have access to quality affordable universal healthcare. If development in Africa is to mean anything surely it must mean that Africans can live full and healthy lives, it is time to bring the Abuja declaration to life.

 

 

 

[1] http://www.who.int/health_financing/universal_coverage_definition/en/

[2] http://www.gov.bw/en/Ministries–Authorities/Ministries/MinistryofHealth-MOH/About-MOH/About-MOH/

[3] http://www.hrhconsortium.moh.gov.rw/about-rwanda/health-system/

[4] https://www.nhs.uk/nhsengland/thenhs/about/pages/nhscoreprinciples.aspx