Tag: industrialisation

Kickstarting intra-African trade & industrialisation through regional value chains

I am a pan-Africanist, firmly of the belief that Africa is stronger together. That when acting in concert we can accelerate socio-economic development, and make our voice heard and matter on the international stage in an increasingly fragmented world.

However, first we must get better at working together, particularly when it comes to economic and trade policy. The selfishness with which we guard parochial economic interests, is at odds with the regional and pan African institutions we have established to foster the continents stated ambitions on trade and development.

Thus, as we try to reach the extraordinary ambition of the ACFTA that envisions a pan-African trade bloc, it is worth taking a leaf from beginnings of the European Union. Starting small and building towards a massive ambition. The EU did not start with a  big bang, it started as a steel and coal trading community, between Germany, France, Italy, the Netherlands, Belgium and Luxembourg. Creating a win-win situation that convinced the politicians, bureaucrats, and people to go all in.

The ACFTA can play this role, fostering strategic cooperation using specifically identified regional value chains. Identifying goods that currently do or have the potential to use inputs from across a region and investing in that potential to create positive incomes and linkages for the various countries involved. In doing so, it can lay the foundation and support for pan-African trade and collaborative policy making.

Fostering Strategic Cooperation

I am Kenyan, a member state of the East African Community (EAC), regularly referred to as Africa’s most integrated Regional Economic Community. With a common trade area, coupled with unprecedented cooperation in a multitude of policy areas, with a stated ambition of becoming a political federation. Unfortunately, the reality is far from the ambition. The common trade area is subject to the self-interest of the nation sates, and their own political economic lobbies. Thus in recent years we have been treated to Tanzania burning Kenyan chicks at the border, Kenya banning Ugandan milk, Uganda and Rwanda closing their mutual borders. Undermining the laws and institutions of the EAC.

If the ambitions of the EAC cannot be achieved in East Africa where there is decades of history of cross border collaboration, what makes us think that it can happen across the continent. Far from being a pessimist, I think the ambition is still valid. That we can foster cooperation needed, by investing in and building value chains.

Why value chains

The value chain of a product is everything that goes into making it and getting it to market. For example, if you look at the value chain of a bottle of beer it starts with the inputs, in this case the farmers who grow the barley, hops, and sugar, the chemists who grow the yeast, the glass maker who makes the bottle, the company that makes the bottle caps. It all comes together in manufacturing process at the brewery where the beer is made, put in a bottle and capped. Its then sold to a distributor, put on a truck, and delivered, the distributor then sells it to an establishment who sells it to a customer. A beer is a comparatively simple product when compared to a car, or solar panels or a smartphone, but whatever the product, the inputs come from a variety of places to be put together in a complex manufacturing process and distributed along a complex logistics chain.

Products with the right value chains require a range of inputs, which can be sourced from different countries and industries within a region. In that value chain, can be built a coalition of the willing among the businesses that supply inputs, those that manufacture the goods and those that distribute and sell those products. That coalition of the willing, the participants in the value chain can create the political-economic support within the individual countries necessary to sustain broader political support for open trade.

As value chains gain success there will be proof and willingness to expand the concept, for people to stop seeing buy Kenya build Kenya, or made in SA, but rather buy Africa, build Africa and proudly African. One value chain at a time, from beer, to motorbikes, to fertiliser to solar panels, we can build economic, logistical, and political relationships that can provide a foundation for Africa to think and dream strategically. To realise the dream of using the raw materials that all to often leave the continent should stay in Africa and make the critical technologies of today and tomorrow in Africa.

Building complexity

Beyond the politics, value chains will allow Africa to build the large complex corporations that are at the centre of economic development. Since independence African economies have largely been dependent on small enterprises and smallholder farming. They have proven to be extraordinarily resilient, adaptable, and creative, thriving in booms, surviving in recessions and making do in everything in between.

However, while small may be resilient it is not transformative. As David Pilling points out in a recent article “Large complex companies, drive productivity by organising workers, building on their specialisation, and pulling in vast resources to create economies of scale.” The successes we see in China, South-East Asia and Latin America have all built large complex industrial networks, as the foundation for industrialisation and sustained economic growth.

Deliberately focusing policy efforts on building regional value chains will encourage the set-up and growth of the large complex businesses needed to coordinate, fund, and use these value chains. Which in turn will need attendant goods and services like finance, marketing, ICT among others, creating economic ecosystems. Eventually with time, like we have seen in Asia these African businesses can provide a foundation for growth and become players on the global stage.

Conclusion

Intra-African or pan-African trade and industrialisation is a big dream that could spur the industrialisation of the continent. Which is critical to create the millions of jobs we need and sophisticated companies and services that will keep wealth on the continent.

But it won’t happen overnight, nor will it happen automatically. African governments, industries and multilateral institutions must be deliberate. Using carefully identified products to build value chains of goods, money, trust, political and commercial interests, will give us the basis for pan African industrial networks. If Africa is ever to realise the dreams of the ACFTA, or Vision 2063, if we are to realise the dreams of African built phones, cars, power plants creating these value chains is critical.

Charting Africa’s Energy Future

Africa’s Energy Future

 

The world is at a crossroads. The war in Ukraine has seen Russia force Western Europe into an energy crisis, and the wider world has been subjected to higher energy prices to keep the lights on and cars on the road.

In Africa, this pain is being felt as energy-driven inflation. Coupled with the rise of the dollar which is making everything paid for in dollars, such as oil gas and coal, wheat, maize, cooking oil and fertilizer even more expensive, doubling the pain. The focus of most policymakers is on the immediate cost of energy and its impact on the cost of living. However, the question we should be asking ourselves is, what is Africa’s energy future?

In a world where the impacts of climate change are causing a myriad of natural disasters, should we be investing in hydrocarbons? What technologies will provide the right mix for the continent, and how do we transition to that mix? Energy is not just electricity and petroleum, its cooking, heating, fertiliser production and the lifeblood of a modern digital economy.

How we chart our energy future will determine our socioeconomic future. Unlike the industrial revolution or the rise of the Asian tigers, we do not have the luxury of using oil, gas, and coal without concern for the consequences. Nevertheless, Africa does need an energy revolution as the foundation for a developmental one, and for that to happen, we must ask the tough questions about the continent’s energy future.

What must Africa’s energy future achieve?

As the continent thinks about its energy future there are a number of factors that must be considered as part of the equation for developing a viable long-term energy strategy.

  1. Access

Currently, about 43% of the continent, over six hundred million people do not have access to energy. Energy access is critical to improving standards of living, basic services (lights in schools, refrigeration and working machines in hospitals etc.) and as a foundation for growth (energy is critical for the development of any sort of industry). Thus, the first imperative is that Africans must have access to affordable and reliable energy.

  1. Sustainability

Africa is facing the brunt of the global climate crisis and we cannot be responsible for pouring fuel on an already raging fire. Africa should not and must not try to power the development of the continent by burning hydrocarbons. We must find and use alternatives. Many see this as unfair, as the developed world blocking the path that they used to industrialise while making Africa pay the price for their past sins. While morally, there may be validity to this argument, it does us no good to make it, as we would bear the brunt of its consequences both now and in future generations. As I have written before rather than treat climate change as a disaster that happens to us, we must also see it as an opportunity as I have written about previously. Seize the opportunity to leapfrog the hydrocarbon phase and make Africa a Green economic hub. An opportunity to develop new crops for Africa whose IP is owned by Africa that does not need as much energy-intensive fertiliser. An opportunity to stop begging for aid but instead use our oil, gas, and coal reserves to instead make money to fund our energy revolution off of carbon credits.

  1. Africa first

Africa’s energy future cannot be another victim of decisions made in foreign capitals. By this, I mean that we cannot allow Africa to be the casualty of the developed world’s net zero strategies, which will affect the continent in a number of ways.

First and foremost, what is the long-term viability of Africa’s, oil, gas and coal deposits, which an energy-starved west is pushing us to develop? Yet, in the long term, they will choose their own net-zero path and leave the continent with stranded assets. Should we consider the option of selling these assets as carbon credits or offsets instead rather than taking the financial and environmental risks of developing them (you can read more about this idea here).

Second, it is likely that development financing and aid will have new “climate” conditionalities attached as extensions of national climate goals further reinforcing Africa’s need to rely on taxes, not aid and decouple ourselves from the policy whims of Brussels or Washington.

  1. Security

Africa must be in control of its energy future, the fuel, resources, and technology that is used to produce that energy must be in Africa. As the current crisis in Europe shows, without control of your own energy, your destiny is decided by international energy markets. Thus, if Africa decides to pursue green hydrogen, it must be produced on the continent, and we must have an ownership stake in the plants and technology doing so. Energy security ensures accessibility.

Charting a path to the future

Charting Africa’s energy future will require crafting an energy policy that combines the four elements of accessibility, sustainability, security, and primacy. How they are combined and balanced will look different in each African country (and therefore I have not advocated any specific energy solutions in this post). However, there are things we can do as a continent (or regions of the continent), which can have a positive impact such as developing inter-connected grids. Sharing knowledge, expertise, and investment (how can Kenya’s expertise in geothermal energy be applied on the continent). Most importantly, what African financing solutions can we develop to fund an energy transformation on the continent?

Energy is the lifeblood of any economy and the foundation of socio-economic transformation. If Africa is to develop and build a better future energy will be a key part of that story. We must be deliberate and forward-thinking in how we build our energy infrastructure to ensure that better future. We cannot take it for granted or wait for someone else to produce the solution or the funding. Through smart, deliberate policy we can take charge of our continent’s energy future and take control of the future of our economies and societies.

Seizing Africa’s Climate change opportunity

Saving our planet, lifting people out of poverty, advancing economic growth… these are one and the same fight – Ban Ki-moon former UN Secretary-General

On the 8th October the UN Intergovernmental Panel on Climate Change released a report and  its frightening. The report warns that there are only 12 years for global warming to be kept to a maximum of a 1.5C rise set by the Paris accords. Anything beyond that will radically increase the risks of flooding, droughts, and extreme heat. Keeping warming to 1.5C is possible but will require concerted global action, something that has been elusive thus far.

For Africa the situation is dire, the continent will bear the brunt of climate change. As CarbonBrief  points out the heat waves will get hotter, the rainy seasons will become more erratic and droughts more likely. For a continent largely reliant on rain fed agriculture it means yet more cycles of drought and famine. The implications of climate change for Africa, if we do nothing, will further entrench poverty for another generation, and displace millions creating climate refugees.

However, this does not need to happen. Climate change is not a good thing, but as the saying goes ‘you should never let a good crisis go to waste’. Climate change is a crisis for Africa, but it is also an opportunity. Rather, than hold out our proverbial begging bowl for money and technical assistance to foster resilience, which is the strategy of most African governments at climate change summits. We can use climate change as the spark for transformation, as we actively seek to mitigate its effects and minimise the continents contribution to climate change. It can be an opportunity to harness science and technology and equip our farmers with tools to feed the continent in an era of shifting weather patterns. To leapfrog fossil fuel energy and lay the foundation of Africa’s economic and social development on green sustainable energy. And to take up the mantle of leadership where the worlds advanced nations have failed to do so. In previous posts (here and here) I have advocated for a conception of development in Africa with the dignity of all Africans as its core goal. Anybody thinking about development in Africa in the 21st century has to account for climate change, as climate change not only endangers our environment but our development and dignity as well. However, with smart, forward-looking policy it need not be a disaster.

Harnessing science to transform agriculture

Agriculture is the employer and source of livelihood for about 60% of the continent. The impact of climate change on agriculture in Africa will be significant and we are already seeing it. This is only the beginning, as pointed out earlier, the bigger the increase in warming the more pronounced these effects will be. This poses a challenge to African states, farmers and consumers; how can we ensure that we can grow enough to feed a growing continent. A large part of that answer lies in investing in science and technology to empower African farmers. To give them the tools (such as GM crops which I have written about previously) that can handle the changing climatic conditions and boost yields. Using technology to give farmers better knowledge about weather, soil and water conditions so they can improve yields, access to markets so they can get the best prices, and access to storage facilities so that we can cut post-harvest losses.

Investing in science and technology would not only help farmers and feed the continent it could provide the push we need to grow our scientific and technological capabilities on the continent. Industrialisation, development, science and technology are intimately linked and if Africa is to succeed in the 21st century digital and knowledge economy it must develop its STEM capabilities. Confronting the challenges of climate change, such as the ones it poses to agriculture could be the African moonshot, that spurs innovation and industry throughout the economy.

Leapfrogging dirty energy

Leapfrogging is the idea that less developed regions, countries or companies can advance rapidly through the adoption of modern systems without going through intermediary steps. The classic case of this in Africa is mobile phones. Mobile phones allowed most of the continent to skip expensive copper land lines, and the embrace of the technology has revolutionised many aspects of life and the economy. Like phone lines we have the ability to leapfrog fossil fuels. Renewable energy is now getting to a stage where they are almost as cheap and will soon be cheaper than fossil fuels. There are some who would argue that fossil fuels like coal are cheap and readily available, however that is increasingly untrue and African countries have free and broad access to the sun and wind. There are others who argue that developed nations used fossil fuels to industrialise and thus why should Africa be disadvantaged by not using them. But that sounds like a petulant child arguing that they too should be allowed to misbehave because everyone else did, frankly Africa has to be better than that. By investing in green ways of generating energy and innovative (e.g. mini-grids) of getting it to the people who need it, Africa can lay a sustainable foundation for its development. We can leapfrog the dirty fossil fuel generating plants and possibly even the expensive centralised electricity grid systems, most importantly we can develop our economies not at the expense of future generations but with their welfare in mind.

Leading the world

We may be a poor continent but that does not mean that Africa cannot lead on key issues. From the 1960’s onwards African nations led the international and diplomatic fight against apartheid South Africa. Boycotting international events, helping South African exiles and the ANC, getting the apartheid government banned from international fora and sports, sanctioning and boycotting their economy, it took a while eventually the rest of the world caught up and the apartheid system fell. The developed world has displayed a remarkable lack of leadership on the issue of climate change. Australia and the USA have leaders in charge who, despite the mass of evidence, deny climate change. Canada and the EU talk a good game but are yet to make those hard choices that would have a real impact on carbon emissions (like taxing carbon). There is a gap which Africa could fill. With policies, like putting a tax on the carbon emissions content of imports. with actions and putting our money where our mouth is, such as investing in green energy instead of fossil fuels. And smart diplomacy – combining our voice on the global stage to help build consensus, shame others into action and forge constructive engagement with the issue of climate change. Not all global leadership issues require a big wallet, or a big gun, determination and concerted effort can make a difference. This is not just wishful thinking on my part, as the continent in line to bear the biggest impacts of climate change, utilising whatever influence we may have to get global action is effort well spent.

Climate opportunity

The 2018 winners of the Nobel prize for economics were Paul Romer and William Nordhaus. Both won for their work on economic growth over the long term and though they did not work together, the work they did does dovetail. Romer’s work looked at how innovation and new technologies come about, and he found that by investing in innovation (like funding research and development initiatives) you can boost economic growth in the wider economy. Nordhaus’ work looked at the connection between the economy and the environment and the impact of climate change on the economy and wider society. Their work comes together in a rather simple way, to combat climate change, to shift our societies and economies to low-carbon ones, will require innovation, new technologies and new policies. We need to invest in the knowledge and ideas that will combat and mitigate the effects of climate change.  Most importantly what Nordhaus and Romer’s work suggests is that by investing in knowledge and ideas and implementing them you can generate long-term growth. Thus, by combating climate change we could actually stimulate economic growth.

For Africa this is an opportunity to do the right thing for current and future generations, and to lay the foundation for the development that we have been chasing for the last half century. Climate change could be a disaster for Africa, or it could be the thing that forces us to pursue a path that leads to long-term, sustainable growth. It will require us to be innovative with our policies, to rethink our ideas of development and industrialisation and to invest in the ingenuity, knowledge and innovation of African’s from all walks of life. Climate change will be one of the defining issues of the 21st century and Africa faces a choice, we can be a victim, or we can take the initiative, take responsibility and make it the springboard to a sustainable successful future.

Let’s go to the Moon: Africa’s Industrialisation needs African science

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone. – President John F Kennedy

In a previous post I urged a rethinking of Africa’s industrialisation path, that through a failure of imagination we have tried to industrialise Africa with policies that do not fit its own context. Part of that lack of imagination has been the lack of emphasis put on science in the pursuit of development in Africa. Industrialisation has always been accompanied by and often led by the growth and advance of science and technology. When Britain became the first industrial powerhouse it was on the back of scientific, engineering and technological advances in the steam engine, mechanisation and metallurgy. The industrial revolutions of the 20th century was driven by scientific discovery and advances in electricity, transportation, communications and computing, and it is no accident that many of them came out of the nation that invested the most in science, the USA. The East Asian tigers and China have all placed heavy emphasis and invested significantly in building and advancing their own scientific and technological capacities, because they know it is a key driver of industrialisation.

If Africa is to develop, industrialise and competently face the challenges of the 21st century then we need African science to flourish. This will require African policy makers to recognise the importance of science, invest in it, and to set and chase ambitious goals.

Science and Industrialisation – inseparable bedfellows

Science, technology and industrialisation are intimately linked. In fact, one could go so far as to say that without scientific advances and new technologies, industrialisation around the world may have been very different or not happened at all. Any study of the first industrial revolution (roughly 1760-1840) cannot ignore the impacts of the technological advances in iron and chemical manufacturing, the harnessing of steam and mechanisation. The second industrial revolution (1870-1914) was characterised by advances in steel, rail transport, telecommunications, electricity and the advent of applied science (the application of existing scientific knowledge to practical applications). The third industrial revolution (1960- today), or digital revolution is based on the advancement of technology from analogue electronic to digital devices, this was enabled by advances in materials science, quantum mechanics and mathematics. Now, according to some[1], the fourth industrial revolution is upon us and it will be marked by emerging science technologies such as AI, biotechnology and 3D printing.

If Africa is to develop and industrialise it must be a participant not just a recipient of the scientific revolutions taking place elsewhere. The rising powers of East Asia did this in the 1950s and 60s and invested heavily (and continue to do so) in building scientific and technological capacity just as their western counterparts had done over the preceding century. A great example of this is China. In 1977 China recognised Science and Technology as one of the four modernisations alongside agriculture, industry and national defence. And in the 1990’s deployed a series of policies such as increased funding, setting up an innovation infrastructure, increasing the societal importance of science and forcing technology transfer from foreign investors to achieve its goal of making China a global science and technology leader. China today is a world leader in areas such as hi-tech manufacturing, renewable energy and infrastructure.  Like China, African governments and policymakers must also recognise the importance of science and technology in development, that industrialisation is not just about factories, railways and trade. If Africa places as much emphasis on building scientific capacity as it does on infrastructure, trade or attracting FDI the continent would take the first step to building the sustainable growth that it seeks.

Walking the talk – investing in African science

Not only must science and technology be recognised as being as important as infrastructure it must get a comparable level of funding. There are three key ways of doing so. Investing in people, investing in scientific infrastructure and technology transfer. China has a target of investing 2.5% of GDP in scientific and technological research and development, and there is no reason why Africa cannot have a similar science and technology investment goal.

Investing in people

Investing in people is simple, it means funding STEM education at all levels (primary, secondary, university and post-graduate) to the level that is necessary to have the scientifically and technologically literate population able to work in a digitally driven economy and produce the scientists, engineers and mathematicians the continent needs at the foundation of its economy. In addition, there are a number of African scientists, mathematicians, and engineers who reside, teach and work outside the continent, kickstarting Africa’s scientific revolution would be easier if they were tempted back to Africa’s scientific agencies, research institutes and universities. This won’t be cheap, syllabuses will need to be updated, teachers trained, scholarships and bursaries funded, and the scientific diaspora given comparable salaries to what they can get elsewhere. However, in my view it is well worth the investment. Africa desperately lacks scientific capacity and that threatens its long term development, investing in human capital will provide a viable foundation for Africa’s future.

Invest in the infrastructure of science

Its one thing to have scientists, but that’s useless if the infrastructure doesn’t exist for them to thrive. By scientific infrastructure I don’t just mean giving greater funding to science departments at universities but also funding the myriad of research institutes, laboratories and agencies and technology parks that have been set up over the years. This also includes the sharing of science, scientific journals and conferences, which are crucial to the dissemination and progression of research and Africa has far too few of them, limiting the visibility and impact of African science. Putting money behind initiatives such as the Scientific African will help remedy this.

Technology transfer

Technology transfer is the idea that foreign investors should as part of their investments transfer some of the technical knowledge and skills which they have to the country in which they are investing. For Africa this would involve giving foreign companies incentives for technology transfer and moving R&D to the continent (such as tax breaks or subsidies), requiring the employment and training of locals in their operations and encouraging investors to enter into joint ventures with African companies when they invest in the continent. This will help insure that FDI into the continent doesn’t just build roads, power stations and factories, but also builds the people and skills that will develop the capacity for Africans to do these things themselves.

Let’s go to the moon

In 1961 President Kennedy asked the US congress to commit to a program to landing a man on the moon by the end of the decade. At that point in time, the USA had barely been able to put a man in space, going to the moon was barely conceivable, the technology and expertise didn’t exist, yet in July 1969 Neil Armstrong took the first steps on the moon. As the economist Mariana Mazzucato outlines in her new book ‘The Value of Everything’, going to the moon required the collaboration and coordination of a variety of different actors, from the aerospace sector to design and build the spacecraft, to the computer industry to invent computers that could run it, to the textiles sector to come up with suits that could walk on the moon. This not only resulted in the achievement of the mission of landing a man on the moon, it led to scientific and technological advances that have changed the world, such as modern computers with integrated silicon chips and multitasking software which are descended from the Apollo Guidance Computer where they were first developed and utilised.

The lesson Africa can learn from this, was that all these achievements came from having a singular focus on a specific challenge (going to the moon) and solving the problems it presented collaboratively between the private and public sectors. Today Africa faces a myriad of challenges, many of which such as climate change, or eradicating aids, or ending hunger contain multiple problems and require collaboration and problem solving between and within multiple sectors and significant funding, which only government can provide. What if we took a leaf from the moon-shot and African Governments funded a challenge. A challenge around which society can coalesce and benefit from as whole such building a green economy or ending hunger. Which like the moon mission could be broken down into various smaller problem-solving projects which would require investment in Science and Technology, would be coordinated by scientists, businesses, civil society, government departments and whole sectors from around the continent and help foster a sense of social cohesion through a goal that the majority of people believed in. I firmly believe if we are to confront and solve the challenges Africa faces in the 21st century we need to be ambitious, we need to think outside the box, focusing on and working collaboratively towards solving the big issues is a perfect way to do this, Africa should go to the moon.

[1] https://www.weforum.org/agenda/2016/01/what-is-the-fourth-industrial-revolution/

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