Industrialization is the key to create jobs and reduce poverty in Africa

Investments in infrastructure, science, technology and industrial training, adequate funding, enhance business environment, strengthen and sustain private sector partnership , intensify regional integration  and good governance are critical  measures for Africa to industrialize and transition into a highly coveted middle income status.

According to the 2014 ReSAKSS Annual Trend Outlook Report (ATOR), industrialization holds the key in creating decent employment opportunities for a youthful population, a pathway out of poverty and thus accelerating Africa’s transition into a middle income continent.

Africa’s growth in GDP averaged 5.4% in the period 1995-2013 with less than a quarter of its countries growing at an average of 6%. But this economic growth has not resulted into creating decent job opportunities, reducing poverty and improving the livelihoods of many populations in the continent. Evidence suggests that Africa is a home of many million poor people living in extreme poverty and without decent jobs.

This growth is driven by agriculture and it has not being accompanied by robust structural transformation characterized with industries. Conversely, in developed countries, economic growth is driven by industrialization underpinned by strong manufacturing. In East Asia economies for example, China has successfully led the fight against poverty in the world by lifting more than 600 million people out of poverty on the heels of rapid economic growth, sustained by industrialization. But this conventional path is a daunting task for most African countries to actualize.

Despite agriculture being a key sector in economic transformation, African countries are yet to take advantage of their agriculture. Africa’s global relevance seems to be relegated only to source of raw materials and this has to change if Africa wishes to be a middle income continent. Their dependence on either too few export commodities or too few sectors makes many countries vulnerable to fluctuations in commodity prices, demand, and extreme weather events such as droughts and floods. Economic diversification thus holds great potentials to increase Africa’s resilience, and the heavy reliance on primary products must be reduced; this requires a new and important role for manufacturing exports, which remain one of the most potent forces for economic growth.

Also, Africa has not fully participated in the global trade on value added goods, their contribution accounted 2.2% in 2011 and this does not guarantee structural transformation. Africa therefore needs to enhance their participation in the global value chain by opening up to trade, targeting regional and emerging markets.

Globally, Industrialization has been reinvigorated as part of post 2015 Development agenda. At the behest of the African Union, the United Nations Industrial Development Organization (UNIDO) , African governments and the private sector formulated the “Action Plan for the Accelerated Industrial Development of Africa (AIDA),” a strategy that aims to mobilize both financial and nonfinancial resources and enhance Africa’s industrial performance. AIDA was adopted by African heads of state at its summit in 2008, which was devoted to industrialization. AIDA is a central pillar of the new Africa’s strategy for 2063 and of the Africa-EU roadmap for 2014–2017.

The ATOR 2014 documents measures to quicken Africa’s industrialization and they include:

Investment in infrastructure

Africa has poor infrastructure especially in transport, energy and water supply as well as costly services provided. Road infrastructure and road density in several African countries are poor compared to other parts of the world as well as lack of access to modern forms of energy. This has created unfavourable business environment for industrialization and economic growth. Africa must promote and push for the full implementation of the Plan for Infrastructure Development in Africa (PIDA), which has at its core the scaling up of investments in the energy sectors as well as invest in modernizing its infrastructure.

Improve business environment and sustain private sector

African countries must develop and implement policies to create a favourable business environment for firms to invest. These policy reforms should focus on creating conditions that will enable enterprises establish, grow and compete globally.

To bridge the industrial gap in the continent, vibrant private sector is crucial. But, the private sector in some African countries remains limited and constrained by various factors such as high cost of doing businesses and infrastructural bottleneck. Measures should be designed to improve state–business relations, support innovative entrepreneurship, strengthen intra-firm specialization and linkages, promote exports, and improve financial services with a view to addressing the deficits of Africa’s private sector.

Invest in science, technology and industrial training.

Science, technology and skills form the backbone of industrial development. Africa has been unable to participate in high value added goods due to poor technology and science skills, occasioned by poor funding on research and development. At present, Africa’s gross domestic expenditure on research and development (GERD) is less than 1 percent, with only South Africa approaching the target of a 1 percent. This is also aggravated by most of African universities neglecting research and the focus of African governments, spurred by donors, on boosting primary and secondary education, thus disregarding universities. African countries need to design policies and strategies to enhance skills development in specific development sectors to enhance industrialization.

Intensify regional integration

Through African Union (AU), African countries can increase their efforts to achieve regional integration. Through better coordination between the key institutions and key stakeholders of different countries, regional integration can facilitate harmonization in critical areas, such as policies, trade, institutions, science and technology, product standards, and the establishment of simplified customs procedures and financial services.

Adequate Financing

Industrialization requires long term financing usually from the private sector and other partnership. In Africa, financing may be through: (i) domestic resource accumulation especially through income from natural resources. (ii) Through industrial partnerships involving strategic partnerships between African countries and other countries in the south or north that are focused on developing specific industrial projects in Africa. In such partnerships, industrialization can be facilitated through regional trade agreements, technology transfer, and foreign direct investment.

Download CHAPTER 7: Renewing Industrialization Strategies in Africa. Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report 2014

Reference

Patrick Kormawa and Afeikhena Jerome. 2015. CHAPTER 7: Renewing Industrialization Strategies in Africa. In Badiane, O. and T. Makombe. 2015. Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report 2014. International Food Policy Research Institute (IFPRI).

This article is written by Andrew Wangili, Communication intern at ILRI/ReSAKSS-ECA.