Industrialisation in Africa is a hot topic among international agencies and government officials. It is also central to achieving AU’s Agenda 2063. It is widely accepted that industrialisation is an important component to development. Industrialisation on the continent will bring new jobs, increases in salaries and prosperity. Africa has all main ingredients to be a manufacturing hub yet the continent is stagnant. In fact, the continent is less industrialised today than it was four decades ago. According to UN Economic Commission for Africa (UNECA), Africa’s gross domestic product actually declined from 12% in 1980 to 11% in 2013.
4 reasons why Africa is lagging in industrialisation:
– Lack of investment in human capital: Lack of appropriate skills is one of the main constraints Africa faces for investing in manufacturing activities. By 2060, the African population is expected to reach 1.6 billion, more than 70% of which will be under the age of 30 years. This can be turned into an economic dividend if governments heavily invest in endowing people with the right skills.
– Infrastructure deficit: Africa suffers from severely poor infrastructure. This accounts for 30% to 60% of productivity losses of firms and 40% to 80% of this is due to the energy sector in half the countries. Poor energy quality imposes additional costs on companies such as idle workers, spoiled materials, lost production, damaged equipment, and restart costs.
– Unfavourable business environment makes it difficult for manufacturing firms to establish themselves. In 2005, it took 63 days to start in business. In 2016 it took 27 days. Although the business environment is improving, it still scares potential business owners.
– Lack of smart policies: natural resources have been a blessing and curse for Africa. Many African countries fail to leverage their position and continue to export raw materials with little value addition. For example, Africa exports 69% of the world’s raw cocoa beans but only 16% of ground cocoa, which is typically worth 2-3 times more per ton than raw cocoa. Revenue from exporting resources could be used to stimulate manufacturing industries. Sadly, the money is wasted on non-productive expenditures.
3 countries leading industrialisation in Africa:
- South Africa is currently number 27 on the Global Manufacturing Competitiveness Index (2016). Metals and machinery enterprises employ the largest number of individuals in the manufacturing industry, followed by the food and beverages and petroleum and chemicals enterprises.
- Egypt: Manufacturing Production in Egypt increased 12.60 percent in April of 2018 over the same month in the previous year. In 2015/2016 manufacturing comprised 17.1% of Egypt’s total GDP, an increase on the 16.5% recorded in 2010/11. In 2016 the government announced a four-year, five-pillar strategy to help transition Egypt into a major regional industrial centre and export hub.
- Nigeria’s manufacturing sector is dominated by the production of food, beverages and tobacco, with sugar and bread products generating the greatest value of output (National Bureau of Statistics). To further foster manufacturing, the Central Bank of Nigeria (CBN) announced plans to facilitate the issuance of single-digit interest rate loans to firms operating in the agriculture and manufacturing sectors.
3 emerging players in industrialisation in Africa
Morocco, Rwanda and Ethiopia have emerged as big players in industrialisation in Africa. These countries embraced policies that target and favour their own manufacturing industries. Second, these governments control, manage and regulate their economies. Lastly they adopted investor friendly policies that have attracted investment and reduced corruption.
- Morocco: The government has implemented Green Morocco Plan (Plan Maroc Vert, PMV) to increase industrialisation and shift activity up the value chain with the aim of ensuring that the rural population benefits from increased production and value addition. The sector’s turnover increased from €5.4bn in 2000 to €9.9bn in 2011, recording average growth of 6% annually.
- Rwanda: the sector is small, but growing, yet competitive. Rwanda is mainly dependent on the primary sector: production and/or processing of wood, tobacco, cement, textiles, agricultural products, small scale beverages, soap, furniture, shoes, plastic goods, tea and coffee. However in alignment to government policies, Rwanda is diversifying and investing in other sectors. The government waived taxes on imported raw materials and accessories for the apparel and footwear industries, although it has not yet translated into meaningful price reductions.
- Ethiopia’s manufacturing industry is dominated by small firms and resource-based industries, low-value and low-technology products, and weak inter-sectoral and intra-sectoral linkages. Since 2006, Ethiopia’s manufacturing sector has expanded by an annual average of more than 10%. Ethiopia’s agricultural sector accounted for 13.2% of GDP in 2011, rising to 15% in 2013, and provided roughly 40% of total employment.
Industrialisation in Africa is possible. Governments must implement smart policies and bold actions to nurture industrialisation. Both the private and public sector must actively and purposively work together to increase Africa’s economic complexity, diversity, competitiveness, and productivity.
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