Explanation:
There is plenty of ambition in Africa to industrialise, for good reasons. Manufacturing is probably the only proven development model so far that has helped to bring jobs, export revenues and rapid and sustained prosperity to a range of (mainly Asian) poorer countries.
But unless African countries get down to the messy and laborious task of actively promoting manufacturing through targeted infrastructure, skills development, financial policy, making quality connections with agriculture and services in partnership with the private sector, and preparing for a more digital future, significant industrial capacity may never take hold in Africa. The window of opportunity is closing.
Large scale manufacturing on the African continent is mostly absent (automobiles in South Africa being a notable exception). But there are many success stories and promising avenues.
The share of manufacturing in sub-Saharan African gross domestic product (GDP) has declined from 14% in 2000 to 9.6% in 2010 and has remained at that level until now. But it is also true that the value of manufacturing output and exports had doubled over the last decade.
Annual manufacturing growth rates since 2000 were close to 10% in Ethiopia (among the top three in the world), Rwanda and Tanzania – though from a low base. Sub-Saharan Africa’s garment and textiles exports to the United States increased by 18% from the first half of 2017 to the first half of 2018, and a whopping 106% in Ethiopia, thanks in part to a drive to build special economic zones.
There are now major opportunities for African manufacturing. With African markets growing and the new African Continental Free Trade Area signed earlier this year, my colleague Max Mendez-Parra makes the case for increasing regional trade in services which in turn support industrialisation.
There are challenges too. African countries should not expect large scale offshoring of manufacturing jobs from China, as Chinese firms often upgrade domestically and automate in the face of rising wages. It means that African countries need a more targeted approach towards China.
Digitalisation may also affect the ability of African countries to compete as labour costs become less important. Karishma Banga suggests a two-pronged approach: prepare for a digital economy, and build industrial capabilities while you can.
The final three perspectives emphasise that domestic policies and institutions are crucial. While Ethiopia’s experiment with industrial parks is well known and shows the importance of leadership, Tanzania’s experience is full of plans that are not implemented, and recent action is mixed. Kenya lacked coordination but has recently stepped up its action from the centre. Rwanda has recently increased its policy emphasis towards industrialisation – in Rwanda, that normally means ‘we are in business’.
This is exactly what’s needed: African countries must step up at this crucial moment, and seize the opportunity while they still can.
