Responding to the call to find better ways of re-industrialising Africa from Nigel Gwynne-Evans, the dti’s director for African Industrial Development, Peter Middleton wonders why South Africa hasn’t yet been able to create the ‘developmental slipstream’ for African development.
In a press release published in advance of next month’s Infrastructure Africa Business Forum taking place in Sandton from 9-10 June, Nigel Gwynne-Evans, chief director for African Industrial Development with the Department of Trade & Industry (the dti) warns that Africa and its 34 least developed countries urgently need to find the best ways to industrialise their economies to avoid being further marginalised and excluded from the global economy for yet another decade. “Africa is de-industrialising and has skipped a vital industrial revolution such as the one Asia experienced in the 1970s,” says Gwynne-Evans.
He quotes an article published by the Economist in November last year: ‘Industrialisation in Africa: More a marathon than a sprint’: Many countries de-industrialise as they grow richer, reads the article – growth in service-based parts of the economy, such as entertainment, helps shrink manufacturing’s slice of the total.
In contrast, according to the Economist: many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher paying factory jobs.
The article lists some stark statistics:
- From 1980 to 2013 the African manufacturing sector’s contribution to the continent’s total economy declined from 12% to 11%, leaving it with the smallest share of any developing region.
- In most countries in sub-Saharan Africa, manufacturing’s share of output has fallen over the past 25 years.
- In Africa, manufacturing provides just over 6% of all jobs, a figure that has barely changed in three decades, while in Asia, the figure grew from 11% to 16% over the same period.
And while other developing countries in the world are also experiencing de-industrialisation – partly because technology is reducing the demand for low-skilled workers – de-industrialisation appears to be hitting African countries particularly hard.
This is first because weak infrastructure drives up the costs of making things and exporting them – high electricity costs, poor roads and congested ports, for example.
Africa’s second disadvantage is, “perversely, its bounty of natural riches”. In periods of “booming commodity prices” economies benefit from increased exports, which drive up exchange rates. This makes it cheaper to import manufactured products and harder to produce and export locally manufactured ones – a phenomenon known as ‘Dutch disease’ for some obscure reason.
Africa’s third snag, according to the Economist article, is its geography. East Asia’s string of successes happened under the ‘flying geese’ model of development, where a ‘lead’ country creates a slipstream for others to follow. In the 1970s, for example, Japan moved labour-intensive manufacturing to Taiwan and South Korea.
“We don’t have a leading goose,” says Ngozi Okonjo-Iweala, Nigeria’s former finance minister. And while light manufacturing is leaving China for neighbouring Bangladesh and Vietnam, none is coming to Africa, despite its cheap labour.
Ethiopia’s manufacturing is bucking the trend with average manufacturing growth of over 10% a year in the 2006-14 period, albeit from a very low base. Why? “Partly, because it has courted foreign investors”: Holland’s horticulture; China’s textile and leather factories and Turkey’s garment manufacturers. “Now we’re bringing in German and Swiss pharmaceuticals,” says Arkebe Oqubay, a minister promoting Ethiopia’s industrialisation.
Says the dti’s Gwynne-Evans: “There’s no doubt that what is known as the ‘fourth industrial revolution’ brings advanced technologies to bear in all aspects of life: improved telecommunications, internet, banking and retail services. Africa is adopting these new technologies exceptionally fast, in leap-frogging to a more advanced world. The big but, and it’s a big one, is that without a strong manufacturing sector, these services will largely be provided by global multi-nationals, with an increasing loss by governments of the levers to transform their economies.”
He cites the adoption of the 2030 Agenda for Sustainable Development, the Sustainable Development Goals (SDGs), the African Union Commission’s 2063 Agenda and the COP 21 Paris climate change agreement in 2015 as initiatives that have given new impetus to the call for industrialisation to transform Africa, especially in its least developed countries.
A 2015 UNIDO report to the China G-20 Development Working Group reads: “Rarely has a country progressed and become developed without sustained structural transformation from an agrarian or resource-based economy towards highly productive agriculture and a sophisticated industrial or service-based economy. Industry, by providing decent jobs and by expanding the fiscal revenues needed for social investments, can boost capacity for inclusive development.”
Shouldn’t South Africa be striving to become the ‘leading goose’ of Africa? We have the infrastructure and significant engineering, industrial and manufacturing expertise.
With a stronger focus on local empowerment in terms of skills, along with a renewed effort to develop cooperative relationships between industry, unions and government, we could reduce our dependence on commodity fluctuations and become Africa’s flying, re-industrialising goose.