Industrialisation is arguably the most talked about subject

28Mar 2019
The Guardian
Industrialisation is arguably the most talked about subject

Industrialization has been a campaign promise across the African continent, with its acknowledged ability to bring prosperity, new jobs and better incomes for all. Yet the continent is less industrialized today than it was four decades ago. 

In fact, the contribution of Africa’s manufacturing sector to the continent’s gross domestic product actually declined, according to the reliable information in the media, from “12% in 1980 to 11% in 2013”, where it has remained stagnant over the past few years. 

The Economist Intelligence Unit, a British business research group, reckons that Africa accounted for more than “3% of global manufacturing output in the 1970s”, but this percentage has since halved. 

It warns that Africa’s manufacturing industry is likely to remain small throughout the remainder of this decade. At no point in recent history have calls for Africa to industrialize been stronger than they have been lately. 

Across the continent, industrialization is arguably the most talked about subject among policymakers. So why has action on the ground failed to move the needle on this important development market? 

High commodity prices triggered by China’s seemingly insatiable appetite for natural resources have fueled rapid economic growth in Africa since the 1990s.

 Many thought the boom would revive Africa’s waning manufacturing industry. Yet to the dismay of analysts, it failed to live up to expectations. 

Instead of using the windfall to set up or stimulate manufacturing industries, African countries—with a few exceptions—wasted the money on non-productive expenditures.

Now falling commodity prices and a cooling Chinese economy have conspired to expose the myth of the “Africa rising” story line. The International Monetary Fund estimates that growth “in 2016 will fall below 4%”. 

‘The Economist’, a UK-based publication, warns will lead “many to fret that a harmful old pattern of commodity-driven boom and bust in Africa is about to repeat itself.” 

Had African leaders heeded advice from experts and pumped profits from the commodity boom into stimulating manufacturing companies, the results could have been different. So what are the options for Africa over the next few years? The only viable option is to industrialize. 

Experts ought to agree that one of the main reasons for Africa’s slow industrialization is that its leaders have failed to pursue bold economic policies out of fear of antagonizing donors.

 A typical example was demonstrated by countries such as Ghana and Zambia, for instance, they used profits from the commodity bonanza to solve short-term domestic problems, such as by increasing salaries for civil servants.

As it were, the strongest criticism of this policy vacuum came not from the debate, but from the op-ed pages of ‘The Financial Times’, a British daily.

Africa stands on the cusp of a lost opportunity because some of her leaders—and those who assess her progress in London, Paris and Washington—are wrongly fixated on the rise and fall of GDP and foreign investment flows, mostly into resource extraction industries and modern shopping malls.

We implore African countries to reject the misleading notion that they can join the West by becoming post-industrial societies without having first been industrial ones. 

Additionally, we call for “policy imagination”—creativity in crafting policies—and urge African policymakers to avoid being bound to any single theoretical policy. “African countries need to have the self-confidence to develop alternative policies and stick to them,”

Asia’s development of its industries is instructive: state-led development policies were responsible for lifting the region’s economies out of poverty during the late 20th century—a point some of us clearly recognize. 

We hereby insist that governments must lead the way, with a firm hand on the wheel and by setting policy that creates an enabling environment for market-based growth that creates jobs.

We are adamant that markets must work for society and not the other way round.  It is a pride to point out that Ethiopia and Rwanda as notable examples of how Africa could industrialize its economies. 

African policymakers are sometimes hesitant to take alternative policies for fear of dictates and conditionality of the leading developed countries particularly in the West. 

Yet ‘The Economist’ sees things differently. In its analysis of why Africa has failed to industrialize, it observes that while many countries reindustrialize as they grow richer, “many African countries are deindustrializing while they are still poor…partly because technology is reducing the demand for low-skilled workers.”  

Another reason, says the magazine, is that weak infrastructure—lack of electricity, poor roads and congested ports—drives up the cost of moving raw materials and shipping out finished goods. 

But the publication acknowledges that Africa’s “favourable demography, rising urbanization and extensive agricultural resource base underscore the potential of the region’s manufacturing industry.”

It is outspoken that rich nations that “preach free market and free trade to the poor countries in order to capture larger shares of the latter’s markets and to pre-empt the emergence of possible competitors. 

Hence the support of smart protectionism, making the case that it’s not only necessary but can be pursued using the rules set by the World Trade Organization (WTO), a UN body that makes rules and mediates trade disputes among nations. 

The ECA has given the same advice, maintaining that African countries can legitimately pursue smart protectionism as practiced by the West. 

Nearly all countries that have industrialized started with degrees of protectionism, but we cannot practice crude protectionism anymore we are engaged in a global debate that includes trade negotiations. 

If we have to make the rules work for Africa, that basically means smart protectionism; many experts have called on Africa to practice “so-called sophisticated or smart protectionism”—that is, to impose temporary tariffs to shield budding industries from the negative effects of cheap imports—as part of its strategy to industrialize.

Probably the world’s most effective critic of globalization, it’s argued that rich countries have historically relied on protectionist approaches in their quests for economic dominance. 

As if to prove the point that rich nations are indeed practicing protectionism, the WTO reported in June 2016 that there is a rapid increase in trade restrictive or protectionist measures by the world’s leading economies that make up the G20 group. 

Between mid-October 2015 and mid-May 2016, the report says, G20 economies had slapped “145 new trade-

restrictive measures at an average rate of 21 new measures per month, a significant increase compared to the previous reporting period at 17 per month.” 

It’s usually noticed that Ethiopia is leading by example. It has shown industrialization can happen in Africa. What the continent needs is political commitment and the audacity to implement the right policies, even in the face of strong external opposition. 

For capitalism to work for Africa, just as it has for China and much of East Asia, public policymakers must shake off the shackles of orthodoxy.

Ethiopia, Rwanda and to a lesser extent Tanzania have proved adept at navigating the bumpy path to industrialization. The common thread among them is that they have embraced policies that target and favour their own manufacturing industries. 

In addition to pursuing what experts call a “developmental state model,” under which governments control, manage and regulate economies, they have adopted investor-friendly policies. 

And most importantly, they have shown a commitment to and ownership of these policies. State control over economic policies appears to have contributed to less corruption in Ethiopia and Rwanda or Tanzania.

The SDGs apply to every country in the world. The concept that world leaders had when they developed these goals was that they would underlie every national development plan of all countries. 

That means existing spending by governments should be adjusted to align to the SDGs. A lot of the money will come from existing national budgets.  But of course extra money will be needed. Some of these goals are going to be expensive. 

But they will be needed particularly in poorer countries to help ensure that there are opportunities for everybody and nobody gets left behind.  

For that matter, development financing is critical, supplemented in some cases by private sector investment. To ensure that development funds are available, [donors] will be asked to maintain their assistance and not to reduce it because of domestic pressures.

 The most important requirement for governments is for fair and transparent systems to ensure money needed for the public sector benefits the people. 

This is the core set of principles underlying the SDGs. If, by any chance, [money is] moved from countries without proper accountability or if there is diversion of money [to avoid paying] taxes not just in poor countries, then this undermines the realization of SDGs. 

That’s why proper use of tax revenue and proper use of government finance is absolutely key for the SDGs to be realized. Because the SDGs were agreed to by all world leaders, and they knew already that there were some activities in their countries that directly reflected what’s in the SDGs. 

The idea is not to completely redesign national plans but instead to align them with the SDGs. In some places that means leaving things as they are. In others, it means changing them so that they are better aligned.  

We’ve seen the reality of life particularly for poor and vulnerable people. Their lives are interconnected. Issues in agriculture, in climate, in gender equity, in health and education tend to be linked in a very intense way. 

You can’t take one area, one aspect of human existence and deal with it out of sync with another aspect. So we actually do believe that all the different issues identified in the SDGs are important. 

And if you take one part out it is like taking a big stone out of the middle of the arch of the bridge; the whole of the bridge will collapse. We believe all of them are important.

In the news we hear about situations where things are not good. But for every account of things going badly, there are thousands of accounts of things going well. 

They just don’t get in the news. It’s an optimism that makes us feel certain that people will come together and achieve the goals by putting special emphasis on climate change, on gender equity, on protracted crises, on human rights, and on financing for development.  

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