Assessing the dynamism of the manufacturing sector and natural resources

01/11/2014
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During an interview on the sidelines of the 9th assembly of the African Economic Conference taking place from November 1 to 3 in Addis Ababa, Marc Luc Dagbégnon Akplogan, a researcher at the Institut National de la Statistique et de l’Analyse Economique (INSAE) in Benin, assessed “The dynamism of the manufacturing sector and natural resources for Africa’s transformation”.

“To achieve transformation, African countries must make crucial choices, especially to diversify their industrial fabric,” he pointed out.

Despite the huge potential of African countries, industrialization on the continent is making slow progress. How must African countries act to make this economic sector dynamic and work towards achieving structural transformation?

Marc Luc Dagbégnon Akplogan:Individually, African countries have a huge potential, especially in terms of their natural resources and agricultural products. But despite this, the various industrial policies implemented in the past have not succeeded in effectively harnessing this wealth to achieve industrialization. It is also widely accepted that if current trends continue, most African countries will not be able to achieve transformation.

What do you mean by that?

MLDA: To achieve transformation, African countries must make crucial choices, especially to diversify their industrial fabric, create new industrial units, and above all to reinforce institutions, among other things. We admit that the policies implemented in our countries have not really helped to make the manufacturing sector dynamic in order to ensure structural transformation such as in emerging economies, especially Brazil, China and India.

However, to optimize this sector, which is a source of economic progress and competitiveness, it is necessary to rethink industrial policies and the institutional framework of their implementation in each country.

For this reason it is useful, from my point of view, to strengthen efforts and the technological capabilities of personal resources; to reinforce science, technology and innovation policies, with a focus on learning and innovation, and promoting national and regional innovation systems; and reinforcing human resources and a general improvement in the infrastructure of science, technology and innovation.

In your opinion, how can we make the manufacturing sector in Africa more dynamic?

MLDA: Managers must put promotion of the manufacturing sector at the heart of economic policies and therefore make it a priority. This means diversifying the industrial fabric of African countries beyond the agro-alimentary and textile industries that dominate the industrial sector; working for the creation of new industrial units for the export and use of local raw materials; regenerating and creating new industrial zones.

To achieve this, ministries of industry and agriculture must work together with ministries of the economy and energy to design dynamic industrial policies.

African countries must also focus on strengthening institutions and taking advantage of partnerships with African institutions such as the African Legal Support Facility. This is part of the drive for optimal and transparent management of agricultural, mining and oil revenues.

These resources enable the financing of productive investments, the acquisition of technologies and continued improvement in terms of development.

Creating specialized research centres that are capable of inventing new techniques to push at the boundaries of technology. It is also worth increasing resource capacities (materials, researchers, etc.) for those that are already operational (public or private) and to set up or test scientifically relevant results for existing research in close partnership with private sector businesses. The interface between government and businesses must be improved, with clearer and more specific priorities among the numerous economic plans and visions for countries.

Encouraging local businesses, especially small and medium-sized business, to increase their capacity for technological absorption in order to improve their performance and produce medium and high technology goods that are compatible with international standards, a source of economic progress and therefore competitiveness. The spread of technological innovation in agriculture must involve reinforcement of the human capital of agricultural players (use of specific fertilizers, understanding the farming calendar, modern growing techniques, etc.).

Finally, to increase commercial openness for the export of manufacturing goods via the gradual conquering of regional, sub-regional and international markets. It is up to African countries to go beyond simply exporting raw products and natural resources, some of which are non-renewable, with low added value and prices that constantly fluctuate on international markets, by processing some of these products before export.

How does the level of development of the manufacturing sector influence economic growth in African countries in terms of the amount of natural resources?

MLDA: The large amounts of natural resources (basic agricultural products, lumber, metals, minerals, oil and gas) in African countries gives them a comparative net advantage. This justifies the high concentration of direct foreign investment coming into Africa from emerging countries, especially China, for activities linked to these resources. Industrialization based on natural resources is therefore a means of developing regional value chains on the continent that African countries must take advantage of.

A level of development of manufacturing industries will enable the creation of new, more productive activities for the reorientation of traditional activities. These will make it possible to give an added value to natural resources, to provide more productive work for an estimated 7-10 million young people who enter the African job market each year.

This structural transformation based on countries’ available natural resources will allow low-productivity sectors gradually to become high-productivity sectors.