Industrialization a precondition for Africa’s economic transformation

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Africa will have to step up investment in industrialization and trade facilitation to ensure that the current growth momentum is more resilient to external shocks and translates into economic transformation.

Africa remains the least diversified region in the world, both in terms of its production and export bases, despite the recent economic progress.   

This was discussed on Wednesday, October 30, the third day of the eighth African Economic Conference (AEC) taking place in Johannesburg during a plenary session held under theme: “Making Industrialization and Trade Transform Africa”.   

While African countries continue to register strong growth with 20 countries growing over 6.5 per cent, this growth performance remains highly vulnerable to external shocks and has not translated into meaningful job creation for most countries.

In addition, weather vagaries and global commodity price volatilities due to the continent’s reliance on agriculture and primary commodities for its performance continue to dampen its prospects for growth.

“We have to adopt strategic and pragmatic approach to industrialisation, said Patrick Osakwe, the Chief, Africa Section from United Nations Conference on Trade and Development (UNCTD).

“You have to identify clearly how you intend to achieve the goals and have a mechanism for measuring progress to achieve those objectives.” He said industrial policies must be realistic and should have accountability mechanisms to facilitate effective implementation.  

“It is very important that African countries be realistic and approach industrialization policies from a strategic perspective. We have to focus on what works, not ideological convictions,” Osakwe said, underscoring that countries have to be pragmatic.   

There is need for diversification of Africa’s production and export base to reduce its dependency on few commodities.

This, coupled with value addition to main exports and accelerating regional integration, has been identified as key to the economic transformation of Africa.  

According to Asma Bouraoui Khouja, the Executive Director of the Maghreb Economic Forum, there is need to support small and medium enterprises (SMEs) as engines of job creation.  

“We need to come up with a sovereign fund to support SMEs,” Khouja said, pointing out that small and medium businesses need support to diversify their production.  

But the underperformance of industries in Africa is also linked to the lack of infrastructure, the energy gap, poor governance and fierce competition from products imported from emerging countries such as China.

“In most African countries, the trade deficit is very high because of weak linkages between sectors.

Policies are incoherent and contradict each other. We talk about trade liberalization, but we have very limited safeguards, yet we are talking about industrialization,” said Jane Nalunga, the Country Director, Southern and Eastern African Trade Information and Negotiations Institutes (SEATINI), Uganda.   

Nalunga also raised issues including tariff escalation, rules of origin and trade partnership agreements as challenges limiting industrialization and trade in Africa.  

“In Economic Partnerships Agreements (EPAs), we are talking about prohibiting export taxes, yet you cannot talk about industrialization when you do not have export taxes – these are some of the contradictions.   

“You find that most of these EPAs do not make economic sense, but most of our African countries are going to sign them, not because they are going to promote our industrialization but for political reasons,” Nalunga said.

Participants underscored that pooling African economies and markets together through trade and regional integration provides a sufficiently wide economic and market space to make it possible for trade to exploit economies of scale.   

African leaders have adopted the Action Plan for Accelerated Industrial Development of Africa (AIDA) to foster industrial development across the continent.  

The discussion was chaired by Stephen Karingi, the Director of Regional Integration and Trade Division, United Nations Economic Commission (ECA).  

The African Economic Conference was organized jointly by the African Development Bank (AfDB), the United Nations Economic Commission for Africa (ECA) and the United Nations Development Programme (UNDP).