Africa Industrialization Day: AfDB reiterates the need to accelerate Africa’s development

Accelerating Africa’s development through industrialization is one of the African Development Bank’s High 5 strategic priorities. Industrialization has long been recognized as a great opportunity for improving the living conditions of Africans.  Within the context of Africa Industrialization Day on November 20, Pierre Guislain, AfDB Vice-President for Private Sector, Infrastructure and Industrialization shared his perspectives on the Bank’s achievements in its bid to “Industrialize Africa”.

“AfDB is active in all sectors of the economy, with a special emphasis on industry, agriculture, infrastructure, energy and SME development,” said Guislain. “To bolster our support to the industry sector, the Bank has partnered with UNIDO [United Nations Industrial Development Organization]. AfDB has invested billions in industrialization programs through numerous projects. But there are still more challenges to address.” 

Africa’s industrialization would provide a great opportunity to improve the living conditions of Africans, said Guislain. With this vision, the institution has held high-level policy dialogues with its regional member countries and has committed to approve a number of key regional member countries’ policies and strategies in this direction.

Among others, the recently approved Sovereign Operations (ISP) to support industrialization policies PPP for Ethiopia in 2015 as well as Côte d’Ivoire’s Industrial competitiveness enhancement project approved in 2015.  The Tanzania Institutional support project was also approved in 2016 to support the operationalization of a Public Private Partnership (PPP) framework. Last but not the least, was the approval of the Madagascar Economic management reform support programme in 2016, aimed to support a PPP framework.

To accelerate support to African countries and develop sound industrial policies, the Bank has partnered with UNIDO on this work stream to revise a MoU. AfDB-UNIDO joint work program in the proposed 2017 MoU will lead to leveraging diaspora financing through diaspora bonds; Value chain development programme in Uganda for USD110 million; Cluster development and business linkages for competitiveness and market access. The work also includes a programme for country partnerships-beginning with pilot countries to be determined; Youth employment programme in Tunisia; Support industrial policy research and capacity building for the Third Industrial Development Decade for Africa (IDDA III). The re-launch of 3ADI (African Agribusiness and Agro-industry Development Initiative) as 3ADI+ (Accelerated Agriculture and Agro-industry Development Initiative PLUS) is also part of the programme.

“This has helped to better deliver on our joint industrialisation agenda, with Ethiopia, Senegal, Nigeria, Angola and Morocco as pilot countries. The Bank Group has concretized its deliveries and catalyzed private funding into key non-sovereign and sovereign infrastructure and industry operations,” Guislain said.

The Bank  is active in the industrial sector and has been involved in landmark projects since 2015, he said, citing upcoming transformative projects within the framework of the Bank’s industrialization financing facility: Five  transformative projects in manufacturing and infrastructure are yet to be approved in 2017 for approximately US$ 246 million and two  transformative non-sovereign operations projects in industry and services planned for 2018 for approximately US$ 197 million. At the same time, 16 projects valued at US$ 1.7 billion are to be approved in 2017.

Vice President Guislain reiterated the Bank’s commitment to provide innovative financing and investment mechanisms to leverage concessional funds to support MSMEs in the industrial value chain. He particularly cited recent achievements, including, two approved Equity projects in 2017 with a focus on SMEs and Fintech, for a total amount of US$ 21 million; a US$ 25 million seed equity capital investment in the African Domestic Bond Fund (ADBF); and co-financing US$ 1 billion agreement with the Chinese Development Bank to provide financial support to SMEs via financial intermediation.

Other concrete actions on the ground comprise scaling up the Bank’s Africa SME program, providing lines of credit and technical assistance to financial SMEs in low income countries including in fragile states.

“Recent achievements include lines of credit to South Soudan, and Sao Tome, Kenya, for approximately USD 108 million. We also provided a line of credit to Sierra Leone under the SME program for approximately US$ 3 million,” he underscored.

The Bank Group also cares for young entrepreneurs on whom huge investments are being made. Its engagement with the youth has been visible these past years. In this regard, the commitment to provide jobs to the youth through industrialization that led to doubling financial support to the sector, was highlighted, even though the institution had already provided more than US$ 2 billion per annum of funding to private sector projects on the continent.

“AfDB has provided the Boost Africa initiative with US$ 200 million, to support entrepreneurs on small and medium sized businesses in Africa and €20 million under the Technical Assistance Facility; and Innovation Lab in collaboration with Youth in Africa team.

The good news so far…

As the Bank celebrates the Africa’s industrialization day, Vice-President Guislain conveys the Bank’s message of hope to stakeholders and African leaders, stressing the need for stronger political will to address challenges ahead. He also pointed to the persistent lack of industrialization, which, he said “is a brake on African economies, largely dependent on agriculture and unprocessed commodities.”

The good news, according to Guislain is that private sector investments are flourishing, the “Africa rising story” is real. Development reports describe the region as the second most attractive investment destination in the world. FDI inflows to Africa have risen from just about US$ 10 billion in 2000 to over US$ 60 billion in 2016. Intra-African investment is also on the rise, from 8% in 2003 to over 25% in 2016, creating a virtuous circle that encourages greater foreign investment. Moreover, investments in Africa are diversifying away from the extractives sector. In 2015-2016 Foreign Direct Investment in Africae mainly targeted the services sector (66%) and the manufacturing sector (21%), while the extractives sector only represented 11%.

 

Furthermore, experts assert that Africa is at a turning point when its economic development can capitalize on sound structural factors including:

 

• Demographics, Africa’s future workforce - Africa will have 2.5 billion people in 2050, accounting for one quarter of the world population with the largest and youngest workforce by 2025.
• Urbanization – Africa has the highest urbanization rate in the world. Around 40% of the population lived in cities in 2014, this figure will reach 56% in 2050.
• Growing internal market and middle class - Internal market is growing by more than 5% annually, fueling domestic consumption.

 

In a nutshell, the 4th Industrial revolution can help accelerate Africa’s economic transformation, with tangible political will bolstering the transformation process. It can provide a boost to competitiveness across all sectors, new opportunities for business and entrepreneurial activity, and new avenues for accessing overseas markets and participating in global e-value chains. It also provides new tools for tackling persistent development problems such as lack of infrastructure and energy.

 

Guislain also touched on a number of factors, including access to talent and skilled workforce, access to capital, access to markets, conducive and supportive policies as well as access to energy.

He noted that Africa has now become a land of innovation and a new generation of African entrepreneurs is taking the lead, with innovative projects like Himore Medical in Cameroon that has designed CardioPad, a wireless solution to enable efficient monitoring of cardiovascular diseases; Aviro Health in South Africa that has developed digital applications for healthcare practitioners to improve the quality of remote medical treatment and the Botswana-based Deaftronics that has manufactured the first solar-powered hearing aid unit, Solar Ear.

Challenges ahead: the continent is moving but we need to speed up…

The Bank Group recognizes power and industrialization as mutually supportive to spark Africa’s transformation.

“In addition to sustainable access to energy, good infrastructure is a prerequisite for industrialization. Africa’s infrastructure lags far behind that of the rest of the world. The Bank calls for stouter partnerships with the private sector to help Africa’s industrialization agenda gain momentum.”

According to the Vice-President, over the past 20 years, Africa has consistently underinvested in infrastructure: in 2014, capex in infrastructure related industries amounted to approx. 7% of GDP, compared to 22% in China. As a result, the stock of infrastructure across Africa is low. In particular, transport infrastructure is a key element of industrialization as it drives the cost of industrial supplies and end products, and the competiveness of production. In sub-Saharan Africa, for example, only an average of 15% of roads are paved, compared with 80% in Europe and 58% in Asia.

Concluding, he quoted the President of the Bank Group, Akinwumi Adesina, highlighting the continent’s upward move. He expressed the Banks determination to speed up the pace and focus on stronger partnerships with the private sectors for huge investments in power “to turn the dream into reality.”

“Just imagine an Africa with lights everywhere. Businesses will boom. Factories will churn out products. Africa's cost of doing business will drop and it will be competitive. It will spark innovation. Jobs will be everywhere, especially for the young. An electrified Africa will be an unstoppable Africa. Then, Africa will truly be free economically to join the league of industrialized nations.” 

Observed each year on November 20, Africa Industrialization Day aims to raise awareness on the challenges faced by the continent with regard to industrialization. The event also aims to mobilize African leaders and international organizations to advocate for the accelerated and sustainable industrialization of Africa.