As the second largest continent in the world both in terms of population and geographical area Africa is a rapidly growing continent that attracts attention of the world. It is endowed with natural resources, strategic location and work force that important input for its economic and social development.
Yet at this moment Africa is contending various economic challenges. It still largely depends on agrarian economy where its products are sold without adding value. Still being able to generate some resource from the micro economic activities, it loses much of it again as it depends on the import of industrial items from out of the continent. Such industrial items would otherwise be produced within Africa, sold on affordable prices for the people of the continent to save expenditure by replacing import, and then build up the capacity of the continent to be competent to produce exportable items and maximize its revenue.
Africa is now striving to speed up its industrialization to realize the goals set by African Union (AU) Agenda 2063 the Africa we want. One of the goals is to facilitate intra Africa trade through implementing the continental initiative Africa Continental Free Trade Area (AfCFTA).
AfCFTA is believed to benefit the continent in many ways including accelerating the movement of people and goods within the continent thereby maximizing the benefit of the continent from its own rich economic potential.
Along with this, industrialization plays meaningful role in adding momentum for optimal intra Africa trade. Industrialization in Africa suffers some setbacks that should be alleviated on time so that the continent can move forward. Recently the United Nations Economic Commission for Africa (UNECA) has held the annual African Economic Conference (AEC). The AEC was launched in 2006 and has been running annually propounding various vital issues surrounding Africa’s economy.
This year’s edition, entitled Imperatives for Sustainable Industrial Development in Africa, has also brought together various actors in the continents economic and industrial development arena.
Stephen Karingi (PhD) is the Director for Regional Integration and Trade Division at the United Nations Economic Commission for Africa (UNECA). During his brief interview with The Ethiopian Herald, he has raised issues on current situation of industrialization in Africa, important considerations about the possible realization of industrialization in the continent, important experiences from Ethiopia’s industrialization efforts, among others. Have a nice read!
Could you tell us briefly about current situation of industrialization?
It’s easy to be pessimistic. And to start by lamenting because for sure, we have not done very well, in the context of industrialization as a continent. We are even in a worse position in terms of our industrialization or in terms of what we call manufacturing value added than we were 40 years ago.
So from that perspective, one could be pessimistic. Now, the good thing is that the desire for industrialization and the commitment to the industrialization objective, that agenda is something that Africa has actually continued to hold on.
I would say that the global rules, in the last 20 or 30 years, and the kind of policy orientation was not very supportive of the idea of the transition of industrial policy to advance them. And I guess that was probably because of the bad experiences, so to speak, whereby some of the industrialization policies in the past were used in a way that did not keep the results that were desired. And so it was a situation whereby everybody wanted industrialization. But the approach that had been used was not sustainable. But now today, we know what needs to be done. We know that it has a realization needs to be seen as part and parcel of the whole economy.
One has to think about the linkages within the economy. And if one was asked to think about the linkages with the markets, that’s why we talk about regional value chains and the global value chains. And so whatever action that you take, in one of the linkages, it has an implication on the outcomes of your industrial policy. So coming back to the present, Africa is very well positioned to take advantage of it as realization, not only because the question of climate change is presenting opportunities, where Africa has a lot of comparative advantages in renewable energy, but also because we have a policy framework set up under the African Continental Free Trade Area, that is actually going to make it as current as they should policy. So I would like to say that, even though I started by stating a pessimistic outcome of the past, I am very optimistic about the future, when it comes to the industrialization agenda in the continent.
Africa is endowed with diverse natural and human resources as well. As industrialization itself is very diverse including, manufacturing sector, tourism sector and the like, where should be the focus in such diverse situations?
During the negotiations, and now the implementation of the AfCFTA one of the things that all of us focused on, is on the industrialization question. So what our empirical work, or the Economic Commission for Africa shows is that if you were to implement the AfCFTA, effectively, you would have an additional more than $200 billion worth of intra African trade in 2045, than if you did not have a CTA. So just by implementing the AfCFTA, we would be able, in the 20 of the year from now, because, you know, AfCFTA is implemented over a number of years. Yes, in the 20th year from now, intra African trade would have increased and you would have an additional of $200 billion dollars, intra African trade addition. Now, most of that is actually going to be from manufacturing, value added trade.
In fact, it’s almost two thirds of that 200 period is going to be in a task in value added goods, industrial goods. So to answer your question, we have started now we have been unpacked, what are those sectors where this is going to happen? It is pharmaceuticals. It is agri foods, there’s also going to be a lot of services that are relevant to the manufacturing processes, there’s also going to be a lot of services growth that are essential for the functioning of the manufacturing sector, take the case of Ethiopian Airlines, Ethiopian Airlines is what you need to move intermediate inputs that are required from Ethiopia to Nigeria or from Nigeria to South Africa for this industrialization process. So we have studied this automotive sector. Textiles and Apparel, autos are going to the sectors where it has realization within the continent. All the empirical work shows there’s going to be opportunities.
Does it mean Africa has already got all that it takes to industrialize?
Absolutely, we do we do have what it takes to industrialize. First of all, we have the raw materials. I’ve not even talked about the critical raw materials that everybody is going for, which are essential for producing the renewable energy, that’s a whole sector in itself, on the electric battery value, value chain, so we have every or that you know that you need. And at the end of the day, you also have the market because I think for industrialization to be sustainable, you also need to be able to have the market and the AfCFTA is actually opening that market for that. Okay, for instance, one of the necessary things is financing.
So, how are we going to do about the financing, especially with regard to making the majority of the financing from local sources?
First of all, I want to start by saying that there is sufficient opportunity to mobilize resources domestically. Starting with, for instance, just a domestic resource mobilization in the area of taxes.
And so, if we want to close this gap of what you need to finance the infrastructure that you need for your industrialization process, we must start at home. Then of course, the public private partnership model is also a very important model. For instance, what the Ethiopian government has done in building the structure for the Special Economic Zone has attracted the private investors to come to Ethiopia and invest in the textiles and apparel and in the leather sectors. So talking about mobilizing resources, the Public Private Partnership model, which has been demonstrated to be working in some of these special economic zones, is another way to mobilize the resources.
Of course, there is room to create a macro policy environment that allows foreign direct investment and Africa direct investments from other African countries within Africa, to also be part of the financing framework. So those are three things that you actually have a handle, you have control. And it’s not something that you cannot say that you do not have a handle over them. So it’s possible to finance our industrialization agenda.
Does Africa have trained human resource that can contribute to its goal of industrialization?
Of course, that’s the starting point you need to have. It’s not just those who have the skills for operating in the industries or in the factories, but you also need to have a public sector, our civil servants need to be people who understand what the manufacturers are doing and what they need, so that even as they enact new policies or design policies, they respond to them. So in fact, we call it as part of the skills development. We advocate for the embedding of Publics happens in these ecosystems of the industrialization. So you need to have individuals who go to other places like Hawassa and not just only here in Addis Ababa, they got to have as they understand what’s going on there. Hence, they can come up with good policies that would also influence the type of skills that the government invests in, when it comes to the manufacturing process. And this has to happen across the continent.
When we manufacture something, we also create a market. So do we expect only within our market within Africa, we orient ourselves we have to orient ourselves to export out of Africa. So is it going to be a challenge or the enabling conditions?
At the moment, the African market is the switch that everybody needs to look at. The African market is phenomenal. And the minute you conquer the African market, you also conquer the global market, if you can be able to satisfy 1.4 billion, it means you must be very efficient and very good in this process.
And you will have scaled up your skills and your standards that will allow you now because the idea is to use the African market through a regional value chain to enter into the global value chain. And so the market is there. The policies are being harmonized, the regulations and standards are being harmonized under the AfCFTA so really, there is no reason why as an industrialist, you should not look at the African market. Of course, there are challenges of connectivity infrastructure, like I talked about but that does not mean that we should sit back and see.
Thank you very much for your time!
You’re most welcome!
BY ZEKARIAS WOLDEMARIAM
THE ETHIOPIAN HERALD SATURDAY 18 NOVEMBER 2023
