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Looking to African industrialisation in a post-COVID world
Looking to African industrialisation in a post-COVID world
Accelerating the development of the continent
African economies are at the bottom of the industrialisation ladder, with only 2% of global manufacturing taking place on the continent. Relying heavily on raw commodities, much of Africa’s imports remain manufactured goods and this causes wealth to drain away from the continent.
Annually, the 20th of November marks Africa Industrialisation Day – a commemoration that aims to raise awareness about the importance of Africa’s industrialisation and the challenges faced by the continent.
Accelerating industrial development The COVID-19 pandemic illustrated that manufacturing remains the backbone of economies. However, it also shows the vulnerability of our production systems to sudden shocks.
The United Nations Industrial Development Organisation (UNIDO)’s Industrial Development Report 2022 found that countries with stronger industrial capabilities were more resilient to the economic impact.
Nobuya Haraguchi, Chief of UNIDO’s Industrial Policy Research Unit, says a key message of the report is that Africa needs to accelerate industrial development, not only to achieve economic development but also to strengthen resilience.
The report showed that a different world is emerging after the pandemic, in which global value chains are being re-evaluated. African countries, as latecomers to those value chains, will need to prepare themselves very quickly to respond to these changes and seize opportunities.
The report advocated the importance of advanced digital technologies in strengthening resilience, and digitalisation is set to play an essential role in fostering industrial development in Africa.
According to the United Nations, industrial development is of critical importance for sustained and inclusive economic growth in African countries. Industry enhances productivity, increases the capabilities of the workforce, and generates employment, as well as introduces new technologies. This in turn helps nations to achieve high growth rates, diversify their economies, and contribute to poverty eradication.
Africa remains the world’s least industrialised region, with only South Africa categorised as industrialised. For this to change, there needs to be a fundamental shift in the structure of the African economies to make industry, especially manufacturing, a larger portion of their trade. To unleash their full potential, African countries must embark on industrial transformation. The African Development Bank believes there is the potential to double the industrial GDP by 2025, and by doing so increased overall GDP increasing to US $5.6-trillion.
Working towards increased continental trade
There is a real opportunity to create jobs and promote inclusive economic transformation through manufacturing and industrialisation, says African Development Bank President, Akinwumi Adesina. “Exploiting Africa’s opportunities for industrialisation involves adding value to domestic products, soft and hard commodities, and developing forward and backward linkages to the regional and international value chains,” he says.
“There is an urgent need for Africa to rapidly diversify its economies – and add value to everything that it produces. Exporting raw materials only leads to vulnerabilities – and no nation or region has succeeded by simply exporting primary commodities.”
It is hoped that the African Continental Free Trade Area (AfCFTA) agreement, which will become operational on 1 January 2021, will usher in new and dynamic opportunities for industrialisation. But to seize the path of industrialisation in Europe and North America, Africa will need to look at inclusive and sustainable industrial development. This will include the decoupling of economic growth from environmental degradation and embracing greener technologies.
“Industrial development does not have to damage the environment, pollute the air and water, or release damaging greenhouse gases. The transformation in production processes and business models— going hand-in-hand with the right choice of technologies—will present solutions to the daunting environmental challenges of our times. Moreover, committing to sustainable production patterns makes business sense, as it reduces the waste of costly resources and contributes to increased competitiveness,” says Helen Hai, UNIDO Goodwill Ambassador for industrialisation in Africa.
There are some strong success stories of industrialisation on the continent. For instance, in Ethiopia, the government has invested around $1.3-billion in the construction of industrial parks. The parks have attracted international anchor companies and have created more than 50 000 permanent jobs. Around 85% of those jobs are held by women.
In South Africa, an initiative by the United Nations Industrial Development Organisation (UNIDO) demonstrated the potential of increased energy efficiency in industrial production, through a project to introduce energy management systems in industrial companies. This has seen energy costs cut in more than 80 companies.
And if the AfCFTA agreement is successfully implemented, Africa’s manufacturing sector is projected to double in size with annual output increasing to $1-trillion by 2025. Projections show that the trade agreement has the potential to create over 14 million jobs in Africa’s manufacturing sector.
With African markets growing and the AfCFTA in place, there are now major opportunities for African manufacturing.
