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This document summarizes an academic seminar on industrialization in Africa. It finds that while socioeconomic progress has been better than expected, growth has been uneven and fragility remains. Key questions around sustaining growth, transforming economies, and reducing reliance on commodities were discussed. Data shows improvements in African GDP, trade, and financing over time but variability between countries. Structural change moving labor to lower productivity sectors slowed growth. Learning to Compete research examines drivers of productivity across African and Asian countries. The African Development Bank's industrial strategy aims to scale up transformation through regional integration and financing. Cautious optimism remains dependent on comprehensive reforms, skills and infrastructure development, and export promotion.
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- 1. AERC Senior PolicySeminar XIX in partnership with AfDB and UNU-WIDER Abidjan, Côte d’Ivoire, 13-14 March 2017 Finn Tarp Industrialization in Africa: Setting the Stage & Overview
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- 3. Setting the Stage •The Economist (11 May 2000): Hopeless Africa • The Independent (15 July 2009): Africa – the lost continent • The Economist (3 December 2011): The hopeful continent – Africa rising • Some question the growth revival referring to poor data – Careful analysis paints a different (more complex) picture
- 4. GROWTH AND POVERTYPROJECT (GAPP) Freely downloadable: see https://www.wider.unu.edu/
- 5. Key Findings • Socio-economicprogress in Sub-Saharan Africa has been markedly better than almost anyone expected 25 years ago • Progress has not been even; the development process has without exception been highly non-linear; and the fragility of the gains is evident So attitudes in and outside Africa towards the continent’s development potential have changed At the same time, a series of pressing policy questions present themselves (at both global and national levels) including: – How to keep up the aggregate growth performance – How to transform economic structures – How to diminish the reliance on primary commodities
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- 7. The African GrowthTurn-Around
- 8. GDP per Capita(real USD2010) 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 South Asia Sub-Saharan Africa (developing only) Latin America & Caribbean (developing only) East Asia & Pacific (developing only) Middle East & North Africa (developing only)
- 9. Substantial Variability: 16GAPP Country Cases Important note: The regional powerhouses of Kenya, Nigeria, and South Africa not among the better performers in terms of growth or poverty reduction
- 10. And Something isHappening to GDP Growth/Capita -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Percent Emerging and developing Asia Latin America and the Caribbean Middle East and North Africa Sub-Saharan Africa Source: IMF WEO
- 11. In Trade Source: UNCTAD -250 -200 -150 -100 -50 0 50 100 20052006 2007 2008 2009 2010 2011 2012 2013 2014 2015 BillionUSD Africa Total Eastern Africa Middle Africa Northern Africa Southern Africa Western Africa Sub-Sarahan Africa Total
- 12. And to NetFinancial Inflows -1 0 1 2 3 4 5 6 7 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 PercentogGDP FDI Portfolio flows Personal remittances Net official aid Source: WB WDI, and authors calculations
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- 14. The Potential forStructural Change • In countries at low levels of income productivity differences between sectors are large – The movement of resources from low productivity to high productivity employment can help drive growth – As incomes rise, productivity differences among sectors (and enterprises) tend to converge • Africa has the greatest differences in productivity among sectors, and therefore the greatest potential for structural change
- 15. Going Up theDown Escalator • In Africa structural change has been going in the wrong direction until recently • An increasing share of the labour force in lower productivity sectors • “Growth reducing” structural change has slowed overall aggregate growth
- 16. Aggregate Growth HasOccurred with De- industrialization • Africa’s share of manufacturing in GDP is less than half of the average for all developing countries • Per capita manufactured exports are about 10 per cent of the developing country average • The share of SSA of global manufacturing is smaller today than in the late 1980s
- 17. Low Penetration ofInternational Markets • Africa marginal – Even less excluding South Africa • Asia – 23% in 1990 to 33% in 2012 • Low survival rates in export markets Source: WTO
- 18. Internet Access: Growingin Africa, but...
- 19. Africa Continues toLag in Educational Attainment
- 20. Putting Structural Transformation andIndustrialization Back on the Development Agenda
- 21. Learning to Compete(L2C): A collaborative research programme between the AfDB, the Brookings Institution, and UNU-WIDER together with the AERC network of researchers
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- 23. Trying to answera simple question: – Why is there so little industry in Africa? Lead to other questions such as: – Does it matter? – Is it realistic for Africa to break into global markets? – What makes firms more competitive? – What makes countries more attractive to competitive firms? – What are the policy options available to further industrialization in Africa? Key Questions
- 24. The L2C CountryComparative Framework • Eleven Countries – Nine African: Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania, Tunisia and Uganda – Two Asian: Vietnam, Cambodia • Three Track Approach – Detailed case studies of industrialization and the evolution of public policies – Econometric analysis of the stock of firm level surveys – Qualitative surveys of FDI firms and linked domestic firms
- 25. Drivers of Productivity 1.The “basics” (“investment climate”) – Infrastructure, technology and skills – Institutions and regulation 2. Exports, productivity and competition – Firms in low income countries increase their productivity by exporting – they learn by exporting – Competition increases productivity through entry and exit 3. Firm capabilities – The tacit knowledge and working practices that affect both productivity and quality – Capabilities can spill over to other firms through supply chain links 4. Agglomerations and Special Economic Zones – Industrial clusters confer significant productivity gains – But virtually everything we know about agglomeration economies comes from middle and high income countries
- 26. Learning to Compete:L2C Freely downloadable: see https://www.wider.unu.edu/
- 27. African Development Bank(AfDB)
- 28. Improve quality oflife for the people of Africa Industrialise Africa Integrate Africa Feed Africa Light up and power Africa The High Five
- 29. AfDB’s Industrial Strategy •Approved 16 July 2016: https://www.afdb.org/en/news-and-events/board- approves-afdb-groups-industrialisation-strategy-for-africa-2016-2025-15981/ • Represents a roadmap for implementing priority programmes to scale–up the industrial transformation of Africa • Addresses key issues such as: – Why we need to industrialize Africa – What it will take – How the AfDB will help • Points to five enablers: (i) Supportive policy, legislation and institutions; (ii) Conducive economic environment and infrastructure; (iii) Access to capital; (iv) Access to markets; and (v) Competitive talents, capabilities, and entrepreneurship
- 30. Two Critical Dimensions •Regional industrialization – Regional integration is a critical priority for supporting industrialization in Africa – How to address the major political economy issues? • Financing industrial development – Significant investment resources are required (AfDB industrial strategy makes reference to crowding-in third party resources to the tune of USD 35 to 56 billion over the next decade) – Lessons from other regions
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- 32. Reasons for CautiousOptimism • Africa has a chance to break into the global market for industrial goods: – Changes in Asia; trade in tasks; industries without smokestacks (IWSS) – But business as usual will not deliver desired for results – Comprehensive infrastructure development, skills upgrading, and a major export push are all essential • And throughout focus must be on industries that add value, including both processing of agricultural commodities and manufacturing more broadly
- 33. But How to? •Reform the Investment Climate Agenda • Mount an “Export Push” • Build Firm Capabilities • Create Clusters =>Policy Round Table
- 34. Three Big Elephantsin the Room • Trump • Brexit • Commodity prices
- 35. If Africa andAfrican policymakers do not take charge of the destiny of the Continent and its People – Someone else will….