The Quramo Conference is a platform for multi-disciplinary experts and knowledge vendors aimed at covering emerging issues. It is tailored to address advocacy and policy required for shaping ongoing governmental and non-governmental decision-making. This April 2016 edition of the conference was themed People Power: Human Capacity for Industrial Africa. The conference focused on investment in human capital for improved trade and commerce across the African region driven by industrialisation.

1. Quramo Conference 2016:
The Path to an Industrial Africa
Akintunde Oyebode
April 8, 2016

2. Outline
1. How Africa compares with the world
2. Africa as an Industrial Opportunity
3. Why Industries succeed
4. How do we Industrialize Africa?
2

3. How Africa compares with the rest of
the world

4. Geography
• Africa is the second largest continent in terms
of land mass after Asia comprised of 55
countries
• 60% of the world’s uncultivated arable
cropland is in Africa
• About a third of Africa's continental countries
are landlocked and have no access to the
ocean or seas
• Sub-Saharan Africa is the world's tropical
region par excellence, with 93 percent of its
land area lying within the geographical tropics
4

5. Population
• Africa is the second most populous continent
in the world after Asia
• Africa is sparsely populated, with an average
population density of 87 persons per square
kilometre (as compared with 246 for Asia and
188 for Europe)
• Africa’s low average population density
reflects :
• The vast expanses of almost empty
desert
• The large areas of sparsely populated
savannahs (with weak agricultural
potential)
• Regions of high population density include the
coast running from southern Côte d’Ivoire to
Nigeria, and the Indian Ocean island
economies (e.g., Reunion and Mauritius)
• Low levels of population density in Africa are
reflected in correspondingly low levels of
urbanization
5

6. Urbanisation
• Only 40 percent of Africa’s population lives
in urban centres
• This contrasts sharply with Latin America’s
high level of urbanization (80 percent), but
is comparable to Asia's rate (47 percent)
• The largest sub-Saharan African city, Lagos,
ranks 19th among the world’s largest cities
• Two main factors, at least, would seem to
explain Africa’s very low rates of
urbanization:
• Low productivity of agriculture - Local food
production cannot support large adjoining
urban areas. Many of Africa’s urban areas
must be fed, at least in part, from
international imports, rather than a local
hinterland
• Much of the population is in the highlands
or at least away from coasts and navigable
rivers, while urbanization is strongly
favoured by a coastal (or riverine) location,
6

7. Infrastructure
• Infrastructure plays a central role in improving competitiveness, facilitating domestic and
international trade, and enhancing the continent’s integration into the global economy
• Africa’s absolute and relative lack of infrastructure points to the existence of untapped
productive potential, which could be unlocked through scaling up investments in the sector
• The estimated financing requirement to close Africa’s infrastructure deficit amounts to USD 93
billion annually until 2020
The State of Infrastructure Supply in Africa
• Infrastructure investments in Africa have not kept pace with growth in demand, creating a huge
deficit
• Less than 40% of the continent’s population has access to electricity
• About 30% of the rural population has access to roads
• Only 5% of agriculture is under irrigation
• Only 34% of the population having access to improved sanitation and a slightly better
• About 65% of the population have access to clean water
7

8. Infrastructure – Access to Electricity
8

9. Transport Infrastructure
• Roads
• SSA’s total road network is only 204 km per 1,000 km2 of land area, of
which only about 25% is paved
• Compared to the world average of 944km per 1000 km2 of land area
• This translates into 3.6 km of road per 1,000 persons for the region,
relative to a world average of about 7 km per 1000 persons
• Rail
• Rail networks are the least developed in Africa, with very little additions
to the systems developed in the colonial period
• Africa has 69 000 km of rail of which about 55 000 km is operational,
mostly in Southern and Northern Africa.
• Thirteen SSA countries have no operational rail networks, while spatial
density of operational rail ranges from 1 to 6 per million people
• Ports
• Africa operates over 64 ports, with about half of the coastal countries
operating port facilities
• Over-the-quay container handling performance is below 20 moves/hour,
compared to 25–30 in modern terminals around the world
• n addition, handling costs average 50% more than in other parts of the
world
9

10. Ease of doing business
10

11. Labor Force
• Latin America, and Central Asia and South Eastern Europe are characterized by higher levels of
output per person compared to Asia and Africa. In the first group, capital is typically more
abundant relative to labour, creating higher output per worker.
• The levels of productivity in developing Asia at 16% are, on average, twice as high as productivity
levels than in Sub-Saharan Africa, were the average was at 8 percent of US levels in 2014
• Both African and Asian economies are generally abundant in labour and scarce in capital,
explaining their low starting positions in regards to output per person 11

12. Africa as an Industrial Opportunity

13. Strengths
13
1. Wealth of Natural Resources
 Africa has a significant and under-explored share of global mineral resources
 The US Geological society ranks Africa as the largest or second-largest reserve of bauxite,
cobalt, industrial diamonds, manganese, phosphate rock, platinum group metals and
zirconium
 These resources and its products will feed global demand and drive growth
2. Large Market Size
 Africa is the second most populous continent with a population of about 1.2 billion people
 Africa has the youngest population in the world, with over 200 million people between ages
15 and 24.
 By 2020, consumer spending is expected to reach $1.4 trillion and the number of African
households with discretionary income is projected to reach 128 million – more than the
total number of households currently in the United States
3. Abundant Labor
 Africa has over 500 million working age people (age 15 to 64)
 This number is expected to double by 2040 resulting in a work force of over 1 billion people,
which would make it the largest in the world, surpassing both India and China

14. Africa’s Wealth of Natural Resources
14

15. Weaknesses
15
1. Africa’s Accessibility
 Large distances from major world markets in the northern mid-latitudes (a common plight of the
tropics
 Separation from Europe by the vast Sahara desert (larger in area than the continental United States
 A very small coastline relative to land area
 An unusual shortage of natural ports along the coastline
 Populations generally far from the coast
 The highest proportion of landlocked states of any continent (and of the proportion of the
population within landlocked states)
 The absence of rivers which are navigable by ocean-going vessels into the interior of the continent
(such as the Rhine, the Mississippi, the Amazon, and theYangtze Rivers, in other continents)
2. Political Stability and Policy Inconsistency
• Severally, agreed policies are not effectively executed, and in other cases policy executions are not
sustained as governments change
• This issue is of key concern to investors who find it difficult to plan their investment programmes
and commit to large capital expenditure (expansions or green field) where there is insufficient
visibility on government policy
3.

16. Weaknesses
16
3. Low Industrial skills and Innovation
 In Africa there are challenges with respect to skills availability for the industrial sector, many
industrialists are unable to fill vacancies because of a dearth of skills
 In many cases, the skills of workers do not match needs of the industry due to obsolete curriculum,
old technology etc
 More often than firms in Africa are financially and technically not capable of providing in-firm
skills development in the same way large-scale firms abroad are able to
4. Consumer Purchasing Power
 Low purchasing power reduces the effective demand in the African market.
 A large segment of Africa’s 1.2 billion strong population about xxx% earn between $ xx- $xx daily
 The relatively low purchasing power means more Africans still spend a disproportionate amount
of their income on food products
5. Infrastructure
 The short Supply of electric power and the poor transport systems in Africa, constitute a major
constraint to productivity of manufacturing firms in Africa
 Manufacturers have had to invest in infrastructural facilities, raising the cost of doing business in
Africa

17. Opportunities
1. Intra African Trade
 Intra-regional trade statistics show
that Africa rates among the lowest,
with less than 20 percent of what is
produced in the region staying
within the region
 This, in essence, means that over 80
percent of what is produced in Africa
is exported, mainly to the EU, China
and the US
 Evidently, Africa produces what it
does not consume and consumes
what it does not produce
 By comparison, 60 percent of
Europe’s trade is within its own
continent, and in North America, the
figure is 40 percent.
17

18. Opportunities
18
2. Export Focused Production rather than import substitution in order to diversify of Foreign
Exchange Revenue streams (case study is Korea)
• From the beginning of the first Five-Year Economic Development Plan in 1962, the Korean government
has adopted an export promotion strategy rather than an import substitution p01icy
• The government strongly supported exporting firms with various incentive measures, including
favorable treatment in the allocation of credit and in the taxation system
• In addition to these incentives, there was also a long list of governmental measures for export activity
promotion at the micro level:
• the government established the KoreaTrade Promotion Corporation (KOTRA) mainly to
explore foreign markets
• To assist Korean exporters in effectively filling foreign orders the government also subsidized
projects to improve the wrapping and design of products, the expansion of inspection
facilities for export goods, the opening of foreign-language training centers, and traveling
expenses for delegations to overseas expositions and trade shows

19. Threats
19
1. Declining Commodity Prices
• In terms of export earnings, SSA’s main export goods are crude oil, gold, natural gas, silver, cocoa, and iron ore
• Crude oil is the top export of Angola, Cameroon, Chad, Republic of Congo, Gabon, Nigeria, and Sudan.
• Extractive industries also play a key role in some of the African economies. For instance, iron ore is the top commodity export in Mauritania,
copper is a main commodity export in the Democratic Republic of Congo and Zambia, aluminum in Guinea, and tin in Rwanda.
• In other countries, agriculture is very important for the economy. For example, coffee is the main commodity export of Burundi and Ethiopia,
cocoa is the top commodity export of Côte d’Ivoire and Togo, and cashews are the principal export of Guinea-Bissau.
• Lower Global commodity prices will weigh heavily on exporters of these commodities, putting pressure on current account and fiscal
balances
• Countries that stand to lose the most are the less diversified oil exporters, such as Angola, Nigeria and the Republic of Congo. Other
commodity exporters, such as the Democratic Republic of Congo and Mauritania, are also being negatively affected by lower prices for their
main traded commodity. By contrast, net oil importers, such as Kenya and Senegal, are set to see modest gains from cheaper energy
prices

20. Threats
20
Declining Commodity Prices (year-on-year, as at March, 2016)

21. Threats
21
2. Climatic Conditions
• Droughts, floods, and cyclones are often not the reason why millions in Africa and many other regions are in
poverty. But they can be the final blow that takes away their opportunities for progress
• In 2015, the El Niño climate phenomenon reached one of its strongest levels in recorded history, leading to intense
changes in precipitation throughout the globe
• East Africa experienced lower-than-average rainfall from June through September, which in turn, reduced
agricultural and pastoral production and increased food insecurity across the region
• The effects from El Niño are projected to continue through March 2016, suppressing rainfall in Southern Africa and
resulting in above-average rainfall in the Horn of Africa which may also increase the risk of flooding
• In Southern Africa, the reduction in precipitation is expected to worsen already acute food insecurity and further
curb crop production, which is already below the five year average.
• The increasing frequency and intensity of extreme weather events driven by climate change, is a major threat to
Africa’s economic growth

22. Why Industries Succeed?

23. Learnings from China
23
• China has transformed from a traditional agricultural society to a modern industrialized nation
• China has successfully moved agriculture from about 60% of Gross Domestic Product (GDP) as at
1960 to 35% now
• China embarked on a structured process to ensure that the level of industrial output increased
substantially, while the proportion of agricultural output to overall output declined over time
• This has created jobs, wealth and strengthened China’s economy
• Today, China is the largest producer of inexpensive cotton textiles in the world and exports large
quantities of textiles and garments
• Other industrial products include television sets, bicycles, cars, trucks, and washing machines, textiles to
railway locomotives, jet planes, and computers

24. Learnings from China
24
Some key elements of China’s path to Industrialization:
• Special Economic Zones (ie. Industrial Cities) - the 14 largest coastal cities were designated
as economic development zones.These regions were provided with requisite infrastructure
and incentives to promote industrialization.
• Export Oriented Private Investments – China actively sought out new markets and investors
which could manufacture in China specifically for foreign consumption
• Investment Promotion – China attracted the largest and most credible industrial companies
to produce specific components within the country
• Monetary and Fiscal Instruments – The Chinese used the currency (Yuan) strategically to
make China’s exports cheap and imports expensive
• Targeting Specific Parts of GlobalValue Chains–The Chinese path to industrialization was to
build strong footholds in pieces of global value-chains of multinationals, and gradually expand
capacity over time.

25. Learnings from Brazil
25
• Brazil’s economic growth in the post-World War was largely as a result of rapid
expansion of industry
• The magnitude of structural change in the post-war years can be seen from :
• The share of the industrial sector in the Gross Domestic Product (GDP), which
grew from 24.1 percent in 1950 to 40.9 percent in 1980
• Whereas agriculture declined from 24.3 percent in 1950 to 10.1 percent in 1980
• Rapid industrial growth and structural change in Brazil were stimulated by a
diversified mix of economic policies, which included:
• Multiple exchange rates,
• Quantitative import restrictions,
• Direct foreign exchange controls
• Tariffs, fiscal and credit subsidies

26. Learnings from Brazil
26
Some key elements of Brazil’s path to Industrialization:
• Financing - Cost of borrowing in Brazil has historically been quite high. The
development bank of Brazil BNDES has therefore played a crucial role in the
accessing of finance by the Brazilian industries. BNDES is now bigger than the World
Bank in assets and disbursements.
• Industrial Skills and Innovation – Brazil invested heavily in industrial skills, and
today has one of the leading technical education schemes in the Brazilian National
Industrial Apprenticeship Service (SENAI). Every year about 2.5 million Brazilians
enroll for various technical programs in SENAI.
• Local Patronage – The Brazilian government has historically enacted some of the
strongest policies on local patronage of “Made in Brazil” goods and services
• A major focus on local demand – While China’s industrialization has been driven
by exports; Brazil’s industrialization was driven by its strong domestic market and
consumption
• Strategic protection – The Brazilian policy has protected strategic industrial sectors
when needed, to provide sufficient time to increase scale.

27. Learnings from Germany
27
Germany, possessed several of the factors that made industrialization possible:
• It had ample iron and coal resources, the basic ingredients for industrial
development
• A disciplined and educated work force also helped the economy
• a rapidly growing population—from 41 million in 1871 to 67 million by 1914 which
provided a huge home market along with a larger supply of industrial workers
Germany's industrialization was in two notable stages:
• First Industrial Revolution. : This started with the building of railroads in the 1840s
and 1850s and the subsequent development of coal mining and iron and steel
production
• Second Industrial Revolution : This was marked by the growth of the chemical
and electrical industries. Germany took an early lead in the chemical and
electrical industries. Its chemists became renowned for their discoveries, and by
1914 the country was producing half the world's electrical equipment.
• The enormous expansion of coal and steel production and the growth of the chemical
industries happened so closely that the country can be said to have experienced the
two revolutions almost simultaneously.
• As a result of these developments, Germany became the continent's industrial giant.

28. How do we Industrialize Africa?

29. Enablers
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The 3 key enablers that will unleash productivity by reducing structural impediments to
Africa’s industrialization include :
1. Infrastructure
Specific emphasis is placed on the availability of transportation and power:
Transportation:
• The challenge with regards to transport infrastructure is not only limited to the
physical deficit but also lack of linkages between roads and rail lines, and poor
connectivity to ports
• As Africa looks at scaling infrastructure investments in the transport sector, the
trade impact of such investments will spur growth and development as it will have
spillover effects in all other sectors that open further opportunities for private
sector investment
• Africa’s realization of the inadequacy of public funds in developing road
infrastructure Africa is spurring the quick to toll roads
Power:
• The costs of power outages are significant, with Africa loosing almost 12.5% of
production time compared to 7% for South Asia, which is the next worst case
• More potential productivity gains from electricity supply, together with the
associated income effect point to a market with significant growth potential costs

30. Enablers
30
2. Financing
• Africa’s terms on credit facilities are not well suited for industrial development
• Available loans have high interest rates, and available tenures are short
• As a result, Africa’s credit to the private sector as a percentage of GDP is ~20
percent, as compared with 190 percent in the United States, 130 percent in China
3. Education
Specific emphasis is placed on developing industrial skills and creating work
opportunities to gain experience and apply newly acquired industrial skills
Developing Industrial Skills:
• Curriculum should be streamlined to focus on fewer areas, with increased depth
• Entrepreneurial skill set should be encouraged amongst the young after primary
education
Creating work opportunities :
• Developing a resource map of employees
• Leverage technology to consolidate information on trainees and employers
• Creating skill set links to available jobs

31. Support Structures
31
The barriers to industrialization are considered systemic in Africa and may therefore
require National reformation even beyond the needs of the manufacturing sectors:
1. Policies :
• Export promoting policies rather than import substituting policies have been
proven to drive industrialization as in the case of Korea and China
1. Customs & Excise :
• Outdated and overly bureaucratic border clearance processes imposed by
customs and other agencies can pose great barriers to trade
• The Cumbersome systems, procedures, and poor infrastructure both increase
transaction costs and lengthen delays to the clearance of imports, exports, and
transit goods
• Such costs and delays make a country less competitive by imposing
deadweight inefficiencies that add to costs that raise the price of exports
3. Culture
Family owned businesses:
• The practice of handing over businesses to the first son in Africa is a proven
recipe for business failure in Africa
• This criteria for the leading the business is not objective and lacks meritocracy

32. A case for Africa’s Industrialization
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• Economic growth in most African countries is on a positive trajectory, and the global
perception of the continent has evolved to that of sheer optimism
• A closer diagnosis of the continent’s performance unmasks one key structural
weakness. The impressive growth rates witnessed are largely driven by high
commodity prices
• Natural resource revenues have soared over the last decade due to increasing
demand from emerging countries. While this has been beneficial in propelling
economic growth, it is problematic on three fronts:
• First, over dependence of commodity exports exposes an economy to volatility in
international prices, dwindling prospects for long-term growth
• Second, commodities are exhaustible, and cannot be relied on infinitely
• Third, commodity production results in foregone income and robs an economy of
the potential to become competitive in global markets.
• This is precisely where industrialization comes into play. Establishing a vibrant
manufacturing sector is a powerful engine of growth and development

33. A case for Africa’s Industrialization
33
There are several benefits which accrue to industrialization :
• Firstly , Quality and better paying jobs, which translates into a substantial source of
income for the continent’s rapidly growing population
• Secondly, income in manufacturing is higher and relatively stable, a noble opportunity
to alleviate poverty. Also, given the labor-intensive nature of the sector, higher wages
and salaries accrue to a larger population, reducing income inequality
• Thirdly, industrialization results into significant capital accumulation which enhances
economic productivity. In other words, investments, both domestic and foreign are
bound to increase, and this enhances efficiency in production processes
• Fourthly , prices of manufactured products tend to increase overtime, a classic
breakthrough to wealth accumulation and economic competitiveness. Industrialization
also enables a country tap into global markets where demand for products thrives

34. Thank You