Africa’s Economic Renaissance leaving Industrialization Behind

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Written by Isaac Mwangi

A new report says that Africa’s high growth rate and economic reforms have failed to lead to any significant increase in industries and manufacturers.

For this to happen, the Economic Report on Africa calls for the revamping of Africa’s industrial policy organizations to make them capable of supporting not only industrial transformation, but also enabling its benefits to trickle down to all segments of the continent’s population.

Entitled, “Dynamic industrial policy in Africa: Innovative institutions, effective processes and flexible mechanisms,” the report is a collaboration between the United Nations Economic Commission for Africa and the African Union Commission.

For instance, in Rwanda the report points out that despite the country coming only second to Mauritius in terma of doing business in Africa, it has persistently failed to attract the kinds of foreign direct investment needed for industrial growth. This, it says, is partly due to the non-inclusion of the private sector in governments industrial policy decisions.

“The Industrial Development and Export Council does not have private sector participation, thus keeping the private sector out of the industrial policymaking loop. Private sector respondents also stated that the government did not discuss with them the types of support that firms needed to take advantage of the new special economic zone developed by the government for manufacturers at Nyandugu,” the report notes.

The report further emphasizes the importance of public-private partnership, effective coordination and regular monitoring of projects as key ingredients for successful industrialization.

“The blueprint approach to industrial policy adopted by most African countries proved to be ineffective. The result was actually de-industrialization,” Soteri Gatera, chief of the Industrialization and Infrastructure Section at Uneca, said a conference in Nairobi.

Toss Out SAP’s

The report also chides the use of predefined interventions — such as the western-imposed Structural Adjustment Programs (SAP’s) — which tend to be applied uniformly across the continent regardless of local circumstances.

Such predefined interventions should only be replaced by national institutions that are inclusive in approach and responsive to the changing needs of industries, it says.

Even Nigeria, which recently rebased its data to become Africa’s largest economy, “has no coherent national industrialization strategy,” the report says.

In Senegal, another west African nation, the contribution of manufacturing to GDP has fallen steadily over the past decade. Business organizations in the French speaking state felt that the current industrial policy had no visible impact.

“A new industrial policy needs to be drawn up, and soon,” they said.

Across, Africa, this lack of a working, inclusive industrial policy stands out in the report as a major impediment to industrialization. This is in contrast with East Asian and European countries.

“Industrialized economies have at their core – regardless of policies – institutions and processes to promote strategic collaboration between the private sector and the government,” the report says.

Although Africa has experienced unprecedented growth over the past decade, the report says, the contribution from industrialization has been minimal. This has consigned a large part of Africa’s population to poverty, rampant unemployment and inequality.

“The failure to experience inclusive growth has been (further) reinforced by several developments in the world economy – particularly volatile commodity prices – highlighting the perils of strong economic growth without concurrent industrial development and structural transformation,” the report says.

Prof. Joseph Kieyah of the Kenya Institute of Public Policy and Research Analysis, says the interests of the private sector in most cases are antagonistic to those of the consumer, hence the government has to come in as an arbiter.

But because African countries are relatively weaker than their Asian counterparts, Keiyah said, African countries “are susceptible to international pressure.” This explains the existence of similar non-functioning blueprints across the continent.