Africa longs for industrialisation

Africa longs for industrialisation

Africa's 2013 Economic Report calls for its commodities to be used to support economic transformation.

In the 1960s, there were high hopes for the development of the newly-independent sub-Saharan African countries. However, these hopes were quickly dashed following a series of shocks which began in the mid-70s, with the first oil price spikes, followed by a severe decline in growth and increase in poverty in the 80s and early 90s. However, by the mid-1990s, economic growth had resumed in certain African countries.

Economic reform, better macroeconomic management, donor resources and a sharp rise in commodity prices were having a positive effect. In the 2000s, many African countries witnessed high economic growth performance and during that period some of the world's fastest growing economies were in sub-Saharan Africa. Angola, Nigeria, Chad, Mozambique and Rwanda all recorded annual growth of over 7 percent. In 2012 Africa's exports and imports totalled 630 billion dollars and 610 billion dollars respectively, ­ a fourfold increase since the turn of the millennium. The Economist Intelligence Unit has forecast average growth for the regional economy of around 5 per cent yearly from 2013-16. Despite all this, the continent still plays a marginal role in the global market, accounting for barely 3 percent of world trade. One significant reason is that African economies are still narrowly based on the production and export of unprocessed agricultural products, minerals and crude oil.

Now, due to relatively low productivity and technology, these economies have low competitiveness in global markets. The low productivity of traditional agriculture and the informal activities continue to absorb more than 80 percent of the labour force. And growth remains highly vulnerable to external shocks. This story of half a century of struggle, set-backs and progress shows two things: One, the road to meaningful and inclusive development still seems long. Two, we are in a better position than ever to make real, sustainable progress.

Many countries are striving to do more in turning their strength in commodities into other areas,­ using commodities as a means of spurring growth across various sectors. The United Nations Economic Commission for Africa's 2013 Economic Report echoes this ­calling for the continent's commodities to be used to support industrialisation, jobs, growth and economic transformation.

In line with this, I think there are a number of essential steps to take: diversification of economic structure, namely of production and exports; enhancement of export competitiveness; technological upgrading and reduction of infrastructure gaps. But how can we take these steps? Of course I should say that although African countries share some common features, no unique set of policies could ever fit for all in a uniform way. Even among the least-developed countries (LDCs), some are already exporters of manufactured products, although often they rely on a single product  while others are more dependent on commodities. 

Diversifying production

African regional integration is of course very high on the policy agenda. There is little doubt that the regional market offers good scope for African firms to diversify their production and achieve greater value addition. Already now, manufactures constitute as much as 40 percent of intra-African exports, compared with 13 percent of Africa's exports to the rest of the world.

The Bali Package agreed in December last year, will help to resolve some problems. Inclusive, sustainable development was at the heart of the whole Bali project ­ and our African members played a crucial role in making it a success. It brought some progress on agriculture. And, in addition, Bali delivered the Trade Facilitation Agreement and this is a direct answer to some of the problems of fragmentation. Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within Africa to unsustainable levels, creating a further barrier to intra-African trade. This Agreement will help to address some of these bottlenecks.  The contribution of the agriculture sector is of utmost importance for the establishment of a sound industrial base. It can provide a surplus to invest in industrial capacity building, and supply agricultural raw materials as inputs to the production process, especially for the food processing industry.

Moreover, it can also significantly contribute to industrialisation by providing an ample supply of food products. Food constitutes a large share of what wage earners in African countries spend on. Its availability at low prices contributes to increase the purchasing power of wages, and therefore raise the competitiveness of a country in international markets. 

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