Outline 1. Introduction 2. The Case for Industrialization in - PowerPoint PPT Presentation

¡ Renewing Industrialization Strategies in Africa ¡ ¡ Patrick Kormawa ¡ FAO Sub-Regional Coordinator, Eastern Africa and Representative to the AUC and UNECA. ¡ Email: Patrick.Kormawa@fao.org ¡ and ¡ ¡ Afeikhena Jerome ¡ National Coordinator, States Peer Review Mechanism, Nigeria Governors' Forum, Abuja. ¡ Email: ajerome4@hotmail.com ¡ ¡ ¡ ¡ ¡

Outline 1. Introduction 2. The Case for Industrialization in Africa 3. Past Industrial Strategies and Outcomes 4. Current Status of Africa’s Industry 5. Toward a New Industrial Strategy for Africa 6. Conclusion

Introduction • Africa is now the second highest growing region in the world, outperformed only by East Asia and the Pacific region. • Overall, the size of the regional economy has more than doubled (in real terms) in the last decade. (Diop, 2015). • However, growth has not been accompanied by significant structural transformation. Out of the 35 countries that have been low income since 1950, 30 of them are in SSA, 4 in Asia, and 1 in the Caribbean (Felipe, Kumar, and Galope, 2014). • Commodity exports are still largely driven by oil and metals.

Introduction • There is already a groundswell of activities around Industry. • Industrialisation has featured prominently in recent continental plans, such as the Common African Position (CAP) on the Post-2015 Development Agenda and Africa Agenda 2063. • At the global level, industrialization is being reinvigorated as part of the Post-2015 Development Agenda. SDG Goal 9 - building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation. • What is needed is to sustain the current momentum. Africa needs to industrialize massively to transform its economies structurally.

The Case for Industrialization in Africa • Until recently, industrialization was the quickest means for a country to transform to a midd income or developed economy. • An unprecedented pace of industrialization in the BRICS and East Asian economies lifted millio out of poverty. • Industry, especially manufacturing, has evolved in several ways, with the dominance of glo supply chains. • The premature deindustrialization and the atypical transformation from agriculture to low-va services, the so-called “tertiarization” has so far failed to deliver quality jobs (Rodrik, 2015). • Job creation (10 -12 million youths join the labour market every year). ¡

Past Industrial Strategies While industrialization patterns in Africa have been as varied as the countries • themselves, the continent has no doubt experimented with all the approaches, especially the first three. 1) Import-substitution industrialization (ISI) policies; 2) Export-oriented industrialization (EOI) policies, which include variants such as export processing zones (EPZs), special economic zones (SEZs), and industrial clusters; 3) Resource-based industrialization (RBI) policies; and 4) Industrialization through innovation (see Low and Tijaja, 2013).

Past Industrial Strategies (1) Immediate Post-Independence Era, 1960 – 1985: 20 ¡ 15 ¡ Import Substitution Strategy (ISI) ¡ GDP ¡Growth ¡(Annual ¡Percentage): ¡1960–1985 ¡ ¡ 10 ¡ 5 ¡ EAP ¡ 0 ¡ • On attaining political independence, mostly in 1960 ¡ 1961 ¡ 1962 ¡ 1963 ¡ 1964 ¡ 1965 ¡ 1966 ¡ 1967 ¡ 1968 ¡ 1969 ¡ 1970 ¡ 1971 ¡ 1972 ¡ 1973 ¡ 1974 ¡ 1975 ¡ 1976 ¡ 1977 ¡ 1978 ¡ 1979 ¡ 1980 ¡ 1981 ¡ 1982 ¡ 1983 ¡ 1984 ¡ 1985 ¡ LAC ¡ -­‑5 ¡ the 1960s, most African nations adopted ISI. ¡ MENA ¡ -­‑10 ¡ SSA ¡ -­‑15 ¡ -­‑20 ¡ • This development strategy seems to have been successful during the first one and a half decades of independence, but lost stream. ¡ Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡ 7 ¡

Past Industrial Strategies (2) tructural Adjustment Programme Era (1986–1995) • The SAP era commenced in the mid-1980s. Many countries sought financial assistance from the IMF and the World Bank. • SAP policies curtailed specific policy efforts to promote industrialization and focused on removing anti-export biases and furthering specialization according to comparative advantage. • The conventional view is that they did not boost industrialization in the region (Soludo, Ogbu, and Chang 2004). Evidently, the declining contributions of manufacturing to GDP in Africa are stark manifestations of the de-industrialization that occurred during the SAP period. Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡ 8 ¡

Past Industrial Strategies (3) w Orthodoxy Era/ Global Financial Crises and its Aftermath (1996–2015) • Since the turn of the millennium, the external environment has shifted in favor of developing countries. • Paradoxically, this shift and the global economic and financial crises opened up the space for developing countries to explore a much wider set of heterodox policies than those endorsed by the Washington Consensus. • The resumption of growth in SSA, though impressive, is yet to translate into the economic transformation that provides the basis for sustained rapid growth. Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡ 9 ¡

Past Industrial Strategies (4) New Orthodoxy Era/ Global Financial Crises and its Aftermath (1996–2015) • These is a renewed appreciation of the importance of an industrial policy to achieve sustainable and inclusive growth path. • This commitment to industrial policy has been particularly strong in countries such as Rwanda, Ethiopia, and South Africa. • Regional Economic Communities (EAC, SADC, and ECOWAS) are also introducing industrial policies as an essential pillar of their economic integration strategy. ¡ Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡ 10 ¡

Record of Industry in Africa (1) • The record of industrialization in Africa has been profoundly MVA PER CAPITA MVA, 2012 disappointing. Africa has a weak industrial base and lags behind 2 REGIONS 2012 (% of of other developing regions in industrial performance. (US $) GDP) Africa 126.92 9.989 Sub-Saharan 43.56 5.224 • Africa's share of world manufacturing output was a paltry 1.49% in Africa 2012, corresponding to 10% of China’s MVA. Manufacturing as a African LDCs 33.04 7.706 Asia & Pacific 912.28 23.007 share of GDP for Africa was only 10% in 2012, compared to 23% in South Asia 153.97 15.351 Asia and Pacific and 15% in Latin America. North America 5,590.37 13.246 Latin America 859.02 15.069 Europe 3,030.50 14.470 • Within Africa, the distribution of manufacturing activity is highly World 1,277.10 16.711 skewed with just one country, South Africa, accounting for 38.9% of total MVA, followed by Egypt (15.4%). Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡ 11 ¡

Record of Industry (2) • In 2010, Africa’s share of global manufacturing exports was Manufactured exports for selected countries (million US$) 1%, lower than India’s share of 1.4% and China´s 15%. South Africa Mauritius Botswana High technology exports account for only 3.5 % of Manufactured SSA share Manufactured SSA share Manufactured SSA ¡ ¡ exports (%) exports (%) exports manufactured exports from Africa compared to 32 % in 2000 16,145 63.6 1,258 5.0 2,396 2001 15,657 64.9 1,208 5.0 2,274 East Asia and the developing country average of 22 %. 2002 18,495 59.4 1,308 4.2 2,205 2003 21,215 60.7 1,397 4.0 2,427 2004 26,569 - 1,357 - 3,008 2005 29,249 - 1,228 - 3,777 • South Africa is clearly an outlier, contributing equivalently 2006 30,750 49.2 1,492 2.4 3,621 2007 36,006 47.8 1,385 1.8 3,793 63.6% of SSA’s total manufactured exports in 2000, though 2008 42,186 43.2 1,366 1.4 3,777 the figure has declined considerably to 37% in 2014. 2009 29,284 43.1 1,245 1.8 2,695 2010 44,466 45.1 1,360 1.4 3,733 2011 49,750 44.2 1,653 1.5 5,200 2012 47,537 41.0 1,635 1.4 5,278 2013 44,019 37.8 1,686 1.4 6,663 2014 45,141 - 2,063 - 7,014 Source: Computed from World Bank, (2015) World Development Indicators Note: SSA = Africa south of the Sahara. 12 Patrick ¡Kormawa ¡and ¡Afeikhena ¡Jerome ¡ ¡

Record of Industry in Africa • Manufacturing companies are already looking to countries such as Ethiopia, Kenya, & Rwanda as a result of rising production costs in Asia. Massive infrastructure projects are also ongoing to spur industrialization • The Huajian shoe factory, which opened in Ethiopia in 2012 is already showing that Africa can indeed become a global manufacturing hub. The 6,000MW Grand Ethiopian Renaissance Dam will be the largest hydroelectric power plant in Africa when completed, and the 11th largest in the world. • Senegal is developing industrial zones near the airport and the first is due to open in early 2016.