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The African Development Bank (AfDB), the United Nations Economic Community of Africa (UNECA), and the United Nations Development Programme (UNDP) have called for sustained industrial development on the continent of Africa.
The three multinational development agencies focused on helping the continent fulfil its full economic potential made this call at the just kicked-off 2023 African Economic Conference (AEC 2023), jointly organised by them and taking place in Addis Ababa, Ethiopia. The event is expected to last for three days (16-18 of November 2023).
During the conference themed “Imperatives for Sustainable Industrial Development in Africa,” Kevin Chika Urama, Chief Economist and Vice President of AfDB Group, representing President Akinwunmi Adesina, highlighted COVID-19’s challenges, prompting Africa to address global economic shocks and enhance competitiveness in global trade.
Urama said, “The COVID-19 pandemic exposed the structural deficiencies in Africa’s industrial sector and amplified the risks associated with continued dependence on foreign manufactured and intermediate goods in Africa. From food and medical supplies to vaccines and other pharmaceuticals, many African countries struggled to cope with the disruptions in global supply chains caused by these global shocks.”
The professor acknowledged that given the influence of the COVID-19 pandemic and the Russian-Ukraine war on the continent’s value chain business, it was crucial for development agencies and partners, governments, and private enterprises to craft “deliberate strategies for sustainable industrialization and structural transformation.”
He said that “sustainable industries create quality jobs, boost innovation and productivity, and foster socio-technological transitions towards high productivity and wealth creation in economies.”
Urama said that though the continent had made significant economic progress, it was not sufficient as it lags behind the Asian continent.
When doing a comparative analysis of both continents, the AfDB vice president said that Africa’s manufacturing contribution stagnated at 2.1 percent globally, whereas Asia surged to 54 percent. China notably increased its share from 3 percent to 31 percent in just under 30 years.
He also highlighted a trend that he believes must shift for the continent to establish itself as a competitive force in global trade.
Currently, Africa heavily depends on raw material exports, constituting 80 percent, while only 20 percent comprises manufactured goods—contrasting sharply with China, which boasts 93 percent in manufacturing exports. Globally, approximately 75 percent of exports are manufactured products.
Yet, Urama praised the accomplishments of the continent’s major corporations. He advocates for these industry leaders to take further steps to pave the way for younger and less established companies to flourish and ascend to the same champion status as theirs.
He said, “According to the Bank’s 2022 Africa Industrialization Index, South Africa, Morocco, Egypt, Tunisia, and Mauritius are making good progress in their industrialization processes compared to other African countries. Key sectors of coverage include the textile and apparel, automotive, and aeronautics industries. Ethiopia and several other African countries have made good progress in recent years, and so has the growth of private sector companies in Africa.
“As of 2018, there were already about 438 businesses with $1 billion of annual sales. Of this total, 25 percent are subsidiary group companies of foreign domestic multinationals, and 50 percent have a local origin. These large firms, to name a few, include Sonatrach (Algeria), Sonangol (Angola), Eskom (South Africa), Office Chérifien des Phosphates (OCP) (Morocco), Orascom (Egypt), or the Dangote Group (Nigeria). These achievements should be celebrated.
“But there remains a lot of work to be done to transform the continent’s manufacturing and industrial sectors to levels that can create wealth.
“We need more of these champions to make the needed investments to accelerate industrialization through diversification and to pull up the many small and medium-sized enterprises in countries through effective linkages across value chains.”
Urama also explained that “Africa possesses critical metals like lithium, cobalt, nickel, and graphite necessary for EV lithium-ion batteries. Over half of African nations harbour these resources, paving the way for a pivotal role in the global green economy.”
He admitted that programmes such as Special Agro-Industrial Processing Zones (SAPZs) launched by the African Development Bank Group could help scale up “agriculture and agri-business in Africa to help Africa feed itself and feed the world.”
Also mentioned is the much-discussed African Continental Free Trade Area (AfCFTA), through which regional economic communities can foster regional economic integration and industrialization in Africa.
However, Urama listed out some of the actionable steps the continent can take to accelerate industrialization and structural transformation. Some of those steps are that governments should prioritise industrialization through stable economic policies.
Encouraging local production, investing in education and skills, establishing Special Economic Zones, and offering fiscal incentives are crucial strategies to foster regional trade and industrial growth.
What UNECA said
Also speaking for UNECA, Claver Gatete, its Secretary General, said that the African Economic Conference 2023 would provide a good opportunity for the continent to develop resilient strategies aimed at sustaining growth and accomplishing most of the Sustainable Development Goals.
Gatete also explained that industrialization, infrastructure development, and AfCFTA’s have significant roles to play in the face of global challenges such as COVID-19 and the Russia-Ukraine war.
He said, “We envision a prosperous Africa with sustainable development that maximises opportunities for income growth, local employment, poverty reduction, and social development.
“Industrialization is the key to sustained growth and transformation, providing jobs, skills acquisition, innovation, and formal employment, especially for women and youth.”
What UNDP said
Matthias Naab, Director, Regional Bureau for Africa UNDP, called for collaboration between AfDB, the Economic Commission for Africa, all governments, and the private sector, believing that it is only through collaboration, industrialization, intra-African trade, and youth involvement that Africa’s sustainable development can be actualized.
Naab said, “Now is the time to invest in Africa’s value addition, because it is the only way that Africa will change the status quo—investing in its abundant raw materials and commodities that have transformed the economies of several advanced economies.
“And we must ensure that this value addition is also based on the regional value chain approach. This is because we need to ensure that Africa’s industrialization brings together all of the people—young and old alike, as well as women and men.
“We must also ensure that we keep all of the small and medium-sized enterprises in mind so that it is a truly democratising process.”