• Tuesday, April 23, 2024
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Industrialisation: A silver bullet for Africa’s economic transformation

Industrialisation:  A silver bullet for Africa’s economic transformation

Africa’s quest to achieve sustainable growth and development can become a near-term reality if the continent, with one of the world’s youngest populations, becomes industrialised.

Over the last two decades, African economies have been shaken by multiple and recurring global shocks that hit major macroeconomic indicators.

The global economic downturn has elevated inflationary pressures, climate change, and declining financial conditions, slowing the continent’s growth from 4.6 percent in 2021 to 3.6 percent in 2022 and rebounding in 2023 to 4.1 percent, according to data from the Economic Report on Africa.

Also, the economic fundamentals of most African economies have not changed much in the last three decades and this is a major concern about the continent’s capacity to withstand and recover from these frequent and severe setbacks.

Investment, domestic savings, government revenue and fiscal structure remain the same, while urbanisation, population density and unemployment continue to rise.

One main obstacle to Africa’s development is the continent’s industrial infrastructure gap. Inadequate and unreliable electricity grids, poor transportation networks, and limited communication systems significantly impede the smooth operations of industrial facilities.

This coupled with the high energy cost burden on manufacturers makes them uncompetitive in the international markets.

In light of these hindrances, Africa has been confined to the profile of a continent brimming with untapped potential yet struggling to translate its resources into tangible economic growth and prosperity.

Read also: Nigeria’s industrialisation push struggles to gather steam

In this context, the question of industrialisation and its multifaceted benefits looms large – Can it be the silver bullet for unlocking Africa’s true value and propelling it toward a long-awaited boom?

Industrialisation is a concept that several may find complex to understand but simply put, it is the process of transforming the economy of a nation or region from a focus on agriculture to a reliance on manufacturing.

According to experts, Africa’s under-performing agriculture is stifling the effective functioning of the industrial sector; consequently, this has resulted in weak linkage between the agricultural and industrial sectors, in the face of a myriad of opportunities.

It is said that industrialisation began in Great Britain in the 18th century. The Industrial Revolution ignited a global transformation that continues to shape the globe today.

Scientific inventions, abundant resources, skilled workers, and supporting policies fuelled the rise of early pioneers like Britain, the US, Germany, France, and Japan, laying the foundation for a tech-driven, globalised world and its widespread as well as long-standing impact.

While industrialisation has been a cornerstone of transformation in developed nations, most African countries still lack the bustling facilities and vibrant industrial landscapes that characterise strong economies, despite its significant manufacturing capability and promising trajectories.
Despite these setbacks, there is hope. Leading multilateral financial institutions such as Africa Finance Corporation (AFC), African Export-Import Bank (Afrieximbank) and African Development Bank Group (AfDB) are lending their voices and resources to create an enabling infrastructure and trade towards Africa’s economic growth and development.

The AfDB supports the sustainable development of African countries through its High5 priority areas: ‘Light Up and Power Africa’, ‘Feed Africa’, ‘Industrialise Africa’, ‘Integrate Africa’, and ‘Improve the Quality of Life for the People of Africa’.

Driven by its bold vision, AfDB aims to unlock Africa’s industrial potential, targeting a doubling of its industrial GDP by 2025. This ambitious pursuit with a focus on empowering the private sector to spearhead continental industrialisation, is expected to propel overall GDP to $5.6 trillion.

Over the next 10 years, AfDB is set to facilitate a cumulative investment of $56 billion toward implementing six flagship industrialisation programs.

The AfDB became a shareholder in AFC in 2018, and both organisations have been co-investing in multiple transformational infrastructure projects, including a $350 million long-term line of credit signed in December last year, to support urgently needed financing.

The AFC, a proven partner of choice for private sector-led infrastructure investment across Africa, has 42 member countries and has invested $12.7 billion across Africa since its inception.

Similarly, Afrieximbank, mandated to finance and promote intra-and extra-African trade, recently committed $1 billion, as a founding member of a new private-sector-focused Alliance for Special Agro-Industrial Processing Zones (SAPZ) to transform Africa’s underdeveloped rural areas into agro-industrial corridors of prosperity.

Other founding members include the AfDB Group, the Islamic Development Bank Group (IsDB), the United Nations Industrial Development Organisation (UNIDO), and ARISE Integrated Industrial Platforms (IIP) & its partners.

A growing number of African countries are also recognising the importance of industrialisation and are implementing policies to attract local and foreign investment as well as promote an extensive increase in manufacturing.

These policies support the development of Special Economic Zones (SEZs), which are geographically defined areas within a country that offer businesses special incentives such as tax breaks, flexible regulations, and improved infrastructure.

South Africa launched its SEZ program in 2007, and with strong institutional frameworks and a clear vision, subsequently grew to 11 designated SEZs by 2021.

Gabon has also built an ecosystem serving its industrialisation goals, playing a crucial role in driving national growth and establishing the country as a leader in the wood processing sector.

There are three SEZs in Gabon all managed by Gabon Special Economic Zone (GSEZ) – GSEZ Nkok, GSEZ Ikolo and GSEZ Mpassa-Lebombi. GSEZ Nkok was launched in 2010 and brings together 144 companies from 17 countries operating in 22 industrial sectors, including a cluster dedicated to wood processing.

Gabon’s forestry growth grew by almost 400 percent between 2010 and 2021, jobs in the sector increased from 8,400 in 2010 to 30,000 in 2022, and contribution to the national GDP from the timber sector rose from 116 billion FCFA to 444 billion FCFA in 11 years, according to available data.

These achievements have seen Gabon transition from a mere log exporter to a leading global producer and exporter of veneer. GSEZ is a public-private partnership between ARISE Integrated Industrial Platforms (IIP) and the Government of Gabon.

ARISE IIP is a leading pan-African developer and operator of tailor-made and sustainable Integrated Industrial Platforms & SEZs across Africa.

The organisation identifies industrial gaps in African countries and unlocks value in key sectors by enabling local transformation as well as maximizing production, efficiency, and cost, which in turn generates local value addition.

ARISE IIP’s public-private-partnership model with governments and investors enables the company to execute large-scale projects that transform value chains and industrialise countries in an environmentally sustainable way. On the heels of its success in Gabon, ARISE IIP has expanded its reach to Benin, Togo, and Chad where it is already recording equally solid results.

In 2022 alone, ARISE IIP processed 1,088,714m³ of wood in Gabon. In Togo, the country is now leading in organic soya exports to Europe, as well as Indian and American markets, and produces 50,000 tonnes of soya in a year out of ARISE IIP’s SEZ; Plateforme Industrielle d’Adetikopé (PIA).

Throughout 2022 and 2023, over 196,000 Made-in-Benin clothes produced at ARISE IIP’s Glo-Djigbé Industrial Zone (GDIZ) were sold abroad, while 102,000+ were sold locally. Also in Benin, 1,000 Beninese are trained in textile trade while working in the zone.

Set on its commitment to drive industrialisation and make Africa thrive, this sustainability advocate and awardee has been called upon to establish an SEZ in Sierra Leone and is also in various stages of discussions and development with Rwanda, Congo-Brazzaville, Democratic Republic of Congo, Côte d’Ivoire, and Nigeria.

In parallel, Nigeria is one of the countries in Africa seeking to leverage industrialisation and SEZs to unshackle its economic treasure trove.

At the last Nigerian Economic Summit held in Abuja, President Bola Ahmed Tinubu mentioned that the Nigerian economy can grow to $1 trillion by 2026 through the construction of megacities, fully connected road, rail, gas, and fibre optic networks, and the establishment of thriving industrial zones in every part of the country before 2030.
When objectives align, partnerships are inevitable. So, it is no surprise that ARISE IIP once again entered into a public-private partnership in 2022, this time with the Ogun state government of Nigeria to design, finance, build and operate Industrial Platform Remo (IPR) – an integrated, world-class & sustainable Free Trade Zone (FTZ) in Sagamu, Ogun state.

Strategically located within the Remo Economic Development Cluster, an AfDB Designated Special Agro-Industrial Processing Zone (SAPZ) and an aerotropolis; Gateway International Airport – the second international airport in South-West Nigeria, IPR presents promising prospects. Its plans include industrial, commercial, residential & logistics zones, natural gas supply, storage solutions, operations & maintenance facilities and other key utilities.

With ARISE IIP’s track record of success as well as Ogun state’s 1.2 million hectares of arable land and its prime positioning interconnecting Lagos, the rest of Nigeria and West Africa (aptly nicknamed ‘Gateway to Nigeria’) it is only a matter of time for the state to be transform through its huge potential.

For Nigeria and Africa as a whole, can our industrialisation ambitions & roadmap weather the storms of global inflation, trade disruptions, and climate change? Will 2024 be a defining year to demonstrate resilience and forge a sustainable industrial path?

While historical models like China’s SEZs offer valuable insights, can Africa implement unique models tailored to its diverse landscapes and resources? Will partnerships and collaborative efforts stall attendant risks and accelerate industrial growth in 2024 and beyond?