A new attempt at Africa's industrialization?

Afrika is about ready. There are promising approaches for a sustainable industrialization. However, the path poses challenges to the continent.

(c) Rainer Kwiotek/Zeitenspiegel
The digital revolution will shape Africa's future. (c) Rainer Kwiotek/Zeitenspiegel/Menschen für Menschen

Helmut Asche

Helmut Asche

Professor Helmut Asche is an economist and sociologist. From 1985 to 1998 he worked as an economic advisor for GTZ. Until 2016 he taught as an honorary professor at the Department of Anthropology and African studies, University of Mainz.

The refugee crisis shed a completely new light on the issue of jobs in Africa

In most African countries, the majority of people work in agriculture. According to predictions of the future economic structure of sub-Saharan Africa, by far the largest number of new jobs – at least in rural areas – will also be in agriculture. Alongside this, employment opportunities are emerging in modern service sectors, especially the IT industry.

 

It seemed unrealistic for Africa to imitate the East Asian development model.

 

 Less than 20 years ago, experts confidently described this combination of agriculture and services as typifying the trend of development on the African continent. Especially in the English-speaking world, academic papers that addressed the question of ‘should Africa industrialise?’ regularly concluded that it should not and recommended instead that it should leapfrog the industrial age. This leapfrogging would involve omitting an entire economic sector – that of manufacturing – and moving directly into an agriculture-cum-service age. It seemed unrealistic for Africa to imitate the East Asian development model. This way of thinking completely excluded a specific industrial policy that could have boosted the faltering development of industrial productivity. There was too deep-seated a memory of the grandiose attempts of Latin America and Africa to bring about industrialisation through state-owned companies operating behind high tariff walls – endeavours that with some exceptions resulted mainly in the production of white elephants.

 

There has been a radical paradigm shift here – and it has occurred not just since the refugee crisis shed a completely new light on the issue of jobs in Africa but in fact some years before that. New studies of structural change and employment trends in Africa have shown that continuation of the present trend – involving job growth in the private and public service sectors and to some extent in agriculture – will not create anywhere near the number of jobs needed to absorb the up-and-coming cohorts of young people looking for work. The demographic window of opportunity will quickly snap shut again. Extrapolated scenarios highlight the need for a radical game change – which will not happen without energetic political support. Alongside manufacturing industry as a driver of job creation, industrial policy thus once again takes centre stage in the development policy debate. Also on the agenda now are the new challenges of economic and environmental sustainability. The belching smokestack phase of catch-up industrialisation is no longer a realistic option, in Africa or elsewhere. A paradigm shift is therefore needed on no fewer than three fronts. The task facing a ministry of trade and industry that is responsible for coordinating this process with the private sector could not be harder.

 

Planning has become harder rather than easier

However, there is at least some clarity with regard to the practical essentials of modern industrial policy – namely a joint search for industrial opportunities by the public and private sectors, and selective promotion with clear time horizons, feedback loops and public control (see: PEGNet Policy Brief). What is far less clear in theoretical terms is which industrial sectors the economic latecomers among the developing countries should focus on. This is a result of the heuristic disposition of modern industrial policy, which has elevated collective self-discovery in a world of complex inter- and intra-industry division of labour to the status of a principle. Patterns of growth are generally more diverse than they were in earlier industrial periods. The classical sequence of industrialisation – typically from light to heavy industry – is not one that developing countries can readily pursue. Rational planning in the context of modern industrial policy has thus become harder than in the past rather than easier.

 

Of course even in such a scenario many agriculture-related jobs will still be created, for example in agroindustry or in the processing of agricultural commodities such as textiles and leather. The situation benefits from the fact that the paradigmatic flying geese of labour-intensive industrialisation, which originally took off in Japan, moved westwards from China a long time ago. However, an economy as a whole does not learn much from the establishment of mature labour-intensive industries. In Africa – as elsewhere – job creation is not the same thing as knowledge creation. An economic policy that promotes dynamic industrial networks must aim at both. With deliberate reference to the processors contained in our computers, I have termed this the ‘dual core’ of modern industrialisation strategies. In practice it is South Africa’s partially successful industrial policies that provide the closest example.

 

Many of these trends cannot be confidently predicted for Africa – and this uncertainty extends to the promise held out by the digital revolution. IT-saturated sectors are one of the principal areas in which leapfrogging is actually taking place; it can be observed in the skipping of the landline telephone stage and the development of innovative banking services. Startups focusing on the development of software and IT-based services are blossoming in Africa. By contrast, there is as yet no clear picture of how developing regions will be affected by the new risks to classical industrial employment that arise from the spread of the Internet of Things and what Germany has termed ‘Industry 4.0’. We do not know precisely what the ultimate effect of the digital revolution in Africa will be.

 

Let’s stick to the subject of leapfrogging. The second sector that is coming up with innovative technical solutions in Africa is renewable energy: off-grid solar systems are particularly promising and combinations of off-grid and on-grid solutions will no doubt take off soon. As in the field of telecommunications, the systemic failure of large-scale networks in Africa is being creatively bypassed and the outcome is a growing contribution to sustainable economic development as defined by the SDGs. In any case, it has now become clear that – contrary to the theories of old-fashioned development economics – leapfrogging relates not to the skipping of industrialisation in general but to progressive leaps forward geared to sustainable and inclusive solutions within particular industries and services. However, the African energy policy debate is still a long way from coming down on the side of sustainability. Large coal-rich countries such as Mozambique, Nigeria and South Africa face a complex public choice, at least for a transitional period in their development: should they rely entirely on renewable energies or go for an energy mix for the time being?

 

Some researchers say that in view of the global trade in tasks, African companies should focus on individual work processes and not on the establishment of entire industrial sectors.

 

Equally unclear is the outlook with regard to industrial division of labour. Promoting the participation of African producers in global and regional value chains is one of the new development cooperation mantras. Some researchers say that in view of the global trade in tasks, African companies should focus on individual work processes and not on the establishment of entire industrial sectors. Yet despite recent descriptions of the great unbundling of concentrated industrial production, we are now witnessing a trend towards re-agglomeration of important industrial sectors. Does it make sense after all to have a fully integrated textile chain in Ethiopia, or at least in a regional community? It is hard to advise developing countries on this point. In view of these uncertainties, which can only be reduced by a structured public-private dialogue with practical iteration loops, and also on account of the notorious political and economic risks – corruption, clientelism and so on – modern industrial policy in developing countries is one of the most challenging areas of policy. Many countries will be unable to deal with it, especially as there are a couple of other problem areas that also come into play.

 

One of the most exciting development policy challenges for some time to come

(c) Rainer Kwiotek/Zeitenspiegel
Helmut Asche: "Africa is full of imaginatives for a sustainable industry."

Promotion of industry is particularly difficult in a group of countries that should be able to fund it themselves: countries that are rich in mineral resources. After decades of discussion of the ‘resource curse’ and the Dutch disease, development economists still have no more than a vague idea of how to deal with the structural disadvantage of agriculture and the manufacturing sector.

 

And, finally, there is the issue of the connection between industrialisation and regional integration. One aspect of this is the fact that, for reasons of economies of scale, a whole range of industries depend on large connected markets. At the same time, successful regional integration requires the relatively balanced industrialisation of member states, and that is even harder to achieve politically. Promoting regional value chains does not automatically have a balancing effect. In consequence, both industrialised and developing countries often fall for the idea of pursuing an industrial policy that hits out at their own regional association. Whether it is ‘Buy American’ at the expense of NAFTA or ‘Buy Ugandan’ at the expense of the EAC, it is always a problematic policy, to put it mildly. The links between agricultural, industrial and trade policy are in any case uncertain territory. For all these reasons, the list of African countries that have actually pursued a successful industrial policy in particular sectors is very short: Botswana, Ethiopia, Mauritius, Rwanda and South Africa. And there is not a single oil producer among them.

 

One can also have a positive take on this: sustainable industrialisation is going to remain one of the most exciting development policy challenges for some time to come, and Africa is full of imaginative initiatives in this field.

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