INDUSTRIALIZE AFRICA

Industry has always played a vital role in development. It boosts economic activity along value chains, from raw materials to finished products. It lifts productivity by introducing new equipment and new techniques, increases the capabilities of the workforce, and diffuses these improvements into the wider economy. Industry also tends to generate formal employment, which in turn creates social stability. It improves the balance of trade by creating goods for export and replacing imports. Industrialization, including the encouragement of manufacturing and processing capability, makes for strong and sustainable economic development, creating wealth in the economy. It is a prerequisite to Africa’s sustainable and inclusive growth, achievable through adding value by processing, packaging and marketing its raw materials. Africa must not miss opportunities for such linkages whenever and wherever they occur. There is a golden opportunity over the next few years as African economies pick up the pace. Africa is home to 5 of the 10 fastest-growing economies in the world, but this growth is unsustainable and non inclusive since it is mostly driven by the export of unprocessed commodities with little value addition.

We are starting from a low base. On average, industry generates merely $7001 of GDP per capita in Africa, less than a third of Latin America’s output ($2,500 per capita) and barely a fifth of East Asia’s ($3,400 per capita). To industrialize Africa, the African Development Bank is committed to mobilizing capital, de-risking investments for the private sector, and leveraging capital markets. This is essential to build a 21st century Africa ready to take its rightful place in global value chains. In rural areas the Bank is encouraging the development of ‘special agro-industrial zones’, enabled with infrastructure such as roads, power and water supply. This will reduce the cost of business, post-harvest losses. The Bank is actively investing in the development of these zones. Africa is also brimming with potential, a fast-growing market offering enormous opportunities. Consumer spending will double to $1.4 trillion by 2020 and treble to $2.1 trillion by 2025. By 2030 demand for food in urban areas will triple to $1 trillion. In addition, 2 billion people will need food and clothing by 2030, not counting the other goods that we should by then be making, processing, and exporting out of Africa. This means that the infrastructure, the investment, the people for this, must come from and be made in Africa.

1. Now is the time to industrialize Africa

20 years of sustained growth Africa has reached a turning point in its history, when it should capitalize at last on the benefits of 20 years of steady growth, coupled with favorable demographics, growing internal markets, urbanization and technological developments that are accelerating the pace of industrialization. Africa has been buoyed by plentiful extractive and raw commodities, rapidly growing services (telecommunications, ICT, banking), the retail and manufacturing sectors, and has profited from easier business regulation and better governance. Africa’s economic pulse has maintained an average overall rate of 5% GDP growth over the last two decades and the pulse is ready to beat even faster over the next decade. Sound structural factors Africa should also capitalize on sound structural factors to maintain and accelerate its economic growth. The factors (see opposite page) offer the continent a great opportunity to industrialize:

DEMOGRAPHICS : Africa will have 2 billion people in 2050 – over one fifth of the projected global population, the largest and youngest workforce by 2025 and over 500 million people in the labor market. Successfully absorbing this workforce in labor-intensive and highly productive activities/sectors (eg manufacturing) holds the key to creating Africa’s demographic dividend.

URBANISATION : Africa has the second-highest urbanization rate in the world and by 2050, 56% of its population will be urban. And in the next 10 years, Africa’s 20 biggest cities are expected to grow by 50%. This represents new opportunities in infrastructure development and services.

GROWING MIDDLE CLASS AND INTERNAL MARKETS : With a growing population and rapid urbanization, a middle class strengthens and becomes more numerous. In 2010, 150 million Africans made up the middle class, a figure that is expected to reach 210 million in 2020 and rise to 490 million by 2040. The rise of the middle class has caused in a shift in consumption patterns with its members preferring consumer goods (finished and manufactured products) as well as buying in supermarkets and larger retail outlets. This is a market worth $250 billion and it is set to grow at an annual rate of 5% by 2025.

DIGITAL AND TECHNOLOGICAL DEVELOPMENTS : In 2016, mobile technologies and services generated $110 billion of’ et ligne 6 a ‘sub-Saharan’ Africa, equivalent to 7.7% of GDP. It is expected to rise to $142 billion, or 8.6% of GDP, by 2020 as countries benefit from improvements in productivity and efficiency from the increased take-up of mobile services. The mobile technologies sector employed some 3.5 million people in sub-Saharan Africa in 2016. The number of mobile broadband connections will be 500 million in 2020, double the 2016 figure.

2. Industrialize Africa: How?

The African Development Bank’s approach: focus on the six flagship programmes The African Development Bank has adopted an industrialization strategy for Africa 20162025, which focuses on areas where the Bank can best leverage its experience, capacities and its financial support. The “Six Flagship Programmes” form the basis of the Bank’s Industrialize Africa High 5.

3. The Bank’s support for industrialization

The Bank has been spearheading the implementation of the Industrialize Africa priority by identifying and investing in high value industrial projects, which have a catalytic effect on countries’ economies and foster the transformation of African economies. In 2018, the Bank approved a minimum of $300 million in loan facilities in favor of projects with high economic and catalytic effects. Prominent amongst the Industrialize Africa operations are:

• The Boke Mine and Port project in Guinea, to which the Bank provided $100 billion. The project contributes to the strengthening of Guinea’s position as a world-leading producer and exporter of bauxite while contributing to the development of core transport infrastructure. When completed, it will contribute $400 million to Guinea’s GDP, and $300 million to the country’s trade balance annually during the operational phase. It will create over 4,000 jobs during the construction phase and 700 permanent and 1,500 temporary jobs during the operational phase.

• TEKCIM in Morocco: the Bank provided a €50 million loan to partly fund the construction and operation of a greenfield cement factory with a capacity of 1,4 million tons of cement per year. When completed, it will increase the share of the industrial sector in the country’s GDP by 23% by 2020; increase regional exports of cement by at least 25% by 2025, create at least 150 temporary jobs in 2018, and employ not less than 150 total full time workers by 2025.

• The new Kotoka Airport terminal 3 in Ghana will handle 6.5 million passengers per year. An automated baggage handling system processes 3,500 bags an hour. The project, funded by the African Development Bank with a $120-million facility, will improve air transport in the country. The improvement and expansion of an outer ring road for the Kenyan capital has significantly reduced travel times and road congestion, providing access to residential and industrial zones in the east and north of Nairobi, and to the Thika and Mombasa roads.

• The Kazungula bridge links the town of Kazungula in Zambia with Botswana, and will transform surrounding communities, counties and cities, boosting road travel and business within SADC, the EAC and COMESA.

4. Partnerships

The African Development Bank makes partnerships with key stakeholders to accelerate Africa’s industrialization. In May 2018, the Bank and the UN Industrial Development Organization (UNIDO) agreed to step up collaboration to boost Africa’s industrialization. The agreement will facilitate cooperation between the Bank and UNIDO on joint activities of shared interest in areas such as agro-industry development, circular economy, eco-industrial parks, investments in innovation and technology, enterprise development, trade and capacity-building, and access to finance, among others.

5. Manufacturing in Africa Africa’s manufacturing value-added growth has lagged behind that of emerging Asian champions. Download the complete article here. 

industrialize africa