A Diaspora View of Africa
Africa must advance industrialization
By Gregory Simpkins
There has been a lot said and written about industrialization in Africa, including assigning blame as to why the continent lagged behind other parts of the world. Certainly, the colonial powers must bear much of the blame for Africa’s initial exclusion, but African leaders in the latter part of the 20th century and now the 21st century must take responsibility for industrialization being so slow to advance despite abundant natural and human resources. After all, other parts of the developing world, especially in Asia, took advantage of the end of colonialism to take control of their economies and have made significant industrial progress.
Colonialism is seen as a 19th century phenomenon, but the international slave trade preceded colonialism by hundreds of years and created a situation in which those European nations that developed significant industrial capacity felt it suited their interests better to use the continent as a source of raw materials and free labor. Sharing the benefit of their accumulating industrial abilities apparently was never a consideration.
Stages of industrialization
Let’s look at the four stages of industrialization to see how Africa has fit in.
The initial phase of the industrial revolution, beginning in about 1765, transformed developed economies in Europe from agriculture to industry. Production processes became mechanized, and products were manufactured on a large scale for the first time. During this period, the discovery of coal and its mass extraction, as well as the development of the steam engine and metal forging completely changed the way goods were produced and exchanged. Inventions such as spinning machines and looms to make fabric were making their appearance. Canal transportation began replacing wagons and mules for moving around these goods. These days, coal mines are technologically advanced and use sophisticated equipment including; trucks, jacks, conveyors, draglines and shearers to extract coal.
The coal itself wasn’t what Europe needed initially; it was the free labor from Africa that made industrialization in Europe blossom. By the time industrialization had begun, the slave trade, a practice done through millennia, had been ongoing in ever greater levels since 1526, when the Portuguese initiated the trans-Atlantic slave trade, followed by the British in 1562.
The second phase of industrialization began at about 1870, right before the height of the notorious scramble for Africa and involved the discovery of electricity, gas and oil and the invention of the combustion engine. These energy sources coincided with this new technology, which of course was used in the colonies but remained under the control of the colonial powers. Both steel and chemically based products became prevalent during this time. Developments in communication technology, such as the telegraph and later the telephone, as well as the invention of the airplane and automobile were used worldwide. Mechanical production grew in speed through the advent of mass production. Again, though, while this technology was used in Africa, colonial governments controlled their use, and relatively few Africans were allowed to own or use such technology outside colonial oversight.
A century later – the third phase – in about 1969, nuclear energy and electronics were developed on a large scale for commercial use. Nuclear power began in Europe and grew in Great Britain, the United States and later in Asia. By then, almost all of Africa was independent. However, most African countries still have vastly underdeveloped power sectors. The cumulative energy demand of 48 countries in sub-Saharan Africa was determined in 2014 to be roughly equal to that of Spain, even though the region is home to approximately 18 times the number of people and more than triple the gross domestic product on a purchasing power parity basis, according to a study by the International Energy Agency. Unfortunately, in the past 9 years, this situation has not markedly improved.
The current phase – the fourth industrial revolution has seen a shift to renewable energy such as solar, wind and geothermal. However, the momentum comes not from the shift in energy but from the acceleration of digital technology. The internet and the digital world mean a real-time connection within increasing components of a production line, both inside and outside facility walls. As the development of the Industrial Internet of Things, cloud technology and artificial intelligence continue, a virtual world will merge with the physical world. Predictive maintenance and real-time data will lead to smarter business decisions and work order solutions for companies around the world. It is here that African countries must finally make their move to catch up with the rest of the world’s economies.
Drivers of successful manufacturing
To accelerate industrial development, policymakers must bring the cost of doing business down, addressing cost-effectiveness challenges such as energy, access to roads and ports, security, financing, bureaucratic restrictions, corruption, dispute settlement, and property rights, among others.
My colleague, Landry Signé, writing in Africa in Focus in November 2017, suggested 5 key drivers of successful manufacturing when elaborating industrial policy. In summary, these include:
Human capital: To grow and be competitive, the manufacturing sector needs capable, healthy, and skilled workers. Policymakers should adjust curriculum to ensure that skills are adapted to the market and should pay special attention to youth. Policymakers should revisit education curricula to focus on skills acquisition and build capacity for entrepreneurship and self-employment through business training at an early age, skills upgrading at an advanced one, and better promotion of science, technology, engineering, entrepreneurship, and mathematics as well as vocational and on-the-job trainings.
Cost: To accelerate industrial development, policymakers must bring the cost of doing business down, addressing cost-effectiveness challenges such as energy, access to roads and ports, security, financing, bureaucratic restrictions, corruption, dispute settlement, and property rights, among others. They should also ensure the effectiveness of special economic zones to fast-track the process.
Supply network: Industries are more likely to evolve in the presence of sufficient or competitive networks. Policymakers should increase the size of the supply market by easing trade restrictions, integrating regional trade networks, increasing the country ability to develop sophisticated products, and lifting the barriers to small and medium-size business growth and development. Successful industrial policies, in this way, are key to the African Continental Free Trade Area, as one of the AfCFTA’s goals is to “expand inter-Africa trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across (Regional Economic Communities) RECs and across Africa in general.”
Domestic demands: Policymakers should offer tax incentives to firms to unlock job creation and increase individual and household incomes. Higher purchasing power for households will increase the size of the domestic market given the rapid growth of the demand for manufactured products. This increase in domestic demand also will contribute to the creation of pan-African demand, which, associated with the removal of trade barriers, protectionist policies, and subsidies, will help fulfill AfCFTA’s goal of a “single continental market for goods and services, with free movement of businesspersons and investments.”
Resources: Manufactures require heavy investment and should be driven by the private sector. Policymakers should facilitate access to finance, especially for small and medium enterprises, by developing and effectively managing instruments appropriate to the stage of development (loans, guaranties, and venture funds) in critical sectors. To better attract foreign direct investment, policymakers should address the poor risk perception that scares off potential investors or sets excessive returns expectations. Policymakers should also mobilize domestic resources, curve illicit flows, appropriately manage state revenues, and invest to stimulate inclusive economic growth.
Improved governance
Governance is improving in Africa, and some governments are following Dr. Signé’s prescriptions, though one must take into consideration that decades’ worth of bad habits won’t be cured overnight. When I visited 4 countries in Africa with the President’s Advisory Council on Doing Business in Africa in 2018, large company participants wondered why Cote d’Ivoire still exported raw materials rather than engage in value added activities in their country first. My answer was that businesspeople in the country (as in others that experienced colonial distortions of their economies) had figured out how to make money in a skewed system and must be convinced that any new way of operating will be at least as profitable as what they had been doing for so long. The same issue arose a couple of years ago when Nigeria hesitated before signing onto the AfCFTA. Nigerian businesspeople needed to see whether their current business practices meshed with this new regime or whether they could manage a shift and still make the same or more money.
The negative impacts of colonialism – the brain drain, corruption and crony capitalism – continue to strangle economic progress in some, but not all, Africa countries. As we proceed with the AfCFTA, one hopes that all African governments and their private sectors can find ways to overcome the impediments of the past to move forward into a more profitable and socially beneficial future.
Gregory Simpkins, a longtime specialist in African policy development, is the Principal of 21st Century Solutions. He consults with organizations on African policy issues generally, especially in relating to the U.S. Government. He also serves as Managing Director for the Morganthau Stirling consulting firm, where he oversees program development and implementation. He further acts as a consultant to the African Merchants Association, where he advises the Association in its efforts to stimulate an increase in trade between several hundred African Diaspora small and medium enterprises and their African partners.
