New UNIDO Report Highlights Africa’s Industrialization Progress, Though Insufficient

By Danilo Desiderio

Despite significant strides in infrastructure development, energy efficiency, and resource utilization, Africa’s industrialization remains insufficient to meet the continent’s growing needs, according to the latest United Nations Industrial Development Organization (UNIDO) Industrial Development Report 2024. Released on March 26 2025 in Johannesburg, South Africa , during a joint event titled ‘The Future of Industrial Development in Africa‘, the report paints a sobering picture: the pace of economic transformation is sluggish, participation in global value chains remains weak, and employment conditions are deteriorating.

This is deeply concerning. The UNCTAD Trade and Development Report 2024 had already highlighted that Africa’s industrialization has been proceeding at an alarmingly slow rate. Between 1981 and 2023 , manufacturing as a percentage of Gross Domestic Product (GDP) in sub-Saharan Africa plummeted from 18 percent to just 11 percent, signaling a clear trend of industrial decline.

Moreover, the report estimates that the number of formal wage jobs created annually – approximately 3 million – is only one-third of the current demand for employment. This gap is expected to widen over the next decade due to rapid demographic growth, leaving nearly one-fourth of the demand unmet.

As a result, the majority of Africans remain trapped in the informal economy, exacerbating poverty and inequality. Coupled with rising inflation, this unemployment crisis poses a serious risk of political instability if not urgently addressed by African governments.

Persistent Bottlenecks: Energy Access and Infrastructure

One of the most pressing barriers to Africa’s industrialization, as underscored by the UNIDO report, is the lack of access to energy and adequate infrastructure, particularly in Least Developed Countries (LDCs). Industrialization in these nations is progressing far more slowly compared to LDCs in regions like the Asia-Pacific.

While many developing countries are nearing universal energy access, only 58 percent of Africans have access to electricity – a stark disparity that hinders progress.

History shows that transport, electricity, and telecommunications are critical catalysts for deep and lasting economic transformation, enabling a shift from low-productivity activities to high-productivity ones. For instance, sectors like horticulture – which includes fruits, vegetables, and flowers – require specialized infrastructure such as temperature-controlled storage and cold-chain logistics along transport corridors and at key hubs.

Without these facilities, post-harvest losses proliferate, leading to both economic losses and food waste. Quality infrastructure, the report emphasizes, is a prerequisite for effective industrial policy – and in this regard, much work remains to be done across the continent.

A Glimmer of Hope: The AfCFTA Opportunity

Amid these challenges, there is immense potential for transformative growth. A pivotal opportunity lies in the African Continental Free Trade Area (AfCFTA) , which could help offset Africa’s weak integration into the global economy by fostering regional and continental value chains.

By enhancing access to continental markets, the AfCFTA enables businesses to leverage the dynamics of regional division of labor, allocating specific stages of production to territories with competitive or cost advantages. This strategic allocation can maximize value creation and drive industrial growth.

AfCFTA offers a unique chance for Africa to harness economies of scale, advance industrial digitalization, and climb the technology ladder. At full implementation, the free movement of goods, services, labor, and capital is expected to boost intra-African trade volumes and establish a common market capable of addressing many industrialization barriers faced by African nations.

Furthermore, the AfCFTA has the potential to stimulate domestic demand, attract foreign direct investment (FDI), and catalyze investments in modern sectors – potentially reshaping the continent’s industrial landscape. However, a 2024 report by the Overseas Development Institute (ODI) , in collaboration with the AfCFTA Secretariat , SOAS – University of London , and SITA (Supporting Investment and Trade in Africa), reveals that despite a recent uptick in FDI, particularly intra-African investments, job creation has been minimal.

Unlike extra-African investors, who often prioritize extractive industries such as oil, gas, and renewable energy, African investors tend to focus on services like communications, finance, business, and tourism. The problem? These sectors generate fewer jobs compared to manufacturing and industry.

Meanwhile, agriculture – a sector with vast untapped potential – remains largely at a subsistence level in many African countries, rarely evolving into intensive production.

Unlocking the Potential of Regional Integration

The AfCFTA offers a unique chance for Africa to harness economies of scale, advance industrial digitalization, and climb the technology ladder. At full implementation, the free movement of goods, services, labor, and capital is expected to boost intra-African trade volumes and establish a common market capable of addressing many industrialization barriers faced by African nations.

According to UNIDO, regional integration through the AfCFTA is not merely about dismantling trade barriers—it also involves strengthening industrial capabilities to improve the quantity, quality, and share of goods produced. Regional value chains can serve as vital conduits for industrialization and growth, potentially acting as a springboard for greater participation in global value chains.

By encouraging specialization in areas of industrial competitiveness, the AfCFTA can create new markets and products with higher value-added content.

However, realizing these opportunities hinges not only on attracting foreign and domestic investments but also on Africa’s ability to enhance the skills and productivity of its workforce through targeted education programs. As UNIDO warns, the success of the AfCFTA depends on aligning political will with concrete action.

Progress So Far: A Positive Start

Implementation of the AfCFTA has shown promising signs thus far. Trade in goods has commenced under the Guided Trade Initiative, and key sectors such as automotive, pharmaceuticals, transport and logistics, and agri-business have been prioritized for industrialization within the AfCFTA framework.

There is also growing anticipation that Special Economic Zones (SEZs) will play a pivotal role in member states’ future industrialization strategies.

To date, African governments have demonstrated strong political commitment to the agreement. Yet, as UNIDO and other experts emphasize, it is time to transition from political will to tangible action.

The stakes are high, but so too is the potential for transformative change. If effectively implemented, the AfCFTA could become a cornerstone of Africa’s industrial renaissance, driving sustainable growth, creating jobs, and fostering prosperity across the continent.

The road ahead is challenging, but with coordinated efforts and strategic investments, Africa can overcome its industrialization hurdles and seize the opportunities that lie within its grasp.

Danilo Desiderio serves as the CEO of Desiderio Consultants Ltd in Nairobi, Kenya, specializing in African customs, trade, and transport policies. He is a customs and trade expert at the World Bank and a senior associate to the Horn Economic and Social Policy Institute (HESPI).