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(Ecofin Agency) – The whitepaper points out that the growing awareness of ecological urgency, the increasing digitization of industrial processes, and the establishment of the African Continental Free Trade Area offer Africa an unrivaled opportunity to embark on the path to sustainable industrialization.
After falling considerably behind in the global industrialization race, Africa can now industrialize its economy without copying other models, according to a white paper published on June 21, by the LSE’s research center Firoz Lalji Institute for Africa. According to the paper, the continent can do so by banking on the digitization of production methods, the deployment of green technologies, and the exploitation of the potential of the African Continental Free Trade Zone (Zlecaf).
Entitled “White paper on sustainable industrialization in Africa: The art of upgrading industrial policymaking itself,” the report begins by stating that industrialization represents the most proven route to high and sustainable living standards, broader tax bases, and diversified exports.
From the late 18th century onwards, the UK, France, Germany, and a host of other European countries began to industrialize their economies. The second wave of industrialization involved Japan and the United States, followed by other countries such as Singapore, South Korea, Thailand, and China.
The final group of emerging countries on the path to industrialization includes Malaysia, Indonesia, Vietnam, India, Brazil, Chile, and Costa Rica.
In most cases, industrial policy was active and intentional, rather than left to the invisible hands of supply and demand.
In Africa, however, the structural transformation of economies, which has in most cases resulted from a transfer of resources from the primary to the secondary and then to the tertiary sectors, tends to bypass the industrialization sequence.
So far, industrialization efforts on the continent are considered unsuccessful, even if the reality is more nuanced and complex. The industrial sector’s share of total employment on the continent fell to 11.8% in 2004 from 12.3% in 1991, before rising slightly to 13.6% by 2021.
The reality is also contrasted depending on sub-regions. In North Africa, industrial employment accounted for 26% of overall jobs in 2021, close to the threshold for industrial take-off. This is followed by Southern Africa (17%), West Africa (13%), Central Africa (11%), and East Africa (10%).
Africa should invent its model, not copy others
The whitepaper points out that the continent’s low industrialization can be explained among other things, by the adverse effects of structural adjustment plans (SAPs), which encouraged African countries to abandon the levers of industrial policy and allow liberalized markets to capitalize on their comparative advantages. This has favored the rise of capital-intensive mining and oil extraction over the development of labor-intensive manufacturing industries.
While industrialization remains one of the best answers to the urgent need to create 12 million jobs a year to absorb new entrants to the labor market, the continent will no longer be able to copy the models that have already proved successful, including that of Southeast Asia.
African countries now face greater competition in the manufacturing sector, on both international and domestic markets, than other countries did when they embarked on the road to industrialization.
On the other hand, global value chains are no longer the same as they were in the 20th century, as the rules of world trade have changed, moving towards more restrictions and regulations.
The paper does, however, point out that Africa has several advantages that will enable it to industrialize differently and more sustainably. The first of these is to take advantage of the global awareness of ecological urgency to adopt clean industrial production methods and green technologies. That way, it will capitalize on its abundant renewable energy resources and maximize the added value of the metals needed for the energy transition, such as copper, cobalt, and lithium.
The continent can also capitalize on the digitization of production processes to increase the value of all its raw materials, including oil, gas, wood, and agricultural products.
The development of regional value chains can also accelerate the industrial transformation of African countries. The African Continental Free Trade Area, which will establish a vast common market of 1.3 billion consumers, offers a unique opportunity to promote these regional value chains. Indeed, Africa is fast becoming the world’s leading consumer market, with its population set to rise from 1.2 billion presently to 2.5 billion in 2050.
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