This is the 13th post in a blog series to be published in 2023 by the APET Secretariat on behalf of the AU High-Level Panel on Emerging Technologies (APET) and the Calestous Juma Executive Dialogues (CJED)

The African Union Agenda 2063 recognises the significant role of a robust manufacturing sector in driving socio-economic growth and development in Africa. The emphasis on industrialisation has gained further momentum with the establishment of the African Continental Free Trade Area (AfCFTA), which aims to establish a unified market for goods and services across the continent, thereby, unlocking manufacturing potential and accelerating industrialisation to promote and fostering sustainable growth and employment opportunities in Africa.[1] Modern industries are enhancing both human and physical capital.  They provide relatively well-paying jobs, particularly for undereducated but skilled individuals who may not have had access to formal employment in the public sector. Employment in the private sector leads to increased household income, and subsequently, driving domestic demand. Moreover, the growth of industries generates extensive backward and forward linkages, creating numerous opportunities for suppliers, distributors, retailers, and business services, thereby fostering a dynamic economic ecosystem.

Agenda 2063 recognises industrialisation as a crucial driver for achieving sustainable development, competitiveness, recovery, resilience, and inclusive prosperity in Africa.[2] It seeks to transform Africa's economies from primarily relying on the export of raw materials to value-added production, manufacturing and services. Therefore, by developing a robust industrial sector, the African Union aims to support Member States to create jobs, enhance productivity, increase incomes, and reduce poverty across the continent. Industrialisation would enable African countries to move up the value chain and capture a larger share of the economic benefits associated with processing their natural resources. By processing raw materials within the African continent, higher value-added products can be generated, leading to increased export revenues, and reduced vulnerability to commodity price fluctuations.[3]

Furthermore, industrialisation can promote economic diversification, which is crucial for reducing dependence on a narrow range of commodities and building resilience to external shocks. By developing diverse industries, African countries can foster innovation, build local capacity, and create opportunities for entrepreneurship and small and medium-sized enterprises (SMEs). Unfortunately, Africa’s manufacturing sector lags significantly behind other regions worldwide, with the lowest output per capita, highlighting a substantial gap in industrial development.

Africa's contribution to global manufacturing stands at a mere 1.9%, placing it at the bottom of the global value chain. This disparity is evident in the trade imbalance, where manufactured goods constitute a substantial portion of imports, accounting for 62% of total imports.[4] In contrast, manufactured products make up only 18.5% of overall exports between 2018 and 2020. The disparity in manufacturing output and trade imbalances highlights the urgent need for Africa to prioritise industrialisation and enhance its manufacturing capabilities to create a more balanced and sustainable economic landscape.

The low level of industrialisation in Africa can be attributed to various factors, including unfavourable policies such as state-led import substitution, structural adjustment and investment climate reforms implemented by many African countries in the late 1980s and early 1990s.[5] These policies hindered the growth of the manufacturing sector and industrial development. Additionally, political instability and conflicts prevalent in several African countries have also discouraged investors from committing their resources to the continent, further impeding industrialisation efforts. African countries have also faced criticism for its overreliance on exporting raw materials and importing consumer goods and services, stifling the growth of the manufacturing sector and industries.

This dependency on raw materials has prevented the development of value-added products and hindered the establishment of a robust manufacturing base in African countries. Examples of specific countries affected by these challenges include Nigeria, which heavily relies on oil exports, and the Democratic Republic of Congo, where conflicts have hampered economic progress and industrialisation efforts.[6] Addressing these issues is crucial for promoting industrialisation and enabling sustainable economic growth across the continent.

The low level of industrialisation in Africa is evident in the continent's import-export dynamics. As of 2022, Africa's total imports reached a value of US$25 billion, surpassing the exported value of US$24 billion highlighting a trade imbalance where Africa leans towards being a net importer rather than an exporter.  This disparity underscores the continent's heavy reliance on imported goods and services. One contributing factor is the preference among many Africans for products manufactured outside the continent, to be of higher quality compared to locally produced African goods. This preference for imported products further exacerbates the trade imbalance and underscores the urgent need for Africa to strengthen its industrial base, enhance domestic manufacturing capabilities, and promote the consumption of goods made in Africa to reduce dependence on imports and achieve a more balanced trade landscape.[7]

The African Union High-Level Panel on Emerging Technologies (APET) urges African countries to embrace a bold agenda driven by private sector investments in industrial transformation to unlock their full potential. APET recognises that by prioritising domestic manufacturing and embarking on a process of industrialisation centred around commodities, Africa can effectively support inclusive economic transformation while leveraging its resources and capitalising on global shifts in production structures. Therefore, to fully utilise Africa's prospects for industrialisation, it is crucial to establish strong forward and backward linkages within domestic, regional, and global value chains. Additionally, adding value to both soft and hard commodities as well as domestic products should be emphasised to enhance Africa's industrial capabilities and competitiveness in the global market. By adopting these strategies, African countries can seize the opportunities presented by industrialisation, foster economic growth, and promote sustainable development across the continent.

A viable approach for accelerating industrialisation in Africa through the adoption of Import Substitution Industrialisation (ISI). ISI is an economic policy that aims to reduce imported goods, and eventually replace them with domestically produced alternatives, fostering self-sufficiency in the manufacturing sector and stimulating domestic production.[8] APET asserts that ISI can safeguard and nurture newly established domestic industries, thereby, enabling them to thrive and effectively compete with imported goods. By leveraging Africa's natural resources and talents, and expanding employment opportunities, ISI has the potential to bolster the development of the continent's secondary and tertiary sectors, contributing to economic growth.

By embracing ISI and addressing these key factors, African countries can foster industrial development, strengthen their economies, and promote self-reliance in manufacturing.[9] To successfully implement Import Substitution Industrialisation (ISI) in Africa and enable local African products to compete effectively with products from other continents, APET emphasises the critical role of harnessing new and emerging technologies in local manufacturing. Emerging technologies offer significant advantages, particularly in automating various time-consuming operations, making technology a valuable asset for businesses and industrialisation.

In the manufacturing sector, technology plays a vital role in ensuring quality and precision throughout the production process. By automating manufacturing processes, technologies address concerns of quality, allowing local products to match the standards of foreign products. This not only enhances the competitiveness of local industries but also promotes self-sufficiency and reduces dependence on imported goods.[10] By leveraging new and emerging technologies in manufacturing, Africa can enhance productivity, improve product quality, and establish a strong presence in both domestic and international markets, leading to sustainable industrial development and economic growth. Examples of such technological advancements can include the use of robotics, artificial intelligence, the Internet of Things (IoT), and data analytics to optimise production processes, enhance efficiency, and drive innovation within the manufacturing sector in Africa.

Several African countries have implemented Import Substitution Industrialisation (ISI) strategies to boost their local manufacturing sectors. These initiatives are encouraging citizens to prioritise the purchase of locally produced goods and services, thereby supporting domestic industries, and stimulating economic growth.[11] For example, in Malawi, the “Buy Malawi Strategy” was implemented to promote the consumption of locally made products. This strategy encourages citizens, businesses, and government entities to prioritise Malawian goods and services, fostering domestic manufacturing and job creation. On the other hand, in South Africa, the “Proudly South African” campaign is promoting the purchase of South African-made products, effectively boosting local industries, creates employment opportunities, and enhancing the competitiveness of domestic goods in the market.

Figure 1: Visuals from the Proudly South African campaign

In Kenya, the “Buy Kenya to Build Kenya Strategy” encourages consumers to prioritise Kenyan-made products and services.[12] This strategy supports local industries, increases job opportunities, and fosters economic development within the country. Similarly, in Nigeria, the “Buy Naija and Promote Naira Campaign” urges Nigerians to buy locally produced goods and support Nigerian businesses. The initiative is boosting the manufacturing sector, reducing dependence on imports, and strengthening the Nigerian currency.[13]APET recognises that these strategies not only encourage citizens to buy local products but also incentivise the manufacturing industries to adopt new technologies and processes to ensure their products can compete with foreign counterparts.

By promoting the consumption of locally made goods, these initiatives create a market demand that drives investment in the local manufacturing sector, fosters innovation, and improves the quality and competitiveness of domestic products. As such, APET highlights the importance of a mindset change among African citizens to embrace and support local products.[14] By initiating awareness campaigns and promoting the benefits of buying locally manufactured goods, governments can encourage a shift in consumer preferences and behaviours, leading to increased support for domestic industries and further stimulating industrialisation.

In conclusion, African countries have a crucial opportunity to attract capital and foster higher value-added, export-oriented manufacturing sectors, which are essential for industrialisation and economic growth. African countries must create a conducive environment for intra-African trade, facilitate the growth of domestic industries, and build strong and resilient economies. African countries should actively promote policies and strategies that support the consumption of African-made products, investment in domestic industries, and the overall development of a robust manufacturing sector.  To capitalise on this opportunity, it is recommended that African nations prioritise the domestication of the African Continental Free Trade Area (AfCFTA) agreement. This would enable Africa to strengthen its industrial base, reduce dependence on imports, and promote the growth of indigenous African industries. By doing so, African countries can unlock their full potential, drive sustainable industrialisation, and foster economic prosperity for their people.

 

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[1] https://www.brookings.edu/wp-content/uploads/2018/09/Manufacturing-and-Industrialization-in-Africa-Signe-20180921.pdf

[2] https://au.int/en/pressreleases/20221201/africa-must-industrialize.

[3] Mike Morris, Judith Fessehaie, The industrialisation challenge for Africa: Towards a commodities-based industrialisation path, Journal of African Trade, Volume 1, Issue 1, 2014, Pages 25-36, ISSN 2214-8515, https://doi.org/10.1016/j.joat.2014.10.001.

[4] https://www.afdb.org/en/the-high-5/industrialize-africa

[5] https://www.brookings.edu/blog/africa-in-focus/2014/11/20/africas-failure-to-industrialize-bad-luck-or-bad-policy/

[6] https://www.oecd.org/coronavirus/policy-responses/covid-19-and-africa-socio-economic-implications-and-policy-responses-96e1b282/.

[7] https://www.brookings.edu/wp-content/uploads/2018/12/africas-consumer-market-potential.pdf.

[8] https://www.ocorian.com/insight/how-import-substitution-transforming-african-manufacturing-industry

[9] https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Inclusive_Growth_-_An_imperative_for_African_Agriculture.pdf.

[10] Mohd Javaid, Abid Haleem, Ravi Pratap Singh, Rajiv Suman, Significance of Quality 4.0 towards comprehensive enhancement in manufacturing sector, Sensors International, Volume 2, 2021, 100109, ISSN 2666-3511, https://doi.org/10.1016/j.sintl.2021.100109.

[11] Aregbeshola R. Adewale, Import substitution industrialisation and economic growth – Evidence from the group of BRICS countries, Future Business Journal, Volume 3, Issue 2, 2017, Pages 138-158, ISSN 2314-7210, https://doi.org/10.1016/j.fbj.2017.06.001.

[12] https://www.tralac.org/documents/resources/by-country/kenya/576-buy-kenya-build-kenya-strategy-june-2017/file.html

[13] http://www.ebsujmc.com/uploads/490041_1527707777.pdf.

[14] https://www.unodc.org/documents/justice-and-prison-reform/18-02303_ebook.pdf