Africa is endowed with a vast wealth of natural resources, ranging from precious stones such as gold and diamonds to fossil fuels, and has 40 percent of the world's gold and up to 90 percent of its chromium and platinum. The largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. It holds 65 percent of the world's arable land and 10 percent of the planet's internal renewable fresh water source. In addition to its natural endowments, Africa has the youngest population in the world; around 60 percent of the continent’s population is currently below 25 years of age. With a population of about 1.3 billion people, the continent is one of the world’s largest free trade markets in the context of the new implemented African Continental Free Trade Area (AfCFTA) framework.
Although, African industry is underperforming in terms of quality employment creation and total factors productivity. The African continent has not advanced to satisfactory industrialization levels. To reverse this situation, the attainment of inclusive and sustainable industrialization and economic diversification in Africa is a priority item on the development agenda. Africa’s drive for industrialization will benefit from an innovative policy mix that combines the focus on traditional manufacturing with a forward-looking focus on new and emerging high-sophisticated opportunities. This will yield certainly significant economic progress across Africa, particularly with the new Africa Industrial Revolution Strategy (AIRS) framework associated with the fully integrated African market under the AfCFTA.
Despite historical policy limitations, Africa now has another chance. Some attributes of the regional economy as well as global conditions present the continent with new frontier opportunities to industrialize, several of which transcend the scope of manufacturing. Appropriating these opportunities requires certain framework conditions which are necessary to overcome major weaknesses and plug deficits in critical parts of the economy that drive structural transformation and economic diversification. Industrial policy in Africa should no longer look like business as usual. There is an urgent need to take bold action and implement disruptive and evidence-based policies along three broad lines, among others, that surmise the framework conditions: active promotion of industrial exports, promotion of industrial agglomeration, and an aggressive move towards industrial financing.
For this to happen, African governments need to be entrepreneurial, being willing to experiment, build capacity and invest. So, what exactly should industrial policy in Africa now look like? There are two sets of prescriptions: policies at the country level and policies that require supranational coordination. At the country-level policies are needed to improve the business climate; support the act of exporting added-value goods and services; and support upgrading of firms. At the regional and continental level, there is a need for a clear policy learning mechanism; coordinated trade and industrial policies; common markets and free trade areas where missing; stronger integration; and coordination of regulations on trade and ancillary services across countries.
As the African Union convenes the Summit on Industrialization and Economic Diversification, emphasis is on a shift to a revolutionary and innovative industrialization strategy that should reflect on the lessons learned and accelerates the achievement of structural transformation by speeding up production capabilities, the rate of innovation and increasing welfare gains. A wider range of economic sectors, including tradable services and digital technologies offer opportunities for increased economic growth, innovation, and employment and wealth creation. These sectors present opportunities for Africa to integrate within itself and into global production value chains. Given their relatively lower entry barriers, these sectors are also attractive to Africa’s teeming youth population and therefore offer a means to reaping the continent’s demographic dividends.
Five action-oriented solutions under the new Africa Industrial Revolution Strategy (AIRS) that will address policy-related blunders that have hindered Africa’s industrialization efforts.
The convening of the African Union Extraordinary Summit on Industrialization and Economic Diversification, will seek action-oriented solutions that will ensure that;
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Disruptive approach for the Industrial Development Policy Design in the new era of Africa Industrial Revolution that should be evidence-based and customized to the domestic and regional context with due considerations of the African economic realities in a case by case, while avoiding duplicating (copy/paste) successive policies from other regions of the world.
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Enhancing actions towards clear and coherent implementation and financing plans for continental and national-level strategies. This includes favourable public budgetary allocation to industrialization; capacity to mobilize resources including taxes; adequate continental industrial development funds; leveraging on remittances; higher investment flows into quality productive sectors; and innovative infrastructural financing.
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Gaps that have hindered Africa from accumulating wealth during the continent’s commodity boom are sealed: African countries lost an opportunity to accumulate funds towards long-term development despite the discovery of oil and numerous other raw minerals. There demonstrates the urgency for the domestication of bold and results-based industrial development policies.
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There is strengthened capacity for industrial policy: Better coordinated policies across countries, for instance, Africa industrial policy should be treated collaboratively with other relevant policies such as those related to trade, infrastructure and education. The many years of emphasis on structural reforms and the doing business reforms that followed weakened the capacity for effective industrial policies in most African states.
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Strengthening intra-African trade: Trade within Africa, the world’s second largest continent is of critical importance. Strengthening intra-African trade for better integration into the international trade helps deeper integration of the African industrial Ecosystems with foreign exchange returns from high added-value export, among others.
For more details about the African Union Extraordinary Summit on Industrialization and Economic Diversification, visit - https://au.int/en/summit-africa-industrialization-economic
For further information, please contact:
Doreen Apollos | Information and Communication Directorate | African Union Commission | Tel: +251 115 517 700 | E-mail: ApollosD@africa-union.org l | Addis Ababa, Ethiopia.
