This document summarizes an academic seminar on industrialization in Africa. It finds that while socioeconomic progress has been better than expected, growth has been uneven and fragility remains. Key questions around sustaining growth, transforming economies, and reducing reliance on commodities were discussed. Data shows improvements in African GDP, trade, and financing over time but variability between countries. Structural change moving labor to lower productivity sectors slowed growth. Learning to Compete research examines drivers of productivity across African and Asian countries. The African Development Bank's industrial strategy aims to scale up transformation through regional integration and financing. Cautious optimism remains dependent on comprehensive reforms, skills and infrastructure development, and export promotion.

1. AERC Senior Policy Seminar XIX
in partnership with AfDB and UNU-WIDER
Abidjan, Côte d’Ivoire, 13-14 March 2017
Finn Tarp
Industrialization in Africa:
Setting the Stage & Overview

2. Introduction

3. Setting the Stage
• The Economist (11 May 2000): Hopeless Africa
• The Independent (15 July 2009): Africa – the lost continent
• The Economist (3 December 2011): The hopeful continent – Africa
rising
• Some question the growth revival referring to poor data
– Careful analysis paints a different (more complex) picture

4. GROWTH AND POVERTY PROJECT (GAPP)
Freely downloadable: see
https://www.wider.unu.edu/

5. Key Findings
• Socio-economic progress in Sub-Saharan Africa has been markedly better
than almost anyone expected 25 years ago
• Progress has not been even; the development process has without exception
been highly non-linear; and the fragility of the gains is evident
So attitudes in and outside Africa towards the continent’s development
potential have changed
At the same time, a series of pressing policy questions present themselves (at
both global and national levels) including:
– How to keep up the aggregate growth performance
– How to transform economic structures
– How to diminish the reliance on primary commodities

6. Macro-economic Trends

7. The African Growth Turn-Around

8. GDP per Capita (real USD2010)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
South Asia Sub-Saharan Africa (developing only) Latin America & Caribbean (developing only) East Asia & Pacific (developing only) Middle East & North Africa (developing only)

9. Substantial Variability: 16 GAPP Country Cases
Important note: The regional powerhouses of Kenya, Nigeria,
and South Africa not among the better performers in terms of
growth or poverty reduction

10. And Something is Happening to GDP Growth/Capita
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Percent
Emerging and developing Asia Latin America and the Caribbean Middle East and North Africa Sub-Saharan Africa Source: IMF WEO

11. In Trade
Source: UNCTAD
-250
-200
-150
-100
-50
0
50
100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
BillionUSD
Africa Total Eastern Africa Middle Africa Northern Africa Southern Africa Western Africa Sub-Sarahan Africa Total

12. And to Net Financial Inflows
-1
0
1
2
3
4
5
6
7
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
PercentogGDP
FDI Portfolio flows Personal remittances Net official aid
Source: WB WDI, and authors
calculations

13. Structural Dimensions

14. The Potential for Structural Change
• In countries at low levels of income
productivity differences between
sectors are large
– The movement of resources from low
productivity to high productivity
employment can help drive growth
– As incomes rise, productivity
differences among sectors (and
enterprises) tend to converge
• Africa has the greatest differences
in productivity among sectors, and
therefore the greatest potential for
structural change

15. Going Up the Down Escalator
• In Africa structural change has
been going in the wrong
direction until recently
• An increasing share of the labour
force in lower productivity
sectors
• “Growth reducing” structural
change has slowed overall
aggregate growth

16. Aggregate Growth Has Occurred with De-
industrialization
• Africa’s share of manufacturing in
GDP is less than half of the
average for all developing
countries
• Per capita manufactured exports
are about 10 per cent of the
developing country average
• The share of SSA of global
manufacturing is smaller today
than in the late 1980s

17. Low Penetration of International Markets
• Africa marginal
– Even less excluding
South Africa
• Asia – 23% in 1990 to
33% in 2012
• Low survival rates in
export markets
Source: WTO

18. Internet Access: Growing in Africa, but...

19. Africa Continues to Lag in Educational Attainment

20. Putting Structural Transformation
and Industrialization Back on the
Development Agenda

21. Learning to Compete (L2C):
A collaborative research programme
between the AfDB, the Brookings
Institution, and UNU-WIDER together
with the AERC network of researchers

22. Partners
www1.wider.unu.edu/L2Cconf

23. Trying to answer a simple question:
– Why is there so little industry in Africa?
Lead to other questions such as:
– Does it matter?
– Is it realistic for Africa to break into global markets?
– What makes firms more competitive?
– What makes countries more attractive to competitive firms?
– What are the policy options available to further
industrialization in Africa?
Key Questions

24. The L2C Country Comparative Framework
• Eleven Countries
– Nine African: Ethiopia, Ghana,
Kenya, Mozambique, Nigeria,
Senegal, Tanzania, Tunisia and
Uganda
– Two Asian: Vietnam, Cambodia
• Three Track Approach
– Detailed case studies of
industrialization and the evolution of
public policies
– Econometric analysis of the stock of
firm level surveys
– Qualitative surveys of FDI firms and
linked domestic firms

25. Drivers of Productivity
1. The “basics” (“investment climate”)
– Infrastructure, technology and skills
– Institutions and regulation
2. Exports, productivity and competition
– Firms in low income countries increase their productivity by exporting – they learn by exporting
– Competition increases productivity through entry and exit
3. Firm capabilities
– The tacit knowledge and working practices that affect both productivity and quality
– Capabilities can spill over to other firms through supply chain links
4. Agglomerations and Special Economic Zones
– Industrial clusters confer significant productivity gains
– But virtually everything we know about agglomeration economies comes from middle and high
income countries

26. Learning to Compete: L2C
Freely downloadable: see
https://www.wider.unu.edu/

27. African Development Bank (AfDB)

28. Improve quality of life for
the people of Africa
Industrialise
Africa
Integrate
Africa
Feed
Africa
Light up and
power Africa
The High Five

29. AfDB’s Industrial Strategy
• Approved 16 July 2016: https://www.afdb.org/en/news-and-events/board-
approves-afdb-groups-industrialisation-strategy-for-africa-2016-2025-15981/
• Represents a roadmap for implementing priority programmes to scale–up the
industrial transformation of Africa
• Addresses key issues such as:
– Why we need to industrialize Africa
– What it will take
– How the AfDB will help
• Points to five enablers: (i) Supportive policy, legislation and institutions; (ii)
Conducive economic environment and infrastructure; (iii) Access to capital; (iv)
Access to markets; and (v) Competitive talents, capabilities, and entrepreneurship

30. Two Critical Dimensions
• Regional industrialization
– Regional integration is a critical priority for supporting industrialization in Africa
– How to address the major political economy issues?
• Financing industrial development
– Significant investment resources are required (AfDB industrial strategy makes
reference to crowding-in third party resources to the tune of USD 35 to 56 billion
over the next decade)
– Lessons from other regions

31. Conclusion

32. Reasons for Cautious Optimism
• Africa has a chance to break into the global market for industrial
goods:
– Changes in Asia; trade in tasks; industries without smokestacks (IWSS)
– But business as usual will not deliver desired for results
– Comprehensive infrastructure development, skills upgrading, and a
major export push are all essential
• And throughout focus must be on industries that add value, including both
processing of agricultural commodities and manufacturing more broadly

33. But How to?
• Reform the Investment Climate Agenda
• Mount an “Export Push”
• Build Firm Capabilities
• Create Clusters
=>Policy Round Table

34. Three Big Elephants in the Room
• Trump
• Brexit
• Commodity prices

35. If Africa and African policymakers do not take
charge of the destiny of the Continent and its
People
– Someone else will….