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Increasing the Productivity of Africa’s Manufacturing Sector is the Key

increasingproductivityThere is a growing culture of IT-related startups and innovation hubs in many African countries. Silicon Savannah in Kenya and Silicon Cape and the Cape Innovation and Technology Initiative in South Africa are examples of this. Above all, the digitalization of the government sector has the potential not only to improve governance, but also to improve public participation in government and promote accountability from administrations. The use of Big Data would have a significant effect on decision making, especially in health, housing, urban planning and transport systems.

At the same time, by contrast with the growth models of the advanced nations and Asia, Africa faces a major contradiction in its economic development. This is the fact that there has been a structural transformation from agriculture to services without building the manufacturing sector. Most of the large numbers of workers moving into the cities from rural areas in the last 20 years have not gone into the manufacturing sector; they have mainly gone into services. There is no doubt that this trend has been propelled by ICT. In developing countries, manufacturing is the key for job creation and poverty reduction. The development of the manufacturing sector is also desirable in terms of reducing income disparities within individual nations.

Professor Dani Rodrik of Harvard University has pointed out that the financial sectors of African countries are integrated into global financial markets, but their manufacturing industries are not integrated into the supply chains of advanced nations. The added value per capita of Africa’s manufacturing sector overall is less than that of Asia or Latin America, and the sector produces only unsophisticated goods. As the continent’s manufacturing sector stands, it is not capable of joining global supply chains. In order to be incorporated in the production processes of advanced nations, it will be essential for Africa’s manufacturing sectors to supply high added value products. The advanced nations that manufacture high added value goods demand high added value products even when ordering parts.

What is required to overcome the current situation is solid and smart industrialization policies. Increased spending on research and development by governments would provide a tailwind. It will also be necessary to retrofit factories with new technologies and robotics, improving their systems to create smart factories. This can improve regional value chains and grow the small and medium enterprise market. Retraining of workers and skills development is also necessary. Without the establishment of a solid manufacturing sector, Africa will not be able to become an IT superpower like China.

Mr. Ashraf Patel is a Senior Research Associate at the Institute for Global Dialogue

The article was first published by the Nippon Institute for Research Advancement

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