Industrialize Africa: Strategies, policies, institutions and financing

By Kayode Ogunwale


A new report released Friday by the African Development Bank (AfDB) calls for the industrialization of the continent with a focus on smart industrial policy, structural transformations and a move towards processing the continent’s raw materials into value added products.
The report, entitled “Industrialize Africa: Strategies, Policies, Institutions and Financing”, was published to coincide with Africa Industrialization Day on November 20. With contributions from 16 authors, including Nobel Laureate Joseph Stiglitz, and famous economists such as Justin Yifu Lin, Haroon Bhorat, Ravi Kanbur, John Page, AfDB Vice-President and Chief Economist Célestin Monga, and AfDB researchers Abebe Shimeles and Amadou Boly.
In his introductory remarks, Stiglitz discusses why industrialization remains relevant as Africa enters the 21st century. The report provides practical policy advice to African countries on various aspects of industrial policies; looks at the structural transformation needed to pursue labour-intensive manufacturing akin to East and Southeast Asia; reviews criteria for success in building clusters and Special Economic Zones and industrial parks in developing countries; and draws lessons learnt from Ethiopia’s industrial policies, as well as the cases of China and South Korea.
In the report’s foreword, the President of the African Development Bank Group, Akinwumi Adesina, noted that “Africa must quit being at the bottom of the global value chains and move to rapidly industrialize, with value addition to everything that it produces. Africa must work for itself, its people, not exporting wealth to others.”
Rather than follow the economic growth seen in Asia and elsewhere, over the past 30 years, Africa has suffered from stagnation and de-industrialization. The African Development Bank has put industrializing the continent at the top of its agenda. “Industrialize Africa” is one of the Bank’s “High 5” development priorities, which includes also “Light up and power Africa”, “Feed Africa”, “Integrate Africa” and “Improve the quality of life for the people of Africa”.
Stiglitz described the kind of structural transformation needed for Africa as one that is “moving towards a green economy, a learning society, and an innovation economy”. He added that “Innovation across the globe is largely focused on saving labour, which goes in exactly the wrong direction. We need to encourage innovation, which is focused on saving the planet and protecting the environment and less involved in saving labour.”
The UN General Assembly, in 1989, proclaimed November 20 “Africa Industrialization Day”. The day is intended to mobilize the commitment of the international community to the industrialization of the continent.
On the other hands, Nigeria as most populous country in Africa with arable land and man power has a big role to play in ensuring that Africa produce what it needs.
For Nigeria to play the role of most populous country in the continent, it must develop the industry sector of its economy.
Some of the factors dragging industrialization backward in Nigeria that government must tackle are: ease of doing business, infrastructures (power, roads, rail) interest rate and availability of foreign currency to procure needed machineries. All these bottleneck around industrialization in Nigeria must resolved so that the country can be able to provide for itself and other Africa countries.
Although, the current administration in Nigeria is tackling ease of doing business which industrialists believed that it has not been yielding positive result.
The Federal Government on May 18, endorsed and signed three Executive Orders expected to give boost to the Nigeria’s concept of ease of doing business.
Federal Government is of opinion that the development will increase patronage for locally manufactured goods and will also remove all bureaucratic bottlenecks that stifled growth of businesses in Nigeria.
The three executive orders touched on specific instructions on a number of policy issues. The issues include the promotion of transparency and efficiency in the business environment designed to facilitate the ease of doing business in the country; timely submission of annual budgetary estimates by all statutory and non-statutory agencies, including companies owned by the Federal Government; and support for local contents in public procurement by the Federal Government.
Given the trend in the global economy and recent developments in Nigeria, Vice President Yemi Osinbajo believe that now is the second-best time to industrialize the country, having lost the chance to do so some decades ago.
Prof. Osinbajo who spoke recently at the ground-breaking ceremony of the Benin Industrial Park said that the establishment of the industrial park was in line with the vision of President Muhammadu Buhari to make Nigeria self-reliant.
According to him, “the best time to industrialize Nigeria was sometime in the last few decades. The second-best time is now. For that reason, we must not allow the political will and the enthusiasm that has led us to this ground-breaking to flag at any point over the course of the next four years.”
He said the turnaround in the economy no excuse for complacency.
“This is the time to, more aggressively than ever before, push our reforms past the point of no return. It is the time to support and enable private enterprise to create the jobs and the prosperity we need.”
While pledging the support and efforts of the Federal Government for the completion and operationalization of the park and similar projects across the country, Prof. Osinbajo said, “Nigerian will be competing with other countries for the more than 80 million jobs in light manufacturing that China is forecast to shed over the next ten years.”
“Closely allied to this effort is the work we’re doing around physical infrastructure, especially transport connections and power.
“We’re upgrading and expanding the national electricity grid and the rail network, investing unprecedented sums of money in fixing our roads, and increasing capacity at our ports.
“Nigeria is also leading on a project that will open up a transport corridor between Lagos and Abidjan.
“These projects and initiatives are all inter-connected – more abundant power supply and more efficient transport connections will no doubt bring down the cost of the goods that will emerge from Industrial Parks like this one,’’ the Vice President added.
Though, the World Bank recently ranked Nigeria among top 10 most reformed economies which some experts condemned.
The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr Godwin Eohoi faulted the World Bank’s report which shows that Nigeria’s business environment is improving.
Eohoi, in a telephone interview with the News Agency of Nigeria on Thursday in Abuja, said that the report was insignificant until the hardship currently felt by Nigerians eased.
The World Bank recently released the Ease of Doing Business report titled, “Doing Business 2018: Reforming to create jobs”.
The report indicated that Nigeria had moved up by 24 points from 169th position on the 2017 ranking to 145th position out of 190 countries in the World Bank’s 2018 report.
The World Bank said that Nigeria had improved immensely in the area of getting credit, starting a business, dealing with construction permits and paying taxes.
“World Bank knows what they are seeing to score Nigeria that high, but the reality is that it’s still difficult doing business in Nigeria even for Nigerians.
“The truth is that the business environment is still very hard for Nigerian businesses. Accessing facilities at a reasonable rate is unheard of in this country.
“Interest rate is still very high. If we can reduce interest rate then we can say that the condition of doing business is now getting better.
“Interest rate in developed countries is about two per cent. But ours is over 24 per cent. These are part of the challenges of doing business in Nigeria,’’ he said.
Tracing some of the reforms that Nigeria had carried out to have gained such recommendation by the Bank, Eohoi said that some of them still needed improvement.
He cited an example of the online registration of companies at the Corporate Affairs Commission. He said the system was flawed and most times, the portal was congested, inaccessible, thereby frustrating.
Eohoi urged the government to redouble efforts in addressing insecurity issues, especially the reoccurring cases of kidnapping to make the country more attractive to investors.
“Yes the fact is that this report will attract more foreign direct investments.
“I pray that when they come, they will see the country in the light that World Bank had given the report so that they will not be disappointed,’’ he said.
Another expert, Mr Donald Ideh, a Public Policy Analyst, commended Vice President Osinbajo for making it possible for Nigeria to make such improvements in a short time.
He recalled that for many years, Nigeria had been in the bottom 20 of the World Bank’s ranking and in a year, the country had moved up to become one of the top 10 improved countries in the world.
“It is a great achievement. A lot of hard work went into it.
“A lot of it had to with the measures taken by the VP when he was acting President. He was able to use the Executive Order to fast track some of these measures and avoid the usual bottlenecks.
“The improvement obviously creates a positive perception of Nigeria, therefore likely to reap rewards for us in the near future.
“However there is a lot more that can be done, especially in relation to our tax to GDP ratio and increasing tax revenue.
“Government should also work further to improve and expand the revenue base. All the revenue is still going into recurrent and debt servicing rather than capital project,’’ he said.
To improve the local business climate, Ideh advised the government to ensure that other components of the Petroleum Industry Bill were passed and implemented.
He also advised government to take advantage of the rising crude oil prices at the international market to make wise investments for the future generation.