MSINGATHI SIPUKA | Africa must use its G20 seat to elevate structural impediments to its own development

For several decades, African leaders have appreciated the transformative power of industrial development, with a particular focus on expanding the manufacturing sector.

This is evidenced in contemporary continental frameworks like Agenda 2063 and Accelerated Industrial Development for Africa. The appreciation that industrialisation holds potential for the continent goes back to the Lagos Plan of Action, which defined the development pathways for the continent's economic liberation from 1980-2000.

The plan of action made bold pronouncements on the industrialisation question in Africa. For example, the plan propagated that a response to the development challenges of integration and modernisation in Africa required the continent to increase its share of world industrial production drastically.

By all accounts, the continent's performance in terms of industrialisation has not matched its bold ambition.

Various data sources measuring key indicators of industrial development in Africa present a clear picture of where we stand since the 1980s to date. For example, Africa's manufacturing sector contributes roughly between 10 to 11% to its GDP, remaining relatively the same as it was in 1970. 

This is compared to a manufacturing contribution to GDP that peaked at 25% in some developing regions within Asia over the same period. Similarly, indicative data places Africa's share of global manufacturing at a negligible 1 or 2%, compared to estimates that go up to 50% for Asia – effectively making the Asian region the world's manufacturing hub.

Employment in manufacturing follows the same trend. It is all good and well to see the picture so clearly painted by the data. But it is another thing to understand the drivers behind these trends. From an African perspective, the matter of real interest is understanding the limits to Africa's industrialisation efforts, especially considering our deep political desire to transform the structural makeup of our continent. 

Past efforts have led us to a number of reasons that can be broadly clustered into culture, innovation and technology, productivity, human capital, strategic coordination capabilities of public institutions, appropriate policy framework and various other issues.

The argument to be made here is that these seemingly difficult technical constraints are secondary to addressing the industrialisation process in Africa. Instead, it is more political economy issues that sit outside of the realm of direct control of African states that define the winners and losers in the global industrialisation process. 

In considering the failure of Africa to move the needle on this subject, it is interesting to consider it through the prism of special economic zones (SEZs). While appreciating that this instrument predates its application within the Asian development experience, it is hard to deny that it is in Asia that they gained the most prominence as important drivers of manufacturing sector development and industrialisation.

In the case of China, where the SEZs were introduced in the 1980s, the World Bank cites that since then, they have contributed 22% of China’s GDP, 45% of total national foreign direct investment, 60% of exports, created more than 30-million jobs, increased and accelerated in the process, and have catalysed the industrialisation process.

Meanwhile, in Africa, the same instrument has failed to make a dent in continental industrial development, with relatively modest investments attracted and even lower labour absorption.

The birth of the first generation of Asian SEZs coincided with a shift away from low-value into higher-value manufacturing in western economies.

This effectively meant that western economies needed to find new geographies to undertake what was considered low-value manufacturing activities while they moved up the complexity ladder in terms of the goods they produced, a process referred to as industrial structure upgrading.  

The beneficiary of the transition that occurred in western economies from roughly the 1970s was the Asian region. Driven to a large degree by the SEZs, a second generation of Asian industrialisers was born mainly in China and East Asia. The demographics and politics of the region, such as abundant and cheap labour, were compatible with the needs of western capital in terms of finding a new home for their low-value manufacturing activities.

If Africa is going to buck the trend and intensify its industrialisation efforts, it has to realise that it is doing so within this broader global context of an almost predefined structure of global production.

It is within this context that Africa has to use its seat in the G20 to elevate the structural impediments to its own development, not least the global division of labour that presents limitations to its industrialisation.

Until then, we are likely to invest in establishing our SEZs without ever seeing the returns that will see them become the hubs of manufacturing we all desire. 

Dr Sipuka is chief of staff at the African Union Development Agency – NEPAD. He writes in his personal capacity