What does sustainable industrialisation look like in Africa?

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According to the UN General Assembly we are in the Third Industrial Development Decade for Africa (IDDA III). But Africa’s share of global manufacturing is smaller now than it was in 1980. Unlike the Asian Tigers, Africa’s economic growth has not been based on industrialisation. Future growth, however, may need to be if it is to be sustainable and create employment opportunities for a booming population.

A recent study by the UN’s Economic Commission for Africa shows that when African countries trade with themselves they exchange more manufactured and processed goods. In 2014 manufactured goods made up a mere 14.8% of exports leaving the continent compared 41.9% of regional exports. It is no wonder then that the Kenyan FMCG giant, Bidco Africa’s, strategy has been to ‘grab, grow and sustain market share in African markets’. An approach that has earned the company a place on BCG’s list of 75 African companies pioneering regional integration.   

But, as Bidco’s Chairman, Vimal Shah, has emphasised logistics remain a major challenge. With sixteen different free trade zones compared to Europe’s four and North America’s one, Africa is a particularly fragmented market. Industrialisation is not an automatic nor a ‘one size fits all’ process. The Director General of the United Nations Industrial Development Organisation, Li Yong, has pointed to the development of infrastructure and logistical frameworks alongside economic integration as the keys to sustainable industrialisation in Africa.

The continent is moving in the right direction with the African Continental Free Trade Agreement reaching the 22 signatories needed for ratification this week. This move towards regional integration has been underway for some time and Bidco’s expansion has relied on the Common Market for Eastern and Southern Africa (COMESA), which gives it access to markets stretching from Tunisia to Zimbabwe. Investment in infrastructure is on the rise with governments and Development Finance Institutions committing capital to major projects. Ethiopia’s commitment to building $2.5 billion railway line connecting Addis Abba and Djibouti and DEG’s $85 million investment in Mubadale Infrastructure Partners this month are testament to this.  

This is not the first time that industrialisation has been hailed as the key to unlocking Africa’s potential and many challenges remain. But, if the private sector’s desire to expand through regional trade can align with the political will to facilitate economic integration, this could be a key moment in Africa’s industrial development story.

Franziska Hollmann from DEG will be at The Annual Debate 2019 to bring to discuss investment and trade opportunities in Africa.