Webinar held on 6th May 2021
Author: Josephat Okemwa
Background to the webinar
Covid-19 pandemic has been devastating from human, social and economic perspectives. As such, there is need for Africa to learn from this to build back. The pandemic’s impact on African economies and people has exposed past structural weaknesses but also revealed new ones. There is need to transform commodities into higher value and more complex products by adding value to leverage regional and continental markets is crucial for Africa. Adding value to primary products and manufacturing goods to trade amongst ourselves on the back of the African Continental Free Trade Area (AfCFTA) within a market of 1.3 billion people is critical for building back boldly and better. The question therefore is no longer: ‘why Africa must industrialize’, but rather how can Africa industrialize on an expedited basis. What are we expected to do individually and collectively to achieve this? What is expected from governments? What should the private sector invest in? What are the roles of regional and international DFIs? What needs to change for Africa to industrialize? How do we industrialize within this global competitive environment if we are not competitive immediately or for a while on an import parity basis? The webinar aimed to explore answers to these pertinent questions.
The webinar was 2021 co-organized by AfricaLics and Globelics and attracted 150 participants from within and outside Africa. Where’s GLOBELICS stands for Global network on the Economics of Learning Innovation and Competence Building Systems. It is a worldwide research network which was initiated around the year 2000 by scholars from innovation studies, evolutionary Economists and other social scientists with a focus on how innovation and competence building may contribute to economic, sustainable and inclusive development. AfricaLics stands for African Network for Economics of Learning, Innovation, and Competence Building Systems. AfricaLics brings together scholars, researchers and policy analysts who study development, innovation, learning and competence building in an African context.
The webinar was designed to be interactive and engaging such that the participants freely expressed opinion about the topic of discussion. This was achieved through plenary presentations, as well as the use of chat box.
The main speaker was Prof. Banji Oyelaran-0yeyinka. Other speakers were Prof. K.J. Joseph and Prof. Erika Kraemer-Mbula as the moderator.
Introduction
Industrial manufacturing capacity basis for innovation
Manufacturing is the production of goods through the use of labour, machines, tools and chemical or biological processing or formulation. It is the heart of the secondary sector of the economy and many countries have become dynamic innovators. To become a strong innovator, you must have a strong industrial capacity. In this regard, there are 4 components for emphasis:
- Manufacturing capacity=Infrastructure capacity: Without industrial capacity/or manufacturing capacity, most countries are unable to make their own or develop their own infrastructure which is important to innovation and industrialization.
- Manufacturing capacity =Transformation of Agriculture: Many countries still remain primitive in their practices and approach. As such, they need to transform from subsistence agriculture -where many countries are trapped and develop their manufacturing capacity.
- Manufacturing capacity =Generates Technological innovations: A strong industrial manufacturing capacity generates technological innovation. First you need to have strong industrial capacity to learn to produce, to learn to maintain and to learn to innovate both minor and major innovations.
- Manufacturing capacity =Transformation services sector: Countries need to have capacity to transform services and without it, many countries in Africa’s service sector remains below productivity services.
Gains in the productivity of industrial Agriculture in the 20th Century were but on five innovations. Some of the very important innovations were available before 1900 century and they include: Irrigation -which goes back to several thousand years; Chemical fertilizer which was based upon the work of a German chemist in 1847; Plant breeding-from Gregor Mendel’s discovery of the principles of genetics in the 1860s; Short strawed wheats and rice -from Japanese dwarfing cereals in the 1880s; and Hybrid corns- from development in 1917 at the university of Connecticut. It is important to note that 100 years ago, there were products of industrial societies that gained capacities to innovate. Many developed countries have gained industrial capacity by manufacturing. For instance, in 2019, Netherlands, a country of 17 million people with very small land mass exported food products worth 95 billion euros. Africa has 60% of the total arable land in the world yet it can’t feed its people. In 2018 Africa imported food close to US$ 60 billion. Without gaining industrial capacity by which you innovate, poverty will remain a big problem. Most innovative economies in the world are also the most advanced industrial countries. There is synergy between developing a capacity to industrialize first and then to innovate. Whether you innovate at micro or major level, you must develop industrial capacity. Covid-19 has exposed many African countries in thatmost Africans are in the last end of the queue to global supply chains-where they have money but can’t buy. For instance, the point of becoming sufficient in food, chemicals is a point that Covid-19 has exposed Africans, as such, the continent should modernize its economy by adding value to their products.
Many countries that have industrialized have witnessed structural transformations in their economies through continued Innovation. Structural transformations is the movement labour from low productive activities to higher productive activities that is from agriculture, manufacturing and to services. These can be done through: Economic diversification which is a shift from one-to-many sectors; product diversification which entails production of new innovative products; and market diversification -new markets for new or same products. Another indication of development and industrialization is that as the share of agriculture in employment continues to decline in Gross Domestic Product (GDP), nations innovate and build industrial capacity. Most countries have made huge progress to build industrial capacity including China and South Korea. Those countries that made progress in 1970s made use of less people to till the land and more surplus labour moving to industry. when you industrialize, the manufacturing share of employment rises. In the poor countries like Zambia, DRC, Nigeria, their economy depended of export of oil and raw materials and minerals. Countries that have succeeded, their manufacturing contribution to GDP is between 25% to 30% where’s poor countries are less than 10%. India has made a huge progress with manufacturing contribution at 19%. Many African countries’ contribution today are services i.e making basic stuffs such as transportation, low level logistics and this is not the kind of services we need to see say 2040.
They are three industrialization trajectories, first those countries that managed to move labour successfully from agriculture to manufacturing to services. Agriculture went down, manufacturing went up leading to innovative productive products across sectors. These countries are referred to as successful industrializers. Secondly, they are those that have managed to move labour for some time and then got stuck, they are called stalled industrializers. Thirdly, they are those countries that moved labour backwards from industry to agriculture because of commodity demand-premature deindustrializes such as South Africa and Nigeria. With Cocid-19, these countries are in debt trap. They are called premature deindustrializes. Those countries that have experienced in-stalled and premature industrializers have low technological progress and depend on commodity trade. When a country relies on commodity dependence lack progress since large majority of its people are stuck on agriculture and mining. Some of these countries include Botswana, Zambia and Nigeria. Studies done by AfDB on natural capital of Africa show that, a country like Democratic Republic of Congo for example, the natural capita according to conservative estimates is about $24 trillion dollars. These minerals are under the ground and are subject to conflict and are termed as conflict minerals. Despite these minerals being extracted from African and used in electrical cars like lithium battery, iPhone, etc, the percentage value gained by these countries are less 5% and most of the value goes to those countries that add value to this mineral.
What can Africa do?
1. Diversification of economies
Leaders or countries should diversifiy their economies including: Economic diversification which is shiftng from a single income e.g., oil and minerals; product diversification which is moving to new innovative products; market diversification which is creation of new markets for new or same products. Diversification increases a country’s ability to meet goals of job creation and improvements in income distribution.
2. Moving away from static to dynamic comparative advantages
African should move away from static to dynamic comparative advantages since they do not lack ideas. States need to formulate a long-term vision and goal and pursue it. They should focus on capital formation, create market and prioritize technological advance as it helps in building linkages.
3. African Leaders need to make a bold industrial choice
The rewards of industrialization by taking a bold policy step are many. For example, India as a seeker, the health prime minister (RajKumari Amrit Kaur in 1947 went to Canada to receive a consignment of penicillin, and in 2021-India as a provider-PM Modi assures Canadian PM Trudeau to facilitate COVID-19 vaccines to Canada.
5. Africa should renew focus on Academic Science and Technology and Excellence
Key messages
- No aid support can lead to sustainable development
- Governments and private sector operators need to work together to address issues of productivity, efficiency, innovation and optimization, to make industrialization a success to jump-start the post COVID-19 recovery of Africa.
- Without industrial capacity/or manufacturing capacity, most countries are unable to develop their own infrastructure which is important to innovation and industrialization.
- A strong industrial manufacturing capacity generates technological innovation.
- Most innovative economies in the world are also the most advanced industrial countries.
- when you industrialize, the manufacturing share of employment rises while the agriculture share of employment declines.
- African should move away from static to dynamic comparative advantages since they do not lack ideas.
- Leaders or countries should diversifiy their economies.
- African Leaders need to make a bold industrial choice.
- Africa should renew focus on Academic Science and Technology and Academic Excellence.
Discussions and conclusion
Agriculture and manufacturing in the current industrial era
The growing conception boundaries between Agriculture and manufacturing should be relooked in this era of industrialization because the productivity of the sectors is almost the same. As a country learns over a period of time, they learn to innovate and industrialize.
Effect of Fiscal returns from commodity trade on industrializatio
Whether the quick fiscal returns from commodity trade is one of the inhibitors of Africa’s industrialization, the speaker noted that the danger of commodity trade is that when you export raw materials, you don’t learn to innovate. The idea of commodity trade should be relooked. We need to add value. For instance, the cashew nuts from Ghana and Nigeria to Vietnam, only ¼ is cashew nodes is paid, while ¾ cashew kernels are shipped to US for paint. There is no value for exporting raw value goods, 5o years is enough to learn.
The African Continental Free Trade Area ( ACFTA)
The ACFTA if taken seriously can be a game changer for Africa’s development. To effect trade in a meaningful way, we should not see it as a trade instrument but rather should be configured to create hope for manufactured and not to create a home for others to invest industries. We should learn over time, trade among ourselves. When Tariffs are removed and barriers taken away, we can learn and start exporting manufactured goods among ourselves. it has been said that in the next 10 years, if we gain the manufacturing advantage, our regional GDP of 3 trillion with 1.3 trillion people can be doubled, we hope all the countries to affect all the instruments.
Policy Incentives
If we are to promote manufacturing, value addition and industrialization then it requires policy incentives. When electricity costs and taxes are high, it removes the incentive for investment (even when labour costs are low). The challenge in many Africa countries is that the governments collect taxes and do not provide services. We should develop special economic zones and as well develop infrastructures and social amenities around these areas. For instance, the AfDB has developing Agro-Industrial Processing Zones in Mozambique, Tanzania, Liberia and Nigeria, by injecting 150million USD. Also, the IFAD is cofounding by injected 100 million USD.
Covid-19 aid from developed countries and Industrialization
On whether Covid -9 aid would assist in industrialization. The speaker noted that no aid support can lead to sustainable development. Countries should reimagine their own infrastructure and industrial capacity. The recent AU’s meeting on Africa Medicine Agency will remove the issue of certification. Given the fragment market in Africa, we should support one another than competeting ourselves. The hope to manufacture medicine in Africa is there and market for medicine is there if we work together and if we do it properly.
Leadership
On what roles does executive and political leadership play in industrial/innovation policy? What kind of leaders make bold decisions? The speaker highlighted that we need good leadership, and they should not look short term gains within their tenure but a leadership that looks beyond their tenure would lead to progress. This is because, industrialization takes a long time.
Trade patent waiver
African should be smatter. We need to collaborate rather than compete. If a market has expertise, lets contract them and let’s take advantage of covid to develop our own. The long-term vision is that we need to help one another and know what a county can do better and support them.
Importance of Scientific research
Scientific Research is important in building academic excellence. Universities should be responsible in industrialization. They need to focus more on local problem than focusing on other people’s problem.
Role of Gender in COVID-19 period
AfDB is strong on gender issues. They have received $250 million from France to support women business- Affirmative Finance Action for Women in Africa (AFAWA).
About the speakers
Professor Banji Oyelaran-Oyeyinka is the Senior Special Adviser on Industrialization to the President of the African Development Bank (AfDB) where he is coordinating the establishment of Agro-Industrial Processing Zones and Industrial Policy in several African countries. Professor Oyeyinka served at a very high level within the United Nations (UN) system for 20 years, his last positions being Director, Regional Office for Africa, Chief Scientific Advisor, UN-HABITAT, and Director Monitoring & Research Division. He provided intellectual leadership for the UN-HABITAT flagship reports: “State of the World Cities Report” and the “Global Report on Human Settlements”. He introduced the “City Prosperity Index”, a monitoring metric for city performance now used in over 400 cities globally. He was Senior Economic Adviser, UN Centre on Trade and Development (UNCTAD), Geneva where he coordinated the ten-year review of performance of Least Developed Countries (LDCs). He is a Fellow of the Nigerian Academy of Engineering and Fellow, Nigerian Academy of Chemical Engineering.
Prof. K.J. Joseph is the director of Gulati Institute of Finance and Taxation (GIFT), President of Globelics and Founding Editor-in-Chief of Innovation and Development published by Taylor and Francis (London). His areas of expertise include science technology and innovation for development with focus on information technology, industry studies especially electronics; FDI, trade, globalization and WTO, regional development with focus on Kerala economy and natural resource-based development with focus on plantation agriculture.
Prof. Erika Kraemer-Mbula is a senior Lecturer of Economics at the University of Johannesburg, South Africa and AfricaLics Scientific Board member. Her work focuses on alternative development paths for African economies. She specializes in the analysis of innovation systems in connection to equitable development and inclusive development and has done pioneering work on innovation in the African informal sector. Prof. Mbula is currently the Chairholder of the DST/NRF/Newton Fund Trilateral Chair in Transformative Innovation, the Fourth Industrial Revolution and Sustainable Development, based at the College of Business and Economics (University of Johannesburg) and in partnership with ACTS and SPRU. Her research unit at the University of Johannesburg is formed by a dynamic team of national and international researchers that engages in cutting-edge research; builds the capacity of younger scholars to help develop the next generation of African thinkers leading transformative change; and engages with policy makers, key stakeholders and research partners, to influence policy change.