The story of industrialization in Africa is, so far, an incomplete one. Despite previous industrialization efforts, what has actually happened over time across the continent resembles a premature deindustrialization where the little gains made in industrialization have been reversed. Premature deindustrialization is the term used to explain the phenomenon whereby many developing nations are becoming service economies without having had a proper experience of industrialization. This means that developing countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers.
Premature deindustrialization has serious implications for Africa’s economic development, more so because, as is economists’ typical standpoint, manufacturing is ‘special’ for economic development. The economic importance of manufacturing is predicated on the work of Cambridge economist, Nicholas Kaldor (1908–1986), who sought to explain the economic development of Western Europe through the development of manufacturing. Kaldor argued that economic development requires industrialization because increasing returns in the manufacturing sector mean faster growth of manufacturing output, which is associated with faster economic growth and structural transformation. This is because backward and forward input–output linkages are strongest in manufacturing, and the scope for capital accumulation, technological progress, economies of scale, and knowledge spill-over is strong. The implication, therefore, is that premature deindustrialization poses a threat to Africa’s structural transformation. Although deindustrialization is not peculiar to Africa, it is hitting the continent particularly hard. It is premature, happening at a time when income levels are still very low.
A 2013 report from the United Nations Economic Commission on Africa (UNECA) found that Africa’s industrialization has been weak and inconsistent. In 1980-2009, the share of manufacturing value added to GDP increased marginally in North Africa, from 12.6 per cent to 13.6 per cent, but fell from 16.6 per cent to 12.7 per cent in the rest of Africa. Overall, between 1980 and 2013, the African manufacturing sector’s contribution to the continent’s total economy declined from 12 per cent to 11 per cent, leaving it with the smallest share of any developing region. In most countries in sub-Saharan Africa, manufacturing’s share of output has fallen during the past 25 years.
A comparison of Africa’s industrialization experience with East Asia is quite the study in contrast. While manufacturing provides just more than 6 per cent of all jobs in Africa—a figure that barely changed over more than three decades to 2008—the figure grew from 11 per cent to 16 per cent over the same period in East Asia. Among other factors, the unequal dispersion of global production from developed countries to developing economies is a plausible explanation for this stark difference. While globalization provided opportunities to Asian countries to industrialize, in the 1980s and 1990s, Africa suffered the most severe process of deindustrialization in the developing world. The rapid deindustrialization of many African economies over the decades, resulting in their increasing marginalization in the global economy, was mainly the result of inadequate policies that offer a framework for these countries to tap into and benefit from the global dispersion of production, key into global value chains and trigger industrialization.
However, keying into globalization is tricky and complex. Trade and globalization account substantively for the degree of de-industrialization in Africa. Prof. Dani Rodrik, in his 2015 paper on premature deindustrialization, argues that as developing countries opened up to trade, their manufacturing sectors suffered setbacks. Countries without a strong comparative advantage in manufacturing became net importers of manufacturing, reversing a long process of import substitution.
In addition, developing countries ‘imported’ deindustrialization from more advanced countries, because they became exposed to the relative price trends produced in the advanced economies. The decline in the relative price of manufacturing in the advanced countries put a squeeze on manufacturing everywhere, including the countries that may not have experienced much technological progress. The emergence of Asian manufacturing powerhouses who benefited disproportionately from the global dispersion of production worsened the situation for Africa. China for example deployed its advantage in low-cost manufacturing to flood Africa with cheap manufactured products making it difficult for local producers to compete.
Given these trends, it becomes plausible to argue that it is not a question of whether countries should engage in globalization, but rather how they should do so. Africa has a lot of options to exploit in its industrialization drive. The continent has a huge labour force that is particularly young and could exploit the prospect of labour-based industrialization. Africa also has a lot of natural resources and could exploit resource-based industrialization. Coming from a low industrial base and given her vulnerability to the impact of climate change, Africa could benefit from greening its industrialization process.
AFRICA’S OPTIONS FOR INDUSTRIALIZATION IN THE CONTEXT OF GLOBALIZATION
Given the conditions in Africa, it is plausible to argue that the continent can exploit the options of labour-based industrialization, resource-based industrialization and green industrialization.
The Prospects for Labour-based Industrialization in Africa
Labour-intensive manufacturing is an industrialization path that development economists favour. For example, the apparel sector has traditionally been a gateway to export diversification for low-income countries (LICs) and is generally regarded as a first step for developing countries embarking on an export-oriented industrialization process. Historically, this has been the path followed by many countries, and the newly industrialized economies (NIEs) of Hong Kong, Taiwan and South Korea and the more recent cases of Malaysia, Thailand, Indonesia, Sri Lanka, China, Vietnam, Bangladesh, Cambodia and Mauritius. I draw my analysis of the prospects for labour-based industrialization from the important work by Cornelia Staritz and Mike Morris on global value chains in apparel.
Given the low-entry barriers (low fixed costs and relatively simple technology) and its labour-intensive nature, the apparel sector absorbed large numbers of unskilled, mostly female workers and provided upgrading opportunities into higher value-added activities within and across sectors, most importantly textiles. Hence, apparel sector development can have important short-term effects by providing employment, incomes and foreign exchange and long-term effects by furthering export diversification, industrial development and linkages to other sectors. Africa is particularly suited for this option of industrialization given its huge population, cheap labour, the low-entry barriers and the promise of upgrading into higher value-added and more skill and technology-intensive activities within and across sectors. The high rate of unemployment in most African countries also makes an argument for this path of industrialization quite compelling.
Over time, changes in global regulatory and competitive conditions in terms of trade arrangements and the emergence of developing market suppliers in East Asia and their intermediaries have accelerated changes in large US and EU buyers’ sourcing policies. These developments will likely restrain low-income regions like Africa from participating in apparel manufacturing. Moreover, these changes involve consolidation of sourcing countries, concentration on core suppliers, higher demands on suppliers with regard to manufacturing and other capabilities, detailed performance monitoring, and stringent selection principles for new suppliers in what has been known as supply chain rationalization.
However, crucial differences in sourcing practices still exist between large and smaller buyers. At the country level, low-cost Asian apparel exporter countries are increasing their market share in the US and the EU, primarily at the expense of regional supplier countries, sub-Saharan Africa (SSA) apparel suppliers and smaller LICs. At the firm level, the increasing adoption of supply chain rationalization sourcing strategies has benefited larger and more capable suppliers at the expense of smaller, lesser developed and marginal suppliers in all countries. Thus, global consolidation has increased entry barriers at the country and firm level.
While preferential market access like the African Growth and Opportunity Act (AGOA) is still important and provides windows of opportunities for LIC apparel exporters, these preferences are likely to erode in the medium term. A pointer to this is the recent spat between the US and Rwanda in which the United States withdrew benefits for Rwanda to export apparel duty-free to the US under AGOA. Rwanda had increased tariffs on US clothing imports and put a ban on used clothing imports, as a means of protecting its nascent garment and textile industry. As large global buyers in the EU and the US demand more capabilities and higher standards from suppliers, only firms with the specified capabilities can break into these supply chains. The implication is that the low labour costs and preferential market access which supplier firms in sub-Saharan Africa have are not enough to compete in the apparel sector today.
Despite the increasing difficulty faced by LICs to enter apparel global value chains (GVCs), there is an opportunity for suppliers who only offer basic manufacturing functions to enter supply chains as second-tier suppliers through intermediaries. Particularly, triangular manufacturing networks of transnational producers have entry barriers that are substantially lower. The downside, however, is that upgrading opportunities, in particular for functional upgrading in terms of higher value tasks like design, are also limited by the intermediaries’ control over key decision-making and high-value functions. A key motivation for intermediaries to source from LICs has been preferential market access (and earlier also multi-fibre agreement quota-hopping). The competitiveness of SSA suppliers at present, therefore, depends heavily on these preferences.
Changing global supply and demand structures as well as asymmetric market and power structures within GVCs are also critical underlying structural challenges which condition the role of the apparel sector in the industrial development process of LICs today. These challenges are related to and have been accelerated by supply chain rationalization strategies of global buyers. At present, there is substantial competition between developing countries wishing to expand their low-cost apparel production ready for export and hence export growth is largely at the expense of other developing countries. This increased competition has constrained the space for other participants in apparel exporting.
Price pressures are also related to asymmetric market and power structures in GVCs. In the context of heightened competition at the supplier level, less rents are derivable from relatively standardized manufacturing activities which are globally available. More rents are associated with design, branding, marketing, R&D and retailing which are the core competencies of buyers and these parts of the GVC are protected by high entry barriers. By controlling these high-rent activities, buyers wield significant power over other actors in the chain. These asymmetric market and power structures further impede the capture of margins and upgrading of suppliers to higher value and rent activities.
However, some developments may signal a partial shift in competitive and power structures in apparel GVCs providing an opportunity for LICs. Some intermediaries and first-tier suppliers have reached powerful positions in apparel GVCs which potentially signal a shift in the governance structure of these chains and a reduction of the power of global buyers vis-ˆ-vis some actors. In the same vein, demand structures are also shifting given the increasing importance of buyers from emerging and developing countries. There is also some insecurity about China’s future as a competitor to LIC apparel exporters due to rising labour costs and exchange rate appreciation which look likely to make China less of a competitive exporter. China’s progress in upgrading its apparel production into a higher proportion of higher value products seems to have been partly reversed during the global economic crisis. These developments could change supply structures and increase the space for LICs in apparel exporting, at least in the low-value market segment.
End market diversification is also critical. As the profile of emerging and developing countries increase in the global economy, end markets in certain products like Apparel are also shifting to large developing countries, regional and domestic markets, underlying the increasing importance of developing countries’ buyers. These shifts in end markets may also lead to changing governance structures because the role of developed country-based buyers may be complemented by buyers from developing countries. These present new opportunities for LIC apparel exporters.
There is also the question of the role of ownership and embeddedness for upgrading. Many LICs are integrated into apparel GVCs through FDI making it crucial to also analyse value chains through the purview of the strategic interest of foreign investors. Ownership of supplier firms specifies how these firms are linked to global production and distribution networks and is an important criterion for the understanding of, and the differentiation between, their behaviour and activities. It reveals the extent to which firms are locally embedded in the social and economic fabric of the host country and captures different strategies of investors and how they play out in terms of local decision-making power, value added and linkages to the local economy. These strategies are determined not only by the nationality of the investor but by the drivers and governance structures of different value chains and end markets in which differently owned firms are integrated.
Many LICs face challenges on how to use the presence of FDI as a basis for building locally embedded apparel industries. FDI has been central in the development of export apparel sectors in many LICs. However, the integration via triangular manufacturing networks of transnational producers has locked LIC suppliers into second-tier positions and has often resulted in limited development of local skills, value added and linkages. Building a locally embedded apparel sector is a precondition for sustainability and industrial development. However, local ownership remains largely absent in many LICs, particularly in sub-Saharan Africa. Local conditions, institutions and policies are also critical in shaping upgrading opportunities.
The present apparel GVC and its associated entry and upgrading possibilities present serious challenges with the use of policy to enter and upgrade in apparel GVCs. In SSA, poor physical, bureaucratic and institutional infrastructure, limited local capabilities and skills, and non-existing or non-effective industrial policies present constraints to the use of the existing entry, upgrading and broader industrial development potential. Tackling these requires proactive policies. For SSA, opportunities exist in focusing policies on improving competitiveness and initiating upgrading in LIC’s apparel sectors, especially in the context of supply chain rationalization strategies. There is an opportunity in market diversification and regional integration as well as in focusing on locally embedded firms and increasing local involvement at the management and entrepreneur level to build locally embedded apparel industries and extend its impact beyond direct employment creation. Optimal use of preferential market access is also critical in sustaining a position in apparel GVCs.
Ethiopia represents a good case of an SSA country that is making good progress in deploying policy to key into global apparel GVCs. A study conducted by Staritz, Plank and Morris in 2016 for the International Centre for Trade and Sustainable Development (ICTSD) explains this progress. The study details how state-driven industrial policy in Ethiopia is attracting foreign lead firms and manufacturers from major apparel producing countries whilst still providing local firm support and protecting the local market. The focus is on incentivizing exports and developing domestic value chain linkages between cotton, textile, and apparel firms. Industrial policy is particularly focused on skill and capacity building.
The Ethiopian case in apparel represents an important policy lesson for other African countries like Madagascar who desire to industrialize based on their abundant cheap labour and who must now do so using strategic policy that takes cognizance of the dynamics of globalization and global value chains.
The Prospects for Resource-based Industrialization: Making the Most of African Commodities
Africa is replete with a lot of natural resources like oil, gold, coal, iron ore etc. However, the general view is that the continent has not fared better and, in some cases, has been made worse off by these resources. The traditional view is that terms of trade run against commodities and is in favour of manufacturing. Commodity prices are much lower and at the same time more volatile relative to manufactures and capital goods. Thus, for a long time, Africa faced deteriorating terms of trade making it difficult to acquire capital inputs for industrialization.
The terms of trade argument is closely related to the resource curse phenomenon, which posits that countries endowed with natural resources are ultimately made worse off by these resources. Professors Morris, Kaplinsky and Kaplan in their 2012 book, One Thing Leads to Another, argue that due to a combination of economic reasons (notably rising exchange rates), policy failures (the inefficient use of resource rents) and political factors (the kleptocracy associated with commodity-driven economies), commodities sectors would ultimately undermine industrial development.
Professors Sachs and Warner in their work on the curse of natural resources presented evidence showing an inverse statistical relationship between natural resource–based exports (agriculture, minerals, and fuels) and growth rates during the period of 1970–90. Sachs and Warner note the anaemic growth rates of resource-rich countries in the post-world-war II period. According to them, the resource curse is borne out by empirical information, even after controlling for trends in commodity prices, further accentuating scepticism about natural resource-led development. There is also the criticism about the enclave nature of commodity sectors which limits the opportunities to link them with other sectors in the economies of resource-rich countries to ensure sustainable, job-creating growth and development.
However, the terms of trade argument has changed over time in favour of Africa. In recent times, the rise in China and India’s demand for African commodities has ensured that the volatility in these commodities have reduced and that there is a more sustainable basis for a favourable term of trade for commodity exporting countries in Africa. Moreover, China now provides a market for the importation of cheap capital goods and south-south trade in capital goods has become very significant. Recent studies suggest that South-South trade in capital goods is particularly more beneficial to developing countries than capital goods imported from the industrialized west.
Many have also argued that the notion of a resource curse is a myth. Authors like Wright and Czelusta argue that it is counterproductive to equate development of mineral resources with terms such as ‘windfalls’ and ‘booms’ and that contrary to the view of mineral production as mere depletion of a fixed natural ‘endowment,’ ‘non-renewable’ resources have been progressively extended through exploration, technological progress, and advances in appropriate knowledge. They argue that resource intensity and industrialization are not mutually exclusive. The United States, they point out was the world’s leading mineral economy during the period where the country became the world leader in manufacturing (roughly between 1890 and 1910). Resource intensity was also a ‘pervasive feature of US technological and industrial development’, they argue. Morris, Kaplinsky and Kaplan also argue that in countries where commodity dependence is extreme, this is more often a result of the unrelated underdevelopment of the industrial sector rather than as the consequence of the destructive impact of commodities production on industry. Thus, ‘what shows up, and is interpreted as, a manufacturing sector weakened by a commodities specialization, is in fact often a commodities specialization in an economy with no or little history of industrial development.’ Sachs and Warner themselves accept that the case for the resource curse is not bulletproof.
The argument about increasingly favourable terms of trade for Africa’s commodities exports is the starting point for a drive towards industrialization based on resources. The recent commodity boom and the seeming reversal of commodity exporting countries’ terms of trade are a result of the high demand for commodities by China. China’s demand for commodities rose dramatically in the years leading up to the global financial crisis, held up well during the crisis as prices fell, and continued to rise post-crisis. China has also driven global growth since the turn of the millennium and much of this was fuelled by commodities sourced from Africa. Arguably, there is a glass ceiling for the prospect of labor-driven industrialization in Africa given that Asian markets are much more competitive and are better able to key into global value chains. This leaves industrialization based on resources as a veritable option for Africa. For a continent that is replete with natural resources, accepting the resource curse argument implies that Africa is in a policy cul-de-sac and appears defeatist. The cases of the US, Canada, Norway, Sweden and Australia also show that growth in the resource and industrial sector was interrelated and support the case for a similar path for Africa.
The heart of the argument for a resource-based industrialization path for Africa is built on linkage development. The importance of linkage development cannot be over-emphasized. Commodity booms have fuelled high levels of growth, but this had hardly translated to poverty reduction or employment creation for the continent. This was because the mineral and oil sectors are capital intensive hence have lower employment linkages than the manufacturing sector; and that the potential benefits accruing from higher revenues have often not materialized because of low tax regimes, tax evasion and financial mismanagement. But herein lies the argument for industrialization based on resources: Africa needs to create employment opportunities for millions of citizens and only massive industrialization can achieve that on the desired scale. Massive industrialization will also facilitate dynamic processes of technological innovation, skills development, knowledge-intensification and capital accumulation. Thus, linkage development to commodity sectors opens a window of opportunities for industrialization in Africa.
Hirschman’s 1981 Essays in Trespassing and the Morris, Kaplinsky and Kaplan-authored, Making the Most of Commodity Program provide us with a conceptual approach to consider a resource based industrialization path built on linkages. Hirschman identifies three major types of linkages. There are fiscal linkages i.e. the resource rents which the government can harvest from the commodities sectors in the form of corporate taxes, royalties and taxes on the incomes of employees. These rents can then be used to promote industrial development in sectors unrelated to commodities. Norway for example has over $1 trillion of oil earnings in sovereign wealth funds which the country deploys to sustain its growth agenda. There are also consumption linkages, that is, the demand for the output of other sectors arising from the incomes earned in the commodities sector. The third form of linkages are production linkages, both forward (processing commodities) and backward (producing inputs to be utilized in commodity production).
Production linkages are seen as the most likely to spur a structurally transformed economy because they relate directly to the output structure of the commodities sector, where one thing would indeed lead to another. In addition to forward and backward linkages, there are also horizontal linkages. This relates particularly to backward linkages and reflects a process where suppliers who develop capabilities in inputs linkages from the commodities sector subsequently develop capabilities applicable in other sectors.
A commodity-based industrialization strategy in Africa involves how commodities can be used to promote linkage development, value addition, new service industries, and technological capabilities. Global mining, oil and gas industries have moved away from a high-level of vertical integration. Instead, these industries outsource almost every stage in the mining process to independent firms. Ultimately, this trend provides a window of opportunity for African commodity exporters. Lead firms make the decision to outsource non-core activities and try to find the lowest cost suppliers who can produce to the required quality and meet delivery schedules reliably. Efficient local suppliers are particularly attractive across Africa. Because transport networks and logistics are poorly developed, goods brought in from overseas may be subject to long and unpredictable delays and because government policies have often mandated the deepening of local value added. Some supplier firms in Africa like local mining firms in South Africa and indigenous oil servicing firms in Nigeria and Angola have responded to these opportunities to be incorporated in the chain.
When lead firms outsource their non-core competencies, there is a market-driven process of linkage development. Initially the pace of outsourcing is low, but this speeds up and subsequently tails off as the easy hits are exhausted. There are several factors that determine the nature, extent and the location of these outsourced linkages. These are intrinsic and contextual determinants of linkage development. Three primary intrinsic factors affect linkage development: the imperatives of lean production, the specificity of resource deposits and the technological intensity of extraction and processing.
Lean production is about being efficient with logistics and costs and about flexibility. The imperatives of lean production (both in resource extraction and in the supply chain) are important determinants of the nature and location of the outsourcing process, and consequently, of linkage development. This is because the proximity of suppliers and customers is critical in some key inputs. In order to achieve lean supply chains, lead firms are required to develop sophisticated programmes of supply chain management. Resource specificity describes a key characteristic of virtually every mining or energy resource which is that it is location specific i.e. available in a particular location. Therefore, the technology and the accompanying knowledge and skill inputs required for efficient identification and exploitation of the resource therefore are of necessity to be applied locally on site. This provides the possibility of drawing on local skills and knowledge as well as the local presence of technology spill-overs.
This need to cater for the specificity of local deposits often leads to the localization of input provision, even in relatively poor economies with generally weak backward linkages such as Tanzania’s gold mining industry where local providers feed inputs, like local assays into mine prospecting. Technological and scale complexity is also an important determinant of linkage development as technological barriers to entry are less evident in the soft commodities sectors, where technological complexity and learning spillover are less limited than in the hard and energy commodities sectors. However, even in the scale and technology intensive hard and energy commodity sectors, there are multiple inputs which are relatively low in technological content and with few barriers to entry. In recent times, there has been a massive accretion of capabilities in low-income economies, in the scale and technology intensive hard commodity sectors. There is ample evidence of growing linkages even in high technology products and services in low income economies in often surprising circumstances, such as IT services in Nigeria’s oil industry.
The contextual determinants of linkage development relate to ownership, the state of infrastructure, domestic capabilities and systems of innovation, as well as the policy environment. While these are crucial factors that influence linkage development, many African economies are found wanting in these capabilities.
Linkage relationships can be altered by purposive state and institutional policy intervention depending on a variety of these determinants. Industrial policy can serve to influence the pace and depth of linkage development. For example, local content policies can help speed up the development of backward linkages. This is the case in Angola where increasing levels of basic goods and services to oil extraction are being imported through local firms. However, the breadth of linkages has increased but not the depth. Such local content policies need to be matched by industrial and business development policies as well as high domestic capabilities to not only speed up linkage development, but also increase the local value- added content of such linkages. This has occurred in Nigeria, where both the breadth and the depth of local linkages have been successfully affected.
Forward linkage development is also subject to similar dynamics. Beneficiation policies adopted by Botswana are helping to speed up and deepen the development of local value addition activities in the diamond industry. Likewise, Ethiopia’s export taxes combined with local upgrading processes have shifted the composition of the country’s exports away from raw hides into intermediate and final leather products.
The government cannot do it alone. Policies designed to promote linkage development must take account of the role of the private sector by aligning visions and capabilities between the state and the private sector and in some cases also, with civil society organisations.
The Prospects for Green industrialization in Africa
The discourse on the green industrialization in Africa is quite a recent one. As a latecomer to industrialization and coming from a low base, there is a possibility for the continent to leapfrog traditional, carbon-intensive methods of growth and champion a low-carbon development trajectory. This can be done by taking advantage of new innovations, technologies and business models on a pathway that uses African natural resources optimally as inputs to an industrialization process powered by Africa’s endowments of clean sources of energy. Greening Africa’s industrialization is particularly important since the continent is one of the most vulnerable regions to the threat of climate change. A 2016 United Nations Economic Commission on Africa (UNECA) Report on Greening Africa’s Industrialization details how Africa can take advantage of green industrialization.
Apart from climate change and environmental risks, there are other very important motivating factors for greening Africa’s economy. A green economy would be a source of growth, providing the impetus to increase GDP and create productive employment. According to the UNECA Report, the green agenda (GA) scenario generates far better outcomes for key development indicators, especially per capita gross domestic product (GDP) and exports and sees deeper and faster cuts in numbers of people in poverty, relative to the business as usual (BAU) scenario where the economy is fossil fuels-based. A green economy also presents an opportunity to improve Africa’s trade balance sharply by reducing energy imports and earning foreign exchange through the export of green goods and services. Since most African economies share common environmental challenges, a shared green growth and industrialization agenda will also promote regional integration and develop continent-wide innovation capabilities. Moreover, since the green economy is relatively knowledge intensive, its expansion can be an important source of structural transformation, productivity change and employment growth.
There are at least three pathways to greening Africa’s industry in what has been known as decoupling. The first is by transitioning out of brown industries such as fossil fuel-based energy sources in Africa. The second is by greening existing industries through increasing resource productivity, cutting pollution and managing chemicals. The third is by creating new green enterprise via the generation of renewable energy and waste water treatment investments and providing environmental advisory services. The expectation is that decoupling would help achieve economic growth with lower levels of intensity.
To achieve these important objectives, a green industrialization policy is crucial. Such a policy must target at least four entry points. It must change price incentives by cutting down on fossil fuel subsidies. It must regulate environmental standards, green public infrastructure and reduce the resource intensity of industrial growth.
A good green industrialization policy must also consider the importance of chain governance in the greening process. This concept of governance can be used to analyse the implementation of greening in the context of the entry points already discussed. A green industrialization policy must also consider the role of other stakeholders apart from government like the private sector and civil societies whose interests in the green agenda might diverge.
AFRICA’S INDUSTRIALIZATION: MORE OF A MARATHON THAN A SPRINT
Despite all the paths of industrialization available to Africa, the continent is still a long way from emulating East Asia. While there is hope for Africa’s industrialization, the race for Africa’s industrialization appears to be a marathon rather than a sprint (The EconomistNovember 7, 2015). For one, Africa does not have a Japan to act as a leading goose for development. Emerging East Asian countries moved into low technology and labour-intensive production as Japan upgraded into more technology-intensive manufacturing due to rising labour costs, and that development enabled the conditions for industrialization to take off in other East Asian countries.
Africa also has very weak infrastructure which is a constraint to industrialization. Skill shortage is also a major constraint. The continent will benefit from industrial strategies that address these constraints and enable Africa to become more competitive by tapping into global value chains and increase value addition. To achieve this, industrial policy must include a coordinated set of macroeconomic and structural policies designed to improve value addition and promote export industrialization. Ethiopia in Apparel and many other cases present important policy lessons for other peer countries who desire to key into global value chains and increase manufacturing value added.
Many paths for industrialization exist for African countries. The pathway lies in learning from other contexts while defining and designing a context-specific industrialization framework based on domestic realities and experiences. Recognizing the constraints, the journey to industrialization for Africa will not be an easy one. Replicating the East Asian experience is likely an unrealistic proposition. But Africa can promote industrialization by leveraging on its abundant cheap labour, its commodities and the green industrialization agenda. The constraints in infrastructure and low skill base, in particular, must be addressed to promote competitiveness. African countries can promote industrialization by being strategic in designing and implementing industrial policies that maximize their comparative advantages and position them to tap into, and benefit from, the global dispersion of production and global value chains⎈