Industrial expansion remains critical for the development and structural transformation of most sub-Saharan African economies, African Economic Research Consortium’s (AERC) has said.
During the AERC biannual research workshop held at the end of May it was pointed out that the advantages of industrialization go beyond provision of manufactured goods and diversification of exports for modernization of society.
The meeting of 200 researchers, academics and policy makers said a majority of the population in Africa is engaged in agriculture, with economies in the very early stages of structural transformation. Important lessons emerging from the East Asian experience are that the transformation of the structure of a predominantly agrarian, semi-subsistence economy cannot be achieved without substantial increases in agricultural productivity.
Second, they said the structural transformation process must take advantage of the positive interactions between agricultural and industrial development. Africa has a rich supply of natural resources and primary export products, but only a tiny core of industrial skills.
They argued that the stock of skills and technical knowledge needed to manage these industries has grown but not rapidly enough to lead to substantial gains in efficiency. Though Africa has witnessed improved growth rates in the last couple of years and its development prospects appear much brighter, poverty reduction remains a major challenge.
John Page of The Brookings Institution, USA said Africa needs structural change to sustain its industrial growth.
“Since the 1970s Africa industrialization has been declining.
“There is an urgent need to reverse this trend by siezing the opportunity offered by rising costs and domestic demand in Asia. However, trade in tasks, firm capabilities, and agglomeration will drive industrial location choices. Strategies to deal with these drivers of change are needed.”
“Policies to increase exports, build firm capabilities, and support agglomerations are also needed. The success of this approach will depend on support from donors and how policy is implemented.”
Célestin Monga of the World Bank said the fruitful era of growth research based on traditional macroeconomic models and regressions is over, thus a need to shift the focus towards more systematic analyses of the micro-foundations of growth.
Monga urgued that rarely has a country evolved from a low- to a high-income status one without sustained structural transformation from agrarian or resource-based towards an industry or services-based economy.
However, he said few African countries have been successful in this transformation. “Even the small number of those that have reached middle-income status seem to face the so-called “middle income trap” and are struggling to break out of it… The success of a small group of countries in achieving sustained growth provides evidence that it can be done”.
Ernest Aryeetey and Nelipher Moyo of University of Ghana and Brookings Institution respectively in their paper said majority of African countries recognize the need for structural transformation. They acknowledged this very early after attaining independence. Unfortunately, such transformation has eluded them while success has been observed in many parts of East Asia.
They said a major difference has been the role and capabilities of the state. “While the state pursued transformation through industrial policy in a systematic way in many East Asian countries, such a systematic approach has not been observed in most parts of Africa,” they stated.
Additionally, they said African countries can learn some principles from East Asia in the pursuit of structural transformation by setting clear goals for transformation and develop clear strategies for achieving the goals.
“They can also assign specific roles to institutions and individuals in the implementation of strategies. But most important, they must show commitment to industrial policy and stick with the agreed policies, making periodic modifications and adjustments when necessary,” Aryeetey and Moyo said.