Industrialization can help address Africa's market failures

Saturday, 31 May 2014 16:52 by administrator

Kigali: The 2014 edition of the Economic Commission for Africa flagship report was launched Tuesday in Pretoria, with the unanimous view that industrialization and diversification is crucial to Africa’s continued development.

Aptly themed, “Dynamic Industrial Policy in Africa,” the Report outlines several key messages, including the crucial fact that “industrial policy in Africa is essential if we are to address market failures and build capabilities within the continent.”

In remarks at the opening, Mr. Agostinho Zacarias, UN Resident Coordinator and UNDP Resident Representative in South Africa, noted that, “having previously been viewed as a continent rife with uncertainty, the current dominant view is that Africa remains the last of the greatest untapped global markets ripe for rapid growth and development”.

“African countries are growing rapidly, but their growth has been largely non-inclusive; an industry-driven diversification strategy is key to ensuring that future growth is inclusive and not merely commodity-based,” he said.

Mr. Zacarias outlined a number of imperatives for Africa to embark on its industrialization agenda, including top-level coordination of industrial policy frameworks, platforms for public-private dialogue, addressing skills deficiencies, and recognizing the importance of innovation policies and linking-in with global value chains.

Implementation of the key findings of ERA 2014 is the vital next step, and he affirmed that “UNDP and the UN system in general stand ready to work with ECA, the African Union Commission and African countries”.

In presenting the findings of ERA 2014, Mr. Adam ElHiraika, Director of ECA’s Macroeconomic Policy Division, emphasized that “with effective industrial policies, Africa’s growth can be translated into enhanced structural transformation and social development”.

Contrary to the common narrative, Africa’s growth is not commodity-dependent, and is rather the outcome broad-based growth in a variety of sectors.

For too long, African countries were told to focus solely on natural resources, but now countries are re-examining the potential of industrialization to yield inclusive and sustainable growth.

However, said Elhiraika, “industrial policy has not been sufficiently effective in Africa because governments rely on a set of incentives that are rigid, not flexible and not attractive enough.”

Furthermore, it was noted that inequality is a large and growing problem across the continent, and that governments must seriously address these issues while pursuing an industrialization agenda.

Mr. Elhraika presented the report’s outcomes, listing the requirements for a successful industrial policy framework. These include among others, the need for the framework to be dynamic and organic, to foster continuous dialogue between the country’s public and private sector, and the assurance of high level coordination and political support from the country’s government.

In response to the report, Mr. Garth Strachan of the Industrial Development Division at the Department of Trade and Industry concurred that Africa as the new global growth frontier “has become a new buzzword in academia and other circles, as has the notion that industrial policy has come back into vogue”.

Yet, stressed Strachan, we need to have a better analysis and understanding of the impact of the “blueprint approach” towards industrial policy, and the impact of liberalization agendas have had on aspirations for industrialization.

In addressing the Continent’s potential, Mr. Strachan noted that an industrial policy, which ignores Africa’s resource endowment, is not complete.

“Early industrializers used their resource endowment – whether it was the United States, Europe or others – for a host of industrial policy efforts”, he said.

Mr. Strachan stressed that policy coherence is a central issue for Africa’s success in industrial policy. He highlighted successful capacity building programmes, such as support the Department of Trade and Industry is providing to the Nigerian automobile sector.

Ximena Gonzalez-Nunez, Executive Director of Trade and Industrial Policy Strategies, honed in on the issue of regional integration.

She noted that the issue of regional integration is a political one, and that we need to examine how industrial policy, which is more national and firm-oriented in nature, can fit into this mix.

She challenged ECA and those in attendance to address “what kind of framework does one use to identify opportunities, engage firms and pursue a practical regional integration agenda?”  (End)