Industrialisation is critical to the success of the AfCFTA
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By Oluwatobi Ojo
The success of the Africa Continental Free Trade Agreement (AfCFTA) is dependent on different factors, including the level of industrialisation and the level of industrial output across the continent. It is not surprising that industrialisation features predominantly in the strategic framework for the African Union’s Agenda 2063. The agenda aims to accelerate inclusive growth including through industrialisation, import substitution, and employment.
Unfortunately, the level of industrialisation in Africa currently is pitiful, compared to the rest of the world. In 2022, the World Bank world development indicator showed that Sub-Saharan Africa only comprised 0.7% of the world’s manufacturing exports and 1.3% of manufacturing value-added. Additionally, the manufacturing sector represents only 10% of Africa’s GDP.
The goal to create an integrated continental economy under the AfCFTA depends on a significant level of manufacturing outputs, regional supply chain, and continental market access. African leaders must begin to re-evaluate their commitment by investing in a sustainable industrial ecosystem with a strategic focus on value-addition, reversing trade imbalance, and acquisition of technical know-how. Africa’s population is increasing rapidly and requires the creation of at least 18 million jobs annually. Investment in industrialisation by closing the gap in global exports will create decent jobs and boost productivity.
A quest for global value chain inclusiveness
One of the objectives of the AfCFTA is to serve as a gateway for participation in the global value chain. Production strengths and industrial capacities are common features among the major players in the global value chain. Africa must therefore prioritise its industrial development to have any hope of emerging as a major player in the global value chain.
Africa’s marginal share of 3% of global export highlights the state of industrial capacity on the continent. Through the AfCFTA, we can rewrite the productive narrative of African nations and uncover an era of economic prosperity by harmonising national and regional industrial policies. While much has been lauded on the prospect of the AfCFTA, government and policymakers, in collaboration with the private sector, must charter policies and strategies on full-scale industrialisation of the African economy for increased global competitiveness.
Credit: PPAI Magazine
The following constitutes models of scaling industrialization across the continent:
1.Creation of economic zones and industrial hubs
Free trade zones have contributed to the economic growth and advancement of developed nations. The export-based model of free trade zones has revolutionised exports in Japan and Korea. More now than ever, Africa must internalise the creation of free model zones to boost its industrial capacities. As seen among developed economies, free trade zones stimulate the economy through increased local competition, attract capital investment for industrial development, diversification, creation of jobs and the efficient utilisation of resources. In partnership with the private sector, Rwanda recently signed an agreement with Arise Integrated Industrial Platforms (ARISE IIP) to establish an industrial hub in Bugesera. ARISE IIP is an organisation that identifies industrial gaps in African countries that unlock value and create new industries. According to the government, the agreement will “unlock its industrial potential and advance its industrialisation plan.” Similarly, Gabon has developed the Nkok Special Economic Zone (SEZ) multi-sectoral industrial park. It brings together 144 companies from 19 countries operating in 22 industrial sectors, including a cluster dedicated to wood processing, which brings together 84 companies.
Given the lack of a favourable business environment in some African countries and the barrier they pose to economic activities, economic zones serve as a means to overcome such barriers by acting as separate customs territories.
2. Capacity building through an overhaul of STEM courses
Given that most of the STEM jobs in Africa are mainly outsourced, it becomes extremely difficult to train homegrown talents across Africa.
The reevaluation of the educational curriculum, especially in science, technology, engineering and mathematics courses, is critical to industrialisation in Africa. These courses are the foundation for technical skill acquisition required in the manufacturing sectors. Investment in STEM education across the continent is a long-term plan to train experts, who, through research and development, proffer solutions to Africa’s industrialisation challenges.
The government of Zimbabwe launched the Second Science, Technology, and Innovation Policy Framework with the ultimate aim of attaining industrialisation, regional integration and economic competitiveness. This policy is beginning to yield dividends in Zimbabwe’s industrial development plans.
To realise the intended gains of the AfCFTA, Africa must prioritise production over consumption by empowering the manufacturing sector for self-sufficiency and onward export. As part of a broader agenda to diversify the economy, industrialisation must take the forefront in economic development policies to maximise Africa’s teeming young workforce and abundance of natural resources.
Oluwatobi Ojo is a Nigerian writer. You can reach him via email, oluwatobimojo@gmail.com