By Bernard Wainaina
The recently concluded conference-‘Africa we want’- held at Kigali,Rwanda hoped to chart out the growth path for Africa in the next 50 years.
It also looked at the challenges of achieving this vision that will hopefully lift majority of Africans especially the youth from endemic poverty.
In most such conferences,the main idea that is mostly hyped is GDP growth rate.
Most leaders will outline their government policies that aim at achieving double GDP growth rates of over,let’s say, 10% over the next so many years.
This kind of generalized information is usually mistaken to mean that the living conditions for the 50% plus population living in poverty will also improve by the same percentage as the growth rates targeted in the overall economic growth,which is further from the truth!
The very poor may not benefit at all from such growth rates.
For one,they may not have skills to take advantage of the opportunities resulting from the economic growth associated with high GDP growth.
Most the poor are peasants who mainly depend on land to produce raw material for foreign industries since most African governments seem to have abandoned the idea of industrialisation in favour of free market economies that promote consumerism for the tiny middle class,and most of these consumer goods are mainly imported from outside Africa in the industrialised countries,more recently,China.
The poor may require their african governments to put in place interventionist policies that focus on industrialisation,value addition for both agricultural and mineral products in order to create jobs for the african youth who are trying to escape from the peasant way of life that their parents have known all their life.
Proper education and skill acquisition for the youth geared to take these opportunities will be an essential component in these interventionist policies.
How many African youth are being trained on Oil drilling,refinery,geology etc,in order to take advantage obtaining from the new oil discoveries in Africa,for example?
Without better education, Africa cannot hope to emulate the Asian miracle.
About 30 years ago, some African nations,beginning with Ghana and Uganda, implemented liberal economic reforms to stop their economic decline.
But in many cases we opened our markets to global competition when, beyond the extractive industries, we had nothing to compete with.
So while the continent’s share of global foreign direct investment projects has improved steadily over the past decade, much of this investment has reinforced the structural deficits of our economies.
For example, even if an African country like Malawi achieves higher GDP growth rates and increased
trade volumes, this doesn’t mean that manufacturing and services as a percent of GDP have increased over time.
Malawi may have earned higher export earnings for tea, tobacco, and coffee on world markets and increased exports, but it is still largely a primary agricultural economy with little movement towards the increased manufacturing or labor-intensive job creation that
are needed for Africa to “rise.”
Africa’s growth tends to be
concentrated on a limited range of commodities and the extractive industries.
These sectors are not generating the employment opportunities that would allow the majority of the
population to share in the benefits.
This is in marked contrast to the Asian experience, where the growth
of labour-intensive manufacturing has helped lift millions of people out of poverty.
Promoting inclusive growth
means… broadening the economic base beyond the extractive industries and a handful of primary
What’s striking about the two examples cited above is that they don’t mention manufacturing, or its
disturbing absence, in Africa. And that, in turn,confirms once again the extent to which the idea of
development as industrialisation has been completely abandoned in the last few decades.
Free market economics has come to advise poor countries to stick with their current primary agriculture and extractives industries and “integrate” into the global economy as they are.
Today, for many champions of free markets, the mere presence of GDP growth and an increase in trade volumes are euphemisms for successful economic development.
But increased growth and trade are not development.
African countries need to use industrial policies, such as temporary trade protection,
subsidised credit, and publicly supported R&D with technology and innovation policies, if they are
ever to get their manufacturing sectors off the ground.
This is true for all the same reasons that it was true for the U.K. and other nations that have industrialised successfully.
According to today’s ideology of free trade and free markets, however,
many of these key policies are condemned as “bad government intervention.”
Bilateral and multi lateral aid donors advise against them (and structure loan conditions accordingly).
WTO agreements and new
regional free trade agreements (FTAs), as well as bilateral investment treaties (BITs) between rich and poor countries, frequently outlaw them.
Critics of industrial policies are correct to cite some historical cases where industrial policies have misfired in developing countries.
But these critics are often selective in their criticisms, ignoring
successful cases and neglecting to explain why industrial policies worked so well in the United
States, Europe and East Asia while failing so badly in Africa and elsewhere.
From the 1950s to the 1970s, particularly in Africa and Latin America, many industrial policies failed because they were used inappropriately, with poor sequencing, and were often driven by political considerations or corruption rather than economic
analyses or strict efficiency grounds.
In Latin America, often the industrial policies were kept in place too long, and were too inwardly focused on
small domestic markets, neglecting the need to develop international competitiveness.
In contrast,the political economies of East Asian countries included institutions that tended to enforce stricter rules for which industries got subsidies and trade protection, and which got cut off from them when
they failed to meet performance targets.
They also adopted a more outward orientation in their industrialisation strategies.
Crucially, this history says more about how industrial policies should be implemented — not if they should be implemented at all.
Though African countries desperately need the policy space to adopt industrial policies, the rich countries are pushing loan conditions and trade and investment agreements that block them from doing so, all the while proffering a happy narrative about “the rise of Africa.”
The very idea of industrialisation
has been dropped from the official development agenda.
Yet there’s a reason why we all regularly refer to the rich, industrialized countries in the OECD
Despite the important gains in services industries and per capita incomes, Africa is still not rising, and
services alone will not create enough jobs to absorb the millions of unemployed youth in Africa’s growing urban areas.
Instead, steps must be taken to revise WTO agreements and the many trade agreements and bilateral investment treaties currently being
negotiated so that Africa has the freedom to adopt the industrial policies it needs in order to make
Bernard Wainaina is an Agribusiness Consultant and CEO at Profarms Consultants®
“The African Story as told by Africans”.©African News Digest®