In 1989 the United Nations General Assembly proclaimed November 20 as Africa Industrialization Day. Since that time, the United Nations has held events on this day across the globe to increase awareness about the significance of Africa’s industrialization and the obstacles it faces.
Industrial development is critical for prolonged and wide-ranging economic growth in African countries. Industry has the power to:
- Enhance productivity,
- Improve the capabilities of the workforce,
- Generate jobs, and
- Introduce new equipment and new techniques.
Industrialization will help African countries achieve economic growth, diversify their economies and reduce their exposure to external forces. Employment and wealth creation are critical to eradicating poverty. One in three Africans or 422 million people currently live below the global poverty line.
Despite being the second most-populated continent in the world (1.2 billion people), Africa represented just 1.4 % of the world Manufacturing value added in the first quarter of 2020. The Economist Intelligence Unit, a British business research group, says that Africa accounted for more than 3% of global manufacturing output in the 1970s. Agriculture is Africa’s largest economic sector, representing 15% of the continent’s total GDP, or more than $100 billion annually.
The process of industrialization in Sub-Saharan Africa began during the colonial regime around the 1920s and ending in the late forties. It resumed in the late fifties and gained momentum into the sixties, when import substitution was implemented more broadly.
Import substitution industrialization (ISI) is a trade and economic strategy that supports replacing foreign imports with domestic production. It is based on the idea that a country should attempt to reduce its foreign dependency through the local production of industrialized products.
Although Sub-Saharan African countries were last to get on board with the strategy of import substitution, they mimicked the steps of their Latin American peers. However, the underlying domestic and external constraints were too strong, and the industry faltered.
Then, beginning in the 1990s, high commodity prices triggered by China’s appetite for natural resources spurred economic growth in Africa. Many hoped the growth would resuscitate Africa’s struggling manufacturing industry. Instead of using the revenue to invigorate manufacturing industries, African countries—with some exceptions—spent the money on unproductive expenses. Ghana and Zambia, for example, used their gains to solve short-term domestic problems, like increasing the salaries of civil servants.
There is currently an industrial revolution underway in places like Ghana, Uganda, Senegal and Côte d’Ivoire. Trends in these countries show that increased interest from smaller Chinese businesses is spurring a new kind of industrialization: what one writer called, “Alibaba Industrialization.”
While the COVID-19 pandemic has developed at a slower pace in Sub-Saharan Africa than in other areas, it’s impact on economic activity has been sizeable. With growth expected to fall to -3.3% in 2020, the region is being pushed into its first recession in 25 years. The combination of lockdowns and lower global demand for goods will impact industry significantly.
The United Nations offers some great resources you can check out to learn more about industrialization in Africa. Click here to learn more!
Written by Lynda Walz, Sales Executive