‘Africa’s In­dus­trial Poli­cies Lack Clar­ity And Clear Goals’

The Guardian (Nigeria) - - INTERVIEW -

Eco­nomic growth, re­duc­tion in unem­ploy­ment, ac­cess to new tech­no­log­i­cal ad­vance­ment are some of the pa­ram­e­ters that de­fine a coun­try’s growth. Co­in­ci­den­tally they are all tied to in­dus­tri­al­iza­tion. Nige­ria as a coun­try strug­gles with the di­ver­si­fi­ca­tion of econ­omy due to the stag­nant na­ture of her man­u­fac­tur­ing in­dus­try. There is cur­rently an over re­liance on im­ported goods. The in­dus­try is seen as a high risk area for bank lend­ing be­cause it is plagued with lack of in­fra­struc­ture and there is in­ad­e­quate man­power and raw ma­te­ri­als. A le­gal ex­pert in en­ergy, trans­port, in­fra­struc­ture and con­struc­tion in­dus­try who have worked ex­ten­sively through­out the Mid­dle East, Europe and Africa, Christo­pher Cross, a part­ner at Ho­gan Lovells, shares in­sight and his in­ter­na­tional ex­pe­ri­ence with JOSEPH ONYEK­WERE on In­dus­tri­al­iza­tion in Africa and the nec­es­sary steps for the man­u­fac­tur­ing in­dus­try to forge ahead.

Can you give us a case study of how In­dus­tri­al­iza­tion has con­trib­uted to eco­nomic growth in the world?

IN­DUS­TRI­AL­IZA­TION has had many im­pacts. It has brought about huge changes to in­fra­struc­ture, devel­op­ment of trans­port, ed­u­ca­tion and also the abil­ity to de­liver ser­vices ef­fi­ciently to the pub­lic as many of the great tech­no­log­i­cal ad­vance­ments were de­vel­oped through in­dus­tri­al­iza­tion. For ex­am­ple, the ap­pli­ca­tion of modern tech­nol­ogy, equip­ment and ma­chiner­ies for the pro­duc­tion of goods and ser­vices are as a re­sult of In­dus­tral­iza­tion. If we look at the United States dur­ing the 18th and 19th cen­tury, man­u­fac­tur­ing in­dus­tries in­creased pro­duc­tiv­ity dra­mat­i­cally thanks to in­dus­tri­al­iza­tion. The pres­ence of fac­to­ries and var­i­ous types of equip­ment used had a huge im­pact on the way peo­ple live. Ap­prox­i­mately, 15 per­cent of Amer­i­cans lived in cities in the 1800’s. By 1900, that per­cent­age had in­creased to around 40 per­cent and it kept grow­ing as Amer­ica moved from a ru­ral to an ur­ban econ­omy. In­dus­tri­al­iza­tion has also al­lowed the ex­ist­ing ru­ral pop­u­la­tion to do a lot more with less. To what level has ple­nary in­dus­tri­al­iza­tion af­fected eco­nomic growth in Africa and Nige­ria in par­tic­u­lar?

I think the is­sue in Nige­ria and Africa in gen­eral is that the heavy in­dus­tri­al­iza­tion re­quired to kick-start the re­gional and lo­cal economies has not re­ally taken place in the way it was hoped for. The devel­op­ment of a com­pet­i­tive and sus­tain­able man­u­fac­tur­ing base should be at the core of eco­nomic trans­for­ma­tion in Africa, how­ever, the re­quired man­u­fac­tur­ing in­vest­ment has not been un­der­taken in the last 30 years and it has re­sulted in stag­na­tion and re­gres­sion for the man­u­fac­tur­ing sec­tor across the con­ti­nent. Man­u­fac­tur­ing is a key part of in­dus­tri­al­iza­tion. De­spite suc­ces­sive gov­ern­ments in Nige­ria im­ple­ment­ing many pol­icy mea­sures and pro­grammes to achieve in­dus­trial growth and devel­op­ment, this has not lead to tan­gi­ble devel­op­ment of an in­dige­nous man­u­fac­tur­ing sec­tor. In­dus­tri­al­iza­tion can­not be at­tained un­til man­u­fac­tur­ing ca­pac­ity is uti­lized to a rea­son­able ex­tent. For ex­am­ple, it was ex­pected in the 1990’s and early 2000s that China would look to Africa to buy nat­u­ral re­sources to fuel its con­struc­tion boom; a move that would have de­fined Africa’s man­u­fac­tur­ing in­dus­try but it didn’t hap­pen be­cause there was bet­ter po­ten­tial for growth in Asia due to bet­ter suited eco­nomic terms, the per­cep­tion of an eas­ier and bet­ter known busi­ness en­vi­ron­ment and pre­vi­ous in­vest­ment to­wards man­u­fac­tur­ing ca­pa­bil­i­ties had al­ready been un­der­taken. So China de­cided to in­vest in Asia in­stead.

Many econ­o­mists also ar­gue that that in­dus­tri­al­iza­tion’s con­tri­bu­tion to eco­nomic growth rate is de­pen­dent on the thresh­old level of in­come. With many Nige­ri­ans liv­ing on less than a dol­lar a day, it means Nige­ria and other de­vel­op­ing African coun­tries have to reach a cer­tain in­come level be­fore the ben­e­fits of in­dus­tri­al­iza­tion can be prop­erly iden­ti­fied. There­fore the fo­cus must be on the adop­tion of new tech­nolo­gies, hu­man cap­i­tal devel­op­ment and an im­proved man­age­rial sec­tor for Nige­ria to mean­ing­fully achieve the re­quired lev­els of in­dus­trial- iza­tion. Africa has a strong de­sire to in­dus­tri­al­ize in or­der to cre­ate in­creas­ingly pro­duc­tive em­ploy­ment op­por­tu­ni­ties and higher liv­ing stan­dards for its peo­ple. Yet, it re­mains among the low­est level of in­dus­tri­al­iza­tion in the world. What are the ma­jor chal­lenges mit­i­gat­ing this process? Al­though Nige­ria has en­joyed a long pe­riod of sus­tained ex­pan­sion of its non-oil based econ­omy, this has not been sig­nif­i­cantly con­trib­uted to by the in­dus­trial sec­tor. A key chal­lenge is hav­ing to play catch-up with other coun­tries and con­ti­nents who now have a much more de­vel­oped man­u­fac­tur­ing base. Other de­vel­op­ing na­tions have al­ready spent a lot of money and cap­i­tal in de­vel­op­ing their man­u­fac­tur­ing base to deal with global de­mand and in­vested in the devel­op­ment of hu­man cap­i­tal. There has not been enough in­vest­ment in Nige­ria in de­vel­op­ing the right work­force, a key re­quire­ment for the man­u­fac­tur­ing in­dus­try. The in­vest­ment in highly ed­u­cated en­gi­neers, who will de­velop in­dus­trial pro­cesses and op­er­ate fa­cil­i­ties, par­tic­u­larly in this modern age, is lim­ited. The num­ber of grad­u­ates tak­ing sci­ence based sub­jects such as in en­gi­neer­ing and man­u­fac­tur­ing is very low in Africa com­pared to other places like Europe, Asia or Mex­ico, where you find a large por­tion, in some coun­tries as high as 30 per­cent of their stu­dents in­volved in sci­ence based sub­jects . In Africa, the num­ber of stu­dents tak­ing sci­ence based sub­jects (which will im­pact the man­u­fac­tur­ing sec­tor) is mooted to be some­where be­tween 3 per­cent – 12 per­cent de­pend­ing on the spe­cific coun­try. There is there­fore a huge knowl­edge gap which is hin­der­ing Africa and Nige­ria’s move to­wards full-blown in­dus­tri­al­iza­tion.

There is also the per­cep­tion that the busi­ness en­vi­ron­ment is dif­fi­cult in some African coun­tries. It can take a long time to set up a com­pany, the cost of the busi­ness can be high, startup pro­ce­dures can be com­plex, and the con­cerns re­gard­ing cor­rup­tion. Is­sues like those mean in­ter­na­tional par­ties may de­cide it is not cost ef­fec­tive to de­velop a man­u­fac­tur­ing plant in an African coun­try. Whereas, in other parts of the world, par­tic­u­larly Asia, stake­hold­ers are pro­vided with more stream­lined pro­cesses to de­velop man­u­fac­tur­ing ca­pa­bil­i­ties. An­other mit­i­gat­ing fac­tor is the ac­cess to fi­nance. This in­cludes ac­cess to credit and cash to de­velop not just the man­u­fac­tur­ing fa­cil­i­ties but also to fund the raw ma­te­ri­als re­quired. The process in­volved in seek­ing credit is usu­ally more fa­vor­able for short term based op­er­a­tions, whereas man­u­fac­tur­ing is a long-term process. A so­lu­tion to this will be the pro­vi­sion of more ac­ces­si­ble longert­erm credit by banks. Which ar­eas should Africa fo­cus on more to achieve In­dus­tri­al­iza­tion?

Sadly, pre­vi­ous colo­nial poli­cies dis­cour­aged the devel­op­ment of lo­cal man­u­fac­tur­ing. While this helped to pre­serve African mar­kets for goods pro­duced in Euro­pean fac­to­ries, it led to a con­tin­u­ous de­cline in Africa and its mar­ket. The first step to­wards real­iz­ing in­dus­tri­al­iza­tion and re­vers­ing the trend is in­vest­ing in new in­dus­tries. It is im­por­tant that while lo­cal com­pa­nies thrive to at­tract For­eign Di­rect In­vest­ments, in­dus­tri­al­iza­tion should be ex­port led to bring in much needed rev­enue. Africa has enor­mous nat­u­ral re­sources. You have oil, gas, agri­cul­ture, and min­ing. There is an abun­dance of the ba­sic ma­te­ri­als needed to stim­u­late ba­sic in­dus­tri­al­iza­tion and since the raw ma­te­ri­als are avail­able the idea is to use what you have to get what you want. The gov­ern­ments should look at the fur­ther devel­op­ment of free trade agree­ment and in­dus­trial co-op­er­a­tion ar­range­ments to aid the devel­op­ment and ex­por­ta­tion of man­u­fac­tured goods. The devel­op­ment of lo­gis­tics and man­u­fac­tur­ing hubs (spe­cial­ist zones) along key trans­port routes will help this. In Africa there is a lot of de­pen­dence on road and air trans­port, but rail and sea trans­porta­tion meth­ods need to be de­vel­oped along with the spe­cial­ist zones, which have a fi­nan­cial, eco­nomic or in­dus­trial ben­e­fit. Pro­duc­tion cost can be re­duced and new tech­nolo­gies adopted fol­low­ing the in­vest­ment in ed­u­ca­tion and train­ing I have men­tioned above, help­ing to make African man­u­fac­tur­ers more com­pet­i­tive.

Cross

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