Africa-Press – Namibia. FOR DECADES AFRICA’S development trajectory has been based on the export of raw materials and natural resources.
The continent has abundant natural resources, oil, gas, minerals, metals, agricultural and forest products, and the blue economy. With an estimated US$30 trillion in potential wealth, Africa’s natural resources are enough to make it one of the wealthiest places on earth, but tragically and ironically, Africa’s massive natural resources have not translated into wealth.
The reason is simple: a dependency on the export of raw commodities, with very little or no value addition. Put in a stark way: a lack of industrial manufacturing. African countries export natural resources and import manufactured products.
According to TrendEconomics, Namibia exported US$5,6 billion worth of goods in 2020, while the country’s imports totalled US$6,82 billion. This resulted in a deficit of US$1,22 billion.
It is a race to the bottom, where the only assured commonality is rising poverty, the export of jobs, variations in the volatility of commodity prices, and import dependency.
Hard-earned foreign exchange is used to support a high propensity for imported goods, machinery, equipment, and raw materials to support industries. The low level of industrial manufacturing is at the core of the slow structural transformation of African economies, with the dominance of the primary sectors.
The situation has also been partly perpetuated by the escalation of tariffs on the export of manufactured goods from Africa. For example, exporting raw materials attract very low tariffs, but value-added products from Africa face steep tariffs.
Low-income countries are perpetually at the mercy of price volatility, throwing their economies into eternal swings. Take the case of agriculture: While the price of cotton will always fall, not so the prices of apparel and textiles.
While the price of cocoa will always fall, not so the price of chocolate. While the price of coffee beans will fall, not the price of brewed coffee. No wonder Africa’s share of the global value chain is a miserly 1,9%, leaving a continent of 1,3 billion people and their economies stuck at the bottom of global value chains.
Africa should therefore industrialise. That’s why ‘Industrialise Africa’ is one of our five highest priorities at the African Development Bank (AfDB).
There is an urgent need for Africa to rapidly diversify its economies and add value to everything it produces, as no nation or region has succeeded by simply exporting raw materials.
While Asian countries, such as Singapore, Malaysia, and China have focused on exporting manufactured products, Africa’s approach has been on import substitution.
Import substitution, while important, is a very restrictive vision. It looks towards survival, instead of looking to create wealth through a greater export market and value diversification.
The end result is a manufacturing sector that cannot develop, nor compete globally, but limits itself to survival mode, and not a global-manufacturing-growth mode.
African countries, including Nigeria and Namibia, have had policies, templates and programmes for industrialisation and expanding industrial manufacturing for decades. But there is a need to close the huge gap between policy ideas and implementation.
There should be massive investments in variable energy mixes, including gas, hydropower resources, and large-scale solar systems to ensure stable baseload power for industries, to direct power preferentially to industries, and to support industrial mini-grids to concentrate power in industrial zones.
Namibia has established a number of solar plants, as well as a wind-power farm at Lüderitz to supplement power generation, but this is still far from satisfying the country’s needs.
Most of Namibia’s power is imported from South Africa. Namibia’s Kudu gas project has remained on the drawing board for over a decade. The African Continental Free Trade Area presents a huge opportunity for Africa to drive an export-driven industrial manufacturing pathway.
It should therefore be a manufacturing zone, not just a trading zone. Otherwise, we would have succeeded in creating a well-organised consumption zone for imported raw materials, machinery, and equipment from others. Developed countries with high labour costs have previously out-shored their manufacturing to low-wage countries for labour-intensive manufacturing.
With the declining cost of cognitive robots, the low-labour cost advantage of Africa would be reduced, as these countries are now restructuring their models by reshoring previously outsourced manufacturing capacities back to their home countries. The future of manufacturing will be digital. The global digital economy is estimated to be worth over US$16 trillion.
The Internet of Things will raise the productivity of labour in manufacturing, deploy smart machines, manufacturing platforms and systems, will connect machines and people, and will be using machine learning and artificial intelligence to improve speed and the efficiency of complex manufacturing processes.
That future is already here. It is time to also introduce bold policy measures to drive the structural transformation of agriculture, with infrastructure and spatial economic policies that will help turn rural economies away from being zones of economic misery to new zones of economic prosperity.
To boost manufacturing, access to affordable finance is critical – especially long-term financing that matches companies’ investment gestation. Nations that have expanded their industrial manufacturing competitiveness have been those which provide incentives for their companies – especially low interest-rate financing.
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