Africa’s Industrialization: Continent Is ‘Rising’, But ‘A Lot of Work Yet to Be Done’, Experts Say
A worker drives a fork-lift past a machine pouring a mixture of copper and cobalt in a bag at the STL (Société pour le traitement du terril de Lubumbashi or Company for the treatment of the slap heap of Lubumbashi) processing plant in Lubumbashi during a maintenance day on December 1, 2011.
LongreadAs Africa Industrialization Day – 20 November – approaches, Sputnik asks experts to share their opinions on the continent’s progress and what they believe its prospects are for industrial transformation.”For much of the past 15 years, Africa experienced very positive growth in successive years, and at some point, better average growth than many other parts of the world,” said Mikatekiso Kubayi, a researcher at the Institute for Global Dialogue at the University of South Africa. He emphasized that the continent has much of what is needed for economical development, including 13 percent of the world’s natural gas and 7 percent of the world’s oil resources as well as commodities such as rare-earth metals. The continent’s population is “youthful and technology savvy”, and it is “increasingly educated with a growing middle class”.
What Africa needs for industrialization and economic growth is infrastructure. This is the "reason why the African Union has 16 flagship projects it hopes will catapult Africa into a healthy rate of growth and development," Kubayi noted.
In 2013, the African Union established a 50-year development plan called Agenda 2063, described as a “blueprint and master plan for transforming Africa into the global powerhouse of the future”. Three years later, the United Nations General Assembly recognized the importance of the plan and proclaimed 2016–2025 as the Third Industrial Development Decade for Africa (IDDA III).Before the COVID-19 pandemic halted the world’s – and Africa’s – economic development, the initiatives were reported as fruitful. According to the African Development Bank Group (AfDB), in 2019, the continent’s industrial GDP increased by 17 percent to $731Bln (in 2010 dollars), with the value-added manufacturing increasing by 39 percent.As Africa recovers from the fallout of the pandemic, the continent’s leaders strive to lay the foundation for new development plans. On 20 to 25 November 2022, the African Union is organizing a summit on Industrialization and Economic Diversification with the role of the African Continental Free Trade Area (AfCFTA) Agreement, launched on 1 January 2021, being among the primary subjects. AfCFTA is expected to “cap a heroic journey to build a one-Africa integrated economy”.
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IDDA III: Accomplishments and Challenges
With IDDA III already six years old, Dr. Wisdom Patrick Enang, a Nigerian oil and gas consultant outlined recent positive trends in Africa’s industrialization. According to him, the main accomplishments have been achieved in such sectors as food and beverages, leather, textiles, and automotive and heavy machinery.Several nations serve as examples of active industrial development. For instance, according to the AfDB, between 2017 and 2019, Ghana’s industrial sector has grown 10 percent a year, after it focused on improving the business environment and developing special export zones (SEZs). Investment in Uganda’s manufacturing led to the country’s industrial sector jumping from 20 percent of GDP to around 30 percent in 2019. There has also been a rise in investment in Ethiopian manufacturing, as well as in African start-ups, mainly in South Africa, Kenya, Nigeria and Egypt.Dr. Enang noted that there is still a lack of diversity that does not let the African industries “really take off”. He described how he would advise African leaders to overcome challenges that hinder the continent’s industrial development.
"The authorities of African countries need to manage the processes of industrialization: to work towards the development of infrastructure, improvement of the investment climate, transparency of legislation, reduction of administrative costs for business, reduction of corruption, prevention of armed conflicts. Regional integration would also help to address the common challenges faced by African Nations," the consultant said.
He also evaluated the effects of the world pandemic, saying that it “significantly disrupted African trade both on the import and export sides” and hit the manufacturing sector that faced a “huge shock to the supply chains of intermediate inputs”. However, he added, those trends are now reversed.According to Kubayi, Africa’s young population is one of the continent’s main advantages, but to make use of it “a youth bulge must turn into a youth dividend”, with the population having “access to work, innovation opportunities, high quality healthcare and all the ingredients to achieve higher Human Development Index (HDI) numbers”.
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Striving for True Independence
In 2021, the African Union stated: “What is abundantly clear is that industrialization successes in Europe and the Americas – and more recently in Asia – cannot be replicated in Africa”. Commenting on the thesis, Dr. Enang said that it is Africa’s reliance on 90 percent external funding, as well as on imported technology and materials, for the development of infrastructure that reduces the region’s autonomy and significantly hinders the pace of its industrialization.
"The history of African dependency though is still something to worry about. This dependency has tended to keep it in debt and unable to develop. The good news, though, is that the African Union is a lot more vocal, upfront and more assertive about development needs and what it wants to achieve. I do to an Africa rising, but there is still a lot of work to be done," Kubayi noted.
According to Dr. Enang, developing infrastructure is crucial for moving away from Africa’s “current Economic Rent-seeking business model, where raw materials are mainly exported, to a model that encourages domestic industrialization”. He drew attention to the negative impact of the potential discontinuation of important infrastructure projects such as the East African Crude Oil Pipeline (EACOP), which recently faced criticism from several western countries on ecology concerns.The Nigerian expert also drew attention to China’s role in African industrialization, naming several key advantages of cooperation with the East Asian giant: low interest funding for infrastructure projects (in partnership with some European and African partners), supply of low-cost imported materials and technology, and China’s operational experience for critical infrastructure projects.Cooperation between African countries is also of great importance. Dr. Enang highlighted the role of the AfCFTA, that can become a “potential game changer for Africa’s economic development” should the initiative’s goals be fully realized. The AfCFTA deal involves the creation of “a continent-wide market embracing 55 countries with 1.3 billion people and a combined GDP of US$3.4 trillion”. Dr. Enang noted – citing World Bank research – that AfCFTA could increase African FDI by between 111 percent and 159 percent and help Africa’s external exports rise 32 percent by 2035 with intra-African exports potentially growing by 109 percent.
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Africa and Russia: Is Productive Partnership Feasible?
In October, Oleg Ozerov, chief of the Secretariat of the Russia-Africa Partnership Forum said that the problems of energy development in Africa would occupy one of the central places at the 2023 Russia-Africa summit, with the development of the energy sector being the main condition for industrialization on the African continent.Daniil Alferov, PhD in History at the Faculty of Oriental Studies, St Petersburg State University, told Sputnik that as the events of the present year have clearly shown, one of the most important factors of stability is energy independence. As far as one can judge, Russia sees this direction as the highest priority. The African continent is in need of oil refineries, hydroelectric power plants, nuclear power plants and other energy facilities, as well as critical infrastructure.Kubayi listed the energy, agriculture, technology, health, and defense sectors as fields covered in the 15 flagship projects of the African Union. At the same time, these sectors are areas of “possible solid collaboration for potential solid partnership” between Russia and Africa.Yuri Bakharev, executive secretary of the Angola-Russia Business Council, who is also vice-president of the Angola-Russia Chamber of Commerce and Industry and a representative of Afrocom Russia in Angola, said that in Africa, technologies and investments are in demand in all areas, and to boost industrialization Russia needs to make political decisions and free up financial resources along with creating appropriate mechanisms on the ground.However, Bakharev added, Russia’s potential has been significantly reduced because of western sanctions that have had an effect on banking transactions and supply chains.Dr. Valentin Khalin, managing director of Namibian mining firm NTM Management, and an associate member of the International Research Institute for Advanced Systems, said that as a businessman who has been working in Africa for 20 years, he has recently had problems transferring money from Russia to Africa, “as obstacles are placed in correspondent banks in Europe and America”.
"This is very disturbing: now we have to find new ways. In general, African countries treat us well, but their banks are geared towards correspondent banks of European and American companies. So we need to build such mechanisms […] that our banks interact directly with the banks of African countries," he said.
Dr. Khalin emphasized the importance development of the energy sector has for industrial growth. He named nuclear power as the main way of solving energy issues in dry regions where construction of hydroelectric power stations is impossible. For example, only 70 percent of Namibia’s needs of 1000 megawatts per year are covered by existing capacities.
"In southern Africa, our Russian company Rosatom is actively working, as you know that Namibia has the fourth-largest uranium reserves in the world. So I would start the development of the energy sector with the construction of a nuclear power plant, since here it would be possible to immediately meet the needs of South Africa, Namibia, Botswana, Angola, Zambia, Zimbabwe," the businessman said, adding, "and this has very great potential, on the basis of which it would be possible to develop the entire territory of southern Africa."
According to Alferov, one of the shining examples of Russian-African projects in the energy sector is the El Dabaa nuclear power plant in Egypt. Its constuction by the Russian state corporation Rosatom began in July this year. The project continues the tradition of cooperation between Egypt and Russia in the energy sector, cooperation which began in 1960 when Soviet specialists started building the Aswan dam.
"In general, as of 2022, the activities of Russian companies in Africa are carried out in more than 100 areas and cover various fields, including industry, energy, scientific engineering and services. Taken together, this lays a solid foundation for expanding cooperation between African states and Russia in the future. The most accurate estimates can be given in the summer of 2023, when the second Russia-Africa Economic Forum will take place," the expert concluded.
