Africa is at a crossroads. The choice is clear – either act now to drive industrial development or miss out on the opportunities and benefits it brings. It’s time to create a policy environment that promotes investment, skills development and infrastructure improvement. This will drive progress and build a sustainable future for Africans.
Africa’s potential is clear. The continent encompasses one of the world’s wealthiest natural resource bases – including oil, gas and land-based mineral deposits such as gold. Africa also has a young population that is highly educated and skilled – much of it is younger than 20 years old. In addition, Africa has made some impressive economic gains in recent years. While still characterised by slow growth, the region’s economies have been buoyed by strong commodity prices and solid growth in most countries that has risen to an average of almost 5 percent peryear over the past decade.
But those gains aren’t enough. If Africa is to succeed, the continent’s leaders must take advantage of this opportunity and build a solid foundation for growth, investment and development by implementing policies and programmes that remove barriers to industrial development. With limited connection to global supply chains, low productivity levels and an inadequate infrastructure base constraining industrial development, Africa could import many of the manufactured products it consumes at a much higher cost – or choose not to manufacture at all.
The private sector has an important role to play, of course. But so does government – backed by strong public-private partnerships – which has the tools in place to make industrial development a reality. And if Africa is to succeed, this must happen quickly.
The good news is clear: If Africa acts now and delivers the right set of policies and programmes, it has a chance to become a global industrial powerhouse with the capacity to drive growth and development across the region and beyond. This can be done. The question is how much time does Africa have?
Nearly 25% of world population growth in recent years has been in sub-Saharan Africa – where population numbers are expected to double by 2050. To meet this demand for services and products, sub-Saharan Africa must increase its manufacturing base at least five times over the next 25 years – from 3% today to nearly 20% by 2040.
Fortunately, the continent is well-positioned to accommodate this growth. Africa’s abundant natural resources, established trade-ties with developed countries and growing consumer markets have earned the region a reputation as a resource-rich, export-driven area. Africa has a young and educated workforce, the third-largest in the world after China and India. In addition, Africa has 60% of the world’s uncultivated arable land – which could help curb food insecurity across the continent.
These are promising indicators for economic development. But the challenges are significant. In many cases, these resources remain untapped and underutilised because of an inadequate investment climate for production and manufacturing activities. This needs to change in order to develop these resources – and provide African countries with new opportunities for wealth creation and value-added growth.
Development is a long-term process that requires committed leadership. There is no single magic bullet that can guarantee success. But there are shortcuts – some of which have been proven in other countries across the globe – that can help accelerate industrial development in Africa by removing barriers to investment and supporting the vital role of small businesses and foreign direct investment.
The starting point is investment. Africa must improve its investment climate with clear rules which allow businesses to plan and capitalise on opportunities. This means creating a predictable, transparent and efficient regulatory environment that reduces uncertainty and improves the business climate, while fostering competition and encouraging foreign direct investment.
Special economic zones can play a crucial role in attracting foreign direct investment by providing a solid, predictable, efficient regulatory and business environment. They are specifically designed to attract businesses and investors and provide them with the necessary infrastructure and support to help them succeed.
One such example is the Dawa Industrial Zone in Ghana, West Africa, which has become a hub for industrial development. With a supportive business climate that provides tax-breaks, streamlined regulations and other incentives, the Dawa Industrial Zone serves as an attractive destination for investors seeking to tap into the growing African market. By creating more SEZs across Africa, the continent can continue to improve its investment climate and encourage economic growth.
Reforms in this area will help unleash the power of innovation – which underpins development across all sectors. Innovation can help spur greater growth and productivity at firms of all sizes, from small-scale entrepreneurs and farmers to established exporters, by helping them adapt to changing market conditions, develop new technologies, or adopt more environmentally-friendly practices as needs arise.
Enhancing innovation is a key priority for Africa. The industrial sector can be an engine of growth, generating jobs and spurring competitive exports that drive stronger economic expansion – but it must be encouraged through incentives such as tax credits or other policies. As industries grow and expand, they create new jobs and stimulate economic activity, thus reducing poverty and improving the standard of living for people across the continent.
However, to achieve these benefits it is essential to create a policy environment that is conducive to investment and growth. This includes reducing the cost of doing business, improving the quality of infrastructure, and promoting innovation and technology transfer. The improvement of infrastructure and transport is crucial to industrial development in Africa. Good roads, ports and airports are essential for the movement of goods and services, while modern and reliable energy systems are critical to the growth of industry.
In addition to creating a supportive policy environment, it is also essential to generate skills and promote investment. A skilled workforce is critical to the success of any industry, and Africa must invest in education and training to build the capabilities and capacities of its people.
Investment is also critical to industrial development, as it provides the capital required to establish and grow businesses, purchase equipment and technology, and create jobs. To attract investment, Africa must improve its business climate, reduce cost of doing business and promote the growth of key industries.
The first step, however, is to develop a clear vision for development. There are plenty examples of industrial hubs that offer valuable lessons – from Shenzhen in China to Minas Gerais in Brazil, not to mention countless cities and regions all over the world. As Africa looks to capitalise on the potential of its natural resources and human resources, promoting growth and creating more jobs can be achieved by focusing on industry clusters that use existing assets and linkages to facilitate industrial growth. This can help drive new opportunities for business development – both domestically and internationally – as well as build a competitive supply base for exports.
Furthermore, Industrial clusters can be effective anchors for development in a number of different ways. Some focus on specific natural resources or provide access to a critical mass of financial services, while others cater to emerging markets and a growing middle-class. Many are also key hubs in global value chains – providing both import and export opportunities as they connect Africa to the international economy. By focusing on these clusters, African countries reap the benefits of stronger growth, increased competitiveness and greater trade opportunities. In this way, investing in industrial clusters becomes an effective strategic approach to achieving long-term economic development.
This approach can help drive industrial transformation by creating new jobs and expanding the tax base, which can in turn be used to improve public services such as education, healthcare and infrastructure – as well as address issues like energy shortages and food insecurity. In addition, investment targetted at industry clusters also provides a framework for accelerated economic growth across the continent – helping to boost local dynamism while facilitating export opportunities that create wealth and jobs for Africans living in Africa.
At the same time, it is important to focus on the expansion of existing industrial hubs and clusters, as well as the creation of more new ones. To help break some of the developmental gridlocks that have held Africa back for too long, governments, African businesses and international partners must work together to create a conducive environment for investment in strategic industrial sectors. This approach can help expand and diversify production capacity – while supporting a competitive supply base, which in turn can help drive economic growth across the continent.
The future looks bright for Africa. At the same time, however, there are many hurdles to overcome. And while industrial development will not be easy, the rewards will be plentiful. As Africa draws on its unique strengths and abundant natural resources, it is well-positioned to reap even greater benefits – both in terms of economic growth and greater opportunity for its people. By enhancing industrial development and capitalising on its vast natural resources while promoting investment and innovation, Africa can create jobs and build a strong economy for future generations.
The writer is an award-winning financial advisory, trade and transformation consulting professional, with almost two decades of enterprise leadership experience across EMEA.
