Prospects for Africa's Industrialization

Premature deindustrialization has serious implications for Africa’s economic development, more so because, as is economists’ typical standpoint, manufacturing is ‘special’ for economic development. The economic importance of manufacturing is predicated on the work of Cambridge economist, Nicholas Kaldor (1908–1986), who sought to explain the economic development of Western Europe through the development of manufacturing. Kaldor argued that economic development requires industrialization because increasing returns in the manufacturing sector mean faster growth of manufacturing output, which is associated with faster economic growth and structural transformation. This is because backward and forward input–output linkages are strongest in manufacturing, and the scope for capital accumulation, technological progress, economies of scale, and knowledge spill-over is strong. The implication, therefore, is that premature deindustrialization poses a threat to Africa’s structural transformation. Although deindustrialization is not peculiar to Africa, it is hitting the continent particularly hard. It is premature, happening at a time when income levels are still very low.

A 2013 report from the United Nations Economic Commission on Africa (UNECA) found that Africa’s industrialization has been weak and inconsistent. In 1980-2009, the share of manufacturing value added to GDP increased marginally in North Africa, from 12.6 per cent to 13.6 per cent, but fell from 16.6 per cent to 12.7 per cent in the rest of Africa. Overall, between 1980 and 2013, the African manufacturing sector’s contribution to the continent’s total economy declined from 12 per cent to 11 per cent, leaving it with the smallest share of any developing region. In most countries in sub-Saharan Africa, manufacturing’s share of output has fallen during the past 25 years.

A comparison of Africa’s industrialization experience with East Asia is quite the study in contrast. While manufacturing provides just more than 6 per cent of all jobs in Africa—a figure that barely changed over more than three decades to 2008—the figure grew from 11 per cent to 16 per cent over the same period in East Asia. Among other factors, the unequal dispersion of global production from developed countries to developing economies is a plausible explanation for this stark difference. While globalization provided opportunities to Asian countries to industrialize, in the 1980s and 1990s, Africa suffered the most severe process of deindustrialization in the developing world. The rapid deindustrialization of many African economies over the decades, resulting in their increasing marginalization in the global economy, was mainly the result of inadequate policies that offer a framework for these countries to tap into and benefit from the global dispersion of production, key into global value chains and trigger industrialization.