For many African countries 2010 marked 50th year of independence from European colonialism. However, there is very little to celebrate as the continent remains the poorest in the world and the majority of its citizens continue to languish under poverty, hunger, malnutrition, illiteracy, civil strife, and political suppression after half a century of freedom from colonial occupation.
Unlike some countries in Asia which overtook many advanced economies in a matter of thirty years, Africa failed to catch up in 50 years because it failed to industrialize. Emphasizing the importance of rapid industrialization for development and survival of a nation in no uncertain terms, Joseph Stalin, autocratic but visionary communist leader of USSR, in his speech to Industrial Managers in February 1931, reiterating previous warning by Vladimir Lenin, stated:
“… And those who fall behind get beaten. But we do not want to be beaten. No, we refuse to be beaten! One feature of the history of old Russia was the continual beatings she suffered because of her backwardness. She was beaten by the Mongol khans. She was beaten by the Turkish beys. She was beaten by the Swedish feudal lords. She was beaten by the Polish and Lithuanian gentry. She was beaten by the British and French capitalists. She was beaten by the Japanese barons. All beat her because of her backwardness, military backwardness, cultural backwardness, political backwardness, industrial backwardness, agricultural backwardness. They beat her because to do so was profitable and could be done with impunity?Such is the law of the exploiters-to beat the backward and the weak. It is the jungle law of capitalism. You are backward, you are weak-therefore you are wrong; hence, you can be beaten and enslaved. You are mighty-therefore you are right; hence, we must be wary of you. That is why we must no longer lag behind.”
In fact many attribute Stalin’s prophetic warnings of 1931 as an internal force that galvanized Russia’s nascent industrialization and ensured unequivocal victory against Hitler’s Nazi invaders who mistakenly believed that Russia could be beaten this time as well. Rapid industrialization within a decade ensured not only Russia’s survival as a nation but also changed the course of the world history for over half a century. What a visionary leadership!
Today, Africa’s survival is at stake. Countries at similar level of economic development with many African countries only thirty years ago are now providing aid to Africa-famine relief aid, development aid , and so on and so forth. Africa is still dependent on aid, dependent on technology and dependent on markets of former colonial masters. In fact, Africa is more dependent on global community today than it was during the pre-colonial and colonial times. Thus, 2010 is indeed the year of 50 years of dependence for most African countries and the so-called celebrations of independence are typical waste of resources.
This has happened because Africa missed two fundamental revolutions that fundamentally altered global economic landscape: the industrial revolution and the green revolution. Africa is struggling to embrace the latest information and communication revolution, but still there is no guarantee that it will not miss this one too, unless the continent’s leaders radically alter their policy choices, priorities and mind set.
No doubt that Africa made some progress since 2001. The African economy grew 6% for more than 7 years for the first time in history. However, this is not enough to lift the continent’s nearly 400 million people living below less than a dollar a day. Although there are more people living on less than a dollar a day in India than in Africa, due to rapid industrialization and economic growth India is likely to reduce the level of poverty faster than Africa. India’s economy has been growing nearly double digit for the past decade and the country is poised to overtake many advanced economies in the near future. On the other hand, only about one-fifth of African economies grew more than 7% on average for the past decade and the sustainability of this growth is at stake because of heavy reliance on exports of primary commodities and the danger of deindustrialization.
Unless Africa industrializes rapidly and urgently, sustained economic growth and development will continue to elude the continent once more. Successful industrialization depends on both global and local economics: comparative advantages, access to trade, the availability of infrastructure, conducive macroeconomic environment, ease of technology transfer and so on; but the core challenge is the development and adoption of appropriate industrialization policy and strategy in the continent.
African industrialization policy and strategy
It is widely accepted today than any time before that Africa will never achieve sustained economic progress without rapid industrialization. The recent financial and economic crises indicated that economic growth driven by commodity price boom is highly susceptible to external trade shocks. Industrialization is also essential for Africa’s full integration into the global economy. Africa’s current share of global output of less than 2% and trade of about 3% indicate that the continent has miserably failed to benefit from globalization. The main reason for this dismal performance is the failure of industrialization in the continent.
Schneider-Barthold (2002) argues that the main reason why industrialization of Africa failed is the marginalization of indigenous small businesses and focus on industrialization from outside. He argues: ” The strategies of the donors in the North and the African power elites were and still are more interested in setting up capital-intensive large concerns than promoting the growth of existing small-scale and micro-enterprises. But since modern big businesses fail to find the environment they need for their operations they are not capable of surviving and contribute hardly anything to the development of the African economy and society.”
After decolonization most African countries followed “catch-up industrialization” policy wrongly aimed at emulating the level of development of advanced economies instead of catching up on the industrialized nations’ route to development. The need to embark on long and arduous task of developing internally to catch ?up the advanced economies was fatally overlooked by many African economies. As a result of this most African countries not only failed to promote the indigenous small businesses as a starting point for industrialization but saw them as backward and subjected them to discrimination and marginalization through various inimical regulatory policies.
Industrialization from outside meant that African governments embarked on import of capital intensive state-of- the- art technology from the west which were often managed by foreigners , created few jobs for the local unskilled people and produced goods with limited local markets and markets in neighboring countries. This created islands of modernity amid overwhelming challenges of lack of power, communication and other infrastructure services and other supply constraints. At the same time, the African governments created rules and regulations which favoured and subsidized the import of everything new while discriminating , criminalizing, and persecuting the existing indigenous small establishments and pushing them into informality (Schneider-Barthold , 2002).
The use of modern technology was not wrong in itself. The modern technology should not have been used to displace indigenous technologies-local artisanship, craftsmanship and other small and micro businesses that were pillars of the local economies for centuries. Systematic policy instruments should have been developed to ensure that modern technologies complemented indigenous establishments rather than displace them.
The policy of industrialization from outside was pursued in African until the 1980s and cost the continent dearly in terms of (a) displacement of indigenous small businesses and obstruction of industrialization from below which could have created massive job opportunities and brought about balanced economic development, (b) job creation for skilled people from abroad where modern plants were manufactured instead of the local people, (c) fiscal loss in terms of massive subsidies and tax incentives, (d) massive corruption and rent seeking by political elites, and finally and consequently (e) massive poverty and underdevelopment.
Most African countries understand that the industrialization policies and strategies they pursued during the past 50 years were disastrous. But no country has provided consistent policy alternative to reverse the trends. Most countries have developed strategies to promote small and medium enterprises (SMMEs) in Africa , but the regulatory environment in many of these countries are still inimical to growth of such businesses. The World Bank 2010 Ease of Doing Business Report indicates that Africa is the worst place to do business by local limited liability companies operating in big cities. The climate for micro and smaller businesses operating in small cities are even worse.
Apart from these, the trade liberalization measures pursued by African countries continue to decimate small businesses in the continent. In particular, the recent EU Africa Economic Partnership Agreements (EPAs) that require reciprocal liberalization on the part of the continent over 10-12 years period and which are already signed by some African countries will wipe out the little industrial base left in the continent if implemented as planned.
Challenges and the way forward
Therefore, challenges for Africa’s industrialization include: inimical private business climate, limited industrial skills and technological capabilities, weak support from institutions, poor infrastructure, inadequate financing and underdeveloped internal and regional markets.
The current regional integration processes could assist Africa’s industrialization drive by increasing production competitiveness through economies of scale and scope, increased trade opportunities through larger markets, increased opportunities for larger investments, and increased bargaining power (UNIDO, 2009).
There is a general agreement now that Africa must not only focus on industrialization as a critical engine of economic growth and development, but the continent should develop more effective strategies and policies to speed up industrialization. Africa Industrialization Day was established in 1989 by United Nations General Assembly and is celebrated on November 20 every year; like the celebration of independence days, there is very little to celebrate on Africa Industrialization Day! The recent Action Plan for the Accelerated Industrial Development of Africa (AIDA) was a step in the right direction but again these are still beautiful words with no concrete actions.
While African countries need to address the challenges of poor infrastructure, limited industrial skills and technological capabilities, and financing of investments urgently, two fundamental challenges at the center of Africa’s industrialization drive need to be prioritized: the increased role of government in industrialization, and the private sector business climate. It is essential to balance the roles of the market and government. China, as a new and reliable development partner of Africa can provide useful guidance in this regard, as its own economic success was the result of government entrepreneurship. African countries need to adopt industrial policies and strategies that are suitable to their own situation and these policies must be generated, owned and managed by the Africans. African leaders should take leadership of African development as Asian leaders did.
Equally important is addressing the uncertainty in the investment climate for the private sector, both high-tech foreign and domestic investments as well as indigenous micro and small businesses. Africa must create conducive regulatory environment for private sector development as a matter of urgency. Currently, the continent is the most difficult place on earth to do business by the private sector due to inimical regulatory hurdles.
Finally, Africa will not be able to achieve accelerated industrialization without effective regional integration. About 15 African countries are mini-states with population of less than 5 million. Without larger regional markets, these countries find it difficult to make viable investments in industrial production. Further 15 countries in the continent are landlocked and hence need less costly access to the ports of the regional member countries to export and import goods. Apart from these, effective regional integration will provide African countries with one voice to negotiate trade deals with external partners to maximize trade benefits from such deals. The current EPAs with EU underscore the importance of such regional voices. Otherwise, smaller countries will be bullied by the economic giants such as the EU into signing trade deals that perpetuate economic dependence for the next 50 years.
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