Myths that need to be busted

Industrialization will help Africa achieve sustained, green economic development

Industrialization is perhaps the most potent force that can help Africa sustain or improve its current growth levels. With its carefully developed backward and forward linkages, industrialization has the ability to diversify economies and reduce exposure to external shocks.

It also opens several doors and addresses most of Africa's challenges, such as poverty reduction and the transition to a green economy.

Organizations such as the United Nations Economic Commission for Africa have been at the forefront of the industrialization efforts in Africa. But there have also been some hindrances that have come in the way of the transition process.

Myth 1: Industrialization is a fashionable developmental word that will soon be forgotten.

Although industrialization has always been talked about in development literature, it will now take center stage in Africa due to its close links with the structural transformation of the state. The Plan of Action for the Accelerated Industrial Development of Africa supported by the African Union, ECA, African Development Bank and the New Partnership for Africa's Development demonstrates how the link between industrialization and structural transformation is being taken more seriously.

Accelerated Industrial Development of Africa is based on four pillars - using Africa's own natural resource endowment as a basis for industrial transformation; developing an infrastructural system including energy and transportation; increasing research and development, using technology and promoting private sector development, especially the role of small and medium scale enterprises. It is hoped that these enablers will help in the structural transformation of African economies.

Myth 2: Industrialization is all we need to develop.

African countries must realize that industrialization is a major tool for social and economic transformation of societies with structural transformation being the end result. Structural transformation is often defined as a significant change in the sectoral composition of the GDP, with the share of the primary sector in employment and output shifting to industry and modern services.

Structural transformation can be realized by paying more attention to key developmental elements such as industrialization. At the same time, countries also have to deal with demographic challenges and transform them into dividends. It is also worthwhile to mention that social cohesion can be achieved through less inequality, embracing diversity and increasing human security and inclusive governance.

Myth 3: African countries have tried industrialization before and it failed, so why now?

In the 1960s, newly independent Africa emulated other regions of the world in undertaking import-substituting industrialization. This led to some remarkable progress but was ultimately stymied by the limits of the model and global political economy. This is why today Africa should be mindful of a very different global context. Africa needs alternate models that play to its strengths and satisfy the need for transformation.

With up to 90 percent of Africans still heavily reliant on the agricultural sector, commodity-based industrialization speaks of its strengths. It also offers immediate scope for value addition and plenty of opportunities for exploiting consequential linkages.

Myth 4: Africa is too late to industrialize without polluting the environment

The world has changed since the times of the Industrial Revolution. Coming late to the club gives Africa the opportunity to industrialize in a different manner. It is not just about export-oriented or import substitution models. The new industrialization model should be closer to the commodity production centers, looking at leapfrogging technological potential and with African market growth in mind. It should ensure strong forward and backward linkages and, of course, understand sophisticated global value chains.

Myth 5: Africa's current economic growth will lead to job creation

Based on demographic growth projections, Africa will need to create up to 10 million formal jobs annually as more young people enter the job sector. Current economic growth models do not create enough modern jobs. In fact the highest-growing African economies also have the highest levels of youth unemployment.

Although growth is robust in many African countries, it is propelled by internal consumption that does not benefit all. To reverse this trend proper planning should focus on modernizing the economies though more manufacturing production taken from other parts of the world where unit values are increasing fast and starting by positioning Africa in relation to its natural resources and renewable energy potential assets. These combined with a younger, more educated, urbanized, connected work force will provide unique advantages.

Myth 6: Investors are not attracted by risky Africa.

Intra-African investment has, since 2007, been growing at a 32.5 percent compound rate with South Africa leading with $18 billion invested across several sectors, followed closely by Morocco and Nigeria. In 2011, the rate of return on inward FDI in Africa (9.3 percent) was the highest compared to other regions of the world such as 8.8 percent in Asia and 4.8 percent in developed economies.

This is important because it means Africans are not just asserting themselves in a political narrative. They are also investing more in their own continent. Fortunately others are following. FDI into Africa will reach $50 billion this year, an all-time high.

There is also a growing realization that Africa is no longer as risky an investment decision as it may appear. In fact it offers the best return on investment. So Africa needs to better market itself.

Africa must also be able to deal with the challenge of having to industrialize and grow when its population and cities are growing quicker than any previous historical experience. It wants more as it realizes it will have to be faster than any other region of the world. It needs more because it is high time it turns the "no hope" to "rising" continent story into meaningful changes that will prove the skeptics wrong.

The author is executive secretary of the United Nations Economic Commission for Africa.

(China Daily Africa Weekly 05/23/2014 page8)