Manufacturing remains an essential part of Africa’s transformation
Raising the bar on manufacturing
Summary of paper: Promoting Manufacturing in Africa by Yaw Ansu (ACET), John Page (Brookings Institution), Margaret McMillan (Tufts University, NBER and IFPRI) and Dirk Willem te Velde (ODI)
Industrialization, particularly the expansion and increased sophistication of manufacturing production and exports, and also the expansion of manufacturing employment, remains an essential part of Africa’s economic transformation. Unfortunately, manufacturing as a share of GDP has declined over the past few decades in most African countries, although in absolute terms it is growing.
Even though African countries face difficult challenges in breaking into world manufacturing markets, there are new developments that work in their favor. These include: rising wages in China and a rebalancing in Asia away from export-led to domestic and regional consumption-led growth; Africa’s growing regional markets; falling transport costs; improved access to abundant natural resources; improving firm productivity and access to global value chains; and improving general economic policy environments.
But governments should not stand aloof; to seize these new opportunities they will have to formulate and implement coherent industrial development strategies. The key elements of such strategies must include:
- continued improvements in the basics, including sound macroeconomic management, improvements in the general investment climate and support for the private sector, and development of public infrastructure and relevant skills
- export push, including regional trade and integration
- agglomeration through building and running efficient SEZs and industrial parks
- active FDI promotion and building linkages with local firms
- supporting productivity enhancement of local SMEs and their access to technology and long term finance to help them venture into production of new or technologically more sophisticated products
- improved coherence and implementation coordination within government; and
- strengthened consultation and collaboration between governments and the private sector.
- How do countries raise their focus and commitment to manufacturing, and develop a coherent strategy to promote it? In what visible forms should this be expressed?
- What key measures can countries take to improve their FDI promotion efforts and link the FDI firms to domestic suppliers?
- How can the performance of SEZs and industrial parks be improved; should the private sector’s role in developing and managing SEZs and industrial parks be increased; how can public-private collaboration be increased in this area?
- How best can the state support access of local SMEs to technology?
- How do we increase access of SMEs to long term finance; in particular, how can development banks (and similar institutions) be made more market and performance oriented; what are the changes needed in their governance; what is the scope for public-private sector collaboration in improving SME access to longterm finance for manufacturing?