INSIGHTS & IDEAS

Policies for resilience and economic transformation in Africa: setting the agenda for a post-COVID-19 era

August 25, 2022
JICA’s TICAD-8 side-event Policies for resilience and economic transformation in Africa: setting the agenda for a post-COVID-19 era was held online on August 23. Speakers and panelists explored the topic of Africa’s economic resilience against future shocks, discussing policies and actions that can drive economic transformation in the context of current global, continental, and regional megatrends. The webinar was underpinned by policy-oriented research jointly carried out by ACET, in collaboration with the Ogata Sadako Research Institute for Peace and Development on behalf of the Japan International Cooperation Agency (JICA).
Key research findings on resilience, vulnerability, and transformation

Dr. Roberto J. Tibana, ACET’s Director of Research, presented key findings from the report Transforming and Building a Resilient Economy in Africa in the Post-COVID-19 Era: Resetting Priorities for the Policy Agenda. He laid out the patterns of economic growth in Africa over the past 60 years, where economic growth has been characterized by accelerations, stagnations, and reversals, all driven by global business and growth cycles and idiosyncratic shocks.

The research found that even during periods of high economic growth, most African countries failed to transform – exhibiting limited improvements in the economic diversification of production and exports, export competitiveness, and productivity and technological upgrading, putting at risk the steady progress on improved human economic well-being. Countries that do not transform are less resilient, meaning they are unable to withstand shocks and to quickly and strongly recover when negatively impacted, which can reverse progress on human economic well-being. The study found, for example, that low transforming countries suffered twice as much loss in growth from the shock of the global financial crisis in 2007 as high transforming countries.

To enhance Africa’s economic resilience against future shocks the study recommended that African governments, with support from their development partners, prioritize policies that promote diversification, productivity increases, export competitiveness and human well-being (growth with DEPTH), increase investment in skills development, productive jobs creation, and capacity retention, and provide conducive settings for institutional and economic governance. Dr. Tibana also called for a coherent industrial policy, meaning interventions and government policies aimed at improving the business environment or directing resources toward economic sectors, technologies, and activities that offer better prospects for economic growth and transformation. Governments should adopt systematic approaches and methods of policy design that include learning from other countries and holding effective dialogues with the private sector. They should also coordinate and develop industrial policy organizations such as banks, capacity-building groups, training institutions, and SME support units.

The renewed importance of industrial policy

Throughout the session, participants expressed their appreciation of the research recommendations’ focus on bringing back industrial policy to deliberately drive economic development. In her opening remarks, Ms Nardos Bekele-Thomas, the CEO of AUDA-NEPAD, highlighted the success stories of countries in Asia and Latin America that have created successful economies with the aid of active development banks and scientific and technological innovation and emphasized the importance of the AU’s Agenda 2063 and its goals for accelerated industrial development.

Prof. Joseph Stiglitz of Columbia University, Co-Founder and President of the Initiative for Policy Dialogue, commended the report’s focus on resilience building through economic transformation, and referred to the current resurgent interest in industrial policy as a sign of the end of neoliberalism. He noted that the passing of the CHIPS Act in the US showed that even the main opponent of industrial policy has now become a proponent. He sees the rapidly changing economic ideologies as an opportunity for African countries to implement new development strategies.

Professor Izumi Ohno, of the National Graduate Institute for Policy Studies (GRIPS) and Senior Research Advisor at the JICA Ogata Sadako Research Institute for Peace and Development emphasized that industrial policy should be more broadly defined today, considering the developments in the current age of digitalization and the growing importance of Information and Communications Technologies, but also the increasing concerns about climate change, the need to implement SDGs and reach other socio-economic targets.

The role of manufacturing in job creation and African economic transformation

Stiglitz agreed with the report’s findings about the need for structural transformation to ensure sustainable growth in Africa. However, he also cautioned that, while manufacturing is an important component of structural transformation, the sector alone cannot meet Africa’s growing employment needs. According to Stiglitz, there is a need for new growth strategies that go beyond industrialization, with a focus on increasing productivity and diversification beyond manufacturing, and also in the services and agriculture sectors.

Ohno argued for a more important role for the manufacturing sector in Africa’s economic development. She noted the important role of emerging digital technologies and automation in the sector in developed countries – something that has yet to happen in Africa. Ohno sees a lot of room for Africa to work on manufacturing, in particular, by building backward linkages, encouraging knowledge spill-over, and driving labor absorption.

Walking the walk: from recommendation to implementation

A common theme during the panel discussion was the importance of implementing the critical recommendations identified in the research paper. Prof. Martin Bwalya, Director of Knowledge Management and Program Evaluation at AUDA-NEPAD, identified a number of barriers that have held back progress in the past. First of all, many public institutions have limited resources and insufficient accountability. Secondly, ministries are not working together enough, leading to major inefficiencies. Thirdly, African institutions have not employed many of the very well-educated and well-trained young people who are under- or unemployed today. And lastly, there has not been enough public-private engagement – the private sector is interested in development and should be seen by the public sector as a partner.

Cynthia Samuel-Olonjuwon, ILO Assistant Director-General and Regional Director for Africa, highlighted the importance of action plans to ensure effective implementation. The ILO is currently working with the AU on a comprehensive African youth employment strategy that will translate the aspirations of the AU Agenda 2063 and the AUC’s Ouagadougou + 10 Declaration into concrete actions. She underlined the importance of each country in Africa developing and implementing a comprehensive plan for transformation – and added that national development plans have to be developed in a way that facilitates decent jobs for young people.

The importance of partnerships as part of the formula for successful implementation was highlighted throughout the event. Samuel-Olonjuwon and Bwalya both called for a whole-of-government approach – with different Ministries working together more effectively towards the same transformation goals. Stiglitz, meanwhile, remarked that more attention should be given to local and regional governments, civil society, and a whole variety of a broader ecology of institutional arrangements, including cooperatives and new institutional arrangements that may be more appropriate for Africa.

Stiglitz also noted that as the world has entered a new era of geopolitics – a new Cold War – African countries have to carefully navigate their position in troubled waters. According to Stiglitz, this includes examining heavily debt-dependent development strategies by rethinking debt structures and reconsidering the sources of credit. He also urged African countries to choose development partners that are more democratic, as this is likelier to lead to broader-based, more people-oriented development.

Key Takeaways from the panelists:

Roberto Tibana: We need a modern view of industrial policy, and a broader concept of diversification: not just transforming between sectors, but also within sectors, and across sub-sectors and activities.

Joseph Stiglitz: The importance of structural transformation for economic resilience, and the role of diversification, both in terms of sectors and actors, in driving that transformation.

Martin Bwalya: The importance of implementation and walking the talk. We need more programs like Energize Africa that are not about box-ticking, but about delivering results.

Izumi Ohno: External partners need to support African leaders responsibly in working towards a broader view of industrial policies, to achieve transformation with higher productivity activities.

Cynthia Samuel-Olonjuwon: The recovery from COVID for Africa should be human-centered in a way that would facilitate the needed transformation for inclusive, resilient, and sustainable development.

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