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Industrial Revolution: The Dream of Policy Makers and Urgency for Economic Transformation in Africa

“Developing economies people were poor because they were in the wrong jobs: move them from subsistence farms into factories and commercial farms and the economy would grow.” Arthur Lewis

Industrial transformation had already begun in Africa before covid-19 pandemic. The proportion of Africans working on farms fell from 66% in 2000 to just under 58% in 2015. Most of these people flowed into informal services or petty manufacturing, such roadside carpentry, where they earn more than farmers.

Growth in Africa’s manufacturing sector has been low at 4.3% a year between 2010 and 2014, but utilities and construction achieved a significant expansion to ensure that the industry overall generated 23% of Africa’s growth, up from 17% in the preceding decade, according to World Economic Forum.

Africa leads the world in mobile adoption, which continues to offer the biggest cross-sectoral economic opportunities. Mobile payment networks, pioneered in East Africa, opened the wired, global economy to poor, unbanked city and rural dwellers. Companies such as Novartis are using mobile communications to manage their supply chain; Olam has used mobile to reach out to new African suppliers and farmers. These mobile initiatives have achieved huge successes on the continent.

The potential for a remarkable and long lasting e-commerce growth is within Africa’s grasps. Now, it is the responsibility of everyone involved in this market to do everything in their power, so that African countries can truly enjoy and benefit from e-commerce. This remarkable growth the African market is expanding nearly twice as fast as Asia’s has confounded analysts and even service operators. The ITU forecast that there would be 500 million users by the end of 2025.

Commercialisation is most evident in the towns and cities

Africa is one of the last places on earth to urbanize. There is surprisingly little agreement about whether this is a good or bad thing. Some optimists are convinced that Africa’s cities are the new frontier: sustained population growth will drive economic development, with Africa supplanting China as the world’s manufacturing powerhouse.

Rural Africans spend only 40% of their work hours on their farms, and the rest on side-businesses such as transport or trade. They buy nearly half the food they eat, as well as concrete blocks and tin sheets for their homes. Migration to the cities has encouraged the development of slums around large cities with countless inhabitants. The largest informal settlements (slums) are Khayelitsha in Cape Town, South Africa, Kibera in Nairobi, Kenya, and Accra’s Jamestown, in Ghana. The population figures refer to the metropolitan area of Africa’s capitals.

With major cities in Africa currently contributing about $700 billion to the continent’s GDP. Egypt and Nigeria are most populated countries and have many cities. usually, cities size is measured on total Population. Many countries in the continent are developing and undeveloped. Cairo is the largest city by Population and Area in the Continent of Africa located in Egypt with the metro population of 9,120,350 with over 6,000 Sq km Area.

A planned city built during Nigeria’s prosperous 1970s and 80s, Abuja replaced Lagos (the nation’s largest city) as the capital in 1991. It is located in the center of the country and has been named as the fastest growing city in the world. 2016 estimates put its population at over six million people.

Missing across much of sub-Saharan Africa are the roads, rails, ports, airports, power grids and IT backbone needed to lift African economies. This lack of infrastructure hinders the growth of imports, exports, and regional business.

Companies that can connect Africans and markets can prosper. Sub-Saharan Africa is plagued by power outages almost 700 hours a year on average sapping productivity, adding cost and leaving businesses captive to back-up and alternative power options. Massive investment is leading to major upgrades and expansion at African ports and airports, but much of Africa’s growth potential depends on in-country and intra-African road, rail and air connections.

Expanding markets that create economies of scale

In 2000, Africa was labeled “The Hopeless Continent” by The Economist, and in 2011, the cover read “Africa Rising.” As of 2019, it’s seen as an appealing option for emerging market investors. For many businesses, expanding into different geographical locations is an attractive way to penetrate new markets and to deliver growth. Africa has rapidly become an attractive investment destination for multinational companies looking to expand into some of the world’s fastest growing markets in recent years. The continent, now home to more than 1.1 billion people, will account for one-fifth of the world’s population by 2025.

Many of Africa’s manufacturers began life as trading firms, switching from imports to local production. The same logic is pulling foreign companies to the continent. Consultants at McKinsey estimate that Chinese firms handled 12% of Africa’s industrial production in 2017, employing several million people. Only a few were eyeing exports to the West. Instead, 93% of their revenues came from local and regional sales. Tian Tang, a Chinese business in Uganda, was founded by a trader importing suitcases; it now makes steel, plywood and mattresses. Another outfit chasing untapped demand is Roha, an American firm. In Ethiopia it built a factory making glass bottles for local brewers.

African growth is already being driven by internal consumption and investment, argues Carlos Lopes of the University of Cape Town. The expansion of regional trade would reinforce that dynamic, especially in industry. Manufactured goods make up only 19% of African countries’ exports to the rest of the world, but 43% of what they sell to each other.

Yet Africa will not get rich by producing only for itself. The countries south of the Sahara have less combined purchasing power than Germany. To find larger markets, firms must export to the world. As they learn to compete globally, they also become more productive

Export-oriented industrialisation adoption

Trade protection, industrial policy, and the ability to conduct macroeconomic policy are necessary for successful development. Export-Oriented Industrialization was particularly characteristic of the development of the national economies of Japan, South Korea, Taiwan and Singapore in the post World War II period.

The African trajectory is far from being based on export-oriented industrialisation. In some regions of the continent, land transfers are on the rise, the result of wholesale expropriation of land by real estate speculators, large corporations in the natural resource business, and by state-led infrastructure development.

Export oriented industrialisation is the orthodoxy and is widely indicated as a development path for sub-Saharan Africa. Industrialisation is therefore part and parcel of the complex modernisation process. With industrialisation, socio-economic development is attributed to great advancement in technological innovation. This technological innovation that necessitates industrialisation rests in the area of large-scale energy production as well as metallurgy production.

Proper industrial policy is also another important tool for effective export oriented industrialization, as a country’s industrialization depends on how individual domestic firms are protected. This is because, it is individual firms that innovate and harness technological change and compete in the world market.

Africa needs to provide job opportunities to millions of young people. Only a massive industrialisation effort will enable Africa to eradicate poverty and achieve sustainable development. At the same time, this will facilitate dynamic processes of technological innovation, skills development, knowledge-intensification and capital accumulation.

Export-oriented industrialisation overcomes the smallness of the domestic market and allows an LDC to take advantage of economies of scale. The expansion of manufactured exports is not limited (as in the case of import substitution industrialisation ISI) by the growth of domestic market.

Adding value to agriculture and our natural resources

Even if Africa decides to ignore export markets, the continent’s one billion people provide a huge and a ready market for agribusiness. Still, every year, African countries import more than 70 percent of wheat consumed, over 300,000 tons of chicken and spend more than $10 billion on imported grains, especially rice.

Experts says automation, competition and shifting demand are closing the door to countries wanting to copy Asia’s industrial revolution. Yet not everyone needs a factory job. Many Africans will move from subsistence farms to commercial ones, or from living alongside a game reserve to guiding tourists around one. Economic transformation, of a distinctively African kind, is a prize worth chasing.

Free trade between and within the continent’s economic blocs would make a huge difference. Africa’s share of global trade a meager 3% can only increase if the continent’s commodity and consumption-led economies begin to produce a broad array of goods for home markets and export.

And an increase in local beneficiation in the commodities sector could be a driver of growth processing local commodities (such as minerals, coffee, cotton) in the country rather than exporting them in raw form. That said, it will continue to be a challenge for regions with poor power and infrastructure to compete as global manufacturers.

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