The Path to Africa’s Transformation

Agenda 2063 highlights industrialization and integration as critical enablers of Africa’s transformation, as do the African Development Bank’s High Fives. How do we combine these to build a resilient continent?

Africa needs to accelerate the pace of industrialization to encourage broad-based growth. Africa’s growth has been impressive over the past 15 years, picking up from an average of around 2pc during the ‘80s and ‘90s to just above 5pc between 2001 and 2014. Growth has, however, dipped to just below 4pc since 2014, largely in response to a global decline in commodity prices.

This illustrates the continent’s continuing dependence on commodity demand, and highlights the need for it to strengthen its economic base through further industrialization – currently, Africa accounts for less than 2pc of global manufacturing, while manufacturing has been stagnant or declining as a percentage of GDP in all but a few countries.

Regional integration must be a core component of industrialization. Among the various pathways to industrialization – strengthening democratic institutions and ensuring transparent and accountable governance, for example – regional integration is one of the most underutilized. While manufactured goods make up only around 20pc of Africa’s total exports, they make up around 60pc of trade between African countries.

This highlights the opportunity that Africa represents as a buyer of its own manufactured products – especially those that are costly or difficult to import from more far-flung regions. Still, despite some improvements in opening borders, the continent remains highly fragmented – existing intra-regional trade levels are the lowest in the world – and the potential for intra-African trade largely untapped. For example, a truck delivering goods to supermarkets across borders in Southern Africa can be expected to carry up to 1600 documents to satisfy various legal requirements.

Further, visa regulations make it harder for Africans themselves to travel within Africa than for North Americans or Europeans, and limit visits and exchanges that encourage trade. Restrictions like these make intra-regional trade in Africa the most expensive in the world – costs are 50pc higher than in East Asia, for example – and, in many instances, create a situation where Chinese or European markets are ‘closer’ to many African countries than their neighbours.

We also need to open our borders more to give opportunity for our people to work across borders. Free movement boosts our economies and helps to transfer skills, knowledge, technology and best practice. It encourages better understanding among ourselves and reduces the tendency for conflict; it enhances integration, which is at the core of the African Union itself.

But if you think of it, our people have always migrated. The Bantu people are today part of the cultural diversity of East and Central Africa. The Nilotic people are found right across the Horn of Africa and the beautiful Mande people in West Africa stretch from Chad to Mauritania. It has enriched our culture for centuries. It is the bedrock of our common African identity.

I am also convinced that we have not fully exploited the Africa Youth Volunteer Exchange Program that can be scaled up and used to give young Africans the opportunity to experience other cultures and countries, open their eyes to new opportunities and help them learn that we as Africans can work together to find solutions to our own common challenges.

Infrastructure investment is a critical enabler of integration. Reducing tariffs and easing legal restrictions on movement are crucial, but insufficient. To boost integration and trade, dramatic improvements in Africa’s connective infrastructure are needed. This includes not only investments in transport networks, but also those that create shared infrastructure to facilitate trade and exchange, such as investments in information and communications technology and regional markets for services – energy pools that allow power plants to distribute energy across multiple countries, for example.

The African Development Bank estimates that there is an annual financing gap of 50 billion dollars to meet Sub-Saharan Africa’s infrastructure needs. Closing it will require drawing in greater private sector investment. One way to do this is make more strategic use of development finance and support. Investors often bemoan the lack of investable or ‘bankable’ infrastructure projects on the continent. While there are several facilities available to assist investors with the costs of identifying and preparing projects, awareness of these is low and facility design is often ill fitted to investor needs.

There is a need to better match facilities with investors through initiatives like the Infrastructure Consortium for Africa’s (ICA) Project Preparation Facilities Network (PPFN), which aims to increase reach, collaboration and learning among support providers on the continent. New financial instruments can also help alleviate risk aversion in private investors. For example, the Asian Development Bank (ADB), in partnership with the India Infrastructure Finance Company Ltd. (IIFCL), has created a 128 million dollars “project bond guarantee facility” that raises the credit rating of infrastructure bonds by absorbing a portion of risk.

This free movement of goods and people will only become a reality when we build links across the continent; roads, railways, airports, the ports that will allow us and our goods, services and capital to move seamlessly around the continent. We already have taken steps in this regard. The Yamoussoukro declaration is a good example that if implemented, would transform air travel within the continent by making our air space open and more accessible, affordable and, facilitate the movement of goods and people. We recently launched the AU passport which we should all fully embrace and roll out.

The call for industrialization is not new for Africa, but we must now heed it in a different way. Global markets will play their part, but we must not forget the opportunities that lie on our own doorstep. Let us clear the way for them.

Africa must take responsibility for the growth of its own economy and institutions. We have the means and the capital to do so. Africa’s financial challenges are not only lack of funding but also lack of effective, inclusive and optimal use of available resources. In Agenda 2063, we now have a blueprint that guides our development path for the next fifty years.

By Amina Mohamed
Ambassador Amina Mohamed is a Cabinet Secretary for Foreign Affairs of Kenya and Kenya's candidate for the position of chairperson of the African Union Commission (AU). This piece is the second of four op-ed series provided exclusively to Fortune.

Published on Jan 03,2017 [ Vol 17 ,No 870]



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