AS the continent marked “African Industrialisation Day” on November 20, a major reason offered for its failure to rapidly shift millions out of poverty continues to be its role as an exporter of raw materials or unprocessed resources, only to spend the cash earned importing the finished product at a much higher price.
The failure to value add—enhance a product to earn more from it— is usually put down to a lack of processing facilities and infrastructure, meaning the region is bulking up others’ economies, only this time with its own consent.
The costs are enormous: A cup of coffee in Kenya for example retails anywhere between $3-$5, prices comparable to those in Europe, despite the country exporting nearly half of its harvested green coffee. An Ethiopian farmer producing the prized Arabica strain earns just a dollar for a pound of green coffee; in the UK a pound of roasted coffee fetches $19.
Indeed, some countries like Egypt, South Africa and Morocco, which do not produce any green coffee of their own, make more money re-exporting value-added coffee—ironically sometimes back to the continent— than most primary African growers.
Minerals and metals have not been spared either—A large chunk of China’s growth was built on the uptake of cheap resources imported mainly from the continent, and on cheap exports back to its same suppliers. Nigeria, Africa’s largest crude oil producer imports the bulk of its own oil—now refined outside, and is only now scrambling to bring long mothballed refineries back online.
But many African countries are looking to change this. Ivory Coast, the world’s largest cocoa producer, in May opened its first industrial-scale chocolate factory. The importance of the industry to Francophone Africa’s largest economy is apparent when one looks at the numbers: “brown gold” accounts for a fifth of its GDP, more than half of exports and two thirds of people’s jobs and incomes, according to the World Bank.
Ivory Coast president Ouattara at a chocolate factory.
Last year, the country’s producers pocketed profits of $2.3 billion, nearly a fifth of global profits—and that helped re-elect president Alassane Ouattara in a landslide last month. Yet the world industry made nearly ten times as much profit—mainly earned by manufacturers and retailers.
The Ivorian leadership has expressed interest in “exporting finished and semi-finished products”, and according to the International Cocoa Organisation, the country could soon become a leader in cocoa bean processing.
Value addition, especially through manufacturing, holds rich promise for the continent’s prospects. It is a quick way to move a lot of people from jobs that have low productivity, such as the continent’s main-stay agriculture, into higher productivity jobs and without the attendant cost of training them for high skills.
This translates to higher productivity, and all-round earnings that help support growth in infrastructure and social services, which when ploughed back become a virtuous cycle, making for more growth, and eventually moving those workers into better jobs.
Africa is however still low on the manufacturing scale, and has actually been losing its share of the global market, from 3% in 1970 to under 2% in 2013. For the vast majority of African countries, the average share of manufacturing in industry is at about 10%, which is too low, as the executive secretary of the UN’s Economic Commission for Africa (UNECA) Carlos Lopes argued in an article elsewhere on this publication.
The challenges the continent faces in raising the role of manufacturing in its economy will be the focus of a key report next month by UNECA, building on increasingly vibrant pushes by the AU and the new Sustainable Development Goals to increase the number of jobs.
The Ivory Coast is not the only country that has been making progress on increasing industrial value, according to 2014 data from the World Bank, which describes value add as the net output after accounting for all outputs and inputs.
Ethiopia’s state-led push into industry has been well documented in recent years, but the sight of Madagascar, which has been plagued by political conflict at the top of the pile is an unusual one. Data for last year is unavailable, but it saw a 22.7% annual growth in industrial value in 2013, from 9.3% in 2012. While alive to the statistical limitation, we extrapolated that data to 2014 mainly to highlight the remarkable jump, as the gains from the resolution of its political crisis start to come through.
Still-rebuilding Mozambique is also a star performer, as is Tanzania. Highlighting the role industrial development can play in an economy, think-tank Brookings says that while the east African country, one of the continent’s more successful ones in this area, has about 40 companies hiring about 10,000 people in its special economic zones, Vietnam has 3,500 firms in its zones and which have employed 1.2 million employees.
Even the Democratic Republic of Congo does well in growing its share of the pie, as does little-heralded Cameroon, and even strife-hit Burundi—though this could be wiped out if the country’s political crisis persists.
On the other end of the scale is Nigeria, perhaps unsurprisingly so, and which has seen the annual value added to its industry actually contract. Zimbabwe, Sierra Leone and even Mauritius and Seychelles have also recorded contractions.
Our count also does not tell the whole story—Burkina Faso in 2011 saw a 23.9% growth in industrial value, before declining a staggering 32 percentage points the following year. Other major swings were in Ivory Coast following its conflict years but this time for the better, but Rwanda booked just 5.8% annual value growth from 17.6% three years earlier, while Sierra Leone has also dipped significantly.
It is also worth keeping in mind that these growth rates are from extremely low bases, but at worst they indicate a deliberate continent-wide effort to challenge the status quo.
The higher inference is that Africa is making the effort to industrialise, with a major research project sponsored by the African Development Bank, Brookings and United Nations University-World Institute for Development Economics Research set to answer the deeper question of just why progress has not been faster.