Emerging Africa, Full of Holes

bmk-dakar-casa-maart-2011-5

Inside a Senegalese factory

There is a very refreshing new Foreign Policy article on development on the continent, running counter to a lot of the discourse of ‘rising Africa’ and the economic successes of countries in Africa. The author essentially deplores the statistics and articles by the likes of the Economist citing supposedly high African growth and rising incomes, saying in a nutshell that this does not prove that development is taking place, nor does it give reason to the liberal prescriptions of free trade that are still made to so many of these countries. The reason? So many of these countries are developing without substantial increases in their manufacturing industries or (though it’s not said explicitly) in total factor productivity. Shortly put, there aren’t any large gains in actual production, be it quality or quantity, or efficiency.

“The very idea of industrialization has been dropped from the official development agenda. Yet there’s a reason why we all regularly refer to the rich, industrialized countries in the OECD as ‘industrialized.'” -Rick Rowden

The author, Rick Rowden, does not reconsider his basic assumption that industrialization (of the economy) is an unavoidable step on the path to development, but I’m not sure that he needs to. To a certain extent one could point to countries like Qatar and Dubai and say that they have covered much ground without relying so much on their manufacturing bases. But look more closely and one will find that even oil producing countries like Qatar are expanding their manufacturing sectors.

This is an easier critique to make in today’s ongoing financial crisis environment, when there is a better understanding that actually producing goods of value is essential to the foundations of a solid economy.

But in Africa, the trend is certainly not being picked up on as much, especially in oil and primary resource-exporting countries in its West and Central regions. Gabon’s manufacturing sector is around 4%, and Equatorial Guinea’s is also laughably small. But these countries are classified by the World Bank and upper-middle and high-income countries respectively.

Their manufacturing industries are not growing like they should, they are urbanizing at great rates (Gabon has in between 80 and 85% urbanization), and agriculture’s share in GDP keeps falling. The answer for sustainable development, according to some of these governments? The services sector. Now this certainly seems like an improvement of some sort, because a more active services sector would enable production of higher value-added services and can have positive second-order impacts on other industries. For example becoming a hub for international conferences can boost tourism-related activities.

Transportation infrastructure building in Gabon

Transportation infrastructure building in Gabon

But most of these countries are not fit to take on service industry development (not without calling on the likes of international telecom companies to ‘partner’ with them to provide said services). Before being a question of software, it’s a question of hardware. Most are not able to set up the proper facilities, such as industrial parks or expanded electrical grids, internet connections, etc. Then, it’s a question of human capital and know-how. It is true that Gabon (keeping with the example) has a lot of overqualified young people in its cities who do not have jobs- they’ve made that clear. But having a degree and having experience is not the same thing.

So that’s for service sector development. Ultimately the more important point, as if it needed repeating, is that these countries need comprehensive strategies to shift their production, their exports and the makeup of their economy away from the crude exploitation of primary-resources. Fluctuating world market prices in primary goods are one reason for this. Others are: missing out on labor force training and professionalization, industry modernization, total factor productivity growth… The choice for African states is very clear.

Take a look at these tree maps showing a country’s main exports (obtained from Wikipedia):

Gabon exports

Gabon’s Exports

Guinea exports

Guinea’s Exports

China_Export_Treemap

China’s Exports

The two most salient points to come out of the most cursory of examinations of these three squares are: 1) China has a much more diversified production for export (the comparison is unfair, yes, but the contrast is telling). And 2) China exports goods which were worked on in China.

The next step for African countries is to see how they can move to boost their manufacturing/industry capacities. And here as well, Gabon is a country to keep one’s eye on.

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1 Comment

  1. Rick Rowden

     /  March 26, 2013

    Hi, thanks for covering my January 2013 article in ForeignPolicy.com, “The Myth of Africa’s Rise”. I agree with you that my explicit point was about total factor productivity growth, but that that terminology was a bit too wonky for FP readers. But that is indeed my point. Regarding some of the issues you raise about the efficacy of services, you may be interested in a recent (March 2013) online debate I participated in on The Economist website (http://www.economist.com/debate/overview/249 ). I debated these issues with Mr. Wolfgang Fengler of the World Bank. Particularly in my closing statement I tried to point out while new services industries in African economies are very important, most such industries tend to rely on servicing local manufacturers in the same economies, through either forward or backward linkages. While some services can indeed be exported, there are also balance of payments problems that can arise when countries are still importing more manufactured goods than they are exporting in services. Ultimately my main concern, however, is that services alone are not likely to provide enough jobs for the growing urban populations in Africa’s cities, and so I hope countries will take more steps to build domestic manufacturing bases going forward. Unfortunately, many of the industrial policies they will likely need are considered taboo by orthodox economics and many are being outlawed in new free trade agreements (FTAs) and bilateral investment treaties (BITs), something I argue against. Thanks for your interest in these important questions. –Rick Rowden

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