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Manufacturing

From Primary Producers to Value Adders

by Solomon Appiah

 

The international system is filled with two major groupings of nations — those who produce raw materials without adding value to them and those who add value to those raw materials. Many of Africa’s nations belong to the former. This is challenging considering that the UN estimates Africa’s current population to double in a mere 36 years. If African nations today are struggling with the provision of basic necessities such as food, shelter and security for their people, how much more when this population doubles, ceteris paribus, in less than one generation? The continent and its current leaders must figure out how to speed up sustainable development in such a way that the continent’s growing population becomes a blessing and not a curse.

It will become a curse if there are more mouths to feed than there is food and if there are more job seekers than there are jobs. Alternatively, the population bulge with sufficient foresight and planning can be a blessing if manufacturing of goods and services is prioritized.

Why manufacturing of goods and services?
The process by which a nation or a continent transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services is defined as industrialization. A major bane of Africa’s challenges has been its inability to industrialize or add value to its raw materials — natural and human — in quantities and with a measure of quality that matter. Adding value to natural resources results in goods or finished produce. Adding value to the human resource results in a thriving services industry. Both are needed for development.

According to the 2014 Africa Progress Report, Africa’s imports exceed exports by 30%. This is bad! Imports imply spending what little foreign exchange reserves African nations have on finished products. When imports (foreign exchange drainers) exceed exports (foreign exchange earners), deficits occur.

Since the trans-Atlantic slave trade era, followed by colonialism, African nations served and continue to serve as primary hubs for the production of raw materials to feed the industrialization of the West and now China. Raw materials are bought at low prices and exported from Africa; value is added by transforming them into finished products like electronics, clothing and food. These are shipped back to African markets at exorbitant prices. This cycle must end because it’s not sustainable.

Does Africa have what it takes?
Emphatically Yes! For African nations to successfully industrialize, they must possess or have access to what are termed the factors of production. Traditionally these are land, labour and capital. Entrepreneurship is also sometimes considered an additional factor. Does Africa have these?

With respect to land, Africa is the world’s second largest continent and home to plenty of land — most of which is arable.

With respect to labour, Africa is the world’s second most populous continent. The 2014 estimate of sub-Saharan Africa alone is 960.1 million. “Africa has the youngest population in the world and will remain significantly so in the future. Approximately 85% of all the people in Africa in 2012 are below age 45 while only 5% of them are old persons aged 60 or more”, according to a UN report.

One may argue that Africa has the numbers but not employable skills. This is controversial because Africans serve in a many disciplines and sectors within the continent and across the Diaspora. It has the requisite labour to industrialize.

Capital refers to man-made products used in the production process such as buildings, machinery and tools. Africa does have a measure of this but needs more — hence the need for greater infrastructural development and skills development. African policymakers as well as their counterparts in the developed world should comprehend that it is time the nature of development assistance to the continent changes from primarily monetary assistance to the type of capital assistance needed for it to industrialize.

With respect to entrepreneurship front, according to a World Bank Policy Research Working Paper, Africa is number one in the world for total entrepreneurial activity among women. This trait is not uncommon in Africa’s men and children alike.

Another factor needed to industrialize is proximity to raw materials. Unlike other nations and continents who had to traverse seas and continents to find labour and raw materials from Africa, Africa already has the raw materials in its land.

Finally, Africa’s impressive economic growth is another favorable factor. PwC’s 2015 predictions forecast that economic growth in Sub-Saharan Africa (SSA) will outpace global growth for the 15th year in a row. Six of the world’s fastest growing economies are currently within Africa. It used to be believed that Africa’s growth was dependent solely on a rise in commodity prices but Oil and other commodity prices have fallen and the growth is still robust. Other reasons have been suggested for this growth. Improved macroeconomic policies, increased investment in infrastructure, institutional development, the deepening of financial systems and rising productivity have been proffered by the 2013 Africa progress report, and the explosion of malls has been suggested by the Economist.

Whatever the reasons may be, its time Africa capitalizes on all the factors in its favor to shift from being a primary produce hub to a continent that also adds value to its raw material — having sufficiently enough to meet its own needs and that of the world at large.

 

Solomon Appiah

Public Policy Professional

Executive Director: Malku Institute of Technology
Director: Education for Transformation
Member: Prisons Service Council – Ghana


Read more about Solomon and his view on being a futurist

 

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