Africa urged to build credible institutions to boost industrialization

African countries need to introduce credible industrial policies and promote effective industrial policy organizations to enhance the structural transformation of the continent.
This is according to a new report jointly produced by the United Nations Economic Commission for Africa and the African Union Commission, themed “Dynamic industrial policy in Africa: innovative institutions, effective processes and flexible mechanisms.”

In the case of Botswana, the government deliberately took measures to promote economic diversification, especially following the discovery of diamonds.  This was done, for example, by avoiding real appreciation of the Pula to ensure competitiveness of other traded goods. This is in line with key economic principles contained in the Vision 2016 document. The principles include: sustainable economic diversification; increased international competitiveness of Botswana’s economy and; export promotion. These principles were not new when the Vision 2016 document was crafted in 1997, but remain a re-affirmation of the policies pursued since independence.

However, according to the report, transforming Africa’s industrial landscape has failed partly because countries used industrial blueprints characterised by lack of dynamism and high level coordination, as well as inadequate consultations with stakeholders.

Until now, says the report, an examination of Africa’s failure at industrialization had ignored the policy processes and institutions governing industrial policy in Africa or the impact of their inherent weaknesses on industrialization.

The report declared that indeed, weak institutional structures and poor policy design have been at the root of Africa’s industrial policy problem throughout its post-independence history.
While acknowledging Africa’s impressive economic growth in the past decade on the back of better commodity prices, improved governance and increasing domestic demand and trade and investment ties with emerging economies, it says that industrialization is a “precondition for Africa to achieve inclusive and sustainable economic growth.”

Beyond an analysis of the continent’s industrialization problems, and based on the experience of industrializing countries in the global south, the report offers an institutional framework for designing and implementing industrial policy in Africa.

The report recommends that top-level coordination of the industrial policy framework is required to deal with potential problems that could undermine the effciency of industrial policy. Making provision for dialogues between public sector and private stakeholders allows governments and the industrial policy organizations to be adaptable to the changing needs of industry, it counsels.
Regarding the provision of modern infrastructure and logistics necessary for industrialization, the report wants governments with few resources to create “pockets of infrastructure” focused on sectoral or clustering needs of industrial expansion. It recommends industrial parks as one approach which “provides high potential for growth and value addition as well as for solid linkage development and related spillovers among companies, suppliers and service providers.”