By Francois Fouche
The results of this first edition of the African Industrialization Index (AII) released by the African Development Bank last week, show that most African countries are making slow and steady progress on industrial development. Only a handful of countries have already developed sophisticated manufacturing capabilities.
Encouragingly, the new Index shows that industrial development is taking place across the continent.
The top quintile in the African Industrialisation Index ranking includes South Africa, three North African countries (Morocco, Tunisia and Egypt), along with Mauritius, Eswatini, Namibia, Côte d’Ivoire, Equatorial Guinea and Senegal.
The strongest progress was seen in Benin, Ethiopia, Eritrea, Gabon, Guinea, Mauritania, Mozambique, Senegal and Seychelles, all of which lifted their ranking by five or more places over the 2010–2019 period.
- In the ‘Performance’ sub-index, countries that perform well include those that generate the highest manufacturing value-added per capita, with a substantial share of their manufacturing output destined for export. In particular, Eritrea and Mauritania improved their rankings significantly, driven by strong export performance.
- The ‘Direct Determinants’ sub-index reveals several countries that have risen through rankings on the back of strong private sector growth and increases in foreign direct investment (FDI). Mozambique, in particular, rose 32 places into the top quintile, driven by large increases in total FDI, although much of this went into the oil and gas sector.
- The ‘Indirect Determinants’ sub-index shows that a good range of countries, including Burkina Faso, Côte d’Ivoire, Kenya, Mauritania, Niger, Tanzania and the Seychelles, have improved their business climates, while Burkina Faso, Côte d’Ivoire and Tanzania have all seen improvements in their market size and the quality of their infrastructure.
Jobs are not being created at the pace required to match rapid population growth and take advantage of the resulting demographic dividend. There is a growing consensus that African countries need more proactive industrial policies, to foster growth in the most promising industries. Industrial policy has a chequered history on the African continent, and for many years African governments have been advised to limit their efforts to creating a level playing field for private investors.
Recently African countries, like Ghana, Ethiopia and Mauritius, among others – have begun to work in collaboration with the private sector to identify and support infant industries, based on ‘educated guesses’ about their growth potential. And developing new policy instruments that enable them to make targeted investment in infrastructure and skills, help firms access capital, technology and export markets, and broker linkages between manufacturers, investors and customers. While these initiatives remain at an early stage, there is good reason to believe that interventions of this kind are essential for kickstarting Africa’s industrialisation.