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Productive transformation is a must for Africa – AU Committee

Productive transformation is a must for Africa – AU Committee
Photo credit: UNECA

11 Mar 2019

African Union Ministers of Finance, Economy and Integration call on formulation of clear and concise public policies in accelerating the process of productive transformation in Africa

There is no alternative to the equation of “developing an African industrial fabric, capable of boosting our production and processing capacity, and reducing our dependence on other continents,” recently argued the Prime Minister and Head of Government of the Republic of Cameroon, Dr. Joseph Dion Ngute – an observation that reflects ECA’s current thinking on the structural transformation and diversification of African economies.

He was speaking at the 3rd session of the African Union’s (AU) Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration, that concluded in the Cameroonian capital, Yaoundé, on 8 March 2019.

“[T]he debates surrounding this issue of productive transformation are more relevant than ever, and the need to find solutions remains an urgent one, as the challenges and weaknesses of the continent’s economies have remained for a very long time, due to their excessive extroversion,” Dr. Ngute added.

Discussions at the STC focused on the theme: “Public Policies and Productive Transformation”. The continent has experienced strong economic growth in the last two decades. However, this growth performance did not lead to the development of the manufacturing sectors and did not create enough decent jobs.

In view of the current high population growth composed by 70% of youth, the continent must create more than 12 million jobs per year to prevent unemployment from rising. The Industrial sector should be at the core of the transformation process while taking into account existing complementarities with the agricultural sector and services.

Countries should adopt measures aiming at diversifying their production and exports by promoting the development of blue economy and taking advantage of the opportunity offered by the prospect of digitalization in the continent.

In this context, AU Commissioner for Economic Affairs of the African Union, Prof Victor Harison – speaking on behalf of the African Union Chairperson. H.E. Moussa Mahamat Faki – highlighted that “the acceleration of the development of the African productive sector is essential for the continent to enjoy a second decade of growth and achieve the objectives of Agenda 2063”.

This brings to light the indispensable role of the secondary sector as the great basis for employment, which should contribute more than ever before to inclusive economic growth in Africa, as posited by Cameroon’s Minister of Finance Louis Paul Motaze, who hosted participants of the session.

What, then must Africa do to boost its secondary sector through massive industrialization?

According to Prof. Emmanuel Nnadozie, Executive Secretary of the African Capacity Building Foundation (ACBF), there are six key actions to take in this regard:

  1. Building the right strategy and policy mix for massive industrialization;

  2. Making critical commitments to unleash industrial capacity especially by developing energy and transport infrastructure;

  3. Creating an enabling environment to attract investors;

  4. Mobilizing internal and external support anchored on Africa’s self-belief on its ability to industrialize;

  5. Taking action to make things happen, by “walking the walk and not just talking the talk”; and

  6. Showing visionary and transformative leadership at all levels.

“This STC and other high-level events, such as the ECA Conference of Ministers and the Commission’s Subregional Intergovernmental Committee of Experts, provide an avenue for good quality dialogue to understand what the binding constraints and opportunities to productive transformation are, in order to define pathways towards achieving it,” said Antonio Pedro – Director of the Subregional Office for Central Africa of ECA.

He noted that, it was through such dialogue that the Douala Consensus on economic diversification through resource-driven and trade-induced industrialization was jointly adopted by ECA and representatives of its member States in Central Africa in September 2017.

“We are happy that some countries in the subregion are taking strides towards operationalizing the concept of economic diversification as outlined in the Douala Consensus. It is not a quick fix though. It requires comprehensive and sound diagnosis, integrated and strategic planning, bold and coordinated action from multiple actors. Our office is developing a body of knowledge and practice on economic diversification, which we are already deploying to the benefit of our member States and Central Africa in general,” Pedro added.

In essence, “the starting point for productive transformation is economic diversification, beyond traditional farming and primary commodities, to include agro-processing, high value services for the digital economy and manufacturing,” argued Dr. K.Y. Amoako – former Executive Secretary of ECA who is now President of the African Center for Economic Transformation (ACET).

This, he said, would lead to “growth with depth,” which also requires engaging in competitive exports and leveraging technology.

“My take from this meeting is that there is need for better coordination among our African institutions to the extent that we would have common and coherent narratives on Africa’s development challenges and what needs to be done to address these challenges as well as concerted action to support the continent deliver the “Africa we want”, mooted Adam Elhiraika – Director of the Macroeconomic Policy Division at ECA.

One of such needed actions is to boost human capital development and establish credible institutions in the investment and business ecosystem in Africa.

“There is absolute need for an African credit rating agency – with a granular understanding of the reality of individual countries and Africa as whole which would then ensure a more accurate assessment of risks, challenges and opportunities thus resulting in credit ratings that reflect the realities on the ground,” he said.

Prof Harison paid homage to the UN Economic Commission for Africa (ECA) and a host of other development institutions and partners in Africa for working tirelessly with the AU towards the productive transformation of the continent.

This STC was held in a context in full effervescence with the Signatures and ratifications of the legal instruments of the AfCFTA. The operationalisation of the Pan African Financial Institutions namely the African Central Bank, the African Monetary Fund, the African Investment Bank and the Pan African Stock Exchange will provide the continent with strong and credible Institutions, enabling it to achieve self-sufficiency and implement the strategies for productive transformation.

Discussions held throughout the event concluded in noting that our countries can improve their ability to make the most of the continent's rich endowment of natural resources by investing in the process of productive transformation through the use of new technology and new processing methods of manufacturing goods. These processes will lead to the development of new products and higher value-added activities; and thus creating higher paying jobs in the productive sectors.

In this regard, productive transformation strategies that are anchored on existing comparative advantages will enable our economies to create economic opportunities for the young Africans entering the labour market and, as a result, promote poverty reduction. In order to achieve this crucial objective of accelerating the process of productive transformation in Africa, it is essential to reinforce regional integration and strengthen the potential of the private sector as a key player in the development of the continent.

The Report of the outcomes of the STC will be submitted for consideration at the AU Assembly of Heads of State and Government in July 2019.

Source UNECA and the African Union
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Date 11 Mar 2019
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