Building capacity to help Africa trade better

Regional integration is a primary condition for Africa’s industrial revolution


Regional integration is a primary condition for Africa’s industrial revolution

Regional integration is a primary condition for Africa’s industrial revolution

“Regional Integration in Africa,” the theme of this year’s October 28-30 African Economic Conference (AEC) in Johannesburg, is at the very core of the quest for the continent’s industrial revolution.

The AEC is an annual business intelligence forum organized by the African Development Bank (AfDB), the UN Economic Commission for Africa (ECA) and the United Nations Development Programme (UNDP), to discuss the continent’s major economic development challenges.

The conference groups government leaders, policy-makers, researchers and development practitioners from Africa and other parts of the world. This year, discussions will focus on how the continent of 54 disparate states can overcome its fragmentation and pool resources for industrialization and productive growth.

Africa’s stunted growth has mostly been attributed to the absence of large economic space that can spur and sustain economies of scale which is a primary condition for genuine economic development.

Empirical data suggest that the quest for an African industrial revolution can only occur where large markets drive competitive production to satisfy demand and supply, facilitated by appropriate public policies.

The lack of these probably explains why the traditional import substitution development and several industrial strategies enacted by many African governments in the past half century have failed to ignite and sustain worthwhile productive entrepreneurship.

Thus, for Sub-Saharan Africa, the need to build economies of scale would depend on the availability of energy, transportation, communication and social infrastructure, water resource management, fiscal convergence and labour mobility, among others, that feature prominently on the agenda of the African Economic Conference.

Integrated infrastructure helps to expand the political, economic and social space for increased production and consumption of goods and services. Besides, globalization and technology have respectively condensed space and heightened competitiveness to the point where micro entities can no longer survive on their own. They must come to the market with a variety of quality goods and services.

Even for the so-called resource-rich countries, indications are that relying solely on the proceeds of extractive industries without value addition would not deliver sustainable development.

This would only entrench the practice whereby African countries compete against each other vis-à-vis external partners in a buyers’ market where technology and innovation are gradually replacing hydrocarbons with biofuels and other forms of green energy.

The 2013 Africa Competitiveness Report on the theme “Connecting Africa’s Markets in a Sustainable Way,” makes this point more clearly. According to the report, jointly produced by the AfDB, the World Bank and the World Economic Forum, regional integration can help Africa to raise competitiveness, diversify its economic base and create enough jobs for its young, fast-urbanizing population.

This can be done by:

  • Closing the competitiveness gap in which Africa is trailing other emerging regions by investing in quality institutions, infrastructure, macroeconomic policies, education and technological adoption.

  • Facilitating trade by liberalizing intra-African trade currently estimated at 11 percent and by removing trade barriers; and diversifying products away from primary commodities.

  • Building better energy, transportation and ICT infrastructure to link up African producers and consumers thereby leveraging economies of scale in manufacturing and service delivery.

  • Developing growth poles through public-private investments in industries and support infrastructure to boost productive capacity for local and export markets.

These suggestions fit and easily tie in with the operational priorities of the African Development Bank as enacted in its Regional Integration Strategy 2009-2012, and its Strategy 2013-2022 which focuses on 1) infrastructure development; 2) regional economic integration; 3) private sector development; 4) governance and accountability; and 5) skills and technology.

Thus, the Bank will continue to channel considerable resources in African integration as it has done since it began operations in 1967, mostly in the areas of hard and soft infrastructure and the diffusion of knowledge products.

For instance, between 2009 and 2011, the Bank completed 51 transport projects valued at over $3 billion, covering road, airport, seaport and railway infrastructure. The institution has financed over 4,000 kilometres of roads and several major bridges in Africa. Its private sector arm supported a fleet modernization for Ethiopian Airlines as well as investments in regional information and communication technology networks, which represent important contributions to regional integration.

Yet, a lot more remains to be done given Africa’s geo-political configuration and demographics. Africa is the world’s second-largest continent (30.2 million km²) with a population of over one billion people, half of whom are below 20 years of age.

The continent’s 54 sovereign states and nine territories are shaped and impacted by emerging global megatrends that present challenges and opportunities for development and sustainable growth.

Forums such as the AEC can provide the knowledge base to ensure that Africa is properly integrated in the global economy.


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