New Plan for South of Revolution

Addis Fortune (Addis Ababa)

Kandeh Yumukella and Rob Davies

16 May 2011

Over dinner in Algiers recently, the question arose whether the youth led revolutions unfolding in northern Africa presage the awakening of economic lions throughout the continent.

Could the changes unfolding in the Arab north usher in an African wide industrial revolution?

It would mean shifting from producing commodities to higher value manufactured products. It would also mean looking objectively at the concept and aims of international development cooperation beyond the lifespan of the United Nations’s (UN) Millennium Development Goals (MDGs).

Manufacturing is undoubtedly the principal propellant in transforming human and natural resources into economic value. It is here that Africa’s natural resources come into play.

Africa holds 90pc of the world’s deposits of cobalt, 90pc of its platinum, 50pc of its gold, 98pc of its chromium, 64pc of its manganese, 33pc of its uranium, and 80pc of its tantalite, according to the United States Geological Survey (USGS).

The continent also ranks top in world reserves of bauxite, industrial diamonds, phosphate rock, vermiculite, and zirconium.

Hydrocarbon reserves in Africa are estimated at between 80 billion barrels and 200 billion barrels. The current value of Sub-Saharan Africa’s mineral reserves is conservatively put at 1.2 trillion dollars.

The benefits of such natural capital should provide greater income and investment in structural change, but Africa’s export trade is still dominated by primary commodities.

Nowadays, a ton of African titanium sand brings in about 100 dollars in export revenues, whereas a ton of titanium alloy is earning countries outside of Africa 100,000 dollars.

There are less than four years left before the MDG deadline. Much progress has been made, but Africa has failed to create jobs for its rapidly growing, urbanised, and youthful population.

Although this is required to achieve the targets, especially on eradicating extreme poverty and hunger, it is not easy as it requires annual GDP growth rates in excess of seven per cent.

Growth on this scale requires a paradigm shift in economic development policy as well as in international cooperation beyond 2015. Structural change must be embraced and the diversification of Africa’s productive base must be pushed away from overdependence on raw materials and mining.

Structural change means the constant improvement of existing activities and generating new ones, moving from one sector to another and absorbing surplus labour. It also entails increasing the contribution of individual workers and promoting the integration of productive sectors within the domestic economy.

Investment, technological progress, and innovation are the key determinants of economic success.

Old products and industries are replaced by new or better ones, thanks to novel technologies, fresh marketing approaches, or new organisational structures. Local entrepreneurs take technologies from established producers abroad and adapt them to domestic conditions.

Structural change in Malaysia has been driven by strong political commitment. For three decades, successive governments have consistently and rigorously applied an economic model based on agriculture led industrialisation.

Malaysian determination to experiment and craft comprehensive reform packages, rather than single, sequentially implemented policies, was critically important. Targeted policies promoted the emergence of a diversified economy based on processed natural resources, services, as well as high value manufacturing industries such as electronics, industrial automation, and heavy industries.

Likewise, Mauritius has made admirable progress in intra-industry structural change, which involved upgrading within the same industry and improving its domestic and international position. Other countries have also been trailblazers in building on what they have and moving up the value chain, such as the Egyptian organic cotton fibre sector.

What Africa needs now is targeted support and investment in four main areas: downstream processing of mineral resources, agro-industrial and agribusiness supply chain development, pharmaceuticals, as well as infrastructure and energy.

This requires lowering the cost of doing business, fighting corruption, promoting transparency in mining deals, and channelling natural resource revenues in ways that enhance economic diversification and competitiveness.

This must take place within a more holistic concept of development. Access to education is essential, but Africa requires a curriculum that emphasises skill formation and nurtures entrepreneurship.

Food security should be brought to the starving without ignoring commercialisation, agribusiness development, and the consumption and trade of higher value food products. This is particularly because 60pc of available uncultivated agricultural land of the world is in Africa.

Indonesia, Malaysia, Thailand, and Vietnam are good examples of countries that have ensured food security through agricultural commercialisation while also increasing wealth in rural communities and expanding foreign exchange earnings and investment capacity.

The call for structural change is made even more urgent by Africa’s demographic profile. The continent’s population is projected to increase to 1.4 billion by 2030 and 1.9 billion by 2050, with 50pc of people living in capital cities and urban conurbations. Today, more than 60pc of Africa’s urban population live in slums.

For now, young Africans watching satellite TV see their European peers living well and ask, “Why not me?” They know that boats from North Africa are reaching Europe. The Arab Spring could become Africa’s nightmare unless we forge a new plan for development and economic opportunity for its entire people.

AllAfrica – All the Time