By Taona Kokera, Associate Director Infrastructure Finance at Mazars.
One of the most concerning observations made in the recently released 2018 Ibrahim Index of African Governance (IIAG), was that almost no progress has been made to grow sustainable economic opportunity for the African continent’s working age population, with employment having increased by only 0.2% over the last decade. This is in spite of the fact that Africa’s economy has seen an average growth of around 40% during the same period, with infrastructure investment and construction having increased exponentially.
Solving this growing problem will require that governments in Africa devise new infrastructure investment strategies based on two equally important pillars: increasing their manufacturing capacity and embracing the Fourth Industrial Revolution.
As it stands, road, rail and port infrastructure projects have attracted the highest amount of investment in recent years, followed closely by electricity generation and distribution. Yet, there has not been significant investment in value addition to exports and import substitution.
This is because Africa is still struggling with the same challenge that has plagued it throughout its history. The continent’s natural resources, such as platinum, coper and iron, are being extracted and sold at a relatively low price, and exported to countries where their full value can be realised. The value-added products are then often imported back into Africa and sold at substantially higher prices. The infrastructure growth experienced thus far, only serves to enhance the extraction and export of raw materials without value addition.
This is why investing in increasing manufacturing capacity should become priority for African governments. Investing in processing facilities, refineries, smelting plants and other infrastructure that add value to raw materials can further boost the continent’s economy, while also creating long-term employment and upskilling opportunities for the local populace.
The World Bank has observed that the manufacturing sector has the largest indirect job creation component in an economy, and in the African context, the demand for local businesses that support manufacturing could grow substantially if the continent’s manufacturing capacity is increased.
The sustainable development goals relating to good jobs and economic growth, and the goals of innovation and infrastructure are key in the future of Africa as they emphasise the solutions that will bring sustainable development in Africa.
The Agenda 2063, the Africa we want, outlines a strategic framework for the socio-economic transformation of the continent over the next 50 years. Its builds on, and seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development.
Vital to fostering further business growth in Africa, however, is the continents’ readiness to embrace the Fourth Industrial Revolution. This will require prioritising investment in wireless communications, large scale fibre networks, information technology and increasing the market penetration of internet connectivity. Increasing communication and technical capabilities in Africa on a massive scale is the only way to allow local businesses to truly compete on a global level.
Africa currently has a population of 1 billion and could be compared with the population of China about 35 years ago. In Africa, the real GDP growth is at an average of 3.5% every year, as opposed to China’s peak growth rate of between10% and 15%. The difference between the two economies, in my view, is the strength of the manufacturing sector and value addition to raw materials.
With that said, Africa’s problem of jobless growth is becoming direr with each passing year, as the continent’s population of working age individuals continues to increase. Therefore, if decision makers on the continent intend to act, they must do so now. Investing in manufacturing capacity and embracing the Fourth Industrial Revolution can drastically change the future of this continent, fulfilling aspiration number 1 of The Agenda 2063, the Africa we want, that seeks to achieve a prosperous Africa based on inclusive growth and sustainable development.