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We can achieve productive transformation in Africa

Monday March 2 2020

By BITANGE NDEMO
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The phrase “we can’t eat GDP growth” is becoming common in Africa.

It refers to a situation where there are economies recording GDP growth without development. Recorded economic growth rate is not translating into jobs.

Forty years ago, when I was in high school, economists told us that Africa had great potential. In virtually every conference I attend today, it is not uncommon to hear speakers say, Africa has got potential, signifying that little has changed.

This is said notwithstanding the fact that no one believes that we are doing enough to lessen widening inequalities.

The president of the African Development Bank (AfDB), Akinwumi Adesina laments that Africa’s food import bill will top $110 billion (Sh11 trillion) by 2025 up from $35 billion (Sh3.5 trillion) today. Why?

More people in Nigeria are sliding into poverty today than at any other period before.

South Africa, with better infrastructure than any African country, is on a downward spiral. In a World Economic Forum platform, Adrian Gore, Group Chief Executive of Discovery, wrote the article, “Things are bad and getting worse for South Africa. Or are they?”

Whenever I make the call for positive leadership in South Africa, to liberate the country’s incredible potential, what fascinates me is the criticism I receive for my naivety. People point to the challenges South Africa faces, and it's certainly true they exist: GDP growth is at 0.8 percent, youth unemployment at 54.7 percent; we have a bloated public sector wage bill and a hefty budget deficit to fill; and tragic inequality. My plea for positivity is not in spite of these challenges, but because of them – and it is rooted in science.

I now understand why a Ghanaian academic, Komla Tsey, highlighted lamentations of a Botoku diaspora in his book, Re-thinking Development in Africa: An Oral History Approach from Botoku:

Why is it always Africa?

What is wrong with Africa?

Why is it that nothing good comes out of Africa?

Any time you turn on the TV it is always bad news: hunger, massacre, war, coup, greed, corruption, child labour, rape, tribalism, hero worship, etc.

What at all is wrong with Africa?

Although there are good things that come out of Africa, I feel the frustration. There certainly are things that we must do to realise our potential.

As I write this article, there is no food in Zimbabwe. When the country attained her independence in 1980, President Julius Nyerere of Tanzania told President Robert Mugabe of Zimbabwe, “You have inherited a jewel in Africa. Don't tarnish it.” Mugabe did the opposite.

LUCRATIVE MARKET

Nowadays, truck drivers divert maize imports from South Africa to a lucrative market in Democratic Republic of Congo (DRC), a country larger than Western Europe.

With drought biting Zimbabwe, they now have to spend more hours queuing for food.

If we cannot feed our people, there isn’t a soul in the world who will respect Africa. And any African for that matter.

What we desperately need is productive transformation. Zimbabwe used to feed many other African countries but most of the productive land today lie fallow with absentee landlords.

The question we must all ask is: How can we achieve productive transformation? Some of the answers to this question are addressed in a recent African Union and the Organisation for Economic Co-operation and Development (OECD) joint publication, Africa’s Development Dynamics: Achieving Economic Transformation.

The publication proposes three sets of policies. These include developing strategic cluster of firms, facilitating regional production networks and enhancing firm’s abilities to thrive in new markets. I will expound each individual policy set identified here.

Strategic cluster firms are often used strategically to develop the economy’s comparative advantage. Virtually all the Asian countries used this strategy to rapidly grow their economies. Vietnam is among the latest countries to use the strategy to gain competitive advantage.

The country created two different types of clusters, that is, export oriented and local clusters at different locations that have propelled the economy within a short period.

The export-oriented clusters included: garment, consumer electronic, motor vehicle and parts. Crafts villages and recycling clusters were strategically located to exploit the internal markets.

The publication emphasises that success of such policy depends on choosing the right location, attracting right capabilities and providing business services to ensure linkages inside clusters.

Further, governments must provide targeted support for local firms to develop stronger supplier base.

REGIONAL VALUE CHAINS

The second policy proposal is to facilitate the strengthening of regional production networks as per the Vietnam strategy by integrating production into regional value chains especially in agriculture.

In Kenya, there are informal clusters that need very little government intervention to make them competitive in the region. These are open-air furniture manufacturers. Government only needs to invest in technology, building a decent display area, facilitate skills development, and little marketing support to move them from informality to formal exporters.

The last policy set is to enhance firms’ ability to thrive in new markets by proactively dealing with issues related to, for example, non-tariff barriers, product standardisation, better infrastructure and reduction of uncertainties.

For example, Tanzanian authorities mistreat Kenyan traders exporting into Tanzania so much that their produce is destroyed.

Such issues are supposed to be dealt with by the state, especially now when Africa has ushered in the African Continental Free Trade Area.

Some of these policies are already there but there are two challenges that we must overcome.

First is the inability to implement policies and the public dismissiveness of the ability of government to productively intervene.

There is, however, no choice but to put our focus on productive transformation than in GDP.

The government must intervene through policies that will support productive transformation by utilising the resources Africa has in abundant - land and labour.

Capital always follows where the other factors of production are efficient.

The writer is a professor of entrepreneurship at University of Nairobi’s School of Business.