An AfDB report accompanying the November 24 inaugural launch of the Africa Industrialization Index shows that 37 African states have industrialized over the past 11 years. In the 2022 ranking, South Africa is ranked first, closely followed by Morocco, which was fourth in 2010.
The African Union (AU) Extraordinary Summit on Industrialization and the AU Extraordinary Session on the African Continental Free Trade Area (AfCFTA) took place from November 20 to 25 in the Nigerian capital Niamey. This conclave was marked by the presentation of the African Industrialization Index (AII) set up by the African Development Bank (AfDB), the AU and the United Nations Industrial Development Office (UNIDO).
The three organizations jointly launched the inaugural edition of the AII on the sidelines of the AU Summit. The accompanying report, presented Thursday, November 24, by the African Development Bank, analyzes the industrialization trends of 52 of the 54 countries in the African Union, with Somalia and South Sudan excluded due to lack of available data.
37 African states have industrialized in the last 11 years
The AfDB’s first finding is that 37 African countries have industrialized over the past 11 years. In the 2022 ranking, South Africa is ranked first, and has maintained this advanced position throughout the 2010-2021 period. The country is closely followed by Morocco, which is in second place this year (it was fourth in 2010). The top five is completed by Egypt, Tunisia and Mauritius. Eswatini surprised everyone this year by ranking sixth.
The African Industrialization Index (AII), developed in collaboration with UNIDO, provides an assessment of the progress of 52 African countries across 19 key indicators, covering manufacturing performance, capital, labor, business environment, infrastructure, and macroeconomic stability. The IIA classifies industrialization along three dimensions, or sub-criteria: performance, direct determinants, and indirect determinants. Direct determinants include capital and labor and how they are deployed to drive industrial development. Indirect determinants relate to business climate, macroeconomic stability, and institutional stability, in addition to infrastructure. For the first and third sub-criteria, Rabat and Pretoria are tied in 2022. On the second, Morocco is ahead of South Africa.
If Africa has shown encouraging progress in industrialization during the period 2010-2022, “the Covid-19 pandemic and the invasion of Ukraine by Russia have slowed its efforts and highlighted gaps in production systems,” according to Abdu Mukhtar, AfDB Director of Industrial and Trade Development, who spoke at the conference in Niamey. For the AfDB, the continent has a unique opportunity to address this dependence by further integrating and conquering its own emerging markets. “The African continental free trade area creates a single market opportunity for 1.3 billion people and total consumer and business spending can reach 4 trillion dollars, in addition to the opportunity to strengthen their trade and production links and finally reap the industrial competitiveness of regional integration as other regions have done,” adds its director of industrial and trade development.
Manufacturing value added more important than the size of the economy
Another finding of the African Development Bank is that “the best-performing countries are not necessarily those with the largest economies, but countries that generate high manufacturing value added per capita, with a substantial proportion of manufactured goods destined for export,” the financial institution said in its report. It says that building productive industry will be integral to Africa’s development, providing a pathway to accelerated structural transformation, large-scale formal job creation and inclusive growth. The AfDB notes, however, that “Africa’s share of global manufacturing has declined to the current level of less than 2%. More proactive industrial policies are considered essential to reverse this trend.
During the Niamey conference, emphasis was placed on the importance of data collection in the industrial sector. The Africa Industrialization Index was one of two new tools presented at the Niamey event. The second is the African Industry Observatory. Unveiled by UNIDO and the AU, it will serve as a central online knowledge platform for collecting, analyzing, and consolidating quantitative data needed for qualitative analyses of national, regional, and continental industry trends. Coupled with the IIA, “they will help consolidate inter-institutional cooperation, strengthen the influence of each institution’s policy dialogue to accelerate industrial development,” according to Victor Djemba, head of UNIDO’s Africa Division. “These tools will greatly improve our industrial policymaking and help bring the required attention that industrialization needs from both policymakers and the private sector,” said Chiza Charles Chiumya, acting director of the African Union Commission for Industry, Minerals, Entrepreneurship and Tourism. The AfDB report, meanwhile, “will allow African governments to identify benchmark countries to assess their own industrial performance and identify best practices more effectively,” according to its authors.
Industrialization, a priority for Africa
The African Development Bank has invested nearly $8 billion over the past five years as part of its “Industrialize Africa” priority, included in its “High-5” program. “In the pharmaceutical sector alone, we intend to invest at least $3 billion by 2030,” says Abdu Mukhtar, AfDB’s director of industrial and business development. As part of this strategy, the Bank is working to support the countries of the continent in their industrialization and in the development of their economic potential. Industrial development is also listed as a cornerstone of inclusive growth in the African Union’s Agenda 2063.
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