African IndustrializationDec 22, 2022
"Productivity - key to the economic transformation in Africa"
Why is industrialization important for Africa? Industrialization creates productivity.
‘Productivity is commonly defined as a ratio between the output volume and the volume of inputs. In other words, it measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output’.
A simple example will be the amount of time it takes to produce a table or a chair. With basic hand tools and an inefficient business structure; this will take at least one week, with a slightly more advanced system, it will take several days, but with a very efficient and technological system, this takes several hours at the most.
In the time, it takes a carpenter with hand tools to make a table and chair working 45 hours a day, 6 days a week; an advanced computerized system can make enough tables and chairs to fill up several classes in a school.
In this way, not only can the industrialized country meets its needs, it can also comfortably create a surplus to export to less industrialized countries. These less industrialized countries will then take their scarce resources (from sales of raw materials in many cases) and pay for the imports from the more industrialized countries and thus perpetuating the vicious cycle of poverty and aid dependence in these less industrialized countries.
Currently, African economies remain very inefficient because of the large amount of labour and capital necessary to produce basic goods and as a result of these inefficiencies; many countries opt for importing instead of producing these products themselves. Imports are an inefficient use of financial resources in many cases, because the capital leaves the country, but investments in local production, is much more efficient because the money invested stays in the country and has a multiplier effect that over time will lift the nation out of poverty.
African nations need to industrialize and begin producing first to meet their own needs and reduce the need for imports and then aim to produce surpluses to export abroad.
These facts have been well known for decades; why have they not been implemented? There are many reasons for this, but I will highlight one - the fragmented structure of the African continent.
I use ''fragmented'' - to describe the political structure of 50+ nations, most of them have been independent for less than fifty years, trying to find their way in the world by themselves. In this situation, there is no real incentive to manufacture and industrialize.
However, now with the AfCFTA (African Continental Free Trade Agreement), we are now seeing Africa looking inwards for answers, looking at her huge internal market, and its huge demographic dividend of young people.
Africa has started to realize that she is the master of her own fate and she can focus on developing local production capacity to meet her internal markets, to create corporate champions to take on the world.
In conclusion, we see two critical factors are play; the first is that there is a mind-set change among Africans to see their internal market opportunities, and the second is the correct political will.
It is these two factors that will be driving African industrialization and the continent forward to higher and higher economic heights.
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