Last week, the United Nations Industrial Development Organization (UNIDO) published a report titled “Industrialization in Africa and Least Developed Countries: Boosting growth, creating jobs, promoting inclusiveness and sustainability.” This report was published for the Development Working Group (DWG) at the 11th G20 Summit, which took place in Hangzhou, Zhejiang, China, on 4 and 5 September.
The report highlights the important benefits of inclusive and sustainable structural transformation and industrialization for diversifying the economy, creating jobs and building equitable societies. It also shows the benefits to Africa and least developed countries (LDCs) of leveraging trade in intermediate goods, investment, and regional and global value chains.
According to the report, in Sub-Saharan Africa, Middle-Income Countries (MICs) – with a Gross Domestic Income (GDI) per capita between US$1,026 and US$12,475 – can be divided into Upper-Middle-Income Countries and Lower Middle-Income countries. The Upper-Middle-Income Countries are countries with a GDI of at least US$4,036. They include Angola, Botswana, Equatorial Guinea, Gabon, Mauritius, Namibia and South Africa. While the Lower Middle-Income countries are Cape Verde, Cameroon, Republic of Congo, Côte d’Ivoire, Djibouti, Ghana, Kenya, Lesotho, Mauritania, Nigeria, São Tomé and Principe, Swaziland, and Zambia.
The report further stated that African MICs are highly diverse – they face common MIC challenges, which can vary substantially from those faced by least developed countries. Generally, MICs risk being unable to compete with either low-income, low-wage producers in labor-intensive products or high-skilled innovators in high value added product. This is mainly because of the so-called middle-income trap.
Besides mentioning Nigeria as one of the lower Middle-Income countries here are other areas the country was mentioned in:
Shallow participation in Global Value Chain
According to the report, Africa’s Global Value Chain (GVC) integration is generally shallow, but it increased by 80 percent between 1995 and 2011. Despite having a very low base, five African countries Lesotho, the Seychelles, Swaziland, Tanzania and Zimbabwe are among the world’s top 30 countries in terms of intensity of GVC participation. 13 countries predominantly in Western and Central Africa are among the bottom 30 globally while six of the 10 most integrated countries are in Southern Africa. Small, open economies such as Lesotho and Mauritius source more inputs from abroad and produce more inputs used in GVCs than larger economies such as Nigeria or South Africa.
Environmental degradation and climate change
The report revealed that in Africa and many Least Developed Countries (LDCs), environmental degradation is due to economic, legal, ethnic and other barriers. Such barriers prevent access to cleaner and more resource-efficient production technologies and practices. These practices decouple economic growth from unsustainable resource consumption and environmental degradation that enable economies to achieve climate resilience. Given the importance of agriculture in sustaining livelihoods, land degradation is also a major problem in Africa and LDCs. Unsustainable land management practices lead to scarcity of water for drinking and agriculture. Climate change is increasing extreme weather events in LDCs (extreme temperature, floods, and droughts). Also, environmental protection often is weaker in developing countries. For example, Africa and LDCs such as Ghana and Nigeria are destinations for large-scale shipments of hazardous waste.
Why Africa and LDCs must industrialize
Without industrializing Africa and LDCs may likely not meet the Sustainable Development Goals by 2030. Rarely has a country evolved without a sustained structural transformation from an agrarian or resource-based economy towards an industrial or service-based economy. This transformation is important to ensure wealth creation through increased economic integration and productivity.
The way forward
According to the report, Africa and LDCs should move away from the “generalized” industrial policies that have proved ineffective over the last three decades. They also need to build strong institutions and viable investment climates. They need to realize the full potential of public– private partnerships (PPPs) and the opportunities for collaboration among industry, governments and other stakeholders.