Africa now accounts for about one per cent of global manufacturing, and cannot realistically hope to reduce widespread poverty if its governments don’t take effective measures to expand this vital economic sector, said a new report by the United Nations Industrial Development Organisation (UNIDO) and the UN Conference on Trade and Development (UNCTAD).
The Economic Development in Africa Report 2011, called for a practical, well-designed approach to industrialisation, that is adjusted to specific country circumstances and based on extensive discussion with and feedback from businesses and entrepreneurs.
The report noted that Africa was losing ground in labour-intensive manufacturing which was generally the entry-level step in industrial development, and was a category especially important in Africa, where jobs were needed in rapidly growing cities. The share of labour-intensive manufacturing activities in manufacturing value-added (MVA) fell from 23 per cent in 2000 to 20 per cent in 2008.
However, the report added that the continent has made some progress in boosting technology-intensive manufactures, such as chemicals. The share of medium- and high-technology activities in MVA rose from 25 per cent in 2000 to 29 per cent in 2008.
Africa’s 53 nations vary widely in their levels of industrialisation and their recent manufacturing growth performance, the report acknowledged. It said that strategies to spur industrial development, in order to be effective, must be individually tailored by governments. But it recommended that industrial policy should be based on a series of hard-learned principles.
While the report stressed the need to promote manufacturing development, it argued that this must not be achieved at the expense of the agriculture sector. It noted that agriculture had been and would continue to be a major source of revenue, employment, and foreign exchange earnings, in the short to medium term. The study urged African countries to create mutually reinforcing linkages between the agricultural and non-agricultural sectors of their economies.
The report recommended steps to promote scientific and technological innovation and to develop the capability of governments to implement industrial policies.
The study also stressed that industrial policy must be consistent with other macroeconomic policies for better development outcomes. It recommendd that African governments avoid exchange-rate overvaluation, that they do more to mobilise domestic resources to fund industrial development, and that they align their monetary and fiscal policies with the objective of industrial development.
Other vital ingredients include not only expanded economic relations with neighbouring countries, since regional markets could provide effective pools of customers for manufactured goods, but also political stability, since frequent changes in strategy or policy could disrupt the long-term approaches that work best for expanding industry.
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