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CGD in the News

Africa must manufacture its way to a ‘lion economy’ (Asia Times)

December 2, 2018

By Joseph Dana

From the article:

Despite a recent downturn in the global economy, an unprecedented shift is underway throughout the so-called non-West. From Southeast Asia to Latin America, these economies have seen explosive urbanization and the emergence of a new middle class. Manufacturing remains the engine behind the re-emergence of non-Western economic power. Robust manufacturing sectors have created millions of jobs in countries such as China and India, which have in turn put these economies on impressive growth trajectories.

Africa remains an anomaly in this transformative story. With one of the world’s fastest-growing populations, Africa’s urbanization rates are also exploding. Yet its economies are not meeting their potential. While the continent has benefited from the internet to create new industries, its manufacturing sector has lagged woefully behind those of the rest of the world. Poor governance (a lack of trade-friendly legislation), a lack of investment in local and regional infrastructure (a paucity of efficient ports) and high costs are all factors behind the abysmal state of the sector.

Yet, more generally, the road is going to be long and hard for Africa’s manufacturing sector. Opening a factory remains an expensive and bureaucratic process. According to a 2017 report by the Center for Global Development, small African manufacturing plants were 39 percent more expensive than similar facilities elsewhere. Medium-sized and large factories were a staggering 50 percent more expensive. Despite high levels of unemployment, labor costs were found to be high in countries from South Africa to Tanzania. All this makes little sense, given that countries on the continent remain among the world’s poorest. The reason, in one word, is corruption. It exists on a massive scale through the accumulation of a multitude of small payoffs — almost like a differential calculus of graft. 

Read the full article here.

 

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