A new generation of business leaders are investing in Africa’s capacity to manufacture cars, process minerals and build equipment. Some governments are now looking for ways to support infant industries without encouraging crony capitalism.
Adding value to a product – whether it is canning tomatoes, turning iron ore into steel or building cars – is difficult. But ultimately, it is what makes a country rich.
If you keep selling pineapples, you will end up with peanuts. “If you look throughout economic history, there is not a single [country] that has got rich without manufacturing, outside a few resource-rich countries in the Middle East – and even they will face an unemployment crisis,” says Hinh Dinh, a senior economist at the World Bank.
A lot of these guys in banking and engineering who lost their jobs were despondent. But at that moment, opportunity started rearing its head here
The continent’s current economic boom, welcome though it is, depends largely on the export of raw materials.
In 2010, two-thirds of Africa’s total exports were oil and minerals. To which one can add soft commodities: coffee, tea, cocoa, sesame, peanuts, bananas, cashews, cotton, livestock and horticultural products.
Manufacturing, outside some honourable exceptions, is scarce in Africa. The total manufacturing output of the continent is just over $150bn, compared to the $2trn in total exports for China in 2012. Cars are made in Morocco and South Africa.
Tunisia and Egypt have some heavy industry, while Zimbabwe and Ghana have factories in various states of decay.
With Africa’s daunting youth bulge about to unleash millions of people onto the job market, turning this situation around becomes an imperative. But how?
Economist Erik Reinert explains: “Rich countries got rich because for decades, even centuries, their states and ruling elites set up, subsidised and protected dynamic industries and services.”
Ironically, the World Bank, itself set up to help poor countries get rich, got caught up in a Cold War-fuelled denial of this historical fact.
In his book How Rich Countries Got Rich … and Why Poor Countries Stay Poor, Reinert says: “If you want to understand the causes of American and European prosperity, study the policies of those who created it, not the advice of their forgetful successors”.
A wayward colony, fed up with being cheated and forced to sell its raw materials to the United Kingdom (UK), rebelled to start a vigorous campaign to have its own industries.
Ghana in the 1950s or Kenya in the 1960s, perhaps? No, this is the United States (US) in 1776. Just 14 years later, Alexander Hamilton was writing about infant industry protection. Between 1816 and 1945, tariffs in the US were among the highest in the world.
By John Kelly
