The industrialisation that never happened
Without domestic refining industries, African countries are bound to serve and supply other countries’ industries with raw material. For most leaders on the continent, industrialisation has been a top priority since the early 1960s. However, despite various attempts, industrialisation has been elusive in Africa.
Associate Prof. Horman Chitonge of the Centre for African Studies at the University of Cape Town, who specialises in economic development dynamics in Africa, spent part of his sabbatical leave in the NAI library, scrutinising national economic strategy policies of several African countries. The NAI library has official documents from almost all African countries. Chitonge is particularly interested in industrial policies before the introduction of structural adjustment programmes (SAPs) in Africa.
“Finding everything in one location is fantastic. The alternative – travelling to each country’s archive – would have been almost impossible”, Chitonge notes.
The independence and liberation period in Africa, from the end of the 1950s and early 1960s, was a time of economic optimism and many leaders launched national industrialisation efforts.
"They believed that Africa both could and should be industrialised. It would lead to improved lives for the whole population, which was never of interest for the colonial governments, and it would create a national identity to complete the decolonisation project”, Chitonge remarks.
All of the newly independent states chose to adopt import substitution industrialisation strategies. The idea was that by establishing domestic industries to refine their own natural resources, African countries would not have to buy expensive consumer goods from Europe or the USA. This was a popular idea at the time. Structuralism and socialism heavily influenced economic models and theories, not only in developing countries but the world over.
"Also, countries which followed a market economy approach, such as Kenya and Nigeria, selected import substitution strategy, even though it can be traced to Marxist thought", Chitonge adds.
At first, it went very well for some African states. Ghana built its own industry despite political instability and military rule. Tanzania developed and diversified its agriculture successfully. Zambia used its copper resources to establish light manufacturing industries concentrated around metal fabrication, and managed to establish a car assembly plant.
However, everything changed with the global oil crisis in 1973, when oil-producing countries put the lid on oil supply, which led to skyrocketing prices worldwide. Developing countries were worse off because they had to spend all of their foreign currency to buy oil and could no longer afford industrial ingredients or spare parts for machinery. A second oil crisis in 1976 completed the disaster.
"It should be said that African industries were not internationally competitive. They were only intended for very limited domestic markets. Moreover, poor infrastructure and frequent power cuts increased production costs. The industrialisation strategy was more ideologically driven than it was economically rational”, Chitonge states.
Once national coffers were empty of foreign currency, the only option was to seek assistance from the International Monetary Fund (IMF). Help is seldom without costs and the IMF attached political conditions to its loans. These SAPs had three main goals: to liberalise and open up national markets, to privatise state-owned companies, and to cut government (public) spending.
Expensive and insufficient
In already poor countries, the consequences were alarming. Pensions and social protection were abolished; fees were introduced for services such as health and education that were previously free. Things did not just become more expensive for people – service delivery became insufficient. Downsizing the public sector meant there were not enough nurses to attend patients in hospitals. And due to cost savings, there were no police cars to send to crime scenes.
Politicians became accountable to the IMF and not to the people
"The reforms also had political and democratic consequences. The people obviously did not like the reductions, but neither did the politicians, who only implemented them because they were forced to by lenders like the IMF. It demoralised political life. Politicians became accountable to the IMF and not to the people”, Chitonge says.
In the late 1990s, the IMF changed its focus to poverty reduction and good governance. But the damage was already done, according to Chitonge. Cuts in the public sector had reduced the capacity of state institutions to the extent that good governance was no longer possible, even if the intention was there.
Negotiating with the IMF
Despite all this, many African countries recovered economically in the 2000s. Some had a significant GDP growth. However, this growth was based entirely on favourable world market prices for raw materials and had nothing to do with industrial production.
"African economies were doing so well that not even the financial crisis in 2008 affected the continent. However, when the Chinese economy started to cool in 2013 demand for commodities fell. Prices of oil, gold, copper and other minerals drastically dropped and this indeed affected Africa. We are still not out of the crisis: 18 countries are currently negotiating new loans with the IMF. Even a traditionally strong economy like South Africa has recently suggested that the country might need IMF support”, Chitonge notes.
According to him, when commodity prices were still high African states should have saved money for industrialisation. Now, with low prices they have nothing else to rely on.
One African market
In official state documents from the 1960s, Chitonge discovered many good ideas and plans for industrialisation. But times are different now and other measures are required. He believes that a common African market, free from customs and trade barriers, is necessary. However, this is contested. Political leaders still think of their own country first and the African Union has no power over individual countries.
“Industrialisation does not happen by chance. It must be carefully planned and thoroughly implemented by governments. Unfortunately, there is a long way to go still”, he says.
Companies must be competitive to make a profit. This requires improved infrastructure that reduces production costs. Yet another important factor, Chitonge adds, is education. In Africa, only 4 percent of people complete university education. In China, the corresponding figure is 44 percent.
“It makes a big difference. Education is a driver of economic development and industrialisation”, Chitonge concludes.
TEXT: Johan Sävström
NAI library suggests
Manufacturing transformation : comparative studies of industrial development in Africa and emerging Asia / edited by Carol Newman… (2016)
Industrial policy and economic transformation in Africa / edited by Akbar Noman and Joseph E. Stiglitz (2015)
Trade and industrial development in Africa : rethinking strategy and policy / edited by Theresa Moyo (2014)
More titles on Industrial development + Industrial policy in the library's collection.