Industry in Africa`s growth

Africa growth prospects remain steady, industry should lead growth

The African Economic Outlook (AEO) analyses macroeconomic developments and prospects in the different African economies. The report has been published annually since 2003 by the African Development Bank Group, and provides headline numbers on Africa’s economic performance and outlook. It also provides relevant and essential reference material on Africa’s economic development, for researchers, investors, civil society organisations, and development partners.The 2019 African Economic Outlook report analysed gains of regional public goods, including synchronizing financial governance frameworks, opening regional aviation to competition, and facilitating the free movements of people, goods, and services through open borders.

 

Africa’s general economic performance continued to recover with GDP growth projected to accelerate to 4.0 percent in 2019 and 4.1 percent in 2020, mainly on account of factors such as mild recovery in commodity prices and improved macroeconomic stability. This growth performance however is claimed not to be sufficient to address the challenges of structural transformation. It rather suggests a rebalancing of Africa’s imports from consumption to intermediate and capital goods as a critical step to help countries benefit from scale and scope economies, exploit knowledge transfers and promote structural transformation.

Africa still faces a huge job challenge and despite industry’s potential to create high-quality jobs, Africa has de-industrialized prematurely. There is thus an urgent need in creating job in higher productivity sectors by developing a strong manufacturing sector. The report however notes that this cannot be achieved if constraints to doing business such as poor governance, low institutional quality, and inadequate infrastructure, continue limiting firm survival and dynamism. Reviving Africa’s industrialization particularly through regional industrial policies will be needed to benefit from externalities’ and agglomerations’ effects. 

With the current rate of labour force growth, Africa needs to create about 12 million new jobs every year to prevent unemployment from rising. The report states that a “concerted industrialization effort that builds on countries’ comparative advantage,” is required.

The focus of this report was on regional integration for Africa’s economic prosperity, highlighting integration for trade and economic cooperation and the delivery of regional public goods.The African Economic Outlook highlights that the Continental Free Trade Agreement (CFTA) can offer substantial gains for all African countries. At the core of African integration, the report suggests that “a borderless Africa” is one of the key foundations of a competitive continental market that could serve as a global business centre”For instance, a scenario where today’s applied bilateral tariffs are eliminated would bring an estimated gain of $2.8 billion in real income; and increase intra-African trade by 15 percent. Additionally removing nontariff barriers can increase total real income gains by $37 billion; and intra-African trade by 107.2 percent. The report further highlights that pushing further and implementing the World Trade Organization’s Trade Facilitation Agreement (TFA) would yield total gain of about $100 billion; and boost intra-African trade by 132.7 percent. To reach such a deep level of integration, further progress should be made on rules of origin, free movement of persons, financial governance frameworks, and regional public goods (infrastructure and regional bodies).

 

Significantly, the report identifies five key trade policy actions that could potentially bring Africa’s total gains to 4.5 percent of its GDP, or U$134 billion a year:

•   eliminating all applied bilateral tariffs in Africa
•    keeping rules of origin simple, flexible, and transparent
•   removing all non-tariff barriers on goods and services
•   implementing the World Trade Organization’s Trade Facilitation Agreement to reduce cross border time and transaction costs tied to non-tariff measures and  
• Negotiating with other developing countries to reduce their tariffs and non-tariff barriers, by 50%.

The report further suggests deep reforms in public financial management so as to improve revenue mobilization, and ease debt vulnerabilities. The report concludes by emphasizing the need for industry to lead growth if we are to maintain the improvement in macroeconomic and employment outcomes

In its last part, the report provides short-to-medium term forecasts on the evolution of key macroeconomic indicators for all 54 regional member countries, as well as analysis on the state of socio-economic challenges and progress made in each country. The report focused on three key areas - Africa’s macroeconomic performance and prospects; Jobs, growth, and firm dynamism and Integration for Africa’s economic prosperity.

In his opening remarks to the diplomats, government officials, policy makers and students-as i conclude, Cote d’Ivoire, Senior Vice President Charles Boamah made remarks that even though the report presents daunting challenges, “Africa has the means to overcome them by joining hands together and removing barriers to integration and drivers of migration.”

 Emmanuel Nambaale is a
  young Economist with 
  Economic Hub Uganda 
               (EHU)