The COVID-19 pandemic has wreaked havoc on the worldwide financial system, with world output contracting at 3.5% in 2020, and no restoration seemingly earlier than the fourth quarter of 2021. Just like different growing areas, sub-Saharan Africa recorded a 2.6% decline, following robust development of three.2% in 2019.
Sadly, this comes at a time when the area has been experiencing a shocking and really welcome manufacturing renaissance. Traditionally, industrialisation has been related to fast technological enhancements and sustained development within the western world, and extra just lately east Asia, gainfully using thousands and thousands of staff and serving to it to shut the earnings hole with richer international locations.
Till the 2000s, sub-Saharan Africa was truly de-industrialising: the temper was gloomy because the little manufacturing exercise that did exist was disappearing, and with it the standard path to growth and poverty discount. In northern Nigeria’s largest metropolis, Kano, for instance, textile factories, leather-based tanneries and ceramics vegetation have been visibly falling into disrepair. There have been stories of empty industrial parks in Ethiopia, whereas South Africa’s footwear trade had collapsed.
However just lately the pattern has reversed throughout the area. We’ve documented this in new analysis primarily based on an in-depth investigation of nationwide statistics in 51 international locations, together with 18 in sub-Saharan Africa, starting from South Africa to Ethiopia to Nigeria to Kenya to Mauritius. These 18 international locations account for almost three-quarters of the GDP of the area, so they’re illustration of the general image.
The graph beneath exhibits how this industrial renaissance affected the share of producing employment in three of the international locations within the research, specifically Nigeria, Ghana and Rwanda. Manufacturing in Ghana and Nigeria began to broaden from round 2010 onwards, whereas in Rwanda it had been steadily growing as a share of employment for the reason that 2000s. Rwanda’s industrialisation consists of the opening of its first automotive meeting plant by Volkswagen in 2018, for example.
Manufacturing as a % of employment, 1990–2018
GGDC/UNU-WIDER Financial Transformation Database
We noticed the identical broad traits throughout the area, though in some – equivalent to Mauritius – industrial capability continued to say no. As you’ll be able to see from the desk beneath, the typical proportion of employment in manufacturing within the African international locations in our research remained static at 7.2% between 1990 and 2010 however had risen to eight.4% by 2018. That is nonetheless low compared with growing Asia and Latin America, however the pattern is obvious sufficient.
Manufacturing in Africa, Latin America and east Asia
GGDC-UNU WIDER Financial Transformation Database
Regardless of this promising pattern, one other factor to notice from the desk is that the manufacturing within the area as a share of actual worth added (in different phrases GDP) truly decreased. What this tells us is that productiveness development in manufacturing was decrease than within the financial system as a complete. In truth, manufacturing productiveness barely improved in any respect within the area within the 2010s.
To clarify why manufacturing employment rose whereas productiveness stayed the identical, we have to make a distinction between small and enormous companies. Massive fashionable companies are typically extra productive than smaller companies, partly as a result of they profit from economies of scale in order that extra items could be produced on a bigger scale however with decrease enter prices.
What appears to have been taking place is that smaller companies have been primarily chargeable for sub-Saharan Africa’s industrial resurgence, hiring staff to make extra low-quality items equivalent to processed meals, clothes and wooden merchandise to fulfill rising demand from home shoppers. That is totally different to manufacturing in east Asia, which was pushed by exports. In sub-Saharan Africa, some manufacturing work moved from China to international locations equivalent to Ethiopia in quest of decrease wages, but it surely’s debatable to what extent this has pushed the general pattern in the direction of elevated industrialisation.
The pandemic impact
One main query that stems from our analysis is how this pattern in the direction of extra industrialisation in sub-Saharan Africa is more likely to have been affected by COVID-19. Numerous financial actions have taken successful, significantly journey and tourism, as lockdown insurance policies have put a break on commerce and travelling. Elementary drivers of long-term manufacturing development have additionally been held again – particularly training, with colleges closed in lots of international locations for prolonged durations.
Alternatively, for the reason that current manufacturing development has primarily been serving a home and never an export market, it’s at the very least not primarily relying on demand from different international locations. However so far as exports are involved, the preliminary indications are that commodity exports in sub-Saharan Africa have been hit tougher than manufacturing – vividly illustrated by the collapse in oil costs in 2020 (which has since bounced again). The just lately created African Continental Free Commerce Space may also enhance regional commerce in manufactured items within the years to return. So all in all, the manufacturing renaissance within the area could also be comparatively resilient.
As Arthur Lewis, a Nobel-prize successful economist from St Lucia, famous again in 1979, increasing small-scale exercise in manufacturing is a crucial a part of the event course of. In sub-Saharan Africa, this has been made potential by an increasing marketplace for home produce. Assuming the pandemic has not undermined this too badly, there is no such thing as a purpose why this pattern shouldn’t proceed within the decade to return.
Gaaitzen de Vries receives funding from The Financial Transformation Database, on which the findings introduced on this article are primarily based, and is supported by UNU-WIDER as a part of the ETD – Financial Transformation Database mission.
Emmanuel B Mensah, Hagen Kruse, and Kunal Sen don’t work for, seek the advice of, personal shares in or obtain funding from any firm or organisation that may profit from this text, and have disclosed no related affiliations past their tutorial appointment.