A New Burst of Energy in Africa’s Industrial Activity

With nearly 600 million people without electricity, Africa is the world’s most energy-poor region, said Kandeh Yumkella, the former director-general of the UN Industrial Development Organization, at a lecture at the London Business School last November. The continent loses “2% to 3% of its GDP because of the lack of reliable energy.”

He noted that Nigeria needs 10,000 megawatts of electricity but generates only 4,500. Yet the country has been flaring gas for 40 years. “We estimate that the gas flared in Africa can supply half of the continent’s electricity needs, but we burn it with no value addition.” In general, concurs the ECA, entrepreneurs in Africa “face high transaction costs, protracted and cumbersome administrative procedures and bureaucratic bottlenecks, and poor physical and financial infrastructure.”

Many African governments are investing heavily in infrastructure–railways in South Africa, energy in Ethiopia and Nigeria, road construction in Rwanda and so on. But workers are ringing the alarm bells, worried that industrialization’s promise also has its perils.

Imani Countess, the African regional programme director at the Solidarity Center, an international labour rights organization, said that industrialization in South Africa – Africa’s most industrialized nation – is lowering wages and causing poorer working conditions. Manufacturing companies put pressure on the government to allow individual companies to determine their own labour standards, rather than having to adhere to the national standards.

There was frequent labour unrest in Liberia’s Firestone rubber plantation until the company accepted some of the workers’ demands for salary increases and a ban on child labour. Workers who constantly agitate against a company’s practices can disrupt its operations.

Anthony Caroll, a researcher at the Center for Strategic and International Studies, a Washington think tank, wants companies in Africa to be able to hire and fire staff if necessary. On the other hand, Michael Clark, adviser with the UN Conference on Trade and Development (UNCTAD), said at a conference in New York last year that liberalization policies of the past that softened governments’ grip on national economies have hurt Africa as massive profits were repatriated by foreign investors. What Africa needs now is “strategic policies targeted at specific sectors.”

Mr. Lopes calls that “sophisticated protectionism,” which allows the government to strategically intervene in the market in a way that benefits national economies.

Any attempt to reset the liberalization button through policies that appear to go against the free market principle is bound to be controversial. Mr. Lopes argues that “sophisticated protectionism” policies do not conflict with the World Trade Organization regulations, as some economists claim.

“Everybody agrees now that there is a role for the state and there is a role for the market,” he says. However, The Economist, a London-based magazine, ascribed China’s recent huge economic leap to its allowing private enterprise to thrive with little interference, and suggested that India’s current economic slowdown and Africa’s high poverty rate may be the results of “monopolies and restrictive practices.”

While the debate continues on the best ways to achieve industrialization, Mr. Yumkella foresees disaster should Africa continue to rely only on commodity exports. The good news is that Africa can aggressively pursue industrialization; he adds quickly, “We can do it.”

 

By: Kingsley Ighobor