ZIVAI WARIKANDWA
For the past 15 to 20 years consistent and improved economic growth in African countries has ignited hope of finally dealing a blow to poverty, conflict and disease. In 2016 the World Economic Forum on Africa highlighted that growth rate in Africa was around 5,4 percent between 2010 and 2015 but was however declining due to lower commodity prices to around 3,[[4 percent current levels. Even growth amongst Africa’s elite states such as South Africa and Egypt has stalled. For some other countries the diagnosis is much worse, Tunisia seems to have developed a “knock” sound in its economic engine and we all hope that the situation does not degenerate into civil unrest much worse than what is currently prevailing.
China Power
While all this has been happening, the rest of the world has been marching on. China’s super machine is now the “world’s workshop” and Beijing’s unbridled industrial ambitions show no signs of waning.
The statistics tell the story; China now produces more than 80 percent of the world’s air conditioners, 70 percent of its mobile phones and 60 percent of the world’s shoes. Considering the fact that China is just a single entity of the Asian industrial region that includes Taiwan, Malaysia, and Singapore amongst other countries. The competition for the global industrial space has never been this tougher for Africa.
In 2016, the European Union Chamber in China noted that China’s overcapacity was damaging the global economy. So large is china’s production capacity to the extent that it is said that in two a year period the Asian giant had produced cement equaling what the United States had produced the entire the 20th century.
Currently China now accounts for half of global steel production and 60 percent of global cement. This has significantly affected global steel prices and affected viability for smaller producers most of whom are in Africa.
China’s dominance is almost in every industry from solar panels, aluminum, kitchen utensils to the most confidential clothing items.
America First
Across the Atlantic, Donald Trump’s administration has been pushing its own industrial agenda. One of his key “trump” cards has been the America first policy. The call has been to bring back jobs to the USA by lowering corporate taxes from 35 percent to 20 percent to make American companies more competitive and already indications are that America’s industry is destined for another famous moon landing.
Subsidy boost
While industrial growth in Africa has mainly been driven by private investment mainly from foreign companies, growth in Europe, Asia and America has mainly been subsidy driven which has led to Africa’s industries being “out-competed” on the global market.
Jamil Anderlini, writing in the financial times in a 2013 article entitled “Chinese industry: Ambitions in excess”, notes that government subsidies in China account for over 30 percent of industrial production. Anderlini further highlights that Chinese vehicle manufacturer Geely, which bought Volvo in 2010, received large subsidies which accounted for nearly half of its profits in 2011.
Sadly, most governments in Africa are not able to sustain such high levels of subsidies as there is little government revenue to fund industrial growth. Subsidies are now even threatening Africa’s major source of revenue, Agriculture. Statistics indicate that as back as 2007 European and American governments were funding their farmers to the tune of more than $1bn a day to sustain high levels of production.
This has had the backdrop effect of excess supply of cereals, meat and vegetable products which inevitably become way cheaper than those of our farmers.
Where will Africa’s Industrial Revolution fit in?
Although significant effort has been made to industrialize Africa, though albeit at a snail’s pace, the challenge however is that global trade is already tilted in the favor of wealthier large states predominantly in Asia, Europe and America. The greatest question is whether or not industrial products from the continent will find space on the global market and if so where?
Of the top 15 producers of sugarcane in 2016, there were only two African countries Swaziland and Mauritius accounting for a combined total of 2.1 percent of global sugar trade. African countries currently contribute just 2 percent to global trade despite significant comparative advantages in agriculture, mining and human resources.
Three ways to enter into a locked house
As some say there are three ways to enter into a locked house. One might either break down the door; enter through the window or via the roof. The options for African industrial products on the global space are quite limited and the continent has to develop its own markets. To expect fairness from the major global players is being overambitious.
Some of the options that the continent may make use of, is to put in place protectionist strategies for smaller growing industries, exploit regional-economic blocs such as SADC and ECOWAS. Furthermore, quickening the pace of natural resource exploitation will be key in funding and hastening the pace of industrial growth.
Zivai Warikandwa is an Investment consultant; Towerscope consultancy: email:towerscopecons@gmail.com.
Disclaimer: this article is an opinion paper that simply expresses the views of the author and is not meant to replace academic journals or books.
