Industrialization and Job Creation for Africa

Towards a Solution

A group of African countries came together in 2011 to create the Industrialization and Job Creation for Africa Initiative to respond to that challenge. The Initiative aims to make Africa the next manufacturing hub for global markets by helping it to seize the opportunity for industrialization arising from the relocation of light manufacturing from China and other emerging market economies. In doing so, Africa will realize its potential for sustainable industrialization, shared prosperity and job growth.

The project helps governments to adopt a proactive approach to investment promotion and improve infrastructure and the business environment in special economic zones/ industrial parks to attract export-oriented light manufacturing firms. These firms have the technological know-how and the confidence of international buyers in China and other emerging economies so they relocate production. The project creates quick wins that produce a snowball effect, attracting foreign direct investment and domestic investment and serving as a source of inspiration and experience for other African countries interested in kick-starting their efforts towards sustainable and inclusive industrialization.

The Initiative was inspired by Professor JustinYifu Lin’s new structural economics, regarded as the third wave of development thinking after structuralism and neoliberalism. New structural economics proposes that developing countries focus on what they can do well (potential comparative advantages) based on what they have (factor endowments). With this guidance, the initiative has achieved quick wins and is being scaled up through demonstration and triangular cooperation.

Industrialization and Job Creation for Africa uses a five-step approach: (1) quick wins: African governments use existing resources and implementation capacity to establish industrial parks and special economic zones with adequate infrastructure and a good business environment so that investors can reduce transaction costs to achieve quick wins in job creation and export promotion; (2) scaling up: success stories foster national champions and scaling up in host countries and across the African continent; (3) triangular cooperation: partners build on collaboration between African countries with comparative advantages in the supply of labour and raw materials to attract investors from emerging economies with manufacturing capability and international buyers/retailers in Europe and the United States; (4) participation: high-level commitment from African governments is essential for triangular cooperation and crucial to building the capacities of countries to design and implement sustainable industrial policies and special economic zones; (5) engaging international organizations in scaling up: UNDP China signed a memorandum of understanding with the Made in Africa Initiative in 2015 to build on early success. The Centre for New Structural Economics at Peking University and the Made in Africa Initiative are working with UNDP to leverage its global network and convening power to advance the agenda of pan-African industrialization.

The Initiative has shown promising early successes. The number of jobs created by the Huajian shoe factory that had invested in Eastern Industrial Park in Ethiopia rose from 600 in January 2012 to 3,500 in December 2013. The success in attracting FDI to Ethiopia created a snowball effect, with the 22 factory units in Bole Lamin, a new industrial park, leased out in just three months in 2013. Ethiopia has shared its pioneer experiences with Rwanda and Senegal. Delegations from other African countries have also visited Ethiopia to learn from its experience. In light of Ethiopia’s success, Rwanda is ready to explore similar partnership with the Made in Africa Initiative and the Centre for New Structural Economics. With their facilitation, C&H Garments invested in the Kigali Special Economic Zone in February 2015 and production began within two months. Over 500 jobs were created by August 2015 and 300 women were trained in embroidery to enable household manufacturing. In Senegal, with advice from the Made in Africa Initiative and the Centre for New Structural Economics, the first special economic zone was created in 2015 to attract FDI in light manufacturing and international buyers, such as Carrefour. Success stories have further sparked high-level political commitment to achieve quick wins for pan-African industrialization. Côte d’Ivoire, Djibouti, Ghana, Nigeria, Uganda and the United Republic of Tanzania have expressed interest in creating quick wins in sustainable and inclusive industrialization.

The sustainability of the Initiative depends on a number of factors such as: (a) political commitment from top leaders in host countries; (b) building of special economic zones/industrial parks to boost infrastructure and the business environment, attract FDI and spark international buyers’ confidence; (c) creation of local industrial clusters by encouraging local entrepreneurs to master manufacturing know-how to achieve economies of scale; (d) targeting of international markets; and (e) ensuring corporate business responsibilities.

This model is highly replicable and has spread from Ethiopia to many African countries. It is ready to be replicated as long as there is adequate funding to incubate successes and systematic action-oriented research to distill lessons. Pilot success stories in international forums and media have already given rise to high-level political commitments in African countries to have similar quick wins. There is momentum for learning from quick wins for industrialization. Stakeholders include African governments at the national and local levels, manufacturing companies such as C&H Garments and the Huajian shoe factory, developers of special economic zones/industrial parks and international buyers, and international institutions including UNDP and UNIDO.