Industrialise Africa

Industrialise Africa is one of five accelerators of the African
Development Bank. The others are Feed Africa, Light Up andPower Africa, Integrate Africa, and Improve the Quality of Lifefor the People of Africa.

I firmly believe that if Africa focuses on these High 5s, thecontinent will achieve 90% of its Sustainable Goals and 90% ofits Agenda 2063 goals. This is why Industrialise Africa is at theheart of the African Development Bank's High 5 Social
Development Goals (SDGs).

Dr. Akinwumi A. Adesina
President
African Development Bank

To industrialise Africa, the African Development Bank iscommitted to mobilising capital, de-risking investments for theprivate sector, and leveraging capital markets. This is essential
for moving Africa’s Industrial agenda forward and for building an
Africa of the twenty-first century that is well positioned to takeits place in global value chains.

Foreword

Africa is certainly the place to do business today. We have arapidly growing young population, and an increasing demandfor consumer goods, food, and financial services. Together,
these factors make Africa an attractive business and industrial
proposition for the private sector.
The bottom line is that we need to produce more and we needto produce better. Most of all, we need to add value to ourresources and raw materials, and turn them into processed
products.
That is the end goal! We must not slow down. Africa’s time isnow!

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2Industrialisation is Key
to Economic Development

No country or region has achieved prosperity anda decent standard of living for its citizens withouta robust industrial sector and African leaders
have repeatedly emphasised the importance ofindustrialisation for the continent’s inclusive and resilient
growth. The role of industrialisation is clearly articulated
in the African Union’s Action Plan for the Accelerated
Industrial Development of Africa (AIDA) and the United
Nations’ Third Industrial Development Decade for Africa(IDDA3). Agenda 2063, the African Union’s strategic
framework for the socio-economic transformation ofAfrica, calls for the promotion of sectoral and productivity
plans, as well as the development of regional andcommodity value chains, to support the implementationof industrial policies at all levels. In respect of thesegoals, the President of the African Development BankGroup, the Director General of the United Nations
Industrial Development Organization (UNIDO) and theExecutive Secretary of the United Nations Economic
Commission for Africa (UNECA) have agreed to work
together to help Africa design an “IndustrialisationAgenda”.
This publication presents a roadmap for implementing
flagship programmes to scale up the industrial
transformation of Africa. It also summarises the rationale for:(a) the industrialisation of Africa; (b) making industrialisation
a current priority; (c) freeing resources for theindustrialisation of Africa; and (d) the African Development
Bank’s assistance in the industrialisation of Africa.

3Why Do We Need toIndustrialise Africa?

Overall, Africa has enjoyed strong economic growth
for almost two decades, but the continent has notseen a commensurate rise in industrialisation.
Growth has been on the basis of expanding domestic
markets supported by a burgeoning middle class, improving
business environments that include better macro-economicmanagement, favourable commodity prices, urbanisationand increasing public and private investment. The persistentlack of industrialisation is a brake on African economies,
which remain largely dependent on agriculture andunprocessed commodities that add relatively little value. Onaverage, African industry generates merely USD 700 of GDP
per capita, which is less than a third of the same measure inLatin America (USD 2 500) and barely a fifth of that in East
Asia (USD 3 400). In addition, African exports consist of lowtechnology manufactures and unprocessed naturalresources, which represent more than 80% of exports fromAlgeria, Angola or Nigeria, for example.

Since industrial growth has a positive influence on overall
GDP and productivity, industrialisation is a necessity forAfrica. When world leaders agreed in 2015 to “build resilient
infrastructure, promote sustainable industrialisation andfoster innovation”, which became Sustainable Development
Goal #9, they recognised this. Industry plays a vital role indevelopment because it increases the value created in an
economy by generating activity further along value chains,from raw materials to finished products. Industrialisation
boosts productivity by introducing new technologies andtechniques, generates employment, increases the skills of
the workforce, supports formalisation of the economy,
diffuses improvements into the wider economy and tends tounderpin social stability. Industrialisation can improve thebalance of trade by creating goods for export and creatinglocal competition for imports.

The challenges of industrialisation are many, but thebenefits are wide and within reach.

4African economies strongly rely on commodities
that account for more than 70% of Africa’s exports
African Merchandise Trade
OthersManufactured Goods

Fuels and Mining Products

390

550

16%

15%

Agricultural Products

African economies strongly
rely on commodities andmainly import manufactured
goods

25%- Commodities make up morethan 60% of African exports

56%- Manufactured goods accountfor more than 50% of imports

44%

15%
15%

13%Exports

Inports

Industrial GDP remains very low across
Africa and the structure of manufactured exports
is still resource-based and low-tech
100,090,013,117,921,021,023,380,029,030,144,870,060,050,086,982,140,079,079,076,730,043,971,069,955,220,010,00,0Nigeria

Medium & High technology

Cameroon Ethiopia

GhanaKenya

Resource-based & Low technology

5Côted'Ivoire

EgyptSouthAfrica

Emerging countries' average share of RB-LT

Industrial GDP percapita, USD, 2014
2500 - 3500
1500 - 2500
500 - 1500
< 150No data> 3500

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Now Is the Time to Industrialise Africa
Africa has benefited from two decades of steady economic growth sustained by commodity
exports and increasingly by structural factors such as demographics, growing internal markets,urbanisation and technological developments.

1988-2000

2001-2015

GDP Growth Per
Annum
>5%
3%-4.9%<2.9%

7

2016-2030

8Africa is the second-largest
FDI destination
behind the Asia-Pacific region. FDI inflows to Africa have risen fromapproximately USD 10 billion in 2000 to over USD 55 billion in 2015.
FDI Projects in Africa are diversifying beyond the extractives sector
Coal, oil and naturalgas 4.1
Diversified industrial
products 4.6
Technology, media andtelecommunications
19.5

Automotive 4,9Clean technology 6.2

Real estate, hospitality
and construction 6.7
Consumer products
and retail 15.2
Transport andlogistics 7.7

Business services 11.8

Financial services 9.9

Source: EY Attractiveness Program Africa, May 2017 / Oxford Economics

9Africa’s Industrial Development Can
Capitalise on Sound Structural Factors• Demographics: Africa will have 2 billion people in 2050, one fifth of the global
population, the largest and youngest workforce by 2025 and over 500 million people
in the labour market.
• Urbanisation: Africa has the highest urbanisation rate in the world. About 40% of
the population already live in urban areas and the 20 largest African cities are
expected to grow by 50% in the next 10 years. This represents opportunities ininfrastructure development and services.
• Growing internal markets and middle class: 150 million Africans made up themiddle class in 2010. This is set to increase to 210 million by 2020 and to 490 million
by 2040. Internal markets are growing by more than 5% annually.
• Digital and technological developments: Africa is the fastest-growing digitalconsumer market with 600 million internet users. The continent will have 720 million
smartphone users by 2020. Currently, 31% of Africans are within reach of internet
connectivity.

10What Will it Take to Industrialise Africa?

S

tructural transformation is needed toensure sustainable, inclusive and shared
growth in Africa. This is not possible
without industrialisation with which to facilitatea move from low- to high-productivity activities.

African Development Bank’s goal is to help
Africa move from agriculture to agro-industries,
from raw natural resource exports to high-valuesemi-processed or processed exports and,hence, to curb high unemployment rates andlay the groundwork for greater diversification ofeconomies. This industrial revolution must beunderpinned by technological progress,
reallocation of new investments into high-returnemerging markets and by offering Africa
opportunities to leapfrog over its development
gap.
Stakeholders acting on the industrialisationagenda of the continent estimate that structuraltransformation requires industrial GDP to growby an average of 11.5% per year
(corresponding to a cumulative growth of1111

130% by 2025), while GDP per capita growthwould have to almost double to 4% per annum.
The experience of other industrialising
economies would seem to indicate that Africa
can realistically achieve these objectives by
increasing industrial GDP in the next ten years
from USD 751 billion to USD 1.72 trillion within
the next decade. This would raise continental
GDP to USD 5.62 trillion and African GDP percapita to USD 3 368 by 2025.
For this to happen, there is a need for acomprehensive and resolute continental
industrial policy that is country-adjustable tolocal contexts and that can be aligned with thecountry’s development goals. This will requirevision and commitment from political leaders
but also from the African Development Bankand the broader development community
called upon to provide support throughtechnical assistance, capacity building,continuous dialogue and advisory services.
Lessons from the experiences of the AfricanDevelopment Bank, UNIDO, UNECA and otherdevelopment organisations highlight five keyenablers that have been common to almost all
countries that have rapidly industrialised theireconomies.
In successful industrialising countries, theseenablers have typically been integrated into acomprehensive industrial policy that hasenabled businesses, both large and small, todevelop along the value chains of selected,
high-potential industrial sectors.

Industrialisation Enablers• Supportive policies, legislation and institutions.
• Conducive economic environments and infrastructure• Access to capital• Access to markets• Regional integration and addressable markets• Competitive talents, capabilities, and entrepreneurship.

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How the Bank Will Help Industrialise Africa
The African Development Bank plans to place a stronger focus on areas where it can bestleverage its experience, capacities and its finances to support countries through six ‘Flagship
Programs’, which are at the core of the Bank’s Industrialise Africa priority.

To deliver its contribution to these programs, the Bank will
significantly increase its level of funding over the next decade.

Foster successful
industrial policies• Provide policy advice andtechnical assistance to governments (regulatory andinstitutional framework, implementation and monitoring) and funding of key
PPP projects

Promote and drive
enterprise development

Attract and channel
funding into infrastructure
and industry projects• Increase and channel funding
into GDP-boosting programmes (infrastructure andindustrialisation projects, by
public and private operators)- Raise own investment- investment by others (domestic and foreign) as
strategic investor or mandated lead arranger

Promote strategic
partnerships in Africa• Improve access to market

finance for African enterprises- Advise governments,
stock exchanges andregulators on development of liquid capitalmarkets- Invest directly in capital
markets to increase liquidity

Develop efficient industry
clusters cross the continent

0605• Drive enterprise development(large, small and medium businesses)• Scale-up investment and financing to lend to SMEs
- Technical Assistance support to strengthen SME-focused entities- Establish linkages of SMEs
to domestic projects/companies and provide trainingof a strong talent pool

Grow liquid and effective
capital markets• Link up African enterprises
and major projects with potential partners and investors, through promotional
activities, including the African Investment Forum• Facilitation and management of investor relations(e.g. contract negotiations)13• Support governments indeveloping efficient industry clusters across Africa
through technical assistance and funding in implementation and monitoring

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15

AfDB Intends to help raise Africa’s
industrial GDP by 130% by 2025
and drive overall
GDP from USD 2.3 trillion
to USD 5.6 trillion

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AFRICAN DEVELOPMENT BANK GROUP

Communication and External Relations Department
Rue Joseph Anoma 01 BP 1387 Abidjan 01 (Côte d’Ivoire)Tel: +225 20 26 16 42 • Fax +225 20 21 31 00 • Web: www.afdb.org
industrialiseafrica@afdb.org
October 2017