Why African countries must accelerate industrialisation, by ECA chief

[TGD]

 The Executive Secretary of the United Nations Economic Commission for Africa, Dr. Carlos Lopes, was not a novice on development issues, especially in Africa, when he was appointed by UN Secretary-General Ban Ki-moon as the eighth head of the commission at the level of UN Under Secretary-General in September 2012. He had previously served as Executive Director of the United Nations Institute for Training and Research (UNITAR) in Geneva and Director of the UN System Staff College in Turin at the level of Assistant Secretary-General from March 2007 to August 2012. The specialist in development and strategic planning, who has authored or edited 22 books and taught at universities and academic institutions in Lisbon, Coimbra, Zurich, Uppsala, Mexico, São Paulo and Rio de Janeiro spoke with The Guardian's BOLA OLAJUWON, on the sideline of the just-concluded conference on 'Industrialisation for Emerging Africa' in Abidjan, Cote D'Ivoire. Lopez traces African experience with industrialisation, why African countries must industrialise as well as accelerate industrialisation.  He claims that Nigeria is at a turning point, but added that the nation needs to renegotiate all its oil contracts. Excerpts:

CAN you please premise the theme of this conference, 'Industrialisation for Emerging Africa,' on the prevailing economic realities on the continent?

We have to industrialise for three reasons and these are very important. First is our demographic curve, which is going to create a situation where we are going to double our population. Beyond the population, we are going to witness incredible urbanisation. We cannot take care of the number of the young people from our population and the number of jobs that are required if we do not industrialise.  You cannot create the jobs through agriculture, because we still have very much communal or subsistence agriculture and where we have surpassed that stage, productivities are very low when compared to any other region in the world; we are the lowest. This is not going to generate enough jobs to cater for all the demands. And for that reason alone, we have to industrialise. The second reason is that if we really want to become middle-income countries, we have to aspire and have that ambition. There is not a single middle-income country that has not industrialised significantly. We should not just focus all the strategies of Africa on poverty reduction. I have nothing against poverty reduction, but it is not going to transform us into the type of countries we want to be. And so, we have to show the same type of ambition as anybody else and that cannot come about without industrialisation. The third reason is because we have so many natural resources and everybody agrees with that. Our commodities are in high demand and in order for us to do justice with ourselves; we need to transform these commodities into something more than just raw. We can no longer be exporting them raw. We have to add value to these resources and this will come with industrialisation. For these three reasons, I will like to say, it is one option among many options that will address the situations I just mentioned.

But since the period of independence, many African countries have tried industrialisation, especially in Nigeria, where many industrial premises in some parts of the country are now being taken over by churches. What do you think are responsible for the failure of the various industrialisation programmes?

We all have our frustrations with what has been the experience with industrialisation in Africa. In the 60s and 70s, the industrial output in Africa was growing consistently in the first 10 or 15 years of independence. Most of these investments were done by the state and instead of the state being a smart investor,  that was not the case. The state didn't realise that in most of the industries, it cannot expect result to follow immediately. This is not agricultural circle where you plant and in 10 years, you want your yields. This is much more sophisticated and broader timeframes are needed.

In the process of industrialising, the oil shock came. The first one in 1972 and all the borrowing that African countries were having easily – they went to the market and got all the money they wanted because they knew that the market economic indicators were good and also an appetite for investing in Africa skyrocketed with the oil shock because we didn't look into the fine print of the contracts. And in the fine print most of the time, there was no cap on the interest rate and so heavy interest rate went up and so did our debts. And then, we had the first strangle on our industries. In addition to that, these industries were left just like jobs for the boys and we didn't actually make them profitable and in many cases, the state became vicious in the way it was using these industries as populace clique, rather than using them to propel the country in terms of innovation, knowledge and in value addition chains. And then came structural adjustments and countries in Africa were subjected to it and as a result, they lost all independence to be able to continue policies that would promote industrialisation. It was like our comparative advantages were considered not to be in that area. We all went through adjustments and adjustments of recessive nature and on top of it, we have poverty reduction strategy and not wealth creation strategy. If you do not do a b and c, you would not have your debts reduced – either through the mechanism for High Indebted Countries or like the case of Nigeria, going through secondary market and buying the commercial debts like Minister for Finance Ngozi Okonjo-Iweala did very well.

So, what happens now?  We are in different stages. We are in a stage of favourable condition and unfavourable conditions. The favourable condition is that we are growing and our macro-economic situations that were declining in 1960s and 70s are back in the normal environment. One very important change that is better for us is that now, there is the level of education in Africa that Asia had when they took off. If they took off with such characteristics – a good macro-economic environment, level of education similar to us and demography that we are experiencing now, things are in our favour. But people are saying that is not enough; we still need what worked for others, which is clever leadership, not just leadership about what you do with your planning, your frameworks and so what. We need the drive. And that is why people are saying Africa has a lot of good conditions. And now, what about leadership? Is it going to rise to the challenge? My answer is: What do we do to rise to the challenge? Well, with evidence-based policy works, recommendations and analyses. We have to confront people with the fact that we have a little time to lose because everything is in our favour and we have to take advantage of the favourable conditions. We have to do it in about a decade and after a decade, you have lost already all opportunities.

On the issue of taking advantage of opportunities, there was a time that in Nigeria all our refineries were working at optimum levels vis-à-vis exportation of our crude oil. But now the refineries are no longer working and we export our crude oil and import refined products. What do you think is wrong with us?

Nigeria has the most talented professionals in the Diaspora than any other countries in Africa can be proud of. That is enough testimony that there is nothing wrong with the Nigerian genius, but something is wrong with the governance. Nigerians are some of the most creative and the most entrepreneurial that you can find   in the world; I am not even saying in Africa.  So, what is wrong and why is that happening? Well, a series of conditions are not favourable for this to happen, but I believe strongly that Nigeria is at a turning-point and things will happen soon. I will give you some examples. There is a degree of confidence of the economic actors in Nigeria that you haven't seen for a very long time. People that want to invest in Nigeria are queuing. Before, it was like Nigeria trying to find investors and now, Nigeria is regulating those to come in for investment. If you go into the City of London, all the private equities and engineering arrangements being done for Africa are led by Nigerians. These are some of the indications that you are at the turning point. When Nigeria will finish with the new calculation of its Gross Domestic Products (GDP) based on year base; closer to reality - and I think it is going to be 2007 as the year base - you are going to discover that Nigeria is much bigger economically than anybody suspected and if it is not close to South Africa, it would not be too far. This is going to be something that will have credible impacts on investors mind. This is a technical issue that would change the minds of investors and the way Nigerians look at themselves.

But people are complaining about the dearth of adequate infrastructure to attract investments...

First of all, let me correct the impression that there is no infrastructural development in Nigeria. You know that there has been a lot. You just build the road all the way to Algiers. The part that belongs to Nigeria has been completed and the part that belongs to Algeria has equally been completed. What is remaining is about 166 kilometres in Niger. But Nigeria and Algeria have decided to fund it. This is not a small undertaking. We are talking about making one road run from Algiers to Lagos, which will completely change the landscape of trade, integration etc. This investment is being done along the desert where most of the activities are non-existent right now. This is one dramatic example that Nigeria is also doing infrastructural development. If you go to Lagos, you will see that the airport is being refurbished and if you also walk around Lagos, you will see the changes that are dramatic over the last five years. Thanks to a brilliant governor, Babatunde Raji Fashola. Nigeria is certainly at the beginning of the turning point I mentioned earlier. But I agree with the fact that you represent youths of the continent; you are impatient because all these are not enough and we have to accelerate. It is true that a certain number of policies are being implemented but we need an acceleration of all of these. Governor of Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, is in exactly the same frame in trying to convey the impatience of someone that knows better that these types of things have to work for the betterment of the country and that we should not believe that it is the narrative and interest or excitement of those outside the continent that would make our lives better or should read what The Economist is saying about Africa, the KMPG or PriceWaterHouse or all these consulting firms. They are looking into opportunities. I would say it is not their problems; it is our problems and we have to make that difference. It is for Africa to take control of their own lives.

How then can African countries make the difference in the area of industrialisation or as emerging industrialised nations?

Not long ago, I think a few years back, you would go from one country to another and you, 'ask what is your status' and they would say 'a Least Developed Country.' Surprisingly too, they would fight to keep that status because they would think, 'Oh, this would bring me more aid.' And those who are not Least Developed Countries would say, "I would like to be a Least Developed Country too.' This was incredible. And now if you go to country after country, what you hear is, 'I will like to be a Middle Income Country by year 2020, 2030 and so and so. Every country is reshaping its mind from just accommodating and depending on aid to a country that leaves aid behind. Like the Minister of South Africa said yesterday, the money you receive may sound free or without strings attached to it, but in fact, it is distractive; it is not part of your strategy, it distracts you from something else. It takes your attention away from what you should be doing. And I think this is the problem of a lot of countries in Africa. We have to keep them on track or back on track. So that they can care about their destinies rather than taking the little offering they get at the end of the day.

Back to Nigeria again. How do you think we can make our crude as a springboard for the envisaged industrialisation?

Nigeria needs to renegotiate all its oil contracts. Nigeria needs to get out of a system where the contributions of oil industries to Nigeria are taxes and royalties. It has to get more than that. Nigeria has to renegotiate with all its investors in the area of value chains. If you want to explore oil here, for instance by the year 2015 or 2020, 100 per cent of engineers have to be Nigerians; this percentage has to be of Nigerian holdings; this much would be taken from taxes to put in sovereign funds; this much would be required for you to continue the exploration project; building of refineries and infrastructural projects. And more importantly, no industry must destroy the environment. You know what that means in the Niger Delta Region. Nigeria has to stop this complete disaster with the way the oil industries have contributed to wastages, gas flaring and pollution of the environment where so many people live. All this has to stop.



The Guardian

[Folami David]

That is very correct. African countries are in the best position to rectify things. I hope they put more effort into it