Enhancing Africa's Structural Transformation for Sustainable Growth

In 2018, the European think tank group (ETTG) released a brief titled "A Rapier, Not a Blunderbuss: Why the EU Must Do Better in Supporting African Job Creation ," authored by Altenburg and three others. Their objective was to tackle the challenge of job creation in Africa, particularly in Sub-Saharan Africa, and provide recommendations for how the EU can enhance its support to African countries in this endeavour.

The study emphasised the significance of generating new jobs, especially for youth and women, advocated for structural transformation, improved skills development, and endorsed social protection programs. By underlining the necessity for targeted and comprehensive strategies, they aimed to guide policymakers and stakeholders in implementing effective measures to address the job creation challenge in Africa.

The paper estimated that Sub-Saharan Africa (SSA) must create 18 million jobs annually until 2035 to accommodate young labour market entrants. The AU-EU Summit of November 2017 had already prioritised job creation and sought development cooperation from the European Union (EU).

While not providing an explicit implementation framework, the document offered guidance on actions and approaches to support job creation in Africa, emphasising the importance of targeted interventions, collaboration between stakeholders, and a focus on inclusive and sustainable economic development.

Despite widespread anticipation for structural change in Africa, approaches to this noble objective often miss the mark. The continent's history of efforts toward structural change may provide insights. Shaped by years of colonisation, Africa entered independence with economies serving foreign interests and rooted in the extraction of raw materials.

Following independence, African nations attempted to reduce reliance on imported goods by developing domestic industries (import substitution industries). However, this path was fraught with difficulties, as protectionist policies often led to inefficiency and hindered innovation, exposing economies to external shocks.

Import substitution industrialisation (ISI) yielded variable degrees of success among African countries but was ultimately limited in effectiveness. Although some countries experienced short-term increases in industrial production and reduced reliance on imports, long-term challenges and unexpected consequences frequently overshadowed these gains.

The turbulent 1980s and 1990s ushered in a new era with the introduction of structural adjustment programs (SAPs). Designed by international financial institutions to address economic crises, SAPs advocated for market liberalisation, privatisation, and fiscal discipline. However, their implementation often exacerbated poverty and inequality, leaving scars on the social fabric of many African nations.

While some African countries experienced partial successes or short-term gains from SAPs, the overall impact was mixed, facing significant criticism, especially from Marxist-leaning scholars. Critics argued that SAPs prioritised market-oriented reforms at the expense of social welfare, exacerbated inequalities, and failed to address structural issues underlying Africa's economic challenges.

It wasn’t until 2021 when new research by Lopes and Willem te Velde from the Institute for New Economic Thinking published another research, Structural Transformation, Economic Development, and Industrialization in Africa Post-Covid-19 , which acknowledged the role of Information and Communication Technology (ICT) in structural transformation albeit with variations across countries and regions.

While Africa's digitalization-driven structural transformation has shown promise, obstacles persist, such as the digital gap between urban and rural areas, insufficient infrastructure, affordability barriers, and cybersecurity concerns. Addressing these difficulties will be crucial to ensuring that the benefits of ICT are dispersed evenly and sustainably across the continent.

Several African countries have benefited significantly from digitalization-driven structural transformation. While the level of transformation varies across countries, Ghana, Kenya, Nigeria, and Rwanda are notable examples where ICT has played a critical role in driving economic growth, improving governance, and advancing social development. For example, digitalisation is streamlining value chains in agriculture and fostering value addition.

This new structural change does not undermine the EU’s massive agricultural production. Indeed, Altenburg and his co-authors argue that African structural transformation will benefit the EU by promoting sustainable economic growth, leading to increased trade and investment opportunities. A more prosperous Africa can create new markets for EU goods and services, contributing to economic development in both regions. A stable and prosperous Africa can also enhance regional stability and security, aligning with EU interests of a sustainable future.

EU support for Africa’s structural transformation will generate new jobs, particularly in higher-productivity sectors such as manufacturing and modernised agriculture. This can help reduce unemployment rates in Africa and potentially decrease migration pressures towards Europe, benefiting both regions. However, these benefits have not materialised as proposed for several years, suggesting that these noble ideas are on the brink of failure, akin to past attempts at structural changes.

The Lopes paper acknowledges that industrialisation is crucial for African countries to transform economies and create jobs, but it also highlights some reservations. Despite a slight decline in manufacturing's value-added share, its per capita contribution has increased significantly. While Africa's "premature deindustrialisation" is a prevailing global narrative, recent data suggests that deindustrialisation is not occurring. Nevertheless, renewed effort and policy focus are necessary to promote industrialisation.

The African Union and African countries have expressed significant support for industrialisation. However, considerable obstacles hinder the required policy structure to enable it. Firstly, the current policy environment remains overly focused on general investment climate issues and lacks targeted, facilitative actions for specific sectors. Secondly, even when there is a commitment to industrial policy, implementation often falters due to weak institutions or an unfavourable political economy.

In my view, the time has come to adopt a different approach. We must learn from other regions where industrialisation spread successfully, such as Europe, Asia, and the US. Rivalry played a significant role in Europe's structural transformation, with competition among nations driving industrialisation and economic development.

The approach in Africa should be tailored according to each country's level of development, with frontrunners serving as inspiration for laggards. In Asia, for instance, Chinese officials studied South Korea's development policies, industrial strategies, and institutional frameworks to identify lessons and best practices applicable in the Chinese context. This included policies related to export promotion, technology transfer, investment incentives, and infrastructure development.

Africa tends to procrastinate without immediate neighbours to spur progress through the competition. Africa needs a disruptor from within, setting the pace for others to follow suit. While there are few frontrunners in ICT-led structural transformation, the best course of action is to align with them, fostering sustainable competition within Africa.

As Africa navigates its journey towards sustainable growth and development, the imperative for structural transformation becomes increasingly apparent. Learning from historical endeavours and leveraging modern insights, African nations, with support from partners like the EU, can pave the way for inclusive and sustainable economic advancement. By prioritising targeted interventions, fostering collaboration, and embracing the potential of digitalisation, Africa can overcome longstanding challenges and realise its full potential. Through proactive adaptation, tailored strategies, and a commitment to learning from successes and setbacks, Africa can become a beacon of prosperity and opportunity for its people and the world.