Is Africa deindustrializing? The Economist praise of Ethiopia’s manufacturing efforts raises eyebrows

11 Nov

By Keffyalew Gebremedhin – The Ethiopia Observatory (TEO)

The debate whether Africa is indeed rising or deindustrializing is not entirely new.

Since 1980, the United Nations has also been seized with Africa’s industrialization in the context of two separate resolutions: 35/66 B of December 1980 and 44/237 of 22 December 1989. Ineffective, as these were the Assembly’s action had not gone beyond proclamation of two consecutive decades as time more for contemplation of Africa’s industrialization; to their credit, I might add here, a number of studies have come forth from individual experts in the wake of this action by the Assembly and have been very useful.

Obviously, with the emergence of China on the international stage and its penetration of Africa since early 2000, easier loans and partly in barter form with raw materials, Chinese funds have made it easier for Africa than before to take measures to improve infrastructures and aim higher into agro processing and other manufacturing undertakings.

It is this and related activites, though from a narrower angle that also The Economist has now offered its fully-undigested view, which appears in its November 7th issue. To put it mildly, it is an intentionally provocative article on the risks associated with the future of Africa’s industrialization.

Frankly, the article’s not-so-benign thread runs throughout with its thinly disguised dubious concern about the “long road ahead for Africa to emulate East Asia.” It thus comes across as gentle arm-twisting by a business magazine on behalf of investors, with no concern as to the local investors that have been systematically cut out of any such role.

It is unfortunate that The Economist should choose to put such view at this very time with total obliviousness of how worse and horrendous Ethiopia’s internal situation has become for its citizens. With every passing day, the situation is exacerbated by the absence of rule of law, nepotism, intensified land grab, human rights violations, denial and absence of justice and the free flow of information, seizure of properties, the use of taxes as punishment to dissuade businesses to leave certain areas/sectors/businesses to members of the ruling party, and etc.

Also the timing does not seem great from a humanitarian perspective, with six of the country’s nine regions exposed to drought and possible hunger and famine. The United Nations is now warning that the level of acute humanitarian needs across virtually all humanitarian sectors has already exceeded levels seen in the Horn of Africa drought of 2011 and more severe situation throughout an eight-month period in 2016 is anticipated.

The international media, including the BBC, has also reported on this situation in its November 9, 2015 bulletin.

Incidentally, it is not only The Economist that is found on this wrong lane. Even the regime in Addis Abeba had top-level meeting five days ago and one of its decisions has to do with harvesting a record 300 million quintals of grains at a time of widespread drought, including in regions normally known as high agricultural producers. For the regime, its poor logic assumes that with higher numbers come respectability by the outside world, although domestically people go to bed empty belly.

Thus the first wary reaction to The Economist’s article I have seen thus far is that of Prof Pius Adesanmi of Nigeria – a columnist on the Sahara Reporters in its November 8 page. He has entertainingly shown his apathy to The Economist’s praise of Ethiopia’s journey into industrialization, carried out with China’s help substantial loans.

Ethiopia’s policy embrace of industrial parks was facilitated especially through the materials prepared by the economist Justin Yifu Lin, an untiring exponent of the New Structural Economics (NSE). He is among the prominent economists, who had groomed former Prime Minister Meles Zenawi and sold him on the importance and benefits of such parks for industrialization and economic growth. I was familiarized with his work in 2012, after I attended his presentation in Helsinki, Finland, at the United Nations World Institute of Development Economic Research (WIDER) 15th Annual Lecture on 4 May 2012. It is following that, I started reading about NSE and finally wrote an article on my blog on 18 November 2012 about Justin Yifu Lin’s ideas, titled: Economist Justin Yifu Lin on state-led economic growth.

At the time, he spoke of his confidence in Ethiopia ‘gradually embracing structural transformation.’

TEO's Editor Keffyalew Gebremedhin in conversation with Prof Joseph Stiglitz and Prof Justin Lin after dinner at the Wanha Satama

TEO’s Editor Keffyalew Gebremedhin in conversation with Prof Joseph Stiglitz and Prof Justin Lin after dinner at the Wanha Satama

In September 2015, I had the pleasure of meeting Prof Justin Yifu Lin in person and interacting with him, along with Nobel Laureate Joseph Stiglitz, at a dinner organized to celebrate the 30th WIDER at Helsinki.

Shifting gear, as to The Economist’s position, the Nigerian professor makes it clear that he does not like one bit this cockeyed soothsaying, otherwise a jinx for him – doomsaying of sorts.

In a historical context, Adesanmi recalls similar praises by a number of Western experts and journalists, for instance, regarding Nigeria, Ghana, Angola and Kenya’s progress; he says each of them have faltered one by one, instead of fast-tracking to the promised land of industrialization, as had predicted those ‘Africa development experts’.

Therefore, employing his varied experiences, he has chosen to offer African countries caution about The Economist’s latest excitement over the progress Ethiopia has made in manufacturing and industrialization, as follows:

    “I tell myself that when you are Africa and your Africa Rising story is coming from The Economist, The Wall Street Journal, Brookings, World Bank, and IMF, you are on a sure path to damnation.”


Why shower Ethiopia with praises?

The Economist praises Ethiopia’s progress by highlighting its policy focus and the success thereon in “providing power and transport links to the industrial parks.”

Consequently, the magazine finds comfort in using official data that usually requires superior care for its poorer quality and state practices and habit of doctoring them for political propaganda. The magazine thus comes out to announce to the world that in Ethiopia manufacturing has grown by an average of over 10 percent a year from 2006-2014.

If that is the truth it has bought, the whole truth nothing but the truth, then The Economist has miserably failed in due diligence of fact-checking. They ought to question, for instance, why the TPLF regime has failed to achieve its planned targets under the Growth and Transformation Plan I (GTP-I, 2010/2011-2014/2015), especially in manufacturing and industrial outputs. If not, the paper ought to ask why Ethiopia is the leading country in Sub-Saharan Africa in being constantly and terribly starved for foreign exchange and also has severe trouble with the huge deficit in its trade account.

The Economist’s data, also cuts through part of the period, when the United Nations Industrial Development Organization (UNIDO) in 2011 jointly reporeted with UNCTAD that Ethiopia’s manufacturing value added (MVA) from 1990-2010 never exceeded a disappointing 0.3.

I urge The Economist to verify this again, including taking advantage of the admission by the TPLF’s extra-hand and advisor to the Man in the Prime Minister’s Office, Arkebe Oqubay. He emphatically pointed out in September 2015 to The Reporter that in looking into GTP-I, one must also recognize “the deficit in manufacturing sector both in terms of export and production targets.” He amplified this further by stating, “the export performance is way below the target while also recognizing the failure in social sectors like education, specifically in secondary school coverage which remained unchanged over the GTP period.”

Moreover, in parliament earlier this month the man in the Ethiopian prime minister’s office was heard saying manufacturing is a do or die thing for Ethiopia, even though it has worsened the housing problems of citizens and the deprivations caused in other priority needs of the population. The essential balance between human needs and TPLF’s search its Canaan for its harshest of developmental states is evidence of the boundless lack of accountability in Ethiopia.

Consequently, under a system that has no respect for citizens, the reality in the country now is that lands are being confiscated; houses are being demolished, and farmers are being dislocated and thrown to the streets – just to build industrial parks – for now – in five major cities. Of the industrial parks, insensitively he thus said in parliament, “Our ability to solve the problem will determine our success” – which means at any cost!

Under GTP-I, seven sugar factories were supposed to be completed and the country ought to be self-sufficient in meeting its sugar needs by 2015. That not being the case, on September 28, 2015, Ethiopia signed contract with Indian company AgroCorp International for the supply of 75,000 tons of sugar, at a price of $397 per ton.

Why has the sugar project failed? It is even officially known by the TPLF and the nation at large that one of its core leaders Abay Tsehaye assumed its leadership. No sooner he walked in, the project money started evaporating; he has not been questioned or charged, as a powerful political figure. In addition, within the leadership, no one has had clean hands to cast the first stone or lift finger, even after the Auditor-General mumbled the problem in public and in parliament in 2014 and 2015!

That The Economist should take this as one reason why industrialization faces lots of problems in Africa is important, especially in countries the West treats the leaders and the parties they operate from as their only link to the nations should be questioned, instead of the peoples’ interests they have willfully ignored and the popular sentiments they seem not interested to give ears.

The trouble with Ethiopia’s industrialization

The shade of The Economist’s idea is that manufacturing and industrialization succeeds, when foreign investors and foreign ideas own and operate them. No doubt this is a bad, bad, self-serving argument/recommendation.

Form what we have so far seen, this approach has not helped Ethiopia; nor have we seen the success of it anywhere in Africa, agro processing, mining, textiles – especially when we hear the example of present difficulties Zambia finds itself in, although it is the world’s eighth copper producer and exporter.

Who could tell us better about the problems about the need for fresh approach, since the past has shown us that it has little to offer?

Unlike The Economist, the problem with Africa is “making significant progress in boosting and sustaining industrialization”, according to a joint UNIDO/UNCTAD study. The corrective message they have for Africa is to re-examine its lack of “effective leadership of the development process”. The origin of this problem is, the study points out, “Africa’s high dependence on official flows” and external actors having had “significant influence on the choice of policies and development paths.”

In my own country, Ethiopia, the official numbers tell very pathetic tales. In a 2014 statistical abstract for 2012/2013 in Ethiopia, the Ethiopian Central Statistics (CSA) reports that the country had 2,610 manufacturing enterprises, specializing in various industrial activities, such as foods and beverages, tobacco products, textiles, leather, paper and paper products, iron and steel, etc.

From this, emerges a picture that, in a country of over 90 million, these 2,610 small enterprises – of which 127 are owned by the state and 2,483 by private entrepreneurs – have contributed to the employment only of a total of 313,946 persons by end 2013. Has The Economist missed this?

The Ethiopian Minister of Industry Ahmed Abitew in a November 4, 2014 presentation rehashed three stages and the phases for the industrialization of Ethiopia:

    (a) Phase 1: Enhancing the productivity of major industries (2013-2015);

    (b) Phase 2: Diversifying and emerging new key industries (2016-2020), and

    (c) Phase 3: Building up high-tech industries (2021 -2025)

While the idea may sound reasonable, we have not seen the light of productivity the minister had promised shining in the 2013 to 2015 phase of industrial development. If the past is any guide to the present and the future, impetuous as the the TPLF regime has been in this quarter century of exercising state powers, it is in no position to translate these neatly laid out plans into action, since the rulers themselves are badly in need of upgrading and undergoing their substantial transformations.

All the same, even at this presentation by the minister the problem is that of lies and cover-ups. In a country where the private sector has been excised out of the front row of developmental activities and relegated to the third tier of participation and operations, i.e., after the investor state and ruling party businesses and Al Amoudi’s MIDROC, the minister misrepresents its place. He tells the world that in Ethiopia “the private sector is the engine of industrial development.”

In the developmental state of Ethiopia, the industrial parks are the sole approach. In an interview with The Reporter, TPLF’s extra-hand and advisor to the Man in the Prime Minister’s Office, Arkebe Oqubay, in May 2015 told The Reporter of the preparations underway Ethiopia “to invest about a billion dollars a year in export-focused industrial parks that will contain textile factories among other manufacturing sites.”

Reuters also, citing ‘a senior government official’, added his own to this on November 9, 2015 to point out that, driven by its desire “to become a hub for light manufacturing industries, [Ethiopia] plans to build four industrial parks in the next two years investing up to $500 million in each”, although credibility of the senior official [Tadesse Haile] it has used as source has on most occasions left citizens, investors and academics alike to look elsewhere, instead.

In its present state, Ethiopia’s industrialization is not any different from a mother reduced to breast feeding so many children, none of whom its own. It could not feed each one of them without any preferences and depriving some others. Turkey, India, China, UK, etc., happen to be the ones that have more rights than Ethiopians, almost having become masters and owners of the means of production and cheap labor they treat no differently from slaves in history, as France’ TV2 exposed in a documentary in September 2013. In Ethiopia, for citizens outside the ‘ethnic’ loop, getting investment funds, lands, water and electricity supply, raw materials, protection, foreign exchange, etc., is like searching water in a desert.

This preferential environment is hardly conducive not only to business, the sense of a nation owning its resources, industries and factories and the belongingness thereon. But far worse, this anomalous situation – where the benefits of growth cannot be shared – stability is systematically undermined. Sense of national loyalty in a multinational state that already is on age is being fast lost than ever before.

Of late, we hear of daily bloodshed that has now become more frequent occurrences from northwest to east, from southwest to south eastern parts of the country – most of all the national army, instead of protecting citizens and as if a foreign invader without the laws of war has been killing so many farmers – women and children included – in Gondar and in SNNPR in particular.

In the hinterlands, the youth has become a time bomb waiting to go off any time, like tinder by fireside.

For a better view of reality, I submit, the deindustrialization issue in Africa must be carefully examined recognizing that commodity is king in Africa, whether it is put to the market as nature has meant it to be or value is added.

This would reveal that, on one side for Africa that has experimented its own era of industrialization in the 1970s/1980s only to be pulled back and subjected to structural adjustment of the 1980/1990s, the present debate is still kept alive more by Africa’s own inability to wane itself out of its total dependence on the cyclically booming commodity exports than its detractors or those coveting its resources.

The occasional high export earnings and what has been accomplished with those monies must also be kept in mind against the backdrop of the region’s never properly audited, unaccountable individual and collective policies and hardheaded leaderships.

Also on the other hand, there is Africa’s inability to sustainably benefit itself from the earnings from commodities – partly due to its misguided policies and failures and because of factors beyond its control. In sum, it has failed to create conditions (manufacturing industries) for rural populations to move to industrial zones and earn their living selling their labor to magnates of industry, private sector or the state.

This could have enabled them to get sustained incomes, lift themselves out of poverty and engage in economically beneficial activities.

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