Addis Ababa, 18 November 2023 (ECA) - African nations can collectively drive industrialization by embracing technological diversity and fostering regional collaboration, researchers at the African Economic Conference 2023 in Addis Ababa, Ethiopia, have said.
During a research session on day 3, about innovation, technology and industrialisation in Africa, moderated by Mr Bartholomew Armah, Chief of the Development Planning Section, Macroeconomics and Governance Division at the UN Economic Commission for Africa (ECA), researchers pointed out the diversity in technological capabilities across African nations as a strength, rather than a challenge.
This diversity is marked by some countries showing robust technological prowess, with others playing catch up, and emerging contenders entering the scene. This landscape sets the stage for cross-country knowledge transfer, creating a conducive environment for collaborative endeavours.
These were some of the major findings of the paper, Technological Capability and Industrialization in Africa, authored by Gideon Ndubuisi et al. It sampled 50 African countries between 2000 and 2018, finding strong heterogeneities in the levels of technological capabilities among countries on the continent.
Whilst some countries have non-existent technological capability or low capabilities, others either show potential or already have adequate technological capabilities for industrialization.
The research also shows that the average technological capability in African states has almost doubled, increasing from 25% to 41% which is linked to increasing internet penetration and rapid diffusion of digital technologies across the countries.
“Our results show strong evidence of technological and industrial development interdependence among countries in Africa. Unlike geography or distance, we find that the channel through which this interdependence is propagated is intra-African regional trade.
Our results hold important implications for the need to promote regional value chains in Africa and the active role AfCFTA must play in this regard,” Ndubuisi said. He argued that their evidence shows there is a window of opportunities for African countries to collaborate to advance industrialisation by increasing intra-regional trade.
Discussing the paper, Mr Jacob Assa, a Senior Strategic Advisor at the UN Development Programme (UNDO), said the research was relevant to understanding Africa’s path towards industrialisation. He noted that the paper’s findings show that Africa already has seeds of industrialisation, and therefore doesn’t have to reinvent the wheel.
“The paper provides country-level evidence on the relationship between capabilities and industrialization,” Assa said. Although, he did recommend that the authors consider expanding country coverage beyond Africa, and develop an index that captures global data.
“This is useful for benchmarking because then you can see that some countries in Africa are at the same level as countries in Latin America, or East Asia, and do cross-regional analysis.”
In another paper, titled "Explaining Capacity Utilization among Firms in Kenya", researchers Kefa Simiyu and Beatrice Mbinya delved into the intricate dynamics shaping capacity utilization among Kenyan enterprises.
Leveraging data from the World Bank's Enterprise Surveys conducted in 2013 and 2018, the study introduced a novel dimension to the analysis: social interactions proxied by the closeness of enterprises within a sector.
“Male-headed firms generally have top managers who have spent 19 years on average in the sector, while top managers at female-headed enterprises average 14 years of experience, but we still realise that capacity utilization remains very low,” said Simiyu.
The study reveals that capacity utilization is hindered by financial challenges, joint corruption-transportation challenges, and the impact of informal competition coupled with transportation issues. It also shows that capacity utilization declines as enterprises within a sector move apart, indicating the impact of social interactions on operational efficiency. Findings also show that top experienced female managers emerge as a positive force, significantly raising capacity utilization within enterprises which underscores the importance of gender diversity in top-level management.
Interestingly, the study suggests that corruption, in the context of informal competition, can raise capacity utilization. However, bribery does not alleviate transportation challenges, emphasizing the nuanced nature of corruption's impact.
The paper advocates for robust institutional strengthening to curb corruption, emphasizing the need for economic, judicial and governance reforms.
Discussing the findings of the paper, Mr Ali Zafar, a Senior Economist at UNDP, said it addresses some of the empirical puzzles in the literature on capacity utilization.
“When you compare Africa to Asia, you notice huge differences in capacity utilization. In China, there’s 80-90% capacity utilization, while the numbers in Africa are 60% or less,” Zafar said. He added that the paper presents “out of the box” thinking, and looks at several parameters previously ignored including capacity utilization finances, corruption, gender dimension, and the network effect.
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