A walk out of poverty and unemployment is through industrialization
By: Ben Patrick
Over the years, we have been grappling with all sorts of development-related challenges. At the center of our economic challenges was a ‘dead’ or non-manufacturing base. What our farmers produced, the economy did not absorb and our people ate what they never produced. We collected peanuts from sale of our few sources of revenue and had to borrow to import finished goods made from our row products. We produced graduates that were not relevant to industrial needs and borrowed to support the same education system that industry and our economy system failed to support. This gave rise to high unemployment, perpetual budget deficits, balance of payment deficits, debts and high poverty levels.
How do we promote local industries to produce finished goods using local raw materials that will compete with high quality goods from other countries produced by firms with a huge capital base, state of the art technology, recognized branding and huge global market share?
This is the big puzzle we have to solve. The answer to this big question lies in attracting leading foreign firms to come and produce here while promoting local firms or industries. Let us borrow the concept of industrial parks, modified it and used joint ventures with very good incentives to attract both local and leading foreign firms to come and produce from within, but this can be achieved through peace, stability, and good policies.
Foreign companies find it cheaper to produce in as location close to markets and raw materials. In countries like China, the domestic production capacity is being exhausted and to continue growing, there is a need to set up production plants elsewhere. This comes at a time the world is looking at Africa with its rapidly growing population as the biggest global market for manufactured goods in the near future.
Given this background we should be constructing industrial parks with a minimum firm capacity. Local companies will form joint ventures with foreign companies and benefit from a global level business environment offered under the industrial parks initiative. Local companies will receive support from African Development Bank or local Banks to allow them meet partnership obligations under joint ventures.They will benefit from huge capital, advanced technology, global branding and market penetration brought in by their foreign partners. This will enable us to process our resources into finished products. It will notably provide a permanent and lucrative market for farm produce and spark an agrarian revolution. This is the magic bullet that will stimulate all sectors of the economy.
Ethiopia inaugurated Hawassa Industrial park, which will employ 60,000 people at full capacity and be able to generate export revenue amounting to $1 billion. Currently, 18 leading global apparel and textile companies from America, China, India, Sri Lanka as well as six local manufacturers are operating within the park. It also has 37 factory sheds, and its own renewable electricity source.
Furthermore, Hawassa Industrial Park also provides all necessary government services under a one-stop shop service center. It also employs Liquid Discharge Company that recycles 90 percent of sewerage disposal water and fulfills international standards. The park will serve as a prototype for the industrial parks being built in other parts of the country.
We should be using a similar model in future as we have a great potential. At 50% less than Hawassa Park, each park will generate around 30,000 direct jobs, representing 300,000 for 10 parks and an annual revenue of $5 billion. An economic activity that produces 300,000 direct jobs and $5b revenue can have downstream effects of producing as many as 1.5 million jobs and $15b annual revenue. Because of strong vertical and horizontal integration that comes with manufacturing industries, this can send the country to a sustained 7% annual GDP growth rate.
The hour to develop is now, the hour to sort unemployment is now, and the hour to transform the economy is now. We may face challenges before this strategy matures and starts producing results but the future is so bright. Let’s be the African development miracle.
Ben Patrick is a PhD Fellow, University of Aberdeen, Department of Health Economics and Senior Consultant and Cofounder of ShimaHR Consultants Limited