African countries need to harness the brain power of Africa’ s young, dynamic population to spur a technological revolution, economic transformation, and competitiveness of the continent for shared prosperity. past decade towards industrialisation but its performance remains below the minimum requirement for Africa’ s structural transformation. Africa’ s share of manufacturing in GDP has remained at around 10 percent over the past 10 years( 2009-2018), with production typically biased towards resource-based and low technology light manufacturing, such as food and beverages, wood products, textile articles, and construction materials.
SPECIAL REPORT
Tax collection is low in Africa due to significant discretionary tax exemptions and rebates, weak capacity of tax administration and a high level of informality, leading to a reduced tax base.
Supporting African countries to design innovative means of taxation, and investing in improved tax administration can play an important role in boosting revenue and reducing the need for debt in financing development. This requires the strengthening of tax administration systems and the improvement of compliance.
Finally, the potential for debt in unlocking long-term growth depends on the ability of countries to improve the efficiency of debt-financed investments. This requires strengthening the absorptive capacity of African economies. Estimates suggest that about 40 percent of the potential value of public investment in low-income countries is lost to inefficiencies in the investment process due to time delays, cost overruns, and inadequate maintenance. Countries should be supported in standardising project quality rankings and implementing best practices in project and private partner evaluations before and after completion.
There is no general debt crisis across Africa, but the only thing to worry about is the ratio in some African countries between domestic debt and GDP, which needs careful attention when the debt has been used to support, for example, domestic consumption.
There needs to be greater prudence in recent debt applications to sovereign funds as the interest rate is higher than it could be, for example, than if the application was made more often to the African Development Bank. If the debt is entered into for the purpose of enhancing infrastructure then this, in my view, is“ good” debt, as it can be repaid as a factor of the economic improvements that enhanced infrastructure can bring.
While Africa has enjoyed strong economic growth for almost two decades, the continent has not seen a commensurate rise in industrialisation. What would you say?
Africa has made encouraging progress over the
African countries need to harness the brain power of Africa’ s young, dynamic population to spur a technological revolution, economic transformation, and competitiveness of the continent for shared prosperity. past decade towards industrialisation but its performance remains below the minimum requirement for Africa’ s structural transformation. Africa’ s share of manufacturing in GDP has remained at around 10 percent over the past 10 years( 2009-2018), with production typically biased towards resource-based and low technology light manufacturing, such as food and beverages, wood products, textile articles, and construction materials.
However, the potential opportunities for accelerated industrialisation are real. Africa must leverage its primary sector for resource-based industrialisation, given its huge natural resource wealth.
Increasing agricultural productivity, in particular, will be essential for the transition towards agro-industrialisation. There is also growing demand for manufactured goods in Africa thanks to an emerging middle-income class. Manufactured imports amounted to about $ 269 billion in 2015 and a majority of countries still import large quantities of even basic products easily made or manufactured in Africa, ranging from food to clothing to electronics.
Unfortunately, African countries are spending $ 35 $ 35 billion in foreign currency annually on food imports a figure that is set to rise to over $ 110 billion per year by 2030. In so doing, Africa is importing the food that it should be growing itself, and exporting the jobs it needs to keep for its unemployed youth, often to developed countries. It also has to pay inflated prices resulting from global commodity supply and currency fluctuations.
There is, therefore, considerable room to develop local production, which will not only help to create more and better jobs but also save valuable foreign exchange. With deeper regional integration, in particular, the African Continental Free Trade Agreement, domestic producers that have not yet integrated global value chains can still benefit from economies of scale necessary for the emergence of internationally competitive industries.
To further promote industrial development, African countries will need to address binding constraints related to deficits of infrastructure, lack of skilled labour, inefficient
16 • COMESA • 2018