Agro-processing is the sector that will provide jobs

On the sidelines of the African Development Bank’s meetings in Busan, South Korea, in May, African Business caught up with Carlos Lopes, the former executive secretary of the United Nations Economic Commission for Africa to find out his opinions on topics ranging from the South Korean development model to the sector most likely to create jobs in Africa.

What can we learn from South Korea’s development model and are there any dangers of a cut and paste model for Africa?

One of the things we should learn from Korea is that they defied the odds. When they wanted to boost their industrialisation no one believed it was possible. Their infrastructure was considered completely inappropriate; the comparative advantage was done; and they were told it was not possible.

Today it’s easy for everyone to come and make assessments; it’s easy for everybody to appropriate a bit of the success and pretend they had something to do with it. But in fact it was only done by Koreans.

Now there is a tendency to do the same in Africa. We look at Asian examples, which have been very successful – including China – and we think it’s just about imitating the same but I don’t believe it. I believe there are elements that are the same. Lee Kuan Yew was the inspiration for Deng Xiaoping but eventually what China did was what Singapore did but much more. These camps are culturally so close but demonstrate the need for adaption, creativity and innovation. Imagine this in Africa.

So I believe that some of the ingredients of the Chinese model will move with delocalisation to Africa, also to other parts of the world. That will be one element but probably not the most significant. The most significant will come from the capacity of Africa to disrupt the industrial model like what has happened each time in history. The way it happened in Manchester in the 18th century has not been repeated since in its entirety; so there’s already an element of innovation.

So if you look at what the pundits were saying at the time they got it 50% right and 50% wrong and today it is more or less the same.

In Africa we should be more modest because the levels of unpredictability are quite high. First is the demographic element. Contrary to history no region of the world has had the same youth bulge. That in itself is unpredictable. We can look into projections and so forth but the numbers are so colossal no one knows what this will represent. 

Then there is the fact that some commodities are going to have less and less value. So this discourse about Africa being rich because it has resources is not going to hold water because, more and more, your real commodity is data. Data is more valuable than oil and all the rest. What is really going to make a difference is not how large a wealth of resources you have but whether you posses or not some of the strategic materials that will become indispensable; therefore giving you a cartel like capacity of intervention in the market. The value chains of Africa are very well positioned for this in some respect.

Cobalt is a good example. These are some of the unpredictable dimensions not mentioned which will eventually influence the way Africa positions itself. Just imitating industrial parks alone will not do the trick.

When assessing development we often use GDP as a yardstick yet overall output doesn’t necessarily translate into socio-economic gains. Is there a problem in the way we approach growth?

Inequality is going to become a bigger issue than it already is. Policy is already changing because of the inequality debate and whether we like it or not it’s not about Trump or Brexit it’s about inequality. People react in different ways that are not structured and are disruptive. I think the mainstream refusal of dealing with inequality will populate populism. So for the same reason in Africa this debate is going to take hold – it’s no different from other regions in the world.

A core component of development is lifting people out of poverty by providing jobs. Which sector in Africa is most likely to achieve these aims? 

I still believe the industrial sector has a chance to provide jobs but for me it’s more and more about agro-processing. For me everything is in favour of agro-processing. First the levels of agricultural productivity are so low that any gains, even marginal, are incredible.

Yields per hectare are so low that if they were even doubled, which is easily achieved, they would still come in below the rest of the world. That said if doubled it would be a revolution. It would create opportunities for synergies that will allow for the transformation of agricultural production and that in itself is industrialisation. You can then scale it up by constructing national value chains and sub-regional chains which should be relatively easy for Africa.

If you were to double irrigation there would be incredible gains. There are many possibilities for introducing transformative elements into agro-processing. One is that with the common tariff system, with the CFTA, small businesses will be protected because they don’t need to compete with global value chains. If you produce pineapple what you need is packing and good distribution networks so you are not competing with pineapple production the world and because your tariff system will protect you. That creates jobs.

As Africa begins to grow again do you think any structural changes through policy are responsible for the growth or is it simply down to rising commodity prices?

Africa has actually been quite resilient these past two years. If you look at the global trends Africa did not actually do that bad; it just looks bad because we isolate Africa from the rest of the world.

I think we have to credit Africa for having better macroeconomic management even before the last crisis. So I don’t think in the two years that stopped working; on the contrary some of the countries that have no commodities fared well. This demonstrates that macroeconomic management has contributed.

But of course you have some bad apples. In Mozambique the way they managed their debt was shocking. Also the fact that Zambia is mismanaged completely is also a pity. Then you have a country like Nigeria which introduced exchange rate controls and got it all wrong in terms of the policy in the first two years of president Buhari’s administration. This has had an incredible impact across the rest of the continent. Then there is South Africa where corruption and badly run parastatals have created a multiplier in the rest of the economy. South Africa’s downturn brought down Africa’s overall performance.

What development advice would you offer to Zimbabwe and Angola who emerge from decades of mismanagement?

I believe that these two countries need to pause and look into industrialisation seriously. Zimbabwe used to be the second most industrialised country on the continent. It is now the country that has lost the most manufacturing value in the continent and has had the largest decrease of GDP in 20 years. It is only now beaten by Venezuela. So a lot has to change.

Angola it’s more a story of too much dependence on one commodity – 80% of taxes come just from one product and that can only mean that fiscal management is a complete disaster. So fixing that is the beginning of the answer.

Tom Collins