IN AN era of high volatility and deep crisis, Africa has been an economic success story.  A combination of high commodity prices, increased domestic demand, improved economic governance and management and stronger trade and investment ties with other developing economies has helped African countries record on average an impressive 5 per cent GDP annual growth over the past ten years.  It is a performance which more developed and wealthier regions simply cannot match.

But while this record should be reason for celebration and confidence, progress on social development has been far slower.  Africa’s growth, contrary to the headline figures, has not been sufficiently inclusive or provided the new jobs the continent and its people desperately need.

So what are the reasons for this discrepancy? The 2014 Economic Report on Africa found that the root cause was the continued heavy dependence on primary commodity production and exports and that industrialisation is an essential precondition for inclusive economic growth and structural transformation. 

The report goes on to argue that industrialisation cannot be left to the markets. Indeed, it says the key lesson from developing countries which have already successfully made the transition is the importance of industrial policy intervention to overcome market failures.

So what might such policy look like and why have most African countries so far failed this test? The report found that past attempts at industrial policy in Africa have relied on state institutions that failed to adapt to the changing needs of industry and national, regional and global conditions.

It calls for Africa to be wary of imposing a straightjacket based on what has worked in very different conditions or on one-size-fits-all blueprints which rely solely, for example, on tax holidays and access to cheap credit. Only new dynamic industrial policy frameworks tailored to the individual conditions of each economy will deliver the results needed.

The report adds that an effective industrial policy framework requires high-level policy coordination as well as continuing dialogue between the state and private sector to identify and resolve problems. A healthy collaboration is crucial.

Highly skilled bureaucrats must also be embedded in the system with the autonomy to act without pressure from either the political elite or the private sector. This will ensure they have the independence to introduce credible and, importantly, long-term policies. Without such independence and the high-level political and business support, the policy will suffer from neglect, if not total abandonment.

As most African countries face inadequate infrastructure and funding there is a strong need at the start for the creation of pockets of efficiency and infrastructure. The setting up of industrial zones, for example, can enable resources to be targeted effectively so successes can be nurtured and eventually spread.

The report stresses the role that enhanced regional integration can play in enabling industrialisation to take hold across the continent. Intra-African trade is far more diversified and oriented towards industrial products than extra-African trade. So measures to boost it can be a powerful lever to help the continent industrialise including by boosting increased and diversified domestic and foreign investment. It can also help through the creation of growth poles in different sub-regions and encourage the production of strategic commodities, such as pharmaceuticals. African governments need to step up efforts to bring down the current high trading costs, and make efforts to formalise informal traders, especially women.

All this, of course, will have the maximum positive impact within a well-coordinated policy environment and institutions supporting long-term national development. Successful industrial policy requires  frameworks that improve policy coordination, monitoring and evaluation as well as resource allocation. Supportive macroeconomic policies, infrastructure and human capacity development, technology acquisitions, innovation and finance should also form part of this integrated framework. And, of course, it is vital that nations work together to overcome the grave challenges of climate change which is such a major threat to Africa’s future.  

Africa has made a strong start to the 21st century. But to deliver sustained success for the continent, its citizens and to enable Africa to play its full role in the global economy, the next stage of development is critically important. It is time for African countries and development partners to focus their attention and efforts on establishing the industrial policy frameworks needed to deliver sustained and inclusive growth.

Dr. Carlos Lopes is the Executive Secretary of the Economic Commission for Africa

This piece first appeared in the Financial Times beyondbrics: ft.com/beyond-brics/