INDUSTRIALISATION IN THE 21 ST CENTURY: NEW CHALLENGES, NEW THREATS AND NEW OPPORTUNITIES FOR AFRICA

1. INDUSTRIALISATION IN THE 21ST CENTURY: NEW CHALLENGES, NEW THREATS AND NEW OPPORTUNITIES FOR AFRICA Raphael Kaplinsky, Development Policy and Practice, Open University, UK.

2. My home in Barcombe Mills The River

3. Barcombe Mills - 13th July 2005

4. The button factory in Barcombe Mills - 1939

5. The workforce- 1939

6. It didn’t end happily…

7. Working in a Qiaotou zip factory

8. Qiaotou • In a remote area of China • First commercial workshop making buttons established in 1980 • Now 700 factories, making 15bn buttons and 200m metres of zips • 1,300 button shops selling 1,400 varieties of buttons • 60% of global button production and most of China’s zip production (80% of world production) Guardian, 25th May 2005

9. China’s growth is not unique..

11. The impact of the Asian Drivers on Africa

12. The impacts may be competitive or complementary

13. And they may be direct or indirect

14. We know much more about the direct impacts

15. Threat?

16. Opportunity?

17. Commodities-manufactures terms of trade

18. The drive to industrialisation • Close association between incomes and industrialisation • Demand for manufactures increases with incomes • Synthetic substitutes for natural products • Manufacturing is more profitable • Manufacturing can be labour intensive – primary commodities are very capital intensive

19. The orthodoxy Manufacturing exports are key: • Competitive effects • Scale effects • Learning effects

21. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

22. EU Imports from China Source: Euratex data as reported by Nathan Associates

23. Caught between a rock and a hard place Percentage of sectors with negative price trends, 1988/9-2000/2001 by technological intensity and country-grouping

24. Actual and projected global share of China’s consumption of base metals Source: Macquarie Mining

28. Manufacturing for the domestic market • SMEs in Ethiopian shoe industry • 28% bankrupt • 32% downsize • SA Clothing and textiles • Employment fell from 119,000 in 2004 to 87,000 in 2005 • Zambia’s Mulungushi mill • Closure in 2007 with

29. What happens when Africa exports the same products as China to the USA? (2004-2006)

30. What happens when Africa exports the same products as China to the USA? (2004-2006)

33. SSA EXPORTS SA, Lesotho, Swaziland, Madagascar, Kenya, Mauritius Hard commodities Clothing footwear SSA LOSS SSA GAIN Oil exporters, Zambia, SA, DRC, Botswana, Ghana, Gabon, etc CHINA IMPORTS CHINA EXPORTS All SSA Oil Clothing footwear SSA LOSS SSA GAIN Most SSA SSA IMPORTS

34. WHAT is to be done? • HOW is it to be done? • WHO is to do it?

35. What is to be done? • Competitivenss, upgrading and innovation are key • SSA requires protection in the domestic market, but: • Scale is important • Upgrading is critical • SSA requires preferential access to global markets • FDI has a major role to play in building supply chain capabilities • Regional markets promote capabilities

39. MAKING THE MOST OF COMMODITIES African Development Bank (2008), African Development Report 2007: Abidjan: African Development Bank

40. MAKING THE MOST OF COMMODITIES • High roads and low roads • Backward linkages • Material inputs • Services • Forward linkages • Processing • National System of Innovation

41. How is it to be done? • Getting the macro policies right • Getting meso policies right • Sectors • Industrial districts • Change at the micro level • Benchmarking is critical

43. Who is to do it? • Industrial policy is a journey of discovery • State failure • Market failure • Systemic efficiency is key: • Value chain consortia

44. The increasing globalisation of VCs Competitive pressures Services Services Design Production Marketing Competitive pressures

45. Who is to do it? • Industrial policy is a journey of discovery • State failure • Market failure • Systemic efficiency is key: • Value chain consortia • IPA’s have a major role to play • So, too, does the international community

46. Firms need to upgrade: Is Innovation enough? ‘Nearly there!’ the Queen repeated. ‘Why, we passed it ten minutes ago! Faster!’ And they ran on for a time in silence, with the wind whistling in Alice’s ears, and almost blowing her hair off, she fancied. ‘Now! Now!’ cried the Queen. ‘Faster! Faster!’ And they went so fast that at last they seemed to skim through the air, hardly touching the ground with their feet, till suddenly, just as Alice was getting quite exhausted, they stopped, and she found herself sitting on the ground, breathless and giddy. The Queen propped her up against a tree, and said kindly, ‘You may rest a little now.’ Alice looked around her in great surprise. ‘Why, I do believe we have been under this tree the whole time! Everything’s just as it was!’ ‘Of course it is’ said the Queen. ‘What would you have it?’ Well, in our country,’ said Alice, still panting a little, ‘you’d generally get to somewhere else – if you ran very fast for a long time, as we’ve been doing.’ ‘A slow sort of country!’ said the Queen. ‘Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!’ Source: Alice through the Looking Glass