Unlocking Africa’s value chains will enable the continent to break the current trap of boom-and-bust cycles driven by volatile commodity prices, high debt, unemployment and other challenges, says African Finance Corporation CEO Samala Zubairu. Speaking at the Africa Investment Forum Market Days 2023 event in Morocco in November, Zubairu said: “Capturing value and maintaining value is very important. This will allow us to produce better quality jobs and make our demographic advantage.”
To do this, Africans need to focus on certain value chains, particularly the mineral value chain, which has become critical in addressing climate change. Zubairu said Africa has more than 40% of the minerals and metals needed to power the energy transition.
By shifting from extracting raw minerals to adding value, the continent can move from realizing a value of $12 billion to $240 billion in this sector.
“This would also help Africans reach net zero. But we have to take responsibility. Someone has to see you do it before they follow,” Zubairu said. “We at AFC are focused on teasing out opportunities. How can we work together and continue to build integrated value chains related not only to the resource itself, but also to processing, transportation and incentives?
“To do it right, we need to allocate capital and incentivize domestic capital. We talk a lot about foreign capital – but let’s look at domestic capital. We need to incentivize pension funds to participate.” Acceleration of industrialization
The African Union’s Agenda 2063 aims to accelerate industrialisation, aiming to increase the continent’s share of global manufacturing value added from the current level of around 1.5% to 7% by 2030 and 15% by 2063.
Zubairu said Africa needs to focus on responsible mining and create a framework to give local capital providers a stake in projects, including local communities.
“They own the land and will be with the projects over time. We have to put them to work. This will help make the project sustainable,” he said.
“As Africans, we must first define the strategy and mock the opportunity with our own capital and find ways to work with international partners to restructure aid to mobilize further capital.”
Alain Ebobissé, CEO of development finance organization Africa50, said Africa’s industrialization must be done responsibly.
“The strategies we pursue must include a balanced energy mix to support our industrialization, including the aggressive development of renewable energy sources to meet electrification targets and the development of natural gas.”
The need for infrastructure
Infrastructure is also crucial and the African Continental Free Trade Area (AfCFTA) has helped make investment more attractive. Ebobissé stressed the need to focus on regional infrastructure, as funds for this are still limited, even though it is necessary to improve trade flows.
Other issues raised in the discussion included mobilizing domestic and regional capital alongside efforts to attract international capital and showing Africans how they can support African projects. There is a need to build a pipeline of banking projects to support the continent’s ambitions.
Moulay Hafid Elalamy, CEO of Saham Group and former Moroccan Minister of Industry, Trade and Digital Economy, highlighted his country’s success in manufacturing – which he said he had won by being deliberate about the process and putting the right structures, frameworks and support in place – pointing to the example of the automotive sector.
Learning to trust African products
Elalamy said it is important to ensure that Africa’s partners understand that they need to support Africa to create local wealth instead of creating barriers. “During the pandemic, we learned a lot about what we can do in Africa.”
However, Africans had to stop playing the victim and learn to trust their own products. Many skilled Africans work in global countries, exporting them – but those skills also exist at home, he said.
He cited the example of locally manufactured ventilators during the pandemic when there was a global shortage of the machines. Although they were made by skilled Moroccan professionals, members of the public questioned their quality just because they were made domestically, ignoring the fact that the country is home to top skills that are in demand worldwide. “We have to trust ourselves and our abilities and encourage our young people to emerge here, otherwise they will emerge elsewhere.”
Tunde Folawiyo, MD of the Folawiyo Group, raised the issue of the fourth industrial revolution, saying there were fears globally about the impact of artificial intelligence on jobs. “How will we in Africa be different from the rest of the world and ensure that artificial intelligence positively affects us?” asked.
“When it comes to job creation, we have no choice but to look at sustainability. We must invest and organize in such a way that, by doing the right thing, jobs will be created.” He said financial inclusion was key to this goal, given its power to build economies.
A single window for investors?
Ng Yeen Seen is the CEO of Center for Research, Consultancy and Technology (CREATE) Malaysia. He said it is important for public-private partnerships to harmonize standards and other requirements at regional or continental level and ensure there are stable frameworks to provide comfort to investors. The industrialization process must be proactive and managed for better results. It was necessary to do this process from scratch. “It’s hard to change course once you’ve set sail.”
He also proposed a single window for investors to enter the region and central data gateways – a move that has served the 10-nation ASEAN bloc well.
“We don’t know where to land in Africa. Where is the regional hub located? People from abroad may not know. This will really accelerate FDI [foreign directinvestment].”
Chakib Alj, president of the General Confederation of Moroccan Enterprises (CGEM), emphasized the importance of local production and industrialization in building the strength of the private sector in African countries.
Morocco has a project to harness the skills and experience of its expatriates to drive industrialization in the country, particularly in the fields of science and education, as well as entrepreneurship and innovation.