Tuesday, December 21, 2010

Why Not Africa?

Progress means that countries that produce simple products often move onto more complex products. Low-skilled jobs are transferred to countries down the economic ladder whose labor costs are less, while the original producers find new products requiring more skilled workers. Thus far, the economic phenomenon of comparative advantage hasn’t worked for Africa as it should have. For example, products no longer being made in America still are not being made in African locales.

For example, the United States stopped making Rawlings baseballs – the ones used in the major leagues, college and high school games and sandlot ball – back in 1969. The St. Louis factory’s production was shipped first to Puerto Rico, then to Haiti and now to Costa Rica. Why not Africa?

Remember the toy Etch-A-Sketch? It used to be made in Bryan, Ohio, but since 2000, it has been produced in Shenzhen, China. Similarly, Mattel toys have been made in China since the last California factory shut down in 2002. Those Converse athletic shoes – know as Chuck Taylors for the All-American high school basketball player – are no longer being made in Massachusetts. Since 2001, they have been made in Indonesia. Levi Strauss & Company shut down its U.S. production of jeans in 2003, and production was outsourced to Latin American and Asian locations. Why not Africa?

For some products, Asian and other locations are still more competitive than African locations for a variety of reasons. No televisions have been produced in the U.S. since 2004. Cell phones stopped being made in America in 2007. Just this year alone, Dell computers, canned sardines and even kitchen flatware (forks, spoons and knives) stopped being produced in America. Complex products can be produced easier and cheaper in Asian countries, but there are still opportunities for African manufacture of products no longer economically feasible for the developed world.

Then why isn’t Africa taking advantage of these opportunities and becoming the destination of choice for the manufacture of products no longer made in America or often other developed countries? I could mention the lack of road and rail infrastructure, or the lack of consistent electric power that forces producers to rely too heavily on generators. The small production capacity of so many countries makes them less competitive on a global scale.

The failure of neighboring countries to cooperate in bundling goods at ports and airports, which also suffer from a lack of security and efficiency, make them less attractive sites for shippers. The dearth of shipping alternatives makes prices too high to be competitive on the world stage. All these and other reasons are certainly the cause of African countries as a whole failing to compete more effectively in the global marketplace, but there are African countries that have made the jump into a position of enhanced global competitiveness.

For all developing countries, it is estimated that manufactured goods account for more than 80% of their exports. That’s up from only 25% thirty years ago. What happened was that many of the resource-rich developing countries invested revenue from resources in the enhancement of infrastructure, the development of human capacity and the employment of new technology. At the dawn of the wave of independence for the developing world in the late 1950s and 1960s, several African countries were economically stronger than their Asian counterparts. However, the discovery of oil and the presence of commodities such as diamonds, gold and cobalt in Africa discouraged much lasting investment in manufacturing. Where would Benin, Cameroon, the Democratic Republic of Congo and Nigeria stand among world economies today if they had pursued such policies as the so-called Asian Tigers did back then?

Instead, too many governments relied on a policy known as “import substitution,” under which production was encouraged in domestic goods instead of exports. This can work if you have sufficient infrastructure, internal markets, skills and technology, and oh yes, if you don’t depend on imported goods to make it work. Unfortunately, this policy, which seemed sound at the outset, was not positioned to work effectively.

Yet countries such as Mauritius, South Africa and Botswana have employed far-thinking policies to diversity their economies and compete well with their more resource-blessed neighbors because of it. One hopes that oil won’t spoil Ghana, Sao Tome and Uganda and lead them to get so comfortable with the production of oil that they neglect other sectors of their economies that produce more jobs than does the oil industry.

It is possible that African countries can take their place among countries attracting outsourced sectors from the developed world. None of the obstacles facing Africa today are insurmountable, and with sound policies keyed to tomorrow and not today, African countries can realize their competitive potential.

The 20th century is often referred to as “American century” because the United States used its natural and human resources to become the sole superpower by the turn of the century. China and India are off to a great start at the beginning of the current century. Still, with better planning and collaboration among African governments, the 21st century can become Africa’s century.


  1. wow another great article, very informative

  2. Your explanation of import substitution is really enlightening. I had not heard of this before. Hopefully, the formation of economic blocs on the country will foster the development of holistic economic policies that promote diversification. One question that remains is, to what extent can African countries implement these policies independent of favorable policies in countries outside of Africa? I think of the US removing DRC from AGOA. DRC has a long way to go in suppressing conflict and human rights abuses, yes. While doing that, what could the country do to improve economic policy and benefit from it without partnership from the US?