Working Paper 102 - Seizing the Day? the Global Economic Crisis and African Manufacturing

Except for the last 10 years, Africa had endurednearly 25 years of slow growth. The global financialcrisis, and its attendant global recession, iscertainly not welcome news. Commodity priceshave fallen, foreign investment has declined,development assistance is under pressure andremittances have weakened. Prospects of sustainedgrowth have thus been dented.Paradoxically, some of the elements that contributedto Africa’s long period of stagnation –declining manufacturing production, increasingmargina-lization from the world market for industrialex- ports, and failing to establish newsources of industrial dynamism – have protectedwhat re-mains of Africa’s manufacturing sectorfrom the worst impacts of the global melt-down.This result arises in that Africa’s main manufacturedexports are more heavily concentrated inmiddle- and low-income markets than in highincomemarkets.However, a number of individual countries andsectors are likely to be strongly affected. Amongthe countries that will be affected are a fewAfrican countries that had achieved some successin manufactured exports – especiallyMauritius, Morocco, and Tunisia. These countries’main export products are highly concentratedin advanced country markets. Sectorssuch as apparel, food products, wood productsand minerals are also likely to come under heavypressure in a wider range of countries.While the vast majority of the Africa’s manufacturingsectors will not be significantly affected,the lack of industrial and export diversity acts asa powerful constraint to growth. The recession,however, may represent an opportunity to boostmanufacturing in Africa. For instance, costs willcontinue to rise in China, with task-based productionmoving away from the South East AsianNICS, while domestic stimuli in Asia may reorientproduction away from global markets. Thisopportunity for more industrial dynamism inAfrica can be exploited if problems that haveconstrained industrial development in the pastare solved. These include the acceleration ofreforms to improve the investment climate –especially in such key areas as infrastructure,spatial industrial policy, trade logistics, andregional integration.