Pointers this time from Ethiopia and Rwanda

Proshare

Thursday, May 28, 2015 8:45 AM / FBN Capital Research

We all often hear that governments should give the private sector free rein but do not always find that they deliver. This was one observation from a panel discussion on the “Road to sustainable industrialisation in Africa: what it takes” we attended yesterday at the annual meetings of the African Development Bank (AfDB) in Abidjan.

The panel was composed of the Ivorian minister for industry and mines, the Rwandan finance minister, the chief executive of the Made in Africa initiative who was instrumental in setting up the flagship shoe factory in Ethiopia, a former World Bank chief economist now prominent in the same initiative and a senior policymaker at Afreximbank.


Panelists agreed that most African economies enjoy comparative advantage in light manufacturing. Labour costs work in their favour. The Ivorian minister noted that television production had moved from Japan to South Korea to China. There is no reason why the next step cannot be to Africa.

The shoe factory in Ethiopia, owned by the Huajian Group, exported its first products only three months after making its final investment decision. It now employs 4,000 people and is the largest of its kind in Africa. Good local supplies of the core input (leather) were helpful but the decisive factor was that the government met the investor’s requests quickly and transparently.

The Rwandan minister insisted that the private sector could and should boss government, whose role was to create the enabling environment. It is proactive. Because the skills base is low, it has removed work permit requirements for citizens of the East African Community. Because it is landlocked, it has, together with its neighbours, removed non-tariff barriers.

Ethiopia and Rwanda have both adopted a highly successful and distinctive model for industrial and economic development. The argument that such dramatic change can only be implemented in a small country does not hold water since Ethiopia has the second largest population in Africa. Theirs is not the only route to rapid growth. Côte d’Ivoire has achieved 9% for each of the past three years but has a far deeper resource base than the two countries.

There are merits in flying across the world in pursuit of ideas. The Rwandan president, Paul Kagame, heard about the shoe factory and extended a trip to China by two days to meet the former World Bank chief economist.

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