Categories
Articles

African engineers and scientists together with the continent’s resources can take Africa to the same industrialization levels as China and the US, and bring prosperity to the people of the continent

Background

Africa is currently the least industrialized continent in the world. With a population of more than 1.2 billion, the governments of the various countries must enact the right policies to kickstart industrial revolution in their various countries that will lead to prosperity for their citizens.

The poverty rate in sub-Saharan Africa is dire with 41% of the population living in poverty. According to the Brookings Institute, 27 of the 28 poorest countries in the world are all located in sub-Saharan Africa.

African leaders are well aware of the fact that industrialization will lead to the growth of their country’s economies and it will remain a pillar in eliminating poverty from the continent.

Since independence, the various African governments have embarked on various policies to industrialize the continent but the results have been nothing to write home about. In fact, according to figures from the African Development Bank, Africa has been deindustrializing. As a result, poverty levels have not declined as expected and now the continent is also grappling with a very high youth unemployment rate.

This article proffers solutions to the industrialization dilemma that has gone unsolved in the continent since independence. The solutions offered here are based on the principles of innovation and its value chain management and historical industrial trajectories of Western and Asian countries. The continent can attain industrialization in a speedy and efficient manner if the suggestions outlined here are hopefully put into practice.

How will industrialization create jobs and reduce poverty?

Based on history, no country has achieved high-income status without undergoing industrialization. An industrial country is one that uses technology to enable mass production. Industrialization will lead to job creation via factories, logistics, transportation, services, etc.

For instance, in the cement industry proper industrialization will create jobs in the following ways: mining of the minerals, processing of the minerals, producing the machinery to be used in the factories, construction of the factory, workers to run the factory, transportation and distribution of the final product, and marketing of the products. Not to forget the indirect jobs it will create via restaurants, schools, real estate and other services geared to the workers. Industrialization creates employment by fully utilizing the entire economic value-chain.

What has been Africa’s industrialization strategy?

Africa’s industrialization strategy has been either to import foreign machinery and expertise to build factories in the continent or to take loans an employ foreign experts to build the infrastructure projects in the continent. There are enough examples to illustrate that this has been and is still the case in both the public and private sectors.

For instance, African governments have been taking loans from China and Bretton Woods institutes to fund infrastructure developments in the continent since independence. For example, the governments of Nigeria, Kenya, Ethiopia among others took loans from China to construct railways, dams and other infrastructure projects. This they believe will spur the industrialization of their countries.

Similarly, African firms also import their machinery and expertise from outside the continent to set-up their factories. For example, Africa’s richest man, Aliko Dangote, procured nearly all his machinery, equipment and top expertise from outside the continent to build his fertilizer and oil refinery. Similarly, his cement factories were all built by Chinese construction firms and the vast majority of the machinery for the factories imported from outside the continent.

Another strategy that has recently gained a lot of traction is the concept of foreign direct investments, whereby foreign companies are provided with a conducive environment for them to set-up their factories to manufacture their goods on the continent. Case in point, are the industrial parks popping up all over the continent to host these factories. In these industrial parks, all the incentives required to operate these factories optimally are met such as power, water, security and other amenities.

Innovation is the key to industrialization

Innovation is the introduction of new products, services and methods that are of economic and societal value. There are two types of innovation-disruptive and sustained innovations. Disruptive innovations create entirely new markets while sustained innovation improves existing products, services and processes.

Disruptive innovation is the type that will bring massive industrialization to Africa, the same way it did to other continents. It was disruptive innovations in the cotton industry of the United States that created huge employment in textiles and in the process clothing was made affordable to all Americans. At the same time, it spurred the industrialization of the US.

Similarly, disruptive innovations in the iron and steel industry of China propelled the Middle Kingdom into the industrial era. As a result, today China is an industrial behemoth. There are plenty of examples from the UK, Japan, Belgium and other countries that have proven beyond any reasonable doubt that disruptive innovations are the precursors to industrialization. For the sake of brevity, examples from China and the US will be highlighted here.

Eli Whitney invented the cotton gin which allowed the separation of the short-staple upland cotton from its seeds. This made cotton farming profitable. This innovation received a patent and it was distributed to other cotton-producing firms in the United States. Consequently, cotton became highly profitable and this resulted in the economic development of the Southern US.

Samuel Slater developed the first successful water-powered roller spinning textile mill in America. Once this was developed, other American firms were also able to build similar mills using the patent of Samuel Slater. As a result, mills were replicated throughout the cotton-producing regions of the United States. This enabled the manufacturing of textiles on a massive scale and as a result making them affordable to the entire American populace. This innovation was the key factor that brought industrialization to the US. It is no consequence that Slater is also referred to as the founder of US industrialization.

Likewise in China, a similar trajectory took place in their steel industry. At first, China didn’t have the scientific and technical expertise to build the mills that will process iron ore into steel. They relied on the Soviet Union for scientific and technological aid in the steel sector. With the help of the Soviet Union, they were able to build the machinery needed to process iron ore into steel.

Once they mastered the building of steel mills, they were replicated throughout the country. Consequently, these mills kickstarted the Middle kingdom’s industrial revolution causing other spin-off steel firms to emerge. As a result, firms that build complex machinery used in manufacturing various products emerged.

There are two key characteristics of the disruptive innovations that occurred in the textile and steel industries of the US and China. Firstly, both countries produced capital goods. In the US, they were the cotton gin and the water-powered spinning mill. In China, they were the blast furnaces and other machinery used in producing different types of iron and steel products.

Secondly, these capital goods were all completely manufactured in their own countries using the natural resources of their countries and their own labour. It is also true that foreign expertise helped both countries in producing these capital goods as they did not initially possess the expertise to manufacture them. Samuel Slater was born in the UK and China initially relied on the Soviet Union’s expertise.

Regardless of the foreign help, the crucial step was that capital goods that will be used in producing other goods were completely manufactured in their own countries.

Why can’t African countries just import the technologies needed to run their factories and build their infrastructures?

The answer to this question is simple, Africa has been importing technologies since pre-independence days and it has done little to significantly change the fortunes of the continent. The railways built during the colonial era as well as the locomotives were all imported from Europe.

Today, railways that are being built all over the continent together with the locomotives are imported from China. Similarly, the factories and machinery operating all over the continent were built by foreign expertise. Moreover, the machinery used in our powerplants and dams are all imported technology. Likewise, private firms import all the machinery and technology used in operating their plants.

A similar story is also at play in the industrial parks where both domestic and foreign firms are enticed to move their production. In these parks, little technological learning take place as the machinery are all imported from outside the continent. Instead, Africans are mostly employed as unskilled workers in these parks receiving meager wages. This is because these firms ship their manufacturing jobs to the continent for the cheap labour. The goods produced in these parks are not even affordable to the average African.

This continuous importation of foreign technologies and machinery negatively impact the continent in several ways. Firstly, it stifles innovation in the continent. Africa has scientists and engineers who given the right environment can build similar machinery and contribute to the continent’s innovation profile. African engineers also have a desire to produce machinery and other innovations that will be used on other continents and benefit humanity overall. But, by importing these technologies they are forced to migrate to other continents where there is an enabling environment for them to thrive. Moreover, importing technologies further adds to the underemployment and unemployment of African engineers.

Secondly, by importing all these technologies, technological learning and absorptive capacity development is hindered in the continent. African engineers will not possess the right technological skills needed to run and maintain these machinery and plants. It is not surprising that when powerplants in different African countries malfunction, those countries have to call outside expertise to fix the problem. Similar trends can be observed across all technology-related sectors on the continent.

Thirdly, the products produced from these firms are usually not affordable to the average African. This is not surprising, as all the capital and most of the top expertise needed to run these factories are imported from outside. These factories have no choice but to sell their products at a premium in order to break-even due to the high investment and operating costs.

Fourthly, the investments needed to set-up factories to process our natural resources are just too high due to the reliance of foreign machinery and expertise. Hence, it does not come as a surprise that today, African countries still export raw materials instead of processing them into finished products. This is because processing these natural resources require heavy and complex machinery that are way too expensive for the average African country or private firm to buy. Furthermore, the operating costs of running a firm on the continent are exorbitant due to erratic power supply and inadequate skilled workers.

Finally, importing capital into the continent increases the debt-burden of most African countries. Due to inadequate profitable firms in the continent stemming from the lack of industrialization, African governments will not be able to collect enough tax revenue to repay their debts. In the long run, these African countries will have to relinquish their natural resources or key assets to their various foreign debt-holders as a means of paying their mounting debts.

To sum up, Africa’s industrial strategy is likened to putting the cart before the horse and in the process further increasing income inequality and burdening their already poor economies with mounting debts.

Does Africa have the Human capital required to kickstart the continent’s industrial revolution?

Yes, Africa possesses the human capital both skilled and unskilled labour required to kickstart the industrial revolution in the continent.

For instance, there are thousands of engineering graduates all over the continent that are underemployed. Due to the lack of suitable jobs, some of these talented people are stuck doing jobs unrelated to their discipline.

Moreover, there are plenty of African scientists and engineers making their marks in foreign countries. Similarly, there are gifted engineers and scientists domiciled in African countries. For the sake of brevity three African engineers who have made key contributions in the engineering field are showcased here.

For instance, Philip Emeagwali, a Nigerian engineer who won the 1989 Gordon Bell prize from the IEEE for his use of a connection machine supercomputer that helped analyzed Petroleum fields.

Another African engineer is Dr Thomas Mensah from Ghana, who worked in the fields of fiber optics and nanotechnology. He was awarded 7 USA and worldwide patents in fiber optics within a period of six years. In all, he has some 14 patents to his name.

One of the world’s most prolific inventors is the Nigerian, Cyprian Uzoh, who has been granted more than 256 utility patents in the US. He is the Principal technologist at Tessera and a former engineer/advisory scientist at IBM. His primary responsibilities include conducting research into advanced packaging and chip wiring technologies for applications in high-performance semi-conductors found in various mobile devices.

These people demonstrate that the continent possesses top talent that, when organized and pooled together in harmony, can lead the continent to the promised land. In fact, during the industrial revolution of the 18th and 19th centuries, a decent amount of the inventors of the different machinery did not receive a formal education. They were just gifted machinery and tool makers who gained experience while working for their employers but the environment was right for them to innovate.

Which areas should the continent focus on to kick-start the industrial revolution

One of the most important steps is to set up an Iron and Steel institute that will research and develop machinery (furnaces) and mills that will transform iron into steel. This is because steel will be used in producing capital goods such as infrastructure, engines, machinery, factories, among others.

Another sector that African countries should focus on is the research and development of capital goods that will be used in exploiting the natural resources of the continent.

Additionally, a critical area to focus on is the research and development of capital goods that will be used for infrastructure development. Hence, capital goods that will be used in power generation (powerplants, dams, solar), transport (railways, roads, water) and telecommunications should be the top priority.

Research and Development institutes will need to be set-up for each sector that will coordinate and be involved in the management of innovations for that particular sector.

Using Network-based Innovation Strategy to kick start the continent’s industrial revolution

In Network-based Innovation Strategy, knowledge inputs are sourced through both the deep integration of external partners (to ensure effective joint development of knowledge) and through maintaining a network of relationships with various external partners.

To kick start the continent’s industrial revolution three important partners need to work closely together. These are the universities, the research and development institutes and firms. Below is a brief explanation of how the three would work together to achieve synergy.

Foremost, a science park will be built near the university that will house the R&D institute as well as firms. The university will serve as a knowledge source, especially in applied research. The R&D institute engineers working together with university professors will be involved in basic design, prototype building and pilot production. Private firms working closely together with engineers from the R&D institute will be responsible for ramping up the manufacturing of the products

Let’s have a hypothetical look at how these partners will work together to develop a furnace for Africa’s iron and steel industry. Assuming an Iron and Steel Institute is set-up in a science park in the vicinity of a particular African university, professors from that university together with other African professors in mechanical/civil engineering will study the entire operations of a furnace. They will then come up with the schematic diagram of the furnace together with explanations of its operations.

This knowledge will be transferred to the R&D institute whose engineers will work with those university professors and come up with a working prototype. From here, firms could be invited who are interested in commercializing the furnace. The firm can then sell its products to other firms in the continent that are interested in steel production.

Funding

The respective Governments, commercial banks and venture capitalists all have a role to play in order to commercialize the innovations coming from the science parks.

The governments of the various countries are expected to fund the construction of the science parks. This is because firms that emerge from such parks will end up paying taxes to the government, create direct and indirect employment for their citizens and paving the way to the industrialization of their countries.

In fact, cost-benefit analysis will prove that African countries will receive far greater dividends if they had used the loans they took to fund such science parks instead of spending them on infrastructure or other white elephant projects.

As for the Commercial Banks, they can provide private equity and venture capital to firms seeking to commercial innovations developed from the Science parks. Of course, angel investors can also invest in such firms.

Conclusion

Currently, there are no indicators to show that the continent is moving in the right direction. Electricity generation in the entire sub-Saharan Africa excluding South Africa, a population of at least 1 billion, is less than that of the Netherlands, a country of fewer than 20 million people.

Apart from Egypt and South Africa, African countries do not even make the list of steel producers in the world despite the countries possessing significant Iron ore deposits. When it comes to the Global innovation index rankings, African countries are nowhere to be found. This implies that Africa is not contributing to global innovations.

African youths desire the same quality of life as enjoyed by their peers on other continents. As it stands now, the future of the African youth looks grim. Similarly, African engineers and scientists also want to contribute to global innovations in the world stage and eventually gain the recognition they would rightly deserve.

In fact, the African might find himself a tenant in his own continent in the not too distant future if changes are not made immediately.

The relevant stakeholders especially the leaders and policymakers can significantly change the trajectory of the continent with the right policies. Once this change is achieved, Africans will finally realize their potential on their own continent.

Share your thoughts below

Categories
Articles

Nigeria has closed its borders in order to attain self-sufficiency in rice production: Will this border closure lead to self-sufficiency in rice production?

President Buhari

Background

Back in August last year Nigeria’s President, Muhammadu Buhari, announced that the country’s land borders will be closed to curb the smuggling of rice. According to the president, his import substitution policy has started to yield successes and is being threatened by smuggling across the borders.

“Now that our people in the rural areas are going back to their farms, and the country has saved huge sums of money which would otherwise have been expended on importing rice using our scarce foreign reserves.

We cannot allow smuggling of the product at such alarming proportions to continue.”

The Nigerian leader has set-up a cross-border committee to come up with recommendations regarding the border issue. According to the President the border will remained closed until then:

Once the committee comes up with its recommendations, we will sit and consider them.”

In this post, I will analyze the impacts of the border-closure on rice farmers, millers, customers and the Nigerian economy at large. Moreover, I will explore the rice industry of Thailand and deduce the reasons why it has a sustained advantage over that of Nigeria. Finally, I will give recommendations on the steps the country should undertake to attain a sustainable rice self-sufficiency industry based on the paths undertaken by other countries and principles of strategic innovation.

Why the focus on rice self-sufficiency?

Nigeria is a rice-loving country as shown by the huge amount it consumes annually. The country consumes 7 million tonnes of rice and spends $1.65 billion annually on rice importation mainly from Thailand and India. The country has abundant arable land to grow rice, hence it is a wise policy to ensure self-sufficiency. This will save the country a lot on importations at the same time provide huge employment opportunities to its teeming population.

What has been the impact of the border closure?

The farmers, millers and consumers have lamented the several constraints they have been grappling with since the border closure.

Smallholders farmers account for nearly 80% of the country’s rice production. These farmers do not have access to enough inputs such as fertilizers, tools, machinery, irrigation etc., due to either the high costs or unavailability. As a result, the yield per hectare for small-hold farmers in Nigeria is about 2.5 tonnes-half the global average.

Similarly, rice millers have been struggling with the high costs of running their mills. Small and medium scale millers account for 80% of rice millers in the country. These mills are powered by diesel generators due to the erratic supply of electricity in the country.

The consumers certainly are not contented with the rice situation in the country. The country’s minimum wage is 30,000 Naira monthly. The above constraints facing farmers and millers have aggregated to exponentially increase the price of rice for the consumers. A 50kg bag of rice used to cost about 12,000 Naira before the border closure now costs as much as 24,000 Naira. As if that was not enough, customers have also complained of stone-riddled rice.

On the other hand, farmers are receiving high-income due to the high prices they sell a bag of rice for. But deep down, many of them know it is not sustainable in the long run so they are rushing to profit as much as they can whilst the price boom lasts.

The economy too has not been spared as the country suffered its highest inflation rate since May 2018.

The rice farming industry of Thailand

Thailand is an agricultural country with about 49.8% of the agricultural land devoted to rice growing. Thailand gained a competitive advantage in rice production through well-thought-out policies and planning. The country introduced modern agricultural technologies such as high-yield seeds, fertilizers and mechanization and other inputs. I will briefly explore the mechanization process the country went through to gain a competitive advantage in rice production.

In 1957, the agricultural engineering division of the country released a design of an axial flow pump. This was subsequently manufactured and adopted by the farmers.

Between 1967-1969, a Thai firm began manufacturing a 4-wheeled tractor powered by a 15hp single-piston diesel engine modified from a 2-wheel tractor. These locally manufactured tractors had a high demand from Thai farmers due to the low cost and being suited for local conditions. Suddenly, the imported tractors had no market because the locally manufactured tractors had a higher competitive advantage. Consequently, a chain of reaction was ignited as local firms started manufacturing these tractors further lowering the price. As a result, farmers from all around the country were able to afford them.

In the early 1990s local firms successfully developed Thai-made rice combine harvesters and the innovation was successfully adopted by Thai farmers. It was mass-produced by local firms lowering the cost. Farmers all over the country were able to afford them.

To sum up, farm mechanization of Thailand began with locally manufactured power-intensive machines such as irrigation pumps, power tillers, and threshers. These local innovations meant that the costs of the equipment to farmers were cheap and expertise was available to repair them and/or provide spare parts. Consequently, this manufacturing capability and the resulting economy of scale gave the country a significant comparative advantage.

How should the ideal rice industry in Nigeria look like?

The dream rice ecosystem of Nigeria should be highly organized and productive for it to compete with foreign rice. The farm inputs such as fertilizers, equipment and seeds should be affordable and of high quality. Farmers should have access to trained technicians to guide them to adopt the best practices in rice cultivation. Local firms should have the capability to design and manufacture farm equipment and rice mills. Power supply should also be affordable.

How can Nigeria achieve the ideal rice industry?

Well, Rome was not built in one day. As shown by the Thai case study innovation is hard but it is a must before a country achieves capabilities that will lead to competitive advantage. On the bright side, through proper organization and strategic innovation, Nigeria can accelerate the achievement of a sustainable rice industry making the country self-sufficient.

The attainment of this dream requires the collaboration of both the government and entrepreneurs in the county. My recommendations are based on principles of innovation as well as observations from similar industries in other countries.

Firstly, the entire rice ecosystem of the country should be mapped out by constructing a value blue-print. The value blueprint maps out the rice ecosystem and its dependencies. This includes farmers, millers, input suppliers and all other players in the rice industry. This map will be used to assess whether the entire players in the ecosystem can come together smoothly for efficient rice production.

Secondly, An engineering department must be set-up to develop locally made farm equipment. This also implies that the country should have the capability for steel production to ensure that components are sourced locally. The country has enough engineers from diverse fields who could contribute to the realization of this stage. All that is needed is proper organization.

Finally, once a firm equipment has been innovated successfully, the patent should be distributed to all interested firms in the country to manufacture. This will enable competition among the firms leading to economy of scale and consequently lower prices for farmers.

Benefits of having local manufacturing capabilities to the economy

There are several benefits to the economy once the country attains capabilities and competence in farm equipment production.

Firstly, farmers will be able to afford them and consequently, rice productivity will dramatically increase. Similarly, customers will be able to afford food due to the lower production cost.

Secondly, the country will attain rice self-sufficiency in a sustainable manner and the smuggling of rice will cease effortlessly.

Thirdly, it will have a ripple effect on the industrial sector of the country. This is because manufacturing capabilities in basic farm equipment will lead to the manufacturing of more advanced machines. Furthermore, more advanced capabilities can be developed such as constructing fertilizer and refinery plants.

Finally, jobs will be created at unprecedented rates solving perennial unemployment issues. Consequently, banditry, kidnapping and terrorism will be greatly reduced.

Conclusion

Indeed, there is no doubt that President Buhari wants the best for his country by taking such a drastic measure as closing the borders and even straining relations with neigbouring countries.

The president was also correct when he said the country should attain self-sufficiency in rice production. But the process of achieving this self-sufficiency is coming at a heavy cost to farmers, consumers and the economy at large.

Instead of closing the borders, the president should set up a team that will come up with a sustainable plan that will enable the country to attain self-sufficiency in rice production.

As it stands now, once the borders are re-opened, foreign rice will ultimately dominate the Nigerian markets again due to their competitive advantage.

The country may still ban the importation of rice but without developing comparative advantages in rice production, the citizens will continue to pay high prices for their locally produced commodity.

Share your thoughts below