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Part I
Contextualising industrialisation
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1 Leveraging African–European Union co-operation for Africa’s industrialisation
An introduction
Francis A.S.T. Matambalya and Massata Cissé
The detailed objectives for economic development may differ across countries. However, they tend to have a common denominator in the form of a focus on the creation of wealth through the growth of (aggregate national, household, and individual) incomes, and the reduction of poverty through the redressing of income inequalities in the society. Industrialisation can contribute to the achievement of all these goals. Wherever it has happened, the industrial revolution has been momentous in terms of inexplicably increasing the output of the economy, improving the quality of products, raising the incomes (of individuals, households, and institutions), uplifting the living standards of the people, and increasing the momentum of further economic transformation.
1.1 Conceptualising industrialisation
Several formal definitions of industrialisation exist. Inter alia, it has been defined as:
a | The process in which a society or country (or world) transforms itself from a primarily agricultural society into one based on the manufacturing of goods and services. Individual manual labor is often replaced by mechanized mass production and craftsmen are replaced by assembly lines. Characteristics of industrialization include the use of technological innovation to solve problems as opposed to superstition or dependency upon conditions outside human control such as the weather, as well as more efficient division of labor and economic growth. (cf. Investopedia, available at: www.investopedia.com/terms/i/industrialization.asp) |
b | ‘A development path based on expanding a country’s capacity to process raw materials and manufacture products for consumers, businesses, and export’ (cf. www.frontierassoc.net/greenaffordablehousing/tools/ChemicalTerms.sht). |
Delineated further, industrialisation in an economic sense can be understood to mean a process in which a human society is transformed from a lower level of development (pre-industrial) to a higher level of development (industrial). This process is characterised by two key changes:
a | Change in the organisation of economic production from ‘artisanal’ and ‘subsistence’ modes of production (with minimal or no automation, and therefore minimal or no use of automated machinery and equipment, reliance on non-skilled labour) towards ‘industrial modes of production’ (i.e. with more automation, and therefore more use of machinery, equipment, and skilled and specialised labour); |
b | Re-orienting the structure of the various dimensions of the economy (investments, production, trade), from activities at the lower end of the value chain with minimal or no value addition (e.g. such primary activities as agriculture, quarrying, mining) towards activities at the higher stages of the value chain through value addition (e.g. agribusiness and agro-industries, mineral beneficiation, manufacturing, etc.). In a typical industrial economy, manufacturing activities attract a significant share of investments, and make a significant contribution to economic production in general, and to trade in particular. |
Therefore, industrialisation is, in essence, a generic name for expressing economic processes (or industrial activities) which are characterised by more efficient ways for the creation of value.
1.2 Industrial activities and industrialisation
Industrial activities play a central role in an industrial economy. In national accounts statistics, industrial activities are broadly defined to include construction, generation, and supply of utilities (energy, gas, water), manufacturing, mining, and quarrying. To give a practical impression of industrial activities, Box 1.1 summarises the term’s legal meaning basing on Australian INCOME TAX ASSESSMENT ACT 1997 – SECT 43.150.
Manufacturing stays at the centre of industrialisation. By producing such goods as machines and equipments, it transforms industrial activities in all sectors of the economy (i.e. primary, secondary, and tertiary) from ‘pre-industrial’ to the ‘industrial’ modes of production.
1.3 Industrialisation and development
Industry constitutes an important driver of economic transformation and growth. Industry-driven growth is the key to unlock the development potential of a country. In practical terms, industrialisation is synonymous with development. Invariably, international disparities in levels of industrial transformation conspicuously mirror international disparities in the levels of development. Rich countries are more industrialised than poor ones, and all developed economies have essentially followed the industrialisation route to prosperity. The level of socio-economic development and standards of living of a country’s citizens are highest in industrialised States, while at the other end of the spectrum, the Least Developed Countries (LDCs) are those where manufacturing value-added (MVA) accounts for less than 10 per cent of Gross Domestic Product (GDP).
Box 1.1 Meaning of industrial activities
‘Industrial activities’ means:
(a) | Any of the following activities (core activities): |
(i) | Operations where manufactured items are derived from other goods even if those manufactured items are themselves used as parts or materials in the manufacture of other items; |
(ii) | Operations (other than packing, placing in containers, or labelling) by which manufactured items are brought into or maintained in the form or condition in which they are sold or used, even if they are for sale or use as parts or materials in the manufacture of other items; |
(iii) | The separation of a metal or a compound of a metal from its ore (not including crushing, grinding, breaking, screening, or sizing to facilitate that separation) or the treatment or processing of a metal or a compound of a metal after its separation; |
(iv) | For a metal or a compound of a metal not requiring separation – applying to the metal or compound a treatment or process which, if the metal or compound had required separation, would not have been applied until after the separation; |
(v) | Refining petroleum; |
(vi) | Scouring or carbonising wool; |
(vii) | Milling timber; |
(viii) | Freezing primary products; |
(ix) | Printing, lithographing, or engraving, or a similar process, in the course of carrying on a business as a publisher, printer, lithographer, or engraver; |
(x) | Curing meat or fish; |
(xi) | Producing chilled or frozen meat; |
(xii) | Pasteurising milk; |
(xiii) | Canning or bottling foodstuffs; |
(xiv) | Producing electric current, hydraulic power, steam, compressed air or gases (other than natural gas) for the purpose of sale, or use wholly or mainly in carrying on another activity mentioned in this paragraph; or |
(b) | Any of the following activities: |
(i) | The packing, placing in containers or labelling of any goods resulting from the carrying on of core activities; |
(ii) | The disposal of waste substances resulting from the carrying on of core activities; |
(iii) | The cleansing or sterilising of bottles, vats, or other containers used by the entity to store goods to be used in carrying on core activities or goods resulting from the carrying on of core activities; |
(iv) | The assembly, maintenance, cleansing, sterilising, or repair of property used in carrying on core activities; |
(v) | The storage, within premises in which core activities are carried out on, or premises contiguous to those premises, of goods in carrying on core activities, goods in relation to which core activities have commenced but not finally been completed or goods resulting from core activities; but does not include the preparation of food or drink (whether for consumption on the premises where it is prepared or elsewhere) in, or in premises occupied in connection with, a hotel, motel, boarding house, catering establishment, restaurant, cafe, milk-bar, coffee shop, retail shop, or similar establishment. |
Source: Based on Australian INCOME TAX ASSESSMENT ACT 1997 – SECT 43.150 (available online at: www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s43.150.html).
Apart from the practical observations cited in the previous paragraph, generally, that industrialisation is a sine qua non for development is underlined by empirical research, which shows strong causality running from industrial production to GDP. (Using indexes of GDP and MVA as proxies, in which the year 2005 = 100), Figure 1.1 portrays the evolutionary relationship between industrial production (IP) and (economic output) GDP, for the period 2000 to 2010. MVA is used as a proxy for IP. Notably, the portrayed progression seems to be in line with the general postulation (i.e. the two variables move in tandem). The picture seems to be in line with the proposition of some empirical studies, that generally, 1 per cent GDP growth requires more than 1 per cent growth of industry. Thus, ideally, industry should grow faster than GDP to achieve economic transformation. To give a more detailed overview, Chapter 3 of this book summarises a selection of useful empirical evidences of the linkages that exist between industrialisation and development.
Figure 1.1 | Evolution of the indices of global economic output and global MVA, 2000–2010 (source: Author. Based on (1) UNCTADstat (available at: http://unctadstat.unctad.org/UnctadStatMetadata/Documentation/UNCTADstatContent.htm), and (2) UNIDO (2011), Industrial Development Report 2011: Industrial energy efficiency for sustainable wealth creation. United Nations Industrial Development Organization, Vienna). |
Moreover, among the economic activities categorised under industry, manufacturing activities embody the strongest catalysts for the development of the fundamentals of sustainable and self-propelled economic transformation. Indeed, the achievement of prosperity in advanced countries and regions of the world is closely associated with the development of robust industrial sectors, in which the manufacturing sector predominates. The roles of manufactured production and manufactured trade in the generation of wealth and stimulation of socio-economic advancement underline the significance of industrialisation. Among other things, the manufacturing sector generates economy-wide spill-over effects by promoting intra-sectoral linkages, and backward and forward inter-sectoral linkages. The economic opportunities provided by industry stimulate entrepreneurship and enterprise development, development of knowledge and skills, emergence of s...
