Regional Development Poles and the Transformation of African Economies

Benaiah Yongo-Bure

• Editorial: Routledge
• Año: 2020
• ISBN:
  9781000041149
• Edición: 1
• Categoría: Economics
• Categoría: Development Economics

This book argues that the development of capital goods manufacturing industries in four relatively large African economies will create regional development poles, from which industrialization will spread to the smaller African countries.

In this book, Benaiah Yongo-Bure explains the need for capital goods industries in Africa and shows how manufacturing can transform economies. He outlines the roles of the Democratic Republic of Congo (DRC), Ethiopia, Nigeria, and South Africa as potential regional development poles, showing how the existing economies, natural resources, and populations of these countries make them ideal candidates, while also considering possible challenges to industrialization. Finally, the author assesses what major infrastructural development is needed to link the countries and regions to increase the spread effects of economic growth.

This book will be of interest to scholars and policy makers in economic development and regional development in Africa.

1 Capital goods and economic transformation

Introduction

Economic transformation requires the diversification and industrialization of an economy. The industrial sector includes a number of subsectors such as mining, manufacturing, construction, electricity, water, and gas. However, of all these, manufacturing is the most transformative subsector of industry. But not just any kind of manufacturing is sufficient to transform an economy. Distinction must be made among the three subsectors of manufacturing, namely manufacturing of consumer goods, intermediate goods, and capital goods.

Consumer goods industries produce goods that are ready for final use. These are the factories that process food, clothing, footwear, beverages, and the thousands of other ready-for final-use products. The machinery they use is produced by capital goods industries. Intermediate goods are inputs used in the manufacture of both consumer goods and capital goods. These include industries manufacturing bolts and joints, spare parts, industrial inputs, ingredients such as sugar used in the manufacture of confectionery, and many other inputs. The machinery for making all types of manufactures originates from the capital goods industries.

As can already be seen, capital goods are the manufactured goods that are used to produce all machinery, plus those used in machinery’s own production. It is a diverse sector used to manufacture machinery and equipment used in various types of manufacturing. They include engineering and construction machineries, agricultural, transportation, energy generation, and equipment, and so many types of machinery and equipment for various sectors. They have profound impact on various sectors of the economy. They are also the subsector where most technological innovations take place.

The embodiment of technology in capital goods industries makes the subsector the most dynamic. Once a country establishes a substantial size of the capital goods subsector, it can supply many of its own industries with machinery and equipment, and it can guide much of its own technological advancement. Hence, the establishment of large capital goods manufacturing within Africa is crucial for African economic transformation. This is because Africa needs large-scale plants for the manufacture of strategic capital goods such as energy generation and transmission equipment, agricultural processing plants, chemical plants, transport machinery and equipment, mining machinery, and many other various manufacturing machinery and equipment.

Capital goods manufacturing is also characterized with economies of scale as many indivisibilities and high-skilled labor are involved in their construction and operation. Capital goods manufacturing is the most dynamic subsector. It supplies itself as well as the other two manufacturing subsectors with inputs. Capital goods industries are technologically dynamic; their regular supplies to all sectors of the economy ensure regular capacity utilization and technological flexibility in the whole economy. With flexible and rapidly changing technology, as consumer demand changes, the economy’s capacity to adjust to the changing demand patterns will instantaneously adapt, ensuring fairly stable adjustments in the economy.

Metal processing and manufacturing is an important component of the capital goods industry. According to the International Standard for Industrial Classification, the metal industry consists of basic metal and engineering industry. The engineering industries can be further grouped into: manufacture of basic iron and steel; manufacture of fabricated metal products except machinery and equipment; manufacture of machinery and equipment; and manufacture of motor vehicles, trailers, and semi-trailers.¹

The engineering subsector

Machinery and equipment needed in manufacturing are products of the engineering subsector. This subsector embodies most technologies in the machinery and equipment it makes and uses. It comprises elements such as engineering design and development, tool engineering and production, production engineering, materials engineering, and maintenance engineering. Together these subsectors translate science and technological innovations and developments into new, more efficient and more economical machines, plants, and equipment. The engineering industry has the capacity to design, adapt, and manufacture the components of new technical systems as well as repair, modify, and rehabilitate existing industrial plants and equipment. Therefore, the engineering industry, drawing from the basic metals and metal-working industries, constitutes the central pillar of an industrial economy (Agbu 2007). Hence, industrialization and technological development are not just a matter of importing more efficient equipment and installing it. It must be linked with fundamental development of scientific knowledge and capital goods industry and the capability to adapt them flexibly into an evolving economy. This process must be internalized within the domestic economy for dynamic and flexible economic transformation to take place.

In view of foreign exchange constraints for importing machine tools, the need to achieve a level of self-reliance in this strategic subsector through the local manufacture of machine tools is a precondition for self-sustaining development, not only of the engineering industry, but also of industry in general and the rest of the economy. Capability in the manufacture and use of machine tools would also contribute to the repair and maintenance of machinery and equipment used in various socio-economic activities. Machinery and equipment are what absorbs most of African foreign exchange as virtually all of them are imported far from outside the continent. Given the necessity of capital and intermediate goods in all industrial activities, shortage of foreign exchange means a predominantly importing economy comes to a halt. This was what happened to most African economies from the 1970s when the prices of petroleum and machinery rose considerably beyond the prices of African exports. This led to the International Monetary Fund’s (IMF) structural adjustment programs, the debt crises, and the two lost decades of African development of the 1980s and 1990s.

Establishment of the capital goods subsector would make technological adaptation and innovation in Africa flexible. New technological capital goods and spare parts would be more easily acquired through acquisition of the currencies of the capital-goods–producing African countries in the neighborhood.

Foreign trade cannot be relied upon permanently for self-sustaining development or as an engine of growth and transformation. Foreign trade led to the establishment of the current structures of African economies. As foreign demand changes, the performances of African economies responded accordingly. African economies boomed as foreign demand for African primary products rose during the colonial period; and in the early post-colonial periods of the 1960s and early 1970s. The post-Second World War boom, due to reconstruction in the west and the boom of the 1960s, helped African economies boom temporarily. However, the prolonged difficulties in the world economy, from the 197...