Helen Clark: Speech at TICAD VI- Promoting Structural Economic Transformation through Economic Diversification and Industrialization

6th Tokyo Conference on African International Development (TICAD VI) – Thematic Session 1

It is my pleasure to introduce today’s thematic panel discussion on Promoting Structural Economic Transformation through Economic Diversification and Industrialisation.

On behalf of the co-organizers – UNDP and the AU Commission – I would like to express our gratitude once more to the Government of Kenya for hosting this TICAD VI Summit, and to Japan for its commitment to Africa’s development.

The purpose of this afternoon’s discussion is to consider how Africa’s economic and social development can be accelerated through economic diversification and industrialisation.

This is particularly relevant at this time: the continent has been experiencing a slow-down in its GDP growth rate due to the decline in commodity prices; its youthful population is in great need of increased job opportunities; and livelihoods overall need to be strengthened, not least for marginalized groups and geographically remote areas.

Today’s topic is also very relevant in the context of both the AU’s Agenda 2063 and the UN’s 2030 Agenda.

Indeed, as part of its Aspiration 1, Agenda 2063 calls for African economies to be transformed structurally to create shared growth, decent jobs, and economic opportunities for all.

Goal 9 of the Sustainable Development Goals calls for countries to build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation.

Key to advancing economic diversification and industrialisation is for countries to lift productivity and reallocate resources away from areas of low value and low productivity to more productive and higher value activities.

For Africa, this will mean focusing on sectors such as commercial agriculture and processing, higher value manufacturing, finance, and ICTs.

Transforming African economies in this way should lead to:

(i) growth of new, higher-value economic activities;

(ii) greater movement of resources and labour from traditional activities to newer and more productive ones, including to medium and larger scale farming;

(iii) strengthened linkages between the extractive sectors and the rest of the economy;

(iv) a rise in overall productivity, which should be accompanied by increased incomes and quality of work, and by reduced inequalities if the growth is inclusive; and

(v) more resilient economies, and reduced volatility in the terms of trade.

To achieve these objectives, countries will need to nurture competitive and vibrant private sectors which are well integrated into the regional and global economies. This is critical in order to create work and strengthen livelihoods for all.

As highlighted by UNDP’s most recent global Human Development Report, Work for Human Development, however, there is no automatic link between the abundance of work and higher human development.

The report stresses that it is the quality of jobs and livelihoods which determines whether work will enhance human development. To improve that quality, specific policy responses are needed, including improved social protection and a focus on workers’ rights.

There are indications that structural transformation of Africa’s economy is under way:

o the average share of agriculture in GDP on the continent declined from twenty per cent in 2000 to seventeen per cent in 2014. That was accompanied by a rise in the share of the services sector from 45 to 48 per cent during the same period;

o there are signs of increased export diversification, as reflected in a falling – albeit slowly – export concentration index. That index measures the degree of export concentration within a country. Higher values on the index (closer to 1) indicate that exports are concentrated in fewer sectors, and lower values (closer to 0) reflect a more equal distribution of market share among exporters;

o while productivity growth has been slower than in other regions of the world, the recent African Economic Outlook Reports prepared by UNDP, AfDB and OECD show that, since 2000, labour has been steadily moving to higher value activities, including in banking, tourism, and ICT; and

o it is estimated that structural change now accounts for nearly half of Africa’s overall productivity growth. A study of nineteen countries indicated that labour productivity – an indication of structural transformation – grew by more than two per cent during 2000-2005, and structural change – or reallocation across sectors – contributed up to forty per cent of GDP growth. That is considerably higher than was the case in 1990-99.

Nonetheless, Africa has recorded little progress in lifting the contribution of manufactured goods as a proportion of GDP. The share of Sub-Saharan Africa’s manufacturing value addition as a share of GDP actually fell from about fourteen per cent to ten per cent between 1990 and 2015.

UNDP has worked on identifying some of the important drivers of structural change in Africa.

These include the quality of governance; education, and skills levels; a stable macro-economic environment; competitive exchange rates; and the share of the labour force absorbed in the industrial and service sectors.

Africa has many strengths as it seeks to transform its economies:

o Its growing youth population has more access to education: by 2030, close to sixty per cent of 20-24 year olds – that is 137 million people – will have had secondary education compared to 42 per cent in 2012. Twelve million people will have had tertiary education. These trends are contributing to a growing pool of skilled workers;

o Growing urbanization is also creating opportunities, as is the spread of information and communication technologies which is giving rise to a growing number of internet and digital entrepreneurs on the continent. ICTs have the potential for positive impact across economic and social sectors and governance.

o As well, digital entrepreneurs are addressing specific service delivery challenges and information and market gaps by introducing technologies which benefit previously excluded people. Examples include the growing access to financial services using mobile phone technology, for example – in Nigeria and Kenya, and access to health information in Rwanda.

These are just some of many examples of the transformational change which is occurring. I know that during our discussion today, we will hear of many more – including from our development partners (AfDB and UNIDO) and representatives of African and Japanese businesses.

Source: United Nations Development Programme.