Session 6: Firm Capabilities in Industry & Trade

The session was chaired by Mr Keith Muhakanizi, Permanent Secretary of the Ministry of Finance, Planning and Economic Development.

Prof. John Sutton (LSE/IGC) gave a presentation about “Industrial Development in Sub-Saharan Africa: Challenges and Prospects” based on the findings of the Enterprise Map Project. Prof. Sutton noted that one of the possible development paths for countries which have a basic industrial sector is to move into middle-level manufacturing. These countries need to broaden their industrial base by improving their working practices in the mid-term horizon. The experience of many countries such as China and India shows that one way to move into mid-level manufacturing is to finance investments through FDIs, which bring in international experience and expertise. Manufacturing FDIs have been scarce in Africa in the past years.

One very effective way of channeling FDIs and investment in general is through the establishment of effective investment promotion agencies. Ethiopia has successfully developed a pro-active investment promotion agency that works with high-potential firms to ensure they are assisted at each stage, especially during their crucial first years. These agencies should target mid-size firms with high potential for job creation, and worked together with them to understand sector-specific challenges and to anticipate their problems.

Countries with natural resources have an advantage of easily attracting investments. These countries can develop their industrial base by integrating small and medium firms in the natural resource value chain at different stages. Regulations to ensure local content in the production process need to be put in place by strategically choosing the products that can be sourced locally. The fast-growing services sector can also play an important role in this process – for example, in the construction sector.

Ms. Elli Pallangyo (Assistant Director, Ministry of trade and Industry, Tanzania) and Ms. Diana Afriye Addo (Deputy Chief, Industrial Promotion Office, Ministry of Trade and Industry, Ghana) placed prof. Sutton’s work in the context of their own policy experience. They emphasised the need to focus on inputs as an important part of the production process. Ms. Afriye Addo noted that SMEs are a large source of employment in Ghana and should therefore be the main target of industrial promotion policies. She also noted that the development of manufacturing has also been very important for Ghana in the context of trade agreements, in order to ensure a good level of exports.