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The Russian factor

By Rafiq Raji, PhD 

In November 2014, at the G20 summit in Brisbane, Australia, Vladimir Putin was given the cold treatment by world leaders. Barack Obama, miffed by President Putin’s mischief, in Crimea months earlier no less, was particularly passive-aggressive. Not that Mr Obama was not justified; Mr Putin treated him like a school boy. And the probability that Mr Putin might be amenable to reason was very low. So if he were not going to conform, the least that could be done was to make it clear he would not be accorded the respect he so dearly craved. While the other leaders were having a chatty and hearty lunch, Mr Putin had to make do with empy chairs at his table and one other quiet partner; who simply munched her lunch. He left the summit early. At the airport, Mr Putin made sure to shake the hands of all the staff that attended to him, including those that tended to his plane; a measure of his anger. One could not help noticing a wry smile as he did this: he was already planning a revenge. Not in the sense we are used to, though. He did not go gun-blazing. Well he did that, sort of. But in an intelligent way. Probably out of spite towards Mr Obama, who chickened out from bombing Syria, even after evidence surfaced President Bashar al-Assad used chemical weapons against his own people, Mr Putin went ahead with the task. The symbolism paid off. Russia is now crucial to any potential resolution of that intractable crisis. But all of that showmanship, of which Mr Putin is never short of, paled in comparison to what is beginning to emerge. The Russians have been engaged in a systematic operation of subversion against Western democracies; top of them the United States. American intelligence agencies accuse Russia of meddling in the 2016 presidential election. Mr Putin’s point, they argue, was to make a mockery of that supposed archetypal bastion of the free world. The beneficiary, Donald Trump, a man as unconventional and insecure as they come, who it is believed would not have won otherwise, has by his actions and inactions, raise suspicions that Mr Putin may have a stranglehold on him. Because even under the most intense pressure, Mr Trump has not so much as put Mr Putin in a bad light, talk less of throwing the ever-ready insults he is wont to put at others. But that is just a bit of it.

Hands in every pie
Reports are beginning to emerge that not only was Russia meddling in the American elections, it also interfered in the British Brexit vote. It has even been suggested that the supposed illegal Catalonia independence vote in Spain had some Russian influence. And in South Africa, the much vilified Gupta brothers are beginning to seem like kids relative to the Russians. Jacob Zuma, the South African president, as if under a spell, insists on an expensive nuclear power build. Initially, it was thought this was motivated by potential pecuniary gains. However, it is beginning to seem like Mr Zuma may have little choice in the matter. The Russians want to build South Africa a nuclear power station. And what the Russians want, they would have. At least, so it is beginning to seem.

So it begs the question: what do the Russians want? That is simple. Respect. Mr Putin and his cohort of ex-spies recall an age when the former Soviet Union was great and feared. That age is long gone. But the thinking is not. What Putin’s Russia wants is to have a say in major international matters. And to be frank, before Mr Putin’s antics, Russia was increasingly sidelined. Well, not anymore. The United Kingdom is reeling from a bumbling and fractious political leadership. Brexit negotiations have been characterised by twists and turns to nowhere. Spain barely escaped a crisis as Catalonians sought to break away from the federation. And not until regional elections planned for December are concluded, the region’s governance hangs in the balance. And in America, Mr Trump is under investigation, at least his aides are, for proof or otherwise of Russian interference in the American elections. Of course, Mr Putin takes offense at even the thought he might be so idle as to even follow the American polls. No matter. Things are just the way he would have wished.

Also published in my Premium Times Nigeria column. See link viz. https://opinion.premiumtimesng.com/2017/11/16/the-russian-factor-by-rafiq-raji/

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Additive manufacturing: Implications for African Economies

By Rafiq Raji, PhD 

Global trade, the merchandise exports component of which was about US$15.5 trillion in 2016, according to World Trade Organisation (WTO) data, is expected to shrink by at least half over the next half century due to 3D printing or additive manufacturing (AM).[1] [2] In tandem would be global value chains (GVCs), which were hoped to give African countries perhaps their last fighting chance at industrialisation. At US$346 billion in 2016, African merchandise exports were just 2% of the world total. And 32% of these were oil exports.

Still, African manufacturing has actually been on the ascendancy, growing in real terms by 3.5% a year to US$157 billion in 2014, up from US$73 billion in 2005, with exports doubling to more than US$100 billion in the period.[3]

But what is additive manufacturing? Simply put, as the name implies: it is manufacturing by adding.[4] Unlike the conventional manufacturing process, where an object having been designed is put into form by “cutting, drilling, and milling”, “a 3D-printer starts with nothing and add stuffs to it”.[5] With the aid of a computer programme, a 3D-printer is able to produce a 3-dimensional physical form of what was hitherto no more than a virtual representation. However, relative to traditional manufacturing, the additive kind is slow and expensive. In addition, the quality of produced objects can sometimes be doubtful. But it is fast evolving to overcome these constraints.

Bespoke specialist products or prototypes are better suited, therefore. For now. Incidentally, there are indications that improvements could come about faster than expected. Take polymer-based manufacturing, for instance: digital light synthesis pioneered by Carbon, an American producer of 3D-printers, allows for a process 100 times faster than conventional printing. And objects produced are of far greater quality and strength.[6] For metal printing, better methods are beginning to emerge as well. An example is “bound-metal deposition”, which produces objects 500 times faster than traditional laser-based ones.[7] Thus, the ascendancy of additive manufacturing to mainstream production is only a matter of time.

African manufacturing trend (2005-14)
AM1.png
Source: Overseas Development Institute (ODI)

Manufacturing more and better with less
On the face of it, the economics of additive manufacturing is very appealing, bar the earlier highlighted, but fast disappearing constraints. Altering objects or producing new ones simply require a change of software, for example. Under traditional manufacturing, this would entail the procurement of new equipment, re-training of staff, modifications to value chain activities and so on. Improvements would evolve at different paces for each type of printing, though. For certain kinds, complex and high-end objects like aircraft parts, satellites, racing cars and medical devices, speed is not what really matters. Greater emphasis is placed on quality and precision.

For such, a relatively slower and more expensive additive manufacturing process entail costs that pale in comparison to the potential gains. And since the end-users tend to have the deep pockets and patience for that level of precision and quality, 3D-printing is already fast gaining ground for that manufacturing segment. There is evidence of this. American industrial giant, General Electric, is investing a great deal in 3D-printing, to produce parts for jet engines, for instance.[8] This is also the case for less space consuming, but equally (if not more so) complex bio-printing, which involves smaller laboratory-type equipment, but require greater care to maintain the sterility and salubrity of produced tissues. These could range from cartilage to more complex organs like hearts, livers and so on.[9]

With automation and 3D-printing, high-wage developed economies may no longer be in much need for manufacturers, whether as intermediates or finished goods, from African and other low-wage countries. Short of raw material constraints, any country would in the not-to-far distant future be able to virtually manufacture any good using a 3D-printer. And if advances in 3D-printing proceed as currently envisaged, it would be possible to do so at about or more than the current speed of traditional manufacturing processes. When that is the case, in about four decades from now, at least according to recent research by ING, a Dutch bank, there might not be that much need for labour-intensive manufacturing, the type African countries need to keep their teeming idle youth populations constructively engaged.

ING’s report suggests about a quarter of world trade could be wiped out by 2060 on the back of advances in 3D-printing, especially in car manufacturing.[10] Incidentally, this was the type of manufacturing that African countries were banking on and have actually been recording some progress with. A Chinese-backed car assembly plant in South Africa is expected to start exporting cars in early 2018, for instance.[11] As the first new car plant in South Africa in at least forty years, it represents an expected trend of that kind of manufacturing moving to relatively lower wage economies from an increasingly pricey Chinese labour market; even though the South African labour market is amongst the most expensive and disruptive on the African continent.[12]

The move probably anticipates the earlier highlighted game-changing automation trends: most of the cars are to be sold in neighbouring countries, which makes sense. It would be cheaper to ship the cars across the border by road and rail, within a region governed by a single tariff regime, that is also relatively borderless, than to ship them all the way from China. Incidentally, the Chinese car manufacturer is following in the footsteps of more experienced and advanced competitors like Germany’s Volkswagen and BMW, Japan’s Toyota and America’s Ford. The Chinese move also pre-empts announced plans by authorities to phase out of fossil fuel cars in France and the United Kingdom (and likely elsewhere in Europe) from 2040, and indeed China itself, in what its authorities termed the near future.[13]

Of course, there are arguments that suggest this likely shrinkage in low-skilled labour-intensive manufacturing and its associated value chains may be grossly exaggerated, especially for developing countries.[14] This is because there are still certain types of manufacturing that robots are not yet skilled at, or if nearly so, they are not cost effective. For example, the textile industry entails certain complications that advances in robotics are yet to master.[15]

3D printing’s impact on world manufacturing production
AM2.png
Source: ING, Oxford Economics; Wohlers report 2017, 3D printing and additive manufacturing, state of the industry, annual progress report, calculations by ING

But that is not to say that even in that sphere of manufacturing, robots are not increasingly taking the place of humans. They are. According to a recent report by The Economist in the UK, one American robotics firm, SoftWear Automation, produces machines that do what seamstresses do in textile factories – not everything yet, though – so-called “Sewbots”, which can already make pillows and bath mats, but would by 2018, if all goes according to plan, be able to produce 1,142 T-shirts per eight-hour shift. This is almost twenty times the output of a human involved in a similar task.[16]

And in the time horizon that recent research suggests 3D-printing would become fast and sharp enough to beat current traditional manufacturing processes, automation would well have become far more advanced. These advances are also somewhat egalitarian; China is a dominant buyer of industrial robots. Besides, a third of industrial robots that were shipped in 2015 were destined for middle-income countries; albeit the earlier mentioned Sewbots have only been sold in the USA.[17] In fact, such are these advances now, the mystery behind current perennially tepid inflation in developed economies is beginning to be attributed to these developments.[18] Even more groundbreaking, the orthodoxy of how countries are meant to develop is increasingly being challenged; which suggests that economies first make the transition to industry from agrarian agriculture before moving on to services.

China’s evolution is a typical example with its manufacturing jobs moving to other Asian countries (and expectedly African ones in due course), not only because wages have risen, but also due to a focus now on services. With advances in robotics triggering so-called “premature de-industrialisation” in developing countries, as manufacturing jobs move back to advanced economies (which increasingly compare favourably cost-wise due to automation) from cheaper labour jurisdictions, suggestions about leapfrogging the industrial development phase straight into services is beginning to gain resonance. Clearly, current industrial policy and thinking in many African countries would have to be rethought in light of these developments.

Industrialisation in Africa
Do African countries still have a chance to industrialise then? Put another way, do they need to? In addressing the question, the time left for any such development must first be countenanced. So, as earlier highlighted, 3D-printing would likely become advanced enough to cut international trade by half in about 40 years’ time. That is still a long time in any country’s development. So yes, African countries still have a chance to industrialise and yes, they still need to. But in doing so, they must begin to position themselves to ensure that the acquired competencies could be easily upgraded to ensure relevance in the envisaged future of manufacturing expected to be dominated by automation and 3D-printing.

Besides, should African countries focus more of their trade efforts on themselves, they could gain at least another 20 years during which they could still prosper from what may have become redundant competencies outside of the African continent. Better still, African countries should begin to focus on global value chains in the services sector; that is, upstream and downstream value chain activities before and after the processing stage. That way, when manufacturing becomes largely automated, they would still be relevant in what would have become shorter GVCs. As it turns out, services GVCs are also more lucrative.

The thinking has some precedence: the so-called “smile curve” theory, first proposed in 1992 by Stan Shih, founder of Acer, a Taiwanese personal computer (PC) manufacturer.[19] The smile curve concept of GVCs argues there is more value to be added at the product design (upstream) and marketing stages (downstream) of a value chain than at the manufacturing or processing stage.

The smile curve depicting value distribution along a GVC
AM3
Source: OECD

In any case, more traditional sectors like agricultural production and its related industries are unlikely to be scathed, though. So, it ought to be accorded greater attention; especially now that it is clear that Africa’s bulging jobless youths would probably only be absorbed substantially by such sectors of the economy. In other words, the solution to the high unemployment problem that was being sought in labour-intensive manufacturing, should now be aggressively pursued in agriculture.

In this regard, there would be a need to ensure that production is weaned of the elements. Agriculture could not continue to be rain-fed, for instance. That said, there are certain types of manufacturing that would likely be resilient to AM-related and automation disruptions; that fast-moving consumer goods (FMCGs) are likely to continue thriving, for instance.

Other types of manufacturing like crude oil refining, cement production and so on would likely be marginally affected. But these are already largely automated anyway. However, further down their value chains, in distribution and marketing, where humans must necessarily be involved, automation and AM-type innovations are likely to be inconsequential. Even so, African industrial thrusts would likely only be more rewarding and sustaining if they are aimed at domestic and continental consumption. It could also would buy African countries some time as they adapt to some of these advances.

Simply put, there is going to be a need for African countries to protect their markets. This is because even as the externalities of these industrial advances and other fourth industrial revolution developments are yet unknown, there is a greater likelihood they are likely to be negative for less developed economies, African ones especially. It is not farfetched to reckon that in time, Africans would acquire the necessary experience and skills that they would need to participate actively in what is expected to be a knowledge-based world economy. But unlike more adaptable technologies in sectors like telecommunications, where in the absence of legacy encumbrances, African countries have been able to leapfrog to mobile telephony and internet technologies from hitherto backward and dysfunctional telecommunication infrastructure, manufacturing and industry are not so easily adaptable or replicable. In the current context, for instance, an African country could not suddenly be able to produce industrial robots or 3D-printers or innovate fast enough to compete with advanced economies that are already way ahead. The current and likely future model for developing countries is that these innovations would be procured from such economies. But without an already robust industrial base and a workforce easily upskilled, such as is the case in China, the potential economic gains from such an adaptation could still be a net negative.

Even so, it is not impossible that some 3D-printing technologies could emanate from developing countries, including Africa (or be readily accessible to them). But it is almost certain the advanced ones would only be available to them subject to the discretion of authorities in the countries of the original equipment manufacturers (OEMs).

For the former scenario, there is already some evidence. South Africa is already actively engaged in additive manufacturing, especially in jewellery, tooling and prototyping.[20] More heartening is the fact that it is producing the technology at home and its innovations are evolving at almost about the same pace as those in advanced economies. For instance, the Aeroswift machine, produced by Aerosud ITC and the Council for Scientific and Industrial Research (CSIR) National Laser Centre, both in South Africa, is the world’s biggest powder bed fusion additive manufacturing machine, and would be used to produce metal parts for an aircraft programme.[21]

South Africa’s progress has been on the back of support from the government, though, which at the urging of the Rapid Product Development Association of South Africa (RAPDASA), commissioned a roadmap in 2013 dubbed “South African Additive Manufacturing Technology Roadmap[22], with the production of parts for the medical and aerospace industries identified as key focus areas. For traditional manufacturing, it was proposed that AM be used to improve efficiency and for repairing what used to be unserviceable parts.[23] Today, South Africa is considered competitive in both polymer-based and metals-based AM.[24]

But there is progress up north as well. In October 2017, Elephab, a Nigerian replacement and emergency parts additive manufacturer, secured funding from an American venture capital firm.[25] It already has continental ambitions, pointing to likely innovation from multiple sources within the continent. Noteworthy though is that the 3D-printers to be used by the Nigerian example are to be procured from Germany and the USA. So, to that extent, South Africa is more advanced.

It helps of course that South African universities already teach the subject; a wide knowledge gap is one of the other major constraints holding back additive manufacturing in general. African countries could leverage on South Africa’s growing expertise to leapfrog into additive manufacturing as well. What is clear, though, is that there would be something that may still put currently advanced economies ahead, raising the barrier to entry. The emerging scenario is that most African countries would necessarily procure their 3D-printers from America and Europe, now and in the future. If African countries must stand a chance then, they would need to protect their markets.

In this regard, it would seem their so-called development partners are already thinking ahead, pushing such supposedly mutually-beneficial preferential trade agreements as the European Economic Partnership Agreements (EPAs) and the American African Growth and Opportunity Act (AGOA). On the face of it, they are not necessarily bad. But when agreed, African countries would have obligations of reciprocity. This is the downside. Because in an environment where a technology is widely available and replicable, comparative advantage would then have to come from being able to do what everyone else is able to do faster. There is no scenario that could possibly be envisaged at the moment that puts African countries in a position to manufacture goods better in the future than their advanced counterparts; that is, even if AM technologies prove to be egalitarian. But if African countries were already entrenched in services GVCs, they would still be able to profit quite well from these advances. Even so, it would be best if they developed their own continental value chains and make other African countries the primary focus of their manufacturing. In that event, the expected shrinkage of global GVCs on the back of automation and additive manufacturing, would be no great matter for them.

Plug into GVCs where it matters
Plugging into global value chains took centre stage after the performance of industrial policy in many African countries (predominantly import substitution) proved to be abysmally poor.[26] There was a clear need to change the focus on developing whole value chains to one which leveraged existing cross-border ones by multinational companies (MNCs). But there was a catch. The aspiration of being able to manufacture finished goods for domestic consumption and exports, would have to be abolished. So, take the example of a car. As opposed to the traditional policy of trying to manufacture one, from design to production, the thinking became that it would be more optimal if an African country or other developing ones chose to produce one or more components of the car for which it had a comparative advantage. As for cars, what has happened mostly is that the few African countries who participate in that value chain, have mostly ended up just being assemblers of the cars targeted at domestic and neighbouring markets.

However, in general, the idea of GVCs supposed that value would be added to imported inputs or raw materials domiciled locally, and then the improved intermediate goods would be shipped to more able manufacturers abroad. So, a country with rubber in abundance, say, could produce car tyres for car factories in Detroit, Guangzhou, and elsewhere. And then they would import the finished cars for its local market. Or better still, import other components to add to the ones it produces for domestic assembly. Expected disruptions from automation and additive manufacturing means that whatever progress has been made in this regard, may not be of much value in a few decades. That might be putting it mildly. Cars themselves are evolving so fast that just when developing countries are beginning to gain mastery in the assembly of fossil fuel-based ones, innovations to make batteries smaller and last longer have improved the prospects of electric cars replacing them a great deal.

So, say industrial policy is successful in car manufacturing in an archetypal African country, the acquired competencies and associated value chains may not be of much use in the future. Thus, African industrial policy must begin to anticipate these disruptions if the continent is to stem the tide of its perennial relative backwardness. Incidentally, Asian countries, which beat their African counterparts to become key players in global value chains, have now also started to position themselves for relevance when that time comes.

Depth of integration of SSA countries in GVCs
AM4
Source: IMF

In 2014, the African Development Bank (AfDB) compiled an extensive report on how little integrated African countries were with global value chains (GVCs).[27] Global value chains are currently dominated by Europe, North America, and East Asia; together about 85%.[28] The share of East Asian countries has been increasing, though, rising to 16.2% in 2011, from 14.4% in 1995. In contrast, that for Europe and North America have been shrinking; the former to 50.9% from 57.5% and the latter to 11.8% from 13.1% in the period.[29]

What is the extent of Africa’s stake then? About 2.2% in 2011, from 1.4% in 1995.[30] And smaller African countries like Lesotho, Mauritius, the Seychelles, Swaziland, and Tanzania are more plugged into international production networks, among the top 30 participating countries in GVCs.[31]Incidentally, what additive manufacturing portends for even that meagre African participation in GVCs, is quite dire. With an estimated 1 billion workforce by 2040, and expectedly more about the time 3D-printing is expected to overcome earlier highlighted constraints, and potentially render redundant precisely the type of labour-intensive manufacturing that have long been envisioned would be used to put that labour force to work, the dangers to global security and peace could best be imagined.

Lack of jobs at home is the primary reason young Africans brave stormy seas to illegally migrate to Europe and almost anywhere else outside the African continent. Thus, unless African governments begin to plan for how this many people would find work, value-adding ones at that, they are likely to have a major crisis on their hands. With new production technologies, robotics and 3D-printing already engendering so-called “re-shoring,” whereby globally dispersed labour-intensive production stages of GVCs in low wage economies are increasingly now being returned to what hitherto were considered high-wage headquarter countries.

African governments would need to rethink plugging into GVCs; at least, they would need to be smarter about it. They could focus on industrial sectors that are likely to be minimally affected, for instance. Better still, they could momentarily focus on developing capacities in non-manufacturing activities, upstream and downstream of manufacturing or so-called services GVCs.[32]To this end, policy must be as it was in the Asian case, namely deliberative, proactive and forceful.

Focus on global value chains in the services sector
The foreign content of the exports of developed countries are expected to decline as 3D-printing makes high-wage economies competitive again, thereby reducing the need for them to manufacture intermediates and/or assembly finished goods in low-wage economies. This would dash the hopes of low-wage African countries looking to attract cost efficiency-seeking manufacturing foreign direct investment (FDI). Not that there were not already sharp wage disparities between African countries, meaning the impression of homogeneity of cheap wages is somewhat misplaced. Average wages in Kenya of US$2,854 are more than three times those in Ethiopia of US$807, where the pace of industrial development is quicker.[33]

Would it not be better then for African countries to focus on services-related GVCs, rather than develop capabilities in goods-related ones, only for them to become obsolete? African countries could specialise in upstream activities like research and design and also be key players in downstream activities like marketing and distribution of the finished goods. Put another way, the choice African countries face is whether to develop proficiencies in less than 40% of the share of value-add in world gross exports, but with competencies that would endure, or instead develop capabilities in the remaining 60%, but run the risk that any achievement could easily diminish on the back of automation and additive manufacturing.[34] Studies show such a choice is mutually exclusive, though.[35]

So, a services GVC focus would be at the expense of manufacturing-related ones. But even when that choice is made, the factors responsible for the current low African participation in GVCs are not likely to be any different. Whether the focus is on goods GVCs or services GVCs, reliable power supply, good roads, and efficient ports remain crucial. Economic institutions like the rule of law and property rights are also indispensable. Thus, irrespective of the strategic choice that is eventually made, it must be in tandem with fixing these traditional deficiencies.

Dr Rafiq Raji wrote this article for the NTU-SBF Centre for African Studies of the Nanyang Business School, Singapore, where he is an adjunct researcher

Also published by NTUSBFCAS, HowWeMadeItInAfrica. See links viz. https://www.howwemadeitinafrica.com/additive-manufacturing-implications-african-economies/60103/

https://ntusbfcas.com/african-business-insights/content/additive-manufacturing-implications-for-african-economies

Also published in my BusinessDay, Premium Times columns. See links viz.
https://opinion.premiumtimesng.com/2017/10/27/additive-manufacturing-implications-for-african-economies-by-rafiq-raji/

http://www.businessdayonline.com/additive-manufacturing-implications-african-economies/

[1] Trade recovery expected in 2017 and 2018, amid policy uncertainty (WTO, Apr 2017) https://www.wto.org/english/news_e/pres17_e/pr791_e.htm

[2] 3D printing: a threat to global trade (ING, Sep 2017) https://www.ingwb.com/media/2088633/3d-printing-report-031017.pdf

[3] Why African manufacturing is doing better than you think (ODI, Apr 2016) https://www.odi.org/comment/10382-why-african-manufacturing-doing-better-you-think

[4] Additive manufacturing: The factories of the future (The Economist, Jul 2017) https://www.economist.com/news/briefing/21724368-recent-advances-make-3d-printing-powerful-competitor-conventional-mass-production-3d

[5] Additive manufacturing: The factories of the future (The Economist, Jul 2017) https://www.economist.com/news/briefing/21724368-recent-advances-make-3d-printing-powerful-competitor-conventional-mass-production-3d

[6] Additive manufacturing: The factories of the future (The Economist, Jul 2017) https://www.economist.com/news/briefing/21724368-recent-advances-make-3d-printing-powerful-competitor-conventional-mass-production-3d

[7] Additive manufacturing: Printing things everywhere (The Economist, Jul 2017) https://www.economist.com/news/leaders/21724397-sceptics-doubt-technology-can-be-used-mass-production-just-wait-3d-printers-will-change

[8] GE is building the world’s largest ‘additive’ machine for 3D printing metals (GE Reports, Jun 2017) https://www.ge.com/reports/ge-building-worlds-largest-additive-machine-3d-printing-metals/

[9] Additive manufacturing: The factories of the future (The Economist, Jul 2017) https://www.economist.com/news/briefing/21724368-recent-advances-make-3d-printing-powerful-competitor-conventional-mass-production-3d

[10] 3D printing: a threat to global trade (ING, Sep 2017) https://www.ingwb.com/media/2088633/3d-printing-report-031017.pdf

[11] BAIC expects first cars from South African plant by early 2018 (Reuters, Sep 2017) https://af.reuters.com/article/investingNews/idAFKCN1C119U-OZABS

[12] Global Value Chain Development Report: Measuring and analyzing the impact of GVCs on economic development (World Bank, WTO, 2017) https://www.wto.org/res_e/booksp_e/gvcs_report_2017.pdf

[13] China to ban production of petrol and diesel cars ‘in the near future’ (The Guardian, Sep 2017) https://www.theguardian.com/world/2017/sep/11/china-to-ban-production-of-petrol-and-diesel-cars-in-the-near-future

[14] Sew what now? Worries about premature deindustrialisation (The Economist, Oct 2017) https://www.economist.com/news/special-report/21729864-automation-less-threat-workers-emerging-world-it-made-out

[15] Sew what now? Worries about premature deindustrialisation (The Economist, Oct 2017) https://www.economist.com/news/special-report/21729864-automation-less-threat-workers-emerging-world-it-made-out

[16] Sew what now? Worries about premature deindustrialisation (The Economist, Oct 2017) https://www.economist.com/news/special-report/21729864-automation-less-threat-workers-emerging-world-it-made-out

[17] Sew what now? Worries about premature deindustrialisation (The Economist, Oct 2017) https://www.economist.com/news/special-report/21729864-automation-less-threat-workers-emerging-world-it-made-out

[18] Unraveling the mystery of ‘missing’ inflation (Nikkei Asian Review, Oct 2017) https://asia.nikkei.com/Politics-Economy/Economy/Unraveling-the-mystery-of-missing-inflation

[19] The smile curve: Evolving sources of value added in manufacturing (UNIBA, Mar 2014) http://www.uniba.it/ricerca/dipartimenti/dse/e.g.i/egi2014-papers/ito

[20] South Africa aiming to become a leader in additive manufacturing (Engineering News, Dec 2015) http://www.engineeringnews.co.za/article/south-africa-aiming-to-become-a-leader-in-additive-manufacturing-2015-12-04/rep_id:4136

[21] South Africa aiming to become a leader in additive manufacturing (Engineering News, Dec 2015) http://www.engineeringnews.co.za/article/south-africa-aiming-to-become-a-leader-in-additive-manufacturing-2015-12-04/rep_id:4136

[22] Implementing the South African additive manufacturing technology roadmap – The role of an additive manufacturing centre of competence http://www.nstf.org.za/wp-content/uploads/2016/03/Additive-Manufacturing-Roadmap.pdf

[23] Implementing the South African additive manufacturing technology roadmap – The role of an additive manufacturing centre of competence http://www.nstf.org.za/wp-content/uploads/2016/03/Additive-Manufacturing-Roadmap.pdf

[24] South Africa aiming to become a leader in additive manufacturing (Engineering News, Dec 2015) http://www.engineeringnews.co.za/article/south-africa-aiming-to-become-a-leader-in-additive-manufacturing-2015-12-04/rep_id:4136

[25] NeuBridges-incubated 3D printed parts company ElePhab gets international VC funding (LinkedIn Pulse, Oct 2017) https://www.linkedin.com/pulse/neubridges-incubated-3d-printed-parts-company-elephab-rich-tanksley/?trk=v-feed

[26] Industrialization for economic transformation and sustainable development in Southern Africa: Addressing the gaps (UNECA, Mar 2013) http://repository.uneca.org/bitstream/handle/10855/22748/b11538429.pdf?sequence=1

[27]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[28]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[29]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[30]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[31]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[32]Global value chains and Africa’s industrialisation (AfDB, 2014) http://www.africaneconomicoutlook.org/sites/default/files/content-pdf/Edition_Thematique_EN_web.pdf

[33] Global Value Chain Development Report: Measuring and analyzing the impact of GVCs on economic development (World Bank, WTO, 2017) https://www.wto.org/res_e/booksp_e/gvcs_report_2017.pdf

[34] Global Value Chain Development Report: Measuring and analyzing the impact of GVCs on economic development (World Bank, WTO, 2017) https://www.wto.org/res_e/booksp_e/gvcs_report_2017.pdf

[35] Global Value Chain Development Report: Measuring and analyzing the impact of GVCs on economic development (World Bank, WTO, 2017) https://www.wto.org/res_e/booksp_e/gvcs_report_2017.pdf

The Osinbajo imperatives

By Rafiq Raji, PhD

Evil men are forever in bondage of their schemes. Just when they think victory is within their very grasp, that ever-patient Omnipotent simply declares otherwise. It is sometimes no more than a blink of the eye. So to speak. All of a sudden, the variables just change. A man whose aspiration was no more than a life in academia has power thrust upon him without even the slightest effort. Yet, many abound in those stained corridors who have twisted knots to no end for the exact same thing. To simply watch how the varied machinations of these sort of people often come to naught is to put it mildly: awe-inspiring. Who would have thought such mischief possible from just a word. “Co-ordinate” in place of “act”: who knew? Of course, the law is clear. Following the letter by the Nigerian president, Muhammadu Buhari, to the legislature declaring his intention to proceed on medical leave – the second one this year already, power transfers automatically to his deputy, Yemi Osinbajo. But the drafters of the letter already knew that. So why did they do it? The shadowy figures probably wondered if anyone would notice. How about we test the waters to see what we can get away with, they probably reckoned. Well now, they know. It is not likely that the president had the time or the strength to bicker with his clearly mischievous aides over the wording of a simple letter. The ailing leader is excused.

Act without fear
With such mischief about though, it has been suggested in some quarters that the life of the acting president might be in danger. Complete nonsense. Prof Osinbajo is not any safer being guarded by his kinsmen than he is by those of his principal. His enemies are not fools. But if they could just guide his hand, slow it perhaps and our destinies in tandem, that may be just right for them, say. Courage beckons on Prof Osinbajo. He must embrace it. Should he act with the needed firmness, he may even come to earn the respect of those who are counting on the stereotype of the faint-hearted Yoruba man. With power now placed by Divinity in the hands of one who has the twin blessings of salubrity and diligence, and might actually be able to do some good with them, even the slightest compromise by the one so chosen would be the greatest betrayal. The acting president must act with dispatch to fix some of the rubbish that has been festering due to the failing health of President Buhari; who could not attend to many government business consequently. It is widely believed a lot of official memoranda which required his approval were either not brought to his attention or even when they were, he could not attend to them.

Ordinarily, a president should not have to personally approve everything. In the American or British jurisdictions, some of these are delegated to the chief of staff or cabinet secretary. And such mundane tasks like the signing of greeting cards, routine letters and so on are done using a so-called “autopen” programmed with the president or prime minister’s signature. That type of leeway would be prone to unimaginable abuse in the Nigerian context, however. Still, it is unbelievably astonishing how some very inconsequential activities require the approval of a Nigerian head of state. A still existing command-and-control structure inherited from the military is partly why. Unsurprisingly, the healthiest president might still find the office a little overwhelming. Even so, Mr Buhari was not able to consider even the very important ones, it is believed. Unfortunately, there have also been actions emanating from the so-called “presidency” in his name that seem alien to his character and thus he probably did not approve of. To have to reverse these likely presidential usurpations whenever he became acquainted with them would have been problematic; especially as the erring officials are believed to be some of his closest. This understanding probably motivates their daring. With Mr Buhari now rightly taking care of himself in England, such mischief would be hard to pass by Prof Osinbajo. Thus, the president’s close aides may be reluctant to give Prof Osinbajo a free pass this time around: during Mr Buhari’s penultimate medical leave, the heavens simply poured rain on the second house. Understandably, the occupants of the first house cannot soon forget the lessons that the drought brought with it: shall we not hold the heavens this time with such conjurations as “co-ordinate” or whatever, some smart aleck probably mused. Well, good luck with that.

Be quick, firm and transparent
Prof Osinbajo’s imperatives this week are as follows. Firstly, he must sign the 2017 appropriation bill without delay. For sure, there would be someone who will likely come with identified “paddings” in the budget: truth can be deployed towards mischief as well. Such issues (if they arise) should be handled through back channels. Time is of the essence. Secondly, swear-in the two new ministers recently confirmed by the Senate at cabinet on Wednesday. Thirdly, deploy the about forty-three already languishing ambassadors-designate. Fourthly, the acting president should relieve the suspended government scribe, Babachir Lawal, of his appointment. (That is, if it has been found that he indeed corruptly enriched himself with humanitarian aid meant for internally-displaced persons in the northeastern part of the country.) Doing these for starters would hardly be reckoned as “co-ordinating” or any such nonsense.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/the-osinbajo-imperatives/

Foreigners welcome

By Rafiq Raji, PhD

Xenophobia, that odious human phenomenon, reared its ugly head in South Africa last week. With chilling consistency, the authorities have been all too happy to let it simmer for a while until, as it always does, it boils over. There have been such attacks before. Before this most recent one, violence erupted in April 2015 when Zulu King, Goodwill Zwelithini, bemoaned the presence of foreigners, African ones especially: they ‘inconvenience locals’, he argued. In supposedly peaceful protests a few days after the first violent attacks broke out in the week just past, police would eventually disperse the protesters – gangs and criminals really – with tear gas and rubber bullets. But only after the marauders had helped themselves to goods not their own. Apart from the longstanding structural issues, the violent attacks are a failing of law enforcement, arguably deliberate, since when the authorities later did their duty, order was restored. It is a phony peace.

South Africa, in its current state, is a tinderbox of sorts. A perfection if you are looking for unseemly ways to warm the cockles of the hearts of a longsuffering majority black poor, whose goodwill and commonwealth greedy politicians squander like there is no tomorrow. So how about we let those hungry ones make away with a few loaves of bread, teach the stingy ‘Paki’ shopkeeper a lesson for a change? And those bloody arrogant and loud Nigerians, only just come and already driving flashy cars and stealing our women. Such anti-immigrant sentiments sing like a chorus to the ears of locals and foreigners alike in South Africa: it is all too familiar. But to allow the opportunistic politicians and the few crooks and joblesss know-nothings rewrite the narrative in favour of their myopic xenophobia would be a great disservice to the warm and lovely people of South Africa.

The majority of South Africans love foreigners and are not xenophobic. And yes, most love Nigerians. And we love you too. I condemn with the utmost vehemence, the opportunistic Nigerian student union leaders, who instead of taking over the streets in protest over the poor quality of education at our universities, the many languishing unpaid and underpaid lecturers, and our thieving politicians, decided the way to retaliate the erring ways of a few nameless South African criminals, was to destroy the property of a South African company; which by the way employs many Nigerians. So they can now give ultimatums? Empty barrels. Foreigners are welcome here.

Kick welfare state
Too high unemployment in South Africa – about a quarter of the population is jobless – is a ticking time-bomb. That some poor black South Africans have chosen to take out their frustrations at foreigners, particularly those of African descent, is somewhat disingenuous. Economic power remains within the firm grasp of the minority white population. And if the politicians feel the slightest relief that their ‘problem’ has found a vulnerable target to vent at, how soon before they turn on them? They are not waiting to find out. Never one to miss a political opportunity, Jacob Zuma, the South African president (never mind that he waited a few days to voice his condenmnation of the xenophobia-fuelled violence) threw a well-timed bone at the poor crowd – lest it becomes an uncontrollable rampaging horde: land would now be expropriated from whites without compensation.

That this recent populist move is coming from the enfeebled ruling African National Congress (ANC) leader, one who has caused his party much grief no less, and who cadres would gladly be rid off as party president come December, is not entirely surprising. Still, it is a most significant policy departure for a centrist party that hitherto – and wisely so – sought to balance the often conflicting needs of capital and politics. Credit for this downswing should go to the ultra-nationalist Economic Freedom Fighters (EFF) and its firebrand leader, Julius Malema, most definitely. A few probably had a foreboding of things to come: President Zuma touted ‘radical economic transformation’ at his recent State of the Nation Address (SONA). But most likely thought it was just huff and puff from a leader whose power is waning: Mr Zuma probably has no choice but to stir up some populist support. Not anymore.

Even so, some hard truths need to be told. Having almost half of households on at least one form of welfare is hardly a recipe for enterprise. How is it that an able-bodied individual gets to expect a paycheck for doing nothing at the end of every month? Where would that person get the incentive to engage in productive activity? South Africa’s welfare system has to be reformed. Authorities must make welfare payments conditional on productive engagement. How about structuring welfare payments to unemployed able-bodied youths as loans? Intelligent solutions would be what stops the vicious cycle of poverty, despondency, xenophobia, and criminality amongst poor black South Africans.

Immigrants prosper
A man who decides to leave home in search of greener pastures is hardly going to reach his destination only to just sit idle. Many have responsibilities back home, with numerous relatives ‘casting and binding’ for their success. And failure. They have to succeed. Unfortunately, this sometimes mean they do so by hook or crook. Even so, many immigrants succeed the legal and proper way. A Nigerian who all of a sudden finds himself in a country with 24-hour power supply, a reliable transportation system, and cheap food, can have his productivity quadrupled without the slightest addition of effort. This is why many succeed abroad. Many come from a life of toil and strife. To immigrate in the first instance would have required years of saving, and in the extreme case, taking a loan. Getting a visa would have required enduring weeks – sometimes months – at embassies, accompanied with fasting and prayer. Tell me, when that person eventually makes it out, what do you think he or she would do? South Africa benefits from immigrants. When they are not playing to the gallery, its politicians acknowledge this fact. Many, many Nigerians and South Africans live and do business together with great warmth and affection. The few xenophobic ‘haters’ in our midst will fail.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. https://www.businessdayonline.com/foreigners-welcome/

Africa should renegotiate EPAs for manufactures’ trade parity (2)

By Rafiq Raji, PhD

Published by BusinessDay Nigeria Newspaper on 16 Feb 2016. See link viz. http://businessdayonline.com/2016/02/africa-should-renegotiate-epas-for-manufactures-trade-parity-2/

Foremost Oxford economists, Paul Collier and Anthony Venables, argue – in their 2007 paper, “Rethinking trade preferences: how Africa can diversify its exports” – that protectionism by African countries has thus far failed to boost manufacturing exports. They also show how trade preference schemes – if properly designed and under the right conditions – could aid industrialization. Their main idea revolves around the need for a change from the finished goods mindset that currently underpins most African industrial policies to that of being part of global value chains. Even then, they argue such schemes only accelerate growth when relevant skills and infrastructure are available. They probably have a point. One wonders though if protectionism would not have worked if the dearth of needed skills and infrastructure was not a constraint. It seems to me that it may be better for African countries to protect their markets pending when they do acquire these requisite complements for industrialization. In any case, one is generally weary of western economists; albeit this pair is quite respectable. Some of that distrust is due to Africa’s history with westerners, mostly dreadful – currently reading Martin Meredith’s recent book: “The Fortunes of Africa.” To be fair, Africans have also been complicit in what is still a lagging continent. Still, my personal experience makes me convinced only Africans can lift their continent from its perennial inertia. If you have worked or lived in London, New York, or any of the other major financial centres, you know ‘Africa’ is an exclusive, niche club. Outsiders – mostly Africans – face high barriers to entry. Africans who try to be ‘AfricaN’ in these places are reminded they could simply board a plane back home. So, worried I might be biased on the revised Economic Partnership Agreements (EPAs) not being in the long-term industrial development interests of African – or African, Caribbean and Pacific (ACP) – countries, I aimed to seek the views of ‘AfricaN’ economists. I got the opportunity on 24 September 2014 at Chatham House in London. Dr. Adam Elhiraika of the United Nations Economic Commission for Africa (UNECA) had come for the launch of UNECA’s 2014 Economic Report on Africa aptly titled: “Dynamic Industrial Policy in Africa.” During the Q&A session after his presentation, I put the question on my concerns (or biases) about the EPA. I got the sense he believed the EPAs in their current form may weigh on Africa’s industrial progress and should be re-negotiated. Some African authorities probably think re-negotiating these revised EPAs would be a daunting task. I beg to differ. Europe needs new markets. With low population growth, it could not possibly sell all the goods it could manufacture in its own market. Europe needs the raw materials that Africa has in abundance – always has. Europe needs the EPA.

Africa’s wealth can only be an advantage if the raw materials it possesses in abundance are available primarily for its own industries and only sold to foreign partners after local industrial requirements have been fulfilled. And even then, only as finished products and at such prices that the destined country’s manufactured goods would never be as competitive. This is the ideal but unrealistic scenario. Were Africa to industrialize and produce goods with the same efficiency and of similar quality as its European counterparts, free movement of goods may not be so attractive – it probably motivates the advocacy for the global value-chain plug-in concept. There would simply be no space for African goods in that saturated market. Incremental demand for European goods is to be found in the still relatively virgin markets of Africa. Simply put, Africa needs to manufacture goods for Africa. However, it could not possibly compete with other countries’ manufactured goods in its own backyard if it gives up its coercive power to impose punitive import bans and tariffs. In my view, this revised EPA – albeit better than past ones – would serve to ensure a constant lag in relative competitiveness for African goods. One of the most effective ways of gauging trade between countries is to visit the local supermarket. In South Africa, most of the consumables on the shelves are made locally. Even when there are foreign brands, they would typically be produced locally. In Nigeria, supermarkets stock mostly foreign brands. The data supports these observations. Whereas manufactures accounted for just 3.3 percent of EU imports from the Economic Community of West African States (ECOWAS) region in 2014, they constituted 28 percent of total exports of the Southern African Development Community (SADC) to the EU in the same year. The SADC region has always had – and still has – a relatively stronger industrial base. Outside of commodities, most of the goods – semi-processed or processed – that Africa sells to Europe are bought by Africans in the diaspora or adventurous Europeans nostalgic about their experiences on the continent. As I recall – when seeking the ‘African’ food products on those shelves – during my weekly grocery shopping trips to a major UK supermarket chain, it was usually sobering upon reflection that they were ‘African’ only to the extent that they were popular European-owned brands one was used to back home.

Should Africa opt out of the EPA? No. If well negotiated, it could be a catalyst for Africa’s industrial development. Ideally, duty-free access for Africa’s exports to the European Union via the EPA should supposedly make its goods cost competitive relative to say, Asian ones who pay duty. Tariffs and duties that would have been paid by African exporters had there been no trade preferences also add to capital for incremental investment. With predictable demand for its exports consequently, these schemes are expected to help generate employment and contribute to growth. Ironically, the component of the EPA – quality specifications – that may really aid Africa’s industrial development has hitherto been a major constraint. African exports to Europe cannot be of lesser quality. Quality specifications in earlier versions of the EPA were beyond the technological reach of most African countries. The still contentious but revised EPA is more flexible in this regard. Subject countries would now be allowed to import intermediate inputs without losing their preferential market access. For instance, the EU-West Africa EPA will allow subject countries “produce goods for exports to Europe using materials sourced from other countries without losing the benefit of the free access to the EU market.” In the long run, this flexibility may allow for some technology and skills transfer. So even if Africans would ultimately be the dominant consumers of relatively cheaper goods manufactured on the continent, they would be assured the quality would be no different from the European ones they are used to. Thus, there is a delicate balance that African authorities need to strike with their European counterparts.

Also published on my company’s website on 17 Feb 2016. See link viz. http://macroafricaintelligence.com/2016/02/17/thematic-africa-should-renegotiate-epas-for-manufactures-trade-parity-2/