State bureaucracy slows down Africa’s growth, says report

Poor coordination between ministries and policy makers has been identified as a key challenge that has held back the country’s budding manufacturing sector from realising its potential.

According to The Economic Report on Africa 2014 titled Dynamic Industrial Policy in Africa, this state of affairs is blamed on the existing heavy regulations that have affected the ease of doing business. The report is a joint annual publication by the United Nations Commission for Africa (UNECA) and African Union Commission (AUC).

According to the report, other factors that have held back the sector include high energy costs, low productivity and limited linkages with other economic sectors. This is despite the manufacturing sector having the potential to promote structural transformation, job creation and ensure the country’s all-inclusive growth.

The report released yesterday also indicates use of inappropriate technologies has dampened the competitive edge of Kenyan goods.

This, it notes, has encouraged entry into the market of substandard imports and counterfeit goods. However, the report urges Kenya and other African economies to put in place institutional frameworks to spur industrialisation so as to improve their growth rates.

One of the key recommendations of the report is the need to promote stronger coordination between government ministries and leading private sector organisations – the Kenya National Chamber of Commerce and Industry, Kenya Private Sector Alliance and the Federation of Kenya Employers.

“This is vital in eliminating overlapping and conflicting mandates, besides ensuring that the private sector is dynamic and constantly adapts to the changing needs of the industrial sector,” it says.

Kenya’s import substitution policy and the World Bank-sponsored structural adjustment programmes are pointed out as policy measures that failed awfully.

However, the National Industrial Policy 2011-2015 is projected to spearhead an industrial revolution, as underpinned in Vision 2030.

The report notes that tax credits and export subsidies employed by many African countries including Kenya did not produce the desired results.

“These often followed a blue-print approach of adopting formulaic interventionist packages, with little private and other non-governmental input,” indicated the report. By adopting an institutional framework, the report argues that a more holistic alternative would build strong and all-inclusive institutions for industrial policy and ensure various industrial arms interact regularly and harmoniously.

“A strong institutional setting will allow the correct and collective identification of constraints and formulation of smart policy interventions,” it says.

The joint publication proposes that high-level political support and coordination for industrial policy is a first and significant step. It argues that success of an industrial revolution largely depends on allowing industrial policy organisations to be dynamic and organically connected.