Emmanuel B. Mensah

IEA – Can you tell us how you got interested in economics and decided to pursue an academic career?

Emmanuel – As a child growing up in the west of Ghana, near the Ivorian border and far from the capital, my father would tell me stories of Ghanian politics and history. He had been a student activist and later young professional in the party of Kwame Nkrumah, and for him the overthrow of Nkrumah in 1966 represented a huge blow to his dreams of our economic development as an independent nation. As a teenager, I found his stories to be somewhat sentimental, yet many stuck with me. Most of all I remember the story of Nsawam Canneries, a state owned enterprise set up in the 1960s which processed and canned fruit juices both for the domestic market and for export. It was part of Nkrumah’s wider vision to ‘industrialize Ghana’. The influence on Nsawam district was supposed to be very great – this one company would act as a ‘growth pole’ which stimulated a whole secondary industry around it. In order to find out how the story continued, I visited the factory in 2007, and found that this once beautiful tiger of the Ghanian industrial vision had become a giant white elephant. Instead of the humming of machines, I heard only the singing of birds in the nearby trees. This bucolic silence spoke to me of the failure of Nkrumah’s development vision, of the post-independence dream of rapid industrialization. In Ghana we have a proverb: Birds sing not because they have answers but because they have songs. Nevertheless, that day when I heard no machines and no trucks, no shouts of workers nor noonday bell – nothing but birdsong – what I wanted was answers.

Opposite the defunct Nsawam Canneries was a pharmaceutical company called LaGray. Their modern and fully operational factory specialized in the production of generic prescription drugs. Were some of the answers to Ghana’s industrial vision to be found here? Unlike the Nsawam Canneries which had employed many low-skilled workers from the local area, LaGray was very automated with only a handful of high-skilled workers who were mostly western-trained. My teenage mind found more questions than answers. Why did the company which employed so many and put so much into the local area go bust, whilst the company which employed so few was thriving? Why did labour intensive companies in other areas – such as Blue Skies, another juice company some kilometers away – not face the same fate as Nsawam? More generally, why do some industries die and others emerge, some struggle and others thrive? When do industry, growth, and local living conditions improve together in tandem, rather than in opposition?

It was these questions which got me thinking about where I might go not only to find the answers, but to contribute to them.

IEA – Much of your work is on structural change in Africa. How do recent patterns of structural change in the continent differ from traditional patterns observed in successful development models?

Emmanuel – To first answer this question somewhat glibly, in the traditional development success stories, Nsawam Canneries would likely not have gone bust! Recent patterns of structural change in Africa are quite different from those observed in what we traditionally think of as the development success stories – the ‘Western economies’ of the 19th and early 20th centuries, and the East Asian powerhouses of more recent decades. Ever since Arthur Lewis wrote dispatches from his desk in the industrial hub of 1950s Manchester, we have become familiar with a process of development through which surplus agricultural labour moved en masse to scalable manufacturing providing the human fuel to the Industrial Revolution in Europe and North America. By and large, Africa has the surplus agricultural labour, but it has not yet experienced the same structural change.

It is not that the vision was lacking. Immediately after independence, many African countries aspired to follow this path, as my father’s tales of Nkrumah attest! Import substitution in particular was seen as a way to develop African industry with initial protection from more established international competitors. Whilst internal factors held back industrial progress – such as the aforementioned coup in Ghana in 1966 and similar events in other countries – the real derailment came after 1970s oil crisis. The 1980s debt crisis put an end to import-substitution, with the government revenues required to maintain state investment rapidly diminished, and international funds coming with the now infamous ‘structural adjustment’ conditions which rendered protection of firms such as Nsawam Canneries impossible and resulted in them quickly facing international competition. By the 1990s, it was precisely those countries – Ghana, Nigeria, Mauritius, etc. – which had most actively pursued import substitution that experienced deindustrialization, at income levels famously far lower than those at which past development success stories began the deindustrialization process.

The picture in the 21st century has become a little more complicated and, if I may say so, my own recent work along with GGDC colleagues has shed some light on this. Construction and analysis of the most up-to-date data has allowed us to document two important recent trends in African industrialization. First, we found that middle-income countries such as Ghana and Nigeria have finally begun to reverse the 1990s and early 2000s patterns of deindustrialization and are experiencing what we dub a ‘manufacturing renaissance’. From textiles in Ethiopia to food processing in Kenya and Tanzania, African firms are finding markets for their manufactured products, with local and regional markets proving vital stepping stones towards full international exports. Indeed, the positive implications of this finding extend even beyond middle-income countries, with some low income countries exhibiting green shoots of industrialization where there was none before – a ‘manufacturing naissance’, so to speak. But before we get too excited, we must consider also the second trend, which is a little more sobering – the bulk of the increases in manufacturing employment come from small and informal enterprises, with little or even negative growth in employment at the largest formal manufacturing firms. This is important because these small firms just do not have the sufficient level of productivity required to drive industrialization-led growth. Some of my own earlier research had already hinted at similar patterns in services, whereby apparent growth in the services sectors of many African countries was in fact driven by informal services such as street vending and trading rather than productive tradeable services such as ICT or business services.

If I was therefore to summarize the current state of structural change in Africa, I would have to describe it as atypical – especially in comparison with successful development models of the past and present – and characterised by high levels of unproductive informal activities, not only in services as might be expected, but also, worryingly, in manufacturing.

But let me finish on a somewhat more optimistic note. Whilst the above mentioned factors may represent breaks on African manufacturing, or at least on productive industrialization, Africa does have some advantages in terms of internal trends. The population growth rates in most African countries are among the highest in the world – the population of the continent is expected to reach 2 billion by 2045, with a third of the working age population expected to be middle-class. This represents potentially huge domestic and regional markets for African economies. And there is a tendency towards regional free-trade which has culminated in the recent African Continental Free Trade Area (AfCFTA) which aspires to span the entire continent. The regional markets which these trade agreements open up may represent the heretofore elusive catalyst for African industrialization and, if Global Value Chains continue to be strained in the post-Covid world, imports to Africa from East Asia and others may stagnate, opening opportunities for domestic and neigbouring countries to fulfill the excess demand. Rising education levels in many African countries may also broaden the scope for higher-skilled production in the long run.