Growth in industrial output is good news

That the Rwandan economy posted impressive growth in the wake of a weaker global economy in 2013, is neither new nor a surprise.
Edward Ojulu
Edward Ojulu

That the Rwandan economy posted impressive growth in the wake of a weaker global economy in 2013, is neither new nor a surprise.

Even though the economy grew at a slower pace (below 6 per cent or there about) compared with last year’s 8 per cent, creation of wealth in the country nonetheless expanded above the global average GDP growth of 3 per cent. That too, is not news.

The real news to come out of  the National Bank of Rwanda during the week is that the industrial sector was the key driver of the country’s GDP growth in 2013. At an impressive rate of 11.6 per cent, one would hope that industry continues to be the driver of economic growth and that it is sustained beyond 2020—the year Rwanda will attain middle-income status.

Why industry? This is primarily because industry is a safer bet when it comes to sustaining growth compared to say, agriculture and to some extent the service sectors. Agriculture and services sectors, though very crucial in employing more people, are vulnerable to external shocks (in the case of services sector) and weather changes in the case of rain-dependent agriculture in most African countries.

On the other hand, economic down-turn in countries to which we export services such as tourism will most certainly hurt the economy. It happened in the wake of the global recession between 2009 and 2011 when it became hard to get a tourist to visit Africa or an African working abroad to remit money home as the European and American economies took a beating.

Yet on the other hand, industrial growth is safe because it signals a shift from subsistence and peasant-dominated farming to industrial production. Growth in industrial sector comes with creation of what modern economists call off-farm jobs. That is employment in the manufacturing and the services sectors whose availability will never depend on the vagaries of weather.

It is off-farm jobs that build a critical mass of consumers—the people with disposable income who are otherwise referred to as the middleclass. This class of people also has taxable income from which government gets  revenue to build infrastructure and provide social services needed to build a healthy and educated population.

The fact that the economy can experience growth in industry or manufacturing, even as the global economy struggles, is therefore a positive sign that the road to middle-income status could be getting clearer and that Vision 2020 is indeed within reach as the younger generation shift from peasantry to off-farm employment.

This, however, is not to suggest that agriculture should be abandoned and relegated to play a less significant role in economic growth. We still need and will continue to need food. Above all, the industries that will deliver Vision 2020 are those that add value to local raw materials—mostly agricultural produce. For example, industries that will make wine from locally produced bananas, mangoes, pine apples or tomatoes; those industries that will process excess potatoes, maize or even milk into finished industrial products for the local and export market.

To be able to achieve this linkage between agriculture and industry, there is however urgent need to move away from rain-fed farming whose production is seasonal, to modern agriculture capable of producing all through the year.

This of course will require heavy investment in irrigation infrastructure and machinery. The good news is that technology is available and the will is there—both at leadership level and at the grassroots.

With basic technology such as water harvesting equipment, it is possible to store water during the rainy season for use in the dry season. This will eliminate unnecessary losses incurred by farmers when Mother Nature fails to deliver so as to ensure a steady supply of raw materials to feed the industries.

It is sometimes saddening to see a whole crop season of maize or beans wither to waste almost at maturity stage when only one week of watering could make a huge difference.

The future for Africa is therefore not in peasant farming, but manufacturing.

 The author is an Editor at The New Times

 

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