Africa has long been recognised as a continent of immense potential, rich in natural resources and home to the world’s fastest-growing population. Yet, despite its wealth, it remains largely a supplier of raw materials rather than a hub of industrial activity. The usual conversation around Africa’s economic transformation focuses on infrastructure development, foreign investment, and trade agreements. But the real bottleneck lies elsewhere – without strong institutions, Africa cannot industrialise. Industrialisation is not simply about setting up factories or processing plants. It requires a governance ecosystem that allows industries to thrive – clear policies, enforceable contracts, regulatory consistency, and financial systems that support businesses at scale. Across Africa, weak institutions continue to undermine efforts to build a robust industrial base. Investors hesitate when policies are inconsistent, businesses struggle when regulations are unclear, and economies stagnate when corruption distorts markets. Without reliable institutions, no amount of foreign investment or economic policy can drive real industrialisation. Take the case of Africa’s vast mineral wealth. The continent holds the world’s largest reserves of cobalt, lithium, and rare earth metals, which are critical for the global transition to clean energy. Yet, instead of benefiting from these resources, African economies remain at the bottom of the value chain, exporting raw materials while wealth is generated elsewhere through refining, processing, and advanced manufacturing. The same applies to agriculture, where Africa produces a significant share of global commodities like cocoa, coffee, and cotton, yet continues to import the finished goods at a premium. The missing link is not access to capital or technology – it is the absence of policies and institutions that protect African value chains, support industrial policies, and ensure that wealth is retained within the continent. The African Continental Free Trade Area (AfCFTA) offers a critical opportunity to shift this trajectory, aiming to create the world’s largest single market and drive intra-African trade. But trade agreements alone are not enough. If Africa does not build institutions that harmonise regulations, enforce contracts, and facilitate seamless business operations across borders, the promises of AfCFTA will remain theoretical. The continent’s fragmented regulatory landscape and slow-moving bureaucracies are among the biggest barriers to industrial growth. A company producing goods in one African country still faces significant legal and logistical challenges when trying to expand into a neighboring market. Until these institutional barriers are removed, African businesses will struggle to scale, and industrialisation will remain elusive. A fundamental issue is the lack of long-term economic planning. Many African countries operate on short-term policy cycles, where industrial strategies are frequently abandoned or changed due to political shifts. Successful industrial nations – such as Germany, South Korea, and China – achieved their growth by ensuring policy continuity and regulatory stability, allowing businesses to invest in manufacturing without fear of sudden disruptions. African governments must recognise that industrialisation is a generational process. It requires consistent policies, independent regulatory bodies, and legal frameworks that guarantee long-term stability. Without these, investors – both foreign and domestic – will continue to prioritise short-term extractive industries over long-term manufacturing. Another major institutional weakness is in financial systems. Manufacturing and industrialisation require large-scale, long-term capital investment. Yet, across much of Africa, commercial banks prefer lending to trade and real estate rather than manufacturing, which requires patient capital and carries longer risks. If Africa is serious about industrial transformation, governments must strengthen development banks, create financing mechanisms tailored for manufacturing, and build capital markets that support long-term investment in productive industries. Without these financial institutions, industrialisation will remain an underfunded ambition. The good news is that some African nations have taken steps in the right direction. Rwanda has invested in special economic zones (SEZs), simplifying regulations and creating an attractive environment for manufacturing. Ethiopia has pursued a state-led industrial strategy, particularly in textiles, benefiting from targeted government support. However, these are exceptions rather than the rule. For Africa to truly transform, institutional reforms must happen across the continent, ensuring that governance supports – not hinders – economic expansion. Africa’s economic future will not be determined by the price of its raw materials but by the strength of its institutions. Industrialisation will not happen simply because Africa has minerals, land, and labour – it will only happen when governments create the frameworks that allow industries to emerge, scale, and compete globally. The focus must shift from merely attracting foreign investment to building systems that empower local businesses, develop value chains, and support long-term economic planning. Without strong institutions, factories will close, investors will flee, and Africa will continue to export wealth while importing dependency. But with the right governance structures, industrialisation is not just possible – it is inevitable. The choice is in Africa’s hands. The author is an applied economist.
