Industrialization: “If Addis can do it, Uganda can do it” Lessons from Addis Ababa – Dr. Enock Nyorekwa Twinoburyo

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By Dr. Enock Nyorekwa Twinoburyo (Economist)

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On a recent visit to Ethiopia in May 2018, I travelled from Uganda with Ethiopian airways and interesting to learn they have 4 flights from Uganda daily and a fifth is expected soon. This is one of the highest of any airline operating at Entebbe airport.

However, the high frequency of flights is not reflected in Uganda and Ethiopian economic ties like trade and investment. And globally, Ethiopian airline flies to over 110 destinations. Another vivid observation is the exclusivity of Ethiopians (from Pilot to hostesses) in service on the airline – local content promotion.

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As Uganda thinks of its own airline, there may be lessons to learn from not only this one but others particularly Kenya, South African and Rwanda. In all cases, the fiscal burden on the respective governments is immense. One of the primary aspects, that should be given attention – is the national pride language that would be used on the Uganda Airline.

My guess is as good as yours – the constitutionally defined national language.
At the back of my mind was the illustrious economic growth over the last decade. It also registered the fastest growth in Africa in 2017 and is poised to continue on this trajectory. As you would expect, growth is usually Urban Centered, and the level of infrastructure boom in Addis Ababa is notable.

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Let us remember that Uganda has its own fair share of investment in infrastructure (two thirds of public and private investment are in brick and mortar) over the first National Development Plan (NDP1) 2010- 2015, just like the Ethiopian Growth and Transformation Plan (GTPI) over the corresponding period.

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Over this period, Ethiopia registered double digit economic growth which is more than double Uganda’s economic growth over the same period. This led to Ethiopia’s GDP per capita more than doubling over that period which same trend was attained by Uganda over nearly two decades. Per capita traction is also attributed to the population transition with now a population growth of 2.5% per annum compared Uganda’s 3% p.a despite Ethiopia having nearly 3 times more people.

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It is against this backdrop that, the rest of the article deductively unbundles the factors that underpinned this growth success story over the last 15 years despite the policy experimenting sometimes against the Bretton Wood Institutions Policy Framework.

In fact, Ethiopia’s high growth epochs coincide with high levels of inflation contrary to the theoretical scissor relationship between the two. Additionally, the exchange rate regime remains managed. Also over this period, it had a spate of internal conflicts.

All the major sectors (agriculture, service sector and industry including manufacturing) grew by 10 per cent or more per annum. Growth has been largely public sector led with investments in agriculture and infrastructure for industrialization (power generation, construction).

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While Africa as a continent is considered to have de-industrialised, Ethiopia is industrializing. Since 2010, industry sector GDP (value added) has witnessed an annual average growth rate of 20%. Ethiopia has promoted industrial parks development with accessible infrastructure, one stop centres and substantial incentives.

The cheapest cost of electricity in Africa for Industries (USD 3 cents per unit) is in Ethiopia, Industrial park (also agro- processing) are linked to the existing railway lines including the 120km an hour Addis Ababa Djiobouti Railway line completed in 2016.

Despite this rapid growth and industry evolution, Ethiopia remains a low income country with a target of lower middle income 2025 and its industry share to GDP is the range of Uganda at 22%. However, Uganda has a higher share of manufacturing to GDP, primarily due to fact that Ethiopia was coming from a low base while Uganda’s share has merely increased by only 3 percentage points since 1990.

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The sector is currently characterized by low-value added products in agriculture processing and consumer goods. While industrialization is the most efficient path to development, countries that rely on primary products tend to have limited structural transformation.

In his book- Made in Africa, Dr. Arkebe Oqubay (a Minister and Special Advisor to the Prime Minister of Ethiopia) underlines that Industrial policymaking in Ethiopia is work in progress, but industrial policy can work and thrive in a low-income African country, and the state can and should play an activist developmental role, with policy independence an important ingredient.

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The UNECA Economic Report for Africa 2017 suggests that 1% increase in industry employment leads to a 0.8% reduction in poverty. In the same report, they underscore the need for regional and urbanization policies to factor in industrialization in planning and vice versa. As already underscored, Ethiopia offers a model (not absolute) to look at as Uganda aims to develop its 23 industrial parks. If politics work,economics works best and vice versa.

Dr. Enock Nyorekwa Twinoburyo (Economist).

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