URBANIZATION AND INDUSTRIALIZATION

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164 Box 5.1 GRANTING POLICY SUPPORT TO THE AUTOMOTIVE SECTOR ECONOMIC REPORT ON AFRICA 2017 Automobile consumption in Africa is associated with rising incomes and urbanization (box figure 5.1). With the sector’s potential to meet the growing demand of the urban middle class for vehicles domestically or regionally, policies can target the sector to foster industrialization and generate learning for later entry to global value chains. Box Figure 5.1 Urban and rural consumption of motor cars by GDP per capita, 2010 387.42 143.49 53.14 19.68 7.29 2.70 1.00 0.37 0.14 0.05 0.02 Urban consumption per capita Lineal (Urban consumption per capita) Mozambique Uganda Niger Sierra Leone DRC Liberia Gambia Madagascar Tanzania Liberia Madagascar Burkina Faso DRC DRC Kenya Lesotho Ghana Tanzania Mozambique Zambia Gambia Lesotho Niger Sierra Leone Uganda Cameroon Senegal Mauritius Cabo Verde Namibia South Africa Mauritius Morocco Gabon Congo Nigeria South Africa Namibia Swaziland Cameroon Gabon Zambia Morocco Cabo Verde Egypt Nigeria Ghana Kenya Senegal Swaziland Egypt Congo Rural consumption per capita Lineal (Rural consumption per capita) 0.01 200.00 540.00 1,458.00 3,936.60 10,628.82 Source: Global Consumption Database. Box 5.2 POLICY TO HARNESS THE POWER OF LARGE RETAILERS IN SOUTH AFRICA’S SUPPLY CHAIN DEVELOPMENT Massmart, a subsidiary of the giant US retailer Walmart, is the second-largest distributor of consumer goods in Africa and the leading retailer of general merchandise. Participation in supplier development was one of the government conditions upon which Walmart was allowed to enter South Africa. In 2012 Massmart established a R200 million Supplier Development Fund to assist South African small and medium-size enterprises, particularly SMEs that are either black owned or local manufacturers, and to run for five years (2012–2017). Investing in farming, manufacturing and service firms, the fund aims to improve the quality of products, assist local suppliers to expand production capacity, help suppliers to reduce input costs,
BOX 5.1 CONT. GRANTING POLICY SUPPORT TO THE AUTOMOTIVE SECTOR South Africa—the continent’s leading producer—illustrates the industry’s potential. Largely reflecting policies since 1995, it exported nearly 334,000 vehicles of all types and sold 284,000 domestically in 2015, alongside $3.9 billion-worth of component exports (Lamprecht, 2016). It has 150 component companies. Gauteng, though geographically the smallest province in South Africa, has the most automotive suppliers, mainly because it offers investors business opportunities, including well-developed infrastructure. The Gauteng Growth and Development Agency, the Automotive Industry Development Centre and the Automotive Supplier Park support the industry and are charged with promoting its trade and investment and with implementing projects. Gauteng province has created an enabling environment for the automobile industry to keep growing. These include its logistical and transport facilities (Gautrain and rapid transit system), physical and economic infrastructure, modern production-testing facilities, administrative government presence (City of Tshwane), research and development (Council for Scientific and Industrial Research) and a financial hub (City of Johannesburg). By 2012 Gauteng province accounted for 29.6 per cent of South Africa’s light vehicle exports by original equipment manufacturers as a share of total exports (Automotive Industry Export Council, 2013). An additional enabling factor is South Africa’s position as a major supplier of platinum and other group metals required by the automotive industry. The country meets 12 per cent of the global demand for catalytic converters and has 70 per cent of the world’s chromium used in catalysts and in producing modern auto exhausts (Automotive Industry Export Council, 2013). One of the challenges for the country’s automotive industry is to increase local content. The Industrial Policy Action Plan 2016/2017–2018/19 stipulates an increase in local content to 70 per cent or more for high-volume models and 40–50 per cent for low-volume models (Automotive Industry Export Council, 2016). Job creation has yet to become an important policy aspect. David Kaplan, former chief economist at South Africa’s Department of Trade and Industry, has remarked that “in practice, most of our industrial support favours capital-intensive activities—for example, two thirds of our industrial policy support goes to the automotive industry, which is not at all labour-intensive” (Altbeker, McKeown and Bernstein, 2012, p. 24). South Africa’s current Industrial Policy Action Plan (IPAP 2016/17–2018/19) emphasizes the need to shift towards manufacturing sectors such as agro-processing and clothing (Department of Trade and Industry, 2016). Industrial policies have also fostered a large and fast-expanding automotive industry in Morocco, including a Renault factory in the economic free zone municipality of Melloussa, near Tangiers, in 2012. The industry is now the country’s largest export sector, dethroning phosphates. Automobile production is also on the rise in Algeria. Egypt has 15 car assembly plants targeting the domestic market (Oxford Business Group, 2016). And Kenya and Ethiopia have emerging vehicle assembly sectors. BOX 5.2 CONT. POLICY TO HARNESS THE POWER OF LARGE RETAILERS IN SOUTH AFRICA’S SUPPLY CHAIN DEVELOPMENT enable Massmart to increase and diversify its local sourcing capacity, provide a route to market to locally produced products (locally and internationally), and establish and build long-term supplier partnerships. Sales of manufacturing SMEs to Massmart, mainly involved in food and beverages (packaged juice, biscuits, baked goods and maize meal) and building materials (paint, window and door frames, and clay and cement bricks) increased from R15 million in 2012 to R70 million in 2014 (Massmart Walmart, 2015). URBANIZATION AND INDUSTRIALIZATION IN PRACTICE 165
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URBANIZATION AND INDUSTRIALIZATION
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CCONTENTS LIST OF BOXES, FIGURES &
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chapter 5 URBANIZATION AND INDUSTRI
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CHAPTER 1 (CONT) Figure 1.11 Growth
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CHAPTER 4 BOXES Box 4.1 Drivers, en
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LIST OF ABBREVIATIONS USED AEO AfDB
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UN-Habitat UNICEF US USAID WDI WTO
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The lead consultant, Mr. Gulelat Ke
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FFOREWORD Urbanization is a mega-tr
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articulated. Yet, industrial target
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harnessing opportunities from rapid
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A diverse urban system can offer in
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Cities and urban agglomerations sho
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Figure 1.1 Economic growth in Afric
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In 2016, the generally weak world e
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Box 1.2 SOME POLICY RESPONSES OF AF
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year, driven by slower growth in Al
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associated with a decline in the va
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Figure 1.7 Productivity growth by A
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AFRICA’S CURRENT ACCOUNT DEFICIT
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lower global prices of oil and food
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about 4 and 5.5 percentage points,
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Box 1.3 THE CONTINENTAL FREE TRADE
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Figure 1.15 Gross domestic savings,
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are seeking to finance public inves
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Figure 1.19 Africa’s growth prosp
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Box 1.4 CHINA’S ENGAGEMENT IN AFR
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REFERENCES AfDB-OECD-UNDP 2016. Afr
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58 ECONOMIC REPORT ON AFRICA 2017 2
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72 Table 2.7 Change in gender gap i
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Page 119 and 120: Figure 4.1 The urbanization-industr
Page 121 and 122: 4.1 DRIVERS: URBAN DEMAND AND SHIFT
Page 123 and 124: FOOD VALUE CHAIN AND RURAL-URBAN LI
Page 125 and 126: But for the construction sector to
Page 127 and 128: The link between GDP and formal hou
Page 129 and 130: Figure 4.7 Employment in constructi
Page 131 and 132: More recent theories of industrial
Page 133 and 134: Table 4.3 Results of selected econo
Page 135 and 136: expensive interventions to support
Page 137 and 138: Figure 4.9 Top two ranked countries
Page 139 and 140: study 16 —makes the following con
Page 141 and 142: Table 4.4 Industrial sector charact
Page 143 and 144: Box 4.5 A PATH TO FORMALIZATION Suc
Page 145 and 146: Arusha, Tanzania Beira, Mozambique
Page 147 and 148: lengthening travel times and creati
Page 149 and 150: in South Asia (Yepes, Pierce and Fo
Page 151 and 152: ҋҋ Linking sector strategies, nat
Page 153 and 154: Agglomeration economies are powerfu
Page 155 and 156: Gutman, J., A. Sy and S. Chattopadh
Page 157 and 158: ENDNOTES 1 The link between urbaniz
Page 159 and 160: Still, policies that are well targe
Page 161 and 162: Figure 5.1 50,000 Four basic countr
Page 163: 5.2 USING URBAN DEMAND TO DRIVE IND
Page 167 and 168: uilding superstructures are often r
Page 169 and 170: Box 5.3 RWANDA’S TRADEABLE SERVIC
Page 171 and 172: the surrounding fertile agricultura
Page 173 and 174: Despite urban primacy, secondary ci
Page 175 and 176: REPUBLIC OF CONGO A functional urba
Page 177 and 178: 5.4 OVERCOMING BARRIERS TO AGGLOMER
Page 179 and 180: Box 5.5 COST-EFFECTIVE AND FAIR TEN
Page 181 and 182: Even non-BRT systems can improve tr
Page 183 and 184: in the economy as a whole, through
Page 185 and 186: 5.5 INTEGRATED POLICIES TO LINK URB
Page 187 and 188: To foster industrialization, polici
Page 189 and 190: evenue is only 15.6 per cent of its
Page 191 and 192: REFERENCES Ackah, C., C. Adjasi and
Page 193 and 194: NISR (National Institute of Statist
Page 202 and 203: 202 Table 6.1 Costs and benefits of
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Despite the recent slowdown of the
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