Machinery and equipment needed in manufacturing are products of the engi neering subsector. This subsector embodies most technologies in the machinery and equipment it makes and uses. It comprises elements such as engineering design and development, tool engineering and production, production engi neering, materials engineering, and maintenance engineering. Together these subsectors translate science and technological innovations and developments into new, more effcient and more economical machines, plants, and equip ment. The engineering industry has the capacity to design, adapt, and manu facture the components of new technical systems as well as repair, modify, and rehabilitate existing industrial plants and equipment. Therefore, the engineering industry, drawing from the basic metals and metal-working industries, consti tutes the central pillar of an industrial economy (Agbu 2007). Hence, indus trialization and technological development are not just a matter of importing more effcient equipment and installing it. It must be linked with fundamental development of scientifc knowledge and capital goods industry and the capa bility to adapt them fexibly into an evolving economy. This process must be internalized within the domestic economy for dynamic and fexible economic transformation to take place.
In view of foreign exchange constraints for importing machine tools, the need to achieve a level of self-reliance in this strategic subsector through the local manufacture of machine tools is a precondition for self-sustaining development, not only of the engineering industry, but also of industry in general and the rest of the economy. Capability in the manufacture and use of machine tools would also contribute to the repair and maintenance of machinery and equipment used in various socio-economic activities. Machinery and equipment are what absorbs most of African foreign exchange as virtually all of them are imported far from outside the continent. Given the necessity of capital and intermediate goods in all industrial activities, shortage of foreign exchange means a predominantly importing economy comes to a halt.
This was what happened to most African economies from the 1970s when the prices of petroleum and machin ery rose considerably beyond the prices of African exports. This led to the Inter national Monetary Fund’s (IMF) structural adjustment programs, the debt crises, and the two lost decades of African development of the 1980s and 1990s.
Establishment of the capital goods subsector would make technological adaptation and innovation in Africa fexible. New technological capital goods and spare parts would be more easily acquired through acquisition of the cur rencies of the capital-goods–producing African countries in the neighborhood.
Foreign trade cannot be relied upon permanently for self-sustaining devel opment or as an engine of growth and transformation. Foreign trade led to the establishment of the current structures of African economies. As foreign demand changes, the performances of African economies responded accord ingly. African economies boomed as foreign demand for African primary prod ucts rose during the colonial period; and in the early post-colonial periods of the 1960s and early 1970s. The post-Second World War boom, due to recon struction in the west and the boom of the 1960s, helped African economies boom temporarily. However, the prolonged diffculties in the world economy, from the 1970s, pushed the dependent African economies to the lost decades of the 1980s and 1990s.
Africa’s positive economic performance in the 2000s relied mainly on the demand for African oil and minerals from China, India, and other newly indus trializing economies. African economies withstood or recovered fast from the Great Recession of 2007–2009 because of the changes in the continent’s direc tion of trade to China and India. However, as China’s growth rate slowed, Afri can oil and mineral exporters began to experience economic diffculties. Africa must use the enormous export earnings it brings in during foreign demand booms to transform its economies so that when the foreign demand declines, the continent is able to sustain its economies largely through internal African demand. The huge potential African market must be developed through inte grated and transformed African economies.
The strategy of commodity-based industrialization of the United Nations Eco nomic Commission for Africa and the African Union Commission (UNECA and AUC 2013a) is a necessary prelude and ingredient of the capital goods industrialization strategy (UNECA 2013b). Commodity industrialization will boost the African market and skills, and contribute to African integra tion as it will promote intra-industry trade. It will also promote rural devel opment and expand the African market. Most of the intra-African trade is in manufactured goods rather than in raw agricultural products2 (Linder 1961).
The consumption of many raw agricultural products is more culturally specifc than that of manufactured products. Processed and manufactured agricultural exports will earn Africa more foreign exchange, which will help in capital goods industrialization. However, massive exportation of similar manufactured agricultural products to the world market may lead to worsening of African terms of trade as such massive increase in exports will food the world market and depress commodity export prices.
As Table 1.1 shows, the more industrialized African countries have more intra-African exports than imports. These include Cote d’Ivoire, Kenya, and South Africa. South Africa, being the most industrialized African country, exports manufactured goods to virtually all African countries. Cote d’Ivoire and Kenya are among the relatively more industrialized African countries. They export substantial manufactures mostly to their neighbors. Hence, intra-African trade should generally increase as manufacturing and transformation progress in African economies.
Nigeria’s higher exports and imports are explained by its export of petroleum to many African countries. South Africa’s large value of intra-African imports results mainly from its imports of petroleum, particularly from Angola and Nige ria. Ethiopia’s low value of intra-African trade can partly be explained by the classifcation of some of its major African markets, such as Djibouti and Soma lia, as Middle Eastern markets. The high level of Cote d’Ivoire’s intra-African imports refect manufactures from South Africa and other fairly industrial ized economies in West Africa such as Ghana and Senegal. Cote d’Ivoire also imports oil from Angola, Cameroon, Equatorial Guinea, Gabon, and Nigeria.