REMARKS BY THE GUEST SPEAKER H. E. BENJAMIN WILLIAM MKAPA, FORMER PRESIDENT OF THE UNITED REPUBLIC
OF TANZANIA AT THE ANNUAL GENERAL MEETING
OF MANUFACTURERS ASSOCIATION OF NIGERIA:
SEPTEMBER 14TH, 2017 IN LAGOS
Your Excellency Muhammadu Buhari, President of the Federal Republic of Nigeria,
Honourable Frank Udemba Jacobs, President of the Manufactures Association of Nigeria (MAN),
Your Excellency Akinwumi Ambode, Governor of Lagos State,
Honourable Ministers and Senators Present,
Members of the Diplomatic Corps,
Members of the Nigerian Manufacturers Association,
Distinguished Invited Guests,
Ladies and Gentlemen.
It is a privilege and an honour for me to join you in this august gathering of Nigerian business executives and to have this opportunity to address you as Guest Speaker.
I must begin by thanking you Mr. President for the invitation but also all members of the National Council who unanimously thought that my thoughts and opinion are worthwhile and may be of use to Nigeria’s manufacturing sector. I also thank you for the hospitality you have accorded to me and my delegation since my arrival here in Lagos.
While I thank the fraternity for giving me such an honour, I must however, express my surprise that you chose me from, I am sure the
long list of luminaries who would have been more eligible than me for such an honour. I am humbled therefore by your words in the invitation letter that you invited me to share my experience as a leader of my country and steps I took to revive my country’s economy in our collective endeavour as Africans to extricate ourselves from endemic retrogression of the manufacturing sector. I thank you for the appreciation of the work I did to my country as President.
You will appreciate my bewilderment when you attempt to compare the size of GDPs of our two sister countries, the number and sizes of manufacturing industries present in our countries and the size of our countries’ domestic markets in terms of the population size which is vital for the growth of industries. According to Tradingeconomics.com, Nigeria’s GDP was estimated at $ 405 Billion in 2016 representing 0.65% of the world economy and is almost a quarter of Africa’s total GDP. In startling contrast, Tanzania’s GDP in the same year was 47.43 billion US dollars, a paltry 0.08 per cent of the world economy!! The two economies can barely sustain comparison!!
I overcame my surprise when I realised that the structure of your economy is typical of the developing countries, with a significant proportion of its GDP accounted for by the primary sector, with agriculture leading the way and the industrial sector ―comprising of manufacturing, mining and utilities―contributing a modest fraction of less than 5%. With such strikingly similar structures, I found more commonalities than differences when it comes to the assessment of the problems afflicting African countries’ manufacturing sector.
As a start, it is important for Nigeria to pause for reflection and assess its own economic history and profile so as to determine its impact on its manufacturing sector growth or decline so far. As Socrates once aptly said, “An unexamined life is not worth living”. And as the Yoruba saying goes, “ A lame man said the load on his head was not properly balanced, and was told its unevenness began from the ground”.
My approach to this address is more broad, general and pan-Africanist than parochial and nationalistic. But I fully acknowledge an important truism, namely that Nigeria remains an extremely important economy and has a major role to play in the continent’s crusade for economic liberation, which in my opinion can best and easily be achieved through strategic industrialisation, with emphasis in the manufacturing sectors that will help us to increase our share in the global trade.
Distinguished invited Guests,
Ladies and Gentlemen,
The subject “Revitalising Nigeria’s Manufacturing Sector”, is both topical and relevant for the era we find ourselves in, especially in the face of teething globalisation, increasing global uncertainties and fierce agitation for control of Africa’s abundant resource reserves.
Generally speaking, the future of manufacturing industry not only in Nigeria, but in Africa as a whole, is not that rosy as it is very uncertain. The onset of emerging technologies such as mobile connectivity, artificial intelligence, next-generation robotics, and 3D printing, supply chains, etcetera has victimised, so to speak, the manufacturing sector. We are in an epoch that other commentators have termed as the “Fourth Industrial Revolution”. This revolution entails new forms of collaboration that drive innovative value chains and business models that are condemning the traditional industrial patterns to oblivion.
That global trend notwithstanding, we will be making a grave mistake if we look at the development of industries in the world and think that we ought to follow a similar path to that industrial economies have followed, and ignore areas where we have comparative advantage. The structure of our economies portrays one undeniable fact, namely that the entry point to Africa’s industrialisation dreams is ONLY through the primary sector using the resources that we have in abundance. We have the possibility of leap-frogging the developed world by designing industrial policies that do not replicate their mistakes but also hasten our industrialisation process. The only safeguard is that we should be careful and inquisitive enough to draw lessons from history and thence recalibrate our industrial development strategies basing on our domestic realities and global trends. There are a number of factors that necessitate this strategic reorientation:
Firstly; the resource base which others have used in the past to build their industrial base has changed. Colonialism was used to ensure reliable supply of resources for industries in the West to flourish. It is not only counter-productive but also impossible to aspire to mould any industrial growth strategy based on similar overt, dependent and exploitative arrangements.
Secondly, the geopolitical environment is vastly different from the past and demands us to relentlessly be on guard against machinations and overtures that mean more harm to us than good. EPAs are the classic cases and which I will address later;
Thirdly, globalization has made it almost impossible to think of viable national industrial development strategies without putting into account global collaborations into the equation, and hence, the advent of the concept of global value chains in concert with national value chains.
Ladies and Gentlemen,
Looking at the manufacturing sector in Nigeria, I have learnt that it is driven by increased investment inflows, stock market capitalisation of companies, technology adaptations, though not to a satisfactory level, and accumulation of skilled industrial human resource over years of practice and training. The same sector faces debilitating constraints some of which the President of the Association has alluded to very eloquently. The problem of unreliable power supply and high cost of power, high cost of borrowing, increasing competition from often cheap and low-quality imports from Asian countries; and inability to fully adapt to modern technologies are not problems limited to Nigeria alone,, but almost all African countries. Potentials for the growth of the Nigerian Manufacturing sector is there for you; what is needed is effectively to make use of the opportunity to tap into the large domestic market with an ever increasing middle class with higher disposable income. These, to begin with, are dominant issues that I argue should engage our minds if the strategy for revitalizing the Manufacturing sector in this country is to succeed.
My Experience in Tanzania as a Leader
Members of the Manufacturing Association of Nigeria
Distinguished Invited Guests,
Ladies and Gentlemen
My experience in leading my country Tanzania is laden with memories of many initiatives taken to tackle similar and persistent challenges that you are facing, of course with varying results. Even though we are products of different political history, in the context of the OAU and the AU, our paths have converged and we are facing very similar macroeconomic challenges. I therefore believe my experience may be practically eye-opening.
After our independence, our founding Father, President Mwalimu Julius Nyerere chose the socialist path culminating in the nationalization of substantial industrial enterprises and of all major means of production and exchange, effectively creating a command economy with the Arusha Declaration in 1977.
Large financial, economic and industrial enterprises were nationalized which in turn deterred new local and external investments. This process reached the level where butcheries were owned by local government authorities!! Development projects were under-written by corruption. I must hasten to add that this policy was not wholly bad; indeed it may have enabled the evolution of a national consciousness and a sense of ownership which defines Tanzania today. But it stunted economic growth.
When Mwalimu retired and Mzee Mwinyi, my predecessor took over, the demands of the time necessitated opening up of the economy as a condition by the Bretton-Wood institutions who prescribed the famous Structural Adjustment Program (SAP). President Mwinyi embarked on that enterprise up to a certain level. The nation and the economy began opening up.
When I came to Office in 1995, I inherited a country that was at its very initial stages of transformation with a very small, fragile and nascent private sector. There was a plethora of inefficient and loss making parastatals most of which survived almost entirely on subsidies from the Government. On top of that, revenue collections were at the lowest, tax evasion was high denying the-much-wanted revenues to the government to drive any meaningful socio-economic inroads.
In addition to re-orientation of the mindset of party and government cadres, I faced three critical obstacles to reform. Firstly successful implementation of government policy requires a contented Civil Service. In my case the civil service sought security of remuneration from the small private sector. With the help of friendly bilateral cooperation countries I was able to reverse this trend.
Secondly I addressed the problem of absence of consultations with the private sector and prospective investors, both internal and external. I instituted regular meetings with Associations of Commerce, Industry and Agriculture along with professional associations. I thus was able to reduce the undercurrent of hostility and aversion between government and these critical movers and shakers of the economy. The best example of the readiness to establish common ground with compatible interest occurred when I decided to open up the mining sector. We held a three day national conference to work out the elements of a mining policy; it brought together political party leaders, parliamentarians, civil society leaders, religious leaders, academics and mining groups from abroad. This encounter enabled a consensus for legislation which has opened up the mining sector.
Thirdly, I had to repair the fragile relations that existed between government and bilateral aid givers on the one hand, and international financial institutions, led by the IMF and the World Bank on the other. I was able to achieve this by demonstrating firmness in the commitment to Reform and Transformation, while at the same time asserting ownership of policy, strategy and implementation. No one would dictate to Government or Parliament.
After very careful consideration within the ruling Party CCM and the Government, both of which institutions I led, I embarked on the privatisation of the loss making parastatals. In undertaking that exercise, I was guided by the deep conviction that we can only make meaningful macroeconomic strides if the private sector is made key to whatever industrial policy we are envisaging. My intention then was to widen the private sector and create an environment that will spur its growth and enable it to be robust enough as an engine of growth of the country’s economy. I am fully aware of the robustness of Nigeria’s private sector that has seen the emergence of the likes of Aliko Dangote, Mike Adenuga, Tony Elumelu, among many others. I salute them for their entrepreneurial spirit, but more importantly for the fame and respect they have earned for Nigeria and mother Africa. I am retracing this history in my attempt to inform you that despite different paths that we have passed since our independence, the challenges that our manufacturing sectors are facing today remain very similar and demand a Pan-African approach.
I went on instituting a number of measures geared at boosting revenue collection, stamping out bureaucracy and red tape as well as corruption so as to better the country’s investment climate and attract foreign direct investments. However, I must admit one of the mistakes I made was not to establish a mechanism to monitor the performance of the privatised enterprises to an extent that most of them are either in abeyance or in disarray as a result of mismanagement, lack of business acumen, and so on. Therefore in terms of industrial development story, we remain with a very fragile and insignificant manufacturing sector. Our balance of trade remained in the negative territory and it has remained there to date. We continued to romanticise exportation of primary products and shun value addition just as we were during colonial times. My current President H. E. John Pombe Magufuli is embarked on a fierce industrialisation drive as his motto; strides are yet to be recorded as he is in very early years of his Presidency.
I am happy that in Nigeria, the macroeconomic indicators of your economy are improving. Your Industrial Revolution Plan (NIRP) is positively poised to help manufacturing revenues. The plan, as I have Page 10 of 19
learnt, will add a further $25 billion to the manufacturing revenues in the next three years. Other measures as enumerated in your President’s speech are heartening as they seek to address the very problems that have crippled the sector over many years. Despite security challenges in some places, I am optimistic that with these compelling growth stories, demographic advantages that you have in terms of your population size and political stability, the future remains promising but only if you put your act together domestically and remain on the lookout internationally. We must be guided by the Fulani saying: What cleverness hides, cleverness will reveal.
Distinguished Invited Guests,
Ladies and Gentlemen,
Permit me to express my carefully considered proposals on the way forward. In this regard, I wish to highlight the need for the following growth pillars as catalysts for accelerated growth of the Manufacturing sector:
• • Encourage Youth and Women Entrepreneurship;
• • Continuous improvement of Business Environment;
• • Adaptation of Technology; and
• • Adopting Effective trade policies.
Encouraging Youth and Women Entrepreneurship
We all in Africa bear witness to your world acclaimed entrepreneurial spirit that has seen a number of Nigeria’s businessmen emerge as global business icons. It is imperative that the Federal Government, State Governments and private entities like yours develop in harmony policies and incentives that seek to encourage many more Nigerian youth and women to venture into business rather than leaving it to individual entrepreneurial acumen. Support systems such as Venture Capital Funds, Business Advisory Centres, Shared Office Space, Supply Quota for Women and Youth Manufacturers, and provision of patient capital, among others will go a long way to revive the spirit of entrepreneurship which is already existent in Nigeria. Special attention must be given to Business Management training, branding, product development, marketing and communication as vital aspects to business success during crafting and implementation of such policies.
Improving the Business Environment
This is one area in Africa where tremendous improvements are badly needed and it is one area that has preoccupied me a great deal since my retirement in 2005. In 2004 British Prime Minister Tony Blair brought together 17 people, the majority of them Africans to form a Commission for Africa with the objective of defining the challenges facing Africa and to provide clear recommendations on how to support the changes needed to reduce poverty. I was one of the Commissioners. In our report titled “Our Common Interest”, we recognised the imperative to establish a Fund to assist the transformation plans of African countries to this end. Until recently, I have been a Co-Chair of the Invest Climate Facility for Africa (ICF), a development organization established in 2007 with a sole mandate of boosting Africa’s economic growth by removing barriers to doing business in the continent. Our modus operandi was to collaborate with Government and businesses to identify and improve priority areas that drive investment climate critical for job creation, income growth and poverty reduction across the continent. In the 9 years life span, ICF had tremendous impact on African development. It is ironic that, despite the remarkable strides, it has had to wind up due to funding challenges as we were dependent significantly on foreign donors.
From my experience in chairing the ICF, I have come to realise the imperative of the private sector and all levels of the government (Federal, State and Local) to work in concert to continuously improve the business climate. In this endeavour MAN should take the lead advocacy role in pushing for business climate improvement reforms to make them competitive for the domestic and export markets. The government needs to deal with issues of bureaucracy and red tape, endemic corruption, reform of business registration procedures. In 9 years of activities, the ICF has had a tremendous impact on African development, with quick interventions, clear targets and tangible results, making it easier to do business in Africa. It worked with 21 partner governments, impacting 36 countries in 73 projects. These projects involved creating commercial courts, launching single window for trade, reducing the time and costs obtaining construction permits, facilitating business registration and reducing informality, improving the management of land administration and introduction of online tax systems to reduce the time and cost of fulfilling tax obligations.
Reform of commercial courts must be looked at so as to enable courts to play the role effectively in adjudicating commercial disputes. As part of our mandate in ICF, we have worked with tremendous success in promoting business arbitration and mediation in Ivory Coast, establishment and operation of Fast Track Commercial Courts in Sierra Leone, Rwanda and Mauritius, Operationalization of the Court of Arbitration in Togo and similar projects in Zambia and Tanzania. I therefore have a full appreciation of how efficient dispute settlement mechanisms can improve the overall business environment with tremendous impact on the overall efficiency of the manufacturing sector.
Ladies and Gentleman
I know of the electric power supply and distribution problems in Nigeria. Power or energy, so to speak, lies at the centre of economic activities and is an indispensable force driving all economic activities. It is therefore counter-intuitive to think of a genuine revitalisation strategy for the Nigerian Manufacturing sector without fixing the appalling state of the epileptic power sector. Nigeria’s power woes urgently call for additional investments based on efficiency and optimisation strategies. Efficient power supply and distribution is the sine qua non for any meaningful strategy you may envision on the revitalisation of the manufacturing sector.
Adaptation of Technology
Mr. President, I will not be doing justice to my talk if I do not address the crucial role of technology in the development equation of the manufacturing industries. A seasoned economist once argued that “Development gap is indeed a technology gap”, and I can’t agree more. The ability to create, acquire and adapt new technologies is a critical requirement for competing successfully in the global marketplace and is very lacking in Africa. It is also a well-documented fact that the African continent has not kept pace with technological advancement and Nigeria is no exception. Africa's technological gap accounts for its increasing economic deterioration because other developing regions are constantly upgrading their own technological capabilities, and the global marketplace has become increasingly liberalized and competitive.
The Private sector in Nigeria, of course in collaboration with the Government at all levels, need to examine the “technology system” obtaining currently in the country to determine how best it is suited to facilitate transfer of technology, as well as enhancement of absorption capacity and its use, especially in the manufacturing industry. Nigeria needs to invest more share of its GDP in Research and Development (R & D) as well as in the acquisition of quality technology to drive the manufacturing (Industrialization) processes. Nigeria as the largest populated country in the whole of Africa can leverage technology to make quantum leaps in production of goods for the ECOWAS region and beyond. It will take a commitment from both the Federal Government and the private sector to find the right technological solutions to the many challenges the country is confronted with. I would suggest that Nigeria looks more to China to tap into their vast knowledge in the development and application of advanced but affordable technology for the production boom. Nigerian businesses should aggressively pursue partnership with Chinese businesses that are willing to invest and provide technology transfer agreements. Over time, Nigeria through the pivotal role of MAN can become the next global production hub after china, Thailand and Vietnam.
Effective Trade Policies
Distinguished Invited Guests,
Ladies and Gentlemen,
This is another area that I think we ought to tread very carefully if we are really serious about our industrialisation drive. Effective trade policies would encourage local manufacturing companies to build better products to compete not only in the regional but also international markets. While our aspiration to pursue development through trade without aid is as ideal as ambitious to any responsible government, the present global paradigm is unfavourably structured for Africa and whether by design or by default, it serves to ensure that we don’t achieve those aspirations and we remain perpetually dependent. Let us seek reprieve from the wisdom of our Yoruba ancestors. “He who disappoints another is unworthy to be trusted”!
At this juncture, I want to thank you immensely for your correct standing on EPA. Your President calmed my nerves in his speech when he confirmed that the position has not changed. Some of my European friends are not very happy with me when I characterise EPAs as the modern day equivalent of the Berlin Conference Treaty. While the Berlin Conference of 1884 to 1885 balkanized Africa among 13 European powers as a guaranteed source of raw materials and market, how are the EPAs different from that? In reality, Africa negotiated these EPAs under unprecedented economic duress and coercion. In the process African governments were arm-twisted into glossing over some very pertinent aspects of the agreement essentially for EU’s economic expediency.
The common element at both Berlin and Brussels is that Africa is not allowed latitude to conduct trade, industrial and development policies for her own development but for the development of Europe. I am aware that most of African Trade Ministers have privately and tacitly rejected the EPAs, but in fact they have acquiesced. In private whisperings, not many Africans or policymakers are happy with the deal, but there is a certain sense of helplessness. the European Union (EU) has been negotiating the EPAs with the Africa Caribbean and Pacific (ACP) countries a fully reciprocal trade arrangement between EU and ACP to replace the previous non-reciprocal, preferential trade access of ACP countries to EU. While the exploitation and looting of Africa’s enormous natural resources during the colonial and immediate post colonial times is histrory, we cannot simply take it as a misfortune borne patiently as though it had not been. We must be driven by the plea of the Hausa proverb: It is to stand up that one changes from sitting!!
Distinguished invited Guests,
Ladies and Gentlemen,
While in the region where I am coming from, some of us are considered as lone crusaders against the EPAs, what gives me twinges of disquiet is the effects these agreements will have to our ambition to industrialise, economically integrate, and develop sustainably. We were told that in order to continue to have access to European markets, Africa is required to eliminate tariffs on over 80% of imports from the EU. In some cases, they will have to abolish all export duties and taxes; in others, countries can retain existing export taxes but not increase them or introduce new taxes. They will be called upon to eliminate all quantitative restrictions and meet all kinds of other intrusive and destructive conditionalities that literally tie the hands of African governments from deploying the same kinds of instruments that all countries that have industrialised applied to build competitive national economies.
To me this is an invitation to commit economic suicide and you have made the right call to reject the EPAs. The key principle underlying them is the market access based on reciprocity.
There are a range of effects that EPAs will have on your and my economy. Let me just mention three:
First; EPAs will put your regional trade and integration at risk. You will find that most of the products that you are producing locally are in fact traded regionally in ECOWAS. If you acquiesce to the EPA and its corollary liberalization, EU competitiveness will certainly jeopardise you regional trade. EU products are likely to flood your market and displace domestic and regional production.
Second; EPAs also oblige your governments to undertake significant reforms and design and create new policies which will have significant costs attached, including adjustment costs and revenue loss as a consequence of tariff elimination. In our region, the EU has vehemently refused to include a Development Matrix in EPA. Instead, the burden of assembling Development Capital is left to the recycled, unreliable, and cumbersome European Development Fund (EDF), and the Aid for Trade (AfT) Programme.
Third; the elimination of tariffs will also have an adverse impact on state revenues. In the case of my country Tanzania, for example, a modest estimate on current trade figures is that tariff losses could be up to 62 million US dollars a year. As for export taxes, against the strident objections by many African countries, the EU continues to insist on their being eliminated. I find it logical to view this insistence in tandem with the EU’s Raw Material Initiative launched in 2008. This initiative states unequivocally that “access to primary and secondary raw materials is a priority in EU Trade and regulatory policy.” Yet it is a known fact that export tax is a sine qua non of the promotion of higher value added activities and the beginnings of industrialization.
I have spoken at length on EPA because I am very passionate about this subject, but also very disheartened by the helplessness and hopelessness we as Africans, have been demonstrating during the negotiations despite the very vivid and apparent effects that they may have to our development aspirations. I am pleased with your position. In our region, even my country has retreated and is currently undertaking a detailed study of the agreement in order to make an informed decision. In reviving your manufacturing sector. I only have one final exhortation: STAY AWAY FROM EPA; the agreement is antithetical to the industrialization aspirations that you have. The Igbo people have an age-old saying: “Taking thought is strength” Take thought.
Distinguished Invited Guest,
Ladies and Gentlemen,
In conclusion, I want to thank you again for the hospitality you have accorded me since my arrival and for the invitation to join you in this very important meeting. I know Nigerians have the “Can Do” spirit of enterprise. Your domestic market is large enough to enable your local industry to achieve economies of scale. If you add the ECOWAS market in the equation, the trade opportunities are even more lucrative to attract both domestic and foreign direct investments which are critical to long term balanced development. Intra-regional and intra-Africa trade should be the way to go before we as Africans can venture head on into the global trade.
I know you can do it and I believe you can do it.
Thank you for your kind attention