Importance
1. Importance of Industrialization
Without industrialization, a country cannot transform from an agrarian system to an advanced economy. Industrialization is the process by which countries shift from primary production to economic activities characterized by manufacturing and industries. This change involves the widespread use of mechanized production processes and systems where primary goods are processed into intermediate or finished goods.
An industrializing economy undergoes many social and economic changes. The most obvious changes are economic ones. Modern machines largely replace manual labor, which boosts productivity. This introduction of machines creates efficiency and opens other areas of opportunity, thereby increasing employment rather than replacing it. Increased efficiency also enables large-scale production that is otherwise impossible with production methods in agrarian societies.
The Gambia has the potential to enter manufacturing by starting with agro-processing. This must be preceded by ensuring high productivity in our agricultural sector because abundant, consistent, and low-cost supply of agricultural produce are critical for commercially viable agro-processing. Just as other countries have successfully transformed their economies through agro-processing, this requires proactive but competent implementation of a forward-looking strategy. It requires understanding the limitations The Gambia faces, as well as the advantages it has. Among our major limitations when it comes to attracting investment is our small market, but this can be mitigated. The Gambian market, small as it is, can serve as a launchpad for businesses looking for regional expansion in West Africa. However, facilitating this requires a competent government being proactive in providing incentives to investors (local or foreign) to have the confidence to risk their capital in our market.
2. The Status Quo in The Gambia
The Gambia currently has no industrial sector to speak of. Our country remains almost exclusively a producer of primary commodities and an importer of processed goods. To transform our economy and grow, we need local manufacturing, starting with the processing of primary agricultural produce for local consumption and for exports.
A few activities that are erroneously considered manufacturing currently in The Gambia, such as tomato paste and cement, are actually just packaging. These products are manufactured in other countries and are then shipped to The Gambia to be repackaged into small units. This is not manufacturing or agro-processing.
The Gambia does have the potential to start agro-processing. The range of products from our agricultural sector provides ample opportunities for the country to start on the first rung of industrialization, which is agro-processing. The table below provides some examples.
Table 1: Examples of feasible agro-processing in The Gambia
|
Agricultural Produce |
Processed product |
|
Groundnut |
Vegetable cooking oil |
|
Tomato |
Tomato paste & ketchup |
|
citrus, mango, melon, papaya |
Juice |
|
mango, cashew, banana, plantain, papaya |
Dried fruits |
|
Milk |
Dairy products (butter, yoghurt) |
|
Maize, soybeans |
Animal feed |
These products are currently all imported into The Gambia. As a result, the country spends a significant amount of our limited foreign exchange on their importation, which adds to our high and persistent trade deficit. In addition, the persistent negative trade balance, coupled with low foreign direct investment, exerts continuous depreciation pressure on our currency.
Successfully putting the country on the path to industrialization by initially focusing on agro-processing can lead to significant economic benefits, including:
a. Food security: The first fundamental benefit of developing agro-processing is for food security. The Gambia currently imports virtually all processed food commodities. This inordinate reliance on imports of essential commodities creates vulnerabilities overall for the economy and more so for food security. As a small country that is over-reliant on imports, we are massively exposed to external shocks.
current state
b. Foreign exchange earnings and savings: Because we traditionally export little and have chronically run a trade deficit, our foreign exchange reserve has always been low. The number of months of imports that official reserves can cover has rarely exceeded four months. However, with agro-processing, our imports will be drastically reduced, which will relieve pressures on reserves by reducing hard currency outflows. Some of these processed products can be exported, which will generate foreign exchange. This will in turn put a stop to the persistent depreciation of the dalasi.
c. Reduction of risk for farmers: Agro-processing creates another channel of demand for our farm produce. Currently, our farmers face highly volatile prices due to the limited marketing window and restricted demand. Groundnut farmers are particularly vulnerable because they are forbidden to sell their groundnut, yet the government consistently fails in purchasing them. Virtually all farm produce in the country is sold unprocessed. However, the presence of industries that can process primary agricultural products will introduce another layer of demand. This will significantly reduce the marketing risk that farmers face each season, whether it is traditional cash crops or the horticultural vegetable production undertaken largely by women.
d. Employment generation: Due to the lack of processing and manufacturing, which are highly labor-intensive, job creation in the country is low. Youth unemployment is massive and remains well over 30%. Local industries, which are labor-intensive, can start generating sustainable jobs and create a bright future for our burgeoning youth population.
Intervention
3. Existing Government's Role
The current government is completely confused about what industrialization entails. Nowhere is this demonstrated more clearly than in its actions with regard to cement and tomato paste.
a. Wrong notion of what industrialization entails: The cement consumed in The Gambia is manufactured outside of the country and mostly imported in bulk through the seaport. Bagged cement is also imported from Senegal. The current government has the policy of favoring importers of bulk cement on the mistaken belief that they are protecting a local industry. This has been implemented through the application of punitive customs duties on the importation of bagged cement from Senegal that is mostly done by small-scale businesses to protect bulk cement importers. The justification provided by the government is that it is protecting local industry—i.e., the importers of bulk cement that engage in bagging locally.
Another example is the government's belief that a local company that engages in repackaging imported tomato paste is engaged in manufacturing. The reality is that the tomato paste is already manufactured outside of the country and imported in bulk containers only to be repackaged in smaller units.
b. No respect for industrial zoning: Another feature of the current government's stance with regard to this sector is the complete disregard for areas that were previously considered industrial zones. A case in point is the Kanifing Industrial Area. That part of the Kanifing Municipality has now been transformed into a chaotic shopping center where new manufacturers would have no chance of securing any location.
c. Wrong investment arrangement: One of the most prominent processing activities happening in The Gambia at the moment are fishmeal plants located near Gunjur. These firms unfortunately represent the wrong kind of industrialization. Their presence has affected the supply of fish availability in the country, leading to such incredibly high prices that food insecurity has significantly increased. Furthermore, these firms' waste products are massively polluting the environment in Kombo South. The relevant government officials have turned a blind eye to these negative effects because of the bribes they received.
4. PPA's Solutions to Industrialization
Industrialization holds major promise to transform our economy from its current moribund and agrarian structure into a more advanced state that can contribute positively to food security, create jobs, and reduce poverty. Toward these objectives, we will implement the following:
a. Raising agricultural productivity: For agro-processing to be viable, it requires the availability of agricultural produce on regular supply and at affordable prices. This in turn requires significant productivity increases in agriculture through efficiency gains. It is this increase in agricultural productivity that will increase supply and lower the price of agricultural produce, which are the intermediate goods for the agro-processing industry. The PPA-led government's strategy on addressing agricultural productivity is discussed in our position paper on the agricultural sector. We will undertake the required investment in irrigation infrastructure and address constraints to essential inputs so as to increase productivity across all sub-sectors of the agricultural sector. Furthermore, complementary actions such as land administration, input supply, and agricultural finance will be addressed.
b. Accessible and affordable energy: Access to affordable and reliable supply is absolutely essential for any industrial activity. This means that our industrial zones should have priority in connection to our electricity grid, and the supply must be reliable and affordable. The high cost of energy has been a major constraint to economic activity in many African countries, including The Gambia. The PPA-led government will be cognizant of the criticality of energy supply and affordability for industrial growth. The government's plan to address this is further expounded upon in our position paper on energy.
c. Improving investment climate: Having the right business climate is absolutely critical to attracting investors—whether local or foreign. This is particularly important for the industrial sector where businesses would need to make substantial investments, which are long-term and risky. The PPA-led government will make sure critical steps are put in place such as reforms of the financial services sector for better access to finance and infrastructure.
d. Industrial zones designation: Areas that have been designated as industrial areas are not being observed for that purpose. This means that there will increasingly be fewer places that will be available for companies engaged in industrial activities. The PPA-led government will ensure that not only are existing industrial zones respected but new ones are created in carefully chosen locations within the context of a much-improved land administration system.
e. Expanding market size: The Gambia is a small country with a small market. Depending solely on our domestic market will limit the growth of local industries. Fortunately for us, the country is a part of ECOWAS, which should allow us to leverage our membership in this regional economic community to ensure that any locally-based industry can access the larger regional market. Therefore, the PPA-led government will deepen our involvement and engagement with our ECOWAS neighbors so that locally-based firms have access to a large market and the opportunity to grow.
solutions
f. Creation of strategically chosen feasibility studies: To attract investors into priority industrial activity areas, the PPA-led government will be innovative in reducing market risk and be proactive in sharing investment opportunities with potential investors. Toward this goal, our government will undertake high-quality feasibility studies to demonstrate the commercial viability of investments in key strategic areas. The financing of these studies will be discussed with development partners where such funding opportunities are abundant and does not entail incurring any debt. These proactive activities make sure that the country actively seeks out quality investors and provides them with incentives that will benefit our strategic sectors.
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