The Politics of African Industrial Policy Despite rapid growth in many African countries, there has been very little economic transformation, which is the key driver behind increasing incomes and raising the standard of living. Economic transformation is the cumulative outcome of successful industrial policies. African gov- ernments generally have been less successful in implementing industrial policies, historically and during the contemporary period, compared to other developing country regions. This book sets out to understand why. Drawing on theories within the comparative political economy of development literature, it creates the Politics of Industrial Policy framework for understanding the conditions under which industrial policies are successfully implemented and identifying the politics that make those conditions possible. The framework is applied to explain the design, implementation, and outcomes of industrial policies in four African countries: Ghana, Mozambique, Tanzania, and Uganda. This book explains the generally limited success with implementing indus- trial policies in these countries, but also variations in success across the four countries and across sectors within the same country. Lindsay Whitfield is Associate Professor in the Department of Society and Globalisation at Roskilde University, Denmark. Ole Therkildsen is Senior Researcher Emeritus at the Danish Institute for International Studies, Copenhagen, Denmark. Lars Buur is Associate Professor in the Department of Society and Globalisation at Roskilde University, Denmark, and Affiliated Senior Researcher at the Danish Institute for International Studies, Copenhagen, Denmark. Anne Mette Kjær is Associate Professor in the Department of Political Science, Aarhus University, Denmark. The Politics of African Industrial Policy A Comparative Perspective LINDSAY WHITFIELD Roskilde University, Denmark OLE THERKILDSEN Danish Institute for International Studies, Copenhagen LARS BUUR Roskilde University, Denmark ANNE METTE KJÆR Aarhus University, Denmark 32 Avenue of the Americas, New York, NY 10013-2473, USA Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107105317 © Lindsay Whitfield, Ole Therkildsen, Lars Buur, and Anne Mette Kjær 2015 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2015 Printed in the United States of America A catalog record for this publication is available from the British Library. Library of Congress Cataloging in Publication Data Whitfield, Lindsay, 1978– author. The politics of African industrial policy : a comparative perspective / Lindsay Whitfield, Roskilde University, Denmark; Ole Therkildsen, Danish Institute for International Studies, Copenhagen; Lars Buur, Roskilde University, Denmark; Anne Mette Kjær, Aarhus University, Denmark. pages cm Includes bibliographical references and index. ISBN 978-1-107-10531-7 (hardback) 1. Industrial policy – Africa. 2. Business enterprises – Africa. 3. Africa – Economic policy. I. Therkildsen, Ole. II. Buur, Lars. III. Kjær, Anne Mette. IV. Title. HD3616.A35W45 2015 338.96–dc23 2015003110 ISBN 978-1-107-10531-7 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate. Contents List of Figures and Tables page vii Acknowledgments ix 1 The Puzzle of Limited Economic Transformation in Africa 1 The Debate on Economic Transformation and Industrial Policy 3 The Debate on the Politics of Industrial Policy 6 Conceptualizing Capitalist Economic Transformation 14 The Politics of Industrial Policy Framework 17 Applying the Framework to African Experiences 25 Methods and Sources 30 Structure of This Book 32 Part I Rethinking the Political Economy of Development 2 The Case for Economic Transformation and Industrial Policy 37 Summary of the Argument 38 Interdependence between Agriculture and Industrialization 41 Manufacturing, Increasing Returns, and Imperfect Competition 45 The Imperative of Industrialization 48 The Role of Industrial Policy 51 Challenges and Opportunities for ‘Catching Up’ in the Twenty-First Century 55 Conclusions: Implications for African Countries 58 3 Assessing Economic Transformation in Africa 60 Trends in Economic Transformation: The Aggregate African Picture 62 Emerging Country Experiences: Ghana, Mozambique, Tanzania, and Uganda 67 Economic Transformation and Structural Adjustment 82 Conclusions 85 v vi Contents 4 Elaborated Political Settlements Theory and Clientelism in Africa 87 Drivers of Clientelism in Developing Countries 88 Clientelist Political Settlements and African Experiences 90 Clientelist Political Settlements and the Conditions for Successful Industrial Policy 95 Conclusions 111 Part II Evolution of Political Settlements 5 Increased Vulnerability and Contestation in Mozambique and Tanzania 115 Evolution of the Political Settlement in Mozambique 116 Evolution of the Political Settlement in Tanzania 129 6 Dispersed Power and Elite Fragmentation in Ghana and Uganda 142 Evolution of the Political Settlement in Ghana 146 Evolution of the Political Settlement in Uganda 161 Part III African Experiences with Industrial Policy 7 Mozambique: Between Elite Capture and Pockets of Efficiency 179 Sugar Sector: Rehabilitating a Traditional Agro-Processing Sector 181 Fisheries Sector: Failed Attempt to Create a National Fish Processing Industry 193 Conclusions 205 8 Tanzania: Intense Contestation within a Weak Dominant Party 208 Rice Sector: Smallholder Food Crop Production 210 Manufactured Exports and Export Processing Zones 220 Conclusions 231 9 Ghana: Competitive Clientelism and Weak Capitalists 233 Cocoa Export Sector: Rehabilitating a Traditional Export 236 Palm Oil Sector: Modernizing a Traditional Agro-Processing Sector 247 Conclusions 260 10 Uganda: Competing Factions and Conflicting Elite Interests 263 Fisheries Sector: Rise and Decline of a Nontraditional Export 265 Dairy Sector: Modernizing a Traditional Agro-Processing Sector 274 Conclusions 284 11 Conclusions and Perspectives 287 Theoretical Contribution 289 African Industrial Policy in Historical Perspective 291 The Politics of African Industrial Policy: Findings from the Case Studies 294 Potential Drivers of Change 296 References 309 Index 337 Figures and Tables Figures 1.1 Model of the Conditions for Successful Industrial Policy page 18 1.2 Model of the Elaborated Political Settlements Theory 24 4.1 Causal Mechanisms Explaining the Conditions for Successful Industrial Policy 104 7.1 Sugar Production, National Sale, and Exports in Mozambique (in Tons), 1996–2011 185 10.1 Exports of Processed Fish Products from Uganda (in Million USD) 266 10.2 Milk Production in Uganda, 1991–2010 275 Tables 3.1 Export Diversification in Ghana, Mozambique, Tanzania, and Uganda, 2009 66 6.1 Ruling Coalitions in Ghana and Uganda, Independence to the 2000s 143 6.2 Margin of Victory between the NDC and NPP Presidential Candidates, 1992–2012 156 7.1 Mozambique Country Study: Summary of Industrial Policy Case Studies 206 8.1 Supply and Demand for Rice (1,000 Tons), 2001 and 2007 211 8.2 Value of Exports of Goods and Services, 1961–2010 (in Million USD) 221 8.3 Tanzania Country Study: Summary of Industrial Policy Case Studies 232 vii viii Figures and Tables 9.1 Ghana Country Study: Summary of Industrial Policy Case Studies 261 10.1 Ugandan Dairy Development Authority Regulatory Initiatives, 2000s 277 10.2 Uganda Country Study: Summary of Industrial Policy Case Studies 285