Reviving Manufacturing in the US: What it means for Emerging Markets
Introduction: Achieving Inclusive Growth
Thank you for that introduction.
And thank you to the American Chamber of Commerce for hosting this event.
It is a pleasure to be in South Africa – and not just because this is one of the most beautiful countries in the world.
I am glad to be here because Africa is one of the most exciting places in the world to do business.
And this – I think you will agree – is an exciting time to do business in Africa.
We meet at a pivotal moment for Africa’s future.
As you know, leaders from across the continent gathered two weeks ago, in Durban, for the World Economic Forum on Africa. The theme of this year’s conference was “Achieving Inclusive Growth.”
It is a topic that has been on many people’s minds recently – one that I think about quite a bit. And it is one of the greatest challenges that Africa is facing today.
That is because the story of Africa in the 21st century – so far – has two diverging plots.
One the one hand, there has been great economic progress. Since 2000, sub-Saharan Africa has been among the world’s fastest growing regions – with annual GDP growth averaging close to 5 percent. Currently, Africa is home to 12 of the world’s 20 fastest-growing economies.
As private-sector activity has accelerated, net inflows of Foreign Direct Investment have hit record highs – making Africa the second-most popular FDI destination in the world behind the Asia-Pacific.
And as regional economies have expanded, it has led to a better overall quality of life. The share of Africans living in poverty has fallen, with millions of people reaching the middle class for the first time. Access to clean water and electricity has improved. Child mortality and the spread of communicable disease have declined.
But at the same time, there is no question that these gains have not been shared equally across Africa.
Economic inequality remains deep and persistent. In fact, Africa is home to four of the five most unequal countries in the world – including South Africa, which tops the list.
Even as many countries have experienced dramatic growth, youth unemployment in sub-Saharan Africa has remained stubbornly high – ticking up to nearly 13 percent in 2016.
Meanwhile, we have been reminded that Africa’s continued progress is not inevitable.
In 2016, overall economic growth in sub-Saharan Africa fell to its lowest level in more than 20 years – 1.5 percent – dragged down, in part, by declining commodity prices. Some countries experienced a contraction – including Africa’s largest economy, Nigeria.
And while the region is expected to see a modest rebound in 2017, the economic picture today is one of multi-speed growth – with non-resource-intensive countries continuing to perform well, as commodity producers remain under economic strain.
Now, in some ways, Africa is unlike any other place in the world.
As the next – and some say “last” – frontier, its history and its challenges are unique… and its potential is unmatched. And of course, every country on the continent has its own set of political and economic issues to contend with.
But Africa is not alone in confronting this question of how to achieve inclusive growth. As the global economy continues to evolve – and to accelerate – it has rapidly become one of the defining issues of our time.
Today, world leaders are grappling with how to ensure the pieces of the economic pie are well-distributed as we navigate a period of seismic change… driven, increasingly, by three broad trends:
- Digitalization is reshaping the ways we live and work… unleashing creativity and boosting productivity.
- Globalization is redefining the international order… enabling incredible growth and prosperity… but also fueling discontent amongst those left behind.
- And sustainability looms ever larger as an imperative – and an opportunity – as companies and countries race to meet rising demand for clean water, affordable housing, and renewable food and energy… all essential to life on our fragile planet.
Different countries are, of course, grappling with these challenges in different ways. But they are taking various paths toward the same destination: toward more inclusive economies rooted in multi-stakeholder involvement… toward sustainable growth that benefits everyone in the ecosystem.
For example, in China – Africa’s largest trading partner – a new reform agenda shows that China’s leaders are not taking growth for granted. Rather, they are working strenuously to support the country’s growing middle class – prioritizing urbanization, energy efficiency, environmental protection, and private consumption. Their recently announced thirteenth Five Year Plan has, as its features, the “One Belt, One Road” initiative as a pathway towards globalization, and the “Blue Skies, Green Mountains, Clean Waters” initiative that embraces sustainability and environmental reform.
Or consider Saudi Arabia. The government there has begun to invest in re-skilling its workforce, while investing more of its natural resources in value-added industries that provide a foundation for future growth. They are doing this to reduce their society’s dependency on one commodity – oil – and to employ their youth in diverse, technology-driven sectors, all under their young prince’s Vision 2030 Initiative.
And then, of course, there is the United States – where I have been privileged to work with the government on policy issues that we believe will lead to a manufacturing renaissance. I know some of you are very interested in what is happening in the U.S, so let me explain it from my perspective.
What I see is a growing consensus that we must collaborate at the intersections of business, government, and civil society to ensure that the economic pie is both larger and better distributed. This means developing smarter policies and supply chains that will create a sense of fairness… that will level the playing field … and that will contribute to a growth economy that truly drives prosperity for all.
To that end, I have been working hard with the new administration in Washington to shape pro-growth, pro-business policies that move the U.S. from an economy focused on consumption to an economy focused on investment and job creation for the new age: not yesterday’s era, but today’s. Not to rekindle American manufacturing at the expense of some other country… but to boost U.S. and global manufacturing – ensuring that it is no longer a zero-sum game.
Again, I describe this to you because I know the U.S. is of interest here, but also because the work we are doing there might help inform policy decisions being made here in Africa and in other parts of the world.
The U.S manufacturing agenda rests on four pillars of competitiveness:
First, on retraining – reskilling – America’s workforce for the 21st century. This means apprenticeship programs. This means national skills certification. At a time when many businesses are starved for properly trained employees – and workers are hurting as old economy jobs have disappeared – this is one of our most important workstreams.
Second, we are streamlining regulations in the U.S. We can keep people and the environment safe while, at the same time, making it easier for businesses to grow. To achieve that, regulations need to be simple, science-based, and harmonized as much as possible across borders. When they are not, the burdens on industry can be overpowering.
Third, the U.S. has pledged to reinvest in infrastructure. We know how easy it is for businesses to choose another country in which to set up shop. So they are not going to invest in places where airports cannot meet capacity and roads are crumbling. To compete, America has to rebuild. And we are pushing Washington to act, at long last, on that priority.
Finally, American lawmakers are working hard to reform tax policy in order to encourage more investment. To operate in the United States, businesses have long had to pay high taxes – and navigate an unnecessarily complex tax code. This impairs the economy. And it is past time to change that.
If we succeed in rebuilding America from within, we can transform the U.S. from a consumption economy to a consumption and investment economy. And, ultimately, a healthier, stronger U.S. economy is a better partner to other economies around the world.
It will help U.S.-based companies like Dow to manufacture more of the innovative products that will change life for the better around the world, and it will enable us to continue investing – and innovating – in emerging economies, including here in Africa.
Creating a Competitive Manufacturing Base in Africa
As I have said, I believe the fundamental principles behind America’s strategy can also be applied in Africa. They can be used to build a strong manufacturing base in Africa that serves as the foundation for sustainable, inclusive growth.
But that will only happen if African leaders act, and act now, on a few key priorities.
Education & Skills Training
It starts with ensuring that the Africa’s rising young population has the skills required for the jobs of the future.
I mentioned earlier the high rate of youth unemployment. Today, young people make up more than 60 percent of Africa’s population – a dynamic that is commonly known as “Africa’s demographic dividend” – and the world’s ten youngest populations are all in Africa. The labor force is projected to grow by some 450 million over the next two decades.
Meanwhile, there is already a shortage of technicians, engineers, and other high-skilled workers.
It is essential that these young people – who are brimming with natural talent and energy – have the skills to participate meaningfully in the economy. They should not merely be included in Africa’s economic growth, they should be driving it. That means making sure they receive the education and training they need.
Over the past few decades, Africa has made significant strides in education: Debt cancellation and the U.N. Millennium Development Goals have contributed to 60 million more African children attending primary school. And between 1990 and 2011, the number of students enrolled in secondary schools more than doubled. But even so, the African Development Bank Group reported in 2014 that 30 million children were not attending school, and that 35 percent of African youth do not have access to secondary schooling or technical skills development.
That is why it is critically important to invest in education and training programs that give young people the skills to succeed in today’s economy – particularly in science, technology, engineering, and math. This should be a top priority not just for governments, but for businesses whose demand for skilled workers is growing every day.
Investing in Infrastructure
Those workers can put their skills to use – I hope – toward the second priority I want to mention: overcoming the infrastructure deficit.
As of 2014, for example, 53 percent of Africa’s roads were still unpaved – and most of the rural population did not have access to an all-season road. The household electrification rate was 43 percent – leaving well over half a billion people on the continent without access to electricity. And with the demand for power expected to grow by 93 percent by 2035, the time to tap into Africa’s abundant natural resources – including wind and solar – to help electrify the continent is now.
In total, the World Bank estimates that addressing sub-Saharan Africa’s infrastructure needs will cost upwards of $90 billion a year, more than double what is currently being spent.
But it is well worth the price. In addition to improving the quality of life across the continent, a modern infrastructure could help jumpstart interregional trade across Africa…allow businesses to expand… and catalyze economic growth.
Creating a Better Business Climate
That brings me to the last point I want to make.
Just like the U.S. is working to streamline regulations and reform its tax code, I hope African countries will do more to create a climate that encourages businesses to invest and grow. African countries need to compete like companies do – and that means rolling out the red carpet for business, not the red tape.
To be clear, when I say “business,” I am not only referring to multinational enterprises like Dow. I also mean the African entrepreneurs who will launch the companies and create the products that define this continent – and change the world – in the 21st century. The world needs African ideas, African innovation, African products. Governments should do more to encourage all the above.
Ultimately, the challenges in Africa today are great, but the opportunities far greater.
There are simply few places in the world with so many untapped resources or so much potential for growth. And despite headwinds and uncertainty, I am as confident as ever that Africa can fulfill that potential.
It will take leaders working together at the intersections of business, government, and civil society to succeed.
But if they do, the benefits for Africa – and for anyone who does business here – could be incredible.
They can build a competitive manufacturing base that creates new collar jobs for the next generation.
They can provide a roadmap to achieving the sustainable, inclusive growth that the world so desperately needs.
And they can create an African continent that is no longer emerging, but has truly emerged.
Thank you again.