The Role of Foreign Development Assistance on Industrialization in Africa: Experiences From Kenya and Mauritius

Abstract

The lack of industrial growth in African countries has been a longstanding concern in the continent. Industrialization is crucial for economic development, as it can foster sustained growth, reduce poverty, and create employment opportunities. The main objective of this study was to examine the role and impact of foreign development assistance on industrialization in Africa, with Kenya and Mauritius serving as case studies. This study utilized a mixed-method research design that utilized empirical data from both qualitative and quantitative sources. The qualitative analysis was based on interviews with key players in the manufacturing sector in Kenya and Mauritius, while the quantitative analysis relied on descriptive statistics from national and global database reports to provide further insights into trends and patterns. The findings demonstrate that when directed towards productive and sustainable sectors, foreign development assistance can foster industrial growth and broader economic development through the provision of foreign capital, technology, and technical assistance. However, foreign development assistance has had a limited impact on the majority of African countries. This limitation can be attributed to a combination of external factors, including global aid reforms, conditionalities, and the promotion of foreign donor and investor interests, as well as internal factors such as weak governance structures, corruption, and a lack of accountability in the utilization of development financing. It is noteworthy that the relatively few African countries that have managed to benefit from foreign development assistance for industrial development tend to possess robust governance and institutional systems that support the sector. The comparative examination of the political economy of Kenya and Mauritius's industrial sector underscores the pivotal role played by policy choices and governance frameworks in shaping industrial development. Mauritius has benefited from post-independence policies that fostered an outward-looking approach utilizing foreign development assistance in the industrial sector. The country has sustained a more competitive export-driven manufacturing sector compared to Kenya, owing to good management of public affairs including human-centred development strategies. These findings support the institutionalist approach to the international political economy which highlights the interconnectedness of political processes and economic systems, which collectively influence how foreign capital is utilized for industrial development. To optimize foreign development assistance for industrial growth in Africa, this study recommends strengthening governance and accountability through reforms that are specifically geared towards improving the environment of doing business including reducing administrative barriers, investing in infrastructure development, and providing access to affordable financing for industrial growth. This study also recommends that policymakers should diversify their sources of funding beyond relying on foreign development assistance to reduce their development aid dependency and reliance on foreign investors. There is an urgent need to empower local entrepreneurs and enhance their competitiveness against foreign counterparts within the industrial sector. In conclusion, this study emphasizes the pivotal role of policy choices and governance in shaping industrial development. A well-crafted policy framework is essential to create a balanced playing field that safeguards local industries while simultaneously promoting foreign development financing for industrial development in Africa.