Deindustrialization – Overcapacity Debate and the Third Question Can Africa Industrialize?

There is a raging debate in the world’s major capitals, and Africa is barely in the room.

The West is warning of “deindustrialization,” notably the erosion of manufacturing in the USA and Europe blamed on unfair competition. On the other hand, China is on the defensive against “overcapacity” accusations labelling them as protectionist narratives by competitors. Both sides have data, both claim victimhood and both treat Africa as a footnote. The absence of Africa in the debate relegates the continent to merely a source of minerals in one narrative, a destination of surplus goods in the other.

The debate fails to situate the place of over 1.5 billion people and the potential of a late industrializer in a world characterized by rising protectionism and surplus manufacturing.

According to African Development Bank, the continent’s absolute manufacturing value added rose to estimated USD 351 billion in 2025 from USD 285 billion in 2020. The continent still accounts for less than 2 percent of global manufacturing output down from 3 percent in the 1970s, stagnating way below the 13 percent of GDP. Our working age population is likely to hit 1.56 billion by 2050.

Africa’s deficit with China alone reached USD 102.01 billion in 2025 against a trade volume that hit USD 348.05 billion. We import manufactured goods we cannot yet make, with foreign currency we do not have, and to employ people who will soon number in billions.

On the current trajectory, manufacturing employment across the continent is set to stagnate below 8 percent of total employment. This is not a development path, but a demographic challenge coupled with persistent trade deficit with major economies.

When the deindustrialization debate heats up and is viewed as a global crisis, commentators rarely focus on regions that never got to build factories in the first place. Africa’s challenge is not only premature deindustrialization.

It is the incomplete industrialization; marked by the many false starts, partial peaks, and the assembly plants that never climbed the value chain. It is a continent that never got a fair chance to build its industrial base and one whose false starts were compounded by its own policy failures.

On the question of overcapacity, African manufacturers experience import surges that undercut nascent industries before they can even scale. Concurrently, when the West pushes to impose tariffs on Chinese green technology, they ignore that those same cheap solar panels and batteries are what make African access to energy conceivable.

The overcapacity becomes a double-edged sword. The question is whether to hold the handle or get cut by the blade. This calls for a rethink in Africa’s institutional architecture to ensure capturing the gains for the continent.

The point is not to simply have Africa join the deindustrialization and overcapacity debate, but to use them as an eye open to modernize strategy and public policy on the continent.

To break free from these extreme swings, Africa must stop waiting to be a captured market or a passive supply chain. The continent should leverage digital innovation, artificial intelligence, create new institutional frameworks that enable nations to turn external global pressures into catalysts for growth.

Rather than individual nation-states negotiating fragmented trade deals with major economic powers, countries should coalesce around Regional Economic Blocs (EAC, ECOWAS, SADC, COMESA) to push for joint corridor development authorities, such as LOBITO and TAZARA authorities.

The proposal in this arrangement would require access to critical minerals (such as lithium, cobalt, copper) to include resource-for-industry swaps. Foreign partners will be mandated to build local refining and processing plants along the corridors. Not just a railway to export the ore but a plant to process it.

With an estimated 80-90 percent Africa’s economic activity characterized in informality (outside Global formal structures), the continent should deploy mobile phone and AI-driven digital platforms that incentivize formalization.

Voluntary formalization will assist capture economic activity that goes underreported and create possibilities to plug into formal regional value chains. Informal traders dominate cross-border commerce, yet trade architecture is built around documentary verification and registered entities shutting most traders outside economic data ecosystem.

Just as physical corridors are meant to catalyze aggregation of manufacturing, digital corridors should aggregate human capital and technology. Regional Economic Blocs should pool resources to launch indigenous language data initiative.

By standardizing and digitizing multi-country African languages (Swahili, Hausa, Wolof or Amharic), the continent can train localized Large Language models and AI tools. This outcome will be an infrastructure that power automated supply-chain logistics, smart agriculture, and local software ecosystems while ensuring continental growth in compute capabilities.

African Regional Economic Blocs should leverage massive demand for green technology (solar panels, inverters and battery storage) to create a joint venture business and technology transfer agreements.

A deliberate and intentional strategy should be put in place to require foreign suppliers to co-locate assembly, co-creation and recycling hubs locally of technologies that are on high demand.

The deindustrialization-overcapacity debate will continue to be fought in Washington, Brussels and Beijing but Africa should not wait to become simply a market to be captured and a supply chain to be secured.

The decisive variable is not Chinese capacity or the West’s geopolitical anxiety; it is whether African governments unite institutionally to capture true value for their people.

By James Shikwati, Founder Director IREN Kenya