Africa needs to abandon the idea that industrialisation is primarily about building factories and instead develop economic systems that allow the continent to capture more value from technology, finance, data and global supply chains, according to development economist Professor Carlos Lopes.
The traditional route of moving from low-cost manufacturing into higher-value production is becoming harder to follow as automation reduces the importance of labour-cost advantages and concentrates value in design, data, systems integration and control of platforms, Lopes said in an Afreximbank lecture.
“Industrialisation is not a recipe. It is not even a path. It is a moving system where value shifts, rules evolve, and those who succeed are those who understand not only what to produce but also where value is captured and under which conditions,” Lopes said.
The argument marks a shift away from a factory-centric view of African industrial policy toward an approach that links production with finance, technology, infrastructure, markets and institutions.
Lopes, the 2026 distinguished lecturer of the African Export-Import Bank, outlined his framework in the bank’s Industrialisation in Africa: The 5-5-5 Formula, delivered during its Founders’ Day celebration in Cairo. The lecture identifies five myths, five pitfalls and five challenges confronting the continent’s industrialisation efforts.
One of the central myths, according to Lopes, is that industrialisation is synonymous with manufacturing. Value has increasingly shifted from labour and capital toward technology and data, while activities such as design, finance, intellectual property, logistics and branding can capture more value than physical production itself.
That creates a problem for African economies that remain heavily dependent on exporting raw materials and importing finished products. Lopes describes this as a structural dependency in which value is created in Africa but captured elsewhere.
The continent is also entering the industrialisation race after some of the models that lifted earlier industrial powers have weakened, he said. Import substitution has largely run its course, while export-oriented manufacturing faces increasing automation, making the traditional low-wage manufacturing escalator less effective.
At the same time, Lopes argues that Africa may have more policy space than commonly assumed. Subsidies, protectionism and strategic industrial intervention have returned to major economies, even as developing countries have often been told that such tools are constrained by international trade and financial rules.
“The real risk is not that policy space is closed. The real risk is that we believe it is closed when others are already operating as if it were open,” he said.
Capital Is Available, but Misaligned
Financing remains one of the biggest constraints. Africa requires an estimated $130 billion to $170 billion a year for infrastructure, with persistent financing gaps of up to $100 billion, according to the lecture.
But Lopes challenges the conventional description of Africa simply as a capital-starved continent. Pension funds, sovereign wealth funds, insurance assets and remittances collectively represent a substantial pool of African-linked capital, he said.
The problem is that much of that money is fragmented, risk-averse or invested outside the continent and is not structured for long-term industrial projects.
The implication is that African institutions need to become better at converting domestic savings into productive investment by managing risk, creating appropriate financial structures and providing the long-term capital required by industrial projects.
That gives institutions such as Afreximbank a role beyond conventional lending, with the bank positioned as a market architect capable of organising capital around industrialisation, according to Lopes.
Technology Changes the Equation
Technology is another fault line in Africa’s industrial strategy.
Lopes argues that technology is no longer simply an input that African companies can import after establishing production. It increasingly forms the architecture through which value is created.
Africa’s expansion in mobile connectivity, digital payments and platform-based services demonstrates that the continent can leapfrog stages of economic development, he said. The next challenge is connecting that digital capability directly to production systems rather than treating technology as an add-on.
Automation is simultaneously closing some traditional opportunities and creating new ones. The report says the conventional progression from low-cost manufacturing toward higher-value activities is being compressed as machines reduce the importance of labour costs and concentrate value in more sophisticated segments.
Young Population, Critical Minerals Offer Openings
Africa’s demographic growth could provide another source of industrial advantage as much of the developed world ages and labour forces shrink, Lopes said.
The continent’s expanding population will increasingly drive demand for technology-intensive products, while changing demographics could encourage production to diversify into regions with more favourable labour-market conditions.
But population growth alone will not create an industrial dividend. Young people must be connected to productivity through industrial ecosystems capable of absorbing labour at scale.
Large African companies in cement, fertilisers, telecommunications and financial services already demonstrate how firms operating at scale can generate networks of suppliers, distributors and service providers, creating employment beyond their own workforces. The challenge is to make that scaling more systematic across the continent.
Africa’s critical-mineral resources provide another opportunity, particularly as global energy and technology industries seek supplies of minerals needed for their transitions.
But Lopes warns that exporting those resources in raw form would reproduce the continent’s existing pattern of value extraction. Processing minerals domestically and connecting them to manufacturing would offer a route toward greater value capture, provided infrastructure, technology and policy are aligned.
AfCFTA Seen as Platform for Scale
The report places continental integration at the centre of the industrialisation challenge.
Through Agenda 2063 and the African Continental Free Trade Area, Africa has already established a strategic framework for industrialisation and created the foundations for a continental market of scale, Lopes said.
The bigger challenge is execution: aligning trade, finance and production so they reinforce each other instead of operating as separate policy agendas.
Infrastructure must similarly be treated as an integrated system rather than a collection of individual projects. Roads, ports, power generation, logistics, digital networks and industrial zones need to function together if African producers are to become competitive.
The energy transition could add both opportunities and constraints. Africa’s renewable-energy potential is significant, but the report says its value will depend on whether energy systems can provide reliable and competitively priced power for industrial production.
Lopes concludes that Africa cannot reproduce the industrialisation strategies used by earlier generations. Instead, the continent must design an industrial model suited to a global economy being reshaped by technology, geopolitical competition, demographic change and the energy transition.
“Industrialisation today is less about building industries than about building systems within which industries can emerge, evolve, and capture value,” Lopes said.
