The African continent continues to prioritise economic diversification and regional integration as key drivers of sustainable development. In a significant move, the African Development Fund (ADF), the concessional arm of the African Development Bank Group, has approved a $3.48 million grant to strengthen industrialisation and trade policy frameworks in five transitioning African nations: Cameroon, Chad, Comoros, Madagascar, and Togo. The initiative reflects a strategic effort to improve evidence-based policymaking, promote inclusive growth, and align development priorities with climate resilience goals.
The grant comes at a time when Africa continues to face a significant industrialisation challenge. Manufacturing accounts for roughly 16% of the continent’s GDP, a figure that has remained largely unchanged for decades. Although this appears close to the global average, it masks a deeper structural issue. The global average includes highly industrialised economies, while Africa’s manufacturing share has actually fallen from its peak of around 18% in the 1970s. Even more concerning, data from the United Nations Industrial Development Organisation (UNIDO) shows that Africa’s share of global manufacturing value added (MVA) has remained at just 2% since the turn of the century. This suggests that industrial growth has largely kept pace with population growth rather than driving meaningful economic transformation away from low-productivity agriculture and raw commodity exports.
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One of the key challenges the grant seeks to address is the shortage of reliable and up-to-date data needed for effective policymaking. Limited access to quality data continues to hinder informed decision-making across many African economies. As of 2023, the International Comparison Program (ICP), led by the World Bank, still relies on extrapolated data for several African countries because recent price and expenditure surveys are unavailable. As a result, important economic indicators such as GDP and productivity are often measured with considerable margins of error. UNCTAD also reports that only 40% of African countries are able to produce high-quality trade data, leaving policymakers with limited information to assess the impact of tariff reforms, identify constraints within value chains, or evaluate the effectiveness of industrial policies.
The project is also strategically designed to support the implementation of the African Continental Free Trade Area (AfCFTA). With a market of 1.4 billion people and a combined GDP of $3.4 trillion, the AfCFTA presents enormous opportunities for economic growth. However, turning that potential into reality depends largely on effective policy implementation. The World Bank estimates that full implementation of the agreement could lift 30 million people out of extreme poverty and increase Africa’s income by $450 billion by 2035, representing a 7% gain. A major driver of this growth is the projected 109% increase in intra-African manufacturing exports. By supporting the African Union’s Accelerated Industrial Development for Africa (AIDA) framework, the grant provides countries with the institutional capacity to develop investment, competition, and skills policies needed to take full advantage of the AfCFTA.
The primary objective of the $3.48 million grant is to move policymaking away from politically driven, ad hoc decision-making towards a more systematic, evidence-based approach. A central element of the programme is conducting impact assessments of existing policies, many of which include industrial incentives, tax breaks, and protectionist measures whose overall effectiveness remains unclear. A 2021 Brookings Institution study found that poorly designed and uncoordinated industrial policies can create a “carrot and stick” trap, where governments reward underperforming firms while failing to enforce meaningful performance standards. By training public officials in data validation and policy analysis, the initiative aims to strengthen institutions and build a culture of results-driven governance capable of continuously assessing and improving policy outcomes.
Another notable feature of the initiative is its integration of gender equality, climate resilience, and SME development into the core framework for measuring policy success. This reflects a growing global recognition that industrial policy should deliver broad-based economic and social outcomes. The economic case for gender inclusion is particularly compelling. According to the McKinsey Global Institute, advancing women’s equality across Africa could add $316 billion to the continent’s GDP by 2025. Developing gender-sensitive indicators will enable governments to monitor whether export promotion programmes benefit women-owned businesses and whether industrial zones provide safe and accessible working environments. Likewise, incorporating climate resilience into policy design recognises that although Africa contributes the least to global emissions, it remains among the regions most vulnerable to climate-related shocks, which the African Development Bank estimates cost the continent up to 5% of GDP per capita each year.
The emphasis on climate-responsive industrial policy also presents significant economic opportunities. Africa possesses around 60% of the world’s best solar resources but accounts for less than 1% of global installed solar photovoltaic capacity, according to the International Energy Agency (IEA). The grant can help governments design policies that encourage investment in renewable energy manufacturing, including solar panel assembly and battery production. At the same time, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will introduce carbon pricing on imports such as steel, cement, and fertilisers. Without clear decarbonisation strategies, African industries risk losing competitiveness in important export markets. Building policy capacity in this area will therefore be essential for long-term industrial competitiveness.
Intra-African trade currently accounts for only 17% of the continent’s total trade, compared with 59% in Asia and 68% in Europe. Much of this gap is attributed to non-tariff barriers (NTBs), which often create greater obstacles than tariffs themselves. The AfCFTA Secretariat’s online reporting mechanism shows that cumbersome customs procedures and inconsistent product standards can significantly slow cross-border trade. By strengthening institutions and improving policy coordination, the grant will support the development of harmonised standards, mutual recognition agreements, and more efficient customs processes. According to UNCTAD, reducing these barriers is particularly important, as trade costs within Africa remain about 20% higher than those for trade with Asia.
The project’s focus on small and medium-sized enterprises (SMEs) is equally important. SMEs account for an estimated 80% of jobs in Sub-Saharan Africa but face a financing gap of approximately $330 billion, according to the International Finance Corporation (IFC). Through improved data analysis, the initiative seeks to develop policies that better address the specific challenges facing SMEs, particularly in agro-processing, where opportunities for value addition remain significant. Africa currently imports more than $50 billion worth of food annually, a trend the African Development Bank is working to reverse. Better-informed policies could identify why local food processors struggle to compete with imported products, whether because of unreliable electricity, inadequate cold-chain infrastructure, high transport costs, or burdensome taxation, allowing governments to target these constraints more effectively.
Despite its strong technical design, the initiative’s long-term success will ultimately depend on sustained political commitment. A 2019 analysis by the Overseas Development Institute (ODI) found that many technically sound reforms fail because they threaten entrenched interests that benefit from existing systems. For this reason, the grant places considerable emphasis on institutional strengthening and regular engagement with the private sector, helping to build broad domestic support for reform. To achieve lasting impact, the project’s recommendations must be embraced by political leaders and finance ministries, supported through adequate budget allocations, and protected from political interference.
The African Development Fund’s grant represents a strategic investment in strengthening Africa’s economic governance. More than simply funding technical training, it lays the foundation for a continuous cycle of evidence-based policymaking, private sector development, and institutional learning. By bringing together the objectives of the AfCFTA, climate resilience, and inclusive growth within a single policy framework, the initiative addresses many of the structural weaknesses that have slowed industrial progress across the continent. Ultimately, it supports Africa’s long-standing ambition for structural transformation by equipping countries with the tools needed to move beyond exporting raw materials and towards building competitive, sustainable, and value-added industries.
