Sustainable Growth and Structural Transformation in Africa

Recently, the role of manufacturing in growth and structural change has been further bolstered by the rapid pace of globalization, increased trade, and significant changes in global production processes. Yet new technology and changing production processes, accompanied by shifts in the political economy of developed economies, are changing the landscape of global manufacturing, posing new risks to the prospects for developing economies to use manufacturing as an engine of growth and job creation on a large scale (Hallward-Driemeier and Nayyar 2017).

Sustainable Growth and Structural Transformation in Africa

A key stylized fact observed over the previous two centuries is that income increases have been accompanied by a fall in the value-added and employment shares of agriculture and an increase in the employment and value-added shares in services. However, the dynamics in the manufacturing sector have been different, in that value-added and employment shares follow an inverted-U shape, rising at low levels of income, reaching a peak, and falling at higher levels of income. Globalization and international trade have facilitated structural transformation with rapid growth of the manufacturing sector in emerging market economies, as in East Asia. In Sub-Saharan Africa, however, the structural transformation powered by industrialization has not been sufficiently robust to enable countries to move from low-income to middle- and high-income status.

In the decade following 2000, Africa enjoyed relatively robust economic growth, exceeding an annual rate of 5 percent, higher than the sluggish growth during 1991–2000, which averaged about 2 percent. In more recent years, economic growth has remained at about half the pace experienced during 2000–11. However, during the period of relatively robust economic growth, the rate of job growth was generally negligible. Except for a few countries, the growth experiences in much of Sub-Saharan Africa were not accompanied by robust job growth or structural transformation of the nature historically observed in today’s developed economies.

With few exceptions, the main trends underlying the region’s growth episodes during the 2000s were rising exports of key natural resources and growth of the services sector, driven by construction and other nontradable services. Even when relatively high, economic growth has not been associated with structural transformation. Such transformation would reflect a shift in the production structure from relatively low-productivity enterprises in agriculture to high-productivity enterprises in manufacturing. Sub-Saharan Africa’s growth episodes have been short-lived, with limited implications for poverty reduction through mass job creation.