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Depth in Africa’s Transformation

Homi Kharas's picture

Construction workers Africa is growing fast but transforming slowly. This is the message of the 2014 African Transformation Report, launched last week by the African Center for Economic Transformation (ACET). The report addresses a worry on the minds of many: in spite of impressive growth, the structure of most sub-Saharan African economies has evolved little in the past 40 years, with a poorly diversified export base, limited industrialization and technological progress, and a large informal economy whose economic potential remains mostly overlooked. In many African economies, manufacturing—the sector that has led rapid development in East Asia—is declining as a share of GDP. The worry is that without a major transformation Africa’s recent growth may soon run out of steam. The report argues that for growth to continue, Africa needs to invest in “DEPTH”–diversification, export competitiveness, productivity, and technological upgrading, all for the purposes of human well-being.

The African Transformation Report contributes in a pragmatic and detailed way to a new narrative for Africa. Gone is the continent of poverty and desperation, and in its place is a continent of promise and opportunity—but only if economic transformation takes place. In building the new narrative, the report follows others: the African Union’s Agenda 2063, the African Development Bank’s long-term strategy, the UN Economic Commission for Africa’s 2013 report, multiple recent IMF papers, and UNCTAD’s 2012 report on structural transformation and sustainable development in Africa. What the ACET report does better than most is provide a concrete roadmap to maneuver through the individual components of such a transformation, based on a three-year research program covering 15 sub-Saharan countries. The report reinforces these case studies with a summary index of transformation, bringing the power of focused measurement and transparent data to what is otherwise an overwhelming landscape.

A few recommendations deserve special attention:

  1. Navigating structural transformation. The best path for structural change in Africa is tricky to identify. Recent rapid growth is quite unusual, compared to what happened elsewhere. As outlined in a blog post by Dani Rodrik and evidenced in multiple academic papers (see for instance Rodrik and McMillan 2011 and De Vries, Timmers and de Vries 2013), African workers moving out of agriculture have typically bypassed manufacturing and gone straight into services—sub-Saharan Africa is actually less industrialized today than it was in the 1980s. What makes it worse is that these services are often low-productivity and informal. The ACET report takes a balanced approach, calling for Africa’s entrance into labor-intensive manufacturing as well as for greater productivity growth in agriculture (or agro-processing), upgrading the agricultural supply chain and developing tourism. The report also provides suggestions on how to better optimize extractive resources, similar to the Africa Progress Panel’s 2013 report.
  2. Bringing out the potential of the informal economy. There is a welcome recognition that most people are working in informal firms or self-employed, and helping them develop better bridges with the formal sector as suppliers and distributors would boost their productivity and competitiveness.
  3. Managing the youth opportunity. By mid-century, sub-Saharan Africa’s workforce will be larger and younger than either India’s or China’s. The needed skills agenda is far broader than the traditional focus on access to and quality of basic education. It also includes vocational training in relevant industries, training of informal workers, and improving technological skills. These recommendations are closely aligned with the approach of the Global Competitiveness Report 2013–2014, which develops a model of stages of development based on levels of innovation rather than on the traditional agricultural / manufacturing / services classification.
Achieving growth with DEPTH is far from an easy task. Successful DEPTH would require wide-ranging policy reforms, and the tackling of cross-cutting issues such as regulation, business incentives and control of corruption. Such an effort would have to be a whole-of-government exercise that produced a strong national vision and strategy, a clear plan for coordination of different agencies and meaningful engagement with non-government stakeholders. It would also need a focus on implementation. As the High-Level Panel’s report on the post-2015 agenda noted, transformations need to be structured and measured. ACET’s 2014 report on a clear and well-informed set of transformational metrics starts this process and lays down a baseline for some African economies. Africa’s remaining economies should also be encouraged and assisted to produce the necessary statistical information. What has been started is a healthy debate on African economic transformation that goes beyond the broad generalizations of inclusive growth to a more focused set of priorities that can be used to shape African development strategies and their collective position in the post-2015 negotiations.
 

Comments

Submitted by John K. on

True! I have seen Kenya grow in terms of infrastructure and wealth, but rare;y; do the lives of the people change e.g healthcare, employment and democracy.

Submitted by Question on

You mean their interrelevence between transportation and standard of living is not high?

Submitted by Nicholas Nickson Murozvi Mada on

There is no respect for each other in Africa. Those in the upper class look at those at the bottom as objects which is very unfortunate unlike in Europe where citizens of all levels are given the opportunity to live a descent life. Very pathetic on how those on top in Africa look down on those who actually put them there one way or another.

Submitted by Bernard on

A serious academic research on the African situation.
I pray African policy makers read this to rethink African models to solve Africa's challenges.

Thanks for this wealth of research. Africa could truly be leading the thinking and delivery on shared value (see www.sharedvalue.org).

The skills needed are not difficult, but they are not necessarily being taught in our universities. They are uncommon wisdom - but we need to bring these skills (including shared value strategy tools, leadership micro skills and culture re-patterning for organisations) into Africa's mainstream.

I believe shared value is in Africa's DNA. It just got beaten out of us over centuries of colonialism and decades of cronyism.

Submitted by Daniel Biau on

Interesting research. But in the opinion of many experts the top priorities of the continent should be to build efficient institutions and adequate infrastructure. Investing in DEPTH could only come as a complement.
Daniel Biau
Nairobi

Submitted by Stanley Ilechukwu on

I quite agree with you, DEPTH is a natural by product of investments in infrastructure, power most especially and education, as only with these can the the knowledge on what and how to diversify would come and the right environment in which to do these and remain globally competitive

Submitted by Sarah Mathews Chacko on

Africa's strengths:
- Natural resources
- It's vibrancy
- It's people and endurance

Negatives
- Heath
- Governance
- Corruption
- Lack of education
- Lack of infrastructure
- Unequal wealth distribution

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