AfricaGrowth Agenda

In recent years, African countries have been giving greater priority to building their industrial capacity, placing particular emphasis on manufacturing in order to reduce their dependency on commodity trade. However, most African countries face significant challenges – not least of which are severe infrastructural shortcomings, weak trading links with their regional neighbours, and skills deficiencies in both the public and private sectors. Although the growing prominence of global value chains (GVCs) has, in principle, opened many doors to African producers and traders, most countries on the continent lack the basic ‘building blocks’ that will enable them to take full advantage of such opportunities. Clearly, African countries need effective and realistic industrial policies that address economy-wide shortcomings while creating business-friendly conditions that encourage more firms to engage in regional and global trade.

While economic growth rates have increased in Sub-Saharan Africa (SSA), the subcontinent remains with the highest levels of poverty, the lowest productivity, and the least structural economic transformation. Empirical evidence demonstrates that urbanization is increasing, but both the agriculture and manufacturing shares of income are either stagnant or declining. The transition into a modern industrial economy is constrained by not only international competition and the poor business climate, but also the low participation in the global value chains. The paper argues that growth in agricultural productivity is necessary but not sufficient for industrialization. Successful structural economic transformation in the SSA demands proactive increase in international connectivity, human capital, institutional quality, efficiency, andregulatory standards.The paper recommends deeper regional economic integration in SSA to enhance regional value chains in manufacturing.