The Key to Africa's Growth

Arica isn’t known for its smokestacks. After a spurt of industrial growth following decolonization, industry declined and workers streamed into farming and other less productive sectors. (South Africa and Mauritius are two exceptions.) Today, manufacturing accounts for a smaller share of the average low-income African country’s gross domestic product than it did in 1985. But no other sector can provide the same economic dynamism. Does Africa stand any chance of becoming an industrialized, middle-income continent in the near future?

Yes — though to do so, it will need to double down on exports, argues economist John Page of the Brookings Institution. It has a long way to go: Manufacturing’s share of output and employment is much smaller than it was in China, India, and Indonesia when they reached the lower-middle income status Africa now aspires to. And yet, while the continent faces a more competitive global environment for exports than East Asia and China did when they reinvented themselves as the “world’s factory” in the 1980s and ’90s, climbing wages and growing consumption in these areas offer an opening for Africa.

Page says African policymakers should focus on policies that enhance infrastructure and promote workers’ skill development, because deficiencies in these two areas are the chief factors driving the high cost of African exports. It still takes about three months for the average African business to obtain a telephone line, and electrical outages occur almost a hundred days a year. Africa also suffers from a dearth of educated workers with business or technology skills. The continent increased its college enrollment rate by only one percent between 1990 and 2005. Such handicaps account for between 18 and 35 percent of the price of Africa’s manufactured exports. In China, in comparison, they only account for eight percent.

Africa should not attempt to become an all-around industrial powerhouse, Page cautions. Better to develop competence in one area of production, as Vietnam has with garment assembly. At the same time, public policies that support the development of industrial centers where companies could more easily tap markets, workers, and other resources would encourage industrial growth. The time is ripe for Africa to industrialize, but “success is by no means assured,” Page writes.

THE SOURCE: “Can Africa Industrialize?” by John Page, in Journal of African Economies (supplement), Jan. 2012.

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