Africa S Manufacturing Puzzle

Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.

Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.

This book examines how light manufacturing can offer a viable solution for Sub-Saharan Africa's need for structural transformation and productive job creation, given its potential competitiveness based on low wage costs and an abundance of natural resources that supply raw materials needed for industries. Based on five different analytical tools and data sources, the book examines in detail the binding constraints in each of the subsectors relevant for Sub-Saharan Africa (SSA): apparel, leather goods, metal products, agribusiness, and wood products. Ethiopia is used as an example, with Vietnam as a comparator and China as a benchmark, and with insights from Tanzania and Zambia used to draw out lessons more broadly for SSA. The book recommends a program of focused policies to exploit Africa's latent comparative advantage in a particular group of light manufacturing industries - especially leather goods, garments, and agricultural processing. These industries hold the prospect of initiating rapid, substantial, and potentially self-propelling waves of rising output, employment, productivity, and exports that can push countries like Ethiopia on a path of structural change of the sort recently achieved in both China and Vietnam. The timing for these initiatives is very appropriate as China's comparative advantage in these areas is diminishing due to steep cost increases associated with rising wages and non-wage labor costs, escalating land prices, and mounting regulatory costs. Five features of this book distinguish it from previous studies. First, the detailed work on light manufacturing at the subsector and product levels in five countries provide in-depth cost comparisons between Asia and Africa that can be used as a framework for future studies. Second, the book uses a wide array of quantitative and qualitative techniques to identify key constraints to enterprises and to evaluate firm performance differences across countries. Third, the findings that firm constraints vary by country, sector, and firm size led to a focused approach to identifying constraints and combining market-based measures and select government intervention to remove them. Fourth, the solution to light manufacturing problems cuts across many sectors: solving the manufacturing inputs problem requires solving specific issues in agriculture, education, and infrastructure. African countries cannot afford to wait until all the problems across sectors are resolved. Fifth, the book draws on experiences and solutions from other developing countries to inform its recommendations. This book will be very valuable to African policy makers, professional economists, and anyone interested in the economic development, industrialization, and structural transformation of developing countries.

A study prepared by the United Nations University World Institute for Development Economics Research (UNU-WIDER)

The African Continental Free Trade Area, established in 2018, represented a monumental step forward for Africa in terms of meeting longstanding aspirations for greater economic and political integration. But it has nonetheless been met with scepticism in some quarters, both within the continent and beyond. Borderless Africa makes the case for the AfCFTA in an accessible and compelling way, without shying away from technical and academic debates. Francis Mangeni and Andrew Mold take us on a journey through the different dimensions and implications of the AfCFTA, the largest free-trade zone in the world, starting with its underlying economic rationale. Pointing to the numerous historical examples of successful regional integration, they argue that the African continent will need to take on board such lessons as the agreement is implemented. They discuss, too, the more controversial elements of the AfCFTA, including the freedom of movement protocol, contending that this should not be seen as an optional extra, but as an intrinsic part of the accord. Also exploring the role of external partners in the construction of an economically stronger, more united Africa, this fascinating study reveals how the AfCFTA is contributing to sustainable development across the continent.

Performance of Manufacturing Firms in Africa: An Empirical Analysis sheds light on the characteristics of formal and informal manufacturing firms in Africa by comparing these firms with firms in other regions. Drawing on two data sources, the authors find that there is a very low share of manufacturing in GDP in Africa and in African exports. Most African manufacturing firms are informal, perhaps because the enforcement of registration and licensing regulations is not strict. These firms are also smaller than firms in other regions and few export. Labor productivity is low in Africa relative to other regions, but this may be because of the more challenging environment—with the lack of physical infrastructure, the heavy burden of business regulation, and other issues. However, after accounting for these differences, the authors find that firms in Sub-Saharan Africa appear more, not less, productive than firms elsewhere. This analysis suggests that improving the business environment might allow firms to enhance their performance. However, given the pervasive distortions in the business environment and the limited resources at the disposal of most African countries, Africa cannot and should not wait until the business environment becomes healthier before growing a more viable manufacturing sector. Performance of Manufacturing Firms in Africa: An Empirical Analysis shows that binding constraints vary by country, by sector, and by firm size. Therefore, countries should identify the constraints in the most promising sectors and adopt policies designed specifically to remove these constraints. The evidence in this book overwhelmingly dispels the false notion of Africa’s inability to compete globally in manufacturing goods. This book will be of interest to economists, policy makers, and government officials working to improve manufacturing firm performance in Africa.

The book provides a useful source of greater understanding of African manufacturing firms and the perplexing lack of widespread industrial growth during the post-colonial decades.

This report provides a new perspective on Africa’s urban economies that is unique in its breadth and level of detail. Based on data from more than 4 million individuals and firms in 2 600 cities across 34 countries, it presents compelling evidence that urbanisation contributes to better economic outcomes and higher living standards.