Industrialization Industrialization, , growth growth, , trade - - PowerPoint PPT Presentation
Industrialization Industrialization, , growth growth, , trade trade and and employment employment in in Africa Africa: : what what options options for for economic economic transformation? transformation? GIOVANNI VALENSISI
Regional Integration and Trade Division – UNECA
1) PURELY ECONOMIC REASONS
countries).
girations, balance of payment problems, etc.) Basically, to enhance the sustainability to Africa’s growth acceleration, so far largely dependent on primary commodities (Haussman, Pritchett and Rodrick, 2004; Arbache and Page, 2007).
2) SOCIAL REASONS To enhance growth contribution to MDGs and poverty reduction, since African countries tend to have a rather low income elasticity of poverty.
East Asia and Pacific Eastern Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub-Saharan Africa
Income elasticity of poverty (regional mean)
$ 1.25/day $ 2.50/day
Source: Fosu, 2011
Africa’s incipient demographic transition (i.e. high though declining pop. growth, youth bulge, and rapid urbanization) is bound to exert pressure on labor markets. A considerable nr. of LDCs are likely to struggle generating sufficient employment to keep the pace with rising labour force throughout 2020, even if they were to LDC were to growth at the rate of 7% as per IPoA.
3,5% 4,0% 4,5%
Decomposition of forecasted labor force growth in LDC; 2013-2020
0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5%
Afghanistan Angola Bangladesh Benin Bhutan Burkina Faso Burundi Cambodia Central African Rep. Chad Comoros Congo, Dem. Rep. Djibouti Equatorial Guinea Eritrea Ethiopia Gambia Guinea Guinea-Bissau Haiti Lao People's Dem. Rep. Lesotho Liberia Madagascar Malawi Mali Mauritania Mozambique Myanmar Nepal Niger Rwanda Samoa Sao Tome and Principe Senegal Sierra Leone Solomon Islands Somalia Sudan Togo Uganda Tanzania Vanuatu Yemen Zambia Demografic growth 1 - Age dependency Labor force participation rate Source: Valensisi & Gauci, 2013
3) ENVIRONMENTAL REASONS Africa is growing fast, but is the pattern of growth conducive to make the best
15% 20%
Adjusted net savings in Sub-Saharan Africa as percentage of GNI
Source: World Development Indicators
0% 5% 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Gross savings Natural resources depletion Consumption of fixed capital Adjusted net savings, excl. particulate emission damage
0% 5% 10% 15% 20% 25% 30%
Manufacturing contribution to value added (2009-2011 average)
Two key dimensions of growth and transformation
In 1980–2009, the share of manufacturing value added to GDP increased marginally in North Africa from 12.6 % to 13.6 %, but fell from 16.6 % to 12.7 % in the rest of Africa.
Source: UNCTADSTAT
0%
Developing economies: Africa Developing economies: America Developing economies: Asia Developing economies: Oceania
0% 5% 10% 15% 20% 25% 30% 35% 40%
Developing economies: Africa Developing economies: America Developing economies: Asia Developing economies: Oceania
Gross fixed capital formation as a share of GDP (2009-2011 average)
Though with large variability across African countries, investment has slowly climbed up since the early 2000s, but is still low in relation to Africa’s long- standing needs. → domestic resource mobilization
Key issue is labour re-allocation outside (mainly subsistence) agriculture, which still employs some 60% of Africa’s labor force. Given the differences in L productivity across sectors, if labour moves towards more productive sectors you may have an overall increase in TFP.
Decomposition of productivity growth by country group, 1990-2005 (weighted averages)
Source: McMillan and Rodrik, 2011
Given the retalively small size of domestic market in most African countries, trade is bound to play a key role in supporting Africa’s transformative agenda. Yet, African exports are heavily concentrated on primary products, and increasingly so (ex. AGOA: oil accounts for 85% of products exported to US!).
0,45 0,50 n index
Export concentration index by region (developing countries only)
0,00 0,05 0,10 0,15 0,20 0,25 0,30 0,35 0,40 Normalized Herfindahl-Hirschmann in
Africa America Asia Oceania
Source: UNCTADSTAT
African countries remain largely confined to low-end activities in the value chain, even in sectors where in principle they should have comparative advantage. Smallholder farmers & SMEs struggle to integrate into international markets, and even if they do, they often accrue limited benefits due to market asymmetries and governance issues.
Source: ECA, 2013
2 500 5 000 7 50010 000 12 500 15 000 17 500 20 000 Egypt South Africa Algeria Nigeria Morocco Tunisia Zimbabwe Ghana Sudan Ethiopia Tanzania Mozambique Zambia Uganda Cote d'Ivoire Cameroon Mauritius
Intermediates imports in Africa (USD million)
Senegal Ghana Mauritania Madagascar Tanzania Central African Rep. Gambia Uganda Burkina Faso Mozambique Niger Malawi Mali Rwanda Burundi Zambia Botswana Namibia Zimbabwe
Share of intermediate imports sourced from Africa
Mauritius Botswana Namibia Senegal Madagascar Mali Malawi Burkina Faso Niger Rwanda Togo Mauritania Burundi Cape Verde Gambia Central African Rep. Sao Tome & Principe Benin Comoros Gabon Guinea Kenya Lesotho Seychelles Swaziland
2001 2011
0% 20% 40% 60% 80% 100% 120% Benin Comoros Gabon Guinea Kenya Lesotho Seychelles Swaziland Cape Verde Sao Tome & Principe Tunisia Egypt Morocco Nigeria Algeria South Africa Togo Ethiopia Cameroon Sudan Cote d'Ivoire Mauritius Senegal Ghana
2011 2001
17% 2% 5% 32% 40%
Composition of intra-Africa exports, 2010-2012
All food items Agricultural raw materials Ores and metals Fuels Pearls, precious stones and non-monetary gold 7% 2% 10% 64% 4% 13%
Composition of African exports to the rest of the world, 2010-2012
All food items Agricultural raw materials Ores and metals Fuels Pearls, precious stones and non-monetary gold Manufactured goods
The regional market still has limited size (12 % of Africa’s total trade), but intra-Africa trade is significantly more diversified than trade with the rest of the world. Regional integration can therefore support Africa’s transformative agenda, allowing firms to embark into greater value addition, and achieving more profitable economies of scale. It can also foster the emergence of regional supply chains, thereby contributing to more stable supplies against idiosyncratic shocks (for instance in agro-food products).
32% 4% and non-monetary gold Manufactured goods
Source: UNCTADSTAT
64% Manufactured goods
I. Though macroeconomic stability is necessary for growth, there is a need for a development-friendly economic policy, crowding-in private investment to spur capital accumulation. Supporting technological upgrading, paying attention not only to physical but also to human capital and its externalities and spillover effects.
II. The state has a bold role to play in relation to well-known market failures, in close and systematic coordination with the private sector. Surveys and case studies highlight the following as key constraints for African firms to move up the value chains: infrastructural provision, access to credit, poor business environment, & high transaction costs.
framework, preserving and making use of available policy space (SDT) to pursue economic transformation. The “New structuralist economics” stimulated an interesting debate on whether to follow or defy comparative advantages; essentially follow but push them further step by step (→ commodity-based industrialization).
push them further step by step (→ commodity-based industrialization).
leverage complementarities and synergies across partners. Regional integration offers ample scope to support ec. diversification, but progress has been uneven (tariffs and NTBs); South-South cooperation provides other opportunities (growing demand, frugal innovation, etc.)