Industrialization and Structural Change: Can Sub-Saharan Africa Develop without Factories?

With its sustained growth, the unprecedented wave of foreign direct investment and the sharp decline in poverty, Sub-Saharan Africa’s track record over the past fifteen years has been largely positive. Yet, this rebound in growth, accompanied by major economic reforms, democratic progress and a lower incidence of conflicts, remains fragile. In Africa, structural change—which in most of toady’s developed countries has come about through a transfer of resources from the primary to the secondary sector, then to the tertiary sector—appears to have “bypassed” the secondary sector. In fact, be it in terms of jobs or value added, manufacturing has never really flourished in Sub-Saharan Africa. Rather,  the trend in most of these countries is towards de-industrialization and this does not seem to have been reversed by the recent growth. The main contributing factors, widely documented by the literature and statistics, include the business environment uncertainties associated with public governance failures, high labor costs relative to worker qualifications, inadequate energy and transport infrastructure (often tied to governance issues) and dysfunctional credit markets. Despite recent improvements in the business climate, few countries in Sub-Saharan Africa offer attractive conditions for manufacturing investment compared to alternative locations, especially those in South East Asia. Can Sub-Saharan Africa pursue its development through its service sectors? To date, cases of countries that have achieved development “without factories” are too scarce and idiosyncratic to serve as a model. However, given the technical progress in services and the lack of plausible alternatives in manufacturing, the question remains open.Keywords: Sub-Saharan Africa, (de-)industrialization, structural change, manufacturing, services, exports, poverty, employment, productivity, growth.JEL Classification: F1, J2, L6, O11, O14, O47, O55.

Cadot, O., de Melo, J., Plane,P., Wagner, L., Woldemichael, M.T. "Industrialization and Structural Change: Can Sub-Saharan Africa Develop without Factories?" Working Paper Ferdi, P143, June 2015 (also working paper AFD, n°2015-10, Octobre.)