africa

Africa at a Fork in the Road: Taking Off or Disappointment Once Again?
quarter century, driven by three phenomena: trade in tasks, agglomeration, and firm
capabilities. Together these largely determine where investors choose to locate.
In some manufacturing activities the production process can be decomposed into
a series of steps, or tasks. As costs of transport and coordination have fallen, it has
become efficient to locate the production of different tasks in different countries.
Task-based production has expanded dramatically in the past 20 years (UNIDO,
2009) and represents a potential lifeline for late industrializers. But success is by
no means assured. Task-based exports are footloose. As the experience of Lesotho
and Swaziland at the end of the Multi-fiber Agreement demonstrates, investors
continuously seek new locations in response to changing costs and incentives.
In most industries productivity and quality depend on a set of interlocking elements
of tacit knowledge or working practices possessed by the individuals who comprise
the firm. These “firm capabilities” are the know-how or working practices that are
used either in the course of production or in developing a new generation of products
(Sutton, 2012). Firms in the global industrial marketplace compete in capabilities,
and the location of industry therefore depends in part on how well economies
acquire and diffuse capabilities.
Manufacturing and service industries tend to concentrate in geographical areas
driven by common needs for inputs and access to markets, knowledge flows, and
specialized skills (Fujita and others, 1990). Because of the productivity boost that
agglomerations provide, countries with existing concentrations of industry have
an in-built advantage: a dense industrial landscape serves as a magnet for further
investment (UNIDO, 2009). Starting a new industrial location is a form of collective
action problem. No single firm has the incentive to locate in a new area in the
absence of others.
8.4 A strategy for industrial development
For most African countries, investment climate reforms alone may not be enough
to overcome the advantages held by the world’s existing industrial locations. As the
experience of East Asia demonstrates, once a critical minimum threshold is crossed,
industrial growth can be explosive. But because trade in tasks, firm capabilities, and
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