2014-african-transformation-report

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35likely to increase. So it would makesense for Sub- Saharan countries tobuild their transformation strategiesaround leveraging those relativeadvantages and seeking over timeto move to higher value activitiesby upgrading skills and technology.It would also make sense for policymakersso as to expand the opportunitiesfor productive employmentby supporting greater labor intensityin the modern sectors.The chapters that follow discussseveral, but not all, of transformation’sdrivers. Chapter 2 exploresthe institutional and general policyenvironment for promoting economictransformation. It discusseshow the state can be strengthenedto effectively discharge the rolescritical for economic transformation,and how the state, the privatesector, and labor could form astrategic partnership to promotetransformation.Chapter 3 examines the importanttask of promoting exports. It arguesthat even though the current globalsituation is in important respectsdifferent from that in the secondhalf of the last century—when thecomparator countries (particularlyin East Asia) pursued export promotionas a central part of their economictransformation strategy—the approach is still relevant toSub- Saharan countries. But it has tobe modified to fit the times.Chapter 4 looks at skills development,exploring how access toeducation can be broadened andquality improved. It discusses howto orient the education systemmore to science, technology, engineering,and mathematics (theSTEM disciplines), how to increasethe role of technical and vocationaleducation and training, and how tomake the education system morepractical and aligned to economictransformation strategies byclosely involving business in skillsdevelopment.The rest of the report discussespossible pathways for Sub- Saharancountries to become more internationallycompetitive in subsectorsand broad product groups in whichthey appear to have a comparativeadvantage. Exploring how Sub-Saharan Africa can use its abundantlabor and natural resources for economictransformation, chapter 5discusses labor-intensive manufacturing,chapter 6 agroprocessing,chapter 7 oil, gas, and minerals, andchapter 8 leisure tourism.The chapters focus more on theformal sectors in agriculture, manufacturing,and services. This is consistentwith going for the best prospectsfirst. The spark that ignites economictransformation is more likely to comefrom the formal or modern sectorsthan from the informal or traditionalsectors. But this does not meanignoring the informal or traditionalsectors. Ongoing efforts to promotethem should continue if they areshowing results, and promising newinitiatives to lift incomes should continueto be explored. Among them,and central to transformation strategy,are initiatives that draw smallerenterprises, the informal sector, andtraditional agriculture into the transformationprocess through links withthe modern transforming sectors.This includes increasing the capabilitiesof small and informal enterprises(through training and accessto improved technology) to supplythe expanding modern firms—and implementing programs thatencourage modern firms to sourceinputs and services from them. Asimilar approach could encourage anew class of commercial farmers andagroprocessors to source inputs fromtraditional smallholder farmers—through outgrower schemes, forexample.Notes1. IMF African Economic Outlook2013.2. Private foreign investment hasalso been low but is beginning torise in several countries.3. Some data are for 2012.4. The classical (Ricardian) theory,implying that a country shouldfocus on its comparative advantage,has nothing to say about thepossibility of a country learningto improve its comparativeadvantage over time. And theHecksher-Olin-Samuelson relativefactor proportions theory of comparativeadvantage assumes thateach country is equally capabletechnologically of engaging in anyeconomic activity. This clearly isnot the case for African countriesin relation to the developed industrialcountries.5. For instance, see Greenwald andStiglitz (2006) and Hausmann,Hwang, and Rodrik (2007).6. Note that dividing by GDPreduces the potential biasagainst small economies, itcould introduce a bias againstlarge economies, which tend tohave lower shares of exports toGDP. But among Sub- Saharancountries this potential largeeconomy bias is likely to be lessof an issue than the potentialsmall economy bias.7. Another way to show trends inexport competitiveness whileavoiding the bias against smalleconomies is to take the growthrate of world export shares. Wedo not use this measure becauseall the other indicators in thisreport and for the indexes are inlevels.8. The sharp jump in 2000 for Sub-Saharan Africa and the ACET 15 isdifficult to explain, but it appearsthe African countries havebecome more competitive on thisproductivity measure.9. There are more comprehensiveand sophisticated measures ofeconomywide productivity thanthe proxies we use here, such astotal factor productivity. But forreasons of data availability andcomparability across countries,and to focus attention on the keysectors of manufacturing andagriculture, we chose to use thesesimple proxies.Central totransformationstrategy, areinitiatives thatdraw smallerenterprises, theinformal sector,and traditionalagriculture intothe transformationprocess throughlinks withthe moderntransformingsectorsAfrican Transformation Report 2014 | Tracking economic transformation
36African Transformation Report 2014 | Tracking economic transformation10. Lall 2000; UNIDO 2009. For production,we use International StandardIndustrial Classification of All EconomicActivities Revision 3 at thetwo-digit level; for exports, we useStandard International Trade ClassificationRevision 2 at the three-digitlevel. Several African countriesdo not report a consistent series ofmanufacturing production data,so the low digit level is required bydata availability.11. Strictly speaking this is true ofgross national product (GNP) percapita growth, but not necessarilyGDP per capita growth. Wherea large share of incomes fromdomestic production accrues toforeigners, or where there arereceipts of large transfers fromabroad, GDP may not be a goodmeasure of income received bynationals. But given our focus oneconomic transformation, with itsemphasis on domestic productionand economic structure, we choseGDP over GNP.12. Corresponding data for 2012 areSub- Saharan Africa, 1.74 times,ACET 15, 2.55 times, and comparators,5.31 times. All the averagesin this chapter are simple (notweighted).13. Annual time series data onpoverty rates (measured byPPP$1.25 a day) are not availablefor countries, but it is often possibleto find at least one data pointover a five-year interval. If there isonly one data point in the interval,we use it to represent each yearin the interval; if there is morethan one data point, we use theaverage (see annex table A1.1).14. A high level of employment ingovernment (or public sector)would raise the share of formalemployment in the labor force,but it may not necessarily reflectprogress on economic transformation.So perhaps a better measurewould be formal employment inthe private sector as a share of thelabor force, but such data are noteasily available.15. The share of formal employmentin the labor force is the same asthe share of the labor force thatis employed (rate of employment)times the share of formalemployment in total employment.A high level of employment ingovernment (or public sector)would raise the share of formalemployment in the labor force,but it may not necessarily reflectprogress on economic transformation.So perhaps a better measurewould be formal employment inthe private sector as a share of thelabor force, but such data are notreadily available.16. AfDB and others 2012.17. We estimate the share of formalemployment in the labor force bythe product of the employmentrate and one minus the rate of vulnerableemployment. The sourcefor both the employment rate andthe vulnerable employment rateis ILO, Key Indicators of the LabourMarket (database).18. AfDB and others 2012.19. See country profiles in annex 2.20. Both exports and GDP excludeextractives, as explained earlier.21. For those interested in comparingAfrican countries on purely thestructural indicators, withouttaking into account GDP percapita and employment, annex 1provides an index and rankingsbased on just diversification,export competitiveness, productivity,and technology.22. We are focusing here on the economicrequirements. We assumethat peace, political stability, andthe rule of law already exist; otherwisethere is little point thinkingabout how best to promoteeconomic transformation.23. Lin and Monga 2011.ReferencesAfDB (African Development Bank), OECD(Organisation for Economic Co- operationand Development), UNDP (UnitedNations Development Programme),and UNECA (United Nations EconomicCommission for Africa). 2012. AfricanEconomic Outlook 2012: Special Theme—Promoting Youth Employment. Tunis.Baah-Boateng, William, Yaw Ansu, andJoe Amoako-Tuffour. 2013. “Mapping ofCountry Information on Employment,Unemployment, and Policy Initiatives.”ACET report commissioned by theDevelopment Platform, NetherlandsMinistry of Foreign Affairs. Amsterdam.Greenwald, Bruce, and Joseph Stiglitz.2006. “Helping Infant Economies Grow:Foundations of Trade Policies for DevelopingCountries.” American EconomicReview 96 (2): 141–146.Hausmann, Ricardo, Jason Hwang, andDani Rodrik. 2007. “What You ExportMatters.” Journal of Economic Growth 12(1): 1–25.ILO (International Labour Organization).Key Indicators of the Labour Marketdatabase. Geneva.IMF (International Monetary Fund).Balance of Payments Statistics database.Washington, DC.Lall, Sanjaya. 2000. “The TechnologicalStructure and Performance of DevelopingCountry Manufactured Exports,1985–98.” Oxford Development Studies 28(3): 337–369.Lin, Justin Y., and Celestin Monga 2011.“Growth Identification and Facilitation:The Role of the State in the Dynamicsof Structural Change.” Policy ResearchWorking Paper 5313, World Bank, Washington,DC.Morris, Mike, Raphael Kaplinsky, andDavid Kaplan. 2012. One Thing Leads toAnother: Promoting Industrialisation byMaking the Most of the Commodity Boomin Sub- Saharan Africa. Authors.UN (United Nations). 2010. WorldPopulation Prospects: The 2010 Revision.http://esa.un.org/unpd/wpp/index.htm.Accessed April 15, 2013.———. Commodity Trade StatisticsDatabase. Geneva.UNIDO (United Nations Industrial DevelopmentOrganization) 2009. IndustrialDevelopment Report: Breaking In andMoving Up: New Industrial Challenges forthe Bottom Billion and the Middle-IncomeCountries. Vienna.———. INDSTAT2: Industry StatisticsDatabase. Vienna.World Bank. 2010. Africa’s Infrastructure: ATime for Transformation. Washington, DC.———. 2013. Securing Africa’s Land forShared Prosperity: A Program to Scale UpReforms and Investments. Washington, DC.World Development Indicators (database).World Bank, Washington, DC.
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Page 14 and 15: OVERVIEWTransforming Africaneconomi
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CHAPTER 5Leveraging abundantlabor f
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CHAPTER 7Managing oil, gas,and mine
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Figure 7.1Examples of Africa’s na
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141created. One certified firm supp
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ANNEX 1Technical note on theconstru
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