AFRICA AGRICULTURE STATUS REPORT 2016

Differences in the African pattern of structural transformation
The experience of agriculture in the past few decades
broadly fits the pattern of typical structural transformation
in terms of declining agricultural employment share and
increased crop diversification. However, other aspects
of Africa’s structural transformation have shown marked
differences from the patterns seen in other developing
regions. Badiane (2014) documents a more rapid decline
in the agricultural GDP share of African countries than
would be normally expected based on their modest income
levels. In a typical structural transformation, increases in
agricultural productivity cause the agricultural GDP share
to decline more slowly than the agricultural employment
share, but the stagnation of agricultural productivity in
Africa over several decades before the current recovery
resulted in an unusually rapid drop in the agricultural GDP
share as labor exited agriculture.
The destination of labor exiting agriculture has also been
markedly different in Africa than in other developing regions.
Unlike East Asian countries which saw rapid increases in
manufacturing, employment and production as agricultural
employment declined, African countries have shown few
signs of any takeoff in manufacturing (Kormawa & Jerome,
2015). Some authors document recent improvements.
For instance, Diao and McMillan (2014) point to a rise in
manufacturing exports as a share of total exports during
the 2000s. However, other signs are more indicative
of deindustrialization in Africa. In fact, the share of
manufacturing in total SSA GDP is lower today than during
the 1970s, having declined gradually throughout the past
four decades (World Bank, 2016). Throughout the 2000s,
the SSA, Middle East and North Africa (MENA) regions
had the lowest manufacturing GDP shares in the world,
even slightly below those of developed regions. The ILO
estimates that the share of manufacturing employment
in total employment in SSA has hovered between 9 and
10 percent since the early 1990s (ILO, 2015). This is the
lowest employment share of all regions, except for the Arab
States.
An important characteristic of successful structural
transformation which is related to industrialization is
the ability of transforming economies to produce more
complex, sophisticated and high-value goods over time
(Badiane, Ulimwengu, & Badibanga, 2012). Here, we
analyze evidence of structural transformation among
African economies, using the Economic Complexity Index
(ECI) and Products Complexity Index (PCI) developed
by Hausmann et al. (2014). These indices capture both
diversification and sophistication of a country’s production
structure. Following Hausmann et al. (2014), the most
complex products are sophisticated chemicals and
machinery that tend to emerge from organizations where
many highly skilled individuals participate. In contrast, the
world’s least complex products are raw minerals or simple
agricultural products. It follows that countries can only
increase their score in the ECI by becoming competitive
in an increasing number of complex industries. Therefore,
transformation occurs when a country moves from less
complex to more complex products. This notwithstanding,
countries endowed with abundant natural resources can
grow relatively fast without being complex. As pointed out
by Hausmann et al. (2014, p.21), “economic complexity
might not be simple to accomplish, but the countries that
do achieve it, tend to reap important rewards.”
We assume that successful transformation must be gradual
and cumulative. Therefore, we compare measures of
economic complexity among African economies between
1995 and 2013. These measures can be negative (reverse
transformation), zero (stagnation) or positive (progressive
transformation). Out of the 41 African countries for which
data are available (see Table 3.4) only 19 (46.3 percent)
recorded a higher economic complexity measure in 2013
than in 1995. This suggests not only limited transformation
but also significant heterogeneity among African economies
in terms of economic transformation. In 2013, only one
country (Seychelles) posted a positive ECI. With respect
to PCI, the structure of African economies is still more or
less the same when we compare1995 and 2013. Indeed,
agricultural products are still less sophisticated than nonagricultural
products. As it stands, Africa may well be a
case of strong growth with limited structural change, which
is consistent with the fact that much of its growth originates
from extractive industries.
With the undersized manufacturing sector unable to provide
large numbers of jobs, much of the labor exiting agriculture
has entered the service sector, particularly the informal
goods and services sector. In addition to the smaller than
expected agricultural contribution to GDP, many African
countries show a larger service sector GDP share than
would be expected based on their income levels (Badiane,
2014). The service sector share is larger in SSA than in
South Asia, and almost as large as shares in East Asian
and Pacific and Latin American and Caribbean countries
with much higher incomes. The service sector is highly
heterogeneous and combines both high-productivity and
low-productivity occupations. However, in Africa it is often
characterized by a high degree of informality and low
productivity.
During much of the preceding decades Africa seems to have
missed out on the growth-enhancing impacts of structural
transformation. As economies develop, incomes grow due
to labor productivity growth. Part of this productivity growth
54 AFRICA AGRICULTURE STATUS REPORT 2016