URBANIZATION AND INDUSTRIALIZATION

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100 ECONOMIC REPORT ON AFRICA 2017 African countries are experiencing “premature deindustrialization”. manufacturing firms to close and others to shed labour to reduce costs. The loss of jobs in highproductivity sectors produced an urban labour force that could only be absorbed in low-productivity informal activities and services (McMillan and Rodrik, 2011). African countries are seeing their share of manufacturing peak at an earlier stage in their development than today’s advanced economies and failing to achieve the development and productivity benefits of a full manufacturing phase—sometimes called “premature deindustrialization.” All developing countries are challenged (especially Africa’s, but with commensurate opportunities—box 3.2). Countries are running out of industrialization opportunities sooner and at much lower levels of income than the early industrializers did. “Industrialization peaked in European countries like the United Kingdom, Sweden and Italy at income levels of around $14,000, in 1990 dollars. India and many African countries other than North Africa reached their peak manufacturing employment shares at income levels of $700” (Rodrik, 2015, p. 15). Instead of manufacturing, labour is shifting into services, but Africa’s service sector has been expanding faster in jobs than value added, suggesting that the marginal productivity of new labour in this sector is low The continued trend of urbanization in the face of deindustrialization has resulted in cities with poorer populations and higher informality. and possibly even negative (Newman et al., 2016). The continued trend of urbanization in the face of deindustrialization has resulted in cities with poorer populations and higher informality. This decoupling of urbanization and industrial development is troubling, because “industrialisation is the most efficient path to sustained growth and economic convergence” (AfDB, OECD and UNDP, 2016, p. 152) and “deindustrialization removes the main channel through which rapid growth has taken place in the past” (Rodrik, 2015, p. 5). Service-led growth could in theory lead the shift to higher-productivity jobs and to faster income growth, but most of the productive services that can play this role are skill intensive, while the bulk of service employment in African countries is neither technologically dynamic nor tradeable (Rodrik, 2015). In Africa, moves to industrialize agriculture are also essential for its structural transformation. Agriculture is the mainstay for a large share of the population and an important contributor to GDP and yet its productivity is less than 56 per cent of the global average (UNECA, 2013). Improving its productivity through industrial production methods and expanded value chains for agri-business and agro-processing will help to provide food surplus for cities and to supply agricultural inputs and labour to industry. Industry can also induce the use of technology and expansion of agricultural production by signalling increased demand for food and agricultural raw materials through urban markets and agro-industrial supply chains. Box 3.2 AFRICA’S OPPORTUNITIES FOR HIGHER LABOUR PRODUCTIVITY Africa is the region that has the most to gain from structural transformation and growth in manufacturing. It has the greatest differences between sectors in output per worker. The average ratio of the highest to lowest productivity sectors in Africa is more than twice that for Latin America and Asia. Moreover, output per worker in manufacturing in Africa is six times that of agriculture. All these factors show enormous potential for movement of labour to urban economic sectors to boost growth of income per person in Africa—a potential that has yet to be tapped (Newman et al., 2016).
3.7 NATURAL RESOURCE–BASED GROWTH AND CONSUMPTION CITIES Failure to achieve growth-enhancing structural transformation is particularly common among countries with high natural resource exports. “There is a very strong and negative association between a country’s reliance on primary products and the rate at which structural transformation contributes to growth. Countries that specialize in primary products are at a distinct disadvantage” (McMillan and Rodrik, 2011, p. 25). This arises partly due to Dutch disease (where labour-poor exports crowd out employment in higher value added sectors) and the difficulty in managing volatile public revenue streams (Collier, 2007). This disadvantage associated with resource endowment (Fukunishi, 2004), combined with colonial histories focused on developing natural resource sectors (AfDB, n.d.), is seen in figure 3.8, which shows that African African countries with better economic performance at a given level of urbanization tend not to have high natural resource rents. countries with better economic performance at a given level of urbanization tend not to have high natural resource rents. At city level, natural resource dependency feeds into the disconnect between urbanization and structural transformation—prompting the term “consumption cities” (Jedwab, 2013; Gollin, Jedwab and Vollrath, 2014). Consumption cities arise from the pull of natural resource earnings that generate Figure 3.8 Urbanization, GDP and natural resource rents in Africa, 2014 LOG GDP PER CAPITA ($) 100,000 1,000 Mauritius Botswana Namibia South Africa Swaziland Arab Rep. Egypt Morocco Tunisia Cabo Verde Nigeria Rep. Congo Kenya Sudan Sao Tome and Principe Zambia Lesotho Cote d’Ivoire Djibouti Tanzania Ghana Mauritania Zimbabwe Chad Senegal Cameroon Comoros Mali Benin Burkino Faso Sierra Leone Mozambique Togo Guinea-Bissau Ethiopia Niger Rwanda Liberia The Gambia Madagascar Burundi Malawi Guinea Dem. Rep. Congo Central African Republic 100 0 10 20 30 40 50 60 70 80 Source: World Development Indicators. Urbanization (%) Equatorial Guinea Seychelles Bubble Size = Natural Resource Rents Per Capita ($) Gabon AN OVERVIEW OF URBANIZATION AND STRUCTURAL TRANSFORMATION IN AFRICA 101
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URBANIZATION AND INDUSTRIALIZATION
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CCONTENTS LIST OF BOXES, FIGURES &
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chapter 5 URBANIZATION AND INDUSTRI
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CHAPTER 1 (CONT) Figure 1.11 Growth
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CHAPTER 4 BOXES Box 4.1 Drivers, en
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LIST OF ABBREVIATIONS USED AEO AfDB
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UN-Habitat UNICEF US USAID WDI WTO
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The lead consultant, Mr. Gulelat Ke
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FFOREWORD Urbanization is a mega-tr
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articulated. Yet, industrial target
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harnessing opportunities from rapid
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A diverse urban system can offer in
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Cities and urban agglomerations sho
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Figure 1.1 Economic growth in Afric
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In 2016, the generally weak world e
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Box 1.2 SOME POLICY RESPONSES OF AF
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year, driven by slower growth in Al
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associated with a decline in the va
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Figure 1.7 Productivity growth by A
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AFRICA’S CURRENT ACCOUNT DEFICIT
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lower global prices of oil and food
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about 4 and 5.5 percentage points,
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Box 1.3 THE CONTINENTAL FREE TRADE
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Figure 1.15 Gross domestic savings,
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Page 55 and 56: REFERENCES AfDB-OECD-UNDP 2016. Afr
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Page 119 and 120: Figure 4.1 The urbanization-industr
Page 121 and 122: 4.1 DRIVERS: URBAN DEMAND AND SHIFT
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Page 131 and 132: More recent theories of industrial
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Page 137 and 138: Figure 4.9 Top two ranked countries
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Page 143 and 144: Box 4.5 A PATH TO FORMALIZATION Suc
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ҋҋ Linking sector strategies, nat
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Agglomeration economies are powerfu
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Gutman, J., A. Sy and S. Chattopadh
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ENDNOTES 1 The link between urbaniz
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Still, policies that are well targe
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Figure 5.1 50,000 Four basic countr
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5.2 USING URBAN DEMAND TO DRIVE IND
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BOX 5.1 CONT. GRANTING POLICY SUPPO
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uilding superstructures are often r
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Box 5.3 RWANDA’S TRADEABLE SERVIC
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the surrounding fertile agricultura
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Despite urban primacy, secondary ci
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REPUBLIC OF CONGO A functional urba
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5.4 OVERCOMING BARRIERS TO AGGLOMER
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Box 5.5 COST-EFFECTIVE AND FAIR TEN
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Even non-BRT systems can improve tr
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in the economy as a whole, through
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5.5 INTEGRATED POLICIES TO LINK URB
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To foster industrialization, polici
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evenue is only 15.6 per cent of its
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REFERENCES Ackah, C., C. Adjasi and
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NISR (National Institute of Statist
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202 Table 6.1 Costs and benefits of
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Despite the recent slowdown of the
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