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Can Africa Maintain its Economic Growth?
http://www.theglobalist.com/can-africa-maintain-its-economic-growth/
Smart Industrialization for Africa’s Economic Transformation.
Africa’s economic rise over the past two decades is no longer news. In the decade from 2003, the region’s output expanded by over 5% a year, in spite of a protracted slowdown in many of its biggest export markets. The African Development Bank is projecting even faster growth of 6.4% this year.
At this rate, the continent’s economy would double in size before 2030.
No wonder foreign investors are looking to cater to the growing African market. Even more important, intra-African investment — an event long awaited to create more growth across the continent — is expanding, led by companies such as South Africa’s Massmart and Nigeria’s Dangote Group.
Alongside all this optimism, there is also growing disquiet. Can this growth be sustained? The likely answer is: not without sufficient structural transformation.
In Africa’s case, this requires shifting employment and resources out of traditional farming towards higher-productivity agriculture, manufacturing and services. As elsewhere, structural transformation is about boosting people’s skills and firms’ technological capabilities. To succeed, this effort must be backed by nimble, more effective public institutions. If and when those elements fall into place, then transformation makes growth resilient and hence durable.
Linking Africa’s economies
Industrialization, properly thought of, is a big part of that structural transformation. The word might still evoke images of cavernous factories and multinational corporations, but the fact is that industrialization is by no means just about manufacturing or large companies.
Manufacturing today is about value addition. It interacts with the rest of the economy — both upstream with regard to energy and raw materials and downstream, with distribution, logistics, environmental and financial services.
Economies around the world succeed because of their ability to build backward and forward links between the various sectors of the given country’s economy (as well as doing so across borders).
Independent of the level of economic development, this is the key to successful structural transformation. It applies to countries such as Germany, France and Italy just as much as to any African country.
In Africa’s case, a key aspect of industrialization also concerns agriculture. The agro-processing sector in particular holds great promise for development in rural areas.
Tourist shops and restaurants
But “classic” sectors such as natural resources and agriculture aside, how does Africa stack up with regard to services?
Recent evidence — mainly the GDP rebasing in Nigeria and Ghana — revealed that services accounted for more than half of their respective economies, far more than previously thought.
Countries like Rwanda, Mauritius and Tanzania are also performing great on services trade. Tourism is in many countries an increasingly important driver of growth and employment.