Africa's Manufacturing Malaise

Published on 27 Sep 2016 - 47 pages
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Summary

This paper investigates constraints facing the manufacturing sector in Sub-Saharan Africa, and employs the economic complexity and product space analytical frameworks developed by Hidalgo et al. (2007), and Hidalgo and Hausmann (2009), respectively. 

 

The analytical approach describes economic development, as a process of accumulating productive capabilities that allow countries to produce increasingly complex products. Countries producing manufactured products  (i.e. well positioned within the product space, with a high opportunity value) tend to be more complex, and their productive structures allow for easier diversification into other manufactured products. The converse is true for countries with marginal manufacturing sectors.

 

In general, African countries have not undergone manufacturing-led structural transformation. However, the analysis also demonstrates heterogeneity in the African experience, with some countries exhibiting manufacturing growth. A higher opportunity value index (a measure of the number of products near a country’s current set of productive capabilities) is associated with higher levels of manufacturing performance. The effect is non-linear, with middle-income countries benefiting most from investing in their productive capabilities. 

 

The analysis indicates that the process of structural transformation is path-dependent. A country’s current productive capabilities influence the extent to which it can shift production toward increased manufacturing activity.

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