Catalysing investment for transformative growth in Africa: main findings and recommendations

Abstract

Africa entered the twenty-first century on a very good note. The economic growth performance of most African countries over the past decade has been good relative to the continent’s historical growth performance and also relative to the average growth rate for the global economy. Despite Africa’s recent growth performance, there are indications that countries on the continent are experiencing the wrong type of growth in the sense that joblessness is still widespread and the growth has not led to significant reductions in poverty. One of the reasons for this phenomenon of jobless growth in Africa is that the continent has not gone through the normal process of structural transformation, involving a shift from low- to highproductivity activities both within and across sectors. In the normal process of economic transformation, economies begin with a high share of agriculture in GDP and as incomes rise the share of agriculture declines and that of manufacturing rises. This process continues until the economy reaches a relatively high level of development where both the shares of agriculture and manufacturing fall and that of services rise. The structural change observed in Africa has not followed this process. Over the past three decades the continent has moved from a state in which agriculture had a very high share of output to one in which the service sector, particularly low-productivity activities within the service sector, dominates output. This transition has taken place without any significant manufacturing development, which is critical to creating employment. It is therefore not surprising that the continent experienced jobless growth over the past decade.