Abstract
PurposeThe purpose of this study is to examine whether the state of infrastructure development in Sub-Saharan Africa actually stimulates industrial sector productivity, using a panel data set of 17 countries spanning from 2003 to 2018.Design/methodology/approachThe study used panel least square estimation technique to examine the relationship between the variables.FindingsThe result of the study indicates that the major factor that influences industrial sector productivity in Sub-Saharan Africa is their quantity and quality of telecommunication infrastructure. Analysis shows that the relatively low level of industrial sector productivity in Sub-Saharan Africa is largely due to their poor electricity and transport infrastructure and underutilization of water supply and sanitation infrastructure.Practical implicationsThe government should partner with other developed countries of the world such as Germany, Japan, Sweden, Netherlands, Austria, Singapore, United States of America, United Kingdom, Switzerland and United Arab Emirates, which are the top ten countries in infrastructure ranking as currently released by the World Bank, to equally extend their quality infrastructure to their own country for enhanced industrialization.Originality/valueThe novelty of this research lies on the fact it is a cross-country study as against the few empirical studies that focused only on a single country. Also, the study made use of the four main indicators of infrastructure development in an economy, which are electricity infrastructure, transport infrastructure, telecommunication infrastructure and water supply and sanitation infrastructure, to examine its effect on industrial sector productivity in Sub-Saharan Africa.
Highlights
A well-industrialized economy is expected to have adequate infrastructure that will impact positively on the industrial sector of the economy which is seen as an engine of economic growth
The negative relationship between electricity infrastructure and industrial sector productivity authenticates the most recent observation of the African development Africa Development Bank (2018a) that electricity costs three times more in Africa than in comparable developing regions, and most manufacturers operating in West and East Africa have to rely on expensive backup generators as a primary energy source, which adversely affects their profit margins
An increase in military expenditure led to a reduction in industrial sector productivity by 5.6 per cent, showing that the impact of the expenditure is not felt on the economy as most countries within the region are still facing challenges in terms of security and reducing the level of investment in the country
Summary
A well-industrialized economy is expected to have adequate infrastructure that will impact positively on the industrial sector of the economy which is seen as an engine of economic growth. Where LLPit 5 log of labour productivity (output per person employed) for country i at time t; LEINDEXit 5 log of electricity index for country i at time t; LTINDEXit 5 log of transport index for country i at time t; LICTINDEXit 5 log of Information and Communication Technology Index for country i at time t, LWSSINDEXit 5 log of Water Supply and Sanitation Index for country i at time t, LGCFit 5 log of gross capital formation (at annual percentage growth rate) (proxy for capital) for country i at time t, LLit 5 log of labour (labour force participation rate, total (per cent of total population ages 15þ), for country i at time t, LLRit 5 log of lending rate for country i at time t, LCPSit 5 log of ratio of credit to private sector to GDP for country i at time t, LMEXPit 5 log of ratio of military Expenditure to GDP for country i at time t, «it 5 error term. The data for labour productivity, capital, labour, lending rate, ratio of credit to private sector to GDP and ratio of military expenditure to GDP were extracted from World Bank database while data on electricity index, transport index, ICT index and water supply and sanitation index were extracted from Africa Development.
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