The Political Economy of Industrialization in Sub-Saharan Africa: Evaluating the Role of Institutions

Abstract

Sub-Saharan Africa has recently witnessed rising growth rates, but the continent is still largely not industrialised. Mainstream empirical diagnosis has identified the paucity of physical and human capital as the main culprit. However, with the increasing inflow of capital into the continent, such arguments have become hackneyed. A possible culprit identified in the evolving development literature is the quality of institutions. How much has the quality of institutions, structured largely by the prevailing political economy of individual states, influenced Africa’s industrial performance? This study deploys descriptive and analytical methodologies to proffer answers to these questions. The estimates obtained from the Pool Mean Group Panel Autoregressive Distributed Lag (PMG-ARDL) as well as the Augmented Mean Group (AMG) panel estimators point strongly to the fact that institutions are bane of industrialization in Sub-Saharan Africa (SSA). Specifically, we find evidence that in the long run, regulatory quality, rule of law and control of corruption all impact the manufacturing subsector negatively and significantly. The panacea is not only within the matrix of optimal resource allocation, but must integrate the entire political and sociological process, involving governments at all levels, non-governmental organisations (NGOs) and faith-based groups.