Structural Transformation In Africa Research Articles

Prospects and challenges of achieving structural transformation in Africa through the African Continental Free Trade Area

The African Continental Free Trade Area (AfCFTA) agreement seeks to integrate markets in Africa into one large market. With the growing concerns about continental integration, this study identifies prospects and challenges of achieving structural transformation in Africa through the AfCFTA. The study employs the Interactive Structural Modelling technique, which helps to develop a contextual relationship between the factors in terms of their driving power or dependence power. The results indicate that unequal trade and investment opportunities, poor infrastructure, poor access to development finance, and the degree of industrialisation have a high driving power, hence a greater potential to create a ripple effect on other factors associated with African integration. Based on the findings, this study recommends that a platform be created within the agreement where these challenges can be tackled. In this view, the establishment of various development finance institutions monitored and facilitated by the AfCFTA affiliates, could be explored.

Globalization in lifelong gender inclusive education for structural transformation in Africa

The present study examines the relevance of globalization in lifelong gender inclusive education for structural transformation. The focus of the research is on 41 countries in Africa using data from 2004 to 2021. The generalized method of moments (GMM) is employed to assess the problem statement within the remit of interactive regressions. Gender inclusive lifelong learning is measured as gender inclusive education acquired during the three levels of education, notably: primary, secondary and tertiary inclusive education stages. Total globalization and corresponding components (social, economic and political dynamics) are employed as moderators. The attendant sub-components of economic (i.e., trade and financial) and social (i.e., interpersonal, informational and cultural) globalization are also employed for robustness purposes. The hypotheses that globalization and gender inclusive lifelong learning individually influence structural transformation are not validated. Furthermore, the hypothesis that globalization dynamics moderate lifelong gender inclusive education to promote structural transformation is also not validated. Clarification as to why the hypotheses are not validated is provided. Policy implications are discussed.

Technological Capability, Inclusive Growth and Structural Transformation in Africa

ABSTRACT Some studies have shown that economic growth in Africa has not been sustainable, transformative, nor inclusive. This is very perplexing, considering that resource-poor East Asian countries have not only achieved high growth rates but have done so while alleviating poverty and becoming major players in the global economy. Despite the recognition that technology was instrumental in the success story of East Asian countries, there have been few empirical studies that focus on how technology drives economic growth in Africa. Based on a sample of forty-one African countries (2005–2020), this article uses the Generalized Method of Moments (GMM) estimation technique to investigate the extent to which technological capability plays an important role on economic growth of African countries. The results from the empirical analysis suggest, inter alia, that technology, investment in physical capital, macroeconomic and political stability are important determinants of growth in Africa. The article suggests that African countries should intentionally strengthen their technological capabilities, to leverage new opportunities in emerging frontier industries, foster inclusive growth, and be adequately prepared for the fourth industrial revolution.

An Assessment of Agenda 2063’s First Ten-Year Implementation Plan and its Implication on the African Continental Free Trade Area

Trade under the African Continental Free Trade Area (AfCFTA) began on 1 January 2021. The AfCFTA intends to bring African countries closer in terms of economic integration and has numerous potential gains for state parties and the continent at large. However, the policies on continental integration are not new to Africa. To improve continental economic integration, the Organisation of African Unity and its successor, the African Union, adopted the Abuja Treaty, the Action Plan for Boosting Intra-African Trade, and the Tripartite Free Trade Area. These policies have not been implemented yet, which creates uncertainty regarding the implementation of AfCFTA. To achieve its objectives, the AfCFTA requires member states to implement a complementary set of measures as part of Agenda 2063’s First Ten-Year Implementation Plan ranging from 2014 to 2023, which seeks to accelerate structural transformation in Africa. The implementation will ensure that some non-tariff barriers are eliminated to facilitate intra-African trade. However, the low aggregated implementation score of 51 per cent against the 2021 targets might have negative implications for the AfCFTA. The member states and regional economic communities are far from meeting the 2023 targets. There is low progress for Aspiration 1 of Agenda 2063 with an overall score of 37 per cent against the 2021 targets. Therefore, the article analyses the implication of the implementation or lack thereof of the First Ten-Year Implementation Plan on AfCFTA.

The political economy of the African Continental Free Trade Area and structural transformation in Africa

ABSTRACTThe post-colonial economy of African countries has continued to manifest all the characteristics of its colonial origins in terms of its structure, direction, and composition. Export of primary commodities continue to take precedence over exports of manufactured products. The African Continental Free Trade Area emerged after series of negotiations to address the problem of structural transformation through value added production, services and increased agglomeration in African economies. This paper examines the extent to which the AfCFTA can foster structural transformation and socio-economic development in Africa. The paper found that despite the challenges that may affect the implementation of the agreement, AfCFTA holds great potentials for the realisation of the social transformation in Africa through creation of regional value chains, unlocking the opportunities in free movement of factors of production and enhancing a stronger voice for Africa in the negotiation of trade and investment agreements with other regions of the world.

Trade reform, infrastructure investment, and structural transformation in Africa: Evidence from Guinea-Bissau

This study examines the impacts of trade reform and infrastructure investment on structural transformation and poverty alleviation in Guinea-Bissau using a dynamic computable general equilibrium model. We found that partial or complete tariff rate cuts accompanied by a scaling-up infrastructure investment funded by debt only positively impact macro-and micro-outcomes but do not generate structural transformation. Conversely, trade reform and infrastructure investment funded by a mix of debt and tax rates on the firm's income generate structural transformation with labor reallocation from agriculture to non-agricultural sectors. This structural transformation pattern favors the poor and contributes to reducing income inequality over time.

Foreign Direct Investment and Structural Transformation in Africa

Foreign Direct Investment and Structural Transformation in Africa

Global value chains participation and structural transformation in Africa: Are we advocating environmental protection?

The environmental policy in Global Value Chains (GVCs) participation and structural transformation of African countries has been hardly investigated. The study analyzes the effect of GVCs participation on the structural transformation of African economies. It also examines the effect of structural transformation on environmental pollution and assesses whether African countries are advocating the environmental issues while seeking structural transformation through GVCs participation. We used second-generation panel data for 41 African countries from 1990 to 2018 and found that GVCs participation, digitalization, and renewable energy are key determinants of structural transformation in Africa. The results revealed that GVCs participation is subject to environmental pollution and the U-inverted hypothesis between GDP and CO2 emissions is verified. Moreover, we find that the moderating effect of the structural transformation on the effect of GVCs participation on environmental pollution in Africa is negative. This result suggests that pursuing the structural transformation in African economies can play a key role in reducing environmental pollution which is highly correlated with GVCs participation. Findings show that the use of renewable energy can significantly reduce CO2 emissions. The results are robust whether we consider the backward or forward linkages. These results have important policy implications in terms of upgrading opportunities to reduce emissions and promote green development for the structural transformation of African countries throughout GVCs participation.

Gender diversity and productivity in manufacturing firms: evidence from six Sub-Saharan African (SSA) countries

AbstractWe revisit predictions about the relationship between gender diversity and firm productivity using data on 1,082 manufacturing firms from six Sub-Saharan African countries: Ghana, the Democratic Republic of Congo, Tanzania, Uganda, Zambia and Kenya. Recent evidence suggests that a gender-diverse workforce opens up a firm to a vast range of talent, knowledge and perspectives critical to enhancing innovation and problem solving, and thereby, increasing firm productivity. Given the importance of manufacturing for employment and structural transformation in Africa, we test the gender diversity–productivity proposition by exploring structural differences (heterogeneity) across manufacturing firms using the Industry without Smokestacks (IWOSS) classification. We find that while gender diversity promotes firm productivity at lower levels, this effect is displaced with further increases. Our results did not show that IWOSS firms do any better in promoting the diversity–productivity link. Implications of this finding and areas for future studies are also discussed.

Infrastructure-Structural Transformation Nexus in Africa: The Role of Financial Sector Development

Abstract This study investigates the link between infrastructure and structural transformation in Africa as well as the mediating role of financial development on the nexus. We employ data from 24 African countries for the period 2003 to 2019 and adopt the system Generalized Method of Moments (sGMM) estimation technique. Our empirical results suggest that infrastructure and financial development foster structural transformation. However, our results show varying effects of ICT, electricity, and transport on sectoral value-added. Specifically, ICT infrastructure spurs the agricultural and manufacturing sectors value-added, electricity infrastructure aids all sectoral value-added, and transport infrastructure is important to the development of the manufacturing and services subsectors. Also, the agricultural and manufacturing sectors benefit more than the services sectors from financial-sector development. Overall, we find that infrastructure stimulates structural transformation. The net effect of the interaction of financial development and infrastructure on structural transformation appears to be zero, suggesting that financial development does not augment the nexus between infrastructure and structural transformation in Africa.

Dynamics of technology gap between OECD and African countries: A structural estimation

Like other technology gap models, the application of “the Latin American Structuralism” model in OECD & African countries reveals that the technology spillovers due to the technology gap is not as easy task as it was presumed by the mainstream growth theories. Using the per capita GDP gap between the OECD and sample African countries as a proxy for the technology gap, this paper indicates that the technology gap growth rate has been further soaring instead of revealing the normal falling tendency. The finding implies the absence of “automatic catch-up tendency” between the homogenous technology producing countries (OECD) and the heterogeneous technology extracting countries (Africa) and the “weak effort” African countries exerted so far to benefit from the technology gap in the form of spillovers from technology imitation.Among African relative sectoral growth contributions, the relative growth contributions of the agriculture and service sectors negatively affect the technology gap growth rate. However, they cause the equilibrium technology gap to further soar. It suggests the need for structural transformation in Africa. The two-steps difference GMM model is used on a panel of 34 African countries for ten years (2005–2014).

Effects of trade and financial integration on structural transformation in Africa: New evidence from a sample splitting approach

Improving on structural transformation is one of the major preoccupations of countries in Africa. However, structural transformation process has been unimpressive despite the efforts of countries to promote transformation. While evidence abound on the macroeconomic determinants of structural transformation, issues around whether or not countries in Africa should open their economies to international markets for improved transformation have not received much attention in the literature. This study therefore examines the threshold effects of trade and financial integration on structural transformation in 32 African countries using a sample splitting estimation approach over the period 1985 to 2015. Our evidence suggests that, trade and financial integration effects do not evolve independently but complement each other in explaining cross-country differences in countries’ level of structural transformation in Africa. However, the transformation-inducing effect of trade (financial) openness slows as financial (trade) integration progresses above the estimated optimal threshold levels. To foster deeper integration in Africa, this study recommends that, efforts to address non-tariff bottlenecks should be a major preoccupation of countries.

Assessing the Obstacles of Regional Integration in the Horn of Africa: the Case of IGAD

Since the independence of the continent, there have been failed attempts to industrialize it using import-substitution policy, which gave rise to the idea of regional integration as an instrument to facilitate structural transformation in Africa. Consequently, African countries have embraced regional integration as an essential element of their development strategies principally driven by the economic rational of overcoming the restraint of small and fractioned economies working in isolation. The establishment of the Organization for African Unity (OAU) in 1963 believed to contribute to many integration initiatives. Even after the transformation of OAU to AU, leaders of the continent once again emphasized their dedication to the idea of regional integration. Obviously, even in the future the issue will continue to be one of the main economic agendas of the continent as there is a widely shared belief that regional cooperation is crucial to tackle development challenges that cannot be addressed at a national level. The cardinal objective of this paper is to assess the obstacles of regional integration in the Horn of Africa. Hence, the findings show that political instability, conflicts, overlapping membership and weak infrastructure are the main challenges for regional integration in East Africa.

Prioritising interventions for sustainable structural transformation in Africa: a structural equation modelling approach

ABSTRACTDevelopment paradigms offer competing theories on the drivers of structural transformation. Most of the analysis has so far focused on the economic factors with little emphasis placed on either the social or environmental dimensions of sustainable development. Furthermore, there has been little theoretical or empirical analysis of how the three dimensions (e.g. economic, social, and environmental) interact to impact on structural transformation. This leaves an important gap in the literature since the three sectors are interlinked, not mutually exclusive, and hence cannot be analysed in isolation from one another. Using a panel data set for a group of 29 African countries spanning the period 1995–2011, this study employs a structural equation modelling approach to estimate the direct and indirect impacts of social, economic and environmental indicators on a composite index of structural transformation. We find that strategies that prioritise investments in social inclusion programmes have the greatest catalytic effect in advancing structural transformation in Africa.

Building and integration of agricultural value chains in Nigeria

ABSTRACTThe current efforts at structural transformation (ST) in Africa aim to remove the negative impacts of external shock and the weak linkages of the economy with the resource sector as well as eradicate poverty and promote sustainable development. Based on the compelling need for sustainable, inclusive and pro-poor development, this paper examines the role and place of building and integration of agricultural value chains (AVCs) in Africa using Nigeria as a case study. It pays very close attention to the production structure and challenges confronting ST in Africa and the case study country. Lessons from selected economies with respect to the part played by AVCs in their ST are drawn such as the need to be sequential and experimental in approach, strategic coordination, monitoring and evaluation of markets, and more active involvement of research institutes in AVC development activities.

The Illusive Quest for Structural Transformation in Africa: Will China Make a Difference?

Despite various attempts since independence and the growing economic engagement between China and Africa in the last two decades, structural transformation in Africa has remained elusive. In the last six decades, and unlike China and East Asian countries, African countries failed to successfully transform their economies and thus upgrade their industrial capabilities to move up the ladder of value addition. There is, however, renewed efforts by African countries to industrialise as one of the ways to structurally transform their economies. African countries should ‘leverage their backwardness’ to attract industries and technologies that are consistent with their comparative advantages (Lin, 2018). Indeed, there appears to be growing interest in Africa from the Chinese labour-intensive manufacturing, who see Africa as a low cost production region, especially given the rising labour costs in China. With clear strategic policy direction, African countries can take advantage of the imminent relocation of a substantial share of China’s 85 million manufacturing jobs. This is not a foregone conclusion, since other regions are also trying to exploit this opportunity, and hence requiring African countries to solidify their competitive advantage for the imminent relocation. The studies, in this issue, while cautiously optimistic about the potential positive contribution of China for Africa’s structural transformation, underscore that such success is conditional on African capability and informed strategic policy making and implementation in a pragmatic manner.

China’s Rise and Opportunity for Structural Transformation in Africa

China’s economic development has been miraculous since the transition from a planned economy to a market economy in 1979. This article provides answers to five related questions: Why was it possible for China to achieve such extraordinary performance during its transition? Why was China unable to attain similar success before its transition started? Why did most other transition economies, including those in Africa, fail to achieve a similar performance? Can African countries have a similar performance as China had in the past three decades and how to do that? What are the opportunities for African countries from China’s rise? The paper concludes with a positive note: If the country in Africa adopt a pragmatic approach to develop its economy along its comparative advantages in a market economy and tap into the potential of latecomer’s advantages with a facilitating state, the African country can benefit from the pending relocation of China’s light manufacturing and grow dynamically like China.

What Kinds of Chinese ‘Geese’ Are Flying to Africa? Evidence from Chinese Manufacturing Firms

This paper provides a preliminary analysis of the nature of Chinese manufacturing investments in Africa, focusing predominantly on four countries – Ethiopia, Ghana, Nigeria, and Tanzania – but also including examples as illustrations from other countries, when appropriate. Drawing on fieldwork conducted between 2014 and 2015, the paper explores the varieties of existing Chinese manufacturing investment and the sectors into which Chinese companies are investing. We demonstrate in this paper that Chinese manufacturing investment in Africa is indeed expanding rapidly, yet the official data on investment approvals, both in China and in African countries, significantly overstates the actual number of investments in operation. Several investors do fit the model of Akamatsu’s ‘flying geese’: large firms seeking new locations for production as part of global networks and value chains. However, we also identified three other kinds of ‘geese’: large, strategic, local market-seeking geese; raw material-seeking geese; and small geese travelling together in flocks. The different kinds of firms offer different kinds of development opportunities and challenges for structural transformation in Africa.

Has climate change driven urbanization in Africa?

This paper documents strong but differentiated links between climate and urbanization in large panels of districts and cities in Sub-Saharan Africa, which has dried substantially in the past fifty years. The key dimension of heterogeneity is whether cities are likely to have manufacturing for export outside their regions, as opposed to being exclusively market towns providing local services to agricultural hinterlands. In regions where cities are likely to be manufacturing centers (25% of our sample), drier conditions increase urbanization and total urban incomes. There, urban migration provides an “escape” from negative agricultural moisture shocks. However, in the remaining market towns (75% of our sample), cities just service agriculture. Reduced farm incomes from negative shocks reduce demand for urban services and derived demand for urban labor. There, drying has little impact on urbanization or total urban incomes. Lack of structural transformation in Africa inhibits a better response to climate change.

Pattern and Determinants of Structural Transformation in Africa

This paper models the evolution and determinants of the shares of agricultural, manufacturing and services sectors' value added for 53 African countries for 1970-2014 years. A number of alternative estimation techniques were used. These included pooled OLS with clustered standard errors, quantile regressions and panel data techniques. However, the quantile regressions do not provide much additional traction over and above the OLS estimates. There are large gaps in the data for many countries for several variables. Policy conclusions are derived from the viewpoint of increasing the shares of the services and, particularly, the manufacturing sector in value added.