Kick-starting Industrial Transformation in Sub-Saharan Africa

Sub-Saharan Africa is experiencing a very promising period of sustained economic growth. Since the late 1990s the economy has grown considerably faster than the population, and per capita income consequently has increased. Two characteristics of the boom are alarming. First, thus far growth has not had the desired effects on employment, income and human development: it has not translated into sufficient jobs, and most employment expansion has occurred in the informal economy, usually at very low levels of productivity. Second there is little indication of structural change towards productivity-driven economies. Growth has mainly been driven by the exploitation and export of natural resources. In order to become economically sustainable and socially inclusive, sub-Saharan Africa needs a structural change of its economies towards productivity-driven activities outside the commodity sectors. To manage this, proactive and targeted industrial policies are essential. The challenge is to kick-start industrial transformation in pre-industrial societies. While the State thus faces an enormous transformational task, policy-makers and bureaucrats act under an incentive structure that is often highly unfavourable for industrial development. Still, there are options for economic diversification – from efficient import substitution, to agricultural processing, export of light manufactures and trade in tasks, to tourism. To exploit them effectively, sub-Saharan African countries need to define realistic and shared “transformation projects” and reform democratic institutions in tandem with the implementation of industrial policy.