Africa’s Structural Transformation Challenge

PRINCETON – Long viewed as an economic basket case, Sub-Saharan Africa is experiencing its best growth performance since the immediate post-independence years. Natural-resource windfalls have helped, but the good news extends beyond resource-rich countries. Countries such as Ethiopia, Rwanda, and Uganda, among others, have grown at East Asian rates since the mid-1990’s. And Africa’s business and political leaders are teeming with optimism about the continent’s future.

The question is whether this performance can be sustained. So far, growth has been driven by a combination of external resources (aid, debt relief, or commodity windfalls) and the removal of some of the worst policy distortions of the past. Domestic productivity has been given a boost by an increase in demand for domestic goods and services (mostly the latter) and more efficient use of resources. The trouble is that it is not clear from whence future productivity gains will come.

The underlying problem is the weakness of these economies’ structural transformation. East Asian countries grew rapidly by replicating, in a much shorter time frame, what today’s advanced countries did following the Industrial Revolution. They turned their farmers into manufacturing workers, diversified their economies, and exported a range of increasingly sophisticated goods.

Little of this process is taking place in Africa. As researchers at the African Center for Economic Transformation in Accra, Ghana, put it, the continent is “growing rapidly, transforming slowly.”