At his swearing in, the new African Development Bank President Akinwumi Adesina set out an agenda for the economic transformation of the continent. Among the five pillars of that agenda--popularly known as the "high fives"--is one that may have surprised many, especially in the donor community: Industrialize Africa.
Why the surprise?
Beyond supporting improvements in the 'investment climate'--another name for structural reforms--and pushing the Doing Business agenda, the World Bank and the larger donor community have ignored Africa's industrialization challenge for more than 20 years.
But more than just being a surprise, President Adesina's emphasis on industrial development is also timely. After more than two decades of sustained economic expansion, growth in sub-Saharan Africa slowed to 3.4 percent in 2015. The growth slowdown reflects lower commodity prices, declining growth in major trading partners, and tightening borrowing conditions. Things, at least according to the International Monetary Fund, don't look to be getting much better in 2016. With population growth still about 2.7 percent per year, progress against poverty and growth of the emerging African middle class will slow.
Something special about industry
Africa's pattern of exports makes it particularly vulnerable to commodity price shocks. Fuels, ores, and metals accounted for more than 60 percent of the region's total exports in 2010-14 compared with 16 percent for manufactured goods. Industrial development--broadly defined to include manufacturing, tradable services, horticulture, and agro-industry--can play a vital role in diversifying the region's economies. Moreover, there is mounting evidence that there is 'something special' about industry. Dani Rodrik, for example, has shown that productivity levels in manufacturing converge to global best practice levels, regardless of policies, geography, or institutions. This 'unconditional convergence', which is not found in agriculture or services, can provide a powerful engine of structural transformation and growth, but its significance depends on the pace of industrialization. That is bad news for Africa. In 2013, the average share of manufacturing in GDP in sub-Saharan Africa was about 10 percent, equal to the level in the 1970s and half of what would be expected from the region's level of development. Africa's share of global manufacturing fell from about 3 percent in 1970 to less than 2 percent in 2013. Manufacturing output...