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Chapter 4. Conclusion

Author(s):
Louise Fox, Alun Thomas, and Cleary Haines
Published Date:
April 2017
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Structural transformation in output and employment in sub-Saharan Africa has become a major concern of development economists. This is because analysis of past trends suggests that while the output transformation has been progressing, the employment transformation has been disappointing in terms of the creation of wage jobs, especially in low-middle-income countries, despite strong output growth performance. Much of the previous analysis used data on only a few countries, and therefore was biased toward middle-income countries outside of sub-Saharan Africa. This paper used a much more inclusive data set, and benchmarked sub-Saharan African performance over the past decade in output, employment, and productivity space against fast-growing Asian countries using continent-wide estimates of employment and output. It has also distinguished between wage and self-employment (household enterprises) in industry and services.

The analysis shows that a major, and often underappreciated, factor behind the slow employment transformation in sub-Saharan Africa compared with the Asian benchmarks was demographics—a labor force growing much faster in sub-Saharan Africa. But another factor was the importance of the mining sector in the growth and employment patterns of sub-Saharan Africa’s industrial sector, and weak productivity in the service sectors because of the high share of household enterprises. Sub-Saharan Africa has a large labor productivity dispersion within the services sectors, including a highly productive financial sector but a number of low-productivity household enterprises in the trading and personal services sectors. Looking forward to 2020 and using optimistic assumptions on output growth, the prospects are good for overall productivity growth in the region. But the employment absorption in the nonagricultural sectors will occur mainly in the services sector and nontradables industrial sector (construction, utilities) rather than in manufacturing.

Could sub-Saharan Africa develop a growth pattern that transforms the economy more rapidly? This is possible if the movement from agriculture into services can generate large improvements in value addition. Benchmarking the projected structural employment shift in sub-Saharan Africa against what east Asia achieved historically shows that sub-Saharan Africa falls short in terms of the development of manufacturing employment. But it remains an open question whether structural transformation can be speeded up with a continuation of the movement of labor from agriculture to services with a small role being played by the manufacturing sector.

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