Economic Transformation in Africa: Patterns, Drivers, and Implications for Future Growth Strategies Ousmane Badiane, Director for Africa, IFPRI, USA 2015 ReSKASS Annual Conference, Addis Ababa, Ethiopia, Sept. 1-3

1. Economic transformation in Africa
Patterns, drivers, and implications for future growth
strategies
Ousmane Badiane
Margaret McMillan

2. KEY TOPICS
 Structural Transformation Process
 Role of Agriculture in Structural Change
 Structural Change Patterns in Africa
 Implications for Growth and Poverty

3. Per-capita Income
low
High
Agricultural GDP
per worker
Agricultural
GDP
low high
AGRICULTURE IN THE ECONOMIC TRANSFORMATION PROCESS
Based on Timmer (2009)

4. Per-capita Income
Share of agriculture
in total labor force
Share of agriculture
in total GDP
low
High
Agricultural GDP
per worker
Agricultural
GDP
low high
AGRICULTURE IN THE ECONOMIC TRANSFORMATION PROCESS
Based on Timmer (2009)

5. (60)
(40)
(20)
-
20
40
60
80
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Share(%)
Ag GDP Share
Ag Emp. Share
Difference
1960 - 2008
 Transformation process has been extremely slow
 Difference between Ag employment and GDP shares almost constant
Stagnating Ag income + Rise in rural poverty

6. -
20
40
60
80
100
120
140
Index:1980=100
Labor Productivity
Agriculture Non-agricultureSource: FAOSTAT 2011
-
10
20
30
40
50
60
70
80
Share(%)
Share of Economically Active Population
With stagnating agriculture:
Labor migrated from that sector to the
non-agricultural sector with rapidly declining productivity
 Decline in total
labor productivity
 Rising poverty rates
1980 - 2008
Macroeconomic Impact

7. 0
10
20
30
40
50
60
70
80
90
100
110
The stunting of the agricultural sector in Africa:
Actual agricultural GDP shares are much lower than would be expected based on
countries’ level of development
Actual
Expected

8. 0
10
20
30
40
50
60
70
80
90
The bloating of the informal goods and services (IGS) sector in Africa:
Actual services GDP shares are higher in most cases than would be expected
based on countries’ level of development
Actual
Expected

9. ANG BEN
BOT
BRK
BUR
CPV
CAM
CAR
CHD
COM
DRC
CGO
COT
DJI
ETH
GAB
GHA
GUI
GB
KEN
LES
LIB
MAD
MWI
MLI
MAU
MOZ
NAM
NGR
NIG
RWA
SEN
SEY
SRL
SA
SUD
SWA
TAN
TOGUGA
ZAM
0
10
20
30
40
50
60
70
80
90
100
-50 -40 -30 -20 -10 0 10 20
Povertyrate(%)
Gap between actual and expected AgGDP shares
Gap between expected and actual ag GDP shares
Agricultural sector underperformance and poverty levels

10. -1.00% 0.00% 1.00% 2.00% 3.00% 4.00%
HI
ASIA
AFRICA
LAC within
structural
-1.00% 0.00% 1.00% 2.00% 3.00% 4.00%
HI
ASIA
AFRICA
LAC within
structural
Decomposition of labor productivity growth: Africa vs other regions
1990 - 1999 Post 2000
Transformation performance has improved markedly with recovery
 Within sector contribution increased significantly
 Structural change contribution went from negative to positive

11. -.08-.06-.04-.02
0
.02
Agriculture Services Professional Unskilled Skilled Not Working
All Female Male
Employment dynamics during recovery:
Average change in working population by occupation 2000 - 2012
Rural Areas
Skilled and unskilled relates to manual labor

12. -.06-.04-.02
0
.02.04
Agriculture Services Professional Unskilled Skilled Not Working
All Female Male
Employment dynamics during recovery:
Average change in working population by occupation 2000 - 2012
Urban Areas
Skilled and unskilled relates to manual labor

13. Implications of poor structural transformation prior to recovery
 Informal goods and services sector (IGS) largest in African economies
 It is a large pool of low productivity labor
 Includes large share of proto-industrial handicrafts
o Wood, leather, metal works
o Small mechanical and electrical parts
o Garments and tailoring
o Food staples processing
Traditional model of industrial policy based on ag vs industry not enough
Industrial policy should include modernization of IGS thru:
o Product sophistication
o Firm maturation
o Enterprise growth

14. Profitability
No. of firms
Based on Sonobe and Otsuka
Current characteristics of IGS in Africa
• Large number of firms producing the same low quality, often imitated goods
• New entrants copy same products, driving profitability down
• No capacity to invest and innovate

15. Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
IGS modernization thru multifaceted innovation and firm maturation
• Vocational training to improve management practices
• Technology acquisition
• Market development
• Infrastructure investment: power, telecom, roads

16. CONCLUSIONS
 Economic transformation performance is improving
 Productivity raising structural change is taking place
 Decade-long stagnation has created a bloated IGS
 Modernization of IGS should be a key target of future industrial policy to:
o Leverage large pool of low productivity labor
o Promote product quality / firm growth in proto-industrial handicraft
sector
o Capture demand in fast growing domestic market
o Raise incomes more broadly and reduce poverty faster

17. REFERENCES
Badiane, O. 2014. “Agriculture and Structural Transformation in Africa.” In Frontiers in Food Policy:
Perspectives on sub-Saharan Africa, edited by W. P. Falcon and R. L. Naylor. Stanford, CA, US: Stanford
University, Center on Food Security and the Environment. Printed by CreateSpace.
Badiane, O., and J. Collins. Forthcoming. “Agricultural Growth and Productivity in Africa: Recent
Trends and Future Outlook.” In Agricultural Research in Africa: Investing in Future Harvests, edited by
J. Lynam, N. Beintema, J. Roseboom, and O. Badiane. Washington, DC: International Food Policy
Research Institute.
Badiane, O., and T. Makombe. 2015. “Agriculture, Growth, and Development in Africa: Theory and
Practice.” In Oxford Handbook of Africa and Economics, Vol. 2, edited by C. Monga and J. Lin. Oxford,
UK: Oxford University Press.
Badiane, O., J. Ulimwengu, and T. Badibanga. 2012. “Structural Transformation among African
Economies: Patterns and Performance.” Development 55 (4): 463–476.

18. REFERENCES (Continued)
McMillan, M. S., and K. Harttgen. 2014. What Is Driving the 'African Growth Miracle'? NBER Working
Paper No. 20077. Cambridge, MA, US: National Bureau of Economic Research.
McMillan, M. S., and D. Rodrik. 2011. Globalization, Structural Change and Productivity Growth. NBER
Working Paper No. 17143. Cambridge, MA, US: National Bureau of Economic Research, Inc.
Sonobe, T., and K. Otsuka. 2006. Cluster-Based Industrial Development: An East Asian Model. New
York: Palgrave Macmillan.
Sonobe, T., and K. Otsuka. 2011. Cluster-Based Industrial Development: A Comparative Study of Asia
and Africa. New York: Palgrave Macmillan.
Timmer, P. 2009. A World without Agriculture: The Structural Transformation Process in Historical
Perspective. Washington DC: American Enterprise Institute Press. Also available as Timmer, T., and S.
Akkus. 2008. The Structural Transformation as Pathway from Poverty: Analytics, Empirics, and Politics.
Working Paper No. 150. Washington, DC: Center for Global Development.