Executive Briefings

Manufacturing in Africa Is on the Upswing

The evidence of strengthening in African manufacturing is increasingly persuasive. Between 2000 and 2010, the share of the African population living on less than $1.25 per day fell from 58 percent to 48 percent. In no small part, the falling rate of extreme poverty is driven by much-improved output performance.

Manufacturing in Africa Is on the Upswing

For U.S. goods producers, a compelling consideration is the path of industrialization and the role it will play in sustainable development across the continent. In recent research, the current and future strength of African manufacturing has been debated as economists watch for signs of long-term change.

While sub-Saharan Africa is still one of the poorest regions in the world, there is an upswing in overall economic strength. Through much of the 1980s and 1990s, gross domestic product growth lagged emerging market and world performance by a considerable margin. But a notable, albeit volatile, upswing began in the mid-1990s. For a brief period in the early 2000s, sub-Saharan growth was considerably stronger than the emerging market and global average.

Debates rage about the sustainability of stronger African economic performance. A recent article in The Economist notes that for decades, commodity prices shaped the continent’s economic cycles to such an extent that output growth would weaken during periods of raw material market weakness. This seems to be changing. The article points to encouraging signs in the wake of the current sag in global commodity markets. Among other things, there have been fewer sizable currency depreciations.

The authors note that one reason for the current resilience to commodity weakness is that African manufacturing has been expanding as quickly as the rest of the economy. Data from the African Development Bank reflect this assertion although the numbers highlight a modest lag. Between 2010 and 2012, African GDP growth averaged 5 percent versus a 4.6 percent average for the growth of African manufacturing value-added. In a healthy developmental picture, industrial growth should be leading. But the improvement is noteworthy nevertheless, especially in the context of better fiscal policy management, upgrades to education and infrastructure, and streamlining of the regulatory regime.

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For U.S. goods producers, a compelling consideration is the path of industrialization and the role it will play in sustainable development across the continent. In recent research, the current and future strength of African manufacturing has been debated as economists watch for signs of long-term change.

While sub-Saharan Africa is still one of the poorest regions in the world, there is an upswing in overall economic strength. Through much of the 1980s and 1990s, gross domestic product growth lagged emerging market and world performance by a considerable margin. But a notable, albeit volatile, upswing began in the mid-1990s. For a brief period in the early 2000s, sub-Saharan growth was considerably stronger than the emerging market and global average.

Debates rage about the sustainability of stronger African economic performance. A recent article in The Economist notes that for decades, commodity prices shaped the continent’s economic cycles to such an extent that output growth would weaken during periods of raw material market weakness. This seems to be changing. The article points to encouraging signs in the wake of the current sag in global commodity markets. Among other things, there have been fewer sizable currency depreciations.

The authors note that one reason for the current resilience to commodity weakness is that African manufacturing has been expanding as quickly as the rest of the economy. Data from the African Development Bank reflect this assertion although the numbers highlight a modest lag. Between 2010 and 2012, African GDP growth averaged 5 percent versus a 4.6 percent average for the growth of African manufacturing value-added. In a healthy developmental picture, industrial growth should be leading. But the improvement is noteworthy nevertheless, especially in the context of better fiscal policy management, upgrades to education and infrastructure, and streamlining of the regulatory regime.

Read Full Article

Manufacturing in Africa Is on the Upswing