Structural Change in Africa

Structural change is a necessary part of economic growth and development. It is the change in the relative importance of the three main sectors of any economy (agriculture, industry and services). As countries grow, they move from having larger shares of resources in the agriculture sector towards the industrial and then the service sector. In most advanced economies, the agriculture sector has the lowest share of employment while the industrial and service sector have higher shares of employment.

In Africa, structural change has not been growth-enhancing (Mcmillan and Rodrik, 2011). Industrialisation is a vital part of structural change for sustained economic growth but for African countries, the process of structural change has not included industrialisation in a meaningful way.

That is to say, in the process of economic growth, the growth and development of the industrial sector has been substandard even though according to Rodrik (2013) the industrial sector is vital for the convergence of the income of poor countries towards that of more advanced countries.

Figure 1, presents the pattern of structural change for 11 African countries from 1960 to 2010 using employment shares of agriculture, industry and services. The pattern of structural change for most African countries is that agriculture has the highest share of employment which is falling over time while the service sector has the second-highest share of employment and is rising over time. Employment in the industrial sector is low and stagnant.

This pattern is baffling as African countries are some of the least developed in the world and are in a prime position for industrialisation for economic growth. It is therefore imperative to study the reasons for Africa’s strange pattern of structural change and propose the right direction for sustainable economic development in Africa. Although some African countries have experienced economic progress in recent decades, there should be concerns over the sustainability of such economic growth without a strong industrial sector.

One thought on “Structural Change in Africa

  1. Structural change is indeed vital for economic growth. What is quite interesting is that it seems to me that many developed countries which have ‘de-industrialized’ (for reasons such as higher labour costs) are now quite at a disadvantage for focusing too much on the service sector. Everything is ‘made in China’ and with innovation, that gives them- China – significant power.

    As for Africa, I think we need to evaluate what would work for us and adopt those, as against just accepting western theories – one of our undoings. There’s the ‘craze’ for free-market capitalism which is being pushed strongly on us by the West, however they didn’t grow their own nations that way – their governments interfering in markets played significant roles in their development.

    Overall, i’m happy to have ‘stumbled’ on your blog and look forward to reading more from you 🙂 Well done Olamide.

    Like

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