Capital flows and economic transformation: chapter 4

Abstract

Africa needs economic transformation in order to achieve sustainable growth and reduce its dependence on primary commodity production and exports that increase vulnerability to shocks. Economic transformation is a process that alters the relative contribution of economic sectors to gross domestic product (GDP) and employment over time. This process manifests itself in growth models through two main channels: first, reallocation of factors of production from less productive sectors to more productive ones; and second,diversification of the economy away from primary commodity sectors (agriculture, oil and minerals) into industry and services (Berthelemy and Soderling 2001).