Smart industrialization through trade in the context of Africa’s transformation

Abstract

Africa’s experience with industrialization has been disappointing. Globally, the share of manufacturing in total output rises with per capita income until countries reach upper-middle income status and declines as services become more prevalent at higher incomes. The share of manufacturing exports in Africa’s total exports similarly declined from 25.6 per cent in 1995 to only 18.9 per cent in 2014. By moving labor and other resources from lower-productivity to higher-productivity activities and raising within-sector productivity growth, industrialization contributes to economic transformation. Moving forward, the transformation of African economies through industrialization will be key to achieving economy-wide productivity improvements, job creation and sustained progress in growth and poverty reduction. This policy brief highlights the importance of trade as a tool for achieving Africa’s structural transformation agenda and provides focused policy recommendations on how African countries can more effectively use trade agreements, trade policy and trade-related complementary measures to industrialize.