Industries without Smokestacks

Under the current international economic conditions, where Asian countries are strong competitors in the manufacturing commodities, low-income countries like Mozambique could attempt to compete in industries without smokestacks. Fruits and vegetables, agro-processing goods, and various tradable services are estimated to have contributed 1.9 per cent to annual average gross domestic product growth in 1993–2015, when the aggregate growth was 7.8 per cent. Around 80 per cent of the total labour force is dedicated to primary activities, producing 25 per cent of the aggregated value added in 2013–15. The share of services in total exports was only 17 per cent in 2012–14. Although still relatively small, these industries have potential for growth, if Mozambique follows a diversified growth strategy.

Integration Along the Abuja Road Map

This chapter reviews integration among the eight African Regional Economic Communities by comparing their characteristics and progress with three other South-South Regional Integration Arrangements. Three conclusions emerge: (i) slow progress towards meeting overly ambitious objectives; (ii) small changes in the destination of trade across all Regional Economic Communities, indicative of persistent high trade costs and few new manufactured products destined for geographically close markets; and (iii) compared with other South-South Regional Integration Arrangements, the Regional Economic Communities include a high number of provisions not covered in Word Trade Organization negotiations, but these have low legal enforceability. Reasons for this slow progress are explored in the chapter.

Rwanda

Since civil war and genocide left the country in ruins, Rwanda has undergone a remarkable transformation. Growth rates since 1995 have averaged 8 per cent annually, poverty rates have fallen, maternal and child health have improved, and infrastructure and public institutions have been rebuilt. This chapter examines the determinants of the growth path of the Rwandan economy, focusing on: the central role of government; the structural transformation of the economy; the role of exports and foreign investment; and particularly the role of ‘industries without smokestacks’. Policy coherence, together with substantial international support, allowed Rwanda to embark on a growth path. A hallmark of the development path has been to use services as a leading sector at an earlier stage of its development than many other countries.

How Trucking Services Have Improved and May Contribute to Economic Development

In East Africa, there have been numerous concerns over logistics efficiency. Among them, a slow pace of regional integration of the trucking industry is perceived as a major problem. This chapter utilizes a combination of unpublished data surveys and published data to assess the extent of regional integration. Based on various types of data, several main messages can be drawn from the trucking industry: there has been a noticeable reduction in the price of long-distance trucking services along the Northern Corridor; the integration of trucking services is moving fast in East Africa, with foreign-owned trucks accounting for three-quarters of services in the Rwandan market; trucking fleet characteristics and management have improved tremendously and are now comparable to those in South Africa; and the facilitation of border clearance processes has played a major role in improving productivity. Despite all these improvements, the performance of the Tanzanian fleet still lags behind.

Telecommunication and ICT-Based Services Trade

This chapter provides a basic understanding of emerging key information and communication technologies which are increasingly critical for economic growth and development. It establishes the distance to high-quality access to the internet for the least developed and other countries. Broad-based access is key in order to make use of ICT-related innovations. The chapter underlines the importance of governments creating a more open and competitive environment in order to attract infrastructure investment in terms, among others, of fibre-optic rings and cable links, foster rivalry among suppliers of services, thereby benefiting users and consumers with lower prices and better-quality services. Ultimately, the challenge is, through sound public policy, to steer societies from being marginalized by the major technological changes in information and communication.

Industries without Smokestacks and Structural Transformation in Africa

An early stylized fact of development economics is that low-income countries have large differences in output per worker across sectors, and the movement of workers from low- to high-productivity sectors—structural transformation—is a key driver of growth. Historically, manufacturing has been the key driver of structural transformation. It can employ large numbers of unskilled workers, is capable of productivity gains and produces tradeable products allowing economies of scale and specialization. But manufacturing growth in Africa has lagged behind other regions, leading some observers to question Africa’s ability to catch up. This view overlooks such emerging industries as ICT, tourism, food processing, horticulture, and new services exports, which share many characteristics with manufacturing. These “industries without smokestacks” are beginning to propel growth in Africa much as traditional manufacturing did in other, fast growing regions.

Widening the Options

Structural change is taking place in Africa at a pace and with a pattern distinct from the historical experience of today’s industrialized countries. These differences reflect technological change, a changing global marketplace interacting with policy, a rapidly growing labour force and natural endowments. Some African countries, perhaps with coastal locations, will be able to transform their economic structures through manufacturing. However, it would be surprising if the successful African economy of the future closely followed the export-oriented manufacturing-led path that characterized East Asia’s structural transformation. Africa’s growing economies are likely to have economic structures that contain high value-added agriculture, agro-industry and tradable services in addition to a more robust manufacturing base. Global realities will force Africa’s policy makers to think of ways to promote structural transformation into activities beyond manufacturing.

Senegal

Senegal is one of the most stable and democratic countries in Africa. It has enjoyed multi-party rule for decades. There is substantial freedom of the press, and Dakar is one of the safest large cities in Africa. The economy has done less well. The oil shock of 1975 and the subsequent debt crisis led to a steady decline. The economy grew strongly for some years around the turn of the millennium. However there was little structural change, and the rural economy remained dependent on vulnerable rain-fed crops. While many African countries experienced a commodity-driven boom, the Senegalese economy slowed down. Today Senegal has a diversified economy driven by services—led by telecommunications and finance. In the secondary sector, construction has been the most dynamic, and the mining sector has gradually expanded.

Trade in Services

This chapter reviews some of the literature on trade in services, with an emphasis on recent analyses of services trade policies and their effects. African trade is heavily concentrated in agricultural and natural resource-based commodities; the agricultural sector continues to be a major source of employment and economic activity. Trade volumes have risen since the 1990s and exports of some industrial and processed products have been increasing, however, intra-regional trade remains well below potential and the challenge of diversification continues to prevail. There are encouraging prospects for accelerating trade growth as a result of policy reforms. A premise of this chapter is that a precondition for leveraging trade opportunities is a substantial reduction in trading and transaction costs for African firms beyond the current focus on actions to facilitate trade and focus more on improving the performance of a variety of services, including transport, logistics, and related services.

Air Transport in Africa

Air transport in Africa is a growing sector. However, the growth does not provide a complete perspective of its health. Several important facts play a role in truly understanding where Africa’s air transport has been, is now, and where it might develop. Air transport volumes in Africa are still very low when compared to the rest of the world. The notion of the national flag carrier is still deeply ingrained in the politics of the air transport sector, and though various privatization attempts have been made, many governments are reluctant to completely hand over airlines to the private sector, or completely depend on airlines from outside the country if a national airline is not economically sustainable. Both anecdotally and empirically, the new challenges for African air transport market development are not so much around liberalization, but rather affordability and the rise of airport charges.