Is sub-Saharan Africa deindustrializing?
Emmanuel Buadi Mensah
There is a general view that Africa is deindustrializing. We examine the extent
to which the existing result is sensitive to sample size and new sectoral indicators.
In addition to the usual linear fixed effect model, we use nonlinear panel data
method that recognizes the fractional nature of manufacturing share of employment
and output. We do not find convincing and robust evidence in support of the
general view that Africa is deindustrializing prematurely. Manufacturing employment
shares do not follow an inverse U-shape relationship. Conditional on income,
population, and country-specific fixed effects, manufacturing output shares show
positive and statistically significant trends over time. When we increase the
coverage of countries to almost all countries in Africa, the results suggest that
Africa is not deindustrializing, although there has not been any significant
industrial development since the 1970s. This result masks important regional
differences. A sub-regional analysis shows that East Africa is industrializing,
whereas Southern Africa is the only region that seems to be deindustrializing.
We examine the underlying drivers of manufacturing performance and discuss the
implication for data collection and industrial policy in Africa.
Keywords: Africa, deindustrialization, industrial development, economic growth
JEL Classification: O14