Tokyo International Conference on African Development (TICAD) 7August 29th, 2019Yokohama, Japan

Haroon BhoratSchool of EconomicsUniversity of Cape TownSouth Africa

haroon.bhorat@uct.ac.za

Quality Growth in Africa:Towards Sustainable, Inclusive

and Resilient Development

Outline

2

▪ Economic Transformation in Africa: An Assessmento Premature DeIndustrialisation in Africa?o Resource Dependence as a Growth Challenge o Economic Transformation and Jobs: What the Future

Holds for Africa

▪ Economic Complexity as an Instrument for Policyo From Product Space Analytics to Frontier Productso Capabilities, Complexity and Industrial Policy Solutions

▪ Conclusion

AGR

MIN

MAN

UTI

CONT

WRT

TRS

BUS

GOS

PES

=15.91; t-stat=1.34

-10

12

3

Log

of S

ecto

ral P

rodu

ctiv

ity/T

otal

Pro

duct

ivity

-.1 -.05 0 .05Change in Employment Share (%)

*Note: Size of circle represents employment share in 2010

Sectoral Productivity and Employment Changes in Africa1975 - 2010

3

Premature Deindustrialisation:

Source: Own calculations using Groningen Growth and Development Centre 10-sector database (see Timmer et al., 2014).Notes: 1. African countries included: Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania and Zambia. 2. AGR = Agriculture; MIN = Mining; MAN = Manufacturing; UTI = Utilities; CONT = Construction; WRT = Trade Services;TRS = Transport Services; BUS = Business Services; GOS = Government Services; PES = Personal Services.

Sectoral Productivity and Employment Changes in Asia1975 - 2010

4

Source: Own calculations using Groningen Growth and Development Centre 10-sector database (see Timmer et al., 2014).Notes: 1. Asian countries are comprised of East and South Asian countries, including: China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. 2. AGR = Agriculture; MIN = Mining; MAN = Manufacturing; UTI = Utilities; CONT = Construction; WRT = Trade Services; TRS = Transport Services; BUS = Business Services; GOS = Government Services; PES = Personal Services. 2. The estimated regression line, measuring the relationship between productivity and changes in employment share by sector, is not statistically significant.

Premature Deindustrialisation:

• 14 of these 17 ‘African Lions’ are classified as resource-dependent.

5

Resource Dependence as a Growth Challenge

Ethiopia

Ghana

Rwanda

Sierra LeoneMozambique

NigeriaZambiaUnited Republic of Tanzania

Uganda Central African Republic

Burkina FasoAngolaNiger Dem. Rep. of the Congo

Chad

Congo

Sao Tome and Principe

56

78

9

GD

P G

row

th(0

8-1

2)

0 .2 .4 .6 .8 1Resource Dependence

• In period 2008-2013: 17 African Economies have grown at over 5%.

Source: WDI, 2014, UNCTAD (2014), Own Calculations.

Economic Transformation and Jobs: What the Future Holds for Africa

6

Population Projections, World and Sub-Saharan Africa: 2015 - 2100

Total Population (Billion)

Working Age Population (Billion)

2015 2100%

Change2015 2100

% Change

SSA 1.0 3.9 291.62 0.5 2.5 400.00

World 7.3 11.2 53.42 4.8 6.7 39.58

SSA Proportion (%)

13.7% 34.8% 10.4% 37.3%

Source: WDI, 2014, UNCTAD (2014), Own Calculations.

7

Economic Transformation and Jobs: What the Future Holds for Africa

10 SSA countries will account for nearly 70% of population growth in region:• Nigeria: Increase of 570

million – nearly 20% of all SSA popn. growth.

• DRC: Increase by 311 million -10.5% of SSA growth.

• Tanzania: Six-fold increase in population from 53 to 299 mill.

3.8%

10.5%

4.8%

3.7%

3.4%

6.4%

19.2%

31.4%

8.3%

5.5%3%

Angola

DRC

Ethiopia

Kenya

Mozambique

Niger

Nigeria

Other

Tanzania

Uganda

Zambia

Share of Sub-Saharan African Population Growth by Country, 2015-2100

Economic Complexity (ECI) and the Log of GDP per capita by analytical group, 2013

8

Source: Own calculations using trade data from BACI data (HS 6-digit revision 1992) and GDP per capita data from the World

Development Indicators.

Notes: 1. The sample of countries is reduced to those for which we estimate complexity measures.

Economic Complexity as an Instrument for Policy

Economic Complexity as an Instrument for Policy: Visualising the Product Space

9

Text

ile &

Fab

rics

Gar

men

ts

Food

Pro

cess

ing

Beer

/Spi

rits

& Ci

gs

Prec

ious

Sto

nes

Coal

Oil

Min

ing

Airc

raft

Boile

rs

Ship

s

Met

al P

rodu

cts

Cons

truc

tion

Hom

e &

Offi

ce

Pulp

& P

aper

Chem

s &

Hea

lth

Elec

tron

ics

Mac

hine

ry

Agr

oche

mic

als

Oth

er C

hem

ical

s

Ind.

Sal

ts &

Aci

ds

Petr

oche

ms

Leat

her

Milk

& C

hees

e

Ani

mal

Fib

ers

Mea

t & E

ggs

Fish

& S

eafo

od

Trop

ical

Agr

ic.

Cere

als

& V

eg o

ils

Cotto

n/ric

e/so

y et

c.

Toba

cco

Frui

t

Mis

c. A

gric

ultu

re

Not

cla

ssifi

ed

Cluster Key

Economic Complexity as an Instrument for Policy: Product Space in 4 Africa Economies

10

Product Space for Kenya, 2015 Product Space for Senegal, 2015

Economic Complexity as an Instrument for Policy: Product Space in 4 Africa Economies

11

Product Space for Ghana, 2015 Product Space for South Africa, 2015

Economic Complexity as an Instrument for Policy:

12

• Map Product Space of Country• Map Product Space for Sector or Product Cluster

[e.g. horticulture, fibrous plants, copper, cocoa]• Determine Criteria for Identifying Frontier Products• Generate List of Frontier Products• Examine capability constraints for growth in

frontier products’ output.

Possible Sequencing of Industrial Policy

Criteria for Identifying Frontier Products: An Example

Which products should

Country target for export?

Manufacturing and Agro-processing

Ignore primary product opportunities

Products in growing global markets

Positive growth –1995-2015

Products that will advance the complexity

of the economy

More complex than country’s current mix

Products that are feasible given current productive

knowledge

Closer by in termsof Distance

Products that have potential for further future diversification in order to

sustain the growth processHave a positive

Opportunity Gain value

Generate a List of Frontier Products:Example of Top 20 Products - South Africa

Aldehydes

Rock

wool

Sausages

Vehicle parts

Pig and poultry fats

Lifting Mach.

Traffic signals

Engines parts

Dairy Mach.

Agri. Mach.

Rubber sheetsVinyl chloride polymersNitrile compounds

Other engines

Flat rolled iron

Harvesting

Mach.

Iron radiatorsRefractory cementConstruction vehicles

• Shift to the more complex and connected products in the core of the PS.

• Building on capabilities developed in primary sector activities (e.g. Agri. Machinery)

• Relatedness between frontier products (e.g. pig fat and sausages)

Generate a List of Frontier Products:

Example of Top 20 Products - South Africa

15

ALL Com. Description

Rock Wool STON Slag, rock wool, mineral fibre and similar mineral wools

Vehicle Parts TRAN Part and accessories (e.g. bumpers, safety seat belts, gear boxes, drive-axles, exhaust pipes, radiators, suspension system)

Pig and Poultry Fat VEGP Pig fat (including lard) and poultry fat

Lifting Machinery MACH Lifting, handling, loading or unloading machinery (e.g. lifts, escalators, conveyors, hoists, elevators)

Traffic Signals MACH Signalling, safety or traffic control equipment; for railways, tramways,

roads, inland waterways, parking facilities, port installations, airfields

Aldehydes CHEM Aldehydes, whether or not with other oxygen function; cyclic polymers

of aldehydes; paraformaldehyde

Other Engines MACH Engines and motors (e.g. reaction engines, hydraulic power engines,

pneumatic power engines)

Rubber Sheets PLAS Plates, sheets, strip, rods and profile shapes, of vulcanised rubber other than hard rubber

Engine Parts MACH Parts for engines (spark-ignition reciprocating or rotary internal combustion piston engines, diesel or semi-diesel engines)

Vinyl Chloride

Polymers CHEM

Polymers of vinyl chloride or of other halogenated olefins, in primary

forms

Large Flat-Rolled Iron MET Iron or non-alloy steel; flat-rolled products, width less than 600mm, not

clad, plated or coated

Nitrile Compounds CHEM Nitrile-function compounds

Refractory Cements CHEM Refractory cements, mortars, concretes and similar compositions

Fire Extinguishers

Preparations CHEM

Preparations and charges for fire extinguishers; charged fire-

extinguishing

Other Agricultural Machinery

MACH Agricultural, horticultural, forestry, poultry-keeping, bee-keeping machinery; poultry incubators and brooders

Dairy Machinery MACH Milking machines and dairy machinery

Iron Radiators MET Radiators for central heating, not electrically heated and parts thereof, of iron or steel; air heaters

Harvesting Machinery MACH

Harvesting and threshing machinery, straw and fodder balers, grass or

hay mowers; machines for cleaning, sorting or grading eggs, fruit or other agricultural produce

Large Construction Vehicles

MACH Bulldozers, graders, levellers, scrapers, angledozers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers, self-

propelled

Prints MISC Engraving, prints and lithographs

Source: Own calculations using data from The Economic Complexity Observatory (Simoes & Hidalgo, 2011).

Notes: Com. Refers to product communities. The shortened words denote: CHEM = Chemicals & Plastics; MACH = Machinery; MET = Metals; STON = Stone & Glass; TRAN = Transport Vehicles; VEGP = Vegetables, Foodstuffs &

Wood; MISC = miscellaneous

Conclusion

16

• Major challenge in SSA: Young and growing labour force, requiring sustainable employment.

- Asia: Expansion in manufacturing a source of growth, employment and economic development.

- SSA: Productive structure disconnected and characterised by products with low levels of economic complexity.

• Evidence of Deindustrialisation in Africa: Can this be altered?- Deindustrialisation given way in Africa to low productivity services

employment.- Can Low-Wage Manufacturing Growth Still Deliver Economic Growth

and Employment?

• SSA: Productive structure disconnected and characterised by products with low levels of economic complexity.

• Productive capabilities in SSA distant from those needed in order to produce increasingly complex manufacture products.

• Using Economic Complexity, Product Space analytics and Capabilities Framework to Build a Deliberate set of policies for economic growth.