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Economic Report on Africa 2014

Dynamic Industrial Policy in Africa

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For millions of Africans, growth is yet to translate into jobs and better living conditions. Africa’s largely commodity- driven growth has not been matched by the much needed structural change that can lead to economic transformation, employment, and reduced poverty. Market failures necessitate industrial policy interventions. Yet, in the absence of the right processes and institutions, good industrial policies will fail. Indeed, weak institutions and poor policy design have hindered industrial policy. This report gives a framework for getting the policy process right to foster industrialization. It uses 11 country case studies to assess the critical ingredients for spurring industrialization – innovative institutions, effective processes and flexible mechanisms – and structural transformation.

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Towards a dynamic industrial policy framework for Africa

Africa’s recent strong economic growth has been not matched by economic and social transformation, leaving the continent in a state of commodity dependence, with high inequality and poverty rates and increasing reliance on low-productivity informal activities. Structural transformation would enable the continent to shift from a largely agrarian society with acute dependence on natural resources towards an economic model based on high-productivity sectors, especially manufacturing and modern agriculture and services, with significant value addition, employment generation, increased competitiveness at home and abroad, and a more equitable distribution of income. Yet so far, such transformation has been limited for a variety of reasons, including weak institutional and organizational capacities; few investments in manufacturing and productive capabilities; and limited development of skills and knowledge for higher economic activities.

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