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5.2 Africa’s diversification regimes revisited: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: A further link to productivity

5.2 Africa’s diversification regimes revisited: Economic Report on Africa 2007

So, there is a link between growth and diversification via the TFP as the transmission
path in Africa. How does this link relate to the diversification regimes that have
been seen to characterize African economies? Is there a clear correlation between the
diversification regimes and the TFP contribution to growth? To answer these questions,
analysis of the sources of growth of a few African countries is related to the
different diversification regimes.

The first diversification regime was described as those countries with little economic
diversification. The study found that many African countries belong to this regime,
including Benin, Burkina Faso, and Malawi. It can be observed from table A5.4 that
these countries have positive growth on average for the period 1981-2000. Benin,
Burkina Faso and Malawi have average annual growth rates of 3.8 per cent, 3.7 per
cent and 3.0 per cent, respectively. The main source of growth is the factor accumulation
rather than the TFP. However, it is interesting to note that the contribution
of productivity to growth in these countries is positive in almost all but one period,
even though they have not diversified much. However, even though growth in these
countries was positive over the 20-year period under observation, their growth rates
were not on the level at which their economies could take off, as compared to the
high growth-performing economies of the NIEs in East Asia.

The second regime comprised those countries that started the process of diversification
but did not make any significant breakthroughs. From table A5.4, the examples
of these countries are Kenya, Senegal and Zimbabwe. It may be observed that all
three countries have shown a slowing-down trend in production during the period
1981-2000, except for Senegal, which recovered during 1996-2000. However, the
growth trends are positive despite the setbacks. Kenya grew at an annual average of
2.9 per cent; Senegal at 3.3 per cent while Zimbabwe was growing at 3.1 per cent.
Again, the main source of growth was factor accumulation rather than TFP. It is
noted, however, that the average TFP contribution to growth in Senegal and Zimbabwe
is positive. The main question is, could it be that these countries experienced
slackening of growth because they failed to deepen their diversification process and
have remained at the same level for a long time?

The third regime is that of countries with a deepened diversification process. Countries
such as Mauritius, Morocco, South Africa and Tunisia exemplify this regime.
Tunisia has managed to achieve horizontal diversification into higher-value exports.
Mauritius, on the other hand, has achieved deep vertical diversification, which has led to more textiles-related exports. The countries in this regime are characterized
by relatively high growth, except South Africa, whose growth has since picked up
with the dawn of a new political dispensation. Mauritius and Tunisia in particular
have registered growth rates of 5.5 per cent and 4 per cent per annum on average,
respectively, for the period 1981-2000. In both these countries, it may be observed
that the contribution of capital is much higher than the contribution of labour.
Moreover, in Mauritius, the TFP contribution to economic growth is positive with
an annual average of 2 per cent, a relatively high figure for an African country.

The fourth regime is composed of countries that registered early positive diversification
gains but later tended to specialize in a few products. Countries such as Gabon
and Nigeria exemplify this regime. These countries are both rich in oil; hence, this
product dominates their exports. As for their growth performance, the GDP growth
rates of both countries, although mostly positive, were characterized by fluctuations
over the period 1981-2000. On average, Nigeria is growing at 2 per cent per annum
while Gabon is growing at 2.3 per cent per annum. As with most of the African
economies, their economies are also labour-intensive with a minimal TFP contribution.
Nigeria’s TFP contribution to growth, on average, is even negative for the
period under study. The economic growth of countries in this regime is relatively
low compared to such countries in the third regime as Mauritius and Tunisia.

The fifth group comprises those countries within the conflict and post-conflict
regime. The countries that belong to this regime are neither diversified nor highly
specialized. Examples are DRC and Liberia. Economic growth in these countries
was stunted by wars and conflicts and can therefore be expected to be negative.
Consequently, the contribution of TFP to their economic growth is also negative.
These countries depend a great deal on their labour force for production as the contribution
of capital to growth is also deteriorating.

Related Articles
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  4.4 References: Economic Report on Africa 2007
  5.0 Diversification and Growth: Economic Report on Africa 2007
  4.3 Conclusion: Economic Report on Africa 2007
  4.2 Diversification regimes in Africa: Economic Report on Africa 2007

Article Tags: african countries, african economies, benin, burkina faso, correlation, east asia, economic diversification, factor accumulation, growth trends, main source, nies, observation, regime, regimes, senegal, setbacks, slowing down, table a5, tfp, transmission path



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