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3 Stylized Facts on Structural Change

One of the key approaches of analysing a country's structural change involves examining the structure and evolution of high productive sectors such as manufacturing and industry. Table 1 presents the share of industry and manufacturing in five African sub-regions as classified by United Nations Conference for Trade and Development (UNCTAD).

The table highlights that in general, the contribution of industry to aggregate economic activity on the continent has increased more than threefold from 13.1 % in 1970 to 40.7 % in 2008. However, the share of manufacturing has only increased marginally from 6.3 % in 1970 to 10.5 %. With respect to the different sub-regions, Western Africa region has experienced an increase in the growth of its manufacturing sector, estimated at 29.6 % of GDP in 2008, compared to 18.8 % of GDP in 1990 and 13.3 % in 1970. Figure 1 ranks the performance of West Africa countries in terms of their magnitude in manufacturing. Due to data availability, some countries such as Nigeria are dropped from the analysis. The analysis shows that manufacturing as a share of GDP is high in countries such as Cote d'Ivoire, Senegal and Burkina Faso. On the contrary, Gambia, Liberia and Sierra Leone are marked with low levels of structural change.

Figure 2 presents the evolution of the Herfindahl-Hirschmann index (HHI), disaggregated into the five sub-regions. The HHI is measure of the degree of exports concentration. It is normalized to obtain values ranking from 0 (maximum diversification) to 1 (maximum concentration). The trend analysis shows that structural change has not occurred in most regions, as countries still continue to export raw and unprocessed commodities. The Southern and Eastern regions have the highest levels of export diversification, as most countries have expanded their export baskets. On the contrary, Middle, Western and Northern African countries have consistently been characterized by limited export diversification. Exports are

Table 1 Contribution of manufacturing and industry (% of GDP)

1970

1980

1990

2000

2005

2008

Africa

Industry

13.1

35.6

35.2

35.5

38.8

40.7

Manufacturing

6.3

11.9

15.3

12.8

11.6

10.5

Eastern Africa

Industry

3.1

7.8

20.6

18.6

20.6

20.3

Manufacturing

1.7

4.9

13.4

10.4

10.3

9.7

Middle Africa

Industry

34.2

38.4

34.1

50.4

57.9

59.8

Manufacturing

10.3

11.8

11.2

8.2

7.3

6.4

Northern Africa

Industry

34.2

50.0

37.4

37.8

45.0

46.0

Manufacturing

13.6

9.7

13.4

12.8

11.3

10.7

Southern Africa

Industry

38.2

48.2

40.6

32.7

31.7

34.5

Manufacturing

22.0

20.9

22.9

18.4

17.9

18.2

Western Africa

Industry

26.7

43.3

34.5

39.8

36.7

37.4

Manufacturing

13.3

21.3

18.8

29.3

27.7

29.6

Source: UNCTADstat, accessed May 2014

Fig. 1 Manufacturing as a % of GDP in West Africa, 2005–2013 (average % of GDP). Source: African Development Indicators, accessed May 2014

Fig. 2 Export diversification (1995–2012). Source: UNCTADstat, accessed May 2014

highly concentrated on primary commodities such as agricultural products and natural resources.

Explaining the reasons behind the limited structural change in terms of export diversification necessitates disaggregating the HHI index at the country level. Table 2 presents the evolution of the HHI index for countries categorized as Western Africa. Four key facts emerge from the data. First, there are countries which are characterized by reserve structural change. In countries such as Cape Verde, Ghana and Guinea-Bissau, the HHI index has consistently increased since 1995. Secondly, countries such as Nigeria and Guinea Bissau have persistently exhibited export concentrated baskets, which tend to the maximum HHI value of 1. Third, there are countries which have stagnated over the period. These include Cote d'Ivoire, Mauritania and Senegal. Finally, there are countries which have recorded a remarkable progress in accelerating export diversification. These include Benin, Gambia, Guinea, Liberia and Togo.

Table 2 Export concentration index (HHI)

1995

1998

2001

2004

2007

2008

2009

2010

2011

2012

Reverse structural change

Cape Verde

0.37

0.39

0.30

0.27

0.31

0.34

0.35

0.41

0.46

0.40

Guinea-Bissau

0.50

0.44

0.76

0.72

0.89

0.89

0.89

0.89

0.89

0.89

Ghana

0.35

0.35

0.31

0.45

0.43

0.42

0.47

0.49

0.39

0.41

Sierra Leone

0.28

0.62

0.35

0.48

0.30

0.27

0.24

0.27

0.27

0.31

Limited structural change

Nigeria

0.85

0.86

0.88

0.88

0.85

0.83

0.83

0.79

0.78

0.78

Guinea-Bissau

0.50

0.44

0.76

0.72

0.89

0.89

0.89

0.89

0.89

0.89

Stagnated structural change

Coˆte d'Ivoire

0.34

0.36

0.35

0.33

0.32

0.34

0.36

0.34

0.35

0.31

Mauritania

0.53

0.54

0.50

0.53

0.48

0.47

0.45

0.50

0.48

0.51

Senegal

0.22

0.22

0.22

0.22

0.20

0.35

0.24

0.27

0.23

0.23

Burkina Faso

0.56

0.62

0.54

0.71

0.69

0.49

0.51

0.51

0.55

0.53

Increased structural change

Benin

0.67

0.59

0.63

0.50

0.32

0.31

0.29

0.28

0.28

0.26

Gambia

0.60

0.57

0.27

0.25

0.28

0.43

0.35

0.26

0.25

0.25

Guinea

0.62

0.56

0.59

0.58

0.53

0.59

0.61

0.45

0.47

0.50

Liberia

0.80

0.68

0.78

0.76

0.65

0.50

0.69

0.40

0.42

0.38

Mali

0.57

0.68

0.49

0.65

0.57

0.58

0.57

0.63

0.51

0.50

Niger

0.42

0.36

0.32

0.32

0.47

0.41

0.43

0.38

0.38

0.36

Togo

0.36

0.40

0.24

0.24

0.22

0.23

0.26

0.23

0.24

0.20

Source: UNCTADstat, accessed May 2014

 
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