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Africa’s Structural Transformation Challenge

As researchers at the African Center for Economic Transformation in Accra, Ghana, put it, the continent is “growing rapidly, transforming slowly.”

Fewer than 10% of African workers find jobs in manufacturing, and among those only a tiny fraction – as low as one-tenth – are employed in modern, formal firms with adequate technology. Distressingly, there has been very little improvement in this regard, despite high growth rates. In fact, Sub-Saharan Africa is less industrialized today than it was in the 1980’s. Private investment in modern industries, especially non-resource tradables, has not increased, and remains too low to sustain structural transformation.

Cross-border capital flows abruptly collapsed. Almost five years later, they remain 60% below their pre-crisis peak.

After expanding across national borders with the creation of the euro, eurozone banks have now reduced cross-border lending and other claims within the eurozone by $2.8 trillion since the end of 2007. Other types of cross-border investment in Europe have fallen by more than half. The rationale for the euro’s creation – the financial and economic integration of Europe – is now being undermined.

Current trends seem to be leading toward a more fragmented global financial system in which countries rely primarily on domestic capital formation. Sharper regional disparities in the availability and cost of capital could emerge, particularly for smaller businesses and consumers, constraining investment and growth in some countries. And, while a more balkanized financial system does reduce the likelihood of global shocks creating volatility in far-flung markets, it may also concentrate risks within local banking systems and increase the chance of domestic financial crises.

In sub-Saharan Africa, for instance, excluding South Africa, the entire electricity-generating capacity available is only 28 gigawatts — equivalent to Arizona’s — for 860 million people. About 6.5 million people live in Arizona.

Over the last 30 years, China moved an estimated 680 million people out of poverty by giving them access to modern energy, mostly powered by coal. Yes, this has resulted in terrible air pollution and a huge increase in greenhouse gas emissions. But it is a trade-off many developing countries would gratefully choose.

Today, 81 percent of the planet’s energy needs are met by fossil fuels, and according to the International Energy Agency, that percentage will be almost as high in 2035 under current policies, when consumption will be much greater. The unfortunate fact is that many people feel uncomfortable facing up to the undeniable need for more cheap and reliable power in the developing world.

Are National Champions Really Winners?

Although the proportion of imported intermediate goods in German manufacturing exports has risen from around 19% to 30% since 1995, the globalization of value chains during this period has improved competitiveness, and dramatically increased manufacturing value.

Where Apple Products Are Born: A Rare Glimpse Inside Foxconn’s Factory Gates

The 1.4 mile-square Longhua complex, with its 140,000 employees, speaks to Shenzhen’s identity as a global manufacturing hub. The city, once a fishing village in the Pearl River Delta region, was designated as a special economic zone in 1980. Its population swelled from 30,000 to more than 10 million as rural workers migrated to the fast-growing city in search of opportunity.

Though Woo notes, by way of context, that 12 suicides per one million employees is lower than the U.S. suicide rate of 13 per 100,000