Can African Countries Skip Manufacturing to Achieve Economic Development?

Hippolyte Fofack

Published: March 2023

The ‘informal economy’ has played a large and growing role in the distribution of imported manufactured goods across Africa sustaining the growth of the services sector but at tremendous costs in economic development, poverty, and macroeconomic instability. A long decline in manufacturing’s share of regional GDP in Africa has bottomed out and now stands at more than 12% of GDP, up from 10% a decade ago. The African Continental Free Trade Area (AfCFTA), which is set to fast-track the diversification of sources of growth and trade, will accelerate this trend and the expected boom in intra-African trade will lead to more sophisticated exports. Africa has been a net importer of food, but agriculture and agribusiness are major growth industries with tremendous potential for job creation and structural transformation. Global fertilizer use averaged 137 kilograms per hectare in 2018, the average across Africa was less than 20 kilograms per hectare. Raising the yields of African farmers and boosting agricultural productivity is central to the continent’s strategy for achieving self-sufficiency in food production and strengthening national security. The Pan-African Payment and Settlement System (PAPPS) has been set up to facilitate trade and tackle the constraint of access to international liquidity causing a large trade financing gap. The PAPSS, is jointly supported by the Afreximbank, the AfCFTA Secretariat, the African Union Commission, and African central banks.