1. Challenges and Opportunities of Private Sector Development in SSA
Stephen Gelb, ODI
IDE-ODI-AERC Seminar:
Industrialization, Private Sector Development & Economic Transformation
Nairobi, 28 August 2016

2. Presentation outline What is economic or structural transformation?
Overview of Africa’s manufacturing performance
Industrialisation in SSA: alternative paths
The role of the private sector

3. What is economic or structural transformation?
Economic transformation involves the shift of resources (labour) and output from low productivity activities into higher productivity activities which offer more sustainable productivity growth
From agriculture into industry Across sectors/activities/firms within manufacturing
Into high-productivity services
Where does extractive industries fit?
Stages of industrialisation
Pathways to industrialisation
New technologies & innovation
Entry of new firms
Diversification of production and trade
Integration into value chains and upgrading within them

4. Overview of Africa’s industrialisation performance
Overall performance has not been good when viewed in the long run
But there are some success stories – countries and sectors
And some grounds for optimism based on recent improvement
Charts and discussion in recent SET (ODI) papers: Balchin et al., Developing export-based manufacturing in Sub-Saharan Africa, 2016, available at

5. Manufacturing as % of GDP in SSA, 1960-2010
Note: Series excludes South Africa. In constant 2005 US dollars.
Sources: UNIDO Industrial Development Database (2015); World Bank Africa Development Indicators

6. Manufacturing share in GDP falling But real output increasing
Note: Charts include South Africa

7. Manufacturing share in employment falling
But absolute employment increasing

9. Average annual growth in value of manufacturing exports, 2005-2014

10. Africa’s manufacturing exports by destination
Positive developments over past decade
Rapid growth in manufacturing real output, employment and exports in SSA
Value of manufacturing production more than doubled: average annual growth 3.5%
Manufacturing employment increased: 11 mill to 17.7 mill
Value of Africa’s manufacturing exports more than doubled: average annual growth 7.4%
Intra-Africa trade is fastest growing amongst regional shares
Increased participation in GVCs – garments, footwear, horticulture, vehicles
Africa’s manufacturing exports by destination

11. FDI in greenfield manufacturing, annual inflows ($m)

12. Industrialisation in SSA: alternative paths
Contrasting strategies
Focused on natural resources (agricultural & mineral) versus
Focused on light manufacturing assembly by unskilled labour
These have different implications
For policy: trade (imports & exports), enterprise development (& upgrading/innovation), competition, capital markets & FDI, skilled labour/management
For services including infrastructure & urbanisation (transactions-intensity)
For macroeconomy & BoP
Must a ‘choice’ be made between these alternatives?
Growth strategy is linked to private sector development potential
Sector focus versus generic resources

13. The private sector and industrial development
There are successful firms in African manufacturing, foreign & domestically-owned
But cost structure results in ‘missing middle’ of firms
Productivity is different - ‘on the shopfloor’ versus ex-factory
Linked to ‘incumbency’
‘Private sector development’ – improving the investment climate – is essential, but not a panacea
Need competition from new entries – through FDI and domestic firms – in manufacturing
But also in services providing inputs for manufacturing firms
Need support for firms’ innovation & capabilities development
From public sector agencies and from VC lead firms
Need sectoral focus for policy – the importance of clusters
Need collective action by firms – business associations – political economy issues

14. Thank you
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