This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate -- a key public good -- and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity. This finding is compared with firm-level evidence from surveys undertaken for Investment Climate Assessments in 2000-2004. These confirm a pattern of generally low productivity, and also suggest the importance of high indirect costs and business-environment-related losses in depressing the productivity of African firms relative to those in other countries. There are differences between African countries, however, with some showing evidence of a stronger business community and better business climate. Finally, the paper adopts a political-economy perspective on the prospects for reform of Africa’s business climate, considering African attitudes to business and the fractured nature of African business sectors as between indigenous, minority and foreign investors. The latter have far higher productivity and a greater propensity to export; however, Africa’s difficult business climate and the tendency to overcome this by working in ethnic networks slows new entry and may decrease the incentives of key parts of the business community form constituting an aggressive pressure group for reform. Even though reforms are moving forward in several countries, this slows their impact and raises the possibility that countries settle into a low-productivity equilibrium. The paper concludes with a discussion of the findings for reforms to boost the competitiveness and diversification of African economies.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Center for Global Development in its series Working Papers with number
56.
Find related papers by JEL classification: D5 - Microeconomics - - General Equilibrium and Disequilibrium D2 - Microeconomics - - Production and Organizations E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles F2 - International Economics - - International Factor Movements and International Business
This paper has been announced in the following NEP Reports:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)