Financing tech-driven industrialization in Africa: Resource wealth, financial structure and the rise of medium- and high-tech manufacturing

This study examines the roles of natural resource wealth and financial structure in driving industrial diversification into medium- and high-tech manufacturing (TM) via a panel dataset consisting of 24 African countries from 1991 to 2021. By utilizing the method of moments approach to quantile regression and the HPJ Wald-type Granger non-causality test, this study provides insights pertinent to achieving sustainable development goal 9.B. The results reveal a U-shaped relationship between per capita GDP and TM, where early stages of economic growth hinder industrial diversification, but higher growth levels stimulate tech-driven industrialization. The study confirms that combined income from energy, minerals, and forest wealth negatively affects TM, particularly in less industrially diversified economies, thus supporting the resource curse hypothesis. Financial structure plays a crucial role; market-based systems foster TM, whereas institution-led financial development tends to impede it. The Granger non-causality tests reveal unidirectional causality from natural resource wealth, institution-led financial development, and market-based financial development to TM, with bidirectional causality between per capita GDP and TM. To fully leverage these findings, African economies should prioritize the development of robust financial markets, implement comprehensive banking reforms, and strategically invest resource revenues in technology-driven sectors.