The Economist January 11th 2025 Special report Africa’s economies 5
By 2030 Africans rica, to be a “prosperous middle-income country” by
Not moving with the crowd 2030. He has talked of the need for “structural trans-
will make up
Population in extreme poverty* formation”. That means people swapping farming and
over 80% of the rural life for urban, industrial jobs. He wants Zambia—
Africa East Asia and the Pacific South Asia Other
world’s poor and Africa as a whole—to go through the sort of green
Population, bn Africa, % of total revolution seen in Asia and Latin America last century.
2.0 80 It is not the only revolution Africa has done with-
out. Robert Osei, an economist, has written that Gha-
1.5 60
na developed “without a green revolution, an industri-
1.0 40
al revolution, or a service revolution of the types seen
…in Asia”; the observation applies beyond his home-
0.5 20 land. In 2024 the African Centre for Economic Trans-
formation (ACET), a Ghana-based think-tank, likened
0 0 African economies to “early transformers” in Asia and
2000 05 10 15 20 24† Latin America. Its “African Transformation Index”,
*Living on less than $2.15 a day at 2017 purchasing-power parity †Estimate which scores countries based on their adoption of
Source: World Bank technology, labour productivity and diversity of ex-
ports, was sobering. “Most African countries are not
transforming their economies at a consistent or steady
▸ For this to happen, those in power need to want rate,” noted K.Y. Amoako, ACET’s founder.
it to happen. At present, this is all too often not the
case. African elites are often frustratingly complacent Superstructuralism
about the future of the continent. There are excep- Underpinning much of this is a lack of productivity
tions, but for the most part this generation of political growth. If the Africa gap is defined in terms of GDP per
leadership is deeply uninspiring. African business person, then closing it could happen via two channels.
leaders, for their part, are hobbled by political interfer- The first is by having a rising share of workers relative
ence and thus incentivised to be damagingly short-ter- to non-workers. In many African countries that ratio
mist. This can lead to mutual enrichment and a satis- will become more favourable over the 21st century as
faction with the status quo. But business- and politics- women have fewer children. But a large “demographic
as-usual are failing today’s ordinary Africans—and dividend”—like that seen in late-20th-century Asia,
blighting the prospects of those to come. ■ where fertility plummeted much faster—is unlikely.
The second channel—increasing how productive
each worker is—remains the crucial one. Research by
the World Bank has found that growth in total-factor
productivity (TFP)—how efficiently labour and capital
Economic fundamentals are combined, and a proxy for the use of technology in
production—has been “negligible” on the continent
The problem for the past 60 years. This suggests that African econ-
omies have grown from increases in labour, capital
of productivity and natural resources, but not from technology.
It is not that African countries are standing still. Far
from it. But social change is happening without eco-
nomic change alongside. Understanding what is hap-
pening is crucial to closing the Africa gap.
In 1960, 15% of sub-Saharan Africa’s population
Africa is undergoing social change lived in cities. Now 43% of people are classed by the
without economic transformation UN as urban. The region is urbanising faster than any
other. The Economist Intelligence Unit (EIU), our sis-
Ihim.TsterISAHARD to decide which looks more forlorn, Web-
Malupande or the wilted maize stalks around
smallholder in southern Zambia, Mr Malu-
ter organisation, reckons that more than half of Afri-
cans will live in cities by 2035. Africa will have six cities
of over 10m and a further 17 of over 5m.
pande is one of many farmers devastated by a recent On the face of it this is a repeat of the global shifts
drought that halved production, leading the govern- from rural to city life. But African urbanisation is hap-
ment to declare a state of emergency. Even before then pening in countries poorer than has been the norm
he struggled to get more yield from his fields. “We do elsewhere. And elsewhere more productive farms en-
what we can,” he says, “but it is never enough.” couraged urban migration, with less need for farm-
The next day Hakainde Hichilema is standing in hands to till fields. Again Africa is different. Its urban-
another field, tipping his cowboy hat to the crowd. isation looks more like an alternative to rural develop-
Zambia’s president—who has an MBA and a cattle ment than a consequence of it.
farm—is inspecting crops grown from drought-resis- Today a little more than half of workers in sub-Sa-
tant seeds. “Climate change is here to stay…We don’t haran Africa still labour on farms, about the share in
need to debate that any more,” he says. Using new western Europe two centuries ago. They typically
technology can prevent shocks in future, he continues. work unproductive plots of less than two hectares (five
More productive farms mean more food and higher ru- acres) using methods more suited to the 19th century.
ral incomes, which in turn will boost industry. “This is The “value-added” per worker in sub-Saharan Africa, a
a Godsend,” the president says of the new seeds. measure of productivity, is less than half the global av-
Mr Hichilema wants Zambia, whose GDP per per- erage, and less than one-fiftieth of the places with the
son of $1,226 is below the average for sub-Saharan Af- most productive farms. Africa’s cereal yields, an- ⏩
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6 Special report Africa’s economies The Economist January 11th 2025
Hit the road, Jack
▸ other measure of productivity, are less than half the The share of Africans working in the service econ-
average in the rest of the world. And though produc- omy has risen from 26% to 37% over the past three de-
tion has increased since 1980, this has largely been be- cades, more or less mirroring the decline of the share
cause Africans are farming more land, not farming it in agriculture from 64% to 52%. However, these jobs
more productively. Between 1980 and 2018 South Asia are not in corporate back offices. They are casual work
more than doubled cereal yields without using any in shops, markets and building sites. McKinsey, a con-
more land. In sub-Saharan Africa yields tripled, but sultancy, notes that service-sector productivity in Afri-
the land used more than doubled. ca is less than half that in Latin America, and lower
Though there are hi-tech commercial farms in than in India.
parts of Africa, most small farms are low-to-no tech.
Fertiliser use is a tenth of that in Asia. Only 3.5% of ag- Trouble at mill
ricultural land in sub-Saharan Africa is irrigated. A So far manufacturing has not offered the plethora of
lack of cold storage means that much food is wasted; jobs seen in other parts of the world. Only 11.5% of sub-
in Nigeria 45% of produce rots. Christopher Udry, an Saharan African workers are employed in industry,
economist based at Northwestern University in Illi- marginally higher than the 9.9% share in 1991. Why
nois, notes how, in America’s Midwest, farmers just manufacturing has struggled to take off is hotly debat-
80km apart may use different seed varieties. But in Af- ed. Africa has for centuries had lots of land and a scar-
rica, “We don’t have seeds optimised for every 50 city of labour, the opposite of Asia. At independence
miles, we have seeds optimised for the continent.” economies were geared to resource extraction. And
African policymakers and donors have tried to en- perhaps because unproductive farms mean more ex-
courage smallholders to adopt better technology. But pensive food, it seems to cost more to employ Africans
it has proved difficult. In a review of the evidence on than it does to employ Asians. Research by the Centre
technological adoption published in 2024, Mr Udry for Global Development (CGD), a think-tank based in
and Tavneet Suri of MIT found that “there is no single Washington, has found that in Africa labour costs
binding constraint”. Mr Malupande, the Zambian were on average roughly twice as much as a country’s
farmer, has barely any savings to invest, no access to fi- GDP per person, whereas in Bangladesh, for instance,
nance and little option but to buy the generic seeds on they were roughly the same.
offer from state-subsidised schemes. In 2021 Xinshen Diao and co-authors at the Wash-
Small surprise that some farmers, or at least their ington-based International Food Policy Research In-
children, are upping sticks. In a lecture in 2024 Mr stitute analysed what they call “Africa’s manufacturing
Udry showed that, in a sample of 200,000 plots in six puzzle”. Using data from factories in Ethiopia and
African countries, yields fell by 4-5% per year between Tanzania, they find a dichotomy: highly productive
2008 and 2018. After mulling many explanations— plants use lots of hi-tech equipment but few workers,
such as changing weather, land degradation, nearby and many less productive plants use lots of people and
conflict—he concluded that it was because the farms little kit. This is not what happened in Vietnam and
Less than 5% were being worked less. Farmers, and their children, Taiwan, they note, where labour was absorbed into
of agricultural are opting to try their luck elsewhere. Yields declined productive factories—creating a flywheel that helped
land is irrigated most in farms closest to cities, suggesting that there is boost GDP per person over many years.
a flow of erstwhile farmhands from the fields to the The authors suggest that this is primarily because,
hustle on the margins of the urban economy. to be globally competitive and plug into interna- ⏩
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The Economist January 11th 2025 Special report Africa’s economies 7
▸ tional supply chains, factories need to adhere to
high technological standards. “The choice that Afri-
can manufacturers seem to face is either to increase Businesses
productivity or to increase employment.”
The implication is that Africa was late to the party;
cheap labour may not be the advantage it once was.
Too many, too little
“The escalator is slowing, although it will not stop al-
together,” says Alan Gelb of CGD.
For some, manufacturing is special because it has
historically employed lots of people globally and had
positive spillover effects. In an article about Mauritius,
which successfully transitioned from a poor, sugar-de-
pendent economy in the 1960s to one based on textile
manufacturing, Joe Studwell, author of “How Asia When it comes to business, Africa must think big
Works”, writes, “The lesson about the special role of
manufacturing in developing countries ought to be FRICAN POLICYMAKERS love to champion their
clear to every African state. And yet the continent has
almost no other examples of governments developing
A continent’s entrepreneurs. For Paul Kagame,
Rwanda’s president, small and medium enterprises are
and deploying coherent manufacturing strategies.” the “backbone of Africa’s economy”. “We must sup-
It may be the case that Africa’s development will port the youth to go beyond looking for jobs,” says
look more like South Asia’s than East Asia’s. A paper by Akinwumi Adesina, the head of the African Develop-
Tianyu Fan of Yale University and co-authors, entitled ment Bank (AfDB).
“Growing like India”, noted that Indian development Such bigwigs like to point to data that seem to
has come in part from improving productivity in non- show how unusually entrepreneurial Africa is. The Af-
traded service sectors, such as retail, hospitality and rican Youth Survey, a regular poll, suggests that 71% of
property, rather than export-oriented manufacturing. young Africans plan to start a business. Male leaders
This suggests that Africa could follow the same path, also like to congratulate themselves on how more than
given its large services sector. The authors imply, how- a quarter of adult women have started, or are starting,
ever, that the cost could be high levels of inequality a business—the highest share of any continent, ac-
and joblessness, as seen in India. cording to data cited by the AfDB.
Yet much of this praise amounts to misplaced vir-
A different route tue-signalling. Though there are African entrepre-
“The general process of African transformation— neurs founding innovative startups in everything from
which seems to be bypassing an industrialisation fintech to commercial agriculture, running a business
stage—is probably not just a temporary phenomenon,” is often the result of desperation, not choice. To close
argues Douglas Gollin of Tufts University. “What’s the gap with the rest of the world, Africa does not
much less clear to me is that this alternative path is need more small businesses. It needs more large ones.
suboptimal.” He believes that development econo- Large firms are productivity powerhouses. They bring
mists can be too focused on what is happening in parts people, ideas, technology and equipment together in
of the economy, such as farms or factories, and not ways that make workers more efficient, which makes
enough on general market frictions that hinder pro- people richer.
ductivity. He would like more attention on removing McKinsey estimates that there are 345 firms in Afri-
barriers to trade, specialisation and the allocation of ca with revenues over $1bn (China has about 1,500). Yet
capital wherever it is most productive. the consultancy noted in a report in 2018 that, exclud-
The fact that Africa is following an idiosyncratic ing South Africa, Africa has only around 60% of the
path does not mean it is headed for a dead end. But large firms one would expect, given the overall size of
whatever route it is on, it needs more productive firms. the countries’ economies. Those large firms are also
Even if the continent is not having a green or an indus- not as large as the ones found in other emerging re-
trial revolution, it will still need a commercial one. ■ gions. Taken together, adds McKinsey, the total rev-
enue pool of African firms (excluding South Africa) is
“about a third of what it could be”. Africa is the only in-
habited continent without any of the world’s 500 big-
Underperforming gest firms, as compiled by Fortune, a magazine.
Real productivity, output per worker, 2019, $'000, log scale Other research suggests that African firms employ
fewer people than businesses do elsewhere. A paper by
Agriculture Industry Services Extraction Total economy
Leonardo Iacovone, Vijaya Ramachandran and Martin
1 10 100 1m Schmidt, three economists, albeit from a decade ago,
Middle East estimated that African firms employ between a fifth
China and a quarter less people than firms of the same age in
other countries, even after controlling for the size of
Rest of Asia the market where they operate. Karthik Tadepalli of
Latin America
the University of California, Berkeley, says that, in
America, firms “either grow or die”. Those that are still
Emerging markets around ten years after their founding typically employ
three times as many people as when they started. Un-
Africa
fortunately, in many developing countries, including
India African ones, firms grow very slowly, often barely add-
Source: McKinsey ing workers over time. ⏩
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