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weak social networks, low education levels, or strong family ties in rural areas.

Demographics also play a role in stalling structural transformation, McMillan says. Te rural population, benefiting from im- proved health interventions, is growing at a higher rate than the urban population. Tis can stall structural transformation if the growth rate of jobs in urban areas does not also grow.

Finally, globalization, which was sup- posed to provide a bracing jolt of compe- tition to make sectors more productive and efficient, can kill industries in developing countries, leaving their workers with nowhere to go but back to the farm.


Some African countries have managed to move workers from agriculture to manufacturing and reduce poverty, but researchers

agree that economies within Af- rica could be growing in a more sustainable way through structural

transformation. But how? One solution is to encourage manu-

facturing. According to McMillan,

manufacturing can absorb a large number of workers with moderate skills and provide them with relatively good wages and benefits. To even break into global markets for manufacturing, agro-industry, and services, however, African govern- ments need to make these sectors inter- nationally competitive. At the very least, this will require more clearly defined and transparent property rights and a prop- erly managed exchange rate regime.

Another solution involves appealing to foreign investors. China, for example, has built special economic zones in Africa and Asia. “Tese zones have significant potential,” says IFPRI Senior Research Fellow Deborah Brautigam. “Te Chinese are building infrastruc- ture, investing in local manufacturing, and creating local employment.”

One thing is clear: African governments need to boost capacity in more modern sectors of the economy such as manu- facturing and business-related services. And the time to do this is now. Accord- ing to Justin Lin, chief economist of the World Bank, wage pressure in China is leading Chinese investors to expand operations overseas in search of cheaper labor. Lin estimates that millions of manufacturing jobs could be relocated from China to Africa over the next decade—if Africa is ready.

In the meantime, most of the poor in Africa are still smallholder farm- ers and need support to increase their productivity on the farm and transition to nonfarm, higher-productivity work. A consensus among IFPRI research- ers, as well as organizations such as the International Labour Organization, calls for a holistic approach: policy action that supports smallholder farmers and industry to allow African countries to join the ranks of their global neighbors who have reached development through structural transformation.

© 2012 C. Hallowell/IFPRI


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