Structural Adjustment Programs and Industry in Sub-Saharan Africa: Restructuring or De-industrialization?

Abstract

Stabilization and structural adjustment programs (SAPs) have dominated policy making in Africa since the 1980s. Thirty-seven sub-Saharan Africa (SSA) countries undertook such adjustment policies with the financial support of the International Monetary Fund (IMF) and the World Bank. Adjustment was inevitable at that time. Very low rates of growth of gross domestic product (GDP) per capita up to 1974 had decelerated or turned negative thereafter. By the early 1980s, many SSA countries had a lower GDP per capita than before independence some 20 years earlier. This already bad economic situation became worse during the first half of the 1980s as a result of further deterioration in the terms of trade and sharply reduced access to international finance. In theory SAPs, with their emphasis on macroeconomic adjustments, trade liberalization, deregulation, and privatization, are expected to lead to significant changes in the industrial sector as well as in other sectors. Accordingly, macroeconomic adjustment and exchange-rate policy would boost competitiveness in the traded-goods sectors.' Trade reforms, expected to have the greatest impact on the industrial sector, would have as their objectives the removal of the bias against exportable-goods sectors, the introduction of competitive pressures from abroad, and the adjustment of relative prices to correctly reflect the opportunity cost of resources.2 Deregulation would address rigidities and distortions present in the industrial sector that could hinder a vigorous supply response. Privatization