Are Manufacturing Exports the Key to Economic Success in Africa?

Abstract

The poor performance of many African economies has been associated with low growth of exports in general and of manufacturing exports in particular. The two most successful countries in Africa have been Botswana and Mauritius. In Botswana rapid export growth followed the discovery of diamonds, in Mauritius manufacturing exports played a major role. In this paper we draw on both macro and micro evidence from nine African countries to investigate whether manufacturing exports are the key to success in Africa. We do this by posing three questions. First, how close is the link between export and income growth? Second, is there evidence from these African countries that manufactured exports have led to greater economic success? Third, what has limited the success of firms in the manufacturing sector? We argue that export and income growth are very closely linked. However there is, for this sample of countries, no evidence that if their exports are manufactures, growth rates are higher. We show that the factors that limit the success of African manufacturing firms in exporting are their levels of efficiency and small size. We argue that the key to success in an area where Africa has a potential cost advantage -labour intensive garments -is to enable large firms to use a more labour intensive technology than is the case at present.