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Africa needs accelerated structural transformation in order to take the bulk of its population out of poverty. This requires deeper investment in factors leading to growth-enhancing structural change. African countries need to diversify and expand the sources of economic growth while creating opportunities for more inclusiveness. The vision leading to most African countries attaining middle income status by 2060 cannot be delinked from the prerequisite of creating technological-driven and competitive industries in Africa.
A Promising Outlook
The continent’s economy is projected to grow at the rate of 4.8% in 2013 compared with 4.5% in 2012 and 3.4% in 2011. Such growth prospects are influenced by the rising African middle class (about 300 million), significant land mass (about 50% of the world’s surface), new large discoveries of oil, gas and other minerals (about 10% of the world’s oil reserves and 8% of its natural gas reserves), strong and visionary leadership, an emerging consumer market and dynamic private entrepreneurs, among others.
However, a number of drivers of change can turn out to negatively impact the development outcome of Africa if the right policies are not implemented. Those drivers of change include the changing global economic landscape, climate change impact, renewable and non-renewable natural resources, demographic transition, and the skills attribute of the African workforce.
A Holistic Approach toward Structural Transformation
Structural transformation requires a package of measures such as (i) increased investment in infrastructure, governance, human development, skills and vocational training, agriculture and the broader engagement of the private sector; (ii) a process of industrialization that is dynamic, self-reinforcing and adds value; (iii) linkages with emerging economies such as China, India, Brazil, Russia, and South Korea; (iv) more efficiently integrated global value chains; and (v) the ability to capitalize on natural resources within peaceful and sustained conditions.
With Special Attention to Entrepreneurship and Skills
The importance of private sector development and its crucial rule in financing and accelerating Africa’s economic transformation cannot be overstated. However, when the underlying environment is weakened by poor or inadequate infrastructure, limited access to finance, government bureaucracy, shortage of skilled labour force and market inefficiencies, there is very little a vibrant private sector can do to contribute to economic growth and development.
While African governments should strive at ensuring conducive business environments and enforcing flexible local policies that promote private entrepreneurship, the private sector itself should take a more proactive role in addressing the structural challenges to enhancing business services and providing opportunities for innovation and competition.
The private sector in most African countries is fragmented with a low density of economic activity. The limited availability of skilled labour and human capital further obstruct the growth of firms. In fact, the lack of high and technological-related skills reduces prospects for moving up the value chain in industries, which end up reducing labour productivity and existing industries’ competitiveness. Also, the slow progress of Africa in adapting to new and emerging technologies impacts productivity and growth. This has contributed to domestic economies void of a competitive advantage and lagging behind those of other developing countries.
However, the potential and opportunities are abundant. Such potential include the growing middle class, the geographic size, the wealth in natural resources and the improving political stability. As the continent presents opportunities for higher returns, the private sector should drive the transformation agenda.
Moving forwards, the following are determinant for the success of entrepreneurship development and structural transformation in Africa: