What happened to Ghana?

In 1964, GDP per person was higher in Ghana than in South Korea; in 2013, it was more than 14 times smaller. This comparison, a version of which I used in the opening to my own masters thesis, has motivated a lot of economic research. The causes of South Korea's transformation are better known than the reasons for sub-Saharan Africa's relative stagnation: good quality basic education, high savings, foreign investment, less corruption and, critically, export manufacturing. Apart from those that have done it through oil or other natural resource endowments, there are virtually no countries that have transitioned from low income to upper middle income status without developing a vibrant export manufacturing sector.

Africa grew faster in the 2000s than it had in prior decades, and many are heralding a golden age for the continent. For now, it has been driven mostly by high commodity prices, although there are a number of countries that have made progress towards building the required pre-conditions, and in fact Ghana has done better than most—notably being a standout in terms of electoral conduct. There is huge diversity in African manufacturing, with output per worker in Kenya being three times higher than in neighboring Tanzania. Understanding the genesis of such differences is critical for Africans to see a sustained increase in living standards. One barrier is that many African firms are using technologies that generate low levels of value added, partly because they are reticent to invest in sophisticated machinery owing to a lack of skilled workers, precarious access to export markets and an uncertain business environment.

Changing the incentives that such firms face is a key challenge for African policymakers. Do you think it's possible for an African manufacturing boom in the next 5 years? Let me know your thoughts on Twitter @Baptist_Simon.

Best regards,
Simon Baptist
Chief Economist and Asia Regional Director