The Narrative for Sub-Saharan Africa

This book looks at growth, jobs and poverty reduction in sub-Saharan Africa (SSA), where the quantum of growth in the last two decades has been markedly weak and volatile, especially compared to other regions of the world. We trace this weakness in the quantum of growth to the quality or pattern of growth, which has come to be based on exogenously given global demand—not for manufactured goods, but for extractives. SSA is richly endowed with extractives—a valuable asset in high demand in the rest of the global economy. The problem lies in the nature of global demand for extractives from SSA, which is volatile, running in successive cycles of high demand with high prices, met by oversupply, causing slumping into lower prices. We argue that a growth strategy based predominantly on exports of extractives is prone to price volatility in exogenous demand given by global markets. However, these boom-bust cycles in export demand affect not just the export sector in SSA as a ‘resource curse’ but also the production of output of the entire economy. The tradeables market for extractives inhibits the entire domestic goods market from Kaldorian productive transformation into manufacturing and services. This relative lack of productive transformation in the goods market works in complement with a relative lack of Lewisian transformation in the labour market, thereby inhibiting contractual transformation of low-productivity, self-employed labour in agriculture into higher-productivity wage labour in manufacturing and services—especially trapping women in unpaid family labour. These weaker outcomes in the goods and labour markets, influenced by the tradeables market for extractives, in turn affect incomes, poverty, prices and hunger. The vulnerability in exports of extractives is best seen in what economists call general equilibrium, affecting all the major markets of the economy. The book captures this through the working out of equilibrium in four major markets: the tradeables market for extractives, affecting the domestic goods market and the labour market. Policy to correct weaknesses in these three markets requires correcting weaknesses in the money market for greater accumulation and investment of physical, human and knowledge-based capital.