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When growth is not enough: In pursuit of transformative economy

July 20, 2016

Africa has achieved impressive economic growth in the past 15 years; from 2001 to 2010, six of the world's ten fastest growing economies were in Africa. Although growth has been moderate in recent years, it is expected to regain strength. However, there is evidence of rising youth unemployment and persistent gender equity gaps across the continent. Inequality is also on the rise: the average Gini coefficient (the most commonly used statistical measure of inequality) for Africa is 1.1 times higher than the rest of the developing world. With these challenges, the question on everyone’s mind is how countries can advance economic growth and improve living standards for all.

On June 1, 2016, IDRC hosted an informative and engaging roundtable about Africa's inclusive economic growth potential. Featuring experts who are working closely with IDRC, the panels provided a forum to share ideas that can lead to new directions and new projects that are intent on solving these important international development challenges. The World Economic Forum has developed a benchmarking tool spanning 112 countries and using 140 indicators to measure how well countries deliver inclusive economic growth. This provides a good basis for cross-country learning and for identifying ways to foster a more inclusive society.

The key challenge is that Africa’s economy has grown without structural transformation. Panellists stressed the notable absence of a manufacturing base in Africa. In fact, manufacturing has witnessed steady erosion—what analysts call “premature deindustrialization”. The region’s manufacturing malaise and inability to build significant economic complexity is a key barrier to improving livelihoods. Haroon Bhorat, director of the Development Policy Research Unit at the University of Cape Town, emphasized “understanding this manufacturing malaise in Africa should be the basis for crafting inclusive growth strategies at country levels”.

But the answer to inclusive growth doesn’t lie solely on the region’s capacity to develop its manufacturing sector. Panellists explained that the potential for the services sector should not be minimized. The growth of modern tradeable services can enhance productivity and growth, and pave the way for broad-based development. Building the capabilities of the services sector should thus be part of the region’s structural transformation agenda. 

Thank you to expert panelists Haroon Bhorat (director of the Development Policy Research Unit, University of Cape Town), Gemma Corrigan (economist from the World Economic Forum), Paul Shaffer (Department of International Development Studies, University of Trent), and Gordon Betcherman (School of International Development and Global Studies, University of Ottawa) for their participation in IDRC’s roundtable.

Read more about IDRC’s projects investigating inclusive growth in Africa: