A tale of industrial stagnation from Africa

Abstract

Many African economies have experienced rather dismal industrial development since the 1980s. The consensus view is that African firms lack competitiveness in a world with increasing trade openness. What determines competitiveness? A well-known explanation is that resource endowments in Africa favour land not labour, which result in high wages, especially in comparison to "labour abundant" Asian economies. This paper examines the validity of this view on the basis of the case of Sudan. We demonstrate that the lack of competitiveness of manufacturing industries is not caused by high wages. Assuming a direct relationship between labour productivity and international competitiveness, we argue that acute capacity underutilisation, caused by supply-side constraints, lowers manufacturing productivity which in turn negatively influences competitiveness.

Capacity Choice and Government Regulation in a Vertical Industry

“…17 < 4 For example, Dixit & Stiglitz (1977), Dagdeviren & Mahran (2010) and Robles (2011) attribute excess capacity to market structure and enterprise behaviour. Basu (1996), Fagnart et al (1999) and Basu et al (2001) < + 2 ; *** − *** > * − * > **** − **** > 0 > * * − * * if…”

Structural constraints and excess capacity: an international comparison of manufacturing firms

“…The views outlined above do not explain a peculiarity in some countries whereby industrial CU rates are persistently lower irrespective of the demand patterns, market structure or the attributes of investment. In Sudan, for example, at least 55% of installed industrial capacity remained idle from 1985 to 1997, except for sugar and leather industries (Dagdeviren and Mahran, ). In fact, the sectors with a greater CU rate than average were those in which market concentration was greater, a finding that seems to contradict the view that excess capacity may be an instrument of entry barrier.…”

“…One argument is that per capita income levels act as a proxy for other factors associated with the level of development. It is possible that industrial CU, especially in the developing world, is partly dependent on some structural factors including the supply‐side conditions and institutional environment within which firms operate (Dagdeviren and Mahran, ; Rand and Tarp, ). Supply‐side factors include the quality and continuity of utility services such as water, electricity and telecommunications, state of infrastructure, including road and transport networks, and availability and conditions of access to credit.…”

“…In extreme and persistent cases, such adversities would result in exits from the sector. Dagdeviren and Mahran () show how political conflict and civil war in what is now South Sudan have led to the disappearance of most manufacturing activities. Under less extreme conditions, social conflicts resulting in, for example, civil disorder and industrial strikes may lower the use of existing productive capacities.…”

La evolución del desarrollo industrial en los países en desarrollo : aplicación al caso del Norte de África : un análisis del impacto de posibles acuerdos comerciales y de la industrialización verde de la región

“…In today's globalised world, multiple studies analyse industrial development within the framework of international competitiveness, considering the role of such factors as institutions, infrastructure, health, education, financial markets, technology and innovation (Dagdeviren and Mahran, 2010). North African countries are heterogeneous in terms of population, resources and capital endowments.…”