Promoting Manufactuiring to Accelerate Economic Growth and Reduce Growth Volatility in Africa

This paper investigates the role of economic transformation in the form of increased manufacturing share in aggregate output in accelerating growth and reducing growth volatility in Africa. Using cross-section time series data from 50 African countries, the paper examines the key determinants of growth in the share of manufacturing output in aggregate output and its relationship with real GDP growth and growth volatility. Results of system GMM estimation indicate that real GDP growth and domestic investment are among the key drivers of growth in the share of manufacturing output in total output and that growth in the latter has, in turn, the potential to raise GDP growth and reduce growth volatility. It is therefore argued that African countries should pursue effective strategies, including industrial policies and institutional reforms, to promote manufacturing and other innovative activities as a means to accelerate economic growth and diversification, and enhance employment creation.