Is the Southern African Development Community afflicted by premature deindustrialisation?

Abstract

A key driver of growing youth unemployment across African economies I identified by Rodrik (2016) as “premature deindustrialisation”, where developing countries move out of labour-absorp- tive, low-income manufacturing and into low value-added services sooner than their industrialised counterparts did historically. Developing countries also make this transition at lower rates of per capita income than their wealthier peers. Traditionally, manufacturing has been the primary channel through which employment growth has occurred, creating a sustained middle class and strengthening the political equilibrium (Acemoglu et al., 2019). A preliminary descriptive analysis of African manufacturing performance reveals starkly divergent trajectories between the Southern African Development Community (SADC) and non-SADC countries. SADC’s output and employment growth as a measure of manufacturing performance is worse than that of non-SADC countries in Africa. This paper quantitatively examines whether SADC is an outlier, controlling for intervening variables. Specifically, we employ econometric modelling focusing on introducing decade-region interaction effects to ascertain whether SADC suffers a statistically significant difference in industrialisation trends when compared with countries. We account for this discrepancy by referring to the weak performance of SADC’s dominant economy, South Africa, and further consider whether the industrialisation prospects of other SADC countries are adversely impacted by a relatively strong reliance on oil and mineral rents. Finally, we propose some adjustments to the current SADC Industrialisation Strategy (2015-2063).