African Nations Must Adapt to a Changing World: Evaluating Economic Growth Strategies

The extended disruption of shipping through the Strait of Hormuz has highlighted the vulnerability of Africa’s economies to geopolitical events. Fuel prices have surged, putting pressure on nations reliant on petroleum imports from the Middle East, including Ethiopia, Kenya, Mozambique, South Africa, Tanzania, and Uganda.

This susceptibility jeopardizes the continent’s efforts to combat poverty through what economists refer to as structural transformation: shifting workers from low-productivity roles like subsistence farming into higher productivity jobs in manufacturing and modern services.

Africa has not fully engaged in the export-manufacturing trend that revolutionized East Asia since the 1960s. Currently, its industrialization ambitions face greater obstacles as geopolitical tensions, fragmented supply chains, and advancements in artificial intelligence reshape the global economic landscape.

As an economist who has examined the impact of weaponized global trade on African economies, I assert that structural transformation remains crucial. However, it must be re-envisioned around four key priorities:

• larger markets
• reliable electricity
• Africa’s comparative advantages
• agriculture.

Why the old model worked

Japan, South Korea, Taiwan, China, and Vietnam industrialized in a largely similar fashion, boosting exports of labor-intensive manufactured goods like garments, footwear, furniture, and electronics. These sectors generated millions of jobs for workers with limited formal education while gradually enhancing technological capabilities, productive enterprises, and efficient logistics networks.

This was made possible by a relatively stable global trading environment. Trade barriers diminished, the demand for manufactured goods increased, and wealthier nations progressively exited low-wage industries as incomes rose. Governments could focus on enhancing competitiveness due to the relatively predictable international trade rules.

Africa, however, did not fully capitalize on this opportunity. Manufacturing comprises only about 10% of GDP in sub-Saharan Africa, compared to approximately 22% in East Asia and the Pacific. The continent’s share of global manufacturing has decreased from roughly 3% in the 1970s to less than 2% today.

The continent has struggled to establish internationally competitive manufacturing, even in a relatively open global trading environment. Factors impeding progress include:

• unreliable electricity
• high transport and logistics costs
• small and fragmented domestic markets
• weak industrial capabilities
• limited access to finance
• unpredictable policy.

Consequently, many economies have remained reliant on commodity exports while importing the majority of manufactured goods.

These persistent constraints remain in place. Africa now faces a dual challenge: it must dismantle the structural barriers that previously hindered the traditional manufacturing-led development model while also adapting to a dramatically altered global economy. This challenge does not render structural transformation unfeasible; it simply signifies that the old methodologies are no longer applicable.

Four changes have rewritten the rules

The first change is that trade has evolved into a geopolitical instrument. Nations utilize export controls, financial sanctions, and the management of strategic technologies to achieve national security objectives. The situation in the Strait of Hormuz exemplifies this dynamic.

The second change is that manufacturing can no longer create jobs at the same scale as before. Automation has diminished the demand for low-skill factory positions that previously absorbed millions of workers.

This shift is significant, as by 2030, sub-Saharan Africa is projected to account for approximately half of all new entrants into the global labor force—around 15 million young individuals annually. Generating productive employment will necessitate growth across manufacturing, modern services, and higher-value agriculture, rather than relying solely on factory jobs.

Third, China has maintained its competitiveness in labor-intensive manufacturing. Rising wages had led many economists to anticipate that the production of clothing, textiles, and footwear would migrate to lower-income nations. Instead, China continues to dominate this sector. This dominance complicates entry for African producers into industries that earlier industrializers previously used as gateways.

The fourth change is the advent of artificial intelligence. AI is becoming a general-purpose technology capable of assisting economies in reallocating labor and capital into more productive endeavors. For example:

• AI-driven tools can aid farmers in making more informed decisions regarding weather, pests, inputs, and market prices
• Businesses can harness AI to cut costs, improve quality, and engage in regional and global value chains.

How governments should respond

The African continent still requires millions of better-paying jobs and significantly higher productivity levels to alleviate poverty and improve living standards. What has shifted is the pathway to achieving these objectives.

First, collectively pursue economic security rather than focusing on national interests. Structural transformation necessitates firm investments in new industries. However, such investments are less likely to occur in uncertain export markets or vulnerable supply chains. A larger integrated market can mitigate these risks.

Collaborative efforts also provide African nations with enhanced bargaining power as the US, China, and Gulf states vie for investment in the continent’s digital and physical infrastructure. The complete implementation of the African Continental Free Trade Area has become increasingly urgent.

Second, prioritize investments in electricity. Reliable power is the cornerstone of both industrialization and the digital economy. Manufacturing, digital services, and AI-driven industries cannot thrive without consistency in power supply. Yet in sub-Saharan Africa, 78% of businesses experience regular power outages, leading to an average loss of 8.4% in annual sales, compared to a global average of 5.2%. In Nigeria, 86% of businesses own or share a generator; in Kenya, it is 65%; and in South Africa, 63%.

This reliance on diesel generators heightens dependence on imported fuel, a vulnerable position.

Third, compete in areas where Africa possesses genuine comparative advantages: industries tied to natural resources and burgeoning domestic markets. Examples include:

Lastly, it is essential to recognize that agriculture is integral to structural transformation, not a separate entity. Approximately half of sub-Saharan Africa’s workforce is engaged in farming. Increasing agricultural productivity elevates rural income, frees labor for more productive activities, and creates a demand for manufacturing and services.

AI can expedite this transition by supporting farmers.

Countries that effectively align these new realities with the enduring goal of channeling workers and resources into high-productivity sectors will be best positioned to achieve sustainable and inclusive growth.

Jonathan Munemo, professor of Economics, Salisbury University

This article is republished from The Conversation under a Creative Commons license. Read the original article.