The Premature Deindustrialization of South Africa

Abstract

Manufacturing activities are on the wane in Sub-Saharan Africa. With the relocation of many industries into Asia, the trend is widespread across the world economy. The USA and most of the European Union are also deindustrializing, but at higher levels of per capita GDP than Africa. Their economies tend to move into services. In contrast, the deindustrialization of Sub-Saharan Africa is often associated with the rising importance of extractive activities in its economy, exported to emerging Asia. Thus, contrary to the developed world, Sub-Saharan Africa is not moving away from industries and into services. Rather it is moving back into extractive activities, to take advantage, so the argument goes, from temporarily sky-high commodity prices. Such a trend has far-ranging consequences for the region’s aggregate activity, which then depends on commodity prices. It also raises the question of the long-run desirability of structural change there.