Africa’s recent economic performance has been quite impressive. However, strong economic growth has not always delivered corresponding benefits in terms of poverty reduction, partly because it has failed to generate sufficient productive employment.
This paper compares the experiences of four fast-growing African countries—Ethiopia, Ghana, Mozambique and Tanzania—in order to shed some light on the different growth paths being pursued, as well as on the policy choices that might explain the gaps in key development outcomes.
There are three key messages emerging from the analysis.
- First, the pattern of economic growth matters for poverty reduction. Growth that is driven by capital-intensive industries seems to generate limited benefits for the poor, as the experiences of Mozambique and Tanzania attest. In these cases, efforts to diversify production structures into more employment-intensive sectors will be crucial to improve the inclusiveness of the growth process.
- Second, macroeconomic stability, the business environment and labour market policies do not seem to explain differences in country performance. This suggests that, while important, they alone are not sufficient to create productive employment and thus improve living standards. A wider range of economic and social policies is therefore required to achieve better development outcomes.
- Third, sector-specific policies play an important role in reducing poverty. In particular, support to agriculture is not only crucial to reduce the incidence of poverty in rural areas (where the majority of the African population lives), but can also contribute to accelerate the pace of structural transformation. Improving agricultural productivity and creating employment opportunities in higher-productivity employment-intensive activities—such as in light-manufacturing and modern services—will be crucial to sustainably raise living standards in Africa. Strategic public investments and greater availability of credit can play a vital role in this regard.