The annual report, Africa’s Development Dynamics, analyses the continent’s development policies. It presents a fresh narrative on Africa’s development, assessing the economic, social and institutional performance in light of targets of the African Union’s Agenda 2063. This second edition examines public policies that can help transform Africa’s production systems.

This second edition of the annual economic report of the African Union Commission (AUC), produced with the OECD Development Centre, is dedicated to the memory of Dr. René N’Guettia Kouassi, Director for Economic Affairs at the African Union Commission and instigator of this report in 2016. A committed pan-Africanist, Dr. Kouassi insisted that the continent could only achieve its ambition of integration by profoundly transforming its productive structures, and by developing activities that create value added and quality jobs. With this conviction, he mobilised all his intellectual resources for the production of this report, before his premature passing in January 2019.

Africa’s growing markets show great potential for transforming their production systems. Africa’s gross domestic product (GDP) has grown by 4.6% annually since 2000, the second fastest rate in the world. Its domestic demand accounts for 69% of this growth performance and has shifted towards more processed goods. The African Continental Free Trade Area raises new hopes of creating a pan-African market for the continent’s industrialisation.

Africa’s Development Dynamics 2019 examines policies for productive transformation to help African leaders reach the targets of the African Union’s Agenda 2063. The first chapter analyses Africa’s potential for productive transformation and current policy approaches to tap these opportunities. It proposes three main policy areas for transforming firms in Africa within a changing world. The five regional chapters of the report demonstrate important differences in productive transformation between Southern, Central, East, North and West Africa, and propose specific policies for each region. The report provides African decision makers with an up-to-date tool for policy dialogue and reform at national, regional economic community and pan-African levels.

This chapter analyses how public policies can support African firms’ productive transformation. It first explains why productive transformation matters for the continent’s development agenda. Second, the chapter proposes three main sets of policies to accelerate productive transformation in a fastchanging world. The first set consists of developing clusters of firms. Successful clusters enable local firms to specialise and scale up their production. The second set of policies aims to develop regional production networks. Governments can strengthen regional public goods, like cross-regional infrastructure and institutions, as well as regional complementarities in value chains. The third set focuses on increasing African firms’ capacity to thrive in export markets. Exports will become ever more important as African governments implement the Continental Free Trade Area. The chapter highlights innovative practices on the continent relevant to African policy makers at local, national, regional and continental levels.

This chapter addresses productive transformation in Southern Africa (Angola, Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe). The first section situates the region’s productive transformation in the context of the regional and country-specific trends in industrial performance. The second section presents drivers of and constraints to productive transformation in the region.

This chapter analyses the public policies needed for productive transformation in Central African countries (Burundi, Cameroon, Central African Republic, Chad, Republic of the Congo, DR Congo, Equatorial Guinea, Gabon, and São Tomé and Príncipe). These countries face structural constraints that hinder their integration into the global economy and hamper inclusive growth. The chapter opens with the analysis of productive structures by reviewing trends in several macroeconomic aggregates as well as Central Africa’s achievements in integrating into the global economy. It then identifies the sectors in which these countries have a revealed or latent specialisation advantage and identifies opportunities for trade growth. It goes on to examine the obstacles the private sector and foreign investors face due to low regional integration. Finally, the chapter proposes public policies to achieve productive transformation in the region.

The chapter sheds light on the state of productive transformation in 14 East African countries: Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda. The first section presents stylised facts and dynamics of East Africa’s productive structures, competitiveness, changes in sectoral contributions and export performance. The second section discusses comparative advantages and the economic complexity of the region’s economies in view of the current state of productive transformation. The section also addresses on challenges to transforming the structure of the economies which might hinder the region’s growth in the medium to long-term. The final section discusses strategies and mechanisms needed to enhance productive transformation.

This chapter examines government policies required for productive transformation in the countries of North Africa. These countries face structural constraints, which hinder international trade and the creation of quality jobs, both of which are necessary to reduce inequality. These challenges require changes to production and trade structures.

This chapter examines the public policies for productive transformation in the 15 countries of West Africa. Despite sustained growth and progress in advancing regional integration, West African countries remain at a competitive disadvantage. The chapter starts by examining productive structures via the dynamics of macroeconomic aggregates as well as West Africa’s integration into world markets. It highlights sectors in which these countries possess a latent or revealed specialisation advantage and it identifies opportunities for expanding the industrial and manufacturing sectors, to leverage better inter-state complementarities. Lastly, this chapter proposes public policy areas that could aid the region’s productive transformation.

Data used in this edition of Africa’s Development Dynamics has been compiled and presented in tables available for free download on the Development Centre’s website (https://oe.cd/afdd2019) along with some additional social and economic indicators that add context to the report’s analysis. Figures are presented on a national basis for African countries for which data is available.