Sub-Saharan Africa (SSA) has been at the center of global economic development interests since the independence of its nations in the late 1950s and early 1960. Despite its significant natural and human resource endowments, following their independence, many SSA economies faced significant growth and development challenges. For example, as highlighted by Jayne et al. [1
] and Adelaja et al. [2
] and shown in Figure 1
, the average real per capita income in SSA countries fell almost consistently between their independence and the mid-1990s. While generally attributed to limited infrastructure and experience and legacy issues from the days of colonization [3
], such poor performance raised concerns at the end of the 20th century about prospects for structural transformation and sustained economic development in SSA [4
] and whether the region could eventually become self-reliant.
The prospects for SSA improved dramatically since about the year 2000 when the region began two decades of sustained and transformative economic growth. For example, real per capita income grew every year from 2000 to 2016 [1
] as average education levels rose [6
]. SSA also became the world’s second fastest growing regional economy, surpassed only by Asia [6
]. Poverty rates declined as the proportion of the region’s population with incomes below the USD 1.90 per day (poverty rate) fell from 54% in 1990 to 41% in 2015 [7
]. Nutritional indicators also showed gradual but marked improvement [8
]. Women became considerably more active in labor markets [9
] and gained greater influence over household resources [10
]. Measures of financial inclusion also improved rapidly [11
]. The post-2000 reversal of fortune has been mainly attributed to improved governance and political liberalization, debt restructuring and a subsequent increase in public expenditures on social services, greater domestic and foreign direct investment in many sectors, improved fiscal and monetary policies, reductions in distortionary economic policies and enhanced overall policy environment [12
While these fundamental reforms put many countries on an improved growth path, SSA remains the world’s least developed region today. For example, with about 25 percent of its people being undernourished, SSA also accounts for over 25 percent of the world’s undernourished and over 50 percent of its poor [14
]. Hence, significant aid and donor support have been targeted toward SSA. Today, this region is the most aid-dependent in the world [7
]. Many SSA countries also face infrastructure deficits and institutional deficiencies that date back to the colonial period [12
]. In addition, at least two decades of development opportunities were lost as per capita GDP in SSA only returned to its 1980 level in 2008.
The unique pattern of growth in SSA during the past two decades has also raised a few questions about whether structural transformation, defined as the reallocation of economic activity (and factors of production) from low-productivity activities to higher-productivity activities, thus raising overall productivity in the economy, is really occurring. In SSA, the 2000 to 2018 period was one of significant progress in agriculture. According to the World Bank [11
], between 2000 and 2018, SSA achieved the highest rate of agricultural production growth of any region of the world (4.3 percent per year average). However, non-agricultural sectors grew even more rapidly and, as a result, agriculture’s share in GDP declined [1
]. The share of the labor force in non-farm employment also increased since 2000 as SSA’s rural labor force diversified away from subsistence farming [15
]. This contributed to the region’s rising labor productivity [16
]. However, unlike the transformation process in other regions, SSA’s growth involved little industrialization and more direct leapfrogging from agriculture to the service sector [9
]. This raises questions about whether SSA’s growth is stable, sustainable and resilient enough to achieve future self-reliance.
The growing incidence of extraneous shocks from armed conflict (e.g., terrorism in the Sahel), natural disasters (e.g., storms), climate (e.g., droughts) and recent health shocks (e.g., Ebola and the recent COVID-19 pandemic) raise further questions about the sustainability of SSA’s progress toward structural transformation [19
]. This is especially so because agriculture, which underpinned recent growth, has borne the brunt of many of these shocks. Armed conflicts have increased in prevalence and lethality in SSA [22
]. For example, the number of armed conflict incidents in SSA countries increased eight-fold between 1997 and 2000 from 2826 to 23,721, while associated fatalities increased from 20,118 to 36,154 [25
]. Armed conflicts have also adversely affected agriculture and aggravated food insecurity at the household level in substantive ways [22
]. By causing internal (IDPs) and external (refugees) population displacements, conflicts also have adverse spillover effects on host communities, thereby exacerbating the economic problems of places remote from the theater of conflicts [28
]. Armed conflicts, therefore, threaten past advancements in economic development, especially in rural areas [29
Likewise, the number of natural disaster incidents rose from 30 in 1990 to 95 in 2020, leading to an increased number of affected people [32
]. Between 1991 and 2020, the 2108 natural disaster incidents in SSA killed 191,638 people and affected 419 million people [2
]. The dominant natural hazards were floods (852 incidents), epidemics (722), storms (203) and droughts (186), but droughts affected the largest number of people (323 million). Climate change also resulted in increased desertification [33
], leading to greater incidents of drought [34
], more frequent and longer incursion by pastoralists in new territories and more farmer–herder conflicts [27
]. Many countries, especially resource-dependent ones, were also exposed to shocks from low and unstable commodity prices. For example, between June and December 2014, the Brent price of crude oil fell by 44%, resulting in one of the most dramatic declines in the price of oil in recent history and creating major challenges for the economies of Nigeria, Angola and other oil-producing countries.
The COVID-19 pandemic resulted in massive economic slowdowns and exposed the vulnerabilities of African farmers and other poor people working in the informal sector who have little job or food security [35
]. According to initial UN estimates, at a minimum, an additional 83 million people, and possibly as many as 132 million, went hungry in 2020 due to the economic recession triggered by COVID-19 [37
]. In SSA, 14 countries are at high risk of or were already experiencing significant food security deteriorations, including rising numbers of people pushed into acute hunger [38
]. Declining employment and wages mean that households have less money for food and household goods [38
]. All of these suggest the need to more deeply explore the impacts of shocks on the pace of structural transformation.
The shocks described above also raise concerns about the resilience of SSA’s economies. Resilience implies responding to avoiding loss of income and assets when shocks occur by building the needed capacity to protect the viability of households and enterprises [2
] and, by extension, macroeconomies. Without resilience, there is a potential to lose past advancement, which cost much to achieve, and for some economies to go off-track. Hence, progress toward structural transformation must be examined in the context of resilience.
Whether or not the growing incidence and severity of shocks have slowed down the pace of structural transformation is therefore an important research question. So is the role of resilience in safeguarding structural transformation in SSA countries. The micro-level impacts of extraneous shocks (on household development outcomes) have been well documented in the literature. These micro-level studies demonstrate the importance of resilience in mitigating the impacts of shocks [39
]. However, the impacts of shocks on the process of structural transformation and the role of resilience capacity in mitigating such impacts and in safeguarding the progress made by SSA countries in structural transformation have received little empirical attention, although several studies allude to them. The issue of structural transformation is most relevant in developing countries because they are the ones still heavily dependent on agriculture. However, research focusing on the role of shocks in moving the trajectory of structural transformation focuses is scant. While there are some studies which focus on the endogenous relationship between structural transformation and armed conflicts [41
], they focus mainly on how countries with a large share of agriculture are more conducive to armed conflicts, not the other way around.
In light of the above, this paper explores three important, intertwined concepts regarding sustainable growth in SSA: the relationships between resilience, agriculture’s progress and progress toward structural transformation. The specific objectives are threefold: to (a) provide empirical evidence on the impacts of key shocks on the pace of structural transformation, (b) develop indices of resilience to these shocks and (c) investigate the possible role of these resilience indicators in mitigating any adverse effects.
We combine cross-country panel data from the years 2000 to 2018 on various shocks [25
] with data on development indicators [11
] to create a database for measuring the impacts of these shocks, constructing resilience indicators using the factor analysis approach and examining the mitigation effects of resilience factors. We use two proxies as dependent variable indicators of the pace of structural transformation: non-agricultural share of (a) GDP and (b) overall employment. Our main hypotheses are that: (a) shocks retard the pace of structural transformation while resilience indicators bolster it, and (b) resilience factors mitigate the adverse effects of shocks on structural transformation.
We organize the rest of this paper as follows. In Section 2
, we briefly review the extant literature on the two related concepts of structural transformation and resilience and summarize potential linkages between them. In Section 3
, we provide a simple conceptual framework for exploring these relationships. In Section 4
, we present the methodology, which includes the empirical model for testing the relationships between shocks, resilience factors and our two indicators of structural transformation. We also provide the description of the data and our estimation techniques. In Section 5
, we present our empirical results. Section 6
provides the summary and conclusion of the paper and presents some policy implications.
3. Conceptual Framework
From the above, we expect that shocks which affect key microeconomic outcomes can also affect aggregate macroeconomic outcomes. Since agriculture is particularly vulnerable to shocks, one expects these shocks to have the potential to affect the pace of structural transformation by impeding or hastening the necessary processes that underpin structural transformation. For example, the human displacements caused by shocks often dislocate people, thereby retarding or accelerating optimal redeployment of labor. That is, shocks may force inter-sectoral moves by people that are inconsistent with the principle of structural transformation (e.g., move people back to agriculture), or accelerate the process of structural transformation (e.g., force people to explore higher-productivity sectors).
Shocks may also lead to infrastructure, homestead and community destruction, thereby necessitating reinvestment that slows down the pace of asset accumulation necessary for structural transformation. Alternatively, they can facilitate leapfrog development and building-back-better opportunities. For example, early evidence from the COVID-19 pandemic suggests that agriculture grew by providing opportunities for people to redirect their efforts to home-grown food production in order to reduce their exposure and smoothen their incomes [21
], but it also accelerated the development of e-commerce. Shocks can also alter planning horizons and distort investment patterns by changing the geographic distribution of risks and security challenges. The net effects of shocks may be positive or negative, depending on the sector in question.
One of the main reasons why the process of structural transformation is vulnerable to shocks is because of the territorial nature of armed conflicts in SSA. In the case of many civil wars and insurgencies in the region, violent non-state actors impose their will on the government and the public by taking control of the land, primarily in rural areas. For example, at the height of insurgency, Boko Haram controlled a significant share of northeastern Nigeria, a region heavily dependent on agriculture. Similarly, most natural disasters and climate-related shocks also impact land, an immobile asset, meaning that shocks can have a disproportionate effect on the agricultural sector vis-à-vis other sectors.
The relative impact of shocks on structural transformation also depends on the duration of shocks. For example, on average, civil wars last over five years, with many of them lasting for decades. The persistent nature of such shocks means that long-term development indicators including education, health and other social outcomes are negatively impacted, affecting the ability of workforce to acquire new skills. This will prevent inter-sectoral movement of labor and thereby slow down the pace of structural transformation.
If shocks impede the process of structural transformation, by its very definition, resilience helps to mitigate the adverse effects of such shocks. For example, because the lack of resilience implies extended periods of deviation from the normal growth process and repeated humanitarian interventions, resilience building can reduce the high human and economic costs of repeated humanitarian and rebuilding efforts and the associated political and public pressures [28
]. The problem, however, is how to select resilience measures that are appropriate to the scale at which shocks and structural transformation are evaluated. Macro-level studies on the selection or measurement of appropriate resilience measures for structural transformation hardly exist. However, the micro-level studies provide some guidance on the types of macro-level variables that can be explored as resilience factors and indicators.
Our empirical strategy is, therefore, to examine the relationships between the levels of selected shocks across SSA countries on the one hand and various indicators of structural transformation on the other hand. Two common indicators of national-level structural transformation include (1) agriculture’s share of GDP and (2) agriculture’s share of aggregate national employment [46
]. Because structural transformation implies a decreasing share of agriculture in (i) national GDP (the output dimension) and (ii) employment (the labor market dimension), to make the dependent variable directly reflective of the progress toward structural transformation there is a need to transpose these two measures. That is, the indicators of structural transformation to be used as dependent variables in our empirical work are (1) non-agricultural share of GDP and (2) non-agricultural share of total employment. However, although both employment and GDP variables track growth trajectories of the economy, employment moves more slowly when compared with the GDP variable. Hence, we may observe evidence of shocks impacting both measures of structural transformation differently.
6. Summary and Conclusions
Existing evidence of the impacts of shocks on the pace of structural transformation is limited. In this paper, using the contributions of agriculture to national income and employment as indicators of the extent of structural transformation, we explore if selected shocks slow down the pace of structural transformation. In general, we find that conflict and terrorism shocks slow down the pace of structural transformation, as measured through the percentage contribution of agriculture to GDP. However, on the employment dimension of structural transformation, we do not find that conflicts or terrorism affects the pace of structural transformation.
We, however, find that natural disasters generally show no adverse effects. We attribute the difference to the notion that conflict and terrorism tend to be more invasive, more deeply rooted, more retarding of gains previously made through good governance and economic liberalization policies and have much deeper negative conditions that slow down structural transformation than natural disasters. As outcomes of nature, not human activities or human constructs, natural disasters tend to be less systematic and less endemic, especially at the national level. Besides, the capacity of emergency management agencies to deal with natural disasters is probably easier to build than the capacity to mitigate the effects of conflict and terrorism. This is reflected in the fact that despite the growing incidence of natural disasters and the number of people affected, resulting casualties have trended downward in the last few decades in Africa [2
]. For example, awareness and infrastructure in place for post-natural disaster redevelopment and reconstruction are well advanced, while similar structures for post-conflict redevelopment and reconstruction are mostly at their infancy.
Given the growing incidence of terrorism and other conflict shocks in Africa, our results suggest the need to take them seriously as detractors from the long-term goal of country self-reliance. Our finding that resilience factors help to work independently to bolster economies is encouraging. Our finding, however, that resilience factors do not help to mitigate the negative effects of conflict on the pace of structural transformation, measured though agriculture’s share of GDP, is not encouraging. More research is needed to find appropriate measures of resilience in the face of armed conflicts, but also terrorism.
In conclusion, we offer the following recommendation. First, more detailed work is needed on the macroeconomic impacts of shocks and the mitigating effects of resilience. Second, a deeper look into the roles of shocks, beyond the three that we examine here, is needed. Third, more research on specific resilience strategies and their potential to cushion countries’ economies from shocks is needed. Finally, we urge deeper investigation into the resilience framework as a tool for hastening countries’ progress toward self-reliance.