_demeaned productivity (demeaned TFP)_ , which overcame the problem of comparing apples and oranges when doing TFP cross-country comparisons (Escribano et al., 2008). We found the concept of demeaned productivity very useful because it is highly correlated with per capita income, ease of doing business indices, firm’s perceptions of growth bottlenecks, and the results of the Africa Competitiveness Reports. Furthermore, the information obtained from the investment-climate determinants of demeaned TFP provided a much deeper insight into the firm-level investment-climate infrastructure elements that are constraining productivity growth in African countries.

We distinguished two clear blocks of countries in Africa.

The first block comprised countries with faster, steadier growth rates. These are mainly in the south, including Mauritius, Swaziland, South Africa, Botswana, Namibia, and Lesotho. The block also included Algeria, Morocco, and Egypt from the north, and Cape Verde and Cameroon from Central Africa. In southern Africa Botswana, Namibia, and Swaziland, were pooled for estimation purposes.

In the second block were Mauritania, Senegal, Benin, Mali, Niger, and Burkina Faso in the central-west; and Uganda, Kenya, Zambia, Tanzania, Malawi, Burundi, Madagascar, Ethiopia, and Eritrea in the central-east. These countries have experienced lower and more irregular growth rates, with periods of both positive increase and persistent decrease in per capita income. Pooled for estimation purposes were the West African states (Burkina Faso, Cameroon, Mauritania, and Niger) and Eritrea and Ethiopia.

Of the 26 African countries analyzed, Mauritius was, in 1950, the country with the highest per capita income (measured in terms of per capita gross domestic product, GDP), followed closely by South Africa, and, by a larger gap, Namibia and Algeria. But the per capita income levels in 2003 were somewhat different; Mauritius was still ranked first, followed by Swaziland, South Africa, and Botswana—and, by a wider gap—Algeria, Cape Verde, Egypt, and Morocco. Mauritius and Botswana experienced the highest sustained per capita income growth during recent years. Lesotho’s rate is the median, splitting the study into two blocks.

To better understand the convergence or divergence of trends, we plotted the per capita income of each African country relative to the per capita income of the United States. Convergence was observed only in Mauritius, Swaziland, and Botswana. For all other study countries, including South Africa, per capita income was found to be diverging from the United States, while, in a few (Egypt, Morocco, and Cape Verde) the ratio was stable. While persistently positive GDP growth allowed Mauritius’s per capita income to reach 45 percent of the United States’ in 2003, this was clearly the exception (together with Swaziland and Botswana). For the rest of the countries, including South Africa, relative per capita income was much lower in 2003 than in 1960 (indicating a divergence). In fact, the 2003 per capita income of several countries was no larger than 5 percent of the per capita income of the United States. As expected, labor productivity was the main factor explaining this divergence, given that labor force participation has a steady influence. Since total factor productivity (TFP) is usually a key factor explaining the evolution of labor productivity, in this paper we used investment climate surveys to identify the main infrastructure-related TFP bottlenecks in Africa.

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