worse, stagnation with increasing indebtedness, the landlocked economies need to redirect their development strategies.<sup>4</sup> To realize a higher growth rate, small economies will need the demand-pull for their tradables from the international economy. So long as global growth and trade remain sluggish, supply-push could raise growth somewhat and create the potential for higher growth once external demand picks up.

A revival of African growth rates calls for a new round of policy initiatives, to enhance the productive potential of key sectors, particularly by the landlocked countries. In capsule, the long-term, supply-side growth potential of SSA economies will depend upon; (i) augmenting factor inputs – i.e. physical and human capital - and improving the quality of both the natural capital and human resources; (ii) channeling resources into tradable activities rural or urban with sound long-term prospects and steadily growing exports<sup>5</sup> ; (iii) raising total factor productivity through human capital deepening and the assimilation of new technologies; and (iv) investing in infrastructure, logistics and other services so as to enlarge the portfolio of tradable activities, strengthen connectivity and facilitate greater integration with the regional and global economies.

A prominent developmental stylized fact is that in developed countries structural change transferred labor from slow-growing and less productive agricultural activities to more rapidly expanding and productive urban industrial ones. In those economies that steadily increased factor productivity and moved up the income ladder, the share of agriculture in GDP fell away from 30 percent in low income ones to 7 percent in the upper middle-income countries and to as little as 1 percent in high income ones (it was 5 percent in East Asian economies in 2016).<sup>6</sup> However, structural change of the productivity-augmenting sort has been slow in coming to SSA. Compared to their counterparts in East and Southeast Asia, economies in SSA remain highly dependent on primary sectors i.e. agriculture and mining rather than on manufacturing, the share of which has slipped from 19 percent of GDP in 1975 to 11 percent in 2014 and from 3 percent of global manufacturing in 1970 to 2 percent in 2013 (Newman et al 2016). In trade, primary commodities have maintained a steady share; they accounted for 72 percent of SSA’s merchandise exports in 2014 as against 74 percent in 2000 (World Bank 2016, WDI, Table 4.4).

SSA is gradually converging towards the urbanization levels of more developed countries but the labor transferring to the urban sector is frequently being absorbed into low value adding informal services rather than manufacturing. McMillan and Rodrik (2014) show that during the decade of the 1990s, structural change

> 4 The indebtedness of countries in SSA is on the rise. According to the Jubilee Debt Campaign, at the end of 2017, 28 countries were rated as in debt distress or at high risk of debt distress, as against 22 at the end of 2016, and 15 in 2013. The number of countries classified as low risk has more than halved – from 24 in 2013 to 11 in 2017.

> 5 Daruich, Easterly and Reshef (2016) point to the tight correlation between exports and per capita incomes. http://www.nber.org/papers/w22869

> 6 <u>http://wdi.worldbank.org/table/4.2</u>

3