metadata: authors: 0: author: Calderon,Cesar
1: author: Dabalen,Andrew L.
2: author: Qu,Ayan
count: Africa,Botswana,Ethiopia,Mauritius
docna: 0: docna: The Changing Landscape of Africa’s Growth
docty: Policy Research Working Paper
abstracts: cdata!: This paper examines the main features of
            real growth per capita of Sub-Saharan Africa over the past
            six decades, before uncovering the sources of
            growth&#x2014;including those of growth miracles. Three
            distinct growth phases before the recent &#x201c;lost
            decade&#x201d; are observed. The swinging pattern of
            income per capita shows that the region has not converged
            with most benchmarks and is not resilient to shocks,
            although resilience has improved since the beginning of the
            twenty-first century. Furthermore, growth across countries
            in the region is heterogeneous and falls into three broad
            groups. Analysis of the sources of growth suggests that the
            region underperforms on duration during episodes of
            expansions/recessions, and the contribution of total factor
            productivity remains small, although it has improved over
            the past two decades. A few countries in the region, for
            example, Botswana, Ethiopia, and Mauritius, have sustained
            growth for decades, on par with the world&#x2019;s best
            performance. These exceptional &#x201c;growth
            miracles&#x201d; are distinguished by a common set of
            factors that explain how such miracles start and are
            sustained: leadership, economic diversification, market
            expansion, and investment for the future.
display_title: The Changing Landscape of Africa’s Growth
listing_relative_url: /research/2025/01/34444366/changing-landscape-africa’s-growth
topicv3: Economic Growth m1326241 471,Inclusive Growth m1327170 477,Determinants of Economic Growth m1327636 1078
publishtoextweb_dt: 2025-01-09T00:00:00Z
dois: 10.1596/1813-9450-11028
origu: Off of Sr VP Dev Econ/Chief Econ (DECVP)
no_of_pages: 40
author_keys: 0: author_key: 166739
1: author_key: 238140
2: author_key: 2009838
model_extractions: Policy Research Working Paper 11028 The Changing Landscape of Africa’s Growth _Cesar Calderon Andrew Dabalen Ayan Qu_ Africa Region Office of the Chief Economist January 2025
Policy Research Working Paper 11028

# **Abstract**

This paper examines the main features of real growth per capita of Sub-Saharan Africa over the past six decades, before uncovering the sources of growth—including those of growth miracles. Three distinct growth phases before the recent “lost decade” are observed. The swinging pattern of income per capita shows that the region has not converged with most benchmarks and is not resilient to shocks, although resilience has improved since the beginning of the twenty-first century. Furthermore, growth across countries in the region is heterogeneous and falls into three broad groups. Analysis of the sources of growth suggests that the region underperforms on duration during episodes of expansions/recessions, and the contribution of total factor productivity remains small, although it has improved over the past two decades. A few countries in the region, for example, Botswana, Ethiopia, and Mauritius, have sustained growth for decades, on par with the world’s best performance. These exceptional “growth miracles” are distinguished by a common set of factors that explain how such miracles start and are sustained: leadership, economic diversification, market expansion, and investment for the future.

This paper is a product of the Office of the Chief Economist, Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at ccalderon@worldbank.org; adabalen@worldbank.org; and aqu@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **The Changing Landscape of Africa’s Growth**<sup>**1**</sup>

Cesar Calderon, Andrew Dabalen, Ayan Qu

**Keywords:** Sub-Saharan Africa, Growth Accounting, Growth Miracles.

## **JEL Codes: O40, O47, O55**

1 This paper is a product of the Office of the Chief Economist, Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and contribute to development policy discussions around the world. The author(s) can be contacted at ccalderon@worldbank.org; <u>adabalen@worldbank.org; aqu@worldbank.org. The views</u> expressed in this paper are those of the authors, and do not necessarily reflect those of the World Bank or its Boards of Directors.
# **1. Introduction**

Over the past two decades, there was great optimism about economic performance in the African continent. During the period 2000-14—known as the Africa Rising period—nearly half of the 25 countries in the world with the fastest GDP growth were in Sub-Saharan Africa, and the growth rates of economic activity for all these countries in the region surpassed an average rate of 6.5 percent per year. In half of the years during this period, Africa’s GDP grew at a faster pace than that of East Asia. Economies in the region were flourishing and most countries were at peace. Life expectancy in the region rose from 51 years in 2000 to 59 years in 2014 while the incidence of HIV and malaria dropped sharply by nearly 60 and 33 percent, respectively. Foreign direct investment into the continent increased from $10.4 billion in 2000 to about $54.5 billion in 2014. Technology appeared to be spreading faster in the region. Mobile cellular subscriptions rose 60-fold between 2000 and 2014, with mobile penetration soaring from less than 1 mobile phone per 100 people in 2000 to about 13 per 100 people in 2014.

There was hope that livelihoods would continue improving in the years ahead. A surge in economic activity in the region was broad-based: resource rich nations rode the wave of commodity prices and had protracted periods of rapid GDP growth ( _e.g._ , Equatorial Guinea, Chad, Mozambique, Nigeria and Zambia), while non-resource rich low-income countries experienced growth spurts supported by sound macroeconomic and structural policies ( _e.g._ , Rwanda, Uganda, Tanzania, and Ethiopia). Broadly, the growth record of the region during this period was attributed to both external and domestic factors. On the external front, the commodity super cycle, the emergence of China as trade and investment partner, and the massive inflow of foreign capital helped propel growth in the region. Domestically, improved macroeconomic management supported rising consumption and investment across resource-intensive sectors (extractives) and nonresource sectors (telecommunications, finance, retail, real estate and transportation).

Economic performance during the Africa Rising period, however, was less impressive when accounting for population growth and not adequately inclusive. After hitting a trough in the mid-1990s, the growth spurt during the period lifted the region’s per capita income to a level that surpassed its previous peak in economic activity—circa 1974 ( **Figure 1** ).<sup>2</sup> After the plunge in commodity prices, however, growth per capita returned to negative territory, _i.e._ , -0.33 percent per year in 2015-19.<sup>3</sup> Additionally, lower growth elasticity of poverty resulted in a reduction in the poverty headcount ratio that was considerably slower than that in East Asia and South Asia.<sup>4</sup> For instance, at $2.15 (in 2017 PPP), the headcount poverty ratio in Sub-Saharan Africa dropped from 56.5 percent in 2000 to 37.6 percent in 2014. In contrast, headcount poverty declined in East Asia and the Pacific (EAP) from 39.5 in 2000 to 3.6 in 2014 while it fell in South Asia (SA) from 39.8 in 2002 to 17.9 in 2014.<sup>5</sup>

> 2 It took more than three decades for the region to surmount the previous peak in living standards. In 2008, SubSaharan Africa’s GDP per capita (US$ 1,539 at 2015 constant prices) finally exceeded its previous peak (US$ 1,533 at 2015 constant prices) in 1974 ( **Figure 1** ).

> 3 The economic fallout from the COVID-19 pandemic resulted in the first contraction in economic activity—as measured by the gross domestic product (GDP)—in the region over the past 25 years. In per capita terms, the contraction was even larger (-4.5 percent).

> 4 The growth elasticity of poverty has also been historically lower in Africa than elsewhere (World Bank 2018 b). This is attributed to the inequalities in the access to education, basic services (safe water and sanitation), the lack of structural transformation, and economic diversification (Wu, Atamanov, and Bundervoet 2023).

> 5 Growth in the region after the plunge in commodity prices was insufficient to reduce poverty significantly. The poverty headcount ratio declined to 34.9 in 2019. See Baah et al. (2023).
<!-- Start of picture text --> GDP per capita (LHS), NE<br>1617.5 (2022) f ..<br>ey<br>Was<br>n 4 &<br><!-- End of picture text --> <!-- Start of picture text --> Relative GDP per capita<br>(RHS), 0.14 (2022)<br><!-- End of picture text -->
<!-- Start of picture text --> 110<br>10009 7"<br>90 o7 -oo? o* ?<br>o” ¢<br>80 o” 7 o”<br>70 --* id<br>0 mae emer<br>50<br>40 ~eooerree<br>“ _ee-eeTad<br>20Sa<br>10 SENMERERRSASHAMEH3AAGRFAFAAAAARRRR—hase ++-4-0-4-0-4-4-4-#RRR8 RR 8RYERRRRBASHNMEHEHSBARAARRRRRRAR+++RRRRRARRRARRA+++ ++RRR toe<br>= Sub-Seharan Africa —#— Low-Income «= «= Lower-Middie-Income @m «= Upper-Middle income<br><!-- End of picture text --> <!-- Start of picture text --> 110<br>90 ==<br>;o”<br>- o*a<br>7 Meme eeee<br>ree ae cedmeen,<br>s s --.68<br>s<br>50 *<br>ao<br>a-e* -<-er<br>2 eee? --"-"<br>30 Serra? oor"<br>10 etles---e<br>PRERSSRSSSRSSSSSSSSSSSSSSSASSSARAANAAAAAAAAAARRRRARRARRARRRARARARRARRRAR<br>Sub-Saharan Africa —+— Latin America & the Caribbean<br>em Middle Fae & Noth Africa mm South Asis<br>—e— East Asia (exc. HICs)<br><!-- End of picture text -->
Third, the region underperforms on duration, _i.e._ , it experiences shorter expansions and longer recessions, while the speed of expansion/recession, _i.e._ , growth per year, is more comparable with other regions.

Fourth, the contribution of total factor productivity growth to economic performance in the region is small but has turned positive over the past two decades, especially among high-performing countries during the “Africa Rising” period.

Fifth, a few exceptional growth miracles in the region are on par with the world’s best performance. They share common characteristics during the onsets that might have explained how a miracle starts: excellent leadership, economic diversification, market expansion, and investment for the future.

The rest of the paper is divided into the following sections. **Section 2** documents the main features of growth per capita in the Sub-Saharan Africa region from three perspectives: (a) analyze the basic statistical moments in the region’s aggregate GDP per capita across sub-periods; (b) present heterogenous patterns of growth across countries; and (c) investigate the main properties of growth episodes, _i.e._ , expansions (troughto-peak) and contractions (peak-to-trough). In **Section 3** , we will use the growth accounting approach to estimate the contribution of different factors and total factor productivity to growth per capita. In **Section 4** , we identify the incidence of growth miracles in the continent and examine best performers with case studies to draw insights on how a miracle episode started. **Section 5** concludes.
# **2. Growth in Sub-Saharan Africa: Stylized Facts**

Economic performance in Sub-Saharan Africa, as measured by per capita growth and risk-adjusted growth, has been poorer than other regions or country income group benchmarks during most time periods in the past six decades with a few exceptions—most notably since the beginning of the 21<sup>st</sup> century when it grew at a faster pace than industrial countries. Aggregate regional growth performance hides wide heterogeneity across countries: roughly one-third of the countries have grown, one-third have presented patterns of long swings, and the rest have been stagnant if not declining over the past six decades. When examining growth by episodes of expansions and recessions, we see that the region spends less time in expansions, especially the oil-abundant and conflict-affected countries, when compared with the rest of the world. Meanwhile, a typical expansion is also shorter and shallower while a typical recession is more comparable in speed with that of other developing countries on average but slightly longer.

## **2.1 Aggregate growth in the region is low and volatile**

Growth in Sub-Saharan Africa is considerably slower than that of industrial and developing countries on average over the past six decades. The (weighted) average growth rate for the region was 0.8 percent for the period 1960-2019, which is about one-fourth of the average growth recorded by developing countries (3.3 percent) and nearly one-third of that of industrial countries (2.2 percent). The living standards of countries in Sub-Saharan Africa have continued diverging over time relative to other groups. For instance, the median income of industrial countries was more than 7-fold that of Sub-Saharan Africa in 1960 and this gap widened to 16-fold in 2019. The same trend can be observed relative to developing countries. The median income of this group was 2.5-fold that of Sub-Saharan Africa in 1960 and it became 4.5-fold in 2019 (see **Table 1** ).<sup>8</sup> Over the past 60 years, growth per capita in Sub-Saharan Africa has experienced long swings, shifting from periods of positive to negative growth and vice versa. For instance, (weighted average) growth per capita in the region was low but positive at 1.1 percent per year in 1960-80, then slowed sharply to an annual rate of -0.85 percent over the next two decades (1981-2000), wiping out the gains of the previous two decades. The Great Moderation and the super cycle of commodity prices boosted incomes in the region over the following two decades when the (weighted average) growth per capita increased to 2.1 percent in 20012019—still slower than that of developing countries (3.7 percent) but greater than that of industrial countries (1.0 percent). Overall, Table 1 suggests that the narrative on the growth record of the region is not one of persistently poor performance but instead a case of short-lived, unsustained growth.

Growth per capita in Sub-Saharan Africa is more volatile than that of industrial countries, and slightly lower than that of the developing countries throughout the 1960-2019 period. In fact, the average standard deviation of growth rates in the region is 1.4 percent as opposed to 0.5 percent among industrial countries and 1.7 among developing countries. Fluctuations in growth per capita in the region were more volatile in the 1981-2000 period (2.4 percent), but still less oscillating than those of developing countries in the same period (3.3 percent). The stable macroeconomic environment experienced by the global economy during the Great Moderation (from the 1990s to the 2007-08 financial crisis) led to lower growth volatility for all country groups—including Sub-Saharan Africa. The standard deviation of growth per capita in the region dropped to 1.5 percent in the 2001-19 period. Additionally, the lower volatility of Sub-Saharan Africa vis-

> 8 **Table 1** computes central moments of the distribution of growth across countries and over time such as the mean, the standard deviation, and selected percentiles (the median as well as the bottom and top deciles), as well as a measure of risk-adjusted growth. These moments are calculated not only throughout the entire period (1960-2019) but also across sub-periods (1960-1980, 1981-2000, and 2001-2019).
|||Growth rat|esbyperi|od|GDPperc|apita|||
|---|---|---|---|---|---|---|---|---|
|||(percen|t)||(2017US$ch|inedPPP)|||
||1960-<br>2019|1960-<br>1980|1981-<br>2000|2001-<br>2019|<br>Initial|<br>Final|Final/<br>Maximum|Final/<br>Minimum|
|Industrial Countries|||||||||
|Average|||||||||
|Weighted|2.23|3.36|2.24|1.04|14,170|51,625|1.0000|3.6434|
|Simple|2.30|3.53|2.22|1.10|14,620|53,105|0.9876|3.9444|
|Risk-adjusted 1/|4.24|3.00|2.63|1.69|||||
|Standard Deviation|0.54|1.18|0.84|0.65|5,992|16,912|0.0413|1.4450|
|Selected Percentiles|||||||||
|Median|2.17|3.57|2.13|0.98|14,928|51,655|1.0000|3.5005|
|90th %-ile|2.86|4.91|2.79|1.72|18,754|74,408|1.0000|5.1216|
|10th %-ile|1.84|2.18|141|0.67|7,509|40,272|0.9857|2.9130|
|DevelopingCountries exc.SSA|||||||||
|Average|||||||||
|Weighted|3.30|3.68|2.59|3.66|1,970|12,979|1.0000|6.6188|
|Simple|2.25|2.73|0.85|2.87|12,689|20,507|0.9218|4.8382|
|Risk-adjusted1/|1.37|0.95|0.26|1.26|||||
|Standard Deviation|1.65|2.88|3.33|2.28|29,817|17,180|0.1652|4.6108|
|Selected Percentiles|||||||||
|Median|2.18|2.75|0.97|2.91|4,843|14,348|1.0000|3.2733|
|90th%-ile|431|6.31|3.92|5.55|19,111|39,717|1.0000|10.0913|
|10th%-ile|0.20|0.34|-2.46|0.11|1,500|5,137|0.6873|1.6788|
|Sub-SaharanAfrica (SSA)|||||||||
|Average|||||||||
|Weighted|0.77|1.13|-0.85|2.10|2,478|3,825|0.9969|1.5919|
|Simple|1.43|1.66|0.36|2.35|2,263|5,349|0.8673|3.3484|
|Risk-adjusted1/|1.03|0.72|0.15|1.53|||||
|<br>Standard Deviation|1.39|2.32|2.42|1.53|1,787|5,980|0.1888|3.2767|
|Selected Percentiles|||||||||
|Median|1.26|1.32|0.15|2.37|1,983|3,151|0.9736|2.2450|
|90th%-ile|3.25|4.76|3.56|3.75|3,819|13,847|1.0000|6.5204|
|10th%-ile|-0.24|-0.95|-1.66|0.08|680|1,220|0.5261|1.3456|
capita distribution in Sub-Saharan Africa. For instance, seven countries in the region recorded average annual per capita growth rates that exceeded 3 percent in the period 1960-2019, whereas income per capita contracted in fourteen countries during the same period. The average growth differential between these two groups of countries was about 5 percent—a margin that can produce rapid shifts in relative income per capita over time. By looking at the growth performance across subperiods, **Table 1** hints that the evolution of income per capita for the region as a whole cannot be characterized by a time trend deterministic model (either upward or downward sloping). Instead, growth per capita in the region swings from periods of fair to poor performance. Still, the great deal of heterogeneity in the evolution of GDP per capita across countries in the region signals that: (a) there is a wide dispersion of growth per capita between top and bottom performers, and (b) every country is unique in its evolution.

Inspecting the evolution of real GDP per capita for each individual country in the region, in the spirit of Pritchett (2000), reveals a diverse landscape of growth patterns in the region. Specifically, the different growth topographies exhibited by Sub-Saharan African countries can be classified into three broad groups: (a) countries with an upward-sloping trend (uphill), (b) countries with long swings (mountain ranges), and (c) stagnant countries (plains)—if not declining. **Figure 4** describes the criteria that we used to classify the growth patterns of Sub-Saharan African countries—which is derived after visually examining the trends and fluctuations of each country’s GDP per capita time series. **Table 2** lists the countries that fall into each of the three groups. Unlike industrial countries where growth is steady with occasional recessions followed by quick recoveries, long swings and stagnant periods are prevalent in the region which have contributed to the low, short-lived, and volatile growth at the regional level.

**Figure 4. Three General Growth Patterns of Sub-Saharan Africa, 1960s to 2010s.**

<!-- Start of picture text --> Group 1: Growing (Uphill)<br>Upward trend overall;<br> Values during the last decade is on average more than double the level in the<br>beginning decade; and<br>Values do not shrink by over one half of historical high in any year.<br><!-- End of picture text -->

|Group 1: Growing (Uphill)<br>Upward trend overall;<br>Values during the last decade is on average more than double the level in the<br>beginning decade; and<br>Values do not shrink by over one half of historical high in any year.|
|---|
|Group 2: Swinging (Mountain Ranges)<br>Outside Group 1; and<br>The minimum and maximum values do not fall within the beginning and<br>ending decades; and<br>The maximum value is more than double the size of the minimum value.|
|Group 3: Stagnant (Plain)<br>Outside Group 1 and 2; and<br>The maximum value is less than double the size of minimum value<br>throughout the six decades.|

<!-- Start of picture text --> Group 2: Swinging (Mountain Ranges)<br>Outside Group 1; and<br> The minimum and maximum values do not fall within the beginning and<br>ending decades; and<br>The maximum value is more than double the size of the minimum value.<br><!-- End of picture text --> <!-- Start of picture text --> Group 3: Stagnant (Plain)<br>Outside Group 1 and 2; and<br> The maximum value is less than double the size of minimum value<br>throughout the six decades.<br><!-- End of picture text --> _Note:_ The value(s) in the diagram refer to real GDP per capita (at chained PPPs in 2017 US$) from Penn World Table version 10.01 (Feenstra, Inklaar and Timmer 2015).
<!-- Start of picture text --> Growing Swinging Stagnant<br>Declining<br><!-- End of picture text -->
<!-- Start of picture text --> Botswana (Uphill reaching plateau) Ethiopia (Emerging uphill) Mauritius (Uphill)<br>°<br>o<br>per<br>ee)<br>~ — +<br>(o)<br>1960 1980 2000 20201960 1980 2000 20201960 1980 2000 2020<br><!-- End of picture text --> <!-- Start of picture text --> Nigeria (Mountain ranges) Zambia (Basin/U shape) Zimbabwe (Valley/V shape)<br>(o>)<br>nN<br>©<br>fe)<br>1960 1980 2000 20201960 1980 2000 20201960 1980 2000 2020<br>Burundi (Plain) Central African Republic (Downhill) Togo (Foothills)<br>(o>)<br>(oe)<br>(ie)<br>wo<br>1960 1980 2000 20201960 1980 2000 20201960 1980 2000 2020<br><!-- End of picture text -->
<!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>eae: 76.0 75.1 81.4<br>30 63.2 66.4 61.1 59.6<br>20<br>10<br>0<br>Non-SSA SSA Non-SSA SSA Non-SSA SSA Non-SSA SSA<br>Developing Countries UMC LMC LIC<br>mExpansions m Recessions<br><!-- End of picture text -->
<!-- Start of picture text --> 8<br>6<br>5<br>4<br>3 6.4<br>5.1<br>2 44<br>1<br>0<br>-2<br>Industrial Developing EastAsa& Eastern Latin Middle East South Asia Sub-Saharan<br>Countries counties the Pacific Europe& Americadk & North Affica (SSA)<br>excl. S54 Central Asia the Africa<br>Canbbean<br>BExpansions $M Recessions<br><!-- End of picture text -->
<!-- Start of picture text --> 5<br>4<br>3<br>2 3.5 «os 3.6<br>3.1 238<br>1 21<br>73 -2.7P 2.9 -2.6- 34 -2.3<br>-2<br>-3<br>-4<br>ndustria Developing Sub-Saharan East Asie & the LatinAmerica Middle East & South Asia<br>Countries countriesexcl Africa (SSA) Pacific & the North Africa<br>SSA Caribbean<br>BExpansions Mf Recessions<br><!-- End of picture text -->
<!-- Start of picture text --> A. Average duration (in years) B. Median amplitude (cumulative % variation)<br>, 12<br>-<oc=<br>6 10<br>--" -<br>5 ¢<br>~-orTM ----: 8 o* gt<br>4 --" ae<br>-- --"* 6 é<br>¢ 4<br>3 ?<br>o” ?¢ Fd7<br>, oa ar,<br>1 2<br>0 0<br>123 4 5 6 7 8 9 1011 1213 14 15 16 17 18 19 20 21 22 23 24 12 3 4 5 6 7 8 9 10111213 1415 1617 18 19 20 21 22 23 24<br>—e— Industrial Countries = @ eNon-SSA Developing Countries —e— Industrial Countries = @ eNon-SSA Developing Countries<br>———= Sub-Saharan Africa (SSA) ——— Sub-Saharan Africa (SSA)<br><!-- End of picture text -->
<!-- Start of picture text --> A. Average duration (in years) B. Median amplitude (cumulative % variation)<br>2.5 0.0<br>12 3 4 5 6 7 8 9 10 11 12 13 14 15 16<br>-05<br>2.0 -1.0<br>1.5 ed 7--" Teer nn as<br>-2.0<br>-25<br>1.0<br>-3.0 N<br>0.5 35-40 a yen--. wee eee eee<br>0.0<br>123 4 5 6 7 8 9 10 11 12 13 14 15 16 5.0<br>—e— Industrial Countries = = +Non-SSA Developing Countries —®— Industrial Countries = @ @Non-SSA Developing Countries<br>——— Sub-Saharan Africa (SSA) —— Sub-Saharan Africa (SSA)<br><!-- End of picture text -->
<!-- Start of picture text --> 5 2.0<br>e<br>44 15<br>e 1.0<br>3 e<br>e 05<br>2<br>ee LJ<br>0 = “1.0<br>World Industria Developing East Asia& SouthAsia Mi ast Sub-Saharan<br>1 Countries Countriesexcl. SSA the Pacific AfricaIh Africa (SSA) -15 SSA Non- SSA Resource SSAResource SSA Resource SSA Fragile<br>Resource Abundant Abundant, Oil Abundant,<br>-2 Abundant Minerals<br>Physical Capital @HumanCapital mTFP Demographics @ Output p/c mPhyscal Capital mHumanCaptal mTFP Demographics @ Output Output p/c<br><!-- End of picture text --> <!-- Start of picture text --> 2.0<br>15<br>1.0<br>05<br>ee LJ<br>“1.0<br>-15<br>SSA Non- SSA Resource SSAResource SSA Resource SSA Fragile<br>Resource Abundant Abundant, Oil Abundant,<br>Abundant Minerals<br>mPhyscal Capital mHumanCaptal mTFP Demographics @ Output Output p/c<br><!-- End of picture text -->
<!-- Start of picture text --> 4<br>3<br>2<br>° | Lo | | |<br>-1<br>-2<br>-3<br>a a a a ym a aI 7a nan a "ay an<br>mSm&S&&S&&S<br>_= = ol = _ ol _ _ ol = = om<br>Ooa= 3ooa= rx]3SoSo =oOa= Sooa= 3SoSoa =Ooa— ooSa= 3>=a So=a= ooSa= 3i=]Ja<br>Sub-Saharan Africa (SSA) SSA Non-Resource SSA Resource Abundant SSA Fragile<br>Abundant<br>ePhysical Capital ms HumanCapital oeTFP oeDemographics © Output per capita<br><!-- End of picture text -->
during this period while TFP growth explains about half of that performance. Additionally, demographics also contributed positively as the share of working age population increased.

**Figure 14. Growth decomposition of high performers during the Africa Rising period, 2000-14**

<!-- Start of picture text -->
-1<br>-2<br>Physical Capital  Human Capital  Demographics  TFP  Output per capita<br>SSA Tanzania Ghana Mauritius Zambia Angola Zimbabwe Liberia Nigeria Lesotho Mozambique Rwanda Mali Ethiopia Sierra Leone<br><!-- End of picture text -->

_Source:_ Penn World Tables 10.01 (Feenstra, Inklaar, and Timmer 2015). _Note:_ SSA=Sub-Saharan Africa.

The contribution of total factor productivity (TFP) growth is positive and large for all high-growth performers in Sub-Saharan Africa. TFP contributes over half of growth in nine of the 14 fastest growing economies in Figure 14 and is positive in the remaining five. It should be noted though that the high share of TFP contribution, the residual not explained by physical and human capital growth, in resource abundant countries might result from an intensive use of natural capital. Of the six resource abundant countries, two are oil abundant (Angola and Nigeria) while the remaining four are abundant in metals and minerals (Liberia, Mali, Sierra Leone, and Uganda). More specifically, accounting for the accumulation of natural capital reduces the contribution of TFP to growth per worker by almost 1 percentage point per year (Calderon 2021). On the other hand, factor accumulation accounts for more than half of growth per capita in five of the 14 fastest growing countries in the region, namely, Ethiopia, Mauritius, Mozambique, Rwanda, and Tanzania.

# **4. Growth Miracles: What Could We Learn from Successful Growth Stories?**

This section identifies “growth miracles”— as defined by episodes of sustained growth for a prolonged period—around the globe from 1960 to 2019. Once identified, we compare the episodes in Sub-Saharan Africa with those of other world regions over time and by sector, before synthesizing lessons from the region’s best performers. We find that “growth miracles” in the Sub-Saharan African region performs as well as those in other regions; however, they are in short supply. This implies that the successful growth experiences in the region are not learnt by the rest of a continent that still struggles with low and volatile growth. While growth performance across these “miracle episodes” are similarly impressive, we will explore their differences and commonalities.
Across time, rapid growth episodes in the region were typically experienced during the _Africa Rising_ period, after countries in the region emerged from deep recessions in the 1980s and 1990s. Across sectors, industrial activity tends to grow at a faster pace during miracle episodes, although services can also play a key role. Unlike other regions, agriculture still plays an important role in Africa and could also drive miracle episodes, especially through productivity improvement, such as in Mozambique and Ethiopia. It should be noted that a balanced growth across all sectors –with interlinkages and positive externalities among them– tends to be most sustainable. In the African continent, Botswana, Mauritius, and Ethiopia are three extraordinary cases whose growth has been sustained for decades and is still continuing today. At the end of this section, we analyze these three economies, focusing on their commonalities at the onset of their growth miracles, to learn what might have triggered the period of very rapid growth. We find that all these miracle episodes happens when the country has great leadership committed to economic development, diversifies into new industries beyond a single traditional sector, expands its markets globally, and invests for the future.

# **4.1 Uncovering and Understanding the Growth Miracles**

The underperformance of economic growth in the region hides several exceptional episodes of sustained growth over long periods—which we denote here as growth miracles. More specifically, we identified these growth miracles as those episodes where real GDP per capita grew over 2 percent continuously for over a decade.<sup>15</sup> Our methodology follows the spirit of the work from Hausmann, Pritchett and Rodrik (2005), although we focus on identifying sustained rather than accelerated growth. To avoid arbitrary thresholds, we also conducted sensitivity analysis by modifying the threshold rate of growth per capita and duration that identify these miracle episodes; namely, growth per capita above 3% for over 8 years and above 3.5% for over 7 years. All identification criteria identified around one in five countries in the world that have experienced such an event in the past six decades, suggesting these growth miracles are indeed exceptional while also attainable. **Table 3** presents the list of countries for which we were able to identify a growth miracle under each criterion. Among 35 countries that are identified by all three criteria, approximately one in nine is located in Sub-Saharan Africa. Meanwhile, a total of 13 Sub-Saharan African countries are identified by at least one of the three criteria. East Asia & Pacific and Europe & Central Asia have witnessed more miracle episodes.

To obtain a more comprehensive understanding of how different regions perform when it comes to “growth miracles”, we computed a series of metrics, including duration, depth, and likelihood of these episodes using our baseline criterion, _i.e._ , above 2% growth rate for over a decade ( **Table 4** ). Results show that SubSaharan African countries are capable of sustaining growth, and “growth miracles” in the region perform as well as, if not better than, those in other regions. Among “miracle countries” (columns c to g), SubSaharan Africa actually outperforms most other regions on the duration of the miracle episode, the annual growth rate during the miracle episode, and the accumulated expansion during the episode. The average duration of growth miracles is nearly 16 years across Sub-Saharan African miracle countries, which is lower only than that of the East Asia and the Pacific region (22.6 years). On average, GDP per capita at the end of the miracle episode is on average sixfold of their initial level among the identified Sub-Saharan African countries. Where the region falls short is the likelihood of such miracle episode. Only 6.4% of country-year units in the region fall into a miracle episode, compared with 10.2% in the rest of developing countries. These results suggest that a Sub-Saharan African country could embark on a sustained growth trajectory, 15 Berg et al. (2012) and Arizala et al. (2017) define growth spells as those periods characterized by a growth surge that is followed by a prolonged period of at least 2 percent average per capita income growth.
and spreading the successful lessons from these growth miracles could transform miracles of a few to the miracle of a continent.

Having identified these “growth miracles”, we examine the patterns of growth before and after the miracle periods. Providing a taxonomy or classification of growth miracles could be a first step in understanding how a growth miracle starts and ends. **Figure 15** classified the miracle episodes into four groups based on the growth rate of real GDP per capita in the year before and after the miracle episodes. Using zero growth rates as the delimiter, we tried to distinguish whether a miracle emerged from a crisis (i.e., negative growth rate) or stagnation (i.e., positive but lower than 2%), and whether a miracle ended into a recession (hard landing) or slows down (soft landing). **Figure 15** shows that globally, countries are distributed evenly across the four groups, and a Sub-Saharan African miracle episode is more likely to emerge from a recession and growth slows down after a period of fast expansion. We acknowledge that time horizon of one year only captures temporary transition to/from a miracle episode and is far from sufficient in understanding the long-run effect of a growth miracle. Therefore, we also plotted the evolution of GDP per capita over three decades—including the decade prior to and after the first decade of miracle episode—for selected SubSaharan African countries in **Figure 16** . The growth experiences of these miracle countries suggest that while miracle episodes are similarly impressive, how they start and end varies across countries. For instance, Mauritius’s economy was fluctuating before the episode, but growth was largely sustained afterwards. Nigeria was also struggling before the episode, but growth lost momentum afterwards before reversing the course. These results motivate us to look into individual cases, especially those with growth sustained for longer periods well beyond one decade as our model performers.

Besides inspecting the evolution of growth miracles over time, we also zoom into the sectoral composition of growth. In particular, we examine the sectoral contributions from agriculture, industry and services during the growth miracle episodes identified earlier. Afterwards, we calculate the average annual growth rates of each of the three sectoral components during the miracle episodes, in comparison with the overall GDP per capita growth rate. These results for Sub-Saharan African countries in comparison with some of the best performers in the world are plotted in **Figure 17** . We found:

- The industrial sector—which includes mining and quarrying, manufacturing, construction, and public utilities—exhibits the fastest growth rate in the majority of countries.

- The service sector—which includes wholesale and retail trade, hotels and restaurants, transport, government, financial, professional, and personal services such as education, health care, and real estate services—is the fastest growing sector in some economies including China, India, and Nigeria.

- The agriculture sector remains an important driver of growth in SSA countries including Mozambique, the only country in this sample where agriculture is the fastest growing sector, mostly due to productivity improvement.
**Table 3.** Countries that have experienced growth miracles since 1960

|Region<br>Country<br>C|riteria 1|Criteria 2|Criteria 3<br>C|Numberof<br>riteriaSatisfied|
|---|---|---|---|---|
|Botswana<br>||<br>|<br>|3<br>|
|Cabo Verde||||2|
|Côte d'Ivoire||||1|
|Equatorial Guinea||||3|
|Ethiopia<br>Gabon|||<br>|3<br>1|
|Sub-Saharan Africa<br>Mauritius||||2|
|Mozambique<br>Nigeria|<br>|<br>||3<br>2|
|Rwanda||||2|
||||||
|Tanzania||||1|
|Uganda<br>Zambia||||1<br>1|
|Cambodia<br>China|<br>|<br>|<br>|3<br>3|
|Indonesia||||3|
|Japan<br>|<br>|<br>|<br>|3<br>|
|Korea, Rep.||||3|
|East Asia & Pacific<br>Lao PDR<br>|<br>|<br>|<br>|3<br>|
|Malaysia<br>Myanmar|<br>|<br>|<br>|3<br>3|
|Philippines||||1|
|Singapore||||3|
|Thailand|<br>|<br>|<br>|3|
|Viet Nam||||3|
|Albania<br>|<br>|<br>|<br>|3<br>|
|Armenia<br>Austria|<br>|||3<br>1|
|Azerbaijan||||3|
|Belarus||||3|
|Belgium<br>Bosnia and Herzegovina|<br>|||1<br>1|
|<br>Bulgaria|||<br>|2|
|Croatia||||1|
|Estonia||||1|
|France||||2|
|Georgia<br>Greece|<br>|<br>|<br>|3<br>3|
|Europe & Central<br>Hungary||||1|
|Asia<br>Ireland||||3|
|Kazakhstan||||2|
|Latvia<br>Lithuania||<br>|<br>|3<br>2|
|Norway||||1|
|Portugal||||3|
|Russian Federation<br>||<br>|<br>|2<br>|
|Serbia<br>Slovenia||||2<br>1|
|Si||||2|
|pan<br>Tajikistan||||3|
|Turkmenistan<br>|||<br>|3<br>|
|Ukraine<br>Uzbekistan|||<br>|1<br>3|
|Antigua and Barbuda||||1|
|Bahamas, The<br>Li Ai &<br>Bil||||2<br>1|
|atn merca<br>raz<br>Caribbean<br>Paraguay||||3|
|Trinidad and Tobago<br>Uruguay|<br>|<br>|<br>|3<br>3|
|Middle East &<br>Iran, Islamic Rep.||||3|
|<br> <br>North Africa<br>Malta||||3|
|Bangladesh||||3|
|Bhutan||||3|
|South Asia<br>India<br>|<br>|||3<br>|
|Nepal<br>Sri Lanka||||1<br>2|

_Note:_ Countries in the list are identified as having experienced miracle growth episode(s) by three varying criteria: 1) growth above 2% for over a decade, 2) growth above 3% for over 8 years, and 3) growth above 3.5% for over 7 years.
<!-- Start of picture text -->
| a i<br>_ al | i=<br><!-- End of picture text -->

<!-- Start of picture text --> lO |LLCCtC“‘(‘(TMSSO“S OT eT iC(OtC“<br><!-- End of picture text -->

Growth rate before the a “miracle”a ” episode..

<!-- Start of picture text --> ae<br>Albania (1998-2011)<br>Belarus (1996-2008)<br>;<br>China (1977-2019) Bhutan (2001-2012) fey)<br>et<br>Mauritius (1984-1998) Ireland (1992-2002) —ie)<br>Mozambique (2001-2015) Japan . (1981-1991) =co<br>oo,<br>Nigeria Tanzania (2001-2011) ><br>Rwanda (2000-2011)(2004-2016) Uruguay- (2004-2014) i©<br>s<br>Sri Lanka (2002-2017) Vietnam (1988-2019) orfa)<br>Uganda (2001-2011) a<br>ct<br>]<br>om! | | | ‘Tn =<br>Armenia (1554-2008, Nee” ‘ 5<br>Equatorial Guinea (1992-2008) 3<br>Georgia (1995-2008) Azerbaijan (1997-2010) aa<br>Greece (1963-1973) Brazil (1968-1980) oO.<br>Indonesiaghana!(2000-2019)z Cambodia (1998-2008) oO.=<br>Malaysia India (2009-2019) a<br>(1987-1997) a<br>Myanmar (1992-2020) Korea (1963-1979) nn<br>Nepal (2003-2015) Lao PDR (1992-2019) o<br>Paraguay (1967-1981) Malta (1986-2000) oO<br>Singapore (1965-1984 Thailand (1975-1996)<br>Trinidad and Tobago (1994-2008)<br>bekistan (1997-2019<br><!-- End of picture text -->
<!-- Start of picture text --> Average Annual Per Capita Growth Rate (%) During "Miracle" Periods<br>16<br>14<br>12<br>10<br>8<br>6<br>4<br>2<br>° |<br>°4 & a & - Ss & & e. s & s & Rs. & e s &<br>eo & & gw ¢ x < ‘S mS ca w S “s<br>ce Agriculture Mlindustry MServices Overall<br><!-- End of picture text -->
**Figure 18.** Sectoral Drivers – Examples of Three Sub-Saharan Miracle Countries

|Time series of sectoral value added per capita (constant 2015$)<br>Botswana|
|---|
|4500<br>4000<br>3500<br>3000<br>2500<br>2000<br>1500<br>1000<br>500|
|0|
|Services<br>Agriculture<br>Industry<br>1960<br>1963<br>1966<br>1969<br>1972<br>1975<br>1978<br>1981<br>1984<br>1987<br>1990<br>1993<br>1996<br>1999<br>2002<br>2005<br>2008<br>2011<br>2014<br>2017<br>2020|
|Mauritius|
|8000<br>7000<br>6000<br>5000<br>4000<br>3000<br>2000<br>1000|
|Industry<br>0<br>Agriculture<br>Services<br>1976<br>1978<br>1980<br>1982<br>1984<br>1986<br>1988<br>1990<br>1992<br>1994<br>1996<br>1998<br>2000<br>2002<br>2004<br>2006<br>2008<br>2010<br>2012<br>2014<br>2016<br>2018<br>2020<br>2022|
|Ethiopia|
|350<br>300<br>250<br>200<br>150<br>100<br>50|
|Services<br>Industry<br>Agriculture<br>0<br>1981<br>1983<br>1985<br>1987<br>1989<br>1991<br>1993<br>1995<br>1997<br>1999<br>2001<br>2003<br>2005<br>2007<br>2009<br>2011<br>2013<br>2015<br>2017<br>2019<br>2021|

Note: The series divide sectoral value added by total population as a decomposition of GDP per capita.
# **4.2 Case Studies: Seeking Commonalities across Three Exceptional Miracle Episodes**

Considering the overall growth and its time and sectoral dimensions, we selected three countries in the region—Botswana, Ethiopia, and Mauritius—for a deep dive into the drivers of their miracle episodes. These three countries have experienced high and sustained growth for decades that goes beyond the “Africa Rising” period with varied sectoral contributions ( **Figure 18** ). Do the three countries share anything in common behind the seemingly different sectoral drivers? In this sub-section, we look into these individual cases and seek commonalities across these successful stories to understand what might have explained how a sustained growth episode started. A similar approach was adopted in The Growth Report led by Michael Spence in which 13 growth miracles were studied and five commonalities were identified (Commission on Growth and Development 2008).<sup>16</sup> At first glance, Botswana, Mauritius, and Ethiopia appear vastly different. Yet they have all achieved sustained growth for a prolonged period that is on par with the world’s best performers. Botswana embarked on a sustained growth path since as early as the 1960s during its transition into independence from colonial rule. Raising cattle had been the backbone of the country’s economic activities for which climate, soil, and vegetation are particularly well suited (World Bank 1971). Mauritius, a small island nation in the Indian Ocean, experienced a growth outburst in the early 1980s, over a decade after the country became independent in 1968. Already a middle-income country, Mauritius had relied upon sugar production that was most resilient to cyclone damages endured by the island. Ethiopia, Africa’s oldest independent country, started its impressive growth episode more recently in the 2000s. Largely an agrarian economy with agriculture accounting for over 80% of employment, Ethiopia was one of the poorest countries in the continent at the onset of its miracle expansion. These diverse initial geographical, political, and economic conditions have not constrained the sustained economic expansion for decades afterwards.

Moreover, these countries faced similar challenges at the outset, which should resonate with many countries in the region that are still struggling with low and volatile growth. Before their economies took off, all three countries faced physical and financial constraints. Being either landlocked or island countries, the three nations faced substantial barriers or costs to connect with external markets. Their economies largely relied upon a few, if not a single, primary industries, be it cattle raising, sugar production, or rainfed agriculture. With protracted deficits, government had to rely on foreign aid or external financing. Undaunted by the challenges, these three countries have successfully transformed their economies to a new level. Nowadays, Botswana has grown from the world’s poorest country in the 1960s to an upper-middle-income economy aspiring to become a high-income one. Mauritius has teetered on the threshold between upper-middleincome and high-income economies in recent years. At its current trajectory, Ethiopia is rapidly approaching the middle-income status as its income per capita at constant price has grown over threefold in the past two decades.

The economic transformation of these countries did not happen overnight, but as a result of solid foundations built and effective economic policies implemented. By seeking common factors among the three countries at the onset of their economic takeoff, we hope to offer some insights on what most likely worked to kick off a miracle growth episode. Our case studies are synthesized from various World Bank reports and academic papers for Botswana (World Bank 1971, 1978; Acemoglu, Johnson & Robinson 2003; Hillbom, 2008; Poteete, 2009; Lewin, 2011), Mauritius (World Bank 1982, 1983, 1985; Subramanian, 2009; Sobhee, 2009; Frankel, 2016; Zafar, 2011), and Ethiopia (World Bank 2002, 2007;

> 16 The 13 economic miracles identified in the Growth Report are Botswana, Brazil, China, Hong Kong, China, Indonesia, Japan, the Republic of Korea, Malaysia, Malta, Oman, Singapore, Taiwan, China, and Thailand. These economies have grown an average annual rate of 7 percent or more for 25 years or longer.
Easterly, 2002; Bigsten, Gebreeyesus & Soderbom, 2009; Shumuye, 2015). We focus on likely common factors driving these case studies along four different but inter-related dimensions: a) leading with conscience, commitment and compassion, b) diversifying the economic structure, c) expanding the markets, and d) investing for the future. In explaining each driver, we will tell the stories from these three countries, as well as resorting to literature for broader evidence of these drivers.

# _<u>Leading with Conscience, Commitment and Compassion</u>_

The mindset, vision, and capabilities of leaders play a critical role in pointing the economies in the right direction and moving things forward. The African leaders who took the helm of the economies at the onset of their miracle episodes are all charismatic figures well regarded and supported by the people in their countries. Sir Seretse Khama, **Botswana** ’s first president, led the country into independence and remained as president until his death in 1980 after being reelected three times. In particular, the president played a crucial role in safeguarding mineral exploitation and the state-tribe relations, turning the resource curse into a blessing. Sir Anerood Jugnauth served as **Mauritius** ’ Prime Minister or President for multiple terms including from 1982 to 1995 when the economy entered periods of fast growth. Jugnauth was largely credited for initiating the diversification of the Mauritius’s economy. Similarly, long serving and well supported, Sir Meles Zenawi took a leading role in **Ethiopia** ’s economic reforms in the modern time from 1995 until his death in 2012. In his own writings, Zenawi has advocated for a developmental state that inhibits rent-seeking activities and invests in infrastructure and market support institutions.

While many important characteristics of great leaders matter (Brady and Spence Ed., 2010), all these leaders were dedicated to economic development, unlike the military juntas, corrupt or weak administrations in other countries or time periods. The fact that they were all well supported by the people suggests that these leaders put emphasis on the wellbeing of their citizens and were able to achieve consensus across multiple interest groups. It should be noted that excellent leadership is not limited to one single figure but a cohort of decision makers. For instance, Ethiopia’s health sector leaders were crucial for the success of the country’s Health Extension Program which is a government-led community health service delivery program that improves access to preventive, wellness, and basic curative services (Bilal et al., 2011). The country’s chief executive(s) are usually responsible for championing or supporting the good economic reforms or policy agendas that we discuss below.

Broader evidence from cross-country analysis shows that national leaders can greatly influence the economic growth of their countries. Jones and Olken (2005) used deaths of leaders while in office as a source of exogenous variation in leadership and found robust evidence that leaders matter for growth, as well as policy outcomes. Using similar approach as Jones and Olken (2005) and applied to Sub-Saharan Africa during the period from 1960 to 2014, 19 leadership transitions due to exogenous deaths ( _i.e._ , death due to natural cause or accidents) happened, and growth increases by a statistically significant 1.87 percentage points in the aftermath of the political transition and increases further two years after the transition (Calderon, 2015). The finding implies that while leadership matters, there might be a higher incidence of weak and shortsighted leaders than good ones in Sub-Saharan Africa.

# _<u>Diversifying the Economic Structure</u>_

All three countries have discovered and expanded into new industries beyond traditional agricultural production. It is no doubt that discoveries of diamonds in **Botswana** have led to a booming industry which, together with copper and nickel mines, became a new engine of growth. While diamonds constitute a natural endowment, their discoveries and mining were made possible through intensive prospecting and
investment. Annual development expenditure on mineral development had ballooned from tens of thousands of rands in the 1960s to millions of rands in the early 1970s, becoming the sector receiving the most budget allocation. New industries such as refining and retailing also sprang from the mining industry. Besides mining, a development corporation was established in 1970 to promote private enterprises in manufacturing and service sectors. **Figure 18** shows that the service sector in Botswana has grown more sustainably into the recent periods than agriculture and industry. After the boom and bust of the sugar industry, **Mauritius** embraced manufacturing and tourism as two additional pillars of their economy which grew rapidly in the 1980s. In addition to driving growth, manufacturing – in particular textiles and other light manufacturing – played a crucial role in creating jobs, especially for females, and thus, addressing the rising unemployment issue that the densely populated island was facing. Public investments were more evenly distributed across the three pillar industries and infrastructure. In **Ethiopia** , structural transformation progressed at a slower pace as most of the population depended on subsistence agriculture, with wide education and skill deficits before the 2000s. Considering these challenging conditions, the government adopted a growth strategy known as Agricultural Development-Led Industrialization (ADLI) with the goals of transforming subsistence farming into market production and facilitating industrialization, including fostering forward and backward linkages between the two sectors. This strategy seems to have worked well for the country and growth rates across all sectors registered impressive figures of 7 to 12 percent around the mid-2000s.

Limited diversification is a common feature of low-income countries which inhibits broad-based and sustained growth. Using cross-country data and case studies, Papageorgiouon and Spatafora (2012) review and extend the evidence that diversification is a crucial aspect of the development process. They concluded that increases in diversification have been associated with both higher growth and lower volatility, especially since 1995 and in LICs with better institutions. While manifested in the structure of economic activity and exported products, diversification of “know-how”<sup>17</sup> and their reconfiguration underpins a prosperous society, a theory championed or developed by Hausmann et al. (2014). According to this theory, these “knowhows” are embedded in brains and human networks that are accumulated through years of experience and may require structural change of an economy. Other research identified a hump-shape relationship between (export) diversification and income per capita. This pattern suggests that diversification increases alongside development but reversed after reaching certain high-income level ( _i.e._ , around PPP $25,000), both processes are mostly attributed to extensive margins rather than intensive margins (Cadot, Carrère, and Strauss-Kahn, 2011).

# _<u>Expanding Access to Markets</u>_

Improved or new production capacity needs to be absorbed by larger markets, which in turn drives production. All three countries moved closer to open trade regimes that were built upon friendly relationships established with major markets. After independence, **Botswana** has largely adopted a policy of non-alignment and pursued friendly relations with other countries. It quickly joined the UN, the Southern African Customs Union, and the European Economic Community (EEC) in the 1960s/1970s, partially leading to rapid increases in export volumes. The government also relied on foreign enterprises for the mining industry, in which the government secured notable equity stake, for investment and technologies. As a small island economy, **Mauritius** embraced an export-oriented strategy more openly. In 1970, Mauritius was the first commonwealth country to join the European Economic Community, which became an 17 In this context, “know-how” is defined as the tacit knowledge that is embedded in the brain, or as a particular wiring of the brain, which is harder to move around, different from tools, _i.e._ , embodied knowledge, and recipes, _i.e._ , codified knowledge (Hausmann 2016).
important market for its burgeoning manufacturing industry, notably in the Export Processing Zone (EPZ), nurtured by foreign investment, in particular from Hong Kong SAR, China, whose investors had established markets in EEC. Additionally, Mauritius also enjoyed preferential access to foreign markets under the “Multi-Fiber Agreement”. Gradually, the country has also been diversifying its markets, including for the tourism sector by adding multiple airport access points across the globe. The openness of the EPZ and the export sector, on the other hand, did not necessarily take away the protection of the import-substituting sectors in the initial stage, denoted by Rodrik (1999) as the “heterodox opening”. **Ethiopia** also succeeded in growing exports of textiles, clothing, and footwear from almost zero at the beginning of the 2000s. Already it had access to major economies through mechanisms such as the US Africa Growth and Opportunity Act and the EU’s Everything but Arms initiative, Ethiopia started the accession process to the WTO in 2003 and continued to expand markets to countries in East Asia and Middle East. Meanwhile, service exports had also boomed, driven by strong performance of transport and tourism, in particular Ethiopian Airlines. Today, Ethiopia has more diversified markets than most of its peers (World Bank, 2022).

External markets represent additional demand for national production, and trade policies could help facilitate their access. Moreover, favorable impact from exports could go beyond its direct contribution to GDP, through other channels including improving total factor productivity that help sustain growth for a longer run. A rich body of research offers empirical evidence on the association of export expansion and economic growth. For instance, Kavoussi (1984) studied a sample of 73 developing countries for the 19601978 period and found evidence in support of export expansion’s positive impact on growth and TFP among both low-income and middle-income countries. The reality is that Sub-Saharan Africa still represents a small share of global trade (around 3%), but it is growing rapidly; on the other hand, the share of trade in national income is substantial in many economies that are vulnerable to external shocks— _i.e._ , total exports as share of GDP is 53% in Sub-Saharan Africa in 2019 (Coulibaly, Kassa, and Zeufack 2022).<sup>18</sup> Expanding access to markets, along with an economic and export product diversification, help mitigate external shocks and sustain growth.

# _<u>Investing into the Future</u>_

Meanwhile, the initial resources accumulated in these countries were responsibly and efficiently managed and invested for the future to sustain the growth, notably in infrastructure, human capital, and environmental sustainability. **Botswana** is well known for its prudent management of mineral resources. It established the Pula Fund, a sovereign wealth fund, to administer and save profits from mining activities for future generations. Important portions of these mineral revenues, one of the highest in Africa and comparable with Norway, were directed to infrastructure, education, and health care that are fundamental to sustained growth. When developing cattle production further, the Botswana government had sustainability in mind. The government prepared legislation for conservation and improvement of agricultural land to curtail overgrazing early on. **Mauritius** had a relatively well-educated population in the 1980s, thanks partly to the country’s universal education, propelling the country’s export-oriented strategy. In the 1980s, the government’s focus turned to improving the quality, rather than the quantity, of education. Public investment also focused on basic infrastructure, and the government encouraged investment in productive sectors such as manufacturing rather than consumption such as residential housing. The country also ventured into renewable energy by developing alternative usage of bagasse, a byproduct of its traditional sugar industry. In **Ethiopia** , there was a massive scale-up of primary education to the extent that the primary 18 Coulibaly et al. (2022) also identify trade agreements, global value chains and offshoring, regional integration, and trade in services as important ingredients for a successful market access strategy.
gross enrollment rate rose from 20% in 1993 to 79% in 2004. Infant mortality also improved with lower rates than other countries of similar GDP per capita. Similarly, the country also invested heavily in infrastructure, and notably, the Export Processing Zones to facilitate development of light manufacturing as part of the country’s Growth and Transformation Plan, as well as hydroelectricity that builds upon the country’s relatively generous river resources as part of the country’s green development.

Fostering the accumulation of physical, human, and natural capital strengthens the root of an economy so that it can branch out into diversified products and external markets. It has been argued that successful integration into the world economy requires a complementary set of policies and institutions at home where the state plays a crucial role: the evidence suggests that the countries that have grown most rapidly since the mid-1970s are those that have invested a high share of GDP and maintained macroeconomic stability (Rodrik 1999). More recent evidence on a panel of countries over time argues that public investment has a positive effect on long-term growth and labor productivity, and increases the speed of convergence of catching-up countries (Fournier 2016).<sup>19</sup> Emerging evidence, such as from the Global Commission on the Economy and Climate, which was founded by seven countries including Ethiopia, has also demonstrated that investment in environmental sustainability is also complementary and essential for sustained economic growth (New Climate Economy 2018).

> 19 The paper suggests that the impact of public investment differs across sectors ( _i.e._ , more effective in areas such as health and research & development) and levels of capital stock ( _i.e._ , growth gains decline at higher levels of capital stock).
# **5. Conclusions**

The goal of this paper was to characterize the economic performance of Sub-Saharan African economies over the long term and uncover sources of growth. Our analysis was conducted along different dimensions: First, we examined the central moments of growth per capita ( _i.e._ , average, standard deviation, selected percentiles) at the regional level over the past six decades and sub-periods, benchmarking with those of the industrial and developing countries. Second, we presented a taxonomy of growth heterogeneity across countries in the region, which captures a wide array of topography, and clustered countries into three broad groups. Third, we computed the main features of episodic growth expansions and recessions after applying the Bry-Boschan algorithm that identifies turning points in real GDP per capita. Fourth, we uncovered the sources of economic growth using the Solow decomposition for the region and country groups across different time periods. Fifth, we identified ‘growth’ miracles across the globe and examined those in SubSaharan Africa—including the sectoral composition of those episodes. Finally, we sought commonalities at the onset of three exceptionally sustained growth episodes in the region, namely, Botswana, Ethiopia, and Mauritius.

We found that the real income per capita of Sub-Saharan Africa exhibits long swings over the past six decades and has failed to converge with aspirational benchmarks. Country growth experiences are widely heterogeneous, and we clustered them into three broad groups inspired by topography—growing (uphill), long swings (mountain ranges), and stagnant (plains) if not declining. Our assessment of episodic expansions and recessions found that the region underperforms in duration, which leads to shallower expansions and deeper recessions as compared with the rest of the developing world. The growth accounting approach suggests that the contribution of TFP is small, if not negative, in the region, although it has turned positive over the recent two decades, and plays an important role in the growth of good performers. The region has also witnessed a few growth miracles that sustained growth for prolonged periods, on par with the world’s best performance. Seeking commonalities among three exceptional growth miracles during their onsets, we found that leadership, economic diversification, market expansion, and investment for the future might explain how a growth miracle starts.

Our findings on the sources of growth help explain the lack of sustained growth in the region. Leadership is associated with TFP, a main driver of growth, as it boosts efficiency in the use of the factors of production. Diversifying the economy and expanding the markets both help mitigate risks and build resilience to external shocks. Investing in the future plays a counter-cyclical role and fosters inter-generational equity, besides strengthening the foundation of growth. The exceptional growth miracles of the region suggest that Sub-Saharan Africa has great potential to grow, if valuable experiences from the miracle episodes are learned and implemented by the rest of the region that still struggles with low and volatile growth.