Structural Transformation and Employment Creation: The Role of Growth Facilitation Policies in Sub-Saharan Africa

Abstract

Employment creation and structural transformation are amongst the two major challenges facing the countries of Sub-Saharan Africa at present. Based on the understanding that appropriate growth policies will be able to address these challenges, this paper examines whether Special Economic Zones (SEZs) could be an important ingredient of such strategies. So far many African SEZs have been unable tocreate significant employment or foster structural change. However, there are some positive exceptions with respect to employment creation in countries such as Mauritius, Kenya, Lesotho, Madagascar and Ghana. The SEZs that have contributed to structural transformation are located mainly outside Africa (e.g. Malaysia and Singapore) and these experiences show that it takes a great deal of complementary policies to enhance the positive impacts. We argue that SEZs may still play a more important role in SSA as long as SEZs are retooled to 1.facilitate growth adequately using good quality policies and adequate support institutions; 2. emphasise the clustering aspects of zones and 3. are able to adapt to new global conditions. This involves taking risks which may only pay off when policies can be implemented consistently backed up by significant capacity and fit in with overall growth strategies. The evidence on the success and failure of using SEZs as a growth and employment policy tool seems to indicate that social cohesion, employment generation, and structural transformation are often found together. We suggest there is a virtuous circle amongst social cohesion, good quality growth policies and beneficial outcomes, which in turn increases social cohesion. We also provide new econometric evidence which suggests that SEZs in Kenya have helped to create some 40,000 manufacturing jobs and increased manufacturing labour productivity by some 20% in the decade to 2006 (or 2% per annum). This suggests that in principle it is possible for SEZs to be both job creating and productivity enhancing, although there are also questions about whether the transformative productivity effects can be sustained forever