Manufacturing Sector and Economic Growth : A Panel Study of Selected African Countries

Objective - The manufacturing sector plays an important role in any economy. However, Africa has experienced significant deindustrialisation over the last few decades, whilst economic growth has been on an upward trend over the same period. The high growth rates have mostly been propelled by improved macroeconomic stability and the commodity price boom. Further, the slowdown in commodity prices has recently caused a deceleration of economic growth which begs the question: Does promoting the manufacturing sector result in higher and sustainable economic growth and reduce unemployment? This study assesses the impact of the manufacturing sector on economic growth in 37 African countries.Methodology/Technique - This study employs the System-GMM Model for the period between 1990 and 2017. This technique is ideal as the number of cross-sectional units is greater than the number of time periods. This technique also caters for problems of endogeneity and heteroscedasticity.Findings - The results show that manufacturing value has a positive effect on economic growth in African countries. Therefore, it is recommended that policy makers enact measures to boost manufacturing output.Novelty - The deceleration of economic growth in African countries coupled with high unemployment and poverty levels has brought the issue of re-industrialisation into the spotlight. This study is vital for policy makers in African countries who seek to promote economic growth and employment levels. The study contributes to literature in African countries by incorporating variables such as human capital and institutional quality which are major determinants of economic growth.Type of Paper - Empirical