International Competitiveness of Manufacturing Firms in sub-Saharan Africa

As the success of East Asian countries has shown, labor-intensive industry is recognized to lead economic growth in the early stages of development, utilizing relatively low labor costs. This same growth process has already started in South and South East Asian LDCs since the mid-1990s. However, the manufacturing sector in sub-Saharan Africa has been underdeveloped and manufacturing exports, in particular labour-intensive goods, have stagnated. This paper investigates the international competitiveness of the African manufacturing sector and its determinants through an analytical survey of empirical studies and a comparison with Asian low income countries. Empirical evidences indicate that primary factors of competitiveness, namely productivity, labour cost and exchange rate are unfavorable in sub-Saharan Africa. Representative arguments attribute the weak competitiveness to problems in the business environment, factor endowment, and the exchange rate. However, careful review shows that labour cost is beyond the range explained by endowment and misalignment of exchange rates have been reduced in Africa. Moreover, comparison with Asian low income countries which have competitiveness in labour-intensive goods shows no difference in the quality of business environment, while the labour cost is significantly lower than sub-Saharan African countries. Although results should be considered tentative, high labour cost beyond endowment and conservative investment behavior emerge as important factors for the weak competitiveness in sub-Saharan Africa when controlling income level.

Clothing Export from sub-Saharan Africa : Impact on Poverty and Potential for Growth

Increases in clothing exports after 2000 signaled the first incidence of large-scale manufacturing exports from sub-Saharan Africa. Using firm-level information, this paper explores the potential of clothing exports for poverty reduction and further growth as seen in other low income countries. It shows that the garment exporting industries in Kenya and Madagascar have contributed poverty reduction in the short term by providing mass employment for female and less educated workers with wages beyond the poverty line. However, the long-term impact is not certain. High production costs and limited development of local firms weaken potential for further growth in the competitive world market. Upgrading of the market and improvement of efficiency are required to remain competitive for African industries, and governmental support for local participation are needed to facilitate technology transfer.

Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms

It has been argued that poor productive performance is one of critical sources of stagnation of the African manufacturing sector, but firm-level empirical supports are limited. Using the inter-regional firm data of the garment industry, technical efficiency and its contribution to competitiveness measured as unit costs were compared between Kenyan and Bangladeshi firms. Our estimates indicated that there is no significant gap in the average technical efficiency of the two industries despite conservative estimation, although unit costs greatly differ between the two industries. Higher unit cost in Kenyan firms mainly stems from high labour cost, while impact of inefficiency is quite small. Productivity accounts little for the stagnation of garment industry in several African countries.

FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.

Marriage as women's old age insurance : evidence from migration and land inheritance practices in rural Tanzania

In a traditional system of exogamous and patrilocal marriage prevalent in much of Sub-Saharan Africa, when she marries, a rural woman typically leaves her kin to reside with her husband living outside her natal village. Since a village that allows a widow to inherit her late husband's land can provide her with old age security, single females living outside the village are more likely to marry into the village. Using a natural experimental setting, provided by the longitudinal household panel data drawn from rural Tanzania for the period from 1991 to 2004, during which several villages that initially banned a widow's land inheritance removed this discrimination, this study provides evidence in support of this view, whereby altering a customary land inheritance rules in a village in favor of widows increased the probability of males marrying in that village. This finding suggests that providing rural women with old age protection (e.g., insurance, livelihood protection) has remarkable spatial and temporal welfare effects by influencing their decision to marry.

Farming strategy of African smallholder farmers in transition from traditional to alternative agriculture : the case of the Nupe in central Nigeria

It is worthwhile to understand farming strategies of smallholder farmers in sub-Saharan Africa, especially those of farmers who are in transition from traditional to alternative agriculture in terms of adoption of innovative technologies. In a case study of inland valleys in central Nigeria, we investigated the farming strategy of Nupe farmers who have a long-term tradition of wet rice cultivation and indigenous methods of land preparation for soil, water and weed management. In this region, a new method of land preparation has recently been introduced along with a recommendation to use improved seeds and chemical fertilizers. Our findings reveal that Nupe farmers directly sow traditional seeds and apply a marginal amount of fertilizer to paddy plots prepared by labor-saving methods on drought-prone hydromorphic valley fringes and flood-susceptible valley bottoms, whereas they preferentially transplanted improved seedlings and applied a relatively large quantity of fertilizer to paddy fields prepared by a labor-intensive and mechanized method on a valley position where they can access to optimum water condition (less risky against the drought and flood).

Religion and polygamy : evidence from the livingstonia mission in Malawi

In contrast to the prevailing preconception, Christian females engage in polygyny in most of sub-Saharan Africa. Based on individual-level data provided by the Demographic and Health Survey (2000, 2004, 2010) in Malawi, this study explores whether Christian identity reduces the likelihood that females enter into polygyny. To address the endogeneity associated with this identity, the analysis adopts an instrumental variable (IV) approach by exploiting the unique setting of a Christian mission dating back to the late 19th century. Exposure to the mission, measured by geographical distance to the influential mission station, Livingstonia, enabled the indigenous population to gradually convert to Christianity. This is particularly true for the local population not belonging to the Yao, an ethnic group that was largely proselytized into Islam because of their historical connection with the Arabs. Using the distance-ethnicity (non-Yao) interaction as an IV for women's Christian identity, with numerous historical, geographic, and climate controls, this study discovers that compared to those practicing other religions (Islam and other) or no religion, Christian females are indeed less likely to form polygynous unions. This study also provides some evidence suggesting that the Christianity effects are more evident in a society at a more primitive stage of development.