Throughout the history of countries, economic development and transformation has involved structural changes in output and employment. Economies have shifted from initially being predominantly agricultural to industrial (especially manufacturing), and eventually to services. But it is the growth of manufacturing that enables the relative decline in the share of agriculture to sustain the rest of the economy as manufacturing enables agriculture to become increasingly productive. The infrastructure of the increasing service sector is also facilitated by the manufacturing subsector.

This paper argues that diversification and manufacturing are essential for integrated, self-sustaining economic development in Africa. Among the manufacturing subsectors, capital goods manufacturing is the most dynamic. It has strong backward and forward linkages to the rest of the economy. Furthermore, manufacturing has higher capacity to absorb labor and has higher and rising productivity.

The major short-comings of most African countries in establishing large capital goods industries are the small sizes of their resource bases and domestic markets. However, there are a few large African countries with large resources and potential domestic markets that can establish large manufacturing sectors from which industrialization can diffuse to the neighboring countries. Given the slower rate of regional integration, these large single political entities could be developed into major regional development poles from which industrialization can spread to the rest of the continent.

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