This book presents empirical evidence on manufacturing firm
performance in Africa based on the World Bank Enterprise Survey and
on a one-time quantitative survey conducted for the World Bank by
Oxford University's Centre for the Study of African Economies.
Because of their institutional environment, their labor
productivity is low, and their labor costs also tend to be low. Key
constraints to firm growth vary by country, by sector, and by firm
size. But the binding constraints for most large formal firms in
Africa are access to finance and to electricity. The binding
constraints for small firms tend to be access to finance and
competition from foreign firms. After controlling for differences
in firm characteristics, geography, infrastructure, political and
institutional factors, business environment, and finance, the
authors show that African manufacturing actually has a conditional
advantage in productivity and sales growth. Political and
institutional factors (especially party monopoly), access to
finance, and the nature of the business environment are key to
explaining the disadvantage of African countries in firm
performance relative to countries at similar levels of income in
which firms perform better. The results of the new Oxford survey,
which covers both formal and informal firms, shed light on
manufacturing firm performance in Africa in relation to that in
Asian countries such as China. The survey results suggest that,
whatever the reasons for China's success relative to Africa, it is
unlikely to be less regulation. Indeed, China seems to have more
stringent registration requirements and labor laws. It is also
unlikely to be corruption, lower labor or land costs, or social
networks: Chinese firms report fewer links with banks and
politicians and fewer business friends. There also are no strong
differences across the countries in the rate at which individual
firms innovate and invest. The dimensions along which Chinese firms
are at an advantage appear to be finance, competition, information
about innovations, and educational attainment. Asian workers and
entrepreneurs have more schooling. Nonetheless, education is not a
good predictor of how quickly production workers can become fully
active in firm operations.
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