INDUSTRIALIZATION IN SUB-SAHARAN AFRICA: A POLICY FRAMEWORK 159
base—most countries in the region are not ready to exploit the opportunities offered by the internet (McKinsey Global Institute 2013). The challenge is even more pronounced when considering their readiness as measured by their ICT skills base. Thus, African countries should invest in building and expanding digital infrastructure.1 Additionally, such efforts must involve developing complementary digital skills (through dynamic education policy and training programs), enforcing targeted reforms in ICT sector regulation, enabling firm and industry capabilities to facilitate the adoption of digital technologies, providing incentives for digital entrepreneurship, and promoting widespread adoption of digital technologies in public services.2 Policy should also aim to address other supplyside constraints such as access to connectivity infrastructure and other complementary infrastructure, including electricity. Policy interventions, therefore, will be required to build up strong enabling sectors in logistics, digital infrastructure, finance, and energy. Such interventions should improve the logistics sector and help provide a wide range of lowcost and high-quality services, expand the provision of reliable and affordable ICT services, facilitate access to finance through development of the banking sector and establishment of secondary markets, and target investment in power generation capacity as well as improve its affordability and accessibility, especially for business enterprises.
Competition Policy Lessening or Eliminating Barriers to Entry for Domestic and Foreign Firms
The manufacturing experiences of Sub-Saharan African countries such as Côte d’Ivoire and Ethiopia suggest that young firms are the main drivers of job growth. This evidence makes entry and exit barriers central to defining the policy agenda for job creation and growth reform. In most of the region, restrictions on firm entry are pervasive. There is strong evidence that entry regulations hamper entry, especially in industries that naturally should have high entry (Klapper, Laeven, and Rajan 2004). Policies that ease the multitude of entry barriers to new firms could yield large gains by raising aggregate productivity, maintaining market discipline, and expanding job creation. Hence, policies that promote competition should be central to industrialization strategies in the region. The possibility of entry by itself provides a market selection mechanism and fosters greater competition between new entrants and existing firms as well as among the new entrants. Evidence from China and other East Asian economies shows that the creation and selection of new firms in the nonstate sector has been the most important source of productivity and output growth in the manufacturing sector.3
