A development publication/newsletter called Development Front ran a review of How Africa Works written by former World Bank vice president Hafez Ghanem. The review is below (or you can read the original here) and a response from me to some of the points made is below that. I don’t think it is a great quality review, but the whole ‘end of manufacturing as we know it’ discourse is important and needs to be addressed.
………………………………….
How Africa Works: Success and Failure on the World’s Last Developmental Frontier, Joe Studwell, Atlantic Monthly Press, 448 pp., $32, February 2026
Joe Studwell has spent most of his career working on Asia and brings an interesting fresh perspective on the economics of Africa. This makes the book worth reading even if one disagrees with some conclusions. The book’s main argument is that Africa should follow the Asian model of first focusing on smallholder agriculture, then labor intensive manufacturing exports, and finally move to high value-added services. Studwell is against leapfrogging directly to higher value manufacturing or services, which he argues is dangerous. To make his case he uses four country case studies, Botswana, Mauritius, Ethiopia and Rwanda.
This review does not follow the same structure as the book. It starts with a discussion of the constraints to Africa’s development as presented by Studwell, then moves to his main argument that Africa should follow the Asian growth model and then to the country case studies. It concludes by explaining why Studwell may have gotten it wrong. The development strategy that worked for Asia in the middle of the 20th century will probably not work for Africa in 2026, proposing a different strategy that brings together lessons from Asia’s experience and African successes.
Constraints to Africa’s Development
Perhaps the most intriguing part of the book is Studwell’s explanation of why Africa lags the rest of the world in economic development. Unlike traditional development economists who focus on governance problems and the colonial legacy, Studwell focusses on demography and low population density. It is a novel but plausible argument that implies that today’s high African population growth rates, coupled with rapid urbanization, could actually help bring about faster economic development and poverty reduction.
Studwell argues that Africa’s relative poverty derives from three historical factors. First, is low population density which made economic development virtually impossible in the absence of concentrated markets and adequate labor supply. Development was also unfeasibly expensive in terms of per capita infrastructure costs. Second, is the legacy of “low budget colonialism.” Because low population density made it more difficult to raise taxes, colonial powers in Africa built isolated enclaves of mineral and agricultural commodity exploitation, ignoring much of the rest of their colonies. failing to invest in education or health. Third, because of low population density and low budget colonialism, independence found most African societies dispersed, uneducated and politically unorganized. Studwell argues that it is these impediments rather than corruption or ethnic violence that constrained the continent’s economic development.
The good news is that by 2030 Africa will have Asia’s population density in 1960. That is why Studwell believes that Africa’s economic prospects look better than ever. He argues that Africa should simply follow in Asia’s footsteps.
The Main Message
How Africa Works is a follow up on Studwell’s well-known book, How Asia Works. There, he argued that successful East Asian economies—Japan, South Korea, China, and Vietnam—followed the same developmental sequence: land reform and smallholder agricultural growth, followed by labor-intensive export-oriented manufacturing; and supported by financial systems that assured the flow of resources to priority areas through capital controls and directed credit. In How Africa Works, he asks whether these would work in Africa. His answer is yes. He distances himself from narratives portraying digital technology or entrepreneurship as substitutes for manufacturing-led development. He insists on the centrality of productive transformation: poor countries become rich by increasing productivity in agriculture and manufacturing.
Studwell’s argument goes against most recent development literature which states that with increasing protectionism and de-globalization and technological change, the development path based on labor intensive manufacturing exports is no longer available. Dani Rodrik (2026) states that: “As manufacturing technologies became more sophisticated and the failure of countries outside East Asia to industrialize successfully became more apparent, I began to consider alternative growth strategies not because I came to think of broad-based industrialization as less desirable, but because I became convinced that it is less feasible.” Rodrik now argues for a model of economic growth emphasizing the development of productive capabilities in labor-absorbing non-tradeable services. He warns African policymakers that trying to emulate the Asian model would at best produce manufacturing enclaves connected to global value chains, while the bulk of the labor force will remain stuck in low productivity activities. Rodrik’s advice is the exact opposite of Studwell’s.
Brookings’ Coulibaly and Page (2021) reach a conclusion similar to Rodrik’s. They consider sectors they call “industries without smokestacks (IWOSS) with four characteristics: they are tradable, have high value added per worker, exhibit capacity for technological change and productivity growth, and show evidence of scale and/or agglomeration economies. This includes sectors like horticulture and high value agribusiness, tourism, business services, transport and logistics. Looking at case studies from South Africa, Rwanda, Senegal, Ghana, Uganda, and Kenya, they find that all IWOSS sectors in those countries are labor intensive. Moreover, labor productivity in the IWOSS sectors in all countries except Ghana were higher than labor productivity in manufacturing. In Ghana labor productivity in manufacturing and in IWOSS were equivalent. In all countries IWOSS had better growth potential than manufacturing. They conclude that developing IWOSS, not labor-intensive manufacturing, is the way to solve Africa’s youth employment problem and creating formal productive jobs at scale.
A 2017 joint report by the World Bank and the China Development Bank also argues that Africa does not have to follow the Asian development path, adding that major changes brought about by the digital revolution make leapfrogging in Africa not only possible but necessary. Eschewing Studwell’s advice on the dangers of leapfrogging they conclude that attracting private investment and creating an enabling environment for technological diffusion is precisely how Africa will harness innovation for development.
Country Case Studies
The book’s analytical core lies in its country studies: Mauritius, Botswana, Ethiopia, and Rwanda, all presented as “early movers” and hence success stories demonstrating both the possibilities and limitations of African development. However, they are not representative of the continent. All are mostly Anglophone (Mauritius is bilingual and Rwanda moved from French to English after the genocide) and are in East and Southern Africa. A book aiming to be relevant to all 54 African countries would have benefitted from including West African Francophone countries and Maghreb’s Arab countries. The successful experiences of countries like Cote d’Ivoire or Morocco would have added depth and credibility to the analysis. It would have also been useful to add case studies from Africa’s largest economies: South Africa, Nigeria, Angola and Egypt, even if they have not been particularly successful.
Mauritius is a success story that Studwell says achieved “something right in paradise;” with inclusive political coalitions, export-oriented industrialization, and strategic economic diversification. Studwell points all this out but fails to explain that the Mauritian example is virtually impossible to replicate today for three main reasons. First, is size. Mauritius has 1.3 million people – one can drive around the whole island in an afternoon. Clearly, it is easier to achieve political consensus in Mauritius than in Nigeria with 235 million people. Size also matters economically. A Mauritian minister once explained that to achieve their employment and foreign exchange objectives they only needed less than 0.1 percent share of the world market. Hence, other countries do not consider Mauritius threatening. Studwell argues that small economies often outperform larger ones with something to be learned from them. There may be some truth to that, but it is not at all clear that large countries can follow the same political and economic path as a small island economy. Second are international ties. Mauritius has an important French-speaking elite with links to France which allowed favorable treatment for sugar exports to the European Union. Also, most Mauritians are of Indian descent helping relations with the large Indian market, especially in financial services. Third is timing. Mauritius gained independence in 1968 and started its economic development when world markets were opening and low wage developing countries had a clear advantage in labor intensive manufacturing. Today, there is a worldwide rise in protectionism and technological advances, and the use of robotics make low wages less of an advantage.
Botswana is presented as a partial success story. Studwell refers to it as “meritocracy without a vision”. Studwell’s analysis of Botswana is different from traditional development economists who only point to success at building strong institutions and making good use of its mineral wealth. While acknowledging the country’s impressive growth and governance record, Studwell criticizes its failure to put in place inclusive agricultural and manufacturing policies. He argues that because of this failure the country has ended up with chronically high unemployment, extreme inequality and an unhappy society. Studwell may be a bit harsh on Botswana. After all, Botswana is considered a model among African mineral producers because its negotiations with DeBeers succeeded in securing increased domestic diamond sorting, trading, and started building an industrial sector based on processing its natural resources.
It is not clear how Botswana is relevant to the book’s main argument. Botswana never tried to implement the Asian model, focusing neither on smallholder agriculture nor labor-intensive manufacturing exports. Its success was based on the judicious use of revenues from diamond exports and developing a domestic diamond processing industry.
An important feature of the Mauritian and Botswanan experiences — only mentioned in two sentences –is that both countries are South Africa’s neighbors. They both started their development programs in the 1960s and 70s when South Africa was ruled by a racist regime. Both countries did not join the rest of Africa in confronting apartheid South Africa. This helped them achieve better economic performance than front-line states like Zambia under Kenneth Kaunda or Julius Nyrere’s Tanzania. Led by Kaunda and Nyrere, the rest of Africa cut economic ties with the apartheid regime and succeeded in mobilizing international support for Nelson Mandella and his freedom fighters, bringing democracy to South Africa. The decision by Mauritius and Botswana to prioritize the economy over the fight for dignity and equality is not one supported by most Africans.
According to Studwell, Ethiopian is “all in on the Asian model.” Meles Zenawi who led Ethiopia from 1991 until his death in 2012 was a student of Asian economies and replicated their experiences; prioritizing smallholder agriculture and manufacturing exports while using capital controls and directed credit, ensuring that resources flowed to priority activities. Meles’s successors stuck with the Asian model and the country had excellent economic results. A country that was suffering from famines in the 1980s grew its GDP per capita by 3.6 times in thirty years and brought about great increases in agricultural productivity and food security, as well as in poverty reduction. But not everything worked well in Ethiopia. The government created public sector conglomerates who face no competition, are inefficient and suppress private sector activity. It also embarked on large mega-projects without sufficient preparation, which led to huge waste. The best example of this is a never completed $5 billion 175-thousand-hectare irrigated sugar scheme.
Ethiopia’s greatest failure is its inability to develop a truly multi-ethnic coalition for economic development. The federal model put in place by Meles broke apart under ethnic tensions and the country descended into civil war, with huge human and economic costs. The challenge facing Ethiopia today is how to stabilize the country and build consensus for a peaceful multi-ethnic society with a commensurate economic development program.
Studwell uses Ethiopia as an example of the Asia model working in Africa, but Rodrik (2026) interprets it differently. He thinks the Asian model did not succeed in Ethiopia, pointing out the growth of manufacturing in Ethiopia through small-scale, mostly informal, enterprises at the expense of productivity. Expansions of manufacturing employment and increases in manufacturing productivity went hand in hand in early Asian industrializers. They moved in opposite directions in Ethiopia.
Moreover, the civil war and ethnic tensions in Ethiopia may be an indication that the Asian model cannot work in multi-ethnic African countries. Successful Asian countries were mostly mono-ethnic, while nearly all African countries are more like Ethiopia with multiple ethnicities, languages and religions. Applying the Asian model of a strong central government picking winners and losers and determining where credit and investment flows in a multi-ethnic society could lead to either of two outcomes, both negative. First, the competition for control of resources among different ethnic groups could degenerate into unrest and even civil war as in Ethiopia. The second possibility is that the ruling elite allocates resources in a way that appeases different ethnic groups rather than maximizes economic benefits, which usually implies inefficiencies and often corruption.
Studwell describes Rwanda as “Singapore in Central Africa.” When Paul Kagame and his Rwanda Patriotic Front (RPF) marched into Kigali in 1994, they found a city littered with bodies. Three-quarters of Rwanda’s Tutsis lost their lives during the genocide. Kagame, himself a Tutsi, was able to pacify the country and grow its economy at phenomenal rates. It is a truly inspirational story.
Kagame’s role model was Lee Kwan Yew, Singapore’s first Prime Minister who put the island on the road to becoming one of the most successful economies in the world. Lee believed in Asian values that prioritized communitarianism as a necessity for social cohesion, political stability, and rapid economic growth. This took precedence over democracy and human rights. At the same time, Lee ran an efficient and transparent government that was focused on economic development, achieving excellent results.
Kagame’s first economic program, Vision 2020, had six priorities: (1) good governance and state capacity development; (2) investment in education; (3) private sector growth; (4) infrastructure development with a special focus on high-speed internet; (5) household agriculture; and (6) trade and regional integration. Success ensued, Rwanda grew by 7-8% a year, GNI per capita rose from $270 in 2000 to $1,040 in 2024.
However, Rwanda’s experience does not support Studwell’s view that Africa should simply copy the Asian model of focusing on agriculture and labor-intensive manufacturing, using capital controls and directed credit to ensure resources flow to priority areas. There are three reasons for this. First, Rwanda did not use capital controls and directed credit. It kept an open capital account, allowing the free movement of money. State-owned banks were sold off to foreign investors and new foreign banks were allowed to operate. Second, Rwanda’s growth did not come from agriculture or from manufacturing. It came from high value tradeable services: transportation, trading and tourism. By 2022 half of Rwanda’s GNI came from the services sector. Third, unlike Studwell, Paul Kagame believed in leapfrogging. He invested in Rwanda’s digital economy, establishing “Smart Africa” (an organization whose mission is to develop the continent’s digital economy). He continues to chair its board of directors.
What Does This Mean for Africa?
Studwell’s statement on page 8 of his book that: “I have found that the policies that were effective in Asia are the same ones that have worked in a handful of cases of early success in Africa” is not supported by his own case studies. Only Mauritius could be described as a successful implementation of the Asian model. But Mauritius started its development program early–before the digital revolution and the increased use of robotics–and its size and geography are atypical. Ethiopia implemented the Asian model, and its focus on agriculture has reduced poverty and improved food security. However, Ethiopia today—with civil war and a low productivity manufacturing sector–cannot be considered a success story. Botswana’s success is due to judicious management of its mineral resources. It never tried to emulate Asia and develop smallholder agriculture or labor-intensive manufacturing. Rwanda did exactly what Studwell warns against. It leapfrogged into high value services and the digital economy. It did develop some industrial zones but the share of manufacturing and agriculture in its GDP declined while the share of services increased.
Nevertheless, Studwell’s “How Africa Works” contains at least five valuable lessons. First, building political consensus around a development project and a vision for the future is a prerequisite for successful economic development. Mauritius achieved this in the context of a parliamentary democracy, while Rwanda—like Singapore– achieved it within a more centralized, authoritarian political system. Second, on a continent where some 70 percent of the population depends on agriculture for a living, an early focus on developing smallholder agriculture is key for poverty reduction and food security. This is the lesson that can be drawn from the Ethiopia case study. Third, mineral rich African countries need to strengthen management of the rent from natural resource and put in place systems to encourage domestic refining and processing rather than exporting raw materials. The key lesson from the Botswana case study. Fourth, it is important to invest in education and in digital infrastructure and grow high value-added services. That is the message of the Rwanda case study. Fifth, developing high value-added services does not mean neglecting manufacturing. All four countries continue to develop their manufacturing sectors, but they cannot depend solely on manufacturing to create the high growth and jobs that their populations need.
“How Africa Works” is certainly worth reading, even if one disagrees with its main message. Studwell’s argument that low demographic density is the main explanation for Africa’s development challenges is new and plausible. More work in this area, especially trying to understand how rapid urbanization is changing Africa’s development prospects is needed. The conventional wisdom that Africa’s population growth is bad for development and poverty reduction may be wrong. The country case studies are well researched and provide many useful information, even for an old Africa hand. Moreover, the book’s style is engaging and easy to follow.
…
I was asked by the editor to respond. Here is what I wrote:
Sir,
I reply to Hafez Ghanem’s review of my book How Africa Works.
Part of the problem with economic development as a subject is that it is boring. The same optimum pattern of smallholder agriculture, export-oriented manufacturing and financial arrangements that support these two sectors through directed credit and capital controls runs from the United States of the 19th century to the European catch-up states beginning in the late 19th century to the post-Second World War Asian tigers/ dragons/ ‘miracles’. The consistent historical pattern is too dull for economists – and their friends in the aid industry – so they quest assiduously for novel explanations of what is required.
We live today amidst an intellectual ‘new paradigm’ frenzy. The ferment is driven by speculation about digital economies, robotics and artificial intelligence (AI). Mr Ghanem notes in his review that one of the most important development economists of the age, Dani Rodrik, has declared that manufacturing-based development will not occur in Africa.
For those of us who are sceptical of a ‘new paradigm’ – as opposed to incremental technological change – the problem is that the conversation is a very loose one. Those who speak of a robotics and an AI revolution in manufacturing talk only about the technology and do not talk about the cost. Yet cost is the decider in real firms. Robots require outlays of tens and hundreds of thousands of dollars per unit. Meanwhile, labour in African countries now costs US$70 to US120 per month – one tenth to one sixth that in China.
Next comes the issue of flexibility. Robots and AI are sunk, upfront costs. Labour in African countries is something you hire and fire as you need it – just like in Asia in its take-off era. In short, the fact that US$700 a month factory labour and a falling population mean Chinese firms are turning to robotics and AI does not mean they will inevitably be more competitive than African factories and does not mean African factories should do the same thing.
Mr Ghanem highlights Ethiopia as proving the impossibility of African industrialisation. He quotes Dani Rodrik saying an East Asian manufacturing strategy failed in Ethiopia. But did it? A raft of new investment zones had only two years of operations before the 2020-22 civil broke out. Messrs Ghanem and Rodrik should pay a visit today. Investment zones are filling up, import substitution programmes are being completed, plants are increasingly capital intensive – from multiple factories working steel billets to a first integrated steel plant under construction and other new industrial product lines like plate glass. Try telling an Ethiopian minister that manufacturing is not going to happen in their country.
The nation held up as the bellwether by the digital evangelists is India. Certainly, India did well in the past three decades compared with its miserable economic performance between 1947 and 1991. Since then, the country averaged 4.2 percent growth while developing a substantial digital sub-economy and ignoring the traditional requirement for a manufacturing focus. But how impressed should we be? Not very. From 1980, China grew for three decades at more than 10 percent a year and today has an economy four times the size of India’s, largely because of its commitment to manufacturing. When people say the best African countries can hope for is an Indian growth rate, it is a fundamentally racist statement.
Mr Ghanem also references another very loosely employed argument to show that Africa has no manufacturing future – the notion that increasing global protection excludes Africa from overseas markets. But rising protection is not directed at Africa. Protection is tariffs on China and China’s reciprocal response to developed countries outside Africa. African states have only been affected, temporarily, by Trump tariffs. Most African states enjoy tariff free access for a wide range of products in the EU, and in China. Protectionism is not stopping the growth of African manufacturing. Furthermore, a great deal of goods export growth in Africa will come not from sales to other parts of the world, but instead from sales between the continent’s 55 countries.
It won’t be digital revolution or tariff barriers that decide developmental trajectories in Africa, but rather (very varied) state capability in the context of circumstances that increasingly favour African industrialisation. Rising population density, an African GDP growth rate that ticked up markedly since the start of the century and urban markets demanding a full range of consumer goods and construction materials mean that there are attractive manufacturing opportunities in Africa like never before.
To give one example, the price of steel in China, where growth has slowed and steel is in chronic oversupply, has fallen to US$550 per ton. Across Africa, where steel is demanded for infrastructure, for urban real estate and as an input in many downstream businesses, steel fetches between US$850 and US$1,200 per ton. So it is no surprise that Chinese firms are shipping steel plants to Africa. Their local production in turn stimulates more investment in downstream factories that use steel. Large Chinese steel plants have been built in Algeria, Zimbabwe and South Africa and signed in Ethiopia.
According to the firm level FDI database collated by the Financial Times, last year Chinese firms invested US$12.5bn in manufacturing plants in Africa. The main driver was better margins than they could achieve at home. Someone needs to tell these people that manufacturing is not going to work in Africa.
There is no doubt that the technological background against which economic development occurs has changed. Since 2000, the services share of global trade increased from 20 percent to about 28 percent. This reflects the raft of new opportunities for developing countries to export services such as business processing outsourcing (BPO), software and other professional services. Governments need to take these opportunities seriously. But that is not the same as ignoring the manufactured goods that still constitute 72 percent of world trade. In my view, anyone who tells African countries to ignore manufacturing is doing the continent a frightening disservice. Fortunately, there is no indication that in countries like Ethiopia people are listening.