Exports and Economic Growth in Sub-Saharan Africa: The Roles of Intra- and Inter-SSA Exports.

ABSTRACT

Most economies in Sub–Saharan Africa (SSA) have been lagging behind in development due to low growth performance over the years. The destinations of SSA exports have largely remained the same, with Europe commanding the ‘lions’ share of total exports while intra-regional trade remains very low over the years. However, the assessment of the effect of export destinations (intra and inter-SSA exports) on economic growth has not received any significant attention in Sub–Saharan Africa. The study investigates the relationship between intra-SSA and inter-SSA exports (represented by exports to Europe/Central Asia) and economic growth using panel data of twenty-nine (29) Sub–Saharan African (SSA) countries for the period 1995–2013. The study adopts the system GMM estimation technique in order to obtain consistent and efficient estimates of the effect of intra and inter-SSA exports on economic growth. In relation to previous empirical studies, this study accounts for time series variations in the data and endogeneity in the estimation model. The estimation results attest to positive effects of exports on growth as well as both intra and inter-SSA exports on economic growth. However, the magnitude of the effect of intra-exports on growth is greater than that of inter-exports. The study further shows that gross capital formation which is included as a control variable is a significant positive determinant of economic growth in SSA. Population and inflation on the other hand are found to have respectively negative insignificant and significant effect on economic growth in SSA. It is recommended that governments in SSA should make more concerted efforts and take pragmatic measures to promote intra-SSA export in the long term as well as improve on general exports and exports to Europe in order to make higher gains from trade. Additionally, physical capital must be increased, labour force must be equipped with relevant skills and given employment opportunities and inflation kept under control in order to enhance accelerated growth in SSA economies.