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J Af Eco 2001; 10:48-80
© 2001 Centre for the Study of African Economies

Article

Determinants of African Manufacturing Investment: the Microeconomic Evidence

Jan Willem Gunning and Taye Mengistae

Free University, Amsterdam
World Bank

Abstract

In this survey paper we consider the microeconomic evidence on investment in African manufacturing. We analyse both the determinants of investment behaviour and the return to that investment. In the 1990s market selection — the process by which the capital stock is reallocated in favour of more efficient firms — has been as strong in Africa as elsewhere. While the macroeconomic literature has focused on low returns to investment as an explanation for Africa's poor growth performance, the micro-data indicate high potential returns. However, investment rates remain quite low, presumably as a result of risk, but the surveys currently available are not suitable for testing this.


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