Examining the Contribution of Capital Goods Imports to Economic Progress in Sub-Saharan Africa

Abstract

This study investigates the impact of capital goods imports on physical capital formation and economic growth in Sub-Saharan African countries from 1985 to 2021, analyzing data from 33 nations. Using descriptive statistics and panel co-integration analysis, the study explored the relationships among the variables. The findings reveal that capital goods imports positively and significantly contribute to both economic growth and physical capital formation, though their impact remains modest. Despite their positive role, capital goods imports are not sufficient to drive transformative progress in economic growth or physical capital formation. This highlights the underutilization of their potential in fostering industrial development and economic advancement across the region.  To address these challenges, Sub-Saharan African governments are encouraged to adopt policies that enhance the manufacturing sector’s capacity to effectively utilize capital goods. Key recommendations include implementing tariff reforms to reduce the cost of importing essential capital goods, making them more accessible to local manufacturers, and streamlining bureaucratic procedures, particularly at ports. Simplifying administrative processes and reducing delays would lower costs and improve the efficiency of handling imports, enhancing their overall impact on industrial productivity. By adopting these strategies, governments can strengthen the manufacturing sector, ensuring that capital goods imports contribute more effectively to physical capital formation and economic growth. These efforts would promote sustainable industrial development, improve competitiveness, and position Sub-Saharan Africa for long-term economic progress. With targeted reforms, the region can better leverage capital goods imports to foster robust industrial capacity and sustained economic advancement.