Convergence in sectoral value-added and income per capita: comparing fragile, resource, and emerging economies in Africa

Africa’s vision to become an optimum currency zone seems idealist, at least in the short term, as large economic and institutional asymmetries tend to work in counter. We examine convergence in real income per capita and sectoral value-added (1970–2023) through five analytical domains: a pan-African aggregate and four structural clusters—fragile, agricultural commodity-driven, oil-exporting, and emerging economies. A range of econometric techniques, including Pooled Least Squares, Fixed and Random Effects, nonparametric Kernel, System Generalized Method of Moments, and Prais-Winsten regressions, is used in the analysis. We establish a continent-wide conditional income convergence of 2.06% per annum, mainly driven by initial income level, industrial expansion, and modernization in service-oriented activity. Though, large productivity differences in agriculture impede full economic integration. Emerging markets have the fastest convergence in output gaps relative to the African steady state post-2007/08 financial crisis due to greater integration into capital markets and international trade. Oil exporters retain moderate convergence despite substantial volatility. Fragile economies, meanwhile, are the most deviant set, operating at nearly 90% below a continental equilibrium because of debt overhang and low engagement into global value chains. Industrialization, foreign investment, domestic credit, and regional trade fuel economic growth in Africa but excessive defense expenditure and exchange rate volatility are acute curbs. Although intra-African trade has marked progress in connectivity, especially since 2010, variations in sectoral transformation, regional trade share, and macro-financial stability cast doubt on the viability of a pan-African monetary model. We argue for a phased move prioritizing economic convergence and structural harmonization while closing developmental gaps before starting a continental currency.