Time Series Analysis of Manufacturing Industry Labour Productivity and Economic Growth: The Case of Cameroon 1990-2019
This research, conducted with meticulous rigor, aims to investigate the impact of labor productivity in the manufacturing industry on Cameroon’s economy over the past 30 years (1990-2019). The study, which relies on robust data from the World Bank Development Indicators (2020) and the International Labour Organization Office (2020), employs multiple linear regressions and econometric analysis. The statistically significant findings reveal that increased labor productivity in the manufacturing industry leads to a rise in real GDP. However, the results also indicate that between 1990 and 2019, labor productivity had a positive but insignificant impact on economic growth in Cameroon. In light of these findings, the paper proposes policy implementations that could significantly influence labor productivity’s role in Cameroon’s economic development, offering a promising future for the country.
Labor productivity and economic growth are indicators and the lifeblood of a nation’s competitiveness. Productivity is the relationship between quantity and output of input used to generate an output. Productivity could be used to measure the effectiveness and efficiency of utilizing resources toward the goal. Labor productivity is a divulging gauge of several economic indicators as it offers a dynamic measure of economic growth, competitiveness, and living standards within an economy (Simpao, 2018). The basic formula of labor productivity is the quotient of output over input, where labor input is usually measured in hours worked or dollars. In contrast, production is generally measured in units.
Manufacturing is described as an engine of growth and development in any country. Despite its inadequate natural resources and the crisis in the 1920s characterized by hyperinflation, Germany has effectively and efficiently exploited the manufacturing sector, becoming the largest economy in Europe and the fourth in the world. Today, the manufacturing industry is a driving force determining a nation’s economic health and efficiency. (Doctor & Campus, 2011). As A critical tool for economic growth and development, industrialization is primarily driven by modern societies’ industrial sector. The manufacturing industry mainly serves as a channel for producing goods and services and generating income (Addo et al. (2017). However, this study’s findings suggest that labor productivity’s impact on economic growth in Cameroon is currently insignificant, which underscores the need for strategic policy interventions to enhance the role of the manufacturing industry in driving economic development in the country.
After its independence, Cameroon experienced strong economic growth with an average of 4% annual GDP growth. Between 2004 and 2008, the country reduced its public debt from 60% to less than 10%, resulting in more than $ 3 billion in savings. In 2016, Cameroon’s unemployment rate was about 3.47%, with one-third of the population below the poverty line under $1.25 a day and an inflation rate of 2.5%. Since the 1980s, Cameroon has started to follow the IMF and World Bank programs, which encourage the privatization of state-owned industries to increase efficiency, productivity, and growth, thereby reducing poverty. Since then, she has promoted tourism and the major industries in Cameroon, including agriculture, mining, manufacturing trade, and transport.
There has been steady growth in the manufacturing industry in Cameroon since the late 20th century. The manufacturing industry was accounting for about one-fifth of the country’s GDP. The manufacturing industry depends on transforming or processing agricultural products such as sugar refining, tobacco processing, cotton spinning textiles, and food processing. Some heavy industries include Edea Aluminum smelter, which imports most bauxite and smelts to finished products. Limbe’s national refining company (SONARA) refined oil and petroleum through the national investment corporation. The government agency’s role has significantly reduced since it adopted privatization in the 1990s. The Cameroon economy continues to encounter many challenges that are retarding economic growth, despite implementing the poverty reduction strategy paper (PRSP). Since November 2016, Cameroon’s economy has been facing political instability (Anglophone crisis), which harms the whole economy.
The need for labor helps shift labor resources from the low-productive sector in agriculture and the informal sector to the more productive industrial sector segment. (Odero et al., 2018) She described the process as a transition from immaturity to maturity. As in Cameroon’s case, an immature economy has much labor available in the agriculture and informal service sectors. Like any other industrial activity, Manufacturing creates an avenue for employment, boosts agriculture, and diversifies the economy while increasing foreign exchange earnings. Manufacturing helps a country to minimize the risk of high dependency on imports.
The industrial sector’s contribution to GDP (Gross et al.) in Cameroon is below that of the tertiary industry, which results in structural problems. The Cameroon Ministry of Finance studied the competitiveness of manufacturing industries, with 95 enterprises in 13 branches. The result of this study shows that the unit costs of enterprises are considerably high. Input constitutes the main component of the general expenses of manufacturing industries (72.2%), then the cost of capital (10.1%), labor cost (9.2%), and taxes (MINFI). Again, Cameroon industrialists face smuggling, high taxes, unfair competition, corruption, and bad governance. With sound policies, the industrial sector can transform the economy from recovery to boom.
Therefore, this research aimed to examine the contribution/impact of the manufacturing sector labor productivity, output, Gross domestic fixed capital, and foreign direct investment to Cameroon’s economic growth as the country’s vision is to emerge by 2035. The concept has notable objectives.
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