Abstract
Manufacturing-led structural transformation is struggling to take-off in much of the African continent, leading to an increased interest in services-led alternatives. This paper demonstrates that East Africa [EA] is becoming a centre of such services-led structural transformation. Productivity in the typical EA country grew 1.4 percentage points per annum faster than that of the typical African country in the 2010s, and this difference is fully accounted for by within-sector productivity growth in services. Services shares of employment and real value added in EA have grown more rapidly than manufacturing since 1990. Input–output analysis using a newly available database suggests that whilst international trade is contributing to services value added in EA, services employment is almost entirely supported by domestic demand. The finding that growth-enhancing structural change is complemented by within-sector productivity growth in services implies that services-led structural transformation in the EA region is likely sustainable.