Industrial expansion remains essential for the development and structural transformation of most sub-Saharan African economies. The advantages of industrialization go beyond the provision of manufactured goods and the diversification of exports to the modernization of society. Growth rates in formal manufacturing tell little about the economic benefits and sustainability of the industrialization process in Africa. Industrial development is beset by a pattern of negative interaction among policy incentives, capabilities, and institutions that has held back growth and, in some cases, led to a vicious spiral of decline. The region has a rich supply of natural resources and primary export products, but only a tiny core of industrial skills. It has built up physical capacity too quickly for its capabilities, institutions, and infrastructures to cope. The industries that have been set up have been highly protected, tightly controlled, and, in many cases, run by incompetent public sector organizations. The stock of skills and technical knowledge needed to manage these industries has grown, but not rapidly enough to lead to substantial gains in efficiency. Each country can act in some fashion to improve conditions in policy incentives, capabilities, and institutions, including implementation of a policy of selective intervention, education and training to produce trained workers, stimulation of technological activity relevant to manufacturing industries, and building up of management capabilities. (Contains 35 references.) (YLB)