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AFRICA’S NEW FRONTIER: INNOVATION, TECHNOLOGY, PROSPERITY
THE INTERNATIONAL DEVELOPMENT RESEARCH CENTER – FEBRUARY 4 -5, 2010
Punam Chuhan-PoleThe office of the Chief Economist, Africa RegionThe World Bank Group
2
Sub-Saharan Africa has seen a remarkable turnaround in economic performance
Introduction
• Average annual GDP grew from 2.5% in 1990s to 6% in 2003-2007.• Increased private sector activity• Progress on reducing poverty and on achieving the MDGs• Stronger leadership, greater focus on governance, more involved citizenry,
local solutions from local knowledge• Better policies, improved business environment, innovation and market-
based solutions, local solutions from local knowledge• However, there are several challenges:
o large differences among country performanceso little economic diversification and weak integration in the global
economyo history of volatile economic performance
• Recent crises threaten hard-won gains• A decade of progress points to Africa’s economic potential
3
-4
-2
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mozambique Tanzania Ghana Botswana
-2
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mozambique Tanzania Ghana Botswana
Strong and sustained economic growth 2000-08
Real GDP growth rates% of change
Source: Development Economics
Real GDP growth rate: select countries
Source: World Bank
Growth in LICs, MICs and oil exporting countries in SSA
Growth, %
Source: World Bank
% of change
Real GDP per capita growth rate: select countries% of change
Source: World Bank
4
30
35
40
45
50
55
60
65
1981 1984 1987 1990 1993 1996 1999 2002 2005
Declining poverty rate
Declining poverty rate in recent years
• A decade of sustained and accelerating growth led to declining poverty rate and improvements in some human development outcomes.
• The proportion of Africans living on $1.25 a day fell from 58 percent in 1995 to 50 percent in 2005. On current trends, poverty would fall to 38 percent in 2015. Well short of the MDG target of 28.8 percent.
Source: Development Economics Data, World Bank
Poverty rate in %
SSA
5
Progress towards education MDG
83.0 82.583.5 85.7 86.2 86.5
86.9
50556065707580859095
100
2001 2002 2003 2004 2005 2006 2007
Net E
nrol
lmen
t Rat
e (%
)
Source: UNESCO Institute for Statistics in EdStats, July 2009
WLD SSA
Net Enrollment Rate (primary education)
40
45
50
55
60
65
2000 2001 2002 2003 2004 2005 2006 2007
Primary completion rate, total (% of relevant age group)
Primary completion rate
Africa has made rapid progress in expanding educational coverage
Over 60 percent of children are completing primary school
The gender gap in primary schools continues to narrow
Source: WDI, World BankSource: UNESCO
In %
6
Primary school completion rates by country
0 20 40 60 80 100
KenyaZambia
Cape VerdeZimbabwe
Sierra LeoneLesotho
GhanaNamibia
Sao Tome and PrincipeSwaziland
NigeriaCongo, Rep.
Gambia, TheBenin
GuineaMadagascarMauritania
TogoCameroon
MalawiLiberia
UgandaMali
Congo, Dem. Rep.Comoros
SenegalSudanEritrea
MozambiqueEthiopia
Cote d'IvoireNiger
BurundiBurkina Faso
RwandaCentral African Republic
ChadGuinea -Bissau
Source: EdStats
Latest year
• There are large differences across countries in Sub-Saharan Africa
• Some countries in the region are unlikely to meet the education MDG
Primary Completion Rates SSA in %
King, E. 2010. Education Sector Strategy 2020
7
Progress on controlling HIV HIV prevalence in SSA (1990 – 2007)
The prevalence rate of HIV/AIDS is stabilizing and declining in some countries
There has a been a rapid increase in measles immunization and progress in curbing malaria
There has been progress in reducing child mortality: child mortality fell in 24 countries
However, there has been little progress on reducing maternal mortality, which remains very high
Sub-Saharan Africa is off-track on meeting the health MDGs
Source: Africa Action plan 2009
8
Favorable trends in trade and investmentMedian Private Investment in SSA (1970 – 2006) Trade Openness in SSA (1970 – 2006)
Source: Regional Economic Outlook, IMF
Source: Regional Economic Outlook, IMF
Source: Regional Economic Outlook, IMF
Exports from SSA (2000 – 2009)
9
5
10
15
20
25
30
2000 2001 2002 2003 2004 2005 2006 2007
Foreign direct investment, net inflows in reporting economy (DRS, current US$)
Rising foreign direct investment inflows; record levels in 2008
FDI net inflows in SSA (2000 – 2007)• FDI inflows into Africa increased by 27% in 2007
• Inflows rose in 29 SSA countries• Increase was spurred by high commodity
prices and search for natural resources and record M&A investments
• Developed countries remained the main sources of FDI with an increased share coming from developing countries especially China.
• Several countries adopted policies that promoted private investment such as free industrial zones, privatizations and partnership with OECD countries
Source: WDI, World Bank
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2000 2001 2002 2003 2004 2005 2006 2007
Foreign direct investment, net inflows (% of GDP)
FDI net inflows as a % of GDP (2000 – 2007)
(US$ billion)
10
Success in growth of ICT, especially mobile communications
• The annual growth rate between 2003 -2008 in both Internet and mobile services has been twice that of the world
• This dramatic growth is mainly in mobile telephony and voice services, but there has also been progress on internet usage
• In 1998 only South Africa had an operative mobile network with less than 4,000 subscriptions.
• By 2006, mobile subscriptions were around 100 million; in 2008 there were 246 million subscribers.
• Countries like Botswana, Mauritius, Seychelles and South Africa are approaching full mobile coverage
ICT growth in Africa and the world, 2003-08
3 6 11 18 3254
90132
201
8 11 1417
21
34
40
42
45
0
50
100
150
200
250
300
2000 2001 2002 2003 2004 2005 2006 2007 2008
Africa excluding South Africa South Africa
Mobile cellular subscriptions in AfricaICT penetration levels in Africa, developing countries and the world in 200
Source: International Telecommunications Union, 2009 Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
2.4
47.0
30.6
2.5
23.0
17.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Fixed telephone lines Mobile cellular subscriptions Internet users
Africa World
Millions of people
In percent
59.0
19.023.0
6.0 6.0
49.0
13.0 15.0
3.0 2.0
32.0
1.04.0
0.1 0.90.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Mobile phone subscriptions
Fixed telephone lines Internet users Fixed broadband subscribers
Mobile broadband subscribers
World Developing countries Africa
Prer100 inhabitants
11
M-PESA– an innovative application
• An innovative application of mobile telephony is M-PESA, Kenya’s mobile money service. Customers can use their phones to:
• transfer money• check account balances• pay bills• make deposits and withdrawals from their personal accounts
• Since its introduction in 2007, $1.6 billion (equivalent) in transfers have been conducted through M-PESA
• M-PESA has successfully tapped into the demand by urban Kenyan’s remit funds to to their families in the rural areas
• The market for mobile money transfer systems is growing—e.g., Zap money (Zain) which can be used to make payments at super markets
• Other applications are being developed
12
Signs of financial deepening, but financial markets remain shallow
Source: Beck and Domrigic-Kunt, 2009Note: this graph shows the median of liquid liabilities to GDP, bank deposits to GDP, and private credit to GDP across SSA for each year
Financial deepening in SSA 1995 - 2007
13
Quality of policies and institutions—the CPIA
3.3 3.3 3.3
3.4 3.4
3.3
3.2 3.2 3.23.2
3.23.1 3.1 3.1 3.1
3.03.0 3.0 3.0 2.9
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
2004 2005 2006 2007 2008
Economic management Structure policies
Social Policies Public management and institutions
Average per cluster of CPIA scores (2004-2008)
Source: World Bank Group
Improved performance on macroeconomic managementGovernance and public sector capacity remain weak
14
Transparency, accountability and corruption
KK Regulatory index for select SSA countries (2004 – 2008)
Corruption Perception Index for select countries in SSA (2004 – 2008)
0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009
Average Mauritius Sudan Ghana
Botswana Nigeria Congo, Rep.
On
a s
cale
of
1-7
(7 b
ein
g b
est)
In %
Source: Transparency International
Source: WDI, World Bank Group
0
10
20
30
40
50
60
70
80
2004 2005 2006 2007 2008
Mauritius Ghana Cape VerdeAverage Nigeria SudanCongo, Rep.
15
Improving trends in competitiveness
Source: Global Competitiveness report, 2010
Improved business environment in SSA (2004 – 2008)
16
0 2 4 6 8 10 12 14
Cameroon
Botswana
CAR
Gambia, the
Togo
Ethiopia
Liberia
Mauritius
Burkina Faso
Senegal
Madagascar
Rwanda
2008 2010
SSA 2008 average
Reformed business environment
0 20 40 60 80 100 120 140 160 180
Mauritius 24 to 17; 6 reforms
Mali 162 to 156; 5 reformsSierra Leone 156 to 148;
5 reforms
Burkina Faso 155 to 147; 5 reforms
Zambia 90 to 99 Liberia 159 to 149; 5 reforms
Rwanda 143 to 67; 8 reforms
Madagascar 144 to 134; 2 reforms
Who reformed the most in Africa in 2008/2009?
Improvement in the ranking on the ease of doing business, DB 2009-DB2010
Share of economies making at least 1 reform improving the business environment in the past 5 years(%)
Source: Doing Business Report, 2010
Number of days to open a business (2008-2009)
SSA 2010 average
17
Even without the crisis, Africa faces many development challenges
0
50
100
150
200
250
300
350
Paved road density
Total road density
Generation capacity
Electricity coverage
Improved water Improved sanitation
Infrastructure deficit
SSA’s LIC Other LICs
Source: Africa Action Plan 2009
Source: Africa Action Plan 2009* Road density is in kilometers per kilometer squared; telephone density is in lines per thousand population; generation capacity is in megawatts per million population; electricity, water and sanitation coverage are in percentage of population
• Despite progress in many areas, the region faces serious development challenges
• A large infrastructure deficit, especially in energy and transportation, and constraining business regulations
• Little growth in productive employment —particularly troubling since 7-10 million young Africans enter the labor force each year
Measure of Infrastructure*
Population Pyramid in SSA in 2005 (UN)
10 5 0 5 10
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
Age
Male (%) Female
Population Pyramid in More developed regions in
2005 (UN)
10 5 0 5 10
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
Age
Male (%) Female
Youth unemployment
18
Agricultural productivity
• Agricultural sector is finally growing after decades of stagnation: agricultural GDP accelerated from 2.3 percent in the first part of this decade to nearly 4 percent in the second part. Agricultural output per worker has also been rising: 13 countries saw growth of over 3 percent a year in 2003-07
• Lagging agricultural productivity; high dependence on rain-fed agriculture—only 5% of cultivated land is irrigated--increases vulnerability to extreme weather events. Use of technology for development will be key.
• Africa may be the continent worst hit by climate change. Climate change threatens Africa’s hard-won gains and prospects.
• The delivery of basic services continues to fail poor people
• Cutting across all these factors is weak governance and public-sector capacity
Source: African Action Plan 2009
100
120
140
160
180
200
220
240
260
280
100 120 140 160 180 200 220 240 260 280Area (1961-65=100)
Yie
ld (
1961-6
5=
100)
ASIAAFRICA
2001-04
2001-04
2.8
0.40.2
2
0
0.5
1
1.5
2
2.5
3
Area expansion Yield Increase
SSA Other LDC
Lagging agricultural productivity
19
A slowdown in growth has serious consequences in the continent …
• The global crisis has impacted Africa: growth fell from 5.1% in 2008, to an estimated 1.1% in 2009
• Growth is expected to rebound in 2010 to 3.8% and rise to 4.6% in 2011, but will remain below trend growth rates
• Virtually all countries in the region experienced a significant slowdown in economic growth in 2009
• Per capita GDP is estimated to have declined in 2009, the first time in a decade• An additional 8 million to 10 million people may have fallen into poverty and
higher number of hungry people• An additional 30,000 to 50,000 infants are likely to die before their first birthday• School enrollments will suffer—especially for girls• Such setbacks in nutrition, health, and education can have serious irreversible
effects on human development outcomes• Hard-won gains on the MDGs are at risk
20
-4.9
-10.3
-2.2
-8.7
1.5
5.1
-2
-12
-10
-8
-6
-4
-2
0
2
4
6
SSA Oil- exporting LIC Nigeria Cote d'Ivoire Liberia Senegal
6.5%8.1%
1.1%
7.4%
3.4%
35.2%
8.2%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
SSA Senegal Sierra Leone Liberia Guinea-Bissau Gambia Nigeria
The main channels through which the crisis is impacting Africa Lower remittances in 2009
Decline in tourism – % change in tourist arrivals inJan – April 2009 from equivalent prior year period
-35
-30
-25
-20
-15
-10
-5
0Gambia Tanzania Mauritius* Kenya Senegal
Source: Africa Action plan 2009Notes:* Time period from Jan 09 – March 09
Change in current account as a percent of GDP: difference between the average of years 2004-08 and 2009 projections
Source: Sub-Saharan Africa Weathering the Storm , Regional Economic Outlook, IMF (2009)
Source: Protecting Progress: The Challenge Facing Low-Income Countries in the Global Recession, World Bank, 2009; Migration & Remittances database, Development Prospects Group.Note: *2009 (Jan – Dec) estimation
SSA Selected countries
• The crisis is hurting Africa through: reduced capital inflows—FDI fell from a peak of $32.7 billion in 2008 to around $26 billion in 2009; declining remittances and tourism; and weak export demand and lower commodity prices
• The impact of lower remittances on countries such as Senegal, Togo, Lesotho, and Sierra Leone, that receive more than 5 percent of GDP in remittances, could be severe
• Balance of payments and fiscal positions are being affected, especially those of Africa’s mineral exporters
% o
f ch
an
ge
% o
f ch
an
ge
% o
f ch
an
ge
21
Response to the crisis
Generally, African governments have continued to pursue sound policies in the face of crisis. The focus is to minimize growth shortfall, protect the poor and prepare for the growth recovery• Countries with fiscal space (e.g. South Africa, Tanzania, Zambia) running modest fiscal
deficits• Those without (e.g. Ghana), contracting• Those with well-functioning safety nets (e.g. Ethiopia, Sierra Leone, Liberia), scaling up• Some countries (e.g. Nigeria) accelerating reforms
The World Bank Group has moved quickly to supporting countries through a range of lending and advisory activities; the mix of instruments is country specific
• Front-load IDA in FY09 to a total of $7.8 billion (17 countries at 110+ percent of FY09 allocation)
• Knowledge assistance on contingency planning, protecting the poor and benefiting from a global recovery
• Initiatives such as the Global Food Price Response Program to fast track support• Partnerships—collaborating with MDBs and other development partners to leverage IDA
resources to achieve common development objectives
22
The way forward
An effective global response requires
i) Mobilizing additional resources
The region needs additional concessional resources ($20-30 billion)• $20 billion short of Gleneagles pledges• Need for additional resources beyond existing ODA commitments• Additional $8 billion to restore losses from crisis
» Losses in revenue to finance pro-poor expenditures» Losses in income of those who fall below the poverty line
ii) Other key priorities
A multilateral trading system more supportive of development—successful completion the Doha Round
Agriculture and food security—success requires a multidimensional approach (as demonstrated by the GFRP); LÁquila Initiative
Provision of timely and flexible support for LICs following crises
Strengthening regional integration and seeking regional solutions