Arica's Future. World Bank

8/3/2019 Arica's Future. World Bank

1/46

Africas Future

and the World BanksSupport to It

March 2011

www.worldbank.org/africastrategy


2/46

The World Bank

Africa Region

March 2011

Africas Futureand the World BanksSupport to It


3/46

ii

Abbreviations and Acronyms

AAP Arica Action Plan

ACBF Arican Capacity Building Foundation

AfDB Arican Development Bank

APOC Arican Program or Onchocerciasis Control

AU Arican Union

CAS Country Assistance Strategy

CSO civil society organization

FCS ragile and conict-aected state

G-8 Group o Eight

GDP gross domestic product

IBRD International Bank or Reconstruction and Development

ICT inormation and communication technology

IDA International Development Association

IEG Independent Evaluation Group

IFC International Finance CorporationLICs low-income countries

MDG Millennium Development Goal

MICs middle-income countries

MIGA Multilateral Investment Guarantee Agency

PPP public-private partnership

SMEs small and medium enterprises

WBG World Bank Group

WBI World Bank Institute


4/46

iii

Contents

Abbreviations and Acronyms ii

Executive Summary 1

I. Introduction 3

II. A 10-Year Vision 8

III. Temes of the Strategy 9

Pillar 1: Competitiveness and employment 10

Pillar 2: Vulnerability and resilience 15

Foundation: Governance and public sector capacity 20

IV. Implementing the Strategy 27

Partnerships 27

Knowledge 28

Finance 29

Country types 29

V. Organizing for Results 32

VI. Risks to the Strategy 34

VII. Africa Strategy Monitoring Framework 35

Te three-tier approach 35

Cross-cutting areas 36

Operationalizing the Arica Strategymonitoring ramework 36

Reerences 37


5/46

iv

Boxes

Box 1: Consultations to Renew the World Banks Strategy or Arica

Box 2: Accomplishments and Lessons Learned rom the Arica Action Plan

Box 3: Exporting Mangoes rom Mali

Box 4: Ethiopia: Leveraging Saety Nets or Eective Crisis Response

Box 5: Burundis Vulnerability and Resilience to External Shocks

Box 6: Service Delivery Indicators in AricaBox 7: A New Approach to Capacity Development

Box 8: Arican Program or Onchocerciasis Control: Among the Most Successul and Longest-Running PPPs or Health

in Arica

Box 9: Regional Approaches as Game Changers

Box 10: Selectivity and the Arica Strategy

Figures

Figure 1: Average GDP growth rates in Sub-Saharan Arica, 19982008

Figure 2: GDP growth in Sub-Saharan Arica by country groups

Figure 3: Poverty rate in Sub-Saharan Arica, 19902005

Figure 4: Maize prices in selected eastern Arican markets

Figure 5: Millet prices in selected western Arican marketsFigure 6: People with insufcient daily nourishment

Figure 7: Mobile cellular penetration in the world, developing countries, and Arica

Figure 8: Poverty increase rom baseline caused by a 25 percent increase in ood prices

Figure 9: Trends in natural disasters

Figure 10: State ragility and warare in the global system, 2009

Figure 11: Change o CPIA scores within clusters or oil-exporting and non-oil-exporting countries

Figure 12: Voice and accountability, 2009

Figure 13: Sub-Saharan Arica: Regimes by type, 19462008

Figure 14: Devolution o work

Figure 15: Arica Strategy three-tier monitoring ramework

Tables

Table 1: Relationships to global strategiesTable 2: Economies improving the most in each Doing Business topic, 200910

Table 3: Zambias inrastructure defcit


6/46

1

Africas Future and theWorld Banks Support to ItExecutive Summary1. Sub-Saharan Arica in 2011 has an unprecedented oppor-tunity or transormation and sustained growth. Until theoutset o the global economic crisis, economic growth hadaveraged 5 percent a year or a decade. Even though growthdeclined as a consequence o the global nancial crisis, ithas rebounded in 2010 thanks to prudent macroeconomicpolicies and nancial support rom multilateral agencies.Progress on the Millennium Development Goals (MDGs)has been suciently rapid that several countries (such asEthiopia, Ghana, and Malawi) are likely to reach most o thegoals, i not by 2015 then soon thereaer. Aricas private

sector is increasingly attracting investment, and the climateor market-oriented, pro-poor reorms is proving robust.

2. Despite these gains, Arican countries continue to acepersistent, long-term development challenges. Among themare undiversied production structure, low human capital,weak governance, state ragility, womens empowerment,youth employment, and climate change. Te current dyna-mism and optimism on the continent, changes in the globaleconomy, and the emergence o new development partners(Brazil, China, and India) make the time right or a renewalo the World Bank strategy or Arica.

3. Te renewed regional strategy was developed throughwidespread consultations. It sets World Bank directions insupport o Aricas transormation and provides the rame-work in which to embed country strategies. Te strategybuilds on lessons learned rom the Arica Action Plan(AAP) and the recent Independent Evaluation Group (IEG)Evaluation o the AAP.

4. Te strategy has two pillars, (a) competitiveness andemployment, and (b) vulnerability and resilience, and aoundationgovernance and public sector capacity. Telong-term challenges and emerging issues identied in the

strategy are consistent with the World Banks Post-CrisisDirections and the International Development Association(IDA) policy ramework.

5. Pillar 1 ocuses on competitiveness and employment,covering all traded goods and service sectors (or example,light manuacturing, agribusiness, mining, inormation andcommunication technology [IC], and tourism) as well askey domestic sectors that support competitiveness (or ex-ample, agriculture, transportation, utilities, education and

skills development, construction, and retail). A prioritywill be to ocus reorms and public investments on areas ohighest growth potential, a healthy and skilled workorce,womens empowerment, and regional integration programs.Strategically targeted interventions will be complementedby deeper and broader interventions targeted at each o thethree main investment climate constraints: inrastructure,business environment, and skills.

6. Under Pillar 2, vulnerability and resilience, the strat-egy will address macroeconomic shocks and idiosyncrat-

ic shocks such as health, natural disasters, disease, oodshortages, conict, political violence, and climate change.Te World Bank will harness its comparative advantage inbuilding resilience to address the cumulative efects o theseshocks through nancial support, knowledge, global experi-ence, and technical assistance in designing, monitoring, andevaluating saety-net reorms and health system reorms aswell as in smoothing the efects o macroeconomic shocks(as in the recent global crisis) and providing knowledge, -nance, advocacy, and convening power in helping countriesadapt to climate change.

7. Governance and public sector capacity are the ounda-tion o the strategy. Feedback rom the Arica Regions con-sultations identies governance and leadership as the mainchallenges underlying Aricas development. Building on thelessons learned, one can approach governance and publicsector capacity rom both the demand and supply sides.On the demand side, the Banks strategy aims to strengthencitizens voices using instruments o social accountabilityand to exploit the immense potential o IC to provide in-novative ways to enable citizen-centered governance. Onthe supply side, oremost is building the capacity o Ari-can political leaders by, or instance, supporting leadershiptraining schools and convening leadership peer-learning

networks. Priority areas will continue to be building publicexpenditure management systems and strengthening incen-tives within the civil service.

8. Te strategy will be implemented by leveraging part-nerships, knowledge, and the World Bank Group (WBG)snancing instruments. Partnerships will be the rst instru-ment o implementation with Arican society, the privatesector, the Arican Union Commission, the Arican Devel-opment Bank (ADB), and other development actors. Inter-


7/46

2

nally, the Bank will collaborate and coordinate closely withthe International Finance Corporation (IFC), the Multilat-eral Investment Guarantee Agency (MIGA), the Develop-ment Economics Vice Presidency, and the World Bank In-stitute (WBI) in capturing synergies and expertise across theWBG. Te second instrument will be knowledge generation

and dissemination to nourish evidence-based debate andcapacity building. Te Bankwill promote catalytic mecha-nisms that leverage its nancing to crowd in other sourceso private investments, link to the countries resources, anddeploy other innovative nancing and risk managementinstruments to support public-private partnerships (PPPs).Te Bank will accelerate support to ragile states, empha-size regional solutions, and help middle-income countries(MICs) reach the next level through knowledge assistance.

9. o implement this strategy successully and cement amore client-driven ocus on development and results, theArica Region is undertaking several management and orga-

nizational changes. Trough deepening o decentralizationand creation o subregional technical and knowledge hubs,the Bank will be closer to the client and respond quickly todiverse clients and changing business needs, improve opera-tional efectiveness, and better coordinate with partners onthe ground. In updating these services and systems, the A-rica Region will work selectively and ocus on results, ex-ibility, ecient delivery, and innovation while increasing theuse o programmatic approaches and maximizing the per-ormance o its portolio. Te Arica Strategy will acilitateand reward selectivity at the country level, where it is bothdesirable, given the large number o partners, and necessaryin light o resource constraints. Trough selectivity and in-

creased multisectoriality in its mode o operations, the A-rica Region will concentrate on high-impact operations inkey strategic sectors.

10. Te strategy takes into account lessons learned romthe AAP and the recent IEG evaluation o the AAP anddenes a multilayered results monitoring ramework atthe regional level that allows a logical results chain. Teramework provides a dynamic integrated monitoring ap-proach to track progress on selected indicators. It should

not be mistaken as a tool or comprehensive reporting osector or country-level outcomes. Rather, it includes a set oindicators to selectively measure progress areas relevant tothe strategy and provides an overarching ramework dem-onstrating how linking sector and country-level programscontributes to achieving development outcomes at the re-gional level. Te projections o results will o course be sub-

ject to the evolution o country demands or Bank support.

11. Given the Regions heterogeneity and diverse countrysituations, the monitoring ramework emphasizes track-ing o progress in the rst ve years. o oster learning, theBank will implement impact evaluations. Annual reports and

a midterm evaluation will provide critical inormation ormanagement o indicators and course correction in the lastve years. Data availability and weak monitoring and evalu-ation systems remain a main challenge to measuring results;thereore, building and strengthening statistical capacity willbe reinorced in the strategy as a long-term undertaking.

12. Te strategy recognizes three main risks: the possibil-ity that the global economy will experience greater volatil-ity, the possibility o conict and political violence, and thepossibility that resources available to implement the strategymay be inadequate. Te two pillars and oundation o thestrategy, as well as the ocus on partnerships, provide some

condence that these risks can be mitigated and that Aricacan realize its ull potential or sustained growth and pov-erty reduction.


8/46

3

Figure 1: Average GDP growth rates in Sub-Saharan Arica, 19982008

Source: World Development Indicators, World Bank.

2. Although Arica was badly hit by the global crisis, thecontinent avoided an even worse growth shortall in 2009thanks to prudent macroeconomic policies and nancialsupport rom multilateral agencies and has rebounded in2010 (gure 2).

3. Second, alongside the acceleration in growth, progresson the MDGs has been suciently rapid that many coun-tries (such as Cape Verde, Ethiopia, Ghana, and Malawi) arelikely to reach most o the goals, i not by 2015 then soon

thereaer. Aricas poverty rate was alling at about 1 per-centage point a year, rom 59 percent in 1995 to 50 percentin 20051 (gure 3). Child mortality rates are declining, HIV/AIDS is stabilizing, and primary educationcompletion ratesare rising aster in Arica than anywhere else.

1 Others (Sala-i-Martin and Pinkovskiy 2010; Young 2010) estimatethat poverty was alling even aster. Note that Aricas rate o povertydecline is aster than Indias.

Figure 2: GDP growth in Sub-Saharan Arica by country groups

Source: World Development Indicators, World Bank.

I. Introduction

1. For at least our reasons, Sub-Saharan Arica (hereaerArica) in 2011 has an unprecedented opportunity ortransormation and sustained growth. First, until the on-set o the global economic crisis, gross domestic product(GDP) growth had been averaging 5 percent a year or a de-

cade, accelerating to over 6 percent in 200608. Growth waswidespread. Some 22 non-oil-exporting countries, includ-ing several countries that have experienced conict, such asMozambique, Rwanda, and Uganda, had 4 percent or highergrowth rom 1998 to 2008 (gure 1).


9/46

4

Figure 3: Poverty rate in Sub-Saharan Arica, 19902005

Source: Development Prospects Group, World Bank.

4. Tird, Aricas private sector is increasingly attractinginvestment, with much o the unding coming rom do-mestic banks and investors and the rest rom the UnitedStates and Europe. Te sector is also creating an emergingArican middle class o hundreds o millions o consum-ers. Returns to investment in Arica are among the highestin the world (Boston Consulting Group 2010; Collier andWarnholz 2009; Roxburgh and others 2010). Success o IC,especially mobile phone penetration, shows how rapidly asector can grow. It also shows how the public sector can setthe conditions or the exponential growth o a vital indus-try that could transorm the continent. Private capital ows

are higher than ocial development assistance (and oreigndirect investment is higher than in India). China, India, andothers are also investing large sums in Arica.

5. Fourth, the climate or market-oriented, pro-poor re-orms is proving robust. During the global crisis, the payofsto economic reorms ell. Yet policy makers continued withprudent economic policies, even in the ace o contradictorypolicies elsewherebecause the public demanded them.Te voice o civil society is increasingly heard, as evidencedby Uwezo on education in Kenya (see http://www.uwezo.net), citizen report cards in Ghana, and the various nonstateactors demanding accountability or resource revenues.

6. Putting these actors together, the Bank concludes thatArica could be on the brink o an economic take-of, muchlike China was 30 years ago, and India 20 years ago. 2

7. o be sure, Arican countries continue to have persis-tent, long-term development challenges. At 15 percent o

2 Unlike China and India, Arica is a diverse continent. Aricasgrowth is unlikely to be uniorm across all countries.

GDP, the private investment rate is about hal o Asias. MostArican countries still have an undiversied productionstructure, concentrated in primary commodities. Aricanshave the lowest levels o human capital in the world. Only 5percent o the eligible population is enrolled in universities(the same rate as in Asia and Latin America 40 years ago);

some 140 children o every 1,000 births die beore their hbirthday. Despite progress in the last 15 years, most Ari-can countries will all short o most o the MDGs, largelybecause they started rom urther behind in terms o theircapacity to reach these global goals. Weak governance is re-ected not just in high levels o corruption9 o the bottom17 countries in ransparency Internationals CorruptionPerception Index are in Aricabut also in service deliv-ery ailures, such as teacher absenteeism in public primaryschools (20 percent in Uganda) or leakage o public undsto health clinics (99 percent in Chad). Tat most o Aricasmineral exporters have not been able to transorm theseresources into sustained growth is a testimony to the huge

opportunity cost o weak governance. Similarly, the mecha-nisms or ensuring bottom-up governance are still largelyunderdeveloped, with potential risks to social cohesion.

8. Furthermore, in the past ve years, more challenges havecome into sharper ocus:

Growth has not been accompanied by a sucient in-crease in productive ormal employment, especially orthe 7 million to 10 million young Aricans who enterthe labor orce every year. In light o the recent unrest inNorth Arica, youth underemployment, i unaddressed,clearly can increase the risk o urban unrest and possible

violence. Te coexistence o a massive inrastructure decit and

the large number o small countries in Arica signal theneed or regional solutions.

Even redistributed growth and productive employmentmay not be enough or the chronically poor, who suferrom ood insecurity and undernourishment.

Arican womenwho are both contributors to and ben-eciaries rom developmentstill lack legal and prop-erty rights and access to nance and modern businesspractices. Tey also risk dying rom childbirth at alarm-ing rates.

Climate change, through its efects on water, will threat-en Aricas agriculture.

Te large number and persistence o ragile states in-dicate that these countries may be stuck in a low-levelequilibrium trap or which nontraditional solutionsmust be ound.

Fiscal austerity in developed countries, as well ascriticism and political backlash against oreign aid,


10/46

5

means that oicial development assistance may be

constraineddespite rhetoric to the contrary. Even

beore the global inancial crisis, the 2005 commit-

ment o the Group o Eight (G-8) countries to double

aid to Arica was running about $20 billion short; the

LAquila pledge on agriculture and ood security has

so ar raised a raction o the committed amountdespite considerable progress by Arican countries in

developing agricultural growth strategies in the Com-

prehensive Arican Agriculture Development Pro-

gram ramework.

9. Te combination o the current dynamism and opti-

mism on the continent (which came through loud and clear

in the consultations [see box 1]) and the development chal-

lenges aheadnot to mention changes in the global econo-

my, in Arica, and in the World Bankmake the time right

or a renewal o the World Bank strategy or Arica. Te

Banks current strategy has been guided by the 2005 AAP,which was developed at a time when the global economy

was buoyant and considerable optimism existed about aid

or Arica (box 2). Since then, the world has sufered the

worst recession since the Great Depression.

BOX 1 Consultations to Renew the World Banks Strategy for Africa

The World Bank started consultations withcivil society, the private sector, govern-ment ocials, and other interested parties

on a renewed Arica Strategy on June 1,2010. In addition to ace-to-ace meet-ings in 31 Arican countries and 5 Euro-pean countries, the Bank held online con-sultations or stakeholders interested insharing eedback through the Web. Therst listening period o the consultativeprocess ended on July 31, 2010. Thecomments and suggestions provided bymore than 1,000 ace-to-ace and 400

online participants during the rst phaseo consultations (JuneSeptember 2010)inormed the initial drat o the strategy.

Stakeholders identied (a) the promo-tion o the private sector as a driver ogrowth, (b) the capacity o governmentsto manage resources, and (c) the roleo subregional economic organizationsin executing regional solutions as thebroad challenges acing the continenttoday. Inrastructure, education, corrup-tion, and institutional development werealso highlighted as critical bottlenecks. Aclear majority mentioned inrastructurewhen naming the biggest development

challenge acing Arica. Yet or others,these are downstream maniestationso poor governance, ensuring that publicgoods cannot be provided without per-

vasive losses caused by poorly allocatedbudgets, and weak asset and public ser-

vice management. Under this umbrella,stakeholders called or the need to ad-dress the lack o roads, water delivery

mechanisms, and electricity. As one citi-zen put it, No society can grow and de-velop in darkness. The provision o elec-tricity would reduce the production costor industries, create more jobs, promotesmall-scale enterprises, and increase theinormation fow on the continent.

[The World Bank should] help Ari-can countries invest in inrastructure oall kinds, wrote one citizen through the

consultations website. Roads, railwaynetworks, and air transport are es-sential or intra-Arican trade. It costsabout the same to ship a containerrom Nairobi to Addis as it does romNairobi to New York.

Education was the area in which theWorld Bank could make the biggest di-erence in helping Arica create jobs,especially or young people and women.People mentioned the urgent need toimprove universities, increase academiccontact with countries outside Arica,develop technical programs, and pro-vide means to expand access to higher

education, including scholarships. Asone eedback provider said, We needto ensure that people get some tertiary-level education, either vocational training

in their eld o interest and/or universityeducation at a subsidized cost.

Besides education, many saw the areao renewable energy as a promising sourceor job creation. Given Aricas abundance

o natural resources and the global threato climate change, many stakeholders sawa uture source o high demand or jobsin all programs geared toward producingclean energy. They saw a role or the WorldBank in helping the continent kick-startthese programs, not only because theywould help expand employment or young

Aricans, but also because they could helpnd solutions to important global environ-

mental challenges.Following the release o the drat strat-

egy in November 2010, the second phaseo consultations enabled the Bank to cali-brate whether the inputs rom the rstround had been incorporated, as well asto receive and incorporate urther com-ments to the document. A solid majority(76 percent) o the 880 respondents re-ported that the drat accurately capturedthe development challenges acing Ari-ca. The eedback rom the phase 1 and 2consultation process orms the basis orthis strategy.

Details o the consultations as well as

eedback provided can be ound at http://www.worldbank.org/aricaconsultations. A video summary o the eed-

back provided can be viewed at

ht tp://www.youtube.com/watch?v=B9PwMzzb1xM&eature.


11/46

6

10. Te global economy is likely to remain volatile or

some time. Aid is becoming more constrained and criti-

cized (in some quarters) or lack o results; traditional mul-tilateralism is coming under greater strain. Te emergence

o development partners such as Brazil, China, and India;

the untapped potential o mobilizing domestic resources;

and the rise in private capital ows to Arica, including a

rise in remittance ows, call or a new approachArica

as an investment propositionand point to the need or

new partnerships among governments, development part-

ners including the Arican Diaspora, and the private sec-

tor.3 Furthermore, Arica is changing. Arican coun-tries are increasingly relying on the private sector as

the engine o growth and conronting governanceproblems, including corruption, head-on. Politicalsupport exists or the role o the state as regulator,acilitator, and agent o redistribution or equity, as

3 The IFC Strategy or Arica was discussed at the Board on March25, 2010. The main elements o that strategy reinorce the directionsoutlined in this document, with a clear agenda or more ocusedWBG collaboration in key areas such as inrastructure, agriculture,business environment, and access to nance.

BOX 2Accomplishments and Lessons Learned from the Africa Action Plan

In 2005, recognizing that a large numbero Arican countries were unlikely to meetmany o the MDGs, the international

community requested the World Bankto develop an action plan to accelerateAricas progress toward the goals. TheG-8 countries had also pledged to doubleaid to Arica. The resulting AAP was acomprehensive and detailed set o 30objectives and 109 actions that would, inthe rst instance, guide the World Banksprogram in Arica. The plan was moresharply ocused in 2007 and urtherstreamlined and adapted to the globalnancial and economic crisis in 2009.

The Banks experience with the AAP,

as well as a recent IEG evaluation othe plan, has yielded several lessonsthat have inormed the development othe present strategy. The broad themeso the AAPaccelerating growth, mak-

ing growth inclusive, building capablestates and strengthening governance,and improving aid eectivenessre-main as relevant today and, in act, canbe mapped to the present Arica Strat-egy. Good progress was made in aligningBank support to Aricas priority needs inseveral important areas covered by the

AAP, including a renewed ocus on in-rastructure and agriculture. Increasedattention to regional projects and issuesis also a welcome development. The rel-atively robust private sectorled growthand signicant progress on some MDGsalso hold the promise o a better uture.

That said, both the IEG and the BanksArica Region nd that signicant prob-lems with the design o the AAP limited

its useulness. First, the AAP was a top-down exercise, prepared in a short timewith little consultation with clients andstakeholders, not to mention Bank staand management. People who had toimplement the plan did not have muchengagement with, and in some caseswere not even aware o, the AAP. Thislesson led the Arica Region to embarkon the current strategy including ace-to-ace discussions with more than 1,000people in 36 countries and an additional400 commentators online (see box 1). In

addition, the strategy was prepared by ateam consisting o managers and starom the Arica Region, with input romsta across the Bank.

The second problem that the IEGs

evaluation raised, and the Arica Re-gion experienced, was that the AAPwas a regional strategy in a country-based environment. It was too com-prehensive to be a useul tool or stra -tegic prioritization. The same could besaid o the present strategy, whosetwo pillars and oundation leave very

little out. But the point is that pri-oritization takes place at the countrylevel. A regional strategy has diicultyexcluding a particular sector in everycountry. By contrast, in each countrystrategy, prioritization is required be-cause o limited resources.

Another issue that is highlighted in theevaluation o the AAP is the perormanceo the Banks portolio in the Region. In

the implementation o this strategy, theArica Region will continue to emphasizethe quality o implementation supportand the quality o project preparation,which has seen steady improvement overthe past seven years.

Moreover, speciying a detailed set oactions at the regional level, when theBank operates in a country-based model,meant that the system was overdeter-mined. Building on these lessons, thepresent strategy species explicitly therelationship between the regional and

country assistance strategies (CASs).The regional strategy represents a lteragainst which CASs will be evaluated. Atthe same time, the regional strategy is in-tended to guide and inspire, but not dic-

tate to, country teams about the designo their strategies. The results rameworko the current strategy is designed to re-fect this relationship between regionaland country strategies.

Finally, because the G-8 countriespromise o doubling aid to Arica has allenabout $20 billion short, the present strategy

emphasizes partnershipswith Aricangovernments, the private sector, and otherdevelopment partners, including South-South partnershipsas the main instru-ment o implementation, so that the Bankexplores all possible sources o nance or

Aricas growth and poverty reduction.


12/46

7

shown in success stories4 such as Malian mangoes (box3), Kenyan cut owers or, Rwandan tourism. Despite deepgovernance problems, conict, and conrontational poli-tics, coupled with weak public sector capacity (reected,or example, in the large execution decit o investmentbudgets), Arican countries are beginning to address these

issues through supply- and demand-side mechanisms,such as results-based nancing or health in Rwanda5 orcitizen monitoring (through cell phones) o conict anddisaster management in Kenyas Ushahidi.6

Regional organizations, such as the Arican Union (AU)and the New Partnership or Aricas Development, are os-tering private sector growth (through trade agreements andregional inrastructure programs), on the one hand, andbetter governance (through the Arican Peer Review Mech-anism, or example), on the other.

11. Te WBG is changing. Te paradigmatic instabilityo the past notwithstanding, the Bank is supporting devel-

opment models that allow diferent mixes o governmentand market interventions. Te Bank is not prescribing so-lutions. Rather, the Bank is using its knowledge assistanceto nourish an evidence-based debate in countries on policyissues. Te Bank is listening and learning. It is promotingSouth-South knowledge exchange or this purpose. Giventhe large number o public and private sector players in A-rica, the Bank sees its role as a partner rst, providing a plat-orm on which development assistance and the countrysown resources can be more efectively used. Te Banks ownnancial resources are sources o leveraging, made morepossible by the reorms to the investment lending policy. Forinstance, the $800 million Bujagali power project in Uganda

leverages $115 million o IDA assistance with comparable

4 See Yes Arica Can: Success Stories rom a Dynamic Continentat http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,,contentMDK:22549653~pagePK:146736~piPK:146830~theSitePK:258644,00.html.

5 See Signed, Sealed, Delivered? Evidence rom Rwanda on theImpact o Results-Based Financing or Health. http://www.rbhealth.org/rbhealth/news/item/188/signed-sealed-delivered-evidence-rwanda-impact-results-based-nancing-health.

6 See Ushahidis website at http://www.ushahidi.com.

amounts rom the IFC and MIGA, and the rest rom theprivate sector, to provide clean, renewable energy to a pow-er-decit area. Te IFCs establishment o vehicles or mobi-lization o external unding (Asset Management Company,Crisis Initiatives) is another example.

12.

Any strategy or Arica should take into account thediferences among countries in levels o development (percapita incomes range rom $200 to $20,0007), economicstructure, and political and social environment. Moreover,the strategy will be implemented largely at the country level.

13. What, then, is the role o a strategy or Arica? Te re-gional strategy provides a ramework in which to embedcountry strategies, based on country circumstances. In somecases, such circumstances might cause the strategy to deviaterom the themes, but such deviation will be explained. TeArica Strategy helps shape country strategies by empower-ing managers to go urther in the directions o the regional

strategy, based on what other partners and the governmentare doing, and the Banks comparative advantage (see box10).8 In addition, this regional strategy, because it is basedon widespread consultations among various stakeholders(government, private sector, civil society), can provide thespace or an Arican consensus in which civil society, theprivate sector, and government and development partners(including the Bank) nd their comparative strengths to se-lect the nature o their interventions. Because promises oaid remain unullled, a common voice that demonstratesthe increasing productivity o aid could be a powerul coun-terweight to political orces attempting to reduce aid, whichwould also eed into eforts toward nurturing regional solu-

tions and platorms or more efective use o scarce resourc-es. As such, the regional strategy is not conceived as just theaggregation o all country strategies but rather will set thedirections o the Banks strategy in the process o Aricastransormation.

7 Burundi and Equatorial Guinea, respectively.

8 The results ramework or the regional strategy is dierent roman aggregation o country strategies. It spells out the logic o theresults chain (linking interventions with outcomes). Quantitative indi-cators to monitor progress are built up rom the country level.


13/46

8

II. A 10-Year Vision

14.Te 10-year vision o the strategy is an Arica where, orat least 20 countries, per capita income would be 50 percenthigher than todayimplying per capita GDP growth rateso 34 percent a year.9 Another 20 countries would grow at

9 A possible list o such countries would include Radelets (2010)17 emerging Arican countries plus Benin, Kenya, and Malawi, all owhich averaged approximately 2 percent or higher per capita growthover the last 15 years.

an average rate o 12 percent.10 Te poverty rate would havedeclined by 12 percentage points. At least ve countries willachieve middle-income status.11 Tis growth will be achievedwith a production mix that is considerably more diversied,with manuacturing and services growing rapidly and ab-

10 The vision could be extended to a 10-year vision o Aricasurban and metropolitan space.

11 The Comoros, Ghana, Kenya, Mauritania, and Zambia are cur-rently on the threshold.

BOX 3 Exporting Mangoes from Mali

Mali is a landlocked country that is heav-ily economically dependent on agriculturebut with limited transportation inrastruc-

ture and, until recent years, little marketunderstanding and agricultural exportcompetitiveness. Although the governmentidentied mangoes as an option or diver-siying Malis export base in the 1990s, itaced several signicant ineciencies: highcosts o air reight, poor access to sea-ports, and weak harvesting and postharvesttechniques. These problems were urtherexacerbated by lack o nance, insucientmanagement capacities, an unavorable in-vestment climate, poor organization, and aninexistent land market.

In 1993, Mali began implementing amultimodal (road, rail, and sea) trans-portation system to move mango ex-

ports to destination markets in Europemore eiciently. Through partnershipwith private operators and backed bydonor inancing, a cold-chain (rerig-erated) system was developed, phy-tosanitary improvements were made,certiication and traceability programswere implemented, and training in or-chard management practices and post-harvest handling was oered to Malianagricultural workers. The overarchinggoal o the strategy, however, was toincrease rural incomes.

Most important, Malis mango ex-ports increased 1,042 percent be-tween 1993 and 2008, rom 1,050 to

11,995 metric tons. Sea-reighted ex-ports, which were zero in 1993, roseto 4,600 metric tons. Transit time ormangoes rom Sikasso to northern Eu-rope, meanwhile, decreased rom 25days to 12 days over the same period,and Mali has become an increasinglyrecognized origin o ruit imports tothe European Union. The approachalso brought producers a signiicantlyhigher price or mangoes at the arm-gate levelCFAF 125 in 2008, uprom CFAF 50 in 1993.

Malis experience underlines the impor-tance o bringing together a combinationo ingredientspublic-private investment,technical expertise, national capacities, and

innovationthat are likely to drive positiveeconomic change. Additionally, it empha-sizes the importance o sustained develop-ment over time and highlights the impor-

tance o leveraging established bilateralrelationships (in Malis case, with Franceand Cte dIvoire) in supporting value-chainimprovements and export growth.


14/46

9

sorbing labor at a rapid clip. Meanwhile, agricultural produc-tivity will increase, with 15 countriesup rom the current8registering at least 5 percent average annual agriculturalGDP growth. Te continents share in world trade will dou-ble (to 8 percent), with regionally integrated inrastructure12providing services at globally competitive costs and human

development indicators going beyond the MDGs to achievequality goals in health and education. Access to inrastruc-ture will have doubled so that at least hal o households havepower. Womens legal capacity and property rights will haveincreased signicantly. Climate change adaptation measureswill have been put in place. Finally, governance indicators willbe rising, with the IC revolution strengthening accountabil-ity in the public sector.

15. Tese objectives are consistent with those in nationalvision statements, such as Nigeria Vision 2020, CameroonVision 2035, and Uganda Vision 2025. A urther articula-tion o that vision is one in which subregional drivers o

growthlarge or integrated countries such as the Demo-cratic Republic o Congo, Ghana, Kenya, Nigeria, and SouthAricanot only are the locomotives o their subregions butalso promote regional solutions that help Arica overcomethe constraints o small states and markets. Aricas MICs,especially South Arica, will play a key role, both as dynamicmarkets in their own right and as links or many low-incomecountries (LICs) or both inward and outward investment.

12 Regionally integrated inrastructure is dened as reducing themissing links in energy, road, rail, and ICT by 50 percent.

16. o realize this vision, the strategy must be transorma-tive. It cannot rely on a single sector or product to triggerrapid growth and poverty reduction. Even i consensus ex-ists that a particular ingredient is undamental, such as edu-cationwithout which nothing can be achievedrealizingthe desired level o education requires the coordination o a

number o sectors, such as health, education, transport, andcommunication. Accordingly, the proposed strategy doesnot divide itsel neatly into individual sectors. Instead, it at-tempts to exploit the synergies among these sectors by orga-nizing around critical themes. Tis strategy does not meanthat individual sectors are not important. Indeed, some,such as health and education, are important in their ownright. But achieving health and education goals requires amultidimensional approach, including achieving goals inother sectors. Conversely, inrastructure is not a goal in it-sel, but rather a critical ingredient in achieving almost allother development objectives, most importantly economicgrowth. For these reasons, the strategy has been organized

around two pillars and a oundation. Lessons rom the past,including the AAP, reveal that a sector-by-sector approachwill not work. For example, ocusing on primary educationcontributed to the neglect o secondary and tertiary edu-cation and learning outcomes. Focusing on health led to aneglect o other actors, such as water and sanitation, thatdetermine child survival. Likewise, gender is a cross-cuttingissue because it is central in all three themes.

III. Themes of the Strategy

17. he themes o the strategy emerge rom the WorldBanks strategic directions ollowing the global crisis. Inparticular, they pick up on the Post-Crisis Directionsstrategic thrust on creating opportunities or growth. A-rica is poised to seize these opportunities and possiblybecome the next growth pole. Likewise, the Post-CrisisDirections ocus on the poor and vulnerable is relectedin the Arica Strategys emphasis on vulnerability and re-silience, which is also a main theme o the IDA16 becauseLICs have ewer options in responding to shocks. Finally,the events o the past ew weeks in the Middle East have

reinorced the notion that governance lies at the heart othe development challenge.

18.Te strategy has two pillars, (a) competitiveness and employ-ment and (b) vulnerability and resilience, and a oundationgover-nance and public sector capacity. Both the long-term challenges andthe emerging issues already described not only t within these pillarsand oundation but also are consistent with the World Banks Post-Crisis Directions and the IDA16 policy ramework. able 1 capturesthese relationships. Addressing them within country strate-gies will be the catalyst needed to realize the vision.

Table 1: Relationships to global strategies

Africa Strategy Post-Crisis Directions IDA16 framework

Competitiveness and employment Create opportunity or growth Gender (womens empowerment)

Vulnerability and resilience Target the poor and vulnerable; manage risk

and prepare or crisis

Climate change; crisis response; gender

(reproductive health)

Governance and public sector capacity Strengthen governance; create global public

goods

Fragile states; regional integration


15/46

10

19. In presenting the pillars and oundation o the Arica

Strategy, this paper rst describes the pillars o (a) com-

petitiveness and employment and (b) vulnerability and re-

silience. In so doing, it points to where governance is the

binding constraint to progress on these pillars, thereby set-

ting the stage or the strategys oundation: governance and

public sector capacity.

Pillar 1: Competitiveness and

employment20.Te rst pillar, competitiveness and employment, rep-

resents the way to harness private sector growth or sustain-

able poverty reduction and, ultimately, wealth creation. Tis

strategy uses a broad denition o competitiveness, which

covers all traded goods and service sectors (or example,

light manuacturing, agribusiness, mining, IC, and tour-

ism) as well as key domestic sectors that are pillars o com-

petitiveness (or example, agriculture, transportation, utili-

ties, construction, and retail). It also includes the concepto competitive cities, because productive and sustainable

urban development will be a key driver o wealth and jobs

going orward or Arica.

21. Despite the greater emphasis on the private sector and

signs o its dynamism, Aricas private sector growth has

not been suciently poverty reducing, nor is such growth

clearly sustainable. Most Arican enterprises are small (o-

ten employing only household members) and sufer rom

low productivity. Although productive ormal sector jobs

are growing at the same rate as GDP in countries such as

Uganda, this rate is not enough to absorb new entrants to

the labor orce. Te underlying reason is the legacy o rapidpopulation growth, which is only beginning to decline in

some countries in the past decade, combined with a poor

investment climate. Aricas ratio o private investment to

GDP is hal o Asias.

Table 2: Economies improving the most in each DoingBusiness topic, 200910

Topic Economy

Starting a business Peru

Dealing with construction permits Congo, Dem. Rep.

Registering property SamoaGetting credit Ghana

Protecting investors Swaziland

Paying taxes Tunisia

Trading across borders Peru

Enorcing contracts Malawi

Closing a business Czech Republic

Source: Doing Business database.

22. Aricas weak investment climate is caused by three

main actors: (a) poor inrastructure, (b) poor business

environment (policies and access to nance), and (c) in-

sucient technical skills. Aricas inrastructure seriously

lags that o other developing regions, and the gap is widen-

ing over time. Moreover, because o their small scale and

limited competition, Aricas inrastructure services aretypically several times more expensive than those in other

parts o the developing world. Tis actor lies behind the

cost disadvantage Arican exports sufer in world markets

and is one o the obstacles to the productive development

o rural and urban areas.

23. In general, Arican rms ace a constrained business

environment, low access to nance, and high indirect costs.

Most small and medium enterprises (SMEs) have problems

accessing nance; all rms have problems getting long-term

nance to und productive investments. Only 20 percent o

households have bank accounts. Aricas exports are mainly

raw materials, which have limited employment-creatingpotential. Eforts to transorm some o these raw materials

to nished or even semi-nished goods have mixed results.

Petroleum rening and mineral beneciation have aced the

same constraintsinrastructure, business environment,

and skillsas other manuacturing enterprises.

Figure 4: Maize prices in selected eastern Arican markets

Sources: Regional Agricultural rade Intelligence Network;

Ethiopian Grain rade Enterprise.

24.Agriculture, which is Aricas largest private sector, aces

the same problems as well as some that are distinctive to the

sector. Farms, including amily-run ones, are businesses and

have needs similar to small enterprises, such as market sta-

bility, access to nance, and inormation. Yet a large number

o government interventions exist, such as extension services

and ertilizer subsidies, whose efectiveness is being ques-

tioned. Recent experience demonstrates the constraints that

Arican agriculture aces in diversiying. Family enterprises


16/46

11

have diculty taking advantage o higher ood prices andexpanding domestic market demand. Furthermore, because

93 percent o Arican agriculture is rain-ed, improving re-

silience to the harmul efects o climate change (including

oods and droughts) is particularly challenging, given thelimited installed water storage capacity across the region,

among other things. Improved agricultural water manage-ment, better transport, and access to cheaper energy are es-

sential conditions to securing access to markets and improv-ing the competitiveness o arming businesses.

Figure 5: Millet prices in selected western Arican markets

Source: Arique Verte.

25. At the same time, opportunities exist to enable small-

scale entrepreneurs in agriculture, manuacturing, and ser-

vices to scale up. Arica is urbanizing rapidly, opening up

possibilities or clusters, growth poles, and agglomeration

externalities. o ast-track such a development path, Aricamay benet rom the kind o industrializing policy that has

acilitated growth and employment creation in both ad-

vanced and developing countries. Because many o the mostimportant government ailures (poor policies and gover-

nance, or instance) are industry-specic, the rst and least

controversial type o industrial policy is to ocus reorms

and public investments on the industries and locations ohighest growth potential. Industrial policy can also be use-

ul in addressing market ailures. Although direct govern-

ment interventions in support o specic sectors (picking

winners) have in the past been inefectivebecause theywere directed at sectors that were ultimately not viable or

were undermined by governance issuesrecent research

has documented the extent to which industrial policy has

been efectively applied in many advanced and developingcountries to spur growth in new sectors o the economy (Lin

and Monga 2010).

26. Government interventions are successul or enter-

prise and industry development i they are ocused on in-dustries and locations with latent competitive advantage

and do not create opportunities or rents and capture. Pro-active support by government can be justied in the caseo large, positive externalities (or example, building newinrastructure that can be used by other industries) or sig-nicant market ailures (or example, coordination issues orhigh entry costs and risks or rst movers). Specic exam-

ples o the success o targeted government interventions areKenyas cut owers and, on a smaller scale, Malis mangoes.In the case o Kenyas cut owers, government intervened byproviding timely and accurate access to inormation as wellas by acilitating technological improvements with attentionto environmental stresses linked to water use. Between 1995and 2002, Kenyas cut ower exports grew by 300 percent. Inthe case o Malis mangoes, government intervened throughmodernization o export inrastructure and practices andsupport or quality control and or the value-chain organiza-tion. As a result, mango exports expanded rom 2,867 tonsin 2005 to an estimated 12,452 tons in 2010.

27. Te World Bank is developing a new breed o opera-tionsthe Growth Poles Projectsto help Arican coun-tries deploy a critical mass o reorms, inrastructure invest-ments, and skills building or the industries and locations ohighest potential. Such projects are being implemented orprepared in Cameroon, the Democratic Republic o Congo,Te Gambia, Madagascar, and Mozambique. A subset o-cuses on the key agribusiness industry through a new tri-partite partnership between the agriculture and private sec-tor teams o the Arica Region o the World Bank and theIFCs Arica Agribusiness team. Te initiative was launchedin October 2010 with our pilot projects in Burkina Faso,Ghana, Malawi, and Senegal.

28.Te growth poles approach will also be used to supporturban development in Arica. Te continents managemento urbanization over the next decade could end up deter-mining whether it lives up to its long-term economic poten-tial. Tis approach is complemented by an efort to supportspecial enterprise zones in Arica, drawing on lessons romsuccesses in China and elsewhere. At 4.5 percent a year, Sub-Saharan Arica has the highest urbanization growth rate inthe world. As the 2009 World Development Reportshows, nodeveloped country has reached its current per capita incomewithout the advantages o urbanization and vibrant cities(World Bank 2009). Urbanization thereore is not just inevi-table, but it is also a key actor in economic growth. Densityand urbanization are essential to achieving agglomerationeconomies. Te productivity advantage o cities stems romthe colocation o many rms and many workers in prox-imity, whereas the spatial distribution across primary citiesand smaller cities and towns benets other sectors, such asagriculture, through market demand and service provision.Urban development is a space or development that goesbeyond individual sectors; it provides services and simulta-


17/46

12

neously creates an environment or innovation, production,trade, and investments, and it ofers a venue or private sec-tor development. At the same time, poverty is becoming anurban problem in Aricaaer having been traditionally arural problemwhich requires strong adaptation o the ex-isting instruments to ght poverty, especially with inequal-

ity in urban areas growing ast.

29. Although such strategically targeted interventionscould be efective in promoting economic development,they should be complemented by deeper and broader in-terventions targeted at each o the three main investmentclimate constraints (inrastructure, business environment,and skills). Tis paper discusses each o them in turn below.

30. Redressing Aricas $93 billion inrastructure decit, owhich countries are already spending $45 billion, will takeconcerted eforts on two ronts. Te rst is to take policymeasures to address numerous ineciencies that together

hemorrhage some $17 billion o inrastructure resources an-nually. Tis step will require careul attention to policy andinstitutional reorms, including improved utility manage-ment; better asset maintenance; greater cost recovery; andenhanced investment selection, budget allocation, and ex-ecution arrangements. Te example o Zambia (see table 3)illustrates how existing resources can be boosted by almost50 percent i eciency gains can be captured. Even i the e-

ciency gap could be eliminated overnight, a unding gap o$31 billion a year would nonetheless remain continent-wide,the larger part o it relating to power inrastructure. Te verypolicy measures that help reduce ineciency should also helpcreate a more avorable investment climate or inrastructure,improving prospects or private investment and success-

ul PPPs. Recent WBG initiatives are supporting innovativePPPs in sectors previously wholly in the public domain, suchas shared ber-optic cable systems or backbones, bulk watersupply, and toll roads. o expand the potential or private in-

vestment and PPPs, the Bank and the IFC are urther inte-grating support or private inrastructure in an initiative thatwill ocus those resources on a ew PPPs with high potentialor leverage. Nevertheless, a substantial share o investmentneeds to remain in sectors (power transmission, rural roads)or countries (ragile states) that are less likely to be strongcandidates or private nance. Tereore, greater domesticand external public resources will also be needed. Monitoringand evaluation o inrastructure programs can build public

support or reorms as well as check on value or money andother indicators. In addition to its role as a direct investor, theWorld Bank will work to address the policy and institutionalissues that waste resources and deter investment. Greateremphasis will be placed on improving the overall public -nance ramework, including inrastructure planning, projectscreening, and project execution (see the section on gover-nance and public sector capacity below).

Table 3: Zambias inrastructure decit (Dollars, millions, per annum)

ICT Power TransportWater, sewer, and

sanitationTotal

Needs (218) (631) (289) (471) (1,609)

Spending 90+ 180 245 158 673

Eciency gains n.a. 160 59 96 315

Funding gap n.a. (291) 15 (217) (493)

Source: Briceo-Garmendia, Smits, and Foster 2008.

Note: n.a. = not applicable.

31. Because inrastructure investments can have deleteri-ous environmental efectsboth globally and locallytheBanks program in Arica will emphasize sustainable inra-structure. Te approach goes beyond simply complying withenvironmental saeguards. It seeks to help countries developclean energy strategies that choose the appropriate product

mix, technologies, and location to promote both inrastruc-ture and the environment.

32. Given the large number o small countries, many in-rastructure programs should be regional to benet romscale economies. Tis need adds an additional layer o com-plexity in harmonizing policies across countries. Never-theless, the benets are so hugesome $2 billion annuallyor the power sector alonethat it is being and should be

pursued. Arican governments should go beyond political

protocols to execution. In the water basins, such as the Ni-

ger and Senegal Rivers, regional inrastructure projects are

helping with conict resolution. Te World Bank is increas-

ingly ocusing on regional inrastructure projects, includ-

ing transport corridors, larger power generation projects,

cross-border transmission lines, ber-optic backbone, andaviation and maritime transportation.13 Emphasis is grow-

ing on blending investments with institutional, regulatory,

and administrative reorms that will not only improve in-

rastructure service delivery but also yield scale economies

and increased specialization that can boost productivity.

13 The regional IDA commitments (including matching nationalIDA contributions) increased rom $0.4 billion (IDA13) to $1.6 billion(IDA14). IDA15 commitments are estimated to reach $2.3 billion.


18/46

13

For example, one-stop border posts can substantially reducetransit delays, while trucking deregulation has the potentialto halve the costs o surace reight transport.

33. Improving the business environment (policies andinstitutions that protect property rights while promoting

air competition) is the next priority aer improving inra-structure. Te potential is enormous because, as one o theparticipants at a consultation said, You dont have to payme to go aer a prot opportunity. Te regulation o labor(in South Arica, or instance) and land (everywhere) oenconstrains businesses. Access to nance has been identiedas one o the major constraints, especially or SMEs. Aricastill lacks long-term nancing instruments, and SMEs arerequently le out o the capital markets. Te Bank and theIFC are working together to improve this situation. TeBank has ocused on policy and institutional development,whereas the IFC has helped ensure banks have sucientcapital, access to long-term resources, and risk management

to expand their market base, particularly in lending to SMEsor in innovation through new products.

34. Micronance, while growing, has huge, untappedpotential in Arica. It is not all about credit, however:households have a large demand or low-cost payment ser-

vices (Mpesa in Kenya), savings accounts (Mzansi in SouthArica), and insurance (weather insurance in Kenya). Incollaboration with the IFC/MIGA and other partners, theBank will work to improve the present situation by rep-licating successul models targeted to the poor as part oan overall nancial inclusion and innovative nancingagenda. On the demand side, nancial (and overall busi-

ness) literacy has come into ocus as a key constraint.Because most enterprises are inormal (oen due to bur-densome business registration and operation procedures,high indirect costs, especially energy, and restrictive laborregulations), policies aimed at the inormal sector couldreap high returns. Te reorm o the business environmentshould ensure that the playing eld is level between oreignand domestic investors, in the process making sure thatindigenous business and investors are not marginalized.Tese reorms should also highlight the need to strengthenthe capacity o the public sector to negotiate PPPs, which iscritical not only to sustaining political support or reorm,but also to mitigating the possible risk that oreign invest-ment will remain isolated with limited domestic spilloversand backward and orward links.

35. Reorming labor and land regulations and relaxingother constraints to business can be deeply political andmay require relying on second-best solutions, such as re-orms limited to certain types o companies (exporters) orindustries and locations (growth poles). Te WBG is alsodeploying new approaches to improve systematically the

business environment. Tese include the regulatory guillo-tine, which, combined with regulatory impact assessment,

is a way to reduce and improve the stock and ow o thehundreds o business regulations. Tis approach is halvingthe 1,365 business licenses in Kenya, where IFC advisory

services provided technical support or the efort while the

Bank reinorced the broader reorm agenda through an IDAcredit. Another important example is the joint Bank-IFCOrganization or the Harmonization o Business Law in A-

rica regional project, which reached an important milestonein December 2010 with the passage o reorms to the com-mon legislation governing a range o business regulations

and implementing common e-government systems in 17Arican countries.

36. In addition to inrastructure and an improved busi-

ness environment, Aricas competitiveness and employ-ment depend on having a healthy and skilled workorce.Building on the success with access to primary education,

countries need to concentrate on improving educationquality overall while increasing access to secondary and ter-tiary education and better skills training. Tis shi involves

changing the ocus to the quality o education and learningoutcomes. It also requires that skills be oriented toward theknowledge economy, especially science, technology, and re-

search. Higher-education institutions and centers o excel-lence need to be supported to ulll this mandate.

Figure 6: People with insucient daily nourishment

19Source: World Development Indicators, World Bank

37. raditional, public sectordriven vocational trainingprograms oen ail in this domain; they need to be replaced

by programs actively supported and driven by the privatesector. Primary education access should target hard-to-reach populations (such as girls in remote rural areas) toexpand the labor pool. Closing the gender gap in girls ed-

ucation, especially at secondary and tertiary levels, wouldcontribute to womens economic empowerment throughincreased participation in the labor market and improved

reproductive and child health.


19/46

14

38. wo other neglected areas, early childhood develop-ment and nutrition (gure 6), could, i scaled up, contributeto better prepared students who are more able to learn andnish school. Adult health challenges (notably HIV/AIDS)lead to absenteeism and lower productivity in the workplace.In some countries, such as South Arica, where the unem-

ployment rate is 25 percent, more exibility in the labormarket will increase employment. Youth-oriented programshave huge potential but have yet to realize it. Second-chanceprograms, especially in postconict countries, could reaplarge benets; the recent experience in these areas should becareully studied to learn lessons or uture implementation.Programs run by subnational governments or agencies havea better chance o succeeding. People orming part o theArican Diaspora could play a role in stimulating productiveemployment by providing their own skills, helping buildthe skills o the local population, and supporting SMEs inagriculture, manuacturing, and services. Initiatives are inplace to have more industry-relevant technical and voca-

tional training systems. Tese include PPPs in reorming thetechnical and vocational education and training system (orexample, in the Nigerian construction sector). Initiativesalso exist to help develop entrepreneurial skills or both or-mal and inormal micro and small entrepreneurs througha combination o training, mentoring, matching grants orbusiness development services, and deployment throughoutthe region o IFCs SME Management Solutions products.

39. Several countries, including some ragile states, haveimproved their business climate. Rwanda was the worlds top

reormer in Doing Business 2010, and Cape Verde, Rwanda,and Zambia were in the top 10 in Doing Business 2011. Min-ing and tourism have improved their competitiveness. our-ism in particular could have spillover efects in job creation,agriculture, inrastructure services, and possibly regionalintegration. In some countries, commercial agriculture has

been protable and will become increasingly so in the uture.Lessons o success stories, such as Malis mangoes or Lesothostextiles, show that scaling up is possible.

40.Aricas economic development can also benet rom ad-dressing the continents rapid population growth to create thepossibility o a demographic dividend, with the dependencyratio alling. Aricas young population may be able to capital-ize on the inormation technology revolution and other em-ployment options. Te success o IC, especially mobile phonetechnology, could improve access to nance (through mobilebanking), good governance and agricultural productivity(through price discovery), and health care (through compli-

ance monitoring). Tese innovationssuccesses in their ownrightcan be replicated continent-wide and serve as Aricascontribution to knowledge exchange. Already, the lessons oM-PESA mobile banking have been spread in Indonesia as hasUshahidis crowd-sourced disaster monitoring in Haiti.

41. More generally, mobile phones are becoming the mostvaluable asset o the poor. Te widespread adoption o thistechnologylargely because o the sound regulatory envi-ronment and entrepreneurshipopens the possibility that itcould serve as a vehicle or transorming the lives o the poor.

Figure 7: Mobile cellular penetration in the world, developing countries, and Arica

42. Te empowerment o women to accelerate economicdevelopmentcritical because, as one participant at a con-sultation put it, []he uture o Arica is in the hands o

Arican womeninvolves many cross-cutting challenges,rom poor access to potable water to disadvantaged healthand nutrition status. Women in Arica spend a considerable


20/46


21/46

16

in weather, but also to slow-onset changes such as warmertemperatures, rising sea levels, and desertication, all owhich are likely to lead to increased chronic poverty and

vulnerability. In particular, because agriculture, the main-stay o most rural livelihoods, is weather-dependent, im-proving resilience to the negative efects o climate change

is both imperative and challenging.

49. Conlict and political violence have a myriad o e-ects at the national and household levels. According to a2007 report,16 between 1990 and 2005 the cost o conlict

16 Twenty-three Arican countries were involved in one orm o con-fict or another during this period. See the work o International Action

in Arica was equivalent to the unds granted to the con-tinent in international aid over the same periodboththe cost o conlicts and aid rom 1990 to 2005 amountedto $284 billion. Conlicts in Burundi and Rwanda havecost their governments an annual economic loss o 37percent and 32 percent o GDP, respectively. A conlict is

estimated to turn the development clock back by 1015years. As economic activity alters or grinds to a halt, thecountry suers rom inlation, debt, and reduced invest-ment, while its people suer rom unemployment, lack opublic services, and trauma.

Network on Small Arms, Oxam International, and Saerworld (2007).

Figure 9:Trends in natural disasters

Source: Centre or Research on the Epidemiology o Disasters, http://maps.grida.no/go/graphic/trends-in-natural-disasters.

50. Te strategy or preventing or mitigating the efects oshocksor building resilience, in other wordshas to be tai-lored to the nature o the shock. For macroeconomic and someo the idiosyncratic shocks, social saety nets can be a powerulremedy. Tey can both strengthen resiliency (by helping house-holds build assets and undertake higher-return but higher-risk

activities) and smooth consumption aer shocks do occur, en-abling poor and vulnerable households to both preserve andbuild the human and physical capital necessary or productive-ly participating in and contributing to growth. Arica has a hosto such programs, including public works programs (Ethiopia[see box 4] and Liberia, or example), conditional and uncon-


22/46

17

ditional cash transers (Kenya, Malawi, Nigeria, and anzania),near-cash instruments (ood vouchers in Burkina Faso), andood distribution schemes (Niger). In addition, some govern-ments have used generalized price subsidies, but these have apoor track record because they are expensive and not success-ully targeted at the poor.

51. Te choice o saety-net program depends on the pre- vailing political environment. Rwandas social protection

program covers 90 percent o the population because it hasstrong political backing.

52. Decentralization can help in the delivery o theseprograms. In addition to protecting the poor and their as-sets rom adverse shocks, social transers may be necessaryor the chronic poorthose who would otherwise be lebehind by growth. Saety nets and transers can have im-portant multiplier efects on local economies through thesteady injection o cash rom poor amilies receiving trans-ers, the use o part o the transers to buy productive assets,and other links to productive activities. In sum, buildingpermanent saety-net systems that support the chronic poor

but that can also be scaled up quickly and efectively in re-sponse to shocks is important or building resiliency.

53. Health shocks require a combination o interven-tions. Public health interventions, such as immunizationsand better water and sanitation, help prevent these shocks.Insurance, or insurancelike mechanisms, help mitigate thehealth and nancial efects o a shock once it has occurred.Ghana, Nigeria, and Rwanda have introduced insurance

or large swaths o the population. Tese programs haveenabled the private sector to play a more active role in theprovision o health services. Trough the Health in AricaProgram, the IFC is working with several other countries(or example, with Lesothos Likotsi Primary Care Clinic) tointroduce insurance systems and to support the emergenceo private health care service providers needed to boost de-livery capacity and eciency. In the absence o insurancemechanisms, Aricas health services sufer rom many

problems, including high out-o-pocket costs, poor delivery,and distorted incentives, highlighting the need to ocus onimproving health care delivery systems encompassing bet-ter incentives and accountability or individual providers,upgraded management, and more efective delivery mecha-nisms. Even with insurance, and especially without, certain

vulnerable groups, such as the disabled or people living withHIV/AIDS, sufer doublyboth rom the ailment and romstigmatization.

54. An important case is emale reproductive health. Ma-ternal mortality is the neglected MDG, with Arica ac-counting or 47 percent o global incidence. Having access

to skilled health proessionals and afordable health servicecertainly helps. But in the case o complications, access tohigh-quality and afordable emergency obstetric care isequally important. Good inrastructure, including com-munication technology and a transport system by whichmothers with complications can be quickly transerred toa hospital, is needed. Tis is an insurancelike mechanism(high-cost, low-probability event). One should not orget,however, that cultural, social, and political actors intervene.

BOX 4 Ethiopia: Leveraging Safety Nets for Effective Crisis Response

In 2008, Ethiopia aced a crisis that wasbroader, deeper, and more complex thanthe ood crisis in almost any other coun-

try. Despite a long spell o strong eco-nomic growth, the long-standing problemo pervasive ood insecurity and severevulnerability to shocks had not beenovercome. In 2008, the country, underthreat rom high infation and a wideningtrade decit, suered ailed small-seasonrains. The resulting drought and localood shortages in several parts o thecountry aected some 12 million peopleand exacerbated the rise in ood pricesalready under way because o global, re-gional, and domestic actors. Food price

infation peaked at 91.7 percent or the12 months ending July 2008, giving Ethi-

opia one o the highest ood price infa-tion rates in the world.

Given the scale o the shock, the gov-

ernment needed to launch a traditionalhumanitarian appeal to raise resourcesto protect the poorest. However, thescale o the emergency appeal wasmuch smaller than what was tradition-ally the case. The government was ableto leverage its existing Productive SaetyNets Programme to provide additionalresources to the programs existing 7.5million beneciaries to protect themuntil the next harvest. It then expandedthe program to an additional 947,000people. The government adjusted the

program wage rate rom 6 to 8 birr andthen again to 10 birr in early 2009 to

ensure that infation did not erode thepurchasing power o the transer. It alsoshited increasingly to ood as the me-

dium o transer or part o the year tohelp mitigate the impact o seasonalood prices.

Most o the additional resourcesrequired or these responses were al-ready held in the program in the ormo contingency budgets and contingentresources rom donors, particularly IDA,which could be drawn on at short no-tice. Thereore, the program was ableto respond quick ly. In sum, the Produc-tive Saety Nets Programme was seenas an indispensable part o Ethiopias

eorts to mitigate the shocks eect onthe rural poor.


23/46

18

Evidence in some countries indicates that husbands do notlet their wives seek high-end care (Lawoyin, Lawoyin, andAdewole 2007).

55. Responses to the adverse impact o uture climatechange are diverse and start with enhancing the ability o A-

rican countries to cope with current variability. Tis responseincludes providing better hydro-meteorological services, es-tablishing early warning systems, adopting preparedness andemergency response plans, upgrading and enorcing buildingcodes (as is being done in Madagascar to enhance resilienceto cyclones), testing or scaling up risk-sharing or risk-poolingmechanisms (including insurance, contingent nancing, andcatastrophe-related bonds), and ensuring that saety nets aretied into early warning systems and can scale up when neededin a timely manner. Five o the most cost-efective and impor-tant measures or climate change adaptation involve not theconstruction o new assets but the sustainable management oexisting ones, such as resh water, orests and wetlands, graz-

ing lands, sheries, and biodiversity.

56. In the longer term, more pronounced shis o climat-ic patterns might have implications, or example, or inra-structure expansion and or diversication o developmentacross space and sectors. Inrastructure might need to bebuilt to withstand the 1-in-100-year ood rather than the1-in-50-year event; economic development might need tobe reoriented and diversied away rom the most vulner-able coastal areas or the least resilient sectors, such as rain-ed agriculture.

57. Wide margins o uncertainty still constrain the ability

o climate models to determine the likelihood o a drier or awetter uture and thereore the ability to deliver rm policyrecommendations. But no regret options are beginningto emerge that can be pursued to enhance Aricas climateresilience. Recent research in Ethiopia suggests that morestringent norms or road building might be adopted rela-tively cheaply while avoiding the larger cost o repair, andmore important, the heavily damaging disruption in supplychains and access to health and education services that morerequent oods o the uture will bring about.

58. Some investment decisions are more sensitive to cli-mate outcomes, however, and thereore less clear-cut. Forexample, opportunity cost o capital invested in long-livedhydraulic inrastructure might be signicant in the presenceo large enough declines in precipitation patterns. I waterbecomes scarcer, dicult trade-ofs will need to be madeamong competing uses, such as irrigation and hydropower.In these more challenging situations, new, robust decision-making paradigms will need to be adopted. Some projectsmight prove to be resilient under a wide range o climateoutcomes; or others, scalable and phased approaches

should be considered to integrate new climate inormationinto the decision-making process as it becomes available,thereby avoiding the locking-in o large capital stocks intoclimate-vulnerable inrastructure.

59. Although possibly the biggest threat to Arica because

o its potential impact, climate change could also be an op-portunity. Adaptation will have to address sustainable wa-ter management, including immediate and uture needs orstorage, while improving irrigation practices as well as de-

veloping better seeds. Tis adaptation response to climatechange could spur development-oriented interventions.Furthermore, regional opportunities or collective actionon hydropower and integrated water-basin management,hitherto constrained by national concerns, may becomemuch more attractive, generating opportunities or localemployment. Climate-triggered collective action could alsoimprove soil and coastal management, which, according toone estimate (Bouzaher, Devarajan, and Ngo 2008), could

be worth about $1.47 billion a year. Arica and its institu-tions ully understand these risks and opportunities. TeBank will work with the continent and other partners todevelop risk nance products or these evolving needs. Itwill also work with the AU, the ADB, and other partners tosupport the continent to better leverage these opportunitiesthrough the Community o Practice 17 platorm.

60. Arica has a very small carbon ootprint (4 percent oglobal greenhouse gas emissions), and only Aricas large andricher countries, such as South Arica and countries withlarge remaining areas o orests and woodland, can meaning-ully contribute to mitigating climate change. However, Ari-

can economic development does not have to ollow the samecarbon-intensive growth path o the developed world. Aricassolar, wind, water, and geothermal resources are so abundantthat it has the potential not only to leaprog over a carbon-intensive development path but also to seize the opportunityto address energy decits critical to transormational growthin the region. Te Banks role in creating specially ormulatedinstruments17 to support this strategy, such as the Low Car-bon Development Fund, can be scaled up.

61.Preventing conict and political violence and building in-stitutions or inclusive growth while mitigating these shocks re-

quire peace-building mechanisms. More generally, preventingshocks and being better prepared or them will involve a mixo capacity strengthening and institution building. Examplesinclude sound macroeconomic management, regulation o thenancial sector, and adaptation to climate change.

17 These instruments include such specialized unds as the GlobalEnvironment Fund, the Clean Technology Fund (aimed at demon-strating transormation at scale in MICs), and the Renewable EnergyProgram, three o whose six pilot countries are in Arica (Ethiopia,Kenya, and Mali).


24/46

19

63. Te Banks role goes beyond assisting when shockshave happened to supporting policies and capacity develop-ment or shock prevention and crisis preparedness. Macro-economic management capacity, strengthening regulatorycapacity to enhance nancial stability, and climate change

adaptation are important examples. So are insurance mech-anisms and saety-net programs that can immediately scaleup when crises hit. Although crises cannot be prevented,reducing their requency and improving response manage-ment will help reduce their costs.

BOX 5 Burundis Vulnerability and Resilience to External Shocks

Macroeconomic vulnerability, selected macroeconomic indicators

Source: International Monetary Fund.

Burundis economic structure and geo-

graphic location make the country vul-

nerable to various economic, political,

and climatic shocks. First, economic

growth depends mainly on the peror-mance o the agricultural sector, which is

very sensitive to weather shocks. Second,

because Burundi is a net ood importer

and depends heavily on uel imports, it

is very susceptible to shocks in interna-

tional markets. For instance, between

2007 and 2008, infation rose by 16 per-

centage points because o the increase in

international ood and uel prices. Third,

recurrent episodes o confict have been

a huge drag on growth in the past de-

cades. Given Burundis landlocked posi-

tion, political problems in neighboringcountries could also have large negativeconsequences.

Burundi household expenditurespercent

Source: Burundi CWIQ Survey (2006).

These shocks, especially when they are

cumulative, can have large welare conse-

quences. For instance, because households

spend a large share o their income on ood

(see gure at right), an increase in ood

prices worsens poverty. Internal and external

conficts drive prices even higher or delay

the delivery o ood and magniy the size owelare losses. Moreover, lack o adequate

saety nets reduces the countrys ability to

protect its population rom these shocks.

Burundi could reduce the eect o uture

shocks by replicating previously successul

policies, such as well-targeted tax exemp-

tions on items mostly consumed by poor

households, distribution and acilitation o

ertilizers, investments in improving ood

production, and improving the eectiveness

o existing saety nets (or example, the

school eeding program).

62. Te World Banks comparative advantage in helpingbuild resilience lies in three areas: (a) addressing the cumu-lative efects o these shocks, as in Burundi (see box 5); (b)providing nance, knowledge, global experience, and tech-nical assistance in designing, monitoring, and evaluating

saety-net reorms and health system strengthening, as wellas in smoothing the efects o macroeconomic shocks (as inthe recent global crisis); and (c) providing knowledge, -nance, advocacy, and convening power in helping countriesadapt to climate change.


25/46

20

Foundation: Governance and public

sector capacity

64. As the preceding discussion and eedback rom con-sultations show, underlying Aricas many developmentproblems is the challenge o governance and political leader-ship. Competitiveness is constrained by restrictive business

regulations that are dicult to remove because o vestedinterests. Inrastructureoen considered another bind-ing constraintis itsel impeded by poor public investmentchoices, weak budget management, corrupt or lethargicprocurement practices, inecient public utilities, and regu-lations that prohibit entry into the trucking industry or keepelectricity tarifs below sustainable levels. Te poor qualityo public servicesreected in absent doctors and teachers,and leakage o public undsis the result o ailures in ac-countability o civil servants and politicians to the public.

65. But these problems are ound in other developingregions.18 Te governance challenge in Arica is particu-larly acute or three reasons. Te rst is the large number oragile states20 o the worlds 33, using the World Banksdenition o ragile and conict-afected states (FCSs). TeCenter or Systemic Peace classies 23 Arican countries as

extreme or high in terms o state ragility, with another13 in the serious classication (gure 10).19 Te problemo ragility is exacerbated by the exceptionally weak capacityo the public sector in these countries.

18 The teacher absence rate in public primary schools in India is25 percent; no city in South Asia has 24-hour access to water.

19 The measure assesses a countrys eectiveness and legitimacyalong our dimensions: security, political, economic, and social per-ormance. See http://www.systemicpeace.org.

Figure 10: State ragility and warare in the global system

Source: Marshall and Cole 2009.

66. Second, political instability continues to bedevil manycountries. Contested elections are ollowed by postelectoralcrises and ethnic or political conict, as in Kenya, Zimba-bwe, and most recently, Cte dIvoire. Coups and nondemo-cratic transers o power occur with disturbing requency, asin Guinea, Mauritania, Niger, and Madagascar in 200809.

Tird, Aricas resource-rich countries have experiencedespecially severe governance problems, including wide-spread corruption and civil conict, giving rise to the termresource curse. Te trend in governance indicators in oilexporters, as measured by the World Banks Country Policyand Institutional Assessment, is not encouraging (gure 11).


26/46

21

Figure 11: Change o Country Policy and Institutional Assessment scores withinclusters or oil-exporting and non-oil-exporting countries, 200509

67.o be sure, the World Bank has been addressing Aricasgovernance problems or some time, with the pace acceleratingover the past three years as part o the Bank-wide Governanceand Anticorruption Strategy. Tat strategy has delivered someimportant gains and encouraged Bank country teams to investin more knowledge about the underlying political economy opoor governance and corruption and to promote approachesthat enhance transparency and build coalitions or positivechange. Bank teams are engaged in supporting high-level dia-logue on governance and accountability in the Democratic Re-

public o Congo, assisting with catalytic reorms in CameroonsCustoms Directorate, advising on transparent oil and gas rev-enue legislation in Ghana, promoting reedom-o-inormationlegislation in Zambia, and preparing an annual report on sup-

porting diagnostic analysis o corruption in Uganda with theInspector-General. Natural resource management issues arenow a key ocus o attention. Analytical and advisory work onthe value chain o extractive industries has been expanded andis now inuencing the Banks policy dialogue with resource-rich governments in Angola, the Democratic Republic o Con-go, Ghana, Niger, and Nigeria. Nevertheless, the overall state ogovernance in Arica remains weak. Te Mo Ibrahim Founda-tions 2010 Index o Arican Governance gives the continent anaverage overall score o 49 on a scale o 100, ranging rom 8

or Somalia to 83 or Mauritius; as a subregion, Central Aricascores lowest with 38. Arica also does poorly on the BanksWorldwide Governance Indicators voice and accountabilitymeasures (gure 12).


27/46

22

Figure 12:Voice and accountability, 2009

Source: Kaumann D., A. Kraay, and M. Mastruzzi (2010). Te Worldwide Governance Indicators:

Methodology and Analytical issues.

68. he experience with implementing the Gover-nance and Anticorruption Strategy has taught severallessons, o which the three most important ollow: (a)governance reorms are deeply political, and attemptsto treat them as technical solutions are bound to ail;(b) an intimate relationship exists between weak gov-ernance and low public sector capacity in Arica, withmany countries (especially ragile states) caught in alow-level equilibrium trap o both; and (c) the Banks

traditional instruments o inance and knowledge assis-tance, usually delivered through individual sectors, maynot be conducive to ostering change or such politicallycharged issues as governance.

69. Moreover, a clear message rom the consultations orthis Arica Strategyrom Arican civil society, private sec-tor, and government ocials alikewas that governanceand leadership were the most important actors drivingAricas uture development. Several participants arguedthat accountabilitydened by one as ensuring that politi-cians and civil servants do what they say they will doisthe central governance challenge. Greater openness exists in

Arica today, not just through elections, but also throughthe growing voice o civil society, the Arican Peer ReviewMechanism, and the number o countries passing reedom-o-inormation legislation.

70. Putting these actors together, the Bank concludes thatgovernance and public sector capacity, instead o b

Documents

Arica's Future. World Bank