Economic transformation in africa drivers, challenges and options

Issues Paper “Economic transformation in Africa: Drivers, Challenges and Options”

Prepared for the Third Meeting of the High Level Panel of Eminent Persons,

30th January to 1th February, 2013

Contents

Introduction 3

Rationale for promoting economic and structural transformation in Africa 3

What is economic transformation? 3

Promoting economic transformation in Africa: challenges and key issues to be addressed 5

Conclusion 17

References 19

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1. IntroductionThe United Nations Secretary General has appointed a High Level Panel (HLP) of Eminent Persons to provide independent recommendations on what international development framework might succeed the Millennium Development Goals, after their expiration in 2015. The HLP is co-chaired by their Excellencies Ms. Ellen Johnson-Sirleaf, President of Liberia, Mr Susilo Bambang Yudhoyono, President of Indonesia, and Mr David Cameron, Prime Minister of the United Kingdom. The HLP has already met in New York and in London to deliver on its mandate, and its next meeting will take place in Monrovia, Liberia from January 30th to February 1st 2013. The general theme of the Monrovia meeting is “National Building Blocks for Sustained Prosperity” with special emphasis economic transformation.

Africa’s low level of development have been attributed in a large part to the continent’s failure to transform its’ predominantly primary commodity based economies into manufacturing-based structures. This issues paper seeks to trigger a discussion on the role of economic transformation in promoting inclusive growth and sustainable development particularly in primary commodity dependent economies. The overall objective is to promote the adoption of an alternative global approach to fostering social development and prosperity in Africa, that not only recognizes the importance of economic transformation in boosting productivity, accelerating growth, increasing incomes and improving living standards, but also acknowledges its relevance to the post-2015 development agenda.

The paper first defines economic transformation, outlines its main drivers, and explains why it is central to Africa’s development process. It proceeds by discussing the the key challenges to transformation in Africa and provides perspectives on how the continent can achieve a successful transformation agenda. The paper concludes with a series of questions for discussion.

2. Rationale for promoting economic and structural transformation in AfricaWhat is economic transformation?

Four essential and interrelated processes define transformation: a declining share of agriculture in GDP and employment; a rural-to-urban migration underpinned by rural and urban development; the rise of a modern industrial and service economy; and a demographic transition from high rates of births and deaths (common in

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underdeveloped and rural areas) to low rates of births and deaths (associated with better health standards in developed and urban areas). Economic and structural transformation is also associated with rising agricultural productivty, an integrated economy and rising per capita growth rates. (Timmer 2008).

Links to GrowthEconomic and structural transformation is a dynamic process that is correlated with economic growth through the improvement of productivity in the agriculture and other sectors of the economy. Accordingly, the drivers found in the literature for economic transformation are the drivers of economic growth and the determinants of agricultural productivity. Those mentioned most repeatedly are (i) the utilization of improved technologies, (ii) investment in higher educational and skills levels for the labor force, (iii) lower transactions costs to connect and integrate economic activities, and (iv) more efficient allocation of resources (Syrquin, 2006; UNECA 2011)

Why transform?Africa’s growth acceleration in recent years has not been associated with economic transformation. Careful assessment of the economies in the region reveals the following characteristics: most economies are natural resource and or primary commodity driven; the manufacturing sector remains embryonic, limiting the potential employment gains from the processing of primary commodities; agricultural productivity remains low and characterized by limited application of modern technologies; the rural sector remains highly underdeveloped setting in motion a massive rural urban drift that has transformed urban areas into a haven for slum dwellers; birth and death rates have declined but only marginally and Africa continues to have the world’s highest rates of maternal mortality, child mortality and HIV prevalence; social protection programmes are undeveloped and underfunded heightening the vulnerability of the aged, the disabled as well as the unemployed and underemployed labor force.

These conditions persist even though the continent ranked the second fastest growing region of the world after East Asia (UNECA, 2012). In effect, Africa’s growth can be described as largely non-inclusive because of its limited contribution to job creation and overall improvement to people’s living standards (UNECA 2011). Indeed despite a decline in the absolute number of poor people and a 5 percentage points decline in poverty rate between 2005 and 2008, the continent is home to the world’s highest proportion of poor people, with a poverty rate over 47 percent in 2008. Thus, Africa needs to transform its economies to create wealth, reduce poverty, minimize inequalities, strengthen productive capacities, enhance social conditions of its people and achieve sustainable development. Economic transformation

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promotes social development and inclusive growth by: diversifying the sources of growth; creating job opportunities; promoting rural development; and enhancing human capital and productivity through strengthened health and education systems as well fiscally sustainable social protection systems.

3. Promoting economic transformation in Africa: challenges and key issues to be addressedAfrica’s capacity to design and implement a successful transformation agenda has been undermined by internal and external factors. While some of these factors are currently being addressed, others persist. Internal factors include poor economic management capacities typified by macro-economic instablity, poor planning design and implementation capacities, weak institutional and individual capacities, limited investments in social and economic infrastructure, limited investment in technology and R&D and political instability.

External factors include: limited policy space due in part to conditionalities imposed by the Bretton Woods organizations and development partners that overstate the importance of market led approaches to development; barriers to trade that undermine export revenues and constrain exports of manufactured goods; and the disproportionate concentration of ODA on the social sectors as opposed to the directly productive sectors of agriculture and industry; and the concentration of FDI in extractive mineral and gas sectors of the economy with limited investments in value addition. Furthermore, in recent years climate change has emerged as a threat to development through its destructive impact on infrastructure and livelihoods.

Collectively the challenges identified above have contributed to the low level of economic diversification, the continued dominance of the agriculture sector in the GDP and inadequate financial resources for sustainable development. Achieving economic transformation requires addressing the challenges at both levels. This section elaborates on these issues and identifies some of the key interventions required to facilitate or drive the transformation agenda.

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The political environment and ownership of developmentThere is a greater consensus among Africans on what needs to be done to accelerate growth, reduce poverty, improve governance and assume leadership and accountability for their own development. The New Partnership for African Development (NEPAD) not only reflects this consensus but builds on it by identifying key priority areas for action. He mandate given by African heads of State to the African Union Commission and its pan-African partners namely ECA, ADB and UNDP-RBA to undertake consultations aimed at articulating an African common position for the post-2015 development agenda is another illustration of Africa’s comitment to owning its development agenda. With better leadership, economic governance is improving, resulting in fewer conflicts and an improvement in the general economic outlook, business environment and investment outlook. Furthermore, several African countries such as Ghana and Ethiopia have put in place appropriate macroeconomic, structural and social policies, which have contributed to increasing economic diversification, sustaining growth rates and some progress towards meeting the MDGs and other social development goals.

Issues for discussion:

• How can Africa strengthen ownership of the development agenda?• To what extent is NEPAD promoting economic transformation in Africa?

Capitalizing on the demographic dividendThe proportion of the young people living in Africa which stood at 18% in 2012 is expected to rise to 28% by 2040 while the share of other regions is expected to decline. Young people are central to Africa’s mission to promote economic transformation, sustainable and inclusive social and economic development on the continent and end poverty. Youth unemployment is particularly high in North Africa and played a role in instigating the “Arab Spring”. But the relatively lower youth employment rates in the rest of Africa mask high levels of informal sector employment which is characterized by low wages and poor conditions of service. The absence of social insurance programmes in Africa, excluding the North, implies tha the youth have no option but to work even in the most undesireable conditions. Thus, while the employment challenge in North Africa is one of job availability, in the rest of Africa the problem is job quality. The misalignment of the educational curricula with the needs of the labor market has been cited as an important reason for the employment challenge. Appropriately designed skills pogrammes and a re-orientation of the educational curricula to labor market priorities can play

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an important role in improving the employability of the youth, thus allowing governments to realize the demographic dividend (R. Sogunro, 2012). However, in addition to the skills mismatch challenge, it is important to emphasize, as discussed above, that the current structure of the economies of most African countries does not support the creation of adequate levels of jobs. Information flows between job seekers and employers constitutes another challenge. Often job seekers rely on word of mouth and contacts to identify employment opportunities. In this context, the development of employment agencies or mechanisms focused on matching job seekers with employers can be an important factor in reducing job search costs for both employers and potential employees.


• What specific interventions are required to improve the skills and productivity of the youth?

• What can educational institutions do to improve the relevance of their curricula to the labor market?

• What specific interventions can the government put in place to reduce job search costs?

The role of the stateThe invisible hand of the markets alone cannot ensure the transformation of Africa’s economies. The central role of the State in the economic success of the Asian tigers and some Latin American countries reaffirms the important role that it can play in the transformation process. The experience of the Asian tigers suggests that strengthening the capacities of firms including through investments in research and development, skills development and infrastructure development can be instrumental for development. Also important is ensuring overall macro-stability and a regulatory regime conducive to private sector investment. On the political level transformation has not always been associated with western stlye democracies as demonstrated by the experience of China. However, some might argue that a transformation process that is inclusive and democratic enough to ensure buy-in by a broad spectrum of stakeholders is vital for sustainability. Overall, the effectiveness of the state in shaping the transformation agenda hinges on the appropriatness of its vision and the level of its capacity for prudent management of the economy. This kind of state is often referred to as a “developmental”. However, governance, institutions and economic management capacity remain weak in the majority of African countries, despite notable improvements. A survey conducted in thirty-five African countries on good governance, suggests slight progress, since 2005, in rule of law and the observance of human rights. In addition, economic management and efficiency of the tax system have also improved. However, access to and quality of service delivery remains far from satisfactory and accountability is also weak (UNECA, 2009).These

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shortfalls are likely to have adverse effects on, inter alia, the allocation of resources, which constitute a key driver for growth and transformation.

Issues for discussion :

1. How important is democracy for the transformation process?2. What is required to facilitate the emergence of developmental states in

Africa?3. What types of institutions are necessary for structural transformation? 4. How can African institutions be strengthened for a better allocation of

resources?

Investing in infrastructure and reducing transaction costs for increased competitiveness, growth and transformationAfrica lacks key infrastructure such as paved roads, access to reliable sources of energy, safe water and the internet. In fact, less than 10 per cent (in 10 countries) and less than 50 per cent (in 33 countries) of roads in Africa are paved, 40 per cent of Africa’s population lack access to safe water and despite a fast penetration rate of ICTs across the continent, access to the internet (3 percent) is extremely low. Studies suggest that in most African countries, particularly the low income countries, infrastructure is a constraint on doing business and undermines firm productivity by around 40 per cent (Escribano et al., 2008). Yet infrastructure is paramount ingredient for a sustainable growth and structural transformation. Contributing to the infrastructure deficit are fiscal constraints limited incentives for private sector investment due to the public goods nature of investments, lack of stable long-term finance, high sector-specific risks as well as high macro-risk arising from political instability and poor governance.

Estimates show that closing Africa’s infrastructure gap would require approximately US$93 billion a year over the next decade – including new investments and maintenance of existing infrastructure. Potential internal sources of finance include raising additional taxes and harnessing domestic capital markets. Public Private Partnerships (PPPs) and other innovative sources of financing and tapping into global savings for investment in infrastructure development in Africa can help Africa address its infrastructure needs, increase global aggregate demand and address the twin problems of low global growth and imbalances. Improving access to energy and transport and communication will reduce production costs, improve global competitiveness and foster economic transformation.

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• What strategies could be envisaged to bridge Africa’s infrastructure gap?

Investing in human capital, developing skills for economic transformationMany African countries are faced with a mismatch between the education systems and the needs of labor markets. Indeed while Africa has made substantial progress to improving primary education, complementary investments in secondary, tertiary and vocational education have been insufficient. And despite rising primary enrolment rates, completion rates and the quality of education remains low and characterised by striking rural urban and gender disparities.

Education constitutes a major driver of economic transformation; coupled with health it provides the basis for building national capabilities to improve the productivity and competitiveness of countries. Investing in human capital ensures that citizens are equipped to earn a livelihood and be productive members of society. The availability of a rich pool of skilled workers is an incentive for foreign and domestic investors. It also contributes to social inclusion and integration of youth in society. Health is also critical for enhancing productive capacities however this is an area that remains a major challenge for African countries and where progress on the MDGs has been weakest. In effect, health is vital for transformation. For example, it is estimated that malaria reduces GDP growth by about 1.3 per cent per year in countries with high disease burdens. Indeed, high rates of HIV infection in southern Africa, have reduced the life expectancy of the population from 62 years in 1990–1995 to 48 years in 2000–2005.

Addressing the challenges in these areas requires both supply and demand side measures. Equally, it is also important to identify the reasons why people are not using the current services being provided. Basic investments in immunizations, nutrition and quality education as well as targeted skills development are necessary to grow and develop the necessary capabilities for the increasingly competitive labour market and for meeting requirements for transformation.


• What measures are required to improve human capital and provide the skills required for economic transformation?

• What measures are required to address the health challenges in Africa?

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Transforming agriculture, diversifying economiesMost African countries economies are driven by mineral and primary commodity exports with volatile prices and limited contribution to employment. For example, in 2008, crude petroleum, natural gas, etc. accounted for 60 per cent of total exports from Africa (AfDB 2010). In 2010, Africa accounted for a total share of 12.2 percent of the global oil production. Mineral resource exports contribute to merchandise exports in 24 (44 per cent) of Africa’s 54 countries. Progress in diversifying the economies away from primary sectors and modernizing production and services systems has been very slow. African agriculture continues to suffer from weak linkages with other sectors, including agro-processing and agribusiness, fragmented markets and weak regional integration of commodity chains. These factors render, the continent extremely vulnerable to external shocks due to inelastic global commodity demand and price volatility. As a result of all these constraints and despite its huge land and agricultural potential, the continent continues to be a net food importer.

Agriculture is central to achieving economic transformation and broad-based development. In fact, it constitutes the starting point for such transformation, given the dominance of the sector in most of the economies and livelihoods it provides across the continent. In Africa, the sector employs 60 per cent of the total labour force, accounts for as much as 40 per cent of total export earnings, and provides over 50 per cent of household income (ECA and AUC, 2009). However, the sector is characterized by low productivity, and low output yield, especially for cereals, and stagnant growth rate. The low productivity and growth rates result from the low level of investments and limited use of fertilizer and modern technology as well as low levels of irrigation, inadequate land management, low tractor use, limited access to credit and insurance schemes, poor access to physical infrastructure, and limited funding for R&D. As a result, Africa’s trade balance measured by the ratio of the value of total agricultural exports to imports has been declining continuously and stood around 0.6 in 2007. Indeed, many African countries have become net importers of agricultural products.

Value chains linking raw material producers to end users can play a vital role in the promoting value addition to agricultural and othe primary commodities. However, in reality, African firms are often located at the extremes of the global value chain. They either trade in finished products or sell primary commodities with little or no investments in the transformation process. The challenge is to ensure greater local participation in the global value chain. Local content measures facilitate value chain development by strengthening linkages with local suppliers. But to be effective, local content measures must be complemented by measures that strengthen the

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competitiveness of local suppliers. Such measures include skills development and upgrading, adoption and adaptation of appropriate technologies and access to capital.

Local and regional markets are a convenient entry point in the initial stage of value chain development since these markets tend to be less demanding in terms of entry barriers thereby allowing local firms to build the necessary production capabilities required by more demanding global chains. In this context, it is in the interest of African countries to deepen the regional integration agenda including through the implementation of the proposed Continental Free Trade Area. It is important to add that coherent value chain initiatives are framed within the broader context of an Industrial policy that is continually reviewed to address existing and emerging bottlenecks. However several African countries do not have a functioning industrial policy.


• How can African countries better diversify their economies? How can they shift from dependence on the export of primary and mineral products to manufactured and processed products and move later to heavy industries?

• How can agricultural productivity be enhanced?• What policies should African countries put in place to promote value

addition?• What challenges has Africa experienced in the implementation of local

content measures?• What are the key factors that could enhance the competitiveness of local

agro-based firms?

Promoting innovation and technology transfer for structural transformation and value additionAlthough Africa has performed relatively well in terms of technology transfer in a number of areas such as royalties and import of capital goods, it lags behind on areas related to new and emerging knowledge. This has contributed to an industrial base that is weak and largely dependent on imported technology which is often to appropriate to local conditions.

Technology is recognized as one of the key drivers for accelerated growth and economic transformation throuuugh its impact on productivity and incomes. For African economies, technological advancement and innovation can provide a platform for diversification and a shift from reliance on agriculture and exports of raw materials to manufacturing. Some of the challenges that Africa faces include

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lack of adequate domestic and institutional policies in setting the general direction of the development acquisition, adaptation, use and diffusion of new and emerging technologies. Related to this is limited human and financial resources and inadequate infrastructure for technology advancement. These challenges can be addressed through quality education, skills development and entrepreneurship training and by encouraging joint ventures and industrial alliances between domestic and foreign firms. The promotion of international science and technology cooperation agreements between African countries and leading or emerging technology exporters would also be useful.

Issues for discussion.

• How can policymakers strengthen the innovative and technological capabilities for increased productivity and economic transformation?

Addressing the daunting challenge of climate changeClimate change poses a threat to Africa’s ambitions of transformation in several ways. Firstly despite the fact that Africa has contributed minimally to the emissions the continent is among the most vulnerable to the effects of climate change. This is because of the impact on agricultural yields, food security and livelihoods as well as the destructive effects of floods on an already weak infrastructure base. Harmful impacts of climate change are predicted to fall unduly upon the poor exacerbating inequalities in health status, education, labour-force participation, and access to adequate food and clean water. Such consequences are likely to affect negatively the skills and productivity of the labor force, especially in the agriculture sector with adverse consequences for economic transformation. A subsequent challenge is how to enable a large and vulnerable population to adapt and respond to the threats brought on by climate change.

Secondly, climate change has implications for Africa’s approach to growth and development. Ultimately the continent will have to adopt a development and growth pathway that reduces its carbon footprint. The short run costs and capacity implications will likely be large. In effect, Africa’s fiscal and technical capacity to respond to the threats of climate change is limited. At present, it is barely meeting its traditional development investment needs from domestic resources, let alone managing the risks of climate change.

Accordingly, financial support to Africa for mitigation and adaptation is vital to ensure adequate reponse to the challenges of climate change. Fortunately, in addition to normal development flows, the “polluter pays” principle prevails and the

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developed economies have recognized their obligation to support African adaptation and mitigation. In Copenhagen, developed countries committed to contribute US$100 billion each year by 2020 to help poorer nations cope with the impacts of climate change.

But climate change presents threats as well as opportunities. China for example is making significant investments in solar energy and is currently the leading producer of solar panels. These investments are a pontential source of employment. Other job creating opportunities include: retrofitting buildings to respond to the threats of climate change; developing mass transit systems; developing energy-efficient automobiles; investing in wind power and cellulosic biomass fuels. For instance, constructing wind farms creates jobs for sheet metal workers, machinists and truck drivers, among many others. Increasing the energy efficiency of buildings through retrofitting relies, among others, on roofers, insulators and building inspectors (PERI June, 2008). Policymakers need to reflect more deeply on how to design and capitalize on green jobs initiatives as part of their transformation agenda.


• How can policymakers pursue simultaneously the objectives of economic transformation and sustainable development?

• What opportunities exist for Africa to benefit from the green economy initiatives?

Promoting trade and accelerating regional integrationThe share of intra-African trade is extremely low compared to other major regions, stagnating around 10-12% with no major progress registered over the last decade. Over the period 2004-2006 intra-African exports represented 8.7% of the region’s total exports and 9.6% of total imports (UNCTAD 2009c; UNECA 2010a). In other words, Africa sourced more than 90 percent of its imports from beyond Africa and exported 90 percent of its products to the rest of the world, rather than to neighbouring countries.

The share of the continent in the world trade is also quite low (around 3 percent), and Africa’s poor export diversification in terms of both products and destination renders the Continent particularly vulnerable to external shocks.

However, Africa has started modifying its trade relationships over the last decade by escalating ties with emerging economies at the expense of traditional partners.

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Indeed, while the European Union and the United States attracted together about two-third of African exports and sourced more than half of African imports just 10 years ago, their influence has waned over the last decade. Over the same period, India, and especially, China have evolved from marginal to strategic partners for Africa, and there is certainly room for trade expansion between Africa and China in the future, as Africa possesses the natural resources demanded by the Asian giants while China is equipped with capital and capital goods which can be used towards improving Africa’s infrastructure. These observed trends however, do not necessarily provide extremely bright prospects for structural transformation of African economies. Indeed, most of Africa’s exports to traditional as well as emerging trade partners comprise raw materials and primary commodities, while Africa’s imports from the outside world are mainly manufactured products. In that sense, China’s increasing demand for African primary commodities may not encourage export diversification of African nations. Africa cannot indefinitely rely on foreign counterparts for its industrial needs. It must build required capacities to add value to the goods it produces.

Nevertheless, African countries face numerous trade-related constraints which strongly hinder trade within the continent and with the rest of the world. Non tarrif barriers and tarrif escalation, which targets processed, goods are prime examples. While efforts must be made to address these challenges in the long run, over the short term regional intergrtion offers opportunities for expanding trade in manufactured goods. Currently, 60 percent of intra-regional trade comprises manufactured goods. Thus economic integration can lead to substantial economic and social benefits in terms of helping to address supply side constraints, diversifying the productive base, ensuring economies of scale for production, expanding markets and improving competitiveness and economic efficiency, fostering technology and knowledge transfer and boosting investment.

African countries have established the African Union, created various regional economic communities (RECs) to expand intra-African trade by breaking down tariffs and non-tariff barriers through trade liberalization schemes. In January 2012, African Heads of State and Government endorsed, during the 18th African Union (AU) Summit held in Addis Ababa, an AU Action Plan for “Boosting Intra-African Trade and the Establishment of the Continental Free Trade Area”. This decision aims at reinforcing trade relationships between African economies, focusing on a number of specific activities for seven key priority clusters, namely trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information and factor market integration. It is hoped that such measures will contribute to doubling the share of intra-African trade over the next decade, from around 10-12% today to 20-25% in 2022. It is projected that the full removal of tariff barriers accompanied by adoption of measures to ease trade within the

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continent will bring the share of industrial commodities in intra-African trade to about 70% (UNECA 2013).


• How can the international community support efforts to facilitate regional integration, foster value addition, diversify production and exports?

Rationalizing African global partnerships - Strengthening South-South cooperation - Mobilizing resources for economic transformation and take-off

Africa is faced with an evident financing gap regarding both internal and external sources of financing that is prejudicial to the realization of its ambition of economic transformation. Stagnating savings, investment, foreign capital inflows and trade balances relative to GDP are restraining the increase in financing available for Africa. The financial system is shallow and incapable of mobilizing domestic savings that are needed to finance the long-term growth required for economic transformation. Potential domestic savers, including those in the large informal sector, are thus forced to invest in land or in buildings for which they receive little immediate economic returns. Revenue collection and tax administration difficulties further hamper the domestic financing abilities of African governments.

Financial market deepening and development remains low and capital markets are fragmented and isolated from the global markets, undermining efforts to mobilize domestic and external private resources.

On the external front, Africa’s current account position improved over the last decade, but turned to a deficit in the wake of the financial crisis. Africa’s trade balance as a percentage of GDP, which was below 8 per cent in the past decade, fell significantly after the crisis with a subsequent drop in demand for African exports following crises in the eurozone and North America. Despite growing global demand and rising prices for Africa’s natural resource exports, the possibility of a double dip recession in trade partner economies and a further drop in foreign resources calls for greater efforts to identify alternative financing sources.

FDI flows to Africa increased significantly prior to the global crisis, and fell less than in other regions of the world after the crisis. However, as a percentage of GDP, the increase has not been significant. Furthermore, the bulk of the investments has been concentrated in a few countries and in the extractive industries with limited value addition. Consequently FDI has not contributed significantly to structural transformation in Africa. North Africa and petroleum-exporting African countries

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dominate all FDI receipts, with Angola, Egypt, Libya and Nigeria receiving the four largest flows of FDI in 2010 (UNCTADStat 2011). The selective destination of the FDIs heightens the risk of a lock-in to primary export trajectory as well as reduces the opportunity to increase value addition and export earnings (ECA and AUC, 2011). Additionally, illicit financial flows from Africa are considerable and primarily linked to extractive and mining industries, benefiting multinationals from developed economies as well as emerging ones, such as China (ECA 2013).

The net impact of international cooperation in general and of south-south cooperation in particular on African economies needs to be beneficial to the objectives of economic transformation of the continent. As such, the central challenge of African countries is to ensure that FDI facilitates value addition. It is equally crucial to ensure that loans from development partners are used to finance projects that enhance capacities for productive employment especially for the youth, given the population structure of Africa.

Guiding FDI towards new sectors such as manufacturing requires the adoption of strategic incentives and policies that both encourage and obligate foreign investors to use domestic inputs, labor and partnerships in the pursuit of their goals. Deliberate efforts to pursue joint ventures with Southern firms should also be explored to contribute to the diffusion of knowledge for local entrepreneurs and hence contribute to the structural transformation of economies (UNECA and AUC, 2011).


• How can African countries be supported in building capacities to enhance, rationalize and maximize gains from all their global partners? In particular how can the flows and the quality of FDI be improved?

• How can Africa be supported in mobilizing new resources, both domestic and external?

• How can the domestic financial systems be improved? • How can national and regional financial markets be improved and expanded?• How can Africa improve the role of remittances in the transformation

process? • How can cooperation with the rest of the world promote technological

transfer?

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4. ConclusionThe huge natural potential and the recent economic and social developments suggest that Africa can escape the scourge of poverty and underdevelopment and embark on the process of industrialization and transformation just as China, India and other emerging and developing countries have done over the past decades. This is possible under the guidance of a capable and development-oriented state committed to mobilizing all development stakeholders and the population, with the dedicated support of the international community around a common national development project aimed at improving the popular welfare.

The consultation currently conducted by the HLP on the shape of the next development agenda provides a compelling occasion for Africa and for all the developing countries to go beyond the conventional approach of promoting economic growth and social development. Under previous development agendas, this approach has been based on dependency on external aid, low internal capacity and productivity, low level of diversification and transformation and export of raw materials. Notably, the MDGs focused on key social development goals without paying due attention to the domestic economic means of creating the wealth needed to achieve these goals. The reflections on the post-2015 era is an opportunity to begin to lay the foundations for an alternative approach where economic transformation takes centre stage in developing countries with the view of providing them with the required domestic means for driving and controlling their own development process. Economic transformation needs to be promoted with the view of boosting productivity in all sectors, accelerating growth, increasing earnings of workers and incomes of families and graduating countries from the status of developing countries to the one of emerging countries.

The African Union Commission and its pan-African partners namely ECA, ADB and UNDP Regional Bureau for Africa, upon instruction of African heads of States, have conducted a series of consultations in the five geographical sub-regions of the continent. The findings clearly call for prioritizing economic transformation in the next development agenda. It is hoped that the report of the HLP to the United Nations Secretary General will strongly reflect this recommendation.

The analysis presented in this paper can trigger a number of issues relating to the future of economic transformation in developing countries. Some of them are outlined below:

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• How should the objective of economic transformation be reflected into the post 2015 development agenda? Should it be a specific goal?

• Can measurable indicators on productive capacities, capacity development in science and technology and resource mobilization be developed?

• What challenges and required initiatives should be given priority in a global development framework?

• What would be the criteria of success of the transformation? • What are the roles and responsibilities of each stakeholder, namely

governments as well as sub-regional and regional public entities, domestic and international private sectors, rich countries, emerging economies, other developing countries, civil societies, etc.

• How could the next development framework ensure accountability, compliance and enforcement from each side on the transformation objective?

The HLP meeting of Monrovia is expected to provide clear and consensual answers to these questions.

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