Emergence and Convergence: The productivity challenge An update on Shifting Wealth and Africa’s...
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Emergence and Convergence: The productivity challenge An update on Shifting Wealth and Africa’s Rise HB Solignac-Lecomte OECD Development Centre Norfund’s
Emergence and Convergence: The productivity challenge An update
on Shifting Wealth and Africas Rise HB Solignac-Lecomte OECD
Development Centre Norfunds Summer Conference 2014 Infrastructure
for Development: Energy and Financial Services 28 August, Oslo
Slide 2
News from a shifting world 2
Slide 3
Shifting weight of global economic activity is continuing 3
Source: Authors calculations based on World Bank (2014), World
Development Indicators (database)
http://data.worldbank.org/data-catalog/world-development-indicators.
Share of GDP in PPP terms Shifting global economic landscape
Slide 4
... in terms of output, consumption and investment 4 Source:
Authors' calculations based on IMF (2014), World Economic Outlook
(database) and World Bank (2014), World Development Indicators
(database) GDP as a share of total (constant 2005 USD)
Slide 5
and in terms of international trade and foreign direct
investment 5 Source: Authors' calculations based on UN Comtrade
(2014), United Nations Commodity Trade Statistics (database) Gross
exports, world total (LHS) and BRIICS' shares of world total (RHS)
Outward FDI flows, world total (LHS) and BRIICS shares of world
total (RHS) Gross imports, world total (LHS) and BRIICS' shares of
world total (RHS) Inward FDI flows, world total (LHS) and BRIICS
shares of world total (RHS)
Slide 6
But: The difference in growth rates has been narrowing since
2009 6 Source: Authors calculations based on World Bank
(2013),World Development Indicators (database). Shifting global
economic landscape
Slide 7
Many upper middle-income countries are not on course of
convergence 7 Source: Authors calculations based on World Bank
(2013), World Development Indicators (database) Shifting global
economic landscape
Slide 8
Poor prospects of convergence raise question of middle-income
trap Common (theoretical) framework to identify the trap does not
exist But: Evidence shows that many middle-income countries face
sustained periods of lower economic growth And: Growth slowdowns
are often associated with significant slowdowns in total factor
productivity (TFP): on average 85% of GDP slowdowns are explained
by TFP slowdowns (Eichengreen et al. 2011*) Productivity slowdowns
can be associated with difficulties to move up the value chain,
away from a factor accumulation-driven and low labour cost-driven
to a an innovation-driven growth path Focus on benchmarking
middle-income countries productivity growth (and levels) against
each other and against more advanced countries 8 Low economic
growth can be associated with low productivity growth The challenge
of productivity for convergence
Slide 9
Total factor productivity gap with advanced countries is
significant The challenge of productivity for convergence
Slide 10
Africas transformation challenge 10
Slide 11
11 Africas growth: resilience in the face of headwinds from the
global economy 11 Africa: Good news from growth
Slide 12
Growth typologies 12 Africas real GDP growth above global
average of 3%. In medium term, growth is expected to accelerate,
reverting to pre-2009 crisis levels. 2012201320142015
Africa6.43.94.85.7 North Africa9.41.93.15.5 SSA4.94.75.85.9 South
Africa2.51.92.73.0 SSA excl. South Africa5.85.76.9 Africa: Good
news from growth
Slide 13
GDP growth 3.7% GDP growth 6.7% GDP growth 1.9% GDP growth 6.2%
GDP growth 3.0% DISPARITIES IN ECONOMIC PERFORMANCE IN 2012 13
Central Africa East Africa Southern Africa West Africa North Africa
Regional growth prospects, 2013 Africa: Good news from growth
Slide 14
GDP growth 6.2% GDP growth 7.2% GDP growth 3.1% GDP growth 6.0%
GDP growth 4.0% DISPARITIES IN ECONOMIC PERFORMANCE IN 2012 14
Central Africa East Africa Southern Africa West Africa North Africa
Regional growth prospects, 2014 Africa: Good news from growth
Slide 15
10 fastest growing (>7%) African countries in 2014/15 15
Libya 11.6% Mozambique 8.4% Angola 8.4% Cte dIvoire 9.2% Rwanda
7.2% Sierra Leone 12.7% Chad 10.1% Congo Dem. Rep. 8.6% Ethiopia
7.4% Liberia 7.5% Nigeria 7.2%
Slide 16
10 slowest growing African countries in 2014/15 16 Egypt 2.9%
South Africa 2.9% Swaziland 2.5% Sudan 3.3% Mauritius 3.8%
Equatorial Guinea -5.2% Eritrea 2.1% Guinea-Bissau 2.7% Cabo Verde
3.2% Morocco 3.9%
Slide 17
External financial flows: FDI picking up Africa: Good news from
growth
Slide 18
Structural Transformation: the challenge of moving people and
money from low productivity to higher productivity sectors has yet
to be met
Slide 19
Natural resources: Africa benefitted from better terms of trade
19 Africa: natural resources can help diversify but
Slide 20
Processing resources: Infrastructure is the major bottleneck
Country 2009 Electricity production (GWh) 2009 Energy need for
refining of mining production (GWh), (bauxite, iron, copper and
nickel only) Energy requirement of base metal refining as share of
total electricity output Botswana4442,996675% Tanzania4,6282,58356%
Congo, Dem. Rep. 7,8307,73899% Ghana8,9588,80098%
Zambia10,30815,946155% Algeria42,7696,60015% Egypt, Arab
Rep.139,0007,2005% South Africa246,815336,991137%
Africa*664,051764,210115% Energy needs for metal refining &
Africas generation capacity Africa: natural resources can help
diversify but
Slide 21
Global Value Chains: Africa highly integrated but more as
source of inputs than production hub Africa: a steep climb up the
value chains
Slide 22
Africas share of trade in intermediate goods is growing but
remains small 2.2% 1.4%
Slide 23
Southern Africa most integrated in both global and
intra-African value chains Africa: a steep climb up the value
chains
Slide 24
Financing Infrastructure in Africa 24
Slide 25
25 Infrastructure spending: 2/3 from govt budget Operation
& Maintenance Capital Expenditure Total Spending $bill./yr
Public Sector (%) Public Sector (%) ODA (%) Non-OECD financiers (%)
Private Sector (%) Total (%) Irrigation66.7 33.3--- 0.9 WSS*40.8
14.515.82.627.660.57.6 ICT**22.2 14.40.0 63.377.89.0 Power60.3
20.76.09.54.339.711.6 Transport48.1 27.811.16.8 51.916.2 Total
(%)45.0 20.87.95.520.855.045.3 Adapted from Briceo-Garmendia,
Smits, and Foster (2008) in World Bank (2010) Africa: the
infrastructure spending challenge
Slide 26
26 Public Financial Management in Infrastructure: new evidence
Use public funds = overall effective, efficient and subject to the
rules of fiscal prudence but weak economic, financial, social,
environmental appraisal; inadequate attention to maintenance ;
inefficiencies related to hidden costs. Project selection could be
improved: Cost-Benefit and/or Cost-Effectiveness Analyses Planning
levels (national, sectorial, local) overlap Bias = new investment
over maintenance Source: Boateng et al. (2014), Public Financial
Management in Infrastructure in Africa, OECD Development Centre
Working Paper No. 323, OECD/CABRI. Africa: the infrastructure
spending challenge
Slide 27
27 www.oecd.org/dev www.africaneconomicoutlook.org Thank
you