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SUSTAINING ECONOMIC
GROWTH IN AFRICA
STATE OF THE AFRICA REGION WORLD BANK – IMF SPRING MEETINGS 2014
OUTLINE
1. Africa’s recent growth performance
2. Elements of a growth taxonomy: a) Natural resource endowments
b) Fragility and conflict
c) Fast vs. slow growers
3. Growth decompositions a) Components of aggregate demand
b) Sectors of activity
c) Factor accumulation and productivity
4. Conclusions
ALMOST TWENTY YEARS OF ECONOMIC GROWTH HAVE BEGUN TO
REVERSE AFRICA’S RELATIVE DECLINE
6.45
6.50
6.55
6.60
6.65
6.70
6.75
6.80
6.85
6.90
6.95
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
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84
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87
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90
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93
19
96
19
99
20
02
20
05
20
08
20
11
Rea
l GD
P p
er c
apit
a in
US$
at
20
05
pri
ces
(in
logs
)
Actual Trend
0.03
0.05
0.02
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
19
60
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63
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66
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69
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72
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75
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78
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81
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84
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87
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90
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93
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96
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99
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02
20
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08
20
11
Inco
me
per
cap
ita
rati
o r
elat
ive
to t
he
Euro
Are
a
Sub-Saharan Africa (SSA) Slow-growing SSAFast-growing SSA
Real GDP per capita in Sub-Saharan Africa, 1960-2012 Real GDP per capita in Sub-Saharan Africa, 1960-2012
Source: World Bank, Africa’s Pulse vol. 9 Note: The data of real GDP for Sub-Saharan Africa and the Euro Area is expressed in US dollars at 2005 prices
Source: World Bank, Africa’s Pulse vol. 9 Note: average growth between 2003-2014 for SSA (5.1%), SSA excl. South Africa (5.9%) and Developing countries excl. China (4.7%)
IN THE LAST DECADE, AFRICAN GROWTH PROVED RESILIENT…
Annual growth in GDP, 2003-2013: selected country groupings
5.1
6.3
4.3
-2
0
2
4
6
8
10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Per
cen
t
Sub-Saharan Africa
Sub-Saharan Africa excl South Africa
Developing countries excl China
2.4
3.5
2.8
-2
0
2
4
6
8
10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Per
cen
t
Sub-Saharan Africa
Sub-Saharan Africa excl South Africa
Developing countries excl China
… AT AROUND 2.4% P.A. IN PER CAPITA TERMS.
Annual growth in GDP per capita, 2003-2013: selected country groupings
Source: World Bank, Africa’s Pulse vol. 9 Note: average growth between 2003-2014 for SSA (2.4%), SSA excl. South Africa (3.2%) and Developing countries excl. China (3.1%)
OUTLINE
1. Africa’s recent growth performance
2. Elements of a growth taxonomy a) Natural resource endowments
b) Fragility and conflict
c) Fast vs. slow growers
3. Growth decompositions a) Components of aggregate demand
b) Sectors of activity
c) Factor accumulation and productivity
4. Conclusions
ELEMENTS OF AN AFRICAN GROWTH TAXONOMY
• Natural resource endowments – Resource rich countries are defined as those with average rents from
natural resources (excluding forests) that exceed 5 percent of GDP in 2006-2011
• Fragility and conflict – Defined as countries having either a harmonized average CPIA rating
of 3.2 or less, or presence of UN and/or regional peace-keeping or peace-building mission during the past three years.
• Recent growth performance – Define fast-growers as countries that experienced at least one growth
spurt (3.5% p.a. growth in real GDP per capita, for at least five contiguous years) in 1995-2012
I. Oil Countries II. Non-oil resource countries
Angola Botswana
Cameroon Congo, Dem. Rep.
Chad Ghana
Congo, Republic of Guinea
Cote d`Ivoire Liberia
Equatorial Guinea Mali
Gabon Mauritania
Nigeria Mozambique
Sudan Namibia
Sierra Leone
Tanzania
Zambia
Note: Resource rich countries are those with average annual rents from natural resources (excluding forests) that exceed 5 percent of GDP in 2006-2011. Source: The World Bank.
RESOURCE RICH COUNTRIES IN AFRICA
Burundi Liberia
Central African Republic Madagascar
Chad Malawi
Comoros Mali
Congo, Dem. Rep. Sierra Leone
Congo, Republic of Sudan
Cote d`Ivoire Togo
Guinea-Bissau Zimbabwe
Note: Fragile Situations" have: either a) a harmonized average CPIA country rating of 3.2 or less, or b) the presence of a UN and/or regional peace-keeping or peace-building mission during the past three years. This list includes only IDA eligible countries and non-member or inactive
territories/countries without CPIA data. Source: The World Bank.
FRAGILE AND CONFLICT-AFFECTED STATES IN THE REGION
PER CAPITA GROWTH RATES 1995-2012: Fragile: 1.2% Non-fragile: 2.3% Non resource-rich: 1.7% Resource-rich: 2.6%
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1995 1998 2001 2004 2007 2010
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
SSA Resource richNon-resource rich Fragile
Source: World Bank, Africa’s Pulse vol. 9 Note: The index presented in this figure depicts the cumulative growth in real growth per capita from 1995 to 2012 in Sub-Saharan Africa and sub-
groups. We use the GDP in U.S. dollars at 2005 prices from the World Development Indicators.
Growth in GDP per capita in SSA by country groups, 1995-2012 (Cumulative growth index , 1995=100)
NON-FRAGILE AND RESOURCE-RICH COUNTRIES GROW FASTER
RECENT GROWTH PERFORMANCE: 1995-2012
Country Resources
Features of Expansionary Phases
Start End Duration (years)
Growth (ppa) GDP p/c (%) GDP (%)
I. Resource-rich countries Oil producers
Equatorial Guinea 1992 2008 17 15.6 18.8 Angola 1994 2008 15 6.5 9.7
Sudan 1995 * 18 3.2 4.6 Chad 1997 2005 9 6.2 9.8
Nigeria 2000 * 13 5.3 7.9
Nonoil resource abundant Liberia 1996 2002 7 23.1 28.7
Liberia 2005 * 8 7.2 10.6 Mozambique 1996 * 17 4.7 7.4
Tanzania 1998 * 15 3.5 6.2 Botswana 1999 2008 10 3.5 4.9
Ghana 2002 * 11 4.3 6.8 Namibia 2002 * 11 3.5 4.9
Sierra Leone 2002 * 11 5.1 8.2 Zambia 2003 * 10 3.2 6.0
TWENTY-TWO FAST GROWERS: THIRTEEN RESOURCE-RICH COUNTRIES
… AND NINE NON RESOURCE-RICH
Country Resources
Features of Expansionary Phases
Start End Duration (years)
Growth (ppa) GDP p/c (%) GDP (%)
II. Non-resource-rich countries Mauritius 1984 * 29 4 4.9 Cape Verde 1992 * 21 6.8 8.4 Uganda 1993 * 20 3.5 6.8 Burkina Faso 1995 * 18 3.2 6.1 Malawi 1995 1999 5 4.4 6.6 Rwanda 1995 * 18 5.7 9.5 Lesotho 2003 * 10 3.4 4.3 Ethiopia 2004 * 9 7.1 9.8 Central African Republic 2006 * 7 4.6 6.5
PER CAPITA GROWTH RATES 1995-2012: Fast-growers: 3.3% Slow-growers: 0.9%
Share of GDP and total population of SSA sub-groups, selected years
THE FAST-GROWING 22 ACCOUNT FOR OVER HALF OF AFRICA’S PEOPLE
Source: World Bank, Africa’s Pulse vol. 9
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
GDP Population GDP Population
Share as of 1995 Share as of 2012
SSA Fast Resource Rich SSA Fast Non-Resource Rich
SSA Slow-Growing
(as % of the region)
GROWTH SPURTS OVER TIME
At the peak of Africa’s boom, just before the global financial crisis, twenty countries were in a rapid growth spurt simultaneously – of which 60% were resource-rich.
Post-crisis, there is a more even balance between resource- and non-resource rich countries.
0
5
10
15
20
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
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98
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99
20
00
20
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09
20
10
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20
12Nu
mb
er o
f co
un
try-
year
ob
serv
atio
ns
Resource rich Non resource rich
Source: World Bank, Africa’s Pulse vol. 9 Note: The figure depicts the number of countries experiencing growth spurt episodes each year from 1990 to 2012. The data on real GDP per
capita used to compute these spurts is expressed in US$ at 2005 prices
OUTLINE
1. Africa’s recent growth performance
2. Elements of a growth taxonomy a) Natural resource endowments
b) Fragility and conflict
c) Fast vs. slow growers
3. Growth decompositions a) Components of aggregate demand
b) Sectors of activity
c) Factor accumulation and productivity
4. Conclusions
DEMAND COMPONENTS: FAST VS. SLOW GROWERS
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
C I G X M
Fast Growing SSA countries
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
C I G X M
Slow Growing SSA countries
Source: World Bank, Africa’s Pulse vol. 9 Note: The data on the components of aggregate demand (household consumption, investment, government consumption expenditure, exports and
imports) is expressed in US$ at 2005 prices
Rapid growth is associated with large investment expansions, and active engagement in international trade.
Expansion in aggregate demand in SSA by country groups, 1995-2012 Cumulative variation since 1995
DEMAND COMPONENTS: RESOURCE VS. NON-RESOURCE RICH
Source: World Bank, Africa’s Pulse vol. 9
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
C I G X M
1.0
1.5
2.0
2.5
3.0
3.5
4.0
19
95
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96
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97
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98
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99
20
00
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20
02
20
03
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20
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20
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20
10
20
11
20
12
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
C I G X M
Resource Rich Non Resource Rich
Investment booms were almost twice as large in resource rich countries – increasing trade deficits. Non-resource rich rapid growers: investment-driven growth and rising trade surpluses.
GROWTH RATES BY SECTOR: SSA VS. OTHER DEVELOPING COUNTRIES
Relative to other developing countries, SSA is characterized by faster growth in the natural resource sector and agriculture. Services grow rapidly in both samples.
1.0
1.5
2.0
2.5
3.0
3.5
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
Agriculture Manufacturing
Resources Services
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
2008
20
09
20
10
20
11
20
12
Cu
mu
lati
ve g
row
th in
dex
(1
99
5=1
.0)
Agriculture Manufacturing
Resources Services
SSA Developing areas
Source: World Bank, Africa’s Pulse vol. 9 Note: Resources sector includes: construction, mining and quarrying and gas, electricity and water.
ECONOMIC TRANSFORMATION
Fast-Growing SSA Countries, Resource Rich Fast-Growing SSA Countries, Non Resource Rich
0
10
20
30
40
50
60
Agriculture Manufacturing Resources Services
1995-99 2007-11
0
10
20
30
40
50
60
Agriculture Manufacturing Resources Services
1995-99 2007-11
Source: World Bank, Africa’s Pulse vol. 9 Note: Resources sector includes mining and quarrying, construction and electricity, gas and water
As a result, Africa’s structural transformation is bypassing manufacturing.
FACTOR ACCUMULATION AND TFP GROWTH
Source: World Bank, Africa’s Pulse vol. 9
-2%
-1%
0%
1%
2%
3%
4%
5%
Fast-growing SSA Slow-growing SSA Fast-growing SSA,Resource Rich
Fast-growing SSA, Non-Resource Rich
Physical Capital Human Capital Total Factor Productivity
Except in fast-growing resource-rich countries, Africa’s growth appears to be driven by factor accumulation, rather than productivity growth.
NATURAL RESOURCES ARE A FORM OF CAPITAL: WEALTH-PRESERVATION REQUIRES THAT IT BE REPLACED BY OTHER FORMS OF
CAPITAL
Source: World Bank, Africa’s Pulse vol. 9
-10
-5
0
5
10
15
2019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
200
3
2004
2005
2006
2007
2008
2009
2010
Adjusted net savings (% of GNI) Gross savings (% of GNI)
Gross and adjusted net savings in SSA, % GNI
0
1
2
3
4
5
6
7
8
9
1 8 16 23 31 38 46 53 61 68 76 83 91 98
Perc
ent
gro
wth
in c
on
sum
pti
on
Consumption expenditure percentile
Growth Incidence Curve, 2004-2010
GROWTH PATTERNS ARE ALSO OFTEN NOT INCLUSIVE
In one African country, average p.c. household consumption grew by 6.5% between 2004-2010. But whereas the top 5% of the population experienced annual growth rates of almost 8%, the bottom 5% grew by between 1% and 3%.
Source: estimates based on household surveys from “Survey-based Harmonized Indicator Program (SHIP)”
OUTLINE
1. Africa’s recent growth performance
2. Elements of a growth taxonomy: a) Natural resource endowments
b) Fragility and conflict
c) Fast vs. slow growers
3. Growth decompositions a) Components of aggregate demand
b) Sectors of activity
c) Factor accumulation and productivity
4. Conclusions
IN SUM: WE CAN CELEBRATE…
• Almost twenty years of resilient African growth
• With per capita rates around 2.4% in the last decade
• Almost everywhere, this growth is investment-driven (rather than consumption)
• Fast-growing non resource-rich economies generally have solid balance of payment profiles
… BUT THERE IS NO ROOM FOR COMPLACENCY
• African living standards remain at less than 1/20 of European living standards
• Growth is uneven across countries: 22 countries did not record a “growth spurt” over the 1995-2012 period
• Growth is faster among resource-rich economies, which appear to be dissaving, and are more vulnerable to terms-of-trade reversals.
• Productivity growth appears limited to resource-rich countries. (Growth is happening on the “extensive margin”)
• Africa’s structural transformation is at best incomplete
• In many cases, growth is not as inclusive as elsewhere
IMPLICATIONS FOR POLICY
The four-part roadmap for sharing Africa’s growth remains key:
1. Maintain strong macroeconomic discipline
2. Build better human and physical capital
3. Promote growth in the places and sectors where the poor are…
4. … and/or create social protection and promotion systems that enable them to share in growth elsewhere.
IMPLICATIONS FOR POLICY
But add an African productivity agenda:
5. Governance and regulatory reform: “simple rules that apply equally to everyone – in business and politics”
• Promoting competition can lower transport and energy costs
6. A capital-conversion agenda for resource-rich countries
• Resource capital into a portfolio of human, physical and financial capital
7. Country-specific diagnostics to promote pro-poor growth
• African countries are different, and so will their solutions be
THANK YOU!
