Accounting for natural capital?The case of the African Economic Outlook

HB Solignac-LecomteOECD Development CentreDAC Environet, 20 Feb. 2014

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Chapter 1: Macroeconomic ProspectsAfrica’s Growth: resilience in the face of

headwinds from the global economy

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(e)

2013(p)

2014(p)

0

1

2

3

4

5

6

7

Africa Africa excluding Libya

Gro

wth

Rat

e (%

)

Chapter 2: External Financial Flows and DRMFDI is picking up

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(e)

2013 (p)

-30

-10

10

30

50

70

90

110

130

150

170

190

210

TOTAL

Remittances

ODA

FDI

Portfolio invest-ments

USD

bill

ion

Chapter 3: Trade and Regional IntegrationTrade: China in the lead

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

50

100

150

200

250

Africa's exports to selected partners (2000-2011)

EU-27

China

USA

India, Brazil, Korea, Turkey, Russia

Intra-African

Billion USD

6

Chapter 4: Human DevelopmentSlow progress

Average change in income and non-income human development indices, 2005-12

7

Chapter 5: Political and Economic GovernancePublic protest up, civil violence down but > 2011

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

0

100

200

300

400

500

600

Public protest (base 100 = 2000)

Civil Violence (base100 = 2000)

2002 (no theme)2003 Privatisation2004 Energy2005 SME Financing2006 Transport2007 Water and sanitation2008 Technical & Vocational Skills2009 Innovation and ICT 2010 Public Resource Mobilisation and Aid2011 Africa’s Emerging Partners

2012 Promoting Youth Employment2013 Structural Transformation and Natural Resources2014 Global Value Chains and Africa’s Industrialisation

Chapter 6: Special Theme

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Chapter 6: Special Theme 2014 “Global Value Chains and Africa’s Industrialisation”

Potential for integrating GVCs :

1. Extractive industries: backward linkages from oil, copper, diamonds, gold. e.g. MOZAL cluster.

2. Agriculture /agroindustry : Cotton, coffee, tobacco, flowers, horticulture, cashews, cut flowers … But so far mainly isolated success stories, no massive upscaling.

3. Light manufacturing: few success stories (Mauritius, Tunisia, Morocco, Lesotho) despite preferential access to EU, US markets

4. Tradable services: Some successful companies across the region, e.g. Kenya: Business Process Outsourcing (BPO), Call Centers.

GVC do have potential in certain areas – but unlikely to become strong drivers of the desired structural change.

Greatest potential for inclusive growth in high-value agriculture.

Source: Tilman Altenburg (German Development Institute)

Farmer Processor RetailerLogistics

Blue Skies’ ‘fresh from harvest’ value chain

• Employment• Income distribution• Technology and skills transfer

Chapter 6: GVCs (cont.)Cut fruit from Ghana

Source: Blue Skies

Chapter 6: GVCs (cont.)Textile/clothing in Ethiopia, Tanzania

• over 28000 employees in China and Cambodia, export to the US and EU markets

• hired over 1000 local workers in Dar es Salam, Tanzania in 2013• Incentives: stable political environment, good relations with China, SEZ

• Sourcing knitwear from MAA Garment & textile, in Mek’ele• Lower wage cost, delivery time to EU shorter by 1/3 vs. China• Ethiopia’s textile & apparel exports grew by 28% / 12 months to June

2012 = US$84.6m (compared to total German imports alone $17.4bn)• Next: Tesco (UK), Primark (IRE)

Source: Tang Xiaoyang, Tsinghua University

Chapter 6: GVCs (cont.)Regional Value Chains: The rise of supermarkets

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Who will benefit?• Supermarkets aim for preferred suppliers• Small holders ill-prepared to meet

demands (quality, packaging etc.)• But experience of Kiambu’s small holders

in Kenya shows that it can be done • Though experience of Nicaragua farmers

with Walmart warrants caution• South African supermarkets in

the lead• Kenyan supermarkets focused in

East Africa (Nakumatt eyeing Nigeria)

• International players entering (Spar, Walmart )

Can supermarket increase global reach of African manufacturers?

Source: Julius Gatune (African Centre for Economic Transformation)

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54 Country NotesStrictly comparable, 15 pages, 7000 words

2-year Forecasts • Growth• Inflation• Current account, • Budget balance

Analysis• Macroeconomic Policy• Economic and Political Governance

• Incl. Natural Resource Management & Environment (300 words)

• Social Context and Human Development• Thematic Analysis: GVCs

African Economic Outlook

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Macro Trade Human GovernanceFinance

Algeria Angola Benin

Ethiopia

Zambia Zimbabwe

Statistical Annex

Special Theme: Youth Employment, Natural Resources, GVCs …

FORECASTS

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Drivers of growth = “Shifting wealth” (including the commodity price boom), demography and better macroeconomic policies

But 5% growth is not enough to take-off

Tackling the job challenge: structural transformation, private sector development

Two drivers: natural resources, rising consumer demand => Territorial strategies, product-specific

The Big Picture: Is Africa Rising?

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The “environmental risks faced by developing countries today call for a radical shift in how we view growth and development”

OECD (2013) Putting Green Growth at the Heart of Development.

Are we missing something?

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1. Integrate the environment in country growth forecasts (upgrade model) → data?

2. Add section in country notes → tokenistic?3. Add selection of environmental indicators to

statistical annex→ visibility, impact?4. Chapter on environment → add?5. Other?

Options for “Greening” the AEO?

Additional issues:• Green Economy, Green

Growth, Sustainable development?

• Political economy

Source: Stoever, J. Options for Greening the AEO.

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Option 1 - Integrate the environment in country growth forecasts (upgrade model)

+ truly integrates environmental factors

into the (traditional) economic growth model

Results are in a language that is familiar to policymakers/the audience of the AEO

Analytically strong and theory-based approach

- Theoretically and empirically

challenging Large workload and data

requirements Uncertain outcome Dependent variable is still GDP

growth (close to GG concept, not necessarily a weakness)

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Option 2 – Add Section in country notes

+• Textual closeness the of environment

and economic growth emphasizes their close connection

• Brings the environment to the attention of the readers of the country notes

• Individually tailored paragraphs for each country, specific contexts can be incorporated and/or highlighted

• Can be combined with options 3&4

-• Add-on solution, no full integration• It does not seem logically

consistent with the current structure of country notes to include a separate fairly standardized paragraph on the environment in all country notes

• Workability (all authors of country notes have to be involved)

• Natural resources are already included in the country notes when they are an important component of GDP growth

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Option 3 - Add a section on the environment in the statistical annex

+• Relatively little effort required• Has been done in other reports (e.g.

ADB, 2013; World Bank, 2013b)• Easy and quick to implement• Can be combined with options 2&4• Only one point for discussion:

selection of indicators (and ways of presentation)

-• Will not generate much attention

compared to other options• Added, but not really integrated in

AEO (as stand-alone option)• Without explanations: limited

interpretation• Does not “change how we think

about growth” if numbers are not put into context

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Option 4 - Add an extra chapter on the environment to the AEO

+• A special theme would generate

public interest• An additional chapter 6 would give

the environment the space and visibility it deserves in the logic of comprehensive wealth

• Can be combined with options 2&3

-• Add-on solution• Chapter 6 (Special theme): partly

very close to 2013 special theme on natural resources

• Environment & poverty overlaps with other chapters

• (Minor) re-organization of other chapter(s) necessary

• “far away”, separates the environment from economic growth part

www.africaneconomicoutlook.org

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