Transcript ENABLING GROWTH

ENABLING GROWTH:
PERSPECTIVES AND
CHALLENGES
A Presentation of the African
Development Bank, on the occasion
of the Borderless Alliance Conference
2014
Sheraton Hotel and
Towers,
Ikeja, Lagos, Nigeria
26 – 28 February
2014
Africa’s success story
Economic outlook for West Africa
Growth and Inclusiveness
Outline
Pathway to economic transformation
Enablers and drivers of growth?
Optimism on the horizon
Regional Bank Group Portfolio
Performance West Africa
Africa’s
success
story…
Amid sustained global economic crisis,
African economies remain resilient
Six of world’s 10 fastest growing
economies in Africa
Growth outperformed both Latin America
and developed economies over the last 5
years,
Latest forecast: GDP growth over the
period 2013–2015 is 5 percent,
outperforming many developed countries.
Steady improvements in economic policy
and the business environment
Inflation lower, exchange rates more
aligned than 20 years ago.
FDI inflows averaged 3 percent of GDP
annually between 2001 and 2011,
compared to around 1.2 percent of GDP in
previous decade
Economic
outlook
for West
Africa
…similar
trends
Fastest growing region of the continent,
growth around 6.7% in 2013 and estimated to
reach 7.4% in 2014.
growth led by strong performance of oil and
mining sectors, accounting for the bulk of the
USD 15.1 billion FDI inflows registered in 2012,
the largest volume of FDI of any other regions
in the continent.
Nigeria, Guinea, Ghana, Niger’s resource
sectors attracted an estimated 88% of total
FDI to the region.
Economic recovery from political stabilization
and the Sahelian drought, key determinants of
double digit growth in Ivory Coast and
economic recovery of Mali, Senegal and the
Gambia respectively
Monetary policy of the WAEMU continued its
prudent stance with priority given to
controlling inflation
Growth
and
Inclusive
ness
Amidst these successes, important challenges
however remain…
First, growth not successfully translated into
poverty reduction; not inclusive; jobs not
created; income inequality has increased.
Second, domestic policies seemingly
preoccupied with crisis management/
managing domestic politics,
rather than on strategic measures to ensure
economic transformation.
The continent has experienced
deindustrialization, declining agricultural
productivity, rising food and nutrition
insecurity
Third, growth largely commodity driven.
Africa remains vulnerable to continuing
economic frailty in advanced economies and
fear of slowdown in emerging markets,
particularly China
Pathways to
Econ
Development:
No single
pathway to
economic
transformat
ion, but
common
trends
observable
First, structure of the
economy changes
depicting increase in
share of manufacturing
coupled with sustained
decline in agriculture
Second, as share of
agriculture
employment falls, that
of the total labour
force in other sectors
of the economy
increases
Third, economic
activity shifts from
rural areas to the cities
leading to an increase
in the degree of
urbanization
The middle class become
larger, changes happen
in the way politics works,
with emphasis on marketfriendly policies and
government become
more effective
Enablers/
Drivers of
Growth
…
So what
then are
the
enablers
and
drivers of
growth?
Enablers…
Creating capable developmental states
In
all
cases
where
structural
transformation has succeeded, the state
has played a crucial role in the process.
Unfortunately, West Africa is arguably one
of the most fragile from a political and
security stand point.
Nearly half of the countries classified as
fragile states, the region exemplifies the
problems of state building
Trade and
Industrialization
Enablers
of
Growth
(2)
Trade, a key engine of
growth; Its catalytic
role has been clearly
evident in many
regions of the world,
especially China
In West Africa: poor
cross-border
and
trade
facilitation
infrastructure;
weaknesses
of
human, national and
regional institutions
capacities, property
rights
and
legal
enforcement remain
highly
relevant
challenges to trade
and
regional
integration.
Market fragmentation
also remains a critical
barrier.
Infrastructure
Development
Africa faces an
acute shortage of
quality
infrastructure
infrastructurefinancing gap at
US$390 billion, the
bulk of which is for
power and energy.
Beyond these, and
in
a
longer
perspective, the
gap
can
be
estimated to run in
trillions of dollars.
Pursuing climate
resilient development
Enablers of
Growth (3)
Growing climate
change concerns
imply that Africa
may need to take
a different
development path
from that followed
by other regions of
the world
leaders must
engage other
global partners to
ensure that the
continent has
resources and
sufficient capacity
to pursue a green
path to industrial
development
Harnessing Regional
Integration
Regional integration
critical in promoting
peace and security.
regional cooperation
in the development of
infrastructure will
lower transaction
costs, enhance the
development of
regional markets, and
make manufacturing
production and
exports more
competitive.
Regional integration
can also contribute to
reducing the
regulatory burden
facing African firms
and boost intraAfrican trade.
Good leadership
Drivers of
growth (1)
In spite of
economic model
operated,
experience
indicate that
success comes
from a political
leadership that
has vision and
capacity to
implement it
Political stability is
critical for national
planning,
sustaining
macroeconomic
policies and for
creating a good
investment
climate.
Climate change
a key factor in
Africa’s growth
trajectory
impact of climate
change on
agricultural
productivity, food and
water security,
disease control, biodiversity and land
degradation among
others, very critical
The recent
drought in the
Sahel region of
West Africa has
shown the
vulnerability of the
region to climate
change.
Urbanization
Drivers of
growth
implies important
spatial
interactions at the
national level that
can provide
transformative
growth
opportunities for
Africa, but also
serious challenges
Strategies will be
needed to ensure
that benefits of
urbanization are
maximized while the
negative effects are
mitigated
Science, technology
and innovation
Africa’s sustained
growth,
competitiveness
and
economic
transformation
will
require
investments
in
new technologies
and innovations
Socio-Economic equality,
investing in human and
physical development
By 2040, Africa’s labour
force is projected to
reach 1.1 billion,
overtaking China’s or
India’s.
Africa has more than 500
million people of working
age (15 to 64 years).
Drivers of
growth
In West Africa about 40%
of the population is under
15, and nearly 70%
under 30.
Converting this
population bulge into a
“demographic dividend”
will require aggressive
job creation, with
corresponding innovative
investments in health and
education (particularly
education in science,
technology and skills
development).
Science, technology
and innovation
Africa’s sustained
growth,
competitiveness
and
economic
transformation
will
require
investments
in
new technologies
and innovations,
especially in the
areas
of
education, health
and bio-sciences,
agriculture,
and
clean energy
Managing natural resource
in a sustainable manner
Drivers of
growth
(2)
Africa richly endowed in
natural resource sector is
expected to generate, in net
present terms, about US$ 600
billion (US$30 billion per
annum)
in
government
revenue over the next 20
years.
Proper management,
including value addition, will
translate into substantially
improved fiscal positions for
governments, the private
sector and households; can
further create other forms of
wealth and accelerate poverty
reduction
Effective private and
public sector
development
In Africa, the sector
is dominated by the
informal sector
Except South Africa,
formal private sector
accounts for only 10
per cent of total
employment,
Private
sector
initiatives as well as
those undertaken in
collaboration with the
public sector will be
important in creating
employment and in
adding value to
Africa’s
natural
resources
Innovative financing
mechanisms
Africa needs to bridge an
infrastructure gap,
estimated at USD$40
billion a year in lost
growth
Drivers of
growth
(3)
Africa’s heavy reliance on
Aid and on revenues from
volatile commodities
prices, not ideal to
support economic
development
Global factors and the
Changing Rules of the
Game
Africa needs to pay heed
to global forces and the
changing rules of the
game
China’s influence in
Africa will increase
considerably in the
coming decades,
Enhanced domestic
resource mobilization has
emerged as a more
sustainable model to
shore up financing gaps
and for self–reliance.
as China rebalances its
model
towards
a
domestic consumption
rather than an export led
economy there will be
implications for Africa’s
long-term
growth
prospects
Some potential sources:
mobilizing public finance;
managing natural resource
revenues; tackling illicit
capital flows; sovereign
wealth funds,
Africa should continue to
see the older markets of
Europe and America and
South-South Cooperation
as part of a broader
diversification strategy
Concluding
views…
There is
Optimism
on the
horizon
The African Development Bank shares that
perspective.
The Bank is acutely aware of the need to
sustain the tempo
the Bank together with the AU and the
UNECA actively involved in a number of
initiatives, among them, the Agenda 2063
The Bank is promoting new, innovative and
sustainable ways of financing Africa’s
development, key among them the “Africa
50 Fund”
The Bank launched the “Ten Year Strategy
(2013 – 2022”, anchored on transformation,
inclusive growth and transition to green
economy
In support of Agenda 2063, the Bank is
dedicating this year’s annual meetings
scheduled for Kigali, Rwanda, to the topic
“The Next 50 Years: The Africa We Want”
Regional
Bank Group
Portfolio
Performance
West Africa
(1)
Bank Operations guided, among others, by
the RIS/ West Africa Regional Integration
Strategy Paper (WA-RISP)
key pillars are: (i) linking regional markets
and (ii) building capacity for effective
implementation of the regional integration
agenda
Key areas of intervention: construction and
rehabilitation of transnational roads,
hydroelectric dam and plants, high tension
transmission and interconnection lines,
integrated financial system in the West
Africa Monetary Zones (WAMZ); soft sides
of infrastructure dealing with trade
facilitation
as at December 1st, 2013, the Bank's
regional operations portfolio in West Africa
included 43 multinational operations
covering a global amount of $1,023.31
billion
Regional
Bank Group
Portfolio
Performance
West Africa
(2)
portfolio predominantly focused on the
infrastructure sector, especially energy and
transport, which accounts for 26
interventions costing total of $787.04
million or 76.91% of commitments.
The finance and social sectors account for
14.95% and 4.79% respectively.
under a renewed commitment to the
challenges of fragility, a new Initiative
currently being developed for the Mano
River Union subset of the ECOWAS, to
accelerate development, connect people
and build capacity
4 key sectors targeted: Energy,
Transportation, ICT and Trade Facilitation,
with projected cost implications of about
$4.5billion