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Myths and Realities of Africa’s Development

Mthuli NcubeChief Economist and Vice PresidentAfrican Development Bank group2 May 2011DANIDA DEVLOPMENT DAYS, Copenhagen: 2-4 May 2011

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Africa’s Economic Growth:2000-2010

African growth is strong. Africa the 3rd fastest

growth region over 10 years

Africa did well out of financial crisis due to good economic management, and diversification

GDP level at US$1.6 billion at par with Brazil or Russia

Growth is being held back by factors such as infrastructure (taking away 2% of GDP growth)

Africa is natural resource rich

Growth not Inclusive

Source: AfDB

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Africa’s Socio-Economic Progress

Poverty levels are falling Per capita income is rising Inequality is rising Intra-Africa trade has risen slightly and

so has Africa’s share of world global trade

ICT access and penetration has increased substantially

Access to water and sanitation has not improved

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Africa’s Socio-Economic Progress….continued

Staple food yields have not improved Fertilizer consumption has fallen Under-5 child mortality has fallen Primary school completion rates are flat Number of fragile states has dropped Combustible renewables and waste to

generate energy is not increasing Cost of doing business has fallen Time required for business start-up has

fallen

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Regulatory Policy Improvements in Africa

Improvements in regulatory environment

Reforming countries grow faster

Investment climate is improving

Rising Middleclass of 300 million people critical to private sector growth

Source: McKinsey Global institute

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Intra-Africa Trade

Intra-Africa trade remains low compared to other regions

Investment in regional transport infrastructure and ports, is necessary

Source: AfDB

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Sub-Saharan Africa lags behind other developing regions on all dimensions

Regional connectivity is particularly lacking

0

50

100

150

200

250

300

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Infrastructure Coverage: SS Africa vs Other Low-income Regions

Sub-Saharan Africa

Other low-income coun-tries

Norm

alize

d u

nit

s

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Pow

er

: M

issi

ng lin

ks

Source: AUC, AfDB, WB presentation at UN Millennium Summit, September 2010

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Roads

: M

issi

ng lin

ks

Source: AUC, AfDB, WB presentation at UN Millennium Summit, September 2010

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ICT:

Mis

sing lin

ks

Source: AUC, AfDB, WB presentation at UN Millennium Summit, September 2010

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Africa’s Agriculture Performance

Agriculture sector is important as 60% of population in Africa depends on it

Staple crop yields remain flat

Fertilizer consumption low

Source: FAO

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Africa’s Governance Progress

Improvements in 3 areas of governance

No improvement in “voice and accountability”

Static in “government effectiveness”

Source: World Governance Indicators 2010

New Classification of African Countries

- Very low incom

e

- Macroeconom

ic instability

(e.g. Burundi, Sierra Leone)

- Low incom

e

- Macroeconom

ic stability

(e.g. Gam

bia, Niger)

- Low incom

e

- Macroeconom

ic stability

- Enabling business environment

(e.g. Ethiopia, Lesotho)

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Fragile States

Pre-Transition

Transition

Frontier Markets

Emerging Markets

- High income & growth

- Macroeconomic stability

- Diversified export base

-Financial markets

(e.g. Ghana, Kenya)

- High income & growth

- Macroeconomic stability

- Diversified export base

-Financial markets

(e.g. South Africa, Tunisia)

Oil Producers: additional criteria focusing more on capacity to manage oil revenues (e.g. Angola, Libya)

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Africa’s Development Challenges

Infrastructure Deficit (US$45 billion annually)

Opportunity but Better management of relationships with “new partners”: China, India, Brazil, Russia, etc

Regional integration Improving investment climate Promoting Domestic Direct Investment

(DDI) Development Small to Medium Scale

enterprises

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Africa’s Development Challenges….continued

Economic structural transformation Balancing “population dividend” with

“poverty challenges” Inclusive growth and Youth

Unemployment Higher education, vocation

education and skills development Financial inclusion Development of agricultural sector

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Africa’s Development Challenges…continued

Domestic resource mobilization Effective and transparent management of

natural resource revenues< e.g SWFs Dealing with illicit financial flows Piracy Leveraging ODA for private sector support Instituting flexible macroeconomic

management Ensuring “Strong, Sustained and Shared

Growth, which is preferably Clean” (SSSc)

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Thank You