Re-engineering growth in an uncertain...
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1 Re - engineering g rowth in an uncertain world Albert G. Zeufack Chief Economist, Africa Region World Bank
Transcript of Re-engineering growth in an uncertain...
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Re-engineering growthin an uncertain world
Albert G. Zeufack
Chief Economist, Africa Region
World Bank
1. Faltering growth, yet signs of resilience
2. Africa can seize a bigger and better opportunity
3. Boosting productivity and strengthening the social contract
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1. Faltering growth, yet signs of resilience
The commodity price super-cycle has ended…
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Source: The World Bank (2016) World Bank Commodities Price Data; IMF (2016) Commodity Price Outlook & Risks.
And access to financing has further tightened
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10
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30
40
50
2013 2014 2015 2016 Jan-Aug
Capital Flows to Sub-Saharan Africa
Equity issue
Bond issue
Bank loans
US$, billions
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300
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700
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1100
1300
1500
Jun-11
Sep
-11
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c-11
Mar-12
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Mar-13
Jun-13
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De
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Mar-14
Jun-14
Sep
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De
c-14
Mar-15
Jun-15
Sep
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De
c-15
Mar-16
Jun
-16
Sep
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Sovereign Spreads
Africa region Emerging markets Gabon
Ghana Nigeria South Africa
Basis points
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Source: The World Bank (2016) Africa’s Pulse
Currency pressures have fueled inflation
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-70
-60
-50
-40
-30
-20
-10
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Ja
n-1
4
Ap
r-1
4
Ju
l-14
Oct-
14
Ja
n-1
5
Ap
r-1
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Ju
l-15
Oct-
15
Ja
n-1
6
Ap
r-1
6
Ju
l-16
Angola
Ghana
Mozambique
Nigeria
South Africa
LCU/US$, percent change since January 1, 2014
0
5
10
15
20
25
30
35
40
Jan
-10
Jul-1
0
Jan
-11
Jul-1
1
Jan
-12
Jul-1
2
Jan
-13
Jul-1
3
Jan
-14
Jul-1
4
Jan
-15
Jul-1
5
Jan
-16
Jul-1
6
Angola
Kenya
Mozambique
Nigeria
Zambia
Year-on-year, in percent
Source: The World Bank (2016) Africa’s Pulse
Year-on-year, in percent
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Mounting Domestic Headwinds
• Policy Uncertainty
• Terrorism
• Elections
• Natural Disasters
Leading economic growth to dip to a two-decade low… And negative income per capita growth…
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Source: The World Bank (2016) Africa’s Pulse
Real GDP Growth 1.6Real GDP Growth in
2016
2.7Population Growth
-1.1Real Per Capita
Growth
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But growth performance is not homogenous across the continent:41% of Africans live in countries showing resilience amid weak regional growth
Source: The World Bank (2016) Africa’s Pulse
We cannot continue relying on commodities
10Source: Angus Deaton, 1999
Real coffee and cocoa prices 1900-1998 Actual and forecast prices for copper
Source: World Bank data
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“…These figures illustrate a number of features of commodity prices that have been important both in the history of Africa, as well as for the commodity price literature in economics.
…Putting the matter conservatively, real commodity prices show distinct lack of a positive upward trend; owners of a constant flow of primary commodity would not have seen much growth in their real income since 1900....”
Angus DeatonLaureate of the 2015 Nobel Memorial Prize in Economic Sciences
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2. Africa can seize bigger and better opportunities
Grabbing opportunities for African
exports of higher value products
and services in Asia
Deepening regional trade at home
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Rising consumption in East Asia: An Opportunity for African exports of goods and services
US$ 9.5 trillion
Private consumption in 2010 East Asia and Pacific; 34% of the global private consumption; higher than the Euro Area!
$25 Billion per year
East Asia demand for world’s fish and seafood, a quarter of world imports
US$ 16.3 Billion
Asia-Pacific region's chocolate market by 2018
3.2 Billion People
The size of the Asia’s Midle-Class Population, 66% of the Global Middle Class by 2030
340 Million
The number of international tourism departures from East-Asia and Pacific & South Asia in 2014, 28% of the world total
50%
East and South-East Asia’s share of Global coconut and cashew nut Imports
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5
10
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2009 2020 2030
In 2
00
5 P
PP
US
do
lla
rs,
bil
lio
ns
Spending by the Global Middle Class
North America Europe Asia Pacific
Asia-Pacific region's chocolate market will increase by around 23% by 2018!
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100
200
300
400
500
600
2011 2012 2013 2014 2015
Chocolate Import Volumes (China,
Million US$)
Source: International Trade Centre – International Trade Statistics 2001-2015
0.0
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0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2008 2009 2010 2011 2012 2013 2014 2015
In T
on
nes
, mill
ion
s
Cocoa beans Cocoa shells, husks, skins, etc.
Cocoa paste, butter, powder Chocolate
Cocoa exports from Cote d’Ivoire
Making it sushi-ready?Mauritania octopus exports to Japan
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Morocco Mauritania China Viet Nam Thailand
US
$ m
illi
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s
In M
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ic T
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nes (
tho
usah
ds)
Top octopus exporters to Japan
Volume Value (RHS)
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China Morocco Viet Nam Mauritania Spain
US
$ m
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on
s
In
Metr
ic T
on
nes (
tho
usah
ds)
Top octopus exporters in the world
Volume Value (RHS)
Top octopus exporters to Japan Top octopus exporters in the world
Source: COMTRADE
Breaking into automotive global supply chains: Auto assemblers in South Africa
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Source: Alfaro, Bizuneh, Moore, Ueno, and Wang (2012) South Africa Automotive Cluster. Harvard Business School
China’s FDI to Sub-Saharan Africa is still low
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• Including in Asia
Leveraging African Diaspora
Deepening intra-regional trade
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Source: IMF Direction of Trade Statistics
3. The Policy Mix
Squarely Focus on policies to Boost productivity and strengthen the
social contract
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-2.0
-1.5
-1.0
-0.5
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1.0
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2.0
2.5
3.0
1961-2014 1961-1973 1974-1994 1995-2008 2009-2014
Average Periods
Contribution of k Contribution of Human Capital TFP
Capital accumulation drove most of the growth not TFP
Cereal Yields (Metric Tons/Hectare)
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1
2
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19
61
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63
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3.27
2.02
1.03
1.11
2.94
2.00
2.04
0.60
0 0.5 1 1.5 2 2.5 3 3.5
East Asia Pacific
Latin America &Caribbean
South Asia
Sub-Saharan Africa
TFP Growth (% per year)
2001-2012 1991-2000
United States
East Asia
South Asia
Sub-Saharan Africa
Total Factor Productivity Growth
1.38
2.10
0.57 0.59
0.52
0.28
1.341.12
0.01
0.97
0.73
1.76
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1961-1984 1985-2012 1961-1984 1985-2012
SSA Other Developing Regions
Agr
icu
ltu
re O
utp
ut
Gro
wth
(%
per
yea
r)
Land Inputs TFP
Sources of Agriculture Output Growth
Source: Goyal, A. and Nash. J. 2016 AFR Regional Flagship Study Forthcoming
Agricultural growth largely driven by area expansion
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Policies for boosting productivity
1. Close the Infrastructure gap
2. Ensure markets’ contestability• Competition (entry and exit): dismantle
cartels
• Factor markets (land and labor)
• Investment climate
3. Reduce the distance to the technological
frontier
• Quality Education/Skills
• ICT
• Technology Adoption and Adaption
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Policies for reducing within-country inequalities and
strengthening the social contract
1. Youth Employment
2. Urban-rural divide in public services delivery
3. Gender gap in education and health
Five action-items
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1. Aggressively and relentlessly attract and nurture private investments in infrastructures, manufacturing and high value services
2. Fix Utilities once for all. They do make money elsewhere in the world when they are well managed
3. Step-up reforms of the regulatory framework to ensure markets’ contestability
4. Invest in skills and technology to reduce the distance to the technological frontier
5. Mobilize more revenues domestically, especially from land and real estate, to deliver “spatially and gender-blind” quality public services
Close the gap in physical infrastructure
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Current status Needs
Electricity access Rate 32% Universal access by
2030
Generation Capacity (Per year) 1 – 2 GW per year 6 – 7 GW per year
Infrastructure Investment (Per year) USD 9 – 10 Billions 40 – 50 Billion
Large gaps in energy at all levels of the sector
Unlocking the potential of global capital markets and private sector to finance infrastructure development
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• Africa’s annual infrastructure needs
estimated at US$ 93 billion (15% of
region’s GDP).
• Infrastructure financing gap of US$ 48
billion per year:
• About US$ 17.4 billion could be
financed through operational
optimization
• PPPs potentially can contribute
annually with US$ 12 billion (40% of
optimized gap)
Source: Dornel, Arnaud (2014) Project Finance for Infrastructure in Africa. Washington, DC: The World Bank
Improving procurement frameworks: Capacity, competition and transparency are key!
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High Income Upper Middle Income Lower Middle Income Low Income
SCO
RE
(1-1
00
)
Benchmarking PPP Procurement scores by area and income-level group
Preparation Procurement USPs Contract Mgm Average
Source: World Bank, Benchmarking PPP Procurement 2017.
Note: PPP = public-private partnership; USP = unsolicited proposal
30Source: Adapted from Trimble et al. (2016)
Only Seychelles
and Uganda
cover their
total current
cost
Lesotho and
Zambia
operate at less
than 10 cents
per kwh
Fix utilities: Nearly all electricity utilities running at loss on the continent
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Comparison of Costs and revenue Collected per kWh billed (in 2014 U.S. Dollars )
Expenditure per kWh Revenue per kWh
Reduce logistic costs
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Average monthly downtime due to power outages
Source: Zheng, Douglas (2015) Global experiences with Special Economic Zones: Focus on China and Africa.
Average time needed for imports through major seaport for customs clearance
Invest in ICT to anticipate the changing jobs landscape
Urban-rural gap in quality of education
Source: World Bank Service Delivery Indicators
Gender gap in education
Source: World Bank’s Education Statistics
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Urban-rural gap in health
Source: World Bank Service Delivery Indicators
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Maternal mortality still too high in Sub-Saharan Africa
Source: The World Bank - World Development Indicators
Accelerate progress toward universal health care in Africa
• More and better spending and effective financial protection
Financing
• People-centered, quality and multi-sectoral action
Services
• Targeting the poor and marginalized and leaving no one behind
Equity
• Strengthening health security
Preparedness
• Political and institutional foundations for the UHC agenda
Governance
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Thank you!
