1

State of the Africa Region

SUSTAINING GROWTHAMID

RISING GLOBAL RISKS

RISING GLOBAL RISKS

2

A more difficult global environment, underpinned by weak growth

3Source: World Bank DEC Global Prospect Group

Slowdown in trade

4

. . . and sharply lower and volatile commodity prices, signaling the end of the commodity super cycle

5Source: Bloomberg

CHALLENGES FOR AFRICA

6

Africa’s growth has been impressive, but recent growth trends are less robust

7Source: World Bank

0

2

4

6

8

10

12

SSA Oil-Rich Non Resource-Rich (Fast Growing)

Real GDP Growth(in %)

Average 2003-08 Average 2010-14

COMPOSITION OF GROWTH

8Source: World Bank

0

2

4

6

8

10

2003-08 2010-14 2003-08 2010-14 2003-08 2010-14

Sub-Saharan Africa Resource-Rich NonResource-Rich

Contribution of Economic Sectors to Growth (%)

Services

Resources

Manufacturing

Agriculture

Relative contribution of investment to growth has increased in resource-rich countries

Source: World Bank

9

34

39

19

85

45

37

12

17

9

27

10

11

-4

-2

0

2

4

6

8

10

12

2003-08 2010-14 2003-08 2010-14 2003-08 2010-14

Sub-Saharan Africa Oil-Rich NonResource-Rich (Fast-Growing)

Contribution of aggregate demand to output growth (%)

Net Exports

Public Consumption

Domestic Investment

Private Consumption

2003-082010-142003-08 2003-08 2010-14 2010-14

Oil-RichSub-Saharan Africa Non-Resource-Rich (Fast-Growing)

Capital accumulation is the main driver of growth

10

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Sub-Saharan Africa Resource-Rich NonResource-Rich NonResource-Rich -Fast Growing

Source of output per worker growth, 1995-2011 (percent per year)

Capital per worker Total factor productivity

Source: Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" forthcoming American

Economic Review, available for download at www.ggdc.net/pwt

Poverty remains high, with fragile countries sharply lagging in reducing poverty

-

50

100

150

200

250

300

350

400

0

10

20

30

40

50

60

70

80

90

100

1990 2012 2012* with NGA

No

. of p

oo

r pe

op

le (M

illion

s)

Po

vert

y h

ead

cou

nt

(%)

56

4337

284

338

389

Note: a) 2012* with NGA = using comparable and quality data, including Nigeria b) Rest are estimates from PovcalNet database. 11

Poverty headcount and number of poor

0

5

10

15

20

25

30

Fragile Non-fragile

Poverty reduction, 1996-2012, in percentage points

Worsening current account balances and downward pressure on currencies

Current account balance

12

Nominal exchange rate change

Source: IMF

Rising fiscal deficits are fueling the rise in debt

Fiscal deficit

13

Public debt

Source: IMF

Note: Republic of Congo received debt relief in 2010

The weight of concessional debt is declining, and countries are exposed to exchange rate risk

14Source: Bloomberg

Currency composition of public debt(in % of PPG debt)

Concessional debt(% of total external debt)

Yield on African sovereign debt has been increasing

15

Source: Bloomberg. JP Morgan Emerging Market Bond Index Yield for Africa. This graph represents the evolution of the secondary yield of African

sovereign debt

16

OPPORTUNITIES FOR GROWTH IN AFRICA

Boost in rice production since 2007, largely through increasing yields

2.8

4.7

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2000-2007 2007-2012

Mili

on

me

tric

to

n

Rice production increase

0

10

20

30

40

50

60

70

80

90

100

2000-2007 2007-2012

Yield contribution (%) Area contribution (%)

Source: Seck et al. 2013

Annual yield growth 2000-2007: 0.4% or 11 kg/haAnnual yield growth 2007-2012: 5.8% or 108 kg/haAnnual yield growth Asia (1960-2010): 50kg/ha

Africa’s domestic resource mobilization is low

Source: IMF

18

Tax revenues are low, with varying structures across countries

Source: IMF

19

0

2

4

6

8

10

12

14

16

Sub-Saharan Africa Resource-Rich NonResource-Rich

Tax Revenues Composition(in % of GDP)

Taxes on International Trade

Taxes on income, profits andcapital gains

Taxes on Goods and Services

Other Taxes

Pattern of trade reveals dependence on commodities, but also opportunities

20

SSA – Composition of exports, average 2010-14

Source: World Trade Integrated Solutions (WITS) database, 2015

SSA- Composition of imports, average 2010-14

% %

% %

1.6% rice

12%

18%

63%

6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010-2014

Imp

ort

Sh

are

(% o

f to

tal g

oo

ds

imp

ort

s)

Percent

Food Fuel Manufacturing commodities Others

10%

12%

16%

49%

13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010-2014

Exp

ort

Sh

are

(% o

f to

tal g

oo

ds

exp

ort

s)

Percent

Minerals and Metals Fuel

Manufacturing commodities Agricultural commodities

Others

21

High fertility rates reduce benefits of growth

0

1

2

3

4

5

Low fertility countries High fertility countries

Perc

enta

ge c

han

ge1

99

5-2

01

4 a

vera

ge

GDP

GDP per capita

GDP

GDP per capita

0

1

2

3

4

5

SSA MNA SAR LAC EAP OECD ECA

Total Fertility Rate (Births per woman)

Invest in human high-return capital

Few children in early child development programs despite proven high returns.

Few tertiary graduates, and few of them are in STEM fields.

22Source: African Center for Economic Transformation 2014

0

10

20

30

40

50

60

70

80

90

ECA LAC SSA SAR EAP MNA OECD

% o

f ch

ildre

n e

nro

lled

in e

arly

ch

ild e

du

cati

on

Source: World Development Indicators

STEM Non-STEM

0% 5% 10% 15% 20% 25% 30%

15 African countries

Global comparators

Percentage of population that graduates from tertiary education

Accelerate the reform agenda in energy

• Energy costs remain high

• High levels of subsidies are fiscally unsustainable

• Distribution companies are performing poorly

• Insufficient investment in maintenance

• High levels of commercial losses – a major obstacle to

private sector investment in production

• Good news -- private sector is increasingly involved in

energy production

• Need to sustain the reform agenda

CONCLUSION

24

MAJOR OPPORTUNITIES DESPITE CHALLENGES

1. Agriculture

2. Revenue Mobilization

3. Quality of spending

4. Energy

5. Demography

25