PROGRAM EVALUATION - % ANNUAL GROWTH RATES

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Presentation Outline

• What wisdom have we gained so far to explain
  growth in Africa?
• Several explanations have been documented
• The survey papers form the 1960s to 1990s
• Trade and growth debate The evidence so far
• Africa in the 21st Century
• The set of conditions necessary for Africa to
  claim the 21st Century

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Presentation Outline (cont.)

1. Current emerging growth experience evidence and
   regularity of Africas economic opportunities
2. Addressing the binding constraints The growth
   diagnostic literature The software issues
   (policy directions) have been solved, but now the
   hardware the physical constraints remain

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The Survey of Issues

• Azam, Fosu and Ndungu (2001) summarises the
  issues up to 1990s
• Macroeconomic policy environment
• Macroeconomic uncertainty
• Human capital and regional effects
• External shocks and
• Trade, openness and growth
• Institutional and political uncertainty.

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Trade and Growth Debate

• But the trade, openness and growth debate still
  lingers and is important
• Enhances development permits exploitation of
  comparative advantage. This enhances
  productivity and hence growth
• The larger international market allows for
  economies of scale to be realised in the export
  sector
• International competition leads to reduced
  inefficiencies in exports production and results
  in adoption of more efficient techniques in the
  tradable goods sector
• An expanding exports sector makes available more
  resources and expands the productive sector.

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Eight Years into the 21st Century

• Can Africa claim the 21st Century? This question
  was asked in 2000 by a group of eminent African
  scholars in very important institutions. The
  answer was conditioned on
• Improving governance, managing conflict and
  rebuilding states
• Investing in people
• Diversifying exports, reorienting trade policies
  and pursuing regional integration

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Eight Years into the 21st Century (cont.)

• Reducing aid dependence and strengthening
  partnership
• Addressing poverty and inequality
• Lowering transactions cost through investments in
  infrastructure and information and
• Spurring agriculture and rural development.
• But, where are we now?

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What is emerging evidence in Africa8 years into
the 21st Century?

• There is emerging evidence in Africa that shows
  optimism for the future
• Growth and stability is slowly returning to SSA
• Export growth is similarly rebounding after
  decline between mid-1970s and mid-1980s
• Stability, likewise, is returning to many parts
  of Africa with reduced inflation and
• Political and social stability is also gaining
  ground as the number of cases of civil unrest is
  declining and more open political regimes are
  being established.

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Africas economic opportunities

• Collier (2007) highlights Africas economic
  opportunities premised on policy management and
  taking advantage of global markets
• Underscores the fact that growth opportunities
  are determined by geography and resource
  endowments and identifies four categories of
  countries
• Resource rich and land-locked
• Resource rich and coastal
• Resource scarce and land-locked
• Resource scarce and coastal.

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Africas economic opportunities (cont.)

• Best performing globally are coastal and resource
  scarce e.g. in Asia
• African population is skewed towards the globally
  slow growing category of land-locked and resource
  scarce
• Resource rich countries need a form of democracy
  with unusually strong checks and balances and
• Resource rich countries are increasingly
  important in Africa.

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But, there is still a lot to do!

• Addressing the binding constraints
• Low physical capital accumulation
• Low social return to factors of production
• Poorly maintained and cost infrastructure high
  transactions costs
• Poor private appropriability returns to
  investment is low, why?
• High taxation
• Macroeconomic risks instability and political
  uncertainty
• Institutional risks poor property rights,
  corruption, crime, etc.
• Labour-capital conflicts and rigid labour market
• Learning and coordination failure product
  diversification as evident in exports in most
  countries.

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Addressing the binding constraints (cont.)

• Financing capital accumulation a major
  constraints
• Low savings rate and high lending rates-
  ineffiency in the financial market or
  dysfunctional markets?
• Lack of innovative instruments to attract and
  channel savings at affordable rates and
• Constraints and distortions in the money and
  capital markets.

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THANK YOU