Title: African Renaissance: is it Sustainable
1African Renaissance is it Sustainable?
Alan Gelb DECVP, World Bank, February 2008
- This draws on research in process with a number
of collaborators, including Vijaya Ramachandran,
Ginger Turner, Benn Eifert, and Bruno Vincent
2A turning point for Africa?
- A dismal longer-run picture. Falling real
incomes. Progress on HDI half that of other
low-income regions, even after controlling for
policy, HIV/AIDS and conditional convergence. - Since mid 1990s, a considerable improvement on
average, real incomes no longer falling.
Performance projected to remain relatively
strong on average growth about 6 - Factors behind this improvement?
- Outstanding questions relating to sustainability?
3Which African countries Have grown in last
decade, and Why?
- Can consider three main groups of countries
- Countries with large oil reserves ( currently 9
countries)
- Countries sustaining good policies (tracking
G11)
- Other countries, subdivided into
- Conflict countries
- Others (tracking control group)
- Groups overlap to some degree.
- The first two groups have performed far more
strongly in terms of growth, FDI.
- Methodology in between regression and case
studies. Cross-country regressions miss a lot of
the country-specific factors.
4Country Groupings1994-2003The G11 and Oil
Exporters
Note Oil exporter growth rates have accelerated
since 2003
5Governance indicators oil exporters and G11
- With high oil prices impelling exploration oil
growth premium is about 3.
- Issue is governance over oil rents exporters in
lowest decile, worldwide
- G11 rate relatively well for poor countries
Botswana 67 78 74
6Oil exporters approaches towards improved
accountability
- The political side of the Dutch Disease
precedes the economic side?
- Lessons from success work towards informed
consensus and transparency
- Supplement normal budget processes by rules based
on horizontal accountability? (Sao Tome oil
law Chad agreement)
- Global and regional lock-ins? EITI, AU?
- Move towards bottom-up rent distribution?
- No formula to mesh institutions and arrangements
7G11 Sustainable Growth.
- G11 Control
- GDP/head growth 2.5, 0.2
- Aid/DGP 17.5 12.8
- Policy rating 3.42 3.14
- Change in rating 0.51 .0.07
- Income/head 228 321
- Fast-growing countries have combined good
(improving) policies and aid. But some
countries in control have also received a lot of
aid, and performed poorly. - Landlocked countries are poorer, get somewhat
more aid and do a little worse
8or generalized Dutch Disease?
- Do aid flows or terms of trade gains cause Dutch
Disease, as shown by
- Weakening macro falling savings, investment,
taxes?
- Weakening competitiveness appreciating real
exchange rates, low export growth and
diversification?
- Deteriorating governance?
- Worsening distribution?
-
91. Macro indicators
Management stronger in G11, weaker in control
group
10Savings and investment
Slow rise in G11 from low base, and weaken in
control
11FDI to G11 rose substantially
Even though the G11 lack oil or major mining.
Issue response of domestic investment?
12Tax/GDP ratios
Rose in G11 even as trade taxes declined with
liberalization fell in control
132. Competitiveness indicators
No clear patterns in real exchange rates. May
follow terms of trade more than aid volumes
14Real exports grew and diversified
- Real export growth averaged 6.6 for G11 and 4.8
for control.
- Share of top 3 commodities declined, especially
in G11. In Senegal, Ghana, Uganda, Tanzania and
Mali
- Non-traditional exports grew at 17,
traditional exports at 4
- The share of non-traditional exports rose from
20 to 42
15Export diversification stronger in G11
16But limited structural transformation to
manufacturing industry, unlike Asia
Where is Africas long-run comparative advantage?
173. Governance
Political rights and civil liberties Sharper
gains in G11. However, accountability weak,
political processes fragile. Identity politics
often dominant in new democracies
18Measures of institutional quality
Institutions Strengthened in G11 especially
relative to SSA average. WGI indices of
Institutional quality and corruption show similar
relative trends
19Considerable gains in public financial management
20.confirmed by HIPC PFM Indicators
- Between 2001 and 2004, for those countries
covered by the Public Financial Management
tracking indicators
- the average number of HIPC PFM Benchmarks met by
G11 increased from 6.5 to 8.0,
- but scores for the control group deteriorated
from 4.75 to 4.5
- However, quality of public administration may
have declined across all groups. This is a
matter of concern.
214. Sharing in Growth
- Only some countries have 2 comparable surveys to
measure poverty trends 8 in the G11 and 3 in
the Control
- For the G11 countries, poverty headcount decline
averaged 1.2 percentage points per year, higher
than SSA MDG target
- For the Control poverty headcount increased at
2.2 percentage points
22Poverty Decline in G11
Growth has been poverty-reducing
23Poverty Increase in Control
24The Picture is somewhat less Clear on Other MDGs
- Health G11 not much better except on
immunization rates
- Education G11 make somewhat faster gains but
from a low base
25Conclusions, and areas for research
- Not one Africa but several. Each with own
sustainability issues
- Oil exporters
- how to avoid boom-bust cycle, transform rents
into productive investments?
- political and institutional issues dominate
narrowly economic concerns. Arrangements to
strengthen checks and balances?
- Well-managed fast-growing countries (G11)
- policy matters many things going better
- geography vs policy sustainability of growth
trajectories and diversification pattern?
- indigenous entrepreneurship and investment vs
FDI?
- strengthening of accountability mechanisms in new
democracies?
26 27 28Policies and aid effectiveness (project
performance and CPIA ordered logit)
29The Picture is Less Clear on Other MDGs
- Health G11 not much better except on
immunization rates
30Education G11 makes somewhat faster gains but
from a low base