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African Renaissance: is it Sustainable

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Title: African Renaissance: is it Sustainable


1
African 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

2
A 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?

3
Which 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.

4
Country Groupings1994-2003The G11 and Oil
Exporters
Note Oil exporter growth rates have accelerated
since 2003
5
Governance 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
6
Oil 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

7
G11 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

8
or 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?

9
1. Macro indicators
Management stronger in G11, weaker in control
group
10
Savings and investment
Slow rise in G11 from low base, and weaken in
control
11
FDI to G11 rose substantially
Even though the G11 lack oil or major mining.
Issue response of domestic investment?
12
Tax/GDP ratios
Rose in G11 even as trade taxes declined with
liberalization fell in control
13
2. Competitiveness indicators
No clear patterns in real exchange rates. May
follow terms of trade more than aid volumes
14
Real 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

15
Export diversification stronger in G11
16
But limited structural transformation to
manufacturing industry, unlike Asia
Where is Africas long-run comparative advantage?
17
3. Governance
Political rights and civil liberties Sharper
gains in G11. However, accountability weak,
political processes fragile. Identity politics
often dominant in new democracies
18
Measures of institutional quality
Institutions Strengthened in G11 especially
relative to SSA average. WGI indices of
Institutional quality and corruption show similar
relative trends
19
Considerable 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.

21
4. 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

22
Poverty Decline in G11
Growth has been poverty-reducing
23
Poverty Increase in Control
24
The 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

25
Conclusions, 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
  • END

27
  • ADDITIONAL SLIDES

28
Policies and aid effectiveness (project
performance and CPIA ordered logit)
29
The Picture is Less Clear on Other MDGs
  • Health G11 not much better except on
    immunization rates

30
Education G11 makes somewhat faster gains but
from a low base
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