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Title: Prsentation PowerPoint No Slide Title


1
23 April 2009
Presentation at of the African Economic Outlook
2009 Africa facing up to the crisis and
ICT United Nations
Leonce Ndikumana, Director Research Department,
AfDB Sala Patterson, Results officer OECD
Development Centre 16 June 2009

2
AEO
Measuring Africas economies since 2001
  • Comprehensive, independent analysis
  • Short-term macroeconomic forecasts
  • Special annual sectoral focus
  • Economic overview annual thematic focus
  • 2006 Transport
  • 2007 Water and sanitation
  • 2008 Technical vocational skills
  • 2009 Innovation ICT
  • 47 country chapters
  • Statistical annex and indicators
  • Four languages (1st time in Spanish)

African think tanks Local consultants
Junior partners
Lead partner
Experts Network
Key financial backer
3
Growth
Africa still growing despite the crisis
Real GDP Growth
? 3.5
? 4.8
? 4.1
? 6.6
Source OECD Development Centre / African
Development Bank, 2009
4
Global Crisis
Taking a toll on Africas growth prospects
Downside risk in GDP Growth projections
Source OECD Development Centre / African
Development Bank. 2008
5
Growth
Regional disparities (May forecasts)
Southern Africa hit severely Oil (Angola)
Minerals (Botswana)
6
Trade
The global trade collapse is now hitting Africa
  • Many African countries have been dependent on
    commodity exports for growth
  • Nominal export growth raced ahead by an
    annualised 34 over 2003-07
  • After years of boom, World Trade is expected to
    contract by 13 in 2009

- 112
- 94
Source African Economic Outlook, 2009
Source Datastream, 2009
7
Trade
The commodity boom is over… for now
  • A cold shower for hard commodity exporters
  • Soft commodity exports prove more resilient

Hard commodities
Soft Commodities
Source OECD Development Centre, based on World
Bank, 2009
8
Private financial flows
A global retrenchment of capital
  • Flows to Africa grew by 17 to over USD 60
    billion in 2008, despite the global slowdown
  • Remittances to Sub-Saharan Africa are set to
    decline from between 4.5 to 8 over 2009
  • Stock markets have taken a severe hit

Remittances
Foreign Direct investment
Stock Markets (MSCI price index local currency)
Source OECD Development Centre , based on UNCTAD
2009
Source OECD Development Centre , based on World
Bank, 2009
Source Thomson Datastream 2009
9
Global Crisis
Fiscal balances will deteriorate significantly
Including grants Excluding Zimbabwe,
Estimations for 20078and predictions for 2009/10
Source OECD Development Centre, African Economic
Outlook, 2009
Source OECD Development Centre / African
Development Bank, 2008
10
Global Crisis
Africa has become more resilient to exogenous
shocks
  • Over recent years, terms of trade improved and
    good macro management in many countries
    strengthened fiscal balances
  • HIPC initiative significantly reduced debt levels
    and composition in many countries
  • Politically more stable than in past decades
  • Africa is more integrated with the world economy
    and less dependent on traditional OECD markets
  • Governments efforts in nurturing private sector
    and enterprise resulted in steady improvements in
    business climate indicators

Total trade with China has increased tenfold in
the past decade to reach USD 106 billion in 2009
Nevertheless…
11
Global Crisis
A patchwork of impacts
African growth has taken a serious hit
2008 near 6 2009 below 3
  • Oil exporters are taking the most severe hit
  • More globally integrated economies, such as South
    Africa and Egypt, are strongly affected
  • Low-income / non-oil exporting countries are less
    affected, because
  • 1. decrease in energy bill
  • 2. less integration to the world economy

Growth deceleration 2008 - 2009
Greater than 3
- 2 to- 3
Zero to 1.9
Increased growth between 2008-09
Source African Economic Outlook, 2009
12
Global Crisis
Oil exporters and importers making a switch?
  • Oil importers are now catching up exporters
  • Lower oil prices and good performance of
    non-mineral exports are reversing the terms of
    trade shock

Real GDP Growth
Source African Economic Outlook, OECD, 2009
Net Oil exporters Algeria, Angola, Cameroon,
Chad, Congo, Côte d'Ivoire, Congo DRC, Egypt,
Equatorial Guinea, Gabon, Libya, Nigeria, Sudan
13
Oil Exporters
The price of having all eggs in one basket
Taking a clear hit from the oil price fall…
…and little room left for manoeuvre
  • Many oil exporters did not take advantage of
    commodity windfalls to improve governance and
    diversify their economies
  • Nevertheless, some oil exporters have performed
    well in terms of lowering levels of external debt

Source OECD Development Centre / African
Development Bank
African Economic Outlook forecasts
14
Oil Importers
Proving resilient… so far
Holding up against the crisis so far…
…yet challenges rising
  • Oil-importing countries have performed well,
    diversifying their sources of growth over recent
    years. While lower energy and food prices
    subsequent to the crisis have helped importers,
    difficult times lie ahead
  • Good performers strengths
  • Sustained and prolonged growth
  • Prudent macroeconomic policies
  • More Diversification
  • Challenges
  • Poor capacity in mobilizing domestic resources
  • Contain fiscal and current account deficits
  • High dependency on ODA
  • Prioritise poverty reduction
  • Difficulty adjusting to price shocks

Source OECD Development Centre / African
Development Bank
African Economic Outlook forecasts
15
Risks
How will the crisis impact the MDGs?
African Development Bank indicator of Progress
Towards MDGs 2009
Source African Development Bank, 2009
16
Policies 1
OECD countries must not forget Africa
  • Aid commitments can make the difference,
    particularly in times of crisis, but to maximize
    aid effectiveness, donors must
  • Leverage the countercyclical properties of aid
  • Work together to minimize aid fragmentation

DAC members' net ODA 1990 2007 DAC Secretariat
simulations of net ODA to 2008 and 2010
Source OECD DAC / DCD, 2008
17
Policies 2
The emerging world is not forgetting Africa
  • While OECD countries are dealing with their
    downturn, emerging countries continue to invest
    and strengthen ties with African countries
  • Africas emerging country partners must not
    sacrifice governance and poverty reduction to
    strategic interests

Source OECD Development Centre, based on China
Mofcom, 2009
18
African innovation is building tomorrows Africa
  • AEO 09 Innovation and ICTs
  • ICTs in Africa has proven to be an innovation
    frontier by combining state-of-art technologies
    with local customs and constraints through
    incremental innovations.
  • ICTs are helping to improve business environments
    by contributing to market development, overcoming
    traditional infrastructural constraints and
    reducing business costs
  • Today, 4 out of 10 Africans have a mobile phone
    line. Africa is the fastest growing market in the
    world.
  • The exponential growth of ICT is enabling many
    African users to gain access to basic services
    (education, health, banking) for the first time.
  • ICT is a vector for innovation, stimulating the
    development of innovative products and business
    models.

ICT shows that African countries can pursue
growth based on greater domestic investment and
consumption, in turn reducing the impact of
exogenous shocks and crises
19
Theme
Innovation and Information Communication
Technologies
  • Africa is the fastest growing market in the
    world. Today, 4 out of 10 Africans have a mobile
    phone line.
  • The exponential growth in ICT is enabling many
    African users to gain access to basic services
    (education, health, banking) for the first time.
  • ICT is a vector for innovation, stimulating of
    innovative products and business models.
  • As an endogenous source of growth, ICT is
    particularly valuable in a time of external
    crisis.

Africas Exponential Growth in Mobile Telephony
Source OECD Development Centre, based on
Wireless Intelligence, 2009.
ICTs are helping to shape an improved business
environment by contributing to market
development, overcoming traditional
infrastructural constraints and reducing business
costs
20
Infrastructure
Connecting Africa to the world in 2009-10
  • The East coast will be connected to the world for
    the first time through fibre optic submarine
    cables on open access, TEAMS and SEACOM the West
    coast will be connected by at least 3 fibre optic
    submarine cables on open access, GLO1, MaIN OnE
    and WACS, instead of having only SAT3 on closed
    access.
  • User prices should start decreasing between 4 to
    10 times from June 2009, as inland high capacity
    networks are built and as wholesalers pass on
    price cuts, which can bring about an exponential
    uptake in ICT and Innovation in Africa.

As of March 2009
MULTIPLE SOLUTIONS
THE MISSING LINK
SAT3
AT LEAST ONE LINK
Source World Bank Group 2008, www.manypossibiliti
es.net (Steven Song).
21
Infrastructure
Good prospects for inland networks
  • Connecting Africas capitals and major cities
    will require 66.000 km of fibre-optic cables.
  • Several major initiatives are already being
    planned
  • Eastern and Southern African Backbone.
  • Central African Backbone.
  • Western African INTELCOM II Backbone.

7,200 km in Northern Africa
19,500 km in Western Africa
30,500 km in Eastern and Southern Africa
8,800 km in Central Africa
Source ITU, 2007
  • Total expenditure commitments for telecoms in
    Africa are set to reach 55,892,950,000 as agreed
    in the Connect Africa Summit, Kigali, Rwanda in
    October 2007
  • Participants committed to completing the
    interconnection of all African capitals and major
    cities with ICT broadband infrastructure by 2012.

22
Crisis
ICTs in Africa remain attractive to investors
Healthy Mobile Business in Africa
  • Like in the dot.com burst in 2000-2001, ICT
    investment will be less affected by the crisis
    than other regions.
  • Big deals have continued through late 2008 and
    early 2009.
  • Capital expenditures are decreasing and price
    competition for market share is rising steadily.
  • Cash-rich transnational operators will
    consolidate their presence.

With publicly funded high capacity infrastructure
projects underway private investments
resilient to the crisis, new products and
business models should multiply despite the crisis
Source Wireless Intelligence, 2008
23
Innovation
Africa first to implement free roaming
  • Africa is the first continent in the world to
    implement free roaming, allowing any user in a
    foreign country to receive and send calls and
    messages at local rates.
  • Zain launched the worlds first borderless
    network in 2006.
  • Free roaming is growing exponentially thanks to
    pan-African operators ? 6 operators account for
    52 of total mobile phone subscriptions in
    Africa by 2009
  • Middle East-based Zain present in 15 countries
    and Moov in 5.
  • South African-based MTN present in 13
    countries.
  • European-based Orange present in 12 countries,
    Tigo and Vodacom in 6.

Free roaming countries
Zain
MTN
Safaricom - Vodacom - MTN
Forthcoming
Source OECD Development Centre
24
Innovation
Mobile banking lowering transaction costs
  • Excellent prospects with e-banking services
    quickly growing and being already present or
    announced in 14 Sub-Saharan and 3 North African
    countries.
  • Overseas Orascom and Vodafone have signed
    agreements with Western Union on remittances.
  • Mobile-payment and mobile-banking services rely
    on existing distribution networks Mobile users,
    village kiosk agents, eventually Western Union
    agents.
  • In Kenya, M-Pesas mobile-payment service for
    domestic transfers has enabled to lower
    transaction costs sharply, e.g., to send 1 000
    Ksh, Western Union asks 500 Ksh, M-Pesa between
    30 and 75 Ksh.
  • M-Pesa has won over 5 million users in less than
    2 years only in Kenya and is seeking to expand to
    East Africa and Afghanistan.

Mobile Phone Transactions in Kenya ()
Source Vodafone, 2009.
25
Innovation
E-Government for donor support
  • Aid Management Systems (AMS) are found in
    Ethiopia, Egypt, Rwanda, Sudan, Tanzania and
    Zambia
  • Cape Verdes government exchanges with citizens
    are paperless
  • South Africa, Kenya and Rwanda implement
    e-taxation with positive impacts on revenue
    collection

United Nations E-Government Readiness Indicator
(2008)
Sub-Saharan Africa is lagging behind in
e-governance ? governments ICT skills, ICT
infrastructure access and online presence
Source United Nations (2008), The United
Nations E-Government Survey 2008 From
E-Government to Connected Governance, United
Nations Press
26
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Innovation in agriculture
Bringing people and markets together
  • E-services such as messages and internet through
    mobile phones have brought together farmers and
    buyers by enabling access to crop prices and
    quantities timely and affordably.
  • These services bring reductions in price
    differences across markets, e.g., 20 per cent in
    Niger, due reductions in search costs Farmers
    are able to search over more markets and respond
    to surpluses and shortages, e.g., markets in food
    crisis regions with mobile phone coverage in
    Niger in 2005 had lower consumer grain prices
    than those regions without mobile coverage.
  • These services are already present in 10 West and
    Central African countries and growing.

Source Does Digital Divide or Provide? The
Impact of Cell Phones on Grain Markets in Niger,
Jenny Aker, 2008.
27
Investment
Connecting Africa to the world in 2009-10
Business climate has room for improvement
Contribution of taxation on mobile operators (
of government revenues)
Perceived ICT regulatory environment
Source Esselaar, S., Gillwald, A. and C. Stork
(2007), Towards an Africa e-Index
Telecommunications Sector Performance in 16
African Countries, Research ICT Africa, GSM
World, 2006, Taxation and Growth of Mobile
Services in Sub-Saharan Africa.
While it is legitimate to raise taxes through
mobile phone revenues in countries with on
average 70 of informal labour force, private
investment has not to be neglected for this
strategy to be sustainable
28
Connecting Africa to the world in 2009-10
Will Africa ever be connected to Internet?
Investment
In Africa, there are extremely few fixed
lines..

Source International Telecommunications Union
2009, African Economic Outlook 2009
Urgent need to attract private investment and
knowhow to fixed-line operators if Africa is to
be connected to high speed internet ? many
fixed-line operators are close to bankruptcy in
Sub-Saharan Africa!
29
ICT
Policy recommendations for Africa
ICTs in Africa has proven to be an innovation
frontier by combining state-of-art technologies
with local customs and constraints through
incremental innovations.
  • However, there is still more to be done to
    deliver more and better value added services to
    the poorest population
  • Expensive inland high capacity networks require
    government support
  • Governments have to ensure that wholesale price
    drops are passed on
  • Policies on ICT and Innovation are not yet well
    integrated in broader development strategies
    Donor targets, MDGs and PRSPs.
  • With many fixed-line operators close to
    bankruptcy, governments must attract private
    investment and knowhow to the fixed-line sector
    by adapting convergent licensing regimes and
    setting symmetric regulation of termination
    charges.

30
AEO.org
Africas economic portal for policymakers
AfricanEconomicOutlook.org
  • The latest developments in Africas economies
  • Brings together the data research from eight
    years of AEO
  • Interactive database of all AEO data and
    statistics
  • Complete and updated country notes
  • Promotes original research by African researchers
    and institutions
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