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Title: Graphics Induction Presentation


1
African Economic Outlook 2008/2009
 
Official Launch Dakar May 10, 2009
2
AEO
2009 an evolving partnership
Lead partner
Junior partners
Experts Network
Consultants. think tanks
Financial partner
3
AEO
Coverage 2009 47 Countries
New in 2009 Burundi Central African
Republic Djibouti Gambia Guinea Lesotho Mauritania
Seychelles Sierra Leone Swaziland Sudan Togo
99 of GDP 97 of population
Source OECD Development Centre / African
Development Bank. 2008
AEO 2009
4
Growth
Africa still growing but much slower than before
the crisis
Real GDP Growth ()
Source OECD Development Centre / African
Development Bank. 2008
5
Growth
The crisis taking a toll on Africas growth
prospects
Real GDP Growth ()
April 08 projections
Nov 08 projections
Feb 09 projections
May 09 projections
Source OECD Development Centre / African
Development Bank. 2008
6
Growth
Regional disparities in growth
Real GDP Growth () 2000-05 2008(e) 2009(p) 2010(p)
Central 5.7 5.0 2.8 3.6
East 4.9 7.3 5.5 5.7
North 4.1 5.8 3.3 4.1
South 4.1 5.2 0.2 4.6
West 7.1 5.4 4.2 4.6
Africa 4.8 5.7 2.8 4.5
Memorandum items
North Africa (including Sudan) 4.2 6.0 3.5 4.2
Sub-Saharan Africa 5.2 5.5 2.4 4.7
Oil-exporting countries 5.4 6.6 2.4 4.5
Oil importing countries 4.1 4.6 3.3 4.5
7
Growth
Regional disparities (May forecasts)
Southern Africa hit severely oil (Angola) and
minerals (Botswana)
2007 2008(e) 2009(p) 2009(p) 2010(p) 2010(p)
      February May February May
GDP Growth Rate in percentage            
Central Africa 4.0 5.0 2.8 2.0 3.6 3.2
Eastern Africa 8.8 7.3 5.5 5.1 5.7 5.5
Northern Africa 5.3 5.8 3.3 3.5 4.1 4.1
Southern Africa 7.0 5.2 0.2 -1.0 4.6 3.6
Western Africa 5.4 5.4 4.2 3.3 4.6 3.4
AFRICA 6.1 5.7 2.8 2.3 4.5 4.0
Memorandum items            
Sub-Saharan Africa 6.4 5.5 2.4 1.4 4.7 3.8
Oil-exporting countries 6.8 6.6 2.4 2.5 4.5 4.1
Oil importing countries 5.4 4.6 3.3 2.1 4.5 3.8
8
Global Crisis
Africa is better prepared to weather the storm
Africa today is much more resilient to exogenous
shocks
  • Committed macro management in many countries has
    brought inflation under control and improved
    fiscal balances
  • The HIPC initiative significantly reduced debt
    levels in many countries
  • The commodity boom helped to improve terms of
    trade
  • Business climate indicators have been improving
    steadily. reflecting government efforts in
    nurturing private sector and enterprise
  • Political conflicts have declined
  • Nevertheless

9
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
10
Global Crisis
A global retrenchment of capital
11
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
12
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
13
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
14
Food prices
After the peak of the food crisis
Food prices
Source World Bank
15
Drivers
Severe macroeconomic impact (February forecast)
Fiscal balance
  • The crisis will cause fiscal balances to
    deteriorate significantly across the continent.
  • Fiscal space to adopt countercyclical policies is
    very limited in many countries.

Current Account
Inflation
Source OECD Development Centre / African
Development Bank. 2008
Excluding Zimbabwe Estimations for 20078and
predictions for 2009/10
16
Drivers
Macroeconomic balances deteriorating
Source OECD Development Centre / African
Development Bank. 2008
Excluding Zimbabwe Estimations for 20078and
predictions for 2009/10
17
Global Crisis
A patchwork of different impacts
Cost of the crisis
  • Oil exporters the most hit.
  • More integrated economies also strongly affected
  • Low-income / non-oil exporting countries are less
    affected. because
  • -- beverages (cocoa. tea. coffee) less affected
    by decline in global incomes.
  • -- less integration to the world economy

Growth differential 2008 - 2009
- 3.1 to 23
- 2 to- 3
Zero to 1.9
Increased growth between 2008-09
Source OECD Development Centre / African
Development Bank
18
Growth
Oil exporters and importers making a switch?
Real GDP Growth
Oil exporters
Oil importers
Source OECD Development Centre / African
Development Bank. 2008
Net Oil exporters Algeria. Angola. Cameroon.
Chad. Congo. Côte d'Ivoire. Congo DRC. Egypt.
Equatorial Guinea. Gabon. Libya. Nigeria. Sudan
19
Oil Exporters
The cost of having all eggs in one basket
Taking a 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 reducing external debt

Source OECD Development Centre / African
Development Bank
African Economic Outlook forecasts
20
Oil Importers
Benefiting from the end of oil and food price
booms
Holding up against the crisis so far
yet challenges rising
  • Oil-importing countries find it difficult
    preserving pre-crisis gains. Rising inflation and
    deteriorating macroeconomic balances.
  • Good performers assets
  • Sustained growth Prudent macroeconomic policies
    Diversification Decreasing poverty
  • Challenges
  • Fiscal deficits ODA dependency widening trade
    deficit climatic price shocks

Source OECD Development Centre / African
Development Bank
African Economic Outlook forecasts
21
Crisis
Main messages
  • Africa has been hit severely the impact varies
    across countries and sectors
  • Changes in the direction of trade, prudent
    macroeconomic policies and debt relief make
    Africa better positioned to weather the current
    crisis.
  • African governments have to preserve the gains
    obtained in the recent past, by pursuing
    structural reforms, infrastructure development
    and targeting poverty reduction.
  • With the right combination of domestic policy
    reforms, Africa can continue to grow despite the
    crisis, while setting the stage to faster growth
    for the future.

22
Risks
Countries to fall further back on progress toward
the MDGs
Source OECD Development Centre / African
Development Bank. 2008
23
Channels
Aid commitments can make the difference
DAC members' net ODA 1990 - 2007 and DAC
Secretariat simulations of net ODA for 2008 to
2010
24
Stability
Is long term decline in political instability
continuing ?
  • Good News
  • Several post-conflict countries making progress.
  • Major improvements in political stability and
    governance in Liberia and Sierra Leone.  
  • After 6 years of civil unrest, the situation in
    Côte dIvoire continues to stabilise.  
  • The Great Lakes region seems to be laying the
    bases for an improvement in the near future.  
  • The conflict in Uganda has lost impetus with the
    elaboration of a peace agreement in April 2008
    (although not yet signed by the rebels).
  • Elections in Ghana leading to a peaceful transfer
    of power.
  • Regional cooperation on governance in the
    framework of NEPAD and APRM is contributing to
    improvements in governance and stability.

25
Stability
Is long term decline in political instability
continuing ?
  • Still some bad News
  • However, some concerns remain in some countries
    with unresolved conflicts.

26
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
27
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).
28
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.

29
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
30
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
31
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.
32
phoner1.gif
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.

Bakin Birgi (Monday) Zinder (Thursday) Tanout (F
riday) Niamey (Sunday)
Farmer in Niger
Home market
65 km from 3 hours to 2 mins
20 km 1 hour
750 km from not accessible to 2 mins
Source Does Digital Divide or Provide? The
Impact of Cell Phones on Grain Markets in Niger,
Jenny Aker, 2008.
33
Policy recommendations
For Africa to continue an innovation frontier..
  • ICTs in Africa has proved to be an innovation
    frontier by combining state-of-art
  • technologies with local customs and constraints
    through incremental innovations.
  • This has been possible through the growth in
    Infrastructure and Innovation in ICT in Africa,
    and still more can be done to move forward in
    delivering value added services to the poorest
    population
  • Expensive inland high capacity networks need to
    be supported and governments have to ensure that
    wholesale price drops are passed on, if users are
    to benefit from being connected to the world by
    low cost solutions.
  • In the Connect Africa Summit commitments in
    Kigali in 2007, African capital and major cities
    are to be connected to broadband by 2012 and
    African villages by 2015.
  • Policies on ICT and Innovation are not presently
    well integrated in broader development
    strategies Donor targets, MDGs and PRSPs.
  • Governments should do more to attract private
    investment and knowhow to the fixed-line by
    adapting convergent licensing regimes and setting
    symmetric regulation of termination charges.
  • Many fixed-line operators are close to bankruptcy
    with decreasing traffic and increasing marginal
    costs.

34
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.

35
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

36
Thank You
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