Mthuli Ncube Chief Economist and Vice President African Development Bank group 2 May 2011 DANIDA DEVLOPMENT DAYS, Copenhagen: 2-4 May 2011 KEYNOTE ADDRESS 1

 Part A: Africa Now  Part B: Africa in 50 years time  Part C: Development Challenges 2

Africa Now 3

 African growth is strong.  Africa the 3 rd fastest growth region over 10 years  Africa did well out of financial crisis due to good economic management, and diversification  GDP level at US$1.6 billion at par with Brazil or Russia  Growth is being held back by factors such as infrastructure (taking away 2% of GDP growth)  Africa is natural resource rich  Growth not Inclusive Source: AfDB 4

5 Commodity prices Domestic consumer market Macroeconomic policies and reforms: Reaping the benefits of decade of reforms Agriculture, services and manufacturing: Good harvests, diversification in some countries

6 Inclusive growth Strong demand for more accountability and good political governance in Africa The youth bulge deserves urgent attention Africa is growing but there are risks

7 Ghana (12%) Ethiopia DRC Zimbabwe (7,8%) Mozambique(7,7%) Angola Tanzania (6,9%) Nigeria Botswana Liberia (7,3%) South Africa Lesotho (2,9%) Comoros (2,5%) Benin (2,5%) Swaziland (1,9%) Egypt Tunisia (1,1%) Madagascar (0,6%) Côte d’Ivoire (-7,3%) Lybia 7,8% 3,6% 6,9% 7,3% 8,4% 6,9% -19% 1,6% 10% 6,9% 7,7%

 Intra-Africa trade remains low compared to other regions  Investment in regional transport infrastructure and ports, is necessary Source: AfDB 8

9

 Poverty levels are falling  Per capita income is rising  Inequality is rising  Intra-Africa trade has risen slightly and so has Africa’s share of world global trade  ICT access and penetration has increased substantially  Access to water and sanitation has not improved 10

 Staple food yields have not improved  Fertilizer consumption has fallen  Under-5 child mortality has fallen  Primary school completion rates are flat  Number of fragile states has dropped  Combustible renewables and waste to generate energy is not increasing  Cost of doing business has fallen  Time required for business start-up has fallen 11

12

13

Sub-Saharan Africa lags behind other developing regions on all dimensions Regional connectivity is particularly lacking 14

Source: AUC, AfDB, WB presentation at UN Millennium Summit, September

Lost production due to power outages and high regulatory costs reduce competitiveness of African exports Working hours lost due to power outage, 2009 Total regulatory costs as % of sales

 Agriculture sector is important as 60% of population in Africa depends on it  Staple crop yields remain flat  Fertilizer consumption low Source: FAO 17

 Improvements in 3 areas of governance  No improvement in “voice and accountability”  Static in “government effectiveness” Source: World Governance Indicators

Source: Leveraging migration for Africa: remittances, skills and investments 2011 Destination of migrants from SSA

Recorded remittances41.1 ODA39.4 FDI55.7 Private debt & portfolio equity-10.9

Cost of formal banking is high (in some countries minimum deposit can be as high as 50% of per capita GDP. Internet and broadband subscription extremely low (so internet banking remains out of reach to most) Mobile banking a way to provide financial services to the unbanked Country Deposits Accounts per 100 Adults Subscribers per 100 inhabitants MobileInternetBroadband Algeria Botswana Congo-DR Gambia Ghana Kenya Madagascar South Africa Tunisia

Africa in 50 years time! 24

25

26

27

28

29

30

31

32

33

34

Africa’s Development Challenges 35

 Infrastructure Deficit (US$45 billion annually)  Improving investment climate  Development of Small to Medium Scale enterprises…as a strategy for fostering “Inclusive growth” and “structural transformation”  Land Ownership reform (ownership will help development of SMEs in agriculture)  Effective and transparent management of natural resource revenues< e.g Sovereign Wealth Funds  ODA in the form of “insurance”…state contingent  Financial inclusion 36

 Recognize and Support the growing middleclass in Africa  Danida to form partnership with Danish companies to invest in Energy Infrastructure  Supporting development of Small to Medium Scale enterprises…as a strategy for fostering “Inclusive growth” and “structural transformation”…entrepreneurship ecosystem  Facilitate agricultural land ownership reform (ownership will help development of SMEs in agriculture)  Effective and transparent management of natural resource revenues, e.g Sovereign Wealth Funds  Convert ODA to some form of “insurance”…state contingent, if certain “events” occur  Invest in Financial Inclusion in partnership with private sector, eg M-Pesa growth in Kenya based on mobile telephony  FACILITATION rather than RESOURCE OUTLAY 37

38