Javier Santiso Director OECD Development Centre 23 April 2009 UNECA Presentation to the Council

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AEO Measuring Africas economies since 2001 Comprehensive, independent analysis Short-term macroeconomic forecasts Special annual sectoral focus Key financial partner Junior partners UNECA Lead partner African think tanks Local consultants Experts Network 1.Economic overview & annual thematic focus 2006: Transport 2007: Water and sanitation 2008: Technical & vocational skills 2009: Innovation & ICT 2.48 country chapters 3.Statistical annex and indicators

Growth Africa still growing despite the crisis Source: OECD Development Centre / African Development Bank, 2009 Real GDP Growth Δ = 7.1% Δ = 4.6% Δ = 3.5% Δ = 4.8%

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 After years of boom, World Trade is expected to contract by 13% in 2009 Source: Datastream, 2009 Source: African Economic Outlook, % - 112%

A cold shower for hard commodity exporters Soft commodity exports prove more resilient Source: OECD Development Centre, based on World Bank, 2009 Trade The commodity boom is over… for now Hard commodities Soft Commodities

Private financial flows A global retrenchment of capital Source: OECD Development Centre, based on UNCTAD 2009Source: OECD Development Centre, based on World Bank, 2009 RemittancesForeign Direct investment 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 Stock Markets (MSCI price index local currency) Source: Thomson Datastream 2009

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 Nevertheless… (e) Fiscal balance, % GDP Current Account, % GDP Total trade with China has increased tenfold in the past decade to reach USD 106 billion in Total external Debt/GDP, % Debt service / exports, %

Global Crisis A patchwork of impacts Source: African Economic Outlook, 2009 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 - 2 to- 3 % Zero to – 1.9 % Greater than 3 % Increased growth between Growth deceleration African growth has taken a serious hit: 2008: near 6% 2009: below 3%

Global Crisis Oil exporters and importers: making a switch? 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 Real GDP Growth Oil importers are now performing better than exporters Lower oil prices and good performance of non-mineral exports are reversing the terms of trade shock

Risks Political instability is on the rise again Civil Tensions: occurrence of strikes, demonstrations, violence and coup détat. Qualitative data obtained from Marchés Tropicaux et Méditerranéens. AEO political stability indicator Source: African Economic Outlook, 2009

Risks How will the crisis impact the MDGs? Source: African Development Bank, 2009 African Development Bank indicator of Progress Towards MDGs 2009

Policies 1 OECD countries must not forget Africa DAC members' net ODA 1990 – 2007 DAC Secretariat simulations of net ODA to 2008 and 2010 Source: OECD DAC / DCD, 2008 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

Policies 2 The emerging world is not forgetting Africa Source: OECD Development Centre, based on China Mofcom, 2009 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 India China Source: OECD Development Centre, based on UNCTAD, Nepgen and Jansson 2009 Significant Chinese and Indian investments in African infrastructure, up to April 2008

African innovation is building tomorrows Africa 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 Policies 3 AEO 09: Innovation and ICTs Africa has been adapting state-of-art ICTs to local customs and constraints through incremental innovations. 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. ICTs are helping to improve business environments by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs. Policy challenges for governments: work with business to lift the hurdles to infrastructure development, improve regulation, and invest in scaling-up innovative applications for social services.

23 April 2009 UNECA Supplementary information

Theme Innovation and Information & Communication Technologies Africas Exponential Growth in Mobile Telephony 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. Source: OECD Development Centre, based on Wireless Intelligence, ICTs are helping to shape an improved business environment by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs

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.

Growth Africa still growing despite the crisis Source: OECD Development Centre / African Development Bank, 2008 Real GDP Growth Real GDP Growth (%) (e)2009(p)2010(p) Central East North South West Africa Memorandum items North Africa (including Sudan) Sub-Saharan Africa Oil-exporting countries Oil importing countries

Oil Exporters The price of having all eggs in one basket Source: OECD Development Centre / African Development Bank *: African Economic Outlook forecasts …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 Taking a clear hit from the oil price fall…

Oil Importers Proving resilient… so far Source: OECD Development Centre / African Development Bank *: African Economic Outlook forecasts 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 Holding up against the crisis so far……yet challenges rising

Global Crisis Staggered impacts are to be expected Weak fundamentals and dependent on one commodity Guinea, Eritrea, Malawi, Mauritania, DRC Stronger fundamentals but dependent on one/few commodity/ies Botswana, Algeria, Cameroon, Rwanda, Benin Weak fundamentals but less dependent on one commodity Gambia, Liberia, Sierra Leone, Ethiopia Strong fundamentals and less dependent on one commodity Tunisia, Uganda, Kenya Time

Macro management Standing up well to recent OECD performance.. * Excluding Zimbabwe ** Estimations for 20078and predictions for 2009/10 Source: OECD Development Centre / African Development Bank, 2008 Inflation Current Account Fiscal balance Africa Fiscal balances to deteriorate significantly across the continent. Source: OECD Development Centre, African Economic Outlook, 2009 Fiscal balance Current Account Source: OECD, 2009 OECD economies