AFRICAN ECONOMIC OUTLOOK 2002/03 Geneva – 8 September 2003

The AEO project A joint product of the African Development Bank & the OECD Development Centre

Key features  Country level analysis, organised in a single unified framework  social and political developments along with economic performance,  set of individual countries representative of the whole continent.

Country coverage, 2002/03

Outcomes  Contributing to policy monitoring: AEO could be used in the APRM process of NEPAD  Capacity building: Progressively hand over AEO to African economists through –Training within AfDB –Constitution of a network Product Process

Structure of the report  A report structured around individual country notes  starting with a synthesis, highlighting the major features – –AEO 2002/03: Privatisations – –AEO 2003/04: Energy Supply  and closing with a statistical annex.

Main Findings 2002/2003  Growth Prospects  Poverty: Meeting the Millennium Development Goals  Focus on Privatisation

1. Growth Prospects The 2002/2003 outlook  Africa performance affected by global slowdown but…  domestic factors (governance, epidemics, and agricultural outcomes) pose major challenges. 22 AEO countries Africa

ODA to Africa

Average growth rates of AEO countries

Best and worst performers

Zimbabwe Governance matters  Increasing macroeconomic imbalances  Food crisis  Political tension Political hardening Political tensions GDP growth

2. Poverty Sub-Saharan Africa will miss the 2015 Millennium Development Goals (MDGs) target … while Northern Africa will achieve them

The income poverty target

Completion rate of MDGs by 2015 (by total population in the Sub region) sub-Saharan Africa

Impact of HIV/ AIDS

3. Privatisations  Ownership of the process  Lack of local capacity  Lack of regulatory framework  Strategy  Cornerstone of SAPs but recent phenomenon in SSA Main Obstacles

Company Buyers (stake) Proceeds (US$) Remarks Maroc Telecom 2000 Vivendi (35%) 2.1 billion Network expanded and reduced tariffs Telkom 1997 SBC (US) & Telekom Malaysia (30%) + BEE (3%) 1.26 billion Higher investment and network improved. IPO in % Sonatel France Telecom (33.3%) + Senegal flotation (17%) 197 million Increased profits Boost to the SE ACSA 1998 Aeroporti di Roma (20%), BEE (4%) 280 million Expansion plans Kenya Airways 1996 KLM (26%), Nairobi Stock Exchange (51%, 34% to local investors) 26 million (KLM) 48 million flotation Total 74 million Profits up, passengers + 78%

Challenges ahead for Africa Achieving MDGs –ability to cope with vulnerability –improved governance –ownership of structural reforms

Algeria Oil dependency & governance  Recovery is boosted by dominant hydrocarbon sector.  High unemployment and social unrest.  Despite fiscal expansion and high INV/GDP.  Vested interests delay badly needed structural reforms.

Egypt Unfinished reforms  Slow-down of RGDP growth…  … combined with unemployment and high population growth  Exogenous sources of income and spillovers from Middle East instability.  Declining foreign exchange and FTA with EU can put pressure for reforms.

Morocco Volatility  Successful stabilization and structural reforms  but growth is volatile,  and social indicators worsening  Challenge is achieving sustained growth to reduce unemployment

Tunisia Resilience to shocks  Open and highly diversified economy…  …succeeded in poverty reduction and improved human development  Despite adverse shocks, growth resumes

Challenges Ahead  Vulnerability : –Reduce dependency on volatile income sources – outlook for oil exporters –Security and political tensions – tourism and FDI  Integration with EU: need to raise competitiveness of private sector  Set up poverty-reduction strategies