1 Going for Growth in Africa Nick Amin John Burton (DFID) ABCDE Conference, Amsterdam 23 th May 2005

2 Outline of Presentation Commission for Africa Huge challenges but more promising prospects Multi-faceted causes Accelerating growth is essential –Investment –Infrastructure –Agriculture –Participation CFA Growth-related Recommendations Risks

3 Commission for Africa International community in support of African initiatives, and in genuine partnership –Implementing international commitments towards Africa Future shaped by Africa Recommend to G8 need for strong programme of action

4 SSA only region to grow poorer over past decades..

5 Bleak, but not without hope as growth rates improved in some countries 7.0% or higher GDP Growth. Source: Africa Development Indicators % to 6.9% 5.0% to 5.9% 4.0% to 4.9% 3.0% to 3.9% 2.0% to 2.9% 1.0% to 1.9% Less than 1.0% No data Over last decade, 16 sub-Saharan Africa countries with average growth rates above 4%, including 10 with rates above 5%. Examples of strong performers from across the region – e.g. Mozambique in the south, Benin in the west, and Uganda in the east. In 2003, 24 countries in had growth rates of 5% or more.

6 And more reasons to be hopeful.... ECA reported last week in Abuja: Political stability and governance improving in many countries Better macro-economic stability and management –Lower inflation –Lower fiscal deficits –Healthier balance of payments ODA starting to rise FDI flows picking up Commodity exports up – volume and prices

7 But must also note underlying causes.... Factors such as: –Political –Structural –Environmental and Technological –Human Of geography, history, and poor governance

8 Political Factors: Civil Conflict 31 out of 43 SSA countries (excluding island states) suffered from civil conflict during the 1980’s and 1990’s: crushes development. BUT Experiences vary - with peace, tremendous progress can be made. AU non-indifference replacing OAU non-interference.

9 Political Factors: Weak Governance..but signs of advance (also UNECA report, APRM,...)

10 Structural Factors: Transport Costs History has generated 48 SSA countries with on average 14.5 million people and infrastructure focussed on exporting primary products to Europe...

11 Environmental and Technological Factors: Low Agricultural Productivity In 2000, the % of cropland that was irrigated was ten times higher in South Asia than in sub-Saharan Africa (40% vs 4%).

12 Human Factors: The Burden of Disease - Malaria kills between 1.1 and 2.7 million people each year, of which about 1 million are children under 5 years in Africa.

13 Target = 7% growth by 2010 Source: DFID, 2004 Effect of growth on poor people Accelerating growth is essential

14 Getting the Investment Climate right will require tackling many barriers.... Relative to other regions, Africa has low domestic and foreign investment, high capital flight and low remittance flows Focus on improving the domestic investment climate for all kinds of investors. Institutional environment key public sector responsibility. IC assessments show main investment barriers: governance (transparency, accountability, tackling corruption); infrastructure, financial markets and property rights, afro-pessimism

15 In Africa Infrastructure is a critical barrier to growth & poverty reduction Poor infrastructure is a key barrier to investment, growth, and poverty reduction, yet resource allocation to this has fallen. Urgent need to increase investment to tackle backlog of investment and raise growth rates

16 Agricultural growth is vital African Agriculture: 30% of GDP and 70 to 80% of employment. Progress critical for sustained growth Potential constrained by geography, pests and diseases, and international trade regime Barely 4% of African land is irrigated compared to 40% of South Asia Effective research declined in past two decades Only 1% of land officially registered in SSA. Security of tenure key, especially women and most vulnerable

17 Participation in growth is essential SME Development and Employment Promotion Small enterprises suffer more from weak investment climates Biggest constraints are a lack of finance and access to knowledge and technology Growth crucial for employment creation, but ‘jobless growth also a concern’

18 CFA Recommendations on Infrastructure, the Investment Climate and participation in Growth Promoting Growth: $10bn a year for infrastructure up to 2010, and subject to review, $20bn by Support NEPAD Investment Climate Facility. Package to promote agriculture. Promoting Participation of Poor People in Growth: Africa Enterprise Challenge Fund to promote small enterprises. Also measures to promote youth employment. Role of Business: Call for action by business in support of Report’s recommendations. Measures to encourage pro-poor investments.

19 ICF to tackle barriers to investment  Governance –Putting in place appropriate policies, legislation and regulations and ensuring effective administration and implementation –Enhancing competition policies –Addressing issues like crime, security and corruption  Infrastructure –Assist with identification and communication of infrastructure needs  Financial Markets and property rights –Strengthening financial markets, standardisation of financial regulation and shared regulatory capacities, access to credit information, identification of gaps in provision of financial services –Making registries more efficient –Providing legislative drafting and expertise with regards to property issues to governments  Afro-pessimism –Addressing the negative perceptions by giving publicity to investment success stories  Health and education –Addressing HIV/Aids and malaria, emphasising private sector response

20 RISKS Continued investor pessimism Deterioration in governance climate HIV and AIDS Uncontrolled rapid urbanisation Insufficient protection from shocks Rich countries live up to promises