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Private Sector Development

Africa on the brink of a take off

Shanta Devarajan's picture

Dear friends,

Today we are trying something new.

I wanted to share with you the reasons why I think we can be optimistic about Africa's development prospects, but rather than writing something up, I thought of using video.

Please, share your feedback, not only on whether you agree that Africa is on the right track, but on the video itself. If you like it, I would like to do more of this short video "Development Talks" with the readers of this blog.

Let me know what you think.

 

Seven steps to structural transformation

Shanta Devarajan's picture

 

 

 

 

 

 

 

 

 

 

 

 

 

My colleagues Justin Lin and Celestin Monga have proposed a six-step plan for identifying industries that could help developing countries industrialize. 

The first step in the plan is to find countries that have a per-capita income that is roughly double yours and have a similar endowment, and observe what they are producing.  These industries would then serve as the basis for possible government intervention to either protect or create, depending on the country’s situation.

However, the six-step plan seems to gloss over the fact that countries, even seemingly successful ones, produce certain goods for political rather than economic reasons. 

Kenya’s telecom revolution and the impact of mobile money

Wolfgang Fengler's picture

Our third “Kenya Economic Update” – Kenya at the Tipping Point? – notes Kenya’s strong economic recovery in 2010 reaching 4.9 percent of GDP. For 2011, we forecast growth of 5.3 percent.  The special Focus on the ICT Revolution and mobile money captures the economic momentum which is now spreading across Africa. Kenya now has 21 million phone subscribers, the vast majority connected by cell phones.

Corruption in Kenya

Johannes Zutt's picture

On October 26, we learned that Kenya’s rank in Transparency Interational's  Corruption Perceptions Index dropped seven places since 2009.  Kenya now ranks 154 out of 178 countries—well below most of its EAC neighbors.  But how bad is it, in fact?  Will the new Constitution do anything to make the situation better?

In Kenya, no one seriously doubts that corruption is a key constraint to greater growth and prosperity. 

Corruption comes in two forms.  Petty corruption occurs when citizens are asked for kitu kidogo (“a little something”):  to get a document stamped, a service provided, or an infraction overlooked.  The amounts are small, but hardly petty to the many victims living on less than $1 a day.  Kenya also has large-scale corruption—public purchases made at inflated prices; public benefits handed out to people who are not entitled; fictitious companies being paid for contracts that they never executed. 

After the World Cup: Policy Dilemmas Tackle South African Government

Sandeep Mahajan's picture

The 2010 FIFA World Cup drew to a close on July 11, 2010, with a Spanish victory and a thunderous ceremony. South Africa took a bow as the world applauded its wonderful organization of the high profile tournament.

A record number of people across the globe viewed the tournament, and the crime rate was the lowest of any World Cup. The direct economic impact of the event is estimated at around 0.5% of GDP in 2011, and the tournament did much to burnish South Africa’s image across the world as an attractive tourist destination.

Sadly, the real drama started after the curtains came down on the World Cup.

In particular, a coalition of unions, representing over one million-public servants -- including teachers, doctors, nurses, police, and court and government officials -- has launched an indefinite strike after the unions’ demand for an 8.6% salary increase (plus 1,000 rand monthly housing allowance) was rejected by the Government.

Will the South African economy get a kick from the World Cup?

Sandeep Mahajan's picture

As the month-long FIFA 2010 World Cup tournament kicks-off on June 11, all eyes will be on South Africa. Quite literally, since the 2006 tournament in Germany had a global viewership of around 30 billion.
 
The event is an opportunity for South Africa to showcase itself not just as an attractive destination for tourism and investment but also as the Rainbow Nation, home to people of every race, color, and creed.
 
The economic dividends will be plenty. As President Zuma explained: “the country’s transport, energy, telecommunications, and social infrastructure are being upgraded and expanded. This is contributing to economic development in the midst of a global recession, while improving conditions for investment.” 
 

Some economists are skeptical, seeing white elephants in large stadium constructions and citing analyses that show little net economic benefit to the hosts of previous such events.

Africa as a BRIC

Shanta Devarajan's picture

My colleague and good friend, Ngozi Okonjo-Iweala, gave an inspiring speech at Harvard where she described Africa as the next BRIC (Brazil, Russia, India and China).  Everything she says in the speech is music to my ears (confession—I provided some background materials to her staff)—that Africa’s growth prospects are strong, that reforms seem to have taken hold—and her idea of African Development Bonds is innovative and worthy of discussion.
 
My only concern is the labeling of Africa as the next BRIC.  First, Africa is not a country, whereas each of the BRICs is.  Africa is 47 countries, some of which are quite small (20 countries have populations less than 5 million).  The distinguishing feature of the BRICs is that they are both middle-income and large.  So it’s not clear how any individual African country can aspire to being a BRIC. Countries such as Malaysia or Chile may be more appropriate models for most African countries.

Varieties of African successes

Shanta Devarajan's picture

Tolstoy notwithstanding, the 20 African success stories described in the booklet “Yes, Africa Can” show that success comes in many different forms.  Broadly speaking, the cases fall into three categories:

- Success from removing an existing, major distortion.  The best example is Ghana’s cocoa sector, which was destroyed by the hyperinflation and overvalued exchange rate in the early 1980s.  When the exchange rate regime was liberalized and the economy stabilized, cocoa exports boomed (and continue to grow).  Similar examples include Rwanda’s coffee sector and Kenya’s fertilizer use.  Africa’s mobile phone revolution, too, is an example of the government’s stepping out of the way—in this case by deregulating the telecommunications sector—and letting the private sector jump in. 

More cell phones than toilets

Shanta Devarajan's picture

An article in yesterday’s New York Times observes that, with the number of mobile subscriptions exceeding five billion, more people today have access to a cell phone than to a clean toilet.  Leaving aside the relative value of these two appliances, the surge in cell phones in Africa—some 94 percent of urban Africans are near a GSM signal—is transforming the continent.  Farmers in Niger use cell phones to find out which market is giving the best price; people in Kenya pay their bills and send money home using M-Pesa.

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