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African Successes

Submitted by Shanta on Thu, 2009-09-17 11:44

In recent years, a broad swath of African countries has begun to show a remarkable dynamism.  From Mozambique’s impressive growth rate (averaging 8% p.a. for more than a decade) to Kenya’s emergence as a major global supplier of cut flowers, from M-pesa’s mobile phone-based cash transfers to KickStart’s low-cost irrigation technology for small-holder farmers, and from Rwanda’s gorilla tourism to Lagos City’s Bus Rapid Transit system, Africa is seeing a dramatic transformation.  This favorable trend is spurred by, among other things, stronger leadership, better governance, an improving business climate, innovation, market-based solutions, a more involved citizenry, and an increasing reliance on home-grown solutions.  More and more, Africans are driving African development. 

The global economic crisis of 2008-09 threatens to undermine the optimism that Africa can harness this dynamism for long-lasting development.  In light of this, it might be useful to re-visit recent achievements.  The African Successes study aims to do just that.

The study will identify a wide range of development successes (see list), from which around 20 cases will be selected for in-depth study.  The analysis of each successful experience will evaluate the following: (1) the drivers of success—what has worked and why; (2) the sustainability of the successful outcome(s); and (3) the potential for scaling up successful experiences.  African success stories offer valuable insights and practical lessons to other countries in the region. 

I welcome your comments and suggestions for success stories. Click here to see the list of what we have come up with so far.

Madagascar: a transition...but challenges are coming soon

Submitted by Noro Andriamihaja on Mon, 2009-06-22 16:30

So far the dialogue between the main political parties has failed to produce an agreement on the way forward for a return to a democratic Government. For the time being, the economy continues to deteriorate but has shown some resilience due to two factors; 

(i) Fiscal Policy: The strict fiscal policy pursued by the authorities has helped stabilize key financial indicators (interest rates, inflation, and the exchange rate) 

(ii) The dual impact of the crisis on private sector and households: A segment of the economy has been seriously affected (such as tourism, textile and construction) resulting in job losses in urban areas. In contrast to these vulnerable sectors, a large fraction of the Madagascar economy has been isolated from the current recession (likewise they benefited less from growth in good times) because of the good rice harvest.  

Three main challenges in the near future: (i) the payment of salaries to community teachers when classes will open in September, (ii) the reaction of textile companies to the uncertainty surrounding the US decision to maintain Madagascar as part AGOA, (iii) investment and planting decisions for the rice counter-season.

The question is will the Government be able to pass those tests in the absence of a political agreement?

To see the full report on the Madagascar economy, click here

Madagascar: From political crisis to economic decline?

Submitted by Noro Andriamihaja on Tue, 2009-04-21 10:57

Following weeks of political turmoil, President Marc Ravalomanana resigned on March 17, 2009. The leader of the opposition, Andry Rajoelina, ex-Mayor of Antananarivo, became “President of the Transition Authority” with the support of the army. The transition – increasingly being referred to as a coup by the international community – marks the culmination of a pitched power struggle that began in mid-January 2009, has put development on hold, and taken over 150 lives. Political uncertainty is nonetheless likely to remain until a clear consensus on the way forward emerges among the political forces in the country – and its subsequent recognition by the international community.

The impact of this crisis is difficult to predict, more so that Madagascar is also being affected by the global financial turmoil. Preliminary estimates indicate that the GDP growth rate is likely to be negative in 2009 -- down from a pre-crisis projection of 7.5%, through the combination of two forces: (i) the slowdown of private activities in the industrial and service sectors, and (ii) fiscal adjustment of public spending. The details are provided here.

The Impact of the Financial Crisis on Madagascar

Submitted by Noro Andriamihaja on Mon, 2008-12-15 14:35

The negative impact of the financial crisis on economic growth in Madagascar is expected to be relatively limited; growth is still likely to attain 7% in 2008. Over the medium term, declining demand in industrial countries is expected to affect strategic export oriented sectors such as mining, tourism, textiles and agribusiness. The depth of the banking sector in Madagascar is still very modest with deposits accounting for less than 9 percent of GDP. Therefore, the transmission mechanism is more likely to affect the real sectors, especially labor intensive ones.

The short term impact of the current financial crisis on the domestic financial sector is likely to be modest because of weak integration in international markets; the local banking sector has remained highly liquid, adequately capitalized and profitable. Prudential indicators provided recently by the Central Bank confirm that the average regulatory capital risk to weighted assets is high (14.1%) and the share of non-performing loans is low (8.5% of gross total loans). In the long run, the banking sector will remain vulnerable to delinquent loans coming from exporting firms.

The challenge ahead for the government would be to take away lessons from the current situation and address certain structural issues by accelerating international competitiveness by reducing the logistic costs on exports (customs, transportation, forwarding agents); increasing labor productivity and redefining the export strategy; securing the fiscal position of the government by increasing tax revenue and promoting more effective government spending.