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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.

Africa: Least integrated but worst hit by the crisis

Submitted by Shanta on Mon, 2009-04-20 09:33

Even though it is the least integrated with the global economy, Africa may be the worst hit region by the global economic crisis. Each of the four channels through which the crisis is affecting Africa has a particularly nefarious impact. 

  • Private capital flows, which in 2007 had surged to $53 billion—for the first time exceeding foreign aid to the continent—are declining.  Since last year, African stock markets have fallen by an average of 40 percent, with some such as Nigeria's falling by over 60 percent.  Ghana and Kenya have postponed sovereign bond offerings worth over $800 million, delaying the construction of toll-roads and gas pipelines.  The Democratic Republic of Congo has lowered its expected foreign direct investment by $1.8 billion. These flows were financing much-needed infrastructure and commodity-based investments. More importantly, the surge in capital inflows had raised expectations that African economies had “turned the corner”—only to have those expectations deflated for reasons that are not remotely the fault of Africans.
  • Remittances, which had peaked at about $20 billion a year in 2008, are expected to decline by 4.4 percent this year.  Typically, remittances are counter-cyclical: when your family is having difficulties, you send them more money. But this time the crisis is in the remittance-sending countries. Over 77 percent of Africa's remittances come from the U.S.

Impact of the Global Financial Crisis on Zambia

Submitted by Julio Revilla on Tue, 2008-12-30 08:50

The direct financial effects of the global financial crisis have so far been limited due to Zambia’s reliance in domestic funding and limited exposure to external credit lines. However, the central bank has increased interest rates sharply as a result of portfolio outflows.

The largest affect has been the sharp fall in global copper prices. Copper exports, which accounted for almost 80 percent of total exports in 2007, have played a major role in sustaining Zambia’s growth, averaging close to 6 percent in the last five years. The fall of copper prices has already resulted in a significant depreciation of the domestic currency and more than doubled the external current account deficit in 2008. Lower copper prices have also contributed to weakening the fiscal position due to the government relying heavily on increased tax revenues (including a windfall tax) introduced in April.

As the economy slows down, second round effects are expected to negatively impact not only the financial sector but also the rest of the economy. Lack of infrastructure development (roads and energy) is likely to reduce growth of non-traditional export sectors in agriculture which could benefit from the exchange rate depreciation.