This week, the World Bank launched its second Kenya Economic Update. We have been positively surprised to see such a strong uptake of our previous report and were pleased to have a full house at the launch and informal briefings we have in the run-up of the launch. These Economic Updates aim to replicate a model of shorter, crisper and more frequent country economic reports, which have become a trademark of the World Bank’s analytical presence in other countries, in particular China and Russia.
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.
- Urban Development
- Public Sector and Governance
- Private Sector Development
- Macroeconomics and Economic Growth
- Information and Communication Technologies
- Financial Sector
- Culture and Development
- Agriculture and Rural Development
- success stories africa
- africa success
Consider the following description of a trucker’s journey in Cameroon: “The plan was to carry 1,600 crates of Guinness and other drinks from the factory in Douala where they were brewed to Bertoua. According to a rather optimistic schedule, it should have taken 20 hours, including an overnight rest. It took four days. When the truck arrived, it was carrying only two-thirds of its original load.”
And this is how a Tanzanian exporter explains why few firms stay in the exporting business: “They discover that it is a miserable experience. Having gone to the effort of getting an export order they then spend weeks pounding through bureaucracy, endlessly waiting in dirty government corridors trying to find a morose civil servant prepared to do his job.”
How do these costs affect Africa’s trade?
During my recent seminar in Geneva, where I was also meeting with the Africa Progress Panel, a couple of members of the audience (which consisted of ambassadors, U.N. staff, civil society and academics) said, “I liked your analysis, but not your conclusions.”
The seminar summarized many of the points I have been making on this blog:
- For the decade before 2008, Africa was experiencing sustained and widespread economic growth, thanks to aid, debt relief, private capital flows, high primary commodity prices, and improved macroeconomic policies
- Despite being the least integrated region, Africa was perhaps the worst hit by the global crisis
- Contrary to some people’s fears, African governments continued to pursue prudent economic policies during the crisis—even though the visible payoffs to these policies (growth and poverty reduction) had suddenly diminished
- Conclusion: Economic policy in Africa, which had been improving before the crisis, and either stayed on course or improved during the crisis, has never been better.
Since my conclusion followed directly from the analysis, I had three possible explanations for the reaction mentioned above:
Despite being pummeled by the global crisis--diamond production and exports contracted by 50 percent in 2009--Botswana was in the enviable position of being able to cushion its people and the economy, thanks to large savings accumulated over the years and access to inexpensive financing.
But it may have overdone the cushioning. The fiscal deficit for the 2009/10 budget year is projected at 14 percent of GDP.
Although diamond prices are expected to rebound, production and exports will remain below pre-crisis levels, and another double-digit deficit is expected in 2010/11. Not even Botswana can maintain double-digit deficits for long without jeopardizing its fiscal sustainability, especially given the specter of a rapid fall in diamond production--and eventual depletion of known reserves--in a few decades.
At the same time, cutting spending is particularly painful in a country like Botswana where government expenditures are pivotal to economic activity and to sustaining non-mining private sector.
Some tough choices ahead for one of Africa's best-managed economies.
Mon ami, l’économiste togolais Kako Nubukpo, avec qui j’ai eu l’occasion de débattre lors d’un de mes voyages à Lomé, a fait part de son analyse sur le bilan des quinze années d’existence de l’Union économique et monétaire ouest-africaine (UEMOA) lors d’un entretien pour le site Ouestaf.com.
D’après lui, même si l’Union est parvenue à gérer l’équilibre macroéconomique et budgétaire entre les États membres, la combinaison d’une monnaie forte (du fait de la parité fixe entre le franc CFA et l’euro) avec ce qu’il appelle « la gouvernance macroéconomique » restreint la compétitivité et donc la diversification et la croissance économique des pays membres.
Ces commentaires émanant d’un économiste qui est actuellement consultant auprès de l’UEMOA relanceront peut-être le débat sur les performances et les options économiques des pays d’Afrique francophone.
For the World Bank's internal website, I was asked to list the three most important developments of the past decade. To elicit a broader discussion, I am sharing it on this blog. In a subsequent post, I will list the three most important challenges and opportunities for the coming decade. One or two of my items are also reflected in Bono's excellent piece in yesterday's New York Times, "Ten for the Next Ten." Here are my top three:
Le déclin économique à Madagascar s’inscrit dans la durée. Depuis 1980, il n’y a que 7 pays en développement qui ont reporté une croissance de leur revenu par habitant moindre que Madagascar. Cette performance traduit des insuffisantes criantes en matière de développement humain et en infrastructure ainsi que des retards technologiques, qui sont les moteurs de la croissance.
For the first time since the beginning of the crisis, the Government spent massively in October through a combination of debt-service and investment outlays. Over the next few months, the new Government is expected to face three daunting challenges with significant financial implications:
- Organizing institutions and the electoral process (US$10-20 million for each election and an additional US$5-7 million per month to run the institutions)
- Managing humanitarian vulnerability to climatic and external shocks (e.g.,US$40 recovery cost in 2007/2008)
At the recent Africa Economic Conference, UN under-secretary general and executive secretary of UNECA, Abdoulie Janneh, said "[Africa’s] previous growth, while benefiting from improved macroeconomic management, was largely dependent on commodity exports and resources flows from outside the continent."