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Africa

Africa should invest in people, not industries

Ravi Kanbur's picture

The current African commodity/resource booms raise the question of how to appropriately use the revenues gained. Professor Ravi Kanbur of Cornell University talks to the distributional dilemmas and the best way forward for these growing countries to achieve transformation. He argues that African countries should generate sustainable growth by investing in infrastructure and human capacity building and not in the light manufacturing industrial policies that have worked so well in East and South Asia. 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Does talking about corruption make it seem worse?
The Guardian
What do most people immediately think of when you ask them why poor countries are poor? We’re pretty confident that it will be corruption. Whether you ask thousands of people in a nationally representative survey, or small focus groups, corruption tops people’s explanations for the persistence of poverty. Indeed, 10 years of research into public perceptions of poverty suggests that corruption “is the only topic related to global poverty which the mass public seem happy to talk about”.  Which is odd, because it’s the absolute last thing that people actually working in development want to talk about.
 
Africa’s moment to lead on climate
Washington Post
Climate change is the greatest threat facing humanity today. To avoid catastrophe, we must dramatically reduce the carbon intensity of our modern energy systems, which have set us on a collision course with our planetary boundaries. This is the challenge leading up to three key international events this year: a July summit on financing for new global development goals, another in September to settle on those goals and — crucially — a global meeting in December to frame an agreement, and set meaningful targets, on climate change. But focusing on ambitious global climate goals can mask the existence of real impacts on the ground. Nowhere is this truer than in sub-Saharan Africa.   No region has done less to cause climate change, yet sub-Saharan Africa is experiencing some of the earliest, most severe and most damaging effects. As a result, Africa’s leaders have every reason to support international efforts to address climate change. But these leaders also have to deal urgently with the disturbing reality behind Africa’s tiny carbon footprint: a crushing lack of modern energy.
 

ASET can be a great asset to Africa

Sajitha Bashir's picture



The African continent is on the cusp of a major transformation. Many economies are growing, with growth driven by investments in infrastructure and energy, trade, and by a stable macro-economic environment. I think that this growth will lead to socio-economic transformation (with higher-income jobs and a better quality of life) if it is also accompanied by building skills and research capacity in applied sciences, engineering, and technology (ASET).

Exploring Value for Money analysis in Low-Income Countries

Irene Portabales González's picture
The World Bank has identified 34 countries that qualify as Low-Income Countries (LICs) for 2015. LICs have a per capita income less than US$1,045 per year, while the world average is US$14,307. These countries face important infrastructure gaps that need to be addressed in order to support economic growth and reduce extreme poverty.
 
Cover of the "Value for
Money" report

Design: Sara Tejada

Public-Private Partnerships (PPPs) have been an important option to develop infrastructure and services.

However, challenges for preparing, procuring and monitoring PPP projects in LICs are huge. Challenges include weak institutional capacity, constraints in fiscal space, shallow capital markets, and lack of access to long-term financing.

Despite these challenges, LICs have made important efforts to implement PPP policies, laws and regulations. As a result, these countries closed 377 PPP deals between 1987 and 2013. Even with this considerable effort, LICs still have important infrastructure needs. This is a good start, but hardly enough to tackle the problem.

During the project selection stage, LIC governments have to discuss whether a particular project should be implemented under a PPP scheme or through traditional procurement. There are several reasons why governments decide to implement a PPP: to accelerate public investment programs, maximize the fiscal space or to try to avoid fiscal controls, for example.

At this key decision point, various options can be considered by governments, including a Value for Money (VfM) analysis.

Bringing peace – and ending violence – for women and girls

Sri Mulyani Indrawati's picture
Sri Mulyani Indrawati talks with a patient’s grandmother at the HEAL Africa hospital. Cherry Stoltenberg/HEAL Africa


Deep inside the sprawling HEAL Africa Hospital complex in the Eastern Congolese city of Goma is a small ward where women recover from injuries they suffered during complicated births and violent sexual attacks. When I entered, I first saw Muwakeso, a fragile-looking elderly woman sitting on a chair next to a bed. It took me a moment to realize that she wasn’t the patient, but rather her 3-year-old granddaughter Sakina, who was curled up into a tiny mound under a hospital sheet on the bed.
 
Sakina was heavily sedated to numb the pain after the second of three major surgeries she underwent to reconstruct parts of her lower body following a horrific attack about a year ago. Muwakeso recalls five men in civilian clothes approaching her house and beating her. Before she lost consciousness she heard Sakina screaming. The young girl was raped, but Muwaseko doesn’t know by how many men, and Sakina is unable to say.

'Business unusual' can still work

Cecile Fruman's picture

I recently spent three days in Hargeisa, Somaliland. An eye-opening experience, as much as one that strengthens my conviction that World Bank Group is doing the right thing by engaging in this fragile country.

Somaliland is business unusual. Imagine among others, sitting in a mandatory security brief and specifying your blood type straight off the plane, going to meetings in armored cars, wearing the hijab  – a veil worn by Muslim women in the presence of adult males – scheduling meetings around prayers and the time of Iftar, the evening meal when Muslims end their daily fast during Ramadan.

The business environment in Somaliland is characterized by a fragile state, poor public service delivery, a weak legal and regulatory regime, inefficient and costly trade logistics, and a fragmented private sector with limited structured engagement with the government. Although the private sector accounts for more than 90 percent of GDP (an anomaly in Africa), it has poor access to finance and lacks an organized voice.



Meeting with the President of the Republic of Somaliland.
 
During my mission, I met with key Ministers, entrepreneurs and development partners and discussed the challenges and opportunities linked to the ongoing economic development agenda, notably the development of infrastructure and the energy sector. The exchanges highlighted how the World Bank Group's program in Somaliland is laying a foundation to create job opportunities and to accelerate the pace of economic development by fostering business reforms and SME engagement. In this light, the set-up of a high-level taskforce – reporting directly to the President – to implement Doing Business reforms compiled in a Doing Business memo, is a milestone and a strong sign of client buy-in. That is always crucial for the World Bank Group's programs to reach their objectives.  

Last, I participated in the presentation of the pilot Reform Champion Program, which aims to develop the capacity of government officials and some representatives of the private sector to implement key reforms that will address constraints to economic growth and development. The project is expected to help trained reform champions implement at least five reforms to improve government-to-business services by July 2016.

The impact of investment climate reform in Africa: How has 'Doing Business' reform promoted broader competitiveness?

Aref Adamali's picture

Sub-Saharan Africa’s (SSA) impressive growth over the past decade or so has been matched by its equally impressive showing on the World Bank Group's "Doing Business" index. In 2012, one-third of the world’s top reformers on the index were from the continent, and every year its countries feature in the top 10 most active reformers. In 2014, five of the top 10 were from SSA.

Doing Business tracks progress in reforms that support a firm through its life-cycle, from start-up, through to raising capital, to potential closure. Through a mix of wide geographic coverage and rankings that generate a lot of public attention (not all of it wholly positive), the report has been a powerful motivator of investment climate reform, with the data serving as a useful means to measure progress made.
 
Doing Business as a start
While a large appeal of Doing Business as a measure of a country’s business environment is that it focuses on tangible business activities to which the private sector and policymakers can directly relate, its indicators are limited in scope. They are therefore intended to be used mainly as a litmus test of the state of a country’s investment climate. Therefore, while Doing Business's accessibility and global profile can be very useful in generating momentum for private sector reform, it ought to mainly serve as a starting point for a country to then engage in both broader reaching and deeper investment climate change. (This approach to the use of Doing Business has largely underpinned investment climate reform efforts in SSA by the Bank Group’s Trade and Competitiveness Global Practice.)  
 
So, if Doing Business is a starting point and is used as such, is there evidence to support the assumption that it triggers wider and deeper private sector reform? Or is movement on Doing Businesses a starting point and, unintentionally, an ending point too?
 
Linkages to wider competitiveness reform data
One of the most comprehensive measures of the state of different countries’ business environments is the World Economic Forum’s (WEF) Global Competitiveness Index (GCI), a data set of over 110 variables that looks at the current state of, and tracks changes in, competitiveness across the world. The data set is structured under 12 pillars that cover measures from institutional development to technology and innovation.

Using GCI as a good measure of competitiveness, and interpreting changes in it as a reflection of a country’s effectiveness in engaging in wider competitiveness reform, we can look at the relationship between GCI and Doing Business and, significantly, the extent of movement on the two indices.
 
A high-level review of the relationship between changes in GCI and Doing Business for different regions between 2007 and 2013 shows SSA to have performed comparatively well on both indices, performing similarly to countries of Eastern and Central Europe and surpassing the world average.[1] However, looking beyond averages to GCI’s specific pillars, SSA’s performance has been variable, advancing as a region in some areas more than others. Figure 1, below, shows GCI pillars where SSA has improved the most and the least, highlighting the top and bottom three.

Figure 1: Variations within competitiveness
(SSA score on GCI, total and select pillars)  




Of particular interest is Pillar 6, Goods Market Efficiency, because many of the areas that this pillar tracks are also areas where the Bank Group has focused its investment climate reform interventions, from business entry and competition, to taxes, trade and investment. (Two of the 16 indicators in this pillar actually comprise Doing Business data – the number of procedures and days required to start a business.)
 
Pillar 6 is one of the top three GCI pillars that have the greatest upward pull on SSA’s overall performance on GCI, countering the areas where SSA has slipped in its scores.

Weak labor market institutions and regulations hurt Nigerian workers

Abiodun Folawewo's picture

I have recently completed an analysis of the impact of institutions and regulatory frameworks on labour market outcomes in Nigeria, focusing on unemployment, employment and wage effects in the formal sector. I have found that Nigeria’s labour market institutions and regulatory framework negatively affect the quantity and quality of jobs, as well as employment, wages and productivity. Moreover, the institutional and regulatory framework covering workers’ rights, protection of the vulnerable workers, enforcement of minimum wages, and the provision of decent working conditions are weak.

Counting Africa’s Rural Entrepreneurs

In recent years there has been a growing interest in small rural business development and entrepreneurship as conduits for accelerating job opportunities – for the youth and for poverty reduction. This holds particularly in Africa, where the youth bulge is challenging policymakers to generate jobs for an additional 170 million people who are expected to enter the labor force between 2010 and 2020 (Fox at al., 2013).

Among them, 38 percent are projected to work in household enterprises, amounting to around 65 million people. Studies show that jobs generated in the sectors where the poor work and places where the poor live, i.e. in the rural areas, are more effective at lifting them out of poverty.

But is this justified? If only small numbers of rural inhabitants are entrepreneurs, if they predominantly engage in low productive activities, or if they do not make significant contributions to household income, we need to be more skeptical with regard to the role of entrepreneurship. Or at least, we must more critically reconsider whether current supporting policies are appropriate or supportive enough.
 

Large scale mining in Africa is a mixed blessing for women

Anja Tolonen's picture

The African continent is rich in natural resources, like oil, gas and minerals that contribute to a large share of exports, and are now a major source of foreign direct investment. In our paper African Mining, Gender and Local Employment, we investigate how this recent, rapid expansion in large-scale mining affects women’s job prospects.

According to previous research and policy documents, it is ambiguous whether industrial mining increases or decreases female employment. The “African Mining Vision” spells out the risk that extractive industries might make gender disparities in economic opportunities larger. The sector is generally known for weak local multipliers, i.e., for each job created in the sector, too few jobs are created in auxiliary sectors, such as services, manufacturing or construction. This is known as the ‘enclave’ hypothesis: that a large-scale mine generates few economic opportunities for local community members. On the other hand, mining activities may generate jobs in services and sales, which are relatively female dominated in the region and which are locally traded.


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