Official LaunchOfficial LaunchDakar May 10, 2009Dakar May 10, 2009

African Economic Outlook 2008/2009

UNECA

UNECA

Financial partner

Junior partners UNECA

Lead partner

Experts Network Consultants. think tanks …

AEOAEO 2009: an evolving partnership

UNECA

AEOAEO Coverage 2009: 47 Countries

Source: OECD Development Centre / African Development Bank. 2008

Algeria

Libya Egypt

Mauritania

Mali

Niger

Chad

Dem.Rep. Congo

Sudan

Central AfricanRepublic

Equatorial Guinea

GabonCongo

Cameroon

Angola

Guinea-Bissau

Guinea

Sierra Leone

Liberia

Côted'Ivoire

Tunisia

BurkinaFaso

Ghana

NigeriaTogo

Ethiopia

Somalia

Djibouti

Eritrea

Kenya

Tanzania

Mozambique

SouthAfrica

Botswana

Zimbabwe

Namibia

Zambia

Swaziland

Lesotho

Malawi

Uganda

Burundi

Rwanda

Madagascar

SenegalGambia

Morocco

AEO 2009

New in 2009:

Burundi

Central African Republic

Djibouti

Gambia

Guinea

Lesotho

Mauritania

Seychelles

Sierra Leone

Swaziland

Sudan

Togo

99% of GDP

97% of population

UNECA

GrowthGrowth Africa still growing but much slower than before the crisis

Source: OECD Development Centre / African Development Bank. 2008

Real GDP Growth (%)

UNECA

Real GDP Growth (%)

Source: OECD Development Centre / African Development Bank. 2008

GrowthGrowth The crisis taking a toll on Africa’s growth prospects

April 08 projections

Nov 08 projections Feb 09 projections

May 09 projections

UNECA

GrowthGrowth Regional disparities in growth

Real GDP Growth (%) 2000-05 2008(e) 2009(p) 2010(p)Central 5.7 5.0 2.8 3.6East 4.9 7.3 5.5 5.7North 4.1 5.8 3.3 4.1South 4.1 5.2 0.2 4.6West 7.1 5.4 4.2 4.6Africa 4.8 5.7 2.8 4.5Memorandum items North Africa (including Sudan) 4.2 6.0 3.5 4.2 Sub-Saharan Africa 5.2 5.5 2.4 4.7 Oil-exporting countries 5.4 6.6 2.4 4.5 Oil importing countries 4.1 4.6 3.3 4.5

UNECA

GrowthGrowth Regional disparities (May forecasts)

Southern Africa hit severely: oil (Angola) and minerals (Botswana)2007 2008(e) 2009(p) 2010(p)

    February May February May

GDP Growth Rate in percentage

Central Africa 4.0 5.0 2.8 2.0 3.6 3.2

Eastern Africa 8.8 7.3 5.5 5.1 5.7 5.5

Northern Africa 5.3 5.8 3.3 3.5 4.1 4.1

Southern Africa 7.0 5.2 0.2 -1.0 4.6 3.6

Western Africa 5.4 5.4 4.2 3.3 4.6 3.4

AFRICA 6.1 5.7 2.8 2.3 4.5 4.0

Memorandum items            

Sub-Saharan Africa 6.4 5.5 2.4 1.4 4.7 3.8

Oil-exporting countries 6.8 6.6 2.4 2.5 4.5 4.1

Oil importing countries 5.4 4.6 3.3 2.1 4.5 3.8

UNECA

Global CrisisGlobal Crisis Africa is better prepared to weather the storm

• Committed macro management in many countries has brought inflation under control and improved fiscal balances

• The HIPC initiative significantly reduced debt levels in many countries

• The commodity boom helped to improve terms of trade

• Business climate indicators have been improving steadily. reflecting government efforts in nurturing private sector and enterprise

• Political conflicts have declinedNevertheless…

Africa today is much more resilient to exogenous shocks:

UNECA

TradeTrade The global trade collapse is now hitting Africa

• Many African countries have been dependent on commodity exports for growth• Nominal export growth raced ahead by an annualised 34% over 2003-07• After years of boom, World Trade is expected to contract by 13% in 2009

Source: Datastream, 2009Source: African Economic Outlook, 2009

- 94% - 112%

UNECA

Global CrisisGlobal Crisis A global retrenchment of capital

Net capital flows to emerging economies

-2000

200400600800

1,000

2002 2003 2004 2005 2006 2007 2008e 2009f

USD

bill

ion

Direct investment Portfolio equity Banks non-bank debt Official flows

UNECA

Private financial flowsPrivate financial flows A global retrenchment of capital

Source: OECD Development Centre , based on UNCTAD 2009 Source: OECD Development Centre , based on World Bank, 2009

RemittancesForeign Direct investment

• Flows to Africa grew by 17% to over USD 60 billion in 2008, despite the global slowdown• Remittances to Sub-Saharan Africa are set to decline from between 4.5% to 8% over 2009• Stock markets have taken a severe hit

Stock Markets(MSCI price index local currency)

Source: Thomson Datastream 2009

UNECA

• A cold shower for hard commodity exporters• Soft commodity exports prove more resilient

Source: OECD Development Centre, based on World Bank, 2009

TradeTrade The commodity boom is over… for now

Hard commodities Soft Commodities

UNECA

The emerging world is not forgetting Africa

Source: OECD Development Centre, based on China Mofcom, 2009

• While OECD countries are dealing with their downturn, emerging countries continue to invest and strengthen ties with African countries

• Africa’s emerging country partners must not sacrifice governance and poverty reduction to strategic interests

India China

Source: OECD Development Centre, based on UNCTAD, Nepgen and Jansson 2009

Significant Chinese and Indian investments in African infrastructure, up to April 2008

UNECA

Food pricesFood prices After the peak of the food crisis

Food prices

Source: World Bank

UNECA

DriversDrivers Severe macroeconomic impact (February forecast)

* Excluding Zimbabwe** Estimations for 20078and predictions for 2009/10

Source: OECD Development Centre / African Development Bank. 2008

Inflation

Current Account

Fiscal balance

• The crisis will cause fiscal balances to deteriorate significantly across the continent.

• Fiscal space to adopt countercyclical policies is very limited in many countries.

UNECA

DriversDrivers Macroeconomic balances deteriorating

* Excluding Zimbabwe ** Estimations for 20078and predictions for 2009/10

Source: OECD Development Centre / African Development Bank. 2008

UNECA

Global CrisisGlobal Crisis A patchwork of different impacts

Source: OECD Development Centre / African Development Bank

Cost of the crisis:• Oil exporters the most hit.•More integrated

economies also strongly affected• Low-income / non-oil

exporting countries are less affected. because:-- beverages (cocoa. tea. coffee) less affected by decline in global incomes.-- less integration to the world economy

- 2 to- 3 %

Zero to – 1.9 %

- 3.1 to – 23 %

Increased growth between 2008-09

Growth differential 2008 - 2009

UNECA

GrowthGrowth Oil exporters and importers: making a switch?

Source: OECD Development Centre / African Development Bank. 2008

Net Oil exporters: Algeria. Angola. Cameroon. Chad. Congo. Côte d'Ivoire. Congo DRC. Egypt. Equatorial Guinea. Gabon. Libya. Nigeria. Sudan

Real GDP Growth

Oil exporters

Oil importers

UNECA

Oil ExportersOil Exporters The cost of having all eggs in one basket

Source: OECD Development Centre / African Development Bank

*: African Economic Outlook forecasts

…and little room left for manoeuvre

• Many oil exporters did not take advantage of commodity windfalls to improve governance and diversify their economies

• Nevertheless, some oil exporters have performed well in terms of reducing external debt

Taking a hit from the oil price fall ..

UNECA

Oil ImportersOil Importers Benefiting from the end of oil and food price booms

Source: OECD Development Centre / African Development Bank

*: African Economic Outlook forecasts

Oil-importing countries find it difficult preserving pre-crisis gains. Rising inflation and deteriorating macroeconomic balances.Good performers’ assets:• Sustained growth; Prudent

macroeconomic policies; Diversification; Decreasing poverty

Challenges:• Fiscal deficits; ODA

dependency; widening trade deficit; climatic & price shocks

Holding up against the crisis so far… …yet challenges rising

UNECA

CrisisCrisis Main messages

•Africa has been hit severely; the impact varies across countries and sectors

•Changes in the direction of trade, prudent macroeconomic policies and debt relief make Africa better positioned to weather the current crisis.

•African governments have to preserve the gains obtained in the recent past, by pursuing structural reforms, infrastructure development and targeting poverty reduction.

•With the right combination of domestic policy reforms, Africa can continue to grow despite the crisis, while setting the stage to faster growth for the future.

UNECA

RisksRisks Countries to fall further back on progress toward the MDGs

Source: OECD Development Centre / African Development Bank. 2008

UNECA

ChannelsChannels Aid commitments can make the difference

DAC members' net ODA 1990 - 2007 and DAC Secretariat simulations of net ODA for 2008 to 2010

UNECA

StabilityStability Is long term decline in political instability continuing ?

Good News• Several post-conflict countries making progress. • Major improvements in political stability and governance in Liberia and Sierra

Leone. • After 6 years of civil unrest, the situation in Côte d’Ivoire continues to stabilise. • The Great Lakes region seems to be laying the bases for an improvement in the near

future. • The conflict in Uganda has lost impetus with the elaboration of a peace agreement

in April 2008 (although not yet signed by the rebels).• Elections in Ghana leading to a peaceful transfer of power.• Regional cooperation on governance in the framework of NEPAD and APRM is

contributing to improvements in governance and stability.

UNECA

StabilityStability Is long term decline in political instability continuing ?

Still some bad News

However, some concerns remain in some countries with unresolved conflicts.

UNECA

ThemeTheme Innovation and Information & Communication Technologies

Africa’s Exponential Growth in Mobile Telephony • Africa is the fastest growing market in the world. Today, 4 out of 10 Africans have a mobile phone line.

• The exponential growth in ICT is enabling many African users to gain access to basic services (education, health, banking) for the first time.

• ICT is a vector for innovation, stimulating of innovative products and business models.

• As an endogenous source of growth, ICT is particularly valuable in a time of external crisis.

Source: OECD Development Centre, based on Wireless Intelligence, 2009.

ICTs are helping to shape an improved business environment by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs

UNECA

InfrastructureInfrastructure Connecting Africa to the world in 2009-10

Source: World Bank Group 2008, www.manypossibilities.net (Steven Song).

SAT3

THE MISSING

LINK

As of March 2009MULTIPLE

SOLUTIONS

AT LEAST ONE LINK

• The East coast will be connected to the world for the first time through fibre optic submarine cables on open access, TEAMS and SEACOM; the West coast will be connected by at least 3 fibre optic submarine cables on open access, GLO1, MaIN OnE and WACS, instead of having only SAT3 on closed access.

• User prices should start decreasing between 4 to 10 times from June 2009, as inland high capacity networks are built and as wholesalers pass on price cuts, which can bring about an exponential uptake in ICT and Innovation in Africa.

UNECA

InfrastructureInfrastructure Good prospects for inland networks

30,500 km in Eastern and

Southern Africa

8,800 km in Central Africa

7,200 km in Northern

Africa

19,500 km in Western

Africa

• Connecting Africa’s capitals and major cities will require 66.000 km of fibre-optic cables.

• Several major initiatives are already being planned:

• Eastern and Southern African Backbone.

• Central African Backbone.

• Western African INTELCOM II Backbone.

• Total expenditure commitments for telecoms in Africa are set to reach $55,892,950,000 as agreed in the Connect Africa Summit, Kigali, Rwanda in October 2007

• Participants committed to completing the interconnection of all African capitals and major cities with ICT broadband infrastructure by 2012.

Source: ITU, 2007

UNECA

CrisisCrisis ICTs in Africa remain attractive to investors

Healthy Mobile Business in Africa

Source: Wireless Intelligence, 2008

• Like in the dot.com burst in 2000-2001, ICT investment will be less affected by the crisis than other regions.

• Big deals have continued through late 2008 and early 2009.

• Capital expenditures are decreasing and price competition for market share is rising steadily.

• Cash-rich transnational operators will consolidate their presence.

With publicly funded high capacity infrastructure projects underway & private investments resilient to the crisis,

new products and business models should multiply despite the crisis

UNECA

Innovation Innovation Africa first to implement free roaming

Source: OECD Development Centre

Zain

MTN

Safaricom - Vodacom - MTN

Forthcoming

Africa is the first continent in the world to implement free roaming, allowing any user in a foreign country to receive and send calls and messages at local rates.

• Zain launched the world’s first borderless network in 2006.

Free roaming is growing exponentially thanks to pan-African operators 6 operators account for 52 % of total mobile phone subscriptions in Africa by 2009:

• Middle East-based: Zain present in 15 countries and Moov in 5.

• South African-based: MTN present in 13 countries.

• European-based: Orange present in 12 countries, Tigo and Vodacom in 6.

Free roaming countries

UNECA

InnovationInnovation Mobile banking lowering transaction costs

Mobile Phone Transactions in Kenya (%)

• Excellent prospects with e-banking services quickly growing and being already present or announced in 14 Sub-Saharan and 3 North African countries.

• Overseas: Orascom and Vodafone have signed agreements with Western Union on remittances.

• Mobile-payment and mobile-banking services rely on existing distribution networks: Mobile users, village kiosk agents, eventually Western Union agents.

Source: Vodafone, 2009.

• In Kenya, M-Pesa’s mobile-payment service for domestic transfers has enabled to lower transaction costs sharply, e.g., to send 1 000 Ksh, Western Union asks 500 Ksh, M-Pesa between 30 and 75 Ksh.

• M-Pesa has won over 5 million users in less than 2 years only in Kenya and is seeking to expand to East Africa and Afghanistan.

UNECA

Innovation in agricultureInnovation in agriculture Bringing people and markets together

Source: Does Digital Divide or Provide? The Impact of Cell Phones on Grain Markets in Niger, Jenny Aker, 2008.

Bakin Birgi(Monday)

Zinder(Thursday)

Tanout(Friday)

Niamey(Sunday)

65 km ~ from 3 hours to 2 mins

20 km ~ 1 hour

750 km ~ from not accessible to 2 mins

Home market

phoner~1.gif

Farmer in Niger

• E-services such as messages and internet through mobile phones have brought together farmers and buyers by enabling access to crop prices and quantities timely and affordably.

• These services bring reductions in price differences across markets, e.g., 20 per cent in Niger, due reductions in search costs: Farmers are able to search over more markets and respond to surpluses and shortages, e.g., markets in food crisis regions with mobile phone coverage in Niger in 2005 had lower consumer grain prices than those regions without mobile coverage.

• These services are already present in 10 West and Central African countries and growing.

UNECA

Policy recommendationsPolicy recommendations For Africa to continue an innovation frontier..

ICTs in Africa has proved to be an innovation frontier by combining state-of-arttechnologies with local customs and constraints through incremental innovations.

• This has been possible through the growth in Infrastructure and Innovation in ICT in Africa, and still more can be done to move forward in delivering value added services to the poorest population :

• Expensive inland high capacity networks need to be supported and governments have to ensure that wholesale price drops are passed on, if users are to benefit from being connected to the world by low cost solutions.

• In the Connect Africa Summit commitments in Kigali in 2007, African capital and major cities are to be connected to broadband by 2012 and African villages by 2015.

• Policies on ICT and Innovation are not presently well integrated in broader development strategies: Donor targets, MDGs and PRSPs.

• Governments should do more to attract private investment and knowhow to the fixed-line by adapting convergent licensing regimes and setting symmetric regulation of termination charges.

• Many fixed-line operators are close to bankruptcy with decreasing traffic and increasing marginal costs.

UNECA

ICTICT Policy recommendations for Africa

ICTs in Africa has proven to be an innovation frontier by combining state-of-arttechnologies with local customs and constraints through incremental innovations.

However, there is still more to be done to deliver more and better value added services to the poorest population :

• Expensive inland high capacity networks require government support

• Governments have to ensure that wholesale price drops are passed on

• Policies on ICT and Innovation are not yet well integrated in broader development strategies: Donor targets, MDGs and PRSPs.

• With many fixed-line operators close to bankruptcy, governments must attract private investment and knowhow to the fixed-line sector by adapting convergent licensing regimes and setting symmetric regulation of termination charges.

UNECA

AEO.orgAEO.org Africa’s economic portal for policymakers

• The latest developments in Africa’s economies

• Brings together the data & research from eight years of AEO

• Interactive database of all AEO data and statistics

• Complete and updated country notes

• Promotes original research by African researchers and institutions

AfricanEconomicOutlook.org

UNECA

Thank You