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Entrepreneurship and industrialisation
Sustainable Cities and Structural Transformation
Regional development and spatial inclusion
Global Value Chains and Africa's Industrialisation
Structural Transformation and Natural Resources
Public Resource Mobilisation and Aid in Africa
Authors : Amarakoon Bandara, Mary Manneko Monyau
Zimbabwe’s gross domestic product (GDP) growth declined from 1.1% in 2015 to an estimated 0.5% in 2016. It is projected to increase by 1.3% in 2017 with the agriculture, tourism, manufacturing, construction and financial sectors all expected to improve. In particular, the country received above normal rainfall which is a major boost for the economy. The poor performance of government revenues against a background of high recurrent expenditure led to a large fiscal deficit. The fiscal deficit for 2016 is estimated at USD 1.042 billion (7.3% of GDP), against a target of USD 150 million. The economy also continues to experience shortages in foreign currency required to fund critical inputs in most sectors of the economy and the high cost of production which has eroded competitiveness.
According to the Zimbabwe National Statistics Agency (ZIMSTAT), the annual inflation rate stood at -2.19% in January 2016 and -0.93% at the end of the year. The estimated average annual inflation for 2016 is -1.5%, up from -2.4% in 2015. The removal of some goods from the Open General Import Licence in June 2016 coupled with a decline in agricultural production owing to drought has pushed up prices. Zimbabwe emerged out of deflation in February 2017 with annual monthly inflation at 0.06% after gaining 0.71 percentage points on the January rate. Inflation is expected to remain positive in 2017, hovering between 1% to 2%, on the back of an anticipated increase in international oil prices and economic recovery. The external position is projected to remain under severe pressure in the medium term because of weak exports.
According to the 2017 Monetary Policy Statement, merchandise exports amounted to USD 3 365.8 million in 2016 representing a 6.9% decline from the USD 3 614.2 million recorded in 2015. Exports in 2016 were dominated by minerals (gold, nickel, platinum, and diamonds) and tobacco. Tobacco remains a major source of export earnings with the Tobacco Industry Marketing Board (TIMB) registering sales of 202 million kilograms (kg) of tobacco as at 12 September 2016, up from 198.9 million kg in 2015. Total sales amounted to USD 593 million at an average price of USD 2.94 per kg. In 2015, the total sales were USD 586.4 million, at an average price of USD 3 per kg. The major export destinations are South Africa, United Arab Emirates, Mozambique, Botswana and Zambia.
Merchandise imports on the other hand declined by 11.7% from USD 6 062.3 million in 2015 to USD 5 350.9 million in 2016. This is mainly because of the Statutory Instrument 64 ban on certain commodity imports. Imports were dominated by diesel, unleaded petrol, electrical energy, crude soya bean, rice, non-alcoholic beverages and medicines. Fuel accounted for 27.2% of the total merchandise imports while food accounted for 11.8%. The top source countries included: South Africa, Singapore, China, India, Mozambique, Japan, Botswana and United Arab Emirates.
The external sector still remains a threat to a strong recovery in the near term largely due to weak exports leading to an unsustainable trade deficit, although imports have been coming down.
The lack of fiscal space has undermined development expenditure and social services provision, exacerbating poverty in rural and urban areas. The Zimbabwe Poverty Atlas of 2015 by ZIMSTAT shows that poverty prevalence remains high throughout the country. It was highest in Matabeleland North (85.7%) and least prevalent in Harare (36.4%) and Bulawayo (37.2%). Other provinces had prevalence rates between 65% and 76%. According to ZIMSTAT in 2016, the poverty datum line averaged USD 478.90, slightly down from USD 491.26 in 2015.
The economy has experienced cash shortages owing to rising informality, fiscal revenue underperformance, declining capital inflows and export receipts, a high fiscal deficit and public indebtedness; external imbalances and capital flight. In order to alleviate cash shortages, the government introduced bond notes in November 2016 pegged at par to the US dollar. The introduction of bond notes initially created apprehension but they have been broadly accepted as a medium of exchange. Economic activity in the near term will depend to a large extent on how quickly measures instituted by the government will be implemented.
Authors : Elda Chirwa, Peter Engbo Rasmussen, Colleen Zamba
Despite negligibly higher growth than in 2015, 2016 proved to be challenging for the Zambian economy. Growth remained restrained and insufficient to ensure a positive per capita growth rate. Global growth prospects and demand for copper remained low throughout most of the year affecting the price which averaged USD 4 860 per ton. The lower price affected mining profitability and overall activity in the Copperbelt Province which is the traditional mining area. On the other hand, the mining industry in the North Western Province is buoyed by their lower cost structure. New mining activities initiated in 2016 led to an increase in total copper production by 8.4%. Despite a drought in Southern Africa, late rains resulted in a decent harvest sufficient to ensure food security, but insufficient to contribute to overall growth. Maize output increased by 9.7% to 2.9 million tons while other crops reduced production. Economic performance is expected to improve in the medium term. Copper output is projected to increase by 16% in 2017 and by 8% in 2018. The agriculture season has started with good rains. The projections assume sufficient electricity will be available to increase copper production while weather conditions remain conducive with a limited effect from army worms for a good harvest.
President Edgar Lungu was re-elected in the August 2016 general elections. The first major task of his government was to launch the five point economic recovery programme termed “Zambia Plus”. This programme aims at balancing the budget to sustainable levels following the increase in fiscal deficits to about 10% of GDP in 2016. A substantial part of the budget is used for paying non-discretionary expenditures such as salaries and interest payments on domestic and foreign loans, and subsidies. Only one third of the domestic revenues are available for goods and services, transfers and other expenditures. Key policies focus on enhancing domestic resource mobilisation, improving fiscal governance, accountability and transparency, restoring budget credibility and raising the confidence of the private sector.
The government launched its Jobs and Industrialisation Strategy in 2013 as an important initiative to diversify the economy and reduce vulnerability to mining. It is noteworthy that foreign direct investment in manufacturing surpassed mining for the first time in the past decade in 2015. This could be an indication that non-mining investors are looking to Zambia that offers, by regional standards, a stable investor environment.
Authors : Vera Kintu Oling, Yemesrach Workie, Simon Peter Nsereko
The Ugandan economy showed remarkable resilience in achieving modest gross domestic product (GDP) growth of 4.8% in 2016 compared to 5.5% growth in 2015. Real GDP projections for 2017 AEO indicate that GDP will grow by 5.1% in 2017 and 5.8% in 2018. Headline inflation is expected to increase slightly from 5.3% in 2017 to 5.9% in 2018, owing to rising food inflation on account of unfavourable weather conditions.
In support of macroeconomic management, the government has continued to implement large infrastructure programmes in 2016 balanced with a cautious but expansionary fiscal policy and a prudent monetary policy aimed at maintaining price, debt sustainability and exchange rate stability. The main focus has been to grow tax-to-GDP by 0.5% per annum to propel growth. However, continued institutional capacity constraints in implementing public investment projects have constrained GDP growth below the 7% full GDP potential.
The current account is expected to deteriorate from 6.5% of GDP in 2015 to 8.4% in 2016 and remain fragile in part due to the importation of inputs for large-scale infrastructure projects and a reduction in global demand for exports. According to the Bank of Uganda (BoU), the stock of foreign exchange reserves at the end of 2016 is equivalent to 4.3 months of import cover.
The country’s fiscal deficit is projected to widen slightly from 4.3% of GDP in 2014/15 to 4.8% of GDP in 2015/16 and oscillate within the range of 4.9 to 5.0% of GDP between 2016 and 2018. According to the Bank of Uganda, the low levels of absorption of externally financed development expenditures resulted in a significantly lower fiscal deficit in fiscal year (FY) 2015/16 than the 7% of GDP projected at the time of the FY 2015/16 budget. The low absorption for project grants and loans is estimated at 58% and 73%, respectively.
In a bid to accelerate growth and make it more inclusive, Uganda has made industrial development an integral part of the government’s overall development strategy in the NDP II period. Industrial sector development is at a nascent stage in Uganda. During FY 2015/16, the sector accounted for around 18% of GDP. The industrial sector remains largely dominated by manufacturing accounting for an average of 47% of GDP of sector, followed by construction (37%), electricity (6%), water (2%) and mining and quarrying (8%) during the period 2011-15. The relative share of industry and manufacturing has not changed over the last ten years. A large share of the active labour force is engaged in entrepreneurship mainly in the service sector. However, the country has no comprehensive policy or strategy to enhance the sector’s growth. Uganda has embedded entrepreneurship development in some of its policy and strategy such as MSME Policy.
Authors : Philippe Trape
Gross domestic product (GDP) growth in Tunisia in 2016 was 1.0%, well below the projection of 2.6% made in the 2016 budget. The previous figure for growth in 2015, of 0.8%, has been revised upwards by the national statistics institute (INS) to 1.1%, since agricultural GDP rose more than foreseen. This means that the economy stagnated in 2016. Economic growth has been affected by security requirements and by an uneasy social climate. As was the case in previous years, growth in 2016 was driven chiefly by the services sector, with internal public and private consumption sustained by pay rises in the public sector still being the main engine of growth in the national economy. The rate of investment remained beneath the “psychological threshold” of 20% because of the dropping back of foreign direct investment (FDI), which fell by 25.4% during the first half of 2016, and financing constraints.
Weak growth, persistent major macroeconomic imbalances in the management of the public finances and delays in the practical implementation of strategic structural reforms (especially in the areas of tax, the public administration, the labour market, and public enterprises) have prevented the country from meeting the main challenge that Tunisia has been facing since 2011, which is the high level of structural unemployment. The average rate of unemployment in 2016 was 15.6% of the working population, compared with 15.1% in 2015, in spite of substantial recruitment in the public sector since 2011. Unemployment is higher for women (23.2%) than for men (12.5%), and it particularly affects those with a higher education qualification (31.9%).
In 2016, the overall unemployment rate remained on average 50% higher than the national average in the most disadvantaged regions, in the interior. Nonetheless, growth should recover in 2017 and 2018 as a consequence of the expected acceleration of investment linked to the launch of major projects outlined in the 2016-20 strategic development plan (Plan de développement stratégique) and the speeding up of the implementation of structural reforms, especially to the public administration under the programme implemented by the International Monetary Fund (IMF) with the backing of development partners. Even so, the pressures on the public purse should remain significant in 2017 and 2018. Inflation should rise slightly in 2017 before dropping back again in 2018. In 2016, Tunisia showed all the hallmarks of a “dual economy”, with a modern industrial base composed of 5 600 businesses with more than ten employees and a spread of under-capitalised small enterprises, most of them with a single person, and 80% concentrated in the services sector, particularly in commerce, transport and storage.
Authors : Carpophore Ntagungira, Ginette Patricia Mondongou Camara, Jeanne Bougonou
The economy grew by 5% in real terms in 2016, slightly down from 5.3% in 2015 because of lesser public investment and a shift of maritime traffic to other regional ports due to Togo’s strict application of West African Economic and Monetary Union (WAEMU) Regulation 14 on axle-load limits. Good rainfall in 2016 allowed agriculture to contribute 1.2 percentage points to overall growth, versus -1.5 points in 2015. The contribution of extractive industries was insignificant, with a negative growth contribution of phosphate production (-0.3 percentage points) and a weak one of clinker production (0.2 points). Despite several programmes to boost entrepreneurship, manufacturing contributed only 0.2 percentage points to GDP growth, down from 0.7 in 2015. Construction accounted for 0.5 percentage points of growth, also down from 0.8 the previous year. The services sector did no better, contributing 0.9 percentage points to overall growth, slightly down from 1.1 in 2015.
The government plans to step up talks with the International Monetary Fund (IMF) in 2017 and start reforms under the IMF’s Extended Credit Facility (ECF) in the hope of consolidating GDP growth, expected to be 5.1% in 2017. The primary sector is projected to account for 1.9 percentage points of growth, services 1.7 points and the secondary sector 0.9 points. Thus, in 2017, nonmarket branches are projected to account for -0.9 percentage points to GDP growth, while VAT revenue should account for 0.8 points and customs duties for 0.7 points.
Major public investment and steady growth marked the 2012-16 five-year periods, but government debt rose from 48.6% of GDP in 2011 to 76.0% in 2016, above the 70% WAEMU limit. The 2017-19 ECF programme aims for long-term viability of the debt. The EFC agreement stipulates that as from January 2017, the government is no longer to contract new non-concessional loans, while concessional loans are regulated and supervised. This new budget policy could reduce public debt to 56.4% of GDP in 2021.
The productive economy is dominated by agriculture. Of the active population, 51% are small farmers, 39% independent non-agricultural workers and 10% employed in the formal sector. In 2016, the formal sector comprised 88 000 jobs, 67% of which in the public sector and 33% in the private sector. Industry in 2016 accounted for only 19.7% of GDP, including 5.5% in manufacturing. Higher education provides few of the skills needed for entrepreneurship.
Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017
AfricanEconomicOutlook.org offers comprehensive and comparable data and analysis of 54 African economies.