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African Economic Outlook 2017

Publications 22/05/2017

The African Economic Outlook 2017 presents the continent’s current state of affairs and forecasts its situation for the coming two years. This annual report examines Africa’s performance in crucial areas: macroeconomics, external financial flows and tax revenues, trade policies and regional integration, human development, and governance. For its 16th edition, the report  takes a hard look at the role of entrepreneurs in Africa’s industrialisation process. It proposes practical steps that African governments can take to carry out effective industrialisation strategies. Policies aimed at improving skills, business clusters and financing could remove important constraints on African private enterprises.

A section of country notes summarises recent economic growth, forecasts gross domestic product for 2017 and 2018, and highlights the main policy issues facing each of the 54 African countries. A statistical annex (available only on line) compares country-specific economic, social and political variables.

Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation

Articles 19/05/2017

Ahmedabad, India, May 22, 2017 – African governments need to integrate entrepreneurship more fully into their industrialisation strategies, according to the African Economic Outlook (AEO) 2017 released today at the African Development Bank Group’s 52nd Annual Meetings.

In 2016, Africa’s economic growth slowed down to 2.2% from 3.4% in 2015 due to low commodity prices, weak global recovery and adverse weather conditions, which impacted on agriculture production in some regions. However, it is expected to rebound to 3.4% in 2017 and 4.3% in 2018. This assumes that as commodity prices recover, the world economy will be strengthened and domestic macroeconomic reforms are entrenched.

In fact, there are promising developments across the continent. Africa’s growth increasingly relies on domestic sources, as shown by dynamic private and government consumption that combined, accounted for 60% of growth in 2016. This growth also coincides with progress in human development: 18 African countries had achieved medium to high levels of human development by 2015. Finally, foreign direct investment, attracted by the continent’s emerging markets and fast urbanisation, stood at USD 56.5 billion in 2016 and is projected to reach USD 57 billion in 2017. Such investment has diversified away from the natural resources sector to construction, financial services, manufacturing, transport, electricity, and information and communication technology.

“Although economic headwinds experienced in the last two years appear to have altered the ‘Africa rising narrative’, we firmly believe the continent remains resilient, with non-resource dependent economies sustaining higher growth for much longer spell. With dynamic private sectors, entrepreneurial spirit and vast resources, Africa has the potential to grow even faster and more inclusively,” stated Abebe Shimeles, Acting Director, Macroeconomic Policy, Forecasting and Research Department, at the African Development Bank.

Still, progress remains uneven. African governments need to push their agenda for job creation with more ambitious and tailored policies. Despite a decade of progress, 54% of the population in 46 African countries are still trapped in poverty across multiple dimensions – health, education and living standards. And demands for better employment opportunities are the main reason behind continued public protests, having motivated a third of all public demonstrations between 2014 and 2016 – albeit in a context of decreasing levels of civil unrest. With the size of the workforce likely to increase by 910 million between 2010 and 2050, creating more and better jobs will remain the core challenge for African policy-makers.

“The key to successful development in Africa is to nurture the  emerging culture of entrepreneurship, to use the famous words of Hernando De Soto, “el otro sendero” (the other path) for development; a path that can unleash high-octane creativity and transform opportunities into phenomenal realisations,” said Abdoulaye Mar Dieye, Regional Director for Africa at the United Nations Development Programme.

To turn the challenge of higher population growth into an opportunity, making Africa’s new industrial revolution successful is paramount. Twenty-six African countries today have an industrialisation strategy in place. But most of these strategies tend to emphasise the role of large manufacturing companies at the expense of entrepreneurs in sectors with the potential for high growth and employment creation, including start-ups and small and medium-sized firms. Businesses with fewer than 20 employees and less than five years’ experience provide the bulk of jobs in Africa’s formal sector. Additionally, the advent of digital technologies and new business models is blurring the boundaries between manufacturing – which is now bouncing back at 11% of Africa’s GDP - and the services sector. Industrialisation strategies thus need to support other sectors where African economies have comparative advantage, such as agri-businesses, tradable services and renewable energy. New strategies need to avoid dependence on businesses that are not environmentally friendly.

“African economies cannot miss out on their next production transformation. Entrepreneurs should be lead actors in Africa’s journey into the fourth industrial revolution,” said Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary-General on Development.

According to the Outlook, Africa has high untapped potential for entrepreneurship. In 18 African countries for which statistics are available, 11% of the working-age population set up their own firms to tap specific business opportunities. This level is higher than in developing countries in Latin America (8%) and in Asia (5%). However, few of them invest in high-growth sectors, grow to employ more workers or introduce innovations to markets. To turn their dynamism into an engine of industrialisation, African governments can improve the skills of workers enhance the efficiency of business clusters – such as industrial parks and special economic zones – and increase access to finance, with more affordable credit and more innovative instruments, for small and young firms.
 


 

About the report

The African Economic Outlook is produced annually by the African Development Bank (AfDB), the Development Centre of the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP).

For the full report, including statistics and 54 individual African country notes, please visit  www.africaneconomicoutlook.org. Official hashtag: #AEO2017

For more information on the African Development Bank Group’s 52nd Annual Meetings, visit  www.afdb.org/am. Official hashtag: #AfDBAM2017
 

Press contacts:

Implementing industrialisation strategies in Africa

Blogs 18/05/2017

By Dirk Willem te Velde, Director of  Supporting Economic Transformation Programme and Head of International Economic Development Group,  ODI

 

A cursory look at national and pan-Africa policy statements suggests that many African countries have a strong desire to industrialise. They have a point: manufacturing creates jobs, diffuses technology and makes the economy more resilient. Unfortunately, much analysis points to a reduction recently in the share of manufacturing as a percent of GDP on the continent, although significant progress is being made in selected countries. Real manufacturing value added has grown around 7% annually or more over 2005-2015 in Tanzania, Rwanda or Ethiopia. And few realise that real manufacturing production and exports of manufacturing doubled in sub-Saharan Africa in the decade to 2015.1

However, despite selected successes, many African countries will miss significant opportunities presented by their comparative and natural advantages, rising wages in Asia, and growing regional markets if they do not place a greater practical focus on implementing a co-ordinated strategy around manufacturing. Research2 on economic transformation over several years in various African (and Asian) countries uncovers key characteristics of a good industrial policy regime, factors behind effective implementation and country examples, recognising that whilst there are broad commonalities, the specifics will always be particular to the context.

So, what is a quality industrial policy regime?

Important substantive factors behind industrialisation and job creation include the political commitment to promote investment in employment-intensive manufacturing and the quality of the industrial policy regime. A good quality industrial policy regime includes:3

  • an inclusive industrial policy making process;
  • an enabling environment around trade rules and trade facilitation;
  • attention to industrial clustering and the provision and regulation of special economic zones (SEZs);
  • the availability and effectiveness of current investment promotion, facilitation and aftercare services;
  • the promotion of activities to support local capacity building, infrastructure planning and development processes;
  • a high quality public-private dialogue; and
  • the availability of support to build firm capabilities, especially around the provision of finance.


    Continue reading the full blog on Development Matters

Green Industrialisation and Entrepreneurship in Africa

Blogs 18/05/2017

By Milan Brahmbhatt, Senior Fellow, New Climate Economy (NCE) and World Resources Institute

Policy makers across Africa have embraced industrialisation and economic transformation as keys to accelerate inclusive growth. They also increasingly see the need for economic transformation to deliver green growth – growth that does not endanger Africa’s natural environment in ways that reduce the welfare of present and future generations. Economic transformation and green growth depend on doing new things: making risky investments in new, unfamiliar sectors or products or adopting new, unfamiliar methods, processes, technologies, inputs or business models. All this depends crucially on the activity of entrepreneurs, who drive change through their innovation and risk-taking. Fostering entrepreneurship, including green entrepreneurship, is thus a key policy aim for African countries.

Africa already is experiencing the ill effects of environmental deterioration on many fronts, including the impacts of climate variability and change. Rapid population growth and land use practices are contributing to deforestation and land degradation, damaging fragile ecosystems, and exacerbating water scarcity. Five of the ten countries worldwide with the fastest acceleration in tree cover loss in 2001-14 were in West Africa. In cities, air pollution and ineffective waste management pose serious and growing problems.

The impact of economic transformation on the environment thus warrants special attention. Economic transformation and growth tend to increase demands on natural capital, especially as countries move from low-income to upper middle-income status. Energy and water uses in most sub-Saharan African countries, for example, are still very small compared to other regions, and will rise substantially over coming decades. But the extent and nature of environmental impacts depend greatly on the specific structural transformation path a country takes, on technological progress and improvements in the efficiency of resource use, and, crucially, on the extent to which economic policies and institutions create incentives for green growth and green entrepreneurship.

Green entrepreneurs develop and serve markets for new processes, technologies and products that make the economy more efficient in its use of the natural environment and more resilient to environmental impacts, such as climate change. Green markets can be for new intermediate processes or inputs in production, or for new consumer goods and services. Take the case of energy efficiency. New markets emerge to supply businesses with technologies or inputs that increase the energy efficiency of their production process. New markets also emerge for energy-efficient consumer goods and services, such as more energy-efficient household appliances.

Continue reading the full blog on Development Matters

Business incubation needs a re-think

Blogs 18/05/2017

By Allon Raiz, Chief Executive Officer, Raizcorp

 

A little more than 12 years ago I read an article about 981 “entrepreneurs” who had been through a brief new venture creation programme. According to the journalist’s investigation, not one of these would-be entrepreneurs who had been in that programme was in existence a year later. The journalist lamented that despite the obvious evidence that these high volume, low quality programmes were ineffectual, they were nevertheless prolific, wasting hundreds of millions of dollars every year.

Twelve years ago, incubation as a way to promote entrepreneurship was only beginning to appear in any significant manner in the developing world. Unfortunately, in my opinion, the incubation industry inherited a few philosophical approaches from the training industry that have plagued the industry ever since.

Myth 1  Anyone can be an entrepreneur.

The first philosophical approach the incubation industry inherited from the training industry was the notion that anyone could become an entrepreneur. The concept of skills development without any consideration of human character (psychological makeup) was an extension of the training mindset. In the training industry, hundreds of thousands of people (if not millions) are put through training “programmes” each year with the basic change theory of “they didn’t know how, then we train them, then they do know how.” Unfortunately, that change model does not translate well in the incubation space, even if the model includes practical learning-by-doing training. The model presupposes an “entrepreneurs are made” view of the world, where all individuals are seen as raw input into a process, knowledge is added and an entrepreneur is produced.

My experience is that this is a false assumption. Entrepreneurs are neither born nor made, they precipitate (See Blog). For entrepreneurs to precipitate, the right set of entrepreneurial characteristics and environmental conditions needs to be present. Incubation might provide some of those conditions, but basic entrepreneurial characteristics need to be present as well. Simply putting anyone and everyone through a new venture creation programme, without considering their appropriateness for becoming an entrepreneur (and not just a survivalist) is, in my opinion, a waste of time and resources.

Continue reading the full blog on Development Matters

Media advisory: Launch of the African Economic Outlook 2017

Events 12/05/2017

Media advisory: Launch of the African Economic Outlook 2017

Monday 22 May 2017

11: 30 A.M local time Ahmedabad, India (6:00 A.M GMT)

 

 

The African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP) will release their joint African Economic Outlook (AEO) 2017 Report on Monday 22 May 2017. The flagship report will be presented on the first day of the 52nd AfDB Annual Meetings which will take place from May 22-26 in Ahmedabad, India.

 

This annual report contains projections and analysis on macroeconomic, finance, trade, social and human development trends and statistics for the continent. It also includes in-depth country profiles which look at recent economic development and highlights the main policy issues facing each of the 54 African countries.

 

This 16th edition of the AEO focuses on “Entrepreneurship and Industrialisation in Africa” by an in-depth analysis of the role of entrepreneurs in Africa’s industrialisation process. It proposes practical steps that African governments can take to carry out effective industrialisation strategies.

 

 

The report will be launched by:

 

  • Mr. Abebe Shimeles, Macroeconomics Policy, Forecasting and Research, AfDB
  • Mr. Mario Pezzini, Director, OECD Development Centre and Special Advisor to the OECD Secretary General on Development
  • Mr. Abdoulaye Mar Dieye, Assistant Administrator and Regional Director, UNDP Africa

 

In the honourable presence of:

  •  H.E. Mrs. Kemi Adeosun, Minister of Finance, Nigeria
  •  H.E. Mr. Philip Mpango, Minister of Finance, Tanzania
  •  H.E. Mr. Hadji Babaammi, Minister of Finance, Algeria
  •  Mr. Abdalla Hamdok, Acting Executive Secretary, United Nations Economic Commission for Africa (ECA)

 

Media contacts for interviews and information requests:

 

 

The African Economic Outlook 2017 and 54 country notes will be available in English and French from 6:00 AM GMT for immediate release on the African Economic Outlook website http://www.africaneconomicoutlook.org/en/.

The presentation will be webcast live (www.afdb.org/am). Join the debate on Twitter: #AEO2017 and #AfDBAM2017.

 

Requests to receive the African Economic Outlook 2017 under embargo should be sent by e-mail to bochra.kriout@oecd.org. Journalists requesting an electronic version in advance of the release time agree to respect OECD embargo conditions.

 

Please note: The OECD's embargo rules prohibit any broadcast, news wire service or Internet transmission of text or information about this report before the stated release time. They also prohibit any communication of the contents of the report or any comment on its forecasts or conclusions to any outside party whatsoever before the stated release time. News organisations receiving OECD material under embargo have been informed that if they breach the OECD's embargo rules they will automatically be excluded in the future from receiving embargoed information.

 

Little changes for women entrepreneurs in Africa unless mindsets and policies change

Blogs 11/05/2017

By Mike Herrington, Executive Director, GEM Global


In the last decade, most countries in Africa underwent radical transformation, increased their GDP per capita and moved towards globalisation. Just look at Botswana where GDP per capita increased from USD 7 136 in 2013 to USD 7 505 in 2014, or Cameroon that saw an increase from USD 1 271 to USD 1 405, or Nigeria that experienced a jump from USD 1 692 to USD 3298 during the same period.1 

However, to move closer to achieving the Sustainable Development Goals by 2030, the continent needs to change the mindset of people and pursue policies to boost the development of small, medium and micro-sized enterprises (SMMEs) to help reduce poverty and unemployment, particularly in sub-Saharan Africa.

On the one hand, we know that retail, agriculture and services dominate Africa’s industry sectoral distribution,2  with manufacturing, information technology, biotechnology and mining ranking way down on the scale. It is strange that mining does not feature more prominently given that many African countries are mineral wealthy with abundant resources. However, most of the mining sector is run and owned by foreign companies and few skills are passed on to the local sector.

On the other hand, what is important beyond these sectors is the type of entrepreneurship underway in Africa. Levels of early-stage entrepreneurial activity are remarkably high compared to many other more developed countries3. Consider the fact that early-stage entrepreneurial activity in Burkina Faso is 33.5%, in Ghana 25.8% and in Nigeria 39.9%, compared to the 18.8% average for Latin America in 2016. Such activity, however, entails a relatively high level of necessity-driven entrepreneurship, when businesses are started out of necessity due to lack of other choices, rather than because of an opportunity. Even when businesses start as a result of opportunity, they do so because they require little capital and few skills and benefit from low barriers to entry. The prime cause for necessity-driven entrepreneurship is a lack of suitable education and training. Africa’s education system is very poor, as in the case of South Africa where the levels of primary and secondary education are amongst the lowest in the world4 . Moreover, the type of education offered is not directed towards creating one’s own opportunities but rather towards seeking formal employment. This is especially true in the case of women, for whom education is considered unimportant more often than not. In Sub-Saharan Africa, women tend to start businesses more out of necessity to supplement household income for food, clothing and basic education.

Read the full blog on Development Matters

Africa’s industrialisation: leaving no woman behind

Blogs 25/04/2017

By Li Yong, UNIDO Director General


Africa must industrialise to fulfill its economic potential. To achieve the Sustainable Development Goals (SDGs) as part of the 2030 Agenda, we need to support Africa in accelerating its development by promoting inclusive and sustainable industrialisation.

Inclusive industrialisation means ensuring that no one is left behind, especially not women. Including women is critical, not only because gender equality is a fundamental human right, but also because it enables faster economic growth, shared prosperity and sustainable development. The 2016 Global Gender Gap report1 shows a positive correlation between gender equality and gross domestic product, economic competitiveness and human development. The economic benefits to increasing female labor force participation are real. The OECD estimates that GDP would increase by 12% if participation rates for women were to reach those of men by 2030.2 

We must recognise the importance of the gender equality-industrialisation nexus particularly in the African context. The 2017 High Level Political Forum on Sustainable Development will bring this interlinkage to the fore, as both SDG 5 on gender equality and SDG 9 on industry, innovation and infrastructure will undergo in-depth review. Like many of the goals included in the 2030 Agenda, gender equality is not only a goal in itself, but also a means to accomplish other development goals.

Read the full blog on Development Matters

Unleashing the potential of women entrepreneurs in Africa

Articles 20/04/2017

Walk around a major city in Sub-Saharan Africa and you will quickly realize that women are a highly visible part of the economy, selling all manner of products and services. In some ways, women are powering the economies of the continent to a greater degree than anywhere else in the world; Sub-Saharan Africa is the only region where women make up the majority of self-employed individuals.  

Read more 

2017 Global Forum on Development

Events 05/04/2017

Session 4: Delivering sustainable urbanisation in Africa: the role of the private sector

The magnitude of the current wave of urbanisation taking place in Africa calls for a more environment-friendly and less resource-consuming process than in the past. Discussions will bring together representatives from the private sector and African policymakers to share views and experiences on how the private sector can contribute to address the demand for low-carbon, climate-resilient urban infrastructure in Africa.

More information on the Global Forum on Development website

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Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017

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AfricanEconomicOutlook.org  offers comprehensive and comparable data and analysis of 54 African economies.