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Inclusive Growth in Africa
Presentation at the Global Development Network Conference, Manila, June 19, 2013
Steve Kayizzi‐Mugerwa
Director of Development Research
African Development Bank
outline
• Inclusive Growth in Africa: Why we should care?
• Our Definition of Inclusive Growth
• The African Development Bank’s Ten‐Year Strategy: Operationalizing inclusion
• Proposed Inclusive Growth Indicators
• Concluding remarks
Inclusive Growth in Africa: Why we should care?
• “Africa rising” is one of the most cogent expressions of the day
• Africa was derided as “hopeless” barely a decade ago but is now talked about in superlatives by all and sundry
• The growth boom has brought with it investments from the “south” but also from the “old world”—and affluence (for the middle classes) to match
• Most, important, Africans are beginning to believe that it is “finally” happening—optimism is high, even in the midst of continued social and political challenges
Inclusive Growth in Africa: Why we should care? (Continued)
• But Africa’s recent high is raising several concerns:  It is not sufficiently “pro‐poor” (Figure 1)
 It has not been sufficiently broad‐based across sectors (Figure 2)
 It is led mainly by the boom in natural resources and has inadequate potential for structural transformation, especially modern sector employment generation (Figure 3, Figure 4)
 It is yet to impact meaningfully on non‐income dimensions of well‐being like health and education
 There are thus issues of sustainability
0
20
Headcount
40
60
80
Figure 1: Trends in headcount ratio in selected regions of the Developing World
1980
1990
2000
YEAR
East Asia
Latin America
South Asia
Central Europe
Middle East & NA
SSA
2010
Figure 2: Despite rapid economic, pace of poverty reduction slow in Africa Poverty and growth in selected African countries
5.00
 Average real GDP growth of above 5% between 2002 and 2012
Actual trend
Poverty reduction
0.00
0.00
2.00
4.00
6.00
8.00
Inclusive
Growth
Deficit
‐5.00
‐10.00
Trend had growth been inclusive 12.00
 Decline in Poverty Headcount, but still high relative to other LDCs
 Six most unequal countries in the World in 2011 were in Africa
‐15.00
Growth
‐20.00
10.00
Employment Elasticity
Figure 3: Fast growing economies had low employment intensity
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0
2
4
6
8
10
Average GDP Growth (%)
12
14
Figure 4: Poverty is pervasive in Africa because of low productivity in agriculture: the higher share of labor force in agriculture, the higher is the rate of poverty. Structural transformation is imperative. 80.00
Share of labour in agriculture
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Headcount index (one dollar a day in PPP)
80.00
90.00
100.00
Our Definition of Inclusive Growth
• Economic growth that broadens access to sustainable socio‐economic opportunities for more people, countries and regions, while protecting the vulnerable. • Inclusive growth has four pillars in the Bank’s Ten‐Year Strategy: • economic inclusion
• social inclusion
• spatial inclusion
• political inclusion
The African Development Bank’s Ten‐Year Strategy: Operationalizing Inclusive Growth • Goal: Improving the quality of growth for inclusive and green development
• Core operational priorities:  Infrastructure development; regional integration; private sector development; governance and accountability; and skills and technology.
• Areas of special emphasis:
 Fragile states; agriculture and food security; and gender.
• Financing the strategy: new and creative ways—
example: Africa50Fund
Proposed Inclusive growth indicators

GDP per capita adjusted for inequality aversion al a Dalton (1949) and Atkinson (1970)

Governance indicator (political inclusion)

Diversification (economic opportunity)
 Health indicator : Index combining (a) Infant mortality , (b) Life expectancy, (c) Business impact of malaria, (d) Malaria incidence, (e) Business impact of tuberculosis ,(f) Tuberculosis incidence , (g) Business impact of HIV/AIDS , (h) HIV prevalence.

Education indicator : Index combining (a) Secondary enrollment , (b) Tertiary enrollment , (c) Quality of the educational system , (d) Quality of math and science education, (e) Quality of management schools, (f) Internet access in schools , (g) Local availibity of research and training services and, (h) Extent of staff training.

Women participation in the labor market: Proportion of the women ages 15 and older that is economically active in the period.  Employment elasticity to growth : Indicator of GDP growth impact on employment,
 Infrastructure Index 0
10
PC GDp Rank
20
30
40
50
Figure 5 Illustration: no correlation between ranking of countries on per capita GDP basis and inequality adjusted per capita GDP in Africa
0
10
20
30
40
Dalton/Atkinson adjusted pc GDP Rank
50
Table 1: Illustration of IGI for Africa: average 2005‐2010
country
Rank of countries with respect to IGI
Egypt
Botswana
Mauritius
Tunisia
Algeria
Gabon
Comoros
Zimbabwe
Guinea
South Africa
Morocco
Madagascar
Namibia
Congo, Rep.
Rwanda
1
7
5
4
3
2
33
19
12
21
6
14
36
16
15
Senegal
17
Ghana
Cameroon
Gambia
Tanzania
Kenya
Togo
Guinea‐Bissau
11
10
28
9
25
8
27
country
Rank of countries with respect to IGI
Eritrea
32
Benin
13
Angola
41
Liberia
23
Uganda
24
Burundi
18
Cape Verde
29
Malawi
26
Djibouti
22
Zambia
43
Mozambique
37
Sierra Leone
30
Mauritania
35
Burkina Faso
31
Congo, Dem. Rep.
39
Côte d'Ivoire
34
Ethiopia
20
Nigeria
45
Niger
38
Mali
42
Chad
44
Central African Republic
46
Sudan
40
A note on promoting inclusive growth in Africa:
• Evidence has shown that the better the level of education attained, the higher the potential for inclusion (Figure 7)
• Better functioning institutions promote inclusion (Figure 8)
• Removing barriers to private sector operations facilitate structural transformation and broad‐
based growth (Figure 9)
Mean Years of Schooling
Figure 7: Education is opportunity equalizer
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
0
10
20
30
40
Gini Coefficient
50
60
Concluding remarks
•
Africa is on the move. There is no question about that. But is progress sustainable? •
Many factors will come to bear, including politics and the global economy.
•
However, if Africa’s growth is enjoyed but a tiny fraction of the population and does not lead to structural change, which creates employment opportunities for the young population—stagnation and reversal could result.
•
Our Bank has launched a ten–year strategy focused on ensuring sustainability of Africa’s growth and development.
•
Ultimately, the burden lies on policy makers to steer the political economy towards inclusion—at the political, spatial, social and economic levels.