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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.