The combination of private and public strengths will allow Africa to reach true rural growth

Africa recently experienced an unusually long spell of steady growth. Sadly, it is a well-known fact that our economies failed to ensure the equitable sharing of the benefits of one of the highest growth rate in the world. So we are today in a specific context of a general decline in commodity prices and a consecutive slowdown in growth in Africa. This downward trend in commodity prices may be a constraint, but I would also like to see it as an opportunity because both public and private stakeholders will have to be more innovative in order to unlock new sources of endogenous growth, wealth and inclusive employment with greater spill over effects for the region’s economies.

Addressing the challenge of employment and wealth in the rural world is crucial for Africa’s development. The situation is highly paradoxical: Africa imports the equivalent of USD 50 billion in food each year, even though more than half of the world’s uncultivated arable land is on the continent and 60% of the population still lives in the rural world! The development of this agricultural potential, at a high productivity and competitiveness level, is essential if Africa is to feed 2.5 billion people by 2050.

Today, the challenge is to identify new tools for sustainable economic growth, this time based on principles of inclusion and equity, while maintaining a steady growth rate. Meeting these conditions will enable African economies to cope with a population that is still booming and with the ever-growing number of young people looking for education, training and jobs. These challenges are set against a backdrop of climate change and resource depletion, calling for the use of production techniques that are tailored to environmental challenges.

The principles of inclusion and equity imply adopting spatial and territorial approaches and policies that ensure rural areas benefit from the same developments and initiatives as urban areas; that responsible investments are made in rural areas; and that women and young people have access to the factors of production, especially training, land, water, finance, renewable energy, markets and income that reflects the fruits of their labour.

There are promising signs that private sector money is finding its way towards more inclusive development models. Conservation finance is one of the most exciting corners of agriculture development in emerging countries today. Conservation finance strives to reach three major and complementary goals to finance the agro-ecologic transition by calculating three different kinds of returns: economic, environmental and social.

These new investment projects are based on limited land acquisition and partnerships with farmers networks that are empowered with new techniques. The new actors take care of their production and of its transformation and ensure an access to the market, whether locally or internationally. Private investment in agroforestry businesses is a big driver for the intensification of farmer’s activities while restoring degraded lands, protecting forests and raising farmers’ incomes.

The African public sector should invest more money in incubators and accelerators to channel funding and technical support at the beginning of the cycle of these projects. This investment will pay off because the incubators could create a network of agroforestry start-ups with the infrastructure, knowledge and access to the funding needed to realize their concept. The consequences in terms of employment and resource developent could be tremedous. In this regard, the support of international governments and donors will also be essential. The progressive transition from solidarity systems to mixed market systems will help to stimulate investment and the development of structural activities capable of laying the foundations for this much-needed change.

Renewing public policies on the basis of local development would also help to tackle the root causes by providing appropriate solutions to ensure people settle and remain in their areas of origin. The empowerment of local authorities should be based on their specific characteristics, their ecosystems, their cultural heritage and their know-how combined with technological innovation and learning, especially for young people and women.

The governance of our natural resources and the financial resources they generate are the cornerstone of our structural change; they require appropriate solutions at the continental, regional, national and local levels, the most critical ones being the regional and local levels. Change will be sustainable when it happens at these two levels.

Rencontres Économiques d’Aix-en-Provence

I thank the "Rencontres Économiques d'Aix-en-Provence" for inviting me to this new edition. Exceptional guests and exciting debate. The video of my speech during the round table: From a world of inequalities to a world of solidarity - coordinated by Pierre Jacquet, member of the Cercle des économistes, and moderated by Béatrice Mathieu, Deputy editor of L'Express, with Jacques Attali, President of Positive Planet, Pierre-André Chalendar, President and CEO of Saint-Gobain, Esther Duflo, Professor at the Massachusetts Institute of Technology and Geoffrey Lamb, Senior Advisor of the Bill & Merinda Gates Foundation, Is available by clicking here.

Leapfrogging Progress

I am sharing an excellent article from my friend Calestous Juma on leapfrogging progress via The Breakthrough website:

ithin two years of its launch in 2007, money transfers through M-Pesa, a cell-phone-based mobile banking application, already equaled the equivalent of 10 percent of Kenya’s GDP. What started as a local system to serve populations too poor for traditional banking has since grown into a global industry, one that threatens to disrupt traditional banking systems around the world. Today, M-Pesa’s network includes 30 million users across 10 countries, and its services have expanded to include international transfers, loans, and even health care.1

Image credit: CNN, “M-Pesa: Kenya’s mobile money success story turns 10” (2017), http://www.cnn.com/2017/02/21/africa/mpesa-10th-anniversary/.

The wide adoption of mobile phones in Africa, along with applications like M-Pesa that it has enabled, has created remarkable technological enthusiasm on the continent. Symbolizing the great potential that lies in technological catch-up and leapfrogging, M-Pesa has served as an inspirational example of what Africa could accomplish in other sectors like energy, education, health, transportation, and agriculture. Indeed, countries such as Rwanda are already using drones to transport medical supplies, while the dramatic drop in the cost of solar energy points to the widespread adoption of the technology across Africa.

Full article here

Why the solutions to global challenges are found at the pan-African level

At a time when more and more voices are being heard to challenge the European Union (EU), the idea of ​​unity of the Old Continent and especially the functioning of its institutions, the African Union (AU) has just accepted a new member: Morocco.

This demonstrates the attractiveness of the continental organization, which, although not perfect, has to its credit many achievements that are conducive to stability and development. It must be said that the AU was able to renew itself. From the OAU of independence to the AU that we know today – in fact largely inspired by the EU – there has been a real qualitative leap we must welcome.

Today the AU is an essential interlocutor for the international community. Africa is able to speak with one voice in the major international arenas, whether on climate or trade. Unity is strength, as the saying goes. But union, especially when it goes beyond the mere economic framework, is not easy: one sees it in other parts of the world, in the Middle East for example, but also in North America where deep divisions have been growing.

In Africa, on the contrary, the continental unity is now strengthened. It is interesting to note that even when countries are divided, at no time do the new entities envisage leaving the AU. I’m thinking here about the latest example to date, South Sudan. Morocco has clearly understood this, which is back in the ideological lap of the founding fathers of Africa, who, after independence, wanted this African unity because they dreamed of a community of destiny and interests.

Already with NEPAD, or with the African Development Bank (AfDB), the vision of development, projects and commitments are continental. We have succeeded in producing an overall African project, where each country sees its interest and can hope to be part of the general effort. This is true for infrastructures – rail, electricity – but also for the social issue through Agenda 2063, which includes measures over 50 years to stimulate socio-economic transformation across the continent.

A key element of this transformation is to take full advantage of the “demographic dividend” to ensure that economic progress improves growth, social development and the sharing of wealth. This is also the case for health with the “African Health Strategy” and the “Catalytic Framework for the Elimination of AIDS, Tuberculosis and Malaria in Africa by 2030”, set up by the AU. There is still progress to be made, especially in integration, the free movement of people and goods, but in 15 years progress has been quite extraordinary.

With its values, ambitions and strengths – economic and demographic growth, important natural resources and dynamic youth – Africa today can face the challenges coming from a world in perpetual change by cultivating unity. In the UN, for example, our countries weigh more when they are united. And it is with this unity that we can also open ourselves to the rest of the world. The AU is our home, our safe haven. We can look at other geographical areas, such as the EU, for example, for Morocco and Tunisia, or as the BRICS for South Africa, but in the end we know where we come from. That is our strength. These extensions from Africa to the rest of the world via individual countries, or also via diaspora, is a key strength. It remains to ensure that there is a principle of “diplomatic sharing” or preferential access set up within pan-African bodies.

Our partners are already very active: for example, on the board committee of the AfDB, we find France, the United Kingdom, the United States, Japan and China, among others. These partner countries and friends of Africa therefore participate directly in the projects implemented by the continental bank. This facilitates action and makes the partnership more effective. Our inequalities can also be forces: if Moroccan and South African banks play their role as a capital distributor, this can benefit other countries and their respective private sectors.

Integrating the pan-African perspective into reflection can only benefit the actors in this immense market that has become Africa.

 

Africa: an emerging destination for investments

One of the major audit firms recently published its index on the attractiveness of Africa for 2017[1]. The report puts into perspective the economic trend of the continent in a rigorous and detailed way, enabling us to avoid the two pitfalls of Afro-optimism or Afro-pessimism.

It should first be noted that 2016 has been the worst year in terms of economic growth for sub-Saharan Africa over the past 20 years. The continent has been hardly hit by the end of the super-cycle of commodities, particularly impacting Nigeria, Angola and South Africa. The geopolitical upheavals of the West such as the Brexit and the election of Donald Trump also contributed to diminishing or at least stagnating investments from these countries which are important investors in Africa. However, while the number of FDI projects fell by 12% in 2016, they increased by 32% in value terms (reaching $ 94.1 billion), making it the second region of FDI growth at world.

Obviously, Africa is not a homogeneous bloc and in fact there are great disparities between countries. The three major countries impacted by the drop in the commodity prices mentioned above should not distract us from the bigger picture that reveals the growing young shoots in French-speaking Africa as in East Africa. While Morocco, South Africa, Kenya, Egypt and Nigeria attract the bulk of FDI projects (57%), other investment hubs appear. Ghana (4th), Côte d’Ivoire (7th) and Senegal (9th) attract investors, as evidenced by their ranking in the Africa Attractiveness Index. On the other side of the continent, growth is also very strong with an average of 6% for Kenya, Ethiopia, Tanzania and Uganda. These last two being boosted by the recent discoveries of oil and gas fields.

As nature abhors the vacuum, Asia-Pacific, especially China, has filled the decline in investment from the United States and Great Britain. China is now the third largest investor in terms of FDI projects in Africa, with the strongest growth in terms of jobs created. Note also the breakthrough Japan has seen its level of investment and jobs created increase by 757% and 106% respectively.

These figures, which show a real enthusiasm of investors for the African continent, remain to be relativized and taken in retrospect. Africa still receives an inadequate share of global FDI (11.4%) in terms of its population and its potential. Long coveted for its natural resources, the diversification of the African economy is underway, driven by the dynamism of sectors such as transport and logistics or the automobile. It is also worrying that the share of investment projects carried by African investors has continued to decline since 2013, falling to 15.5% in 2016. This contributes to the degradation of Africa’s resilience to external shocks ‘economy.

That Africa is attractive to foreign investors is a good thing, but it must also become an opportunity for African investors themselves! That is why we must redouble our efforts to achieve greater regional integration and a policy of reducing barriers to trade between the countries of the continent. History has shown that these choices lead not only to economic development but also to political stability, two essential objectives for ensuring the well-being of the population.

[1] EY’s Attractiveness Program Africa, « Connectivity redefined », May 2017

Formal sector versus informal sector: towards reconciliation

More often than not, particularly in Africa, we are used to opposing the formal and informal sectors. Shouldn’t we adopt for once a holistic approach of our economies and try to integrate more and more the informal sectors of our economies by the means of smart and fair policies?

Behind this somewhat negative word, the informal sector – understood as all activities that are beyond the control of the state, whether legal, social or fiscal – there are artisans, mechanics, tailors, merchants, taxi drivers, masons. In short, people who scrap a living. But in this logic of day to day survival, these men and women also walk down a precarious path in the medium to long term. What can you do if you get sick when you only have a small job to earn money to pay for the day’s food? What happens when the informal worker, one he is too old, no longer has the strength to work? It is easy to understand that above all, one must escape from the logic of survival in which too many of our fellow citizens are stuck, often against their will.

According to the African Development Bank (AfDB), the informal sector accounts for an average of 55% of cumulative GDP in sub-Saharan Africa. In some of our countries, the workers who produce this wealth sometimes count for the majority of the active population. Statistics are lacking, but in a report on the informal sector published last May, the International Monetary Fund (IMF)[1] indicated that informal employment accounts for between 30 and 90 per cent of non-agricultural employment in sub-Saharan Africa. Let us recall that there is no clear frontier between the formal and informal sectors: legitimate companies may indeed use informal contractors for certain matters, for example on a construction site.Even the IMF, a former vocal critic of the informal sector, in the report we have just mentioned, shows that times have changed and that the informal sector can be a growth opportunity for our economies.

While international experience indicates that the share of the informal economy declines as the level of development increases, most economies in sub-Saharan Africa are likely to have large informal sectors for many years to come, presenting both opportunities and challenges for policymakers”, the report says. This is all the more true as the number of jobseekers increases exponentially and as a “fight” against the informal sector will deprive our states of an important safety valve, especially for youth. Remember that to absorb new workers, Africa must create 122 million jobs in the next ten years. The IMF adds: The challenge for policymakers, therefore, is to create an economic environment in which the formal sector can thrive while creating opportunities for those working in the informal sector to maintain or improve their living standards”.

Bringing these individual or family businesses into common law is not an easy task, but there are ways and means to make it happen, and above all a strong argument in favor of this move: entering the system makes it possible to fight precariousness, especially if sound policies of health insurance and retirement pensions are accompanying this regularisation. Under no circumstances should policies appear to be a tax burden on micro and very small informal enterprises. Policies must promote access to banking services and improve productivity of these small businesses, so that they create more jobs, pay social contributions for employees, and, only in a second phase, provide tax revenues to the state.

 

[1] Regional Economic Outlook, IMF, May 2017.

Africa Nutrition Map

African Heads of State and Government committed to the goals contained in the 2014 Malabo Declaration, which acknowledges that agriculture and food security are key determinants of nutrition that require coordinated and comprehensive responses from other sectors, including health, education, labour, social protection, and coordinated collaboration with multiple stakeholders.

While it is a well-known fact that Africa hosts half the available arable lands in the world, as a continent Africa still disproportionately suffers from hunger and hunger related diseases such as stunting or malnutrition.

On the margins of the 13th Comprehensive Africa Agriculture Development Programme[1] Partnership Platform (CAADP PP) in Kampala, Uganda, the NEPAD Agency publicised the Africa Nutrition Map.  The Africa Nutrition Map is a tool that indicates hot points on the continent with regards to hunger, malnutrition, and food insecurity.  The map also indicates the growing prevalence of less covered “rich country diseases” on the continent such as obesity or diabetes.

The NEPAD Nutrition Map provides a snapshot of Africa’s nutrition context as at the end of 2016. Too many people still suffer from hunger in Africa. Hunger is a by-product of poverty, but the Nutrition Map also provides points to the opportunity for African leaders to take advantage of the continent’s huge agricultural potential in ensuring the provision of nutritious food,” said Kefilwe Moalosi, NEPAD Agency’s Nutrition Programme Officer.

Africa still imports USD$50bn worth of food each year, even though agriculture and its value chains could provide more employment to its youth and food security to its citizens. CAADP was adopted by the continent’s leaders as the framework within which to redress these and other challenges, by putting the necessary reforms in place to trigger the green revolution that Africa needs. 

[1]CAADP, short for the Comprehensive Africa Agriculture Development, is an African-wide agenda designed to support the transformation of the continent’s agriculture for sustained food security and socio-economic growth.

Africa Day, 25 May 2017

Africa Day is a time for reflecting on who we are – an enterprising, innovative and resilient people. Today we not only celebrate who we are and our achievements, but we also focus on our continent’s future.

25 May, Africa Day, is a day for celebrating the occasion when the Organisation of African Unity (OAU), the precursor to the African Union, was formed in 1963. It is a day when we celebrate the progress made by Africans, while reflecting on the common challenges we face in a global environment.

Industrialisation is the one area in which the continent of Africa needs to make rapid progress. It is not an overstatement that industrialisation is a critical engine for economic growth and development. If managed prudently and effectively it can contribute to creating employment opportunities and re-position the continent to becoming competitive in the global trading environment.

This year, the NEPAD Agency commemorates Africa Day by also celebrating the innovations that entrepreneurs on the continent are developing, under the African Union theme for 2017, Harnessing the Demographic Dividend through Investments in Youth.

The growing extent of youth unemployment poses a fundamental challenge for the whole of Africa. About 60 percent of the unemployed are under the age of 25 and young women are especially affected.

On the positive side, Africa has the youngest population in the world, and it is this population that will supply the much needed human capital and innovations in the years to come, even as the continent becomes more and more industrialised.

Even as the continent faces the challenges of integration and industrialisation, many are the innovations that young enterprising Africans are developing to redress development challenges on the continent. Many are the innovations by young Africans that need to be up-scaled that provide solutions in the areas of biosciences (including agriculture), climate change adaptive innovations, ICTs, advanced manufacturing, to name but a few.

On this special day for Africa, we therefore make a call for the need to ensure that investment into industrialisation and innovation is at par with the growing demands for skills development, employment and entrepreneurship from our youthful population. With a footprint in 52 countries on the continent, the NEPAD Agency provides the gateway to boost the expansion of innovations, providing African solutions to Africa’s challenges. Indeed, the more we think regionally, the faster we can grow into ‘The Africa We Want’ by ensuring the skills of our entrepreneurs and innovators are being shaped as they grow, resulting into the overall transformation of all regions on the continent.