1. SEVENTH ANNUAL CONFERENCE ON REGIONAL INTEGRATION IN AFRICA (ACRIA 7) July 8-9, 2016 Cotonou, Benin

2. WHY HAS AFRICA FAILED TO REDUCE SIGNIFICANTLY POVERTY OVER THE MDG PERIOD? El Hadji Fall, Janvier Alofa, Marc Akplogan UNDP, Benin Cotonou 8-9 July 2016 ACRIA 7

3. Table of Contents 3 1. Context of the Problem 2. Related Current Literature 3. Objective and Research Questions 4. Some Stylized Facts 5. Methods and Materials 6. Empirical Results and Key Lessons 7. Conclusion 8. Policy Implications

4. 1. Context of the Problem Last 20 years, Africa experimented strong growth about 5%, better than other regions. Poverty declined from 56,5% in1990 to 48,5% in 2010 with inequality falling from 45.8 to 43.9 but stay high (MDG Report 2014). The world share of poor living in Africa hase increased by 15% in 1990 to 35% in 2010 (Chandy and Homi, 2014). The total number of Africans living below the poverty line (in million; from 290 in 1990 to 376 in 1999 and 500 in 2014). In contrast, in East Asia, less growth Poverty reduction from 45% to 14% (UNDP, 2014). 4

5. 2. Related Current Literature  Theoretically why these substantial differences:  The relationship between growth and poverty is not indifferent to the initial level of inequality and its evolution (Fosu, 2009; Ravallion, 2008; Kalwij and Werschoor, 2007);  Growth which is non-creating new jobs and not inclusive (ADB, 2009 and UNECA, 2014);  Structure of the economies (Olinto et al, 2013 ; McMillan et al, 2014);  Macroeconomic policies implemented (Milanovic, 2011; Le Goff and Singh, 2014) and the governance (Gyimah-Brempong, 2002 ). 5

6. 3. Objective and Research Questions Goal Analyze empirically the relationship between growth and poverty in Africa by taking into account several characteristics of the economies. Fous of this Paper  (i) what are the growth elasticities of poverty in Africa over the recent period?  (ii) At what rate African countries must grow to reduce poverty by half by 2030?  (iii) What are the links between poverty and indicators of economic governance and human development, including education?  (iv) What is the relationship between the structure of economies, trade liberalization and poverty in Africa? 6

7. 4. Some Stylized Facts(1) 7 (p-value); N=38, R 2 =0.0978

8. 4. Some Stylized Facts(2) Inequality has increased in almost half of the African countries of the MDG period. Strong disparities between countries and regions about inequality : South Africa(49), Central Africa (45), East Africa(41), West Africa(39) and North Africa(37). Whereas a significant reduction in inequalities in emerging countries except China. 8

9. 5. Methods and Materials Theoretical Model and Variables Starting from the basic model growth-poverty (Ravallion and Chen, 1997) (1)  Transformed into poverty "augmented" equation with control variables (Fosu, 2010, Epaulard, 2003) and added regions dummies variables (2)  Elaboration of elasticity in cross section and robustness test;  Estimated of several variants of (1) and (2);  Simulation of growth rates to reduce poverty;  The data: PovcalNet, 2015; WDI, 2015, WGI, 2015; Transparency International, 2015; UNESCO, 2015; UNCTAD, 2015 (36 countries from 95-2014). 9

10. 6. Results and Key Lessons(1) + Relationship Growth-Inequality and Poverty Countries g, Gini Ey Eg Growth rate per capita to reduce by half poverty (1.25$) in 2030 Neutral g=0 Reality g Pro-poor g=-0.1% Pro-rich g=0.1% Benin1.50-1.794.432.1%-1.6%2.7% Botswana-1.14-4.5110.610.7%0.2%0.6%1.0% Burkina Faso-1.49-1.344.182.4%0.4%1.8%3.5% Cabo Verde-2.85-3.418.020.9%0.1%0.7%1.2% Cameroon-0.82-2.715.651.1%0.4%0.9%1.4% CAR5.13-1.503.462.1%-1.7%2.7% Chad0.94-2.074.211.7%-1.4%2.2% Congo, Rep.-2.73-2.114.751.7%0.2%1.4%2.2% Cote d'Ivoire1.26-2.735.941.1%-0.9%1.5% Egypt, Arab Rep.0.17-6.705.040.5% 0.4%0.5% Ethiopia-1.16-1.523.892.3%0.6%1.8%3.1% Gambia, The-1.21-1.735.041.5%0.3%1.1%2.1% Ghana0.69-2.455.731.1%-0.9%1.5% Guinea-1.99-1.704.402.2%0.4%1.8%3.0% Kenya0.34-2.375.801.2%7.3%0.9%1.6% Lesotho0.62-1.324.382.6%-1.9%3.9% Madagascar0.28-0.141.5424.9%-11.7%- Malawi-0.64-0.132.2027.3%2.2%9.9%- Mali-2.14-1.313.682.6%0.4%2.0%3.6% Mauritania0.63-2.986.431.0%-0.9%1.3% Morocco0.39-6.956.200.4%0.7%0.4%0.5% Mozambique0.20-0.622.735.2%44.3%3.6%9.3% Namibia -0.82 -3.729.180.9%0.3%0.7%1.2% Niger-6.59-1.484.392.4%0.1%1.9%3.4% Nigeria-0.57-0.743.104.6%1.4%3.2%7.9% Rwanda -0.12 -0.733.224.8%3.1%3.4%8.6% Sao Tome and Pri.-4.06-2.395.451.4%0.1%1.2%1.8% Senegal-0.23-2.165.261.7%1.1%1.3%2.2% Sierra Leone-1.38-1.253.542.9%0.6%2.2%4.0% South Africa0.87-4.9711.040.7%-0.6%0.9% Swaziland-1.78-1.595.282.1%0.3%1.6%3.1% Tanzania0.74-1.222.983.1%-2.5%4.1% Togo1.69-1.584.312.3%-1.8%3.1% Tunisia-1.01-7.657.580.5%0.2%0.4%0.5% Uganda1.14-1.974.482.0%-1.6%2.6% Zambia1.03-0.893.523.8%-2.8%6.4% 10

11. 6. Results and Key Lessons(2) + Relationship Growth-Inequality and Poverty  The reduction of poverty is less than proportional to the growth of output per capita.  When inequality is low, growth is more inclusive and better able to accelerate the reduction of poverty.  Elasticity absolute growth-poverty is low in Sub-Saharan Africa (SSA) than in North Africa.  To halve by 2030, the growth of income per capita varies between 0.1% and 3.1% but higher in many countries (Benin, Central African Republic, Chad, Ivory Coast, Ghana, Kenya Lesotho, Madagascar, Mauritania, Mozambique, South Africa, Tanzania, Togo, Uganda and Zambia).  When growth is accompanied by rising inequality, achieving the goal to reducing poverty by half in the light of the new horizon 2030 will be out of reach for many African countries even those which experience strong growth. 11

12. 6. Results and Key Lessons(3)  The structure of economies contributed differently to poverty reduction across countries and geographical areas :  Agriculture (+) : Tanzania, Ethiopia, Tunisia, Morocco, Mali, Guinea, Malawi, Rwanda and Cameroon.  Industrial sector (+) : Congo, Guinea, Nigeria, South Africa.  In many countries, low contribution of manufactures unlike services. + Structure of economies, income inequalities and poverty Africa Variables [1] [2] [3] [4] Log(Gini)3.206***1.521***1.642***1.610*** (0.636)(0.578)(0.589)(0.582) Agriculture1.091*** (0.162) Manufacture -0.758*** (0.177) Service -1.648*** (0.444) Industry -1.062*** (0.198) Favorable Condition for agriculture 0.433***0.642***0.370**0.622*** (0.135)(0.175)(0.144)(0.163) 12

13. 6. Results and Key Lessons(4) + Corruption and Poverty  The level of corruption is negatively and significanttly correlated with poverty rates in Africa.  The magnitude of this relationship depends on the endowments resources of African countries. For the best endowed in natural resources, the marginal propensity is lower than that of the least resourced countries.  The best performances were registered in Mauritius, Botswana, Cape Verde,Namibia, Seychelles and Ghana.  Among the countries with poor governance performance, we have producer or oil exporters countries (Nigeria, Chad, Angola, Congo, Equatorial Guinea, Sudan and Zimbabwe),  Conflict countries (South Sudan, Somalia, Libya, Guinea Bissau, Central African Republic, Madagascar) or those with abundant natural resources (Democratic Republic of the Congo, Guinea, Eritrea, Burundi). 13

14. 6. Results and Key Lessons(5) + Education and Poverty  Education is a powerful factor in reducing poverty in Africa. Better, the magnitude of the elasticity varies according to resources endowment and the indicator of education considered.  Elasticity education-poverty is lower in countries with natural resources and also in SSA compared to those of North Africa (NAF). For example, for countries of NAF, a 1% increase in enrollment in the upper contributes to 0.6% to the reduction of poverty as against only 0.037% in SSA.  For less resource-rich countries, the elasticity is 0.24% against 0.01% in the best-resourced countries. Also, in SSA, it is basic education (literacy, primary education) that has a hight elasticity education-poverty reduction, while in North Africa, it is rather higher education. 14

15. 6. Results and Key Lessons(6) + Trade openness and Poverty (1)  In theory, trade promotes the efficient allocation of resources, specialization in production, competitiveness and technology diffusion, which has a positif effet on growth and hence on poverty reduction.  The trade liberalization-poverty relationship is not automatic but not linear and highly dependent on structural characteristics of economies.  Trade openness is po-poor on condition that the enrollment rate in secondary is above a threshold of 56%, far from the average estimated at 40% of the sample. 15

16. 6. Results and Key Lessons(7) + Trade openness and Poverty (2)  Moreover, in countries with good governance(good control of corruption), the effect of trade openness is more important (-0.89 vs -0.2).  This is also the case of countries with access to the sea (-0.41 vs -0.28).  However, for resources-rich countries, the elasticity is lower (-0.63 vs -0.81) 16

17. 7. Conclusion  In Africa, the strong growth of the last twenty years has had a positive effect but heterogeneous (depending on the region), on the reduction of poverty.  Weaknesses in economic governance, inequality of income and unfavourable preconditions are among the factors which hamper poverty reduction.  The impact of trade liberalization on poverty is not automatic, and education is a key factor in poverty reduction. 17

18. 8. Policy Implications(1) Sufficiently to reduce poverty, we must:  Sustainably maintain high rates of economic growth through real structural transformation of economies: exclusive exportation of raw materials and natural resources is detrimental to African economies (low value-added and volatility of price);  Implement better targeted policies of income redistribution through increased social spending: invest more in generalization of education by increasing the share of GDP allocated to educationnal systems (training, infrastructure, etc.). 18

19. 8. Policy Implications(2)  Adopt complementary policies to trade opennes (improving human capital, enhance business environment and the quality of institutions) of economies; increase the technological absorption capacity in agricultural and in manufacturing (technical schools, supply of transport and electricity, fertilizer, seeds resistance, …).  Sustainably improve indicators of gouvernance in order to make African economic growth inclusive especially in countries rich in natural resources. 19

20. THANK YOU. 20

21. SEVENTH ANNUAL CONFERENCE ON REGIONAL INTEGRATION IN AFRICA (ACRIA 7) July 8-9, 2016 Cotonou, Benin