1. Emergence and Convergence: The productivity challenge An update on Shifting Wealth and Africa’s Rise HB Solignac-Lecomte OECD Development Centre Norfund’s Summer Conference 2014 Infrastructure for Development: Energy and Financial Services 28 August, Oslo

2. News from a shifting world 2

3. Shifting weight of global economic activity is continuing 3 Source: Authors’ calculations based on World Bank (2014), World Development Indicators (database) http://data.worldbank.org/data-catalog/world-development-indicators. Share of GDP in PPP terms Shifting global economic landscape

4. ... in terms of output, consumption and investment 4 Source: Authors' calculations based on IMF (2014), World Economic Outlook (database) and World Bank (2014), World Development Indicators (database) GDP as a share of total (constant 2005 USD)

5. … and in terms of international trade and foreign direct investment 5 Source: Authors' calculations based on UN Comtrade (2014), United Nations Commodity Trade Statistics (database) Gross exports, world total (LHS) and BRIICS' shares of world total (RHS) Outward FDI flows, world total (LHS) and BRIICS’ shares of world total (RHS) Gross imports, world total (LHS) and BRIICS' shares of world total (RHS) Inward FDI flows, world total (LHS) and BRIICS’ shares of world total (RHS)

6. But: The difference in growth rates has been narrowing since 2009 6 Source: Authors’ calculations based on World Bank (2013),World Development Indicators (database). Shifting global economic landscape

7. Many upper middle-income countries are not on course of convergence 7 Source: Authors’ calculations based on World Bank (2013), World Development Indicators (database) Shifting global economic landscape

8. Poor prospects of convergence raise question of “middle-income trap” Common (theoretical) framework to identify the trap does not exist But: Evidence shows that many middle-income countries face sustained periods of lower economic growth And: Growth slowdowns are often associated with significant slowdowns in total factor productivity (TFP): on average 85% of GDP slowdowns are explained by TFP slowdowns (Eichengreen et al. 2011*) Productivity slowdowns can be associated with difficulties to move up the value chain, away from a factor accumulation-driven and low labour cost-driven to a an innovation-driven growth path  Focus on benchmarking middle-income countries’ productivity growth (and levels) against each other and against more advanced countries 8 Low economic growth can be associated with low productivity growth The challenge of productivity for convergence

9. Total factor productivity gap with advanced countries is significant The challenge of productivity for convergence

10. Africa’s transformation challenge 10

11. 11 Africa’s growth: resilience in the face of headwinds from the global economy 11 Africa: Good news from growth

12. Growth typologies 12 Africa’s real GDP growth above global average of 3%. In medium term, growth is expected to accelerate, reverting to pre-2009 crisis levels. 2012201320142015 Africa6.43.94.85.7 North Africa9.41.93.15.5 SSA4.94.75.85.9 South Africa2.51.92.73.0 SSA excl. South Africa5.85.76.9 Africa: Good news from growth

13. GDP growth 3.7% GDP growth 6.7% GDP growth 1.9% GDP growth 6.2% GDP growth 3.0% DISPARITIES IN ECONOMIC PERFORMANCE IN 2012 13 Central Africa East Africa Southern Africa West Africa North Africa Regional growth prospects, 2013 Africa: Good news from growth

14. GDP growth 6.2% GDP growth 7.2% GDP growth 3.1% GDP growth 6.0% GDP growth 4.0% DISPARITIES IN ECONOMIC PERFORMANCE IN 2012 14 Central Africa East Africa Southern Africa West Africa North Africa Regional growth prospects, 2014 Africa: Good news from growth

15. 10 fastest growing (>7%) African countries in 2014/15 15 Libya 11.6% Mozambique 8.4% Angola 8.4% Côte d’Ivoire 9.2% Rwanda 7.2% Sierra Leone 12.7% Chad 10.1% Congo Dem. Rep. 8.6% Ethiopia 7.4% Liberia 7.5% Nigeria 7.2%

16. 10 slowest growing African countries in 2014/15 16 Egypt 2.9% South Africa 2.9% Swaziland 2.5% Sudan 3.3% Mauritius 3.8% Equatorial Guinea -5.2% Eritrea 2.1% Guinea-Bissau 2.7% Cabo Verde 3.2% Morocco 3.9%

17. External financial flows: FDI picking up Africa: Good news from growth

18. ‘ Structural Transformation’: the challenge of moving people and money from low productivity to higher productivity sectors has yet to be met

19. Natural resources: Africa benefitted from better terms of trade 19 Africa: natural resources can help diversify but …

20. Processing resources: Infrastructure is the major bottleneck Country 2009 Electricity production (GWh) 2009 Energy need for refining of mining production (GWh), (bauxite, iron, copper and nickel only) Energy requirement of base metal refining as share of total electricity output Botswana4442,996675% Tanzania4,6282,58356% Congo, Dem. Rep. 7,8307,73899% Ghana8,9588,80098% Zambia10,30815,946155% Algeria42,7696,60015% Egypt, Arab Rep.139,0007,2005% South Africa246,815336,991137% Africa*664,051764,210115% Energy needs for metal refining & Africa’s generation capacity Africa: natural resources can help diversify but …

21. Global Value Chains: Africa highly integrated but more as source of inputs than production hub Africa: a steep climb up the value chains

22. Africa’s share of trade in intermediate goods is growing but remains small 2.2% 1.4%

23. Southern Africa most integrated in both global and intra-African value chains Africa: a steep climb up the value chains

24. Financing Infrastructure in Africa 24

25. 25 Infrastructure spending: 2/3 from govt budget Operation & Maintenance Capital Expenditure Total Spending $bill./yr Public Sector (%) Public Sector (%) ODA (%) Non-OECD financiers (%) Private Sector (%) Total (%) Irrigation66.7 33.3--- 0.9 WSS*40.8 14.515.82.627.660.57.6 ICT**22.2 14.40.0 63.377.89.0 Power60.3 20.76.09.54.339.711.6 Transport48.1 27.811.16.8 51.916.2 Total (%)45.0 20.87.95.520.855.045.3 Adapted from Briceño-Garmendia, Smits, and Foster (2008) in World Bank (2010) Africa: the infrastructure spending challenge

26. 26 Public Financial Management in Infrastructure: new evidence Use public funds = overall effective, efficient and subject to the rules of fiscal prudence… … but weak economic, financial, social, environmental appraisal; inadequate attention to maintenance ; inefficiencies related to hidden costs. Project selection could be improved: Cost-Benefit and/or Cost-Effectiveness Analyses Planning levels (national, sectorial, local) overlap Bias = new investment over maintenance Source: Boateng et al. (2014), Public Financial Management in Infrastructure in Africa, OECD Development Centre Working Paper No. 323, OECD/CABRI. Africa: the infrastructure spending challenge

27. 27 www.oecd.org/dev www.africaneconomicoutlook.org Thank you