Étiquette : growth

Innovative Africa for a better tomorrow

Posted on by Rubrique Analyse Economique

shutterstock_162828188Despite a decade of strong growth, Sub-Saharan Africa still faces a number of social and economic challenges. These range from access to education, off-the-grid electricity, clean water, job creation and public infrastructure. While there is no silver bullet, one word is inspiring millions – innovation.
 
Of course, innovation doesn’t just happen, it takes government will. In short, the region needs to reform its economic structures to make enterprise easier. The international community also has its part to play as do foreign governments and global bodies – one piece of the jigsaw is a fair deal on climate change.
 
The COP21 conference in Paris last year laid bare the dual threats to African economic growth in relation to global warming. The first is that by asking African countries to greatly reduce their carbon output, we are asking the region to compromise economic development.
 
Moreover, climate change is, and will continue to impact Africa disproportionately through flooding, drought and starvation.  It is the ultimate injustice that African development should be threatened in this way. Francois Holland said at COP21 that the world owes “…an ecological debt…” to Africa. Such vocal support was much needed and it just that the final COP21 deal states that developing countries are entitled to international support in the development of new technologies. If the international community meets these obligations, African innovators will stand a much greater chance of building sustainable businesses.
 
Young Africans overwhelmingly prefer to work for themselves than for an existing company. They are tech-savvy with high mobile phone penetration and the continent has a growing middle-class that is hungry for high-end products and services. COP21 also provided Africa with an opportunity to showcase home-grown technologies that provide new ways to bring clean water and energy to the poorest rural communities. Energy and water support one of the region’s most important industries – agriculture. It employs millions.
 
Organizations such as Gorta-Self Help Africa are supporting rural farming communities across sub-Saharan Africa, helping them to find new ways of yielding crops. These include developing drought tolerant crop varieties and ‘climate smart’ technologies that help to keep moisture in the soil. Home-grown innovations such as these reduce reliance on purchasing foreign technologies, they create jobs and help to create supply chains that are the building blocks of a diverse small and medium enterprises (SME) sector. The COP21 deal also mandates that developed countries pool capital in order to provide poorer nations with at least $100 billion per year by 2020.
 
It is within this context of international support that young innovators can realise their potential – and it is not confined to agriculture or the environment. Mobile money solutions have helped millions of unbanked Africans enter the banking system by enabling the transfer of funds or shopping through a simple mobile phone. In the healthcare sector, new technologies are being created that have a high social impact in the prevention and treatment of disease. Professor Lesley Erica Scott won the Innovation Prize for Africa’s ‘Special Prize for Innovation’ with the development of the Smartspot TBCheck – a device that is designed to assess whether or not machines used to diagnose TB function properly. This is a technology that will greatly aid accurate diagnosis and help to curb the TB epidemic in Africa.
 
The challenge for such innovators is often limited access to capital. A region of disparate economies and financial systems means that Sub-Saharan Africa does not have the capital markets needed to support entrepreneurs. However, some countries, such as Angola, are pushing ahead with economic reforms that include public-private partnerships. Angola has also launched a unique state-backed venture capital fund, FACRA, which acts as a conduit between growing Angolan businesses and foreign investors. Through FACRA, businesses and investors from developed countries have an opportunity to meet financially viable, growing Angolan enterprises – providing foreign firms with investment opportunities whilst creating a new pathway for Angolan entrepreneurs to reach the capital they need to grow.
 
As we look ahead to a year of economic uncertainty – where low oil prices and a slump in commodities are the new normal – Sub-Saharan African nations and the international community must push ahead and do everything possible to support African innovators. Capital markets must mature, banks must be liberalised, governments must find new ways of enabling innovation and the global community must continue to do its fair share.
 
Africa has what it takes to create a tomorrow that helps it to meet its climate change obligations and innovators that will go on to build robust, diverse economies. Economic growth and environmental responsibility are not mutually exclusive and in order to support economic growth, the world must unite so that African entrepreneurs can develop financially viable businesses that provide African solutions to African challenges.

 

This article was published for the first time by TEODORO DE JESUS XAVIER POULSON on the website of the World Bank.

 

 

                                                                                                                                                                                                                                                                                   Rubrique Analyse Economique

Where PRSP efficient ?

Posted on by Rubrique Analyse Economique

img-8Since the 2000s, a few African countries have committed to strategies, initiated by the World Bank and then extended to the Millennium Development Goals (MDGs), to fight against poverty. These strategies, compiled in what are generally called Poverty Reduction Strategic Papers (PRSPs), are based on the dogma which considers that growth is enough to reduce poverty. Therefore, they highlight growth acceleration and identify measures to be implemented to improve the living conditions of the poorest.

Discussing the efficiency of these programs, with the birth of MDGs, the Bretton Woods institutions, in particular the IMF, indicated that these strategies constitute a break from other existing development programs, and offer a pool of measures which probably be able to reduce poverty. Although the MDGs have reached their completion point and data is available, it is possible to wonder whether these strategies have had the expected results. A tentative answer is given by Daouda Sembene[i], who analyses the impact of PRSP on growth, inequities and poverty in Sub-Saharan African countries. His analysis compares countries having adopted PRSP and countries which haven’t.

In his analysis, it appears that although the implementation of PRSPs has allowed a significant reduction of poverty elsewhere in the word, in the Sub-Saharan African countries which have adopted them (32 in total), it remains difficult to identify its impact on poverty and inequalities. Indeed, poverty is increasing at almost the same speed in all countries of the region, whether or not they have adopted PRSPs. The good news is that DSRPs have allowed countries which have adopted them to be more efficient and more resilient to economic shocks. For instance, the PRSPs countries recorded far more stable and substantial growth rates since the implementation of PRSPs (with an average of 2.13% during the 1990-1999 period against 5.12% between 2000 and 2012). On the contrary, economies which had not adopted the PRSPs have had more erratic performances (from 7.1% on average between 1990 and 1999, to 5.3% between 2000 and 2012). In addition, the 2008 financial and economic crisis had less impact on PRSPs counties than on non-PRSP countries: average growth of – 1.9% in 2009 for non PRSPs, when PRSPs countries demonstrated an average growth of 4%.

According to PRSPs, only public action can generate sustainable growth, able to reduce poverty. The actions to be implemented in the context of PSRPs in the concerned Sub-Saharan African countries were therefore in favour of growth. They involved in particular infrastructures and human capital (health and education), diversification and private sector development but also some transversal issues such as good governance promotion and rural development. For the growth created through these measures to be able to reduce poverty and inequalities, it was thus necessary to strengthen the redistribution channels. To attain this, the PSRPs planned to improve access to basic social services, to employment or to revenue-generating activities. Fund transfers and a priority access to public jobs for poor people, also constituted fundamental pillars of these strategy papers.

The failure of these strategies to reduce poverty and inequalities is mainly linked to the redistribution strategy used. For instance, social transfer programs are usually not conditional on results to be reached by the beneficiary household, in terms of health and education for the children. According to Kakwani and al. (2005) [1], in about 15 Sub-Saharan African countries, the implemented transfer programs depended on the registration and regular school attendance, and the amounts involved were not sufficient to take the beneficiaries out of their situation of poverty. Another form of redistribution is the implementation of subsidies (either in the agricultural, energy, or food sectors). It is the most common form of redistribution used on the continent; each African country benefits from subventions in one or more of those sectors: Nigeria and Ghana for instance have implemented subsidies in the agricultural and energy sectors. Others are more focused on the agricultural sector (Tanzania) or the energy sector (Niger, Senegal and Mali). These subsidies, supposed to be beneficial for the poorest and which mobilize a non-negligible part of budgetary resources, do not really produce the expected results [2]. They benefit mostly the richest, who consume an important part of the subsidized products and services.

Overall, the implementation of PSRPs has particularly allowed to improve economic governance in the countries which have adopted them, which translated into improved economic performances and a strong resilience to exogenous shocks. Regarding poverty and inequalities, these strategies have been less efficient. A failure which could be linked to the design strategy of PSRPs. Indeed, if the way PSRPs are designed, they provide conditions to reduce poverty with a focus on growth, their implementation is made difficult by the institutional capacity of the countries to identify precisely the targets of those policies. Policies aimed at reducing poverty and inequalities should not only take more into account local realities, but also integrate measures to be appropriated by local authorities, in order to design redistributive policies more adapted to the local context, and whose implementation would be linked to institutional capacities and competencies of the country. It is an approach that countries already try to have within their own development programs, which are then submitted to their partners for funding. Regional programs, or those initiated by international institutions, should therefore be reshaped according to a same model, to strengthen redistributive mechanisms. 

An original article by Foly Ananou, translated by M.C. 

[1] Kakwani, Nanak, Fábio V. Soares, and Hyun H. Son (2005). Conditional Cash Transfers in African Countries. UNPD International Poverty Centre, Working Paper n° 9, Brasilia.

[2] See Faut-il supprimer les subventions à l’énergie en Afrique ? for the case of energy.

[i] Daouda Sembene (2015). Poverty Growth and Inequality in Sub-Saharan Africa : Did the Walk Match the Talk under the PRSP Approach ? IMF Working Paper, WP/15/122.