www.africaneconomicoutlook.org

Overview

Towards more inclusive, place-based
development strategies in Africa
Africa’s performance and prospects
Africa’s macroeconomic prospects
Africa’s gross domestic product (GDP) growth is expected to strengthen to 4.5% in2015 and 5% in 2016 after subdued expansion in 2013 (3.5%) and 2014 (3.9%). The 2014
growth was about one percentage point lower than predicted in last year’s African
Economic Outlook, as the global economy remained weaker and some African countries
saw severe domestic problems of various natures. But the world economy is improving
and if the AEO 2015 predictions are right, Africa will soon be closing in on the impressive
growth levels seen before the 2008/09 global economic crisis.

Figure 1. Africa’s economic growth, 2002-16
AfricaAfrica excluding Libya

Growth rate (%)
7
6
5
4
3
2
1

20

16
(

p)

p)
15
(
20

13

14
(e
)
20

20

12
20

11
20

10
20

09
20

08
20

07
20

06
20

05
20

04
20

03
20

20

02

0

Note: (e) estimates; (p) projections.
Source: Statistics Department, African Development Bank.

West Africa achieved relatively high growth of 6% in 2014 despite its battle with the
Ebola virus (Box 1). Nigeria’s growth of 6.3% came mainly from non-oil sectors showingthat the economy is diversifying. But Southern Africa’s growth fell below 3% as the key
South African economy only grew by 1.5%.

© AfDB, OECD, UNDP 2015

African Economic OutlookiOverview

Table 1. Africa’s growth by region, 2013-16(Real GDP growth in percent)2013

2014 (e)2015 (p)2016 (p)Africa

3.5

3.9

4.5

5.0

Central Africa

4.1

5.6

5.5

5.8

East Africa

4.7

7.1

5.6

6.7

North Africa

1.6

1.7

4.5

4.4

Southern Africa

3.6

2.7

3.1

3.5

West Africa

5.7

6.0

5.0

6.1

Memorandum items:
Africa excl. Libya

4.0

4.3

4.3

5.0

Sub-Saharan Africa (SSA)

4.7

5.2

4.6

5.4

SSA excl. South Africa

5.4

6.2

5.2

6.2

Note: (e) estimates; (p) projections.
Source: Statistics Department, African Development Bank.

Domestic demand has continued to boost growth in many countries while external
demand has remained mostly subdued because of flagging export markets, notably inadvanced countries and to a lesser extent in emerging economies. Export values of goods
were also depressed by lower export prices. African exports are expected to strengthen
in 2015 and 2016 as the world economy improves. In 2014, domestic demand was in mostcountries boosted by private consumption and public infrastructure investment withthe latter also increasingly financed by issuing international sovereign bonds.
On the supply side, many African countries have improved their investment climate
and conditions for doing business, which enhance long-term growth prospects. Benin,
Côte d’Ivoire, the Democratic Republic of the Congo (DRC), Senegal and Togo are even in
the top ten countries worldwide with the most reforms making it easier to do business.
Africa’s supply side growth in 2014 was mainly driven by agriculture, extractive industries,
construction and services, and to a lesser extent by manufacturing. But sectoral growth
should not be seen in isolation, as there are important spillovers between sectors.
Furthermore, modernisation and structural transformation, the process by which new,more productive activities arise and resources move from traditional activities to thesenewer ones, is also happening within some sectors.
So far African economies have been relatively resilient to the sharp fall of internationalcommodity prices. Production of commodities has often increased despite the lower
prices, and overall growth has also been boosted by other sectors. But if commodity
prices remain low or decline further, growth in resource-rich countries might slow
down as governments need to cut spending. Governments will be keeping a close watch
on conditions in key markets, especially China and Europe. There are some positiveeffects, however, as lower oil prices ease inflation, increase real incomes and strengthen
export markets.
In countries where inflationary pressures have eased – such as Botswana, themembers of the Central African Economic and Monetary Community (CEMAC),
Mozambique and Rwanda – policy interest rates have been reduced to stimulate growth.
By contrast, in countries where exchange rates came under pressure, such as Nigeria,
central banks responded by tightening policies to stabilise exchange rates and containinflation. Most African countries continued their prudent fiscal policies to keep budget
deficits at sustainable levels. But in several countries, including oil exporters, fiscal
positions weakened despite efforts to limit spending and to improve tax revenues.

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Box 1. The economic impact of Ebola
The Ebola virus has particularly hit Guinea, Liberia and Sierra Leone, causing tremendous
human hardship and high economic costs. The epidemic curtailed the immense strides
those countries had made in macro and fiscal stability in recent years. Only a gradual
recovery is expected in the near term (UNDP, 2014a). By March 2015 there had been
more than 25 000 reported cases of the virus and more than 10 000 reported deaths,
according to World Health Organisation figures. But thanks to international support
and national policies in the region there are signs of progress. The spread of the virus toneighbouring countries has been contained.
The 2014 GDP shortfall in the three countries together (compared with AEO 2014
projections) amounted to about USD 1.4 billion in purchasing power parity, with
Sierra Leone accounting for USD 775 million, Guinea USD 460 million and Liberia
USD 165 million. This corresponds to a shortfall of per capita income of about USD 130
in Sierra Leone and about USD 40 in Liberia and Guinea. Our scenario for growth inthese three countries assumes that the Ebola crisis will be contained during 2015.
Economic activity will remain depressed, notably in Sierra Leone where the economy
is expected to contract, but by 2016 the economies are expected to recover again in all
three countries.
Lower economic activity has kept government revenues stagnant while the need for
additional social expenditure has increased (UNDP, 2014b). With lower growth andweaker fiscal positions, the risks for macroeconomic and financial market instability
are rising. Government and donor spending may be diverted to emergency health careservices, at the cost of other infrastructure, which could reduce longer-term growth.
The perception of a return to instability could take years to overcome. This could also
reduce growth potential (Hettinger, 2014).
Although the spread of the virus to neighbouring countries has been contained, theregion has been adversely affected through lower cross-border trade and fewer
international tourists, notably Burkina Faso, Côte d’Ivoire, Gambia and Senegal (formore details see country notes at www.africaneconomicoutlook.org).

External financial flows and tax revenues for Africa
In 2014, total external flows to Africa were estimated at USD 181 billion, 6% lower innominal terms than in 2013. This decrease resulted from a sharp drop in portfolio flows
and a slight decline in foreign direct investment (FDI) flows, reflecting subdued global
demand and weaker commodity prices, especially for metals. This decline offset theslight increase in remittances (+2.1%) and official development assistance (ODA) (+1.1%).
Overall, estimates for total external flows averaged 7.3% of GDP in 2014, compared to
8.2% in 2013.

© AfDB, OECD, UNDP 2015

African Economic Outlookiii

Overview

Figure 2. External financial flows to Africa, 2000-15
Remittances

Official development assistancePortfolio investments% GDP

Foreign direct investments

Current USD, billion
250

% GDP
20
18
16

200

14
12

150

10
8

100

6
4

50

2
0

0

-2
-4

-50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 2014 (e) 2015 (p)0Note: ODA (e) estimates and (p) projections based on the real increase of Country Programmable Aid (CPA) in the2014 Global Outlook on Aid: Results of the 2014 DAC Survey on Donors’ Forward Spending Plans and Prospects for Improving
Aid Predictability. Forecast for remittances based on the projected rate of growth according to the World Bank.
(This graph excludes loans from commercial banks, official loans and trade credits).
Source: Authors’ calculations based on OECD/DAC, World Bank, IMF and African Economic Outlook data.

Private external flows in the form of investment and remittances are driving growthin external finance. Foreign investments are expected to reach USD 73.5 billion in 2015,
underpinned by increasing greenfield investment from China, India and South Africa.
FDI is diversifying away from mineral resources into consumer goods and services andis increasingly targeting large urban centres in response to the needs of a rising middle
class. African sovereign borrowing is increasing.

Figure 3. Sources of greenfield investment in Africa (by number of projects),
2003-08 and 2009-14
A. 2003-08
Africa
11%

China
2%

India
4%

B. 2009-14
Africa
19%

India
6%

North
America
13%

North
America18%

Rest ofthe world
21%

China
3%

Rest ofthe world
18%
Europe44%Europe41%

Source: Authors’ calculations based on fDi Markets (2015) and UNCTAD (2014).
Europe43%

iv

Official remittances have increased six-fold since 2000 and are projected to reach
USD 64.6 billion in 2015 with Egypt and Nigeria receiving the bulk of flows. They remain
the largest source of international financial flows to Africa, accounting for about 33%of the total since 2010. Conversely, ODA will decline in 2015 to USD 54.9 billion and isAfrican Economic Outlook© AfDB, OECD, UNDP 2015

www.africaneconomicoutlook.org

projected to diminish further. More than two-thirds of states in sub-Saharan Africa, themajority of which are low-income countries, will receive less aid in 2017 than in 2014
(OECD, 2014a).
Despite significant improvements in tax revenue collection over the last decade,domestic resource mobilisation remains low. Public domestic finance in Africa has
increased more than threefold in a decade from USD 157 billion in 2003 to USD 507 billion
in 2013. Compared to 2012, total tax revenue in 2013 registered a slight decrease of about
1.5% mainly on account of lower resource rents.

Box 2. Financing for Development: from Monterrey (2002) to Addis (2015)
The third International Conference on Financing for Development (FfD), due to takeplace in Addis Ababa in July 2015, will provide an opportunity to take stock of progress
made since the first Monterrey Conference in 2002 towards financing the Millennium
Development Goals (MDGs). In the run-up to the 2015 conference, the international
community is designing a new development finance framework to fund the Sustainable
Development Goals, which will replace the MDGs. African Union leaders representing
the Common African Position on the Post-2015 Development Agenda have reiterated
the need to mobilise significant resources from a variety of sources and to ensure theeffective use of financing (African Union, 2014).
Since the Monterrey Conference, financing options for the continent have increased
substantially. Private financial flows have become more prominent, increasing from 63%
of total external resources in 2002-06 to more than 70% in 2010-14. Africa has attracted
increasing foreign investment, notably from other emerging economies and within thecontinent. Foreign direct investment is also diversifying away from extractive sectors
towards consumer goods and services.
Portfolio flows to the continent have also increased. Since 2011, more than a dozen
countries, including Kenya, Nigeria and Uganda, have issued international sovereign
bonds for the first time with the objective of financing large infrastructure projects.
While private capital flows are volatile, remittances may constitute a more stable sourceof foreign exchange for longer-term purposes such as financial sector development(Ncube and Brixiova, 2013). In 2014, G20 leaders agreed to reduce the global average costof transferring remittances to 5%; support country-led actions to address the cost andimprove the availability of remittance services, particularly for poor people; and use
remittance flows to drive financial inclusion and development (GPFI, 2014).
Conversely, the relative importance of international public flows, and especiallybilateral aid from OECD countries, is diminishing. The share of ODA in total external
flows declined from 37% in 2002-06 to 30% in 2010-14. This reveals a shift in regional aid
allocation with a reduction of grants to low-income African countries and an increase ofsoft loans to middle-income countries in Asia. Nevertheless, South-South co-operation
continues to grow rapidly, more than doubling between 2006 and 2011 (UN, 2014).
Tax revenues have grown thanks to major efforts to improve revenue collection andgains from the commodity price boom (Sy, 2015). However, in spite of considerable
efforts and reform, tax mobilisation remains low. Reiterating the key messages of the2002 Monterrey Consensus and the 2008 Doha Declaration in the context of the 2014
Common Africa Position on the Post-2015 Development Agenda, African Union leadersdeclared that policies that increase and improve the quality of finance from domestic
sources should remain a top priority for their governments (African Union, 2014).

© AfDB, OECD, UNDP 2015

African Economic Outlookv

Overview

Trade and regional integration in Africa
Africa is not immune to the shocks and changes in the world economy that could
help or hinder its efforts to speed up integration and bring down borders. The World
Trade Organisation’s (WTO) World Trade Report 2014 identified four major trends from thelast decade which have had an impact on African integration:• The increasing impact of shocks to the global economy: Open trade can spread thefallout but also help to reduce volatility.
• The phenomenal trade growth led by emerging economies and spurred by demandfor commodities: It has helped narrow the income gap between emerging anddeveloped countries, but Africa is lagging behind.
• The expansion of global value chains (GVCs): The share in total trade of intermediate
goods, services and components between developing countries grow from about 6%
in 1988 to nearly 25% in 2013. This has created new opportunities, although African
firms have struggled to participate meaningfully in those GVCs (AfDB et al., 2014).
• The changing prices of exports of fuels and mining products.
Two other notable trends will create both opportunities and challenges for Africa:
the facilitation agreements aimed at bringing down trade barriers, and the new wave ofmega-trade agreements.
Recent trends in African total trade flows – exports and imports – highlight a shift
in trade dynamics and increasing competition from China for the African market.
Although Europe remains Africa’s largest trading partner, Africa’s trade with Asia roseby 22% between 2012 and 2013, while trade with Europe grew by just 15%. Manufactured
exports from Europe to Africa fell from 32% of the total in 2002 to 23% in 2011. On theother hand, Asia’s share in Africa’s trade rose from 13% of the total to 22% during thesame period. In 2009, China overtook the United States as Africa’s largest single trading
partner.

Figure 4. Africa’s total trade flows with selected global and intra-African
partners, 2000-13
EU27

China
United States

Brazil, India, Korea, Russia and Turkey
Intra-Africa

USD billion
450
400
350
300
250
200
150
100
50
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Authors’ calculations based UN Statistics Division (2015), via http://wits.worldbank.org/wits/.

Price volatility could cause problems for Africa’s commodity producers. At the startof 2015, global commodity prices reached a five-year low. This is expected to have asignificant impact on African trade, investment and economic growth as mineralsviAfrican Economic Outlook© AfDB, OECD, UNDP 2015

www.africaneconomicoutlook.org

and ores account for two-thirds of Africa’s merchandise exports. The continent’s
merchandise exports fell 5.8% between 2012 and 2013 to USD 602 billion (3.3% of world
exports), according to the WTO. Imports, on the other hand, rose a modest 2.2% to
USD 628 billion (3.4% of world imports). African merchandise exports were dominatedby oil producers (USD 330 billion) and South Africa (USD 96 billion), pointing to the needfor greater industrialisation, value addition and diversification.
Intra-Africa trade is growing mostly within subregions. From 2010 to 2013,
intra-African exports grew by 50% and by another 11.5% in 2013 to USD 61.4 billion.
However, the share of exports between African subregions increased only from 11.3% in2012 to 12.8% in 2013. This could indicate a lack of development of regional value chainsand low levels of trade in intermediates between African countries.

Human development in Africa
African countries have made significant strides in all dimensions of humandevelopment, comparable with other regions of the world. In 2014, 17 out of 52 Africancountries achieved high and medium levels of human development (Table 2).

Table 2. Country classification of human development levels by low,
medium and highHigh humandevelopment(above 0.7)

Medium humandevelopment(between 0.55 and 0.7)

Low humandevelopment(below 0.55)

Algeria
Libya
Mauritius
Seychelles
Tunisia

Botswana
Cabo Verde
Congo
Egypt
Equatorial Guinea
Gabon
Ghana
MoroccoNamibia
Sao Tome and Principe
South Africa
ZambiaAngolaBenin
Burkina Faso
BurundiCameroon
Central African Republic
Chad
Comoros
Congo, Democratic Republicof theCôte d’Ivoire
Djibouti
Eritrea

Ethiopia
GambiaGuineaGuinea-Bissau
Kenya
LesothoLiberia
Madagascar
MalawiMali
Mauritania
Mozambique

Niger
Nigeria
RwandaSenegalSierra Leone
Sudan
Swaziland
Tanzania
Togo
UgandaZimbabwe

Note: Data were unavailable for Somalia and South Sudan.
Source: UNDP (2014c).

However, human development gains are uneven with significant inequality between
and within countries. Countries in East and West Africa have experienced faster rates ofimprovement in human development indicators related to education, health and income
compared to Central, North and Southern Africa (Figure 5). The last 15 years have beencharacterised by strong recovery from the “lost decades” in the 1980s and 1990s – a periodmarked by slower rates of improvement in human development and even reversals insome countries. Since 2000, improvement rates for human development indicators haverecovered in Central and Southern Africa and accelerated in East Africa. In Central
Africa, Chad and the Republic of the Congo present the highest improvements in humandevelopment indicators, while improvements in the Southern Africa region are highest
in Angola, Botswana, Malawi, Mozambique and Zambia. The leading countries in East
Africa are Burundi, Ethiopia, Rwanda and the United Republic of Tanzania. West Africa
maintained a consistently high rate of progress with improvements highest in Benin,
Liberia, Mali, Niger and Sierra Leone. Progress in North Africa was also high but slowed
between 2000 and 2013.

© AfDB, OECD, UNDP 2015

African Economic Outlookvii

Overview

Figure 5. Change in human development by Africa’s regions, 1980-2013
Average annual HDI growth, 1990-2000
Average annual HDI growth, 1980-90
Average annual HDI growth, 2000-13
%
2.5
2.0
1.5
1.0
0.5
0
-0.5
-1.0

Central Africa

East Africa

North Africa

Southern Africa

West Africa

Source: UNDP, 2014c.

Human development levels in Africa remain much lower than the world average.
In sub-Saharan Africa, for example, the average level in 1990 was 0.40, compared to
the world average of 0.60, representing a difference of 33%. This level rose slightly to
0.50 in 2013 but still remained 28% lower than the world average of 0.70 (UNDP, 2014c).
Progress has resulted from improvements in education and health and from growth inincome per capita. Many countries are catching up with better performers, driven by
improvements in poverty reduction and health and education outcomes.
High levels of inequality in Africa significantly affect human development. The
Inequality-adjusted Human Development Index (IHDI) for sub-Saharan Africa reveals a
33.6% loss in values once adjustments are made for inequality in distribution of income,health and education outcomes. In Africa, the underlying driver of inequality in IHDI
values is significant disparities in access to health and education. This contrasts strongly
with high human development countries, where inequality is related more closely toincome.
Gender inequality remains a challenge. On average, the level of female humandevelopment is 13% lower than that for males. Women in Africa face high levels of
discrimination that have an impact on their socio-economic rights, as shown by theSocial Institutions and Gender Indicators (www.genderindex.org). This is most apparent
in relation to restrictions on resources and assets, physical integrity and discriminatory
practices within households and families. Violence against women continues to be amajor concern.
Human development is highly vulnerable to economic, political, social andenvironmental risks. Some gains were subject to reversals in Central Africa and Southern
Africa in the 1990s. More recently, negative socio-economic consequences have arisen
from the impact of the Ebola virus in West Africa. Other sources of vulnerability include
the fall in commodity prices, civil war and conflicts. Human development policies must
commit to maintaining gains by addressing vulnerability to natural disasters, climatechange and financial setbacks for those most at risk. Recent conferences have called for
implementing the Istanbul Programme of Action for least developed countries, whose
priority areas include productive capacity development, trade, commodities, human andsocial development, response to shocks, mobilisation of financial resources, promotionof good governance, and agriculture, food security and rural development (UN, 2011).
Countries must focus on integrating equity, sustainability and vulnerability reduction

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into goal setting for the post-2015 development agenda and on improving data collection
and measurement goals, taking into account initial conditions.

Political and economic governance in Africa
There were some positive governance developments in 2014. In Tunisia, a constitution
endorsed in January 2014 enshrined religious freedom and guaranteed gender equality.
This was followed by largely undisputed parliamentary and presidential elections, heldin October and December 2014 respectively. South Africa held its fifth round of peacefulelections 20 years after its historic 1995 elections marked the end of the apartheid era.
Over 179 million people went to the polls and voted in largely peaceful and credible
elections (IFES, 2015; International IDEA, 2015). In Burkina Faso, mass protests led tothe ouster of President Compaore in a short, successful transition. Several countries
nevertheless continued to experience instability, acts of terrorism or conflicts.
In 2015, a record 266 million people could be called to the polls (IFES, 2015). Elections
are planned, or have been held, in countries that are among both the continent’s largest
economies and most populated, including Egypt, Ethiopia, Nigeria, Sudan and Tanzania.
In Nigeria, the April 2015 elections were hailed as the first handover between civiliansof different political parties since independence.
Overall, public sector management has not improved much for the continent, butthere has been some progress in specific areas, especially equity in the use of publicresources, statistical capacities and public administration. The outbreak of the Ebola
virus in Guinea, Liberia and Sierra Leone highlighted the fragility of health systems,
although it also demonstrated the importance of a committed leadership at thecommunity level.
The business environment has improved markedly in countries that needed
it the most. Sub-Saharan Africa remains the region with the most difficult businessenvironment, but it is also the region making the most progress, accounting for one inevery three regulatory reforms worldwide. The ten countries that most improved theirbusiness environment from June 2013 to June 2014 include five African countries thatwere in the bottom quintile globally for ease of doing business: Benin, Côte d’Ivoire, DRC,
Senegal and Togo. The fact that these countries remain in the bottom quintile, however,indicates that further efforts are needed.

African economies must prepare for global and domestic changes
This year’s African Economic Outlook finds the continent poised to resume its
medium-term growth trend. However, looking beyond 2016, a number of internal andexternal factors may alter the context in which African policy makers seek to accelerate
growth and deepen structural transformation. African economies have to take thosechanges into account and adapt their development strategies accordingly.

Africa’s recent growth episode has been building on greater political stability, afavourable global economic landscape and sound economic policies
Figure 1 above shows that Africa’s medium-term trend of positive growth – 5% peryear on average since the turn of the century – was upset in 2009 and 2011. This
corresponds to two events: in 2009, demand fell from OECD countries hit by the global
economic and financial crisis, and in 2011, the Arab Spring suddenly froze growth in
Egypt, Libya and Tunisia. However, on both occasions, the continent’s average growth
rates recovered, mainly due to the good performance of East and West Africa. Thisepisode of growth is in sharp contrast with the 1980s and 1990s, Africa’s so-called “lost© AfDB, OECD, UNDP 2015

African Economic OutlookixOverview

decades”. When comparing the performance of individual countries between 1986-2000
and 2001-14, three main factors appear to have accelerated growth:• Greater political stability: Many countries that recorded growth below 2% during theperiod 1986-99 suffered from civil wars, military coups or social unrest (Algeria,
Angola, Burundi, the Central African Republic, DRC, Djibouti, Guinea-Bissau, Niger,
Rwanda and Sierra Leone). By contrast, between 2001 and 2014 violent conflicthas receded overall and political stability improved – although several economies
suffered again, at least temporarily, from political unrest.
• High commodity demand and soaring prices: During the 2000s, Africa has been
benefiting from a shift of global wealth. World output growth has accelerated,
mainly driven by China and other emerging nations. This has boosted demandfor oil and minerals and increased commodity prices, which has benefited Africa’s
resource-rich countries, whose reserves are among the least exploited globally(AfDB et al., 2011; AfDB et al., 2013). Over the first decade of the century, African
exports to Europe doubled, exports to emerging economies quadrupled andexports to China alone increased by a factor of 12 (Figure 4). By the middle of that
decade, foreign investment, stimulated by a global savings glut, poured into mines
and agriculture (e.g. biofuels), but also into the infrastructure necessary to exploit
them, such as ports, roads, electricity and support services (e.g. banking, insurance,transportation). Average annual growth in several resource-rich countries (Angola,Chad, Equatorial Guinea, Nigeria and Sierra Leone) rose to 8% and more between
2001 and 2014. In Zambia average growth accelerated from half a percentage
point in 1996-2000 to almost 6% in 2001-14. Mozambique and Ghana, which are
not classified as resource rich but where extractive industries have become more
important, also attained high growth of almost 8% and close to 7% respectively.
• Improved economic policies: Lower inflation and stronger budgets due to more prudent
fiscal policies, helped by debt relief, have improved macroeconomic stability andsupported growth in many countries. Governments are improving the businessenvironment and promoting structural transformation from traditional towards
more productive activities. This has helped some countries without resources,
such as Ethiopia and Rwanda, to attain high annual growth of 8% or above.
In the coming decades, changes in the global context, rapid population growth andgrowing social demands will create new opportunities and new challenges to which
African policy makers will have to respond with innovative development strategies.

To sustain growth and accelerate transformation, African economies will have toprepare for new global conditions
The global context may be less favourable than in the 2000s
The gradual strengthening of African economies is what the AEO 2015 sees as
the most likely outcome. But if the global economy weakens and commodity prices
fall further, Africa’s growth will be affected. This could be through lower exports ofgoods and services, including tourism, and possibly also lower inflows of foreign direct
investment, official development assistance and workers’ remittances. Another externalrisk is financial market volatility and exchange rate pressures in some countries. This
could also be caused by volatile capital movements if market expectations change about
the likely evolution of monetary policies stance in key countries, notably the UnitedStates.
The medium- to long-term prospects for the global economy are less favourable thanduring the last decade. According to Braconier, Nicoletti and Westmore (2014), growth in
the OECD and emerging G20 countries is likely to decelerate from 3.4% in 1996-2010 to 2.7%
in 2010-60. In addition, the growth-driving effect of emerging economies on Africa may
also decrease: while the “shifting wealth” phenomenon seems set to continue, growthin those economies has been slowing down. A number of them now look unlikely toxAfrican Economic Outlook© AfDB, OECD, UNDP 2015

www.africaneconomicoutlook.org

catch up with average OECD income levels by 2050, even if they maintained the average
growth rates they enjoyed between 2000 and 2012 (OECD, 2014b). These include lowermiddle-income countries (e.g. India, Indonesia and Viet Nam) as well as upper-middleincome ones (such as Brazil, Colombia, Hungary, Mexico and South Africa). While China
remains among those countries likely to catch up, it is “shifting to a lower but still rapid
and likely more sustainable growth path” (OECD, 2015).
In addition, African economies will continue to face stiff competition on global
markets, in terms of costs, quality of goods and services, and production potential. Last
year’s AEO demonstrated the opportunities offered by greater participation in global
value chains and upgrading in the agricultural, manufacturing and services sectors but
showed the limited impact in terms of business development and job creation in formalcompanies so far (AfDB et al., 2014).
Africa is vulnerable to climate change
Unlike countries that industrialised earlier, African economies face the challenge ofstructural transformation in a global context of climate change. The negative effects ofclimate change-related hazards on agricultural resources heavily affect the poorest wholargely depend on them not only for food but also for jobs. Pressure on already limited
water supply is expected to increase sharply due to changes in water cycles caused byerratic rainfall and to affect negatively the production of annual crops such as cereals
and cotton, or perennial crops like coffee, cocoa and palm oil.
Livestock may also suffer from shrinking water supply, as grazing land is divided
and damaged, and new diseases arise. As the demographic pressure on land grows,
gathering wood for fuel will cause deforestation, as will developing agriculture andfelling for timber. The recent growth episode has compounded the deterioration ofenvironmental resources. The related challenges must be taken into account in African
development strategies, based on local contexts.

Demographic growth will create both opportunities and challenges
Africa’s population of 1 billion in 2010 should double by 2050, although the magnitudeof the increase will vary across the continent. South Africa and the region of North
Africa will be less affected (Figure 6).

Figure 6. Population growth in Africa, 1950-2050
East Africa

Central Africa
Southern Africa

North Africa
West Africa

Millions
1 000
900
800
700
600
500
400
300
200
100
0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045 2050

Note: Medium fertility scenario.
Source: UNDESA (2012).

© AfDB, OECD, UNDP 2015

African Economic OutlookxiOverviewThose demographic changes bring about both opportunities and challenges. On
the one hand, the ongoing demographic transition opens a window of opportunity, as
the working-age population increases. The ratio between those inside and outside theworkforce, the activity ratio, will increase over the next several decades and possibly
create a demographic dividend for sub-Saharan Africa. The number of active people
supporting inactive people will increase due to lower birth-rates; this will free up
resources to improve living conditions (e.g. education, health care and housing) andboost savings and investment. And it will remove a long-lasting, heavy burden fromAfrica, although differences between countries will be significant. In the 1990s, there
was practically one active person for each inactive one. The average activity ratio is
expected to steadily rise and continue well beyond 2050. By that time it is forecast toreach 1.6 active people per inactive person in sub-Saharan Africa (still less than China’s
current level) (Figure 7). Ahmed et al. (2014) estimate that Africa’s demographic dividend
could contribute 10-15% of gross GDP volume growth by 2030.

Figure 7. Activity ratios in sub-Saharan Africa, North Africa, South Africa andChina, 1950-2100
Sub-Saharan Africa (excluding South Africa)
South Africa

North Africa
China

3.0
2.5
2.0
1.5
1.0
0.5

19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
20
55
20
60
20
65
20
70
20
75
20
80
20
85
20
90
20
9
21 5
00

0

Note: Aggregate ratios are population weighted. The activity ratio is the ratio between the working-age
population (15-64) and the dependent-age population (under 15 and over 65). Projections are modelled using the
medium fertility variant.
Source: Authors’ calculations based on data from UNDESA (2012).

On the other hand, the rapid growth of Africa’s workforce will increase the pressure
on labour markets. The workforce is expected to increase by 910 million people between
2010 and 2050, of which 830 million in sub-Saharan Africa and 80 million in North Africa.
Creating more productive jobs, a major stake in Africa’s structural transformation,
becomes even more pressing. The estimated numbers of youth joining labour markets
in 2015 are about 19 million in sub-Saharan Africa and 4 million in North Africa. Overthe next 15 years, the figures will be 370 million and 65 million respectively, or a yearly
average of 24.6 million and 4.3 million new entrants. The upcoming growth in Africa’s
workforce represents two-thirds of the growth in the workforce worldwide (Figure 8).

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Figure 8. Projected workforce growth, 2010-50: Sub-Saharan Africa, North Africa,
China, India, Europe and the United States
Millions
1 000
800

830

600
400

317

200
80
0
-200

Sub-Saharan Africa

North Africa

-150

China

India

-96

33

EuropeUnited States

Source: UNDESA (2012).

African citizens’ expectations of more inclusive growth will increase
One major lesson from Africa’s ongoing growth episode is that political and social
stability are prerequisites for economic growth. But stability also depends on how thefruits of growth are shared. In this respect many African countries rank poorly. Amongcountries with average growth above 6% from 2001 to 2014, Ethiopia had the highest
ranking with respect to inclusive growth (Ncube, Shimeles and Younger, 2013). Other
countries with similarly high or even higher GDP growth ranked much lower. There isan urgent need to sustain growth and make it more inclusive.
Growth needs to be made more inclusive
Assessing the performance of African countries in terms of GDP per capita showsthat only a few of them have engaged in a convergence process with high income
countries. In particular, sub-Saharan Africa’s GDP per capita as a share of the OECDaverage has stagnated: it declined slightly in the 1990s before returning to only 7% in2013 (Figure 9). Convergence is thus the exception rather than the rule. Between 1950 and2009, King and Ramlogan-Dobson (2015) identified six converging countries: Botswana,
Egypt, Lesotho, Mauritius, the Seychelles and Tunisia. Another six – Cabo Verde, Chad,
Ethiopia, Gambia, Tanzania and Uganda – initiated the process, mostly in the 2000s.
The more recent convergence of Algeria, Cameroon, Ghana, Namibia, Niger and Senegal
must continue to be consolidated. The World Bank (2015a) forecasts that by 2030, despite
major efforts in the context of current policies, 19% of Africa’s population will still live inpoverty. Those 300 million people will then represent 80% of the global population livingon less than USD 1.25 a day in 2005 purchasing power parity.

© AfDB, OECD, UNDP 2015

African Economic OutlookxiiiOverview

Figure 9. Share of OECD countries’ gross domestic product per capita for Africa,
China and India, 1990-2013
China
South Africa

India
North Africa
Sub-Saharan Africa (excluding South Africa)

GDP per capita as share of the OECD average (current USD PPP)
45
40
35
30
25
20
15
10
5
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: World Bank (2015b); OECD National Accounts data files.

Relatedly, job creation has been slow. Although structural transformation did
increase slightly since 2000, the change has been insufficient (AfDB et al., 2013). Overall,between 1990 and 2005, “labour seems to have moved” from relatively high-productivity
sectors (wholesale and retail trade, and manufacturing) to low-productivity sectors(informal services and agriculture); as a result, labour productivity fell by 1.3 percentage
points per year and eliminated more than half of within-sector productivity gains.
Some countries did experience positive structural transformation (Ghana, Ethiopia andMalawi), but not enough to fundamentally transform their economies (UNECA/AU, 2014).
As a result, the benefits of Africa’s recent growth episode have been shared unequally
between countries and within them, raising the question of their sustainability andeffectiveness. Growth so far has failed to create the amount and quality of jobs thatyoung entrants in labour markets demand: the African Economic Outlook 2012 foundthat only some 7% of the population aged 15-24 in African low-income countries had adecent job, and 10% in middle-income countries (AfDB et al., 2012).
Social demands are on the rise
The African Economic Outlook’s indicator of public protests monitors strikes anddemonstrations with political, economic or social motives (Figure 10). Since themid-1990s the intensity of the protests has experienced three successive movements: a
reduction by half by 2004; a rebound in 2005-07 when high levels of inflation hit Africanhouseholds, notably through hikes in prices for food and fuel; and a sharp increase in
the wake of the revolutions of the Arab Spring.

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Figure 10. Public protests and violence by non-state actors in Africa, 1996-2014
Public protests (base 100 = 2000)
600
500
400
300
200
100
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Violence by non-state actors (base 100 = 2 000)
600
500
400
300
200
100
0

1996 1997 1998

1999 2000 2001

2002 2003 2004 2005 2006 2007 20082009 2010 2011 2012 2013 2014

Note: See full methodology and data by country in the Statistical Annex of this report.
Source: Authors’ calculations based on news verified by press agencies (Marchés Tropicaux et Méditerranéens for
1996-2005, AFP and Reuters for 2006-14).

Remarkably, this rise in public protests contrasts with the “flatter” trend of violence
by non-state actors. Also worth noticing is the fact that, while some governments haveresorted to violence against demonstrators, most have shown a growing tolerance for
freedom of expression. After peaking in 2013, at levels more than five times higher thanten years before, protests started to decrease slightly in 2014. This trend reflects aneasing of tensions in most African countries, which contrasts with heightened tensions
in a limited number of hot spots. The political normalisation of countries that had beenin crisis, particularly since the Arab Spring, partly explains the overall decline in theintensity of protests.
Importantly, in 2014 as in the previous years, top drivers of public protests continue
to be employment-related claims for wage increases and better working conditions,followed by demands for better public services (Figure 11). This confirms Afrobarometer’sfindings in 34 countries that Africans are increasingly dissatisfied with public provisionof basic services and that “lived poverty at the grassroots remains little changed” despite
the recent growth episode (Asunka, 2013; Dulani, Mattes and Logan, 2013). Similarly,
according to the Ibrahim Index of African Governance (Mo Ibrahim Foundation, 2014),
while “sustainable economic opportunity” had been a driver of positive governancetrends over 2005-09, it contributed slightly negatively to the index over 2009-13. Lack of© AfDB, OECD, UNDP 2015

African Economic Outlook

xv

Overview

decent jobs and participation in the wealth accumulated over a decade of steady growththus stand out as sources of frustration. However, there was also a rise in less traditional
motives, such as political divides among citizens and, for the first time in the top ten list,
protests over international or global matters.
That citizens should increasingly turn to mostly peaceful means of expressing socialand political claims is good news, as the demand for better opportunities and moreaccountability is a prerequisite for improved governance. It does however increase thepressure on governments to provide viable answers to these claims, especially in thecontext of fast demographic growth.

Figure 11. Top drivers of public protests in Africa, 2014
Demand for salary increase
Working conditions
Quality of public service delivery
Social divides, e.g. identity-based orvis-à-vis specific government policies
Reaction to executive overreach (arrestsof journalists, protesters, opposition, etc)
Demand for dissolution of govement
or stepping down of the head of state
Political or legal reforms
or proposals thereof
Unpaid salaries
Election results or proceduresInternational/global matters

0

5

10

15

20

25
%

Source: Authors’ calculations based on news verified by AFP and Reuters.

Africa needs innovative development strategies
Despite some progress over the last decade, current policies have not proved effective
enough at speeding up job creation in productive sectors. In the decades to come, afast rise in urban and rural populations and the constraints of global competition will
make the challenge of transforming the continent a unique undertaking, althoughwith wide variations between the various subregional and national contexts. Africa’stransformation path will thus have to cross unchartered territory.
Past experiences of demographic, urban and economic transition may inspire action,
but they cannot provide blueprints
Structural transformation typically sees productivity growth in agriculture release
workers from farming, pushing them towards urban areas where higher productivity
sectors locate as they benefit from higher economies of agglomeration and knowledge
spill-overs. Progress in income, health and education are usually associated with ademographic boom which also fuels urbanisation until fertility eventually decreases.
Strikingly, however, this traditional model of structural change does not seem to apply
to most African countries:• Firstly, both cities and rural communities are booming. The majority of Africa’s
population is likely to remain rural until the mid-2030s, while the majority of theworld’s population has lived in urban areas since 2007. Continued demographic
growth in the rural areas means that productive opportunities must be createdeverywhere: policies focusing mainly on moving the rural labour force to productive
activities in the cities may not be enough.
• Secondly, urbanisation in Africa has so far occurred without industrialisation(Losch, Fréguin-Gresh and White, 2012). Most rural migrants have moved fromxvi

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low-productivity activities in rural areas to those in the urban sector, where
informal settlements have been mushrooming in the absence of comprehensive
urban development strategies (Kayizzi-Mugerwa, Shimeles and Yameogo, 2014;
see Special theme section). Lack of opportunities in the cities has even led somemigrants to return to rural areas.
• Finally, the pattern of Africa’s insertion in international trade – dependency oncommodity exports and increased openness to cheap food imports – has altered
the market relations between cities and the countryside. For earlier industrialisers
in Asia or Europe, the hinterland supplying the city with goods it produces was an
essential driver of structural transformation.
Effective transformation strategies need to draw from Africa’s own experiences andthose of others, but they must also focus on the uniqueness of Africa’s transformation
challenge.
Current policy options may be insufficient to exploit Africa’s full potential for structuraltransformation
Given the unique set of challenges confronting the continent, “business-asusual” will not be enough. African institutions are thus giving priority to structuraltransformation, an overarching objective of the African Union’s Agenda 2063. Experts
have put forward several policy options in pursuit of that objective, but none of themalone may be sufficient to address the continent’s challenges. Although each option
holds a part of the answer, they tend to prioritise one sector, overlook the importance of
demographic dynamics and sometimes underestimate the constraints imposed by the
global context (Losch, 2015; Table 3).
African policy makers thus need innovative, effective ways of articulating thosepolicies. While there is little doubt that job creation must be the central priority, theoptions are not necessarily exclusive. Drivers of change differ according to the context:“Perhaps it will be agriculture-led growth. Perhaps it will be services. But it will look quite
different than what we have seen before” (Rodrik, 2014). New development strategies
must combine the merits of existing options so as to build on each economy’s uniqueassets and chart original paths towards structural transformation. At the continental
level, those assets represent an immense potential:• a young and growing active population• a fast growing domestic market of 1.1 billion people expected to grow by about
1.2 billion by 2050, with an emerging middle class of urban consumers (Africa’s
combined consumer spending was USD 680 billion in 2008 and is projected at
USD 2.2 trillion in 2030; AfDB, 2011)• a diversity of ecosystems: Africa hosts a quarter of the world’s approximately
4 700 mammal species, a fifth of the world’s 10 000 bird species and
40 000-60 000 plant species (UNEP, 2006)• abundant and largely under-exploited natural resources, including an estimated
10% of the global reserves of oil, 40% of gold and 80-90% of chromium/platinumgroup metals (AfDB et al., 2013)• large scale and vast land areas, with around 24%, – 600 million hectares – of theworld’s arable land.
However, in a context of wide spatial disparities, those assets are not easily identified
and exploited by private and public actors, who tend to focus on a limited range oflarge urban centres and natural resource enclaves. This year’s African Economic Outlook
therefore zooms in on regional development and spatial inclusion. It concludes thatmulti-sectoral, place-based and participatory development strategies can contribute to
unlocking the potential of Africa’s diverse regions.

© AfDB, OECD, UNDP 2015

African Economic Outlook

xviiOverview

Table 3. Alternative strategic options for accelerating Africa’s transformation:
Strengths and weaknesses
Strengths

Weaknesses• Increasing manufacturing costs in Asia, the shift to taskbased production, outsourcing and intra-firm trade (GVCs)
open up new opportunities for light manufacturing, which
requires less capital, fewer technical and managerial skills andremains viable in fragile environments.

• The hurdles related to appropriate public policies, institutions,
governance systems and sustainability are many.

Industrialisation• Africa may emulate export-led strategies of developedand emerging economies by improving trade facilitation,
increasing access to energy, investing in skills andimplementing smart industrial policies.

• Technical change has gradually rendered manufacturing
more capital- and skill-intensive, triggering premature deindustrialisation in many developing countries.
• Manufacturing is increasingly service-intensive:
underdeveloped service sectors may thus hamper its
emergence and competitiveness.
• Industrialisation alone may not suffice to create the almost
30 million additional jobs Africa will need every year.

Service-led growth• Jobs in services continue to expand.
• Services related to outsourcing, new information andcommunication technologies, and cloud computing present
multiple possibilities.

• Services are becoming increasingly tradable. The challenges
associated with winning effective market shares are
numerous.
• Productive services require high-skilled workers, whereas theAfrican workforce is mostly low-skilled.
• It is uncertain whether opportunities sufficient enough toenable countries to bypass industrialisation.

Natural-resource-based development• Investing natural resource revenues wisely andsimultaneously developing industrial policies could diversify
economies.
• Under adequate conditions, extractive sectors can generate
linkages and support the upgrading of suppliers.

• Governance deficits exist in the extractive sector.
• There are environmental limits.
• International prices are volatile and global demand isuncertain as emerging economies slow down.

• Improving transparency, tax collection, public spending,the management of public companies, and the social andenvironmental impacts of mining would sustain growth.
Green growth• Dramatic changes in Africa’s production and consumption
modes could initiate the world’s energy transition and lead toa more sustainable development path.
• The potential to leverage renewable energy sources is huge.

• Such a transition would take a long time.
• The current resource extraction model will most likely
continue to mobilise significant investments in the short tomedium term.

Agriculturally-based growth• Agriculture is the first employer; the population in rural areas
and overall demand for agricultural products will continue togrow.

• It is unsure how to reconcile absorbing a significant shareof the workforce while dramatically improving agricultural
productivity.

• Agriculture plays an important role in structuraltransformation and directly reduces poverty.

• The debate over the best type of development model
for agriculture, e.g. small- vs. large-scale farming, isinconclusive.

• Improved agricultural performance played a major role in theeconomic successes of East and Southeast Asia.

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Special theme: Regional development and spatial inclusion
Poverty in Africa has a strong spatial dimension, and regional disparities are amajor obstacle to structural transformation. They cut off remote areas from growthpoles, deprive citizens of services, and prevent farmers and businesses from accessing
markets. Spatial inclusion is thus a pillar of inclusive growth, together with economic,
political and social inclusion (AfDB, 2013). Past efforts to tackle the regional disparities
that hinder spatial inclusion have taken many forms but have had mixed success.

Box 3. Definitions: Regions, regional development and spatial inclusion
The term region refers here to spatial units at the supranational, subnational and crossborder levels.
Regional development refers to policies that improve welfare and increase economic
productivity in the different regions of a country. It takes a positive approach todeveloping the potential of the spaces that usually go under the radar of national policy
makers.
Spatial inclusion may be defined as the objective of connecting people to assets andpublic goods regardless of where they live or work. It may be pursued through policies
promoting the development of regions, including lagging regions, by connecting themto one another, e.g. by providing infrastructure or basic services.

Regional disparities and insufficient spatial inclusion hinder inclusive growth
Spatial factors account for a great deal of pervasive poverty in Africa
Development is a spatially unequal process. Economic, environmental, social andpolitical factors can catch lagging regions in “spatial poverty traps” (Bird, Higgins
and Harris, 2010). Recent evidence seems to indicate that this is particularly true ofAfrica: while a paucity of data has prevented any systematic analysis on the underlying
determinants of inequality on the continent, Shimeles and Nabassaga (forthcoming)
report that close to 40% of asset inequality is mainly due to spatial factors (Table 4).

Table 4. Determinants of inequality levels in 37 African countries
PeriodAverage Gini
coefficient
for assets

Component
due to spatial
inequality

Component due
to inequality ofopportunities

Component due
to otherfactors

Before 1995

0.42

0.37

0.11

0.52

1996-2000

0.43

0.34

0.13

0.53

2001-05

0.38

0.32

0.13

0.54

2006-09

0.4

0.34

0.14

0.51

2010-13

0.44

0.39

0.13

0.47

Note: Based on Demographic and Health Surveys from 37 countries conducted in 108 waves.
Source: Shimeles and Nabassaga (forthcoming).

The spatial distribution of poverty reflects the continent’s regional disparities
Household hardship may be assessed at subnational level by the Multidimensional
Poverty Index (MPI), a composite measure of poverty headcount and poverty intensity
consisting of ten indicators (e.g. electricity access, drinking water, sanitation): higher
levels of the MPI correspond to higher levels of deprivation. Analysing its values in 36
African countries not only reveals major differences between capital regions and otherregions, but also the larger regional gap in poorer countries, such as Ethiopia, Mali and
Niger (Figure 12).

© AfDB, OECD, UNDP 2015

African Economic Outlook

xixOverview

Figure 12. Extreme and average Multidimensional Poverty Index values in
36 African countries, 2005-12
MPI value

National average

Multidimensional Poverty Index
High poverty 0.8
0.7
0.6
0.5
0.4
0.3
0.2
Low poverty 0.1

Ni
Et g er
hi
op
ia
Bu
rk M
in aliaFa
Gu s o
in
Li ea
Ce
be
De
nt
m
ra
Bu r i aoclArafr i S r untic
c a en di
n eg
Re
Re a
pu
pu l
bl
b
ic
of B licth ene
M C inoz onaSi mb goer iq
r a ueLeon
M Uga e
ad n
a da
M gas
au c arit r
aR w ni aan
M daa
Ta lawnz iaZ a ni amb
Cô Ga iat e mbd' i a
Iv
oi
re
Ca To
m go
er
o
Ni on
ge
r
Co
Ke i ango, N a n y a
Re m
pu ibiaSaZ i blic
o
m o
To
ba f
m
b
e a L wend esoPr thoinc
Dj ip e
ib
ou
G ti
Sw ha
a z na
il a
n
Ga d
bo
Eg n
yp
t

0

Note: The Multidimensional Poverty Index ranges from 0, the lowest value, to 1, the highest. It can be decomposedby region as well as by dimension.
Source: Alkire, Conconi and Seth (2014).

MPI data also illustrates the disparities between coastal and landlocked areas ofmany African countries, where the MPI corresponds to 0.23 and 0.43 respectively. In the
365 regions of 36 African countries, landlocked areas have a higher poverty headcountand intensity than the coastal areas, and the difference is statistically significant at lessthan 1%. The MPI says 86% of the poor (252 million people) live in landlocked areas andonly 14% (41 million) in coastal areas.
Multidimensional poverty is also much higher in the countryside than in urban areas,
although this relationship decreases with higher levels of a country’s development. In
42 African countries the average aggregated MPI is 0.11 in urban areas against 0.39 inrural areas, with 74% of poor people living in the countryside. Overcoming this inequality
is part of structural transformation: the rural-urban gap narrows with diversification,higher productivity and better rural living standards.

Figure 13. Multidimensional poverty in Africa’s rural vs. urban areas
Multidimensional Poverty Index for rural areas
8
7

ETH
BFA

6

GNB
MRT
BDI
MOZ
DJI ZMBGMB COD
CIV
TCD
TZA
RWA
MDG UGA

5
CMR

4
TGO

3
ZWE

2
1
0

NGA
KEN
NAM

LSO
MAR

SWZ

EGY

ZAF

GAB

GHA

COG

45 degrees gradient line

NER
SOM
GIN
SEN

MLI
LBR

CAF
BEN
SLE

MWI

STP

TUN

0

1

2

3

4

5
6
7
8
Multidimensional Poverty Index for urban areas

Note: The green line represents no rural-urban disparity in MPI values.
Source: Alkire, Conconi and Seth (2014).

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Spatial inequalities fuel inefficient migration and urban poverty
Spatial inequality is all the more important that the majority of Africa’s population is
likely to remain rural until the mid-2030s. By 2050, sub-Saharan Africa’s rural population
is expected to increase by two-thirds, i.e. 400 million more people. While this forecast
should be interpreted with caution, notably due to the various definitions of “rural”
and “urban”, and to the fast changing dynamics that blur the borders between thosecategories, a general trend towards a significant increase in the “rural” population is to
be expected.
Spatial inequalities can lead to significant migration flows, as migrants seek better
opportunities elsewhere. However, spatially unequal provision of public services fuelsmigration that is economically inefficient: migrants looking for better public services
may not find more productive economic activities in their new places of residence. At
present, according to the Gallup World Poll, 29% of people in sub-Saharan Africa wantto move away from their current areas, and dissatisfaction with local public services
accounts for 60% of the variation in migration intentions compared with 20% for
discontent with their personal living standard (Figure 14). Many migrants thus find lowpaid informal jobs and still end up in poverty, often in the slums of megacities. Only
16% of the rural-urban gap in multidimensional poverty is explained by the gap in the
deprivation intensity, suggesting that the deprivations faced by the rural and urban poor
are similar.

Figure 14. Relative contribution of explanatory variables to overall variation in
migration intentions, 2014
Contentment with the local public services
Confidence in the country's institutions

Sub-Saharan Africa

Satisfaction with personal living standard
Wealth index

2060

Latin America

36

Asia

38

Area security

Perceptions of the change in a country's overall situation

19

33

19

9

5

2

25

4

10

4

2

5

2

5

Source: Table 2 from Dustmann and Okatenko (2014), based on Gallup World Poll 2005-06.

The urbanisation process thus often turns the rural-urban gap into an internal urban
problem with the apparition of slums. Sub-Saharan Africa’s proportion of slum dwellers
is higher than in any other region in the world: 35-50% of Africa’s urban population
have no access to safe water (Kayizzi-Mugerwa, Shimeles and Yameogo, 2014). In
the vast informal settlements, this proportion is much higher; and only a fraction of
housing units, if any, are connected to power grids and water mains. The unplanned andhighly chaotic land-use pattern of informal settlements makes public service provisiondifficult. Moreover, their informal status makes them subject to demolition at any time,
which discourages improvements in the quality of homes even as income increases. An
estimated 50% of the population in Africa’s urban informal settlements live below theabsolute poverty line.

© AfDB, OECD, UNDP 2015

African Economic Outlookxxi

Overview

Therefore, policies aiming for sustainable and inclusive growth must address these
acute spatial inequalities. Spatial management policies can support greater spatial
inclusion. But how have spatial management policies fared so far in Africa?

Regional policies have yielded mixed results
Two broad types of policies addressing spatial inequalities or stimulating regional
development can be distinguished: actions targeting specific regions and places, and“non-spatial” policies with strong regional impacts.
Policies targeting specific regions and places have been too scattered
In the past, regional development policies have been carried out in several Africancountries to tackle regional disparities and promote spatial inclusion. Generally, thesedifferent policies have met with little success and have been progressively brought to ahalt since the 1980s, in the aftermath of the debt crisis. Today, some policy instruments
continue to be applied, but they often remain patchy and lack an integrated and crosssectoral approach, among other weaknesses. Current spatial policy instruments include
the following:• Special economic zones (SEZs) can promote regional development (e.g. China’s
experiences of SEZs as a driver of growth) but in Africa they have not createdmassive employment so far; major obstacles include high costs of input, poor
national investment climate, lack of coherent objectives, and misunderstanding of
the multidimensional nature of place-based actions (e.g. social infrastructure notat par with economic infrastructure development).
• Economic corridors have been successful in certain cases, especially in East andSouthern Africa. Economic corridors are integrated networks of soft and hard
infrastructure connecting economic agents in a specific geographical area. They
can cut costs and expand markets but require careful planning in order to mitigate
potentially negative impacts on local firms.
• Planned cities and poles of growth can help balance urban networks if embeddedin broader regional development strategies; if not, they may serve merely as
instruments of regional favouritism.
• Policies that target lagging regions have been criticised for building “cathedrals in thedesert”, but they proved useful in countries facing high levels of spatial inequality
under certain conditions (e.g. Ethiopia, Ghana or Uganda).
• Finally, some multi-sectoral cross-border initiatives boast international best practices,such as the Senegal River Basin Development Authority (OMVS), the cross-border
co-operation programme known as SKBo (Sikasso-Korhogo-Bobo-dioulasso), or the
Regional Park W in West Africa.
However, the sum of those spatial policy instruments does not constitute in itself apolicy for regional development.
“Non-spatial” policies with strong regional impacts have yet to reduce regional
fragmentation and to empower local actors
In parallel with policies of spatial management, some sectoral national policies
have positive spill-over effects on regional development. Progress in infrastructuredevelopment within and across national borders, especially transportation, ICT, energy
and river basins, has contributed to reducing regional fragmentation and strengthened
regional ties. For instance, 60% of the 37 African countries reviewed by the WorldBank’s Logistic Performance Index have improved their performance between 2010 and2014 (Figure 15). However, additional financial resources and improved cross-borderxxii

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co-ordination are needed. According to the Africa Infrastructure Country Diagnostic, of
the continent’s USD 93 billion estimated annual needs for infrastructure, the funding
gap stands at about USD 31 billion.

Figure 15. Change in logistics performance for African countries, 2010-14
Logistic Performance Index 2014
4

ZAF

3

EGY
RWA
BFA
AGO

NAM
GNB

ERI

2

CIV

DZA

NGA

GHA
TCD
GIN
MUS
NER
MDG
COM
TZA
MOZ
GMB CMR
GAB
SDN
DJI
COG
LBY
ZMB

ETH

SEN
TUN

COD
SOM

1
1

2

3

4
Logistic Performance Index 2010

Note: The World Bank’s Logistic Performance Index has a scale of 1 to 5, where a score of 5 represents the best
logistics performance. The diagonal line represents no change in performance between 2010 and 2014.
Source: Based on the World Bank’s Logistics Performance Index (World Bank, 2010, 2014).

Decentralisation, a process for transferring powers and resources from the central
government to lower levels of government, can also strongly affect regional development,
including by empowering local actors and containing the rent-seeking behaviour of theelite. However, the political, administrative and fiscal components of decentralisation
have progressed unevenly in Africa. In most countries, fiscal decentralisation has not
kept pace with political decentralisation, thereby limiting local communities’ ability tomobilise their economic potential. In Africa on average, the weight of local government
revenue is 7% of the total revenue of local, regional and national governments combined,
and the weight of local expenditure is 8% of total expenditure, far below those of otherworld regions (Figure 16). Lack of local capacity and transparency are the main obstacles
to effective, decentralised governance.

Figure 16. Weight of local government in total government revenue
and expenditure
African countries

Non-African countries

African average

Weight of local government revenue in total government revenue (%)
45
40

Japan
EU27

35

India

30

Indonesia

BrazilTanzania

25

China
Rwanda20

South Africa

15
10
5

AfricaUganda

0
0

30
40
50
60
70
Weight of local government expenditure in total government expenditure (%)
Note: Total government revenue and expenditure at all government levels, i.e. local, regional and national.
Source: UCLG (2010); Yatta (2015); Paulais (2012); IMF (2014).

© AfDB, OECD, UNDP 201510

20

African Economic Outlookxxiii

Overview

Owing to their limited fiscal clout, most local governments depend heavily on central
government transfers, which have generally been criticised for not being spatiallyprogressive and for limiting the ability of local governments to invest efficiently (World
Bank, 2009; OECD, 2009). Many local governments receive a significant share of their
total revenues from central government transfers, even in decentralised countries like
Tanzania or Uganda and in federal countries like Nigeria (Figure 17).

Figure 17. Central government transfers as a share of local budgets in selected
African countries

%
100
90
80
70
60
50
40
30
20
10

a

ria

ni

ge

za

Ta
n

Ni

i

da

an

Ug

t

aw

al
M

a

yp

an

Eg

e
qu

Gh

ia
is

bi

oz

am

co

Tu
n
M

a

oc

M

or

a

ny
Ke

ia

Af

ric

i

an

rit

n

al
M

au

M

ia

bo

Ga

n

op

Et

hi

o

ni
Be

a

To
g

l
ut

h

Af

ric

e

ga

ne
So

Se

bw

r
Zi

m

ba

ge

bi
m
Za

Ni

a

0

Source: Yatta (2015); UCLG (2010).

African regions and their resources too often escape the attention of policy makers
Leaving aside the issue of the effectiveness of these different tools, and considering
instead the daily practice of policy management, two major factors stand out that
hamper effective regional policy making: strictly-sectoral approaches and inadequate
information.
Regional, context-specific policies should not work in isolation from national andsectoral policies. Yet in practice, narrowly-defined sectoral approaches tend to almost
exclusively frame governmental action, hampering effective problem-solving at the
local level:• Sectoral policies alone overlook local knowledge, aspirations, resources anddynamics.
• Ministries may intervene along administrative boundaries, instead of focusing onfunctional areas, where social and economic activities effectively take place.
• Top-down, sectoral policies are exposed to risks of insufficient co-ordination,
duplication and inter-ministerial competition.
• Sectoral lenses tend to limit action to a few specific tools, overlooking the complexityof problems. For instance, Paulais (2012) finds that, despite the significance of
the urbanisation challenge, only 3 out of 30 African countries having prepared a
Poverty Reduction Strategy Paper (PRSP) have urban strategies with relatively welldefined budgets. Most African countries’ PRSPs are structured around the themesof governance, economic growth and infrastructure.
In addition, a salient lack of knowledge about African regions and local economies
drastically impedes the capacity of policy makers to identify and unlock their potential:

xxiv

African Economic Outlook© AfDB, OECD, UNDP 2015

www.africaneconomicoutlook.org• In particular, subnational statistics are limited to a few basic variables, which are
insufficient to understand regional economies.
• In several countries, entire groups within a population and sectors of the economy
are overlooked. A case in point is the “informal sector”: although it accounts for thebulk of employment in most countries, it remains insufficiently understood and its
potential insufficiently captured.
• While a number of initiatives, such as the ECOLOC programme (SWAC/PDM, 2001) or
the West African Long-Term Perspective Study (Cour and Snrech, 1998), have aimed
to fill the gap in information on local economies, most have been discontinued.
• This inadequacy of information is compounded by rapidly-changing regional
dynamics in many African countries. The static categories of “rural” and “urban”
no longer capture the appearance of hybrid lifestyles and socio-economic
behaviours related to intensifying and diversifying rural-urban migration patterns
and diffusing new technology (Berdegué and Proctor, 2014; Losch, Magrin and
Imbernon, 2013; Agergaard, Fold and Gough, 2010; Tacoli, 2002).

Regional development strategies can help find innovative solutions to Africa’s structuraltransformation challenge
From catch-up policies to a positive strategic approach
Both the mixed results of spatial policies so far and the novelty of the conditions ofAfrica’s structural transformation call for new approaches. Instead of merely attempting
to compensate for spatial inequalities, African economies need to liberate thepotential of their many regions to foster endogenous growth and accelerate structuraltransformation. Top-down, subsidy-based interventions aiming to temporarily alleviateregional inequalities must give way to a broader family of policies increasing regional
competitiveness and innovation, mobilising untapped resources and stimulating the
emergence of new activities (Table 5).
Regional development thus takes a positive approach to developing the potential of
the spaces that usually go under the radar of national policy makers: it aims to improvewelfare and increase economic productivity in the different regions of a country. Spatial
inclusion, as a related objective, will improve the connectivity of those regions.

Table 5. Old and new paradigms of regional policy
Old paradigm

New paradigm

Objectives

To compensate temporarily for disadvantages
due to the location of lagging regions

To tap underutilised potential in all regions,enhancing regional competitiveness

Strategies

Sectoral approach

Integrated development projects

Tools

Subsidies and state aids

Mix of soft and hard capital (capital stock, labour
market, business, environment, social capital andnetworks)

ActorsCentral government

Different levels of government

Source: Based on OECD (2009).

Promoting regional development requires revamping the entire policy process, andtherefore adopting place-based, multi-sectoral and participative development strategies
that do the following:• Focus on local assets that constitute untapped resources for development: thoseassets can be either generic resources – e.g. natural resources like gas – or specificresources, e.g. cultural heritage, the rural landscape and certain types of know-how.
The latter are only “activated” when they are used and get a market value (Table 6).

© AfDB, OECD, UNDP 2015

African Economic Outlookxxv

Overview• articulate various sectoral policies and public investments in a regional framework,
as complementarities and trade-offs come with the place where they are located.
• engage different actors in multi-level government settings, and in particular promote
the active participation of local stakeholders, so as to reduce asymmetries in
information and knowledge between national and local actors.

Table 6. Examples of specific African resources activated through the participationof local stakeholders
Specific local resourcesCountry

Development outcome

Dry figs from Béni Maouche
Pepper from Ighil Ali

Algeria

Productivity increase, added value to product, income increase

White pepper (IGP)* from Penja

Cameroon

Profit rate increase, income increase, product protection

Dry figs and weaving from Béni Khedache

Tunisia

Commercialisation and valorisation of the product, income increase

Fine garments

Madagascar

Massive creation of employment, industrialisation, exportation increase

Regional Park W’s natural and cultural
endowments

Benin, Burkina Faso, Niger,
Nigeria

Ecotourism, cultural tourism, tree-planting using indigenous species,
processing of goods made from natural resources

Tedla’s landscape heritage

MoroccoEcotourism, employment creation as local tour guides

Note: * Indications Géographiques Protégées (protected geographical indication).
Source: AFD/CIRAD (2014); Campagne and Pecqueur (2014); Fukunishi and Ramiarison (2012); SWAC/OECD (2005).

How to craft development strategies for regional development
Seven main steps may guide the formulation of development strategies at regional
level (Figure 18):
• Stakeholders and traditional institutions collect reliable data, including statistics,
to obtain the most knowledge possible about the region. Data shortages should notprevent the process from continuing.
• Scenarios for the region’s future are laid out through foresight studies andparticipatory processes, taking into account uncertainties related to missing data.
This leads to building a vision for the country’s future based on local potential andopportunities.
• Based on the scenarios and the economic, demographic and spatial conditions
underpinning them, stakeholders and government identify a limited number ofintegrated priorities and spell out multi-annual policies for achieving them. The
priorities are those that contribute the most to the country’s long-term development
strategy.
• Multiple levels of government, civil society and traditional institutions implement
these policies, particularly as they participate in the scenario planning, priority
setting and policy design steps. They co-ordinate their actions and use formal andinformal checks and balances to ensure transparency.
• Policy implementation is monitored according to the key priorities. A pre-defined
incentives framework ensures that the various levels of government responsiblefor implementing those policies are rewarded or penalised based on their achieving
specific goals.
• Policy outcomes are evaluated to enable the various levels of government toaddress inefficiencies, adjust their multi-annual plans and, if outcomes are notmet, reassess and redefine their vision and priorities.
• Fiscal revenues are used to support the overall strategy (not represented on the
figure below).

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African Economic Outlook© AfDB, OECD, UNDP 2015

www.africaneconomicoutlook.org

Figure 18. A strategic process for regional development

1. C OLLECT DATAREGION’S FEATURES

2. C ONDUCT PROSPECTIVE STUDIES• Political• Social• Economic• Environmental

3. I DENTIFY PRIORITIESINSTITUTIONSCentral

6. E VALUATE POLICIES
5. M ONITOR POLICIESSTAKEHOLDERS(Civil society, citizens,
women’s organisations,traditional leaders, firms)
Meso-level

4. I MPLEMENT POLICIES

Local• Economic corridors• Free zones• Growth poles• Expansion of public services

Four priorities for improving the effectiveness of regional development in Africa
In order to improve the effectiveness of regional development strategies, four aspects
deserve particular attention in many countries.
Firstly, a number of initiatives in Africa illustrate ways of improving the mechanisms that
inform policy design and implementation.
• An evidence-based culture of policy making helps set targets and track progress in public
sector performance. South Africa is one of the most advanced countries in disseminating
socio-economic information as a participatory mechanism. For example, after Statistics
South Africa published a national Multidimensional Poverty Index in 2014, the Gauteng
City Region Observatory produced its own index the following year.
• The data revolution – a fundamental pillar of the post-2015 development agenda for
improving governmental statistical capacity – will help policy makers understand thespecificities of regions and adopt timely measures as the needs of their jurisdictions
evolve (PARIS21, 2015). New technologies provide reliable and cost-efficient means tomap local resources:• The Africapolis project estimates urban growth in 16 West African countries bycombining demographic surveys and geographic information systems (GIS; see
AFD et al., 2009).
• A local project in Burkina Faso using very high spatial resolution (VHSR) satellite
images produced a detailed regional map of land used for agricultural and otherpurposes with less than 2% errors in area estimation (Imbernon, Kabore and Dupuy,
forthcoming).
• Measuring the intensity of nightlights captured from satellites can complement
official measures of income or inequality (Mveyange, 2015).
• Mobile phone data may serve to assess the impact of policies; it has been used to
optimise bus routes in Abidjan.
Secondly, defining integrated strategic priorities can be done even with limited data thanks toinnovative approaches. Regional foresight studies, for instance, bring together different levels ofgovernment – national, regional and local – as well as non-state actors to map possible futures,
identify opportunities and challenges, stimulate debates on pathways to development andlead to place-based solutions (Alvergne, 2008). The scope for progress is significant: while
many African countries plan for the long term, few use regional foresights studies or a genuine
participatory process. Out of 37 countries surveyed in the AEO 2015 report, 27 have mediumto long-term strategies, but while most span 20 years or more, only about a third foresee
alternative scenarios. Finally, they tend to overlook the multi-sectoral nature of development
and ignore local specificities.

© AfDB, OECD, UNDP 2015

African Economic Outlookxxvii

Overview

Thirdly, capacity must be strengthened at multiple levels of government so as to make multilevel governance effective. This may be achieved by putting in place “binding” mechanisms– e.g. legal mechanisms or contracts between local and national administrations – or “soft”
mechanisms, such as platforms for discussion. Rwanda’s Joint Action District Forum is one
example of such a participatory process where local stakeholders articulate development
plans, set budgets and allocate district resources. Involvement of subnational governments
in policy making takes time, but medium- to long-term benefits should outweigh the costsof co-ordination.
Finally, resources for multi-level governance must be substantially scaled up, and public
and private institutions strengthened.
• Central governments will have to provide most of the funding. New resources may bemobilised through more effective taxation of natural resource extraction, the curbingof illicit financial outflows, effective channelling of resource revenues to production
transformation (Box 4) or from innovative finance mechanisms such as funding fromemerging economies, sovereign wealth funds (SWFs), funding from remittances ordiaspora bonds.
• At the local level, fiscal systems must be bolstered across the board through transparent
and predictable transfers from central governments, expanding the local fiscal base
– for instance through more effective use of property taxes – and by progressively
tapping capital markets, provided local governments respect national guidance
for macroeconomic stability. Regional development requires strong local fiscal
systems and transparent governance to finance local economies and the necessary
infrastructure. Greater fiscal legitimacy of local governments is necessary to improve
the local fiscal capacity: taxpayers are more likely to comply with paying taxes and toaccept new forms of taxation if they perceive the benefits of related public spending,and thus consider the taxes to be legitimate.

Box 4. Using royalty payments for sustainable regional development:
The case of Colombia
Colombia’s General System of Royalties, established in 2011, collects and manages the overall
royalty payments from the exploitation of natural resources. It allocates revenues to:• a pension fund for subnational public employees (10%)• a savings and stabilisation fund (up to 30%)
• a science technology and innovation fund (10%)• direct payments to resource-based departments and municipalities (25%, with a provision togradually lowering that share to the benefit of the regional compensation fund and regional
development fund)• a regional compensation fund to invest in the infrastructure and development of poor regions
and municipalities (15% to be gradually absorbed by the regional development fund)• a regional development fund to promote the competitiveness and development of regions(10% initially).
The system introduced two innovations: all departments and the large majority of municipalities
now have access to royalty revenues, regardless of their economic specialisation; and funds
transferred to subnational levels are not earmarked: recipients can decide how to invest them on
the basis of their needs and priorities.
Source: OECD, 2014c.

In sum, place-based, multi-sectoral and participative development strategies are one
way of “decompartmentalising” existing policies, so as to tap the full potential of African
regional resources. They provide an avenue for implementing the African Union’s agenda ofintegration and structural transformation, including through its Rural Futures programme,
which aims to reconnect rural and urban development within a regional perspective(NEPAD, 2010). International dialogue and exchange of experience will be essential toinspiring country-specific processes.

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Key facts and figures by subregions
Central Africa
Central Africa’s growth accelerated in 2014 to 5.6% from 4.1% in 2013. Economic
conditions are, however, quite different between countries. The Central African Republic
is affected by a political and security crisis. Despite some moderate growth, grossdomestic product (GDP) will remain much lower than before the conflict broke out at theend of 2012. In Equatorial Guinea, GDP continues to fall due to lower oil production. Allother countries in the region should remain on a relatively high growth path. Despitesome damage from lower commodity prices, the mining sector and related investment
remain the main engines of growth in the region. But in some of the countries, such as
in Cameroon, the Democratic Republic of the Congo, Gabon, and Sao Tome and Principe,
growth is broader based.

Macroeconomic prospects for Central Africa
Real GDP growth (%)

20132014 (e)2015 (p)2016(p)Africa

3.5

3.9

4.5

5.0

Africa (excluding Libya)

4.0

4.3

4.3

5.0

Central Africa

4.1

5.6

5.5

5.8

Cameroon

5.5

5.3

5.4

5.5

-36.0

1.0

5.4

4.0

Chad

3.9

7.2

9.0

5.0

Congo

3.3

6.0

6.8

7.3

Congo, Dem. Rep.

8.5

8.9

9.0

8.2

Equatorial Guinea

-4.8

-2.1

-8.7

1.9

Gabon

5.6

5.1

4.6

4.7

Sao Tome and Principe

4.0

4.9

5.1

5.4

Overall fiscal balance, including grants (% GDP)2013

2014 (e)2015 (p)2016(p)Africa

-3.5

-5.0

-6.3

-5.3

Central Africa

-1.9

-5.3

-6.7

-6.0

Cameroon

-4.1

-5.2

-6.4

-5.8

Central African Republic

-6.3

-3.2

-3.8

-3.7

Chad

-2.7

-5.6

-5.2

-4.1

Congo

8.3

-5.4

-7.0

-2.3

Congo, Dem. Rep.

-1.7

-3.7

-3.9

-4.6

Equatorial Guinea

-4.5

-7.2

-7.9

-8.1

Gabon

-3.2

-6.6

-13.2

-11.8

Sao Tome and Principe

-11.3

-9.4

-7.2

-8.0

Central African Republic

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

© AfDB, OECD, UNDP 2015

African Economic Outlook

xxix

Overview

East Africa
East Africa’s growth accelerated in 2014 to more than 7%, from below 5% in 2013. It
is projected to decelerate to 5.6% in 2015 and accelerate again to 6.7% in 2016. East Africa
will then again become the continent’s fastest growing region. East Africa recorded thehighest increase in foreign direct investment in 2014. Fluctuations in East African average
growth are due to volatile development in South Sudan, where armed conflict cut oil
production and GDP in 2013. It recovered in 2014 but is projected to decline again in 2015,
although forecasts for this country are highly uncertain and depend on the evolution of
the peace process. Ethiopia, Kenya, Rwanda, the United Republic of Tanzania and Uganda
kept up their relatively high growth. As these countries have small mining sectors andtheir manufacturing is also not very large, or has declined as a percentage of GDP, their
growth is more driven by services and construction. But countries are achieving growthwith different degrees of sectoral transformation. In Ethiopia structural changes aremost pronounced with the share of agriculture in GDP shrinking (although remaining
higher than in the other countries) and services expanding more than in the othercountries. In Sudan, growth remains weaker as the economy is still coping with theshock of South Sudan’s secession in 2011 and the loss of oil revenues.

Macroeconomic prospects for East Africa
Real GDP growth (%)

20132014 (e)2015 (p)2016(p)Africa

3.5

3.9

4.5

5.0

Africa (excluding Libya)

4.0

4.3

4.3

5.0

East Africa

4.7

7.1

5.6

6.7

Burundi

4.5

4.7

4.7

5.0

Comoros

3.5

3.5

3.6

3.6

Djibouti

5.0

5.9

6.0

6.2

Eritrea

1.3

2.0

2.1

2.0

Ethiopia

9.8

10.3

8.5

8.7

Kenya

5.7

5.3

6.5

6.3

Rwanda

4.7

7.0

7.5

7.5

Seychelles

6.6

3.8

3.7

3.6

Somalia

…

…

…

…

-26.7

30.7

-7.5

15.5

Sudan

3.6

3.4

3.1

3.7

Tanzania

7.3

7.2

7.4

7.2

Uganda

4.7

5.9

6.3

6.5

Overall fiscal balance, including grants (% GDP)2013

2014 (e)2015 (p)2016(p)Africa

-3.5

-5.0

-6.3

-5.3

East Africa

-4.4

-3.9

-4.5

-3.7

Burundi

0.4

-1.2

-0.4

-0.4

Comoros

18.2

-0.6

1.5

1.6

Djibouti

-3.1

-2.6

-0.5

-0.1

Eritrea

-10.3

-10.7

-10.3

-9.9

Ethiopia*

-1.9

-2.6

-1.4

-0.9

Kenya*

-5.6

-8.0

-8.8

-8.3

Rwanda

-5.2

-4.3

-5.2

-3.6

Seychelles

0.9

1.0

0.9

0.0

Somalia

…

…

…

…

South Sudan

-12.8

-3.7

-5.9

-5.3

Sudan

-2.3

-0.9

-1.1

-0.8

Tanzania*

-6.9

-3.8

-6.2

-5.3

Uganda*

-2.6

-4.9

-5.8

-5.0

South Sudan

Note: * Fiscal year July (n-1)/June (n).
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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North Africa
North Africa’s growth remains uneven as fallout from the uprisings of 2011 is stillaffecting countries. Libya is highly unstable with power struggles between different
groups and a collapse of political and economic governance. Its oil production declined
again in the first half of 2014. Despite some recovery in the second half, growth wasagain negative in 2014 and prospects are highly uncertain. By contrast, in Egypt
and Tunisia greater political and economic stability is helping to improve business
confidence. The gradual recovery of export markets and improved security should
support growth, including in tourism, although in Tunisia terrorist attacks in Marchhave created new concerns. Algeria’s oil production increased for the first time in eight
years and is boosting growth together with the non-oil sector. In Morocco, agricultural
production declined in 2014 from its exceptionally high level in 2013 and reduced GDP
growth. But assuming normal harvests and better export markets, growth is expectedto accelerate. Mauritania continues to achieve the highest and steadiest growth in
the region, supported by favourable macroeconomic and structural policies. This was
mainly boosted in 2014 by parts of the mining sector (iron ore) and construction andon the demand side by private consumption and private investment. The exceptionallyhigh total investment of around 45% bodes well for future growth.

Macroeconomic prospects for North Africa
Real GDP growth (%)

20132014 (e)2015 (p)2016(p)Africa

3.5

3.9

4.5

5.0

Africa (excluding Libya)

4.0

4.3

4.3

5.0

North Africa

1.6

1.7

4.5

4.4

Algeria

2.8

4.0

3.9

4.0

Egypt*

2.1

2.2

3.8

4.3

Libya

-13.6

-19.8

14.5

6.3

Mauritania

5.7

6.4

5.6

6.8

Morocco

4.7

2.7

4.5

5.0

Tunisia

2.3

2.4

3.0

4.1

Overall fiscal balance, including grants (% GDP)2013

2014 (e)2015 (p)2016(p)Africa

-3.5

-5.0

-6.3

-5.3

North Africa

-7.2

-11.1

-9.8

-7.7

Algeria

-1.5

-7.0

-9.5

-8.2

Egypt*

-13.7

-12.8

-11.0

-8.5

Libya

-6.2

-49.1

-29.6

-14.8

Mauritania

-1.1

-3.4

-2.8

-1.7

Morocco

-5.5

-4.9

-4.2

-3.8

Tunisia

-4.6

-4.7

-4.5

-4.2

Note: *For Egypt, fiscal year July (n-1)/June (n).
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

© AfDB, OECD, UNDP 2015

African Economic OutlookxxxiOverview

Southern Africa
Southern Africa’s growth slowed to below 3% in 2014, and only a moderate recovery
is projected for 2015 and 2016. The subdued performance is due to the relatively poor
growth in South Africa. The key economy’s growth fell to 1.5% in 2014 from 2.2% theprevious year. It suffered from weakened demand in trading partners and lower prices
for its raw materials, while labour unrest and electricity shortages disrupted economic
activity. South Africa’s growth is projected to recover gradually on the back of morebuoyant export markets and improved competitiveness due to the large depreciationof the rand. In Angola, growth also decelerated due to the oil price fall, a temporary
reduction in oil production as well as a drought, which reduced agricultural production.
Angola’s growth is projected to remain lower than for most of the past decade as
government expenditures are depressed due to lower oil revenues. Mozambique andZambia are achieving the highest growth in the region. Mozambique is mainly driven byso-called mega projects and large infrastructure investment, financed by foreign direct
investment and the government. In Zambia, good harvests boosted 2014 growth andmitigated the effect of lower growth in mining, manufacturing and services. Growth isexpected to remain strong in both countries, but more efforts are needed to broaden theeconomy and make growth more inclusive.

Macroeconomic prospects for Southern Africa
Real GDP growth (%)

20132014 (e)2015 (p)2016(p)Africa

3.5

3.9

4.5

5.0

Africa (excluding Libya)

4.0

4.3

4.3

5.0

Southern Africa

3.6

2.7

3.1

3.5

Angola

6.8

4.5

3.8

4.2

Botswana

5.9

5.2

4.5

4.3

Lesotho

5.7

4.3

4.7

5.1

Madagascar

2.4

3.0

4.0

5.1

Malawi

6.1

5.7

5.5

5.7

Mauritius

3.2

3.2

3.5

3.6

Mozambique

7.4

7.6

7.5

8.1

Namibia

5.1

5.3

5.6

6.4

South Africa

2.2

1.5

2.0

2.5

Swaziland

3.0

2.5

2.6

2.4

Zambia

6.7

5.7

6.5

6.6

Zimbabwe

4.5

3.1

3.2

3.3

Overall fiscal balance, including grants (% GDP)2013

2014 (e)2015 (p)2016(p)Africa

-3.5

-5.0

-6.3

-5.3

Southern Africa

-2.7

-3.0

-4.8

-4.4

Angola

0.3

-2.2

-10.6

-7.7

Botswana**

0.7

5.2

3.2

3.8

Lesotho**

4.8

1.0

2.3

1.5

Madagascar

-4.0

-2.0

-2.1

-2.9

Malawi*

-0.2

-4.3

-3.7

-3.4

Mauritius

-3.5

-3.6

-3.3

-3.6

Mozambique

-2.9

-10.0

-7.4

-6.7

Namibia**

-1.1

5.0

6.2

4.8

South Africa

-3.9

-3.4

-3.6

-3.9

Swaziland**

0.9

-0.3

-0.6

-1.3

Zambia

-6.7

-5.5

-5.1

-4.9

Zimbabwe

-2.4

-2.4

-1.3

-1.1

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1).
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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www.africaneconomicoutlook.org

West Africa
West Africa achieved relatively high GDP growth of 6% in 2014 despite the outbreakof Ebola in the region. The virus significantly reduced growth in the most affected
countries: Guinea, Liberia and Sierra Leone. In Nigeria, Africa’s largest country, growth
accelerated to 6.3%, from 5.4% in 2013. It was again driven by the non-oil sector,
notably services, manufacturing and agriculture, which shows that Nigeria’s economy
is diversifying. Its oil and gas sector has declined to around 11% of GDP and is now asimilar size to manufacturing at around 10% of the total. Benin, Côte d’Ivoire, Niger andTogo also remained on a relatively high growth path. But growth slowed in Ghana, andGambia’s economy shrank slightly. West Africa’s growth is projected to become more
moderate in 2015 and to strengthen again in 2016, driven mainly by Nigeria.

Macroeconomic prospects for West Africa
Real GDP growth (%)

20132014 (e)2015 (p)2016(p)Africa

3.5

3.9

4.5

5.0

Africa (excluding Libya)

4.0

4.3

4.3

5.0

West Africa

5.7

6.0

5.0

6.1

Benin

5.6

5.5

5.6

6.0

Burkina Faso

6.6

5.0

5.5

7.0

Cabo Verde

0.7

2.0

3.1

3.6

Côte d’Ivoire

8.7

8.3

7.9

8.5

Gambia

4.3

-0.7

4.2

5.2

Ghana

7.3

4.2

3.9

5.9

Guinea

2.3

0.6

0.9

4.3

Guinea-Bissau

0.9

2.6

3.9

3.7

Liberia

8.7

1.8

3.8

6.4

Mali

1.7

5.8

5.4

5.1

Niger

4.1

7.1

6.0

6.5

Nigeria

5.4

6.3

5.0

6.0

Senegal

3.5

4.5

4.6

5.0

Sierra Leone

20.1

6.0

-2.5

2.8

Togo

5.4

5.5

5.7

5.9

Overall fiscal balance, including grants (% GDP)2013

2014 (e)2015 (p)2016(p)Africa

-3.5

-5.0

-6.3

-5.3

West Africa

-0.5

-1.0

-4.6

-4.2

Benin

-1.9

-1.1

-1.5

-1.8

Burkina Faso

-4.4

-3.7

-4.0

-3.8

Cabo Verde

-9.0

-8.0

-7.1

-6.2

Côte d'Ivoire

-2.3

-2.2

-3.4

-3.9

Gambia

-8.6

-8.7

-3.5

-1.4

Ghana

-9.5

-10.4

-9.5

-9.9

Guinea

-2.1

-4.2

-2.8

-4.1

Guinea-Bissau

-1.4

-2.1

-3.9

-3.4

Liberia*

-1.6

-1.1

-6.7

-9.0

Mali

-6.9

-5.6

-5.1

-5.1

Niger

-2.3

-5.7

-7.8

-3.2

Nigeria

1.1

0.1

-4.5

-3.9

Senegal

-5.5

-5.1

-4.5

-4.6

Sierra Leone

-2.4

-1.2

-3.2

-3.5

Togo

-4.5

-4.9

-3.1

-2.9

Note: * Fiscal year July (n-1)/June (n).
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

© AfDB, OECD, UNDP 2015

African Economic OutlookxxxiiiOverview
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Further reading
Bigsten, A. (2014), “Dimensions of income inequality in Africa”, WIDER Working Papers, No. 2014/050,
United Nations University World Institute for Development Research, Helsinki, www.wider.unu.
edu/publications/working-papers/2014/en_GB/wp2014-050/.
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Organization for Migration, Geneva, http://publications.iom.int/bookstore/free/FatalJourneys_
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Ravallion, M. and S. Chen (2012), “Monitoring Inequality”, Let’s Talk Development Blog, World Bank,
http://blogs.worldbank.org/developmenttalk/monitoring-inequality (accessed 4 May 2015).

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