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Structural Transformation in Sub-Saharan Africa Regional Economic Outlook: Sub-Saharan Africa

Structural Transformation in Sub-Saharan Africa Regional Economic Outlook: Sub-Saharan Africa. African Department International Monetary Fund November 2012. Structure of the presentation. Introduction and Context Structural transformation: what has happened?

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Structural Transformation in Sub-Saharan Africa Regional Economic Outlook: Sub-Saharan Africa

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  1. Structural Transformation in Sub-Saharan AfricaRegional Economic Outlook: Sub-Saharan Africa African Department International Monetary Fund November 2012

  2. Structure of the presentation • Introduction and Context • Structural transformation: what has happened? • Barriers to diversification; lessons from success • Looking Ahead • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 2

  3. Introduction • Many countries in sub-Saharan Africa (SSA) have experienced strong economic growth since the mid-1990s. • Has this growth been accompanied by structural transformation – the shift of workers to sectors/activities with higher average productivity? • Motivation: • Is SSA growth more than a “natural resources” story? • Distinctive features of structural transformation in SSA? • Obstacles to further transformation? • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 3

  4. SSA countries as an aggregate experienced solid growth since the mid 1990s • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 4

  5. Marked differences across SSA countries in output and productivity growth rates Growth rate of real GDP per person in the labor force, 1995-2010 (Annual, percent) • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 5

  6. Several countries have experienced something of a take-off over the period Excludes China for presentation purposes, as China's growth is much higher than that for the other countries. ASEAN 4 = Indonesia, Malaysia, the Philippines, Singapore and Thailand. • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 6

  7. SSA Low Income Countries: Key Stylized Features 1. Large agricultural sectors, with low productivity levels compared to other sectors of the economy. 2. The formal sector accounts for a modest share of total employment – a situation that is unlikely to change significantly for the foreseeable future. • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 7

  8. Structure of the presentation • Structural transformation: what has happened? • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 8

  9. Low income countries : falling agricultural share, rising labor productivity • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 9

  10. Low income countries : resources moving into construction and services • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 10

  11. SSA: agricultural productivity growth has been disappointing in the aggregate • Average labor productivity in the agriculture sector • (Agriculture value added per worker, constant 2000 US$, Index: 1995=100) • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 11

  12. Sectoral Perspectives: agricultural labor productivity growth across countries in SSA • Growth in real value added per worker in the agricultural sector, 1995-2010 • (Annual, percent) • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 12

  13. Structural change in SSA: what is missing? • The pace of productivity growth in the agricultural sector? 2. The growth of the manufacturing sector? • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 13

  14. Structure of the presentation • Barriers to diversification and lessons from success • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 14

  15. Some impediments to structural transformation in SSA Large infrastructure gap: transportation, energy High costs of exporting (transport costs) Small markets and barriers to intra-regional trade Quality of government service delivery • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 15

  16. Boosting agricultural sector productivity • Wider use of fertilizer and better seeds • Stronger research and development efforts • Improved extension services • Improved water management (including irrigation) • Improved access to markets Source: UNDP, African Human Development Report 2012 “Towards a Food-Secure Future” • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 16

  17. Burkina Faso: agriculture-led growth Cotton is the most important agricultural product: • employing directly or indirectly almost 20 percent of the population • annual output growth of 7% per annum during 1995-2006 • resumed rapid growth from 2009 Key policy reforms: • realistic price-setting, with “price smoothing” arrangements and use of forward sales contracts; • revolving door “input” funds to mobilize seasonal bank financing and fertilizer subsidies; • risk pooling: loans to agricultural inputs/cooperatives New priorities: • Innovation (better seeds, controlled land rotation) • Expanded irrigation to hedge against drought • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 17

  18. Kenya: boosting service sector exports • Services: the largest contributor to growth of GDP growth and foreign exchange revenue in recent years • New growth areas: • Transport services (air and shipping), • IT-based services (e.g. call centers; business process outsourcing) • Regional financial services • Sources of competitive advantage include low-cost telecomm services and higher education levels 18

  19. Structure of the presentation • Looking Ahead • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 19

  20. Looking back: • The preponderance of economies in SSA have experienced sustained growth since 1995 – accompanied by some degree of structural transformation, varying across countries. • The pace of agricultural productivity growth has been modest in the aggregate, but there have been many strong performers • The manufacturing sector has played a modest role in economic expansion – a sharp contrast to the Asian model where exports of manufactures have been key to growth • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 20

  21. Looking Ahead: • Agriculture in most SSA countries remains large (in terms of employment share) and has low average productivity levels: raising productivity levels will be key to boosting GDP growth and rendering it more inclusive. • The formal sector of the economy will continue to account for a modest share of employment over the medium-term: policies will need to avoid a pro-formal sector bias and give due attention to boosting productivity in the informal sector. • Exporting manufactures is not the only route to sustained economic growth • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 21

  22. Thank You • International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 22

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