Africa In 2015
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The year 2014 that has just gone by presented many challenges, old and new: the headwinds in the global economy; slowdown in the large emerging markets; and sharp declines in commodity prices. Yet much of Africa maintained its dynamism, at 5.5% growth. Indeed, some countries, including Côte d’Ivoire, have registered even higher performance. However, we know that given our demographics, 5% growth is strong but not stellar. It is 7% we must target. And the elephant in the room is infrastructure and Non-Tariff Barriers (NTBs).
Those parts of the Continent making faster progress on both areas are able to see higher growth, even when commodity prices are weakening. It is important to emphasize the fact that some of the fastest-growing countries in Africa are not commodity dependent. Hence their growth, which is less volatile compared to those that are highly commodity dependent. In most countries, in 2014, the three key drivers of growth are: investment, domestic consumer demand and regional trade.
The Year 2014, however, also exposed the complexities of managing the vortex of demographic dynamics, rapid urbanization, jihadism, and the natural resource curse. In the Sahel, in the Central African Republic, in South Sudan, we continue to see clear evidence of the link between development, security and the environment. So, in short, while growth remains strong, it is still below what is needed, given high population growth. Equally, inequalities are increasing, with a Gini coefficient as high as 0.7 in some regions.
If infrastructure and NTBs are elephants in the room, the lack of jobs, inclusion, effective safety nets are the giants holding back Africa’s full potential. As if these were not enough, the Ebola epidemic struck, laying bare how dysfunctional primary health systems in some of our countries have become. This was about as much about Ebola as dysfunctional health systems at a primary level given the destruction in Sierra Leone and Liberia in the 1990s. Remember, there have been Ebola outbreaks in the DRC, in Uganda in the past, which were contained. This is how Nigeria and Senegal were able to deal with Ebola in the very early days.
I take the opportunity to express my thanks to friendly countries, Organizations, gallant individuals who joined the people of the Mano River Union region and all the support they provided. Admittedly, the response was too slow, too late and we could have done better. I pay homage to the people of Guinea, Liberia and Sierra Leone for their courage, especially in the early days when they were very much left on their own. I salute health workers of all nationalities – from African countries, Europe, North America, Cuba, China and many others – who laid down their lives to prevent the spread of Ebola. And for the way in which Nigeria, Senegal and Mali were able to contain this virus. But the Ebola Viral Disease still remains a challenge.
Let us not lower our guard or slacken our efforts. Disease or epidemic management is not a core business of the Bank. But Ebola did not allow us the luxury of "leaving it to others." This was a crisis which required all hands on deck. That is why the African Development Bank, as you would expect, was one of the first Organizations to mobilize every resource we could find to counter Ebola.
To date we have committed close to US $220 million, including budget support, to the three affected countries. We are involved in an AU initiative to send African Health Workers to the Mano River Union region to bolster the health systems which are now even weaker than before. That is why we are fully supporting a private sector led initiative in that regard as well International Organizations looking for a long-term vaccine solution. But even when vanquished, Ebola will leave in its wake desolate economies, and livelihoods and systems to rebuild. Although only three countries were affected, and the rest of Africa remained open for business, confidence suffered badly elsewhere on the continent. So, as someone said, "This is not West Africa fighting Ebola, it is humanity fighting a virus." We are all in it together and we must draw lessons as to what went wrong; when the disease was first identified in Guinea in December 2013, how it could have reached a stage of a humanitarian disaster.
Some Lessons
It is time to radically rethink Africa’s primary health-care systems, looking at the way Senegal, Nigeria and Côte d’Ivoire managed the outbreak, but more broadly what it takes to have the minimum level needed for a functioning basic health-care system. It is time to closely examine the regional aspects in relation to fragile states.
At the beginning of the outbreak, regional solidarity was put to test as neighbours closed borders and supply chains were disrupted. Yet, it was clear that Ebola could not be contained in one country and cross borders it did. The international response and preparedness requires reinventing. We need a global epidemic management system that is fit for purpose. That is not the case now. The current architecture requires fixing and African countries themselves have to strengthen their disaster preparedness.
Africa in 2015: Prospects
Let me return to where I began – Africa’s prospects in 2015. But before doing so, let me point out that it is stability that must be the starting point. Predictability of what happens tomorrow is crucial. At a time when many countries are going into elections, it should not be a period of anguish, anxiety and apprehension. Regular elections are a sign of maturing democracies. In any case the act of elections is only part of the democratic culture we must build.
It requires fair play, tolerance and always ensuring there are no groups who feel they will be permanent losers. Lee Kuan Yew was once asked, “How you build a peaceful, prosperous society in an imperfect young democracy?” and he said: “Fair institutions that provide a level playing field to all.”
Meritocracy.“Safety nets for those who need and deserve it and integrity by those in Leadership.”
We may not be able to reach perfect democracies in one step, but this is a good place to begin. As I look at the experience of South Sudan and CAR conflicts, I cannot but contemplate these sage words by LKY. Rent-seeking leadership has imposed a very high price on the peoples of those countries. Beyond this, Africa's priorities remain the same.
FIRST: How to secure growth that is strong, inclusive and sustainable; growth that creates jobs, that benefits the broad categories of the population and not simply the few elites. Growth that combats inequality and deprivation. Growth that provides means and safety nets for those in need and with less opportunities.SECOND: Growth that is transformational, that creates opportunities in the higher ladders of the global value chains, that generates jobs for the fast-growing population.THIRD: Institutions that anchor the rule of law, fairness, policy predictability, and national cohesion. Institutions that deliver services that are efficient and accountable. Institutions that manage natural resources wealth in the interest of all, not rent for some. Those are the Institutions that will anchor long-lasting peace and the stability essential for investment and growth. From the projections available now, African economies are set to maintain and even accelerate the pace with growth exceeding 5.5%.
There will be some who will see a slowdown – net oil exporters as well as those facing acute energy challenges. For each and every country, the strategic imperative will be how to transpose that strong economic growth to economic transformation, joining the higher levels of the global value chains, in an inclusive economy.
Tactically, in the short term, in 2015, each country’s challenge may be different: For some it will be: Rebuilding shock absorbers in the light of global uncertainties, such as commodity price volatility and altered conditions in the capital markets; and addressing the energy shortages and outages. For countries going into elections, it will be about retaining, or at least not undermining investor confidence by ensuring that elections are times of political combat, not one of shedding blood or generating instability.
Commodities Crash?
At this time there is a lot of attention on what the crash in the oil markets mean for African countries. We have to look at it from several perspectives: Net exporters; Net importers; and Regional economic engines.
Impact on exploration for the new producers
First, net oil exporting countries will have to revise their budgets. They will have to look for new sources of revenues. It is an opportunity to revisit the implications of long term dependence. Second, net oil importers will see benefits all the way, from reduced pressures on budgets, balance of payments, inflation and increased purchasing power. It is an opportunity for them to strengthen macro-economic buffers, put in place viable safety nets, increase investments in infrastructure. Third, the neighbourhood effects. We need to factor in the impact of lower economic activity in some of the regional economic engines. For example, lower revenues might impact negatively growth in Nigeria somewhat, and indirectly the neighbouring countries.
In the same vein, lower oil prices provide a relief for countries such as South Africa and Kenya and indirectly impacts positively on the neighbourhood, thus boosting trade and domestic demand. This is why we need to make faster progress in eliminating NTBs. Tariffs are no longer the major issue, but free movement of people and logistics for more efficient supply of goods and services.In the same spirit, funding infrastructure must be brought to critical mass with new instruments that combine public and private capital. That is why the Bank sponsored the Africa50. But we need Africa’s institutions to invest in this instrument.
In the Sahel, in Africa as a whole, we are witness to the close links between development, security and the environment. It is a tripod which must be won together. You lose in one, you lose all. Building inclusive societies is at the heart of the Bank’s Ten Year Strategy. This is what will be our focus – inclusion, transformation and jobs.
The international development agenda in 2015 is a crucial year in what we do. We need to work together to ensure success on: The post-2015 Sustainable Development Goals, as the MDGs expire this year; The Conference of Parties on climate change, to ensure that at long last a binding climate deal can be reached; The Addis Ababa Conference on Financing for Development; and figuring out how to fund development in a new landscape. I hope together, across the International Community, we can work together to ensure to generate political will and imagination for success.
By Dr. Donald Kaberuka,
President, African Development Bank Group.