Africa – Opportunities and Challenges

Roger Nord

International Monetary Fund

London, December 2014

Outline

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2015

• Short-term Risks and Medium-term

Challenges

• The IMF and Africa

2

6.6

5.1

0

1

2

3

4

5

6

7

1980-1989 1990-1999 2000-2008 2009-2013

Per

cent

2.6 2.2

6.6

5.1

0

1

2

3

4

5

6

7

1980-1989 1990-1999 2000-2008 2009-2013

Per

cent

Africa has seen strong growth since the late 1990s

Sub-Saharan Africa: Average Real GDP Growth, 1980-2013

4

Excludes China for presentation purposes, as China's growth is much higher than that of the

other countries. ASEAN 5 = Indonesia, Malaysia, the Philippines, Singapore and Thailand.

50

100

150

200

250

300

350

400

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

Rea

l GD

P p

er c

apita

(Ind

ex, T

akeo

ff =

100

)

Years after takeoff

India, 1982 ASEAN-5, 1973 Vietnam, 1990 Uganda, 1986 Tanzania, 1995 Mozambique, 1992

Sources: IMF, World Economic Outlook.

Growth has not been driven by natural resources

GDP per Capita

75

100

125

150

175

200

225

1990 1993 1996 1999 2002 2005 2008 2011

Ind

ex 1

99

5 =

10

0

SSA Resource Intensive

SSA Non Resource-Intensive

SSA LICs Resource-Intensive

SSA LICs Non Resource-Intensive

Good economic policies have resulted in

deeper financial sectors …

6

Sub-Saharan Africa Sample Countries: Credit to the Private Sector

Sources: IMF, African Department database; and IMF, World Economic Outlook database.

0

5

10

15

20

25

30

35

Bur

kina

Fas

o

Eth

iopi

a

Tanz

ania

Moz

ambi

que

Rw

anda

Uga

nda

Oth

er n

onre

sour

ce-

inte

nsiv

e LI

CS

and

fr

agile

cou

ntrie

s

Per

cent

of G

DP

2000 2013

… broader tax bases …

7

Sub-Saharan Africa Sample Countries: Tax Revenue, 1995 and 2013

Source: IMF, World Economic Outlook database.

0

5

10

15

20

25

Bur

kina

Fas

o

Eth

iopi

a

Tanz

ania

Moz

ambi

que

Rw

anda

Uga

nda

Oth

er n

onre

sour

ce-

inte

nsiv

e LI

CS

and

fr

agile

cou

ntrie

s

Per

cent

of G

DP

1995 2013

… and rising investment

8

Sub-Saharan Africa Sample Countries: Saving and Investment, 1995–2013

Source: IMF, World Economic Outlook database.

0

5

10

15

20

25

30

35

Per

cent

of G

DP

Other nonresource-intensive LICs and fragile

countries, investment

National saving

Investment

Political and structural reforms have also helped

9

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

1996 2000 2003 2005 2007 2009 2011

Control of Corruption

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

1996 2000 2003 2005 2007 2009 2011

Government Effectiveness

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

1996 2000 2003 2005 2007 2009 2011

Political Stability

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

1996 2000 2003 2005 2007 2009 2011

Regulatory Quality

Other nonresource-intensive LICs and fragile countries

Sample countries

Source: IMF staff estimates based on World Bank, Worldwide Governance Indicators.

Note: LIC signifies low-income country. The composite measures of governance of the Worldwide Governance Indicators are expressed in

units of a standard normal distribution, with mean zero, standard deviation of one, and running from approximately -2.5 to 2.5, with higher

values corresponding to better governance.

Outline

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2014

• Short-term Risks and Medium-term

Challenges

• The IMF and Africa

10

Global growth is expected to remain subdued

Advanced and Emerging Economies: GDP growth 2005–16

-6

-4

-2

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Rea

l GD

P g

row

th in

per

cent

Advanced countries Emerging countries

Growth in Sub-Saharan Africa to remain strong

12

Selected Regions: Real GDP Growth 2007–14

Sub-Saharan Africa: Real GDP Growth, 2007–14

2007 2008 2009 2010 2011 2012 2013 2014 2015

-2

0

2

4

6

8

10

12

Per

cent

age

chan

ge

World Developing Asia Sub-Saharan Africa

2007 2008 2009 2010 2011 2012 2013 2014 2015

-4

-2

0

2

4

6

8

10

12

14

Per

cent

age

chan

ge

Oil Exporters Middle-income countries Low-income countries Fragile countries

Rising investment remains driver of growth

13

Sub-Saharan Africa: Investment, 2010–14

14

16

18

20

22

24

26

28

30

2010 2011 2012 2013 2014

Per

cent

of G

DP

Oil exporters

Middle-income countries

Low-income countries

Fragile countries

Outline

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2014

• Short-term Risks and Medium-term

Challenges

• The IMF and Africa

14

And although public debt to GDP ratios for

the whole region are broadly stable …

Sub-Saharan Africa: Public Sector Debt 2004-2013

31.5 37.9

0

20

40

60

80

100

120

140

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Per

cent

of G

DP

Interquartile Range Median

Sub-Saharan Africa

… they are rising more rapidly in market access

economies than in the rest of the region

Sub-Saharan Africa: Public Sector Debt 2004-2013

27.5

41.3

0

20

40

60

80

100

120

140

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Per

cent

of G

DP

Interquartile Range

Median

Market Access Economies

41.0 37.5

0

20

40

60

80

100

120

140

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Per

cent

of G

DP

Interquartile Range

Median

Rest of the Region

Note: Market access economies include Angola, Ghana, Kenya, Mauritius,

Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, and Zambia.

Ebola is having a devastating impact in

directly affected countries

Since the summer, oil and commodity prices have

declined significantly…

60

70

80

90

100

110

120

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14

US

Dol

lars

per

bar

rel

WTI

Brent

Oil Price Spots, June 2014–Present

Selected Commodity Prices, Change since

June 2014 to Present

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

Per

cent

age

chan

ge

The impact on SSA countries will depend on

their net oil exporter (or importer) position.

-2

0

2

4

2014 2015 2016

Per

cent

of G

DP

Oil at $100 per barrel (Oct 2014 WEO)

Oil at $75 per barrel

-8

-6

-4

-2

2014 2015 2016

Per

cent

of G

DP

Oil at $100 per barrel (Oct 2014 WEO)

Oil at $75 per barrel

Sub-Saharan Africa: External Balance, 2014-2016

Oil Exporters Rest of Region

Medium-term Challenge: Inclusiveness

Source: International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, October 2011

Per Capita GDP Growth and Consumption Growth of the Poorest Quartile

20

-3

-2

-1

0

1

2

3

4

5

6

7

Cameroon Ghana Mozambique Rwanda Tanzania Uganda Zambia

Per

cent

GDP Growth per Capita Per Capita Consumption Growth of the Poorest quartile Per capita consumption growth of all households Per Capita Consumption Growth of the Poorest quartile (using regional price deflators)

Medium-term Challenges : Infrastructure

Normalized units

Sub Saharan Africa-Low Income Countries

Other Low Income Countries

Paved Road Density 31 134

Total road density 137 211

Main line density 10 78

Mobile density 55 76

Internet density 2 3

Generation Density 37 326

Electricity Coverage 16 41

Improved water 60 72

Improved sanitation 34 51

21

Medium-term Challenges : Infrastructure - Energy

Source: World Development Indicators and IMF staff estimates.

100

500

900

1300

1700

2100

2500

2900

1975

19

76

1977

19

78

1979

19

80

1981

19

82

1983

19

84

1985

19

86

1987

19

88

1989

19

90

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

kWh

per

capi

ta

East Asia & Pacific Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa

Electricity Production

22

Demographic Dividend:

Challenge or Opportunity?

I

13 11 9 8 9 13 15 18 24

35

64 65 64

58 56

61 61 60 56

46

7

9 9 8 8 7

5 7

5 5 5 5 5 21 21 22 25 22 12 10 9 8 7

0

20

40

60

80

100

1750 1800 1850 1900 1950 2000 2012 2025 2050 2100

Europe

North America

Latin America

Asia

Africa

23

Outline

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2014

• Short-term Risks and Medium-term

Challenges

• The IMF and Africa

24

IMF Involvement in Africa

• 20 countries with IMF-supported programs:

ECF (12); RCF (2); PSI (5); EFF (1).

• Capacity building: 40 percent of IMF TA;

AFRITACs; Africa Training Center

• Regional Economic Outlook

• Policy advice: natural resource mgt;

financial sector stability; regional

integration

There are a variety of lending and non-

lending programs

26

ECFPSIRCFEFF

SurveillanceProgramsNear program

The stock of IMF lending to SSA stood

at $7.5 billion at end 2013 …

1087

6441

157 SBA/EFF

ECF, SCF, ESF

RCF

Sub-Saharan Africa: Credit Outstanding

(Millions of U.S. dollars, as of December 2013)

… but IMF lending to Africa has fallen from the

2009 peak

28

Sub-Saharan Africa: IMF Lending Commitments1, 2000-2014

Source: IMF, Finance Department 1 Includes concessional lending (PRGF/ECF, EPCA & ENDA, ESF and RCF) and non-concessional lending (SBA/EFF). Excludes arrears-related lending

(Liberia). updated through September 2014 . 2 Converted into U.S. dollars using the average exchange rate for each year.

0

2

4

6

8

10

12

14

0

1

2

3

4

5

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Num

ber

Bill

ions

of U

.S. D

olla

rs2

Non-concessional lending

Concessional lending

Number of new PRGT arrangements (right axis)

AFRITACs: Technical Assistance is an

important service provided by the Fund

29

East

Central

West

South

West 2

Thank You

30