African Economic Ang-moz-sa

2007

African Economic Outlook The African Economic Outlook combines the expertise of the OECD – which produces the OECD Economic Outlook twice a year – with the knowledge of the African Development Bank on African economies. The objective is to review annually the recent economic situation and the short-term likely evolutions of selected African countries. The Outlook is drawn from a country-by-country analysis based on a unique analytical design. This common framework includes a forecasting exercise for the current and two following years using a simple macroeconomic model, together with an analysis of the social and political context. It also contains a comparative synthesis of African country prospects, placing the evolution of African economies in the world economic context. This edition includes a special focus on water and sanitation issues. A statistical appendix completes the volume.

African Economic Outlook

This volume will be of significant interest to decision makers in African and OECD countries, both in the public and private sectors, such as aid agencies, investors, and government officials of aid-recipient countries. The African Economic Outlook is a joint project of the African Development Bank and the OECD Development Centre, with generous support from the European Commission. This publication provides dynamic links (StatLinks) for graphs and tables. These StatLinks direct the user to a web page where the corresponding data are available in Excel® format.

COUNTRIES COVERED • ALGERIA • ANGOLA • BENIN • BOTSWANA • BURKINA FASO • CAMEROON • CHAD • CONGO • CÔTE D’IVOIRE • DEMOCRATIC REPUBLIC OF CONGO • EGYPT • ETHIOPIA • GABON • GHANA • KENYA • MADAGASCAR • MALAWI • MALI • MAURITIUS • MOROCCO • MOZAMBIQUE • NAMIBIA • NIGER • NIGERIA • RWANDA • SENEGAL • SOUTH AFRICA • TANZANIA • TUNISIA • UGANDA • ZAMBIA

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African Economic Outlook

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2006/2007

www.oecd.org/dev ISBN 978-92-64-02510-3 41 2007 01 1 P

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ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Commission takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. * **

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The Development Centre of the Organisation for Economic Co-operation and Development was established by decision of the OECD Council on 23 October 1962 and comprises 22 member countries of the OECD: Austria, Belgium, the Czech Republic, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Korea, Luxembourg, Mexico, the Netherlands, Norway, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey and the United Kingdom as well as Brazil since March 1994, Chile since November 1998, India since February 2001, Romania since October 2004, Thailand since March 2005 and South Africa since May 2006. The Commission of the European Communities also takes part in the Centre’s Governing Board.

The opinions expressed and arguments employed in Development Centre publication are the sole responsibility of the author and do not necessarily reflect those of the OECD, its Development Centre or of the governments of their member countries. * ** Également disponible en français sous le titre : PERSPECTIVES ÉCONOMIQUES EN AFRIQUE

© OECD, African Development Bank (2007) No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to OECD Publishing [email protected] or by fax 33 1 45 24 99 30. Permission to photocopy a portion of this work should be addressed to the Centre Français d’exploitation du droit de Copie (CFC), 20 rue des Grands-Augustins, 75006 Paris, France, fax 33 1 46 34 67 19, [email protected] or (for US only) to Copyright Clearance Center (CCC), 222 Rosewood Drive Danvers, MA 01923, USA, fax 1 978 646 8600, [email protected]. African Economic Outlook

© AfDB/OECD 2007

THE AFRICAN DEVELOPMENT BANK GROUP The African Development Bank Group is a regional multilateral development finance institution the members of which are all of the 53 countries in Africa and 25 countries from Asia, Europe, North and South America. The purpose of the Bank is to further the economic development and social progress of African countries, individually and collectively. To this end, the Bank promotes the investment of public and private capital for development, primarily by providing loans and grants for projects and programmes that contribute to poverty reduction and broad-based sustainable development in Africa. The non-concessional operations of the Bank are financed from its ordinary capital resources. In addition, the Bank’s soft window affiliates – the African Development Fund and the Nigeria Trust Fund – provide concessional financing to low-income countries that are not able to sustain loans on market terms. By the end of 2006, the African Development Bank Group cumulatively approved 3 102 loans and grants for commitments of close to $59 billion. The commitments were made to 52 regional member countries and institutions to support development projects and programmes in agriculture, transport, public utilities, industry, education and health services. Since the mid-1980s, a significant share of commitments has also gone to promoting economic reform and adjustment programmes that help to accelerate socio-economic development. About 60 per cent of the total Bank Group commitments were financed on non-concessional terms, while the balance benefited from concessional financing.

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© AfDB/OECD 2007

African Economic Outlook

Foreword

Foreword The African Economic Outlook project is a joint initiative of the African Development Bank and the OECD Development Centre. The Report was essentially drafted by a core team drawn from both institutions, supported by resource people in selected countries. A generous grant from the Commission of the European Communities was essential to initiating and sustaining the project.

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African Economic Outlook

© AfDB/OECD 2007

Table of Contents

African Economic Outlook Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Part One: Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Part Two: Country Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 • Algeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 • Angola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 • Benin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 • Botswana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 • Burkina Faso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 • Cameroon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 • Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 • Congo Republic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 • Congo Dem. Rep. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 • Côte d’Ivoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 • Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 • Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 • Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 • Ghana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 • Kenya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 • Madagascar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 • Malawi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 • Mali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 • Mauritius . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 • Morocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 • Mozambique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 • Namibia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405 • Niger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 • Nigeria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 • Rwanda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 • Senegal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 • South Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 • Tanzania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 • Tunisia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 • Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 • Zambia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Part Three: Statistical Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 © AfDB/OECD 2007

African Economic Outlook

5

Acknowledgements

Acknowledgements The African Economic Outlook was prepared by a team led by Kenneth Ruffing. The core team was composed of Peter Ondiege, Barfour Osei, Mohammed Salisu, Audrey Verdier-Chouchane and Beejaye Kokil at the Chief Economist Complex of the African Development Bank and Céline Kauffmann, Federica Marzo, Nicolas Pinaud and Lucia Wegner at the OECD Development Centre. The comparative synthesis of the Report was drafted by Céline Kauffmann and Kenneth Ruffing with inputs from: Andrea Goldstein, Federica Marzo, Audrey Verdier-Chouchane and Lucia Wegner. The country notes were drafted by Farid Benyoucef, Federico Bonaglia, Andrea Goldstein, Sana Harrabi, Céline Kauffmann, Federica Marzo, Ida Mc Donnell, Peter Ondiege, Felix N’Zue, Barfour Osei, Stephen Owusu, Nicolas Pinaud, Mohammed Salisu, Désiré Vencatachellum, Audrey Verdier-Chouchane and Lucia Wegner. The work on the country notes greatly benefited from the valuable contributions of local consultants: Rose Aiko (Tanzania), Oluyele Akinkugbe (Botswana), Salmata Ouedraogo (Burkina Faso), William Bekoe (Ghana), Abderrazak Zouari (Tunisia), Youcef Benabdallah (Algeria), Tabo Symphorien Ndang (Chad), Carlos Nuno Castel-Branco (Mozambique), Emilio Dava (Mozambique), Klaus Schade (Namibia), Malak Reda (Egypt), Eric Hazard (Senegal), Yaro Jinjiri (Nigeria), Serge Kpassokro (Côte d’Ivoire), Teigist Lemma (Ethiopia), Oumar Makalou (Mali), John McGraph (Malawi), Mohamed Derrabi (Morocco), Michel Matamona (Congo), Thierry Mutombo (Democratic Republic of Congo), Patrick Musila Mwaniki (Kenya), E.S.K. Muwanga-Zake (Uganda), Robert Ngonthe (Cameroun), Francis Gatare (Rwanda), Chiwama Musonda (Zambia), Modeste Mfa Obiang (Gabon) and Abdoulaye Zonon (Burkina Faso). The Angola country mission benefited greatly from the support of Massimo Pronio from the European Commission delegation in Luanda. The committee of peer reviewers of the country notes included: Maria João Azevedo, Sylvain Dessy, Paul Koffi Koffi, Anne-Marie Geourjon, Stephen Golub and Arne Wigg. 6

Valuable statistical inputs were provided by Hilaire Kadisha, Koua Louis Kouakou and Fetor Komlan at the AfDB Development Research Department. The macroeconomic framework used to produce the forecasting was updated and managed by Céline Kauffmann and Federica Marzo at the OECD Development Centre and Beejaye Kokil at the African Development Bank. The statistical annex is the product of a joint work carried out by Beejaye Kokil and Federica Marzo. The project also benefited from crucial research assistance provided by Ralph Christian Maloumby-Baka and Yvette Chanvoédou at the OECD Development Centre and Rhoda Bangurah, Nelson Abiana, Koua Louis Kouakou and Fetor Komlan at the AfDB Development Research Department. Michèle Girard, Librarian at the OECD Development Centre, was also of assistance. The country maps were produced by Roland Pourtier. The maps and diagrams used in this publication in no way imply recognition of any states or political boundaries by the African Development Bank Group, the European Union, the Organisation for Economic Co-operation and Development, the Development Centre or the authors. A large number of African government representatives, private-sector colleagues and civil society members provided extremely valuable inputs and comments, including all the participants in the joint AfDB/OECD Development Centre expert meeting on: Access to Drinking Water and Sanitation. Several institutions also contributed to the project at various stages: the AfDB country operations departments, the AfDB Water and sanitation Department, the European Commission delegations in Africa, the African Partnership Forum Support Unit, the OECD Economics Department, the OECD Development Co-operation Directorate, the OECD Environment Directorate, the OECD Directorate for Financial and Enterprise Affairs and the World Bank Economic and Prospects Group. The OECD Development Centre’s Communication Unit, led by Colm Foy and Sheila Lionet, was responsible for transforming the manuscript into the publication. Graphic design and layout were done by Vif Argent Communication, Paris The Outlook was prepared under the overall guidance of Javier Santiso, Chief Development Economist, OECD Development Centre, Louis Kasekende, Chief Economist, AfDB and Temitope Waheed Oshikoya, Director, AfDB Development Research Department. African Economic Outlook

© AfDB/OECD 2007

Preface

Preface This year’s edition of the AEO contains, once again, grounds for optimism regarding the continent’s sustained economic development. Backed by favourable commodity prices, increased aid flows, debt forgiveness and, most importantly, the implementation of needed reforms, economic performance improved in many African countries in 2006. Many African governments have taken promising steps towards restructuring their countries’ economies. In many countries, democracy is becoming deeply rooted, leading in turn to increased participation by civil society in the political process. Substantial progress has been achieved towards regional co-operation supported by the NEPAD initiative, under the auspices of the African Union. We are also pleased to note that the first three of the African Peer Review Mechanism (APRM) reviews have been completed, signifying in concrete terms the beginnings of a sustained commitment to improved political and economic governance. Furthermore, there appears to be a resurgent commitment on the part of the international community to support African efforts to mobilise resources for investment in infrastructure through the Infrastructure Consortium for Africa. These recent developments provide a sound basis for future economic progress. Access to drinking water and sanitation is the topic of special focus for this edition of the report. It is to be deeply regretted that few African countries are on track to reach the Millennium Development Goals set for these areas. In order for sub-Saharan African countries to reach the drinking water MDG by 2015, annual growth in the number of people provided with access to safe drinking water would need to triple. For the same countries to meet the MDG for access to sanitation, a further 35 million people annually would need to be provided with access to it; this is to be compared with the current pace of 7 million. Financing remains a major issue: government financing, private-sector participation and development assistance have been largely insufficient to cover the scale of investments needed. Within this generally disappointing panorama, many outstanding examples of good performance have nevertheless been identified. The experiences of the good performers in water and sanitation show that moving forward requires ambitious reforms in institutions, legal frameworks and policies in order to change the structure of incentives. They also point to the enormous benefits of strengthening capacity on the ground, notably at local level where most water management is undertaken, and developing monitoring mechanisms to follow progress and adopt corrective measures as necessary. They also demonstrate the need for cross-subsidisation between wealthier and poorer users, and between water and sanitation, as well as the identification of those polluting industries that should bear the costs of abatement. On the issue of financing, public-private partnerships need to be encouraged and international effort has to be redoubled to mobilise resources for water and sanitation in Africa. Looking ahead, economic prospects for 2007 and 2008 are in aggregate positive, though, in view of the likelihood of a softening in non-oil commodity prices, substantial differences are expected between the experiences of net oil-exporters and oil-importers. Resource-rich countries will need to ensure that a large part of the windfall gains now accruing to their treasuries due to favourable terms of trade is directed towards supporting medium- and long-term development: emphasis will need to be placed on investments in infrastructure and human capital. Net oil-importing countries will need to ratchet down inflation to single-digit levels while minimising the impact on growth. Though the economic prospects are broadly favourable, most countries are of course starting from a very low base. Human security continues to be severely affected by the vulnerability that accompanies extreme poverty. Exacerbated by weak governance structures and by internal conflicts, this vulnerability is holding back privatesector development and continues to impede the integration of African countries into the global economy. The added impetus to the international community’s support to Africa given by the G8 Summit in St-Petersburg has therefore been essential; the decision of the German presidency of the European Union to maintain this impetus at Heiligendamm is to be warmly welcomed. We are pleased that our two organisations have succeeded over the past six years in steadily increasing the usefulness of the AEO in improving understanding of the changes that are shaping the economy of Africa. We are proud to announce that this collaboration will continue in the future with the African Development Bank taking the lead role in this partnership beginning with the 2007/2008 edition. Donald Kaberuka President, African Development Bank Tunis

Louka T. Katseli Director, OECD Development Centre Paris April 2007

© AfDB/OECD 2007

African Economic Outlook

7

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Part One

Overview

The African Economic Outlook is based upon the experience and skills of the OECD and the African Development Bank to provide an annual snapshot of the economic condition of African countries. It is, therefore, a reference point and a health check for the continent as a whole, taking account of the international situation and the influences of both internal factors and of the global economy. In this Overview, we provide an overall analysis of the state of Africa’s economies in a continental and global context, identifying and examining key features applied to the review of each country making up our sample. In this year’s edition, the special focus is on access to drinking water and sanitation. The 31 countries examined in this sixth edition of the African Economic Outlook account for some 86 per cent of Africa’s population and 91 per cent of its economic output. The countries are classified by subregion: • In North Africa: Algeria, Egypt, Morocco and Tunisia. • In West Africa: Benin, Burkina Faso, Côte d’Ivoire, Ghana, Mali, Niger, Nigeria and Senegal. • In Central Africa: Cameroon, Chad, the Republic of Congo, the Democratic Republic of Congo, Gabon and Rwanda. • In East Africa: Ethiopia, Kenya, Madagascar, Mauritius, Tanzania and Uganda. • In Southern Africa: Angola, Botswana, Malawi, Mozambique, Namibia, South Africa and Zambia. Ours is a comparative assessment and provides a continent-wide perspective, drawing on the country studies and supplementary analysis from the OECD Development Centre and the African Development Bank. Economic activity in Africa is estimated to have risen by nearly 5.5 per cent in 2006, and is expected to © AfDB/OECD 2007

remain high, at 5.9 per cent and 5.7 per cent in 2007 and 2008, respectively. Oil-exporting countries, however, are outpacing others by a substantial margin. Moreover, some countries continue to face serious problems – including the humanitarian catastrophe in the Darfur region of Sudan, the economic collapse in Zimbabwe, conflicts and political unrest in Ethiopia, Côte d’Ivoire, Somalia, and security problems in the oil-rich delta region of Nigeria, which are likely to dampen their growth prospects. Nonetheless, the outlook for much of Africa continues to be highly favourable. The continued global expansion – albeit slowing somewhat – continues to sustain demand for oil and other industrial raw materials at relatively high prices. At the same time, a significant increase in official development assistance (ODA) to Africa, driven largely by debt relief and emergency assistance, and improving macroeconomic stability have all contributed to this positive economic outlook. In addition, increased oil and mineral production in Southern and Central Africa and some improvements in the security situation have boosted growth. Inflation, however, has returned to double-digit numbers in net oil-importing countries, mainly due to increasing oil prices. Current account balances have improved in many countries, with the largest gains for exporters of oil and metal ores, while some countries were adversely affected by higher import bills and lower prices for some agricultural products, cocoa and cotton in particular. The windfall gains from commodity prices have improved public finances, notably in net oil-exporting countries. These gains will need to be managed carefully with a sizeable proportion used for investment in transport and other infrastructure and in human resource development to lay the basis for sustained economic growth once the current commodity boom has run its course. In that respect, the Outlook identifies recent efforts by a number of oil-exporting countries to improve the transparency of their petroleum-sector operations and introduce fiscal rules for the use of oil revenue. African Economic Outlook

13

Overview

The challenge for net oil-importing countries is altogether different. While GDP growth is expected to remain buoyant in 2007 and 2008, inflation is now running at double-digit levels, mainly due to a more complete pass-through to consumers of the oil price increases, and reducing inflation to single-digit levels may have adverse consequences for growth. Moreover, the GDP growth forecasts in this edition of the AEO are associated with increases in current-account deficits that result from sustained higher oil prices even while the boom in non-oil commodity prices appears largely to have run its course. Thus, the forecasts assume that the additional funds required to finance the deficits will be forthcoming. This set of challenges for macroeconomic policy is one of the risks that must be borne in mind in assessing the current economic outlook for Africa.

14

Another challenge is associated with the widening of the large imbalances in the global economy. Should these unwind in a disorderly fashion, with sharp sudden movements in exchange rates, a precipitous decline in world output and, thus, demand for African exports, cannot be excluded. After a significant decline throughout much of the last decade, aid levels have increased in recent years and Africa is the continent that has benefited the most. The launch of NEPAD, the Monterrey consensus on financing for development in 2002, and the implementation of the Enhanced Heavily Indebted Poor Countries (HIPC) initiative and the commitments made at the G8 Gleneagles Summit (2005) which are expected to further ease external debt burdens significantly – have all played important roles in increasing flows of development finance to Africa. Nonetheless, it remains to be seen whether the amount of aid will continue to increase, once the temporary surge in debt relief and emergency aid has passed. The question is, therefore, whether donors will be able to mobilise sufficient resources to meet their commitments, which already fall well short of the amounts required to help most countries attain the Millennium Development Goals (MDGs) by 2015. Thus, an assessment of progress on the MDGs confirms the diagnosis of last year’s AEO; on recent African Economic Outlook

trends, only six African countries – most of them in North Africa – are likely to meet the key target of halving the share of the population living on less than one dollar a day. In this regard, the years 2005 and 2006 witnessed the development of a series of new initiatives aiming at providing increased and more effective aid in the run up to 2015. Outside the Doha Round, the lifting of quota restrictions on trade in textiles and clothing from the beginning of 2005 has presented a difficult challenge to textile-exporting countries in Africa (including North African countries, Madagascar, and Mauritius), due to their vulnerability to competition from Asian countries, and, in particular, China. With the recognition of its critical role in economic growth and poverty alleviation, the focus on promoting good governance has intensified in recent years. The NEPAD has played an important role here. Thus, the African Peer Review Mechanism is expected to provide a candid assessment of African countries and to foster progress in governance. Ghana, Kenya and Rwanda have already completed such a review. The Outlook notes that democracy has started to take root in a number of countries in the last decade, through, for example, substantial progress in the electoral process, while conflicts have started to subside. Corruption, however, continues to be prevalent in many countries and, despite progress in macroeconomic management and the regulatory environment, more needs to be done to ensure an environment conducive to private-sector development.

International Environment Growth in the OECD Area GDP growth strengthened somewhat to 3.2 per cent in 2006, the fifth year of the current expansion in OECD countries, up from 2.7 per cent in 2005 despite the persistence of sharply higher oil prices. Prospects are for some slowing of growth, to 2.5 and 2.7 per cent in 2007 and 2008, respectively (Figure 1), with growth rates becoming more similar across OECD © AfDB/OECD 2007

Overview

regions1. A sharp slowdown of growth in the United States was precipitated by a sharp correction in residential investment that began in the second quarter of 2006 and is expected to continue in 2007. However, other components of domestic demand remain robust. The expansion in Japan, led initially by exports, has spread to fixed investment by enterprises and household consumption, but GDP growth is expected to be considerably slower than in 2005 and 2006. Domestic demand in the euro zone accelerated markedly in the second half of 2006. Investment followed by consumption is now driving growth as the employment performance has strengthened. By and large, GDP growth in the OECD countries in the near term is expected to exceed or closely approach potential growth, thus eliminating the output gap and leading to an increase in fixed capital formation. Growth has continued to be underpinned by accommodative fiscal

policies, low long-term interest rates, and a stable outlook for inflation. However, prospects for 2007 and 2008 are for some tightening of monetary policies in most countries and less expansive fiscal policy. Outside the OECD area growth has continued to be especially buoyant in Asia, led by continued rapid growth in China and India. World trade growth accelerated to 9.6 per cent in 2006, up from a strong 7.3 per cent in 2005 and is expected to remain buoyant averaging about 8 per cent in 2007 and 2008. This strong growth in the OECD area and in Asia has helped sustain African economic activity in 2005 and 2006, led by growth in export volumes, which averaged about11.5 per cent per year. The robust growth in import demand expected for the OECD countries and Asia in 2007 and 2008 augurs well for sustaining demand for African exports during the next two years.

15 Figure 1 - Growth in OECD Countries —— United States

—— European Union

—— Total OECD

% 5

4

3

2

1

0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006(e) 2007(p) 2008(p)

Source: OECD (2006), OECD Economic Outlook, December. http://dx.doi.org/10.1787/735165510457

1. Source: OECD (2006), OECD Economic Outlook, December.

© AfDB/OECD 2007

African Economic Outlook

Overview

Exchange Rates Concerns over the sustainability of flows needed to finance the US current account deficit persist. They had already led to significant exchange rate adjustments, which strengthened the competitiveness of US exports vis-à-vis the euro area and Japan during the three year period, 2002 – 2004. After strengthening by about

12 per cent against the euro in 2005 due to large inflows of financial capital, the US dollar shed those gains in the course of 2006 and continued to weaken in early 2007. Thus in January 2007, one euro purchased nearly 48 per cent more dollars than in January 2002 (Figure 2). Changes against other currencies, however, have been more moderate; and, overall, exchange-rate adjustments have remained orderly.

Figure 2 - US$ per Euro and per Rand —— Euro

(base 100 in January 2001)

—— Rand

160 150 140 130 120 110 100 90 80 70

16

60 50 40 jan-01

july-01

jan-02

july-02

jan-03

july-03

jan-04

july-04

jan-05

july-05

jan-06

july-06

jan-07

Source: www.x-rates.com. http://dx.doi.org/10.1787/330475308837

The weakening of the US dollar against the euro during 2006 led to a modest appreciation of the effective exchange rate in the Franc Zone, in the real effective exchange rates of the West African Economic and Monetary Union (WAEMU). However, the South African rand and those countries whose currencies are pegged to it weakened against the US dollar and even more so against the euro. These developments partly reversed the sharp appreciation of these same currencies that had occurred in 2002/04, strengthening the competitiveness of non-traditional exports. Raw Material Prices Strong world demand and supply shortages were responsible for commodity prices rebounding sharply during the global recovery. In nominal dollar terms, metals and minerals, and oil prices increased the most between 2000 and 2006 (up about 159 and 128 per cent, African Economic Outlook

respectively). In domestic currency terms, however, the impact of these price hikes was dampened somewhat for many countries because of the depreciation of the dollar over the same period. The general rise in global commodity prices has had a positive impact on the trade balances of many African countries, although higher oil prices have hurt oil importers. The countries with the largest gains have generally been exporters of oil and metal ore. For most other countries, gains from higher-priced commodity exports vis-à-vis the prices of manufactured imports have been roughly equivalent to losses from higher priced oil imports. However, a number of countries have faced net losses reflecting lower prices for some agricultural products – cocoa (down nearly 12 per cent between 2003 and 2005) and cotton (down about 14 per cent over the same period). The dependence of many countries on commodity market developments remains © AfDB/OECD 2007

Overview

a key vulnerability over the medium term. Careful management of the windfall gains from the increase in commodity prices is key to avoiding boom-bust cycles that can result from price volatility.

average $/barrel 60 per year in both 2007 and 2008. High oil prices have slowed but not derailed the global expansion; however, oil price uncertainty will continue to be a major risk factor for economic growth in the near term.

Oil Metals The rise in crude oil prices to record nominal highs has been accompanied by higher price volatility (Figure 3). This surge in prices in 2005, which was largely unanticipated, reflected a number of factors, including: the level and growth in the global demand for oil as the global recovery has taken hold; the disappointing growth in oil production and the tensions in oil-exporting nations – particularly Iraq, Nigeria, Russia and Venezuela – and a confrontational stance with Iran; the low levels of spare oil production and refining capacity temporarily aggravated by hurricane-related damage in the Gulf of Mexico; and the low inventories of crude oil in the OECD countries. Weather-related problems did not figure in 2006, and there was some easing of political tensions. But with excess capacity still very low, prices are likely to remain high, especially if the global expansion remains solid. The average crude oil price (Brent) increased from $/barrel 38.2 in 2004 to $/barrel 54.4 in 2005 and $/barrel 65.2 in 2006. The assumption used in this report is that it will fall back slightly to

Metals prices continued to increase in 2006 to reach average levels 127 per cent higher than the average price in 2000, in large part because of China’s high demand for metals. They are expected to decline slightly (by 6 per cent) in 2007 and by a further 17 per cent in 2008, but to remain higher than in 2004. The price of gold has escalated since mid-2001, triggered by the reduction of producer hedging – as interest rates lowered – and by international uncertainty; this benefited South Africa, the world’s leading producer, and other African gold producers, such as Ghana and Mali – although the strength of the rand and the CFA franc dampened the impact of buoyant commodity prices in South Africa and Mali especially in 2005. Prices of other metals also rose substantially in 2005 and 2006. Copper prices rose by 83 per cent in 2006 following a 28 per cent increase in 2005 as the market remained in deficit on strong demand and marginal growth in supply; since then, prices have been

Figure 3 - Prices of Oil and Metals —— Petroleum

—— Gold

(base 100 in January 2001)

----- Copper

----- Aluminium

490 450 410 370 330 290 250 210 170 130 90 50 jan-01

july-01

jan-02

july-02

jan-03

july-03

jan-04

july-04

jan-05

july-05

jan-06

july-06

jan-07

Source: World Bank. http://dx.doi.org/10.1787/824402588583

© AfDB/OECD 2007

African Economic Outlook

17

Overview

volatile and began to decline in the second-half of 2006. Prices in 2007 are expected to fall by about 14 per cent and by a further 25 per cent in 2008. Gains in aluminium prices have been more modest over the last two years but continued to strengthen in 2006, because of the large expansion of primary aluminium capacity and exports to China. Zambia (for copper) and to a lesser extent Mozambique, Ghana, Cameroon and Guinea benefited from these increases. Metals prices are expected to decline cumulatively by about 18 per cent in 2007 and 2008.

Agricultural Products Prices of tropical commodities have been volatile and have generally performed poorly (Figure 4). Cocoa prices reflected the uncertainties generated by the civil conflict in Côte d’Ivoire, the world’s largest cocoa producer and exporter. Following record lows in early 2000, prices recovered to reach new highs in early 2003, then fell sharply as a significant supply response occurred, and fluctuated around a narrow range during the period 2004/06.

Figure 4 - Prices of Tropical Beverages —— Cocoa

----- Tea

(base 100 in January 2001)

—— Coffee (arabica)

----- Coffee (robusta)

300 250 200

18

150 100 50 0 jan-01

july-01

jan-02

july-02

jan-03

july-03

jan-04

july-04

jan-05

july-05

jan-06

july-06

jan-07

Source: World Bank. http://dx.doi.org/10.1787/807530736514

The prices of coffee, exported by many African countries, increased substantially in 2002; they held fairly steady (increased for the Arabica variety) in 2004 and then increased sharply in 2005 (by 41 and 43 per cent for Robusta and Arabica varieties, respectively), recovering the levels of early 2000. They fluctuated around these higher levels throughout 2006, with the Robusta variety moving sharply upward in the second half of the year. Little change in their current levels is expected in 2007 and 2008 because the fundamentals for coffee remain weak, with little growth expected in consumption while global stockpiles remain abundant. Tea prices in 2006 were little changed compared with 2004 or 2005, but are still about 12 per cent below their 2000 levels, and are expected to remain at African Economic Outlook

about the same levels in 2007 and 2008. The outlook is not favourable, given the declining trend in consumption growth and the continued growth in output. Cotton prices rose by slightly more than 4 per cent in 2006 recovering a small part of the losses in 2004 and 2005. By the end of the year, they were about where they had been in mid-2003 (Figure 5). They are not expected to improve much in 2007 and 2008, perhaps gaining another 3 or 4 per cent cumulatively. This drop has substantially lowered export earnings in countries like Mali, Benin, and Burkina Faso for the past two years. The cotton price illustrates the problems encountered by some of the poorest sub-Saharan countries in the context of trade distortions. West and © AfDB/OECD 2007

Overview

Central African countries produce low-cost, high-grade cotton, but face unattractive world prices, which have been dampened by the provision of substantial subsidies from developed countries in recent years. An additional burden for the cotton-producing countries in the CFA zone has been the appreciation of the euro against the US dollar since 2000.

The “cotton initiative” launched in September 2003 by four West African countries (Benin, Burkina Faso, Mali and Chad) to end cotton subsidies in WTO member countries was finally included in the WTO General Council decision reached in mid-2004 on the framework to proceed with agricultural negotiations. At the WTO Ministerial Meeting in Hong Kong,

Figure 5 - Price of Cotton

(base 100 in January 2001)

130 120 110 100 90 80 70 60 50

19

40 jan-01

july-01

jan-02

july-02

jan-03

july-03

jan-04

july-04

jan-05

july-05

jan-06

july-06

jan-07

Source: World Bank. http://dx.doi.org/10.1787/451820817024

further progress was made, including setting a timetable for its implementation. However, with the suspension of negotiations this potential improvement is on hold. In the meantime, there is a need to speed up the process of providing assistance to African producers until the removal of subsidies results in higher world prices. In the present situation of low prices, distorted by subsidies, African production costs are above the world price, which threatens cotton production in countries where the sector is key – an estimated 12 million people are dependent on cotton for their livelihood in West Africa. Official Development Assistance (ODA) Official Development Assistance has been growing steadily since the beginning of the decade, with net ODA disbursements reaching $107 billion

in 2005. This represents 0.33 per cent of the combined gross national income of members of the OECD’s Development Assistance Committee (DAC), up from 0.26 per cent in 2004 and the highest ratio since 1992. About 70 per cent of the real increase between 2004 and 2005 ($18 billion out of $25 billion) is explained by debt relief, heavily dominated by the Paris Club settlements for Iraq and Nigeria. Thus the increase was heavily concentrated by recipient country, and delivered in a form which does not provide new transfers to the recipient. Humanitarian aid also increased for the second successive year. Much of this increase was concentrated in Iraq and Afghanistan. As a result, ODA other than humanitarian aid and debt relief to the vast majority of recipients rose only very slightly in real terms.2

2. OECD (2007), DAC, 2006 Development Co-operation Report, Paris.

© AfDB/OECD 2007

African Economic Outlook

Overview

If all the commitments made in 2005 to increase aid are met, including the pledge to double aid to Africa announced at the G8 summit in Gleneagles, ODA from DAC donors alone will rise by almost $50 billion in real terms between 2004 and 2010, to nearly $130 billion (at 2004 prices and exchange rates)3. Yet the expected increase of ODA is less impressive when measured as a share of gross national income (GNI). The estimated figure for 2010 (0.36 per cent of total DAC GNI) would only marginally exceed the average level of 1980-92 (0.33 per cent), and would still fall short of the estimated financing required for countries to attain the MDGs by 2015. In addition, according a partial survey of DAC members carried out in 2006, aid commitments to 2008 appear to fall well short of the trend increases required by many DAC members to reach their 2010 targets. The sharp rise of ODA in 2005 is likely to be short-term, since future debt deals are unlikely to match the scale of relief granted to Iraq and Nigeria. 20 This issue is particularly worrying in the case of Africa, to which donors have promised to double ODA between 2004 and 2010. Debt relief to many African countries is now complete, and total debt relief is likely to fall sharply from 2007. To date, debt reduction packages have been approved for 30 countries, 25 of them in Africa, providing $35 billion (net present value terms as of the date of reaching the decision point) in debt-service relief over time4. Other forms of aid will therefore need to rise very fast – on the order of 10 per cent per year in 2008-10 – to compensate. This will mean increasing tax payerfunded aid faster than almost all other forms of public expenditures in donor countries. According to the DAC Development Co-operation Report, a particularly significant test of donors’

intentions will be their willingness to increase the funding for the next replenishments of the World Bank and African Development Bank soft funds, the International Development Association and the African Development Fund. These institutions also need to be compensated for the costs of the Multilateral Debt Relief Initiative (MDRI)5. Some encouraging signs of additional aid volumes have come from the launch of innovative forms of development assistance. In January 2006, six OECD countries established the International Finance Facility for Immunisation, which is expected to scale up the annual spending on vaccines to $500 million, averting up to 500 000 child deaths a year. 19 OECD and non-OECD countries have undertaken initial steps to introduce an air-ticket solidarity levy, and which may raise a total of $1 to 1.5 billion a year for development purposes. Three OECD countries have also agreed on Advanced Market Commitments – a market based mechanism to support research and development of vaccines. Flows from charitable and philanthropic foundations are also on the increase, from $7 billion in 2000 to over $11 billion in 2004. They seem likely to continue to rise, especially in the areas of humanitarian aid and research into vaccines and tropical diseases (for example in 2004, the Bill and Melinda Gates Foundation spent over $800 million on international health programmes). Although aid from DAC members will continue to account for close to 90 per cent of total ODA, nonDAC members are also helping to increase total aid volumes. For example, Korea has decided to increase its ODA to 0.10 per cent of its GNI by 2010, which implies more than doubling its aid to around $1 billion in that year. Other non-DAC OECD member countries

3. OECD (2007), DAC, 2006 Development Co-operation Report, Paris. 4. IMF Fact Sheet December 2006 5. The MDRI was proposed by the G8 countries in June 2005 to cancel all the multilateral debt held by the World Bank’s International Development Association (IDA), the IMF and the African Development Bank’s African Development Fund (ADF), incurred before 1 January 2005 with the IMF and the ADF, and before 1 January 2004 for the IDA.

African Economic Outlook

© AfDB/OECD 2007

Overview

such as Turkey, Mexico and several European countries also have ambitious plans to scale up their aid by 2010. The non-DAC OECD members of the EU (the Czech Republic, Hungary, Poland, and Slovakia) and the other new EU members committed themselves to reach 0.17 per cent of GNI by 2010 and 0.33 per cent by 2015. Official flows from Middle East and other OPEC countries are also expected to increase, mainly in the form of loans for project finance. China is also becoming an important donor. The November 2006 “Beijing Action Plan” launched in the Forum on China-Africa Cooperation (FOCAC) resulted in commitments to double the size of China’s assistance to African countries by 2009. Although increasingly important, China’s ODA programmes are likely to be less significant to developing countries than the effects of its trade, direct

investment and non-concessional financial flows. There may be a risk, however, of compromising debt sustainability efforts in the poorer and more aid dependent countries. While non-DAC and non-traditional donors are augmenting the resources available to help developing countries to reach all the MDGs, this recent trend poses new challenges for harmonisation and alignment with recipient country priorities. Non-DAC donors are a heterogeneous group; the degree to which nonDAC donors apply DAC approaches and norms as regards the provision of aid varies from country to country. In addition, the limited data on non-DAC ODA makes it difficult accurately to assess aid volume and prospects from these sources.

Figure 6 - DAC Members’ ODA: 1990-2005 and Simulations to 2006 and 2010, based on Commitments at Monterrey and Since Total ODA (right scale) ODA as a % of GNI (left scale)

Total ODA to Africa (right scale)

% of GNI

ODA ($ billion) 2004

150

0,40 0.36 0,35

0.33

0.33

120 0,30

0,25

0.26

90

0.22

0,20

60 0,15

0,10

30 0,05

0

0,00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: OECD/DAC statistics (2007) http://dx.doi.org/10.1787/573526007704

© AfDB/OECD 2007

African Economic Outlook

21

Overview

Growth of Aid to Africa Africa’s share of total ODA, which had fallen to 36 per cent by 1999, recovered to 42 per cent in 2004056. This rise was driven largely by debt relief and emergency assistance, which reached 27 per cent and 11 per cent of total ODA respectively in 2005, more than tripling their shares since 2000. Emergency aid from DAC countries, the World Food Programme, the European Commission and UNHCR has been channelled to relief and reconstruction in areas affected by drought, especially in Southern and Western Africa, and in fragile states, notably in Sudan.

22

Nigeria was the top recipient of ODA in 2005, receiving about 16 per cent of total aid to Africa (about $6 billion out of total commitments to Africa of $37 billion). About 85 per cent of aid to Nigeria was accounted for by debt relief. The other largest African recipients included several among the 17 which have achieved their Heavily Indebted Poor Countries initiative (HIPC)7 completion point or are in the process of doing so. Debt relief accounted for more than 50 per cent total aid in Zambia, about 40 per cent in Ghana, and about 30 per cent in the Democratic Republic of Congo.

The challenge of the HIPC initiative, and of the Multilateral Debt Relief Initiative (MDRI), is to ensure that the resources that are freed from debt repayment are channelled to expenditures on health, education and other social services. Although most of the HIPC countries have increased their spending in social sectors, difficulties remain to ensure that money is redirected to social priorities in fragile states. For example, in Rwanda and Ethiopia, large new loans are being contracted to meet pressing reconstruction needs while old debt is simultaneously being retired. Other countries face challenges to meet the criteria for reaching the HIPC decision point due to uneven policy records or poor governance resulting from civil conflict. Finally, even after debt relief under the HIPC and MDRI initiatives is fully implemented, maintaining a sustainable level of debt service while seeking the additional financing needed to make progress towards the MDGs will be a challenging task. For example, some countries might be tempted to use their improved creditworthiness to access international capital markets or export credits and loans with low levels of conditionality, including from non-DAC donors, risking a return to high and unsustainable debt levels.

Box 1 - Public Debt Management and Bond Markets in Africa8 The volume of government debt as a percentage of GDP varies across African countries. Some countries have low to moderate burdens, while in others the level is well in excess of 100 per cent of GDP. In between are countries where the level is in line with that of many OECD countries. The difference, however, is that the economies of African countries are typically more susceptible to shocks, which affects the ability of governments to service their debt. This is the case even after benefiting from external debt relief, as many African countries have under multilateral initiatives. Modern public debt management practices are used by only a handful of countries. As a result government securities markets in Africa generally remain rudimentary compared with markets in middle-income and more developed economies. Going forward, riskbased debt sustainability needs to remain a focus of debt strategy in Africa because volatility in the macroeconomic environment is high, often due to external shocks.

6. Based on region-allocable ODA only. 7. The HIPC initiative, started in 1996, is a comprehensive approach to debt reduction for heavily indebted poor countries pursuing IMF and World Bank supported adjustment and reform programmes. 8. This analysis is based on an OECD project on African Public Debt Management and Bond Markets. The authors, Greg Horman and Hans Blommestein, are Financial Analyst and Project Manager, respectively.

African Economic Outlook

© AfDB/OECD 2007

Overview

Box 1 - Public Debt Management and Bond Markets in

Africa8

(cont.)

Foreign-currency debt is more important than local-currency debt in most African countries. Foreign-currency borrowing typically offers lower interest rates and longer tenors than local-currency borrowing. The predominance of foreign-currency debt in general reflects the availability of, and continued reliance on, concessional multilateral and bilateral funding but this may entail a currency mismatch with foreign exchange earnings that can increase a country’s vulnerability. The lack of a developed domestic debt market can lead to budgetary volatility if the government is unable to draw on domestic funding sources in the event of drop-off in external funding or grants. A few African countries borrow successfully on the international bond markets, but they tend to be the ones with more developed domestic markets as well. A number of African countries have used local-currency funding to some degree since the 1980s, and more recently many countries have taken steps to develop their domestic markets. The few countries where local-currency debt constitutes the larger share of the debt portfolio have higher levels of per capita GDP, investment, and savings; stronger financial and banking sectors; more diverse private sectors; and a lower reliance on concessional funding from external sources. In much of Africa, however, the issuance of debt in the domestic market often remains erratic and in small volumes, leading to problems in developing liquid instruments and benchmarks. Local-currency debt is also primarily short-term. One consequence is that African governments are exposed to significant levels of refinancing risk in respect of their local-currency debt. Although a few countries issue bonds with tenors of 10 or even 20 years, in many African countries government yield curves do not extend beyond five years at the longest, and even in those countries where the curves do extend over longer periods, liquidity tends to be concentrated in the shorter maturities. Interest payments on local-currency debt often consume a higher share of the budget than interest payments on foreign-currency debt, even though local-currency debt makes up a lower share of outstanding debt. This is because the interest rates in African domestic markets tend to be relatively high compared with the interest rates prevailing for foreign-currency borrowing, although borrowing in local currency has the advantage of avoiding exposure to exchange rate risk. An important policy question for African governments is the appropriate balance between minimising cost and risk, in particular taking account of the major risks (interest rate, exchange rate, and refinancing) and the possibility of other budgetary shocks, such as from a sudden drop-off in aid inflows. In most African countries, local commercial banks represent the largest category of holders of government securities, often in excess of 50 per cent of outstanding debt. Participation of institutional investors and non-residents is relatively limited in most countries. This reflects, among other factors, capital account restrictions, limited information on creditworthiness, a perception of high country risk, and weak legal and regulatory infrastructures. Narrow investor bases, a tendency to hold to redemption, and the absence of entities prepared to commit risk capital to dealing in government securities contribute to a general lack of secondary market liquidity. An important policy question for many African countries is what priority to give to stimulating a diverse investor base and developing market-based instruments, trading facilities, and distribution networks that suit the needs of investors. Source: Public Debt Management and Bond Markets in Africa, OECD, Paris (forthcoming).

Much of the recent increase in ODA to Africa was accounted for debt forgiveness and emergency aid, with loans and grants for programmes and projects remaining almost unchanged in 2005 (see Figure 7). The social sectors and governance accounted for about 30 per cent of ODA in 2005 while aid for economic infrastructure and production sectors was about 17 per cent, compared to 36 per cent and 18 per cent respectively in 2004. Programme aid accounted for about 9 per cent of total ODA compared to 12 per cent © AfDB/OECD 2007

in 2004. It remains to be seen whether the absolute amount of this core development aid will rise once the temporary surge in debt relief and emergency aid has passed. The European Commission, France, the United States, and the United Kingdom are the leading donors in Africa, accounting for 51 per cent of total aid in the region, followed by Germany, Japan and the Netherlands. African Economic Outlook

23

Overview

Figure 7 - Net Official Development Assistance to Africa ■ Other ODA

■ Bilateral debt forgiveness

(all donors, constant 2004 $ billion)

■ Emergency aid

$ billion 2004 35

30

25

20

15

10

5

0 1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: OECD/DAC statistics (2007) http://dx.doi.org/10.1787/532023360860

24 Donors have continued to focus on a small number of countries which have historically benefited from large aid flows: Egypt accounted for 37 per cent of flows to North Africa, while Nigeria, Ethiopia, Sudan, the Democratic Republic of Congo, Tanzania, the Republic of Congo, Mozambique and Zambia accounted for half of total ODA to sub-Saharan countries in 2005.

Declaration on Harmonisation of 2003 to reduce the transactions costs associated with in aid, encourage more harmonised, joint efforts among bilateral and multilateral donors, and enhance aid effectiveness through results-based approaches. It is particularly noteworthy that all G-20 countries signalled their support for the Paris Declaration at the G-20 meeting in Melbourne in November 2006.

Despite the encouraging trend of increasing aid to Africa, the MDGs remain underfinanced and most of Sub-Saharan Africa is far from reaching most of the eight goals.

The aid effectiveness agenda stresses ownership by recipient countries, alignment of external aid to local priorities and local delivery channels when these meet adequate standards, harmonisation and simplification of donor procedures, a stronger focus on achieving real results by both recipient countries and donors, and greater mutual accountability for those results. A set of indicators has been established to measure progress in this regard.

Progress in making aid more effective In addition to the commitment by donors to increase ODA volumes, steps have been taken by the international community and African governments to improve the quality of aid. The international effort on aid effectiveness has been gaining momentum since 2005 when over 100 partner countries and donors endorsed the Paris Declaration on Aid Effectiveness. The participants renewed pledges made in the Rome African Economic Outlook

According to the 2006 Baseline Survey on Monitoring the Paris Declaration, about 60 countries have undertaken actions in support of the Paris agenda. Substantial progress has been made in a number of African countries including Burkina Faso, Ethiopia, © AfDB/OECD 2007

Overview

Ghana, Mozambique and Tanzania in terms of harmonisation actions (joint analytical work, joint programming and assistance strategies, programmebased approaches, pooling of financing among donors and use of country systems when feasible) which have helped reduce transaction costs. Nevertheless, the survey suggests that greater attention is needed in aligning aid flows with national priorities and improving the transparency of the flows. There are still substantial discrepancies between the funds disbursed by donors and the information recorded in the recipient’s budget9. In addition, the survey suggests that only a minority of countries have put in place mechanisms of mutual review of progress on aid effectiveness commitments.

Against the prospect of scaling up of aid, progress in the Paris agenda and especially more co-ordination among aid delivery channels (bilateral funds, multilateral funds, global funds, and private funds) will be all the more crucial. In particular, global funds need to support country-led strategies and priorities and avoid undermining the capacity of national authorities for coherent planning, financing and service delivery. The principles of the Paris declaration have been put at the heart of the Aid for Trade Agenda, aimed at helping developing countries benefit from WTO agreements and expand their trade. The WTO tasks force issued its recommendations in 2006, calling for donors active in the provision of aid for trade to abide by the principles enshrined in the declaration.

Box 2 - Dealing with Complexity: Health Financing in Ghana The international development finance system has become complex, with a proliferation of financing instruments and new actors, both public and private, entering the scene. How does this complexity affect a “donor darling” like Ghana, where ODA accounts for a large percentage of GDP (12 per cent in 2003)? A recent Development Centre case study identifies three major trends in Ghana’s health sector. Firstly, donors have diversified their financing instruments. Secondly, household spending on health is growing and bypassing the Ministry’s budget and purview. Thirdly, new actors have emerged as funding sources and implementing organisations. This new complexity has important implications for policy makers in developing and donor countries alike. Firstly, they must work together to strengthen information systems that can capture all flows and help craft effective policies. Strengthening information implies building capacity in data collection and monitoring. More generally, it also requires that local actors and donor agencies recognise the high potential of non-aid flows for development. Secondly, further efforts are needed in implementing the Paris Declaration. Global programmes, for example, have attracted criticism for contributing to a proliferation of co-ordinating mechanisms at country-level. HIV/AIDS matters, for instance, are now discussed in meetings of the Ghana Aids Commission (GAC), the Partnership Forum, the Business Meeting, the UNAIDS Technical Working Group, the GAC Sub-Committee, the Regional Aids Committee, and the District AIDS Committee. Finally, it must be recognised that the major challenge for decision makers does not relate to finance alone, but to larger issues of governance and administrative capacity. If recipient-country governments are to take the lead in managing development finance strategies, they must improve co-ordination and communication between their own national public entities. As donors move to general budget support in Ghana, for example, the Ministry of Health will need to develop new communication and negotiation skills vis-à-vis the Ministry of Finance. Source: Denis Drechsler and Felix Zimmermann, “New Actors in Health Financing: Implications for a Donor Darling”, OECD Development Centre, Policy Brief No. 33, 2006.

9. OECD (2007) , DAC, 2006 Development Co-operation Report, Paris.

© AfDB/OECD 2007

African Economic Outlook

25

Overview

Box 3 - Improving the Effectiveness of Aid for Trade in Africa The international community has long recognised the need to provide targeted trade-related technical assistance and capacity building to promote the integration of developing countries, especially the least developed ones, into the multilateral trading system. Donors have always provided substantial support to productive sectors and infrastructure to varying degrees long before the emergence of the Aid for Trade concept. New is the recognition of trade as part of the overall development strategies of countries. Moreover, there is increased awareness in the trade community of the importance of the so-called “supply side” constraints that hamper the ability of developing country enterprises to reap the opportunities created by trade liberalisation. The Doha Development Agenda adopted at the 2001 WTO Ministerial meeting reaffirmed this commitment stressing that the successful trade integration of LDCs “requires meaningful market access, support for the diversification of their production and export base, and trade-related technical assistance and capacity building (paragraph 42)”. Following the launch of the Doha round, the OECD and WTO improved the monitoring of aid flows to strengthen trade capacities, or “aid for trade” (http://tcbdb.wto.org). Provision of aid for trade has expanded significantly over the last few years, witnessing an increase in funding and in the number of donors and agencies with explicit strategies and guidelines for aid for trade. According to the WTO-OECD database, Africa is the largest recipient of trade-related technical assistance and capacity building, receiving one third of the world total. In 2005 the international community committed $1.03 billion to the continent, a 6 per cent increase in nominal terms over 2004. Africa also received $3.8 billion of aid to finance infrastructure, placing it as the second largest recipient after Asia.

Aid commitments for Trade Related Technical Assistance and Capacity Building and Infrastructure to Africa ($ million, 2005)

26

$ million

Share of Global TRTA (%)

Trade Policy & Regulations

361

39.2

923

Trade Development

667

30.1

2 220

1 029

32.7

3 143

$ million

Share of Total Infrastructure (%)

Total Infrastructure

3 810

31.2

12 197

Total TRTA

Infrastructure

Global TRTA

Source: WTO/OECD Trade Capacity Building Database. In October 2006, the WTO General Council endorsed the recommendations of the WTO Aid for Trade Task Force. The recommendations make several proposals to broaden the scope and enhance the effectiveness of trade-related development assistance. The Task Force also adopted a broader definition of aid for trade by adding to the “traditional categories” of trade-related technical assistance (trade policy and regulations and trade development) four new categories: (1) trade-related infrastructure, (2) building productive capacity, (3) trade-related adjustment and (4) other trade-related needs. In particular, they called providers of aid for trade to abide by the principles agreed in the Paris Declaration on Aid Effectiveness (including country ownership, aligning aid to national development strategies, donor co-ordination, and harmonisation of donor procedures). The recommendations insist on improved mainstreaming of trade into national development strategies and in country structures, using country-based processes such as PRSP and Consultative Groups. In addition, they include proposals for mainstreaming trade and growth issues in donor programming, including strengthening the trade expertise of donors. At global level, the recommendations point at strengthening monitoring and evaluation, including by establishing a monitoring body in the WTO, reporting by recipient countries on trade mainstreaming, reporting by bilateral donors, multilateral and regional agencies and the private sector on aid-for-trade activities. Source: WTO/OECD Trade Capacity Building Database; Aid for Trade: Making it Effective. OECD (2006); The International Architecture of Aid for Trade, joint SECO-OECD Development Centre Report (2007), forthcoming.

African Economic Outlook

© AfDB/OECD 2007

Overview

In parallel, with initiatives to improve aid effectiveness, G8 Heads and African leaders agreed on a comprehensive package of measures to support Africa’s development.

They set up the African Partnership Forum, a process intended to give fresh political and strategic impetus to the currents of cooperation for Africa.

Box 4 - The African Partnership Forum The Africa Partnership Forum (APF) is a unique international body established following the Evian G8 Summit in 2003 as a way of broadening the existing dialogue between the G8 and the New Partnership for Africa’s Development (NEPAD) to include other African institutions and Africa’s major bilateral and multilateral development partners. Its core remit is to catalyse action at the highest political level in favour of African development. The APF monitors progress achieved in delivering on commitments its membership have undertaken, identifies bottlenecks, and signals priorities for follow-up action. Members of the APF include “Personal Representatives” of the Heads of State and Government of African and G8/OECD countries, as well as representatives of the Chairperson of the African Union Commission and of regional and international institutions. The Forum is governed by four co-Chairs, two from Africa and two from development partners. At their October 2006 meeting in Moscow, APF members assessed progress achieved to-date regarding infrastructure, HIV/AIDS and agriculture across the African continent. The analysis indicated that while encouraging advances had been made in the first two areas, progress in achieving higher agricultural output and food security – a critical sector for poverty reduction — was lagging behind. It urged African governments to intensify their efforts and development partners to provide increased and more effective support to this sector in line with Paris Declaration principles. Two additional papers on energy poverty and infectious diseases – related to 2006 G8 St Petersburg discussion topics – were also discussed, and the following recommendations were agreed: • While energy issues in Africa have not been high on the international agenda, secure and sustainable access to energy is essential to achieving the MDGs. Mobilising the necessary investment – from both public and private sources – will require African governments and donors to take concrete steps aimed at improving financial viability in the sector, creating a more hospitable business climate to reduce risk and attract investors, and bolstering regional co-ordination and integration. • Infectious diseases impose a heavy burden on Africa: the continent accounts for two-thirds of global mortality from AIDS, malaria and tuberculosis. While the APF applauded efforts to tackle the “big three” – including through concerted government policy implementation and the creation for special delivery mechanisms and funds – it warned that the continuing neglect of other major debilitating diseases constitutes a ticking time bomb. The importance of reinforcing human resources in the health sector was stressed, as well as the capacity of health systems at national level to tackle the infectious disease burden. APF members acknowledged the importance of addressing the worrying gender dimensions of the escalating increase in sexually transmitted diseases (including HIV/AIDs), and asked members to work more resolutely on promoting women’s empowerment and self-determination. The Africa Partnership Forum will maintain a watching brief on developments in these areas and will report back to the membership at regular intervals. At its spring 2007 meeting in Berlin, the APF will address investment, climate change, peace and security, and gender. APF reports may be accessed at www.africapartnershipforum.org

Foreign Direct Investment After a downturn in 2002, FDI flows to Africa recovered in 2003 (+ 39 per cent) and remained relatively stable in 2004 ($18 billion)10. Still, Africa’s share in world

FDI inflows remained small at 3 per cent. High prices for minerals such as copper, diamonds, gold and platinum, and particularly for oil, along with the resulting improved profitability of investment in natural resources encouraged foreign investment in the region.

10. Sources: UNCTAD (2006a), World Investment Report, Geneva, and UNCTAD (2006b), Global Investment Prospects Assessment 2005-2008, Geneva.

© AfDB/OECD 2007

African Economic Outlook

27

Overview

Inflows rose in 40 out of the 53 countries in Africa, though they fell in 13, including in some of the region’s top FDI recipients such as Angola, Morocco and Nigeria. Cross-border mergers and acquisitions (M&As) in the mining industry increased to more than three times their 2003 value. The five top home countries of FDI for Africa in 2004 were France, the Netherlands, South Africa, the United Kingdom and the United States, together accounting for well over half of the flows to the region.

28

Africa received record high foreign direct investment (FDI) inflows in 2005 of $31 billion, but this was mostly concentrated in a few countries and industries, says the UNCTAD World Investment Report 2006, FDI from Developing and Transition Economies: Implications for Development. A sharp rise in corporate profitability and high commodity prices over the past two years helped produce a growth rate of 78 per cent in FDI inflows to the region. Prospects are good for another increase in 2006 given high project commitments, large numbers of investors eager to gain access to resources, and a generally favourable policy stance for FDI in the region. FDI continued to be a major source of investment for Africa as its share in gross fixed capital formation increased to 19 per cent in 2005. However, the region’s share of global FDI remained low at about 3 per cent in 2005. In the manufacturing sector, a number of transnational corporations (TNCs) in the textile industry pulled out of Africa because quota advantages for African countries declined after the end of the Multi-fibre Arrangement (MFA) in 2005. South Africa was the largest FDI recipient in the region in 2005, experiencing a sharp jump in inflows to $6.4 billion from only $0.8 billion in 2004. South Africa accounted for about 21 per cent of the region’s total. This was mainly due to the acquisition of Amalgamated Bank of South Africa by Barclays Bank (UK) for $5.5 billion. Africa’s top 10 recipient countries – South Africa, Egypt, Nigeria, Morocco, Sudan, Equatorial Guinea, the Democratic Republic of Congo, Algeria, Tunisia and Chad, in that order – accounted for close to 86 per cent of the regional FDI total. In eight of these countries, FDI inflows African Economic Outlook

exceeded $1 billion (more than $3 billion for Egypt, Nigeria and South Africa in particular). Inflows to South Africa were also the most diversified: investment was channelled into energy, machinery and mining, as well as into banking, which received the largest share. At the other extreme, FDI inflows remained below $100m in 34 African countries. These are mostly least developed countries (LDCs), including oil-producing Angola, which witnessed a drastic decline in FDI receipts in 2005. Many of the low FDI recipients in the region have limited natural resources; lack the capacity to engage in significant manufacturing, and, as a result, are among the least integrated into the global production system. Some countries have also experienced political instability or civil war in the recent past, which destroyed much of their already limited production capacity. FDI inflows to the region were concentrated in a few industries, such as oil, gas, and mining. Six oil producing countries (Algeria, Chad, Egypt, Equatorial Guinea, Nigeria and Sudan, in descending order of the value of FDI) accounted for about 48 per cent of inflows to the region. Although countries such as Kenya, Mauritius, Lesotho, Swaziland and Uganda had begun to receive FDI for their textile and apparel industries due to the African Growth and Opportunity Act (AGOA), the trend changed following the end of the MFA in 2005. In Mauritius there was a 30 per cent contraction in the volume of garments manufactured in 2005 following the departure of Hong Kong (China)-owned companies. In Lesotho, six textile TNCs closed, with a loss of 6 650 jobs. The setback demonstrates that the impact of trade-related initiatives can be short-lived in Africa, where domestic capabilities are inadequate for quickly absorbing and continuing production processes. It also underscores the fact that Africa’s industrial progress requires competitive production capacity, in addition to better market access and more welcoming regulatory frameworks. The persistence of the critical capacity problem may continue to hamper the region’s ability to attack and retain FDI in the manufacturing sector. © AfDB/OECD 2007

Overview

FDI outflows from Africa in 2005 remained small and originated from a few countries. Six home countries – Egypt, Liberia, Libya, Morocco, Nigeria and South Africa – accounted for over 80 per cent of total outflows. The largest African TNCs are also from a small number of countries. In 2004, Orascom Construction (Egypt) also made it onto the list. South Africa’s top TNCs were: Sasol Ltd (industrial chemicals); Suppi Ltd (paper); MTN Group Ltd (telecommunications); Steinhoff International Holdings (household goods); Barloworld Ltd (diversified); Naspers Ltd (media); Nampak Ltd (packaging); Gold Fields Ltd (metal and metal products) and Datatet Ltd (diversified). (UNCTAD.org-World Investment Report 2006) Continued high demand for commodities, a more stable policy environment and increasing participation in infrastructure networks by African multinational corporations (MNCs) boosted FDI in 2005. In the short run, expectations for FDI inflows to Africa remain fairly positive, although investment promotion agencies are more optimistic than foreign MNCs. Both experts and MNCs believe that North African

countries have greater potential to attract FDI than those in sub-Saharan Africa. South Africa and China were the most frequently cited as potential sources of FDI. In recent years, Chinese MNCs have expanded their resource-seeking and manufacturing activities on the continent, and Indian firms have begun to invest in IT-related services. A relatively new phenomenon is the increase in FDI outflows (as opposed to portfolio flows and capital flights, that have long been worryingly high) from African countries, which more than doubled in 2004. With the purchase of Italy’s second-largest telecom operator in 2005, Orascom of Egypt joined the list of African MNEs, hitherto largely limited to South Africa. Is Africa the next financial frontier to be explored by private equity? CDC, an emerging markets private equity investor owned by the UK government, and Citigroup has agreed to invest at least $200 million. They join a small group of specialists who put money to work south of the Sahara.

Box 5 - Private Equity in Africa Private equity funds raised $557 million in Africa in 2005, a decrease of 42.7 per cent from 2004. In 2005 government and aid agencies were the largest source of capital. Over half the funds raised were for additional investments in companies by investors who had invested in the same companies at an earlier stage (so-called late stage funds). Direct and portfolio equity investment combined reached $948.3 million in 2005 across Africa, of which South Africa recorded the largest amount. The vast majority of total investments (96.5 per cent) was provided by domestic investors. Transportation services overtook consumer products to account for most of the value of investment, attracting 132 domestic investments. In 2006, a handful of emerging market specialists active in Africa raised new funds in international capital markets. Ethos closed subscriptions to a $750 million fund in October 2006, Aureos Capital, which already runs three funds which total $140 million, is aiming to raise $400 million and Citigroup also established a dedicated fund to invest at least $200 million in Africa. Source: African Venture Capital Association, 2006 Yearbook and other sources

On paper, Africa has attractions. It certainly needs capital. Local equity markets, however, are small. Excluding South Africa, sub-Saharan market capitalisation is about $75 billion, even after some eyewateringly speculative recent rises. Raising debt, © AfDB/OECD 2007

meanwhile, is a “major problem”, even for cashgenerative companies, says the founder of Celtel, a private equity-backed mobile company recently sold to Kuwait’s MTC for $3.4 billion. And private equity, out of the public eye, may handle risk better than most. African Economic Outlook

29

Overview

Macroeconomic Performances in Africa Economic Growth Africa as a whole exhibited real GDP growth of 5.5 per cent in 2006 – well above the long-term trend for the fourth consecutive year – and GDP per capita

grew by about 3.5 per cent. The main factors supporting this growth performance were strong external demand for oil and non-oil minerals, increased investment in these sectors, and good growing conditions for agriculture in most countries. The continuation of sound macroeconomic polices in most of the countries in the continent has also increased business confidence leading to a pickup in private investment generally.

Table 1 - Average Growth Rates of African Regions Region

30

(annual % change)

1998-2004

2005

2006(e)

2007(p)

2008(p)

North Africa West Africa Central Africa East Africa Southern Africa Total Africa

4.5 4.0 5.0 4.0 3.0 4.0

4.6 5.6 4.9 6.4 5.6 5.2

6.3 4.8 3.9 5.1 5.4 5.5

6.0 5.9 5.2 5.8 6.1 5.9

6.0 5.1 6.3 6.0 5.3 5.7

Memorandum Items: Net Oil exporters Net Oil importers

4.5 3.6

5.9 4.7

5.9 5.2

7.4 4.7

6.7 4.8

SANE * Countries Other Countries

3.8 4.1

5.2 5.3

5.1 6.0

5.4 6.5

5.2 6.2

* South Africa, Algeria, Nigeria, Egypt Note: Due to lack of data, these aggregates do not include Liberia and Somalia Source: Various domestic authorities; IMF World Economic Outlook and authors' estimates (e) and projections (p). http://dx.doi.org/10.1787/185107384555

Growth also appears set to accelerate somewhat on average in 2007, and to remain buoyant in 2008 notwithstanding the recent softening of commodity prices most of which are expected to weaken further in the course of 2007 and 2008. However, this continent-wide average masks considerable differences between net oil-exporting and other African countries, groupings that face very different challenges. The challenge for the former and for some non-oil mineral exporters is to ensure that a large proportion of the proceeds from the minerals sector are invested in infrastructure and human capital development to support their medium- and long-term needs for diversification. For many of the others, especially in the second half of 2007 and in 2008, it will be to contain inflationary pressures now running at doubledigit rates as a result of the recent oil price increases, and to finance or contain the expected increases in their trade deficits. African Economic Outlook

As in the previous two years, GDP growth was particularly strong in net oil-exporting countries, at 5.9 per cent in 2006, the same as in 2005, largely due to the increase in oil prices and, in some countries, increases in production as well. However, the growth differential between these and net oil-importing countries remains large with average GDP growth in the latter of 5.2 per cent in 2006 (4.7 per cent in 2005). This generally strong GDP growth performance is expected to strengthen somewhat in 2007, when the average real GDP growth rate for the continent as a whole is expected to be 5.9 per cent, with net oilexporting and net oil-importing countries exhibiting real GDP growth of 7.4 and 4.7 per cent, respectively – a growth differential of more than 2.5 per cent. The projections for 2008 are for slightly lower growth for the net oil exporters and about the same for the net oilimporters as in 2007. © AfDB/OECD 2007

Overview

These forecasts are based on a number of plausible but somewhat optimistic assumptions, suggesting that they are subject to significant downside risk. Apart from assuming continued moderate growth in the global economy, they also assume that oil prices stabilise at $60 per barrel in 2007 and 2008; that growing conditions in agriculture will be favourable in 2007 and 2008; that oil output will increase in 2007 as stability is restored to the Niger Delta region; that no new regional conflicts having significant macroeconomic impacts emerge; and that the worsening current account balances forecast for many of the net oil-importing countries will be fully financed. In this respect the implementation of debt relief agreements for a number of the HIPC countries that began in 2006 will continue to be particularly helpful. North Africa Real GDP growth in North African countries averaged 6.3 per cent in 2006, significantly higher than the 4.6 per cent registered in 2005. It is expected to remain high at.6 per cent, in both 2007 and 2008. The high growth rates recorded in 2006 were largely due to the exceptionally high growth rates estimated for Mauritania (13.9 per cent) and Sudan (12.1 per cent) mainly due to increases in oil and gas production, as well as strong growth in Morocco (7.3 per cent) due to a recovery of agricultural output with the ending of the drought, as well as in Egypt (6.8 per cent). The 2007 and 2008 growth rates in most North African countries are projected to be about the same as in 2006, or higher, sustained by high prices for oil and gas, and strong growth in tourism. West Africa Economic growth in the countries of West Africa was 4.8 per cent in 2006, substantially less than in 2005; it is projected to accelerate to 5.9 per cent in 2007 and to remain high, at 5.1 per cent in 2008. In the West African Economic and Monetary Union (WAEMU), consisting of Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo, economic performance continued to be negatively affected by the continued political turmoil in Côte © AfDB/OECD 2007

d’Ivoire – the largest economy within WAEMU. Growth also slowed in Senegal, due mainly to sharp reductions in the output of cereals and groundnuts, as well as industrial output, especially phosphates and fertiliser. The major positive development in the WAEMU was the sustained growth in agricultural production in several of them. In addition to buoyant agricultural output, Mali benefited from high gold prices, with the result that GDP growth remained high at 5 per cent in 2006 after an exceptionally strong 6.1 per cent in 2005. Within the five non-WAEMU members (The Gambia, Ghana, Guinea, Nigeria and Sierra Leone), Nigeria – by far the largest economy in West Africa – exhibited GDP growth of 5.3 per cent in 2006 down from 6.5 per cent in 2005 due to disruptions of oil production in the Niger Delta. Projections for 2007 indicate an acceleration of Nigeria’s growth rate to 7 per cent, mainly due to the recent increase in oil prices, but also to increased production. Guinea’s growth performance strengthened in 2006 (5 per cent up from 3.3 per cent in 2005), while Sierra Leone’s and Ghana’s performance continued to be relatively strong in 2006 (7.4 per cent and 6.1 per cent, respectively) with particularly good performance in cocoa production and processing. Central Africa Average GDP growth in Central Africa slowed to 3.9 per cent in 2006. Projections indicate an increase in real growth to 5.2 per cent in 2007 and an acceleration of growth to 6.3 per cent in 2008. The slower growth in 2006 was due mainly to an end of the rapid expansion of oil production in Chad and Equatorial Guinea. Thus, the trends among Central Africa’s ten countries are very different, with the Central African Republic, Rwanda and São Tomé and Principe showing clear upward trends, while Chad, the Republic of Congo, and Gabon are expected to exhibit GDP growth of only about 2 per cent, at least in 2007. Growth is projected to remain broadly at 2006 levels for the Democratic Republic of Congo (6.2 per cent) due mainly to donor-supported reconstruction efforts, and to accelerate in Burundi (6.6 per cent in 2007 up from African Economic Outlook

31

Overview

6.1 per cent in 2006). The projections for Cameroon and Equatorial Guinea show some strengthening of growth for 2007 and 2008. East Africa

32

Economic growth in East Africa averaged 5.1 per cent in 2006, and is projected to accelerate to 5.8 and 6 per cent in 2007 and 2008, respectively. Ethiopia, Tanzania, and Uganda continued to be the fastest growing countries within East Africa, growing at 5.9 per cent, 5.7 per cent, and 5.4 per cent, respectively, in 2006. All three countries are also projected to broadly maintain or increase these high growth rates in 2007 and 2008, exhibiting broad-based growth, but led in some cases (Uganda) by the agricultural sector. However, these forecasts are subject to considerable uncertainties due to the unstable political situation in some countries. The Comoros, Djibouti, Kenya, Madagascar and Mauritius, which have recently been exhibiting slow growth, are expected to experience an acceleration of GDP growth in 2007 and 2008, reaching about 5.2 per cent on average in this period. The growth prospects of Mauritius and Madagascar continue to be negatively affected by the increased competition from Chinese, Indian and Bangladeshi textile producers and the end of the Multi-Fibre Agreement. Eritrea is projected to improve its growth performance from 1.5 per cent in 2006 to 2 per cent and 3.3 per cent in 2007 and 2008, respectively, while in the Seychelles GDP growth is expected to be low as well. Southern Africa Economic growth in Southern Africa was 5.4 per cent in 2006, about the same as in 2005, reflecting rapidly increasing output from new oil fields in Angola and the coming on stream of a large number of mega-projects in the mining sector in Mozambique. In South Africa growth – at 5 per cent, its highest since the end of Apartheid – has been broad-based and mainly driven by domestic demand. In Malawi and Namibia growth increased as well in 2006, but it slowed in Botswana. In 2007 and 2008, Botswana is expected to grow by slightly more than 4 per cent per year, and Malawi and Namibia by about 5 per cent per year. In Zimbabwe, economic African Economic Outlook

activity continued to decline in 2006, contracting by about 5 per cent. The projections for South Africa indicate that GDP growth should remain robust at about 4.5 per cent in both 2007 and 2008, marking an important break from the relatively slow growth rates experienced over the past ten years. Overall, the average growth rate for Southern Africa is projected to increase from 5.4 per cent in 2006 to 6.1 per cent in 2007, reflecting the projected near doubling of Angola’s growth rate from 14.8 per cent in 2006 to 27 per cent in 2007 (largely due to rising oil sector activity in new oil fields, and to a lesser extent by increased diamond mining). Inflation Following the historically low inflation rate of 7.5 per cent in 2004, inflation in Africa increased to 8.8 per cent in 2005 and to 9.1 in 2006, largely due to the impact of increasing energy prices (although partially offset by lower prices for imports of manufactures), and by unfavourable weather conditions, especially in Southern and West Africa which raised food prices. This continent-wide average masks important differences between net oil-exporters and net oilimporters. The latter experienced an upward surge of inflation from 8.4 per cent in 2005 to 12 per cent in 2006, which is expected to increase further to 12.7 per cent in 2007 and to 12.9 per cent in 2008.Although low worldwide inflation still benefited countries with pegged exchange rates (such as CFA franc countries), this was far less the case in 2005 and 2006 than in earlier years as the inflation differential between some CFA countries and the Euro region increased considerably. However, there were only 4 countries (Angola, DRC, Guinea-Bissau, and Zimbabwe) that experienced inflation rates at or above 20 per cent in 2005, and the number remained the same in 2006 (DRC, GuineaBissau, São Tomé and Principe and Zimbabwe). The forecasts assume that monetary authorities will not need to tighten monetary policy significantly since oil prices are not expected to increase further. North Africa Inflation in North Africa fell back to 4.3 per cent in 2006 following a temporary increase to 5.9 per cent © AfDB/OECD 2007

Overview

Table 2 - Weighted Mean CPI Inflation of African Regions Region

(annual % change)

1998-2004

2005

2006(e)

2007(p)

2008(p)

North Africa West Africa Central Africa East Africa Southern Africa Total Africa

4.4 9.4 33.5 5.5 16.3 10.0

5.9 13.6 9.1 8.2 10.7 8.8

4.3 7.7 9.5 9.9 16.5 9.1

4.6 5.7 4.2 5.7 20.1 9.2

4.3 6.7 4.2 5.5 21.3 9.5

Memorandum Items: Net Oil exporters Net Oil importers

11.6 8.8

9.4 8.4

5.7 12.0

5.3 12.7

5.5 13.0

SANE * Countries Other Countries

6.3 14.5

7.1 10.9

4.8 14.2

5.3 13.8

5.3 14.2

* South Africa, Algeria, Nigeria, Egypt Note: Owing to lack of data, these aggregates do not include Liberia and Somalia. Source: Various domestic authorities; IMF World Economic Outlook and authors' estimates (e) and projections (p). http://dx.doi.org/10.1787/053866558216

in 2005 when inflationary pressures gained momentum in Algeria, Egypt, and Mauritania. Inflation slowed in Egypt (from 11.4 per cent in 2005 to 4.1 per cent in 2006) and in Mauritania (from 12.1 per cent in 2005 to 6.4 per cent in 2006). However, inflation increased in Tunisia (from 2 per cent in 2005 to 4.5 per cent in 2006) and to a lesser degree in Libya (from 6.9 per cent in 2005 to 8 per cent in 2006). The average rate of inflation in North Africa is projected to remain low in both 2007 and 2008. West Africa The average rate of inflation in West Africa declined to 7.7 per cent in 2006 after experiencing inflation of 13.6 per cent in 2005. Increases in the prices of both food, reflecting the impact of drought which provoked a regional food crisis, and fuel in many WAEMU countries had a negative impact on inflation. Nevertheless, the WAEMU countries, whose currencies are pegged to the Euro, still have a far lower average inflation rate than the member countries of the West African Monetary Zone (WAMZ)11, each of which has inflation rates of at least 5 per cent. In Guinea, inflation rates declined slightly from 31.1 per cent in 2005 to 25 per cent in 2006. The rate of inflation in

Nigeria also declined from 17.9 per cent in 2005 to 8.6 per cent in 2006. In Ghana inflation declined from 15.1 per cent in 2005 to 10.9 per cent in 2006 and in Sierra Leone inflation declined from 12 per cent in 2005 to 9.5 per cent in 20006. In The Gambia inflation rates were low in 2005 to 2006, at 3.2 and 2 per cent, respectively. Projections for 2007 are for large decreases in inflation rates, especially in Ghana and Guinea. Central Africa The average rate of inflation remained high in Central Africa at 9.5 per cent in 2006 largely due to continued high inflation in three countries: DRC (22 per cent), Rwanda (9.3 per cent) and São Tomé and Principe (19.8 per cent). In Burundi inflation dropped from 13.5 per cent in 2005 to 5 per cent in 2006 as weather conditions normalised; and inflation rates remained stable in the remaining Central African countries (Cameroon, the Central African Republic, the Republic of Congo, Equatorial Guinea, and Gabon). The projections for 2007 and 2008 indicate that inflation will decrease in Central Africa to 4.2 per cent, much closer to the convergence target of 3 per cent, largely due to a return to single-digit inflation rates in all countries except São Tomé and Principe.

11. Nigeria, Ghana, Sierra Leone, Guinea and Gambia.

© AfDB/OECD 2007

African Economic Outlook

33

Overview

East Africa Except for Djibouti, Madagascar and Seychelles, inflation in each of the other countries of East Africa increased from 2005 to 2006. As a result, the average rate of inflation in East Africa increased from 8.2 per cent in 2005 to 9.9 per cent in 2006. In Madagascar, where inflation had increased to 18.3 per cent in 2005 due to increases in both food and fuel prices, it decreased to 11.4 per cent in 2006, with the resumption of a normal rice harvest. In Uganda, inflation decreased from 8 per cent in 2004/05 to 6.6 per cent in 2005/06 with the ending of the drought. Mauritius, however, experienced an increase in inflation of 4 percentage points from 2005 to 2006. The outlook in East Africa for 2007 and 2008 is for gradual reductions in inflation rates in every country, except for Seychelles where inflation is expected to remain low at around 2 per cent. Thus, the average rate of inflation in East Africa is expected gradually to fall to 5.7 per cent and 5.3 per cent in 2007 and 2008, respectively. 34 Southern Africa Southern Africa’s experience was mixed in 2006, with 6 countries experiencing higher inflation rates and 4 countries experiencing stable or lower inflation rates. Reflecting the relative sharp decreases of inflation rates in Angola (which thanks to a less expansive fiscal

policy, together with currency appreciation, declined from 23 per cent in 2005 to an estimated 10 per cent in 2006) and accelerating inflation in Zimbabwe, the average inflation rate in Southern Africa accelerated to 16.5 per cent in 2006 from 10.7 per cent in 2005. Moreover the 2006 inflation rate exceeded 1 200 per cent in Zimbabwe, clearly pointing to hyperinflation; and inflation remained above 10 per cent in Angola, Botswana, Malawi and Mozambique, posing the risk of accelerating rates. In all countries where inflation has been high (except Zimbabwe) it is expected to return to single-digit levels in 2007, and to remain close to 5 per cent in Botswana, Lesotho, Namibia, South Africa and Swaziland.

Public Finances In 2006 the overall fiscal balance (including grants) of the group of net oil-exporting countries exhibited a surplus equivalent to 8.2 per cent of GDP due mainly to higher oil prices but also to increases in production. The group of net oil-importing countries increased its overall deficit slightly to the equivalent of 2.3 per cent of GDP in 2006 from 1.9 per cent in 2005. The low deficit of the net oil-importing countries reflects good macroeconomic management and a higher level of grants, including a portion provided in the form of debt relief. On the one hand, projections for 2007 show a

Table 3 - Average Budget Balance to GDP Ratio Region

1998-2004

2005

2006(e)

2007(p)

2008(p)

North Africa West Africa Central Africa East Africa Southern Africa Total Africa

-1.4 -1.9 -0.6 -3.5 -2.6 -2.0

3.2 5.5 6.5 -2.9 0.4 2.4

5.0 5.7 8.3 -4.7 0.2 3.2

5.3 2.6 7.7 -3.4 0.2 2.7

4.9 0.5 7.8 -3.4 -0.3 2.0

Memorandum Items: Net Oil exporters Net Oil importers

-0.8 -3.1

7.0 -1.9

8.2 -2.3

7.3 -2.2

6.1 -2.4

SANE * Countries Other Countries

-1.8 -2.3

2.5 2.3

2.9 3.5

1.4 4.1

0.6 3.6

* South Africa, Algeria, Nigeria, Egypt Note: Due to lack of data, these aggregates do not include Liberia and Somalia. Source: Various domestic authorities; IMF World Economic Outlook and authors' estimates (e) and projections (p). http://dx.doi.org/10.1787/202878646475

African Economic Outlook

© AfDB/OECD 2007

Overview

large but declining fiscal surplus for the group of net oil-exporting countries (reaching 7.3 per cent of GDP) and then declining somewhat in 2008. On the other hand, the average deficit of the group of net oilimporting countries is expected to remain at about the same level as in 2006 in both 2007 and 2008. North Africa In North Africa the average fiscal balance exhibited a surplus equivalent to 5 per cent of GDP in 2006, as the largest oil-exporting countries in the region, Algeria and Libya, increased their surpluses to 13 per cent and 42 per cent, respectively. Egypt, Mauritania, Morocco and Tunisia, on the other hand, experienced little change in their fiscal deficits in 2006. Sudan is estimated to have eliminated the small deficit exhibited in 2005. In 2007 and 2008, nearly every country is projected to improve its fiscal balance except for Algeria whose fiscal surplus is expected to decrease somewhat. West Africa In 2006, fiscal balances deteriorated in 4 countries in West Africa. However, The Gambia, Guinea-Bissau, and Sierra Leone registered substantial reductions in their deficits. In spite of some improvement, 6 countries registered deficits of 4 per cent of GDP or more (Cape Verde, The Gambia, Ghana, Guinea-Bissau, Niger, Senegal). The projections for 2007 and 2008 are for stable or improving overall fiscal balances in most countries. In the case of Nigeria, however, the currently very high fiscal surplus is expected to decrease in both 2007 and 2008. Central Africa In 2006 the average fiscal position in Central Africa improved substantially for the second year in a row as all countries but one reduced their deficits or increased or maintained large surpluses. Chad exhibited a small deterioration. The Republic of Congo, Equatorial Guinea and Gabon also improved their fiscal balances significantly, and São Tomé and Principe continued to register a large surplus in 2006 due to revenue received from oil exports. Projections for 2007 and 2008 show © AfDB/OECD 2007

little change in Central Africa’s average fiscal surplus as a percentage of GDP. East Africa Fiscal balances worsened in East Africa in 2006, reaching -4.7 per cent of GDP. The deterioration was largely due to increased fiscal deficits in East Africa’s three largest economies, Kenya, Ethiopia and Tanzania, accounting for about two-thirds of East Africa’s GDP. In Kenya, fiscal balances worsened from a small surplus of 0.1 per cent in 2005 to a deficit of 3.5 per cent in 2006; in Ethiopia, the fiscal deficit increased from 4.7 per cent in 2004/05 to 7.4 per cent in 2005/06; while Tanzania’s deficit increased from 4.6 per cent in 2005 to 6 per cent in 2006. In 2007 fiscal deficits are expected to improve somewhat and to remain at about the same levels in 2008. Southern Africa The average fiscal balance of the countries in Southern Africa exhibited little change in 2006 with reduced deficits in Malawi, Namibia, and Zimbabwe offsetting reduced surpluses in Angola and Lesotho. The projections for 2007 and 2008 show little change for the region as a whole. However, the fiscal deficits of Mozambique and Swaziland are expected to worsen, while the fiscal surplus of Namibia is expected to give way to a small deficit. Balance of Payments In 2006, Africa’s average current account balance exhibited a large surplus equivalent to 4.7 per cent of GDP. This overall figure, however, masks large differences among countries. On the one hand, net oil-exporting countries recorded a current account surplus of 12.8 per cent in 2006 (up from 11.7 per cent in 2005); on the other hand, the group of net oilimporting countries experienced a significant average current account deficit of 3.9 per cent of GDP in 2006 compared with an average of 2 per cent in the period 1998-2004. These developments in current account balances were also far more homogenous within the group of net oil-exporting countries than in the group African Economic Outlook

35

Overview

of net oil-importing countries. Among the latter, only two countries improved their current account balances significantly (Botswana by 2.5 percentage points as a share of GDP and Mauritania by 8.7 percentage points). The surplus in the current account balances of net oil-

exporting countries is projected to decrease slightly in 2007 and further in 2008. Meanwhile the average current account deficits of the net oil-importing countries in 2007 and 2008 are expected to be about the same as in 2006.

Table 4 - Average Ratio of Current Account Balance to GDP Region

1998-2004

2005

2006(e)

2007(p)

2008(p)

North Africa West Africa Central Africa East Africa Southern Africa Total Africa

2.9 -3.6 -4.0 -3.3 -1.8 -0.4

10.5 5.3 0.9 -5.5 -2.4 3.6

12.5 3.2 5.2 -6.1 -1.3 4.7

11.9 4.1 2.4 -6.7 -1.4 4.3

10.3 3.7 4.7 -7.1 -3.4 3.1

Memorandum Items: Net Oil exporters Net Oil importers

1.4 -2.0

11.7 -3.9

12.8 -3.9

12.1 -3.9

10.0 -4.3

SANE * Countries Other Countries

0.7 -1.8

4.9 2.1

5.0 4.4

4.1 4.6

2.9 3.4

* South Africa, Algeria, Nigeria, Egypt Note: Due to lack of data, these aggregates do not include Liberia and Somalia. Source: Various domestic authorities; IMF World Economic Outlook and authors' estimates (e) and projections (p). http://dx.doi.org/10.1787/431735236880

36 Africa’s overall balance of payments has benefited from increased foreign direct investment flows and significantly reduced debt service payments in many heavily indebted poor countries (HIPCs) (see details in previous section). As of end-2006, 17 African countries had reached their completion points and 9 additional African countries had reached the decision point under the enhanced HIPC Initiative. North Africa Northern African countries continued to display large differences in their current account balances in 2006. While Algeria and Libya increased their trade surpluses to about 24 per cent and 48 per cent of GDP, respectively in 2006, Egypt and Morocco registered small and declining surpluses, and Tunisia’s deficit declined slightly. Mauritania made significant progress in reducing its current account deficit from nearly 50 per cent in 2005 to 37 per cent in 2006, while Sudan reduced its current account deficit from 10.6 per cent in 2005 to 5.9 per cent in 2006. Largely due to improvements in Algeria, Libya and Mauritania, North Africa’s current account surplus improved from 10.5 per African Economic Outlook

cent in 2005 to 12.5 per cent in 2006. In 2007 and 2008 the current account balances of Libya, Mauritania, Morocco and Sudan are expected to improve, while those of Algeria, Egypt and Tunisia are expected to worsen. West Africa In 2006, 11 countries in West Africa registered current account deficits ranging from about 4 to 14 per cent of GDP. Smaller deficits were registered only in Cote d’Ivoire and Mali. The average current account balance in West Africa is dominated by Nigeria where the current account surplus was 8 per cent of GDP in 2006 down from about 12 per cent in 2005. Little change is expected in 2007 or 2008 for most of the deficit countries. Central Africa In 2006, the average current account balance in Central Africa registered a further improvement reaching a surplus equivalent to 5.2 per cent of GDP, largely due to further large increases in the nominal value of oil © AfDB/OECD 2007

Overview

exports, especially in Chad, the Republic of Congo and Gabon. Four countries (Burundi, the DRC, Rwanda and São Tomé and Principe) registered deteriorations in their current account balances, while the surplus of Equatorial Guinea remained high. In 2007 and 2008 the current account surpluses of most net oilexporting countries in Central Africa are expected to decrease slightly. East Africa In 2006 the average current account deficit in East Africa widened to reach 6.1 per cent of GDP compared with an average of 3.5 per cent for the period 19982004. This was largely due to the sizeable deterioration between 2005 and 2006 in the deficits of Ethiopia (from 8.6 per cent of GDP in 2005 to 11.5 per cent of GDP in 2006), Madagascar (from 10.1 per cent of GDP in 2005 to 16.8 per cent in 2006) and Mauritius (from 5.2 per cent of GDP to 7.4 per cent). Current account deficits also widened in Kenya and Uganda. Tanzania reduced its current account deficit from 7.6 per cent of GDP in 2005 to 5.7 per cent in 2006. Prospects for 2007 and 2008 are for some further worsening of current account deficits reaching 6.7 per cent and 7.1 per cent of GDP in 2007 and 2008, respectively. Southern Africa Among the countries in Southern Africa, Angola experienced an increase in its current account surplus to 14.5 per cent of GDP in 2006, up from 12.8 per cent in 2005, as a result of rising oil production and prices and of increased diamond production. Botswana registered an increase in its current account surplus from 8.1 per cent in 2005 to 8.8 per cent in 2006, and Namibia also registered an increase in its current account surplus from 5.7 per cent of GDP in 2005 to 10 per cent in 2006. The current account deficit of Mozambique was reduced substantially in 2006, thanks to buoyant aluminium exports. Nevertheless, a new wave of mega-projects is expected to result in a strong increase in capital goods imports and a renewed deterioration of the current account balance in 2007 and 2008. Current account deficits in Lesotho and South Africa © AfDB/OECD 2007

worsened slightly in 2006, but deficits fell in Zambia and Zimbabwe. South Africa’s current account balance is projected to remain nearly stable in 2007 and 2008, while Angola’s very high current account surplus is projected to narrow slightly in 2007 and then to decrease substantially in 2008 with a slowdown in the growth of oil exports.

The Millennium Development Goals: Progress Report In making progress towards achieving the Millennium Development Goals (MDGs) Africa is lagging behind other developing regions. On current trends, the average number of targets likely to be met per country is 2.4 out of 9 in Sub-Saharan Africa and 7.4 in Northern Africa. Nevertheless, those countries that have adopted appropriate economic policies, coherent poverty reduction strategies and have a record of good governance have made considerable progress. Two main issues appear of particular importance to help African countries improve their social indicators. The first one relates to foreign aid. Arguing that large amounts of well-targeted aid could produce some remarkable success stories the UNCTAD report Economic Development in Africa 2006 calls for aid to be dramatically increased, depoliticised and distributed multilaterally instead of being concentrated on a relatively small number of countries. The second issue is the magnitude of the HIV/AIDS pandemic in Africa which affects all aspects of socio-economic life, leading to a decline in economic growth, productivity and many social indicators. These effects flow from the erosion of the most productive cohort of the labour force which reduces total labour input, depresses fiscal revenues and deepens the social crises of families. Based on World Bank and UNDP data, Table 5, Main Progress Towards Achieving the MDGs, shows only the countries that have already achieved or are on track to achieve the considered target. A country is “On track” when the actual growth rate of the indicator is equal or higher than the required growth rate to achieve the target. One should note that any situation can be reversed in the future; the trend from the baseline African Economic Outlook

37

Overview

scenario to 2015 is not necessary linear. In other words, even countries that have not achieved or are not on track to achieve the target this year, could reach it in the near future. The satisfactory performance ratio is the percentage of countries that has achieved or is on track to achieve the target out of the 53 African countries. Blanks may also indicate missing data. Goal 1 – Reducing extreme poverty and hunger by half Monetary poverty

38

This first target refers to halving, between 1990 and 2015, the proportion of people whose income is less than one dollar a day. Although Northern Africa (Algeria, Egypt, Libya, Morocco and Tunisia) and some SubSaharan countries (Botswana, Burkina Faso, Cameroon, Ghana, Lesotho, Mauritius, South Africa and Uganda) are making good progress, other countries are not yet making satisfactory progress. Overall, the poverty rate in Sub-Saharan Africa has declined marginally, from 44.6 per cent in 1990 to 44 per cent in 2002.

2015. Millions of children presently are not attending school, especially in rural areas, more than half of them girls. All North African countries are on track to reach the target with an average primary enrolment ratio of 94 per cent (64 per cent in Sub-Saharan Africa). Countries that are “On track” have a ratio greater than 85 per cent and increasing. Completion rates Unfortunately, increased enrolment in primary school has not often translated into increased completion rates. Children who have not completed a full course of primary education would not have become fully literate. The three countries (Egypt, Mauritius, and Seychelles) that have achieved the target had a completion rate of at least 99 per cent in 2004.The percentage of countries with a satisfactory performance ratio for completion rates is 22.6 per cent. However, considering both targets (primary enrolment and completion rates), only Algeria, Cape Verde, Egypt, Mauritius, Seychelles, Tanzania and Tunisia (13.2 per cent of African countries) are likely to ensure that all children complete primary school by 2015.

Hunger Goal 3 – Eliminating gender disparity In Africa, the proportion of people who suffers from hunger has declined from 31.4 per cent in 1990/92 to 29.1 per cent in 2001/03. Hunger is still widespread, particularly in rural Africa. However, over the same period 20 countries managed to reduce the proportion of people suffering from hunger by at least 22 per cent, including three countries that have achieved the target of a 50 per cent reduction. The prevalence of the undernourished as a percentage of the population has decreased from 53 per cent to 26 per cent in Djibouti, from 10 per cent to 5 per cent in Gabon and from 37 per cent to 12 per cent in Ghana. Goal 2 – Achieving universal primary education Primary school enrolment Only 24.5 per cent of African countries are likely to achieve universal primary education by African Economic Outlook

One of the challenges for many African countries is to ensure access to education for the girl-child. For the female primary school enrolment ratio as a percentage of the male ratio, the percentage of countries with satisfactory performance (62.3 per cent) is the highest of the nine targets. It was calculated by considering all the countries that had a ratio of greater than 85 per cent that was increasing. However, in secondary education, only 37.7 per cent of countries are on track. Only six countries (Botswana, Lesotho, Libya, Mauritius, Namibia, Seychelles) have achieved gender equality in both primary and secondary levels of education as indicated in the United Nations Millennium Declaration “preferably by 2005”. Thirteen other countries seem able to reach both targets by 2015 (Algeria, Cape Verde, Egypt, Ghana, Kenya, Madagascar, Rwanda, São Tomé and Principe, South Africa, Sudan, Swaziland, Tunisia and Zimbabwe). © AfDB/OECD 2007

Overview

Box 6 - Women in Sub-Saharan Africa According to recent estimates, women provide approximately 70 per cent of agricultural labour and produce about 90 per cent of all food. Women’s economic activity rate, which measures the percentage of people who furnish the supply of labour for the production of economic goods, ranks highest compared to other regions of the world (including the OECD countries) with a value of 61.9. However, women are predominantly employed in the informal sector and/or they occupy low-skill jobs. This can be illustrated by considering the percentage of women in wage employment in the non-agricultural sector, which scores lowest among all regions of the world with a value of only 8.5 per cent. The weak status of women in the formal economy of Sub-Saharan Africa has many reasons. Insufficient access to the key resources of education and health are two important contributing factors. As is illustrated by the Gender, Institutions and Development Data Base (GID-DB) of the OECD Development Centre, primary education of females is still at a strikingly low rate of 67 per cent despite international endeavours such as the second Millennium Development Goal to achieve universal primary education by the year 2015. Unsurprisingly, illiteracy remains a major challenge. Among those above the age of 15, only 51 per cent of women are able to read and write compared to 67.1 per cent of men. Improvements in maternal mortality also fall far short of international objectives. The African value of 866 deaths per 100 000 live births – partly due to dismal medical services which only guarantee 50.9 per cent of all births being attended by skilled health personnel – is alarming and far worse than in any other region of the world. Apart from these relatively obvious factors, the GID-DB also helps to identify and understand more hidden reasons that obstruct the socio-economic development of women. The comprehensive data base compiles for the first time in a coherent and systematic fashion information on inequalities that are based on social norms and traditions. The prevailing family code in many African countries, for example, discriminates against women in preventing daughters from having an equal share of inheritance or parental authority over their children after a marriage is dissolved. Similar to South Asian countries, girls often find themselves in arranged or even forced marriages, into which they enter at very young ages. Compared to an OECD average of 27.4 years, girls in Sub-Saharan Africa marry at only 21.3 years. What is more, 28 per cent of all girls before the age of 20 have been married at least once in their life. Polygamy is pervasive in many Sub-Saharan African countries and property rights over land are not granted equally to men and women. Although women may have the right to obtain a bank loan on paper, customs still prevent females from having equal access to credit in many rural areas in Africa. Other traditions such as female genital mutilation – which in some countries is reported to affect more than 95 per cent of all women (e.g. in Guinea, Mali, Somalia and Eritrea) – are not only a violation against women’s basic human rights but also impairs their health status and consequent chances in the labour market. Highlighting the important impact of social norms and traditions may help to design better policies that can improve the socio-economic status of women in the long-run. See www.oecd.org/dev/institutions/GIDdatabase for further information. Note: Sub-Saharan Africa as defined by the World Bank (including Mauritania and Sudan).

Goal 3 also focuses on women’s empowerment in the areas of employment and political decision making. On the political front, the number of women in parliaments has constantly increased over the years. However, they are still under-represented in politics and at the highest level of economic institutions and sectors. Over the period 1990-2006, the share of women in parliament has increased from 7 per cent to 16 per cent in Sub-Saharan Africa and from 3 per cent to 7 per cent in Northern Africa. Rwanda is the only African country which has come close to parity. © AfDB/OECD 2007

Goal 4 – Reducing child mortality In Africa, progress towards reducing under-five mortality rates has been painfully slow. With only 20 per cent of the world’s children under age five, the region accounted for half of total child deaths worldwide. The percentage of countries exhibiting satisfactory performance is particularly low (15.1 per cent) and even lower (5.7 per cent) in sub-Saharan Africa. Only three countries in sub-Saharan Africa (Cape Verde, Comoros, and Eritrea) have managed to African Economic Outlook

39

Overview

reduce under-five mortality rate by at least 37 per cent between 1990 and 2004. Due to the HIV/AIDS pandemic or conflicts, several other countries have even slipped back over the period 1990-2004 (Botswana, Central African Republic, Côte d’Ivoire, Equatorial Guinea, Kenya, Rwanda, South Africa, Swaziland and Zimbabwe). The majority of children’s deaths can be attributed to preventable diseases such as polio, smallpox or parasites; this is due, at least in part, to that fact that the percentage of children receiving vaccination was only 65 per cent in sub-Saharan Africa in 2004. Goal 5 – Improving maternal health

40

Only 20.8 per cent of countries are on track to meet the target of reducing the maternal mortality ratio by three-quarters by 2015 and no country has yet achieved the target. In 2000, more than 1 500 women per 100 000 live births died during pregnancy or delivery in Angola, Malawi, Niger, Sierra Leone and Tanzania due to limited access to health care. The provision of skilled care at childbirth is one of the key elements necessary to reduce maternal mortality. However, in sub-Saharan Africa the proportion of deliveries attended by skilled health care personnel has increased by only 4 percentage points, from 42 per cent to 46 per cent, between 1990 and 2004; and inequality between urban and rural care at delivery is particularly significant. In contrast, the proportion has increased from 40 per cent to 71 per cent in Northern Africa. Goal 6 – Combating HIV/AIDS, malaria and other disease The goal of halting and reversing the spread of HIV/AIDS, malaria, tuberculosis and other major diseases by 2015 appears daunting in Africa. Concerning HIV/AIDS, although some prevention efforts are proving successful in some places (urban areas of Burkina Faso, Kenya, and Zimbabwe), deaths and new infections continue to increase. The world-wide epidemic remains centred in Sub-Saharan Africa. In 2005, the region accounted for 64 per cent of HIV-positive adults worldwide, and 90 per cent of children under 15 living with the virus. In sub-Saharan Africa, more than African Economic Outlook

12 million children were AIDS orphans and 59 per cent of HIV-positive adults were women. The apparent stabilisation of the HIV prevalence rate in Sub-Saharan Africa, at about 6 per cent, reflects the fact that as new people acquire the virus, nearly the same number die from AIDS. Concerning tuberculosis, Table 5 indicates that 10 countries (among which six Sub-Saharan countries) are on track to halve the spread of the disease by 2015. However, new tuberculosis cases are on the rise, not only because they are associated with HIV. Excluding people who are HIV-positive, the number of new tuberculosis cases per 100 000 has increased from 148 to 281 in Sub-Saharan Africa between 1990 and 2004. Concerning malaria, the fight against the disease has taken off with the increased availability of insecticidetreated mosquito nets and effective anti-malaria drugs. However, disparities between rural and urban areas in sub-Saharan Africa remain large. Goal 7 – Ensuring environmental sustainability Goal 7 embodies reversing the loss of environmental resources, along with provision of safe water, adequate sanitation and decent housing. Poverty across Africa has led to continued loss of forests and other precious environmental resources. The proportion of land area covered by forests has decreased from 29 per cent in 1990 to 27 per cent in 2005 in Sub-Saharan Africa. The conversion of forests to agricultural land and the use of fuel wood for heating, cooking and lighting have caused extensive deforestation. This in turn has increased drought and flooding. Sub-Saharan Africa has made little progress towards achieving the target of improving the lives of at least 100 million slum dwellers. During the period 1990-2001, the number of people living in slums increased at an annual average rate of 4.6 per cent. These families face overcrowding, inadequate housing and a lack of water and sanitation. However, there has been progress towards meeting the target of halving by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation. Five countries have already achieved the target for improving access to safe drinking water (Egypt, Malawi, Mauritius, Namibia and Tunisia), and © AfDB/OECD 2007

Overview

15 countries are “On track”, bringing to 37.7 the percentage of countries with a satisfactory performance. Concerning sanitation, progress has been much slower. In sub-Saharan Africa the proportion of population using improved sanitation increased on average, from 32 per cent to 37 per cent between 1990 and 2004, compared to the target for 2015 of 66 per cent. Rapidly growing populations and wide disparities between rural and urban areas pose daunting challenges to fully achieving the drinking water and sanitation targets. Goal 8 – Developing a global partnership for development This broad goal encompasses partnerships between developed and developing countries through aid, debt relief, trade, procurement of drugs, creation of work, exchange of new technologies, etc. Official development assistance (ODA) to Africa has started to increase since 2001. It recovered from a low of $15.3 billion in 2000 to $26.5 billion in 2004. In 2005, debt relief accounted for three quarters of the aid increase following the G8 Summit in July 2005 regarding debt cancellation. Other forms of aid rose by 9 per cent in 2005 and donors have pledged to double it by 2010. Unfortunately, debt relief as well as emergency and disaster relief will not necessarily release more money for poverty reduction and longterm development. Access to essential drugs has significantly expanded in Sub-Saharan Africa, especially those for treating HIV following availability of generic drugs. The number of people on antiretroviral therapy has increased from 100 000 in 2003 to 810 000 in 2005. Job prospects for youth have not kept pace with population growth both in sub-Saharan Africa and in Northern Africa: the rate of youth unemployment has increased from 18 per cent in 1995 to 18.3 per cent in 2005 in the former and from 33.9 per cent to 34.5 per cent in the latter. As regards international trade, producer subsidies in developed countries, and tariffs and quotas on imports, especially on strategically important categories, such as clothing and farm products, still restrict access for African products. The challenge of the ongoing Doha trade negotiations is to further reduce such trade barriers. © AfDB/OECD 2007

Governance and Political Issues Since the early 1990s, important progress has been recorded in strengthening democracy, reinforcing the judiciary and media, and lessening armed conflicts. The promotion of good governance has also become a mainstay in the policy dialogue between African governments and international donors. Nonetheless, few African political regimes have met the minimum requirements of representative democracy and the process of democratisation often suffers from breakdowns and setbacks to varying degrees of severity. In many countries the press is still controlled; and corruption is often perceived as endemic and regarded as one of the major hindrances to economic and human development. Moreover, while civil and international wars are less frequent and less intense than in the past, Africa remains the world’s most unstable region. Conflicts and Political Troubles The AEO political troubles indicator (reported in the Statistical Annex to this volume) shows a continuation in 2006 of the long-term decline in political instability that has been observed since 2002. In Algeria political troubles have dramatically dropped since 2001, and in Ethiopia and Kenya there has been an important and recent decrease in ethnic clashes. In Uganda, the government and the Lord’s Resistance Army (LRA) rebels signed an historical truce in August 2006, which marked a cessation of hostilities and the beginning of peace talks between the two sides, although the latter soon came to a halt. In a positive development for Côte d’Ivoire, President Gbagbo and the chief of the rebels, Guillaume Soro, signed an agreement on 4 March 2007. This agreement, which came after months of negotiations and is known under the name of “Accord Politique de Ouagadougou”, possibly constitutes the first concrete step towards the end of the crises that have beset the country during the past four years. More generally, the decrease of political instability in the continent is reflected, among other things, by the number of state-based armed conflict in sub-Saharan Africa falling from 13 in 2002 to 5 in 2005, while reported deaths decreased from 4741 to 1851 over the African Economic Outlook

41

African Economic Outlook

102 161 163 131 174 169 144 106 172 171 132 140 167 164 148 111 120 157 170 124 155 136 160 173 152 149 999

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia

HDI Rank

Indicators

Targets

42

Ensure that all children can complete primary school

Halve the % of people suffering from hunger

© AfDB/OECD 2007

On track

Achieved On track

Achieved

On track Achieved On track

On track

On track

On track

On track On track

On track

On track

On track

On track

On track On track Achieved

On track

On track

On track

Net primary Children reach enrolment ratio grade 5 (%) (% of grade 1)

Achieve universal primary education

Undernourished people (%)

Goal 2

Goal 1

Eradicate extreme poverty and hunger

On track

On track Achieved

On track Achieved

On track

Achieved

Achieved

On track Achieved Achieved On track

On track On track

On track On track

On track

Achieved

Achieved

On track

On track

On track

On track

On track

Under five mortality rates (per 1000 lives)

Female Female primary secondary ratio as % of ratio as % of male ratio male ratio On track

Reduce by 2/3 under 5 mortality rates

Reduce child mortality

Goal 4

Eliminate Gender disparity in all levels of education

Promote gender equality and empower women

Goal 3

On track

On track On track On track On track

On track

On track

On track

On track

Maternal mortality ratio (per 100 000 live births)

Reduce maternal mortality by 3/4

Improve maternal health

Goal 5

Goal 7

On track

On track

On track

Tuberculosis incidence (per 100 000 people)

Halt and reverse spread of Tuberculosis

On track

On track

On track

Achieved

On track

On track On track

On track On track On track On track

Access to improved safe water (%)

Halve the % of people without access to safe water

Ensure Combating environmental HIV/AIDS, sustainability malaria and Target other disease

Goal 6

Table 5 - Progress Towards Achieving the Millennium Development Goals

6 of 9 1 of 9 1 of 9 5 of 9 1 of 9 2 of 9 2 of 9 5 of 9 1 of 9 2 of 9 3 of 9 3 of 9 0 of 9 3 of 9 2 of 9 9 of 9 2 of 9 3 of 9 2 of 9 2 of 9 2 of 9 5 of 9 1 of 9 0 of 9 3 of 9 4 of 9 0 of 9

Number of targets to be achieved

Overview

© AfDB/OECD 2007 0 13 24.5%

3 17

37.7%

Satisfactory Performance Ratio

On track

11 22 62.3%

22.6%

On track

3 9

On track On track On track On track On track Achieved On track On track

On track Achieved On track On track Achieved

Achieved

On track Achieved On track

Achieved On track Achieved

On track

On track

On track

On track

Achieved

On track

On track

On track

Achieved

On track

On track On track

On track

On track

On track On track

On track

On track

On track On track On track

Achieved On track

Libya Madagascar Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

37.7%

13 7

On track

Achieved

Achieved On track Achieved

Achieved Achieved

On track Achieved

Achieved

Achieved

Achieved On track

5 15 37.7% 18.9% 20.8%

15.1%

Achieved On track

On track

On track

On track

On track

0 10

On track

On track

On track

Achieved

Achieved

Achieved

0 11

On track

On track

On track On track

On track

On track

0 8

On track

On track

On track

5 of 9 3 of 9 4 of 9 1 of 9 2 of 9 6 of 9 4 of 9 1 of 9 5 of 9 0 of 9 2 of 9 4 of 9 5 of 9 2 of 9 6 of 9 1 of 9 0 of 9 4 of 9 2 of 9 2 of 9 4 of 9 1 of 9 7 of 9 2 of 9 2 of 9 2 of 9

http://dx.doi.org/10.1787/811258553025

Sources: Author's calculations based on data from UNDP (2006) Human Development Report, Oxford University Press, New York and World Bank (on line) World Development Indicators, Washington, D.C.

64 143 166 175 153 63 123 168 125 177 159 158 127 156 47 176 999 121 141 146 162 147 87 145 165 151

Overview

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43

Overview

same period. There has also been a large decline in the number of countries in the region experiencing statebased conflict over this period from 11 to 412. Despite this generally positive evolution, some countries experienced increasing troubles in 2006. In Chad, the tensions generated by the neighbouring Darfour crises and by internal opposition to the regime have erupted in a coup attempt and an outbreak of civil strife. In Nigeria, several rebel attacks against oil platforms and kidnappings of firms’ foreign staff added to political tensions, which were already increasing with the approach of general elections. Finally, DRC is still experiencing a difficult political transition, which could hopefully lead

to the end of the civil war. In February 2007, the UN Security Council renewed the mandate of the MONUC, United Nations Mission in the Democratic Republic of the Congo, (in place since November 1999) which provides for assistance to prevent and manage conflict, support state institutions, monitor human rights abuses and enforce the arms embargo. MONUC is the world’s largest and most expensive peacekeeping operation. Armed conflicts remain the strongest threat to democracy and human rights, and violent conflicts in relation to the number of states remain higher in subSaharan Africa than anywhere else13. In 2006, as in the previous year, 74 political conflicts14 were recorded with

Figure 8 - Political Troubles in Africa, 1996-2006 Political troubles

Trend

600

44

500

400

300

200

100

0 1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Note: the indicator has been calculated on the basis of 25 countries: Algeria, Botswana, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Egypt, Equatorial Guinea, Ethiopia, Gabon, Ghana, Kenya, Mali, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Senegal, South Africa, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe. Source: Based on Appendix Table 21. http://dx.doi.org/10.1787/217725660146

12. According to Human Security Centre (2006), Human Security Brief 2006. Note that some countries have more than one conflict. 13. Heidelberg Institute for International Conflict Research (2006), Conflict Barometer 2006. 14. According to Conflict Barometer a conflict is “the clashing of interests (positional differences) over national values of some duration and magnitude between at least two parties (organised groups, states, groups of states, organisations) that are determined to pursue their interests and win their cases. A conflict is considered to be a severe crisis if violent force is repeatedly used in an organised way. A war is a type of violent conflict in which violent force is used with a certain continuity in an organised and systematic way. The conflict parties exercise extensive measures, depending on the situation. The extent of destruction is massive and of long duration”.

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three conflicts ending in 2005, and three new ones emerging in 2006. No conflict ended in 2006. Of these 74 conflicts, two were wars (Somalia and Sudan) and 13 were severe crises. Thus, 15 were characterised by a high level of violence, compared to nine in 2005. This increase was largely due to the re-emergence of regional conflicts. Besides the Darfour crises, the Horn of Africa showed ominous signs of breakdown, with Somalia experiencing all-out civil war, Eritrea arming the Union of Islamic Courts, and Ethiopian troops entering Somalia to restore the transitional federal government.

with the Western African Standby Brigade, building on the peacekeeping experience gained by the ECOMOG force in Sierra Leone, Liberia, and Côte d’Ivoire. The European Union has extended $330 million in aid to the force, which is also benefiting from the Global Peace Operations Initiative (GPOI), a multilateral, five-year programme led by the United States to train and equip 75 000 peacekeeping troops, a majority of them African, by 2010. The Political Stance

In 2002, the Durban Summit of the African Union endorsed the establishment of the African Standby Force (ASF) as one of the cornerstones of a new African security edifice. Phase two of ASF force development has begun and will run until June 2010. During this time, AU protocols state that the force will develop the capacity to manage complex peacekeeping operations, while the five regions will continue to develop the capacity of their own forces. Progress is more advanced

In 2006, there was no improvement in the indicator of political hardening (as defined in the statistical annexes to this volume), as the sharp deterioration in the political climate in a few countries offset the smaller improvements in many others. A hardening of the political stance has been provoked by the outburst of new conflicts (such as in Chad), by the slow progress in resolving ongoing crisis (such as Côte d’Ivoire), sometimes by the holding of elections (such as in 45

Figure 9 - Political Hardening in Africa, 1996-2006 Hardening of the regime indicator

Trend

250

200

150

100

50

0 1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Note: the indicator has been calculated on the basis of 25 countries: Algeria, Botswana, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Egypt, Equatorial Guinea, Ethiopia, Gabon, Ghana, Kenya, Mali, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Senegal, South Africa, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe. Source: Based on Appendix Table 23. http://dx.doi.org/10.1787/488128413665

© AfDB/OECD 2007

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RDC). In Guinea, a series of strikes that started towards the end of 2006 provoked a harsh response from the government in early 2007. The repressive means used

by the authorities caused the deaths of many civilians who were demonstrating for the resignation of the president, and raised concerns that the violence might

Table 6 - Political Governance Indexes for African Countries, 2005 and 2006 Country

46

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Central A Rep. Chad Congo Rep. of Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Libya Madagascar Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Political Rights and Change from Civil Liberties 2006 (ranking) 2005 (value) 148= 148= 64= 64= 118= 111= 169= 130= 148= 140= 169= 169= 140= 148= 176= 176= 140= 140= 130= 52= 148= 111= 90= 80= 111= 185= 90= 118= 64= 140= 1= 130= 111= 64= 90= 118= 148= 64= 80= 90= 111= 176= 52= 185= 169= 111= 148= 148= 130= 118= 176=

0 0 0 0 -0.5 -1 0 -1 0 0.5 0 0 0 0 0 0 0 0.5 0.5 -0.5 0 -0.5 0 0 -0.5 0 0 0 0 -0.5 0 0 0 -0.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Press Freedom 2006 (ranking)

Change from 2005 (value)

126 91 23 53 70 125 112 62 124 73 142 n/a 121 133 n/a 166 160 114 149 34 109 n/a 118 n/a 84 152 66 n/a n/a 77 n/a 97 n/a 26 95 120 n/a

-0.33 3.5 0 -1 -3 16.83 7.75 -5.25 5.5 0 -6.33 -27.25 -4 -5.75 4 -2.25 33 2.5 13 -6.5 -1.5 -2.5 0.25 -3.5 -1.5 -26.25 -9.5 2.75 1 -22.5 0.5 -11.34 1 0.5 11.5 -6.52 3

n/a n/a n/a n/a 44 139 127 88 n/a 148 116 n/a 140

-1.5 7.5 -13.5 -7.75 4.75 4.13 5.5 2.32 -8.75 -3.75 10.58 -0.5 -14.25

Source: Freedom House and Reporters sans frontières. http://dx.doi.org/10.1787/611133186550

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escalate. Developments in Nigeria have, however, been more positive. Some hardening of the political climate with the approach of presidential elections in 2007 notwithstanding, the Senate refusal to modify the constitution and, thus, preventing the incumbent president from being re-elected for the third time, is a sign of consolidation of parliamentary democracy.

including in Uganda, where no such polls had taken place since 1986 and where the incumbent president was reelected with 59.28 per cent of votes. Finally, in Côte d’Ivoire, where the situation remains extremely volatile, the conduct of new presidential elections – already postponed from December 2005 to October 2006 – is now planned for October 2007.

The political freedom index from Freedom House is based on measures of several components of political freedom such as free and fair elections; honest tabulation of ballots; the extent to which citizens are free to organise in different political parties or other political groupings of their choice; whether there is a significant vote for the opposition and a realistic possibility to gain power through elections; self-determination, and freedom from any kind of domination; reasonable selfdetermination for cultural, ethnic, religious and other minority groups; and the extent to which political power is decentralised.

Africans rate the quality of their elections relatively highly. These major achievements notwithstanding, however, the ability of elections to provide voters with either a real voice in government, or an effective means for enforcing accountability on their representatives, remains much less certain. In addition, while the state enjoys a considerable degree of legitimacy, and there is solid support for protection of individual freedoms and enforcement of the rule of law, there is also a sizeable and durable minority that appears willing to compromise on these safeguards, either to protect the state, or to “get things done”. It appears that the public recognises the need for citizens to be more critical of the state in principle, but does not always find itself able to fulfil this duty in practice15.

Progress towards Democracy The transition to competitive, multiparty politics continued in African countries during 2006. Almost 59 million Africans participated in the presidential elections held in ten African countries in 2006 (67.3 per cent turnout rate). The incumbent head of state was reelected in nine cases, with margins ranging from 67 per cent in the Gambia to 42 per cent in Zambia. In Senegal, in the aftermath of a tense electoral campaign, Abdoulaye Wade was re-elected in February 2007. The most convincing victory was in Benin, where a new president was elected with a 73 per cent second-round majority. An historical achievement was the first free and fair elections held in the DRC in 40 years in July 2006. Despite accusations by Vice President Jean-Pierre Bemba, one of the candidates, that President Joseph Kabila had tampered with the first-round results, and the eruption of violence in Kinshasa, the process ultimately succeeded. Moreover, seven countries organised multiparty elections,

Corruption Much has been said about corruption in Africa. Transparency International data indicate that out of 42 African countries for which the 2006 CPI perception index is available, only Botswana is listed in the world’s top quartile, 11 countries are in the second, 14 are in the third, and 15 in the lowest. Making comparisons from one year to another is problematic. Nonetheless, to the extent that changes can be traced back to individual sources, Seychelles and Tunisia are noteworthy examples of deteriorations between 2005 and 2006, while improvements were recorded for Algeria and Mauritius. More broadly, Africans themselves say they perceive less official corruption today than six years ago. This result runs counter to the popular wisdom that corruption in Africa is entrenched and worsening16.

15. Carolyn Logan, Tetsuya Fujiwara and Virginia Parish (2006), “Citizens And The State In Africa: New Results From Afrobarometer Round 3”, Afrobarometer Network, Working Paper No. 61. 16. Bratton, Michael and Wonbin Cho (2006), “Where is Africa Going? Views From Below. A Compendium of Trends in Public Opinion in 12 African Countries 1999-2006”, Afrobarometer Network, Working Paper, No. 60.

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Table 7 - Elections in Africa, 2006-07 2006

2007

Presidential (5 and 19 March)

Parliamentary (May) Presidential and parliamentary, (to be confirmed) Parliamentary (25 March)

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Congo Congo, Dem. Rep.

48

Côte d’Ivoire Djibouti Egypt Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Mali Mauritania Mauritius Morocco Mozambique Nigeria Rwanda São Tomé and Principe

Parliamentary (May) Parliamentary (June) Parliamentary (22 January) and presidential (12 February) Presidential (3 May)

Parliamentary (April) Parliamentary (May)

Presidential (30 July and 29 October 29) and parliamentary (30 July)

Presidential (November) Parliamentary (17 December) Presidential (22 September)

Parliamentary (25 January)

Presidential (December) Parliamentary (17 February) Presidential (3 December)

Referendum (25 June) and parliamentary (19 November and 3 December)

Parliamentary (September) Presidential and parliamentary (21 April) Parliamentary (26 March) and presidential (30 July)

Senegal Seychelles Sierra Leone South Africa Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Parliamentary Presidential (29 April and 13 May) and parliamentary (1 and 29 July) Parliamentary (21 January) and presidential (11 March)

Presidential and parliamentary (25 February) Parliamentary (November) Presidential and parliamentary (28 July)

Presidential (July 28)

Parliamentary (24 June) Presidential and parliamentary (23 February) Presidential and parliamentary (28 September)

Source: www.electionguide.org and http://africanelections.tripod.com/ http://dx.doi.org/10.1787/131105245444

The African Peer Review Mechanism (APRM), launched in July 2002 in the framework of the NEPAD, constitutes an opportunity for African countries and African Economic Outlook

their leaders to show their commitment to improving economic and political governance. In September 2006, a declaration to accede was received from São Tomé and © AfDB/OECD 2007

Overview

Principe, bringing to 26 the number of participating members. Although half of them (13) have already launched the process, the country review reports have been finalised for four of them (Ghana, Kenya, Rwanda and South Africa), and the draft report on Mauritius has been completed. To date, Ghana and Kenya have

achieved stage five, with the country report and programme of action having being published. In 2006, unfortunately, no new country deposited its ratification of the African Union Convention on Preventing and Combating Corruption, adopted in

Table 8 - Corruption Perception Indexes (CPI) for African Countries, 2005 and 2006 Country

Global Rank 2006

CPI 2006

Global Rank 2005

CPI 2005

37 42 51 51 55 63 70 70 70 79 79 79 84 84 84 90 93 93 99 99 105 105 105 111 121 121 121 121 130 130 130 130 130 138 138 142 142 142 142 142 151 151 156 156 156 160

5.6 5.1 4.6 4.6 4.1 3.6 3.3 3.3 3.3 3.2 3.2 3.2 3.1 3.1 3.1 3.0 2.9 2.9 2.8 2.8 2.7 2.7 2.7 2.6 2.5 2.5 2.5 2.5 2.4 2.4 2.4 2.4 2.4 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.1 2.1 2.0 2.0 2.0 1.9

32 51 46 43 47 55 70 65 78 70 70 78 97 97 88 107 88 88 97 117 97 117 107 88 103 83 130 137 107 137 126 151 130 144 152 126 152 152 158 144 144 -

5.9 4.2 4.5 4.9 4.3 4.0 3.4 3.5 3.2 3.2 3.4 3.2 2.8 2.8 2.9 2.6 2.9 2.9 2.8 2.5 2.8 2.5 2.6 2.9 2.7 3.1 2.3 2.2 2.6 2.2 2.4 2.0 2.3 2.1 1.9 2.4 1.9 1.9 1.7 2.1 2.1 -

Botswana Mauritius South Africa Tunisia Namibia Seychelles Egypt Ghana Senegal Burkina Faso Lesotho Morocco Algeria Madagascar Mauritania Gabon Eritrea Tanzania Mali Mozambique Libya Malawi Uganda Zambia Benin Gambia Rwanda Swaziland Burundi Central African Republic Ethiopia Togo Zimbabwe Cameroon Niger Angola Congo, Rep Kenya Nigeria Sierra Leone Côte d’Ivoire Equatorial Guinea Chad Congo, Dem. Rep. Sudan Guinea Source: Transparency International.

http://dx.doi.org/10.1787/063811658136

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Table 9 - African Index of Economic Freedom for 2000-07

50

World rank

Country

34 38 52 55 59 64 65 69 82 86 88 91 92 93 96 101 103 105 106 111 113 114 116 117 118 123 124 126 127 128 129 130 131 134 136 137 139 141 146 147 148 149 151 154 155

Mauritius Botswana South Africa Namibia Uganda Swaziland Madagascar Tunisia Kenya Senegal Cape Verde Ghana Zambia Gambia, The Morocco Mozambique Tanzania Côte d’Ivoire Malawi Guinea Burkina Faso Benin Ethiopia Cameroon Lesotho Mali Niger Mauritania Egypt Equatorial Guinea Gabon Djibouti Nigeria Algeria Rwanda Central African Republic Togo Sierra Leone Burundi Chad Guinea Bissau Angola Congo Zimbabwe Libya

Sub-Saharan Africa North Africa

2007 Score

2006 Score

2005 Score

2004 Score

2003 Score

2002 Score

2001 Score

69.0 68.4 64.1 63.8 63.4 61.6 61.4 61.0 59.4 58.8 58.4 58.1 57.9 57.6 57.4 56.6 56.4 55.5 55.5 55.1 55.0 54.8 54.4 54.4 54.1 53.7 53.5 53.2 53.2 53.2 53.0 52.6 52.6 52.2 52.1 50.3 49.8 48.4 46.8 46.4 45.7 43.5 43.0 35.8 34.5

66.5 70.3 66.3 60.9 64.9 62.2 63.0 59.2 60.0 57.4 60.3 56.7 59.1 57.9 53.0 55.1 59.3 56.8 57.9 53.7 55.7 54.3 53.4 54.2 57.0 54.1 53.6 55.6 52.2 50.2 54.9 55.0 48.8 53.4 54.3 54.8 48.5 46.7 49.6 49.4 47.1 43.3 43.6 34.0 34.3

64.3 69.8 61.5 60.0 61.4 58.0 61.6 56.7 56.0 56.6 59.7 55.1 54.5 56.3 54.0 54.6 54.0 54.9 53.4 55.8 54.6 49.7 50.1 49.7 52.9 56.6 51.2 57.0 52.7 50.6 52.3 56.4 45.8 50.3 48.5 53.6 46.8 43.4 n.a. 48.7 41.2 n.a. 43.0 33.9 28.4

64.3 69.5 65.0 61.6 61.6 56.8 59.1 59.4 55.4 57.3 59.5 56.5 51.9 53.7 58.1 55.5 57.3 56.2 52.0 54.0 55.8 52.5 52.3 50.1 48.6 55.7 51.4 59.0 53.5 49.2 54.3 55.3 47.3 54.9 50.2 54.7 45.8 42.6 n.a. 49.8 39.3 n.a. 41.2 31.6 28.9

64.5 68.5 66.0 66.5 57.9 60.1 62.9 59.2 55.8 56.1 53.5 56.0 53.5 54.8 59.4 58.1 54.1 55.2 51.3 54.7 55.4 52.3 46.6 50.1 50.7 57.8 51.1 56.0 51.7 49.0 56.5 54.1 48.5 54.0 44.9 57.3 45.6 41.1 n.a. 49.3 40.0 n.a. 42.4 33.9 31.8

65.4 60.9 62.8 64.2 58.8 60.2 56.5 60.3 55.3 56.5 56.8 56.6 57.7 56.3 59.3 56.8 57.7 55.9 54.1 52.9 56.3 54.4 47.1 50.8 49.1 60.3 45.3 52.3 50.5 42.2 55.9 56.3 49.8 60.0 47.6 57.0 44.0 n.a. n.a. 45.9 38.2 n.a. 40.9 33.9 31.7

66.7 62.7 60.6 63.7 61.2 63.7 54.0 60.8 55.8 58.4 56.2 61.7 57.4 54.1 63.7 55.7 55.7 53.8 52.3 56.2 53.9 58.3 48.6 50.8 52.3 60.6 47.2 48.9 48.7 44.7 54.7 57.0 52.3 55.2 44.9 n.a. 42.9 n.a. n.a. 44.2 40.3 n.a. 42.2 37.0 32.2

54.7 51.7

55.2 50.4

53.5 48.4

53.5 51.0

53.5 51.2

53.3 52.4

53.6 52.1

Source: The Heritage Foundation/The Wall Street Journal, 2007 Index of Economic Freedom. http://dx.doi.org/10.1787/451816350127

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2003, which remains four ratifications short of the 15 needed for it to enter into force. Fourteen African countries are members of the EITI (Extractive Industry Transparency Initiative).

Economic Governance Economic freedom suffered a minor setback in Africa (Table 9)17 according to the 2007 Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal. The 2007 index fell to 54.3 per cent, down slightly from the 54.6 per cent of the 2006 index. The decline in subSaharan Africa (-0.5 per cent) more than offset the improvement in North Africa (+1.3 per cent). Even so, the scores for both of these two years were higher than those recorded in any of the earlier years for which the index was compiled. Of the 39 countries graded numerically in the 2007 Index, none is classified as a “free” or “mostly free” economy. The bulk of countries—32 economies— have freedom scores of 50–70 per cent. Seven are “moderately free” (scores of 60–70 per cent) and 25 are

“mostly unfree” (scores of 50–60 per cent). Only 8 countries have “repressed economies” with scores below 50 per cent, although this represents 40 per cent of the economies around the world which are classified as such. Among specific economies during the past seven years, the scores of 29 countries are now higher, and the scores of 9 countries are worse.18 Thanks to reforms to financial, monetary, and trade policies, Mauritius surpassed Botswana as the region’s economically freest country. Nigeria recorded the largest improvement, graduating from repressed to “mostly unfree” status. Zimbabwe continues to be the least free country in the region and the gap vis-à-vis the second worse performer, the Republic of Congo, widened further.

Access to Drinking Water and Sanitation in Africa Access to safe drinking water and sanitation is essential to human health and well-being, and thus the direct concern of two of the MDGs, but it also contributes indirectly to achieving many of the other MDGs. Unsafe drinking water and inadequate sanitation cause illness and generates high health costs

Box 7 - Definitions Access to safe drinking water is measured by the percentage of the population using improved drinking water sources. Similarly, access to sanitary means of excreta disposal is measured by the percentage of the population using improved sanitation facilities. Improved sanitation facilities are those more likely to ensure privacy and hygienic use. Improved drinking water technologies are those more likely to provide safe drinking water than those characterised as unimproved. Improved drinking water sources: Household connection / Public standpipe / Borehole / Protected dug well / Protected spring / Rainwater collection Unimproved drinking water sources: Unprotected well / Unprotected spring / Rivers or ponds / Vendor-provided water / Bottled water / Tanker truck water Improved sanitation facilities: Connection to a public sewer / Connection to a septic system / Pour-flush latrine / Simple pit latrine / Ventilated improved pit latrine Unimproved sanitation facilities: Public or shared latrine / Open pit latrine / Bucket latrine Source: WHO/UNICEF Joint Monitoring Programme

17. Although the methodology used for measuring freedom was revised this year, previous scores were also revised to be consistent across time. 18. The decline occurred in Central African Republic, Djibouti, Gabon, Ghana, Guinea, Malawi, Mali, Swaziland, and Zimbabwe

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with negative impacts on economic activity. Children are particularly vulnerable to water scarcity and poor quality. In the latest Human Development Report19, the UNDP estimates that access to safe drinking water would diminish the risk of diarrhoea by close to 70 per cent in Ghana, and that improved sanitation would cut the risk of infant mortality by 40 per cent in Uganda. In water-scarce situations, women and girls also generally bear the burden of carrying water long distances to their homes and are as a result excluded from other economic activities or education. As discussed in an earlier section of this Overview chapter, however, progress remains inadequate in relation to needs and the likelihood of reaching the access targets for drinking water and sanitation of 78 per cent

and 69 per cent, respectively, by 2015 is low. SubSaharan Africa has the lowest drinking water coverage and the lowest sanitation coverage in the world, with over 322 million people without access to safe drinking water sources and 463 million without access to improved sanitation. The deficit in sanitation remains much larger than for water because efforts have been less intense. However, if progress in access to water is not matched with corresponding measures for sanitation and effluent management, the volume of sewage produced will proportionally increase with negative consequences for human health and natural ecosystems. Over the last 25 years water has become embedded in the sustainable development agenda. Substantial analysis has been conducted and many examples of

Box 8 - Milestones in the Building of an International Consensus and African Responses to Water Development Challenges

52

1981-90 – UN International drinking water supply and sanitation decade 1992 – UN Conference on Environment and Development, Rio de Janeiro: set the stage for subsequent discussions on water. 1992 – International Conference on Water and the Environment, Dublin: four guiding principles on water 1996 – Formation of the Global Water Partnership to implement holistic approach to water, concretised in the concept of Integrated Water Resource Management 1996 – Formation of the World Water Council, think tank on international water policy issues, leading organiser of the World Water Forum held every 3 years 1997 – First World Water Forum, Marrakech 1997 – Formation of World Commission for Water in the 21rst century: A Water Secure World indicated that an additional annual $100 billion investment in the water sector was required 2000 – Second World Water Forum, The Hague: Adoption of the African Water Vision for 2025 2001 – UN Millennium Declaration: setting of the water target of reducing by half the proportion of people without sustainable access to adequate quantities of affordable and safe water 2001 – NEPAD and the Water and Sanitation Infrastructure Programme 2002 – Establishment of the African Ministers’ Council on Water (AMCOW) to provide political leadership, policy direction and advocacy in the provision, use and management of water resources. 2002 – UN Conference on Finance of Development, Monterrey: new commitments on the part of donors to raising official development assistance 2002 – UN World Summit on Sustainable Development, Johannesburg: MDG targets extended to sanitation and recognition of the need for water storage and hydropower development. 2003 – Report of the World Panel on Financing Water Infrastructure (known as the Camdessus Panel) 2003 – Third World Water Forum, Kyoto 2004 – Establishment of the UN Secretary General’s Advisory Board on Water and Sanitation (UNSGAB) 2006 – Report of the task force on Financing Water for All (known as the Gurría Panel) 2006 – Fourth World Water Forum, Mexico 2006 – Human Development Report on Beyond Scarcity: Power, Poverty and the Global Water Crisis 2008 – UN International Year of Sanitation 2009 – Fifth World Water Forum, Istanbul

19. UNDP Human Development Report, 2006. Beyond scarcity: power, poverty and the global water crisis.

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good practice highlighted. Improvements are needed in several key areas, notably in the management of the water sector, the institutional set up, and strategic policy setting. Government budgets and development assistance have also been insufficient so far to cover the investment needs. Insufficient financial discipline and accountability combined with inadequate maintenance, deficient billing and poor collection rates have prevented the establishment of effective cost recovery mechanisms by water utilities in most countries. The water and sanitation sector has also been the infrastructure sector least attractive to private investors. Ensuring adequate financing remains a key challenge for improving water and sanitation coverage.

I - Taking Stock of Resources and Access The minimum supply of safe water for domestic use is commonly estimated by WHO at 20 litres per person per day for drinking and personal hygiene. Factoring in bathing, cooking and laundry brings the figure up

to around 50 litres per day. Domestic needs increase with development; European households consume on average about 200 litres per person per day, for example. In turn, development has an ambivalent impact on availability, both increasing the pressure on resources through increased activity and facilitating the development and implementation of new technologies to exploit water better. However, in nearly all countries there is more than enough fresh water available to meet the needs of households for drinking water. The following section gives an assessment of resource availability and population access based on the latest available data by FAO and the WHO/UNICEF Joint Monitoring Programme (JMP). A word of caution is needed, however, because the quality of data and especially information regarding access remains problematic. Nevertheless, the JMP data provide useful information on global trends and as such are used in the section to take stock of global progress. When calling on specific examples, however, the following sections will refer to alternative sources of information as appropriate such as the AMCOW, AfDB, EUWI, UNDP, WSP and UNDP MDG Country Status Reports.

Box 9 - The Quality of the JMP Data and Initiatives to Improve Information and Comparability Data collection and treatment in Africa is generally poor and in some cases distorted for political use. It is consequently difficult to assess the progress made to extend coverage but also to draw comparison across countries. For example, in Angola the national UNICEF MICS survey of 2001 estimated the percentage of population with access to safe water at 62 per cent. A later UNICEF estimate however suggests that just 34 per cent of urban population has access to safe water, this figure rising to 39 per cent for rural areas. Since almost 70 per cent of Angolans are urbanised, it is unlikely that the national coverage could be higher than 35 per cent. Meanwhile, the joint monitoring programme provides a global estimate of 53 per cent for 2004. Similarly, in Mozambique, current official figures report both urban and rural water coverage rates of about 40 per cent. According to the latest household survey, however, rural water access is only 27 per cent while urban water access is much higher at 64 per cent. The data collected by the Joint Monitoring Programme and meant to monitor the progress of countries towards the water related MDGs, have been criticised for lack of accuracy. To help improve the monitoring, some donors have supported the development of alternative figures based on wider consultation. Recently, AMCOW, the AfDB, the EUWI, UNDP, WSP and the UNDP20 have collaborated with local sources to produce MDG Country Status Reports for 16 SSA countries (Benin, Burkina, DRC, Ethiopia, Ghana, Kenya, Madagascar, Malawi, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia), assessing the probability to achieve the MDGS for rural and urban areas respectively, not only looking at past trends in coverage extension, but also at investment gaps and quality of institutional arrangement to ensure sustainability.

20. Getting Africa on Track to meet the MDGs on Water and Sanitation, a Status Review of Sixteen African Countries, 2006, a regional initiative by AMCOW, AfDB, EUWI, WSP and UNDP

© AfDB/OECD 2007

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1- Availability of Resource and Uses and Perspectives for the Future According to the FAO, some 14 870 m3/inhab/year renewable water resources are available in Africa, including internal and external resources at the national level. These resources are considered overall abundant, but are only marginally exploited under managed conditions. One-third of countries experience some pressure on their internal water resources as measured by the volume of internal renewable water per capita

withdrawn annually. Over a quarter of the renewable water used is imported from other countries. Water is used primarily for agricultural purposes (68.4 per cent), followed by households (24.1 per cent) and finally by industry (7.5 per cent). Water availability in Africa is characterised by extreme variability (of rainfalls, rivers…). To cope with this variability, important water conservation and water storage measures are often needed. Water resources in Africa are also very unequally distributed

Figure 10 - Renewable Water Per Capita (m3/inhab/year), 2003-07

North Africa

East Africa

54

Southern Africa

West Africa

Central Africa

Africa

0

10000

20000

30000

40000

50000

60000

Source: Aquastat, FAO: www.fao.org/ag/agl/aglw/aquastat/main/indexfra.stm http://dx.doi.org/10.1787/603581614167

Figure 11 - Water Uses in Africa, 2003-07 Domestic use 24%

Agricultural use

68%

8%

Industrial use

Source: Aquastat, FAO: www.fao.org/ag/agl/aglw/aquastat/main/indexfra.stm http://dx.doi.org/10.1787/006482437356

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among countries. Africa hosts both some of the driest countries in the world (in Northern Africa), but also some of the best endowed (in Central Africa). Egypt and Libya receive very limited precipitation (some 51 and 56 mm/year respectively) and overall North Africa receives less than 3 per cent of the total precipitation of the continent. Central Africa, by contrast, receives 37 per cent of the total precipitation while accounting for only 20 per cent of land. DRC alone accounts for 23 per cent of internal renewable water resources in Africa. Consequently, most northern African countries experience stress on their water resources: especially Egypt, but also Libya and Sudan. For example, Egypt meets some 97 per cent of its water resources with imports. Availability evolves with climate change impact, demographic pressure and economic development. In 2003-07, some nine countries are estimated to face water-scarce conditions with less than 1000 m3 of renewable water resources per capita per year and eight others have to deal with water-stress conditions with less than 1700 m3/cap/year. According to a study by UNEP21 up to 25 African countries could be subject to water stress or water scarcity by 2025, the most severe cases arising in northern Africa. As water becomes relatively scarce, its use as an input in agriculture and industry needs to be progressively re-directed toward activities with high value-added per m3 of water used, and demand management for household use becomes more important as well. Tunisia manages to provide nearly universal access to drinking water and sanitation for its citizens despite having a resource endowment of less than 500 m3 of water per person per year.

Africa extracts only a marginal portion of its water resources compared to the rest of the world and has the lowest water storage capacity. Northern Africa and southern Africa however constitute exceptions. In South Africa, no fewer than 458 dams were commissioned between 1950 and 2000, initially for irrigation purposes and then shifted towards the provision of drinking water. With demand growing, South Africa faces a serious risk of shortages by 2020. In order to meet the challenge, the country is investing both in water use efficiency programmes (especially in the domestic and agricultural sectors) and in alternative sources such as re-use of water, desalination and development of further water-resource infrastructure. The municipally of Windhoek, in Namibia provides a successful example of use of unconventional sources of additional water. Windhoek was one of the first cities in the world to introduce direct recycling of effluent for drinking purposes. Extensive water quality monitoring programmes are in place to ensure an appropriate standard of water quality after each treatment process and of the final water supply. Water availability and quality are further affected by industrial pollution, poor sanitation and sewage practices. In Congo, only 68 per cent of water samples provided by the Société Nationale des Eaux are estimated to comply with the standard for good quality. Inefficient land use and agricultural practices (use of fertilisers and pesticides) also contribute to worsen the problem. In Ghana, for instance, pollution is considered the most serious threat to the sustainability of water resources. Pollution issues are also serious in South Africa, where agriculture, mining and energy sectors are key drivers of activity.

Box 10 - Increasing Available Supply in Tunisia The country’s available water supply rose from 2.6 billion m3 in 1990 to 4.1 billion in 2005 and 11 major dams and 50 hill dams are to be built in the next few years to increase it further. Demand still exceeds supply however and the government is trying to bridge the gap by using treated sewage for agriculture, reusing drainage water and developing water-saving methods to prevent leakage between production and use and to avoid waste by consumers. The authorities are steadily upgrading supply lines and distribution networks, making taps and toilet-flushes more economical, educating major consumers such as hotels and companies and introducing sliding rates that rise with consumption. Source: see country notes in the body of the report.

21. UNEP, 2000. Global Environment Outlook: http://www.unep.org/Geo2000/english/0056.htm

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56

However, wastage is certainly taking the greatest toll on availability. In most African cities over 50 per cent of the water supply is wasted or unaccounted for. A review of the water balance situation in Botswana reveals that on average, more than 46 per cent of it is wasted though leakage, lack of demand management programmes and inefficient water use. In Mauritius, 47 per cent of water consumption is unaccounted for, including 35 per cent due to pilferage and 7 per cent due to leakages as a result of old pipes (more than 50 years old). Unaccounted-for water also reaches 50 per cent in the cities of Cairo and Alexandria and 40 per cent in Algeria. Thus, addressing water conservation, demand management and efficiency of use could result in significant savings. Demand-side management programmes are becoming increasingly common since they represent a low-cost alternative to capacity development. They usually involve control measures (in particular restrictions on certain uses of water, rationing and supply intermittence), use of pricing to rationalise demand, incentives to use water saving devices, public campaigns to promote conservation and close control of distribution system to detect leakages. In an effort to ensure a sustainable demand of water in a context of scarcity, the municipality of Windhoek introduced water demand management in 1994. The strategy concentrates on changing consumer habits by increasing public awareness on the importance of water saving and the implementation of block tariff system with a steeply rising water cost with increasing consumption. Some other measures include the reduction of residential plot sizes, implementation of legislation to address water conservation in Windhoek, improved maintenance and technical measures to reduce leaks. In 2006, unaccounted-for water fell to 10.3 per cent, well below the African average and a very good performance by international standards (for reference unaccounted-for water reaches some 10-15 per cent in the United States and Canada and 15-20 per cent is considered good practice).

2- Access to Drinking Water22 Most countries in Africa are making insufficient progress towards achieving the water and sanitation MDGs, as underscored by the WHO/UNICEF Joint Monitoring Programme. In sub-Saharan Africa (SSA) only 56 per cent of the population are served with improved water and 322 million people are without access to improved drinking water. Despite a 7 percentage point improvement between 1990 and 2004 in drinking-water coverage, the population has grown even faster with the result that the absolute number of unserved people has increased by about 60 million over the same period. Moreover, this number is expected to increase by an additional 47 million by 2015. Although 10 million people have been provided improved drinking water annually over 1990-2004, this number would need to triple in order for SSA to reach the water MDG by 2015. Northern Africa presents a very different picture. The level of access is, with Latin America, the highest in the developing world at 91 per cent of the population and the number of people without access to improved water is expected to decrease further by one million by 2015. The region still remains slightly off track to achieve the water MDG for the region which is 95 per cent of total population. Within northern Africa, Tunisia has already achieved the water-related MDG and virtually all urban dwellers are connected to drinking water (some 98.5 per cent through home connections). Within SSA, Mauritius is a notable exception, having advanced well beyond the MDG goals for drinking water and sanitation. More than 99.6 per cent of Mauritians have access to water while 99.9 per cent of the population has access to improved sanitation services in both the urban and rural areas. In the 10 years after the end of apartheid, South Africa has also managed to increase access to safe water dramatically: a total of 21.4 million people have been provided with access to an improved water source since 1994, reducing

22. Country data are available in the statistical annexes.

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the percentage of people with no access from 39.9 to 7 per cent. In line with this active policy the Department of Water Affairs and Forestry in 2003 established a target of universal access to water by 2008, well above the requirements of the MDGs (80 per cent of access by 2015), which is likely to be reached by the end of the decade. However, most African countries remain off-track and some are even receding. Among key obstacles to sustainable increase in access, war is exacting a heavy toll on water and sanitation infrastructure. In Côte d’Ivoire for instance, the political crisis is leading to poor maintenance of the water network and explains the high percentage of deficient systems (60 per cent). In DRC, the war has led to a drop in access to drinking water from 37 per cent of the population in 1990 to 22 per cent in 2004. In Northern Uganda, civil conflict constitutes a major hindrance to effective water and sanitation services development. Even when existing and not threatened by wars, water infrastructures in SSA are usually aging and badly maintained leading to large unaccounted for water and low quality of water. Of course, conditions differ greatly, depending on whether people live in major cities, in small towns, in peri-urban areas or in rural areas. In general, coverage in urban areas is far ahead of that in rural areas where women and children often need to travel long distances carrying heavy containers of water. However, most of the population growth currently occurs in urban and peri-urban areas, putting great pressure on existing infrastructure and posing tremendous health risk. The UN Population Division estimates that urban population in Africa grows by some 15 to 20 per cent every five years, amounting to a doubling between 2005 and 2030 (from 360 million to some 783 million people)23. So if the rural population is certainly the most deprived, people in informal settlements in peri-urban areas are the most exposed to the consequences of deficient networks. Within countries, the situation also differs across different provinces. In Angola, for instance, the huge provincial inequalities are due to the extent to which different areas were affected by the

war, to the presence of national and international NGOs, and to the different management models chosen by each province in a context of incomplete decentralisation. In Mali, regional inequality is high, with the isolated, low population density regions facing great difficulties in maintaining water facilities. Between 1990 and 2004, some 62 million people gained access to safe water supplies in rural areas of subSaharan Africa (corresponding to an increase in coverage of 6 per cent) and a further 12 million people in North Africa (a 4 per cent increase in coverage). By contrast, high migration from rural to urban areas, combined with demographic pressure led to a mere 1 per cent increase in coverage for the urban population in North Africa and even to a 2 per cent decrease in sub-Saharan Africa. As a result, urban water coverage in Nigeria, Algeria and Mozambique declined by over 10 percentage point between 1990 and 2004. There are nonetheless encouraging examples. On current trends, Uganda is on course to achieve the MDG target on access to water supply in urban areas. In 2005/06, the government completed the construction of 6 water systems, and construction of water systems is in progress in another 13 towns. In the large towns operated by the National Water and Sewerage Corporation (NWSC), service coverage improved from 67 per cent in June 2005 to 70 per cent in June 2006 and new water connections increased from approximately 22 000 in the 2004/05 financial year to about 28 000 in 2005/06 due to a new customerfriendly connection policy. This growth trend is expected to continue thanks to the emphasis being put on service to the urban poor with the support of an OutputBased Aid programme of the World Bank. Benin has improved considerably its rural sub-sector by putting in place a coherent strategy and programmatic approach that for instance ensures that sufficient funding is channelled to rural communities bringing the MDG target for access to drinking water within reach. Even if the MDGs were to be reached by 2015, the backlog of unserved people will remain substantial. It

23. Source: www.esa.un.org/unpp/

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is estimated by the Joint Monitoring Programme that some 243 million people in Africa will be without access to drinking water (among whom 234 million located in sub-Saharan Africa) and 348 million without access to sanitation (317 million in sub-Saharan Africa). 3- Access to Sanitation

58

The situation of sanitation in Africa is more dramatic than water both in terms of the low level of access and limited progress since 1990. In 2004, two out of three people in SSA had no access to improved sanitation, with the prospect of a further increase of 91 million people without access to sanitation services by 2015. Very few countries are on track to reach the MDG by 2015 and if SSA were to reach the MDG some additional 35 million people would need to be provided with access to improved sanitation annually compared with the current rate of 7 million. Progress has been greater in northern Africa, where coverage has increased by 12 percentage points between 1990 and 2004 to reach 75 per cent. The number of unserved people is also expected to decrease by an additional 11 million by 2015. Thus, northern Africa appears to be broadly on track to reach the 83 per cent sanitation target by 2015. Rural sanitation coverage in SSA is half the urban coverage, i.e. almost totally absent in most areas. However, the negative consequences of insufficient sanitation services are much more acute in slums because

of high population densities. High urban population growth resulting from migration has led cities to grow rapidly in a few decades. Consequently, existing facilities have dramatically deteriorated where they existed and infrastructure development has not kept pace with the unplanned growth of informal peri-urban settlements. Increasing population density associated with poor sanitation habits (notably the flying toilets) have contributed to deteriorating health conditions in these settlements. A similar situation often prevails in the refugee camps in many African countries. Tanzania, however, demonstrates that progress is indeed possible. There, access to some form of sanitation is estimated at 90 per cent. The 2002 Census data indicate that in Dar es Salaam only 1 per cent of population had no toilet facility, while 83 per cent of population had access to pit latrines and 14 per cent of population had flush toilets. Most of the households without access to some form of sanitation facilities are in rural areas, where they account for 11 per cent of the rural population. These figures are consistent among several sources: the national census, the MDG Country Status Report by AMCOW et al., and the country status published by WaterAid. The quality of the facilities has however been questioned and according to AMCOW et al., a strict MDG definition would lower the rate of coverage to about 50 per cent. However, it would require only limited effort to upgrade the existing facilities. These achievements did not happen over

Box 11 - Critical Situation of Sanitation in Chad Except for some isolated projects, very few villages have improved traditional latrines, ventilated pit latrines or organised collection of sewage or garbage and 88.5 per cent of households use the fields as toilets. Major village water projects do not always include sewerage, which is fairly cheap but needs training and familiarisation of local people. None of the country’s towns and cities have functioning systems for disposal or treatment of sewage, garbage and solid waste and very few for rainwater. Those that do exist are antiquated. In February 1997, only N’Djamena, Moundou, Sarh and Abeche had urban maps showing housing zones, transport networks and rainwater drainage facilities. Hospitals and clinics have no established infrastructure or official ways of handling and disposing of biomedical waste, which often ends up in the streets where it can be picked up by children and reused. Hospital sewage is similarly dumped untreated and can be reused. In 2000, there was no regulation or standards applying to industrial waste and nearly all industries dumped their liquid effluent untreated into waterways. Source: see country notes in the body of the report.

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night. An active government policy aimed at ensuring a latrine for all households was initiated more than 30 years ago, in 1973, based on the “Mtu ni Afya” programme (You are your health). Efforts to raise awareness in households have been continuous, and hygiene and sanitation programmes continue to be well financed in government budgets.

II- Improving Management and Shifting the Focus to Sanitation – the Key Challenges The above assessment clearly highlights the need for improvement in the water sector in the countries that have been lagging behind: improving institutions

Table 10 - Sustainability Scorecard (scores range from 0-100 per cent) Countries

Rural Water

Urban Water

Rural Sanitation

Urban Sanitation

Overall sector

BENIN

Institutional Financial

67 73

74 51

78 54

76 54

76 91

BURKINA FASO

Institutional Financial

70 57

47 40

69 30

34 13

45 82

DRC

Institutional Financial

23 16

50 57

86 44

22 17

32 36

ETHIOPIA

Institutional Financial

70 57

47 40

69 30

34 13

46 82

GHANA

Institutional Financial

80 50

75 71

56 50

70 17

68 50

KENYA

Institutional Financial

55 43

50 36

31 10

23 32

55 50

MADAGASCAR

Institutional Financial

32 44

50 32

23 0

23 33

8 44

MALAWI

Institutional Financial

40 28

31 36

6 10

18 8

27 12

MAURITANIA

Institutional Financial

45 27

31 37

16 26

12 0

4 34

MOZAMBIQUE

Institutional Financial

39 25

56 70

26 24

28 12

41 47

NIGER

Institutional Financial

75 25

60 50

35 5

23 5

45 15

RWANDA

Institutional Financial

75 25

60 50

35 5

25 5

45 15

SENEGAL

Institutional Financial

75 57

81 86

50 40

59 58

86 75

UGANDA

Institutional Financial

80 57

65 74

67 50

52 25

80 57

ZAMBIA

Institutional Financial

47 53

74 32

43 31

32 34

63 42

All 15 countries

Total Institutional Financial

50.2 58.2 42.5

54.5 56.7 50.8

36.8 46.0 27.3

28.4 35.4 21.7

48.7 48.1 48.8

Source: Getting Africa on track to meet the MDGs on water and sanitation, a Status Review of Sixteen African Countries, 2006, Report on a regional initiative by AMCOW, AfDB, EUWI, WSP and UNDP http://dx.doi.org/10.1787/475735215038

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in both rural and urban areas and most notably remedying the deficiencies of the sanitation sector. Moving forward requires ambitious reforms in institutions, legal frameworks, and policies in order to change the structure of incentives. This is possible in an African context as shown by the box on Senegal. Progress also requires supporting these strategies with adequate resources for their implementation. Table 10 ranks the institutional and financial sustainability of sector strategies for 15 countries by means of a scorecard system developed by AMCOW, AfDB, EUWI, WSP and UNDP. It clearly shows that sanitation is the sector for which improvements are the least sustainable based on current strategies, the worst case being the financial sustainability of urban sanitation. 1- Implementing Integrated Water Resource Management (IWRM)

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Responsibility for water management is often split among different government ministries, between regional and local authorities as well as the private sector, NGOs and donors which makes it difficult to develop a coherent strategic approach to the sector. Drinking water is also a basic need, but water is often

a scarce resource with several other competing uses: hydropower generation, irrigation, and industrial. Consequently, there is a need for a comprehensive and integrated approach to ensure the sustainability of expanding simultaneously access to drinking water and sanitation while facilitating economic growth and meeting ecosystem needs24. The principles of a holistic approach to water were established in 1992 at the International Conference on Water and the Environment in Dublin and at the United Nations Conference on Environment and Development held in Rio de Janeiro. They led in 1996 to the creation of the Global Water Partnership whose mission is to “support countries in the sustainable management of their water resources”. In 2002, the plan of implementation of the Johannesburg World Summit on Sustainable Development aimed at stimulating the adoption of IWRM by calling all countries to develop integrated water resources management and water efficiency plans by 2005. IWRM is at various stages of implementation in most African countries. In the table 38 countries are classified in 3 categories, based on a survey conducted by GWP in late 2005: i) 5 countries have plans incorporating the

Box 12 - The Successful Reform of Senegal’s Urban Water System The grave financial crisis at the national water company SONEES (Societé National d’Exploitation des Eaux du Sénégal) caused by excessively low rates and poor recovery of customer debts was the incentive for reform in 1995. This involved thorough reorganisation, separating sanitation and drinking water supply and setting up a partnership between the government, a public water company, SONES (Société Nationale des Eaux du Sénégal), and a private firm, SDE (Sénégalaise des Eaux). Development partners mostly provided the funding for the new arrangement as part of clear sector policies – the Programme Sectoriel Eau (1995-2001) and its successor the Programme Sectoriel Eau de Long Terme (2002-07). A new sector policy and an investment programme were drawn up in 2005 under the millennium national drinking water and sanitation programme PEPAM (Programme national d’eau potable et d'assainissement du Millénaire). These cover upgrading the network, providing connections for the poor and drafting a “second generation” of institutional reforms to meet the sanitation needs of an expanding Dakar (including a new rates system that will raise more money to be spent on sanitation). The 1995 reform law replaced SONEES by two bodies. The public firm SONES is franchised by the government and approves three-year investment plans and supervises new investment, while the SDE is a private firm (part of the French group SAUR) operating the network and selling its products under a leasing arrangement with the government and SONES, which also has a performance contract. The leasing worked well and was renewed for five years in 2006, with the aim of balancing the books and improving drinking water access for the very poor. Source: see country notes in the body of the report.

24. See African Development Bank (2000), Policy for Integrated Water Resources Management.

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Box 13 - Defining IWRM IWRM is a process that promotes the co-ordinated development and management of water, land and related resources, in order to maximize the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems. This approach promotes more co-ordinated development and management of land and water, surface water and groundwater, the river basin and its adjacent coastal and marine environment, and upstream and downstream interests. IWRM is also about reforming human systems to enable people to obtain sustainable and equitable benefits from those resources. For policy making and planning, taking an IWRM approach requires that: • Water development and management takes into account the various uses of water and the range of people’s water needs; • Stakeholders are given a voice in water planning and management, with particular attention to securing the involvement of women and the poor; • Policies and priorities consider water resources implications, including the two-way relationship between macroeconomic policies and water development, management, and use; • Water-related decisions made at local and basin levels are along the lines of, or at least do not conflict with, the achievement of broader national objectives; and • Water planning and strategies are incorporated into broader social, economic, and environmental goals. An IWRM approach focuses on three basic pillars that aim at avoiding a fragmented approach of water resources management: • An enabling environment of suitable policies, strategies and legislation for sustainable water resources development and management • Putting in place the institutional framework through which to put into practice the policies, strategies and legislation • And setting up the management instruments required by these institutions to do their job. Source: Global Water Partnership

61 IWRM principles in place or a process well underway – level 1; ii) 21 countries are in the process of preparing national strategies which require further work – level 2; and iii) 12 countries are at a very early stage and have not yet inserted IWRM principles in their national policy and legal frameworks – level 3. In the five countries highlighted by the GWP as good performers the IWRM principles are part of the main policy and legal frameworks, as well as in the various official planning and development programmes related to poverty reduction (PRSP for instance), agriculture, energy and environment. Four out of the five countries have put in place IWRM action plans: Burkina in 2003, South Africa in 2004, Uganda in 1995 and Zimbabwe in 2001. Namibia does not have a specific IWRM Action Plan but is implementing the water policy through various programmes and basin committees. The whole water-sector review process is geared towards integrated water resources management. All countries are characterised by strong participation of all stakeholders from ministries to NGOs and strong leadership at national level (usually by the main ministry in charge: the Department of Water Affairs and Forestry © AfDB/OECD 2007

in South Africa, the Water Resources Management Department in Uganda, the Ministry for Water Resources and Infrastructure Development in Zimbabwe). The experience of these good performers shows that it takes time to integrate IWRM fully into local management. Successful implementation crucially hinges on institutional and human resources capacities. Even in well-performing countries, such as Burkina, limited capacities have slowed progress. Successful development of a sound IWRM framework also requires abandoning the supply-driven, top-down approaches, in favour of greater stakeholder involvement. Finally, where monitoring mechanisms are weak, progress is not easily measured and corrective actions not easily undertaken. There is a need for strong national water policies as a basis for legislation, strategic planning and management. In many cases, unfortunately, policies are poorly developed and little legislation exists. For example, there is usually no clear institutional responsibility for water quality management. Policy is African Economic Outlook

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Table 11 - Status of National IWRM Planning in African Countries Region

Northern Africa

Level 1

Level 2

Level 3

0

Egypt Morocco Tunisia Mauritania Sudan

Algeria Libya

Total respondents

7

Central Africa

0

Cameroon

Burundi Central African Rep. Chad Congo DRC Rwanda

7

Eastern Africa

Uganda

Eritrea Ethiopia Kenya Mauritius Tanzania

Djibouti

7

Western Africa

Burkina Faso

Benin Ghana Mali Nigeria Senegal

Cape Verde

7

Southern Africa

Namibia South Africa Zimbabwe

Botswana Malawi Mozambique Swaziland Zambia

Angola Lesotho

10

5

21

12

38

62

Total

Note: regional grouping follows AfDB classification. Source: based on GWP, Setting the stage for change, second informal survey, February 2006. http://dx.doi.org/10.1787/226346857718

Box 14 - Monitoring Water Quality in Uganda In Uganda, the water and sanitation sector has mechanism for monitoring and evaluation. There are 70 surface water monitoring stations, 16 groundwater water observation wells, 112 water quality sampling sites and 18 climatic stations. A water quality and pollution control laboratory has been established and equipped. Also, a Quality Assurance system has been established, including audits and external proficiency scheme to ensure performance to international standards; the process for obtaining accreditation of the laboratory is underway. However, standards and guidelines for water quality management in Uganda remain eclectic. These include the National Standards for Drinking (potable) Water, the World Health Organisation (WHO) guidelines on specific local conditions and water use habits, National Effluent Standards for discharge of waste water into the environment, and a Provisional Water Quality Guideline for untreated rural water supplies. Source: see country notes in the body of the report.

needed to provide incentives for conservation, for ensuring that planned expansion of water networks takes into account sanitation and wastewater treatment, and promote environmental protection. Policy making African Economic Outlook

should be accompanied by strong monitoring tools so as to assess the progress in implementing IWRM and to identify the need for adopting corrective measures if necessary. A good example is provided by Uganda. © AfDB/OECD 2007

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Box 15 - Trans-boundary Water Management in Tanzania Tanzania is an enlightening case where about 43 per cent of water resources are shared with other countries: Lake Victoria is shared with Kenya and Uganda; Lake Tanganyika is shared with Burundi, Zambia and Republic of Congo; and Lake Malawi is shared with Malawi and Mozambique. Also, water uses are diverse ranging from domestic, industry, agriculture and livestock, wildlife and hydropower supply (that accounts for 80 per cent of installed electricity generation capacity). A strong mechanism for water resources management is thus indispensable if conflicts among users within and between countries sharing the waters are to be avoided and ensure that the resource is used sustainably for human development. In August 2003 the Tanzania parliament ratified a protocol providing guidelines for the establishment of institutions to manage common water resources in SADC countries. Tanzania’s Water Ministry in collaboration with countries sharing river Zambezi waters are establishing a River Zambezi Commission that will manage sustainable use of the basin’s waters. Tanzania is also establishing a commission in collaboration with Mozambique Water Ministry for overseeing sustainable use of Ruvuma Basin waters. During 2005/06 Tanzania and other countries sharing water from the Nile continued to manage the use of water through the Nile Basin Initiative (NBI) which is an interim institution established for this purpose. The process of establishing the permanent Nile Basin Commission is in its final stages, including the required assessment of water use needs in the country. In collaboration with Kenya and Uganda, Tanzania continued with implementation of the First Phase of the Lake Victoria Environmental Conservation Project. The project, initiated by the East African Community, intends to assess the extent of pollution in lake waters and their sources in view of designing and implementing collective measures. Source: see country notes in the body of the report.

Co-operation at the regional level is also a key element of IWRM. Africa has a unique water resource endowment, with some 60 trans-boundary rivers, more than in any other continent. Consequently, many countries share river basins. For instance, ten countries share the Nile river basin, nine share the Congo River basin and nine others share the Niger River basin.

Some countries host all or parts of several river basins, such as Guinea, riparian for fourteen basins, and Mozambique, riparian for eight. This situation requires strong regional co-operation to establish trans-boundary mechanisms that can minimise the potential for conflict by organising the sharing of resource, regulating their uses, co-operating in infrastructure development, and

Box 16 - Managing the Different Actors through SWAP, the Case of Uganda In Uganda, the NGO and private sectors are very active in diverse water and sanitation related activities alongside the public sector service providers. Private-sector firms undertake design and construction in the water sector under contract to local and central governments. They provide maintenance services to water users in rural and peri-urban areas, and they manage piped water services in the majority of small towns with piped water. NGOs and Community Based Organisations (CBOs) are active in the provision of water and sanitation services (construction of facilities, community mobilisation, training of communities and local Governments, hygiene promotion as well as advocacy and lobbying). In August 2006 the Uganda Water and Sanitation NGO Network (UWASNET) had a membership of 150 NGOs/CBOs implementing projects in the sector. Between January and December 2005, NGOs served an estimated number of 113 420 people with new water sources (protected springs, shallow wells, boreholes, gravity scheme taps and rainwater harvesting faculties). Some of them have demonstrated their ability to innovate (e.g domestic roof water harvesting, biosand filters, and leverage of household investments). The UWASNET secretariat is supported financially by the government and development partners. In 2005, 5 per cent of the DWSCG and 11 per cent of NGO funds were utilised for sanitation. In order to co-ordinate the participation of all stakeholders in the sector, Uganda adopted a Sector Wide Approach to Planning (SWAP) for the Water and Sanitation Sector in September 2002. SWAP is a mechanism whereby Government and development partners support a single policy and expenditure programme using a common approach. The SWAP mechanism has resulted into a harmonised sector-planning framework in which duplication of efforts by different stakeholders has been minimised. Source: see country notes in the body of the report.

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co-ordinating measures to tackle pollution. Tanzania provides a good example of co-operation in transboundary water management. Beyond regional co-operation, all stakeholders should be part of the IWRM dialogue. Their various roles need to be clearly defined and strong co-ordination mechanisms developed. The first step for managing water resources is to clarify the most appropriate level of decentralisation and the corresponding allocation of functions. Central government should ensure that activities are co-ordinated across the broad range of actors. Uganda provides a good example in this regard.

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Finally, there is a need for sound and autonomous regulation to reap the benefits of partnerships in a decentralised framework. Effective water resources management requires separating the development and regulatory aspects from water supply and sanitation delivery functions. A service provider cannot at the same time fulfil the regulatory or allocative functions to decide among competing uses without giving rise to conflicts of interest. Autonomous institutions should carry out the regulatory functions. An example can be seen in Zambia, which established an independent water regulator in 1997, the National Water Supply and Sanitation Council (NWASCO), which has since developed regulatory tools and guidelines on service provision, tariff negotiations and yearly reporting. In particular, NWASCO has been instrumental in strengthening the monitoring of access to water and sanitation services through a close follow-up of the commercial utilities activities. It carries out detailed

inspections of the service providers and provides capacity building to ensure compliance with performance and corporate governance. It also approves tariff adjustments. In 2005, NWASCO put in place water quality guidelines describing the types and frequency of water sampling for routine water testing. The regulator also established Water Watch Groups to resolve disputes between consumers and providers. It includes a customers’ complaint handling procedure that encourages direct resolution with the utilities. This mechanism also helps to monitor service quality. In 2004/5 most complaints concerned erratic supply, and some were addressing sewerage overspill and water quality. 2- Strengthening Local Management Decentralising responsibility and ownership, and providing a choice of service levels to communities, based on their ability and willingness to pay can accelerate progress in expanding access. Communities have a better understanding of local realities enabling quick and realistic decision making. Consumer groups, cooperatives, and professional associations have a key role to play in water resources management: setting development goals, participating in project implementation, adapting technologies to local conditions, and bridging gaps between public sector and communities. Over the last two decades, central governments have started devolving the responsibility for providing water and sanitation services to local bodies and the responsibility for oversight to local authorities. There was an expectation that the water departments would subsequently evolve into

Box 17 - Institutional Reforms The design of the regulatory system is the most essential step in the process of reforming the water sector, especially in countries that seek to delegate water services to private operators such as North African countries (see table 12). An independent regulatory agency provides political stability and safe economic environment for both private and public water operators. Often countries create an autonomous water regulatory agency. However, in the practice these agencies are rarely independent from governments and are thus not very useful. The separation of roles – political, strategic, regulatory and operational – is also a condition of efficient management. Another important reform is the corporatisation of local water operators: establishing legal and financial independence of water operators reduces administrative burden and political interference. It guarantees the transparency of costs and financial flows. It also ensures a fair and fruitful competition among water operators, public or private. In addition, countries can create River Organizations, which are funded through users’ fees and aim to finance local water projects. Thus, part of the public responsibility is delegated to the regional level, which is able to evaluate more precisely the needs. This system also reduces the fiscal and administrative burden of the central state. Without creating Basin Agencies, the administrative burden can also be moderated by decentralising part of water policy to regions.

African Economic Outlook

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Overview

Table 12 - Elements of Regulation in North African Countries

Presence of regulatory agency

Algeria

Egypt

Morocco

Tunisia

Not yet but planned in the 2005 water law

Yes since 2004

No

No

Independence of regulatory agency

No

Separation of powers

Yes

Important political interferences

Yes

Some political interferences

Corporatisation of local operators

Possible since 2005

No

Possible since 2002

No

Basin organisations

No

No

Yes since 1997

No

Decentralisation

Decentralised

Highly centralised

Decentralised

Centralised

Decentralisation process planned Source: Perard, E (2007), Private Sector Participation and Regulatory Reform in Water Supply: the MEDA Experience, mimeo, OECD Development Centre, Paris. http://dx.doi.org/10.1787/037063805755

65 autonomous commercial entities, able to generate sufficient revenue to cover at least their operation and maintenance costs. However, although decentralisation is included in most countries’ institutional reform packages, local authorities do not always have sufficient management capacity to discharge their new responsibilities. Angola, for instance, established an ambitious decentralisation plan, but it was only partially implemented, with a number of local units existing only on paper or not officially recognised by the central government. The budget also remains mostly centralised, with central and provincial governments responsible for allocating the funds to local authorities. Similarly, the 2002 Water Law foresees the creation of Empresas de Agua for water treatment and distribution at provincial level by 2010. EPAL was created in Luanda, but only a few of the smaller urban centres have so far followed suit. Moreover, the regulatory framework attached to the 2002 Water law is still waiting for approval by the government. In Zambia, the Water Supply and Sanitation Act of 1997 delegated to the local authorities the © AfDB/OECD 2007

responsibility to provide water and sanitation services in their respective areas. Consequently 50 out of 72 local authorities have established nine commercial water utilities in urban areas, which are expected in the long term, to be commercially viable. The commercial utilities are responsible for service provision to 86 per cent of the urban population; the remaining areas are serviced either by 22 local authorities (13 per cent) or private providers (1 per cent). Commercialisation has been crucial to sustain improvement in service delivery. Over the years, the commercial utilities have made considerable progress in extending water supply coverage (from 58 per cent in 2004/05 to 73 per cent in 2005/06), thanks to the support of the Devolution Trust Fund (DTF) (a basket of co-operating partners’ funds which aims at assisting the providers to extend the provision of services to the peri-urban poor). The institutional framework for rural WSS, adopted by the government in 2004, devolved authority to the local authorities and communities, promoted community management in order to ensure service sustainability, and embodied the WASHE (Water, Sanitation and Health Education) concept to promote awareness regarding sanitation and environmental health. African Economic Outlook

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Decentralisation is well advanced in Uganda. It was first adopted because a combination of mismanagement and reduced revenue collection had led to unreliable services and deterioration of infrastructure. Local Governments (Districts, Towns, and Sub-Counties) were empowered by the Local Governments Act (1997) to provide water services. They receive grant funding from the central government and were authorised to mobilise local resources for implementing rural water and sanitation sector programmes and to support small towns. Local Governments also appoint and manage private operators for urban schemes outside the jurisdiction of the National Water and Sanitation Company. However, a number of obstacles to further developments in the WSS have been identified by the various stakeholders: i) poor technical competence in the water and sanitation fields at district levels; ii) poor co-ordination of sector activities; iii) inadequate capacity to handle the tendering, contract procurement and management of privatesector implementation; iv) inadequate supervision, monitoring and reporting capacity; and v) lack of capacity at sub-county and lower levels which are responsible for implementation. For example,

transparency now exists in the awarding of contracts by central authorities in the Ministry of Water Lands and Environment and/or National Water and Sewerage Corporation through properly constituted Contracts Committees. However, such transparency is rare in the case of contracts awarded by district tender boards, which lack capacity and qualified manpower, and are thought to be susceptible to political influence from local councillors. To respond to the lack of capacities, some countries have put in place interesting mechanisms, relying for instance on public-public partnerships and the expertise accumulated at central government to train subsovereign entities. The cross training of Umgeni by TCTA in South Africa presents such an example, where the South African government agency responsible for the implementation and funding of bulk water supply developments helped to build up treasury capacity at the water service provider. Uganda also presents an interesting case where the National Water and Sewerage Corporation has partnered with the Directorate of Water Development25 to train the local private sector and local governments in management and institutional development.

Box 18 - Cross-training of Umgeni by TCTA (Trans-Caledon Tunnel Authority), the government agency responsible for the implementation and funding of bulk water supply developments in South Africa South Africa’s TCTA, a parastatal, was created in 1986 in order to “implement, operate and maintain the project works within South Africa” according to the Treaty governing the Lesotho Highlands Water Project (LHWP). Because of its role in financing large-scale water infrastructure, and its strong financial skills, TCTA was able to provide assistance to Umgeni Water, which operates under the direction of the Ministry of Water Affairs and Forestry (DWAF). In 2001, TCTA assumed responsibility for treasury management services, with a remit to strengthen Umgeni’s own capacity. By 2004, DWAF determined that TCTA had built sufficient capacity, and the handover was completed in January 2005. Through this process Umgeni received sufficient training to perform treasury functions; in addition training and financial modelling skills and computer programs were transferred, such as cash-flow projections, debt modelling, tariff calculations, and other financial decision-making aids. TCTA remains a participant on Umgeni’s Water Finance Committee, and through a service agreement, continues to provide assistance on issues relating to tariffs, funding and debt management, risk management, formulating interest rate reviews, and other financial functions. Source: Based on African Development Bank (2006), Studies on Financial Instruments to Facilitate Investment for Water Infrastructures, by Rachel Cardone, based on TCTA website and discussion with Leslie Maasdorp, Chairman of the Board, TCTA.

25. The Directorate of Water Development is the government arm in charge of overall water-resource development and management and is responsible for the provision of services to the rural areas and small towns under a decentralised management framework.

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3- Advancing Sanitation and Wastewater Treatment to the Top of the Agenda Progress in sanitation has been largely disappointing. Neither has progress in improving access to drinking water been accompanied by an adequate increase of wastewater treatment capacities. Cholera and infant diarrhoea continue to figure prominently among the six main water-related diseases which afflict half of the African population. Cholera outbreaks affected Luanda and other large cities of Angola in 2006. In Zambia some 7 615 cholera cases were reported between August 2005 and April 2006, most of them in Lusaka. In Ghana, lack of access to clean water and sanitation systems are estimated to contribute to some 70 per cent of the burden of disease. In Madagascar, 60 per cent of infant mortality is related to low water quality and bad sanitation. Consequently, the World Health Organisation estimates the economic benefits to Africa of meeting the water and sanitation MDGs at about $23 billion annually26, compared to an annual cost of intervention of $2 billion. Moreover, environmental sustainability will worsen if the water supply target is achieved without accompanying measures for sanitation and effluent management. The volume of sewage produced will increase proportionally, exacerbating its threat as a main source of water pollution. Some sanitation solutions adopted by households, such as septic tanks, flush toilets and sewer connections without proper treatment, can also cause water pollution. The excreta disposal situation is also worsening in Africa because on-site installations are multiplying but are not properly emptied. Owners do not have the means or the awareness to pay for mechanical emptying and prefer to pay smaller fees for manual removal. On top of the sanitary risk for the removers, manual removal usually takes care only of the top layer and untreated waste is often disposed of in open urban areas, inland waters and the sea. Moreover, with rapid urbanisation, the number of people per plot is increasing and the new lands are often poorly drained and shallow. Pits fill

even faster and maintenance is becoming even more critical. Safe water supplies can only be secured if the water resources are protected from contamination by untreated or inadequately treated, wastewater discharges. In densely populated areas, increasing access to drinking water can therefore only be safely achieved if the sanitation situation is tackled simultaneously. Sanitation does not receive the attention it warrants for a variety of reasons. The costs might seem colossal to governments pressed by stringent budget constraints even though they are small compared to the health and environmental costs of inaction. Also, the sanitation system is highly segmented between the initial provision of facilities, the removal and transport of waste and its treatment, involving many different actors among which partnerships rarely exist. This situation is usually mirrored by a fragmented institutional framework where responsibilities are divided among several different state agencies. The current institutional framework for wastewater management in Botswana, for instance, comprises five departments responsible for some 11 Acts: the Department of Waste Management and Pollution Control, the local authorities, the Department of Water Affairs, the Directorate of Public Service Management and the Department of Local Government. Such fragmentation results in low capacity to undertake large projects, a lack of accountability, and excessively high costs of service provision. There is also a risk that sanitation facilities will be provided without ensuring maintenance services. The complexity of handling these issues leads governments to favour projects with more immediate returns and this results in too little money spent on sanitation compared to water. Change is possible, however, as illustrated by the case of Senegal. The difference between the costs of highly engineered sanitation solutions and the amounts considered affordable points to the need to adapt the technologies employed to local conditions. In fact, there is a range of potential technologies that can be adapted to the needs of communities, such as ease of maintenance, and entailing cost in line with their

26. Hutton and Haller (2004) Evaluation of the Costs and Benefits of Water and Sanitation Improvements at the Global Level, WHO, Geneva.

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Box 19 - Senegal’s Pro-Active Strategy Things have moved very slowly in sanitation in Senegal, so the government has made the sub-sector a priority, giving it pride of place in the PEPAM, creating a special ministry for it, drafting a sanitation law and spending more on investment. The sector strategy is based on synergy of urban and rural water operations and the need to increase the execution capacity of the national sanitation department ONAS (Office National de l’Assainissement) and the sanitation directorate (Direction de l’Assainissement), especially to handle the scale changes in rural sanitation. The aim is reduce financial barriers to access by encouraging shared connections, subsidising investment (semi-shared and independent) and strengthening monitoring and assessment methods. Second-generation reforms in urban areas will update the law on public drinking water supply. A rates survey is being done and an ONAS-government performance contract introduced to improve the financial situation of ONAS. Infrastructure is to be boosted with 92 400 shared connections, 800 km of sewerage and 135 100 autonomous networks. Access will be facilitated through the complementarity between shared, semi-shared and autonomous sanitation, as well as by increasing the capacity for treating sewage and disposing of drainage waste and by finding and introducing a viable way to fund management of rainwater. The plan in the countryside focuses on meeting demand, through training and education. Growth of the private sector is encouraged by local people carrying out the work. The plan aims to promote technical packages that are simple to construct and maintain (ventilated latrines, hand-flushed toilets, washbasins and standard public lavatories). The programme plans to build 355 000 autonomous domestic connections and 3 360 public lavatories. Investment in sanitation infrastructure between 2006-15 is estimated at 220.6 billion CFA francs in urban areas and 103.5 billion in the countryside, and for related work 15.8 billion in urban areas and 16.3 billion in rural areas. Source: Based on the intervention of Adama Mbaye, Director, Direction de l’assainissement, ministère de la Prévention, de l’Hygiène publique et de l’Assainissement, at the OECD/AfDB expert meeting on Access to Drinking Water and Sanitation, Paris, December 2006.

68 willingness to pay. Beside the main sewerage network, mini networks can be developed to cater for the needs of densely populated settlements that are not connected to the main sewer network, as shown by the experience of Mali. In informal peri-urban settlements, the main impediment to making these connections is often the reluctance of the authorities to permit investments in the sanitation infrastructure that could lead to legalising the settlements.

In any case, with rapid urbanisation, and the development of informal peri-urban settlements, the prospects for connecting all households to sewerage networks in the short term are slim. Thus, on-site sanitation is often the only practical solution, as the Building Partnerships for Development in Water and Sanitation27 programme has found. Involvement of communities in the construction of such facilities and their maintenance (through user fees) has proved useful

Box 20 - Mini-sewers in Mali The only areas connected to mains sewers are central Bamako (and its suburb of Koulouba), the industrial zone and a small part of the town of Ségou. Mini-networks of small-diameter sewers have also been built in Bamako to serve about 12,000 people and as a suitable way to manage sewage in a densely-populated urban area. The preferred solution is family-funded individual sanitation but the government (through the state housing department, the Office Malien de l’Habitat) has invested 139 million CFA francs building mini-sewers in the Bamako neighbourhoods of Bankoni and Baco Djicoroni, as well as building them in the towns of Djenné and Timbuktu. Microfinance institutions, sanitation co-ops and consortia are involved in funding, managing and cost recovery. The big problem is still the very low cost recovery rate (about 20 pour cent). Source: see country notes in the body of the report.

27. Schaub-Jones, D., K. Eales and L. Tyers, 2006. Sanitation Partnership: Harnessing their Potential for Urban On-site Sanitation. Building Partnerships for Development in Water and Sanitation, London.

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to promote political ownership. Local actions of NGOs and community-based organisations (CBOs) are also instrumental in influencing policy making. For example, the coalition “Muungano wa Wanvijijihas” formed by NGOs and CBOs operating in the area of Nairobi, emerged to improve conditions of the slum dwellers of Kibera. The coalition managed to lobby for the destruction of some clusters for the development of communal facilities, thereafter managed by the residents under CBOs’ oversight. This shows that making progress on sanitation requires both strong partnerships and awareness raising.

flow of orders. The public sector can also take the lead in co-ordinating demand. For example, the South African municipality of Durban has chosen to overcome the sporadic nature of demand by ensuring that pits are emptied every five years according to a specific schedule (regardless of volume), at no cost for the households. In parallel, the city is supporting the professionalisation of manual pit emptying operators, regulating their activity to ensure safety and security (allowing work only in daylight, requiring the use of appropriate material and securing the chain of custody from emptying the pits to the safe disposal of waste for treatment).

Partnerships can help overcome the fragmented nature of sanitation by providing a platform for discussion among the different actors. Partnerships can also consist in creating intermediaries (typically CBOs) between households and (private) service providers. Such intermediaries can catalyse demand and thereby help the local service providers to develop a more stable

The sanitation situation can also benefit from large awareness campaigns about the risks arising from untreated wastes, and also about the possibilities of using properly treated human excreta as fertilisers. Good examples of behaviour change can be found with community level sanitation programmes such as the AHEAD clubs in Zimbabwe. 69

Box 21 - Community Health Clubs in Zimbabwe Community Health Clubs were first pioneered in Zimbabwe in 1995, in a small pilot project in Makoni District, with the objective of creating demand for sanitation and rapid uptake of hygiene practices. From the start, the health clubs attracted a strong response from the community with clubs of between 50 to 200 members. It was estimated that approximately 70 per cent of the members in each club continued to attend the weekly health sessions for over six months. By 2001, there were 472 health clubs in Zimbabwe, with 27 784 members in 6 districts. In all districts Environmental Health Technicians, from the Ministry of Health, were responsible for facilitating the health club sessions, thus institutionalising the programme within the government structure. The approach has led to important changes in behaviour (Waterkeyn and Cairncross, 2005). Health club members constructed 3 600 latrines in two of the districts within 18 months in 1999 and 2000 which can be compared to some 8 000 latrines constructed in the entire country in 1998. The health promotion needed to stimulate this strong demand was achieved at a cost of $0.55 per head for 12,630 beneficiaries in Tsholotsho District, and $0.21 in Makoni District for 68 700 people. Despite minimal external support following the socio-political collapse of Zimbabwe, the health clubs are surprisingly resilient and continue to prosper (Waterkeyn, 2005). In 2004, Africa AHEAD Association was founded to replicate and adapt the CHC Approach throughout Africa by starting pilot projects in as many countries as possible. Source: http://africaahead.com

III- Financing There are various estimates of the additional financing needed to reach the MDGs28. However, they all agree that the largest financing need by far is for the treatment of wastewater. AfDB et al. estimate in the Africa Water

Vision 2025 that to ensure a sustainable water future, Africa should invest some $20 billion annually until 2025, a third of which for sanitation, a quarter of which for drinking water supply, and $1 billion for policy and institutional reform, capacity building, information, awareness and education, and R&D. UNDP argues that in low income

28. They are reported in Fonseca, Catarina and Rachel Cardone, 2005. “Analysis of cost estimates and funding available for achieving the MDG targets for water and sanitation.” WELL (WEDC/LSHTM/IRC), London. Internet: http://www.lboro.ac.uk/well//resources/Publications/Briefing per cent20Notes/BN9 per cent20Fonseca.pdf

© AfDB/OECD 2007

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Table 13 - Investment Requirements to Reach the MDGs in Selected Countries (in m$/year) Total Investment Required

BENIN

Water Sanitation

BURKINA FASO

Water Sanitation

DRC

Water Sanitation

GHANA

Water Sanitation

KENYA

Water Sanitation

MADAGASCAR

70

Water Sanitation

MAURITANIA

Water Sanitation

MOZAMBIQUE

Water Sanitation

NIGER

Water Sanitation

RWANDA

Water Sanitation

SENEGAL

Water Sanitation

UGANDA

Water Sanitation

ZAMBIA

Water Sanitation

Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban Rural Urban

New

Rehab

Public I required

Planned Pub I

Surplus /Gap

11 7 6 6 62.17 1.48 15.2 11.65 52 117 21 188 42 72 25 12 53 9 51 24 14 18 2 5.5 35.3 1.1 5.1 14 42 1 15 52 0 3.6 2.8 1.3 24 3 4 30.7 15.9 22 35 29 14 35 38 14.9 2.3 -

6 3 3 3 7.83 16.52 10.4 12 18 13 11 4 9 51 22 25 14 7 9 41 4 9.1 6.8 0.8 1.5 22 12 2 2 6.2 20 1.2 0.7 31 4 2 1 2.1 8.1 0 10.7 44 6 68 10 2.3 N/A -

16 7 8 8 68.96 17.87 14.57 11.52 39 132 3 40 44 81 14 57 67 0 59 26 7 6 1 13.1 35.8 0.6 3.3 35 47 0 2 50 20 2.8 3.5 40 0 1 0 32.4 17.8 20 43.9 69 20 35 18 9 1 -

24 10 2 0 10.97 2.42 0.3 3.67 7 62 1 1 42 36 10 33 77 2 14 52 21 4 15 11.4 25.2 0.2 0.8 23 44 1 19 5 0 1 0 9.7 3.3 2.6 23 46 54 10 9 0.18 0.27 0.02 0.03

8 3 -6 -8 -57.99 -15.46 -14.28 -7.86 -32 -70 -2 -39 -2 -45 -4 -24 10 2 -45 26 14 -2 14 -1.7 -10.6 -0.4 -2.5 -12 -3 1 17 -35 0 0 0 -22.7 -14.5 -17.4 -20.9 -23 34 -25 -9 8.82 0.8 -

Source: The Heritage Foundation/The Wall Street Journal, 2007 Index of Economic Freedom. http://dx.doi.org/10.1787/853764276241

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countries with limited coverage and a high level of poverty, public spending on drinking water and sanitation should equal about 1 per cent of GDP with cost recovery and community contributions making up an equivalent amount. These figures are more than twice as high as current levels of spending. Estimates for a selected number of countries are shown in the table below on investment requirements to reach the MDGs derived from the assessment of AMCOW et al. Ultimately there are three main sources of financing: through the user fees paid directly to the water utility, through tax revenues and their use to subsidise service delivery and finance investments, and official development assistance and contributions by non-state actors. The case of Uganda is enlightening as it shows the respective importance of the different actors in

funding. The Poverty Eradication Action Plan (PEAP) clearly recognises the fact that the tariffs cannot fully cover costs and, therefore, the Government still retains overall responsibility for financing investments in the water sector. In 2005/06, the total public spending on water and sanitation sector in 2005/06 was 103 billion shillings (i.e. some 0.6 per cent of GDP), 61 per cent of which was financed by donors. So far, however, government budgets and development assistance have largely been insufficient to cover the scale of investments needed. National water providers have also failed to help establish a financially sustainable system. Alternative sources such as private participation have proved disappointing, with water and sanitation the least attractive sector to private investors.

Box 22 - Principles for Private-Sector Participation in Infrastructure 71 The shortage and low quality of infrastructure in African countries is an obstacle to meeting the populations’ needs, to enterprise development, and to achieving the goals of the Millennium Declaration (MDG). World Bank calculations identify a need for $40 billion investment in infrastructure per year, equivalent to 9 per cent of GDP of the continent, for the next 10 years in order to attain the MDG. To meet these needs, encouraging private-sector participation in infrastructure is an option that governments cannot afford to ignore in determining their overall strategies for enhancing and financing infrastructure. The OECD Principles for Private Sector Participation in Infrastructure http://oecd.org/dataoecd/41/33/38309896.pdf aim to assist governments to make the most of private-sector involvement in infrastructure development for the benefit of society. Specifically, they offer a coherent catalogue of policy directions to be assessed as a first step in the authorities’ consideration of effective ways of involving the private sector in their infrastructure sectors, in light of their own national circumstances and needs. The Principles cover five main issues: 1) deciding on public or private provision of infrastructure services; 2) establishing an enabling policy framework for investment; 3) enhancing the public’s acceptance and the government’s capacities to implement agreed projects; 4) making the co-operation between the public and private sectors work; and 5) communicating government’s expectations about responsible business conduct to their private partners. The Principles are of applicability to foreign and domestic operators, and to the various forms private-sector participation can take. They can be used as a template for country self-assessment at national and local government levels, an aid for progress reporting by public authorities, a tool for structuring regional and other inter-governmental co-operation and public-private dialogues. They may also be used by donors as a reference point, and complement donor guidance on pro-poor growth in the infrastructure area. The Principles will be used in the context of the OECD-supported regional initiatives, such as the NEPAD-OECD Africa Investment Initiative.29 This will include, inter alia, the development of more operational guidance, specific to infrastructure sectors, such as water and sanitation and developed through multi-stakeholder consultation and tested through pilot assessments of volunteering countries. For further information see: www.oecd.org/daf/investment

29. For information on the NEPAD-OECD Africa Investment Initiative, visit www.oecd.org/daf/investment/africa

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Overview

There are very specific risks for commercial funding in the water and sanitation sector, as underlined by the Camdessus panel30. The water and sanitation projects

are usually capital intensive. They involve high initial investment, long payback periods and low rate of return. As highlighted by the AfDB31, the commercial rate of

Box 23 - Matching Demand with Supply: Feasible Financing Strategies for Water Supply and Sanitation An important obstacle to achieving the internationally agreed targets on water supply and sanitation in many countries has been the failure to address the associated financial issues adequately: the costs of achieving the targets; how those costs could be minimised; and the challenge of matching costs with available resources. The need for a fresh approach has become evident as many developing countries and economies in transition struggle to maintain even the low levels of services currently delivered by water supply and sanitation infrastructure, not to mention the need to extend it to reach a greater share of the population. The Danish government and the OECD have jointly developed an approach to meet these challenges, particularly for investment-intensive environmental infrastructure, such as urban and rural water supply, waste water collection and treatment. This approach, backed by a special decision-support tool called FEASIBLE, has been applied in several transition economies including in the former Soviet Union, some new EU countries and China. The main ideas underlying this approach are realism, affordability and cost-effective use of resources. The basic approach underlying the FEASIBLE method is to collect detailed technical data on the existing state of infrastructure, set and agree upon the public policy targets with stakeholders in areas like water supply and sanitation, determine costs and timetables for achieving them, and compare the schedule and volume of expenditure needs with available financing. This analysis generally reveals financial deficits which would likely arise during the planned implementation. FEASIBLE can then develop various scenarios to determine how the gaps might be closed. This could involve identifying measures to help achieve the targets at lower cost; identifying ways to mobilise additional finance; adjusting the ambition level of the targets; or rescheduling tasks and targets.

72

An important feature of FEASIBLE is the emphasis on realism and affordability. The model can assess the levels of finance (public, private, domestic, foreign) that might be available under different macroeconomic conditions. In this way it provides a check on what public budgets might realistically be expected to contribute. It can also help to assess the potential social implications of increasing tariffs by determining the impacts of such price increases on household income. It helps to review the obstacles systematically that would need to be removed in order to mobilise private sector and foreign financing for environmental infrastructure. Thus FEASIBLE can support a process of dialogue and consensus building among stakeholders and build bridges between policy development and implementation. The assumption underlying the FEASIBLE methodology is that governments should not be expected to finance all or even most of the environmental expenditure required, or sponsor all or even most projects. The main role of government in relation to financing is to establish the policy, regulatory and institutional framework as well as the incentive structure, within which resources from users, financial markets, capital markets, local budgets and enterprises can be mobilised in a complementary way, and be applied as cost-effectively as possible to achieve agreed goals. These applications are more than technical exercises: by engaging all the major stakeholders involved in financing environmentally related infrastructure, they support constructive dialogue and agreements that facilitated effective programme implementation, improvement of service quality and the achievement of environmental goals. If properly developed financing strategies can help to generate additional financial flows from water users, public budgets, donors, IFIs, and the private sector. In some cases, the results of such work have been incorporated into medium-term expenditure frameworks in ministries of finance, and they could provide a useful input into Poverty Reduction Strategy Programmes through setting the indicators for monitoring of the services quality inter alia taking account the need to achieve the MDG targets on water supply and sanitation. Following the initial focus on the countries of the former Soviet Union countries, the OECD is now planning to adapt the methodology to the African context, where discussions are under way with Egypt as a possible pilot country. It is also planned to identify a country in sub-Saharan Africa where this work could effectively support efforts to achieve the internationally agreed water targets. For further information see: www.oecd.org/env

30. Winpenny (2003), “Financing Water for All: Report of the World Panel on Financing Water Infrastructure”, chaired by Michel Camdessus: http://www.gwpforum.org/gwp/library/FinPanRep_MainRep.pdf 31. African Development Bank (2006), Studies on Financial Instruments to Facilitate Investment for Water Infrastructures, by Rachel Cardone.

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Overview

return for a water infrastructure project is between 5 and 10 per cent compared to 17-25 per cent in the power sector and 25-30 per cent in telecommunications. The resulting water-related infrastructure is fixed and very specific; it cannot be used for other purposes or removed from the country. This profile generates high contractual risk especially in a context of poor initial information and a weak regulatory environment. The revenues come mainly from user fees or government subsidies in local currency while funding is largely in foreign currency, exposing the investor to high foreign exchange risk. Management of the projects are mainly local, exposing the investors to weak management and financial capacities of the sub-sovereign entities (subsovereign risk). Finally, as a basic need, water has important political repercussions, and therefore justifies political interference (notably in the setting of tariffs). Such a project profile deters commercial financing and explains that most funding to the water and sanitation sector mainly comes from government and donors. However, new developments in the area of guarantees and risk mitigation mechanisms supported by the donor community are helping enhance attractiveness of the water sector and make sub-sovereign financing a viable option. 1- Implementing Cost Recovery Mechanisms Establishing an appropriate tariff structure is a key element of water management since charging for water provides an incentive for its efficient use and the revenues can cover most of the costs of service provision. The objectives of cost recovery are to ensure sufficient revenues to deliver services of quality over the long term, extending the network to serve lower income consumers while providing incentives to make better use of scarce resources. The cost recovery ratio measures the extent to which user fees with other direct contributions can meet service costs, and contribute to financial sustainability of the sector. The costs can be broadly divided into three main categories: i) operating and minor maintenance expenditures, ii) infrastructure maintenance and replacement expenditures and iii) long-term cost of capital. In the past, maintenance has been largely overlooked, jeopardising the © AfDB/OECD 2007

sustainability of the services. It is therefore crucial that financing be designed not only to cover investment needs but also to provide for recurring expenditures, including maintenance. African countries are characterised by wide variations in payment capacity. While there is a potential for full cost recovery of providing water services in most urban settings, extension of networks in peri-urban areas and service delivery in many rural areas require subsidisation of capital expansion. By contrast, sewerage and wastewater treatment are not necessarily affordable by the majority, even in urban areas. Accounting for the wide variations of affordability across users, crosssubsidisation between the wealthier and the poorer users is necessary, together with subsidisation across water and sanitation and clear differentiation of industries (particularly the polluting ones that should bear the costs of pollution abatement). According to the “polluter pays” principle, the tariffs applied should reflect the cost of treatment and therefore depend on the volumes and pollution content of the wastewater. Alternatively, it could also give incentives to industries to treat wastewater on site (in line with clear agreed standards) to reduce the burden on treatment plants. Cross-subsidisation is not at odds with the cost-recovery principle since the average tariff can be set so as to ensure financial sustainability of the provider, without recourse to government support. The tariff structure that is usually implemented to incorporate crosssubsidisation is a stepped or progressive one where a low price is charged for a small quantity of water, and the tariff increases with successively higher levels of water consumption. This structure has the additional advantage of encouraging water conservation, unlike other financing systems, such as property taxes. However, monitoring consumption levels requires an efficient metering system and the prevention of illegal connections. Also, implementing different levels of cross-subsidies (across user categories and activities) can lead to a complex tariff system that may be difficult to administer. Wide variation in payment capacity is also matched by variations in the costs of water provision. This reflects the differences in technologies used, notably to African Economic Outlook

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access newer, more remote and deeper sources. In Uganda, for instance, the per capita cost of providing improved water to people in rural areas is $34 on average, but it varies between Districts. In some cases this is a result of the technology mix: there has been a steady increase in per capita costs due to a marked reduction in the availability of low cost options such as springs and shallow wells, increased expenditure on overheads (in part as a result of the creation of new Districts) and an increase in the cost of other resources (e.g. fuel, construction materials). In the 2005/06, financial year the per capita cost for small towns was $96, attributable to cost of diesel generators, poor state of schemes, and the purchase of bulk water. With tariffs ranging from 800 to 2 500 shillings per cubic metre, it is estimated that only 17 out of 53 small towns are able to cover their operation and routine maintenance costs.

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As of today, very few water utilities are financially sustainable. Even in urban areas, tariffs rarely fully cover all operating and maintenance costs, not to mention charges for capital raised to finance investment expenditures. In northern Africa, for instance, the World Bank finds that only the water utilities in Rabat and Casablanca reach operating cost recovery32. By contrast, the water utilities in Cairo and Alexandria are estimated to cover only some 25 per cent of their operating costs. Consequently, most water utilities rely on subsidies at least for network expansion and modernisation. Ensuring sustainable access for all: the respective role of user fees and subsidies. The key elements determining users’ payments are affordability and willingness to pay. Willingness to pay is in turn a function of quality and reliability of services. It is also influenced by the existence of competing water sources or by different price policies in neighbouring communities. Awareness campaigns on

the consequences of not paying, but also on the consequences of poor water and sanitation conditions on health and education, help to increase willingness to pay. The usual rule of the thumb to appraise affordability is that households should not pay more than 3 to 5 per cent of their incomes for water services. However, for a variety of cultural and historic reasons, paying for water and sanitation services is not well established in Africa. Following the Gurría task force33, it is however largely admitted today that “free water services ultimately may be very expensive for the poor”. Rural areas face a particularly difficult challenge to ensure financial sustainability as most of their population is poor and can hardly cover even operating and maintenance costs. Some transfer pricing mechanisms between urban and rural areas exist that involve for instance levies on volumes of water “imported” by cities from basins in rural areas. However, the challenge remains great as the population in richer areas might not be wealthy enough to support the resulting costs in most African countries. Also, the utilities are increasingly autonomous and managed on a commercial basis, making such transfers difficult. In the specific case of sanitation, the financing can not be raised through tariff-based user charges in areas where networks do not exist. Its cost, therefore, can hardly be covered by households. The AfDB34 concludes that most financing for rural water and sanitation will continue to come in the form of a mix of loans and grants, mainly from international development assistance (whose contribution is estimated at 80 per cent), from national governments (15 per cent) and from communities (for 5 per cent) in the form of free labour and material for construction and maintenance. It is widely acknowledged that sewerage operations should be linked with water services in an integrated tariff system to reflect the direct link between wastewater removal and provision of drinking water. However,

32. World Bank, 2007. Making the most of scarcity. Accountability for better water management results in the Middle East and North Africa. 33. World Water Council, 2006. Enhancing access to finance for local governments. Financing water for agriculture: Task force on Financing water for all, chaired by Angel Gurría. 34. African Development Bank (2005), Rural Water Supply and Sanitation Initiative, implementation Plan and Resource Mobilisation Strategy.

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sanitation remains the most difficult element to finance through cost recovery as shown by the case of Tunisia. The costs of sewerage and wastewater treatment are usually higher than the costs of networked water supply, depending on the level of treatment. However, charges for sanitation services are usually set at only 20 to 30 per cent of the costs of water provision. Since networked sanitation is only available in formal housing areas, such a level of cost recovery implies that some 70 per cent of sanitation costs are subsidised by general tax revenues. In Algeria, for instance, sanitation fees amount to 20 per cent of the water bill, even though improvement in services is much needed: only 14 of the existing 45 treatment plants work and the country reports 1 such plant for 711 000 inhabitants in 2005 to be compared with 1 per 5 000 inhabitants in France in 1998. Subsidies remain a central issue in the general problem faced by service providers and governments of ensuring greater access for the poor while preserving quality and quantity of access for the already connected.

In order to provide some answers, the AfDB35 makes a useful differentiation between the lower middleincome households, the developing poor, the coping poor, the very poor and the destitute. For the lower middle-income households, employed at low wages but living in conventional housing, water and sanitation tariffs are affordable but need to be structured to allow delays in payments in exceptional circumstances (as they are sensitive to shocks and might be pushed into poverty). The developing poor live in informal housing but have sufficient income to invest in developing their dwelling. The coping and developing poor could afford differentiated household connections but for low pressure, limited hours and a limited volume of water. The remaining poor have little means to access individual water and sanitation facilities, but would benefit from well-managed community-based toilets and sanitary blocks. The destitute, living on the streets, would need to access the services for free. A large number of the poor currently depend on water vendors, and therefore already pay at least ten

Box 24 - Implementing Cost-recovery in Tunisia The price of drinking water and sanitation in Tunisia is not used in its distribution or in active regulation of demand, but is part of cost recovery and depends on use (domestic, industrial or for tourism) and the amount used. Consumers get a single bill combining charges for water (from Sonede) and sanitation (Onas) and a government tax. The water and sanitation parts include a fixed charge (to cover maintenance) and a variable one according to consumption. The government keeps the fixed charge the same for the smallest consumers as a way of helping the poor and has steadily increased it for other levels of consumption and other users (tourism, industry). The variable rate increases according to five levels of consumption (in cubic metres). The distinction between sliding rates for domestic consumption and for type of use allows for some consumers to be subsidised by others. Sanitation’s share of the total bill varies between 21 and 46 per cent for domestic consumers, while industry’s is 32 per cent (low-level pollution), 42 per cent (medium pollution) and 49 per cent (heavy pollution). In the tourist sector, its share is 54 per cent (more than water’s share). Revision of the drinking water price structure has enabled Sonede to balance its books, but the structurally-indebted Onas is in dire financial straits and its debt grew from 18 per cent of turnover in 2002 to 35 per cent in 2004. Onas’ revenue mainly depends on its charges, which do not cover costs very well because they are fixed. The biggest operating costs are for depreciation and wages. The government contributed an estimated 64.9 per cent of Onas’ income in 2004 (a subsidy per cubic metre of sewage that was more than the average price paid by households) but this was not enough to cover investment needs, operating costs and renewal work, thus threatening the quality of Onas services. The National Statistics Institute’s household survey in 2000 showed that the average water and sanitation bill was only 0.93 per cent of total per capita spending, well below the usually accepted level of 3 per cent of income. Sonede says 90 per cent of its customers pay less than the cost price for water. Source: see country notes in the body of the report.

35. Guidelines for user fees and cost recovery for water, sanitation and irrigation projects, 2006.

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times more for water than middle-class urban dwellers with access to piped water. However, since the poor purchase only small quantities of water, their observed “willingness to pay” does not imply that they could pay the equivalent price for larger volumes. In poor, isolated rural areas, payments in cash are not common. Free labour forces and inputs are used to develop the networks and ensure some maintenance. However, recurring costs cannot be covered in this way and therefore still require subsidies. When they are necessary, subsidies should follow the key principles of affordability (for the general budget), targeted (to the groups in need) and transparency (clearly identified in the fiscal accounts). There are recognised difficulties in identifying and reaching target groups. Consequently, targeting areas where the majority of poor households are located could help avoid distortion.

Subsidies in the form of progressive tariffs with increasing levels of water consumption are however detrimental to large families and to groupings of families (to which the poorest might resort). Moreover, subsidising services only helps the poor if they have access to water. Otherwise, subsidies become countereffective as they leave little funding for extending infrastructure to the unserved. Helping the poor in areas where connection is low requires providing them with the means to access water and sanitation facilities, rather than providing on-going support for consumption. In this respect, social funds, access to credit and cost sharing are key elements. The NWSC of Uganda provides an interesting case in which connection subsidies are offered to promote access as opposed to consumption subsidies. However, subsidies that lower investment costs might not be

Box 25 - Affordability and Subsidies in Namibia

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In Namibia, survey data based on water tariffs in 2003/04 and 2004/05 show that low-income families or pensioners with an income of less than N$ 600/month cannot afford to use the 6m3/month, which is regarded as baseline water for a urban family of five with full water services. In rural areas the situation is likely to be worse. The non-payment of accounts leads to a vicious circle, where both NamWater and local authorities need to increase their tariffs to compensate for non-payment of accounts. This practice makes services even more unaffordable to the poor in Namibia. In both Windhoek and Rehoboth, the intention of the City Council is to subsidise low-income households to make baseline water (40 litre/person/day) available at a lower price. Windhoek currently applies a raising block tariff: each month, the first 6m3 are provided at a subsidised rate, while in the 6-to-36m3/month range the tariff is at average cost-recovery levels. For consumption over 36m3/month, the tariff is set at long-term marginal cost (above average costs). There is a general consensus within municipalities and at NamWater that the strategy adopted in South Africa of providing free water up to a consumption of 6m3/month would be ineffective, as it would create enormous problems for municipalities to cover costs of supply and increases in water wastage. Source: see country notes in the body of the report.

sufficient to help poor households to acquire a connection in case of non-financial obstacles. Land and property titling can be an issue, as well as growing tenancy that has accompanied rapid urbanisation. If the cost of providing and maintaining sanitation are not factored into the rent, the poor tenants have little incentive to develop facilities in places they do not own, while the landlord is only likely to provide a crude structure. The use of microfinance in the water sector is a recent development driven by the need to increase connections and improve the maintenance of existing facilities. As such examples, ASCI in Ethiopia and KRep in Kenya provide financial services for maintenance African Economic Outlook

purposes. In Cote d’Ivoire, the partnership between the water distribution company (SODECI )and CREPA (Regional Centre for low-cost Drinking Water and Sanitation) allowed 300 more poor households in Abidjan to be connected to the network. CREPA provided micro loans to cover the cost of the connection as well as assistance to the household to manage the payment of bills and repayment of the loan. • Strengthening utilities: the role of service providers, governments and the private sector Strengthening utilities is a key step in the process of establishing sustainable cost-recovery mechanisms. The performance indicators used to evaluate the © AfDB/OECD 2007

Overview

Box 26 - Microfinance for Rural Community-managed Water Projects in Kenya Kenya provides interesting examples of projects pre-financed with market-based finance from domestic private microfinance institution (K-Rep Bank) both for rehabilitation/augmentation of existing projects and new, greenfield projects. Under this scheme, KRep pre-finances loans worth 80 per cent of the capital costs for small-scale piped networks; the community is responsible for the other 20 per cent. The communities are also responsible for paying the costs of their technical and financial assessments. On project completion, 40 per cent of K-Rep’s loan will be provided as an Output-Based Aid (OBA) subsidy (performance-based subsidies, as developed below in the section on aid) which will help to keep the tariffs affordable in the short run. In practice, the OBA subsidy is intended for the first few communities, and, on positive outcomes, further lending by K-Rep will be without the subsidy. The expected outputs are increased service coverage (through direct household connections and kiosks) and increased quantity of water supplied. The key innovations of the schemes are the use of technical assistance to meet high transaction costs and build local capacity, the use of OBA to address affordability concerns and a risk-sharing mechanism by Community Water Projects and a CWP employed Project Engineer. The key parameters that allow replication of such schemes in other countries are a conducive policy environment that gives “space” and does not crowd out private market finance, a policy environment that supports a gradual move towards cost-recovery tariffs, reasonably well developed domestic financial institutions, a regulatory framework that gives “legitimacy” to small service providers and viable demand from an adequate “market size”. Source: Based on the intervention of Meera Mehta, Water and Sanitation Programme, at the OECD/AfDB expert meeting on Access to Drinking Water and Sanitation, Paris, December 2006.

efficiency of utilities are usually the staff per thousand connections, level of non-revenue water and billing and connection efficiency. A level of bill collection below 90 per cent either reflects a deficient billing system or that the tariffs are perceived as unaffordable or unacceptable given the quality of service. These performance indicators are not easily available for African utilities, making the assessment of their financial sustainability difficult. A practitioners’ workshop was organised by WSP in Pretoria in August 200636 that highlighted some

action points, distinguishing between the respective role of utilities and governments. Utilities were urged to improve revenue collection, to minimise unaccounted for water, to introduce financial and management information systems and to improve customer relations. For example, the Lusaka Water and Sewerage Corporation of Zambia embarked in late 2005 on a programme that included reducing the waiting time for the installation of a connection to 10 days and improving customer service (notably through greater responsiveness to complaints). The staff were sent to the different communities to identify the facilities,

Table 14 - Bill Collection Rate in Selected Countries Countries

Companies

Bill Collection Rate

Source

Burkina

36 urban centres

72%

Well briefing Note 33, 2006 www.lboro.ac.uk/well

Mali Senegal Tanzania Tunisia Uganda Zambia

16 urban centres 56 urban centres Dar Es Salaam SONEDE NWSC Average of the 9 commercial utilities

94% 98% 60% 99% 90% 77%

Perard (2007) NWSC, 2007 NWASCO, 2005/2006

http://dx.doi.org/10.1787/404832583528 36. http://www.wsp.org/filez/pubs/2122007120644_MobilizingMarketFinanceforWaterUtilitiesinAfrica.pdf

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inform the customers and negotiate debt settlements and call centres were established. The billing process was also improved with cross-checking of customers’ addresses and cancellation of double billing. As a result, by the end of 2005, 80 per cent of customers had noticed positive changes in the management and delivery of water services. In order to address the problem of payments arrears in Namibia, a number of towns began installing pre-payment water meters in 2003. This measure met widespread criticism from civil society organisations and was plagued from the beginning by a high incidence of faulty equipment. An alternative mechanism consisting of community level water committees that collect money from different household for the use of shared taps and toilet facilities has apparently been more successful, although it has been used only on a very limited scale.

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Benchmarking among water utilities also provides a basis for promoting efficient performance. To that end, the NWSC of Uganda has partnered with water utilities in Kenya, Tanzania, Nigeria and Zambia to share experiences and undertake performance enhancement programmes. Following the 2006 World Water Forum

of Mexico, the UN Secretary General’s Advisory Board on Water and Sanitation is also working on strengthening capacities of the key players in the water sector by establishing a Water Operators Partnership to promote co-operation. The objective is to set up mechanisms that will allow utility operators to provide mutual support on technical and managerial issues without intermediaries. Governments also have an important role to play in strengthening water utilities. It is widely recognised today, following work by the World Bank and others that governments have a key role to play in setting an environment which is conducive to business, notably by improving the institutional, policy and regulatory frameworks. One key element of such a businessconducive environment is predictability of agreed government transfers and respect for contracts. In Zambia, for example, six out of nine local commercial utilities had reached operational cost coverage by the end of 2006, but the number would have been even higher were it not for the non-payment by government institutions for their water use. Governments can also help to strengthen water utilities by strengthening their

Box 27 - The Success of NWSC-Uganda and Relevance for Other African Countries In NWSC-Uganda, the internal reforms and organisational restructuring carried out from 1998 have led to significant efficiency gains. Subsequently, the NWSC has improved its turnover from $11 million in 1998 to $33 million in 2006 and operating profit after depreciation has increased from a loss of $0.4 to $2.4 million. Through this improved efficiency, NWSC has managed to generate its own internal finances and constructed more than 1 060 km of new water mains to serve the peri-urban communities and the urban poor, for which the government or development-partner funds were not required. This has helped to improve service coverage from 48 per cent of target households in 1998 to 70 per cent in 2006. Internal sources of finance as a percentage of total capital investments reached a 45 per cent compared with 21 per cent in 1998. Consequently, internally generated funds through user fees currently cover all operation and maintenance costs, the cost of free new connections, depreciation, the construction costs of secondary and tertiary mains and a small contribution to major extensions. In NWSC-Uganda, the tariff is split into “public stand pipe”; “domestic”; “institutional” and “commercial” rates. This allows the Corporation to offer fair, sustainable and enforceable tariff rates to different customer categories. Furthermore, in addition to the new connections policy, NWSC has carried out tariff adjustments to keep user-friendly tariffs: reduction of the connection charges and reconnection charges by 50 and 75 per cent respectively, elimination of the minimum charge, indexation of the tariff against the factors of domestic and foreign inflation, exchange-rate depreciation and the electricity costs, and gradual re-balancing of the tariff thereby reducing the cross subsidy amongst the customer categories. However, the tariffs are not sufficient to meet external debt service obligations as full cost recovery would require, since this would mean significant tariff increases that cannot be afforded by the citizens or would be done at the expense of coverage extension. Source: Based on the intervention of Dr. William T. Muhairwe, Managing Director, NWSC at the OECD/AfDB expert meeting on Access to Drinking Water and Sanitation, Paris, December 2006.

African Economic Outlook

© AfDB/OECD 2007

Overview

balance sheets, e.g., through debt for equity swaps. In Uganda, for example, the NWSC has proposed converting the present value of NWSC long-term debt (comprising interest and principle amounting to $90 million) into government equity in the company under the condition that NWSC undertake a 5-year network expansion programme. Examples of good performance exist both for stateowned and privately run utilities. In Tunisia, the water and sanitation sector is entirely state-owned and fully centralised; yet it displays very sound performance: unaccounted-for water was only 18.2 per cent in 2004,

more than 99 per cent of bills are paid and access to water is available 24 hours a day in all cities. The stateowned utility behaves in this case as a private company would, seeking cost recovery. The same efficiency standards can be found in the water public sector of South Africa and Uganda. In other countries, however, such as Senegal and Morocco, the private sector has been playing an important role to extend coverage and improve quality of service. The difficulties faced by the private sector in its involvement in the water and sanitation sector often reflect difficulties inherent to the sector – huge infrastructure needs, the presence of externalities and tremendous sanitation backlogs.

Box 28 - Successful Public-Private Partnership in Urban Water Supply in Senegal The success of the public-private partnership is due to an appropriate institutional framework, suitable incentives and the major role of the government, which has inspired confidence in its partners. The private firm Sénégalaise des Eaux (SDE), owned by the French group SAUR, is upgrading the supply network under its contract but also because increased water consumption means bigger profits. The stakeholders have also established a good dialogue, with contracts reviewed every six months by a committee that monitors SDE’s performance. The review is based on 18 criteria spelled out in the contract between SDE and its public counterpart, the Société Nationale des Eaux du Sénégal (Sones), which is responsible for investment plans and supervision of them. Achievement of each of the main targets is rewarded and failure incurs fines. This system has made SDE more efficient and the firm increased its customers by 69 per cent between 1996 and 2005, had a volume production/sale ratio of 80.5 per cent (68.2 en 1996), network efficiency of 80 per cent (the target is 85 per cent) and has had balanced accounts since 2003. The government has played a strong regulatory and coordination role and has kept its promises, notably by paying its own bills (making for SDE’s 98.3 per cent bill collection rate). The necessary rate increases provided for in the SDE-Sones contract have also been made. Source: see country notes in the body of the report.

Together with the traditional national utilities, local small-scale operators can contribute to expanding service provision on a cost-recovery basis. Small-scale operators have been in the water market for a long time, but mainly as informal, unregulated providers meant to fill a gap, notably by reaching the poor and remote communities where bigger utilities do not operate. For example, the Well Briefing note 33 on Private Sector Participation in Urban Water Supply37 shows that some 39 per cent of the population of Dar es Salaam and up to 50 per cent of the population of Nairobi is supplied by small water enterprises. Bearing all the risks and faced with little competition, they frequently charge high prices for their services. As such policy makers largely saw them as problematic. Today,

however, they are more likely to be considered as part of the solution because they have a strong knowledge of population needs, operate without subsidies and are flexible. They are of particular use in peri-urban and rural areas where networked service provision is limited and actions are localised. However, their activity needs to be better regulated, especially as regards water quality. At the same time, the national institutional and regulatory frameworks should be made more flexible to facilitate their increased participation. Besides contributing to service provision, local entrepreneurs are also instrumental in developing water and sanitation-related activities: drilling, construction of latrines, emptying of latrines and in the provision

37. http://www.lboro.ac.uk/well/resources/Publications/Briefing%20Notes/BN33%20PSP.htm

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Box 29 - Association of Private Water Operators in Uganda APWO-Ug was established in 2003 with the support of GTZ(Gesellschaft für Technische Zusammenarbeit) (German technical co-operation agtency). It has ten member companies managing 57 towns-of the 180 in Uganda. The key principles for water provision are to use metering to reduce the unaccounted for water and ensure payment for the cost of service (93 per cent metering), customer care and sensitisation, good maintenance of water supply systems (functionality at 93 per cent), effective utilisation of government grants to extend water services (improved access by 0.5km), water quality testing and dosing (95 per cent of samples in conformity) and proper record keeping and regular reporting (availability of national data for assessing coverage). However, the sector faces some key issues: - Lack of streamlined policy frameworks for private-sector engagement, e.g. de-gazetting of towns to the public sector, inadequate compensation and uncertain business environment - Non inclusion in key policy/legal documents such as the Water Act - Restrictions on private-sector investment in water systems - Tariffs set without consultation with private operators and non reflective of the reality on ground - Sector governance, participation, accountability and transparency issues i.e. corruption - Delayed payment of management fees resulting from low rates of investment by government, low tariffs, delayed payments by government institutions - Inadequate regulation mechanisms in the entire water and sanitation sector.

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- Inadequate resource/capacity of the local authorities & DWD to facilitate performance monitoring for both private and public sector - Lack of representation on key water sector committees to create linkages to the sector mainstream - Political influence and interference in day-to-day operational issues including bidding and contract procurement processes, debt collection, water extension - National power crisis (load shedding reducing hours of production by 304 hours/month on average) - Lack of resources to facilitate planned activities like training, secretariat logistics Source: Based on the intervention of Winifred Kalebu, Chairperson, Association of Private Water Operators, Uganda, at the OECD/AfDB expert meeting on Access to Drinking Water and Sanitation, Paris, December 2006.

of the spare parts necessary to maintain existing facilities. They face the usual constraints of SMEs in Africa (highlighted in the African Economic Outlook 2004/2005). Helping them access funding can take the form of local revolving funds and provision of guarantees. • Conclusion: the need for a significant change in policies and practices Implementing cost recovery requires a radical change in management culture. It requires the establishment of an independent regulator as well as the involvement of the users (including the poor, the industries and government agencies) for all to buy into the new organisation. Indeed, changes in the tariffs structure require a good partnership between governments and utilities but also awareness campaigns since the population very often resists the reforms. This is also why, even if subsidises may be justified on social grounds African Economic Outlook

at one point in time, it is important to take into account their longer term impact, such as the adverse effect on the management of utilities, and the difficulty of removing them once established. One-off subsidies such as support for connection have the advantage of avoiding a habit-forming effect, of key importance in countries with a binding budget constraint. Beside a complete change in the tariff structure, there is a need for regular increases, notably to adjust for inflation. The widely agreed principle here is to implement small but regular increases, as they are better understood if the service is good enough. When indexation is not followed, revenue falls behind costs with the result that maintenance is deferred and services deteriorate. It becomes then even harder to fully adjust the prices. 2- The Role of Donors Aid to water supply and sanitation is the only social sector where aid allocations fell in the 1990s, partly © AfDB/OECD 2007

Overview

because of a general decline in aid, partly because of the sharp drop in aid for large dams and water storage schemes. However, the 2003 recommendations of the Camdessus panel to double financing for the water sector to achieve the Millennium Development Goals on water and sanitation, helped to reverse this trend. The share of African countries in total aid for water increased again slightly in recent years. Nevertheless, it is difficult to predict the expected increases in ODA for the water and sanitation sector since the donors do not make projections at sectoral level.

2004, followed by a slight decline in 2005 to levels that remain above the average of the 2000-03 period (see figure). Most of the increase in aid was due to new commitments by multilaterals (IDA and EC) whose allocation to the water and sanitation sector in Africa rebounded from about 30 per cent in the middle of the 1990s to 50 per cent in 2003-05. Nevertheless the share of aid devoted to water and sanitation in Africa by the World Bank remains low: only $146 million allocated to water over 19902005, representing some 6 per cent of the World Bank portfolio of $23 billion.

The most recent data from the Development Assistance Committee of the OECD show a sharp increase in the allocation of Official Development Assistance (ODA) to water supply and sanitation in

Conversely, the share of bilateral aid to water and sanitation in Africa declined from 34 per cent in mid the 1990s to 22 per cent in 2003-05, reflecting the

Figure 12 - Total Water ODA to Africa, $ billion, 2004 prices, commitments with 3 years moving average Bilateral ODA

Multilateral ODA

Bilateral Trend

Multilateral Trend

81

.2 .0 0.8 0.6 0.4 0.2 0 1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: DAC statistics, Creditor Reporting System http://dx.doi.org/10.1787/263526661141

Figure 13 - Water ODA Commitments by Sub-sector 2005 Rivers / Waste / Education 4% Basic drinking water s.& s.

Water resources policy 20%

32%

44% Water s. & s. - large systems

Source: DAC statistics, CRS http://dx.doi.org/10.1787/582267471277

© AfDB/OECD 2007

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Overview

weakness of new commitments compared to the large infrastructure projects carried out in the second half of the 1990s. The trend in bilateral aid to the water sector is mainly set by the large donors and allocations are concentrated in a relatively few recipient countries. In 2004-05 Germany, Japan, Denmark, France and the Netherlands extended about three quarters of total bilateral aid to water supply and sanitation. Over the same period, about three quarters of total aid was concentrated in 10 recipients, including Ghana, Nigeria, Tunisia, Kenya, Ethiopia, Benin, Morocco, South Africa, Tanzania and Burkina Faso.

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In the water sector most aid is used to finance investments in infrastructure (figure). Projects are large and on average take at least 8 years to be completed. In view of the capital-intensive nature of water projects, timely financial flows are crucial for planning and implementation purposes. Nevertheless, aid flows remain highly unpredictable. Late disbursements have strong negative consequences, leading to very low execution rates, to accumulation of debt to contractors, and to temporary suspensions of work. In Mozambique, for instance, the water sector’s execution in the first half of 2006 was only 17 per cent of planned investment expenditure reflecting late disbursements by treasury and by the funding agencies. The challenge for donors is to work towards longer-term, stable funding to enable better planning and implementation. In tandem, governments could put in place a special national or international facility to pre-finance disbursements budgeted for a later period.

Despite a general trend towards greater harmonisation and alignment on recipient country priorities, reflected by a relative increase in Sector Budget Support (SBS) and General Budget Support (GBS), the vast majority of foreign aid to water and sanitation is spent on projects. Most donors consider that the large scale and technical complexity of water and sanitation civil engineering works may be more adequately managed as projects. The project approach is also considered to support innovative approaches, involving the private sector and civil society that are not always well taken into account in government programmes. In addition, some donors favour harmonisation of policies but not of financial mechanisms and procedures, each donor country preferring to retain its own rules. The limited adherence to SBS and GBS support in some countries reflects the concern that these funding mechanisms are still at early stages and require major improvement. Accordingly, some donors and recipient governments are working to improve planning and monitoring, and to agree on the use of common reporting, auditing and procurement procedures. Water Sector Working Groups of donors and government representatives have been set up in many countries to improve national coordination, including Mozambique, Uganda and Zambia. While the trend of ODA for to the water sector to be increasingly given in the form of grants is to be welcomed (58 per cent in 2004-05 compared to 36 per cent in the mid 1990s), it is crucial that aid does not crowd out local initiatives or discourage

Box 30 - A Trust Fund to Improve Service Provision in Peri-urban Areas in Zambia The Devolution Trust Fund, instituted under the National Water Supply and Sanitation Council (NWASCO), has been financing projects on a pilot scale for commercial utilities to improve water supply since 2003. Funds are provided to commercial utilities to extend their services to the peri-urban poor. A total of about 120 000 people in low-income areas have since benefited in terms of safe and adequate water supply. During the pilot phase, detailed procedures and guidelines were developed to make DTF operations more transparent and accountable. The establishment of the DTF as a basket fund targeting peri-urban and low cost areas has been lauded as the most significant initiative the government has taken to extend water supply and sanitation services to these areas. Consequently a number of co-operating partners have made financial commitments to support the government achieve this objective. As at end 2006, about 8.8 million euro had been mobilised by the DTF from the German banking group KfW (Kreditanstalt für Wiederaufbau), the Danish International Development Agency (DANIDA), and the EU for financing implementation of WSS projects. In the future, there are plans to broaden the DTF mandate to water treatment investment. Nevertheless, the limit of the DTF is that it is not aligned to the decentralisation process. Source: see country notes in the body of the report.

African Economic Outlook

© AfDB/OECD 2007

Overview

water authorities from becoming financially selfsustaining. Thus, ODA funds should be used to mobilise other flows, such as user charges, other local revenues, bank loans and private capital, and to empower other stakeholders in line with the national water strategy. For example, in Zambia aid is channelled through a the Devolution Trust Fund which assists the nine commercial water utilities in urban areas to extend the provision of water and sanitation services to the peri-urban poor. Another means through which aid could be used to mobilise other financial flows is to provide subsidies targeted on performance, such as Output-Based Aid (OBA). OBA is a strategy for using explicit performancebased subsidies to support the delivery of basic services where policy concerns would justify public funding to complement or replace user-fees. OBA involves delegating service delivery to a third-party, typically

private firms, but also public utilities, NGOs, and community-based organisations, under contracts that tie disbursement of the public funding to the services or outputs actually delivered. OBA in the water sector can be used in the form of subsidies to reimburse water bills of low–income consumers, or to expand water and sewer networks, in cases in which disbursements are tied to the number of new connections. Many countries are adopting the OBA funding mechanism. For example, in Mozambique, the Global Partnership on Output-Based Aid (GPOBA), a multidonor trust fund administered by the World Bank, has recently launched a project to provide subsidised water connections for domestic consumers in five cities that currently utilise PPP contracts. The aim of the GPOBA-funded project is to increase access to water services for poor households through further public-private partnerships.

Box 31 - Mozambique Water Private Sector Contracts – OBA for Coverage Expansion The GPOBA project is to provide subsidised water connections for domestic consumers in Maputo, Beira, Nampula, Quelimane, and Pemba. This will facilitate access for low- to –middle-income households that currently have no access to piped water. The World Bank-financed National Water Development Project II (NWDP II) began implementation in 2000 and concentrated on large investments to increase the capacity of several water systems. These investments have secured a sufficient supply of potable water to dramatically increase service coverage. However, the high cost of an individual household connection is a major barrier for low- and middle-income households. Thus, GPOBA will contribute towards subsidising around 36,300 new connections, equivalent to an increase in the number of households gaining access to piped water by 23 per cent in Maputo, 31 per cent in Beira, 100 per cent in Quelimane, 46 per cent in Nampula, and 100 per cent in Pemba. Source: Global Partnership on Output-Based Aid, World Bank

3- Developing Innovative Financial Tools There is potentially great scope to tap domestic and international financial markets by issuing long-term bonds and shares in equity. The decentralisation process has raised the issue of long-term local currency financing for sub-sovereign entities38 and the issue of creditworthiness of utilities that could help generate funds. However, while devolution of the responsibility for service delivery has been proceeding, few subsovereign entities have been given the tools needed to

raise adequate funding. Raising taxes remains very often the task of central government. Some larger cities may have the capacity to raise bonds, such as the city of Johannesburg that launched in 2004 the first nonsovereign guaranteed loan in Sub-Saharan Africa. However, the central power remains in many cases reluctant to provide the corresponding guarantee as it constitutes a liability on the budget and local capacities are usually deemed weak. Moreover, the scale of the required funding very often exceeds the capacity of local financial markets. Furthermore, there are

38. See: Winpenny, J. 2005, Guaranteeing Development? The Impact of Financial Guarantees OECD Development Centre, Paris.

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Box 32 - Decentralised Financing in Mali There is little decentralised funding available in Mali, except for money from NGOs and local community groups. National water department (DNH) projects are internationally funded. In the Kayes region, Malians living in Europe often invest heavily in water supplies for their home village. Communities can also get money from the national agency for local investment, (Agence Nationale d'Investissement des Collectivités Territoriales – ANICT), which earmarks about 10 per cent of its funds for water and sanitation projects, but with conditions that prevent borrowers from buying more than hand-pumps and large diameter wells. Source: see country notes in the body of the report.

Box 33 - Responding to the Calls of the Camdessus and Gurría Panels: a Selection of Financing Schemes for the Water and Sanitation Sector in Africa IFC Partial Credit Guarantee The IFC partial credit guarantee is a credit enhancement mechanism for bonds and loans. IFC uses its triple-A credit rating to allow borrowers to access the financial market and extend debt maturity. The IFC guarantee covers creditors irrespective of the cause of default. Partial guarantees can be either in local currency (for domestic transactions) or foreign currency (for cross-border transactions). The outstanding example in Africa of provision of such a guarantee is the issue of bonds by the city of Johannesburg in 2004. See: www.ifc.org/structuredfinance The World Bank Multilateral Investment Guarantee Agency (MIGA)

84

MIGA is a multilateral risk mitigator, promoting foreign direct investment into developing countries by ensuring investors against political or non-commercial risks, mediating disputes between investors and governments, advising governments on attracting investment and sharing information through online investment information services. The main users are cross-border investors, but nationals and state-owned corporations operated on commercial basis are also eligible. MIGA action in the water and sanitation sector remains however limited and is almost non-existent in Africa. In 2005, however, MIGA issued four guarantees to Urbaser S.A. for its concession agreement with the Municipality of Cairo to contribute to the modernisation of Cairo’s waste management sector. See: www.miga.org The Public-Private Infrastructure Advisory Facility (PPIAF) PPIAF is a multi-donor technical assistance facility that aims to improve the quality of infrastructure through public-private partnerships. It was launched in 1999, is supported by 15 development agencies and managed by the World Bank. It finances advisory activities, including the design of policy, regulatory and institutional reforms. In 2006, 14 per cent of PPIAF funding to SSA was allocated to water and sanitation. See: www.ppiaf.org EU Water Facility In 2004, the European Commission created an ACP-EU Water Facility using €500 million from the 9th EDF, to be allocated in two tranches via competitive calls for proposal. A first Call to allocate €180 million was launched in late 2004. By January 2005, the EC had received 800 preliminary proposals requesting grant financing for €2.75 billion. The demand by far surpassed expectations and €50 million were anticipated from the second tranche, for a total available amount of €230 million. Together, the first and second calls for proposals of the Water Facility resulted in the selection of 175 proposals, from over 1300 submitted, for a total EC contribution of €420 million, leveraging an additional €360 million. The ACP-EU Water Facility is not designed to finance large water infrastructure projects. It is a fund that creates the conditions to attract funding from sources other than public development assistance and brings funding directly to the local level. Evaluation of the Facility is planned for 2007. Among the key themes for the evaluation will be to find ways to increase coherence with Country Strategies, to identify modalities for increasing the leverage of new resources, including a higher participation of the private sector.

sometimes (legal) restrictions on borrowing by subsovereign bodies, also on MFI funding. Sub-sovereign bodies also very often lack capacity to produce financial African Economic Outlook

statements, conduct auditing and oversight. Finally, the fiscal relationship between central government and sub-sovereign bodies is not always clearly defined and © AfDB/OECD 2007

Overview

Box 33 - Responding to the Calls of the Camdessus and Gurría Panels: a Selection of Financing Schemes for the Water and Sanitation Sector in Africa (cont.) EIB The EIB manages the Cotonou Investment Facility. The 2003 ACP-EU Cotonou Convention provided the EIB with new financial instruments allowing i) a higher level of risk-taking by the Bank to support the private sector, including the use of equity, quasi-equity, and guarantees, and ii) elements of concessionality in projects supporting reforms and eradicating poverty. After amendments, both the Investment Facility and own resources can be used for infrastructure financing with interest subsidies of up to 3 per cent. In 2006, the EIB-ACP Project Preparation Facility was created to provide technical assistance in tandem with the EUWI. See: www.eib.org The Private Infrastructure Development Group Umbrella (PIDG) - Emerging Africa Infrastructure Fund (EAIF): EAIF was launched in 2002 to provide long-term debt to pro-poor private sector funded infrastructure service projects in sub-Saharan Africa in the energy, telecommunications, transport and water sectors. It is supported by DFID, SIDA, DGIS and SECO. - GuarantCo: provides guarantees to enhance credit, notably of municipal bonds. Many infrastructure projects, particularly at the sub-sovereign level, derive most of their revenues in local currency, making hard-currency debt funding inappropriate. In 2004 the PIDG launched GuarantCo, which is designed to mitigate risks for local currency financing of infrastructure. It is supported by DFID and SIDA. - In 2003 PIDG established a local capacity Technical Assistance Facility (TAF) to assist in the building of local capacity and capability associated with private sector investment in infrastructure. Technical assistance is provided to both the public and private sectors in support of the planning and implementation of projects and programmes of any of the facilities or funds undertaken under the PIDG umbrella with funding support from the World Bank. See: www.pidg.org Cities Alliance Cities Alliance is an alliance of cities and their development partners to improve living conditions of the urban poor. It was launched by the World Bank and UN-Habitat in 1999. It operates the Community Water and Sanitation Facility (CWSF), which targets NGOs, local governments, private sector, CBOs. See: www.citiesalliance.org CLIFF (Community-Led Infrastructure Finance Facility) Guarantee Facility This is co-ordinated by Homeless International with funds from DFID and Sida. It provides venture capital and other financial products directly to urban poor organisations to support slum upgrading. It began operations in India in 2002 and started operating in Kenya in 2005, where it supports Muungano Wa Wanavijiji. The NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) NEPAD-IPPF was established in 2003 with seed funding from the Canadian Government and transformed in 2005 into a multidonor facility. The key objective of the NEPAD-IPPF is to assist African countries, Regional Economic Communities (RECs) and related infrastructure development institutions, to prepare high quality, viable regional infrastructure projects in energy, trans-boundary water resource management, transport, and ICTs, which would be ready to solicit financing from public and private sources.

more than often fails to ensure continuous and sustainable funding. The case of Johannesburg in 2004 however shows how a successful loan can help build up investors’ confidence. In this specific case, the R1 billion operation was carried out with the support of DBSA and IFC in the form of a partial credit guarantee (for 40 per cent © AfDB/OECD 2007

of principal outstanding) that helped enhance the credit rating to AA-, allowing the participation of pension funds, and extended the final maturity to 12 years. That initial guarantee helped create confidence in the local market so that in 2005 Johannesburg was able to issue another R700 million bond with a maturity of 8 years without credit enhancement. In both instances, the bond issues were largely oversubscribed. African Economic Outlook

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The international community is responding to the calls of the Camdessus and the Gurría panels to develop and adapt financial instruments to improve funding for the water and sanitation sector. For example, the World Bank is developing a sub-sovereign financing facility in local currency. The AFD provides guarantees to West African local issuers through the WAEMU regional bond market that mitigates exchange-rate risk. However, sub-sovereign lending will continue to depend on the capacity of sub-sovereign actors to develop sound accounting systems, transparent management and the ability to develop sound, bankable projects. In parallel, local financial markets need to be strengthened. The potential role of domestic banks in financing the water sector is increasingly recognised since domestic financing

avoids the currency risk associated with raising finance in international capital markets. Pooling mechanisms are also emerging that help to leverage funds and mitigate risk. In South Africa, INCA (Infrastructure Finance Corporation Limited), a private fund, uses its AA credit rating and recognised diversified portfolio to borrow from capital markets and extend long-term fixed interest rate loans to infrastructure providers such as municipalities and water boards. Pooling of resources is also usually combined with pooling of expertise by involving NGOs, local business and government. There is great potential in such mechanisms to support the development of rural water and sanitation. More and

Box 34 - The AfDB Water Facility 86

The African Water Facility (AWF) is an initiative led by AMCOW, aimed at addressing the funding gap. Established within the context of the Africa Water Vision as well as the MDGs, the AWF is hosted by the African Development Bank (AfDB) at the request of AMCOW. The AfDB Board of Governors approved the Instrument establishing the AWF in 2004. The establishment activities took place in 2005 and operations started in 2006. The amount so far committed for the AWF is around €60 million, from Canada, France, Denmark, Norway, Sweden, Austria and EU. The main objective is to create an enabling environment to attract more resources into the water sector: focusing on policies, strategies, information system, monitoring and evaluation, knowledge sharing, and project preparation. After one year of operations, a total of 14 projects were approved in 2006, at a total budgeted cost of €9 million. Out of the 14 approved projects, three are related to the implementation of national IWRM policies; five projects focus on the implementation of transboundary water resources management initiatives and programmes; three projects concern preparation of programmes/projects in water supply and sanitation, which will lead to immediate sector investments. The remaining three projects are small capital investments designed to attract additional resources or to introduce innovative technologies. The key challenge is to accelerate the implementation of the approved projects and demonstrate the effectiveness and the value added of the Facility. The Facility is facing a rapidly increasing demand. As a result of the limited number of staff and the amount of funding, viable projects could not be considered. To mitigate the capacity challenge, the AWF will continue to depend mostly on the secondment pledges by member countries. The AWF has also developed a resource strategy paper to facilitate mobilising more resources. Looking Ahead, the AWF priorities are threefold: - Portfolio Building and Consolidation: The AWF will continue to implement quality portfolios through the preparation of viable projects and build the pipeline for future investments to ensure efficient processing and management of operational activities; - Building Partnerships: The AWF will continue to raise awareness and build synergy through creating partnerships, especially among Water Basin Organisations, and organisations with similar objectives; - Mobilising Additional Resources: The AWF will support activities that create an environment conducive to higher levels of investments from all sources, including, commercial finance, in concert with other partners. This will be done through supporting policy and regulatory environments that promote Private Sector Participation, beneficiary user fees and internal capital generation for investment in the water sector. Source: AfDB Water and Sanitation Department

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Overview

more, governments are developing comprehensive rural sub-sector strategies in order to strengthen the institutional framework, to strengthen planning and ultimately to catalyse funds and harmonise the different actors efforts (local population, NGOs, donors, local administrations and business). Development Banks have an important role to play as intermediaries between foreign lenders, central governments and sub-sovereign entities. As such an example, the AfDB was given the responsibility in

2005 at the Paris Conference to take the leadership in the financing – and in the mobilisation of resources – of the water and sanitation sector in Africa, especially in rural areas. The AfDB has consequently engaged in very diverse activities to support the water and sanitation sector: from direct investment in water storage facilities, to support to utilities and financial intermediaries via technical assistance. It has also developed two specific initiatives to support increased financing to the sector: the African Water Facility and the Rural Water Supply and Sanitation Initiative.

Box 35 - The AfDB Rural Water Supply and Sanitation Initiative (RWSSI) The RWSSI was conceived in 2002 as one of the Bank’s responses to the challenge of the MDGs in Africa. The objective of RWSSI is to accelerate access to water supply and sanitation services in rural Africa to attain 80 per cent by 2015 and extend water supply and sanitation services to 277 million and 295 million people respectively at a cost of $14.2 billion over 3 phases. The first phase (2004-07) is estimated to cost $4.6 billion; the second phase (2008-10) $4.2 billion; and the third phase (2011-15) $5.4 billion. The Bank is committed to financing 30 per cent of the needs and is encouraging other stakeholders to contribute the rest as follows: 50 per cent by multilateral and bilateral donors; 15 per cent by governments; and 5 per cent by beneficiary communities. The RWSSI strategy involves: raising awareness about the RWSS situation in Africa; mobilizing resources from donors, RMCs, NGOs and communities; adopting Fast Track Mechanisms for preparation and implementation of national programmes; adopting a demand–driven, programmatic approach; prioritising sanitation focusing on hygiene promotion and health education; ensuring beneficiary participation, especially of women, in the design and implementation of programmes; assuring Sustainability through promotion of appropriate technology. The Bank has made significant achievements since it started supporting RWSS programmes in 2003. The Bank has so far approved financing for 14 RWSS programmes for which it has provided financing of $536 million, and expects to approve five more by end 2007 and increase its funding to $803 million. These programmes are expected to extend services to 32.5 million people by 2010. A 43 per cent increase of ADF resources permitted a 5-fold increase in Bank’s annual lending for water supply and sanitation from less than $70 million prior to 2003 to about $330 million currently. Many donors like France, the Netherlands, the United Kingdom and Denmark and some African Governments have increased their water sector financing. Additional financing is available through a multi-donor RWSSI Trust Fund established by France, Denmark and the Netherlands at the Bank with contributions of €90 million. In Addition, RWSSI continues to raise awareness of the poor state of RWSS in Africa and the links to the health, education, gender, and poverty MDGs. The establishment of the first time within the Bank of a Department dedicated water and sanitation has allowed better co-ordination of the water initiatives and more efficient use of resources. Some of the key challenges include: maintaining the trend of increasing water-sector financing by the Bank, donors and African governments; improving staffing at the Bank’s headquarters and Field Offices, improving the Bank’s Business processes; according sanitation higher priority; building local government, community, local-contractor, artisan and consultant capacity; establishing reliable supply chains; improving monitoring and evaluation systems. Source: AfDB Water and Sanitation Department.

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Part Two

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Angola

Luanda

key figures • • • • •

Land area, thousands of km2 1 247 Population, thousands (2006) 16 400 GDP per capita, $ PPP valuation (2006) 3 438 Life expectancy (2006) 41.7 Illiteracy rate (2006) 32.6

Angola

A

and prolonged economic growth, thanks to a boom in commodity prices and rapid development of oil and diamond production. Nevertheless, and despite encouraging signs of recovery in the non-mineral sectors, the lack of structural reform, widespread inefficiency and weak governance are still jeopardising the potential of economic growth to bring about social development. NGOLA IS EXPERIENCING RAPID

Record-high international oil prices and rapidly growing output from new oil fields sustained real GDP growth, which reached 14.8 per cent in 2006, following 20.6 per cent in 2005, and is expected to remain high at 27 per cent in 2007 and 17.3 per cent in 2008. Angola is exceptionally dependent on oil. Other economic activities account for a negligible share of

overall growth and of export revenues, although they contribute more to job creation. Improved performance in banking, construction, retail A number of factors trade and telecommunications are fostering rapid suggests, however, that some and prolonged economic impacts from the oil boom are growth but governance percolating through to the broader needs improving. economy. Agriculture is also picking up, although output and productivity remain far below potential and the situation is unlikely to improve considerably until infrastructure rehabilitation is completed, markets for key inputs are established and mine clearance is finished. At the macroeconomic level, despite the progress recorded since the end of the war, transparency of oil 107

Figure 1 - Real GDP Growth and Per Capita GDP ($ PPP at current prices) ■ Angola - GDP Per Capita (PPP in US $)

■ Southern Africa - GDP Per Capita (PPP in US $)

■ Africa - GDP Per Capita (PPP in US $)

——— Angola - Real GDP Growth (%) Per Capita GDP ($ PPP)

Real GDP Growth (percentage)

8000

30

7000 25 6000 20 5000

4000

15

3000 10 2000 5 1000

0

0 1999

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06(e)

2006/07(p)

2007/08(p)

Source: IMF and National Institute of Statistics data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/474756712485

© AfDB/OECD 2007

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Angola

revenue management remains incomplete, and much remains to be done to align fiscal policy actions with the priorities of poverty eradication. Angola’s relationship with the Bretton Woods institutions is poor, and progress in reaching an agreement that would broaden the country’s access to international financial markets has stalled as the authorities have gained access to alternative bilateral credit lines. An expansionary fiscal policy continues to place the burden of macroeconomic stabilisation on monetary policy. Although the latter has proven to be very effective in reducing inflation, it has generated adverse consequences in terms of high interest rates, an over-valued domestic currency and uncompetitive domestic prices.

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At the microeconomic level, despite the signs of recovery in the private sector, risk taking and entrepreneurship continue to be stifled by high de jure and de facto barriers to entry, including privileged access to market opportunities and finance for a small number of business people. Some important reforms have been made – for instance, to accelerate the procedures for establishing new companies – but implementation has been delayed in practice by the poor state of the bureaucracy. Finally, inter-generational considerations give rise to concern. Angola may be experiencing a petroleum boom, but output will soon reach a plateau and then decline quickly. To prepare for this, the authorities should redouble efforts to diversify and increase production by wisely investing current revenues for the benefit of future generations. One way of doing so would be to accelerate land reform, increase allocations to education and health, and improve the efficiency of public spending.

Recent Economic Developments Developments in the mining sector are driving the currently high rate of GDP growth. In 2006, the growth rate of the oil sector slowed down when compared to 2005, while that of labour-intensive diamond mining strongly increased. Overall, the mining industry is estimated to have expanded at a African Economic Outlook

somewhat slower rate in 2006 than in 2005, but is expected to accelerate in 2007. In 2005, the oil sector accounted for more than 56 per cent of GDP, 83.1 per cent of government revenues and 94.1 per cent of exports. In 2006, oil production is estimated to have grown by 15 per cent compared to 26 per cent in 2005. Daily production in offshore fields, mostly in the Congo River basin opposite the Cabinda enclave, averaged 1.4 million barrels a day in 2006 and is expected to peak at 2.6 million barrels in 2010/11. The slower growth was due to maintenance work in a number of fields, including the Girassol field in Block 17, and the slower than anticipated start-up of production on the Dália field. Hence, instead of the initial forecast of 597 million barrels, annual output amounted to 510 million barrels. With reserves now estimated to be between 20 and 22.8 billion barrels, the growth rate of production is expected to accelerate in 2007 and further increase in 2008. In early 2006, oil was produced for the first time from Block 14, while the Benguela, Belize, Lobito and Tomboco fields are expected to produce 200 000 barrels of crude oil per day in 2008. New concessions will be awarded in 2007, and imports of increasingly sophisticated equipment are rising as exploration and exploitation move to ultra-deep fields. In December 2006, Angola officially became a member of the Organisation of Petroleum Exporting Countries. Moreover, new explorations are being undertaken in the field of natural gas, whose potential has not been estimated yet. The Angolan oil boom has now been under way for a number of years, and reform of the policy environment is more imperative than ever. The government has traditionally intervened in the oil industry through Sonangol, a state-owned enterprise that retains responsibility for regulation and contract negotiations, is sole owner of the fields and has entered into production-sharing agreements with major western oil companies, led by Chevron, Total and ENI, although independent companies, as well as national oil companies from Brazil and China, also play an active and growing role. This combination of Sonangol’s various roles has long been criticised for giving rise to conflicts of interest. © AfDB/OECD 2007

Angola

The process of Angolanisation, started in 1982, requires oil companies to staff operations in the country with Angolan workers. The government recently proposed new procurement and employment clauses in the production-sharing agreements aimed at increasing local participation in the industry. This policy attempts to address the fact that the sector has little direct employment impact, creates few direct linkages to other sectors of the economy and relies on imports of capital equipment and specialised services. Nevertheless, there is a risk that foreign oil companies will recruit most of the few highly skilled Angolan workers and crowd out the public administration and the non-oil private sector. Moreover, having reduced inflation, modernised the banking sector and introduced electronic payments and real-time gross settlement of balances, the government has renewed its calls for oil firms to route all industry payments through the domestic banking system. These calls have raised resistance among oil firms, which doubt the capacity of local banks to handle large amounts of money.

(about 5 per cent of total exports in 2005). Angola is considered to be one of the world’s most promising diamond areas, with estimated reserves of 400 million carats of alluvial diamonds and 40 million carats of kimberlite, although detailed geological exploration has started only recently and modern techniques are scarcely in use. Production increased by 16.2 per cent in 2005 and by 41.7 per cent in 2006 as output at the Catoca mine doubled, reaching 10 million carats. This trend is expected to continue, at least in the short term, since 23 new exploration licences were issued to private enterprises in Bié province. To add value to production, the largest polishing and cutting factory in Africa opened in November 2005. The Angola Polishing Diamonds factory – a joint venture between the state diamond company Endiama, the Angolan consortium PROGEM and Lev Leviev Diamonds (LLD), the world’s second-largest diamond trading company – employs 400 technicians. As in the case of Sonangol, Endiama combines the roles of regulator and economic operator. 109

Diamond mining in extensive kimberlite and alluvial projects is the second-largest source of export revenues

The domestic non-mining economy continued its recovery in 2006, exhibiting growth of 13.8 per cent

Figure 2 - GDP by Sector in 2004/05 Other services

Agriculture, forestry and fishing

9% Wholesale and retail trade

(percentage)

8.6%

14.9%

4.1% 4.1% Manufacturing 2.9% Diamonds Construction

56.3%

Oil and gas

Source: Authors’ estimates based on National Institute of Statistics data. http://dx.doi.org/10.1787/384572172060

as the dynamism spread from construction and services to agriculture and, to a lesser extent, manufacturing. This positive trend is expected to impact favourably on internal market development and job creation and thus contribute to poverty reduction. Angola has fertile soil and a climate conducive to agriculture; in fact, at independence the country was © AfDB/OECD 2007

self-sufficient in food production, the largest staple food exporter in sub-Saharan Africa and one of the world’s biggest coffee exporters. The civil war exacted a heavy toll on the agricultural sector, especially in the central and northern regions, which were the most affected by fighting. Although production is recovering (the growth rate for the sector over the 2000-04 period has averaged 13.3 per cent and production has increased African Economic Outlook

Angola

by more than 80 per cent since 2000), agriculture accounted for only 8.6 per cent of GDP in 2005, because agricultural production is still hampered by the widespread presence of land mines, infrastructure inadequacy, low productivity, input shortages in general and the absence of storage systems. Agricultural output grew at a rate of 17 per cent in 2005, but the 2005/06 agricultural season has been below expectations, due to poor rains which have reduced Angola’s total cereal production to 742 000 tonnes, a 15 per cent fall compared with the previous season. According to the Famine Early Warning Systems Network (FEWS Net) assessment, households expect drought conditions to reduce their maize crops by 40 to 70 per cent. By contrast, coffee production increased during the 2005/06 growing season, but the road to recovery remains a long one due to high production costs and poor infrastructure. Coffee production had dropped sharply during the civil war, when output of cash crops in general became insignificant.

up by 22.14 per cent in the period January-September 2006, following 17 per cent growth in 2005. Progress has been made in rehabilitating transport infrastructure, particularly roads and bridges. Chinese contractors completed major projects such as the Keve bridge and the Luanda-Namibe railway, although completion of the Luanda-Malanje link will be delayed until 2007. In Luanda, on the other hand, a number of Portuguese construction firms completed or announced projects involving residential, hotel and office buildings. All in all, the construction sector expanded by a remarkable 66.2 per cent in 2006, and the hosting of the Africa Cup of Nations football championships in 2010 is expected to sustain growth over the next few years.

Angola once had one of Africa’s most developed manufacturing industries, but the civil war led to a prolonged phase of negative growth. There are signs, however, that production is picking up in certain industries, as consumers’ purchasing power recovers in Luanda and other major urban centres. The sector recorded a cumulative growth rate of 67.4 per cent in real terms for the 2000-04 period, 24.9 per cent in 2005 and 30.7 per cent in 2006. The beverages sector, for instance, grew by 8 per cent in 2005 and is estimated to have grown even more in 2006, benefiting from the national football team’s participation in the World Cup. In general, agribusiness is expected to benefit from the recent opening of cold-storage facilities in Luanda and the announcement of a rehabilitation programme for the national cold-storage network. On the negative side, the performance of the only existing petroleum refinery continues to be hampered by persistent bottlenecks, partly associated with the nature of the supply arrangement with Sonangol and distorted incentives that encourage imports of refined petroleum products.

The growth rate of the services sector (which accounted for about 15 per cent of GDP in 2005) slowed in 2006, compared to 8.5 per cent in 2005, with the trade sub-sector taking the lead. Telecommunications, and especially mobile telecommunication services, have experienced exceptional growth since 2002, benefiting from the end of the war and the privatisation of the sector. The total number of cell phone subscribers reached 2.6 million at end-2006 (a 44 per cent increase), with the incumbent’s market share falling slightly to 81 per cent. The geographical distribution of telecommunication service is extremely asymmetric, with Luanda and other few major towns accounting for more than 85 per cent of the existing connections. The growth potential of the sector is extremely large, considering the low access rate (0.60 per cent), well below that of neighbouring countries such as Namibia (6.86 per cent), South Africa (11.46 per cent) and Botswana (5.64 per cent). The financial sector is continuing on the track of fast post-war development. Ten commercial banks have applied for operating licences, and in 2006 two new banks opened, bringing the number of operating banks to nine. Bank deposits are rising, access to short-term credit is improving, and residential mortgages are increasing, but access to other long-term finance is limited, especially outside Luanda.

Construction, another booming sector, is leading growth in the non-oil sectors, with physical production

The demand structure reflects Angola’s historical reliance on oil exports and imports for most consumer

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© AfDB/OECD 2007

Angola

Table 1 - Demand Composition 1997/98

2004/05

(percentage of GDP) 2005/06(e)

Percentage of GDP (current prices)

2006/07(p)

2007/08(p)

Percentage changes, volume

Gross capital formation Public Private

35.2 5.9 29.3

7.5 4.7 2.8

51.9 80.0 5.0

12.8 12.0 15.0

13.7 15.0 10.0

Consumption Public Private

81.1 28.3 52.8

68.0 24.1 43.9

21.7 10.4 25.6

18.1 8.0 21.2

21.1 13.2 23.2

-16.3 56.2 -72.5

24.5 72.6 -48.0

9.6 26.9

30.1 14.8

7.0 16.1

External sector Exports Imports

Source: IMF and National Institute of Statistics data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/624438874407

goods. This state of play is expected to continue in 2007 and 2008, with mineral exports continuing to improve the external sector balance and further stimulate growth. The investment component has continued to expand and is estimated to have increased by nearly 52 per cent in 2006. Private investment remains concentrated in the mineral sector, whereas public investment, which expanded at an exceptional rate in 2006, remains focused on infrastructure reconstruction and the social sectors. Growth of both public and private investment is expected to return to more reasonable rates in 2007 and 2008. Private consumption is recovering and accelerating, thanks to increased incomes in Luanda and higher public sector salaries. As a consequence of this growth in investment and consumption, import volumes are expected to grow by 27 per cent in 2006.

Macroeconomic Policies Fiscal Policy In recent years, efforts to reduce inflation and improve public finances have been broadly successful, and these gains were further consolidated in 2006, when the inflation rate approached the target of 10 per cent and the fiscal balance remained soundly positive. Nevertheless, the sustainability of the policy mix remains a cause for concern, unless structural reforms are © AfDB/OECD 2007

implemented. In fact, the country’s success in curbing inflation is largely due to expensive exchange-rate operations, which sterilise the huge amounts of foreign currency injected in the economy, while fiscal policy remains extremely expansionary, generating strong inflationary pressure. The concern arises from the fact that this policy seems to be sustainable only as long as oil prices (and revenues) remain high. Some improvements have been made in enhancing budgetary oversight over most off-budget expenditures, such as the quasi-fiscal operations carried out by Sonangol on behalf of the government and the central bank’s operating deficit. Nonetheless, the country still has no medium-term expenditure framework allowing for countercyclical expenditure planning, and the budget design does not seem to take into serious consideration the limited absorption capacity of the public administration. Unfortunately, the combination of high oil prices, reduced leverage of the international financial institutions with respect to new financing opportunities for the country and the upcoming legislative and presidential elections make any serious change in the policy mix rather unlikely in the short term. Despite some improvements on the revenue side, a great deal more progress is needed to achieve full transparency concerning the expenditure side and oil revenues (especially concerning Sonangol’s quasi-fiscal operations). Angola remains an observer to the Extractive African Economic Outlook

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Industries Transparency Initiative, arguing that full membership requires a set of implementation measures that exceed the country’s current capacity. For the time being, data on oil production and exports are published on the website of the Ministry of Finance and the financial statements of Sonangol for fiscal years 2003 and 2004 have been audited by international firms, although the latest audit reports have not yet been published. Revenue collection in the expanding diamond industry remains opaque.

Despite the conservative oil price adopted, the government had to revise the 2006 budget to take account of higher oil prices ($56 per barrel instead of the initial forecast of $45), lower oil production and weaker GDP growth. Oil revenues, although increasing, were also revised downwards, from 31 to almost 28.5 per cent of GDP. The government maintained its basic public spending priorities, as the oil revenue windfall made it possible to more than double budgeted expenditures. The largest bill is for the social sectors,

Table 2 - Public Finances

112

(percentage of GDP)

1997/98

2002/03

2003/04

Total revenue and grantsa Tax revenue Oil revenue

26.3 6.6 19.2

37.9 7.8 28.9

36.9 6.8 29.3

38.0 5.7 31.0

35.4 5.8 28.5

34.8 5.8 27.8

32.7 6.1 25.4

Total expenditure and net lendinga Current expenditure Excluding interest Wages and salaries Interest Capital expenditure

55.3 34.4 27.6 9.1 6.8 5.8

44.9 37.5 35.2 12.4 2.3 7.4

35.8 30.6 28.3 10.3 2.3 4.4

30.1 25.4 23.5 8.6 1.9 4.7

30.0 23.3 21.9 8.8 1.4 6.7

28.5 21.9 20.1 8.2 1.8 6.5

28.9 21.9 20.6 8.4 1.4 7.0

-22.3 -29.0

-4.6 -7.0

3.4 1.1

9.8 7.9

6.8 5.4

8.1 6.3

5.2 3.8

Primary balance Overall balance

2004/05 2005/06(e) 2006/07(p) 2007/08(p)

a. Only major items are reported Source: IMF and Ministry of Finance data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/837655487055

which attracted more than 30 per cent of total expenditures, as against 29 per cent of total spending in 2005. Nevertheless, taking into account the weak absorption capacity of the public administration, it seems highly unlikely that the government’s overambitious expenditure plan will be executed. The trend of current expenditure, which decreased in terms of GDP share, is characterised by an increase in public wages and new recruitment, and a decrease in goods and services expenditure, while subsidies to fuel, water and electricity were maintained and accounted for 3.8 per cent of GDP in 2006. The 2006 budget marked a significant change in the composition of expenditure, with the share of capital expenditure in overall budgeted spending increasing considerably, but not as much as foreseen by the government. Capital expenditure is estimated at 6.7 per cent of GDP in 2006, corresponding to an increase of 80 per cent in real African Economic Outlook

terms over 2005. This level should be maintained in 2007 and 2008. Overall, fiscal year 2006 is expected to close with a substantial surplus of 5.4 per cent, although the fiscal position is deteriorating with respect to 2005. The fiscal balance is expected to improve marginally in 2007 and to deteriorate again in 2008, due to a probable decrease in oil prices and hence in government revenue. The 2007 budget as announced by the government in December 2006 is based on the assumption of an international oil price of $50 for Angolan crude, and includes expenditure commitments for 1.8 trillion kwanzas (equivalent to a 32 per cent real increase). Although expansionary, the fiscal policy seems more reasonable than in 2006, taking more into consideration the limited absorption capacity of the economy. This, and in particular the forecast 12 per cent decrease in © AfDB/OECD 2007

Angola

net investment, should be considered a step towards the improvement of public expenditure efficiency. The social sectors are expected to receive 28.1 per cent of fiscal outlays, while the share of defence and security should fall further to 12.7 per cent as the country consolidates reconciliation. The budget is supposed to generate 260 000 new jobs in 2007 and 403 000 in 2008. The impact of the expenditure increase on the fiscal balance is expected to be offset by larger than budgeted oil receipts. However, this might not be the case in 2008, when oil revenue is expected to decrease sharply, leading to a deterioration of the fiscal balance. Monetary Policy Owing to an effective monetary policy, the inflation rate has been decreasing dramatically since 2003, with the annual rate declining from 98 per cent in that year to 43.5 per cent in 2004 and 23 per cent in 2005. Despite a slight increase at the end of the year, mostly fuelled by a spike in transport prices, inflation fell to about 10 per cent in 2006, almost achieving the government target. It is expected to stabilise at around 9 per cent in 2007 and 2008. This result has been achieved thanks to the ex ante stabilisation strategy of Banco Nacional de Angola (BNA), which has been purchasing kwanzas with dollars (derived either from oil receipts or from loans backed by promises of future oil receipts) to stabilise the kwanza’s nominal exchange rate against the dollar and dampen the inflationary pressures caused by substantial public expenditures. In the first half of 2006, the BNA sold $2.755 billion, twice as much as in the corresponding period in 2005, but still below the amount forecast because of the low absorption capacity of the economy. In consequence of this strategy, the nominal value of the kwanza has been stable against the dollar since the last big nominal appreciation of the exchange rate (7.8 per cent) in November 2005, while the real effective exchange rate has continued to appreciate. Real appreciation was 40 per cent between 2004 and 2005. While this strategy keeps down the prices of imports, which represent 90 per cent of domestically consumed goods, it damages the competitiveness of domestically © AfDB/OECD 2007

produced goods, thus working against the diversification of production. External Position Following the introduction of a revised six-level tariff structure in early 2005, the simple average Most Favoured Nation applied import duty stood at 7.4 per cent in 2005. Rules of origin are relatively simple, although the full implementation of Angola’s integration into the Southern African Development Community (SADC) Trade Protocol would add to their complexity. Angola has made very little use of bilateral schemes with the United States and the European Union under the Generalised System of Preferences (GSP). The trade balance has continued to improve, thanks to high oil prices coupled with increased production, which boosted export earnings in 2006. Oil and diamond exports, which together amount to 99 per cent of total exports, are estimated to have risen in volume by 13 per cent in 2006. Over the projection period, export volumes are expected to rise dramatically, by an estimated 31 per cent in real terms in 2007 and 8 per cent in 2008, due to expanded crude oil production, offsetting the decrease in oil prices which is expected for 2007. The increase in households’ disposable income, coupled with the growth in oil production and the boom in the construction sector, is expected to lead in turn to an increase in imports, particularly of cement and capital goods, which are projected to grow by 16 and 17 per cent per year in real terms in 2007 and 2008. In the first half of 2006, freight forwarders’ shipment data indicate that the United States remains the largest export destination (33 per cent), followed by China (25 per cent). The European Union remains relatively marginal for exports, while it accounts for roughly half of imports. Portugal is the largest source country, with imports from this country totalling EUR 1.098 billion in the 11 months to November 2006 (a 52 per cent rise over the same period in 2005). The growth of imports from Brazil to Angola has also been dramatic (60 per cent at the end of 2006, to reach $836 million). China’s 2005 exports to Angola stood at $370 million, an increase of 91 per cent. African Economic Outlook

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Table 3 - Current Account

(percentage of GDP)

1998

2003

2004

2005

2006(e)

2007(p)

2008(p)

Trade balance Exports of goods (f.o.b.) Imports of goods (f.o.b.) Services Factor income Current transfers

22.4 54.3 32.0 -38.6 -14.9 2.3

28.9 68.2 39.3 -22.4 -12.4 0.7

38.6 68.1 29.5 -22.6 -12.5 0.0

44.9 71.3 26.4 -20.4 -11.8 0.1

41.4 64.8 23.4 -18.3 -8.7 0.1

41.6 63.1 21.5 -17.3 -11.4 0.0

36.1 57.6 21.5 -17.4 -16.8 0.0

Current account balance

-28.8

-5.1

3.5

12.8

14.5

12.9

2.0

Source: IMF and Banco Nacional de Angola data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/661783765870

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The current account balance has been positive since 2004, and its improvement was consolidated in 2006, when the current account surplus expanded from 12.8 per cent of GDP to 14.4 per cent. This result is wholly attributable to the trade surplus, which largely offsets the persistent deficit in the factor income account. The latter, highly correlated with the performance of exports, is estimated at 8.7 per cent in 2006, down from 11.8 per cent in 2005. It is expected to worsen in 2007 and 2008, however, as foreign oil companies remit increasing profits to their headquarters following the increase in oil production. Together with Nigeria, Angola was Africa’s largest recipient of foreign direct investment (FDI) flows over the 2003-05 period, owing to its mineral wealth. Rising investment in the country is due to high oil prices, together with promising reserves prospects. In 2006, a number of new licences for nine blocks were granted, and the creation of five new blocks was authorised. Also in the natural resources sector, the world’s largest mining company, BHP Billiton, invested in nine diamond projects and is interested in investing in base metals. Although FDI flows remain small in the rest of the economy, new opportunities continue to emerge. In agriculture and food processing, for instance, Israeli and other investors are exploiting pent-up demand for fresh fruit and vegetables in peri-urban areas, at prices considerably lower than those of imported food. In banking, the Portuguese banks Banco Internacional de Crédito (BIC) and Banco Comercial Portugues (BCP Millennium) expanded their branch networks, African Economic Outlook

the Russian bank Vneshtorgbank and local partners constituted Banco VTB África and ten additional licences have been requested. As for FDI outflows, the government acquired the absolute majority of shares in the cement industry from Portugal’s Cimpor in September 2006. In November, Sonangol took full control of the Luanda refinery from Total, in anticipation of a major investment, possibly in partnership with Asian investors. The external debt burden continued to ease, following the trend of recent years. At end-2004, Angola’s debt amounted to $10.6 billion (including arrears and overdue interest), which corresponds to 53.6 per cent of GDP, down from 99 per cent in 2001. In 2005, although the external debt stock increased slightly when Sonangol contracted a new $3 billion oilbacked commercial loan, the IMF and World Bank estimate that the debt-to-GDP ratio fell below 38 per cent. Thanks to the high GDP growth rate, this downward trend is expected to continue for the next two years, stabilising at 24.6 per cent in 2007/08. A quarter of the outstanding stock of external debt consists of arrears, nearly all owed to the Paris Club. Imports are increasingly being financed by new credit lines provided either by Paris Club members that have signed bilateral debt renegotiation agreements (such as Germany, Spain and Portugal) or by non-OECD countries such as Brazil, Israel, Russia and China. In addition, Angola seems to have reached agreement on a supplementary multi-billion dollar facility from China, although official information on its terms is not available. Access to trade credits from a wider variety of sources has helped to sustain reconstruction efforts © AfDB/OECD 2007

Angola

Figure 3 - Stock of Total External Debt (percentage of GDP) and Debt Service (percentage of exports of goods and services)

Source: IMF.

115 http://dx.doi.org/10.1787/617054383372

and give the treasury some operational autonomy. It is more difficult to gauge the risks that such new loans entail for debt sustainability and creditworthiness. Similarly, it is hard to predict whether a homegrown reform programme that takes into account some of the IMF’s recommendations will provide a sufficient basis for successful conclusion of ongoing negotiations with the Paris Club. After three decades of external intervention, Angola’s government is sensitive to close monitoring by the international community.

Structural Issues Recent Developments The transformation of Angola into a functioning market economy is a long process that has not been facilitated by the circumstances of the country’s postconflict transition. Still, the pace of structural reforms is disappointing. Hindrances to private sector © AfDB/OECD 2007

development, including egregious examples of rentseeking behaviour, limit the potential benefits of the current economic boom. Moreover, the persistence of inefficiency in the public sector and of abuses of market power by state-owned enterprises in various sectors has impeded fiscal consolidation, shifting the burden of macroeconomic management to monetary and exchange rate policies. International rankings such as Doing Business and the Transparency International index confirm that major bottlenecks due to endemic corruption, outdated regulations and rent-seeking behaviour frustrate entrepreneurial efforts, thus hampering the creation of new job opportunities. Angola ranks 156th out of 175 countries in the 2007 Doing Business classification, losing one place with respect to 2006. Although the time required to open a business has been drastically reduced since 2004 – falling from a year to 30 days, thanks to the creation of a one-stop window for business creation – barriers to entry remain high as the regulatory burden is heavy and the privilege of venturing into African Economic Outlook

Angola

promising new business sectors is reserved to a small number of businesses thought to have strong political influence. According to the 2006 World Economic Forum ranking, Angola is the least competitive out of 125 economies. Decentralisation, meant to improve delivery of public services, remains incomplete, as administrative tasks have been transferred to lower levels of government without a corresponding delegation of spending or taxation authority.

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Since 2003, the authorities have introduced an array of new legislative measures that have gone in the right direction but not fully borne fruit in the absence of accompanying normative and institutional measures. In fact, since 2005, the pace of structural reforms has slowed. A competition bill was drafted in 2004 but has not yet been transmitted to parliament. Concerns regarding the status and success of the privatisation process had led the authorities to suspend it in 2001. To reactivate this process, a confidential diagnosis presented to the authorities in 2006 includes proposals to draft specific laws to cover public enterprises and holders of public service concessions. In the meanwhile, empire-building and prestige-seeking seem to abound in the strategies of state-owned enterprises. The national airline TAAG embarked on a major investment drive in view of a long-needed overhaul of its ageing fleet. The $150 million syndicated loan that a pool of local banks secured towards the acquisition of six new aircraft was rightly seen as a sign of the country’s financial maturity. Unfortunately, TAAG is still on the International Air Transport Association (IATA) list of carriers showing a sub-standard safety record, and its pilots have failed so far to obtain flying certification for the new aircraft, which were delivered on the day of Angola’s 31st anniversary. Sonangol and, most recently, Endiama have decided to expand their airline business. In financial markets, the dollarisation of the economy remains a cause for concern. Nonetheless, the return of price stability, the entry of new banks, the opening of a substantial number of new branches in Luanda and the provinces, and the availability of withdrawal facilities have combined to overcome African Economic Outlook

households’ reluctance to place their savings in formal financial institutions. As a result, total bank deposits increased by 23.9 per cent in real terms in the first half of 2006. Although the stock of commercial credit increased by just 1.38 per cent over the same period, the liquidation of treasury liabilities released resources for the productive sectors and credit to private firms increased by 42.2 per cent. A new development bank, Banco de Desenvolvimento de Angola (BDA), started operations in late 2006 and will receive 5 per cent of oil revenues. A similar initiative is the Fundo Nacional de Desenvolvimento (FND), which will disburse up to $300 million per year at concessional terms. The FND will be managed by BDA and be funded partly through oil and diamond extraction levies. The experience of the Fundo de Desenvolvimento Economico e Social (FDES), which managed to disburse only a fifth of its budget (also drawn from oil revenues) to support investment in the private sector, illustrates one of the challenges facing these new institutions. Inefficiencies in thermal generation facilities and delays in completing the Capanda dam and hydroelectric plant still plague energy infrastructure. Brownouts and power cuts have become even more frequent as the economy accelerates, and less than 20 per cent of the population has access to electricity. In Luanda, the number of households connected to the grid is as low as 131 500, one major obstacle to the increase of capacity and investment being the low tariffs applied to electricity. Nevertheless, thanks to massive government and Chinese investments, electricity generation is expected to grow by 42 per cent in 2007/08. In fact, a huge number of projects are to be financed by a new Chinese credit line of $5 billion, including the Apanda-N’Dalatando power line (2007), a new power line from the Cambambe dam to Luanda (2007), a series of electricity distribution and transformation centres (end-2006), a power line from Quifangondo to Caxito (2007) and a $70 million project to electrify Luanda’s suburban areas. In the meanwhile, government wishes to increase hydroelectric potential: the Cambambe dam, in Malange province, is expected to increase production by 260 MW from © AfDB/OECD 2007

Angola

2007 and the start-up of two new turbines should bring the dam’s output to its full capacity of 530 MW by July. Access to Drinking Water and Sanitation Angola has abundant water resources, but existing hydraulic infrastructure is largely inadequate, having been traditionally confined to the production of energy. Moreover, households’ access is severely deficient, as the available infrastructure was destroyed or damaged during the civil war and little or no investment has been made to cope with massive rural-to-urban migration. In urban areas, installed capacity is estimated, on average, at 40 litres per capita per day, for per capita consumption of 20 litres per day. In peri-urban areas, however, where most of the poor and most vulnerable population groups live, consumption falls as low as 5 litres per capita per day. Water utilities, where they exist, encounter major financial difficulties, due to inadequate tariff systems, a huge proportion of unaccounted-for water (between 50 and 60 per cent) and very poor collection ratios. This situation, together with the poor skills of available staff, leads to continuing degradation of the existing infrastructure. Households rely on fountains, standpipes and truck tank systems for their water supply. In the capital city, water is provided by Empresa Provincial de Aguas de Luanda (EPAL) and, in informal settlements, by informal private operators. Water sold by private truck tanks is much more expensive ($10/m3 as against less than $0.50/m3). EPAL maintains 100 000 connections, thus providing water to fewer than 1 million people through home connections or a prepaid fountain system. Considering the overall population of Luanda (close to 5 million) and the obsolescence of the hydraulic network, which dates back to the Portuguese period, the service provided is plainly inadequate. The network, measuring 570 kilometres, needs considerable investment, in terms of both length and capacity, and water quality controls should be introduced. However, the extension of the network to peri-urban areas would require an urbanisation plan, which does not exist. © AfDB/OECD 2007

In rural areas, safe water sources are in most cases standpipes – generally boreholes with hand pumps – where water is free of charge. Up to 50 per cent of all standpipes are out of order, however, due to lack of spare parts and of maintenance in general. This situation obliges most people to rely on a seasonal supply of surface water, which they must often travel considerable distances to collect. It is important to stress that this broad picture masks huge inequalities between provinces, due to the extent to which different areas were hit by the war, to the presence of national and international NGOs, and to the different management models chosen by each province. Since the secondary legislation (regulatory framework) attached to the 2002 Water Law is still waiting for approval by the government, each province can still choose its own management model for the water system. At central level, all water affairs are under the responsibility of the Ministry of Water and Electricity, which plays the role of regulatory authority, whereas technical support and operational supervision for the provincial departments is handled by the National Water Directorate (Departamento Nacional de Agua). In turn, provincial agencies create local units at town and community level (brigadas das aguas and grupos de agua e saneamento). This design, associated with the more general process of decentralisation, is only partially implemented, however, as local units are either inexistent or not officially recognised by the central government. Where the budget is concerned, the system also remains mostly centralised, with central and provincial governments allocating funds to local units. Data collection and processing in Angola remain very poor. It is therefore very difficult to have reliable quantitative estimates of access to safe water and sanitation. At the national level, the 2001 UNICEF Multiple Indicator Cluster Survey sets the percentage of population with access to safe water at 62 per cent and to sanitation at 59 per cent, but these figures are widely believed to overestimate access. A later estimate, produced by UNICEF in 2002, suggests that just 34 per cent of the urban population has access to safe water, this figure rising to 39 per cent for rural areas. This picture places Angola among the worst performers African Economic Outlook

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in Africa, despite its higher than average GDP per capita. Sanitation is even more neglected. Only 59 per cent of the urban population has access to sanitation, whereas in rural areas this percentage falls to 26 per cent. Even in urban areas, the high population density and the concentration of human and non-human waste can produce dramatic health emergencies, such as the cholera epidemic that afflicted Luanda and other major towns in 2006. Besides Luanda, only four cities have waterborne sewage systems, and in all cases these serve only very central areas covering 17 per cent of the urban population.

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As part of a Water and Sanitation Development Strategy, the government has identified the needs and deficiencies of the current system and formulated an ambitious 14-year programme to develop the sector. The strategy, which would require investment of up to $3 billion, calls for a 70 per cent increase in improved water production and the construction of 927 fountains and 1 060 wells. As for sanitation, the government’s objective is to reach an access rate of 85 per cent in urban areas and 65 per cent in rural areas by 2016. Considering the magnitude of the financial and institutional efforts required and the slow pace of improvements recorded so far, however, it is unlikely that Angola will achieve the Millennium Development Goal (MDG) of reducing by half the percentage of people not having access to safe water and sanitation. The Water Law provides for the creation of water utilities (empresas de agua) for water treatment and distribution at provincial level. Although the target is to create one empresa per province by 2010, only a few small urban centres have already created their water companies, apart from EPAL in Luanda. The World Bank’s Urban Rehabilitation and Environment Project for Benguela and Lobito Province (PRUALB) led to the establishment of such companies for the cities of Lobito and Benguela, and in Soyo and Caxito private companies owned by Angolans were given licences to operate the water system, with the assets remaining the property of the state. As a matter of fact, although the huge investments required for the rehabilitation and African Economic Outlook

construction of infrastructure constitute a major disincentive for private companies to enter the sector, the Water Law provides for the entry of private operators, specifying the rights and duties associated with grants and licences, as well as the terms under which they can be delivered. Since the central government provides only 50 per cent of EPAL’s overall financing, other sources of technical and financial support are clearly needed for expanding the system. With only a limited role foreseen for the private sector, external donor support will continue to be important in Luanda and elsewhere. The main external partners are China (construction and rehabilitation of infrastructure), Brazil (construction of water treatment facilities and technical assistance) and the European Commission (technical assistance). Since 2003, the Portuguese co-operation agency has been assisting in the restructuring and modernisation of EPAL, providing technical assistance and capacity building.

Political Context and Human Resources Development Long in gestation, the presidential elections – initially scheduled for September 2006 and now unlikely to be held before mid-2008 – are supposed to constitute a milestone in national reconciliation and the consolidation of democratic institutions. The basic procedures are now in place following the establishment of a national electoral commission, completion of the electoral census and of the corresponding voter registry, and the courts’ ruling that President Eduardo dos Santos can serve three consecutive terms of office. Reasons for the delays of the process include abundant technical problems (to name just one, the size of Angola’s population is unknown), friction within the ruling Movimento Popular de Libertação de Angola (MPLA) and the difficulty in building the necessary trust between the MPLA and opposition parties. Although the MPLA seems sure to remain in power, in each of the opposition parties there are separate fringes that, despite the authorities’ efforts to co-opt them, may refuse to acknowledge the verdict of polls and stir up ethnic © AfDB/OECD 2007

Angola

tensions. In fact, the peace agreement reached in mid2006 with the secessionist movement in Cabinda (Frente para a Libertação do Enclave de Cabinda – FLEC), which would include the appointment of new vice-ministers in some areas, was quickly denounced by some FLEC leaders who were excluded from the deal. In a post-conflict environment, it is very difficult for civil society organisations to exercise critical surveillance over governments’ deeds, and Angola clearly is no exception. The MPLA extends its control over state resources to the media, including radio stations and the press, while the number of people displaced during the hostilities who have not yet regained their homes is estimated to be 450 000. Despite the progress achieved since the end of the civil war, progress towards good governance is slow and corruption remains endemic. Transparency International has ranked Angola at 142nd on the Corruption Perception Index. Although small improvements towards democratisation have been recorded, the parliament does hardly anything to check the government’s actions and counter balance the overwhelming power of the presidential elite. In February 2006, Angola ratified the United Nations Convention against Corruption, which now requires domestic legislation to be implemented. Indicators of living standards are of poor quality and often rather outdated. The last household spending survey, covering only 8 provinces out of 16, dates back to 2001, and the last household living conditions survey was conducted in 2002. The latter, which is believed to be more reliable than the former, sets the urban share of the population as among the highest in Africa. Rapid urbanisation has had a number of negative consequences, from the deterioration of living conditions in overcrowded urban and peri-urban areas to the abandonment of the countryside and, in consequence, of many agricultural activities. Since the population in rural areas is mainly composed of children and the elderly, food insecurity is an issue (in early 2006, an estimated 800 000 people experienced food shortages before the main harvest). With the progressive withdrawal of emergency NGOs and the World Food © AfDB/OECD 2007

Programme, government has had to take responsibility for responding to food crises, which it seems to be doing rather effectively. The poverty rate was estimated at 68 per cent in 2000/01, with 28 per cent of the national population living in extreme poverty. Inequality in income distribution is among the highest in the world (62 per cent), and it is on the rise. In Luanda, the striking wealth of a small minority stands in sharp contrast to the harsh poverty of the large majority, a phenomenon that is certainly a root cause of widespread frustration and a rising crime rate. Although Angola enjoys one of the highest rates of per capita GDP growth in the world, there are few indications that the country will achieve any of the MDGs by 2015. This predicament underscores the responsibility of the government and the private sector, domestic and foreign, to do more to foster human development together with growth. Implementation of the interim Poverty Reduction Strategy Paper (drafted in 2004 and never formally approved) would support the social sectors, which still receive a very small share of the national budget. Despite the end of the war, the living conditions of the Angolan population have been deteriorating in recent years, life expectancy is only 40 years (UNFPA, 2005) and health indicators are among the worst in the world. The under-five child mortality rate rose from 250 per thousand in 2001 to 260 per thousand in 2004, the second highest rate in the world, while maternal mortality (1 400 to 1 700 per 100 000 births) also remains very high because of the very low rate of assisted deliveries, which decreased from 24 per cent in 2001 to 22.5 per cent in 2003. The incidence of malaria, which is one of the most frequent causes of child and maternal death, increased in the 2000-03 period, afflicting 22 per cent of the population as against 16 per cent in 2000. Other major causes of death are diarrhoea and respiratory diseases. Vaccination coverage for infants is rather low, ranging from 75 per cent for tetanus to 46 per cent for polio, and 43 per cent of routine Expanded Programme on Immunisation (EPI) vaccinations are financed by the government (UNICEF, The State of the World’s Children 2006). Another indication of the progressive deterioration of the living African Economic Outlook

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conditions of Angolans, especially in urban areas, is the severe cholera epidemic that struck Luanda and other towns in 2006 in 10 of the 16 provinces, the illness having been transmitted through contaminated water. The epidemic affected 56 213 people between February and October, and caused more than 2 300 deaths.

schools. The main innovations brought about by the reform include the restructuring of the school system with the creation of a compulsory primary school of six years (ensino primario), updating of the curriculum and teaching methods (using a child-centred methodology), and a maximum pupil/teacher ratio of 35.

Many obstacles hamper progress in health services quality and delivery. These include the low priority given to primary health care by the government, insufficient numbers of qualified staff, inefficient co-ordination mechanisms between different levels of the public administration and with other sectors (as well as donors), and inefficient management structures. The Ministry of Health is still to approve a national policy and a medium-term strategy that could provide guidance on tackling vertical programmes.

The demand for education exceeds supply and is rising. The evidence for this is a gross enrolment rate above 100 per cent, whereas net enrolment remains very low (around 50 per cent in 2003), at least when compared to other African countries. Access remains problematic for many Angolan children, as only 22 per cent of children enter primary school at age six. The reasons for this are manyfold. Since the system is decentralised, access to schooling and the quality of teaching are not uniform, and in general rural areas suffer from a lack of financial resources, resulting in fewer schools and less well-trained teachers. In particular, the expansion of the education system has been more rapid in the littoral area, which accounted for more than 60 per cent of primary pupils, as against almost 39 per cent in the central areas in 2004. The quality of teaching, although superior in urban areas, remains very poor. Nevertheless, the social context is crucial for educational achievement, and living conditions are often worse in peri-urban areas than in rural areas – hence the low levels of learning achievement recorded in some areas of Luanda. Finally, although schooling is supposed to be free of charge, in most cases families are obliged to pay a fee to the teacher in order to let the child attend school, and learning materials are rarely provided for free. The result of all this is very low achievement rates (30.6 per cent in 2003), high repetition rates (26.3 per cent in 2003) and high dropout rates. In its Poverty Reduction Strategy Paper, the government has set ambitious objectives, although the budget share allocated to the education sector still remains inadequate (7.14 per cent in the 2005 budget).

HIV/AIDS prevalence is officially one of the lowest in the region (2.7 per cent according to 2005 local estimates) owing to the country’s isolation during the years of war. However, the lack of statistical information and poor quality of surveillance centres suggest that actual HIV/AIDS prevalence might be much higher. Moreover, it seems that the national rate masks large regional disparities: border areas, where international mobility is easier, exhibit prevalence rates as high as 10.4 per cent (e.g. Cunene province). Hence, the increased openness of the country, due to political stabilisation and peace, could cause an increase in the national rate, especially when one considers that the population has limited knowledge of the illness and its transmission channels. On the positive side, some progress has been recorded in education. Since the end of the war in 2002, government efforts to increase school enrolment – through the construction and rehabilitation of schools and the recruitment and training of teachers – have led to a measurable increase in enrolment rates. Since 2003, the government has continued the recruitment campaign, and the number of teachers at the primary level is estimated to be around 80 000. In 2006, a reform of the public education system was finally implemented nationwide, after an initial experiment with a pilot project started in 2003 in 5 per cent of African Economic Outlook

© AfDB/OECD 2007

Mozambique

Maputo

key figures • • • • •

Land area, thousands of km2 802 Population, thousands (2006) 20 158 GDP per capita, $ PPP valuation (2006) 1 957 Life expectancy (2006) 41.8 Illiteracy rate (2006) 48.3

Mozambique

M

OZAMBIQUE HAS ACHIEVED IMPRESSIVE economic

Since mega-projects generate limited spillover effects on the rest of the economy and contribute relatively little to job creation and tax revenue, broad-based growth remains a major challenge. Although the 2006 bumper agricultural production and the favourable prospects for the next harvest season can be expected to improve rural incomes Continued expansion in and maize stocks, construction and the coming agricultural performance on stream of Mega projects is remains erratic and boosting growth in Mozambique vulnerable to climatic while a second wave of reforms shocks. Securing sustainable is aimed at reducing poverty. agricultural development requires a clearer sectoral strategy and complementary policies. Similarly, the lack of a coherent strategy to promote industry inhibits the country’s potential in agro391 processing, light manufacturing, and tourism.

expansion since the end of the civil war. Over the past five years, growth averaged 8.9 per cent, spurred by foreign-financed “mega-projects” and large aid inflows. The economy is estimated to have expanded by 7.9 per cent in 2006, supported by investments in the extractive industry, favourable harvests, and continuing infrastructure rehabilitation projects. On the basis of continued expansion in construction and the coming on stream of investment projects, including Moma Titanium Minerals, growth is expected to reach 7.3 per cent in 2007 and 6.8 per cent in 2008. Further improvements in transport, especially railways and ports, and in energy provision are essential for the successful implementation of pending mega-projects in the extractive industry.

Figure 1 - Real GDP Growth and Per Capita GDP ($ PPP at current prices) ■ Mozambique - GDP Per Capita (PPP in US $)

■ Southern Africa - GDP Per Capita (PPP in US $)

■ Africa - GDP Per Capita (PPP in US $)

——— Mozambique - Real GDP Growth (%) Per Capita GDP ($ PPP)

Real GDP Growth (percentage)

8000

14

7000

12

6000 10 5000 8 4000 6 3000 4 2000 2

1000

0

0 2000

2001

2002

2003

2004

2005

2006(e)

2007(p)

2008(p)

Source: IMF and National Institute of Statistics data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/137432776810

© AfDB/OECD 2007

African Economic Outlook

Mozambique

392

The country’s development strategy is framed in the Plano de Acção para Redução da Pobreza Absoluta II (Action Plan for the Reduction of Absolute Poverty II – PARPA II) for 2006-09, which aims at reducing the incidence of poverty from the current 54 per cent to 45 per cent in 2009. To achieve this target, the government is consolidating macroeconomic stability and undertaking a second wave of structural reforms, encompassing the public sector, fiscal policy, governance, and the business climate. The implementation of a computerised integrated budget and treasury management system (e-SISTAFE) has contributed to improved public expenditure management. Revenue collection has increased moderately too. To boost revenue further, it will be necessary to broaden the tax base, especially in the extractive and informal sectors, and to strengthen tax administration. The government is committed to improving the transparency of special tax regimes for mega-projects and to reducing fiscal exemptions for new ones. In line with the PARPA target, the government is increasing spending in priority areas (to 65 per cent of total expenditure) and undertaking huge infrastructure rehabilitation projects. This increase in spending will be comfortably financed by rising aid inflows and, to a lesser extent, by resources freed up by the Multilateral Debt Relief Initiative (MDRI). Nevertheless, progress in other structural reforms has been slow. Despite the large reduction in the number of days needed to register a new company, deep-seated constraints to private-sector development remain, notably the weak judicial system. In addition, institutional and capacity bottlenecks lead to very poor

performances in basic health services (HIV/AIDS antiretroviral therapy [ART] coverage), and in water (rural water supply and sanitation). Better human resource management, more predictability of funds from the central government, and greater clarity in the processes of decentralised planning and budgeting should be key priorities in order to ensure the successful implementation of the PARPA.

Recent Economic Developments Mozambique has been one of the world’s most rapidly growing economies over the past five years, with much of the impetus coming from reconstruction efforts and extensive foreign investment in projects based on natural resources. In 2005, GDP increased by 6.2 per cent in real terms. This increase was led by industry, which expanded 7.8 per cent, mainly due to mining and electricity. The service sector followed, also growing strongly at 7.6 per cent. Agriculture and fishing registered a modest growth rate of 1.6 per cent. Real GDP is estimated to have risen by 7.9 per cent in 2006, with 10.9 per cent growth in agriculture and strong performance (15 per cent) in the extractive industry. In 2005, agriculture and fishing accounted for 20 per cent of GDP, but 78.5 per cent of total employment. While fishing benefited from a strong rebound, agricultural output suffered from a drought

Figure 2 - GDP by Sector in 2005 Other services Finance and business services Government services 3.3% 5.4% 6.6% Hotels and restaurants 1.2%

(percentage)

Agriculture and fishing 19.7% 0.9%

Transport and communications

16.4%

12.8%

Mining and quarrying Manufacturing

5.9% 21.2% Trade

6.4%

Electricity and water

Construction

Source: Authors’ estimates based on National Institute of Statistics data. http://dx.doi.org/10.1787/514310354573

African Economic Outlook

© AfDB/OECD 2007

Mozambique

in some regions. In 2006, abundant and regular rainfall and the timely provision of agricultural inputs contributed towards the best harvest over the last five years, triggering a strong recovery of agricultural production (6.5 per cent growth). It is estimated that cereal production reached 2.1 million tons (maize alone accounting for 1.5 million), which was 10 per cent higher than the previous season. Outputs of pulses and cassavas are estimated to have risen by 10 and 14 per cent, respectively. Notwithstanding this progress, the authorities assessed the domestic cereal deficit at 565 000 tons, mainly due to the lack of wheat and rice. Assuming favourable weather conditions and the adequate provision of inputs and extension services, a 12.2 per cent increase in agricultural output is expected in 2007, led by rice and maize production. The production of cash crops (cashew nuts, cotton, sugar and tobacco) also rebounded in 2006, although agricultural diversification remains limited. Sugar remains the leading sector. After an extraordinary 2005 harvest, the best for three decades, sugar-cane production decreased in 2006 by about 3 per cent, due to lowerthan-expected rains in Marromeu and Mafambisse. Cashew nut production more than doubled between the 2004 and 2005 seasons, attaining 104 000 tons, reflecting in part a peak in biological productivity. Production is estimated to have fallen in 2006 to around 62 800 tons, but is projected to increase gradually over the following five years. New production areas are being developed in the south. Cotton production declined 15 per cent to 78.5 thousand tons in 2005, but increased to around 110 thousand tons in 2006. Tobacco registered an impressive 30 per cent increase in output in 2005, but declined slightly in 2006 and is expected to level off in 2007. Fishing accounts for about 2 per cent of GDP. In 2005 the sector rebounded by 3.6 per cent after experiencing a 3.8 per cent contraction in 2004. Aquaculture and traditional fishing were the main drivers of growth, as industrial and semi-industrial fishing declined by 13 per cent, mainly due to a 65 per cent reduction in the tuna catch. Following the expansion of prawn-farming areas, aquaculture © AfDB/OECD 2007

production doubled. The authorities expect fishing to grow by 3.3 per cent in 2006 and 3.5 per cent in 2007. Growth in livestock, which accounts for 1.6 per cent of GDP, remains disappointing, as the sector is diseaseprone and suffers from inadequate feeding. Industry’s share of GDP expanded sharply from 16 per cent in 1996 to 26 per cent in 2005; this increase is largely due to mega-projects in the extractive industry sector. Nevertheless, due to high capital intensity, profit repatriation, and fiscal incentives, the mega-projects generate relatively minor benefits in terms of employment, transport linkages, and foreign-currency earnings. Manufacturing expanded by 8.5 per cent in 2005 and an estimated 5.7 per cent in 2006. The Mozal aluminium smelter in Maputo Province, created with a $2.1 billion investment by Australian and South African interests, now accounts for half of manufacturing output, and has made Mozambique one of the world’s leading exporters of aluminium. Mozal’s output edged up to 555 000 tons in 2005 compared with 549 000 in 2004. The feasibility studies for further expansion (Mozal 3), which would increase capacity by an additional 250 000 tons per year by 2009, were completed. The food, beverages, and tobacco subsector is the second-largest manufacturing sub-sector. Sugar and molasses production each fell an estimated 1 per cent in 2006, due to lower-than-expected cane production. Ethanol fuel production is still very limited, although the government plans to develop both bioethanol and biodiesel programmes. Petromoc has signed a co-operation agreement with South-Africa’s Cofamosa to invest $150 million in an ethanol plant in Moamba which will use sugar-cane. The Portuguese group Nutasa is building a similar plant in Maputo. The government’s decision to promote domestic tobacco-processing by stipulating that growers’ use of the most favourable land would be subject to the condition that they constructed processing plants led Alliance One International to close down its operations and withdraw from the country. Mozambique Leaf Tobacco, a subsidiary of the American Universal Leaf Africa Company, was awarded Alliance One International’s concession, and opened the first greenleaf processing plant in the country in May 2005. African Economic Outlook

393

Mozambique

After expanding by 11 per cent the previous year, output from the extractive industry sector is estimated to have increased by about 15 per cent in 2006, with a strong rebound in coal production following the modernisation of the Chipanga-IX mine. The sector is expected to expand further with the construction of the Moatize coal project and thermal power plant. The Brazilian Companhia Vale do Rio Doce, which has already invested approximately $80 million in the project over the last two years, has delivered the feasibility studies to the government and should start production in 2010. The development of the mine requires rehabilitation of the Beira-Tete railway and the construction of an export terminal at Beira port. The Moma Titanium Minerals Project, which will produce more than 750 000 tonnes of mineral sands a year, is almost completed, and production should start in 2007. The Irish firm Kenmare Resources has already announced that it intends to expand Moma’s capacity in the second half of that year. Sasol plans to double its gas production in Mozambique in the coming years,

while new petroleum exploration began in 2006 in the northern Rovuma Basin. The construction sector is heavily influenced by mega-projects. This sector expanded by 3.8 per cent in 2005. A new cement factory in Nampula is expected to alleviate the shortage of cement. A stronger expansion in construction is expected in 2006 and 2007, due to the implementation of several public-investment projects, especially the construction of the Zambezi Bridge, and the start of new mining projects. The service sector, which generates about 46 per cent of GDP, grew by 7.6 per cent in 2005, led by 15 per cent growth of transport and communications. The Minister of Transport and Communications announced plans to review the telecommunications law and the possibility of clearance for a third cellulartelephone operator to compete against state-owned M-Cell and Vodacom. A second fixed-line operator is likely to be licensed before the end of 2007.

394 Table 1 - Demand Composition 1998

2005

(percentage of GDP) 2006(e)

Percentage of GDP (current prices)

2007(p)

2008(p)

Percentage changes, volume

Gross capital formation Public Private

24.2 9.8 14.5

29.9 12.5 17.4

27.5 45.0 15.0

15.0 15.0 15.0

11.7 8.0 15.0

Consumption Public Private

93.2 10.4 82.8

82.0 12.9 69.1

2.3 8.6 1.6

3.3 6.2 3.0

5.3 5.0 5.3

-17.4 10.5 -27.9

-11.9 30.9 -42.9

6.7 6.7

6.7 3.9

6.2 7.1

External sector Exports Imports

Source: IMF and National Institute of Statistics data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/612366457406

The government’s large-scale infrastructure programme, investments in the extractive industry, and high mineral exports were the main motors of growth in 2006. Development projects, notably in donor-supported transport infrastructure rehabilitation, led to a jump of about 45 per cent in public capital expenditure in 2006. Due to other large infrastructure projects, especially in urban renewal and road African Economic Outlook

rehabilitation, public investment is expected to continue to grow by 15 per cent in 2007 and 2008. The expansion in construction that accompanied the new wave of mega-projects and the continued influx of foreign investment have led to a 15 per cent growth of private investment in 2006; private investment is projected to remain strong in 2007 and 2008. Thanks to the results of the mega projects, extractive-industry exports have © AfDB/OECD 2007

Mozambique

increased dramatically over recent years, and are expected to continue to grow substantially in the next two years.

Macroeconomic Policies

of 65 per cent expenditure execution rate in the priority areas fell just short of target, at about 62 per cent. Nevertheless, investment at the district level improved in the second semester. Public-sector wage expenditures increased considerably, reflecting the recruitment of teachers and health workers.

Fiscal Policy Mozambique’s development strategy for the next five years is detailed in the Plano de Acção para Redução da Pobreza Absoluta II (PARPA II) for 2006-09. The PARPA II’s main objective is to reduce the incidence of poverty from the current 54 per cent to 45 per cent in 2009. To achieve this target, the government plans to continue its efforts to consolidate macroeconomic stability and to implement a second wave of structural reforms, encompassing the public sector, fiscal policies, governance, and the business climate. Compared to the earlier development strategy (PARPA I) with its strong focus on investment in social sectors, the new PARPA places more emphasis on promoting growth and the modernisation of the economy, and points to decentralisation and development at the district level as key objectives. PARPA II calls for greater investment in economic sectors, especially agriculture and infrastructure, and for creating a favourable business climate, especially for small and mediumsized enterprises. Foreign assistance, which already finances more than 40 per cent of the government’s expenditures, is expected to rise further. To improve aid effectiveness and accountability, the government and donors have agreed on a series of indicators and targets in the areas of public finance, governance, HIV/AIDS, education, and justice. The 2006 mid-year joint review between the government and donors in September 2006 noted that the overall performance of fiscal policy was encouraging. A new computerised system for recording expenditure (e-SISTAFE) was implemented in a number of ministries, enabling improved monitoring of expenditures in priority sectors. 57 per cent of expenditures were in the priority sectors of health and education, surpassing the 50 per cent target; the goal © AfDB/OECD 2007

Public-sector reform was given fresh impetus, first with the creation of the new National Civil Service Authority which reports directly to the President of the Republic, and second, through the preparation of Phase II of the Public Sector Reform Programme (20062011), which focuses on strengthening the decentralisation process. Equal allocations of about $300 000 per district were made during 2006, although execution was lower than expected, owing to delays in issuing the guidelines on permissible uses of these funds. Some ambiguities remain over the division of revenue and spending responsibilities; the effective absorptive capacity of local agencies is also a major problem. To clarify the decentralisation strategy, a proposal to formulate the National Decentralisation Policy and Strategy was prepared in March 2006. Progress was also made with the preparation of the National Decentralised Planning and Financing Programme (PPFD); also, the Administrative Tribunal (TA) performed district audits in four provinces. On a negative note, the government’s rising indebtedness to construction contractors, linked to delays in refunding VAT, remained a major problem in 2006. An assessment of the magnitude of the problem is being carried out for the road sector, and donors have decided to finance an audit to determine the size of the accumulated debt. At 11.8 per cent, Mozambique’s tax revenue to GDP ratio remains much lower than that of its neighbours and than the average of 24 per cent for sub-Saharan Africa. Efforts to increase domestic revenue, which were already substantial in 2005, continued in 2006, and were partly reflected in the collection of corporate tax and VAT. Some progress was made in improving the collection of tax arrears, strengthening tax administration, and broadening the tax base. Nevertheless, the establishment of the Central Revenue African Economic Outlook

395

Mozambique

Authority (ATM), which was expected for September 2006, was delayed. The prospects of widening the tax base further suffer from special tax regimes for mega-projects, including preferential corporate tax rates, tariff exemptions, and tax deductions for social and environmental expenditures, all of which lack transparency. In this respect, donors and the government are reviewing the fiscal impact of these projects. The government is also considering joining the Extractive Industries Transparency Initiative (EITI), but needs first to assess its ability to comply with the associated obligations. Overall, the fiscal situation improved in 2006. The substantial increase in government spending in priority

areas, and in particular in transport rehabilitation, was mostly covered by large aid inflows and, to a lesser extent, by resources freed up by the Multilateral Debt Relief Initiative. High spending on poverty-reduction projects, including infrastructure, is expected to continue in the medium term, and to be mainly financed by rising aid inflows. Revenue collection is expected to improve further in 2007 and 2008, reflecting the full implementation of the Central Revenue Authority. Discussion over the fiscal contribution of mega-projects will continue, with the aim of renegotiating the tax regime and reducing fiscal exemptions for new investment. Despite the gradual improvement in revenue mobilisation and in the growth of grants, the overall deficit is expected to deteriorate slightly, reflecting high spending on public-

Table 2 - Public Finances

396

(percentage of GDP)

1998

2003

2004

2005

2006(e)

2007(p)

2008(p)

Total revenue and grantsa Tax revenue Grants

19.5 10.5

22.4 12.0 9.5

20.2 11.7 7.5

20.0 11.8 6.3

23.0 11.8 9.8

23.9 11.8 10.7

24.1 11.8 11.0

Total expenditure and net lendinga Current expenditure Excluding interest Wages and salaries Interest Capital expenditure

21.8 11.5 10.5 4.5 1.0 9.8

26.9 14.7 13.6 6.8 1.2 11.7

24.7 14.5 13.5 6.9 1.0 9.4

22.2 13.6 12.9 6.8 0.8 8.1

25.1 13.6 12.9 6.6 0.8 10.5

26.7 14.0 13.0 6.7 1.0 11.6

26.8 14.3 13.3 7.1 0.9 11.8

Primary balance Overall balance

-1.4 -2.4

-3.3 -4.5

-3.5 -4.5

-1.5 -2.3

-1.3 -2.0

-1.8 -2.8

-1.8 -2.7

a. Only major items are reported Source: Ministry of Finance and Planning and IMF data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/744777686373

sector wages and in priority social sectors, as well as large development projects in road rehabilitation and urban renewal. The deficit is therefore expected to average 2.8 per cent of GDP in 2007 and 2.7 per cent in 2008. Monetary Policy The Bank of Mozambique has successfully stabilised inflation, following hyperinflation in the early 1990s, by restraining broad money growth. Inflation averaged 6.4 per cent in 2005, compared to 12.3 per cent in 2004. For 2006, the Central Bank fixed a target of 15 per cent for broad money growth, with a target of 7.5 per cent African Economic Outlook

for average inflation. Nevertheless, inflation registered a steep increase in the first quarter. The combined effect of rising petrol and food prices led to a surge in inflation from 3.2 per cent in May 2005 to 17 per cent in April 2006. In response, monetary policy was tightened through open-market operations in the first half of the year, pushing up the Treasury Bill rate to 17.5 per cent in May 2006, an 8 percentage-point increase since October 2005. A restrained monetary policy, stable international oil prices, the appreciation of the metical, and a favourable agricultural season all contributed to the © AfDB/OECD 2007

Mozambique

deceleration of inflation in the third quarter of the 2006, reaching a low of 10.6 per cent in August. However, it accelerated again to 12.7 per cent in September, reflecting rising food prices at the start of the lean season from October to March. Inflation then edged up in the last months of 2006, mainly owing to the seasonal price hikes, so that it averaged 12.6 per cent for the year. Monetary policy is expected to remain tight in 2007 and 2008, with inflation targets of 5.9 per cent and 5.1 per cent for 2007 and 2008, respectively. Despite weaker oil and food inflationary pressures, increased government spending and domestic consumption are forecast to exceed target levels, at 8.1 per cent and. 5.7 per cent in 2007 and 2008, respectively. The authorities are committed to a flexible exchangerate regime, and in January 2005 they introduced a foreign-exchange auction system. In response to various shocks such as large oil-import transactions, the currency experienced considerable volatility in 2005 and 2006, reflecting the thin foreign-exchange market. To cushion volatility and depreciation pressures, the Bank of Mozambique introduced an exchange-rate band in the inter-bank foreign-exchange market in the last quarter of 2005. Since June 2006, the currency has remained fairly stable against the US dollar. The Ministry of Planning and Finance instituted a redenomination of the currency, with new metical bank notes equivalent to 1 000 of the old notes. From 1 July 2006, the new and old notes circulated concurrently; the old notes were fully withdrawn by the end of the year. Commercial banks will exchange old notes against new ones until 31 December 2007. External Position Mozambique’s current account deficit rose to 10.8 per cent of GDP in 2005 from 8.6 per cent in 2004. The trade balance deteriorated in 2005 as exports, which increased from $1.50 billion to $1.75 billion, rose less than imports (from $2.03 billion to $2.47 billion). A surge in aluminium export prices and © AfDB/OECD 2007

volumes boosted exports in 2006. Preliminary data suggest that merchandise exports reached $1.75 billion in the first nine months of 2006 (up 39 per cent compared with the same period in 2005), offsetting a 24 per cent growth in imports. The new projects in the extractive industry sector are forecast to boost imports of capital goods in 2007 and 2008, thus causing a deterioration in the trade balance, since their contribution to export growth takes time to develop. Gross international reserves increased from 4.6 months of imports of goods and services in December 2005 to 5.1 months at the end of June 2006. Mega-projects play a major role in Mozambique’s trade, accounting for about 72 per cent of exports and 17 per cent of imports. Base metals are the leading export, accounting for about 60 per cent of export revenue. Aluminium from the Mozal project is the single largest earner of foreign exchange. However, since the smelter uses imported alumina as raw material, its contribution to the net trade balance is limited. Natural gas (associated with the Sasol pipeline to South Africa) is the second-largest export item (14.3 per cent). Other major exports include fish and crustaceans (5 per cent), cotton (3.5 per cent), tobacco (2.5 per cent) and sugar (2.2 per cent). Mozambique’s imports are dominated by mechanical and electrical machinery, vehicles, and iron and other inputs used by mega-projects. Despite an improved harvest, the country remains a substantial importer of cereals, especially wheat and rice. Preferential exports to the European Union (EU) benefited from the additional Everything But Arms (EBA) sugar quota awarded to Mozambique as the result of other Least Developed Countries (LDCs) being unable to meet their allocations for the year ending June 2006. Sugar exports are expected to grow 35 per cent in volume and 32 per cent in dollar terms. About half of sugar exports benefit from preferential market access agreements, with prices set above those in the world market. A major concern for the sugar industry is the reform of the EU sugar regime and the associated 36 per cent African Economic Outlook

397

Mozambique

reduction in the guaranteed price over the period 2006/07-2009/10. Given the relatively small quota allocated to Mozambique within the Sugar Protocol and the fact that the reference price will still be higher than the international price, the immediate impact of the reform will not be dramatic. A more serious concern is the longer-term competitiveness of the industry once the international sugar market is liberalised. Starting from September 2009, the EU will grant unlimited duty-free access to all LDCs, thus offering an opportunity to expand market access for Mozambican producers. To seize this opportunity, investment is needed to expand production and achieve greater economies of scale.

398

The three-year fishing agreement with the EU, which gave access to Mozambican waters to European fishing vessels in exchange for fees from each vessel and a 4 million euros annual compensation fund, expired in 2006. The renegotiation of the agreement reached a standstill over the EU’s proposal to exclude some less-profitable species. Frozen fish and crustaceans – mainly shrimps and prawns – generated export revenues of $84.3 million in 2005. However, the sector has been at risk since a recent EU inspection revealed serious sanitary problems, due to declining human and financial resources allocated to supervision. Prawns farmed by one aquaculture enterprise operating in Beira were banned from Europe. An emergency plan was launched to tackle this problem. Mozambique’s principal export market is the EU, to which 100 per cent of Mozal’s aluminium is exported, reflecting Rotterdam’s role as a hub for the transshipment of aluminium. Other important export destinations include South Africa, Zimbabwe, and Malawi. The largest source of imports is South Africa, followed by the Netherlands, Portugal, India and the United States. Two major processes will shape the country’s trade policy in the coming years, notably regional integration and the negotiation of an Economic Partnership Agreement (EPA) with the EU. Mozambique’s membership of the Southern African Development African Economic Outlook

Community (SADC) means that a schedule of tariff reductions will be imposed on intra-regional imports beginning in 2008, and leading to the complete elimination of tariffs by 2015. In January 2006, the government reduced the maximum tariff rate from 25 to 20 per cent on imports from SADC countries and submitted a proposal to the Assembly to extend this measure to all trading partners. Negotiations with Zambia for a preferential trade agreement were concluded, but a final agreement has not been signed. The negotiations for the EU-SADC EPA, which began in 2002, entered a new round in September 2005, and are scheduled to be completed in late 2007. The objectives of the EPA include liberalised trade between SADC and the EU in the longer term, and EU support for trade capacity building in the medium term. At present, Mozambique benefits from nonreciprocal tariff-free access to the EU under the EBA initiative for LDCs. Although the EU has made a commitment to grant EBA to LDCs in an open-ended manner, it is not clear yet how the special status will be treated under EPA’s reciprocal liberalisation principle. EPA negotiations are at a standstill, mainly because of: the overlapping memberships of participating countries in different regional trade blocs; the role of South Africa (which already has a bilateral trade agreement with the EU and a customs union with other four SADC members); and the issue of special treatment for LDCs. Abundant natural resources have made Mozambique one of the magnets for foreign direct investment (FDI) in southern Africa. The stock of FDI attained $2.4 billion in 2005. Following the completion of mega-projects in 2003, FDI inflows slowed down, declining to $108 million in 2005 compared to $337 million and $245 million in 2003 and 2004, respectively. Inflows are expected to increase again as new projects in mining and tourism start. The expansion of Mozal and Corridor Sands are amongst the largest potential investments. BHP Billiton, owner of Mozal, has taken over the Corridor Sands titanium project from WMC Resources in 2005. The development of both projects will be heavily influenced by the outcome of negotiations on long© AfDB/OECD 2007

Mozambique

Table 3 - Current Account

(percentage of GDP)

1998

2003

2004

2005

2006(e)

2007(p)

2008(p)

Trade balance Exports of goods (f.o.b.) Imports of goods (f.o.b.) Services Factor incomea Current transfers

-14.5 6.2 20.6 1.0 -5.4 4.5

-14.5 21.8 36.3 -1.2 -4.1 4.9

-9.0 25.5 34.5 -4.7 -5.8 5.5

-10.6 25.6 36.2 -4.5 -6.1 5.3

-6.4 29.3 35.7 -1.4 -4.7 4.1

-8.1 27.5 35.6 -1.4 -9.5 4.8

-9.7 25.7 35.5 -1.6 -9.2 5.0

Current account balance

-14.4

-15.1

-13.9

-15.9

-8.5

-14.2

-15.6

a. Factor income is included in services. Source: IMF and Bank of Mozambique data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/181467010311

term power-supply contracts. Moreover, given BHP Billiton’s partnership with Rio Tinto, the future of the Corridor Sands project will also depend on the latter’s decision to pursue the development of its own titanium project in Madagascar. Mozambique is among the world’s largest recipients of Official Development Assistance (ODA). Disbursed net ODA (including from non-DAC donors) amounted to about $1.3 billion in 2005, a 3.2 per cent increase in nominal terms with respect to 2004 (about 1 per

cent in real terms), yielding a very high aid-to-GNI ratio of 21 per cent. Assistance mainly consisted of grants (78 per cent of the total), and was largely for general budget support. Direct budget and sectoral support in 2006 amounted to $297.5 million and is expected to rise to $583 million in 2007. Co-ordination among donors is exemplary. Mozambique’s stock of foreign debt stood at $4.7 billion in December 2005, a 7 per cent increase over 2004; 54.5 per cent of this debt was owed to

Figure 3 - Stock of Total External Debt (percentage of GDP) and Debt Service (percentage of exports of goods and services) ■ Debt/GDP

——— Service/X

160

140

120

100

80

60

40

20

0 2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: IMF. http://dx.doi.org/10.1787/843507303745

© AfDB/OECD 2007

African Economic Outlook

399

Mozambique

multilateral creditors. The biggest share of the bilateral debt is held by non-Paris Club countries. In 2006, the country benefited from significant debt relief. The Multilateral Debt Relief Initiative (MDRI) cancelled debt of about $1.6 billion (of which, $1.3 billion by the World Bank), while the Japanese government provided full debt relief, amounting to $60 million. Portugal has expressed its intention to cancel commercial debt too. These operations should bring down the net present value of the debt from 25 per cent to 12 per cent of GDP. Debt service, which amounted to $24 million in 2005, fell to about $21 million in 2006, or a mere 1.6 per cent of export revenue. The government has also decided to buy back its remaining outstanding commercial debt, amounting to $175 million.

Structural Issues Recent Developments

Notwithstanding this progress, there remain serious problems related to corporate governance and lack of competition. A weak judicial system has been largely ineffective in resolving commercial disputes and protecting intellectual property rights. Counterfeited goods are widely found in the streets, damaging legitimate producers and tax revenues. Dominant incumbents and lack of competition in the service sector are often mentioned as a major constraint on private-sector development. The mingling of politics and business also contributes to the hostile business climate. Business representatives complain about high severance payments and the difficulty of layoffs, as well as restrictions on hiring expatriates. The Labour Consultative Commission, a tripartite forum with representatives from government, trade unions, and the employers’ associations, agreed on a draft reform proposal in early 2006. The draft was later unilaterally amended and watered down by the Minister of Labour, and has not yet been submitted to Parliament for approval.

400 In order to promote and diversify foreign investment, the authorities are pursuing the development of special or “Rapid Development Zones” (RDZ) in the Niassa province, Nacala district, Mozambique Island, Ibo Island, and the Zambezi Valley. Investments in these zones are exempt from import duties on certain goods and from real property transfer taxes, and are granted an investment tax credit of 20 per cent of total investment. Also, a feasibility study for a free trade zone in the Nacala district has been launched. Despite these incentives, few firms have settled in the Belulane industrial park in Maputo. Businesses claim that operating costs are too high. The World Bank’s Doing Business report classified Mozambique as having one of the world’s least conducive environments for business in 2005. The government is committed to tackling some of the shortcomings. The National Assembly has approved major revisions to the outdated commercial code. In the light of the new code and of complementary legislation, the procedures for company registration have been simplified, so that the time required for registration has fallen from 90 days to only a few days. African Economic Outlook

Following the agreement reached in November 2005 with Portugal, the government paid a first instalment of $250 million to acquire 67 per cent of the Cahora Bassa Hydroelectric (HCB) plant, raising its stake in the company to 85 per cent. The government is obligated to remit an additional $700 million, which threatens to increase the country’s foreign debt substantially. The authorities claim that HCB will raise all the necessary financing itself, thus avoiding an increase in government indebtedness. Another important development within the energy sector was the signature of a Memorandum of Understanding with the Export-Import Bank of China for an investment of $2.3 billion in the new Mepanda Nkua Dam and 1 300-megawatt hydro-electric plant on the Zambezi River, which are to be completed in 2011. Progress on privatisation has slowed down, since the remaining state-owned enterprises are mostly public utilities. In 2006 the Tanzanian firm METL bought Texmoque, a large state-owned textile factory in Nampula which had ceased operations in 1994. METL has promised to invest $20 million in new equipment and resume production in 2007. © AfDB/OECD 2007

Mozambique

The government has pledged $500 million to improve infrastructure, and especially to upgrade the port of Maputo by 2008. A specialised sugar terminal was opened in September 2006, and this is expected to double the sugar exports originating in the region being trans-shipped through Maputo. Construction of the Zambezi Bridge, linking the north and south of the country and budgeted at around $14.4 million, started in 2006, and should be completed by the end of 2009. The South African shipping company Grindrod has taken a 12.2 per cent share in the Maputo Port Development Company, and has announced that it will invest up to $25 million to upgrade the Matola Coal Terminal’s capacity from 1.7 to 6 million tons per year. Access to Drinking Water and Sanitation Water-resource management is extremely important in Mozambique, in the light of the country’s vulnerability to natural disasters (drought and floods), and of its dependence on neighbouring up-river countries for more than 50 per cent of its surface water. Some 14 million Mozambicans – nearly 75 per cent of the total population – rely on groundwater supply. Wells have an average depth of 50 metres, so allowing the use of hand pumps. With the approval of the Water Law in 1991, the National Directorate of Water (DNA) within the Ministry of Public Works and Housing (MOPH) was given the central role in water management. Following the publication of the National Water Policy in 1995, responsibility for implementation resides with a number of semi-autonomous regional and sectoral bodies. Over the last ten years, major progress has been made in water management. The 1995 Water Policy established the principle of delegated management, creating the basis for private-sector participation in urban utilities. Under this framework, two new institutions were created: the Water Regulatory Council (CRA) is responsible for economic and other regulation of water systems that are under delegated management, while the Investment and Assets Fund for Water Supply

(FIPAG) owns the infrastructure in urban areas that is either managed or leased by private operators. For all other urban areas, as well as for rural areas, DNA retains full control of water systems. Data on the population’s access to water is unreliable and out of date1. Current official figures report both urban and rural water-coverage rates of about 40 per cent. According to the latest household survey, however, rural water access is only 27 per cent, while urban water access is much higher, at 64 per cent. The MDG target is to reach 78 per cent by 2015 in urban areas and 56 per cent in rural areas. Also, according to government estimates, the proportion of the population with sanitation is about 35 per cent in urban areas and 33 per cent in rural areas. The MDG target is set at 80 per cent and 50 per cent access for urban and rural sanitation, respectively. Despite the progress that has been registered over the past ten years in encouraging and regulating private participation in urban water-supply, achieving the MDG targets remains a challenge. At present, budget execution in the water sector is less than 50 per cent. According to the UNDP Human Development Report, government financing of water-supply and sanitation will have to increase to $7 million per year (from its current $2 million level) if the targets set for 2015 in MDG Number 7 are to be met. Effective water management also requires capacity building at the local level, and more predictable financing from donors and the government. The accumulation of debts to construction contractors which has already been mentioned is delaying the realisation of some of the major projects in the sector. The vast majority of foreign aid to rural water and sanitation is channelled through project financing. Only one donor currently provides general budget support to water, but donors and the government are working towards more harmonised support to the sector by improving planning, monitoring, reporting, auditing, and procurement procedures. The coordinating mechanism in the sector features monthly

1. The quality of data on water access is expected to improve with the new census to be carried out in 2007.

© AfDB/OECD 2007

African Economic Outlook

401

Mozambique

Consolidation of the Delegated Management Framework (DMF): increases in connections, coverage, and water availability The key reason for Mozambique’s success in attracting investment into water systems has been the strategy of delegating operations to the private sector, coupled with economic regulation by the Water Regulatory Council, which balances consumer and commercial interests. In 1999, the government awarded a 15-year lease contract for Maputo and a 5-year management contract for Beira, Quelimane, Nampula, and Pemba to the private company Águas de Moçambique (ADM), whose major shareholder is Águas de Portugal. Overall, ADM operates reasonably well and will have to concentrate efforts to reduce non-revenue water and improve customer services. In 2004, as a result of noticeable improvements in water management in these five cities, the government decided to expand the delegated management framework to southern cities. The water-supply systems of Inhambane, Maxixe, XaiXai, and Chokwe were integrated and delegated to the Dutch company Vitens. In 2006, a further expansion of delegated management contracts took place in the central region. Donors in 1999 secured to FIPAG funds in the order of 115 million dollars for financing expansion and maintenance of the water supply network. Funds from investments have risen since then to 175 million dollars in 2004 and are currently at 365 million dollars. Further investments are under negotiations with the World Bank. 402 Increased investment has led to a significant improvement in the coverage, reliability of supply, and water quality in the five cities monitored (Maputo, Beira, Quelimane, Nampula and Pemba). Daily water availability has risen from about 10 hours in 2000 to 16.5 hours in 2006 – which is, however, still below the African average of 17 hours. In 2007, connections are forecast to increase to about 122 000 in the five cities (about 34 per cent higher than in 2000), which translates into 645 000 people covered. Despite improvements, water losses remain a major problem, and are on an upward trend. In the five cities, the average loss is over 50 per cent, well above the African average of 39 per cent. This poor performance is attributable to physical losses in the distribution network and illegal connections and commercial losses associated to poor metering. Rehabilitation works are under way in all cities but tangible results are yet to be seen. In the cities of Beira, Quelimane, and Nampula the replacement rate of old pumps is less than 50 per cent. meetings of a Water Working Group of donors and government representatives.

Political Context and Human Resources Development The 2004 presidential and legislative elections – the third to take place since the end of the civil war in 1992 – brought Armando Emílio Guebuza to the presidency and maintained the Frente de Libertação de African Economic Outlook

Moçambique (Liberation Front of Mozambique – FRELIMO) in power. The party has had an uninterrupted hold on power for 30 years, during 18 of which Guebuza’s predecessor, Joachim Chissano, held power. Although President Guebuza heralded the fight against corruption as a major goal of his mandate, to the point that in the new FRELIMO constitution it is a party-member duty to fight corruption, not a single major corruption case has been brought to © AfDB/OECD 2007

Mozambique

court. The 2006 mid-year joint review between the government and donors highlighted the absence of progress in implementing the government’s AntiCorruption Strategy. Various reports on governance released in 2006 also pointed to alarming levels of corruption, lack of accountability, and the deficiencies of the justice system. The delays in prosecuting the two high-profile murders associated with the Banco Austral corruption case are a major source of concern for donors and civil-society organisations. A forensic audit for the Banco Austral case was completed, but its findings have not been disclosed. The government has agreed to set up a high-level working group that will include two donor representatives and representatives from the Ministries of Finance and Justice, to move the case forward. Provincial elections are scheduled for 2007, to be followed by municipal elections in 2008, and presidential and parliamentary elections in 2009. The Parliament passed a bill to set up directly elected Provincial Assemblies, whose role will be to approve the programmes of the provincial governments and monitor their implementation. Independent groups of citizens (and not only registered political parties, as is the case for parliamentary elections) may also propose candidates to stand for provincial elections. FRELIMO’s Ninth Congress did not produce dramatic changes. It confirmed President Guebuza’s leadership and the popularity of the Prime Minister within the Party. While literacy rates remain very low, educational and health indicators have improved dramatically in recent years. However, a slowdown or even a reversal of these positive trends is expected, due to the impact of HIV/AIDS. According to the mid-2006 government-donors’ joint review, primary-school enrolment has substantially improved. The net schooling rate for primary education (EP) in 2006 was 90.3 per cent overall (against a target of 85 per cent) and 87.5 per cent for girls (against a target of 82 per cent). The gross EP completion rate was 33.7 per cent for both sexes (against a target of © AfDB/OECD 2007

34 per cent) and 27.2 per cent for girls (against a target of 28 per cent). Education accounts for 22 per cent of the government’s expenditure. Thanks to the proper implementation of e-SISTAFE, the expenditure execution rate improved to 46.6 per cent in 2006. Nevertheless, the current expenditure execution rate, excluding salaries, was only 38 per cent, and the investment expenditure was a meagre 22.6 per cent, due to delays in disbursements from the central to the local level. In order to secure a more predictable flow of funds and increase foreign assistance for education, in early 2006 the Ministry of Education (MINED) and donors signed a Memorandum of Understanding on the Fundo de Apoio ao Sector da Educação (Education Sector Pool Fund – FASE). The FASE ‘pooled fund’ is financed by several bilateral agencies supporting the education sector, and is managed by the MINED at national and provincial levels. The objective of the FASE is to finance a portion of the MINED’s priorities as presented in the Education Sector Strategic Plans (1999-2003 and 200408). In addition, donors and the government signed an agreement for the funding of the Vocational Education Reform Programme (PIREP). According to the PARPA II, the funds allocated to the education sector are expected to grow by 6.5 per cent in real terms per year over the period 2007-09, with an emphasis on the recruitment of new teachers and the construction of new schools. The health sector registered moderate progress in terms of expansion and access to services, as well as a slight improvement in budget execution. (In the first semester of 2006, global execution was 37.8 per cent, compared to 32.9 per cent in 2005.) Vaccination coverage and physician consultations per capita were on target for 2006 – vaccination of infants 0-11 months was 92 per cent (annual target 2006: 95 per cent), and there were 1.2 consultations per inhabitant (annual target 2006: 0.94). Despite these improvements, the Mozambican health sector is faced with serious challenges. Health indicators are generally lower than in neighbouring African Economic Outlook

403

Mozambique

South Africa, Malawi, Tanzania, Zambia, and Swaziland. It is estimated that only half of the population has access to basic health services. The last available figures show that 15 per cent of all children die before reaching the age of five years, the most common cause of death being malaria. According to the World Health Organization (WHO), 1 out of 16 women die as a result of childbirth. Significant disparities in the availability and quality of health services are observed amongst provinces, the situation being particularly poor in rural areas. Even though the number of staff has increased over the last years, the number of health professionals per inhabitant is among the lowest in the world. About 12.7 per cent of government expenditures are devoted to health, and according to the PARPA II, the allocation to health is expected to grow by 3-4 per cent per annum in real terms over 2006-09, mainly for new rural hospitals, health centres, and training institutions for primary health-care workers.

404

Donors are increasingly funding health through a Sector-Wide Approach (SWAp). Most of the funds are channelled through three common funds: a general health fund, a common fund for health services in the provinces, and a common fund for medicines and medical equipment; these funds are administered by

African Economic Outlook

the Mozambican Ministry of Health (MISAU), and are used for the implementation of the Mozambican National Health Sector Strategic Plan. The HIV/AIDS pandemic is the biggest challenge for the country. The HIV/AIDS prevalence is 16.2 per cent, the tenth-highest in the world, and the country has one of the fastest-growing rates, with an estimated 500 new HIV infections each day. Some provincial prevalence-rates exceed 20 per cent, with a peak of about 30 per cent along the Beira Corridor. Increased political commitment, rising financial resources from the National AIDS Council (CNCS), and better harmonisation and alignment of donorsupported projects provide some hope for progress. Nevertheless, the national response is insufficient due to inadequate human resources and lack of coordination. To date, only 10 per cent of people in need of ART receive treatment and less than 5 per cent of pregnant women living with HIV or AIDS receive the full course of prophylaxis for the prevention of motherto-child transmission. It is widely acknowledged that the role of CNCS as the co-ordinating authority for HIV/AIDS must be strengthened.

© AfDB/OECD 2007

South Africa

Pretoria key figures • • • • •

Land area, thousands of km2 1 221 Population, thousands (2006) 47 594 GDP per capita, $ PPP valuation (2006) 12 857 Life expectancy (2006) 45 Illiteracy rate (2006) 17.6

South Africa

T

S OUTH A FRICA highlights both the buoyancy of its economic performance and the increasingly risky environment with which it is confronted. By South African standards, the country experienced high real GDP growth in 2005 and 2006 at around 5 per cent, fuelled mainly by booming consumption and vigorous investment. The emergence of a black middle class, boosted by the Black Economic Empowerment (BEE) measures, and increased social expenditures are stimulating private consumption and, in turn, the services and construction sectors. By contrast, gold mining and agriculture are largely underperforming owing to structural bottlenecks and diminishing prospects. As a result of growing incomes, South Africa is experiencing significant tax overruns, with the fiscal deficit shrinking to a mere 0.3 per cent of GDP in 2005/06 and an estimated HE MOST RECENT HISTORY OF

0.4 per cent in the following years. The strong growth is also leading to increased imports and a widening current account deficit, estimated at 4.6 per cent of GDP in 2006. The current account Steady growth based on internal deficit mostly reflects demand in 2006 caused a currentstructural factors which account deficit, underlining the are limiting export need to hasten structural reform. competitiveness and constitute a major challenge for policy makers. Inputs are costly, especially in telecoms and transport, adversely affecting all other industries. Poverty remains very high, as do crime figures and HIV/AIDS statistics. Although declining, unemployment remains at around 26 per cent (and close to 40 per cent if the discouraged unemployed 487 are included).

Figure 1 - Real GDP Growth and Per Capita GDP ($ PPP at current prices)

Source: IMF and local authorities’ data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/645266545018

© AfDB/OECD 2007

African Economic Outlook

South Africa

In May and June 2006, the turbulence of emerging financial markets affected South Africa, pushing the rand to a depreciation of some 20 per cent. South Africa was one of the most impacted emerging markets due to its large current account deficit and, possibly, perceived, heightened political risk. The domestic financial system was not damaged, however, highlighting the increased resiliency of the South African economy. The South African Reserve Bank (SARB) and the fiscal authorities are working together to dampen domestic demand. The SARB raised interest rates by 200 basis points in the last six months of 2006 while the government is keeping expenditure growth under control. The government is making some efforts to tackle structural bottlenecks: the Accelerated and Shared Growth Initiative for South Africa (ASGISA) programme is aimed at identifying and remedying the binding structural constraints to long-run growth.

488

The short term outlook continues to be largely positive, with investment, both public and private, expected to replace consumption as the engine of growth. Growth rates are therefore expected to remain high at around 4.5 per cent in 2007 and 2008. The outlook could be clouded, however, by international risks associated with rising interest rates in the United States, fresh oil price increases, a downturn in raw materials markets and domestic uncertainty regarding the succession of President Thabo Mbeki (selection of the next ANC president is scheduled for the end of 2007).

Recent Economic Developments In 2006, real GDP growth remained at around 5 per cent after 5.1 per cent in 2005. Growth was led by domestic demand-driven sectors (construction, manufacturing and services), while export-oriented sectors (agriculture, mining) lagged behind. The primary sector was a drag on growth in the first three quarters of 2006. Agricultural output fell by 14.9 per cent over the period due to low crop prices, notably of maize. However, a rebound in food prices in the second half of 2006 helped reinvigorate production in late 2006. African Economic Outlook

The mining sector contracted in the first nine months of 2006 by 3.4 per cent after recording a lacklustre growth rate of 2.3 per cent in 2005. In the same year, gold production receded by 13 per cent to 297.3 tons, its lowest level since 1923. These poor performances point to the structural difficulties of a sector that remains vital to the South African economy: both directly (7.3 per cent of GDP, 6.2 per cent of non-agricultural formal sector and 30 per cent of exports of goods) and through major induced and multiplier effects. The mining industry undoubtedly suffered from the appreciation of the rand against the US dollar up to July 2005 but it was subsequently unable to reap the benefits of higher rand-denominated metal prices (which rose 66 per cent between July 2005 and June 2006) and, in particular, a bull gold market. The industry reported a sharp 32.7 per cent decline in fixed investment in real terms between early 2004 and early 2006. As a consequence, South Africa slipped from fourth to seventh position in country rankings for exploration spending. The internal capital investment survey of the South African Chamber of Mines points to red tape and regulatory uncertainties, associated in particular with the Mining Charter, Royalty Bill, legal titles and mining prospecting rights, as the main constraints on mining activity. The Chamber estimates that these constraints are responsible for a ZAR 10 billion annual reduction in capital investment in mining. The sector is also confronted with constraints in rail and port capacity and rising water and transport costs. However, the comprehensive restructuring of the industry carried out in recent years and rising international prices are expected to result in a recovery in production in 2007 and beyond. The labour-intensive construction sector showed 13.2 per cent growth in the first three quarters of 2006 and reported a 22 per cent increase in employment, equivalent to 87 000 new jobs. Manufacturing experienced a 4.2 per cent growth in the nine months to September 2006. The highest rate of manufacturing capacity utilisation in 35 years was reported in June 2006 at 86.3 per cent, while the Investec Purchasing Managers Index (PMI), which measures confidence in the manufacturing sector, reached a record high in July 2006. Similarly, services benefited from vibrant domestic © AfDB/OECD 2007

South Africa

Figure 2 - GDP by Sector in 2005

(percentage)

Source: Authors’ estimates based on National Institute of Statistics data. http://dx.doi.org/10.1787/247765010430

demand, growing 5.9 per cent over the first three quarters of 2006. As a result of sustained vigorous growth, services contributed 66.4 per cent of GDP in 2005 compared to 60 per cent in 1994. Following the weakening of the rand and interest rate hikes in 2006, a rebalancing of growth in favour of export-oriented manufacturing industries and away from domestic-demand-driven sectors is anticipated in 2007. On the other hand, import-competing domestic industries should remain dynamic thanks to the delayed effect of depreciation of the rand. All the components of domestic demand proved vigorous in 2006 with real increases in final consumption expenditure by households and government of 4.2 per cent and 7.2 per cent respectively and a 10.6 per cent jump in gross capital formation. As a result, gross fixed investment reached an all-time high of 18.7 per cent of GDP in the third quarter of 2006, up from 15 per cent of GDP in 2002. Household consumption has been boosted by higher real disposable income and outstanding consumer confidence: the FNB/BER Consumer Confidence Index registered the longest continuous period – 10 quarters – of positive consumer expectations since 1994. Confidence and consumer spending have been supported by subdued inflation and a strong rand. They have also been bolstered by a 6 per cent increase in private sector real wages in 2005, substantial personal income tax relief over the past five years, rising government transfers, and a 5 per cent increase in employment since the beginning of 2005, equivalent to almost 350 000 jobs. The emergence of a growing black middle class, aided by black empowerment programmes, also contributed to the © AfDB/OECD 2007

vitality of consumption. Targeting a lucrative and vibrant domestic market, cash-flush local corporations have undertaken large fixed investments, supplemented by rising public investment. Finally, domestic demand has been fuelled by an accommodating monetary policy and strong credit expansion. Inexpensive credit allowed household consumption to exceed disposable income: 2006 marked the first episode of “dissaving” by South African households since 1984. 489 Overall, South Africa’s national savings rate fell to a historical low of 13 per cent in first quarter 2006, which was reflected in a dramatic widening of the current account deficit to 6.1 per cent of GDP in the first quarter – its highest level since 1994 – and 4.6 per cent over the year as a whole. The strength of the rand up to mid-2006 did not help exports and undoubtedly contributed to this deficit. Monetary tightening in the second half of 2006, along with depreciation of the rand and rising inflation should dampen consumer spending, especially for durables and semi-durables which are very currency- and interest rate-sensitive. Combined with the prudent medium-term fiscal strategy unveiled in October 2006, these factors should help narrow the current account deficit. Yet, the latter is expected to remain large, between 4.6 and 5 per cent of GDP, as investment continues to be buoyant over the next four to five years. Investment is forecast to expand by around 10 per cent annually under the impact of preparations for the 2010 FIFA World Cup and large-scale infrastructure and social project spending by the government and state-owned enterprises such as Transnet and Eskom. These public African Economic Outlook

South Africa

Table 1 - Demand Composition 1998

(percentage of GDP)

2005

2006(e)

Percentage of GDP (current prices)

2007(p)

2008(p)

Percentage changes, volume

Gross capital formation Public Private

16.8 5.8 11.0

17.7 4.9 12.9

10.6 15.0 9.0

9.9 12.0 9.0

9.9 12.0 9.0

Consumption Public Private

82.1 18.8 63.3

83.7 20.2 63.5

4.9 7.2 4.2

4.2 5.0 3.9

4.5 5.0 4.3

1.1 25.7 -24.5

-1.5 27.1 -28.6

2.2 5.3

2.3 4.9

2.1 6.1

External sector Exports Imports

Source: Statistics South Africa data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/388260456467

490

investment programmes are expected in turn to leverage complementary private sector investments. Although investment constitutes a small share of GDP and exhibits lower import content than consumption, the import leakage of large investment programmes such as those planned by Eskom and Transnet is far from negligible. The Industrial Development Corporation estimates it at ZAR 53 billion out of overall capital outlays totalling ZAR 134 billion. The widening of the current account deficit in 2006 underlines some of the structural weaknesses of the South African economy. Growth in South Africa is limited by supply-side bottlenecks and external constraints. Potential growth and export orientation has admittedly increased over the last five years, owing to improved macroeconomic policies, trade liberalisation and structural reforms, including the restructuring of the manufacturing sector since 2003. Yet, potential growth in South Africa is estimated at only four to 4.5 per cent, and, although up from about 3 per cent in the late 1990s, is still below the level needed to make a major dent in poverty and unemployment. Investment rates of below 20 per cent of GDP, themselves attributable to insufficient savings and foreign direct investment, are low by emerging market economies’ standards. As a result, the availability of critical infrastructure is insufficient and the quality of service is poor. Inadequate investment, along with African Economic Outlook

limited competition, explains the high costs of services, particularly transport and telecommunications, and of intermediate inputs, in steel and chemicals for instance. The ASGISA initiative aims to address these problems and to lift average growth to 6 per cent over the 2010-14 period. It is estimated that achieving this target will require an increase in investment to 25 per cent of GDP by 2014. Based on a realistic scenario of investment growth of 10 per cent, however, reaching an investment ratio of over 22 per cent by then promises to be a challenge and, in the period to 2010, growth looks unlikely to exceed 5 per cent.

Macroeconomic Policies Fiscal Policy Prudent policies have resulted in a dramatic consolidation of South Africa’s fiscal position since 1996. Budget deficits have recently hovered in a range between 1.5 per cent of GDP in 2004/05 and 0.4 per cent in 2006/07, while national government debt has been scaled back from 45.3 per cent of GDP in late 2001 to 34.8 per cent in the second quarter of 2006. The country now enjoys a good international credit standing: its long-term foreign currency debt is rated investment grade by S&Ps (BBB+), Moody’s (Baa1) and Fitch (BBB+). The risk premium on South Africa’s © AfDB/OECD 2007

South Africa

Table 2 - Public Finances

(percentage of GDP)

1998/99

2003/04

2004/05

2005/06 2006/07(e) 2007/08(p) 2008/09(p)

Total revenue and grantsa Tax revenue

24.7 24.0

23.8 23.3

25.1 24.6

26.3 25.8

26.3 25.7

26.2 25.7

26.2 25.7

Consolidated expenditureab Current expenditure Excluding interest Wages and salaries Interest Capital expenditure

28.5 26.9 21.3 10.8 5.6 1.6

27.7 26.6 22.9 9.5 3.7 1.2

27.8 26.6 23.1 9.4 3.5 1.2

29.1 27.5 24.2 9.8 3.3 1.7

29.0 27.3 24.3 9.6 3.0 1.8

28.8 26.9 24.1 9.4 2.8 1.9

28.7 26.7 24.1 9.4 2.6 2.0

Consolidated balanceb Main budget balance

-3.9 -2.7

-3.9 -2.3

-2.7 -1.5

-2.8 -0.3

-2.8 -0.4

-2.6 -0.4

-2.5 -0.5

a. Only major items are reported. b. Includes expenditure by national and provincial government, social security funds and selected public entities. Source: : South African National Treasury data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/706773153276

long term foreign currency debt reached an all time low 68 basis points in February 2006 and widened to a mere 115 basis points in July 2006, following the May-June 2006 turbulence in emerging markets. This risk premium narrowed again to 98bps in October 2006. In short, the government has a significant margin for increasing public expenditures. As in 2004/05, the budget deficit turned out to be far lower in 2005/06 at 0.3 per cent of GDP than the expected 3.5 per cent of GDP. The situation is likely to repeat itself in the following years with a likely closing of the fiscal deficit. The unexpectedly low deficit in 2006 was due to very strong revenue growth of 13.5 per cent in 2006, far above anticipated 4.5 per cent growth, and almost double GDP growth. Indirect taxes (VAT in particular) grew 14.5 per cent, while personal income and corporate tax receipts showed an 18.1 per cent increase. The surge in tax revenues has been driven by dynamic domestic demand but also by structural factors1, namely the continued broadening of the tax base, partly attributable to a progressing formalisation of the economy, and the strong tax compliance efforts made by the South African Revenue Services in recent

years. Despite tax relief for individuals and a tax amnesty for small businesses, the tax revenue to GDP ratio has risen from 21.2 per cent in 1996/97 to 26.2 per cent in 2006/07. The cyclical component of this rise in tax revenues is fairly small, according to the IMF2. At the same time, expenditures (capital outlays included) turned out to be broadly in line with the initial budget forecast. For the future, the government is aiming to increase the share of investment in public expenditure. Public investment is forecast to rise by 9.8 per cent annually from 2005 to 2009, so as to prepare the 2010 FIFA World Cup, improve public service delivery and achieve the priorities set out in the ASGISA. Capital outlays are set to reach 7.2 per cent of total expenditure and 2.2 per cent of GDP by 2009/10 compared to 4.5 per cent and 1.2 per cent respectively in 2004/05. Priority sectors are public works, housing, water, education and health services (including a hospital revitalisation programme). They will be supplemented by massive investment planned by Eskom in electricity generation and electrification, as well as significant spending by Transnet, aimed at improving the quality and efficiency of the country’s rail network, major ports and harbours.

1. Tax revenues in South Africa have been consistently higher than expected by government in recent years. 2. 'South Africa: Selected Issues', September 2006, IMF Country Report No. 06/328

© AfDB/OECD 2007

African Economic Outlook

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South Africa

While increasing the share of capital expenditure, the government aims to keep total expenditure below 30 per cent of GDP, by restraining the growth of current expenditure in line with GDP. In particular, the wage bill and transfers to households are expected to remain stable as a share of GDP. The roll-out of the government social grant programme is nearing completion and its impact on the budget is flattening out. There are no clear indications that the initiative will be extended further as the government intends to avoid the emergence of a dependency culture and to prevent the financial cost of the scheme from spinning out of control. In other words, spending plans by the fiscal authorities continue to strike a sensible balance between fiscal stability and social objectives. This strategy should result in narrow fiscal gaps over the period to 2009-10 – no higher than 0.5 per cent of GDP. Yet fiscal policy remains expansionary when cyclically adjusted, with a structural deficit estimated by the IMF at 2 per cent of GDP.

492

The authorities make the case for a prudent fiscal stance by stressing that the scope for increasing tax revenues further is limited because all feasible measures to improve tax compliance have already been undertaken. Cautious expenditures plans are also underpinned by a realistic assessment of South Africa‘s capacity for absorption, skill constraints and limited administrative capacities at the municipal and provincial levels. The government also stresses the need for coordinating fiscal and monetary policies to relieve pressure on the current account, slow growth to its potential rate and dampen inflation. Monetary Policy Monetary authorities were confronted with rising inflation in 2006: in September 2006, the Consumer Price Index (CPIX) inflation rate reached 5.1 per cent – its highest level in two years – and averaged 4.9 per cent over 2006 as a whole. Inflation could again be at the top of the targeted 3 to 6 per cent band in 2007, averaging out at about 5 per cent. The increase in inflation is attributable largely to strong domestic demand resulting in high capacity utilisation (86.2 per cent in June 2006, 88.6 per cent in durable goods) and in growth exceeding its long term potential. As a African Economic Outlook

result of labour-market pressures, growth in unit labour costs accelerated in the formal non-agricultural sector to 7.6 per cent in the year to the first quarter 2006. In addition, rising prices of imported goods (oil in particular), transport and food, at a rate well above 6 per cent, drove the overall inflation index up. The rise in the price of inputs, energy and labour were easily passed on to consumers. The growth in credit to the private sector has been consistently higher than 20 per cent since January 2006 and reached a record 25.3 per cent in September 2006, as the SARB accommodated the increase in money demand accompanying growing nominal GDP. Previously disadvantaged sections of the population which were entering the credit market for the first time in 2005 and 2006 largely accounted for the sharp increase in credits. Monetary policy was the most expansionary since 1994: from April 2005 to June 2006, the repurchase rate of the central bank stood at an all-time low 7 per cent. The inflationary pressures were compounded by the sharp 20.6 per cent depreciation of the rand between April and October 2006 and ensuing pass-through effects. Global factors, such as the tightening of US monetary policy and concerns about a drop in international investors’ appetite for emerging markets assets played a role in the weakness of the rand. The rand proved particularly vulnerable to the sell-off of emerging markets’ assets due to very large current account deficits and declining prices for key South African export commodities in 2006. However, the rand bounced back later in the year to such an extent that overall depreciation in 2006 was only 8.6 per cent. The challenge now faced by the monetary authorities is to keep inflation in check, to engineer a soft landing of the economy and in due course to narrow the current account deficit and reduce the rand’s instability. Achieving these objectives requires that the SARB tread a fine line between a too soft monetary response and the risk of a hard landing. In other words, the tightening of the monetary stance must dampen domestic demand while avoiding a crash on the property market, which is vulnerable to interest rate swings due to a high volume © AfDB/OECD 2007

South Africa

of mortgage debt at variable interest rates. Also, the central bank intends to dampen damaging interestrate volatility. The strategy so far has consisted in a gradual tightening of the monetary stance: policy interest rates were raised in June 2006 for the first time in almost four years. Tightening in 2006 reached 200 basis points overall. This strategy started to bear fruit in early 2007. Despite the depreciation of the rand and the rise in inflation in 2006, stable nominal wage settlements in the third quarter 2006 and an inverted interest rates curve are indications that expectations regarding inflation remained stable. Also, as real interest rates rise, domestic demand and credit were expected to slow down in early 2007. Combined with softening international oil prices in early 2007, the latter developments improved the inflation outlook and led the SARB’s monetary policy committee not to raise interest rates further on 15 February 2007.

Development Community (SADC) – European Union (EU) EPA negotiations (it had previously been only an observer), even though trade between South Africa and the EU is already governed by the Trade, Development and Cooperation Agreement (TDCA) which came into force in January 2000. Botswana, Lesotho, Namibia and Swaziland (BLNS) make the case for special treatment of their sensitive products. The European Commission (EC) made it clear however that South Africa could not benefit from such special treatment and would remain subject to the existing TDCA regime. In turn, South African trade officials rule out such a possibility. Also, the aim of the SADC EPA group is that in due course all its members (and not only its least developed members – Angola, Mozambique and Tanzania) should benefit from an Everything But Arms (EBA) access to the EU market, even though this is unlikely to be endorsed by the EC.

External Position

In 2005 and 2006, vibrant domestic demand combined with the lagged effects of the strong rand to boost imports. At the same time, the value of oil imports has been driven up by high prices. Overall, the value of imports increased by about 17 per cent in 2006. Exports, especially in manufacturing, grew less rapidly at 14.8 per cent, hampered as they were by the effects of the strong rand, while local producers tended to serve the booming domestic market instead of expanding their market shares abroad. As a result, the country’s merchandise trade deficit widened from 0.8 per cent of GDP in 2005 to 1.3 per cent in 2006.

The trade liberalisation programme pursued by South Africa since 1994 has resulted in a more open economy: the import penetration ratio was estimated at an all-time high of 25.1 per cent in 2006 while the exports-to-GDP ratio (including services) increased from 22 per cent in 1994 to an estimated 23.8 per cent in 2006. However, upstream sectors are over-protected. The tariff structure is also too complex with too many tariff bands and spikes. In March 2006, the SADC Economic Partnership Agreement (EPA) Group proposed that South Africa became a full participant in the Southern African

The widening gap in services also contributed to growth in the current account deficit in 2006 to 4.6 per

Table 3 - Current Account

(percentage of GDP)

1998

2003

2004

2005

2006(e)

2007(p)

2008(p)

Trade balance Exports of goods (f.o.b.) Imports of goods (f.o.b.) Services Factor income Current transfers

1.4 21.7 20.3 -0.2 -2.4 -0.6

2.1 23.2 21.1 -0.2 -2.8 -0.5

-0.1 22.4 22.5 -0.6 -2.0 -0.7

-0.8 22.8 23.6 -0.7 -2.0 -0.7

-1.3 23.8 25.1 -0.9 -1.8 -0.7

-1.5 23.5 25.0 -0.9 -1.7 -0.6

-2.3 22.4 24.7 -0.7 -1.5 -0.5

Current account balance

-1.8

-1.3

-3.4

-4.2

-4.6

-4.6

-5.1

Source: South African Reserve Bank data; estimates (e) and projections (p) based on authors’ calculations. http://dx.doi.org/10.1787/756403288572

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Figure 3 - Stock of Total External Debt (percentage of GDP) and Debt Service (percentage of exports of goods and services)

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Source: IMF. http://dx.doi.org/10.1787/272684865441

cent of GDP – its highest level since 1982. Nevertheless, the latter was comfortably financed by portfolio capital inflows in the first three quarters of 2006, despite turbulence in emerging markets, and international reserves actually increased. But reliance on volatile capital inflows remains a source of vulnerability and a shift from portfolio to foreign direct investment (FDI) would be desirable. FDI inflows remain disappointing, however. Despite the volatility of the rand and of South Africa’s vulnerability to capital outflows, the authorities remain committed to liberalising capital controls and, in particular, to gradually lifting remaining ceilings on outflows. Their objective is to replace quantitative limits on outward investment with prudential regulations for institutional investors. This strategy is made possible by an increasingly comfortable stock of international reserves, which increased from $18.7 billion in January 2006 to $21.5 billion in October. As a result, reserve coverage of imports of goods and services rose from 7.9 weeks in 2003 to 14 weeks. Also, the ratio of gross foreign reserves (including gold) in the economy to gross external short-term debt African Economic Outlook

stood at 157 per cent in March 2006, up impressively from 71 per cent in December 2003. Hence, despite a ratio of reserves to imports relatively low by emerging markets standards, improving liquidity ratios have enabled South Africa to easily withstand the turmoil on emerging markets in 2006 and helped to retain the confidence of international investors. South Africa’s foreign debt was just 18.8 per cent of GDP in 2006 compared to 29.4 per cent in 1999 and an ever increasing share of it is rand denominated (43.8 per cent in the first quarter of 2006 compared to 37.5 per cent one year before). Debt service accounted for 8.8 per cent of export revenues in 2005.

Structural Issues Recent Developments With the macroeconomic situation stabilised and creditworthiness restored, the South African authorities are now focusing on structural obstacles to growth © AfDB/OECD 2007

South Africa

and on equity. Despite the remarkable transformation undergone by the South African economy, the level of employment creation remains disappointing. With the ASGISA program unveiled by president Mbeki in February 2006, the South African authorities are pursuing the objective of halving poverty and unemployment by 2014. The document identifies six key constraints and related policy measures to address them: a) the cost, efficiency and capacity of infrastructures, b) the shortage of suitably skilled labour, c) barriers to market entry and competition, d) the regulatory environment and the burden on small and medium-sized businesses, e) deficiencies in government organisation, capacity and leadership, and f ) the level and volatility of the exchange rate. ASGISA has been criticised as unfocused by some analysts. The authorities submitted their programme for review by experts from the Harvard Center for International Development3. Although generally supporting its approach, these experts lamented its excessive reliance on capital accumulation and its neglect of labourmarket issues. Reflecting government policies, transport infrastructure is improving. In line with the exportoriented strategy of the country, port development has become a priority. This is consistent with the importance of maritime transport for South Africa, which handled 96 per cent of imports and exports in 2005. The stateowned monopoly Transnet is allocating half of its ZAR 32 billion investment budget to restructuring and expanding port facilities in the coming five years. Although delayed, the deep water port in Coega is expected to start operating in early 2008. By end-2006, the Coega industrial development zone had attracted some 10 investors, including aluminium company Alcan which is investing some ZAR 16 billion in an aluminium smelter. The 2010 World Cup is also generating investment in infrastructure. Some ZAR 15 billion have been earmarked by central government (and similar contributions are expected from other spheres of

government) for construction and upgrading of stadiums. After investing ZAR 3 billion in infrastructure over 1999-2003, Airports Company South Africa (ACSA) has allocated a further ZAR 5 billion for the period up to 2009 for upgrading airport terminals and runways. The O.R. Tambo Airport (Johannesburg International Airport) is already the busiest airport in Africa, with 13 million passengers in 2005 and 200 000 flight arrivals and departures. In 2006, six new airlines joined the 100 or so already present at JIA. JIA is also a major freight hub with more than 320 000 tons of cargo moved in 2005 – 7 per cent more than in 2004. The much-delayed construction of the Gautrain fast rail link finally started in mid-2006. The first segment, linking the airport to Johannesburg, is to be completed by June 2010 for the World Cup and the remaining link between Johannesburg and Pretoria by 2011. To date, it represents the largest publicprivate partnership (PPP) signed on the African continent. The ZAR 21 billion contract for a 15-year concession was under negotiation for 15 months before it was finally signed in September 2006 by Gauteng province and the Bombela consortium led by Bouygues Construction and RATP International. The project is expected to provide transport for 60 000 to 70 000 passengers daily. In response to criticisms, the project has been further integrated in the existing transport system (with commuter trains, buses and with large car parking areas) and safety measures have been upgraded. However, the Gautrain project remains only a partial answer to the huge Johannesburg-Pretoria commuting problem, which concerns over 6 million commuters a day. The upgrading of infrastructures and public services is limited by the limited capacities of local governments and skill shortages. This is a real challenge for the central authorities, given their commitment to increase provincial and local budgets by 58 per cent over the next three fiscal years. Several mechanisms have been developed to promote training and capacity building in local government. Technical assistance is provided

3. http://www.cid.harvard.edu/southafrica/index.html

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by the Treasury in the fields of planning, budgeting and financial management. Also, the Development Bank of Southern Africa (DBSA) has started providing aid in basic service delivery through the deployment of experts in municipalities with the greatest needs (Siyenza Manje initiative). In March 2006, in order to tackle the mismatch of skills, the Deputy President launched the Joint Initiative for Priority Skills Acquisition (JIPSA). It focuses on skill development through improved alignment between higher education programmes and the needs of the public and private sectors, incentives for the repatriation of skilled South African expatriates and recruitment of retired experts.

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Faced with very weak export performance since 1960 by international standards and a low level of export sophistication compared to its GDP level, the South African authorities are seeking to strengthen trade and industrial policy. The new national industrial policy framework attempts to better coordinate, focus, monitor and evaluate industrial policies so as to increase their impact. Fourteen priority sectors have been identified, with particular emphasis initially on business services and tourism. The authorities are aiming to diversify away from minerals and mineral-processing, while intensifying industrialisation and higher value activities in new areas of global growth. To that end, they are deploying a mix of incentives (including fiscal), large infrastructure investment and financing of priority sectors. They are also encouraging industrial development zones (ex. Coega). So far, however, there is a lack of co-ordination among the proliferation of initiatives. The approach of targeting certain sectors, while large unresolved economy-wide structural bottlenecks remain, is questionable. In that respect, the authorities are seeking to enhance competition through trade liberalisation and import tariffs on steel have been removed recently. A new competition law is under review by the Department of Trade and Industry. Strengthening competition is especially needed in telecommunications, the cost of which remains a major concern for investors in South Africa. Even though South Africa ranks first in sub-Saharan Africa in terms of fixed line coverage (10 per 100 inhabitants), this ratio African Economic Outlook

is weak among emerging countries and even deteriorating. It is partly compensated by a high mobile phone penetration, with 31 million registered users and 65 mobiles per 100 inhabitants. The country has been trying to open the fixed line sector to competition since 2000 with the establishment of the Independent Communications Authority of South Africa. However, competition is only just developing with the entry in August 2006 of a second fixed-line operator, Neotel, led by the Indian group Tata. The new company has announced a ZAR 1 billion investment plan over the next 10 years to develop the network. A new Electronic Communications Act was also adopted in parliament in April 2006 to allow attribution of licences for both mobile and fixed systems. Besides the three existing mobile operators, three additional telecom groups are expected to benefit from the new act to offer some mobile phone services, which should help put further pressure on prices. Some uncertainties remain, however, notably regarding use of the West Africa / South Africa / Far East underwater high speed cable for which Telkom has a monopoly. The market opportunities created by the emergence of the black middle class and large infrastructure projects are stimulating FDI. FDI is also facilitated by a sound governance and legal system. Some six major new investments worth a total ZAR 45 billion, notably in the retail, financial services and transportation sectors, are in the pipeline. Despite progress in diversification, FDI in South Africa is likely to remain concentrated on primary products and natural resource-intensive industries for some time. Domestic private investment is also picking up with new developments, notably shopping malls, in townships. Obstacles to higher foreign and domestic investment include the relatively small national and regional markets, factor costs (with the notable exception of electricity) and lack of skills. The overall business environment is characterised by a continuous improvement in investor and consumer confidence, fuelled by rising growth. However, the selection of the new ANC president in 2007 is putting some pressure on the investment climate. Jacob Zuma, a possible successor to President Thabo Mbeki, has been critical of the government’s liberal economic policies. His © AfDB/OECD 2007

South Africa

accession to power might slow the pace of reforms, notably in the labour market, but would probably not dramatically reverse the government’s policies. High crime rates also remain a detriment to the attractiveness of the country, even though improvements are appearing. The Police Service’s crime statistics released in September 2006 show a drop in the overall crime rate by 11.3 per cent between April 1994 and March 2006. Serious crimes also appear to have peaked. Nevertheless the number of serious crimes remained high at some 2.17 million in 2005/06, and some of them, including homicides, residential robberies and most of all drug-related crimes are still on the rise. The authorities have set a target of reducing “contact crimes”

by 7 to 10 per cent per year and are consequently strengthening the police. South Africa’s Black Economic Empowerment (BEE) programme continues to be an issue for debate in the country; although it is official government policy. There are encouraging signs that the black middle class is expanding thanks to affirmative action, particularly in the public sector. The government’s official Codes of Good Practice on BEE, which will shape the racial transformation of South Africa in the coming decade, were gazetted early February 2007. The codes are the blueprint for implementation of government’s “Balanced Scorecard” (the range of measures businesses must undertake).

Table 4 - The Balanced Scorecard Elements

Definition

Weighting

Compliance Targets

Ownership

Voting rights

20 points

25% +1 vote

Management control

Representation in management

10 points

40% to 50%

Employment Equity

Weighted employment equity

15 points

43% to 80%

Skills Development

Skill development expenditure

15 points

3% of payroll

Preferential Procurement

Procurement from black-owned and empowered enterprises

20 points

70%

Enterprise Development

Investment in black-owned and empowered enterprises

15 points

3% (Net Profit After Tax)

Socio-Economic Development

Industry specific initiatives

5 points

1% (Net Profit After Tax)

Source: Authors based on DTI. http://dx.doi.org/10.1787/373031608003

Companies must score in each of the seven categories, including equity transfer or ownership. The exceptions are: multinationals which can prove that it is their standard practice not to have outside shareholders in subsidiaries; businesses with a turnover of less than ZAR 5 million which are excluded completely; businesses with a turnover of between ZAR 5 million and ZAR 35 million which can chose five elements of the scorecard to comply with. However, any company wishing to do business with government will have to comply with the broad-based BEE scorecard. Part of any such companies’ “preferential procurement” compliance is to buy goods and services from other companies which comply with the codes, creating a cascade effect which will affect all but the smallest firms. Apart from its impact on small businesses, © AfDB/OECD 2007

questions remain about the extra regulatory burden of complying with a fairly complex set of rules. The financial system remains sound and regulation is improving. At the end of June 2006, the capital adequacy ratio of the banks (regulatory capital over risk-weighted assets) stood at 12.4 per cent, well above the required 10 per cent. Asset quality also improved with non performing loans at 1.2 per cent of total loans compared to 1.5 per cent end of 2005. The most significant risk to the banking sector today lies in increasing household mortgage debt in a context of rising interest rates. Bank credit to households increased from 33 per cent of total credit in June 2005 to 43 per cent in June 2006. However, the number of insolvencies has steadily declined since 2003 and household debt African Economic Outlook

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service remains low, making it unlikely that loan defaults would be widespread enough to cause systemic problems. Strengthened bank supervision, and enhanced bank risk management systems, notably to comply with the Basel II agreement, have also reduced the risk of a banking crisis. Access to Drinking Water and Sanitation

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South Africa is a semi-arid country, with rainfall well below the world average and unevenly distributed; available water resources are used very intensively. No fewer than 458 dams were commissioned between 1950 and 2000, initially for irrigation purposes but subsequently also for the provision of drinking water. These facilities were not initially located near population centres and therefore required heavy investment in piping. Water is also very inefficiently used with 60 per cent of available supply consumed by agriculture, which only accounts for 4 per cent of GDP. Water pollution remains an issue in a country in which agriculture, mining and energy are major sectors. With demand growing, South Africa faces a serious risk of shortages by 2020. To meet the challenge, the country is investing primarily in water use efficiency programmes (especially in the domestic and agricultural sectors) and secondarily in additional supply via recycling, desalination and new infrastructures. At the end of the apartheid regime in 1994, South Africa inherited a backlog of some 15 million people with no access to safe water supply and more than 20 million with no access to sanitation services, most of them in the former homelands. The newly elected government instituted an overhaul, with the Department of Water Affairs and Forestry (DWAF) at the centre of the new system. The 1994 White Paper on Community Water Supply and Sanitation, the 1997 Water Services Act and the National Water Act of 1998 established the objective of access to basic water and sanitation services for all while ensuring environmental sustainability as well as economic efficiency. A 2001 White Paper introduced a free basic water allotment of 25 litres per day per person. The constitution vests the responsibility for water and sanitation services in local government. National government, however, is provided with the regulatory function. African Economic Outlook

Despite the official adoption of a decentralised approach to managing water and sanitation issues, the sector remains highly centralised with the DWAF overseeing both service provision and the institutional and policy framework. This reflects capacity constraints at the municipal level but also some reluctance on the part of the DWAF to relinquish its control. There is also very little co-operation with the private sector. The number of public-private partnerships fell to only three after the termination of the management contract between the municipality of Johannesburg and Suez affiliated JOWAM in March 2006. The government has shown a clear reluctance to transfer substantial responsibilities to private operators. Overall, the country has made considerable progress in improving access to safe water and sanitation, especially considering the rising population: a total of 21.4 million people have been given access to improved water supplies since 1994, bringing the percentage of people without access from 39.9 per cent to 7 per cent. Meanwhile, 9 million people have been provided with improved sanitation, raising the percentage of people with access from 49 per cent to 69 per cent. In 2003, the DWAF established the Strategic Framework for Water Services, which set targets of universal access to water by 2008 and to sanitation by 2010, well ahead of the MDG targets of 80 per cent with access to water and sanitation by 2015. In practice, however, while South Africa will easily reach the MDG water supply target by 2015, it will find it difficult to meet the sanitation target and provision of a universal service is likely to take even longer. After the remarkable progress of the last decade, tackling the remaining backlog of 5 million people without services represents a much more difficult challenge as this population is mostly rural and dispersed. Better rural access to water services will require substantial improvement in municipalities’ managerial and engineering capacities. At the same time, urban water and sanitation systems are in urgent need of better maintenance. While government focuses mostly on the development of new infrastructure, maintenance of older networks, which today are between 50 and 100 years old, is neglected. All these problems mean that © AfDB/OECD 2007

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it will be difficult to raise access levels much in the coming years. Even though it remains largely state-owned, the sector is seeking financial sustainability but faces low willingness to pay on the part of population, partly as a result of historical resistance in the townships to the apartheid regime, and, in the case of smaller municipalities, limited collection capacity. Smaller municipalities face huge challenges in terms of covering operational and maintenance costs in a context of high poverty levels, existing free access to basic water services and plans on the government’s part to phase out subsidies after five years. On the other hand, some of the bigger municipalities such as Johannesburg are seeking innovative financing schemes.

Political Context and Human Resources Development South Africa’s standing continues to rise on the African continent as well as in the international arena. In 2007, the country starts a two-year term on the United Nations Security Council. It has also become chair of the G20 forum of industrialised and developing economies. However, with the election of the next ANC president approaching, internal politics is moving under the spotlight. The March 1 2006 municipal elections gave expression to a rise in popular discontent fuelled by a perception of limited progress in the provision of public services at local level, the slow pace of improvement in the majority of the black population‘s living conditions and pervasive unemployment. Rising dissatisfaction is putting pressure on the ANC coalition, deepening the divide between the current leadership and the left wing represented by the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP). The coming selection of the ANC president in December 2007 prior to presidential elections in 2009 is exacerbating the tensions which have been further fuelled by the twists in the Zuma affair. After Jacob Zuma, then deputy president, was dismissed by President Mbeki in 2005 on allegations of fraud and © AfDB/OECD 2007

corruption and further indicted with rape charges, his political prospects as future ANC president seemed very slim. However, his case changed dramatically in September 2006 when the corruption charges against him were dismissed for lack of proof and he was acquitted of rape. Zuma is back in contention for the ANC presidency, a post which is virtually certain to lead to the presidency in 2009. Despite the trials, support for him has grown, especially among the unions and the communists which see in him the most credible alternative to the current business-oriented government. Between 1995 and 2005, South Africa’s population increased from 41.5 million to 46.9 million while average household size fell from 4.7 to 3.7 people. Demographic pressure, combined with a rise in the number of households and migration to urban areas, has partly offset the government’s efforts to improve delivery of public services. For example, even though 2.5 million new formal housing units were built between 1995 and 2005, the proportion of households living in formal housing decreased from 72.9 per cent to 69.8 per cent and informal settlements mushroomed. This trend is making it increasingly difficult to meet demand for electricity and water services. Despite the creation of 1.2 million jobs in the formal sector (excluding agriculture) between March 2001 and March 2006, the growth of the labour force has prevented unemployment from being significantly reduced and real wages from being increased. From 1995 to 2005, the active population rose by 65 per cent and the number of unemployed people increased by 168 per cent, from 1.6 million to 4.4 million. The stubbornly high unemployment rate also stems from the apartheid legacy of skill mismatch and inequalities. Nevertheless, encouragingly, the unemployment rate has started to decline in recent years, from a high of 30.2 per cent in 2002 to 25.6 per cent in March 2006. Earnings inequality rose sharply during 1995-1999 and remained high but stable over 2000-04. South Africa’s efforts to stimulate export-led growth have yielded limited gains in employment and incomes for unskilled workers due to the capital-intensive nature of exports. Clearly, skill development remains a key African Economic Outlook

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priority and South Africa rightly devotes almost one fifth of budget spending to education. The government’s efforts are directed at learners via the extension of free schooling, which is due to be made available to 40 per cent of learners in 2007, and teachers via improved qualifications. Rising inequalities co-exist with the emergence of a black middle class. According to Cape Town University’s Black Diamond marketing survey, the number of black households earning more than ZAR 154 000 a year increased by 368 per cent between 1998 and 2004. From next to nothing in the early 1990s, the middle class had grown to 10 per cent of the black adult population or 2 million individuals by 2004 and is currently growing at a rate of 50 per cent per year. Three quarters of the black middle class still live in the townships and the remaining quarter commute from the suburbs to the townships where they visit family and friends over week-ends. 500

In rural areas, though, little has changed. With only four per cent of land owned by the black population (compared to a target set in 1994 of reaching 30 per cent by 2015), land reform has made slow progress. The authorities are adopting a more pro-active policy, moving away from the initial approach based on voluntary transactions to relying more on expropriations and compensations. A total of 5.4 million people are HIV-infected in South Africa, including 16.2 per cent of 15-49 year old adults and one third of young women aged 25 to 29, according to the 2005 South African National HIV survey commissioned by the Nelson Mandela Foundation. Some 2.2 million people were estimated to have died of AIDS by July 2006. The number of

African Economic Outlook

dead in 2006 alone reached 350 000. Statistics also suggest that the epidemic is still worsening, even if at a slower rate. As a result, life expectancy has fallen from 57 years in 1995-2000 to under 50 in 2006. To tackle the tremendous challenges raised by the disease, South Africa has put in place a large anti-retroviral treatment plan, in which some 134 500 people have been enrolled through the public sector and a further 80 000 people by the private sector and NGOs. However, enrolment remains well short of needs with some 500 000 adults estimated to be still without access to treatment. More importantly, there are signs that the government is reversing its approach to HIV/AIDS. Following the uproar created by the South African display of vegetable “treatments” at the Toronto AIDS conference in August 2006 and under the pressure of NGOs (notably Treatment Action Campaign) and of 81 leading scientists who called for the sacking of controversial health minister Manto Tshabalala-Msimang, the cabinet formed an inter-departmental committee to oversee the government’s response to the epidemic. Deputy President Phumzile Mlambo-Ngcuka, who heads the committee, has already made her mark through strong statements and symbolic gestures such as meeting AIDS specialists and walking arm in arm with TAC activists. The HIV/AIDS strategic plan for 2007-2011, due in December 2006, was postponed to March 2007 to allow for broader participation, notably by civil society. The two key objectives of the plan are a 50 per cent reduction of the new infection rate by 2011 through increased prevention and the extension of treatment, care and support to 80 per cent of the HIV-positive population. This policy reversal provides for greater availability of drugs and will encourage the population to make more use of conventional treatment, thus opening the way to much-needed progress.

© AfDB/OECD 2007

Part Three

.

Statistical Annex

.

Statistical Annex

List of Tables

Methodology Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 Table 19 Table 20 Table 21 Table 22 Table 23 Table 24

Basic Indicators, 2006 Real GDP Growth Rates, 1998-2008 Demand Composition, 2005-08 Public Finances, 2005-08 Monetary Indicators Current Account, 2005-08 Exports, 2005 Diversification and Competitiveness International Prices of Exports, 2000-06 Foreign Direct Investment, 2000-05 Aid Flows, 2000-05 External Debt Indicators Demographic Indicators Poverty and Income Distribution Indicators Access to Services Basic Health Indicators Major Diseases Basic Education Indicators School Enrolment Employment and Remittances Corruption Perception Index Political Troubles Softening of the Regime Hardening of the Regime

© AfDB/OECD 2007

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Statistical Annex

Methodology

The table is based on exports disaggregated at 4 digit level (following the SITC3)

on: www.unctad.org/wir). It is the unweighted average of scores of: GDP per capita, the rate of growth of GDP, the share of exports in GDP, telecom infrastructure (the average number of telephone lines per 1 000 inhabitants, and number of mobile phones per 1 000 inhabitants), commercial energy use per capita, share of R&D expenditures in gross national income, share of tertiary students in the population, country risk, exports of natural resources as a percentage of the world total, imports of parts and components of electronics and automobiles as a percentage of the world total, world market share of exports of services and inward FDI stock as a percentage of the world total (Source: UNCTAD, World Investment Report 2006).

Table 8. Diversification and Competitiveness

Table 11. Aid Flows, 2000-05

The diversification indicator measures the extent to which exports are diversified. It is constructed as the inverse of a Herfindahl index, using disaggregated exports at 4 digits (following the SITC3). A higher index indicates more export diversification. The competitiveness indicator has two aspects: the sectoral effect and the global competitivity effect. In order to compute both competitiveness indicators, we decompose the growth of exports into three components: the growth rate of total international trade over the reference period (2001-05) (not reported); the contribution to a country’s export growth of the dynamics of the sectoral markets where the country sells its products, assuming that its sectoral market shares are constant (a weighted average of the differences between the sectoral export growth rates – measured at the world level – and total international trade growth, the weights being the shares of the corresponding products in the country’s total exports); the competitiveness effect, or the balance (export growth minus world growth and sector effect), measuring the contribution of changes in sectoral market shares to a country’s export growth.

The DAC countries are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States and the Commission of the European Communities.

Tables 1 to 6. Where indicated, the figures are reported on a fiscal-year basis. Figures for Egypt, Ethiopia, Kenya, Mauritius, Tanzania, and Uganda are from July to June in the reference year. For South Africa and Botswana, fiscal year 2005 is from April 2005 to March 2006. Table 7. Exports, 2005

568

Table 10. Foreign Direct Investment, 2000-05 The UNCTAD Inward Potential Index is based on 12 economic and structural variables measured by their respective scores on a range of 0-1 (raw data are available African Economic Outlook

Table 13. Demographic Indicators Infant mortality rate: under one-year-old child deaths per live birth per year. Total fertility rate: average number of children per woman. Mortality under age 5: probability that a newborn infant would die before the age of 5. Table 14. Poverty and Income Distribution Indicators National poverty line: absolute poverty line corresponding to the value of consumption necessary to satisfy minimum subsistence needs. International poverty line: absolute poverty line corresponding to a level of income or consumption of $1 or $2 a day. Gini index: index measuring the intensity of inequality in income or consumption expenditure © AfDB/OECD 2007

Statistical Annex

distribution. Perfect equality leads to a Gini index of zero and maximum inequality to a Gini index of 100. Share of consumption: share of total consumption for a decile of the population ranked by level of consumption. Table 15. Access to Services The Sanitation coverage is the percentage of the population with access to improved sanitation technologies (connection to a public sewer, connection to septic system, pour-flush latrine, simple pit latrine or ventilated improved pit latrine). The water supply coverage is the percentage of the population with access to improved water supply (household connection, public standpipe, borehole, protected dug well and protected spring or rainwater collection). Table 16. Basic Health Indicators Life expectancy at birth is the average number of years a newborn infant would live under the hypothesis that, during its life, the conditions of mortality remain the same as observed at its birth. Life expectancy at birth with AIDS is the estimated average number of years a newborn infant would live under the hypothesis that, during its life, the conditions of mortality remain the same as observed at its birth in particular the characteristics of AIDS epidemic. Life expectancy at birth without AIDS is the estimated number of years a newborn infant would live under the hypothesis of absence of AIDS during its life. Under nourishment prevalence is the proportion of the population that is suffering insufficient food intake to meet dietary energy requirements continuously. Food availability is the available nutritious food for human consumption expressed in kilo-calories per person per day (note that the recommended daily caloric intake for an active healthy life is 2 100 calories). Public share of total health expenditure is calculated by defining public health expenditure as current and capital outlays of government, compulsory social security schemes, extrabudgetary funds dedicated to health services delivery or financing and grants and loans provided by

© AfDB/OECD 2007

international agencies, other national authorities and commercial banks. Private share of total health expenditure is calculated by defining private expenditure as private insurance schemes and prepaid medical care plans, services delivered or financed by enterprises, outlays by non-governmental organisations and nonprofit institutions serving mainly households, out-ofpocket payments, and other privately funded schemes not elsewhere classified, including investment outlays. Table 17. Major Diseases Healthy life expectancy at birth is the average equivalent number of years in full health a newborn infant would live under the hypothesis that, during its life, the conditions of mortality and ill-health remain the same as observed at its birth. People living with HIV/AIDS is estimated whether or not they have developed symptoms of AIDS. HIV/AIDS adult prevalence is the estimate of the adult population (15-49) living with HIV/AIDS. Malaria notified cases are cases of malaria reported from the different local case detection and reporting systems. These figures should be considered with caution because of the diversity of sources and probable underestimation. The Measles incidence is the number of new cases of measles reported during the reference year. MCV: Measles Containing Vaccine. DTP3: Third dose of Diphtheria and Tetanus toxoids and Pertussis vaccine. Table 19. School Enrolment Gross enrolment ratio: population enrolled in a specific level of education, regardless of age, expressed as a percentage of the official school-age pupils enrolled in that level. Net enrolment ratio: official school-age population enrolled in a specific level of education expressed as a percentage of the total population enrolled in that level.

African Economic Outlook

569

Statistical Annex

Table 20. Employment and Remittances

Table 22. Political Troubles

Participation rate: measure of the proportion of a country’s working-age population that engages actively in the labour market, either by working or looking for work. It provides an indication of the relative size of the supply of labour available to engage in the production of goods and services.

• Strikes 0 = non-occurrence, 1 = 1 strike or number of strikers lower than 1 000 (inclusive), 2 = 2 strikes or number of strikers between 1 000 and 5 000 (inclusive), 3 = 3 strikes or number of strikers higher than 5 000.

Total unemployment: proportion of the labour force that does not have a job and is actively looking for work. Inactivity rate: percentage of the population that is neither working nor seeking work (that is, not in the labour force). Table 21. Corruption Perception Index, 2000-06

570

The Corruption Perception Index (CPI) is a composite indicator based on surveys of business people and assessments of country analysts. A background paper presenting the methodology and validity of the CPI is available on the Transparency International website: http://www.transparency.org/policy_research/surveys_in dices/cpi/2006/methodology Table 22 to 24. Political Indicators The political indicators were built on information taken from the weekly newspaper Marchés Tropicaux et Méditerranéens according to a methodology first proposed by Dessus, Lafay and Morrisson1. The qualitative information derived from the newspaper were either computed as 0-1 variables with 0 being the non-occurrence of the event and 1 its occurrence or as 4-value indicators (with 0: non-occurrence, 1: occurrence but weak intensity, 2: medium intensity and 3: strong intensity). From these indicators, three main political indexes were constructed: an index of conflicts, a measure of the softening of the political regime and one of its hardening.

• Unrest and violence (number of dead and injured) Dead 0 = none, 1 = between 1 and 10 (non inclusive), 2 = between 10 and 100 (non inclusive), 3 = higher than 100. Injured 0 = none, 1 = between 1 and 50 (non inclusive) or if the number of dead is between 1 and 10, 2 = between 50 and 500 (non inclusive) or if the number of dead is between 10 and 100, 3 = higher than 500 or if the number of dead exceeds 100. • Demonstrations 0 = non-occurrence, 1 = 1 demonstration or number of strikers lower than 5 000 (non inclusive), 2 = 2 demonstrations or number of strikers between 5 000 and 10 000 (non inclusive), 3 = 3 demonstrations or number of strikers higher than 10 000. • Coup d’état and attempted coups d’état Table 23. Softening of the Political Regime • Lifting of state of emergency • Releases of political prisoners • Measures in favour of human rights

1. Dessus, S., D. Lafay and C. Morrisson (1994), “A Politico-economic Model for Stabilisation in Africa”, Journal of African Economies.

African Economic Outlook

© AfDB/OECD 2007

Statistical Annex

• Improvement of political governance (fight against corruption…)

• Violence perpetuated by the police (number of dead and injured)

• Relinquishment of political rehabilitation, return from exile

Dead 0 = none, 1 = between 1 and 10 (non inclusive), 2 = between 10 and 100 (non inclusive), 3 = higher or equal to 100.

persecution,

• Political opening (measures in favour of democracy) 1 = Discussion with the opposition, 2 = Entry of the opposition to power, 3 = Opening of a regime to elections.

• Lifting of bans on press or public debates

Injured 0 = none, 1 = between 1 and 50 (non inclusive), 2 = between 50 and 500 (non inclusive), 3 = higher or equal to 500.

Table 24. Hardening of the Political Regime

• Prosecutions, executions

• State of emergency

• Bans on strikes and demonstrations

• Arrests, incarcerations 0 = non-occurrence, 1 = between 1 and 10 (non inclusive), 2 = between 10 and 100 (non inclusive), 3 = higher than 100.

• Bans on press or public debates

• Additional resources for the police, propaganda or censorship

A principal component analysis was undertaken in order to determine a relevant weight for each qualitative variable within the synthetic indexes.

• Lifting of bans on strikes or demonstration

571

• Closing of schools • Obligatory demonstrations

• Toughening of the political environment (expulsions, dismissals, curfew, and dissolution of political parties)

© AfDB/OECD 2007

African Economic Outlook

Statistical Annex

Weights in “Political troubles” Weights Strike Dead Injured Demonstration Coups d'état and attempts

0.286 0.950 0.958 0.543 0.059

Weights in “Softening of the political regime” Weights Lifting of state of emergency Release of political prisoners Measures in favour of human rights Improvement of political governance Relinquishment of political persecution Political opening Lifting of bans on strikes Lifting of bans on public debates

0.282 0.709 0.373 0.089 0.502 0.373 0.323 0.522

Weights in “Hardening of the political regime” Weights

572 State of emergency Violence perpetuated by the police: Dead Injured Arrests Additional resources for the police Toughening of the political environment Prosecutions, executions Bans on strikes Bans on demonstrations Closing of schools

African Economic Outlook

0.631 0.261 0.423 0.402 0.603 0.253 0.583 0.383 0.292 0.092

© AfDB/OECD 2007

Tables

Algeria Angola Benin Botswana** Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt* Equatorial Guinea Eritrea Ethiopia* Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar Malawi Mali

33 354 16 400 8 703 1 760 13 634 7 834 16 601 519 4 093 10 032 819 4 117 59 320 18 454 807 75 437 515 4 560 79 289 1 406 1 556 22 556 9 603 1 634 35 106 1 791 3 356 5 968 19 105 13 166 13 918

Population (thousands)

Land area (thousands of km2) 2 382 1 247 115 582 274 28 476 4 623 1 284 2 342 2 345 322 23 1 001 28 118 1 104 268 11 239 246 36 593 30 111 1 760 587 118 1 240

574

14 13 76 3 50 281 35 129 7 8 366 12 25 57 35 75 18 39 72 5 138 95 39 45 59 59 30 3 33 111 11

238 821 56 378 10 089 20 431 17 916 5 935 47 286 3 356 4 890 15 558 1 195 5 739 50 764 25 714 1 739 339 493 20 406 4 075 62 952 10 783 3 230 48 400 20 217 1 222 64 428 5 198 .. 71 676 17 570 8 592 13 838

7 160 3 438 1 159 11 611 1 314 758 2 848 6 473 1 195 1 551 1 459 1 394 856 1 393 2 155 4 500 39 623 894 794 7 668 2 076 2 146 2 105 748 1 835 2 903 .. 12 009 920 653 994

Population Density GDP based on PPP valuation*** GDP per Capita (pop/km2) ($ million) (PPP valuation, $)

Table 1 - Basic Indicators, 2006

4, 2 9,0 4,4 7,2 5,9 2,2 3,9 6,6 0,9 9,2 2,2 4,0 1,5 0,7 2,4 4,9 22,9 1,2 4,5 0,4 4,7 4,9 3,5 - 1,2 3,3 1,6 .. 3,4 3,5 2,5 5,3

Annual real GDP growth (average over 1998-2006)

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

158 256 943 158 052 426 375 230 160 936 81 679 496 594 992 029 025 306 210 857 861 085

924 320

5 8 47 36 1 39 6 10 29 11 13

11

3 1 31 20 2 14 134 9

30 323

1 026 2 711 802 824 1 267 924 26 1 197 0,455 72 638 1 221 2 506 17 945 57 164 241 753 391

Land area (thousands of km2)

30

3 616 45 25 2 11 145 350 166 61 179 79 13 39 15 59 41 111 62 124 16 33

270 234 404 447 377 819 839 430 270 713 979 378 .. 911 227 935 176 850 301 633 842 724

2 594 649

611 98 5 23 9 90 46 13 29

5

20

9 18 185 39 17 10 143 15

936 519 804 957 467 750 070 672 684 735 034 947 .. 857 655 765 594 562 844 562 167 272 2 844

1 8 1 1 2

12 2 5

1 1 1 1 12

2 14 5 1 8

Population Density GDP based on PPP valuation*** GDP per Capita (pop/km2) ($ million) (PPP valuation, $)

(cont.)

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1) *** Purchasing Power Parity. Sources: Population: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects, The 2004 Revision. Land area: African Development Indicators, World Bank. GDP: Various domestic authorities; IMF World Economic Outlook and authors' estimates and forecasts.

Africa

Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda* Zambia Zimbabwe

Population (thousands)

Table 1 - Basic Indicators, 2006

http://dx.doi.org/10.1787/673625150313

4,3

.. 3,5 6,5 2,4 5,6 1,8 4,9 5,6 3,7 - 4,8

5,0 4,2 4,6 8,1 4,3 4,0 4,5 6,0 3,7 4,6 0,6 8,0

Annual real GDP growth (average over 1998-2006)

Statistical Annex

African Economic Outlook

575

Algeria Angola Benin Botswana** Burkina Faso Burundi Cameroon Cape Verde Central Afr. Rep. Chad Comoros Congo Congo. Dem. Rep. Côte d’Ivoire Djibouti Egypt* Equatorial Guinea Eritrea Ethiopia* Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar Malawi Mali

5.1 6.8 4.0 14.5 7.3 4.8 4.9 8.4 3.9 6.9 1.2 3.7 -1.7 5.4 0.1 7.6 17.7 1.8 -4.0 3.5 6.5 4.7 4.8 -28.2 3.4 -4.5 … -0.4 3.9 1.1 8.1

1998 3.2 3.2 5.3 7.1 6.2 -1.0 4.1 11.9 3.6 -0.5 1.9 -2.7 -4.3 1.6 3.0 6.1 23.2 0.0 6.0 -8.9 6.4 4.4 4.7 7.6 2.1 0.2 … 0.3 4.7 3.5 5.7

1999

576

2.2 3.0 4.9 7.3 1.9 -0.9 4.2 7.3 1.8 -0.5 1.4 7.6 -6.9 -2.3 0.5 5.4 13.1 -13.1 5.9 -1.9 5.5 3.7 1.9 7.5 0.5 2.6 … 1.1 4.7 0.8 -3.3

2000 2.1 3.1 6.2 9.1 7.1 2.1 4.5 7.1 0.3 11.5 3.3 3.8 -2.1 0.1 2.0 3.5 78.3 9.2 7.7 2.1 5.8 4.2 4.0 0.2 4.5 1.8 … 4.5 6.0 -4.1 12.0

2001 4.7 14.5 4.4 1.6 5.4 4.4 4.0 4.3 -0.6 8.5 4.1 4.6 3.5 -1.6 2.6 3.2 21.3 0.7 1.2 -0.3 -3.2 4.5 4.2 -7.1 0.6 2.9 … 3.3 -12.7 2.1 4.2

2002 6.9 3.3 3.9 9.5 8.0 -1.2 4.0 4.7 -7.6 14.3 2.5 0.8 5.8 -1.7 3.2 3.2 14.1 3.9 -3.5 2.5 6.9 5.2 1.2 -0.6 3.0 2.7 … 9.1 9.8 3.9 7.6

2003 5.2 11.2 3.1 3.4 4.6 4.8 3.7 4.4 1.3 33.7 -0.2 3.6 6.6 1.6 3.0 4.1 32.4 2.0 12.3 1.4 5.1 5.8 2.7 2.2 4.9 4.0 … 4.6 5.3 5.1 2.3

2004

Table 2 - Real GDP Growth Rates, 1998-2008

5.3 20.6 2.9 8.4 7.1 0.9 2.2 5.8 2.2 8.6 4.2 7.7 6.5 1.8 3.2 4.5 6.0 4.8 8.7 3.0 5.0 5.8 3.3 3.2 5.8 2.9 … 3.5 4.6 2.2 6.1

2005 2.9 14.9 4.5 4.2 5.5 6.1 3.5 5.8 3.5 0.2 1.2 6.8 6.5 1.4 4.2 6.8 0.4 1.5 5.9 2.1 4.5 6.1 5.0 4.6 5.0 1.6 … 5.0 4.8 8.4 5.0

2006(e) 5.1 26.9 4.5 4.3 5.4 6.6 4.0 6.5 4.0 2.5 3.0 1.9 6.2 2.4 5.0 6.6 9.4 2.0 6.3 2.0 5.0 5.9 5.0 5.2 5.3 1.4 … 4.6 5.2 4.8 4.8

2007(p)

5.0 17.3 4.8 4.1 5.1 7.1 4.0 7.0 4.3 1.0 4.5 6.6 6.0 2.6 5.6 6.7 17.8 3.3 6.9 2.5 5.0 6.0 5.0 5.8 5.1 2.0 … 4.4 5.5 5.1 4.6

2008(p)

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

3.4

2.8 6.1 7.7 12.6 3.3 12.6 0.3 8.9 2.5 5.9 2.5 -0.8 … 0.5 4.3 3.3 3.7 -2.3 4.8 3.6 -1.9 0.1 3.1

6.7 2.6 0.5 7.5 3.4 1.1 1.5 7.6 2.5 6.3 1.9 -8.1 … 2.4 3.1 3.5 3.5 2.4 6.1 8.2 2.2 -3.6

1999

3.4

1.8 9.0 1.8 1.9 3.5 -2.6 5.4 6.0 3.0 3.2 4.3 3.8 … 4.2 8.4 2.0 5.1 1.0 4.7 5.4 3.6 -7.3

2000

4.2

2.9 2.6 7.6 13.1 2.4 7.4 3.1 6.7 4.0 4.6 -2.2 18.2 … 2.7 6.2 1.7 6.2 0.2 4.9 4.9 4.9 -2.7

2001

3.6

1.1 1.9 3.3 8.2 6.7 5.3 1.5 9.4 4.1 0.7 1.3 27.5 … 3.7 6.4 2.8 7.2 4.1 1.7 6.4 3.3 -4.4

2002

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1). Sources: Various domestic authorities; IMF World Economic Outlook and authors' estimates and forecasts.

Africa

Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda* Zambia Zimbabwe

1998

2004 5.2 5.7 5.2 7.5 6.6 -1.0 6.1 4.0 3.8 5.6 -2.0 7.4 … 4.8 5.2 2.1 6.7 2.3 6.0 5.7 5.4 -3.8 5.4

5.6 4.3 6.1 7.9 3.5 3.3 10.7 0.9 4.0 6.7 -6.3 9.3 … 3.1 4.9 2.4 5.7 5.2 5.6 4.4 5.1 -10.4 4.6

(cont.)

2003

Table 2 - Real GDP Growth Rates, 1998-2008

5.2

5.4 1.2 2.4 6.2 4.2 7.0 6.5 6.0 3.8 5.5 1.2 7.2 … 5.1 7.9 1.9 6.8 1.2 4.2 6.7 5.1 -6.5

2005

5.9

6.3 5.0 3.4 7.3 4.8 4.0 7.0 5.7 5.5 5.6 1.5 6.5 … 4.5 11.3 1.6 6.8 2.9 5.8 6.0 5.8 -4.7

2007(p)

5.7

2.6 5.4 4.8 6.8 4.9 3.9 5.3 4.9 6.5 5.1 2.0 6.5 … 4.4 9.3 1.5 6.6 3.2 5.5 5.9 6.0 -3.3

2008(p)

http://dx.doi.org/10.1787/368601060524

5.5

13.9 3.9 7.3 7.9 4.8 3.1 5.3 4.3 5.5 2.9 4.5 7.4 … 5.0 12.1 1.8 5.7 1.8 5.8 5.4 5.9 -5.1

2006(e)

Statistical Annex

577

African Economic Outlook

African Economic Outlook Gross Capital Formation

2005

External Sector

33.6

43.9

76.8 27.8 72.5 71.7 24.7 27.4 85.3 70.3 71.6 84.2 31.4 81.3 76.8 82.4

Angola

Benin Botswana** Burkina Faso Cameroon Chad Congo Congo. Dem. Rep. Côte d’Ivoire Egypt* Ethiopia* Gabon Ghana Kenya Madagascar

12.0 22.8 21.5 9.9 20.8 13.2 8.3 13.9 12.7 13.8 11.5 15.3 17.1 9.0

24.1

11.8 10.2 25.6 9.5 14.5 17.9 17.0 10.5 6.6 13.4 8.3 17.4 17.0 12.2 16.7

2.8

20.4 8.0 9.1 11.1 4.9 8.7 5.4 3.7 2.7 4.5 12.1 5.8 12.0 4.6 9.3

4.7

9.6 21.6 49.8 9.7 20.4 54.4 87.1 31.6 50.6 30.3 15.8 66.2 36.2 26.7 28.2

72.6

48.0

Percentage of GDP

28.5 35.1 24.3 21.4 26.6 50.2 39.3 44.1 32.6 34.3 32.3 61.8 37.4 45.5

48.0

23.5

Private Public Private Public** Exports Imports

Final Consumption

Algeria

578 2007(p)

2008(p)

3.2 3.1 5.3 3.0 1.6 3.5 9.2 2.4 9.3 5.5 -1.5 7.7 4.8 3.3

21.7

3.4 13.5 15.8 6.1 7.5 7.3 19.1 8.2 -4.3 15.8 17.5 10.2 13.4 15.9 14.8

51.9

6.0 5.0 1.6 9.7 3.4 -1.0 5.8 13.8 2.1 13.1 2.1 2.0 5.9 3.8 5.6

9.6

1.6 5.2 8.7 8.4 4.4 7.0 7.4 25.1 3.3 17.2 10.4 3.2 15.4 5.6 8.1

26.9

5.7

Real Percentage Growth

4.6 2.8 4.5 4.0 4.3 9.6 3.8 2.7 5.8 7.2 2.1 4.6 3.9 4.3

18.1

3.9 7.6 8.3 6.8 6.9 8.3 10.6 29.5 2.1 17.0 3.0 5.0 7.7 12.5 8.5

12.8

8.7

6.0 3.4 12.1 2.2 -0.2 -4.9 7.5 1.8 5.0 5.0 -2.7 4.4 4.5 3.7

30.1

4.1

7.0 4.0 5.5 4.5 6.6 6.1 4.0 2.5 11.0 6.9 1.2 4.5 2.2 4.4

14.8

4.5

Real Percentage Growth

4.9 2.7 5.4 4.1 3.7 6.5 3.4 2.7 7.2 7.3 1.2 6.8 4.4 5.0

21.1

4.0

8.4 7.3 6.4 6.4 7.0 5.0 26.3 6.4 14.2 5.9 3.8 8.7 8.9 7.4

13.7

9.3

6.8 3.3 8.4 2.0 -3.0 5.1 7.8 2.2 2.5 5.2 1.3 4.6 5.0 4.1

7.0

3.7

8.1 3.6 6.8 4.7 5.4 3.8 4.3 3.5 11.8 7.3 0.8 9.5 2.5 4.8

16.1

5.9

Real Percentage Growth

Total Gross Exports Imports Total Gross Exports Imports Total Gross Exports Imports Final Capital Final Capital Final Capital Con- FormaCon- FormaCon- Formasump- tion sump- tion sump- tion tion Total tion Total tion Total

2006(e)

Table 3 - Demand Composition and Growth Rate, 2005-08

Statistical Annex

© AfDB/OECD 2007

Gross Capital Formation External Sector

© AfDB/OECD 2007

51.7 77.7 36.7 86.8 77.8 63.5 78.0 63.8 78.5 66.2

Namibia Niger Nigeria Rwanda Senegal South Africa Tanzania Tunisia Uganda* Zambia

29.4 15.0 21.2 12.6 13.9 20.2 7.3 15.5 14.4 13.7

16.8 17.1 14.8 19.2 12.9 18.0 13.5 11.5 8.8 15.6 12.9 13.1 16.0 16.6 16.0

3.7 14.2 15.3 27.3 17.4 7.6 5.3 9.4 10.1 8.1 4.9 9.1 7.4 4.6 7.0

7.3 7.0 6.3 2.9 12.5 35.1 20.9 55.2 11.4 26.1 27.1 22.9 48.0 13.1 33.9

26.7 24.8 59.9 31.6 30.9 41.8 32.5 34.0 29.8 41.5 28.6 30.4 50.6 27.2 36.7

60.6 28.6 65.9 37.8 42.9

2006(e)

2007(p)

(cont.) 2008(p)

4.2 3.5 6.2 5.2 7.6 4.9 3.9 3.0 6.5 7.8

6.6 2.1 2.0 9.3 2.3

-6.5 9.0 5.4 7.3 6.7 7.5 2.5 -4.0 6.6 -9.4 2.2 5.7 1.5 1.8 6.2

-0.2 10.0 12.5 5.9 27.5 7.3 7.2 22.9 4.8 6.1 10.6 8.8 1.7 20.1 7.3

7.4 6.7 15.2 8.5 6.8 5.3 4.0 1.0 13.6 10.5

-7.3 6.4 5.4 8.7 6.7

Real Percentage Growth

0.0 4.2 6.2 4.8 3.3 4.2 6.3 5.7 5.1 6.4

1.2 3.4 4.3 2.5 3.3 5.5 6.1 19.8 17.9 5.1 9.9 10.4 7.3 11.8 12.3

24.6 5.4 7.0 4.5 15.0 10.0 2.4 3.1 5.5 9.8 2.3 3.0 5.4 4.3 4.6

5.6 6.2 5.5 4.9 6.7

1.8 5.3 8.1 7.2 2.3 4.9 8.9 5.0 7.1 9.5

1.1 3.3 5.1 2.7 3.9

Real Percentage Growth

8.7 6.1 12.0 7.9 5.1 9.9 12.0 9.0 10.7 10.2

11.1 5.7 7.3 7.0 11.7

6.2 2.6 2.3 6.7 2.4 2.1 3.1 4.2 3.1 6.3

4.7 5.0 3.1 6.5 6.2

5.1 4.8 6.9 4.5 4.0 6.1 7.7 6.7 7.1 5.6

4.7 5.2 1.4 4.1 7.1

http://dx.doi.org/10.1787/325822570786

3.1 3.9 5.2 4.6 5.4 4.5 5.5 6.3 5.3 4.4

3.6 4.3 3.7 3.4 5.3

Real Percentage Growth

Total Gross Exports Imports Total Gross Exports Imports Total Gross Exports Imports Final Capital Final Capital Final Capital Con- FormaCon- FormaCon- Formasump- tion sump- tion sump- tion tion Total tion Total tion Total

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1). Sources: Various domestic authorities; IMF World Economic Outlook and authors' estimates and forecasts.

106.1 65.6 69.6 56.6 69.1

Malawi Mali Mauritius Morocco Mozambique

Percentage of GDP

Private Public Private Public** Exports Imports

Final Consumption

2005

Table 3 - Demand Composition and Growth Rate, 2005-08

Statistical Annex

579

African Economic Outlook

Algeria Angola Benin Botswana** Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo. Dem. Rep. Côte d’Ivoire Djibouti Egypt* Equatorial Guinea Eritrea Ethiopia* Gabon Gambia Ghana Guinea Guinea Bissau Kenya* Lesotho Liberia Libya Madagascar

41.0 38.0 18.4 36.8 16.8 30.5 18.1 31.2 12.2 12.3 19.9 39.6 16.8 18.2 37.1 20.6 40.5 37.0 20.5 31.4 21.4 27.9 13.6 26.0 22.6 49.5 ... 73.9 16.7

Total revenue and grants

580

29.1 30.1 21.3 35.7 21.7 36.8 14.6 36.3 16.7 13.0 19.9 23.7 19.5 19.9 36.8 30.0 18.1 56.6 25.2 21.9 30.1 30.8 14.4 38.1 22.5 45.2 ... 41.6 21.3

2005 Total expenditure and net lending 11.9 7.9 -2.9 1.2 -4.9 -6.3 3.6 -5.1 -4.6 -0.8 0.1 15.9 -2.7 -1.7 0.2 -9.4 22.3 -19.7 -4.7 9.4 -8.6 -3.0 -0.8 -12.1 0.1 4.2 ... 32.2 -4.7

Overall balance

41.7 35.4 19.0 36.9 19.8 41.4 18.8 34.1 10.8 11.7 20.6 40.1 22.0 17.9 33.7 21.1 44.3 34.7 18.9 31.6 23.0 28.6 15.0 36.1 23.0 58.3 ... 73.9 17.0

Total revenue and grants 28.7 30.0 21.8 37.1 23.1 41.8 14.8 41.2 12.1 13.3 21.8 21.2 23.2 19.9 34.9 30.4 18.5 52.6 26.3 20.9 27.7 32.8 14.0 46.9 26.5 55.5 ... 31.7 21.7

2006(e) Total expenditure and net lending 13.0 5.4 -2.7 -0.2 -3.3 -0.4 4.0 -7.1 -1.4 -1.7 -1.2 18.9 -1.2 -2.0 -1.2 -9.3 25.8 -17.9 -7.4 10.7 -4.8 -4.3 1.0 -10.8 -3.5 2.7 ... 42.1 -4.7

40.1 34.8 19.3 37.0 16.9 33.2 18.1 33.6 11.0 11.5 23.2 38.0 21.1 17.7 29.9 20.8 48.7 37.7 20.8 30.7 28.3 29.2 15.3 29.8 22.5 50.7 ... 75.2 16.1

Total revenue and grants 29.4 28.5 22.0 37.1 22.6 41.7 15.2 37.9 12.2 14.0 23.8 25.7 22.5 19.8 31.2 29.8 16.3 54.0 26.6 23.2 28.5 32.8 13.8 37.9 23.7 52.4 ... 30.0 21.0

2007(p) Total expenditure and net lending

(percentage of GDP)

Overall balance

Table 4 - Public Finances, 2005-08

10.7 6.3 -2.7 -0.1 -5.7 -8.6 2.9 -4.3 -1.1 -2.5 -0.6 12.3 -1.4 -2.1 -1.3 -9.0 32.4 -16.3 -5.8 7.5 -0.2 -3.6 1.4 -8.1 -1.2 -1.7 ... 45.1 -4.8

Overall balance

39.6 32.7 19.5 36.1 17.2 33.3 17.9 34.3 11.3 11.1 24.8 37.6 20.8 17.6 29.3 21.2 49.4 40.2 20.5 30.4 27.4 29.0 15.0 30.1 22.2 48.5 ... 75.0 15.1

Total revenue and grants

29.8 28.9 22.4 36.5 23.1 41.0 15.3 38.4 12.4 14.7 24.6 25.4 22.8 20.0 35.3 29.3 15.4 54.0 25.8 23.2 27.3 32.6 14.1 36.9 23.6 50.0 ... 30.7 20.2

2008(p) Total expenditure and net lending

9.7 3.8 -2.8 -0.3 -6.0 -7.7 2.6 -4.0 -1.1 -3.6 0.2 12.1 -1.9 -2.3 -6.0 -8.0 34.0 -13.8 -5.6 7.2 0.1 -3.6 1.0 -6.8 -1.4 -1.6 ... 44.3 -5.1

Overall balance

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 30.6

37.5 21.6 26.4 19.9 23.9 20.0 30.0 17.1 43.3 29.2 129.9 21.1 53.5 21.9 ... 26.3 22.0 32.7 21.3 15.4 25.0 20.9 23.0 44.2 28.2

43.1 24.8 33.5 24.9 29.9 22.2 31.1 18.9 32.6 28.5 70.6 24.3 52.4 24.6 ... 26.7 23.8 36.8 25.9 16.2 27.6 21.6 25.6 50.3

2005 Total expenditure and net lending

2.4

-5.6 -3.2 -7.0 -5.0 -6.0 -2.3 -1.1 -1.8 10.7 0.7 59.3 -3.2 1.1 -2.7 ... -0.3 -1.8 -4.1 -4.6 -0.8 -2.6 -0.7 -2.6 -6.1

Overall balance

31.2

44.1 22.7 33.4 20.1 23.4 23.0 36.4 15.3 42.1 28.2 104.1 21.8 51.1 21.1 ... 26.3 24.4 30.7 20.4 15.6 24.2 19.7 21.1 38.0

Total revenue and grants

28.0

47.1 24.4 40.4 25.4 29.0 25.1 34.2 19.3 32.3 27.5 77.9 27.2 53.8 21.6 ... 26.7 24.2 37.0 26.5 18.8 27.1 21.8 23.6 41.2

2006(e) Total expenditure and net lending

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1). Sources: Various domestic authorities; IMF World Economic Outlook and authors' estimates and forecasts.

Africa

Malawi Mali Mauritania Mauritius* Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa** Sudan Swaziland Tanzania* Togo Tunisia Uganda* Zambia Zimbabwe

Total revenue and grants Total revenue and grants 41.6 22.6 26.6 20.4 23.2 21.0 30.4 14.7 38.9 27.6 308.7 21.8 48.1 20.1 ... 26.2 30.5 29.4 22.0 16.4 24.0 18.6 21.2 37.4 31.0

-3.0 -1.7 -7.0 -5.3 -5.6 -2.0 2.2 -4.0 9.8 0.7 26.2 -5.5 -2.7 -0.5 ... -0.4 0.2 -6.3 -6.0 -3.2 -3.0 -2.1 -2.5 -3.1 3.2

28.2

43.1 24.4 32.4 25.1 28.9 26.7 32.7 19.1 33.8 28.8 73.2 26.1 52.4 22.6 ... 26.7 27.5 37.1 26.4 18.0 27.0 21.7 23.2 39.2

2007(p) Total expenditure and net lending

(percentage of GDP) (cont.)

Overall balance

Table 4 - Public Finances, 2005-08

2.7

-1.5 -1.8 -5.8 -4.7 -5.7 -5.7 -2.2 -4.4 5.1 -1.1 235.5 -4.3 -4.4 -2.5 ... -0.4 3.0 -7.7 -4.5 -1.6 -3.0 -3.2 -2.0 -1.8

Overall balance

28.5

46.4 24.9 32.0 24.9 28.5 26.8 32.1 18.8 35.2 28.9 68.5 26.2 52.7 22.5 ... 26.7 29.0 37.7 26.2 19.0 27.3 21.7 23.9 43.0

2008(p) Total expenditure and net lending

2.1

-6.7 -2.5 -5.6 -4.4 -5.6 -6.3 -2.3 -3.7 2.1 -1.0 -10.4 -4.4 -4.7 -2.5 ... -0.5 2.9 -8.5 -4.1 -2.0 -3.3 -3.8 -1.8 -5.3

Overall balance

http://dx.doi.org/10.1787/786335886722

30.7

39.7 22.4 26.4 20.5 22.8 20.5 29.8 15.1 37.3 27.9 58.1 21.8 48.0 20.0 ... 26.2 31.9 29.2 22.2 17.0 23.9 17.9 22.1 37.8

Total revenue and grants

Statistical Annex

581

African Economic Outlook

Algeria Angola Benin Botswana** Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt* Equatorial Guinea Eritrea Ethiopia* Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

1.9 23.0 5.4 7.8 6.4 13.5 2.0 0.4 2.9 7.9 3.2 2.5 21.4 3.9 3.5 11.4 5.0 12.4 6.8 -0.2 3.2 15.1 31.1 3.4 10.3 4.0 6.9 2.5 18.4

2005

2.9 10.1 2.4 11.6 2.8 5.0 3.0 3.6 5.6 6.3 3.8 4.0 22.0 2.4 3.0 4.1 5.2 10.9 10.5 1.9 2.0 10.9 25.0 1.9 14.5 4.5 8.0 3.0 11.4

3.3 8.5 1.8 5.8 2.7 3.3 1.8 0.2 3.1 3.0 3.0 2.8 7.4 2.6 3.0 6.4 4.1 10.5 6.0 1.8 3.7 7.2 12.4 2.2 3.6 4.8 7.5 3.5 9.4

3.2 9.3 2.3 5.5 0.3 4.0 2.1 0.3 2.3 3.0 3.0 2.3 7.1 2.9 3.0 6.1 3.7 10.0 5.9 2.2 3.2 6.9 8.1 2.0 3.8 4.5 7.5 3.5 7.7

2006(e) 2007(p) 2008(p)

Inflation (%)

582

African Economic Outlook 1

9 2

1

72.1 83.5 528.3 4.7 528.3 100.9 528.3 88.8 528.3 528.3 396.2 528.3 395.9 528.3 177.7 6.2 528.3 13.8 8.6 528.3 30.0 004.6 225.0 528.3 79.2 6.5 54.9 1.3 868.9

2004

2

9 3

1

73.3 87.2 527.5 5.1 527.5 081.6 527.5 88.7 527.5 527.5 395.6 527.5 473.9 527.5 177.7 5.8 527.5 15.4 8.7 527.5 28.6 072.5 644.3 527.5 75.6 6.4 57.1 1.3 003.0

2005

2

9 5

1

Exchange Rate (LCU / $)

72.7 80.4 524.0 5.8 524.0 031.8 524.0 88.4 524.0 524.0 393.0 524.0 439.7 524.0 177.7 5.7 524.0 15.4 8.7 524.0 28.1 174.5 139.6 524.0 72.2 6.8 58.4 1.3 147.1

2006

Table 5 - Monetary Indicators

4 233.6 481.6 635.6 21.2 588.4 254.5 1 544.5 76.4 122.4 288.8 32.5 653.1 288.1 2 063.4 101.2 553.9 265.5 22.2 51.0 903.6 6.7 29 616.0 2 264.5 53.6 592.5 2.8 6.8 17.1 2 188.9

Level

45.2 12.7 25.5 35.6 18.2 26.6 15.9 77.8 15.9 8.1 20.6 16.9 7.4 22.7 74.8 93.1 5.5 123.8 44.3 18.2 47.0 26.4 14.7 31.2 34.6 27.9 ... 25.9 18.6

% of GDP

4.8 23.1 0.2 44.6 5.9 5.0 1.8 8.4 -4.7 16.5 -2.1 42.5 6.6 -0.9 3.6 5.9 -4.9 1.5 8.5 7.5 9.6 5.6 13.2 1.6 8.3 6.8 6.3 4.1 7.7

Growth 2005/06

Broad Money (LCU billion) 2006

67 586 5 229 769 7 093 495 86 1 271 209 133 293 90 1 198 ... 1 516 103 22 487 2 530 24 1 043 868 100 1 916 99 81 2 235 591 46 47 149 490

36.9 5.7 9.0 22.9 5.3 3.3 4.8 5.1 9.3 3.6 11.2 6.1 ... 3.6 3.7 8.9 15.3 0.6 3.0 6.8 3.9 4.5 1.4 7.6 3.6 5.3 ... 43.8 3.7

Reserves excluding gold ($ million) 2006 Stock at Eq. Months year-end of imports

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007

8.8

15.7 6.4 12.1 4.9 0.9 6.4 2.3 7.8 17.9 9.2 16.3 1.7 1.0 12.0 … 3.9 8.5 4.8 4.3 6.8 2.0 8.0 18.3 237.8 9.1

13.4 2.1 6.4 8.9 3.3 12.7 5.0 0.8 8.6 9.3 19.8 2.0 -0.4 9.5 … 4.9 7.0 5.0 7.1 2.7 4.5 6.6 8.4 1216.0 9.2

9.5

8.2 7.2 2.1 2.0 8.7 8.0 5.0 5.9 2.3 1.9 8.1 5.7 4.9 5.0 1.9 1.9 6.9 9.6 5.1 5.0 17.2 11.3 2.0 2.0 1.8 2.2 8.3 8.0 … … 5.0 4.5 5.0 4.0 5.9 5.0 6.5 5.8 2.9 3.1 2.7 2.3 5.6 5.3 8.6 7.8 4278.8 8462.1

2006(e) 2007(p) 2008(p)

1 4 5

1

2

9

22

108.9 528.3 265.5 27.5 8.9 581.3 6.5 528.3 132.9 577.4 902.3 528.3 5.5 701.3 … 6.5 257.9 6.5 089.3 528.3 1.2 810.3 778.9 068.7

2004

1 4 22

1

2

10

22

118.4 527.5 265.5 29.5 8.9 428.3 6.4 527.5 131.3 557.8 558.0 527.5 5.5 889.6 … 6.4 243.6 6.4 128.9 527.5 1.3 780.7 463.5 363.6

2005

1 3 133

1

2

11

Exchange Rate (LCU / $)

…

3 6 9

4

1 1

1

…

57.9 804.8 ... 298.2 499.9 47.1 19.9 264.9 037.0 258.3 715.2 570.9 4.5 759.9 ... 037.4 657.5 3.6 287.9 335.1 23.5 323.7 280.5 233.9

136.0 524.0 270.6 31.7 8.8 25.4 6.8 524.0 127.4 551.7 050.2 524.0 5.5 960.7 … 6.8 217.3 6.8 254.1 524.0 1.3 835.1 590.7 912.6 3

Level

2006

Note: * Fiscal year July (n-1)/June (n) ** Fiscal year April (n)/ March (n+1). Source: Various domestic authorities; IMF World Economic Outlook & International Financial Statistics and authors' estimates and forecasts.

Africa

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda* Zambia Zimbabwe

2005

Inflation (%)

Table 5 - Monetary Indicators (cont.)

…

19.4 25.7 ... 153.2 99.3 0.0 46.5 14.1 19.9 19.9 77.2 32.4 120.6 17.6 ... 61.8 19.6 20.9 26.6 28.1 58.3 19.3 16.0 0.0

% of GDP

7.2 -4.4 ... 10.5 5.3 4.8 14.5 6.7 15.4 2.0 21.1 1.4 1.5 4.9 ... 10.7 20.3 3.8 9.0 6.7 5.1 5.8 10.4 54.3

5 1

2

23 2

1

37

1 18 1

116 879 ... 365 574 114 444 289 003 420 29 295 76 174 ... 787 445 354 176 309 120 496 558 …

…

1.4 8.7 ... 5.0 9.4 4.2 2.1 4.3 11.7 11.0 6.0 5.1 1.6 5.1 ... 4.5 3.9 2.0 10.1 3.6 4.7 9.0 2.1 ...

Reserves excluding gold ($ million) 2006 Stock at Eq. Months year-end of imports

http://dx.doi.org/10.1787/034242223177

Growth 2005/06

Broad Money (LCU billion) 2006

Statistical Annex

African Economic Outlook

583

Algeria Angola Benin Botswana* Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt* Equatorial Guinea Eritrea Ethiopia* Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

26 400 14 740 -293 1 088 -525 -182 248 -349 -23 2 295 -77 3 216 -198 2 368 -263 -10 359 5 219 -472 -2 786 4 091 -126 -2 510 76 -18 -2 168 -635 … 18 783 -481

2005 31 756 25 025 -328 909 -586 -280 465 -453 -38 2 471 -93 4 019 -412 2 289 -402 -14 696 8 787 -525 -3 583 4 327 -141 -2 726 77 -20 -2 814 -844 … 32 272 -745

Trade balance ($ million) 2006 2007 34 156 19 586 -334 900 -593 -245 593 -399 -31 2 721 -86 4 642 -468 2 022 -295 -11 986 6 853 -482 -3 234 5 177 -137 -2 532 88 -18 -2 976 -807 … 27 231 -717

584

31 678 25 727 -363 990 -623 -295 401 -504 -40 2 217 -102 4 314 -251 2 338 -481 -19 222 10 545 -570 -3 872 4 317 -148 -3 167 22 -17 -2 783 -873 … 33 052 -809

2008 21 200 4 194 -194 809 -585 -84 -257 -45 -40 290 -17 498 -345 -50 -29 2 911 -898 -7 -983 1 448 -60 -757 -161 -21 -495 -23 … 15 581 -507

28 864 6 837 -226 1 031 -759 -167 64 -72 -47 559 -18 1 641 -404 -331 -31 2 271 -455 -24 -1 488 2 478 -55 -1 145 -144 -16 -811 -53 … 23 484 -906

24 753 7 762 -234 1 387 -777 -170 -201 -113 -53 -544 -24 760 -350 -275 -140 978 1 003 -39 -1 842 1 498 -33 -1 253 -160 -26 -1 071 -134 … 28 810 -936

Current account balance ($ million) 2005 2006 2007

Table 6 - Current Account, 2005-20

24 353 1 424 -274 1 527 -841 -161 -162 -135 -59 -257 -28 892 -304 -363 -221 -3 644 2 194 -46 -2 083 1 651 -45 -1 628 -229 -24 -808 -161 … 30 409 -1 014

2008 21 13 -4 8 -10 -11 -2 -5 -3 5 -5 8 -5 0 -4 3 -13 -1 -9 17 -13 -7 -5 -7 -3 -2 … 40 -10

24 14 -4 9 -12 -17 0 -7 -3 8 -5 19 -5 -2 -4 2 -5 -2 -12 24 -11 -12 -4 -5 -3 -3 … 48 -17

20 13 -4 11 -11 -16 -1 -10 -3 -7 -6 9 -4 -2 -17 1 9 -5 -13 15 -6 -11 -4 -8 -3 -8 … 51 -16

19 2 -5 12 -12 -14 -1 -11 -3 -3 -6 10 -3 -2 -25 -3 17 -5 -13 17 -8 -13 -6 -7 -2 -10 … 51 -16

Current account balance (as % of GDP) 2005 2006 2007 2008

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 87 381

-494 92 216 -1 095 -10 937 -575 -524 -212 30 439 -292 -56 -1 676 -198 -127 … -3 255 1 293 -76 -1 068 -293 -2 234 -1 003 759 63 93 105

-348 201 755 -1 171 -11 219 -759 -392 -181 29 668 -312 -60 -1 648 -199 -130 … -4 038 4 062 -80 -1 245 -289 -2 626 -1 086 574 -83 84 958

-387 118 757 -1 482 -11 892 -984 -341 -168 29 386 -328 -64 -1 804 -192 -125 … -6 718 4 438 -69 -1 518 -316 -3 415 -1 236 -181 -1

2008

34 427

-324 -119 -934 -324 945 -1 084 349 -252 11 900 -75 -21 -726 -100 -86 … -10 118 -2 919 -35 -955 -313 -360 -198 -695 -500

-315 15 65 -494 1 024 -1 323 755 -190 13 489 -154 -48 -1 068 -21 -101 … -12 383 -1 289 -72 -499 -310 -676 -458 -1 037 -145 53 342

-421 2 -193 -496 97 -760 712 -205 11 001 -117 -46 -1 124 -23 -94 … -11 628 -2 229 -42 -526 -319 -359 -343 -348 42 52 655

2008

41 361

-226 -139 -5 -728 1 893 -1 581 708 -290 14 366 -119 -51 -1 210 -2 -105 … -14 914 -1 520 -70 -746 -328 -1 286 -640 -1 589 -31

Current account balance ($ million) 2005 2006 2007

* Fiscal year July (n-1)/June (n). Various domestic authorities; IMF World Economic Outlook and authors' estimates and forecasts.

62 774

Africa

Note: Source:

-380 -123 -783 -797 -8 086 -721 -573 -259 27 300 -229 -38 -1 322 -261 -127 … -1 887 -1 087 -95 -1 324 -300 -1 963 -885 32 -375

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda* Zambia Zimbabwe

2005

Trade balance ($ million) 2006 2007

Table 6 - Current Account, 2005-20 (cont.)

4

-16 -2 -50 -5 2 -16 6 -8 12 -4 -30 -8 -14 -7 … -4 -11 -1 -8 -15 -1 -2 -10 -11 4

-19 0 2 -7 1 -14 10 -5 9 -5 -61 -11 -3 -7 … -5 -3 -3 -5 -12 -2 -5 -8 -1

3

-13 -2 0 -10 2 -16 9 -7 9 -4 -59 -12 0 -6 … -5 -3 -2 -6 -12 -3 -6 -11 0

http://dx.doi.org/10.1787/686310430456

5

-19 0 -7 -7 0 -8 10 -6 8 -4 -63 -13 -3 -7 … -5 -6 -2 -5 -14 -1 -4 -3 1

Current account balance (as % of GDP) 2005 2006 2007 2008

Statistical Annex

585

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central Afr. Rep. Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

Natural gas, gaseous (5.6%) Oth.non-ferr.metal waste (6.4%)

Bananas, fresh or dried (8.7%) Gas turbines, nes (4%) Cotton,not carded,combed (8.9%) Fish,frozen ex.fillets (12.7%) Crude petroleum (16.7%) Cocoa paste (7.7%) Othr.ferrous waste,scrap (7%) Portland cement, etc. (4.7%) Molluscs (7.6%) Manganese ores,concentrs (6.9%) Groundnuts (peanuts) (7.7%) Wood,non-conifer, sawn (6.7%) Copper ores,concentrates (7.8%) Oth.frsh,chll.vegetables (8.1%) Diamonds.excl.industrial (15%) Natural rubber latex (8%) Spices,ex.pepper,pimento (9%)

Edible nuts fresh,dried (16.5%) Nickel mattes,sintrs.etc (8.1%)

Wood,non-conifer, sawn (14.1%) Trousers,breeches,etc. (6.3%) Wood,non-conif,rough,unt (33.8%) Essential oils (14.2%) Oth.non-ferr.ore,concntr (17.2%) Crude petroleum (12%) Trousers,breeches,etc. (7.2%) Crude petroleum. (10.3%) Sesame (sesamum) seeds (8.7%) Sesame (sesamum) seeds (20.2%) Wood,non-conif,rough,unt (10.6%) Mech.shovel etc.s-propld (9.9%) Manganese ores,concentrs (7.2%) Alumina(aluminium oxide) (17.2%) Cut flowers and foliage (14.2%) Trousers,breeches,etc. (22%) Spec.purpose vessels etc (8.9%) Crustaceans, frozen (13.2%)

Product III

2 1 3 1 1 1 4 4 3 1 3 1 3 7 17 46 1 14 5 1 6 8 3 1 27 4 2 1 14

No. of products accounting for more than 75 per cent of exports

Natural gas, liquefied (13.2%)

Product II

Three main exports, with their share in total exports*

Crude petroleum (67.2%) Crude petroleum (95.8%) Cotton,not carded,combed (55.3%) Diamonds.excl.industrial (88.2%) Cotton,not carded,combed (84.5%) Coffee, not roasted (88%) Crude petroleum (48.8%) Fish,frozen ex.fillets (61.4%) Diamonds.excl.industrial (40%) Crude petroleum (94.9%) Spices,ex.pepper,pimento (57.9%) Crude petroleum (88.7%) Diamonds.excl.industrial (42.6%) Cocoa beans (38.2%) Bovine animals, live (20%) Natural gas, liquefied (15.8%) Crude petroleum (92.6%) Natural gums,resins,etc (17.3%) Coffee, not roasted (47.8%) Crude petroleum (76.7%) Edible nuts fresh,dried (43.5%) Cocoa beans (46.1%) Aluminium ore,concentrat (50.9%) Edible nuts fresh,dried (93.5%) Tea (16.8%) Jersys,pullovrs,etc.knit (29.2%) Ships,boats,othr.vessels (73.9%) Crude petroleum (95.3%) Jersys,pullovrs,etc.knit (19.4%)

Product I

586 Table 7 - Exports, 2005

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 Fish, frozen ex.fillets (13.5%) Shirts (7.6%) Natural calc.phosphates (5.6%) Zinc, zinc alloy, unwrght. (9.7%)

Tin ores, concentrates (9.8%) Drawing, measuring instrument (7.6%) Fish,fresh,chilled,whole (6.4%) Ships,boats,othr.vessels (11%) Cultivating machnery.etc (4.1%) Fish,frozen ex.fillets (7.8%) Gold,nonmontry excl ores (7.9%) Flavours,industrial use (9%) Copper ores,concentrates (8.6%) Cotton,not carded,combed (18.6%) Insultd wire,etc.condctr (6.7%) Tobacco,stemmed,stripped (7.5%) Cotton,not carded,combed (5.7%) Nickel ores,concentrates (12.3%) Nickel ores,concentrates (2.8%) [17.5%]

Molluscs (24%) T-shirts,othr.vests knit (18.7%) Insultd wire,etc.condctr. (6.8%) Crustaceans, frozen (4.7%) Radio-active chemicals (11.4%)

Ore etc.molybdn.niob.etc (19%) Vessels,oth.float.struct (10.9%) Molluscs (9.8%) Fish,frozen ex.fillets (27.5%) Cocoa beans (7.2%) Bovine animals, live (19.7%) Oth.coal,not agglomeratd (8%) Food preparations, nes (9.3%) Fish fillets,frsh,chilld (9.7%) Natural calc.phosphates (19.8%) Trousers,breeches,etc. (8.7%) Fish fillets,frsh,chilled (24.3%) Cobalt,cadmium,etc.unwrt (7%) Nickel,nckl.alloy,unwrgt (12.6%) Diamonds.excl.industrial (3.7%) [12.6%]

26

4 1 2 10 32 2 5 1 1 3 4 8 3 4 5 39 1 20 15 8 36 5 5 16

http://dx.doi.org/10.1787/413343675072

Sugars, beet or cane, raw (5.3%)

Product III

No. of products accounting for more than 75 per cent of exports

Tea (7.6%)

Product II

* Products are reported when accounting for more than 4 per cent of total exports. ** Figures in [ ] represent the share of Africa in the World export for each product. Sources: PC-TAS 2001-2005 International Trade Center UNCTAD/WTO - UN Statistics Division.

Crude petroleum (49.2%) [18%]

Africa

Note:

Tobacco,stemmed,stripped (59.2%) Cotton,not carded,combed (81.8%) Iron ore,concntr.not agg (51.3%) Sugars,beet or cane, raw (21.4%) Inorganic acid,oxide etc (7.2%) Alum.,alum.alloy,unwrght (73.4%) Diamonds.excl.industrial (39.1%) Radio-active chemicals (79.5%) Crude petroleum (92.2%) Coffee, not roasted (51.9%) Cocoa beans (55.2%) Inorganic acid,oxide etc (38.8%) Fish,prepard,presrvd,nes (44.1%) Diamonds.excl.industrial (62.7%) Sheep and goats, live (34.6%) Platinum (12.5%) Crude petroleum (89.2%) Sugars,beet or cane, raw (14.1%) Gold,nonmontry excl ores (10.9%) Cocoa beans (22.4%) Crude petroleum (9%) Coffee, not roasted (31.1%) Copper;anodes;alloys (55.8%) Tobacco,stemmed,stripped (13.9%)

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and P. Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Product I

Three main exports. with their share in total exports*

Table 7 - Exports, 2005 (cont.)

Statistical Annex

587

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo. Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

5.3 1.3 1.8 7.5 4.4 1.9 4.5 8.6 2.4 1.5 1.3 1.5 2.4 6.8 49.0 26.3 1.3 14.4 5.3 1.7 5.8 8.2 3.4 1.6 11.3 5.2 2.1 1.4 9.2

2001

588

2.8 1.2 3.3 1.3 6.5 3.2 4.5 5.8 2.0 1.8 2.4 1.4 1.8 5.5 29.8 26.0 1.2 11.7 4.3 1.7 7.2 6.1 3.9 2.8 12.0 5.1 2.5 1.2 8.4

2002 2.4 1.1 3.4 1.3 2.2 2.2 4.4 11.4 3.4 2.1 1.3 1.5 2.8 4.3 17.4 29.3 1.2 18.0 4.3 1.6 9.3 4.9 4.1 2.1 14.9 5.4 2.1 1.2 7.6

2003 1.9 1.0 2.7 1.4 2.1 2.2 3.6 10.5 2.8 1.2 1.4 1.4 3.8 6.0 9.2 25.3 1.1 9.1 4.0 1.7 7.3 4.7 3.7 2.2 16.2 5.1 1.4 1.1 10.7

2004

Diversification index

2.1 1.1 2.9 1.3 1.4 1.3 3.6 2.6 3.5 1.1 2.6 1.3 4.1 5.6 14.8 22.6 1.2 15.4 3.6 1.7 4.6 4.3 3.3 1.1 15.2 5.6 1.8 1.1 12.2

2005 27.6 51.0 -5.2 369.7 9.0 35.2 10.7 8.1 -7.7 477.6 -8.7 35.7 3.5 8.6 -19.5 24.7 61.4 11.0 27.7 13.9 0.1 9.9 6.7 6.0 9.7 25.5 2.6 29.8 0.1

Annual export growth (%) 2001-2005

Table 8 - Diversification and Competitiveness

-1.4 13.5 -8.3 9.7 -7.4 6.9 4.0 -4.9 -1.0 -10.4 -14.5 11.5 5.8 1.1 -3.1 -2.6 10.4 -4.9 -5.6 11.7 -7.5 0.0 -0.7 10.6 -6.7 -10.2 3.5 11.2 -8.7

14.9 23.4 -11.0 488.1 2.2 14.2 -7.4 -1.1 -20.8 473.8 -8.4 10.1 -16.4 -6.6 -30.4 13.1 36.9 1.8 19.2 -12.0 -6.5 -4.2 -6.7 -18.7 2.2 26.1 -15.1 4.4 -5.4

Competitiveness Indicator 1999-2003 (%) Sectoral Global effect competitiveness effect

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 8.1

2.9 3.2 3.8 12.6 35.3 2.9 7.1 4.6 1.3 2.6 7.0 12.8 2.6 6.8 11.6 33.2 1.7 8.8 19.0 9.3 28.5 6.2 4.2 9.8 8.0

2.9 2.2 3.8 12.2 36.4 2.7 7.2 3.8 1.2 2.8 3.6 13.0 2.8 7.6 6.3 31.2 1.8 13.9 21.0 9.0 29.9 6.5 4.3 7.8

2002

6.3

3.3 1.4 4.1 11.8 36.2 2.3 10.3 1.9 1.3 2.4 2.1 13.4 2.4 4.8 6.7 27.7 1.6 15.7 24.1 12.8 31.0 6.9 5.0 10.7

2003

5.1

3.7 1.2 3.5 10.3 36.2 1.9 7.0 3.0 1.2 1.8 4.2 11.7 3.1 2.6 6.2 25.3 1.5 15.0 22.0 6.7 31.3 6.2 3.6 12.2

2004

Sources: PC-TAS 2001-2005 International Trade Center UNCTAD/WTO - UN Statistics Division.

Africa

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

2001

Diversification index

4.1

2.8 1.5 2.9 9.9 34.7 1.8 5.2 1.6 1.2 3.1 3.0 5.7 3.5 2.5 5.6 23.1 1.3 18.9 18.7 7.6 30.6 5.8 3.1 13.9

2005 -11.9 -4.7 13.3 -5.6 -4.3 -4.1 -0.8 4.6 14.8 41.3 -1.8 -2.8 -5.3 1.3 -4.0 2.1 11.5 -5.9 -2.5 -6.0 -4.0 -3.0 7.3 -2.5 4.5

21.4

http://dx.doi.org/10.1787/306021685644

2.8

3.5 -7.7 -13.6 -7.2 2.5 18.9 60.2 -23.4 -1.7 -50.6 -16.0 -9.9 8.5 19.8 -7.0 -5.0 19.5 20.2 9.5 -6.4 1.5 1.9 11.2 -11.6

Competitiveness Indicator 1999-2003 (%) Sectoral Global effect competitiveness effect

5.7 1.7 13.8 1.4 12.4 28.9 56.5 -4.7 27.3 4.9 -3.7 1.4 17.4 35.2 3.1 11.2 45.1 28.4 21.1 1.7 11.7 13.0 32.7 0.1

Annual export growth (%) 2001-2005

Table 8 - Diversification and Competitiveness (cont.)

Statistical Annex

589

African Economic Outlook

Aluminum Banana (US) Coal (US) Cocoa Coffee (Arabica) Coffee (Robusta) Copper Cotton Fish Meal Gold Groundnut oil Iron ore Lead

($/mt) ($/mt) ($/mt) (cents/kg) (cents/kg) (cents/kg) ($/mt) (c/kg) ($/mt) ($/toz) ($/mt) (c/dmtu) (c/kg)

Unit

590

1 549.14 424.00 33.06 90.58 191.97 91.30 1 813.47 130.22 429.48 279.03 713.67 28.79 45.39

2000 1 444.00 583.30 44.86 106.90 137.30 60.70 1 578.00 105.80 486.70 271.00 680.30 30.03 47.60

2001 1 349.91 528.58 40.02 177.79 135.66 66.18 1 559.48 101.92 605.92 309.97 687.08 29.31 45.27

2002 1 431.29 374.79 ... 175.09 141.54 81.45 1 779.14 139.91 610.71 363.51 1 243.17 31.95 51.50

2003

Table 9 - International Prices of Exports, 2000-06

1 715.54 524.58 ... 154.98 177.40 79.30 2 865.88 136.57 648.58 409.21 1 161.00 37.90 88.65

2004 1 898.31 602.84 ... 153.81 253.22 111.45 3 678.88 121.70 730.96 444.84 1 060.44 65.00 97.64

2005

2 569.90 677.24 ... 159.19 252.21 148.93 6 722.13 126.66 1 166.33 604.34 970.23 77.35 128.97

2006

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 ($/mt) ($/bbl) ($/mt) ($/mt) (cents/kg) (cents/kg) (c/kg) (cents/kg) (c/kg) (c/kg) ($/mt)

($/CM)

Source: World Bank, Global Commodity Price Prospects, March 2007.

Maize Oil (crude) Palm oil Phosphate (rock) Rubber (Malaysia) Sugar (EEC) Sugar (free market) Sugar (US) Tea (Avg. 3 auctions) Tea (Mombasa) Tobacco

Logs Cameroon

Unit

88.53 28.23 310.25 43.75 69.12 57.71 18.04 44.45 187.62 202.86 2 976.21

275.43

2000

89.60 24.35 285.70 41.80 60.00 52.86 19.04 47.04 159.80 151.70 3 011.00

266.10

2001 ...

... 105.37 28.85 443.25 38.00 105.60 59.72 15.63 47.37 151.66 154.36 2 646.10

... 99.27 24.97 390.25 40.38 77.06 54.92 15.18 46.14 150.60 149.21 2 744.50

111.80 38.30 471.33 40.98 ... 66.97 15.80 45.47 168.56 155.42 2 740.20

2004

2003

2002

Table 9 - International Prices of Exports, 2000-06 (cont.)

121.85 65.39 478.35 44.21 ... 64.56 32.59 48.76 187.21 195.23 2 740.00

...

2006

http://dx.doi.org/10.1787/418061547318

98.67 54.43 422.08 42.00 ... 66.54 21.79 46.93 164.71 147.75 2 790.00

...

2005

Statistical Annex

591

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

592

438 1 113 1 065 634 882 1 081 879 2 146 1 672 3 505 1 449 -24 60 44 14 45 64 21a 57 31 403 418 391 346 23 6 15 29 14 19a 12 0 0 0 -2a -1a 0 0 0 0 0 18a 32 9 12 14 20 19 1 5 6 3 - 13 6a 115 460 924 713 478 705a 0 1 0 1 0 1a 166 77 137 323 668 402a 23 82 117 158 15a 1 344a 235 273 213 165 283 192a 3 3 4 14 39 23 1 235 510 647 237 2 157 5 376 108 945 323 1 431 1 664 1 860a 28 12 20 22a -8a 11a 135 349 255 465 545 205a - 43 - 89 30 206 323 300a 2a 24a 44 35 43 -1a 166 89 59 137 139 156 10 2 30 83 98 102a 1 0 4 4 2 10a 111 5 28 82 46 21 31 28 27 42 53 47 21 8 3 372a 207a 194a 141 - 133 145 142 -354 261 83 93 8 95 53 48a

FDI inflows 2000 2001 2002 2003 2004 2005

($ million)

18 9 100 20 15 29 4 2 1 2 380 43 0 1 2 0 0 0 - 12 28 7 1 1 0 0 0 1 0 0 0 ... ... ... 4 6 6 -2 1 -2 8 -5 -4 0 0 0 51 12 28 -4 4 0 0 0 0 0 0 0 25 4 - 32 5 5 5 0 0 0 … 5 7 ... 0 1 0 0 7 ... ... 0 780 - 313 386 98 175 - 136 ... ... ...

14 258 24 35 0 -1 206 - 39 2 -9 0 ... 36 ... ... ... 0 .. 0 ... ... ... 2 ... ... ... 23a -26a 0 0 21 159 0 ... 0 0 0 0 - 57 5a 7a 10a 0a 0a ... ... 1 -8 2 4 0 0 80a 92a 63 - 271 ... ...

23 29a 0 57 -3a … … … … … … … … -4a 0 92 … 0 0 -28a 13a 0a … -4a 10 … 186a 138 …

FDI outflows 2000 2001 2002 2003 2004 2005

Table 10 - Foreign Direct Investment, 1999-04

4.0 4.2 4.9 198.3 62.2 -1 6.4 8.1 2.5 23.7 19.2 17.8 3.4 1.3 1.6 0.0 -2.6 -0.8 0.0 0.0 0.7 6.4 6.9 5.9 2.0 -7.5 3.4 49.7 45.9 64.5 3.1 0.0 3 33.8 56.7 26.4 22.3 1.3 106.9 12.8 15.5 10.1 18.3 47.1 26.4 2.0 16.8 33.6 258.2 285.3 304.2 13.1 -3.9 5.4 34.2 32.2 11.6 14.2 17.6 15.6 -1.6 2.2 23.1 7.8 5.6 6 23.1 24.1 23.9 13.5 4.8 27.5 3.5 1.8 0.8 9.6 9.9 8.4 967.9 340.8 304.9 5.2 -12.2 8.6 10.8 4.8 4.2

65 80 136 70 129 … 109 … … … … 99 140 126 … 81 … … 125 103 108 110 133 … … … … 41 135

FDI inflows / GFCF 2003 2004 2005 2004

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

* The potential index is based on 12 economic and policy variables. See note on methodology for further details. Note: a UNCTAD estimates. Source: UNCTAD, World Investment Report 2006.

1 159

1 885

1 054

15.8

427

1 573 -2 557

9 627 20 027 12 994 18 513 17 199 30 672

19.1

…

http://dx.doi.org/10.1787/600636668030

11.8

132 122 122 … 89 97 88 131 96 124 … 111 … 139 … 72 123 … 112 130 69 115 134 141

Africa

-0.4 1.6 10.5 15.8 1.4 33.3 1.0 1.8 8.7 22.1 20.0 8.4 15.7 23.2 4.1 2.3 20.5 31.2 2.4 2.3 -7.6 32.4 4.3 2.9 54.7 114.9 15.4 15.2 … … 2.3 15.8 35.8 52.2 13.8 -3 19.9 19.1 13.6 10.7 10.1 12.1 14.7 16.3 18.0 18.6 1.2 13.5

2.1 17.2 81.9 4.9 23.1 44.9 11.4 4.0 32.4 1.5 4.8 3.6 92.3 2.3 … 2.8 41.8 -25.7 24.4 9.9 10.0 14.5 16.0 0.4

… 2a … 48 174 … -12 3a 200 0 0 30a 8 … 0 68 0 21 0 -10a 13 … … 1

... 2 ... 9 54 0 -5 -2 172 0 0 34 9 ... 0 399 0 0 0 2 7 ... ... 3

... 5 4 17 1 ... 13 3 60 100 0 0 3 - 13 -1 -4 169 94 0 0 0 0 1 -7 8 9 ... ... 0 0 271 -3 180 0 0 17 - 18 0 0 0 -7 0 6 - 28 ... ... ... 8 4

-1a 3a 26 34 6 4a 82 122 244 132 101 159a 40 92 118 214a 5a 115a 266 - 28 32 63 14 24 471 2 875 534 2 429 1 070 2 933 139 255 347 337 245 108 188 365 182 149 226 349 8 23 5 11 20 12a 1 310 1 277 2 040 2 171 2 127 3 403 8 4 3 5 8 8 4 3 3 1a -2a 7a 63 32 78 52 77 54a 24 65 48 58 37 82 39 10 2 3 26 27 21a 24a 0 0 0 -1a 888 6 789 757 734 799 6 379 392 574 713 1 349 1 511 2 305 91 51 90 - 61 60 -14 282 467 430 527 470 473 42 64 53 34 59 49a 779 486 821 584 639 782 181 151 185 202 222 258 122 72 82 172 239 259 23 4 26 4 9 103

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

... ... 1 1 -1a ... -6 32 20 32 0 0 - 10 - 22 0 7 167 261 0 0 0 0 3 13 8 8 ... ... 0 0 565 1 352 0 0 - 11 1 0 0 - 6 - 13 5 4 ... ... ... ... 0 0

FDI inflows / GFCF 2003 2004 2005 2004

FDI outflows 2000 2001 2002 2003 2004 2005

($ million) (cont.)

FDI inflows 2000 2001 2002 2003 2004 2005

Table 10 - Foreign Direct Investment, 1999-04

Statistical Annex

African Economic Outlook

593

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt 1 Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya* Madagascar

201 302 238 31 335 93 379 94 75 130 19 33 177 351 71 328 21 176 686 12 49 600 153 80 510 37 67 0 322

2000

African Economic Outlook 1

1

1 1

328 414 216 37 471 172 656 92 60 228 32 57 175 068 78 237 20 230 297 72 60 649 249 59 391 76 52 0 369

234 493 295 28 507 227 899 143 51 247 24 69 5 416 254 79 987 21 316 1 594 -11 63 957 240 145 521 79 107 0 539

314 1 145 385 47 614 362 772 140 110 321 25 115 1 824 160 64 1456 30 263 1 819 40 65 1 362 280 77 664 106 213 0 1 248

ODA net total, All donors 2001 2002 2003 2004

224 283 272 29 390 137 486 77 66 185 27 74 243 169 58 1 256 13 281 1 104 9 53 641 281 59 462 56 38 0 374

594

1

1

1 1

371 442 349 71 660 365 414 161 95 380 25 449 828 119 79 926 39 355 937 54 58 120 182 79 768 69 236 24 929

2005 66 189 191 24 228 41 213 70 53 53 11 23 103 250 42 1 139 18 112 379 -12 15 376 93 42 293 22 24 0 139

2000

($ million)

63 179 144 24 221 55 357 49 48 73 10 30 143 159 28 1 090 13 151 367 -8 13 387 122 30 270 29 16 0 146

123 286 140 37 230 85 436 43 40 67 11 41 351 831 37 1 124 14 121 489 49 18 406 126 26 288 30 27 0 126

169 372 196 27 266 121 756 90 32 96 11 34 5 009 281 37 775 18 185 1 033 -41 20 479 135 98 320 33 70 0 225

235 1016 210 32 331 186 572 91 55 163 14 48 1 165 197 39 1 176 23 177 1 025 24 12 897 178 29 471 35 163 0 685

ODA net total, DAC countries 2001 2002 2003 2004

Table 11 - Aid Flows, 2000-05

290 258 207 52 339 181 336 104 62 167 17 1 360 1 034 151 54 659 30 226 1 202 30 15 603 128 39 495 39 149 17 500

2005 64 107 49 8 103 52 169 25 22 76 8 10 74 100 20 135 3 55 292 23 32 221 57 39 212 16 44 0 184

2000 107 104 126 3 155 82 131 29 18 112 16 45 100 10 30 104 1 127 709 17 38 251 160 29 186 28 23 0 229

63 129 73 2 196 87 220 50 20 159 17 15 824 236 39 83 7 96 774 22 40 238 117 34 93 48 25 0 245

68 122 100 2 238 106 143 53 19 151 13 35 406 -28 39 84 3 131 528 30 40 465 105 48 199 47 36 0 315

80 131 175 17 282 176 199 49 55 155 12 68 659 -37 27 260 6 90 757 16 54 456 102 48 194 72 50 0 564

ODA net total, Multilateral 2001 2002 2003 2004

71 183 142 19 319 184 77 56 33 213 8 89 793 -32 23 238 9 132 706 24 43 503 54 40 260 30 87 4 429

2005

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007 21 362

376 466 344 24 486 2 201 134 297 294 354 26 445 8 353 191 505 343 22 1 230 51 265 710 639 199 1 554 26 801

517 543 238 -15 539 1 037 146 457 308 335 38 447 9 304 174 641 613 34 1 704 50 298 976 589 186 2 107 29 418

501 568 181 38 707 1 246 173 541 578 488 33 1 055 10 360 200 628 992 22 1 761 69 328 1 198 1 125 187 2405 35 212

575 691 190 32 652 1 286 123 515 6 437 576 32 689 19 343 236 700 1 829 46 1 505 87 376 1 198 945 368 2176

2005

10 373

269 300 82 12 293 624 97 106 84 175 18 288 3 116 56 354 90 3 779 52 150 578 486 193 970

2000

10 160

196 209 81 8 342 720 77 114 108 149 22 224 8 167 88 313 108 4 944 28 184 386 274 149 1047

314 272 136 -18 336 697 110 245 200 213 25 314 5 208 114 477 332 13 966 46 208 587 592 161 1758 19 158

225 257 147 4 217 1661 85 114 215 199 19 243 4 225 102 375 232 7 903 39 145 466 360 178 1341 13 362

19 318

308 328 83 15 394 731 124 306 315 217 22 755 6 163 140 459 848 7 1 029 52 231 684 746 166 1944

ODA net total, DAC countries 2001 2002 2003 2004

($ million) (cont.)

ODA : Official Development Assistance. DAC : Development Assistance Committee of the OECD. * Libya was classified by the DAC as a recipient country for ODA from 2000 to 2004 and re-included in the classification in 2005. Source: OECD Development Assistance Committee 2007.

Note:

16 447

Africa Total

15 489

404 351 267 21 518 931 109 256 168 299 38 413 13 343 148 428 181 29 1 269 43 377 790 349 162 1196

ODA net total, All donors 2001 2002 2003 2004

Malawi 446 Mali 359 Mauritania 211 Mauritius 20 Morocco 419 Mozambique 876 Namibia 152 Niger 208 Nigeria 174 Rwanda 321 São Tomé and Principe 35 Senegal 423 Seychelles 18 Sierra Leone 181 Somalia 101 South Africa 487 Sudan 220 Swaziland 13 Tanzania 1 019 Togo 70 Tunisia 222 Uganda 817 Zambia 795 Zimbabwe 176 Africa Unspecified 1154

2000

Table 11 - Aid Flows, 2000-05

24 717

322 378 125 22 289 771 99 256 5 966 292 18 440 8 130 146 486 1 472 20 871 59 269 704 836 179 1816

2005

4 817

171 61 129 7 130 253 54 103 89 146 17 139 8 65 44 132 31 10 243 16 71 233 308 -16 172

2000

6 011

197 130 187 6 142 207 31 141 62 150 16 189 5 174 45 113 63 22 330 11 193 402 74 17 137 7 400

201 272 105 3 157 337 33 212 109 121 12 136 3 92 60 163 278 20 738 2 95 388 -8 25 345

9 914

192 241 97 25 244 511 34 235 264 271 12 299 3 196 60 168 119 14 730 16 95 512 377 20 460

1 0269

251 313 66 10 309 513 23 259 471 284 13 249 11 213 90 213 315 26 622 27 105 492 109 189 359

2005

http://dx.doi.org/10.1787/477345650642

7 301

142 155 199 20 135 537 47 180 81 155 7 191 4 125 44 128 60 12 331 9 77 238 277 21 174

ODA net total, Multilateral 2001 2002 2003 2004

Statistical Annex

African Economic Outlook

595

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt. Arab Rep. Equatorial Guinea Eritrea Ethiopia Gabon Gambia The Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Libya Madagascar

Country

5 3

8 3 1 5

6 2

28

5 11 12

1 1

17 12 2 1 1 1 6

185 353 103 103 861 426 200 834 268 592 266 904 057 306 439 949 253 620 703 578 615 655 262 002 031 721 … 574 670

2005

Total ($ million)

77 57 28 0 16 20 73 0 35 17 28 52 71 51 35 83 59 31 24 89 12 13 46 35 43 17 … … 15

Of which: Multilateral Bilateral (as % of total) 2005 2005 9 40 0 63 0 0 5 41 4 0 0 28 0 20 0 6 0 0 1 1 12 12 0 0 5 8 … 43 3

2005

Private

Debt outstanding, at year end

14 3 72 37 84 80 22 59 61 83 72 20 29 29 65 11 41 69 75 10 76 75 54 65 52 75 … … 82

596 16.7 37.6 48.3 11.1 33.2 178.4 37.2 84.8 92.1 27.1 72.0 99.0 155.7 75.2 61.9 32.2 3.6 63.9 58.9 29.8 133.3 80.9 99.0 332.2 26.9 49.1 … 14.4 72.8

2005 8.0 31.6 20.9 9.8 17.3 152.7 3.0 86.2 87.3 22.2 71.1 71.2 62.4 83.1 59.0 29.2 2.7 61.5 55.1 21.5 126.3 93.1 95.7 317.4 17.9 46.6 … 11.4 32.0

2006 7.4 27.3 20.7 9.8 19.7 140.7 3.8 86.7 83.4 22.7 55.8 73.8 53.5 54.1 65.2 26.1 2.2 74.4 54.4 18.6 118.4 91.6 83.3 296.6 19.1 45.9 … 9.9 34.8

2007

Total debt outstanding (as % of GDP)

Table 12 - External Debt Indicators

6.7 25.1 20.7 9.9 22.6 128.5 4.8 86.7 79.8 23.3 50.0 67.3 48.1 48.5 79.6 23.2 1.8 78.6 51.7 14.2 110.9 88.7 72.9 276.6 20.1 44.7 … 9.4 36.8

2008 12.4 10.7 14.8 12.0 7.2 41.6 15.4 18.4 0.0 0.9 8.5 11.7 6.9 1.3 10.1 9.7 0.2 41.7 4.9 3.7 27.6 5.8 12.3 14.5 7.1 12.5 … … 10.3

2005

14.9 4.2 15.3 12.7 4.8 44.7 14.5 18.0 0.0 1.8 7.7 5.8 9.5 2.2 9.9 8.6 0.2 39.0 5.1 7.1 24.8 6.6 13.6 13.3 6.6 9.3 … … 10.6

2006

3.6 5.3 13.8 13.1 4.3 32.8 6.8 18.9 … 1.0 21.5 5.5 10.1 0.0 8.8 10.9 0.1 37.4 4.6 17.7 28.2 1.2 14.0 12.2 7.0 9.4 … … 2.9

2007

3.8 4.7 13.4 13.5 4.4 30.0 6.8 20.1 … 1.3 19.7 5.3 8.7 0.0 9.8 7.3 0.1 39.5 4.5 10.0 30.7 1.4 14.0 10.4 6.9 8.8 … … 2.9

2008

Debt Service (as % of Exports of goods and services)

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007 324 579

11 355 3 421 2 325 896 14 356 5 053 1 327 1 702 20 479 1 511 259 3 515 467 628 … 46 209 27 700 583 6 358 1 537 16 744 3 896 4 131 4 969

2005

30

81 75 62 12 35 46 … 80 12 90 59 67 10 53 … 1 14 52 62 53 31 89 55 35 44

19 25 30 80 35 43 … 20 78 10 41 0 55 43 … 10 70 37 30 47 38 11 45 16

Of which: Multilateral Bilateral (as % of total) 2005 2005

Sources: IMF, World Economic Outlook ; GDF Online Database, Worldbank

Africa

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Country

Total ($ million)

26

0 0 8 8 30 11 75 0 10 0 0 33 35 4 … 89 16 11 8 0 31 0 0 49

2005

Private

Debt outstanding, at year end

110.6

546.6 62.9 124.2 14.3 24.4 74.1 21.7 52.8 20.7 70.4 368.0 40.0 67.3 51.8 … 19.3 100.6 22.9 50.5 72.9 58.4 46.2 56.8 110.6

2005

(cont.)

2007 165.6 27.4 42.5 12.0 19.6 63.1 24.1 49.5 3.2 15.6 327.4 18.4 65.8 46.8 … 18.8 67.2 22.1 25.3 57.6 51.3 17.8 5.0 20.3 20.3

2006 181.4 26.7 51.2 13.4 20.9 61.0 21.9 52.9 3.5 12.7 348.8 18.0 64.1 48.0 … 19.3 76.7 22.4 61.5 65.4 58.0 41.7 4.2 62.0 62.0

Total debt outstanding (as % of GDP)

Table 12 - External Debt Indicators

23.8

165.5 31.7 41.1 10.7 17.8 53.1 24.7 47.8 2.9 18.4 304.9 18.4 64.9 45.2 … 17.8 64.9 21.9 24.6 51.2 50.2 19.2 5.7 23.8

2008

20.8

17.4 5.4 6.7 6.4 13.3 22.6 2.5 7.9 17.0 20.2 29.9 7.2 4.6 14.9 … 8.4 4.9 … 7.1 8.3 15.5 14.7 6.7 20.8

2005

7.7

16.4 3.6 2.0 4.1 10.4 18.3 3.4 7.9 1.6 6.0 54.0 5.2 5.0 3.2 … 8.5 2.6 … 102.9 6.6 15.7 195.7 2.0 7.7

2007

7.2

15.9 3.4 2.3 3.6 11.4 19.0 3.9 7.9 1.8 5.4 43.0 4.9 5.3 6.2 … 8.5 2.2 … 2.5 5.8 15.5 9.9 2.6 7.2

2008

http://dx.doi.org/10.1787/375017428145

16.3

16.6 4.2 4.8 4.8 11.1 18.4 3.0 8.0 1.9 6.5 57.5 6.9 8.2 10.8 … 8.8 3.0 … 5.1 6.7 17.1 31.1 2.1 16.3

2006

Debt Service (as % of Exports of goods and services)

Statistical Annex

597

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

African Economic Outlook

4 79 1 1 22 9 1 35 1 3 5 19

75

4 59 18

4 10

354 400 703 760 634 834 601 519 093 032 819 117 320 454 807 437 515 560 289 406 556 556 603 634 106 791 356 968 105

60.5 38.0 46.9 53.0 19.0 11.0 53.7 58.4 44.3 26.2 36.9 54.8 33.4 46.3 85.0 42.4 50.9 21.3 16.5 85.7 26.2 46.8 37.3 36.4 42.7 18.4 48.5 87.2 27.3

101.9 97.3 101.8 96.9 101.2 95.7 99.1 92.5 95.4 98.0 100.7 98.5 98.5 103.3 100.0 100.5 98.1 96.6 99.0 99.3 98.4 102.5 105.2 97.7 100.5 87.3 99.6 106.4 99.0

Total Urban Sex ratio population population (males per (thousands) (% of total) 100 females) 2006 2006 2006

33 16 8 1 13 7 16

598

1.6 2.5 3.0 1.7 2.8 1.1 2.3 2.3 2.1 3.1 2.8 3.3 2.3 2.6 3.0 1.9 2.4 2.5 2.7 2.6 3.3 2.3 2.5 2.8 2.5 1.1 6.6 2.0 3.0

1.5 2.8 3.2 0.3 3.1 2.8 1.9 2.3 1.4 3.4 2.7 3.1 2.7 1.7 2.2 1.9 2.3 4.2 2.5 1.8 2.9 2.2 2.2 3.0 2.2 0.2 2.0 2.0 2.8

Population growth rate (%) 2000-05 2005-10 32.3 131.8 99.1 44.3 116.8 100.3 91.4 25.6 94.2 112.4 50.3 68.9 113.7 114.7 85.6 31.4 96.0 58.5 92.6 52.4 69.8 57.0 98.5 112.7 63.9 60.3 134.0 17.2 72.7

Infant mortality rate (per 1000) 2006

Table 13 - Demographic Indicators

2.4 6.5 5.5 3.0 6.4 6.8 4.2 3.4 4.7 6.7 4.4 6.3 6.7 4.6 4.6 3.0 5.9 5.1 5.5 3.6 4.3 3.9 5.6 7.1 5.0 3.3 6.8 2.8 5.0

35 233 150 99 188 176 157 31 169 196 66 103 200 184 128 36 172 84 160 89 115 93 151 198 109 115 212 19 121

Total Mortality under fertility rate age 5 (per 1000) 2006 2006 28.9 46.3 43.9 37.3 47.0 44.6 40.8 39.0 42.8 47.3 41.8 47.3 47.4 41.5 41.1 33.3 44.5 44.6 44.2 39.6 39.9 38.6 43.6 47.7 42.8 38.2 47.2 29.8 43.8

67.4 52.8 55.0 59.0 51.9 54.6 56.4 58.1 54.0 51.1 57.1 51.4 51.6 56.2 57.0 63.0 52.8 54.8 54.1 57.1 57.8 58.8 54.1 50.9 55.9 56.2 52.1 67.1 54.6

3.7 0.9 1.0 3.7 1.1 0.8 2.7 2.9 3.2 1.6 1.1 1.3 1.0 2.3 1.9 3.7 2.7 0.5 1.6 3.4 2.3 2.6 2.3 1.5 1.4 5.5 0.7 3.0 1.6

Distribution by age (%) 0-14 15-64 65+ 2006

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007

166 918 158 256 943 158 052 426 375 230 160 936 81 ... 679 496 594 992 029 025 306 210 857 861 085

924 320

5 8 47 36 1 39 6 10 29 11 13

11

13 13 3 1 31 20 2 14 134 9

40.1

40.9 36.5 58.3 41.7 24.1 38.5 37.0 64.7 12.5 36.9 36.4

17.6 34.4 65.5 44.0 59.4 39.1 34.0 23.9 49.1 23.6 38.1 51.8 50.8

99.9

97.3 98.5 96.6 101.4 93.5 99.2 97.6 101.5 100.2 100.5 98.7

98.8 99.4 97.9 98.6 98.8 94.1 98.5 104.7 102.6 94.1 98.6 96.8 ...

2.4

1.5 1.7 1.8 2.3 1.5 2.4 3.4 1.3 3.0 2.3 1.4

2.4 2.7 2.8 1.1 1.6 2.6 2.8 3.4 2.5 6.2 1.8 2.5 0.5

2.2

3.9 3.2 0.9 2.0 0.3 2.0 2.8 1.1 3.4 1.8 0.7

2.3 3.0 3.0 1.0 1.5 2.0 1.5 3.4 2.3 3.1 2.2 2.4 0.8

Population growth rate (%) 2000-05 2005-10 5.8 6.7 5.5 1.9 2.6 5.2 3.6 7.6 5.4 5.3 3.7 4.6 ... 6.5 6.1 2.7 4.0 3.6 4.6 4.9 1.9 7.1 5.3 3.3 4.7

160.8 115.7 39.6 66.4 65.6 104.1 88.5 19.7 77.5 89.7 59.5 82.5

138

281 192 73 109 137 162 129 22 130 163 114

170 209 144 17 39 166 73 251 191 191 106 124 ...

41.3

42.9 44.2 32.4 39.0 40.4 42.3 43.2 25.2 50.5 45.6 39.5

47.3 48.2 43.0 24.2 30.7 43.8 40.8 49.0 44.0 43.1 39.2 42.2 ...

56.5

55.0 55.0 63.3 58.7 55.7 55.5 55.1 69.1 48.9 52.3 57.1

50.9 50.7 55.2 69.7 65.4 53.8 56.3 50.8 54.2 55.6 57.9 56.0 ...

2.2

2.2 0.8 4.3 2.3 4.0 2.2 1.6 5.7 0.6 2.1 3.4

1.7 1.1 1.8 6.1 3.9 2.3 2.9 0.2 1.8 1.3 2.8 1.8 ...

Distribution by age (%) 0-14 15-64 65+ 2006

http://dx.doi.org/10.1787/061700738332

Total Mortality under fertility rate age 5 (per 1000) 2006 2006

104.2 127.4 89.8 14.0 32.7 92.7 38.0 146.8 109.3 113.0 79.0 78.4 ...

Infant mortality rate (per 1000) 2006

(cont.)

Note: * Including Agalega, Rodrigues and Saint Brandon. Sources: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects, The 2004 Revision.

Africa

Malawi Mali Mauritania Mauritius* Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles ... Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Total Urban Sex ratio population population (males per (thousands) (% of total) 100 females) 2006 2006 2006

Table 13 - Demographic Indicators

Statistical Annex

African Economic Outlook

599

16.6 94.3 31.6 … 52.3 36.0 49.9 ... ... 67.0 ... ... ... 41.8 86.5 … ... ... 45.0 ... ... 51.6 ... ... 51.0 53.9 ... ... 77.0

7.3 57.0 23.6 … 19.9 43.0 22.1 ... ... 63.0 ... ... ... 23.4 ... … ... ... 37.0 ... ... 22.8 ... ... 49.0 27.8 ... ... 54.0

12.2 68.0 28.5 30.3 46.4 36.2 40.2 44.0 ... 64.0 ... ... ... 33.6 45.1 20.0 ... 53.0 44.2 62* 64.0 42.6 40.0 20.8 51.8 49.2 76.2 ... 72.0

National poverty line* Population below the poverty line (%) Survey year Rural Urban National

Algeria 1998 Angola 2001 Benin 2002 Botswana 2002-2003 Burkina Faso 2003 Burundi 1990 Cameroon 2001 Cape Verde 1989-1994 Central African Republic ... Chad 1995-1996 Comoros ... Congo ... Congo, Dem. Rep. ... Côte d’Ivoire 1998 Djibouti 1996 Egypt 2004-2005 Equatorial Guinea ... Eritrea 1993-1994 Ethiopia 1999-2000 Gabon 1994 Gambia 1998 Ghana 1998-99 Guinea 1994 Guinea Bissau 2002 Kenya 2000 Lesotho 1993 Liberia 2002 Libya ... Madagascar 2004

600

1995 ... 2003a 1993a 2003a 1998a 2001a ... 1993a ... ... ... ... 2002a ... 1999-2000a ... ... 1999-2000a 1994 1998a 1998-99a 1991 1991 1997a 1995a ... ... 2001a

1.8 ... 30.9 23.5 27.2 54.6 17.1 ... 66.6 ... ... ... ... 14.8 ... 3.1 ... ... 23.0 23.0 59.3 44.8 26.3 88.2 22.8 36.4 ... ... 61.0

15.1 ... 73.7 50.1 71.8 87.6 50.6 ... 84.0 ... ... ... ... 48.8 ... 43.9 ... ... 77.8 ... 82.9 78.5 50.2 96.7 58.3 56.1 ... ... 85.1

International poverty line Population below the poverty line (%) Survey year Below $1 Below $2 1995 ... 2003 1993 2003 1998 2001 ... 1993 ... ... ... ... 2002 ... 2000 ... ... 2000 ... 1998 1999 1994 1993 1997 1995 ... ... 2001

35.3 ... 36.5 63.0 39.5 42.4 44.6 ... 61.3 ... 33.9 ... ... 44.6 38.6 34.4 ... ... 30.0 63.2 50.2 40.8 40.3 47.0 42.5 63.2 ... ... 47.5

2.8 ... 3.1 0.7 2.8 1.7 2.3 ... 0.7 ... ... ... ... 2.0 ... 3.7 ... ... 3.9 ... 1.8 2.1 2.6 2.1 2.5 0.5 ... ... 1.9

26.8 ... 29.0 56.6 32.2 32.8 35.4 ... 47.7 ... ... ... ... 34.0 ... 29.5 ... ... 25.5 ... 37.0 30.0 32.0 39.3 33.9 48.3 ... ... 36.6

Gini Share Coefficient** of consumption (%) Survey year Index Lowest 10% Highest 10%

Table 14 - Poverty and Income Distribution Indicators

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007 66.5 71.0 61.2 ... 27.2 55.0 ... 66.0 63.3 65.7 ... 57.5 ... 79.0 ... ... ... ... 38.7 ... ... … … 48.0

54.9 31.0 25.4 ... 12.0 52.0 ... 52.0 43.2 14.3 ... ... ... 56.4 ... ... ... ... 29.5 ... ... … … 7.9

65.3 64.2 46.3 12.1 19.0 54.0 ... 63.0 54.4 60.3 53.8 48.5 ... 70.0 ... 57.0 ... 40.0 35.7 72.2 4.2 38.0 67.0 34.9

1997-98a 1994a 2000a ... 1999a 1996a 1993 1995a 2003a 1999-00a ... 1995a ... 1989a ... 2000a ... 1994a 2000-01a ... 2000a 1999a 2002-03a 1995-96a 41.7 72.8 25.9 ... <2 37.9 34.9 60.6 70.8 51.7 ... 22.3 ... 57.0 ... 10.7 ... 8.0 57.8 ... <2 84.9 75.8 56.1

76.1 90.6 63.1 ... 14.3 78.4 55.8 85.8 92.4 83.7 ... 63.0 ... 74.5 ... 34.1 ... 22.5 89.9 ... 6.6 96.6 94.1 83.0

International poverty line Population below the poverty line (%) Survey year Below $1 Below $2

* The national poverty line is defined as two-thirds of the average consumption. ** The Gini coefficient is defined on consumption. a Consumption base. b Income base. Sources: Domestic authorities and World Bank (2006), World Development Report, Country DHS,

Note:

Malawi 1997-1998 Mali 1999 Mauritania 2000 Mauritius 1997 Morocco 1999 Mozambique 2002-2003 Namibia ... Niger 1993 Nigeria 2003-04 Rwanda 1999-2000 São Tomé and Principe 2001 Senegal 2002 Seychelles ... Sierra Leone 2003-2004 Somalia ... South Africa 2001 Sudan ... Swaziland 1995 Tanzania 2000-01 Togo 1995 Tunisia 2000 Uganda 2003 Zambia 2002-03 Zimbabwe 1995-96

National poverty line* Population below the poverty line (%) Survey year Rural Urban National 1997 1994 2000 ... 1999 1997 1993 1995 2003 1985 ... 1995 ... 1989 ... 2000 ... 1994b 2000–01 ... 2000 1999 2002–03 1995

50.3 50.5 39.0 36.7 39.5 39.6 74.3 50.5 43.7 28.9 ... 41.3 ... 62.9 ... 57.8 ... 60.9 34.6 ... 39.8 43.0 42.1 50.1

42.2 40.4 29.5 ... 30.9 31.7 64.5 35.4 33.2 24.2 ... 33.5 ... 43.6 ... 44.7 ... 50.2 26.9 ... 31.5 34.9 33.7 40.3

http://dx.doi.org/10.1787/763006236207

1.9 1.8 2.5 ... 2.6 2.5 0.5 0.8 1.9 4.2 ... 2.6 ... 0.5 ... 1.4 ... 1.0 2.9 ... 2.3 2.3 2.4 1.8

Gini Share Coefficient** of consumption (%) Survey year Index Lowest 10% Highest 10%

Table 14 - Poverty and Income Distribution Indicators (cont.)

Statistical Annex

601

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

602

5.79 0.49 0.81 8.27 0.47 0.3 0.63 12.57 0.26 0.14 0.98 0.75 1.78 1.54 8.64 1.35 0.84 0.37 3.18 2.65 1.08 0.32 0.93 0.95 1.24 0.21 10.79 0.34

7.82 0.59 1.02 7.48 0.74 0.39 0.61 14.09 0.26 0.15 2.12 0.36 1.53 1.63 14.04 1.99 0.86 0.79 2.83 2.9 1.45 0.34 0.82 0.82 2.67 ... 13.56 0.36

0.28 0.2 0.87 12.17 0.22 0.24 0.68 4.54 0.14 0.07 2.38 3.2 2.14 1.1 9.79 0.45 0.66 0.56 0.42 1.21 0.05 0.71 0.39

41.52 6.86 5.33 46.63 4.33 2.03 13.84 16.12 1.53 2.15 2.01 12.25 4.77 12.06 5.07 18.41 19.26 0.92 0.53 46.95 16.31 12.85 2.36 5.01 13.46 13.65 4.87 4.15 2.71

18 592 1 157 399 1 959 … … 2 719 … … … … 260 2 442 2 757 … 64 330 … 173 1 419 989 … 6 055 … … 3 408 … … 10 132 …

23 608 1 799 545 2 041 … … 3 320 … … … … 314 2 254 3 032 … 85 088 … 224 2 051 1 154 … 5 318 … … 4 669 … … 12 059 …

4 105 211 59 164 … … 761 … … … … 180 228 699 … 10 750 … 38 167 234 … 1 616 … … 867 … … 3 592 …

4 976 325 114 131 … … 790 … … … … 293 211 847 … 12 315 … 48 254 273 … 890 … … 968 … … 5 740 …

Telecommunications Access to electricity Main telephone line Mobile lines Final consumption Distribution losses per 100 inhabitants per 100 inhabitants (GWh) 2000 2005 2000 2005 2000 2004 2000 2004

Table 15 - Access to Services

85 53 48 95 63 79 66 80 75 42 86 58 22 84 73 98 43 60 39 88 82 56 50 59 62 79 61 31

88 75 57 100 70 92 86 86 93 41 92 84 37 97 76 99 45 74 83 95 95 61 78 79 89 92 72 67

80 40 41 90 60 77 44 73 61 43 82 27 12 74 59 97 42 57 31 47 77 52 35 49 46 76 52 16

Water supply coverage Total Urban Rural (%) 2004 92 31 40 42 11 36 51 43 27 9 33 27 9 37 82 70 53 9 12 36 53 35 18 35 48 37 27 97 56

99 56 64 57 14 47 58 61 47 24 41 28 8 46 88 86 60 32 50 37 72 40 31 57 56 61 49 97 75

82 16 19 25 10 35 43 19 12 4 29 25 10 29 50 58 46 3 4 30 46 31 11 23 43 32 7 96 49

Sanitation coverage Total Urban Rural (%) 2004

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

2.52

0.45 0.38 0.74 23.53 4.96 0.5 6.19 0.19 0.49 0.23 3.3 2.16 26.72 0.42 0.36 10.88 1.24 3.16 0.5 0.92 9.99 0.25 0.78 2.19 3.09

0.8 0.66 1.34 28.84 4.26 0.37 6.36 0.17 0.93 0.27 4.61 2.29 26.54 ... 1.22 9.97 1.85 3.39 0.39 0.95 12.47 0.35 0.81 2.76 2

0.47 0.1 0.6 15.08 8.16 0.3 4.61 0.5 2.63 33.63 0.26 1.14 18.28 0.07 3.27 0.32 1.08 1.25 0.52 0.92 2.34 15.03

3.33 7.66 24.3 57.29 39.37 6.16 24.37 2.15 14.13 3.21 7.67 14.84 70.68 2.21 6.08 71.6 5.04 19.36 5.16 7.22 56.32 5.29 8.11 5.87 345 789* 431 683*

6 10

8

1

162 2

1

8

12 1 2

… … … … … … … … 838 16 288 013 7 019 386 2 790 … … 688 12 892 … … … … 337 1 919 … … … … … … 516 197 497 058 3 259 … … 913 1 927 521 521 979 10 820 … … 039 7 712 494 10 117 53 377*

1

1

17

5

2

… … … … 122 243 260 … 618 … … 236 … … … 053 376 … 555 36 117 … 249 422 59 758*

1

1

14

6

3 1

… … … … 116 187 304 … 809 … … 346 … … … 710 607 … 578 89 543 … 338 472 62

67 50 40 100 81 40 87 59 48 46 79 75 88 57 29 88 70 62 52 52 93 66 62 81 83

96 78 30 100 99 37 98 64 67 66 89 90 100 75 32 99 78 87 85 80 99 67 86 98 50

62 36 49 100 56 41 81 57 31 44 73 64 75 46 27 73 64 54 42 36 82 61 37 72

Water supply coverage Total Urban Rural (%) 2004

44

46 46 36 94 73 36 25 18 44 8 25 33 39 26 65 34 48 90 35 85 60 27 53

58

66 59 55 95 88 38 50 79 53 8 32 57 53 48 79 50 59 90 71 96 71 41 63

34

42 39 20 94 52 35 13 5 36 8 20 17 100 30 14 46 24 44 90 15 65 58 13 47

Sanitation coverage Total Urban Rural (%) 2004

African Economic Outlook

http://dx.doi.org/10.1787/730873623306

Sources: Telecommunications: International telecommunication Union - online database, 2006. Electricity: International Energy Agency - online database, 2006 Water supply coverage and sanitation coverage: WHO and UNICEF, 2006, Joint Reporting Form and WHO regional offices reports; October 2006 Data for Benin, Burkina, DRC, Ethiopia, Ghana, Kenya, Madagascar, Malawi, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia are from Getting Africa on track to meet the MDGs on water and sanitation, a Status Review of Sixteen African Countries, 2006, Report on a regional initiative by AMCOW, AfDB, EUWI, WSP and UNDP.

Africa

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

(cont.)

Telecommunications Access to electricity Main telephone line Mobile lines Final consumption Distribution losses per 100 inhabitants per 100 inhabitants (GWh) 2000 2005 2000 2005 2000 2004 2000 2004

Table 15 - Access to Services

Statistical Annex

603

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

72.0 41.7 55.5 34.4 48.9 45.1 46.2 71.4 39.5 44.2 64.7 53.2 44.4 46.2 53.7 70.9 41.9 55.5 48.3 53.6 57.3 57.8 54.2 45.3 49.6 34.8 42.5 74.3 56.0

2006

… 41.9 55.9 33.9 49.3 45.6 46.3 … 39.5 44.3 … 53.5 44.7 46.2 53.9 … 41.5 56.0 48.5 53.3 57.7 58.1 54.4 45.5 50.3 34.3 42.5 … 56.2

… 45.7 59.1 70.0 54.5 52.5 54.4 … 54.5 49.5 … 61.0 49.3 55.2 57.5 … 54.1 59.9 54.3 65.0 59.5 63.0 59.4 49.6 61.4 65.6 48.4 … 58.8

With Without AIDS AIDS 2005-10

Life expectancy at birth (years)

2002-04

prevalence (%)

Food availability

African Economic Outlook 1 1 2 2 2 2 2 2 2 1 3 2

3 2 2 2 2 1 2 3 2 2 1 2 1 2 2 3

114 178 652 084 529 682 212 058 004 137 787 130 560 637 350 286 … 465 840 707 178 723 426 001 149 495 923 476 070

2004 4.1 2.8 4.4 5.6 5.6 3.1 4.2 4.6 4.0 6.5 2.7 2.0 4.0 3.6 5.7 5.1 5.8 1.5 4.4 5.9 4.4 8.1 4.5 5.4 5.6 4.3 5.2 4.7 4.1

as % (Kcal/person/day) of GDP

Undernourishment

4 35 12 … 15 66 26 … 44 35 … 60 33 74 13 24 4 … … 46 5 29 11 24 39 31 … 50 3

604 89.0 26.0 20.0 232.0 19.0 3.0 37.0 78.0 12.0 16.0 11.0 19.0 28.0 4.0 47.0 55.0 96.0 8.0 5.0 196.0 21.0 16.0 22.0 9.0 20.0 31.0 6.0 171.0 8.0

($) 2003

Per capita**

80.8 84.2 43.1 58.2 46.8 23.3 28.9 73.2 38.6 39.9 54.1 64.2 18.3 27.6 66.9 38.6 42.6 67.5 45.5 58.4 66.6 40.0 31.8 16.6 45.8 38.7 79.7 56.7 62.9

19.2 15.8 56.9 41.8 53.2 76.7 71.1 26.8 61.4 60.1 45.9 35.8 81.7 72.4 33.1 61.4 57.4 32.5 54.5 41.6 33.4 60.0 68.2 83.4 54.2 61.3 20.3 43.3 37.1

Distribution Public Private (%) (%)

Total health expenditure

Table 16 - Basic Health Indicators

2005 2005 2005 2005 2005 2005 2005 2004 2005 2005 2005 2005 2004 2004 2004 2004 2004 2004 2004 2004 2003 2004 2004 2004 2005 2003 2004 2002 2004

Survey year

92.9 16.7 4.3 37.7 2.7 6.7 20.1 46.7 4.7 3.6 14.8 19.5 10.4 11.6 16.6 53.0 31.1 5.1 1.6 29.0 10.9 15.0 10.7 12.2 26.1 4.9 3.2 120.0 28.7

Physicians

(per 100 000)

Health personnel

238.2 247.8 26.3 240.3 32.3 79.1 47.8 82.8 29.8 24.7 75.9 91.1 51.5 57.0 33.0 202.0 46.3 59.2 14.0 511.9 119.6 91.0 51.7 67.4 125.3 62.4 18.9 355.5 31.3

Nurses

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007

46.4

41.1 49.3 … … … 41.8 45.9 45.4 44.2 44.6 … … … 41.9 … 44.1 56.9 29.9 46.6 55.8 … 52.1 39.1 37.3 55.5

58.8 51.8 … … … 54.9 70.0 47.0 50.3 49.4 … … … 43.8 … 68.4 60.6 65.5 58.0 62.0 … 57.5 55.7 64.3 20

38 35 29 10 5 6 44 … 32 9 33 10 20 9 … … 3 26 … 44 24 3 19 47

2002-04

prevalence (%)

Food availability

077 163 640 999 158 057 174 121 720 173 525 414 426 849 … 004 311 224 963 334 344 348 947 978

2 435

3 2 2 1 2 3 2 1 1

2 2 2 2 3 2 2 2 2 2 2 2 2 1

2004

5.6

2.7 9.3 4.8 4.2 3.7 5.1 4.7 6.4 4.7 6.2 8.6 5.1 5.9 3.5 … 8.4 4.3 5.8 4.3 5.6 5.4 7.3 5.4 7.9

as % (Kcal/person/day) of GDP

Undernourishment

63.4 35.2 57.4 76.8 60.8 33.1 61.7 70.0 53.0 25.5 83.9 41.8 73.2 58.3 … 38.6 43.2 57.3 55.4 24.8 45.7 30.4 51.4 35.9 49.3

42.9

2003

50.7

36.6 64.8 42.6 23.2 39.2 66.9 38.3 30.0 47.0 74.5 16.1 58.2 26.8 41.7 … 61.4 56.8 42.7 44.6 75.2 54.3 69.6 48.6 64.1

Distribution Public Private (%) (%)

13.0 16.0 17.0 172.0 72.0 12.0 145.0 9.0 22.0 7.0 34.0 29.0 522.0 7.0 n.a. 295.0 21.0 107.0 16.0 137.0 18.0 12.0 21.0 40.0

($)

Per capita**

Total health expenditure

…

2004 2004 2004 2004 2004 2004 2004 2004 2003 2004 2004 2004 2004 2004 1997 2004 2005 2004 2002 2004 2004 2004 2004 2004

Survey year

…

2.1 8.0 10.5 105.7 54.1 2.6 29.8 2.8 27.7 4.5 53.0 5.2 151.4 3.1 4.8 73.8 22.1 16.5 2.3 3.8 98.1 7.9 11.0 16.1

Physicians

(per 100 000)

Health personnel

African Economic Outlook

…

57.6 49.8 63.5 369.0 86.4 20.4 305.8 20.1 167.0 40.5 167.4 28.9 793.4 34.5 23.0 390.7 49.5 660.2 36.7 35.8 296.0 58.3 165.6 72.3

Nurses

http://dx.doi.org/10.1787/121137204756

*Including Agalega, Rodrigues and Saint Brandon ** at average exchange rate Sources: Life expectancy at birth : United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects, The 2004 Revision, ADB Statistics Department.

51.4

Africa

Note:

40.8 49.0 54.1 72.8 70.7 41.8 46.4 45.2 44.0 44.4 63.8 56.8 71.9 41.6 48.3 45.0 56.8 30.5 46.5 55.5 73.9 51.1 38.8 37.3

Malawi Mali Mauritania Mauritius* Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

2006

With Without AIDS AIDS 2005-10

Life expectancy at birth (years)

Table 16 - Basic Health Indicators (cont.)

Statistical Annex

605

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

60.6 33.4 44.0 35.7 35.6 35.1 41.5 60.8 37.4 40.7 54.6 46.3 37.1 39.5 42.9 59.0 45.5 50.0 41.2 51.4 49.5 49.8 44.8 40.5 44.4 31.4 35.3 63.7 48.6

Total

59.7 31.6 43.4 36.0 34.9 33.4 41.1 58.8 37.0 39.7 53.9 45.3 35.0 37.6 42.5 57.8 44.7 49.3 40.7 50.2 48.5 49.2 43.9 39.6 44.1 29.6 33.6 62.3 47.3

2002

Male

61.6 35.1 44.5 35.4 36.3 36.8 41.8 62.9 37.7 41.7 55.3 47.3 39.1 41.3 43.2 60.2 46.3 50.8 41.7 52.6 50.5 50.3 45.6 41.5 44.8 33.2 37.0 65.0 49.9

19 320 87 270 150 150 510 0 250 180 <500 120 1 000 750 15 5 9 59 … 60 20 320 85 32 1 300 270 … … 49

0.1 3.7 1.8 24.1 2.0 3.3 5.4 … 10.7 3.5 <0.1 5.3 3.2 7.1 3.1 <0.1 3.2 2.4 … 7.9 2.4 2.3 1.5 3.8 6.1 23.2 … … 0.5

HIV/AIDS People living with Adult HIV/AIDS prevalence Female (000) (%) Survey end-2005

Healthy life expectancy at birth (years)

606 … 160 62 120 120 120 240 … 140 57 … 110 680 450 6 … 5 36 … 20 4 170 28 11 1 100 97 … … 13

AIDS orphans cumulative (000) Notified 2004 cases

1997 197 2002 1 409 328 1997 670 857 1995 17 599 1995 501 020 1995 932 794 1997 645 309 1997 20 2003 95 644 1995 343 186 1996 15 509 1997 9 491 2003 4 386 638 1997 983 089 1997 4 314 1997 11 1995 12 530 2003 72 023 2003 565 273 1997 35 842 ... ... 2003 3 552 869 1997 802 210 ... ... 2002 124 197 ... ... ... ... ... ... ... ...

2003 year

Malaria notified cases

Table 17 - Major Diseases

African Economic Outlook 2 117 2 1 11 6 1 91 10 1 1 19

7 84 17 3 11

4 5

19 36 2 9 2 6 15

730 079 932 862 620 822 964 205 837 077 ... 782 687 782 231 490 416 805 600 174 945 891 199 600 522 111 753 917 309

2003

Tuberculosis notified cases

2 302 258 210 8 253 0 605 0 471 2 912 146 182 485 117 298 77 ... 19 357 0 0 435 99 0 153 ... 8 292 ...

2004

Measles incidence

83 45 85 90 84 75 68 65 35 23 80 56 70 51 65 98 51 84 59 55 84 83 59 80 69 85 94 97 59

88 47 93 97 96 74 80 73 40 20 80 65 73 56 71 98 33 83 69 38 88 84 69 80 76 83 87 98 61

Vaccination coverage (%) MCV DTP3

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007

44.6

Africa

43.8

35.0 37.5 42.8 60.3 59.5 36.3 42.9 35.8 41.3 36.4 54.2 47.1 57.4 27.2 36.1 43.3 47.2 33.2 40.0 43.5 61.3 41.7 34.8 33.8

2002

Male

45.3

34.8 38.3 46.3 64.6 60.9 37.5 43.8 35.2 41.8 40.2 54.7 48.9 64.9 29.9 37.5 45.3 49.9 35.2 40.7 45.7 63.6 43.7 35.0 33.3 23 876

1 1 1

1

5

2

1

940 130 12 4 19 800 230 79 900 190 61 0 48 44 0 500 350 220 400 110 9 000 100 700 6.4

14.1 1.7 0.7 0.6 0.1 16.1 19.6 1.1 3.9 3.1 … 0.9 … 1.6 0.9 18.8 1.6 33.4 6.5 3.2 0.1 6.7 17.0 20.1 11 521

1

1

1

1

550 94 7 … … 510 85 46 930 210 … 25 … 31 23 200 … 63 100 88 … 000 710 100

AIDS orphans cumulative (000) Notified

...

2002 2 2003 ... 1997 2000 2003 5 2003 1997 2003 2 1997 1 ... 1995 ... ... 2003 1996 2003 3 ... 2003 10 ... ... 2003 12 2001 2 1995

2003 year

...

853 317 809 428 ... 65 59 087 865 444 081 978 855 608 479 210 775 ... 628 773 ... ... 23 349 29 160 084 320 ... 712 526 ... ... 343 411 010 185 330 002

2004 cases

Malaria notified cases

1 153 546

25 841 4 496 3 067 ... 26 789 28 602 11 776 7 078 44 184 6 011 ... 9 410 ... 5 289 9 278 227 320 25 095 6 748 61 579 1 766 1 965 41 795 53 932 53 183

2003

Tuberculosis notified cases

318 280

1

2 110

12

184 33 127 7 ... 598 4 183 927 129 0 0 0 29 ... 615 374 0 23 38 15 22 45 420

2004

Measles incidence

68

82 86 61 98 97 77 73 83 35 89 88 74 99 67 35 82 60 60 91 70 96 86 84 85

70

93 85 71 97 98 72 86 89 25 95 97 84 99 64 35 94 59 71 90 82 98 84 80 90

Vaccination coverage (%) MCV DTP3

Notes: DTP: Diphtheria, tetanus toxoids and pertussis antigen. MCV: Measles Contaning Vaccine. Sources: UNAIDS and WHO, Country epidemic updates September 2006; Malaria notified cases: WHO, Roll Back Malaria (RBM) database; World Malaria Report, 2005. Tuberculosis notified cases: WHO, 2006, Global Tuberculosis Database; Vaccination coverage and Measles incidence: WHO Vaccine Immunization and Biological, 2005 Global Summary. WHOSIS, February 2007. http://dx.doi.org/10.1787/567153014637

34.9 37.9 44.5 62.4 60.2 36.9 43.3 35.5 41.5 38.3 54.4 48.0 61.2 28.6 36.8 44.3 48.5 34.2 40.4 44.6 62.5 42.7 34.9 33.6

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Total

HIV/AIDS People living with Adult HIV/AIDS prevalence Female (000) (%) Survey end-2005

Healthy life expectancy at birth (years)

Table 17 - Major Diseases (cont.)

Statistical Annex

African Economic Outlook

607

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

20.4 17.1 52.1 19.6 70.6 32.7 23.0 12.9 35.2 59.2 36.0 8.3 19.1 39.2 19.5 17.0 6.6 27.7 46.7 ... 48.9 33.6 57.4 38.8 22.3 26.3 24.1 6.2 23.5

39.9 45.8 76.7 18.2 84.8 47.8 40.2 28.3 66.5 87.2 50.1 18.1 45.9 61.4 37.4 40.6 19.5 49.3 60.7 ... 63.4 50.2 81.9 68.2 29.8 9.7 56.3 24.9 34.7

Estimated adult illiteracy rate (%) Latest available 1999-2004 (people over 15) Total Male Female

30.1 32.6 65.3 18.8 78.2 40.7 32.1 21.3 51.4 74.3 43.0 13.4 32.8 51.3 28.7 28.6 13.0 38.6 53.7 ... 56.3 42.1 70.5 53.9 26.4 17.8 40.2 15.3 29.3

608 8.0 ... 41.0 9.6 59.7 30.6 7.2 9.3 26.0 25.6 40.5 1.5 13.6 33.7 12.1 26.5 1.9 25.5 39.0 ... 35.6 6.2 ... 35.0 3.3 8.0 26.0 2.3 16.6

4.8 ... 23.9 13.1 49.0 30.8 6.2 7.0 19.8 20.8 33.9 1.1 8.7 26.0 9.0 21.2 1.0 16.7 34.2 ... 28.2 4.8 ... 22.9 3.0 14.9 11.6 0.2 14.0

11.3 ... 57.9 6.1 70.7 30.3 8.3 11.6 32.0 30.3 47.2 2.0 18.5 41.3 15.1 32.1 2.9 34.4 43.7 ... 42.9 7.6 ... 47.1 3.6 1.0 40.3 4.5 19.3

Estimated youth illiteracy rate (%) Latest available 1999-2004 (people between 15 and 24) Total Male Female

Table 18 - Basic Education Indicators

... ... 3.3 ... ... 5.2 3.8 7.3 ... ... 3.9 3.2 ... ... 6.1 ... 0.6 3.8 4.6 ... 1.9 ... ... ... 7.0 9.0 ... ... 3.3

(% of GDP)

Public expenditure on education Latest available 2002-04

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

43.3

Africa

Sources: UNESCO Institute for Statistics (UIS) Database.

35.9 81.0 48.8 15.6 47.7 48.3 15.0 71.3 28.1 35.1 15.1 60.7 8.2 64.9 ... 17.6 39.1 20.4 30.6 46.8 25.7 33.2 32.0 7.6

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe 34.5

25.1 73.3 40.5 11.6 34.3 33.2 13.2 57.1 21.5 28.6 ... 48.9 8.6 53.1 ... 15.9 28.9 19.1 22.5 31.3 16.6 23.2 23.7 4.5 52.4

46.0 88.1 56.6 19.5 60.4 62.9 16.5 84.9 34.4 40.2 ... 70.8 7.7 75.6 ... 19.1 48.2 21.7 37.8 61.5 34.7 42.3 40.2 10.7

Estimated adult illiteracy rate (%) Latest available 1999-2004 (people over 15) Total Male Female

24.2

16.1

20.2

http://dx.doi.org/10.1787/533803487518

6.0 ... 3.4 4.7 6.3 ... 7.2 2.3 ... ... ... 4.0 5.4 ... ... 5.4 ... 6.2 ... 2.6 8.1 5.2 2.8 ...

34.3 70.2 56.5 4.3 34.0 46.2 5.1 83.1 10.3 13.4 ... 51.7 ... ... ... 7.5 21.8 6.7 8.4 29.1 7.3 23.0 11.2 2.9

25.5 59.2 49.3 5.1 27.2 33.7 6.8 73.3 8.9 12.8 ... 43.8 ... ... ... 7.5 18.1 7.5 6.9 19.6 4.3 17.7 9.4 1.8

16.8 48.2 42.1 5.8 20.5 21.2 8.4 63.5 7.6 12.1 ... 35.9 ... ... ... 7.5 14.5 8.4 5.4 10.0 1.4 12.3 7.6 0.7

Public expenditure on education Latest available 2002-04 (% of GDP)

(cont.)

Estimated youth illiteracy rate (%) Latest available 1999-2004 (people between 15 and 24) Total Male Female

Table 18 - Basic Education Indicators

Statistical Annex

609

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

111.7 ... 99.0 105.0 53.0 80.0 117.0 111.0 56.0 80.0 85.0 89.0 ... ... 39.0 101.0 ... 66.0 77.0 130.0 81.0 81.0 79.0 ... 111.0 131.0 ... ... 134.0

Total 116.0 ... 111.0 105.0 59.0 87.0 126.0 113.0 67.0 97.0 91.0 92.0 ... ... 44.0 103.0 ... 74.0 85.0 130.0 79.0 84.0 87.0 ... 114.0 131.0 ... ... 136.0

Male 107.0 ... 86.0 104.0 47.0 73.0 107.0 108.0 44.0 63.0 80.0 85.0 ... ... 35.0 98.0 ... 59.0 69.0 129.0 84.0 79.0 71.0 ... 108.0 131.0 ... ... 131.0

96.7 ... 82.6 82.1 40.5 57.0 ... 91.8 ... ... ... ... ... ... 32.2 95.4 ... 47.8 46.4 ... 75.2 57.9 63.8 ... 76.4 85.9 ... ... 88.8

Total 97.8 ... 92.5 80.9 45.6 60.2 ... 92.2 ... ... ... ... ... ... 35.9 96.7 ... 51.7 49.2 ... 73.1 57.7 69.0 ... 76.4 83.4 ... ... 88.8

Male 95.4 ... 72.4 83.3 35.3 53.8 ... 91.4 ... ... ... ... ... ... 28.5 94.0 ... 43.8 43.6 ... 77.4 58.1 58.2 ... 76.5 88.5 ... ... 88.7

Female

Primary School, 2004/05 Net enrolment ratio

Female

Gross enrolment ratio

610 Table 19 - School Enrolment

27.0 ... 52.0 26.0 49.0 51.0 54.0 27.0 ... 69.0 35.0 83.0 ... ... 35.0 22.0 ... 48.0 72.0 36.0 37.0 33.0 45.0 ... 40.0 44.0 ... ... 52.0

Pupil/ teacher ratio 81.0 ... 26.0 75.0 12.0 12.0 44.0 66.0 ... 16.0 35.0 39.0 ... ... 22.0 87.0 ... 29.0 28.0 ... 47.0 42.0 26.0 ... 48.0 36.0 ... ... ...

78.0 ... 36.0 73.0 14.0 14.0 51.0 63.0 ... 23.0 40.0 42.0 ... ... 25.0 90.0 ... 38.0 34.0 ... 51.0 45.0 34.0 ... 50.0 32.0 ... ... ...

84.0 ... 17.0 77.0 10.0 10.0 36.0 69.0 ... 8.0 30.0 35.0 ... ... 18.0 84.0 ... 21.0 21.0 ... 43.0 38.0 17.0 ... 46.0 41.0 ... ... ...

21.0 ... ... 14.0 31.0 19.0 33.0 23.0 ... 34.0 14.0 34.0 ... ... ... 17.0 ... 51.0 54.0 ... 42.0 19.0 33.0 ... 32.0 26.0 ... ... ...

Secondary School, 2004/05 Gross enrolment ratio Pupil/ teacher Total Male Female ratio

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

95.9

125.0 64.0 94.0 103.0 106.0 95.0 ... 45.0 99.0 119.0 133.0 76.0 110.0 145.0 ... ... 60.0 ... 101.0 101.0 110.0 125.0 99.0 ... 103.7

123.0 71.0 95.0 103.0 111.0 104.0 ... 52.0 107.0 118.0 134.0 78.0 109.0 169.0 ... ... 64.0 ... 103.0 110.0 112.0 126.0 101.0 ...

Male

90.4

126.0 56.0 93.0 103.0 100.0 86.0 ... 37.0 91.0 120.0 132.0 74.0 110.0 122.0 ... ... 56.0 ... 99.0 92.0 108.0 125.0 97.0 ...

Female

71.1

95.3 46.5 74.3 95.1 86.1 71.0 ... 39.2 60.1 73.2 98.2 66.1 96.4 ... ... ... ... ... 85.9 78.8 97.4 ... 79.8 ...

Total

73.2

93.1 50.1 74.7 94.2 88.7 74.8 ... 45.7 63.5 71.5 98.5 67.8 96.0 ... ... ... ... ... 86.8 85.3 97.2 ... 79.8 ...

Male

Pupil/ teacher ratio 70.0 52.0 41.0 23.0 28.0 65.0 ... 44.0 36.0 62.0 32.0 43.0 14.0 67.0 ... ... 29.0 ... 56.0 44.0 21.0 50.0 49.0 ... 43.8

Female 97.6 42.7 73.9 96.1 83.4 67.3 ... 32.4 56.5 74.8 98.0 64.5 96.9 ... ... ... ... ... 85.1 72.3 97.6 ... 79.9 ... 68.8

Primary School, 2004/05 Net enrolment ratio

(cont.)

Sources: ADB Statistics Department ; UNESCO Institute for Statistics (UIS) Database, March 2007; various domestic authorities.

Africa

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

Total

Gross enrolment ratio

Table 19 - School Enrolment

40.8

29.0 22.0 20.0 85.0 48.0 11.0 ... 8.0 35.0 14.0 40.0 19.0 102.0 14.0 ... ... 33.0 ... ... 39.0 81.0 19.0 26.0 ... 40.1

32.0 28.0 22.0 86.0 52.0 13.0 ... 9.0 38.0 15.0 39.0 22.0 98.0 14.0 ... ... 34.0 ... ... 52.0 ... 21.0 29.0 ...

...

... ... 28.0 17.0 19.0 ... ... 31.0 ... 26.0 ... 26.0 14.0 ... ... ... 25.0 ... ... 34.0 18.0 19.0 34.0 ...

http://dx.doi.org/10.1787/021613337607

36.5

26.0 17.0 18.0 85.0 43.0 9.0 ... 6.0 31.0 14.0 41.0 16.0 106.0 14.0 ... ... 32.0 ... ... 26.0 ... 17.0 23.0 ...

Secondary School, 2004/05 Gross enrolment ratio Pupil/ teacher Total Male Female ratio

Statistical Annex

African Economic Outlook

611

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo, Dem. Rep. Côte d’Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

2004 … … 2001 1994 1990 2001 … … 1993 … … … … … 2003 … 1984 2004 1993 … 2000 1994 … 1994 1997 … … 2002

Year 20 … … 19 3 1 8 … … 1 … … … … … 11 … 17 23 18 … 8 3 … 21 39 … … 5

20 … … 16 … 1 8 … … 1 … … … … … 7 … 15 16 19 … 8 5 … 13 31 … … 4

Men

Unemployment rate

Total

612

21 … … 22 … 0 7 … … 0 … … … … … 23 … 19 31 16 … 9 2 … 28 47 … … 6

Women 58 82 70 56 84 92 66 54 79 71 72 71 75 64 ... 47 70 74 80 72 72 73 83 76 79 58 69 57 82

Participation rate (>15) 2005 42 18 30 44 17 8 34 46 21 29 28 29 24 36 ... 54 30 27 20 28 28 27 17 24 21 43 31 43 18

Total 20 9 14 33 11 7 20 24 11 23 13 13 10 12 ... 27 10 10 11 18 14 25 13 8 11 28 17 20 14

64 26 46 55 22 8 48 66 30 34 42 44 39 61 ... 80 50 42 29 39 41 30 21 39 31 54 46 68 21

Inactivity rate (>15) 2005 Men Women

Table 20 - Employment and Remittances

790 ... 87 26 67 ... 11 87 ... ... 12 10 ... 119 ... 2 852 ... 3 000 53 6 14 32 1 2 538 252 ... 9 11

2000 1 070 ... 76 27 50 ... 11 85 ... ... 12 1 ... 120 2 893 ... ... 33 3 7 44 15 18 395 194 ... 7 17

2 911 ... ... 18 5 7 46 9 10 517 209 ... 10 11

2002

670 ... 84 26 50 ... 11 81 ... ... 12 1 ... 116

2001

African Economic Outlook 2 961 ... ... 47 6 8 65 111 23 494 288 ... 8 16

1 750 ... 55 39 50 ... 11 92 ... ... 12 1 ... 142

2003

Workers’ remittances ($ million)

3 341 ... ... 134 6 8 82 42 23 494 355 ... 10 16

2 460 ... 55 39 50 ... 11 92 ... ... 12 1 ... 148

2004

Statistical Annex

© AfDB/OECD 2007

© AfDB/OECD 2007

1998 2004 … 2004 2003 … 2001 … 1995 1996 2000 … … … … 2004 … 1997 2001 … 2003 2003 1998 2002 11 336

1 9 … 9 12 … 31 … 17 1 14 … 35 … … 27 … 25 5 … 15 3 .20 12 8 12 394

Total 1 7 … 6 12 … 27 … 18 1 13 … 28 … … 24 48 20 4 … … 3 13 10 12 906

Men 1 11 … 14 13 … 36 … 15 0 18 … 41 … … 32 52 26 6 … … 4 12 6 15 323

Women

Note: See note on methodology. Source: Employment: ILO, KILM database. Workers’ remittances: World Bank, Global Development Finance 2006.

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe Africa

Year

Unemployment rate

87 78 69 61 54 84 54 83 65 82 52 69 … 75 … 62 28 51 88 70 52 83 78 74 18 845

Participation rate (>15) 2005 13 22 31 39 47 16 46 17 35 18 49 31 … 25 ... 38 76 50 12 30 48 17 22 26

Total

(cont.)

10 16 16 21 19 17 37 5 15 16 26 18 2 6 ... 21 641 28 10 10 25 14 9 16

15 28 46 57 73 16 53 29 55 20 70 44 1 44 ... 54 740 69 14 50 71 20 34 36

Inactivity rate (>15) 2005 Men Women

Table 20 - Employment and Remittances

1 73 2 177 2 161 37 9 14 1 392 7 0 233 1 7 ... 344 978 74 8 34 796 238 ... ...

2000 1 88 2 215 3 261 42 9 22 1 167 8 1 305 1 7 ... 297 1 224 74 16 69 927 338 ... ...

2001

523 89 11 148 1 432 347 ... ...

435 88 9 148 1 250 285 ... ...

288 1 403 62 12 104 1 071 416 ... ...

http://dx.doi.org/10.1787/574003408116

25

26

22

1 154 2 215 4 221 58 16 26 2 273 10 1 511

2004

1 154 2 215 3 614 70 12 26 1 063 9 1 511

2003

1 138 2 215 2 877 53 7 19 1 209 7 1 344

2002

Workers’ remittances ($ million)

Statistical Annex

613

African Economic Outlook

Algeria Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo Congo. Dem. Rep. Côte d´Ivoire Djibouti Egypt Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea Bissau Kenya Lesotho Liberia Libya Madagascar

614

… 1.7 … 6 3 … 2 … … … … … … 2.7 … 3.1 … … 3.2 … … 3.5 … … 2.1 … … … …

… 85 … 26 65 … 84 … … … … … … 71 … 63 … … 60 … … 52 … … 82 … … … …

… … … 6 … … 2 … … … … … … 2.4 … 3.6 … … … … … 3.4 … … 2 … … … …

… … … 26 … … 84 … … … … … … 77 … 54 … … … … … 59 … … 84 … … … …

… 1.7 … 6.4 … … 2.2 … … … … … … 2.7 … 3.4 … … 3.5 … … 3.9 … … 1.9 … … … 1.7

… 98 … 24 … … 89 … … … … … … 71 … 62 … … 59 … … 50 … … 96 … … … 98

2.6 1.8 … 5.7 … … 1.8 … … … … 2.2 … 2.1 … 3.3 … … 2.5 … 2.5 3.3 … … 1.9 … … 2.1 2.6

88 124 … 30 … … 124 … … … … 113 … 118 … 70 … … 92 … 92 70 … … 122 … … 118 88

2.7 2 3.2 6 … … 2.1 … … 1.7 … 2.3 2 2 … 3.2 … 2.6 2.3 3.3 2.8 3.6 … … 2.1 … … 2.5 3.1

97 133 77 31 … … 129 … … 142 … 114 133 133 … 77 … 102 114 74 90 64 … … 129 … … 108 82

2.8 2 2.9 5.9 3.4 2.3 2.2 … … 1.7 … 2.3 2.1 1.9 … 3.4 1.9 2.6 2.2 2.9 2.7 3.5 … … 2.1 3.4 2.2 2.5 2.8

97 151 88 32 70 130 137 … … 158 … 130 144 152 … 70 152 107 137 88 103 65 … … 144 70 137 117 97

3.1 2.2 2.5 5.6 3.2 2.4 2.3 … 2.4 2 … 2.2 2 2.1 … 3.3 2.1 2.9 2.4 3 2.5 3.3 1.9 … 2.2 3.2 … 2.7 3.1

84 142 121 37 79 130 138 … 130 156 … 142 156 151 … 70 151 93 130 90 121 70 160 … 142 79 … 105 84

2000 2001 2002 2003 2004 2005 2006 Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank / 90 / 91 / 102 / 133 / 145 / 158 / 163

Table 21 - Corruption Perception Index

Statistical Annex

African Economic Outlook

© AfDB/OECD 2007

© AfDB/OECD 2007

Source: Transparency International.

Malawi Mali Mauritania Mauritius Morocco Mozambique Namibia Niger Nigeria Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania Togo Tunisia Uganda Zambia Zimbabwe

(cont.)

4.1 … … 4.7 4.7 2.2 5.4 … 1.2 … … 3.5 … … … 5 … … 2.5 … 5.2 2.3 3.4 3

43 … … 37 37 81 30 … 90 … … 52 … … … 34 … … 76 … 32 80 57 65

3.2 … … 4.5 … … 5.4 … 1 … … 2.9 … … … 4.8 … … 2.2 … 5.3 1.9 2.6 2.9

61 … … 40 … … 30 … 90 … … 65 … … … 38 … … 82 … 31 88 75 65

2.9 … … 4.5 3.7 … 5.7 … 1.6 … … 3.1 … … … 4.8 … … 2.7 … 4.8 2.1 2.6 2.7

68 … … 40 52 … 28 … 101 … … 66 … … … 36 … … 71 … 36 93 77 71

2.8 3 … 4.4 3.3 2.7 4.7 … 1.4 … … 3.2 … 2.2 … 4.4 2.3 … 2.5 … 4.9 2.2 2.5 2.3

83 78 … 48 70 86 41 … 132 … … 76 … 113 … 48 106 … 92 … 39 113 92 106

2.8 3.2 … 4.1 3.2 2.8 4.1 2.2 1.6 … … 3 4.4 2.3 … 4.6 2.2 … 2.8 … 5 2.6 2.6 2.3

90 77 … 54 77 90 54 122 144 … … 85 48 114 … 44 122 … 90 … 39 102 102 114

2.8 2.9 … 4.2 3.2 2.8 4.3 2.4 1.9 3.1 … 3.2 4 2.4 2.1 4.5 2.1 2.7 2.9 … 4.9 2.5 2.6 2.6

2.7 2.8 3.1 5.1 3.2 2.8 4.1 2.3 2.2 2.5 … 3.3 3.6 2.2 … 4.6 2 2.5 2.9 2.4 4.6 2.7 2.6 2.4

105 99 84 42 79 99 55 138 142 121 … 70 63 142 … 51 156 121 93 130 51 105 111 130

http://dx.doi.org/10.1787/203153668061

97 88 … 51 78 97 47 126 152 83 … 78 55 126 144 46 144 103 88 … 43 117 107 107

2000 2001 2002 2003 2004 2005 2006 Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank Index Country Rank / 90 / 91 / 102 / 133 / 145 / 158 / 163

Table 21 - Corruption Perception Index

Statistical Annex

615

African Economic Outlook

Statistical Annex

Table 22 - Political Troubles

616

Algeria Angola Benin Botswana Burkina Faso Cameroon Chad Congo Congo, Dem. Rep. Côte d'Ivoire Egypt Equatorial Guinea Ethiopia Gabon Ghana Kenya Madagascar Mali Mauritius Malawi Morocco Mozambique Namibia Niger Nigeria Rwanda Senegal South Africa Tanzania Tunisia Uganda Zambia Zimbabwe

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

121.4 … … 0.0 0.0 23.7 4.4 … … 16.4 22.9 1.9 48.5 10.0 4.9 14.8 … 3.4 0.0 … 12.2 37.7 3.5 … 30.2 … 0.3 85.0 4.7 0.0 81.3 4.8 9.6

124.2 … … 0.0 3.2 54.7 5.6 … … 3.8 43.6 0.0 12.2 1.0 0.0 25.5 … 13.7 0.0 … 1.6 0.0 0.0 … 51.3 … 19.6 40.8 1.9 0.0 15.3 4.6 9.7

126.6 … … 0.0 1.1 1.3 2.2 … … 3.4 0.0 1.9 1.6 2.5 0.3 34.1 … 1.2 0.0 … 2.2 0.0 0.0 … 10.2 … 2.7 20.3 0.9 0.5 10.5 4.9 11.3

141.6 … … 0.0 5.6 1.5 20.2 … … 21.7 1.0 0.0 24.8 0.9 4.5 0.0 … 8.8 5.2 … 0.5 2.7 7.6 … 47.1 … 5.6 38.8 0.0 2.5 9.6 3.6 5.4

120.3 … … 0.0 9.5 2.2 26.7 … … 28.1 7.8 0.0 5.7 0.0 1.9 0.0 … 0.0 0.0 … 0.5 6.8 3.8 … 29.2 … 5.7 18.9 0.0 0.5 0.0 0.6 16.8

142.5 … … 0.0 2.5 1.0 16.7 … … 2.9 7.2 0.0 8.4 0.0 3.8 11.6 … 0.0 0.0 … 0.0 0.0 0.0 … 39.7 … 5.9 2.2 6.0 0.0 23.9 17.6 12.6

64.8 … … 0.0 2.5 0.6 10.5 … … 13.7 2.0 0.0 42.6 1.5 3.8 1.9 … 0.0 0.0 … 0.0 0.0 0.0 … 19.4 … 7.7 3.3 0.0 2.9 14.3 1.1 16.5

14.5 … … 0.0 0.1 0.8 2.9 … … 18.8 5.4 1.0 15.2 0.0 1.1 6.8 … 0.6 0.0 … 0.0 4.5 0.0 … 10.4 … 6.7 1.2 0.5 2.3 17.2 5.7 8.8

61.4 54.6 2.7 0.0 4.1 2.0 3.8 2.0 21.7 25.2 8.5 1.0 25.9 0.5 1.9 4.5 6.7 0.6 1.9 … 3.5 3.8 0.0 5.5 31.6 0.0 9.1 11.3 0.3 0.0 41.1 2.0 3.4

23.4 2.9 0.0 0.0 0.8 3.3 11.2 1.9 21.9 20.6 13.7 0.0 13.2 6.6 0.0 12.4 8.8 2.5 1.9 5.7 2.0 1.0 0.0 3.5 4.0 0.0 4.7 3.1 5.3 2.9 8.8 2.0 4.5

0.6 2.0 1.0 0.0 2.0 3.4 38.5 1.0 18.9 6.8 0.0 6.7 2.4 0.0 5.7 4.8 1.9 1.0 5.4 0.0 0.0 0.0 1.2 21.5 32.4 0.5 4.3 9.4 0.0 0.0 7.6 2.7 4.1

Note: See note on methodology. Source: Authors' calculations based on Marchés Tropicaux et Méditerranéens.

African Economic Outlook

http://dx.doi.org/10.1787/680402624746

© AfDB/OECD 2007

Statistical Annex

Table 23 - Softening of the Regime

Algeria Angola Benin Botswana Burkina Faso Cameroon Chad Congo Congo, Dem. Rep. Côte d'Ivoire Egypt Equatorial Guinea Ethiopia Gabon Ghana Kenya Madagascar Mali Mauritius Malawi Morocco Mozambique Namibia Niger Nigeria Rwanda Senegal South Africa Tanzania Tunisia Uganda Zambia Zimbabwe

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1.3 … … 0.0 0.4 0.7 4.5 … … 1.5 0.1 0.0 0.1 0.0 0.9 0.9 … 1.4 0.0 … 0.9 0.1 0.0 … 1.1 … 0.5 3.1 0.2 1.4 0.0 1.4 0.1

3.6 … … 0.0 0.4 2.0 4.0 … … 2.1 0.0 2.6 0.1 0.5 0.1 0.7 … 2.3 0.1 … 0.6 0.0 0.4 … 1.8 … 0.7 2.3 0.1 0.7 0.4 0.0 0.1

0.8 … … 0.0 0.0 0.8 0.0 … … 1.0 0.0 0.0 0.8 0.5 0.0 0.6 … 0.9 0.0 … 0.6 0.0 0.0 … 6.6 … 0.0 0.8 0.1 0.1 0.4 1.7 0.0

1.9 … … 0.4 0.0 0.0 1.8 … … 1.1 1.4 0.8 0.0 0.0 0.0 0.0 … 1.7 0.0 … 0.0 0.0 0.0 … 3.4 … 2.4 2.0 1.6 2.8 0.6 0.7 0.2

0.7 … … 0.0 1.1 0.1 0.5 … … 2.6 1.9 0.7 0.1 0.1 1.1 0.0 … 1.4 0.0 … 2.1 0.7 0.0 … 0.3 … 1.1 0.9 0.0 0.7 0.7 0.0 1.2

0.0 … … 0.0 0.0 0.8 1.1 … … 3.9 0.2 0.5 1.6 0.0 0.2 1.1 … 0.1 0.0 … 0.0 1.5 1.1 … 0.0 … 1.6 2.2 1.6 1.8 0.1 1.2 0.6

3.0 … … 0.0 0.7 0.0 2.7 … … 1.8 0.6 1.8 0.0 1.1 0.0 0.0 … 1.3 0.0 … 0.9 0.7 0.0 … 0.9 … 0.1 0.9 0.7 3.0 0.4 1.3 1.5

2.2 … … 0.0 0.1 0.7 3.2 … … 6.9 2.6 1.5 0.0 0.4 0.0 2.7 … 0.0 1.0 … 1.0 0.1 0.5 … 0.6 … 0.0 0.5 0.0 0.7 0.9 1.6 2.5

3.8 1.2 0.9 0.0 1.1 2.4 0.2 0.8 0.4 6.0 2.5 0.4 0.4 0.8 0.4 0.7 2.9 0.2 0.1 … 3.0 0.1 0.0 0.0 1.2 0.6 2.6 0.6 0.5 0.0 0.6 0.5 0.5

1.9 0.7 0.2 0.0 0.0 1.0 0.4 1.1 1.7 3.6 1.8 0.0 1.9 0.8 0.0 0.0 0.2 0.0 0.1 0.0 1.2 0.0 0.2 1.2 0.3 1.5 1.2 0.8 0.0 1.1 0.6 0.2 0.1

1.1 1.9 0.6 0.0 0.0 0.6 0.4 0.1 1.3 2.0 1.7 1.9 0.7 0.0 0.2 0.4 0.0 0.0 1.5 2.1 0.0 0.0 1.4 0.6 1.6 0.1 0.7 0.2 0.0 0.4 2.2 0.5 0.7

Note: See note on methodology. Source: Authors' calculations based on Marchés Tropicaux et Méditerranéens.

© AfDB/OECD 2007

http://dx.doi.org/10.1787/104360166735

African Economic Outlook

617

Statistical Annex

Table 24 - Hardening of the Regime

618

Algeria Angola Benin Botswana Burkina Faso Cameroon Chad Congo Congo, Dem. Rep. Côte d'Ivoire Egypt Equatorial Guinea Ethiopia Gabon Ghana Kenya Madagascar Mali Mauritius Malawi Morocco Mozambique Namibia Niger Nigeria Rwanda Senegal South Africa Tanzania Tunisia Uganda Zambia Zimbabwe

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

11.9 … … 0.3 0.8 7.4 2.9 … … 2.9 9.4 0.0 7.5 1.0 2.2 3.9 … 0.4 0.3 … 5.0 0.3 0.0 … 125.5 … 1.7 18.6 1.3 3.9 3.1 5.5 4.0

6.5 … … 0.5 1.9 5.9 1.0 … … 2.5 6.8 1.2 3.9 5.1 0.8 11.0 … 5.1 0.0 … 3.7 0.9 0.3 … 9.1 … 3.3 14.3 0.4 1.5 0.0 8.5 3.7

4.3 … … 0.0 0.6 1.9 1.4 … … 0.7 5.5 5.0 2.4 0.7 2.5 3.6 … 0.0 0.0 … 1.4 2.3 0.0 … 5.8 … 2.7 6.1 0.5 1.5 0.7 3.9 7.7

2.5 … … 0.6 4.5 1.6 0.0 … … 10.2 2.0 0.0 0.0 2.1 2.4 0.0 … 0.4 0.4 … 1.2 1.1 1.2 … 4.2 … 0.3 4.5 0.0 2.4 0.9 3.0 5.1

0.3 … … 0.0 1.6 1.0 1.1 … … 7.8 7.7 0.0 0.7 0.4 0.0 0.0 … 1.2 0.0 … 3.4 3.7 1.6 … 4.5 … 0.0 1.9 0.3 1.4 0.0 1.1 4.8

8.1 … … 0.0 1.1 3.3 2.6 … … 1.4 3.9 0.9 3.6 0.0 0.8 0.7 … 1.1 0.0 … 2.9 1.2 0.3 … 2.8 … 1.7 1.2 0.4 3.3 5.8 4.7 12.5

15.0 … … 0.0 2.7 0.9 1.7 … … 3.2 11.5 5.7 8.4 0.5 1.3 1.2 … 0.3 0.0 … 2.5 0.0 0.3 … 2.4 … 1.1 1.8 0.0 2.9 1.3 5.2 17.5

4.5 … … 0.0 2.4 2.2 0.0 … … 7.2 4.8 0.5 1.2 1.3 0.0 2.0 … 1.0 2.2 … 3.7 0.4 0.8 … 3.5 … 1.4 1.7 0.5 1.6 3.8 1.5 15.5

8.9 5.7 1.2 1.0 2.8 2.5 0.9 1.4 4.9 9.6 4.0 8.1 1.3 3.6 0.4 2.3 2.8 0.3 0.4 … 5.6 1.6 0.3 1.6 12.4 4.0 0.9 4.0 0.0 6.4 12.3 2.4 16.3

0.0 0.3 0.3 0.3 0.5 0.0 6.9 1.0 10.4 7.2 3.2 0.0 12.4 7.8 0.0 2.6 1.1 0.0 0.4 3.4 1.9 0.0 0.0 3.1 2.6 0.0 2.6 4.5 1.5 2.7 2.9 1.2 13.4

1.8 1.3 1.7 0.0 0.3 2.5 17.0 0.5 14.7 5.6 1.4 4.1 2.7 0.0 3.6 1.7 0.8 0.0 8.2 0.8 0.0 0.3 1.6 4.0 21.4 0.0 2.8 2.2 0.0 0.5 6.5 1.4 10.1

Note: See note on methodology. Source: Authors' calculations based on Marchés Tropicaux et Méditerranéens.

African Economic Outlook

http://dx.doi.org/10.1787/788830603871

© AfDB/OECD 2007

2007

African Economic Outlook The African Economic Outlook combines the expertise of the OECD – which produces the OECD Economic Outlook twice a year – with the knowledge of the African Development Bank on African economies. The objective is to review annually the recent economic situation and the short-term likely evolutions of selected African countries. The Outlook is drawn from a country-by-country analysis based on a unique analytical design. This common framework includes a forecasting exercise for the current and two following years using a simple macroeconomic model, together with an analysis of the social and political context. It also contains a comparative synthesis of African country prospects, placing the evolution of African economies in the world economic context. This edition includes a special focus on water and sanitation issues. A statistical appendix completes the volume.

African Economic Outlook

This volume will be of significant interest to decision makers in African and OECD countries, both in the public and private sectors, such as aid agencies, investors, and government officials of aid-recipient countries. The African Economic Outlook is a joint project of the African Development Bank and the OECD Development Centre, with generous support from the European Commission. This publication provides dynamic links (StatLinks) for graphs and tables. These StatLinks direct the user to a web page where the corresponding data are available in Excel® format.

COUNTRIES COVERED • ALGERIA • ANGOLA • BENIN • BOTSWANA • BURKINA FASO • CAMEROON • CHAD • CONGO • CÔTE D’IVOIRE • DEMOCRATIC REPUBLIC OF CONGO • EGYPT • ETHIOPIA • GABON • GHANA • KENYA • MADAGASCAR • MALAWI • MALI • MAURITIUS • MOROCCO • MOZAMBIQUE • NAMIBIA • NIGER • NIGERIA • RWANDA • SENEGAL • SOUTH AFRICA • TANZANIA • TUNISIA • UGANDA • ZAMBIA

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African Economic Outlook

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2006/2007

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