Accounting for natural capital - The case of the African Economic Outlook

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In Paris at the ENVIRONET Workshop, 20th February 2014, at the Green Growth, Development Planning and Policy Workshop, Henri-Bernard Solignac-Lecomte, Head of Unit, Europe, Middle East & Africa, OECD Development Centre, presented this presentaion on 'Accounting for natural capital - The case of the African Economic Outlook'. In it, he covers:
Chapter 1: Macroeconomic Prospects
Chapter 2: External Financial flows and Domestic Resource Mobilization (DRM)
Chapter 3: Trade and Regional Integration (China is in the lead)
Chapter 4: Human development
Chapter 5: Political and economic governance
And finally, Global Value Chains and Africa’s Industrialisation

Listen to Henri-Bernard Solignac-Lecomte discuss his work as presented at ENVIRONET here: https://archive.org/details/Henri-Bernard-Solignac-Lecomte-African-Economic-Outlook


The Network on Environment and Development Co-operation (ENVIRONET) of the OECD Development Assistance Committee (DAC) promotes and facilitates the integration of environment and climate change into all aspects of development co-operation. ENVIRONET is a network of development co-operation practitioners committed to working together to promote good practice in the fields of environment and development.

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  • Overall, China is thus unquestionably leading the way for emerging powers in Africa.It is at the heart of the south- and eastward- shift in global economy’s growth engine, and its behaviour and discourse in Africa has helped to change perceptions of the continent.China increased its share of African exports from 3.2% in 2000 to 13% in 2011Africa’s trade with its other emerging partners:India from 2.8% to 6%;Korea: Totalling 25 billion USD in 2011, and 21.5 billions USD in 2012, Korea’s trade with Africa displays one of the fastest growth performance since the turn of the century. Korea’s rise as a trade partner to African countries is more exports-driven than other emerging partners. The technological intensity of Korean exports to Africa is also higher than that of other emerging partners. Around three quarters of Korean exports are composed of equipment and electronic products against 40% for this category in the case of China.
  • Overall, China is thus unquestionably leading the way for emerging powers in Africa.It is at the heart of the south- and eastward- shift in global economy’s growth engine, and its behaviour and discourse in Africa has helped to change perceptions of the continent.China increased its share of African exports from 3.2% in 2000 to 13% in 2011Africa’s trade with its other emerging partners:India from 2.8% to 6%;Korea: Totalling 25 billion USD in 2011, and 21.5 billions USD in 2012, Korea’s trade with Africa displays one of the fastest growth performance since the turn of the century. Korea’s rise as a trade partner to African countries is more exports-driven than other emerging partners. The technological intensity of Korean exports to Africa is also higher than that of other emerging partners. Around three quarters of Korean exports are composed of equipment and electronic products against 40% for this category in the case of China.
  • At which stages in the GVCs are most benefits accrued (income, jobs, technology, spillovers)?Adding value in Africa is what is needed.  Exporting manufactured goods means jobs for West Africans, hard currency influx means a boosted local micro economy.  Factories create their own demand on local markets which triggers new businesses.  Furthermore, exporting manufactured goods, implies the transfer of technology to Africa.
  • At which stages in the GVCs are most benefits accrued (income, jobs, technology, spillovers)?Adding value in Africa is what is needed.  Exporting manufactured goods means jobs for West Africans, hard currency influx means a boosted local micro economy.  Factories create their own demand on local markets which triggers new businesses.  Furthermore, exporting manufactured goods, implies the transfer of technology to Africa.
  • Accounting for natural capital - The case of the African Economic Outlook

    1. 1. Accounting for natural capital? The case of the African Economic Outlook
    2. 2. Chapter 1: Macroeconomic Prospects Africa’s Growth: resilience in the face of headwinds from the global economy 7 Growth Rate (%) 6 5 4 3 2 1 0 Africa Africa excluding Libya 2
    3. 3. USD billion 210 190 170 150 130 110 90 70 50 30 10 -10 -30 Chapter 2: External Financial Flows and DRM FDI is picking up TOTAL Remittances ODA FDI Portfolio investments
    4. 4. Chapter 3: Trade and Regional Integration Trade: China in the lead Africa's exports to selected partners (2000-2011) Billion USD 250 200 150 EU-27 China USA 100 50 India, Brazil, Korea, Turkey, Russia Intra-African 0
    5. 5. Chapter 4: Human Development Slow progress Average change in income and non-income human development indices, 2005-12 5
    6. 6. Chapter 5: Political and Economic Governance Public protest up, civil violence down but > 2011 600 500 Public protest (base 100 = 2000) 400 300 Civil Violence (base100 = 2000) 200 100 0 6
    7. 7. Chapter 6: Special Theme 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (no theme) Privatisation Energy SME Financing Transport Water and sanitation Technical & Vocational Skills Innovation and ICT Public Resource Mobilisation and Aid Africa’s Emerging Partners Promoting Youth Employment Structural Transformation and Natural Resources Global Value Chains and Africa’s Industrialisation
    8. 8. Chapter 6: Special Theme 2014 “Global Value Chains and Africa’s Industrialisation” Potential for integrating GVCs : 1. Extractive industries: backward linkages from oil, copper, diamonds, gold. e.g. MOZAL cluster. 2. Agriculture /agroindustry : Cotton, coffee, tobacco, flowers, horticulture, cashews, cut flowers … But so far mainly isolated success stories, no massive upscaling. 3. Light manufacturing: few success stories (Mauritius, Tunisia, Morocco, Lesotho) despite preferential access to EU, US markets 4. Tradable services: Some successful companies across the region, e.g. Kenya: Business Process Outsourcing (BPO), Call Centers. GVC do have potential in certain areas – but unlikely to become strong drivers of the desired structural change. Greatest potential for inclusive growth in high-value agriculture. 8
    9. 9. Chapter 6: GVCs (cont.) Cut fruit from Ghana Blue Skies’ ‘fresh from harvest’ value chain Farmer Source: Blue Skies Processor Logistics • Employment • Income distribution • Technology and skills transfer Retailer
    10. 10. Chapter 6: GVCs (cont.) Textile/clothing in Ethiopia, Tanzania • Sourcing knitwear from MAA Garment & textile, in Mek’ele • Lower wage cost, delivery time to EU shorter by 1/3 vs. China • Ethiopia’s textile & apparel exports grew by 28% / 12 months to June 2012 = US$84.6m (compared to total German imports alone $17.4bn) • Next: Tesco (UK), Primark (IRE) • over 28000 employees in China and Cambodia, export to the US and EU markets • hired over 1000 local workers in Dar es Salam, Tanzania in 2013 • Incentives: stable political environment, good relations with China, SEZ Source: Tang Xiaoyang, Tsinghua University
    11. 11. Chapter 6: GVCs (cont.) Regional Value Chains: The rise of supermarkets Who will benefit? • South African supermarkets in the lead • Kenyan supermarkets focused in East Africa (Nakumatt eyeing Nigeria) • International players entering (Spar, Walmart ) • Supermarkets aim for preferred suppliers • Small holders ill-prepared to meet demands (quality, packaging etc.) • But experience of Kiambu’s small holders in Kenya shows that it can be done • Though experience of Nicaragua farmers with Walmart warrants caution Can supermarket increase global reach of African manufacturers? 11
    12. 12. 54 Country Notes Strictly comparable, 15 pages, 7000 words 2-year Forecasts • • • • Growth Inflation Current account, Budget balance Analysis • Macroeconomic Policy • Economic and Political Governance • Incl. Natural Resource Management & Environment (300 words) • Social Context and Human Development • Thematic Analysis: GVCs 12
    13. 13. African Economic Outlook Macro Finance Trade Human Governance FORECASTS Special Theme: Youth Employment, Natural Resources, GVCs … Algeria Angola Benin Ethiopia Zambia Statistical Annex Zimbab we 13
    14. 14. The Big Picture: Is Africa Rising? Drivers of growth = “Shifting wealth” (including the commodity price boom), demography and better macroeconomic policies But 5% growth is not enough to take-off Tackling the job challenge: structural transformation, private sector development Two drivers: natural resources, rising consumer demand => Territorial strategies, product-specific 14
    15. 15. Are we missing something? The “environmental risks faced by developing countries today call for a radical shift in how we view growth and development” OECD (2013) Putting Green Growth at the Heart of Development. 15
    16. 16. 1. 2. 3. 4. 5. Options for “Greening” the AEO? Integrate the environment in country growth forecasts (upgrade model) → data? Add section in country notes → tokenistic? Add selection of environmental indicators to statistical annex→ visibility, impact? Chapter on environment → add? Other? Additional issues: • Green Economy, Green Growth, Sustainable development? • Political economy 16
    17. 17. Option 1 - Integrate the environment in country growth forecasts (upgrade model) + truly integrates environmental factors into the (traditional) economic growth model Results are in a language that is familiar to policymakers/the audience of the AEO Analytically strong and theory-based approach Theoretically challenging and Large workload requirements empirically and data Uncertain outcome Dependent variable is still GDP growth (close to GG concept, not necessarily a weakness) 17
    18. 18. Option 2 – Add Section in country notes + • Textual closeness the of environment and economic growth emphasizes their close connection • Brings the environment to the attention of the readers of the country notes • Individually tailored paragraphs for each country, specific contexts can be incorporated and/or highlighted • Can be combined with options 3&4 • • • • Add-on solution, no full integration It does not seem logically consistent with the current structure of country notes to include a separate fairly standardized paragraph on the environment in all country notes Workability (all authors of country notes have to be involved) Natural resources are already included in the country notes when they are an important component of GDP growth 18
    19. 19. Option 3 - Add a section on the environment in the statistical annex + • Relatively little effort required • Has been done in other reports (e.g. ADB, 2013; World Bank, 2013b) • Easy and quick to implement • Can be combined with options 2&4 • Only one point for discussion: selection of indicators (and ways of presentation) • • • • Will not generate much attention compared to other options Added, but not really integrated in AEO (as stand-alone option) Without explanations: limited interpretation Does not “change how we think about growth” if numbers are not put into context 19
    20. 20. Option 4 - Add an extra chapter on the environment to the AEO + • A special theme would generate public interest • An additional chapter 6 would give the environment the space and visibility it deserves in the logic of comprehensive wealth • Can be combined with options 2&3 • • • • • Add-on solution Chapter 6 (Special theme): partly very close to 2013 special theme on natural resources Environment & poverty overlaps with other chapters (Minor) re-organization of other chapter(s) necessary “far away”, separates the environment from economic growth part 20
    21. 21. www.africaneconomicoutlook.org 21

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