Ethiopia’s Manufacturing Industry Opportunities, Challenges and Way Forward: ...
Macreconomic outlook challenges and opportunities
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UNECA
The African Economic Outlook 2008
Measuring the Pulse of Africa
Andrea Goldstein
Vice-Direttore,
Heiligendamm Dialogue Process Support Unit
OCSE
11 July 2008
IAI, Rome
Macroeconomic Outlook: Challenges and
Opportunities
The Macroeconomic Picture
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Total OECD
Africa
Source: OECD Development Centre / African Development Bank, 2008
Real GDP Growth Real GDP growth expected to exceed
5% for the sixth consecutive year in
2008 , and reach 5.9%
•2007: 25 countries over 5%
•2008: 31 countries over 5%
•2007: 13 countries between 3-5%
•2008: 16 countries between 3-5%
Growth in 2009 will remain
sustained at 5.9%
GrowthGrowth Africa continues steady growth
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DriversDrivers China & India: new drivers of African growth
Source: OECD Development Centre / UN Comtrade, 2008
2001 2002 2003 2004 2005 2006
World 15524 4684 6427 4595 10509 17569
Developed
economies
14964 3668 3156 4571 9564 7173
Developing
economies
559 1016 3270 2024 476 9721
Africa 520 809 569 1849 360 746
Asia 39 141 2536 175 116 8850
Distribution of cross-border M&A purchases in Africa
by home region, 2001-2006 (US$ million)
Source: OECD Development Centre based on UNCTAD cross-border M&A database, 2008
Trade Investment
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DriversDrivers Improved macroeconomic framework
* Excluding Zimbabwe
** Estimations for 2007 and predictions for 2008/09
Source: OECD Development Centre / African Development Bank, 2008
Fiscal Balance % GDP Current account % GDP Inflation
Average
2000-04
Average
2005-09**
Average
2000-04
Average
2005-09**
Average
2000-04
Average
2005-09**
Central 1.6 8.6 Central -3.2 3.2 Central 14.6 4.6
East -2.2 -3.2 East -4.3 -7.5 East 6 8.7
North -1.2 6 North 5.6 13.2 North 2.6 5.2
South -2.5 1.6 South -1.2 -1.7 South* 14.4 6.8
West -0.5 4.5 West -2.7 3.3 West 10.3 7.8
AFRICA -1.5 3.4 AFRICA 0.8 3.8 AFRICA* 8 6.4
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DriversDrivers Record investment in 2007: a new driver?
Source: OECD Development Centre / UNCTAD, 2008
31
Public and Private Investment
% of GDP
Source: OECD Development Centre / EPFR, 2008
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GrowthGrowth Oil exporters and importers: divergent paths?
Source: OECD Development Centre / African Development Bank, 2008
Net Oil exporters: Algeria, Angola, Cameroon, Chad, Congo,
Côte d'Ivoire, Congo DRC, Egypt, Equatorial Guinea, Gabon,
Libya, Nigeria, Sudan
Real GDP Growth
• Growth rates for oil importer
and oil exporter countries
diverged significantly in 2007
and 2008
• However, this difference is
set to narrow in 2009, due to:
- Slower growth of oil
production in Angola
- Growth recovery in Kenya
and South Africa
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OilOil
ExportersExporters
Performance and threats
Source: OECD Development Centre / African Development Bank
*: African Economic Outlook forecasts
…but poor diversification &
governanceStrong growth…
Oil-exporting countries have a historical
opportunity to pull ahead, yet many remain
mired in poor governance, not using oil
windfalls to finance broad development.
Good performers’ assets:
• Sustained and prolonged growth
• Improving macro management
• Rising Investment in non-oil sectors
Challenges:
•Poor diversification and governance
•Structural declining productivity of oil fields
• Capitalise on windfall gains and maximise
spillover to rest of the economy
• Avoid Dutch Disease
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OilOil
ImportersImporters
Performance and threats
Source: OECD Development Centre / African Development Bank
*: African Economic Outlook forecasts
Oil-importing countries have performed well,
diversifying their sources of growth over recent
years. However, rising inflation, food prices and
lower global demand for non-resource exports
signal rougher waters ahead.
Good performers’ assets:
• Sustained and prolonged growth
• Prudent macroeconomic policies
• Good Diversification
• Decreasing poverty
Challenges:
• Contain fiscal deficits, streamline spending
• High dependency on ODA
• Finance widening trade deficit
• Prioritise poverty reduction
• Vulnerability to climatic and price shocks
Good performance… …yet challenges rising
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Food PricesFood Prices Significant food price inflation over past year
Source: OECD Development Centre / Thomson Datastream, 2008
Source: OECD Development Centre / FAO, 2008
2006(e) 2007(e)
Change 2006-
2007 (%)
Africa 144.1 135.6 -5.9
North Africa 36 28.9 -19.8
Western Africa 49.1 47.4 -3.5
Central Africa 3.6 3.5 -2.7
Eastern Africa 33.9 33.9 0
Southern Africa 21.5 21.9 2.1
• Rising grain prices : an international and
local trend
• Sub- Saharan Africa is a net cereal
importer
• But vulnerability varies among countries
• Need for long term concerted solutions
African Cereal Production
(million tonnes)
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StabilityStability Long term decline in political instability ?
Regime Hardening
(LHS)
Qualitative data obtained from Marchés Tropicaux et Méditerranéens. Data is used to construct two indicators referring to:
Political instability: occurrence of strikes, demonstrations, violence and coup d’état.
Hardening of the political regime : incarcerations of opponents, measures threatening democracy such as dissolution of political parties, violence
perpetrated by the police and the banning of demonstrations or public debates.
Source: OECD Development Centre “Moving towards
political stability? Monitoring political instability,
governments response and economic performance in
African countries” forthcoming article, April 2008.
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OutlookOutlook Oil exporter & importers: different challenges
ahead?
Oil and Mineral exporters
Challenges:
• Capitalise on windfall gains
• Maximise spillover to rest of the
economy
• Avoid Dutch Disease
Trade Balance Inflation*
Growth Fiscal Balance
Oil importers
Challenges:
• Contain fiscal deficit
• Finance widening trade deficit
• Streamline spending to prioritise
poverty reduction
Source: OECD Development Centre, African Economic Outlook, 2008
* Oil Importers exclude Zimbabwe
Inflation is a challenge for
the entire continent
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DiversificationDiversification
• Between 2002 and 2006 29 african countries
have further specialised.
• The 10 less diversified countries are all oil
exporters
• The 5 most diversified are Morocco, Tunisia,
South Africa, Tanzania and Senegal
In 2007, only 12 out of 35 AEO countries
increased export volume by 5 per cent or
more
Diversification should be fostered to
sustain growth and fight against rising
import costs
Common challenges: diversify to raise exports
Source: OECD Development Centre, UN Comtrade, 2008
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ChallengesChallenges Energy crises threaten prospects
Liberia
Morocco
Source: Briceno-Garmendia (2006); Eberhard and others (2008).
Countries Vulnerable to Energy
Shortages: • Installed capacity in SSA is
insufficient to respond to high
growth rates and increasing demand
• Half of the continent is currently
experiencing severe energy
shortages.
• Crises have been worsened by South
Africa shortages, Kenyan political
crisis, droughts and high oil prices.
• A combination of high growth and
low investment in energy
infrastructures has created severe
bottlenecks to development
No crisis/no data
Energy crisis
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CreditCredit
CrisisCrisis
Is Africa safe from U.S. downturn?
Source: OECD Development Centre / UN Comtrade, 2008.
(data on Nigeria corresponds to last available year, 2003)
Note: The “Others” category includes Latin America, the
Middle East. East Asia and South Asia.
Due to a low share of
external trade with
the U.S, Africa is less
vulnerable to effects
of U.S credit crisis
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AidAid Foreign aid as a catalyst for development
Source: OECD Development Centre / African Development Banks, 2008
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MDGsMDGs Slow progress, despite growth
Source: OECD Development Centre / African Development Bank, 2008
Goal 1
Goal 2
Goal 3
Goal 4
Goal 5
Goal 6
Goal 7
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UNECA
The African Economic Outlook 2008
Measuring the Pulse of Africa
Macroeconomic Outlook: Challenges and
Opportunities
Federica Marzo
Economista
Centro di Sviluppo
OCSE
11 July 2008
IAI, Rome
Investing in African Youth
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AEOAEO Technical and Vocational Skills Development (TVSD)
Which role for TVSD in Africa today?
What is the status of skills development? Which providers
and what access?
Are skills gaps being adequately addressed? What are the
constraints
and what are the lessons learnt from recent reforms ?
Key questions
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DefinitionDefinition Technical and vocational skills development
Acquisition of knowledge,
practical competences & knowhow
Public or
private TVET
schools
Degree of formalization
of labour market
Formal Informal
Workplace
training in
enterprises
Informal
ApprenticeshipDual
Training
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Role ofRole of
TVSDTVSD
Key Facts
Sustained economic growth …but:
• World’s lowest productivity (25% of world average, 1/12th of the
average of industrialized countries, slow progress) partly due to
limited technical skills
• Increasing youth unemployment (20% on average)
• Large informal sector (on average, more than 80% of total
employment)
Notable improvement in primary education, …but:
• Big pressure on secondary schools and TVET systems
• High drop out rates
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Achieving the MDGs
Technical and
Vocational Skills
Development
Technical and
Vocational Skills
Development
MDG 1:
Eradicate Extreme
Poverty and
Hunger
MDG 2: Expand
Primary Education
MDG 3:
Improve Gender
Equality in Educ.
MDG 4: Lower
Mortality Rates
MDG 5:
Enhance
Reproductive
Health
MDG 6: Combat
HIV/AIDS, Malaria,
etc.
MDG 7:
Environmental
Sustainability
MDG 8: Develop
Decent Work
strategies for youth
GINI ↓
SMEs
development
Elimination of
child labour
Better jobs
for parents
Empowering Rural Women
Water & soil
mgt
For community
health workers
Info & counselling
Role of TVSDRole of TVSD
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Formal Training, what else?
The percentage of total secondary students enrolled in
technical and vocational programmes in 2005
African countries can be
grouped in three
categories:
Group I: Proportion of
TVET enrolment > 10%.
Group II: Proportion of
TVET enrolment between
5 % and 9%.
Group III: Proportion of
TVET enrolment <5%.
Others: Data not
available
Source: OECD Developemnt Centre / UNESCO,
Global Education Digest, 2007
AccessAccess
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• Mostly financed by
government’s
budgetary allocations
• On average, only
about 2 to 6% of
educational budgets are
devoted to (mainly
formal) TVSD.
Access: Is Financing a Constraint ?
Source: OECD Development Centre, African Development
Bank / ILO world Employment Report (98-99), 2008
ConstraintsConstraints
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Access: ODA for vocational training in Africa
back on track?
The donor development agenda
(commitments in USD millions, 2005)
Source: OECD Development Centre / DAC Creditor
Reporting System, 2008
ConstraintsConstraints
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Challenges
• The training system in Africa is largely
underfinanced (only 2 to 6% of national edu.
budget).
• Donors’ support to training has been erratic &
insufficient to upgrade the quality and access
to training.
• Many enterprises undertrain their staff.
• Funding is fragmented: Countries must make
better use of existing funds
• Access remains more problematic for the poor
and vulnerable, especially in rural areas.
ConstraintsConstraints Financing is a major problem!
Needs
• Greater
diversification of
funding sources for
TVSD,
• Development of
private training
markets,
• Increased
competition between
public and private
TVSD providers,
• Encourage more and
higher quality
enterprise training.
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Constraints on TVSD’s impact & expansion
National
development
policy
TVSD
Industry skills needs Post-secondary
and tertiary
institutions
Firm-based
and informal
training
Lack of a coherent strategic
approach
Missing links Weak links
ConstraintsConstraints
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1. Adopting an integrated vision and clear lines of authorities :
• Senegal: Launched a TVSD reform making the TVSD a tool for competitiveness
• Zambia: clear legal and regulatory framework: Technical, Vocational and
Entrepreneurship Training Authority, 2005
• Tanzania : created a Vocational Education and Training Authority already in 1994
and skills development is part of the second generation PRS.
However in many cases it remains difficult to identify the leading institution
• Training authorities need to be given clear mandate and authority over resources.
2. Improving Forecasting and Planning for Skills Needs
• Successful TVSD reforms include
– Long-term planning + skill audits (Rwanda)
– Monitoring and Evaluation mechanisms
• Benin: Labour Market Observatory (tracking graduates, Labour Market survey)
LessonsLessons
LearntLearnt
Vision and Planning
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3. Improving the quality of TVSD
• Switch to demand-driven training model.
• TVET National Qualification Framework (NQF):
– Ethiopia: New Quality Management System (2006)
– South Africa: A new statement for the NQF was developed to enhance the efficacy
and efficiency (2007)- involving users and providers
4. Addressing the informal sector’s skill needs (and those of vulnerable
groups)
• In view of its large size, Training in the informal sector should be recognised.
– Benin: Test, certification of skills acquired through traditional apprenticeship
(Vocational Skill Certificate).
– Senegal: Pilot scheme to transform traditional apprenticeship into a dual system.
LessonsLessons
LearntLearnt
Quality Improvement & Informal Sector
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5. Setting up accompanying measures
• Design of integrated programs that couple training with access to finance,
Business development services, Marketing support, network
• AfDB & ILO: Support to growth oriented women entrepreneurs (GOWE).
• Angola First Job Law: Active labour mkt policies to facilitate transition to
work (internships, 60 per cent contribution to salary, support SMEs creation)
6. Foster Partnership with All stakeholders
• Policy design and actual delivery of education and training can best be
achieved through a partnership between government, social partners and
various stakeholder groups in the formal and informal sectors of the
economy.
• Mauritius & Tunisia: strong partnership with private sector
• Egypt: The most successful example of PPP between training institutions &
businesses is the Mubarak-Kohl Initiative (MKI).
LessonsLessons
LearntLearnt
Innovation & Partnership
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7. Involving Local Communities and Strengthening Local Management of
TVSD
• Delegation of responsibilities to regional authorities.
• Ethiopia: Consider establishing autonomous TVET Authorities at
federal and state levels, governed by TVET Council.
• Tunisia: The decentralization process is based on the devolution of
responsibilities to the training centres.
But...
• in many countries local authorises and school mgt have Insufficient
pedagogical, managerial, and administrative capacity to discharge new
responsibilities
LessonsLessons
LearntLearnt
Local Communities & Management
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1.Coherent vision and governance to TVSD
2. Make TVSD bankable: Strategies, action plan and
identification of objectives & resources needed
3. Increase awareness about benefits of TVSD
among firms and parents
4. Foster evaluation and monitoring mechanisms
To sum up...
To be fully effective, TVSD strategies must be integrated into
comprehensive employment policies and focus on sectors experiencing
employment growth and skill shortages
