This document summarizes the key findings of the 2010 African Economic Outlook report published by the United Nations Economic Commission for Africa. It discusses the report's projections of economic growth in Africa between 2010 and 2011, noting growth rates around 4.5% in 2010 and 5.2% in 2011 on average across the continent. It also summarizes some of the drivers of growth in Africa like commodity prices and trade, as well as challenges including uneven impact of the global crisis and risks to continued growth from factors like global economic conditions and food prices.

1. 23 April 2009African Economic Outlook 2010Emerging Africa and the Global Business RevolutionBridging the Gap between Wealth and DestitutionIESE Center for Emerging MarketsBarcelona Chamber of Commercewith Casa África Measuring the Pulse of AfricaBarcelona, 28 June 2010

2. AEO PartnersUNECA
Lead partner
(since 2007/08)
Other partners10 Independent African Think Tanks
Experts Network
Financial partners
(European Development Fund)

3. Increased coverage and relevance for the continentCoveragefrom 47 to 50 countries (+ Comoros, Guinea‐Bissau and Sao Tomé& Principe) Relevance99.5% of Africa’s GDP 97.3% of its population

4. Focusing on key structural issues every yearSpecial annual focus2003: Privatisation2004: Energy2005: SMEs2006: Transport2007: Water and sanitation2008: Technical & vocational skills development2009: Innovation and ICT 2010: Public Resource Mobilisation and Aid

5. OverviewMacroeconomic OutlookDrivers of Growth1234The Global Crisis and Africa’s ResilienceChallenges and Risks Ahead

6. The outlook is generally positive... + 4.5% in 2010+ 5.2% in 2011PART 1: MACROECONOMIC OUTLOOK

7. ODA (not declined)Dynamic emerging partners have alsosupported growth and assisted with the recovery SECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCEReal GDP growth in Africa and emerging countries

8. Differentiated performance across the continentPART 1: MACROECONOMIC OUTLOOK
Real GDP Growth

9. Projected 10 fastest growing countries in 2010PART 1: MACROECONOMIC OUTLOOK

10. Projected 10 slowest growing countries in 2010PART 1: MACROECONOMIC OUTLOOK

11. Improving commodity prices and volumesThe drivers of growth still largely trade related...
Growth ratesSECTION 2: DRIVERS OF GROWTHOil and goldCopper and aluminiumRice, wheat and maize

12. Private financial flows are to rebound… SECTION 2: DRIVERS OF GROWTH
FDI flows to Africa
2000-2009

13. In 2009, the crisis slashed economic growth … SECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCE
Real GDP Growth
…however, the continent continued growing and the impact was unequal across regions

14. 11 countries experienced declines in GDP per capita of 2% or more in 2009 Whereas some countries saw negative growth… SECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCE

15. …many others have proved resilientSeveral countries saw GDP per capita increase between 3% and 7% in 2009 SECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCE

16. Economic policies key to resilienceSECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCECurrent Account BalanceFiscal Balance% of GDP%
Macro balances deteriorated in 2009,
but are expected to improve in the mid‐term

17. ODA (not declined)Supportive aid flowsSECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCE

18. While emerging partners dynamism helped to support growthand to trigger recovery China’s role stands outSECTION 3: THE GLOBAL CRISIS AND AFRICA’S RESILIENCE

19. Key risksSECTION 4: CHALLENGES AND RISKS AHEADAnnual Food Price Indices (2002‐04=100) AEO Diversification Index
1.Global economy not recovering as expected
2.Exit strategies might be politically difficult and harm fundamentals
3.Expectations of food prices rising again Ænew social tensions?
4.Commodity driven growth might bring further specialisation and growth volatility

20. Beyond crisis recoverySECTION 4: CHALLENGES AND RISKS AHEAD
Address the structural problems that existed before the global crisis and constrain the potential of sustained endogenous growth, in particular:
–Further improving political and economic governance
–Improving infrastructure
–Reducing barriers for intra‐African trade
–Combating inequalities and poverty
…including through improved domestic resource mobilisation

21. Public Resource Mobilization and AidWhy Public Resource MobilizationTaxes in Africa: some stylized Facts123Policy options

22. 1. WHY PUBLIC RESOURCE MOBILIZATIONThe cornerstone of broad‐based developmentODA < 50% tax revenueODA > 50% tax revenueNo available data
Source: Development Centre, based on AEO country survey’s, 2010.

23. Mobilising Africa’s public resources: canand mustbe achievedMedianAverageSource: Development Centre, based on AEO country survey’s, 2010.2. SOME STYLISED FACTS

24. 2. SOME STYLISED FACTSEncouraging trends considering income levelsSource: Development Centre, based on AEO country survey’s, 2010. ≈USD 3000≈USD 500≈USD 7020072007

25. 2. SOME STYLISED FACTSBut driven by volatile and unbalanced sources of incomeTax share = 36.4% of GDPTaxes on income and profits = 11.6% of GDPVAT = 10.5% of GDPResidual taxes = 14.3% of GDPCompared to Germany: Source: Development Centre, based on AEO country survey’s, 2010.

26. Some non resource‐rich countries have performed better in terms of tax effort (Tax effort = actual tax revenue/potential tax revenue) Source: Development Centre, based on AEO country survey’s, 2010. Yet several reformers show resource abundance not necessaryOil exporters usually show low tax effortAfrican average =1.092. SOME STYLISED FACTS

27. Four Challenges for African Tax Policy Makers 3. POLICY OPTIONS
1. Inadequate capacity
Small staff, low pay, IT, governance …
2. Low to very low fiscal legitimacy
Health, infrastructure, education …
3. Shallow tax base
Informal sector = about 75%
4. Unbalanced tax mix
Some overtaxed, some undertaxed
Source: Centre de Développement, sur la base des notes pays des Perspectives économiques en Afrique, 2010.

28. Micro, small and medium enterprises = low fiscal potential3. POLICY OPTIONS
Micro / small informal
Formal SMEs
•Few exemption benefits
•Tend to be abusively taxed
•«Missing middle»
•High collection costs
•Low fiscal returns
•Already pay VAT

29. Big transactions and enterprises have a high fiscal potential3. POLICY OPTIONS
Large informal transactions
Multinationals
•Effective tax rates
< nominal tax rates
•Lack of transparencyLow collection costsHigh fiscal returns
•Fraud and exemptions

30. At national level3. POLICY OPTIONS
In the short run
•Tax big informal and formal transactions better
•Fight fraud and fiscal evasion
In the medium / long run
•Stimulate private sector development
•Moderate, broad-based effective tax rates
•Strengthen administrative capacity
•Build fiscal legitimacy by improving quality of expenditure

31. 3. POLICY OPTIONSA high multiplier, yet neglected in technical cooperationCountryAverage Cost ‐revenue ratioSudan5.7% Ethiopia5.3% Congo RDC5.2% Rwanda3.2% Tanzania3.2% South Africa1.2% ArgentinaEcuadorCosta Rica1.8% 1.0% 0.8% Collection costs as a % of collected tax revenues
Source: OECD/DAC 2010

32. 3. POLICY OPTIONSThe voice of Africa must be heard in the international tax dialogueCHANGE GLOBAL RULES OF THE GAMECountry-by- Country MNEs reporting… Dealing with misuse of transfer pricing by MNEsParticipation in International Tax DialogueRegional initiatives: African Tax Administration Forum= OECD : tax havens… = OECD : capacity building + peer learningBeing studied as a potential solution = = Capacity issues
Local
International

33. www.AfricanEconomicOutlook.orgThank you