OECD Working Dinner, Davos - 22 January 2015

1. OECD Working Dinner, Davos 22 January 2015
TRANSFORMING AFRICAN
ECONOMIES:
INTERCONNECTEDNESS, INVESTMENT
AND INCLUSIVENESS

2. • To engage in an informal exchange around challenges facing private sector
stakeholders across the African continent. Some of the these current
challenges include:
 Interconnectedness: Despite an 11% annual trade growth between 2005-2012, Africa’s share
in global value added trade remains low. How to overcome the remaining barriers to further
integration?
 Investment and financial sector development: While external financial flows have
quadrupled since 2000, access to finance is still an important hindrance in the development
of African businesses. How can the policy framework be more conducive to
entrepreneurship?
 Inclusiveness: Low literacy rates and low quality education still hamper inclusive growth in
several African countries. Skills mismatches are also a severe constraint. What instruments
are needed to reduce these gaps?
• To identify ways in which the OECD can step up its engagement in
supporting the transformation of African economies :
2
Why hold this event?

3. • Robust Economic Growth in Africa expected to continue
• Solid growth in trade, in particular with emerging partners
• Intra-African exports have the highest manufacturing intensity
• Africa still has a small share of global value added in trade
• Total investment is lagging behind compared to other developing
regions
• Resource rich countries in Africa capture two-thirds of FDI
• Intra-African FDI is on the rise
• Access to finance, corruption and infrastructure are among the top three
barriers to doing business in Africa
• The mismatch between the demand and supply of skills in Africa
remains high
• Africa still lags behind other regions in health and education but is
catching up 3
Key points for discussion

4. GDP growth projected to continue strongly in 2015. West Africa is the fastest growing
region with growth projected at 7.1%.
0
2
4
6
Southern Africa North Africa Africa Central Africa East Africa West Africa
2013 2014 2015
4
Robust economic growth in Africa
expected to continue
4
GDP growth by region 2013 – 2015
(real GDP in %)
Source: AfDB, OECD, UNDP, African Economic Outlook 2014
Africa

5. 0
200
400
600
800
1,000
2005 2012
5
Solid growth in trade, in particular
with emerging partners
Africa’s trade growth between 2005 and 2012 averaged 11% per year. Trade with China
grew at annual average of 25% and its share of total African trade increased from 9% to
21%.
USD 940bn
360 (38%)
China
USA
Intra-African
IND+BRA+KOR+TUR+RUS
80 (18%)
51 (11%)
Africa’s trade with main partners, 2005 and 2012
in billion USD (in share of total)
Source: AfDB, OECD, UNDP, African Economic Outlook 2014
200 (21%)
EU 27
148 (16%)
132 (14%)
100 (11%)
231 (51%)
41 (9%)
49 (11%)
USD 450bn

6. 0
200
400
600
800
1,000
EU25 USA China Intra-African
Manufacturing value-added processing
6
Intra-African exports have the highest
manufacturing intensity
32%
Raw resources
Billion USD
Source: AfDB, OECD, UNDP, African Economic Outlook 2014
Manufacturing intensity of Africa’s exports 2005-10,
by main trading partners
67%
18%
14%
18%
67% of intra-African trade is manufacturing. Chinese trade dominated by raw
resources – 86%. Africa’s four biggest oil and gas producers are among the
continent’s top five exporters.

7. 7
Africa still has a small share of global value
added in trade
Source: AfDB, OECD, UNDP, African Economic Outlook 2014
Value added exports, USD billion
African regions global value chain trade, 2011
0
20
40
60
80
100
Southern Africa North Africa West Africa East Africa Central Africa Indian Ocean
Backward integration Forward integration
Africa’s share of global value added trade was 2.2% or USD 253 billion in 2011.
Southern Africa and North Africa account for 76% (USD 193 billion) of Africa’s
total value added trade.

8. 8
Total investment is lagging behind compared
to other developing regions
0
2
4
6
8
10
0
10
20
30
40
50
Advanced
economies
Latin America Africa Developing Asia India China
Investment as % of GDP GDP Growth %
Africa’s investment and GDP growth in international comparison
GDP-weighted averages, 2001-12
Investment in % of GDP GDP growth in %
Africa’s investment ratio was around 23% of GDP during the past decade – far
lower than in developing Asia. Not only quantity of investment matters, but
also quality. Physical capital accumulation together with innovation were the
main engines of growth in China and India.
Source:AfDB,OECD,UNDP,AfricanEconomicOutlook2014
Africa

9. 9
Resource rich countries in Africa capture two
thirds of FDI
FDI into Africa reaches USD 60 billion in 2014 – 10% average annual growth over
the past 14 years. FDI into non-resource rich countries grew faster than into
resource rich countries – capturing 36% of total FDI into Africa.
0
20
40
60
80
2000 2004 2008 2012 2014
Foreign direct investments to Africa: Resource-rich and non-
resource-rich countries, 2000-2014
USD billion
Non-resource-rich countriesResource-rich countries
Source: AfDB, OECD, UNDP, African Economic Outlook 2014

10. 10
Intra-African FDI is on the rise
China
North America
Intra-
African
10
India
Europe
North America
44
18 13
4 3 Rest of world
21
Rest of world
China
India
3
6
41
Europe
Intra-
African
18Rest of Africa
South Africa
Kenya
Nigeria
Rest of Africa
South Africa
Kenya
Nigeria
19
10
30
50
10
39
30
17
11
Sources of greenfield investments to Africa
by number of projects, 2003-08 and 2009-13, in percent
2003-08 2009-13
Share in African origin
in % Share in African origin
in %
Source: UNCTAD 2014

11. 11
Access to finance, corruption and
infrastructure are among the top three
barriers to doing business in Africa
0 5 10 15 20
Poor public health
Government instability/coups
Foreign currency regulations
Insufficient capacity to innovate
Crime and theft
Restrictive labour regulations
Tax regulations
Policy instability
Poor work ethic in national labour force
Inflation
Inadequately eductaed workforce
Tax rates
Inefficient government bureaucracy
Inadequate supply of infrastructure
Corruption
Access to financing
sub-Sahara Africa
North Africa
Doing business in Africa – the most problematic factors,
World Economic Forum, Executive Opinion Survey 2012
In % of responses
Source: World Economic Forum 2012
Access to financing

12. 12
The mismatch between the demand and
supply of skills in Africa remains high
1 2
Skills mismatching versus lack of skills
In percentage of countries either as the biggest obstacle
Many job seekers have advanced
qualifications but not in the skill
required by employers
Most job seekers have
little or no skills
54 %
41%
Source: African Economic Outlook 2012, Country expert survey
Skills mismatches point to a problem in quality of education and insufficient
linkages between education systems and employers. Major problems identified:
lack of targeted education and shortage of technical and mechanical profiles.

13. 13
Africa still lags behind other regions in health
and education but is starting to catch up
2
3
4
5
6
The Global Competitiveness Index 2012-13 – Africa and comparator regions
by pillars (average scores)
4th pillar:
Health and
primary education
5th pillar:
Higher education
and training
Source: World Economic Forum , African Competitiveness Report 2013
Africa
BRIC
South Eat Asia

14. • Interconnectedness: Look more closely at how to make the
most of expanding regional integration of African markets,
including leveraging the OECD work on Trade in Value-
added.
• Investment: Identify ways to further leverage the OECD
Principles for Public Private Participation in Infrastructure,
the Policy Framework for Investment and the Guidelines for
Multinational Enterprises.
• Inclusiveness: Continue to support efforts by governments to
revisit national educational strategies and vocational training
policies, to reduce the mismatch gap. Encourage more
African countries to participate in OECD PISA and PIIAC
studies.
14
Next steps for OECD in strengthening our
cooperation with Africa

15. 15
For more on the OECD’s work with Africa:
www.oecd.org/africa