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Sub-Saharan Africa and Europe in a restructuring world

François Bourguignon and Pierre JacquetParis School of Economics and Agence Française de Développement

AFD-EUDN Conference, December 2009, Paris

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Sub-Saharan Africa in a multi-polar world

Commodity exports not sufficient to sustain SSA's catching-up: need for diversification.

SSA development handicaps: productivity gaps, population growth, hard and soft infrastructure deficit.

SSA unlikely to become a development pole by itself without outside support

Development prospects depend on relationship with existing and emerging global economic poles

The potentially privileged position of Europe

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Outline

1. Development performances of SSA and its present global economic integration

2. Inward and outward oriented strategies to accelerate SSA development

3. What European policy towards SSA?

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1. Development performances of SSA and its present global economic integration

i. Aggregate performancesii. Trade integrationiii. Factor flowsiv. Aid to SSAv. Global powers' initiatives towards

SSA

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i. Aggregate performances

GDP per capita growth rates by world regions: 1970-2008

-6

-4

-2

0

2

4

6

8

1970 1975 1980 1985 1990 1995 2000 2005

Developing countries

Developed countries

Sub-Saharan Africa

6

Sub-Saharan Africa: Terms of trade and GDP per capita growth, 1980-2007

0

20

40

60

80

100

120

140

160

1980 1985 1990 1995 2000 2005

Year

Ind

ex (

2000

=10

0)

-8

-6

-4

-2

0

2

4

6

8

Gro

wth

rat

e (%

)

Terms of Trade (2000=100)

GDP per capita growth

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Sub-Saharan Africa: Sectoral composition of GDP, 1970-2008

0

10

20

30

40

50

60

1970 1975 1980 1985 1990 1995 2000 2005

Year

Per

cen

t

Services

Industry (inc. Manufactuiring)

Agriculture

8

1970-1978 1979-1994 1995-2007

Sub-Saharan Africa (unweighted mean)2.0 -0.7 1.7

Resource-rich countries 1.6 -1.6 1.9Resource poor countries 2.1 -0.3 1.6

Landlocked countries 2.0 -0.6 1.8Coastal countries 1.9 -0.7 1.7

Fragile countries 1.4 -1.7 1.4Non-fragile countries 2.6 0.4 2.1

Sub-Saharan Africa: mean per capita GDP growth rates by type of country

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ii. Trade integration

Sub-Saharan Africa: Openness and share of world trade

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

% o

f W

orl

d E

xpo

rts

and

Wo

rld

GD

P

SSA ExportsSSA GDP

0

5

10

15

20

25

30

35

40

Openness (X+M)/2*GDP

10

Sub-Saharan African Exports -2008

0%5%

10%15%20%25%

30%35%40%45%50%

ALL SSA Resource Non-resource Coastal Landlocked

Rest of World

Europe

Africa

China

J apan

USA

Subsaharan African Imports - 2008

0%

5%

10%

15%

20%

25%

30%

35%

40%

ALL SSA Resource Non-resource Coastal Landlocked

% o

f S

SA

GD

P

Rest of WorldEuropeAfricaChinaJ apanUSA

Geographical structure of SSA trade

1111

SSA Trade specialization, 2008

Source : Comtrade. The category “non-resource rich” includes South-Africa

-

50

100

150

200

250

Exports Imports Exports Imports Exports Imports

SSA without South Africa Resource rich Non - Resource rich

Curr

ent d

olla

rs, i

n Bi

llion

Fuel Manufactures Agr. Raw Materials Food Ores & Metals

1212

SSA manufactured trade by destination countries: 1998-2008

Source : Comtrade. The category “manufactures” does not include non-ferrous metals.

-

5

10

15

20

25

EU - 27 USA SSA China Other

US$

bill

ion

1998

2008

-

10

20

30

40

50

60

70

EU - 27 USA SSA China Other

US$

bill

ion

1998

2008

SSA exports of manufactures SSA imports of manufactures

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iii. Foreign factor flows

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SSA migration by region of destination

Stocks of SSA migrants outside SSA: 1990-2000

0

0.5

1

1.5

2

2.5

3

3.5

America Europe EU 15 Asia and Oceanis Total

Region of destination

Mil

lio

ns

1990

2000

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iv. Aid to SSA

Official Development Assistance to Africa by donor: 1990-2007

0

5

10

15

20

25

30

35

Multi-lateral EU US Others Total

$ B

illi

on

1990

1995

2000

2005

2007

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v. Global powers' SSA initiatives

EU : after 30 years (GSP, Lomé, Cotonou) of a policy based on trade preferences and development finance, shift toward reciprocal trade agreements cum regional integration through the EPAs.

SSA comeback as a strategic stake (access to resources, global politics) since the early 2000s AGOA: Apparel and non-apparel preferences EBA: Preferences open to least advanced countries FOCAC: the China-Africa partnership

Issues Crucial role of rules of origin :AGOA vs. EU's EBA Questions on the impact of preferences Is WTO compatibility an issue ? Is China more or less effective than the West ?

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vi. Partial summary

A region highly diverse but with common problems

A region very open and globally dependent on trade in primary commodities

Dismal growth performances in the 1980s and 1990s. No autonomous growth engine at work

Very strong links with Europe (trade and market access, aid, migrations)

Important role for ODA (programmable aid about 5% of SSA GDP)

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2. Inward- and outward-oriented strategies to accelerate SSA development

i. Limitations of the "business as usual" or the "rentier" scenario

ii. Import substitution through proper regional integration

iii. Diversifying exports through trade preferences

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i. Limitations of the "business as usual" or the "rentier" scenario

Commodity exports' rent and remittances cannot support ambitious development: Fragility; dependency on global demand; non-

tradable bias; demographic growth; weak global prospects

Limited development potential of non-traditional tradable sectors: Low competitiveness; small domestic market size;

lack of hard and soft infrastructure Investing in governance and human capital

necessary but not a substitute to a trade-related 'growth engine'

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ii. Import substitution through proper regional integration

Past SSA experiences with Regional Integration Agreements (SADC, ECOWAS, UEMOA, ..) Free trade areas vs custom unions, overlaps, trade

diversion Transforming present agreements into proper

custom unions: Uniform tariffs and relative protection of a few

sectors; effective regulation of competition; infrastructure investments; foreign investors

Asian development WTO rules

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iii. Diversifying exports through trade preferences

Revisiting AGOA and EBA types of agreements with US and EU economic poles: Extend country coverage, soften rules of origin

Chinese investors using SSA as an export base is not necessarily a problem: Tariffs in US and EU are low anyhow; competition

among foreign investors; spillover effects on domestic markets identical

Present experiences of Special Economic Zones supported by Chinese firms

Combining regional integration and trade preferences

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3. European policy toward SSA

Why is SSA strategic ? Access to energy and natural resources Demographics Game of influence through development

effectiveness Why should Europe invest more in SSA ?

Natural geopolitical space EU and SSA are natural markets for each other Labor and personal mobility Laboratory for innovation in sustainable

development

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3. European policy towards SSA (2)

Evolving relative position of Europe in SSA Define global, consistent policy toward SSA

Trade preferences, support for regional integration, more flexible rules of origins

Substantial scaling-up in volume and quality of development assistance

Consistent immigration policies Promotion of a conducive global governance

framework: Allowing SSA policy space for economic

diversification (through trade policy, subsidies, forms of “industrial” policies…).

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END