African Economic Outlook 2017 2 0 1 7 ENTREPRENEURSHIP AND INDUSTRIALISATION The African Economic Outlook 2017 presents the continent’s current state of affairs and forecasts its situation for the coming two years. This annual report examines Africa’s performance in crucial areas: macroeconomics, external financial flows and tax revenues, trade policies and regional integration, human development, and governance. For its 16th edition, the report takes a hard look at the role of entrepreneurs in Africa’s industrialisation process. It proposes practical steps that African governments can take to carry out effective industrialisation strategies. Policies aimed at improving skills, business clusters and financing could remove important constraints on African private enterprises. A section of country notes summarises recent economic growth, forecasts gross domestic product for 2017 and 2018, and highlights the main policy issues facing each of the 54 African countries. A statistical annex (available only on line) compares country-specific economic, social and political variables. A Full-length country notes are available on www.africaneconomicoutlook.org/en/countries. F R I C A N E C O N O M I C O U T L O O K E n t r e p r e n e u r s h ip a n d In d u s t r ia lis a t io n ISBN 978-92-64-27425-9 41 2017 09 1 P 1 African Economic Outlook 2017 ENTREPRENEURSHIP AND INDUSTRIALISATION The opinions expressed and arguments employed herein do not necessarily reflect the officialviewsoftheAfricanDevelopmentBank,itsBoardsofDirectorsorthecountriesthey represent;oftheOECD,itsDevelopmentCentreortheirmembercountries;ortheUnited NationsDevelopmentProgramme. Thisdocument,aswellasanydataandmapincludedherein,arewithoutprejudicetothe statusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersand boundariesandtothenameofanyterritory,cityorarea. ISBN978-92-64-27425-9(print) ISBN978-92-64-27426-6(PDF) Series:AfricanEconomicOutlook ISSN1995-3909(print) ISSN1999-1029(online) http://dx.doi.org/10.1787/aeo-2017-en Photocredits:CoverdesignbytheAfricanDevelopmentBankbasedonimagesfromShutterstock.com CorrigendatoOECDpublicationsmaybefoundonlineat:www.oecd.org/about/publishing/corrigenda.htm. ©African Development Bank, Organisation for Economic Co-operation and Development, United NationsDevelopmentProgramme(2017). Youcancopy,downloadorprintthismaterialforyourownuse,andyoucanincludeexcerptsfromthispublicationinyourowndocuments, presentations,blogs,websitesandteachingmaterials,providedthatsuitableacknowledgmentofAfDB,OECDandUNDPassourceand copyrightownersaregiven.Allrequestsforpublicorcommercialuseandtranslationrightsshouldbesubmittedtorights@oecd.org. RequestsforpermissiontophotocopyportionsofthismaterialforpublicorcommercialuseshallbeaddresseddirectlytotheCopyright ClearanceCenter(CCC)[email protected]çaisd’exploitationdudroitdecopie(CFC)[email protected]. 1. <Header left page - cHapter> Foreword The annual African Economic Outlook (AEO) monitors the continent’s state of affairs using a collaborative approach. The AEO assesses the recent economic and social situation in Africa, projects likely developments for the near future and explores a special theme on the structure of African economies. The AEO 2017, the 16th edition, examines entrepreneurship and industrialisation in Africa. The report results from a unique partnership between three international organisations: the African Development Bank, the OECD Development Centre and the United Nations Development Programme. Three parts comprise the AEO 2017. Part I examines Africa’s macroeconomic performance, financing, trade policies and regional integration, human development, and governance. Part II explains how improving entrepreneurship contributes to Africa’s industrialisation and offers policies to do so. Part III summarises the performance of every African country; a condensed version appears in the printed copy of the report. The statistical annex contains 26 tables comparing economic, social and political indicators across all 54 African countries. For the first time, they are published only online, allowing for updates throughout the year. The AEO presents rigorous and independent analysis and data for a large audience. Over 150 researchers, economists, statisticians, and other experts from Africa and different regions of the world contribute to this report. They draw on data from numerous sources, including national statistics offices, ministries, multilateral development institutions, civil society and the media. This valuable, policy-relevant compilation can inform decision makers, advisors, business analysts, private sector actors, journalists, non-governmental organisations and engaged citizens around the globe on factors shaping Africa’s development trajectory. The AEO 2017 is available in various editions and formats. The full report is published in English and French, and an abridged version is produced in Portuguese. Each version is available in both hard copy and electronic format. The report has a dedicated website: www.africaneconomicoutlook.org, which houses these as well as past editions. The site also contains 54 full-length country notes in their original language and accompanying figures and tables, along with the 26 statistical tables. 3 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017 Editorial The 16th edition of the African Economic Outlook highlights the fact that Africa’s economic performance is reflecting the perils of the global economy. The region’s real GDP growth slowed down to 2.2% in 2016, mainly due to the continued fall in commodity prices and weak global economic growth. East Africa was the fastest growing region at 5.3% real GDP growth, followed by North Africa at 3%. Growth in other regions was anaemic, ranging from a low of 0.4% in West Africa, dragged down by the recession in Nigeria, to 1.1% in Southern Africa, with South Africa, the region’s largest economy, posting only 0.3% growth. With dynamic private sectors, entrepreneurial spirit and vast resources, Africa has the potential to grow faster and more inclusively. The continent’s average growth is expected to rebound to 3.4% in 2017, assuming that the recovery in commodity prices is sustained, the world economy is strengthened and domestic macroeconomic reforms are entrenched. In 2018, growth is expected to consolidate, expanding by 4.3%. The composition of total financial flows to Africa reflects the dynamism of its domestic markets. In 2017, inflows are projected at almost USD 180 billion. Remittances will reach USD 66.2 billion, up from USD 64.6 billion in 2016. Foreign direct investment inflows are expected to reach over USD 57 billion in 2017, supported mainly by greenfield investments from emerging economies. Tax revenue remains the most important source of domestic financing in African countries but has slowed with the decline in commodity prices. African countries will need to explore other options of mobilising domestic resources to minimise vulnerability of revenues to volatility in commodity prices. Unlocking Africa’s less volatile sources of growth to spur human development will require greater investment in human capital – such as in health, education and skills – , stronger capacities to diversify financing and more effective efforts to promote structural transformation. Despite a decade of progress, 54% of the population in 46 African countries are still living in poverty. It is essential to double efforts to empower Africans with the necessary skills to promote development from the bottom up, driven by domestic innovation and investment. This is why the African Economic Outlook focuses this year on the role of entrepreneurs in Africa’s industrialisation. We need to help African countries address the challenges of low human development and social exclusion, and this is what we are doing. Industrialisation is one of the High 5 priority areas of the African Development Bank. It is also in line with the African Union’s proclamation of industrialisation as the main strategy to promote inclusive economic transformation, and it is the ninth Sustainable Development Goal. In addition, in July 2016, the United Nations General Assembly proclaimed 2016-25 as the Third Industrial Development Decade for Africa; and under China’s leadership, the G20 also agreed in September 2016 to support Africa’s industrialisation as part of its Action Plan on the 2030 Agenda for Sustainable Development. To bolster this momentum, this year’s African Economic Outlook proposes several concrete steps for action. Africa’s industrialisation will differ from the experience of other world regions. First, the 54 African countries are diverse and will thus follow various pathways to industrialisation. Second, industrialisation will not rely solely on the manufacturing sector, which remains modest at 11% of the continent’s GDP. Twenty-first century industrial policies can target additional sectors with high-growth potential, such as agro- processing and services with higher value added. Third, policies must promote “green industrialisation”, as technological and market changes have made it possible to achieve industrialisation with lower environmental costs. Greater efforts should also be made 5 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017 edItOrIal to ensure that green infrastructure is developed and is accessible to firms and citizens. Fourth, and most importantly, Africa’s industrialisation will also depend on the solid growth of African private companies. New industrialisation strategies should therefore leverage Africa’s booming entrepreneurs. The entrepreneurial culture is vibrant with about 80% of Africans viewing entrepreneurship as a good career opportunity. The continent has the highest share in the world of adults starting or running new businesses, but often in sectors where productivity remains low. New industrialisation strategies should focus on leveraging this dynamism and targeting the continent’s fast-growing private enterprises which have potential to create quality jobs. To unlock this huge potential and different sources of growth, global co-operation is needed more than ever. The African Economic Outlook – produced by the African Development Bank, the Organisation for Economic Co-operation and Development and the United Nations Development Programme – aims to promote up-to-date evidence and analytics to support Africa’s decision makers. Akinwumi Ayodeji Adesina Angel Gurría Helen Clark President, Secretary-General, Administrator, African Development Organisation for Economic United Nations Bank Group, Co-operation Development Programme, Abidjan and Development, New York Paris 6 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017 Acknowledgements The African Economic Outlook (AEO) was prepared by a consortium of three teams from the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP). The Outlook benefited from the overall guidance of the office of the Vice President and Chief Economist, Economic Governance and Knowledge Management (AfDB) and direct supervision of Abebe Shimeles (Acting Director, Macroeconomic Policy, Forecasting and Research Department, AfDB), Federico Bonaglia (Acting Deputy Director of the OECD Development Centre) and Ayodele Odusola (Chief Economist and Head of the Strategic Advisory Unit, Regional Bureau for Africa, UNDP). The AfDB team was led by Anthony Simpasa. Key team members included Maurice Mubila, Louis Kouakou, Anouar Chaouch and the entire AfDB Statistics Department. The team at the OECD Development Centre was led by Henri-Bernard Solignac-Lecomte and Arthur Minsat, while the team at UNDP was led by Angela Lusigi. The report benefited from substantial input by Jennifer Blanke, Vice-President for Agriculture, Human and Social Development, as well as Lawrence Tawah, Ferdinand Bakoup, Stefan Muller, Thomas Viot, Mahib Cisse, Alhassane Haidara, Laura Sennet, Walter Odhiambo, Saloua Sehili, Kapil Kapoor, Emanuele Santi, Thouraya Triki and staff in the Macroeconomic Policy, Forecasting and Research Department at the AfDB; as well as by Laurent Bossard at the Sahel and West Africa Club and Nadine Gbossa, Johannes Jütting, Bathylle Missika, Rolando Avendano, Marcus Böhme, Lucia Cusmano, Juan De Laiglesia, Antonio Fanelli, Gaëlle Ferrant, Miriam Koreen, Adrien Lorenceau, Maria Rosa Lunati, Keiko Nowacka, Antonella Noya, Lucia Perez Villar, Jonathan Potter, Annalisa Primi, Jan Rieländer and Vicente Ruiz at the OECD. Part I on Africa’s performance and prospects was drafted by Jacob Oduor, based on the forecast from the AfDB Statistics Department (Chapter 1), Lucia Wegner and Mouhamadou Sy (Chapter 2), Bumi Camara (Chapter 3), Kate Tench and Angela Lusigi (Chapter 4), and Bakary Traoré, Sébastien Markley, Harriet Ayernor and Ines Zebdi (Chapter 5). Additional data analysis and input were provided by Christine de la Maisonneuve, Richard Dutu, Ryan Jacildo, Willi Leibfritz and Thang Nguyen (Chapter 1), Yasmin Ahmad, Olivier Bouret, Elena Bernaldo de Quiros, Angel Melguizo, Emmanuelle Modica, Aimée Nichols, Lorenzo Pavone and Valérie Thielemans (Chapter 2), Laurent Bossard, Bakary Traoré, Sébastien Markley, Rodrigo Deiana and Martin Wermelinger (Chapter 3), Sunita Pitamber, Adamon Ndungu Mukasa, Andinet Woldemichael, Bumi Camara, Alessandra Heinemann, Keiko Nowacka and Willi Leibfritz (Chapter 4), as well as Catherine Anderson, Sara Batmanglich, Joël Boutroue, Derek Carnegie, Rachel Scott and Lisa Williams (Chapter 5). Part II on entrepreneurship and industrialisation was drafted by Willi Leibfritz, Arthur Minsat, Thang Nguyen and Rodrigo Deiana with assistance from Gisely González- Peña, Palesa Thinta, Kentaro Fujimaru, Portia Maseogane and Paula Misler. John Page (Brookings Institution), Milan Brahmbhatt (World Resources Institute), Catlyne Haddaoui (New Climate Economy) and Wim Naudé (Maastricht School of Management) drafted background papers. The following people made written contributions: Mike Herrington (Global Entrepreneurship Monitoring); Dirk Willem te Velde (Overseas Development Institute); Frank Cinque and Mario Marco Molteni (E4Impact); Saskia Vossenberg (KIT – Royal Tropical Institute/Center for Frugal Innovation in Africa, CFIA); Michael Onyango (Kisumu County Government); Roland Portella (CADE); Samuel Mathey and Siriki Coulibaly (FAFEDE); Parminder Vir OBE (Tony Elumelu Foundation); Youth Unit/Urban Economic Branch, UN-Habitat; Sara Núñez Evora (Ministry of Trade, Industry and East African Community Affairs, Rwanda). 7 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017 acKNOWledgeMeNtS In collaboration with the partner institutions and under the overall guidance of the AfDB Directors General and lead economists, AfDB country economists prepared the country notes. In most cases, they collaborated with UNDP country economists and/or OECD Development Centre economists. The work on the country notes benefited from contributions from local consultants in selected countries. The country notes were drafted by the people below. Country Authors Algeria Hervé Lohoues and Tarik Benbahmed Angola Joel Muzima and Glenda Gallardo Benin Daniel Ndoye, Ginette Patricia Mondongou Camara and Janvier Polycape Alofa Botswana George J. Honde Burkina Faso Facinet Sylla, Amata Sangho Diabate, Alain Siri and Hervé Marie Patrice Kouraogo Burundi Joel Tokindang, Ernest Bamou and Arthur Rushemeza Cabo Verde Adalbert Nshimyumuremyi, Yannis Arvanitis and Luca Monge Roffarello Cameroon Richard Antonin Doffonsou and Francis Jony Andrianarison Central African Republic Kalidou Diallo and David Tchuinou Chad Claude N’Kodia and Daniel Gbetnkom Comoros Alassane Diabate, El Hadji Ndji Mamadou Fall and Issa Attoumane Boina Congo Nouridine Kane Dia and Francis Jony Andrianarison Congo, Dem. Rep. Jean Marie Vianney Dabire, Ernest Bamou and Jean Amisi Mutumbi Kalongania Côte d’Ivoire Pascal Yembiline, Idrissa Diagne and El Allassane Baguia Djibouti Guy Blaise Nkamleu Egypt Angus Downie Equatorial Guinea Dominique Puthod Eritrea Magidu Nyende and Frederick Mugisha Ethiopia Edward Batte Sennoga, Admit Wondifraw Zerihun, James Wakiaga and Haile Kibret Gabon Dominique Puthod and Célestin Tsassa Gambia Adalbert Nshimyumuremyi, Yannis Arvanitis, Khadidiatou Gassama, Radhika Lal and Abdoulie Janneh Ghana Eline Okudzeto, Radhika Lal and Kordzo Sedegah Guinea Olivier Manlan, Idrissa Diagne and Mamadou Sarifou Diao Diallo Guinea Bissau Yannis Arvanitis, Luca Monge Roffarello and Inacio Ie Kenya Walter Odero, Wilmot Reeves and Julius Chokerah Lesotho Edirisa Nseera and Asha P. Kannan Liberia Patrick Hettinger, Moses Sichei and Stanley Kamara Libya Yasmine Eita Madagascar Tankien Dayo, El Hadji Ndji Mamadou Fall and Adamson Rasolofo Malawi Peter Mwanakatwe and Alka Bhatia Mali Abdoulaye Konate, Hamaciré Dicko and Becaye Diarra Mauritania Marcellin Ndong Ntah, Becaye Diarra and Selma Cheikh Malainine Mauritius Ndoli Kalumiya and Luka Jovita Okumu Morocco Vincent Castel Mozambique Andre Almeida Santos, Glenda Gallardo and Manuel Filipe Namibia Martha Phiri and Alka Bhatia Niger Facinet Sylla, Amata Sangho Diabate and Moctar Seydou Nigeria Barbara Barungi, Ojijo Odhiambo and Robert Asogwa Rwanda Bernis Byamukama and Yemesrach Workie Sao Tome and Principe Flavio Soares Da Gama and Idrissa Sanoussi Senegal Toussaint Houeninvo, Khadidiatou Gassama and Isiyaka Sabo Seychelles Tilahun Temesgen and Roland Alcindor Sierra Leone Jamal Zayid, Moses Sichei and Milton Korseh-Hindowa Somalia Richard Walker and Salome Kimani South Africa Wolassa Lawisso Kumo, Fatou Nyang Leigh and Arthur Minsat South Sudan Guy Blaise Nkamleu and Frederick Mugisha Sudan Suwareh Darbo and Yousif Eltahir Swaziland Peninah Kariuki and Asha P. Kannan Tanzania Chidodzie Emenuga, Prosper Charle and Rogers Dhliwayo Togo Carpophore Ntagunguria, Ginette Patricia Mondongou Camara and Jeanne Bougonou Tunisia Philippe Trape Uganda Vera Kintu Oling, Yemesrach Workie and Simon Peter Nsereko Zambia Peter Engbo Rasmussen, Colleen Zamba and Elda Chirwa Zimbabwe Mary Manneko Monyau and Amarakoon Bandara 8 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017 acKNOWledgeMeNtS The committee of peer reviewers of the country notes included Adamon Ndungu, Adeleke Salami, John Anyanwu, Amadou Boly, Andinet Woldemichael, Audrey Chouchane, Blessing Ose Oligbi, Bumi Camara, Carlos Mollinedo, Charlotte Karagueuzian, Chuku Chuku, Dawit Birhanu, El-Haji Mamadou Bah, Elizabeth Anyango Owiti, Eric Kere, Gilbert Galibaka, Jacob Novignon, Jacob Oduor, Jacqueline Odula, Johnathan Dastu Danlad, Kevin Lumbila, Laureline Pla, Linguere M. Mbaye, Mawuko Kokou Kponnou, Mouhamadou Sy, Nicolas Masiyandima, Oscar Pitti Rivera, Qingwei Meng, Regis Lakoue Derant, Rose Mwebaza, Sandrine Alissoutin, Thierry Kangoye, Urbain Nerry Cyrille Mballa and Zeke Geh (AfDB); Rodrigo Deiana, Arthur Minsat and Thang Nguyen (OECD); Angela Lusigi and Idrissa Diagne (UNDP). The macroeconomic framework and database used to produce the forecast and statistical annex were managed by Mubila Maurice and Koua Louis Kouakou at the AfDB. Statistical inputs for updating the database and running the AEO model were provided by Anouar Chaouch, Mbiya H.K. Kadisha, Soumaila Karambiri, Doffou Marc Elisée Monsoh, Slaheddine Saidi and Jerbi Slim in the AfDB Statistics Department. Bakary Traoré and Sébastien Markley assembled the final dataset for publication at the OECD Development Centre. Patience Gogo, Veronique Aka, Abiana Nelson and Elisabeth Turner also provided assistance. The report benefited from inputs and comments from a large number of African government representatives, private sector operators and civil society members; sector specialists and senior management officials in the AfDB Vice Presidency Complexes, operations departments and field offices; the UNDP Africa Regional Bureau and Country Offices; and OECD bodies: Centre for Entrepreneurship, SMEs, Local Development and Tourism; Development Centre; Development Co-operation Directorate; Directorate for Employment, Labour and Social Affairs; Directorate for Financial and Enterprise Affairs; Directorate for Public Governance and Territorial Development; Directorate for Science, Technology and Innovation; Economics Directorate; Global Relations Secretariat; Public Affairs and Communications Directorate; Sahel and West Africa Club; Statistics Directorate; and Trade and Agriculture Directorate. Part II on entrepreneurship and industrialisation in Africa drew heavily from the knowledge of international experts invited to the AEO 2017 experts’ meeting in Paris on 10-11 October 2016: Blandina Kilama (Repoa), Eric Bazin, Catherine Dernis (Land of African Business), Catlyne Haddaoui, Russell Austin Bishop (New Climate Economy), Christophe Angely (FERDI), Dorothy McCormick (University of Nairobi), Eyerusalem Siba (Brookings Institution), Isabelle Ramdoo (Linkages and Investment), Jean-Michel Severino (Investisseurs & Partenaires), Lena Giesbert, Tabea Lakemann (GIGA Institute of African Affairs), Lucia Wegner (KIT – Royal Tropical Institute), Magena Ayyagari (George Washington University), Marco Kamiya (UN HABITAT), Marie-Ange Véganzonès Varoudakis (CERDI-CNRS), Martyn Shannon (DfID), Max Cuvellier (GSMA Mobile for Development ), Oa Selialia Sechada (Scoody), Olga Memedovic (UNIDO), Paul Ginies (Stratconseil), Pierre Ewenczyk (IMF), Roland Portella (CADE), Siriki Coulibaly and Samuel Mathey (FAFEDE), and Wim Naudé (Maastricht School of Management). Key contributions to the thematic chapters were also made by Justin Yifu Lin (Peking University), Dirk Willem te Velde (Overseas Development Institute), David Kaplan (University of Cape Town), Elizabeth Glass (US Small Business Administration), Abiodun Egbetokun (National Centre for Technology Management), Thierry Giordano (FAO), José Pineda (University of British Columbia), Anton Cartwright (African Centre for Cities), Felicity Proctor (Proctor Consulting), Gideon Mass (Coventry University), Jacqueline Kew (University of Cape Town), Kingston Mutsonziwa (FinMark Trust), Mikael Samuelsson (Stockholm School of Economics), Allon Raiz (Raizcorp), Lesley Wentworth (Southern 9 afrIcaN ecONOMIc OUtlOOK © afdB, Oecd, UNdp 2017