Africa s Third Liberation? 21 st Century Development Drivers. Greg Mills SIDA

THEBRENTHURST FOUNDATION Africa s Third Liberation? 21 st Century Development Drivers Greg Mills SIDA 19 January 2012

Point of Departure: Six Di Drivers People. Growth and Differentiation. Democracy and Conflict. Resources. Food. Competitiveness and Technology.

DRIVER ONE: DRIVER ONE: People

SSA Population: 1950 2050 2 (B Billions s) 1.5 1 0.5 1.08 Billion in 2020 0 1950 1975 2000 2025 2050 Source: United Nations 8

Population by Age Group 100+ 90-94 80-84 70-74 74 60-64 50-54 40-44 30-34 20-24 24 10-14 0-4 1980 2020 Male Female 1.0 0.5 0.0 0.5 1.0 (in Billions) Source: United Nations 9

The Urbanization Phenomenon Billiion ns 2 70 60 1.5 50 1 40 30 0.5 20 10 0 0 1950 1975 2000 2025 2050 Ttl Total Population % Urban Source: United Nations 12

This is where This is where she lives

700 600 500 3 This is where 100 she lives 0 400 300 200 African Per Capita Income, Constant (2000) US$ 1 960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2 2 006 008 2010

Result: by 2025 there will be 30 million people younger than 24 years in African cities a most potent political and cultural force on the continent. What does this mean for Africa? Stress on urban infrastructure Risk of appeal of populism Need to manage expectations Need to ensure rural growth

Yet her generation has the best chance of breaking out of poverty

The demographic dividend 70 Working Age Population (% of total population) 65 60 55 50 2045 2050 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 World Sub saharan Africa

DRIVER TWO: Growth th& Differentiation

6000 Constant Per Capita Income Across Regions 5000 4000 3000 2000 East Asia Latin America Middle East South Asia Africa 1000 0

Much has been achieved 40+ democracies Range of donors and allies Governance improved Growth over 5% Morehonest inward scrutiny Commodities revival

700 600 500 400 300 200 100 0 Africa vs. Largest Countries, Constant Per Capita Income Much has been achieved 40+ democracies Range of donors and allies DRC Governance improved Ethiopia Nigeria Growth over 5% Sub Saharan Africa Morehonest inward scrutiny Commodities revival

Much has been achieved 40+ democracies Range of donors and allies Governance improved Growth over 5% Morehonest inward scrutiny Commodities revival Differentiation important phenomenon

Much has been achieved 40+ democracies Range of donors and allies Governance improved Growth over 5% Morehonest inward scrutiny Commodities revival

GDP Growth and Employment Trends Despite the best growth decade on record, labour participation rates largely remained static Growth (% %) 7 6 5 4 3 2 1 0-1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 50 GDP Growth GDP Per Capita Growth Labor Source: Participation World Bank Rate and (ALL) International Labour Organisation Labor Participation Rate (YOUTH) 26 75 70 65 60 55 Labor Fo orce Partici ipation Rate

DRIVER THREE: DRIVER THREE: Democracy & Conflict

25 Sub Saharan Saharan African Conflicts 20 15 10 5 0 Conflicts

The potential for social destabilisation exists it

Arab and African Springs? Some commonalities: How to achieve growth with democracy and jobs? How to address population dynamics: 65% of regional population is under 30? 34

Egypt imports about half of its staples, and spends $15 billion a year in food Some commonalities: subsidies. But redistribution not a What substitute follows? for employment How to achieve growth with democracy Egypt s and population jobs?, currently 81 How to address million, population will reach 104m by 2025, and dynamics: 140m 65% of by regional 2050. population is under 30? 35

GLOBAL PER CAPITA INCOME (PPP) & INCOME INEQUALITY

DRIVER FOUR: Resources

Africa s Globalisation Link Western consumer demand Ai Asian production & savings Commodity demand

AFRICAN COMMODITIES BOOM

But it never lasts 80.00 Selected Commodity Prices (1998 US$) 10,000 70.00 9,000 8,000 60.00 7000 7,000 50.00 6,000 40.00 00 5000 5,000 Iron ore Oil 30.00 4,000 Copper 3,000 20.00 2,000 10.00 1,000 0.00 0 1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

DRIVER FIVE: Food

This is how she has to cope

A hungry man is an angry man. Raila Odinga

250 Economist Commodity Price Index: Global Food Prices Weekly index, 2000 = 100 250 225 225 200 200 175 175 Index 150 150 125 125 100 100 75 05 06 07 08 09 10 11 75 Source: Economist Commodity Price Index

250 Economist Commodity Price Index: Global Food Prices Weekly index, 2000 = 100 250 225 225 200 200 175 175 Index 150 150 125 125 100 100 75 05 06 07 08 09 10 11 75 Source: Economist Commodity Price Index

Africa s net food importers Angola Ethiopia Niger Benin Gabon Nigeria Botswana Gambia Sao Tome and Principe Burkina Faso Ghana Senegal Burundi Guinea Seychelles Cameroon Guinea-Bissau Sierra Leone Cape Verde Kenya Somalia Central African Republic Lesotho South Africa Chad Liberia Sudan Comoros Madagascar Swaziland Congo, Dem Republic of Malawi Tanzania, United Rep of Congo, Republic of Mali Togo Côte d Ivoire Mauritania i Uganda Djibouti Mauritius Zambia Equatorial Guinea Mozambique Zimbabwe Eritrea Namibia

Africa s net food importers: 39 of 49 Angola Ethiopia Niger Benin Gabon Nigeria Botswana Gambia Sao Tome and Principe Burkina Faso Ghana Senegal Burundi Guinea Seychelles Cameroon Guinea-Bissau Sierra Leone Cape Verde Kenya Somalia Central African Republic Lesotho South Africa Chad Liberia Sudan Comoros Madagascar Swaziland Congo, Dem Republic of Malawi Tanzania, United Rep of Congo, Republic of Mali Togo Côte d Ivoire Mauritania i Uganda Djibouti Mauritius Zambia Equatorial Guinea Mozambique Zimbabwe Eritrea Namibia

5000 Cereal Yields (Kg/Ha) in Developing Countries 4500 East Asia & Pacific 4000 3500 3000 Latin America & Caribbean 2500 2000 South Asia Middle East & North Africa 1500 1000 500 0 1961 2005

5000 Cereal Yields (Kg/Ha) in Developing Countries 4500 East Asia & Pacific 4000 3500 3000 Latin America & Caribbean 2500 2000 South Asia Middle East & North Africa 1500 1000 Sub Saharan Africa 500 0 1961 2005

DRIVER SIX: Competitiveness, Skills & Technology

Result: Africans, natural connectors, will increasingly have their lives shaped by global and regional information and financial exchange What does this mean for Africa? Impact on expectations A linked diaspora Avenue to globalisation, good and bad

The uneducated fall behind [picture of skills premium point] Skills Premium

140 Gross primary enrollment 120 100 % 80 60 40 East Asia & Pacific Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa 20 0 1970 1975 1980 1985 1990 1995 2000 2005

120 100 80 60 40 20 Net Enrollment Rate Minimum Mastery 0

Output Level Per Worker SSA productivity increases lag significantly behind South Asia and East Asia Driving further divergence across regions 14.0 35,000 Produc ctivity (% Cha ange) 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 South Asia East Asia SSA Outp put Per Worker r (USD) 30,000 25,000 20,000 15,000 10,000 5,000 0 South Asia East Asia SSA 2000 2009 2020 Source: International Labour Organisation 61

Not aid/donors but private sector growth crucial 62

UPSIDE PEACE DIVIDEND DOWNSIDE RISING INEQUALITY 63

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE & WIDENING DEMOCRATISATION DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS & RISE OF POPULISM (EG ZAMBIA) 64

UPSIDE PEACE DIVIDEND DOWNSIDE Distribution of African Population by Class Poor Class (<$2) Floating Class ($2 4) Middle Class ($4 20) Rich Class (>$20) BETTER GOVERNANCE RISING INEQUALITY SMALL MIDDLE CLASS 4.77 4.32 6.49 4.84 14.58 14.35 13.1 13.44 11.61 12.59 14.07 20.88 69.04 68.74 66.34 60.84 1980 1990 2000 2010 65

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS 66

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE 67

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE 68

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT 69

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND 70

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM 71

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM 72

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM RISING UNIT COSTS ELSEWHERE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM LAND TRADABILITY 73

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT NATURALRESOURCES A S EXTERNAL DEMAND GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS LAND TRADABILITY LOW FDI 74

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT NATURALRESOURCES A S EXTERNAL DEMAND GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS LAND TRADABILITY LOW FDI 75

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT NATURALRESOURCES A S EXTERNAL DEMAND GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS INCREASED OPENNESS LAND TRADABILITY LOW FDI HIGH TAX RATE, LOW BASE 76

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT NATURALRESOURCES A S EXTERNAL DEMAND GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS INCREASED OPENNESS YOUTH ENERGY LAND TRADABILITY LOW FDI HIGH TAX RATE, LOW BASE YOUTH UNEMPLOYMENT 77

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT NATURALRESOURCES A S EXTERNAL DEMAND GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS INCREASED OPENNESS YOUTH ENERGY LAND TRADABILITY LOW FDI HIGH TAX RATE, LOW BASE YOUTH UNEMPLOYMENT 78

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS INCREASED OPENNESS YOUTH ENERGY CHINA S INTEREST LAND TRADABILITY LOW FDI HIGH TAX RATE, LOW BASE YOUTH UNEMPLOYMENT EFFECT ON GOVERNANCE AND LOCAL POLITICS 79

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION LOW STARTING BASE NATURAL RESOURCES GROWTH POTENTIAL ESP IN AGRICULTURE, AND AGRO INDUSTRY TOURISM DOWNSIDE RISING INEQUALITY SMALL MIDDLE CLASS LOW SAVINGS POOR INFRASTRUCTURE SKILLS DEFICIT EXTERNAL DEMAND GROWTH COALITIONS, POLICY PREDICTABILITY & POLITICAL POPULISM RISING UNIT COSTS ELSEWHERE END OF DEBT CRISIS INCREASED OPENNESS YOUTH ENERGY CHINA S INTEREST LAND TRADABILITY LOW FDI HIGH TAX RATE, LOW BASE YOUTH UNEMPLOYMENT EFFECT ON GOVERNANCE AND LOCAL POLITICS 80

Some things worth thinking about for next 15 years: Widening i differentiation 800m 1.5 billion 25% world s youth Urban continent 50+ cities with 1m+ Average age 25; Europe 45+. Improving connectivity. Megacities: Lagos, Cairo, Accra, Jo burg, Khartoum, Kinshasa, Nairobi. 6% great; why not 10+%? 81

Three Liberations 50 Years Ago, from the colonial powers 82

Three Liberations 50 Years Ago, from the colonial powers Then.. From the liberation leaders and movements themselves.. 83

Three Liberations 50 Years Ago, from the colonial powers Then.. From the liberation Mugabeleaders and movements themselves ANC, Frelimo,.. MPLA, etc 84

Three Liberations 50 Years Ago, from the colonial powers Then.. From the liberation leaders and movements themselves. Now, from a political economy still (increasingly?) characterised by graft, crony capitalism, capitalism elitism, and widening (and destabilising) inequality. 85

Thank you very much 86