African Economic Outlook 2017: Industrialisation and Entrepreneurship Mario Pezzini OECD Development Centre Director and Special Advisor to the OECD Secretary General on Development Milano, 22 June 2017
Outline of presentation 1. Africa s Macroeconomic Outlook o Africa s Growth resilience tested o Regional comparisons Role of structural diversification o Domestic demand main driver of growth o Persisting challenges Financing and domestic resource mobilisation 2. Industrialisation and Entrepreneurship o Structural transformation remains a challenge o New industrialisation strategies to tap all high-growth sectors and businesses o Targeted entrepreneurship policies complement industrialisation strategies o Improving skills (including managerial ones), business clusters and access to finance will unlock Africa s entrepreneurial potential
PART I AFRICA S MACROECONOMIC OUTLOOK 3
GDP Growth (%) Africa s Growth Performance, 2013-2018 5 4,3 4 4 3,9 3,7 3,4 3,4 3 3 2 2,2 2013 2014 2015 2016(e) 2017(p) 2018(p) Africa Africa (excluding Nigeria)
More diversified regions will be more resilient in 2017 West Africa GDP growth 3.4% North Africa GDP growth 3.5% Central Africa East Africa Africa 3.4% GDP growth 2.2% Southern Africa GDP growth 5.7% GDP growth 1.9% 5
Percentage point Private consumption is driving growth 14 12 10 8 6 4 2 0-2 -4-6 Drivers of growth in Africa, 2000-18 Private consumption Government consumption External balance Gross fixed investment Stockbuilding
Remittances and FDI make 60% of financial flows, but aid decreases Current USD billion % GDP 200 20 52 18 57 54 48 52 51 50 51 16 150 34 23 21 14 43 28 22 16 7 5 12 100 11 50 49 53 56 51 56 58 10 46 8 49 6 50 42 53 60 64 64 67 65 65 66 4 2 0 0 2005-09 2010 2011 2012 2013 2014 2015 2016 (e) 2017 (p) Remittances Portfolio investments % GDP External inflows to Africa, 2005-17 Foreign direct investments Official development assistance Sources: Adapted from African Economic Outlook data, IMF (2016a), OECD (2016) and World Bank (2016b).
Domestic revenue mobilisation still falls short of needs USD, billion The tax revenue mix in Africa, 2005-15 600 500 400 300 200 100 0 2005-09 2010 2011 2012 2013 2014 2015 Direct taxes Indirect taxes Trade taxes Resource revenues Sources: Africa Economic Outlook data.
PART II INDUSTRIALISATION AND ENTREPRENEURSHIP 9
Message 1 STRUCTURAL TRANSFORMATION REMAINS A CHALLENGE 10
Sectoral Productivity as % of Average Productivity Africa s structural transformation challenge: 2500 huge sectoral productivity gaps 2000 1500 1000 Mining (min) Utilities (pu) Finance (fire) Transport (tsc) Manufacturing (man) Construction (con) Other services (cspsgs) Trade (wrt) Agriculture (agr) 1269 902 2162 500 407 100 0 36 89 105 0 10 20 30 40 50 60 70 80 90 162 213 Labor Productivity Gaps in Africa, 2005 Share of Total Employment (%)
Message 2 NEW INDUSTRIALISATION STRATEGIES NEED TO TAP ALL HIGH-GROWTH SECTORS AND BUSINESSES 12
% of GDP Africa s industrialisation will not only depend on manufacturing 45 40 35 30 25 20 15 10 5 0 Development of industry and manufacturing in Africa (% of GDP) 1990 1995 2000 2005 2010 2015 Manufacturing Total Industry 13
New strategies harness the new industrial revolution 14
Share of total employment (%) New strategies to target all businesses African young SMEs create many jobs 25 Sizes and ages of formal enterprises in 38 African countries 20 15 10 Less than 20 employees 20-99 employees 100 or more employees 5 0 5 years or younger 6-10 years 11 years or older Source: Adapted from Ayyagari, Demirguc-Kunt and Maksimovic (2014) 15
The share of new entrepreneurs is highest in Africa (22%), but mostly in non-tradable services Sectoral composition of early-stage entrepreneurship in Africa, 2012-16 Retail trade, hotels & restaurants Agriculture,forestry,fishing Other services Manufacturing Government, health, education, social Wholesale trade Mining,construction 0% 20% 40% 60% % of early-stage entrepreneurship Source: Calculations based on GEM (2017) 16
Message 3 TARGETED ENTREPRENEURSHIP POLICIES COMPLEMENT INDUSTRIALISATION STRATEGIES 17
% of working-age population Policies should target opportunity-driven entrepreneurs 25 20 15 10 5 0 Prevalence of opportunity-driven & necessity-driven entrepreneurs in Africa Opportunity-driven entrepreneurs Necessity-driven entrepreneurs Source: Calculations based on GEM (2017) 18
Entrepreneurship policies complement industrialisation strategies Industrialisation strategies Opportunity-driven entrepreneurship Entrepreneurship policies 19
Message 4 IMPROVING SKILLS, BUSINESS CLUSTERS AND ACCESS TO FINANCE CAN UNLOCK AFRICA S ENTREPRENEURIAL POTENTIAL 20
% of firms Constraints on firms can be lifted by improving skills, business clusters and access to finance 20 Common operating constraints for African firms 15 10 5 0 Access to finance Electricity Practices of the informal sector Africa All developing countries Skills Source: Adapted from Enterprise Surveys (http://www.enterprisesurveys.org), the World Bank. 21
Improving skills is key for high-potential entrepreneurship Share of students in secondary education enrolled in vocational programmes East Asia and Pacific OECD Africa Latin America and South Asia 21,2% 20,4% 10,5% 9,7% 1,7% Egypt Rwanda Algeria South Africa Morocco Senegal Ethiopia Ghana 8,3% 7,3% 6,1% 4,5% 4,2% 1,8% 15% 21% 22
Policies can strengthen industrial clusters to help small firms grow Public goods Comparative advantage Business linkages Cluster-driven industrialisation 23
Improving access to finance calls for targeted policies Proportion of working capital financed by banks (%) 20% 15% 10% 5% 0% Africa (48 countries) Latin America (24 countries) Small enterprises Medium-sized enterprises Large enterprises 24
Thank you! Merci! Grazie! 25