South Africa & The World Bank Group Joint Country Partnership Strategy 2008-2011 2011 Ritva Reinikka April 2008
Economic trends Steady economic growth, inflation under control, but unemployment remains high 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 South Africa: Real GDP growth, Inflation and Unemployment Real GDP growth rate Inflation rate Unemployment rate 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (est.) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
Progress made Macroeconomic stabilization complete: Revenue story,, not an expenditure cutting story ; Revenue collection and fiscal management are considered international best practice; and SA borrows at unprecedented low sovereign risk spreads and can borrow off-shore in its own currency. Created fiscal space to: Triple social grants expenditures and the number of beneficiaries; Improve social development indicators by pro-poor poor reorientation of spending; and Provide free basic utility services (water, power, housing) to low income households.
Many challenges remain More than 25 % unemployment labor force has grown substantially Poverty and striking inequality in: income & assets; education & health outcomes; and access to quality public services HIV/AIDS pandemic Crime
South Africa is a Driver of regional growth World USA World USA 20% United States Over 20% of world PPP GDP nearly 25% of the expansion in world real GDP during the 1990s SSA South Africa South Africa 33% SSA South Africa 33% of African PPP GDP 30 percent of the expansion in African GDP during 1980 2003 African and SA growth move closely together (correlation coefficient over 80%)
South Africa is a Driver of regional growth World: 1% additional growth in a country 0.4% increase in growth of neighboring countries. South Africa: 1% growth 0.5% 0.75% 0.75% increase in rest of Africa (not just neighboring countries), independent of common regional shocks. South Africa is one of the driving forces behind NEPAD, the African Peer Review Mechanism, African Union, SADC, and SACU and is the chair of the G-20 G in 2007.
The WBG Portfolio International Bank for Reconstruction and Development World Bank stopped lending in 1966, and resumed dialogue in 1991. After 1994, the WBG provided policy advice funded by its own internal budget, grants from development partners, but also limited lending: Industrial Competitiveness and Job Creation Project (1997; ) Municipal Financial Management Technical Assistance Project (2002; US$15 m) SA and Lesotho have jointly implemented the Lesotho Highlands Water Project: South Africa repaid two loans for the project (US$90 m) National and regional Global Environmental Facility grants were approved for nature conservation, renewable energy, and the phase-out of toxic chemicals, for a total of just under US$80 million.
The WBG Portfolio International Finance Corporation IFC s committed portfolio has grown to more than US$200 million in 23 projects. IFC supports the Government's objectives in terms of BEE, development of SMEs,, expansion of financial markets and of assisting South African companies to go north.
The WBG Portfolio Multilateral Investment Guarantee Agency South Africa is MIGA s eighth largest investor country, accounting for US$206.7 million (4% of the its gross exposure). MIGA and IFC actively promotes outbound investment in Africa by South African companies.
The WBG Portfolio World Bank Institute Capacity development training: About 600 South Africans participate per year since 1994 53,000 participant training days Most WBI activities in SA were regional in nature and few focused exclusively on the country.
Lessons Learnt Individual activities were evaluated quite positively, but overall program was less than the sum of its parts World Bank struggled: how to engage with an African Middle Income Country with little appetite for borrowing? Previous Country Assistance Strategy suffered from lack of ownership by government
Country Partnership Strategy: Eradicating poverty and reducing inequality Pillars Urban and rural development Regional integration On-going New Capacity- building for public service delivery Urban and municipal development Land reform and agriculture Private sector development (IBRD, IFC, MIGA, FIAS) Environment (GEF, carbon finance, climate change) Infrastructure Cross-cutting theme Regional communities (SACU, SADC, COMESA, NEPAD) South African investment (IFC, MIGA) Knowledge sharing (WBI) Sectoral technical assistance and WBI programs
Pillar 1: Urban And Rural Development Urban and municipal development 15 years of engagement one loan currently active. Municipal Financial Management Technical Assistance Project (approved in 2002, US$15 million). Leveraging with Cities Alliance Trust Funds (about US$1 million per year in TA to municipalities). Capacity-building, inter-governmental fiscal system, city development strategies, slum upgrading. CPS focus: undo the geography of apartheid,, create more inclusive cities.
Average Distance per Person to CBD
Pillar 1: Urban And Rural Development Land reform and agriculture Over 15 years of engagement 3 3 year TA program agreed Focus: accelerating and improving impact of land reform programs: Improve participation by beneficiaries and stakeholders, decentralization, integration of planning, approval and budgeting silo s. Land market reforms: sub-division, implementation of Property Rates Act, land use planning (urban and rural) Impact evaluation: Economic analysis of current land reform approaches evaluate new approaches
Pillar 1: Urban And Rural Development Environment 7 projects (GEF grants) worth over US$40 million: Portfolio moving from conservation and biodiversity Towards creating jobs and skills as part of sustainable local development Disposal of obsolete pesticides On climate change, assistance to: review of options for low-carbon growth strategy; preparation of an adaptation strategy for rural areas; adaptation strategies in the water sector; national strategy to promote energy efficiency; national renewable energy program; and development of the carbon finance market
Pillar 1: Urban And Rural Development Private Sector Development (IBRD, IFC and MIGA) financing and planning of public-private private partnerships in infrastructure; identifying, and helping to remove, constraints to doing business (competition and regulatory frameworks, red tape); promoting foreign direct investment; SME development and integration into the formal economy; and training and skills development, with a particular focus on SMEs.
Pillar 1: Urban And Rural Development Private Sector Development - IBRD IBRD s program with DTI includes support for the creation of an M&E dashboard for DTI s s main projects and programs and those of its key agencies. Additional planned work includes follow-up analysis, and repeat, of the 2005 ICA and MICA to deepen the knowledge of: 1. The impact of exchange rate volatility on exporters; 2. The impact of labor regulations and skills development programs on employment and economic activity at the lower end of the income scale; 3. The impact of HIV/AIDS on firm level costs and productivity.
Pillar 1: Urban And Rural Development Private Sector Development - IFC IFC s strategy in SA has one basic premise and three prongs. Premise: SA has a very well developed financial sector IFC should not compete for normal, local corporate business. The three prongs are: 1. Support South African companies going north and global; 2. Provide advice and financing to underserved niches in the local market; and 3. Provide TA and support for small business (focusing on the informal and SME sector and education).
Pillar 1: Urban And Rural Development Private Sector Development - FIAS and MIGA FIAS analytical work for NT and DTI: impact of marginal effective tax rates; tax compliance costs for small business; Impact of competition law and policy. MIGA guarantees and TA: for South African investments in Africa; For FDI in South Africa.
Pillar 1: Urban And Rural Development Infrastructure New area of support: ASGISA: investment-driven growth strategy; World Cup 2010. Assistance to: Competition and regulation policies in key sectors: energy, telecommunications, transportation. Energy sector: locate expert in Country Office.
Pillar 2: Regional Integration Facilitating SA companies to invest in Africa Large portfolio s s of IFC and MIGA investments and guarantees To private and public companies E.g. Southern Africa Power Pool, Inga Hydropower, EASSY fiber optic cable network, Kudu gas.
Pillar 2: Regional Integration Building regional communities Starting with SADC Regional free trade areas and customs unions Regional infrastructure and financial markets Cross-country comparative analysis: trade, business climate, public finance
Pillar 2: Regional Integration Sharing knowledge in support of Africa World Bank Institute has established a regional hub here Partners Department of Science and Technology DBSA HSRC ANSA
Cross Cutting Theme Capacity-building for public service delivery Capacity-building TA in various sectors (e.g. education, social welfare reform, macro modeling). Training courses (e.g. SADC/UNDP/DFID/SARPN Land Policy training). Reserve Asset Management Program (RAMP) with the Reserve Bank National Treasury Collaborative Africa Budget Reform Initiative World Bank Institute: Local government and service delivery (with DPLG and Cities Alliance); Education (jointly with DoE and DST); and Social protection grants (with SASSA and DSS).
World Bank and Outreach Partnerships Increase awareness and understanding of World Bank role in South Africa and Africa region HSRC, DBSA, and others. Share knowledge Development Dialogue. Development Information Centers Johannesburg with SAIIA, investigating other sites Increases interaction with partners/civil society. Website: www.worldbank.org/southafrica All public documents available. Electronic Quarterly Information Brief. Media Frequent interaction. Support for media training (Gender Links). Community radio project.
Instruments strategic policy advice: Also on global and regional issues financial services: financing, credit enhancement and risk management tools to the sovereign and non-sovereign public sector; knowledge services: research, project cycle, analytical work, training, institutional capacity building and technical assistance; loans, equity, structured finance products
Conclusion (1) CPS is a joint document: With the National Treasury Between IBRD, IFC and MIGA Focus: knowledge sharing Objectives: eradication of poverty; reduction of inequality; in South Africa and the region.
Conclusion (2) Flexible and dynamic approach: guided by a common framework Coordination: agreed on a yearly basis (with three reviews per year with NT and two per year between IBRD, IFC, and MIGA) harmonized with South Africa s planning and budgeting cycle Align with civil society and development partners (mechanisms to be worked out)