Green Industrialisation and Entrepreneurship in Africa

By Milan Brahmbhatt, Senior Fellow, New Climate Economy (NCE) and World Resources Institute1


Explore this topic further with the upcoming launch of the
2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa.
Stay tuned for details


Solar salesman in Gulu Uganda Photo credit James Anderson
Solar salesman in Gulu, Uganda. Photo credit: James Anderson

Policy makers across Africa have embraced industrialisation and economic transformation as keys to accelerate inclusive growth. They also increasingly see the need for economic transformation to deliver green growth – growth that does not endanger Africa’s natural environment in ways that reduce the welfare of present and future generations. Economic transformation and green growth depend on doing new things: making risky investments in new, unfamiliar sectors or products or adopting new, unfamiliar methods, processes, technologies, inputs or business models. All this depends crucially on the activity of entrepreneurs, who drive change through their innovation and risk-taking. Fostering entrepreneurship, including green entrepreneurship, is thus a key policy aim for African countries.

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Habitat III decisions crucial for the future of Africa’s cities

By Greg Foster, Area Vice-President, Habitat for Humanity, Europe, Middle East and Africa

habitat-3Africa will have some of the fastest growing cities in the world over the next 50 years. Unless something is done, and done soon, millions more will flood into unplanned cities and live in already overcrowded informal settlements and slums. It would appear as if the United Nation’s Habitat III conference, which happens every 20 years, and New Urban Agenda couldn’t come at a better time.

Habitat III’s goals sound simple — develop well-planned and sustainable cities, eradicate poverty and reach full employment, and respect human rights. Being able to leverage the key role of cities and human settlements as drivers of sustainable development in an increasingly urbanised world, the meeting will seek political commitment to promote and realise sustainable urban development. This could be a watershed moment for Africa’s cities. But critical challenges stand in the way of making Africa’s cities economic powerhouses, centres for exchanging ideas, and places that meld cultures and peoples. Three actions are needed. Continue reading

Myanmar can flourish by sowing seeds of agricultural prosperity

By Deirdre May Culley and Martha Baxter, policy analysts at the OECD Development Centre

MyanmarDEVmattersOn 30 March, Htin Kyaw, a long-time adviser and ally of Aung San Suu Kyi – whose National League for Democracy party achieved a historic victory in recent electionsbecame the first elected civilian to hold office in Myanmar since the army took over in 1962.

The NLD won the democratic battle and enjoys unparalleled political capital and legitimacy. It must now deliver on exceedingly high expectations, build a cohesive multi-ethnic state and improve citizens’ lives. Economic progress will be indispensable if the country is to overcome years of ethnic armed conflict and move towards a common future. So what can the new government do?

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China’s economic slowdown: Good or bad news for Europe and Central Asia?

By Maurizio Bussolo, Europe and Central Asia Chief Economist Office, The World Bank Group

 

China-Dev-MattersChina’s economy looms large in global markets. After decades of sustained economic growth, the country became the world’s largest exporter in 2007 and today sells abroad 60% more goods and services than the United States and 75% more than Germany – the second and third largest exporters, respectively. In addition, China is the second largest importer of goods and services in the world, after the United States.

Because of China’s importance in the global economy, news of its economic slowdown and financial sector turmoil have caused many observers to worry. In fact, at the beginning of 2016, some were explaining the plummeting of stock markets as anticipating a growth collapse in China (also reflected in very low oil prices). Continue reading

A 21st century vision for urbanisation

By Dr Joan Clos, Executive Director, UN-Habitat

UrbanRuralWorldIf urbanisation is one of the most important global trends of the 21st century, with some 70% of the world’s population forecasted to live in cities by 2050, then urbanisation in Africa – and the ways in which that growth occurs – marks one of the most significant opportunities for achieving global sustainable development.

By 2050, cities in the developing world will absorb more than two billion new urban residents, representing 95% of global urban growth. African cities will take the lion’s share, in some cases increasing twice as fast as any other urban population worldwide. By mid-century, the urban population in sub-Saharan Africa alone is expected to quadruple, ushering in 1.15 billion new urban residents. How Africa prepares for its urban future will have far-reaching social, economic and environmental impacts – not only for the continent, but also for the world.  Continue reading

Can the G20 make a difference for development?

By Federico Bonaglia, Senior Counsellor to the Director at the OECD Development Centre

Can the G20 really make a difference for development? The short answer is yes. The long answer is that the G20 can actually do more and should not miss the opportunity offered by the SDGs to deepen its engagement on global development. How can we upgrade the development agenda? In a two-part Development Post, the author explores the first question here. Look for a second submission that delves into the G20’s forward-looking agenda for development.

With the tragic Paris events weighing on their minds, G20 leaders gathered in Antalya last week and reaffirmed their commitment to strong, sustainable and resilient growth for all, including low-income and developing countries. Why does this matter for development and the recently approved Sustainable Development Goals? The reasons are substantial. First, the sheer size of the G20 economies and the transmission mechanisms that link their actions, or inaction, to the development prospects of the rest of the world cannot be ignored. Second, G20 leaders possess convening and agenda-setting power and their like-minded approach to development demands attention. Third, the value of each G20 country’s own respective development experiences can contribute to inform developing countries in their efforts.

Indeed, development has a special place in the G20. Different from other fora, the G20 has not evolved into a pledging platform for development initiatives. Just think of the 2005 G8 Gleneagles Summit, with its ambitious plans to double aid and undertake massive debt relief, or other G7/G8 initiatives on water (Evian), food security (L’Aquila), maternal health (Muskoka) or the Middle East and North Africa transition (Deauville). The G20 countries representing 85% of the world’s GDP are focusing instead on promoting an enabling global environment to spur development and enhance the role of developing countries as new poles of growth[1].

For its part, the OECD has been involved in the design and implementation of the G20 development agenda since the adoption of the G20 Seoul Multi-year Action Plan on Development. And the G20’s own progress reports offer information on whether commitments in the development field are on track. Consider the impact of some of the G20’s actions on developing countries:

Lifting G20 growth: The Brisbane Growth Strategies, which outline structural reforms to lift growth in each G20 country, would raise G20 GDP by roughly 2.1% by 2018 if fully implemented and have potential spill-over effects on developing economies. Lifting the growth of G20 countries – or failing to do so – will ultimately affect developing countries through trade, investment, migration and technological channels.

Coordinating macroeconomic policies: Macroeconomic coordination is likely to have – at least in the short term – a much larger effect on developing countries than structural reforms in G20 countries. While we understand the implications of these policies for the G20, the implications for developing countries, through interest rates, global liquidity and capital flows, have yet to be fully explored.

Reforming the international tax system: Developing countries stand to benefit from the G20-OECD Base Erosion and Profit Shifting (BEPS) project, set to end double non-taxation of multinationals and increase transparency through the automatic exchange of information. G20 leaders’ call to action to strengthen tax capacities by offering officials as Tax Inspectors Without Borders or supporting the strengthening of tax revenue statistics is welcome. These measures will help developing countries harness the potential created by reforms to the global tax system, such as tackling tax evasion and reducing tax loopholes.

Lowering the cost of remittances: Remittances to and from G20 countries account for almost 80% of global remittance flows. G20 countries announced measures to reduce the cost of sending remittances, including enhancing competition among money transfer operators. Globally, remittances totalled U.S. $436 billion in 2014, more than three times official development assistance, and are the largest source of private external finance for several developing countries. By taking steps to promote effective intermediation, receiving countries can further amplify impact.

Boosting infrastructure investment: The G20 was instrumental in placing infrastructure bottlenecks on the development agenda. The actions taken are wide-ranging, from calling multilateral banks to modify their internal procedures and incentives for financing infrastructure projects to identifying priority projects with developing countries. With support from the OECD and the World Bank, the G20 has distilled principles and indicators to help countries mobilise private investment for infrastructure. The G20 is also committed to working with investors and developing countries to better appraise the risks and returns of these investments.

Enhancing global food security: The G20 Action Plan on Food Security and Sustainable Food Systems is the culmination of five years of intense discussions and initiatives. Since its inception, the G20 debated the volatility of commodity prices and lagging agricultural productivity growth. It convened relevant organisations to develop a consensus on causes and possible remedies and established a global monitoring system for food stocks. This plan has the potential to help advance food security in developing countries and globally.

Sharing knowledge: Many G20 development deliverables are global public goods and contribute to knowledge sharing. These are distilled into databases and toolkits to support better policy making in developing countries. Consider, for example, the development of indicators on skills and of toolkits to design inclusive green growth strategies or enhance agricultural productivity.

Assessing the impact of G20 actions on development outcomes is not easy and, to the best of our knowledge, no rigorous attempt has been made so far to that end. Challenges include:

  • identifying relevant G20 actions or inputs and quantifying their magnitude;
  • choosing a baseline, such as GDP growth, well-being or jobs, for the appropriate outcomes to be measured in partner countries;
  • mapping the transmission channels from G20 actions to development outcomes in terms of finance, trade, migration or technology;
  • estimating the net effect of different and maybe offsetting actions; and
  • distinguishing between the G20’s direct attribution versus its contribution to observed outcomes.

Yet, efforts to address some of these concerns have been made. The Turkish presidency released a framework mapping the whole-of-G20 contributions to development. But given such challenges, the yardsticks to identify impact will have more to do with the convening and consensus-building power and the effective implementation of commitments rather than quantitative economic assessments. Closely monitoring implementation and involving developing countries in discussing the G20’s development agenda and its impacts will have to remain a priority for future presidencies.

[1] In 2010, G20 leaders acknowledged that “narrowing the development gap and reducing poverty are integral to [the] broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy for all.”

 

The Narrative of Development Has Changed

This interview, with Mario Pezzini, Director of the OECD Development Centre, first appeared in “Digital Development Debates” on October 14, 2015. Click here to read it anew

Interview by Frederik Caselitz and Prisca L. Watko

 

The OECD Development Centre serves as forum where policymakers can find solutions to pressing development questions. We met Director Mario Pezzini on the occasion of the Africa Forum held in Berlin this year, where Africa’s future role in the world economy was discussed. DDD had a chance to talk to Pezzini about the challenges facing Africa’s agriculture and how these are being analysed at the OECD Development Centre. Pezzini stresses the importance of considering overall rural development, not just agricultural development for rural communities. He sees the increase in population as a huge opportunity for Africa that could either help solve other problems or become a curse.

The OECD Development Centre brings together many different perspectives from the North and South. What are the most controversial issues and trends currently being discussed? Is agriculture a topic of discussion in the forum as well?

Mario Pezzini: If we go back in time, the North and the South didn’t share a common understanding of what was going on in emerging markets: In the 90s, 13 non-OECD countrieshad a growth rate more than the double that of OECD countries. Between 2000 and 2010, a total of 83, not just 13, countries enjoyed a growth rate more than double that of OECD countries. This resulted in a geographical shift. The geographical absolute centre of the economy, as stressed by the London School of Economics, was between Europe and North America in the middle of the Atlantic Ocean 40 years ago. The same exercise now locates the  very centre between Turkey and Iran. It is moving further east towards China and the South. A shift in wealth is taking place ex normal. Today, the picture is little bit more blurry, but the geography of the world has definitely changed.

A second important point is: What does being a developing country mean today? Are developing countries demanding cooperation and resources in order to follow the same path as developed countries have undertaken in the past? Today we are witnessing a wide range of development paths. There is no doubt that similarities in development do exist, but there are also differences in how development has taken place. We cannot just look back at our own history and say to developing countries: “Copy us and you will be successful”. Ideas and best practices come from everywhere, from developing and developed countries alike. This is the major point we focus on at the OECD Development Centre: The narrative of development has changed, and so has the agricultural sector in development.

Economic partnership agreements (EPA) between the European Union and several African countries are currently facing harsh critique. Many African economies are still monocultures that only sell primary products. Are EPA going to make it even harder for African countries to progress?

Most of these agreements are still under discussion, so the outcomes are not finalised. African countries often lack a local level of services and inputs to develop other types of production.

In many cases, agriculture continues to be based on the family model where a variety of products are grown, but not sold to the national and international markets. The capacity to improve productivity is still weak. How can this mode of production coexist with large-scale farming? How will Africa be capable of further developing rural societies and providing rural support for a different type of agriculture?

This is currently one of the big debates: On the one hand, we have people like Vandana Shiva who support small-scale farming and on the other hand people demanding more investment into modernizing rural economies. Is it possible to modernize small-scale farming as well?

I think that we have to focus on rural development in Africa in general. Agriculture is one important component of rural development, but not the only one. One of the major challenges for Africa, and also a huge opportunity, is the enormous population growth. The population is set to double by 2050. We have seen that China and India benefited from a strong increase in population, which allowed them to enlarge their employment base and improve their societies.In Africa today, there is only one young person for every old person. Population growth will mean there are several young people to support every old person. This will free important energy for growth and development. But what if these young people cannot find jobs, and especially jobs they perceive as decent? Social tensions will intensify. Increase in population is taking place throughout the continent, though more strongly in the centre of Africa, which is exactly the part of Africa where industrial development and the diversification of the economy have been the weakest. It is taking place in urban and in rural areas alike. So the bottom line for rural areas will not just be what to do about agriculture but first and foremost: What will happen to people in general, and youth and women in particular, as agriculture industrializes, as it becomes more and more productive and capable of generating exports? It is likely that its capacity to absorb young people and population in general, will drop in the medium and long term after an initial adjustment. This will likely drive a rural exodus with people leaving for the cities.

If this takes place at the same time and in parallel to manufacturing industrialisation, the population in the cities will increase, but not the number of jobs. We are currently observing jobless growth in Africa. This generates serious social problems in urban areas.  The solution to this problem lies back in the countryside, at least in part. We need to come up with development ideas for rural areas where agriculture is crucial. It is not the only sector though, and therefore other types of employment besides agriculture are needed. So is a different type of agriculture besides large-scale intensive production conceivable? The answer is yes, obviously, because there are different types of agriculture that depend on what is produced, the way it is produced, and the market in which it is sold. Strengthening local markets will be crucial so that more sophisticated products can be sold. Producing sophisticated agricultural products does not necessarily require a large scale and the use of chemicals and pesticides. The big picture is still the transformation of rural areas as a whole and not just of agriculture.

We have talked a lot about conflicts, challenges and differences. But in the evaluations the OECD Development Centre undertakes, what practices do North and South agree upon that can help eradicate hunger?

There is a wide capacity for creating dialogue and exchanging experience – despite how it may seem. When Korea held the Presidency of the G20, it introduced a point called “knowledge sharing” to the agenda of the G20 Working Group on Development.

For a long time we thought that the only factor missing was financing for development. We thought that by investing money we could temporarily compensate the poor and then reduce poverty on a permanent basis. The idea that we could also share some of our success stories only came up later. There is one important condition: Coming together at tables where participants have equal voices. We need to build trust among the actors in order for this to happen. I mentioned some areas in rural development, in regional development, but there are many more policy fields in which this exchange could take place.

One point must be clear though: The learning curve does not just run from North to South. It can also go from South to North. I have a good example: conditional cash transfer programmes (CCT), a very well-known social policy for the poor in which the government gives money to the poor. Funds are given to women instead of men and the requirements are that they send their children to school and to see a doctor. The first three countries to implement it were Brazil with the Bolsa Família program, Mexico with Progresa, and Bangladesh with the Female Secondary School Assistance Program II. Today there are more than 83 countries that have applied this scheme, most recently the US in New York City. So you can easily see that you can learn from all sides.

 


 

This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.