APRIL 2010 67993 An analysis of trends shaping Africa’s economic future Although Africa is the least integrated region in the world, it was hard hit by the global economic crisis. This document was Economic growth went from 5.2 percent in 2008 to 1.6 percent in 2009. Fortunately, it responded by produced by the Office maintaining the good policies that had brought growth in the past, and now with a global recovery of the World Bank Chief Economist for underway, it is seeing a quick rebound. Output is projected to expand by around 4.3 percent in 2010. the Africa Region Despite the many challenges facing the continent—weak initial conditions for the MDGs, a massive infrastructure deficit, low agricultural productivity, and weak governance—Africa’s performance in the recent past gives us cause for optimism. Today, aid to Africa has the potential to be as productive as it has ever been. Africa was hit hard by the global economic crisis, but growth is rebounding. The response of African policymakers helped to dampen the impact of the crisis and set the stage for the continent to benefit from a global recovery. Despite the wrenching shock of the global economic crisis and long-term development challenges, Africa’s performance over the past decade and a half gives cause for optimism. Although Africa is off-track in reaching many of the MDGs, and the crisis has pushed some countries further behind, the continent has, over the past decade, been making substantial progress toward the MDGs. Though rising, aid is falling short of commitments: Africa is likely to receive less than half the additional aid that donors agreed to provide by 2010 at the Gleneagles summit. I. Recent Economic Trends and Prospects Economic recovery Amid a global recovery, Sub-Saharan Africa is seeing a rebound in economic activity. After growing at an estimated 1.6 percent in 2009, output is projected to expand by around 4.2 percent in 2010—a faster turnaround than Africa registered in previous crises. Growth is expected to accelerate to 4.9 in 2011, but will remain below the 6 percent growth rate recorded in the pre-crisis period. Per capita income, which fell by nearly 1 percent in 2009—the first such contraction in a decade—will also post an upward trend. AFRICA'S ECONOMIC GDP and GDP per capita growth in Sub-Saharan Africa GDP growth by country groups GROWTH DROPPED 8 10 BY ALMOST FOUR 7 9 PERCENTAGE 6 8 7 POINTS IN 2009. 5 6 4 Although it will 5 3 4 rebound in 2010, 2 3 it will stay below 2 pre-crisis levels 1 1 through 2011. 0 0 -1 -1 -2 -2 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 Low income Middle income Oil exporters GDP at market prices (2005 US$) Real per capita GDP growth Oil exporters xcl. Nigeria Non-oil exporting resource rich Source: Development Prospects Group, World Bank. Note: 2009 data are estimates; 2010 and 2011 data are projections. Although Africa is the least integrated region in the world, it was not able to escape the effect of the global economic crisis. The combination of weak export demand, lower commodity prices, declining private capital flows (which had exceeded foreign aid in 2007), slowdown in remittances, lower tourism revenues, and weaker government revenues all conspired to reduce Africa’s economic growth rate by close to four percentage points in 2009. The region’s middle- income countries, which are more integrated in global markets, were the hardest hit: with growth slipping by about 4.5 percentage points in 2009. Slumping energy prices depressed earnings of oil-exporting countries, contributing to the weak economic performance of these economies. 2 AFRICA’S PULSE THE COMBINATION Current account balance as % of GDP, by country groups Sub-Saharan Africa and selected economies: Foreign Direct Investment OF WEAK EXPORT 15 12 35 DEMAND, LOWER 11 10 30 COMMODITY 10 9 PRICES, AND 8 25 5 7 DECLINING CAPITAL 6 20 FLOWS—AMONG 0 5 OTHER THINGS— 4 15 3 CONSPIRED TO -5 2 10 REDUCE AFRICA’S 1 -10 0 5 ECONOMIC -1 GROWTH IN 2009. -15 -2 0 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 Low income Middle income South Africa Angola Nigeria SSA Oil exporters Sudan Sub-Saharan Africa Source: Development Prospects Group, World Bank. Until the onset of the global financial crisis, Africa had been experiencing a period of sustained and widespread growth. In addition to the oil exporters, some 22 non-oil-exporting countries were experiencing better than 4 percent growth for a decade. The region’s per capita GDP was growing at an average annual rate of over 2 percent. The sources of this growth were three-fold: (i) external resources—aid, debt relief, private capital flows and remittances were all increasing; (ii) strong commodity prices and a buoyant global economy; and (iii) improved macroeconomic policies, reflected for instance in the fact that the median inflation rate in the mid-2000s was about half that in the mid-1990s. Africa’s policy response to the crisis Despite its severity, the response of African policymakers to the global economic crisis helped to dampen the impact, and set the stage for the continent to benefit from a global recovery. The fall in growth initially prompted concerns of a slowdown or reversal of the reforms that African governments had been undertaking for the last decade—the same reforms that enabled the continent to grow at 6 percent a year before the crisis. The payoffs to these reforms had now become much less. The good news is that this did not happen. Policymakers generally contin- ued to pursue prudent economic policies during the crisis; some countries accelerated their reforms. Many countries maintained and, in some cases, even increased social spending. Safety nets were ramped up in several countries: countries have attempted to protect the poor by scaling up existing safety net programs where they exist and appear to be functioning well—Ethiopia, for instance, has increased the wage paid in its public works program. Countries also focused on supporting capital spending to finance much-needed infrastructure. For example, in the Republic of Congo, capital spending increased from 9.4 percent of GDP in 2008 to 14.4 percent of GDP in 2009 in or- der to accelerate the rehabilitation and reconstruction of basic infrastructures. In Rwanda, capital expenditures increased from 8.6 percent of GDP in 2007 to 11.2 percent of GDP in 2009. The international financial institutions responded strongly to support countries’ efforts to limit the economic slowdown, protect core developments, strengthen the private sector, and assist the poor. Overall, African countries saw a widening of fiscal deficits by about 3 percent of GDP in 2009, as countries used fiscal policies to counter the effect of the slowdown in economic activity. Fiscal deficits rose by over 9 percent of GDP for the group of oil-exporting countries and by nearly 7 percent of GDP for middle-income countries. Among low-income countries, those that had fiscal space, such as Tanzania and Zambia, ran modest fiscal deficits; those that did not, such as Ghana, contracted their deficits. AFRICA’S PULSE 3 The prudent response to the crisis means that the BEFORE THE Growth performance of selected countries: GLOBAL ECONOMIC Comparing average growth 2004-2008 with growth in 2009 policy environment in Africa, which had been improving CRISIS, AFRICAN Oil Exporters AGO until the crisis, continued to improve during the crisis. COUNTRIES HAD SDN As a result, Africa’s economic growth is expected to turn SEEN SUSTAINED NGA GROWTH ACROSS ZAR around faster than in previous crises. Of course, sus- COG THE BOARD. taining the recovery will depend upon the quality of do- Low Income Countries ETH mestic policies and on the growth performance in key UGA RWA export markets and investment partners, particularly the MOZ TZA United States, the European Union, and China. Looking MWI ahead, the withdrawal of fiscal and monetary stimulus SLE GMB poses a challenge to policymakers. The concern will be GHA Middle Income Countries not to undermine the economic recovery underway, CPV NAM while ensuring that the medium-term economic policy ZAF framework is consistent with securing long-term growth. MUS BWA LSO -10 SWZ -5 0 5 10 15 20 Risks to economic prospects Average GDP growth rate 2004–2008 Growth in 2009 Rising global food prices. Rising global food prices present a risk to the region’s growth prospects. The re- Source: Global Economic Prospects, 2010. cent upward trend in price of staples in domestic mar- kets is worrisome as it poses a significant threat to both food security and nutrition in the region (see Box 1). THE RESPONSE OF Fiscal balance as a percent of GDP AFRICAN POLICY 8 MAKERS HELPED DAMPEN THE 6 BOX 1: Food prices: rising again IMPACT OF THE 4 Global food prices rose by 24 percent between December CRISIS. 2 2008 and December 2009 (and by 16.7 percent Fiscal Balances 0 between December 2008 and March 2010) according deteriorated as to the World Bank food benchmark index. Although food countries countered -2 the effects of prices remain below the highs of mid-2008, the recent -4 the economic double-digit increase in food prices could aggravate the slowdown. -6 2006 2007 2008 2009 2010 2011 adverse effect of the food price spike of 2008, which Low income Middle income still linger in many countries in the region. The two main SSA Oil exporters reasons for this are: one, the price adjustment in domestic Source: Global Economic Prospects, 2010. markets has been much slower than the easing of food prices in international markets after the mid-2008 spike; and two, the global economic crisis may have further strained the already stretched coping mechanisms of the poor in these countries. Among countries with the largest increase in domestic price of main staples (out of 58 countries monitored by FAO, GIEWS) for January-October 2009 were several Sub-Saharan African countries: Nigeria (sorghum 50%), Uganda (maize 35%), Sudan (sorghum 24%), Tanzania (maize 23%), and Kenya (maize 16%). The upward trend in price of staples in domestic markets is worrisome as it poses a significant threat to both food security and nutrition in the region. 4 AFRICA’S PULSE RISING GLOBAL Global food index Trends in maize prices FOOD PRICES POSE 300 450 A RISK TO FOOD 400 SECURITY AND 275 350 NUTRITION 250 300 250 US $/MT 225 200 200 150 100 175 50 150 0 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV 07 07 07 07 07 07 08 08 08 08 08 08 09 09 09 09 09 09 Food index Kenya Global Source: Food Price Watch (February 2010), Poverty Reduction and Equity Group, PREM Network, The World Bank. Debt sustainability. Widening fiscal deficits have pushed up debt ratios and raised concerns of possible debt distress in low-income countries. Thanks to the HIPC initiative and the MDRI, many low-income African countries entered the global economic crisis with low debt burdens. But in the face of limited aid and declining non-debt flows (such as FDI and remittances), countries had to increasingly rely on external and domestic debt financing to close the widening fiscal financing gaps. Debt levels and ratios have consequently deteriorated. Results from recent debt-sustainability analyses show that the present value (PV) of the public-debt-to-GDP ratio is estimated to be about 5 percentage points higher in 2009 than 2008. A similar pattern is observed in public external debt ratios. The deterioration is short term; the uptick in public debt to GDP tapers off in the long term and debt ratios are expected to return to a downward trend by 2011-12. Two countries—Central African Republic and the Republic of Congo—saw their debt risk improve from high risk to moderate risk, with delivery of HIPC/MDRI debt relief. For countries that entered the crisis with relatively high debt vulnerabilities (i.e., a high risk of debt distress or already in debt distress), the crisis has not exacerbated their debt situations. While the crisis has had a significant impact on the debt vulnerabilities of low-income countries in the region, debt vul- nerabilities generally remain manageable and risks of a broad-based debt crisis are low. Nevertheless, the global crisis has raised anew concerns about debt sustainability and underscored the need for prudent borrowing policies. Aid flows lag commitments. Although rising, ODA is falling short of donor commitments. The global economic crisis has brought to the fore the question of aid commitments to Africa. At the Gleneagles summit in 2005, Africa’s partners agreed that for Africa to reach the MDGs, official development aid would have to double by 2010. The latest OECD- DAC data show that by 2010 Africa is likely to receive less than half of the additional aid that donors agreed to provide to the region at the 2005 G-8 Gleneagles Summit: about $11 billion of the $25 billion in additional aid financing.1 The crisis highlighted the need for additional external assistance (in the face of declining growth and government revenues and increasing poverty), and the fact that, given the economic policy response to the crisis, additional aid at this time could be highly productive. Today, we have a unique opportunity to accelerate growth and poverty reduction in Africa. Aid to Africa must increase by more than the shortfall in the Gleneagles commitments in order to help low-income countries in the region resume and accelerate progress on the MDGs. 1 http://www.oecd.org/document/11/0,3343,en_2649_34487_44981579_1_1_1_1,00.html. AFRICA’S PULSE 5 2. Africa and the Millennium Development Goals MDGs still off-track, but progress has been made Although African countries are off-track on most of the MDGs, Africa has, over the past decade, been making the greatest progress toward the goals. The impact of the crisis on poverty and human development outcomes could stall this progress, making it harder to sustain the gains. Poverty. Africa’s economic growth has been accompanied by a reduction in the proportion of Africans living on less than $1.25 a day from 58 percent in 1995 to 51 percent in 2005. Over the past decade, the region’s poverty rate has been declining at about one percentage point a year.2 Nevertheless, the $1.25-a-day poverty rate is at about 50 percent, the same rate as in 1980. Even without the crisis, the continent as a whole was off-track on the first MDG—to reduce the 1990 poverty rate by half by 2015. The global crisis has slowed progress on reducing poverty: the poverty rate on current trends is now expected to fall to 38 percent by 2015, as opposed to the pre-crisis projected rate of 36 percent. The crisis will leave an additional 20 million people in extreme poverty by 2015. Human development goals. The crisis could affect THE GLOBAL Sub-Saharan Africa MDG1— progress on other human development outcomes ECONOMIC CRISIS the percentage of population living under $1.25/day SLOWED PROGRESS 70% as well. Before the crisis, Africa was the region with ON POVERTY the fastest progress in primary school completion: 60% REDUCTION. 57.6 the average primary completion rate increased from 50.9 The poverty rate is 50% 53 percent to 65 percent between 2000 and 2008. After crisis now expected to fall to 38% by 2015. The 40% Among low income countries, several had 50 percent 38.0 pre-crisis projected Before or higher improvement in completion rates, including crisis rate was 36%. 36.0 30% 28.8 Mozambique, Rwanda, Ethiopia, and Burundi— 20% admittedly, starting from a low base. African countries 1990 1995 2000 2005 2010 2015 Actual $1.25/day Path to 2015 Projected $1.25/day have also made progress in closing the gender gap in Source: World Bank staff calculations using the Povcal database. primary school enrollment ratios. More and more girls have been enrolling in primary schools. Improvement varied between 5 to 40 percent increase for low income countries in Africa: Benin, Burkina Faso, Ethiopia, Guinea, and Liberia saw a 20 percent increase in their gender parity index between 2000-08; changes were less for Zambia and Rwanda, which had much higher initial values in 2000. If the experience of past crises is a guide, many more children, most of them girls, will not be able to complete primary school. 2 Although the population share in extreme poverty is falling, as a result of population growth, the actual number of poor people—nearly 380 million— has been increasing. 6 AFRICA’S PULSE ALTHOUGH IT IS PRIMARY EDUCATION ENROLLMENT AND COMPLETION RATES OFF TRACK TO Sub-Saharan Africa Countries with larger improvements 80% MEET THE MDGs, Mozambique Rwanda AFRICA HAS MADE Ethiopia GREAT PROGRESS Burundi TOWARDS THE 70% Burkino Faso Mali GOALS IN THE Guinea LAST DECADE, THE Madagascar MOST AMONG ALL 60% Senegal Benin REGIONS OF THE Mauritania WORLD. Zambia Ghana 50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 0% 20% 40% 60% 80% 100% Net enrollment rate, primary level, total Primary completion rate, total 2000 2008 Source: Edstats, World Bank Source: World Development Indicators, World Bank. GENDER PARITY IN PRIMARY EDUCATION Sub-Saharan Africa Gender parity index in primary education 0.950 Ethiopia Benin 0.925 Guinea Liberia 0.900 Burkino Faso Gambia, The 0.875 Burundi 0.850 Senegal Mozambique 0.825 Mali Togo 0.800 Nigeria 2000 2001 2002 2003 2004 2005 2006 2007 2008 Mauritania Gender parity index (GPI), gross enrollment ratio in primary education Uganda Malawi Source: World Development Indicators Ghana Rwanda Zambia 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2000 2008 Source: World Development Indicators. There is some evidence that child mortality in Africa, after stagnating for some time, had begun to fall sharply before the crisis. Countries such as Rwanda, Ethiopia, Gambia and Malawi have seen declines of 25-40 percent in under-five mortality during 2000-08. As a result of the crisis, the under-five mortality rate might fall by less: to 139.5 per 1000 (post-crisis trend) instead of 129.2 per 1000 (pre-crisis trend) by 2015 (Global Monitoring Report 2010). As a result of the slowdown in growth in 2009, Friedman and Schady (2009) estimate that an additional 30,000-50,000 infants are unlikely to reach their first birthday. AFRICA’S PULSE 7 AS A RESULT OF Mortality rate – under 5 (per 1,000): THE GLOBAL Countries with larger improvements between 2000–2008 ECONOMIC CRISIS, Rwanda Malawi THE UNDER-FIVE Ghana MORTALITY RATE Mozambique MIGHT FALL LESS Ethiopia THAN PREVIOUSLY Niger EXPECTED. Tanzania Sierra Leone The slowdown in Guinea growth in 2009 Madagascar might mean 30,000- Gambia, The 50,000 additional 0 50 100 150 200 250 300 infant deaths. 2000 2008 Source: World Development Indicators. Medium-term Challenges Sustained growth and faster progress on the MDGs will depend on how well African countries address longer term challenges of large infrastructure deficits, lagging agricultural productivity, poor service delivery, weak governance, and climate change. Infrastructure gap. During the past decade, Africa has made great strides in Information and Communications Technology. The number of mobile phone subscribers rose from 11 million in 2000 to 246 million in 2008—an average annual growth rate of 50 percent.3 These improvements have been estimated to contribute as much as one percentage point to per capita GDP growth. Yet in other infrastructure areas such as energy, water, and transport, the expansion of infrastructure is slow. For example, results from the Investment Climate Surveys show that half of the firms surveyed listed electricity as a major constraint to business operations, and over a quarter of firms reported transport as a major constraint. Regional collaboration is becoming increasingly important in tackling many of the infrastructure challenges facing the region. A recent study (Africa’s Infrastructure: A time for Transformation) shows that: (i) infrastructure services are twice as expensive as elsewhere, partly because of the large infrastructure gap compared to other regions; (ii) addressing Africa’s infrastructure needs will cost about $93 billion a year—about 40 percent of this spending is needed for power which is by far the largest challenge; and (iii) further institutional, regulatory, and administrative reforms are needed to realize potential efficiency gains and reduce the financing gap for these services. Investment climate. There have been recent im- THE INFRASTRUCTURE Sub-Saharan Africa— Other Low Income provements in Africa’s business climate, reflected for GAP POSES ONE Normalized Units Low Income Countries Countries instance in the 2010 Doing Business Indicators—for OF THE GREATEST Paved road density 31 134 CHALLENGES TO the first time an African country (Rwanda) was ranked Total road density 137 211 AFRICA’S SUSTAINED as the “top global reformer�; two African countries— GROWTH. Main line density 10 78 Liberia and Rwanda—were among the top 10 reform- Mobile density 55 76 Internet density 2 3 ers; and Mauritius moved into the ranks of the top 20 Generation density 37 326 economies on the Overall Ease of Doing Business. Electricity coverage 16 41 Nevertheless, Africa’s private investment rate is still be- Improved water 60 72 Improved sanitation 34 51 low 15 percent of GDP, and eight of the ten countries Source: World Bank, 2009, Africa’s infrastructure: A Time for Transformation. judged as having the most difficult environment in the Note: The World Bank, Africa Action Plan, 2009, p. 4. world for starting a business are in Africa. 3 “International Communications Union, 2009, Information Society Statistical Profiles, Africa. 8 AFRICA’S PULSE THE POLICY Improvement in ranking on the ease of doing business, 2007/09 Reforms in Sub-Saharan Africa (46 economies) ENVIRONMENT 159 to 149 IN AFRICA IS Liberia 3 reforms DB 2005 22 IMPROVING IN Ethiopia 111 to 107 3 reforms MANY AREAS, 170 to 169 DB 2006 30 Angola 3 reforms INCLUDING 156 to 148 DB 2007 65 BUSINESS Sierra Leone 5 reforms 162 to 156 ENVIRONMENT. Mali 5 reforms DB 2008 52 155 to 147 Burkina Faso 5 reforms For the first time, DB 2009 61 24 to 17 Mauritius an African country 6 reforms 143 to 67 was ranked “top Rwanda 7 reforms DB 2010 63 global reformer� 0 20 40 60 80 100 120 140 160 180 0 10 20 30 40 50 60 70 80 in the 2010 Doing Business Indicators. Source: Doing Business Report 2010. Source: Doing Business Report 2010. Agriculture. After decades of neglect, African agriculture is slowly reclaiming its role as a major instrument for reducing poverty. Agricultural GDP growth has been accelerating from 2.3 percent a year in the first half of this decade to close to 4 percent in the latter half. From 2003-2007, 13 countries registered better-than-three-percent growth in agricultural output per worker.4 The improvements have been the result of reform of agricultural policies, increased donor and gov- ernment attention, and increases in food prices. However, with less than 5 percent of cultivated land irrigated, African agriculture remains extremely vulnerable to the effects of global climate change—more frequent floods and droughts, as well as a drying trend in large parts of the continent. Governance. There are indications that governance is improving in several African countries, yet weak gov- SCORES ON ernance and low capacity remain a reality for many CPIA score on public sector management and institutions (2004-08) PUBLIC SECTOR 3.2 African countries. Some countries such as Ghana, MANAGEMENT AND INSTITUTIONS 3.0 Mozambique and Nigeria have made significant prog- FOR IDA-ELIGIBLE ress in institutional quality. Post-conflict countries such COUNTRIES IN 2.8 AFRICA DID NOT as Rwanda have also seen gains in this area. Overall, 2.6 CHANGE MUCH however, the World Bank’s CPIA (Country Policy and DURING 2004-08. 2.4 Institutional Assessment) scores on public sector Oil exporting 2.2 management and institutions for IDA-eligible countries countries registered much lower scores 2.0 in the region did not change much during 2004-08. 2004 2005 2006 2007 2008 on average than There are significant variations across country groups, Non-oil resource rich Non-oil and non-resource rich countries non-oil exporting Oil exporting countries countries. with oil exporting countries registering much lower Source: The World Bank. Note: Average scores for IDA-eligible countries in Africa. scores on average than non-oil exporting countries.5 Also, the quality of public sector management and institutions tend to be lower in Africa than in other regions. 4 The World Bank, Africa Action Plan, 2009. 5 Scores from Transparency International’s Corruption Perception Index show that only 11 percent of oil exporters in Sub-Saharan Africa (IDA and non- IDA countries) saw an improvement in this index during 2006-09, compared with 50 percent for non-oil countries. AFRICA’S PULSE 9 3. Yes Africa Can: Success Stories from a Dynamic Continent The economic landscape of Africa has changed dramatically since the mid-1990s, as stagnation has given way to dynamism in a broad swath of African countries. Below are some examples of recent development successes. Rwanda: Improving health through results-based financing. As a result of a sweeping reform that linked physicians’ pay to their performance (among other things), there has been a dramatic improvement in health out- comes in Rwanda: In three years, modern contraception nearly tripled, assisted deliveries increased from 39 percent to 52 percent, use of insecticide-treated nets among children under 5 years increased from 4 percent to 67 percent, and under-five mortality decreased by more than 30 percent. To be sure, these outcomes were due to a number of factors, but randomized impact evaluation shows that the introduction of results-based financing was one of the significant determinants. Mobile payments go viral: M-PESA in Kenya. LINKING PAY TO Indicator 2005 2008 M-PESA, a small-value electronic payment and store of PERFORMANCE, Contraception (modern) 10% 27% value system that is accessible from ordinary mobile AMONG OTHER REFORMS, IMPROVED Delivery in health centers 39% 52% phones, is enjoying a boom.6 Since its introduction in HEALTH OUTCOMES Infant mortality rate 86 per 1000 62 per 1000 IN RWANDA. 2007, it has been adopted by 9 million customers— Under-five mortality rate 152 per 1000 103 per 1000 i.e., 40 percent of Kenya’s adult population. M-PESA For example, under-five Anemia prevalence: children 56% 48% mortality decreased by is facilitating an average of $320 million per month in Vaccination: all 75% 80% more than 30% in three Vaccination: measles 86% 90% person-to-person transfers. Half of the 16,900 retail years. Use of insecticide treated nets 4% 67% stores providing M-PESA services are located outside among children under 5 urban centers. Twenty-seven companies are using Fertility 6.1 children 5.5 children M-PESA for bulk distribution of payments, and 75 Source: Demographic and Health Surveys, 2005 and 2008. companies are using its new bill pay function, including the state-owned electric utility company. By providing a cost-effective and reliable electronic means of payments, M-PESA is offering a sustain- M-PESA IS Money transfer behavior before and after M-PESA able and affordable way to provide financial services, OFFERING 50 AFFORDABLE including to the poor. While the success of M-PESA is FINANCIAL 40 a result of the great vision and creativity of Safaricom, SERVICES TO it also benefited from several enabling factors within KENYA’S POOR 30 THROUGH MOBILE Kenya. More specifically its success was facilitated PHONES. 20 by a strong latent demand for domestic remittances, Since M-PESA’s 10 poor quality of available financial services, liberal introduction in 2007, it has been banking regulation, and a mobile communications 0 adopted by 9 mil- M-PESA Hand Bus Post Office Direct Money Cheque Someone Other market characterized by Safaricom’s dominant market Deposit Transfer else lion customers, or 40% of Kenya’s 2009 2006 position and low commissions on airtime sales. adult population. Source: Ignaco Mas and Dan Radcliffe, 2010, Mobile Payments go Viral: M-PESA M-PESA presents an example of how technological in Kenya, African Success Stories Study. innovation can be adapted to address local issues. 6 M-PESA (“M� for mobile and “PESA� for money in Swahili) was developed by mobile phone operator Vodafone and launched commercially by its Kenyan affiliate Safaricom. 10 AFRICA’S PULSE Tourism in Cape Verde. In spite of its isolation, TOURISM HAS Tourism growth in Cape Verde BEEN A KEY poor natural resource base, chronic droughts, and 600 300,000 DRIVER OF long history of outmigration, Cape Verde has achieved GROWTH IN 500 250,000 an unprecedented average annual growth in GDP of CAPE VERDE. 400 200,000 6.5 percent over the last decade. Tourism has been Arrivals US$ in millions Tourist receipts reached $432 300 150,000 a key driver. Tourist arrivals increased from 67,000 in million in 2008, 1999 to over 285,000 in 2008. Early estimates for 200 100,000 comprising 25% of GDP. 2009 suggest the total may be close to 300,000. 100 50,000 Tourist receipts reached $542 million in 2008, com- 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 prising 72 percent of all service exports, 25 percent Tourist receipts (US$ Million) Tourist arrivals of GDP, and providing direct and indirect employment Source: L. Twining-Ward, 2010, Cape Verde’s Transformation: Tourism as a Driver of Growth, African Success Stories Study. for 15 percent of the workforce. Although the country still faces development chal- lenges, such as dependence on tourism, a chronic trade deficit, and a limited export base, Cape Verde has demonstrated that when conditions are right—political stability, good governance, favorable economic incentives—tourism assets can yield fast economic gains. Mali: Linking mango farmers to markets. Mali saw a six-fold increase in exported mangoes between 1993 and 2008 on the back of increasing demand in Europe and the ability of mango producers and exporters to adapt to the market. Sea freighted exports that were at zero in 1993 rose to 4,600 metric tons in 2008. Transit time from Sikasso to northern Europe decreased from 25 days in 1993 to 12 days in 2008. At the same time, the farmgate prices of man- goes increased from 50 FCFA to 125 FCFA between 1993-2008. Mali, a landlocked country, overcame a number of challenges in order to boost mango exports. By implementing a multi-modal transportation system, combining road, rail and sea freight, Mali was able to overcome its infrastructural constraints. Through a partnership with private operators, a cold chain system was established, transporting mangoes using refrigerated containers all the way to Europe. Backed by donor funding, phytosanitary improvements were made, certification and traceability programs were implemented, and training in orchard management and post-harvest han- dling was offered to Malian agricultural workers. More on the World Bank in Africa: www.worldbank.org/africa A MULTI-MODAL Mali’s mango exports (2003–2008) TRANSPORTATION 7,000 SYSTEM IN 6,000 MALI HELPED OVERCOME 5,000 Quantity in tonnes INFRASTRUCTURE 4,000 CONSTRAINTS, BOOSTING MANGO 3,000 EXPORTS. 2,000 1,000 0 2003 2004 2005 2006 2007 2008 Volume exported by sea Volume exported by air Source: Y. Sangho, P. Labaste and C. Ravry, 2010, Growing Mali’s Mango Exports: Linking Farmers to Markets through Innovations in the Value Chain, African Success Stories Study AFRICA’S PULSE 11