Africa’s Success: More Than A Resource Story

IMF Blog, October 31, 2013

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Africa’s Success: More Than A Resource Story

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Bibliographic details

• Authors: Antoinette M Sayeh
• Published: October 31, 2013

Overview and main finding

• Author: Antoinette M. Sayeh
• Date: October 31, 2013
• Core conclusion: Africa’s continued success since the mid-1990s is more than a “commodity story”; several economies have become high performers without basing their success on natural resources, driven largely by sound policymaking.

Case-study approach and period covered

• Countries studied: Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda.
• Analysis period: 1995–2010.
• Common pattern identified: turnaround from macroeconomic distress (often following destructive conflict) supported by encompassing visions and strategic frameworks.

Country-specific highlights

• Burkina Faso:
  • Focused on institutional strengthening and early medium-term macroeconomic planning.
  • Skillful management of the cotton sector important for livelihoods of many poor people.
• Ethiopia:
  • By far the most populous country in the sample.
  • Accelerated growth by actively supporting agriculture and certain export products and services (cut flowers, tourism, and air travel).
• Mozambique:
  • Attracted significant foreign investment and external capital flows in the late 1990s.
  • Funded capital-intensive megaprojects to produce and transmit electricity and gas; electricity used to produce aluminum.
• Rwanda:
  • Rebounded after achieving political stability.
  • National recovery strategy focused on specific sectors such as tourism and coffee.
• Tanzania:
  • Achieved sustained high growth through three well sequenced waves of macroeconomic and structural reforms reaching across all sectors.
• Uganda:
  • Began significant macroeconomic and structural reforms just before 1990.
  • Stimulated private investment and launched export diversification into nontraditional products.

Virtuous circle and fiscal space

• Mechanism described:
  • Sensible, medium-term–oriented policymaking and structural reforms → attracted higher aid flows and debt relief → released domestic resources.
  • These gains created “fiscal space” for expanded social spending and capital investment, particularly infrastructure → contributed to higher growth.
• Fiscal behavior:
  • The six countries created and used fiscal space wisely.
  • Benefits included early debt relief and relatively large external flows (budgetary aid and foreign direct investment).
  • Investment rates in the sample countries were higher than peers and focused on infrastructure, health, and education.
  • Mozambique experimented with public-private partnerships for railway lines, ports, and toll roads.

Importance of agriculture and services

• Agriculture:
  • Still of enormous importance in most sample countries.
  • Employment shares in agriculture:
  • about 80 percent in Mozambique and Burkina Faso
  • 71 percent in Uganda
  • 65 percent in Tanzania
  • Poor and extremely poor are concentrated in rural areas and often rely on subsistence farming.
  • Ethiopia and Rwanda show that government programs providing access to seeds and fertilizers can dramatically improve agricultural yields.
• Services and telecommunications:
  • Services were an important growth driver, partly reflecting expansion of telecommunications.
  • Mobile phones serve as tools for communication, dissemination of market prices for crops, and mobile banking—enhancing financial inclusion for very poor people outside the formal financial system.

Infrastructure and remaining challenges

• Despite massive investment, infrastructure still falls short of meeting basic needs in the sample countries.
• Specific constraints:
  • Continuous power cuts and electricity shortages hamper business operations.
  • Lack of roads prevents farmers from marketing products effectively.
• Policy implication: sustained and high investment in infrastructure—particularly in energy and transportation—remains crucial.

Overall trajectory and outlook

• The six studied countries have transformed into high performers even without being natural resource producers.
• With the right policies, these countries are positioned on a trajectory to becoming emerging markets.

Source: Africa’s Success: More Than A Resource Story (Antoinette M. Sayeh, October 31, 2013).

Content in this bundle

• Regional Economic Outlook: Sub-Saharan Africa - Keeping the Pace, October 2013
  • Regional Economic Outlook: Sub-Saharan Africa - Keeping the Pace, October 2013 (Markdown version)
  • Regional Economic Outlook: Sub-Saharan Africa - Keeping the Pace, October 2013 (PDF)