It is time for Africa - Promising opportunities from natural resources


Remarks by Angel Gurría, OECD Secretary-General, at the 13th International Economic Forum on Africa, Paris, 7 October 2013

(As prepared for delivery)

Prime Minister Duncan Kablan, Ministers, Excellencies, Ladies and Gentlemen,

It is a pleasure to welcome you to the 13th International Economic Forum on Africa! I would like to extend a particular welcome to Donald Kaberuka, the President of the African Development Bank; to Carlos Lopes, Executive Secretary of the UN Economic Commission for Africa; and to all the Ministers and policy makers that have joined us today.

This year we are focussing on how to harness natural resource wealth for economic transformation. The impressive turnout at this event underscores the importance of this issue on the agenda, and highlights the African continent’s energy and commitment to support its strong growth trajectory!

Africa’s Impressive Rise

We called this Forum “Africa 2.0”, because in many ways Africa is experiencing a rapid and profound transformation. Africa is, indeed, “A Continent on the Rise”.

Since 2000, Africa has grown by 5.1% per year on average: that’s twice the growth rate observed over the 1990s, or nearly 3 times the average growth rate of the OECD economies during the same period (1.8%). Even if all economies are not expanding at the same pace (in fact six African countries experienced negative growth in 2012), the regional average projects a remarkable dynamism.

This dynamism is very much related to increasing trade and investment flows: Africa’s exports quadrupled from 2000 to 2007. These positive achievements are also due to fundamental improvements in macroeconomic policies, which have allowed the continent´s average fiscal deficit to fall steadily from 7% in the 1980s to close to zero at the end of the 2000s. Inflation dropped from over 10% on average during the 1990s to an average of 6% during the 2000s.

Today, the region’s economic outlook is rather promising: regional GDP is expected to grow by 4.8% in 2013 and by 5.3% in 2014. There are also signs of improvement in the quality of growth: During the 2000s, Africa’s labour productivity increased by close to 3%, almost half of which was attributed to workers moving to new activities with higher productivity. This is very important: productivity enhancement is what sustains economic growth in the longer term!

These are all impressive achievements, but they should be no cause for complacency. African countries are still facing multiple economic and social challenges.


Persisting Economic and Social Challenges

Africa’s remarkable GDP growth and macroeconomic performance still need to be reflected in equivalent improvements in living standards. Despite recent progress, the latest data shows that nearly 78% of the population of Sub-Saharan Africa is living in poverty, while close to 49% still lives in extreme poverty. Africa will probably be the only region not to reach the Millennium Development Goal of halving poverty by 2015.

All African countries are grappling with unemployment and underemployment. The greatest challenge here is youth unemployment: youth represent close to 60% of the total unemployed in the region. With one of the world’s largest young populations, some people see this as a ticking time bomb. We need to turn it into a great opportunity!

Widening inequalities are another concern. African wealth disparities are among the broadest in the world. According to a recent (2012) study by the African Development Bank, 6 of the 10 most unequal countries are in Sub-Saharan Africa.

The continent needs a catalyst to speed up economic transformation and better distribute the benefits of growth. Without a faster and more profound transformation, Africa runs the risk of losing out on the demographic window of opportunity that Asia was able to tap some decades ago. But how can Africa achieve such structural transformation?


Time to make the most of natural resources

Our African Economic Outlook 2013 points to the region’s natural resource wealth. More concretely, we propose policy options to make the most of their natural resources. Right now, the continent holds 24% of the world’s agricultural land, but only accounts for 9% of global output. And despite very large endowments, Africa’s share in global natural resource assets has declined between 1995 and 2005. There is certainly a problem of investment here: the average African country spends USD5 per square km in mining exploration, against USD65 on average in Latin America, Canada and Australia.

With the right policy settings, natural resources can actually be an important source of diversification and economic growth.

It requires a coordinated set of policies that go beyond the natural resource sector, and regular monitoring and evaluation to ensure transparency and accountability. The 2013 African Economic Outlook puts forth a four-layered policy approach that promotes natural resource-based structural transformation:

• Layer one: Enabling the right framework conditions. Structural transformation requires new economic activities to blossom. Yet, too many African countries do not provide the level of public services necessary for this to happen at a large scale. This calls for a new wave of policies to improve infrastructure, logistics, skills, and the capacity of government agencies to be proactive partners to business.

• Layer two: Strengthen the natural resource sector. Natural resources are not “manna from heaven”. They require investments and know-how to be identified and turned into revenue and job opportunities. Appropriate land management is crucial, especially for smaller firms. Energy and skill shortages also have to be addressed. Overcoming the scarcity of electricity supply and improving vocational training must therefore be among the priorities.

In South Africa, for instance, if the mining sector’s constraints such as electricity shortages, infrastructure bottlenecks, water scarcity and skills shortages were addressed, the sector could grow by 3-4% annually until 2020, creating at least an accumulated 300,000 jobs.

• Layer three: Managing natural resources efficiently and sustainably. The sustainable economic management of natural resources begins with putting in place a transparent and fair tax system and fighting rent-seeking behaviour and corruption. African tax administrations have being doing a lot but cannot do this on their own. As you know, the OECD is leading international efforts to allow governments to collect the tax revenue they need to serve their citizens. Africa’s full participation in this global tax reform agenda is essential.

• Finally, Layer four: Harnessing the potential of the resource sector to achieve structural transformation. The extractive sector can be the engine of growth and development in Africa, if governments and business agree on a comprehensive strategy, and if a stable policy framework for investment is in place. We have several examples of successful supplier-development programmes that promoted linkages from the extractive industry to the rest of the economy. Australia and Chile, but also South Africa, are today leading exporters of services and machinery for mines.

Ladies and gentlemen:

It’s time for Africa to invest more in itself by harnessing its natural resources for inclusive economic growth. We are convinced that the region’s governments can design and implement comprehensive industrial strategies to promote the natural resource sector and sow the seeds for other labour intensive sectors.

African governments can count on the OECD! We are engaging several African countries alongside other developing, emerging and OECD economies in a policy dialogue to share experiences and design better policies.

We will soon host the first meeting of the OECD Network on Natural-Resource Based Development. The network convenes policy makers from countries whose development is driven by the extractive sector as well as from countries that have development co-operation programmes in this sector. Already Norway, Morocco, Zambia, Liberia, the Dominican Republic and Switzerland have joined the network with more expected to be added to the list.

I hope many of you will want to tap into this global resource that brings together cutting edge research and policy makers. The OECD is here to make it happen!

Thank you very much.


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