Abdul Kamara

Africa’s Economic Transformation:Trends and Prospects for Enhancing

Food Security

African Development Bank Group

Economics, Value Chains and Policy

Dialogue on International Food Security 2014, University of Alberta

The Continent’s Transformation Process

- Change is rapidly taking place, … where change altering dev. landscape

- The last investment & development frontier, with diverse countries; where need harness emerging - Global opportunities, … …, …. a challenge! Reason for speaking on Africa’s Economic Transformation

- Firstly, this dialogue is critical in the African context … transformation prospects depend on: - How we manage it; how we respond to opportunities; how we deal with the inherent challenges.

- Secondly, … several regions in Africa still food insecure- Africa in need of gaining its rightful please in the global value chain- Still has not acquired it rightful share of global trade, … internal capacity constraints …. ; but also due to trade-related problems

IF

African Voices

Ellen Johnson

Sirleaf

Vision 2015

Kofi Annan

African Development

Bank

- Level of optimism (rising, moment, investment frontier, growth pole, etc)- Where is this optimism coming from?- What does it mean for food security/- What are the policy implications, ….?

Sources: AEO, ACR, WB-Doing Business, McKinsey Report: Lions on the Move Own Research, as Research Manger

The African Story- unprecedented /sustained growth, > 5% on @;- Bet. 2000 & 2010, six of the 10 fastest growing countries of the world;

- Growth is expected to remain strong, with IMF projecting, 7 of 10 fastest growing economies in the world over the next 5 years to be African

- Caveat: diverse countries; varying opportunities; different levels of growth; some still stuck in low growth paths.; nonetheless, …

- A continent-wide GDP of barely US$600 billion in 2000, reached US$2.2 trillion in 2013; … sig.-GDP growth in 2013 to average 6.6%.

Drivers of Change

Commodity price

Improved Macro-

Economic Policies

Sustained Reforms

Good

Governance

Improved Investment

Climate

Capital Flows

Increased Global Demand for Resources

Improved Macro-

Economic Policies

Important Trends, but Challenges RemainLack of basic infrastructureDisjoint regional economiesUndiversified economies driven by few

commodities (oil, extractive resources) Fragility & conflictsCountries differ markedly

Underdeveloped infrastructure (roads, power, energy, water infrastructure)

hinders regional integration Increases cost of doing businessmakes firms less competitive, ….even harder to benefit from globalizatnHinders structural transformation Growth has not been inclusive, or ….e.g. agriculture, employing 60-70% of pop.

has seen little transformation (land, labor,.)

… opportunity

to become the new

growth pole;

… significant

structural

constraints …- Poverty- Inequality (6 / 10)- $30 bn food import

# What does this mean for food security, and what are the continents prospects for moving

higher on the value chain?- Africa does not produce all the food it needs- Urbanization leading to more food imports, … …

- Cost is huge; $30 bn a year; could double by 2020- Situation gets worse during crisis (droughts), … …

- In 2007-2008 food crisis; cereal prices went up- Response? Public protests in several cities, …

- …, …, …., Africa a net cereal importer- Cereal import bill about $22 bn in 2008 (50% SSA)

- Food price vulnerability analysis: Cereal Balance; Import Dependency; Ability to Pay; Urbanization.

• BUT doesn’t Africa have some 400 mn ha of land waiting to be cultivated?

• And isn’t Africa one of the last frontiers where such unexploited potential is still found?

…Africa is net cereals importer because structural transformation is still a tall order

…. But what about the drivers of global food prices?

- Global level, food price risk due to volatility- Can be managed through regulating trade, …

Short-Term: conflicts; natural disasters; oil prices increases; exchange rate fluctuations; hedge funds

Long-Term: population growth; higher incomes; changing tastes; demand for biofuels, among othersIn Africa, … exacerbated low productivity, market distortions, infrastructure gap, also conflicts; disproportionate damage by climate change. - Global price could stimulate food production, but price transmission mechanisms in Africa operate with a lag market distortions; capacity consts.

This brings me to my third point: policy considerations for enhancing food security

Many believe food Africa’s insecurity, … has to do with laws, policies and institutions that have held back agriculture.

Land ownership structure (not new! CGIAR) Low agricultural productvy, since 1970, real growth at 2-2.5%, @ par or below pop growth, Technologies, do exists, CGIAR, biosc. corps- BUT problem persists: i) GM method driven by private firms , …. brings both opportunities and challenges (FAO: world’s 10 transnational bioscience corps spend ca. $3 bn/year on R & D. (3x > CGIAR) Bureaucracy ….; new seeds, fertilizer… regulated, years to approve: the result? Improved seeds get stuck at the border, … farmers stuck with low yields.

And the challenge of climate change?

- The developing world, esp. Africa contributes little to the causes of CC, but stands to be hit hardest by its impacts- Preliminary assessment suggest agric. prodtvty. decreases on @ of about 15-20% by 2080, & by up to 50% in highly vulnerable countries.

- The risks of humanitarian food crisis likely to rise due to increased freq. of extreme weather events

- In some regions, e.g. Southern Africa, this risk is exacerbated by that of HIV/AIDS.

These are in addition to the binding structural constraints discussed earlier, notably trade and infrastructure-related constraints

Africa and the Global Value Chains

Operationalizing the Strategy

Take

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ays!

-African has a growth momentum

-A good potential for true economic transformation

-Formidable challenges lie ahead-Momentum creates a long awaited opportunity for Africa to move higher on the value chain

Emer

ging

Pot

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Afric

an C

onsu

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- About 350 mn in 2010, up from 126 mn in 1980;- Consumer spending now at $720 bn/yr; AfDB projects to reach $1 trillium in 2020. We believe that this provides the first foot in the door, for Africa to move higher on global value chian- Intra-regional trade in professed goods will be the first opp. for African firms to move higher on the VC.

Africa and the Global Value Chains … contd.

Operationalizing the Strategy

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- Though still modest, intra-Africa trade more than doubled bet. 2005 & 2011, rising from $49 billion to $108 billion- In 2010 it was 16% of African exports were to other African countries. Much higher ….!- Expected to be higher, once statistics is corrected; including coffee, tea sold to neighbors; We believe this is the most logical place to start, …. by providing “smart aid” such as the AfDB’s “Aid For Trade” program, which seeks to remove trade related constraints.

Africa and the Global Value Chains … contd.

Operationalizing the Strategy

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- By some estimates, lifting barriers to food trade (inc. structural constraints) , from farm to market, could double Africa’s production of cassava and rice; triple maize, millet and sorghum; and quintuple wheat. The region could feed itself! This could mean higher incomes for farming families, and more secure food supply for urban dwellers; and better employment opportunities This is why the African Development Bank Infrastructure its core business; along with Regional Integration; Private Sector Development; Governance; and Capacity Building to enhance Skill and Technology.

Africa Going Forward

Operationalizing the Strategy

Take

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Afric

a is

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s!- With this unmatched potential, Africa is open for business, and organizations, like the AfDB, have laid so many foundations for trade, growth and investments. - The Bank has helped build a network of roads, rail, water, electricity, and build institutions to fight corruption!- During the food crisis in 2007/2008, we launched $1 billion trade finance initiative; over the past 3 yrs, we have supported a cum. level of trade of $2.5 billion; in 2013 along we committed some $6.7 billion dev. projects, about 60% of which is geared towards infrastructure constraints We believe this is the most logical place to

Development Aid only as part of the

way forward

Domestic Investments

PRIVATE SECTROR

Foreign Investments

Africa Going Forward

THANK

YOU!