Post-HIPC growth dynamics in Sub-Saharan Africa

Access to debt relief under the Highly Indebted Poor Country Initiative enhanced the growth performance across Sub-Saharan Africa, especially in the subset of debt-ridden low-income countries. Over the past few years, these Completion Point countries have enjoyed significantly higher investments and growth rates, primarily fueled by the expanding fiscal space of the post-Highly Indebted Poor Country Initiative era. 

They are also weathering the adverse effects of the global crisis much better than their non-Highly Indebted Poor Country Initiative counterparts. Despite these growth rebounds, the region is not likely to meet the Millennium Development Goals, however. Long-term growth projections from a simple macroeconomic model, which is applied to Ethiopia, suggest that prospects for reversing the widening income gaps with other regions of the developing world are limited. Under the baseline scenario, assuming current growth trends, the estimates show that it could take more than five decades for per capita real income to double in Ethiopia. 

However, even these gloomy prospects are likely to be undermined by the looming risk of another sovereign debt crisis. In effect, the experiments show that lowering interest rates on external debt would not bridge the widening income gap with other regions of the world, unless it is accompanied by a rapid expansion of capital accumulation financed by sustained inflows of foreign aid.

World Bank.Author: Bayraktar, Nihal ; Fofack, Hippolyte.Document Date: 2011/12/01. Document Type: Policy Research Working Paper.Report Number: WPS5924

Post-HIPC growth dynamics in Sub-Saharan Africa

x

Power tariffs:caught between cost recovery and affordability

This is the first paper to build a comprehensive empirical picture of power pricing practices across Sub-Saharan Africa, based on a new database of tariff structures in 27 countries for the years 2004-2008. Using a variety of quantitative indicators, the paper evaluates the performance of electricity tariffs against four key policy objectives: recovery of historic power production costs, efficient signaling of future power production costs, affordability to low income households, and distributional equity. As regards cost recovery, 80 percent of the countries in the sample fully recover operating costs, while only around 30 percent of the countries are practicing full recovery of capital costs.

However, due to the fact that future power development may be based on a shift toward more economic technologies than those available in the past, existing tariffs look as though they would be consistent with Long Run Marginal Costs in nearly 40 percent of countries and hence provide efficient pricing signals. As regards affordability, today's average effective tariffs are affordable for 90 percent of today's customers. However, they would only be affordable for 25 percent of households that remain unconnected to the grid. Tariffs consistent with full recovery of economic costs would be affordable for 70 percent of the population. As regards equity, the highly regressive patterns of access to power services, ensure that subsidies delivered through electricity tariffs are without exception also highly regressive in distributional incidence.

The conclusion is that achieving all four of these policy objectives simultaneously is almost impossible in the context of the high-cost low-income environment that characterizes much of SSA today. Hence most countries find themselves caught between cost recovery and affordability.

World Bank.Author:Briceno-Garmendia, Cecilia;Shkaratan,Maria.Document Date:2011/12/01.Document Type:Policy Research Working Paper.Report Number: WPS5904.Volume No:1 of 1

Power tariffs: caught between cost recovery and affordability

n

Brazil and Sub-Saharan Africa.South South Partnering for Growth.Bridging the Atlantic

Bridging the Atlantic is a descriptive study about Brazil’s involvement with counterparts in Sub-Saharan Africa over the last decade through knowledge exchange, trade, and investments. The objective of the study is to understand these relations better with the intent to forge concrete and mutually beneficial partnerships between Brazil and Sub-Saharan Africa. Two elements explain the focus on the last decade. First, although Brazil and Sub-Saharan Africa have interacted with one another for at least 200 years (chapter 2), only in the last decade was a more robust engagement built, through stronger partnerships and long-term projects. Second, neither in Brazil nor Africa was there a practice of collecting, organizing, and analyzing data on early partnerships, a serious obstacle to obtaining reliable information.

Brazil and Sub-Saharan Africa are natural partners, with at one point a shared geography and later a shared history. About 200 million years ago, Africa and Brazil were parts of the landmass of Gondwana (figure ES.1). Between the sixteenth and early nineteenth centuries, the transatlantic slave trade united the two regions until slavery’s abolition. Now, the two areas are reestablishing connections that will affect each other’s prosperity and development in major ways. This renewed engagement reflects new, positive realities in the evolution of development cooperation; Africa’s rapid growth in recent years; and Brazil’s rise as a global economic power interested in intensifying its ties—cultural and commercial—with Africa.

The international economy is going through great changes. Developed economies— Japan, the European Union, and the United States—face a reduction in economic dynamism—for different reasons. Developing countries—led by China, India, Brazil, Argentina, Turkey, South Africa, and Russia—have growth accelerating, with prospects of further expansions in income, domestic employment, and investment between the main emerging economies. In recent years, there has also been a revival on the African continent, albeit patchy. The International Monetary Fund estimates that the economies of Sub- Saharan Africa, having grown 5.4 percent in 2010, will expand 5.2 percent in 2011 and 5.8 percent in 2012. The Middle East and North Africa, having grown 4.4 percent in 2010, should expand 4 percent in 2011 and 3.6 percent in 2012.

In this reconfiguration of the global economy, Brazil has promoted a policy of diversification of its international integration, engaging with developing countries in Latin America, Southeast Asia, and Africa. The former president, Luiz Inacio Lula da Silva, made 12 trips to Africa, visiting 21 countries. In the opposite direction, Brazil received 47 visits of African kings, presidents, and prime ministers from 27 nations. Brazil’s diversification policy remains the mandate of President Rousseff. In her first year in office, she visited Angola, Mozambique, and South Africa. The government also plans to design a special strategy for closer ties with the African continent to facilitate exports of goods and services (mostly engineering), by creating new mechanisms to guarantee credit lines (a commodity account, for example, to facilitate payments). As Bridging the Atlantic: Brazil and Sub- Saharan Africa, South–South Partnering for Growth shows, trade with Africa grew slowly between 2003 and 2008, and then fell between 2009 and 2010, with the worsening of the global economic crisis and the aggressive actions of the Asian countries in the region.

President Rousseff also stresses the importance of Brazilians leaving “a legacy to Africa” in the form of technology transfer, manpower training, and social programs. Brazilian cooperation for development involves humanitarian aid and bilateral or multilateral interventions. Brazilian institutions act as partners in training to develop and strengthen institutions. It is thus encouraged by political solidarity, historical and cultural affinities, economic and political interests, and the knowledge produced by exchange and experimentation through partnerships. The portfolio of Brazilian cooperation projects in Africa covers agriculture, health, education, training, e-government, public administration, environment, information technology, urban development, sanitation, biofuels, air transport, tourism, justice, culture, human rights, and sports.

World Bank. Studies and International Political and Economic Relations (IPEA)

Bridging the Atlantic. Brazil and Sub-Saharan Africa: South–South Partnering for Growth

x