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Africa Holds Potential to Lead Global Growth in Next Two Decades

February 2, 2011

ADDIS ABABA, February 2, 2011 — Following the global financial crisis, African economies quickly rebounded, giving the continent the opportunity to become a global growth pole in a mulitpolar world, the World Bank said.  To do this, African countries need to sustain macroeconomic reforms and implement business friendly policies that are indispensable for attracting investors.

“African governments must walk the talk of reform,” said World Bank Vice President for the Africa Region Obiageli Ezekwesili in an interview with the BBC on the sidelines of the 16th Session of the African Union summit.

“They must also ensure that the macroeconomic stability attained over the past decade does not unravel,” Ezekwesili added. “The continent must ensure that current improvements in the business and policy environment continue and that reforms in the energy, agriculture, tourism, infrastructure and basic service delivery sectors are sustained.”

Africa, she explained, has the potential to be a growth pole for many sectors. Agriculture, tourism, real estate, financial and banking services, and transport can all replicate the enormous success of Africa’s Information and Communication Technologies (ICT) revolution.

“Africa is where global growth will be coming from over the next two decades and more,” Ezekwesili affirmed.

Africa as an investment destination

Africa is forecast to grow 5.1 percent and 5.4 percent respectively in 2011 and 2012, up from an estimated 4.5 percent in 2010 and 1.6 percent in 2009. The continent’s economic outlook is expected to continue to strengthen, driven by historically high commodity prices and stronger external demand.

Compared to other regions, “Africa offers some of the highest returns on investment,” the World Bank Vice President said.

Foreign direct investments (FDI) to Africa, which rose nearly nine-fold from $10 billion in 2000 to $88 billion in 2008, were much higher than flows to India ($42 billion) and only slightly behind flows to China ($108 billion).

“It would be a mistake for any corporation not to make African an investment destination. As a matter of fact,” Ezekwesili argued. “I want to go on record as saying that shareholders of any company whose CEO has not yet presented their Board of Directors with an Africa strategy should worry about missing opportunities in Africa.”

World Bank drafts new Africa strategy

“The World Bank’s new strategy for Africa is designed to support this new and emerging Africa,” Ezekwesili told the BBC, referring to the draft document outlining a new approach at partnership between the Bank and the continent that is currently being finalized ahead of consideration next March by the Board of Executive Directors of the Bank.

The draft stresses partnerships with governments, development actors, the private sector, civil society, and citizens and puts a premium on knowledge sharing in an effort to avoid past and known errors of development while fast-tracking replicating of successful approaches. It recognizes the limited effectiveness of World Bank financing, which is relatively small, as the key driver of change, unless that funding is used to leverage other resources such as private investors, foundations, national budget resources, public-private partnerships.

The strategy was formulated through a highly consultative process, involving face-to-face meetings with nearly 2,000 Africans from 36 countries and feedback provided via the Internet or in written comments from thousands more stakeholders including government officials, development partners, private sector representatives, civil society organizations, academia, media and other groups.

One of the key goals of the new strategy is to help Africa pursue the reforms needed to attract investors; foster the private sector as the engine of growth, jobs and wealth; take advantage of rising food prices by accessing the vast arable farmland that lies fallow across the continent, improving agricultural productivity, and boosting intra-African as well as the continent’s share of global trade; while pursuing the macroeconomic reforms that made a quick rebound from worst global economic shock since the Great Depression possible in the first place.

World Bank financing of most African countries is provided by the International Development Association (IDA), the Bank’s fund for the world’s 79 poorest countries, 38 of which are in Africa.

Funding from IDA to Africa has almost tripled over the last three years – from $4.7 billion in 2007 through $7.6 billion in 2010 to $11.3 billion in 2011 – making this fund the premier financing window for Africa.

Estimates are that each IDA dollar so far leverages up to $8 dollars. The new Africa strategy envisages significantly increasing the amount leveraged for each dollar during the next round of IDA financing known as IDA-16. The three-year IDA-16 total financing envelope of $49.3 billion – 50 percent of which will be devoted to Africa – will start disbursing in July 2011.