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© Patricia Davies/World Bank
Africa's economy grew by 4.4 percent in 2004, with virtually all countries reporting positive growth. The region is projected to grow by 4.1 percent in 2005 as the benefits of past reforms and a more peaceful environment continue to translate into expanded economic activity. But the region faces serious challenges. More than 314 million Africans live on less than $1 a day—nearly twice as many as in 1981. The continent is home to 34 of the world's 48 poorest countries and 24 of the 32 countries ranked lowest in human development. The HIV/AIDS pandemic costs Africa 1 percentage point of per capita growth a year, while malaria kills about 2,800 Africans a day. (See www.worldbank.org/aids and www.aidsmedia.org/.) Some progress toward improving human development was made during the past year, but the challenges remain enormous. To address them, several global development initiatives were launched in fiscal 2005. Key among them were calls for a doubling of aid, fairer trade, and greater debt relief. Since the establishment of the New Partnership for Africa's Development (NEPAD) and the Poverty Reduction Strategy Paper (PRSP) process, African countries have taken much more effective ownership of their own development. Both NEPAD and the PRSP process are based on partnerships with donors, dependable financial flows, measurable results, empowerment of poor people, participation by civil society and local communities, and accountability of recipient governments to their own people. The Bank has endorsed the Commission for Africa report, which emphasizes accelerated economic growth and the participation of poor people in economic expansion. WORLD BANK ASSISTANCE The World Bank is the largest provider of development assistance to Africa, and it has increased its support dramatically in the past five years. IDA commitments of $3.9 billion in fiscal 2005 represented an increase of more than 80 percent compared with fiscal 2000, and disbursements of $4 billion, more than double the fiscal 2000 figure. Africa has also benefited from a total of $3.1 billion of relief from the Heavily Indebted Poor Countries Initiative. (See “Debt Relief and Debt Sustainability” in “Summary of Fiscal Year Activities.”) The Bank's strategy for assisting Africa is outlined in the Strategic Framework for IDA's Assistance to Africa, which draws on the report Can Africa Claim the 21st Century? The framework focuses on reducing conflict, improving governance, increasing economic growth, enhancing competitiveness and trade, and improving aid effectiveness. The strategy is complemented by a vision of “hopeful realism” about Africa's capacity to reduce poverty. This vision focuses on five areas: developing the private sector, increasing regional integration, building capacity, doubling aid flows, and increasing Africa's share of world trade. In June 2005 the Bank sponsored a conference in Cape Town, South Africa, to focus on the challenge of financing Africa's huge infrastructure needs. More than 200 policy makers, financial experts, and private sector and civil society representatives attended. (See also the IFC and MIGA annual reports.) REDUCING CONFLICT Conflict is estimated to cost affected African countries 2.2 percentage points of economic growth each year. In collaboration with NEPAD, the Bank is working to achieve peace and stability. These conditions are needed if countries in the region are to attract foreign investment and increase their exports. In fiscal 2005 the Bank provided assistance to 17 conflict-affected countries and low-income countries under stress (see “Low-Income Countries under Stress” in “Summary of Fiscal Year Activities”. It also worked to increase transparency and reduce incentives for illegal trade in commodities linked to conflict, such as oil, gas, diamonds, timber, and precious metals. A key objective of NEPAD is to help build capable and effective states that provide basic services, promote equity and security, and create an enabling environment for investment, wealth creation, and wealth sharing, particularly through the peer review mechanism. In support of this objective, the Bank directs more than 20 percent of its new lending toward public sector governance. Interventions cover expenditure management, civil service reform, decentralization, accountability mechanisms, and legal and judicial reform. The Bank also provides catalytic grants to the Partnership for Capacity Building in Africa and assistance for the establishment of the African Institutes for Science and Technology, which seek to increase scientific and technical achievement through regional approaches. INCREASING ECONOMIC GROWTH, COMPETITIVENESS, AND TRADE Fifteen African countries averaged economic growth of 5 percent a year over the past decade, but their success was not enough to offset the continuing drop in Africa's share of world trade. Trade expansion requires strengthening the agriculture sector, which employs 70 percent of Africa's labor force and accounts for 40 percent of its exports. The Bank is promoting efforts to meet the objective of NEPAD's Comprehensive African Agricultural Development Program of increasing agricultural output by 6 percent a year through 2015. It is working to liberalize intraregional trade, set up capital markets, eliminate cascading tariffs that penalize African products, and help ensure the successful conclusion of the Doha Round of trade negotiations. INCREASING REGIONAL INTEGRATION With 15 landlocked economies and a gross domestic product the size of Belgium's, Africa needs more effective regional integration to prosper. In July 2004 the Bank established a Regional Integration Department that will fund multicountry pilot projects worth about $500 million by fiscal 2007. Since fiscal 2001 the Bank has supported 11 similar projects totaling about $550 million. The programs cover trade facilitation, regional approaches to HIV/AIDS, private sector development, regional power systems, telecommunications, transport, tertiary health and education, agricultural research, migratory pests, food security, transnational environmental issues, and the weather-related vulnerability of rural communities. BUILDING THE PRIVATE SECTOR The private sector has the potential to be the engine for growth and job creation, but changes in the business environment are needed if that potential is to be realized. Africa is a high-cost, high-risk place to do business, according to the Bank's Doing Business in 2005 report. As a result, it received just $9 billion of the world's $135 billion in foreign direct investment in 2003. To help make Africa more attractive to foreign investors, the Bank is promoting constructive and practical partnerships between Africa's private sector and national governments. It also facilitates innovative approaches to financing. For example, the Bank, IFC, and MIGA are working together to support increased private participation in priority infrastructure projects. The Bank and IFC have also jointly begun a micro, small, and medium enterprises initiative. SIMPLIFYING AND HARMONIZING AID FLOWS Africa requires substantial increases in assistance to reach the 7 percent annual economic growth needed to achieve the Millennium Development Goals, to finance $17 billion in annual infrastructure investments, and to fund the $2.1 billion needed to attain the goal of Education for All. The Bank, which chairs the Strategic Partnership with Africa, is working to simplify, harmonize, and reduce the cost of providing aid to Africa. It is urging international partners to honor the promises they made in 2003 at the Monterrey Summit to increase assistance by $12 billion a year and to fulfill the commitments they made in the Commission for Africa report. |
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