2018 - 2019 Edition of Citi Perspectives for the Public Sector

50 Africa Debt: Distress Déjà vu or Development Driver? 286 infrastructure projects. 2 Debt levels in Sub-Saharan Africa have risen from their lows in 2007-2008: the ratio of public debt relative to GDP stood at a median of 40% in 2017, lower than Latin America’s 47.5% and much lower than Africa’s 1996 level of 73%. 3 Many African countries have been able to convert debt into growth through proper investment and asset allocation decisions as well as implementing structural reforms that are contributing to reduced poverty and sustainable development. While the recent period of declining commodity prices affected the continent’s pace of growth, GDP growth is beginning to accelerate again with countries such as Ethiopia, Ghana and Cote d’Ivoire growing above 7% in 2017. 5 This growth has translated into significant improvements in citizens’ standard of living. Average GDP per capita has grown by 61% since 1996 while average life expectancy in the region has extended by an admirable ten years since 2000. 6 The standard of living is still far from that of advanced economies but the direction of travel is clear. In 2017, more than 6.1 million Kenyans were connected to electricity, compared to 2.3 million in 2013. 7 From 1993 to 2008, Mali achieved a six- fold increase in mango exports associated with the government’s infrastructure investment in this sector. 8 Mobile phone penetration in Africa has grown from non-existent to almost 80% within the last two decades, bringing technology- driven transformation to the continent. 9 African sovereigns have also increased their social spending, developing soft infrastructure such as health care and education. In Benin, the government used its savings from HIPC debt relief to invest in rural primary health care and HIV programs. Tanzania abolished primary school fees and Mozambique began offering free immunization to children. The economic and developmental progress has not been uniform across the region; there are clearly laggards and leaders. Laggards have been characterized by the accumulation of debt to finance recurrent expenditures, the investment in vanity or non-productive projects and the failure to develop institutional capacity. The key attributes of leaders have been prudent debt management, investment in strategic infrastructure that drives economic growth and implementation of necessary structural reforms. Africa today is more resilient and responsible Africa’s economic resilience is the result of hard-won economic reforms. Policymakers have built a more solid macroeconomic foundation using measures such as trade liberalization, privatization and reduction of entry barriers to new businesses. Ease of doing business in Debt levels are modest compared to two decades ago Sub-Saharan Africa debt as a % of GDP and revenue (1996-2017) 4 73% 69% 70% 55% 26% 32% 26% 40% 422% 425% 406% 250% 103% 171% 130% 195% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Debt (% of GDP), median Debt (% of Revenue), median 2 Deloitte 2016 3 AfDB data, Statista 2018 4 AfDB data 5 IMF data 6 World Bank data 7 Kenya government 8 World Bank: http://documents.worldbank.org/curated/en/114451468281940010/Growing-Malis-mango-exports-linking-farmers-to- markets-through-innovations-in-the-value-chain 9 World Bank data