2018 - 2019 Edition of Citi Perspectives for the Public Sector

Citi Perspectives for the Public Sector |  2018-2019 51 Africa has also improved, facilitating private investment growth. The cost of starting a business has declined significantly from 199% of gross national income (GNI) in 2003 to 53.9% of GNI in 2016. 10 FDI stock in Sub- Saharan Africa has increased from less than $57.3 billion in 1996 to $602.6 billion in 2016. 11 Without such policy advances, the large scale investment now taking place in Africa would not be possible. Many African economies have become more resilient and better positioned to weather external shocks. Reserves have accumulated from a median of 7.7% of GDP and 1.1 months of import cover in 1996 to 14.7% and 3.2 months in 2016 respectively. 12 While there is more room for improvement, positive changes are evident. Moreover, governments are taking the necessary steps to further diversify their economies. GDP composition has also shifted to higher value-added sectors such as services, which acts as a catalyst for economic transformation and offers input into other sectors, including transport and telecommunications. The expansion of the services sector, as opposed to the agricultural sector, is evidence of an improvement in Africa’s productive capacity which, as a sector with a development multiplier, will allow countries to produce more efficiently and competitively, thus intensifying the pace of structural transformation. At the end of the 20th century, African countries were mainly reliant on funding from bilateral and multilateral official creditors in the OECD. Following debt relief, African sovereigns were able to access diversified pools of finance including non-OECD official creditors such as China (China provided over $94.4 billion 13 of capital to Africa from 2000 to 2015, which exceeds the total amount of debt relief provided by HIPC/MDRI) and the international debt capital markets. Since the early 2000s, over 25 African sovereigns have obtained their first sovereign rating from the three key rating agencies (Fitch, Moody’s and S&P) and gained access to the international debt markets: following Ghana’s debut issue in 2007 HIPC recipients have raised nearly $24 billion via Eurobonds to date. 14 This integration into the international financial ecosystem has promoted greater accountability and disclosure with regards to the sovereign’s performance, policies, funding strategies and development plans. It has necessitated the establishment of debt management offices across African countries to centrally formulate, execute and monitor the government’s debt policy, arrange and execute debt issuance, manage the debt portfolio, centralize and coordinate public sector borrowing and sustain a constructive dialogue with investors and rating agencies. African sovereigns have also made significant progress in developing their domestic capital markets, consistent with the desire to deepen the domestic financial market and further tap 57.3 70.1 180.4 278.9 446.6 602.6 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Inward FDI Stock (USD billions) 10 World Bank: Doing Business 11 UNCTAD 12 World Bank data, Datamarket 13 John Hopkins School of Advanced International Studies , https://assets.publishing.service.gov.uk/ media/5a5f38d6e5274a443e00372b/177_China_aid.pdf 14 Dealogic Significant investment stock has been accumulated over the years Sub-Saharan Africa inward FDI stock (USD billions) 10