COMMITTED TO

IMPROVING THE STATE

OF THE WORLD

While the political landscape in most of sub-Saharan Africa has improved

considerably in recent years, the long awaited renaissance of the African
economy has not yet taken place. Indeed, with few exceptions, it is difficult
to point to a single group of African economies that has experienced high,

The Africa Competitiveness Report 2004

sustained per capita income growth.

The Africa Competitiveness Report 2004 highlights the prospects for

Africa
The
growth in the region and, more importantly, the obstacles to improving Competitiveness
competitiveness in the region. Through in-depth analysis of regional trends Report 2004
and detailed country profiles, the Report assesses the comparative
strengths and weaknesses of 25 African countries. It also contains essays
from prominent academics and development experts on a variety of issues Ernesto Hernández-Catá
relevant to Africa’s development agenda. The Africa Competitiveness The Johns Hopkins University
Report 2004 is an invaluable tool for policy-makers, business strategists
Klaus Schwab
and other important stakeholders, as well as essential reading for all those World Economic Forum
with an interest in the region.
Augusto Lopez-Claros
World Economic Forum

COMMITTED TO
IMPROVING THE STATE
OF THE WORLD ISBN 92-95044-00-2
World Economic Forum
Geneva, Switzerland 2004

The Africa
Competitiveness Report 2004
Dr Ernesto Hernández-Catá
The Paul Nitze School of
Advanced International Studies,
The Johns Hopkins University
Editor

COMMITTED TO
IMPROVING THE STATE
OF THE WORLD
The Africa Competitiveness Report 2004
is published by the World Economic Forum
within the framework of the Global
Competitiveness Programme.

Professor Klaus Schwab

Executive Chairman
Dr Augusto Lopez-Claros
Director
Jennifer Blanke
Emma Loades
Philippe Sion
Catherine Vindret
Saadia Zahidi

Editing by
AmadeaEditing

Graphic design, production and printing by

Kamal Kimaoui, World Economic Forum
SRO-Kundig
Jessica Da Mata, Appi

The terms country and nation as used in this

report do not in all cases refer to a territorial
entity that is a state as understood by international
law and practice. The term covers well-defined,
geographically self-contained economic
areas, which may not be states, but for which statistical
data are maintained on a separate and
independent basis.

World Economic Forum

Geneva

Copyright © 2004
by the World Economic Forum

Published by
World Economic Forum
www.weforum.org

All rights reserved. No part of this publication

may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any
means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior
permission of the World Economic Forum.

ISBN 92-95044-00-2
Contents

Preface i
Klaus Schwab
Executive Summary iii
Ernesto Hernández-Catá

Part 1 Chapters
1.1 The Economic Tragedy of the Twentieth Century:
Growth in Africa 1
Elsa V. Artadi and Xavier Sala-i-Martin

1.2 Health, Economic Growth, and Competitiveness in Africa 19

Alan W. Whiteside

1.3 Africa’s Economic Morass: Will a Common Currency Help? 31

Paul R. Masson and Heather Milkiewicz

1.4 Africa’s Competitiveness and Regional Infrastructure 37

Peter L. Watson

1.5 How Should Africa Position Itself in the International

Trading System? 43
Maria A. Oliva and Luis A. Rivera-Batiz

1.6 Building Capacity to Narrow the Digital Divide

in Africa from Within 59
Ewan McPhie

1.7 How the Congo Decomposed in the 1990s 73

Philippe Beaugrand

1.8 What Does the Growth Competitiveness Index Say About

Development in Africa? 81
Augusto Lopez-Claros

Part 2 Country Profiles

How Country Profiles Work 101

List of Countries 103

Partner Institutes 205

 Preface
Klaus Schwab, Executive Chairman, World Economic Forum
Amartya Sen and others have noted the welcome shift in
the debate on the key ingredients of a successful
development strategy. Earlier neglect of “soft” concerns,
such as the role of safety nets to protect the poor, or the
provision of political and civil rights, has given way to
an approach that recognises their key importance and
actually tries to incorporate them into the design of aid
programmes and development strategies. Even in the
international financial institutions—long identified with
the notion that macroeconomic stability was an
indispensable condition for sustained growth—the focus
appears to be gradually shifting to the creation of
conditions for so-called “high quality growth.” This is a
term that explicitly acknowledges the importance of
policies aimed at reducing poverty, improving
opportunity, tackling corruption, and protecting the
environment. The importance of this broadening of
intellectual horizons cannot be overestimated, for this
more inclusive approach to development, which
explicitly recognises the relevance of factors hitherto
largely ignored, is likely to have vast implications for the
success of development programmes. Nowhere are the
implications of this shift in approach more consequential
than in Africa, a continent that has yet to fulfil its
enormous potential.
For over two decades now, the World Economic Forum
has been firmly identified with the notion that just
getting price signals right and adding some elements of
liberalising, deregulating, and privatising to the policy
mix will not suffice to create conditions for rapid growth
and increase per capita income. The competitiveness
indices produced by the World Economic Forum make
this clear. While readily acknowledging the importance
of a stable macroeconomic foundation for the creation of
an environment supportive of growth, the Forum has
long argued that other elements are equally important.
Whether the private sector and the business community
can operate in an environment with reasonably well-run
public institutions, in which the state allocates adequate
resources to education, public health, and infrastructure,
through mechanisms that are reasonably transparent—
all make a tangible difference in a country’s ability to
generate growth. In the age of globalisation it matters a
great deal whether scarce public resources go to boost
Internet penetration rates in the schools, or to finance
unproductive expenditures.
The work done by the World Economic Forum in the
area of competitiveness has repeatedly shown that
countries that build up sound public institutions are
better able to attract larger levels of investment and
boost their growth potential. Weak rule of law, the
absence of economic opportunities, poorly formulated
spending priorities of governments—leading them to
neglect the role of public services—represent, in some
form or another, significant barriers to successful
development.
The World Economic Forum’s Executive Opinion Survey
and the associated annual compilation of individual
country profiles identifying strengths and weaknesses in
a broad range of areas, from the quality of public
i
institutions, to a country’s technological readiness, to the
macroeconomic environment, are an important
contribution to a better understanding of the challenges
❚ Preface
 faced by policy makers and the international community
in their efforts to better assist these countries.
The Forum’s ability to do this meaningfully in Africa
was boosted last year by a significant expansion in the
coverage of our competitiveness work, which now
includes a total of 25 African countries. This year’s Africa
Competitiveness Report is thus a more comprehensive
attempt to place the continent in a broader international
context. The Report also includes a number of analytical
articles that address a broad range of issues at the heart
of the debate on how to improve the quality of life for its
citizens: from finding better ways to cope with
HIV/AIDS, which continues to exact a heavy toll on
Africa, to questions of infrastructure, trade, governance,
and institution building.
The unfinished agenda which the international
community confronts in Africa is complex and daunting.
We approach these with a heightened sense of
responsibility, painfully aware that the World Economic
Forum’s competitiveness work is a humble attempt to
ii
❚ Preface
cast light on some important aspects of development in
the region. We will continue to broaden the coverage of
our work in Africa, and to enhance the quality of the
indicators we produce. Along the way, we expect to
remain fully engaged in the region, a voice for better
policies, improved governance, more intelligent aid
efforts by the international community, and increased
involvement of the private sector in finding solutions to
African challenges.
Finally we would like to thank Dr Ernesto Hernández-
Catá from the Johns Hopkins School for Advanced
International Studies, Editor of this Africa Competitiveness
Report, for having generously shared his time and broad
experience. Equally warm words of appreciation to Dr
Mamphela Ramphele, Managing Director for Human
Development at the World Bank, for her support and
encouragement, and to Augusto Lopez-Claros, the
Director of the Global Competitiveness Programme, and
to his team, Jennifer Blanke, Emma Loades, Philippe
Sion, Catherine Vindret and Saadia Zahidi.
 Executive Summary
Ernesto Hernández-Catá, The Paul Nitze School of Advanced
International Studies, The Johns Hopkins University
In recent years, the political landscape in most of sub-
Saharan Africa has improved considerably. Duly elected
presidents came to power in Senegal and Ghana,
significantly strengthening democracy in the region.
Ethiopia and Eritrea signed a peace accord, and the long
and devastating conflicts in Angola and Sierra Leone
came to an end. The warring parties in the Democratic
Republic of Congo came to an agreement that augurs
well for a lasting solution to the problems of this
potentially rich country. This is all good news, for armed
conflicts in the region have exacted a terrible human toll,
discouraged private investment, destroyed
infrastructure, and hindered development.
In other parts of Africa, however, the political situation
remains unsettled. While in previously peaceful and
prosperous Côte d’Ivoire and in Liberia, fighting has
stopped, partly through the efforts of international
peacekeeping forces, including African forces, the civil
war goes on in Sudan. And while democracy continues
to thrive in South Africa, Zimbabwe has seriously
backtracked in the areas of individual freedom and
human rights, with the efficiency and the stability of its
economy suffering greatly from self-inflicted and
misguided policies. More generally, the long awaited
renaissance of the African economy has not taken place.
Indeed, it is very difficult to point to a single group of
African economies that have experienced high, sustained
per capita income growth. Countries will hop into and
drop out of any such group with considerable frequency,
with Mauritius and Botswana appearing to be the only
permanent members of the group.
In the lead article to this Africa Competitiveness Report,
“The Economic Tragedy of the Twentieth Century:
Growth in Africa”, Elsa Artadi and Xavier Sala-i-Martin
characterize Africa’s dismal growth performance after de-
colonization as “the worst economic tragedy of the 20th
century”, with most sub-Saharan African countries in a
state of greater poverty now than they were when they
became independent. The authors provide convincing
quantitative evidence to back their statements. Per capita
GDP in sub-Saharan Africa is now US$200 lower than in
1974, a decline of 11 percent over a quarter of a century.
During this same period the rest of the world was growing
at an average annual rate of 2 percent, while per capita
income in many of the East Asian countries was
converging rapidly towards advanced country levels.
Artadi and Sala-i-Martin also show conclusively that the
distribution of income in Africa has deteriorated, mostly
because of a rise in within-country inequality, rather than
an increase in inequality among countries. The Gini
coefficient, a widely used measure of income
distribution, shows a pronounced trend away from
equality during the 30-year period from 1970 to 2000, a
period during which, in contrast, inequality declined
worldwide. Data for a comparable period shows that
poverty in Africa increased dramatically, at a time when
iii
it was falling rapidly in the rest of the world. They
conclude that the only reliable way to reduce poverty in
the continent is to set the economy into a path of
positive, long-term growth.
❚ Executive Summary
 Artadi and Sala-i-Martin offer a wide range of
explanations for Africa’s “dismal” performance in the
last third of the 20th century. The most important of
these include expensive investment goods, low levels of
education, poor health (due in large measure to the
prevalence of malaria), adverse geography (as reflected
in the proportion of territory located in the tropical
zone), relatively closed economies, too much public
expenditure, and devastating armed conflicts.
As if these problems were not daunting enough, the
onslaught of HIV/AIDS in the last ten years has
seriously complicated the task of improving living
standards in Africa, including in some of the most
successful countries, such as Botswana. In his article on
“Health, Economic Growth, and Competitiveness in
Africa”, Alan Whiteside warns that the expected trend of
improving health, falling child mortality, and rising life
expectancy can no longer be taken for granted in Africa.
He predicts that, in the absence of affordable, effective
and deliverable treatment, including anti-retroviral
therapy, health conditions in sub-Saharan Africa will
continue to deteriorate.
It is often said that Africa’s development problems
cannot be resolved entirely within the borders of one
country, and that they require an approach based on
international cooperation, or even integration. Institutions
such as the West African Economic and Monetary Union
(WEAMU) and the related Central Bank of West Africa
(BCEAO) have already been in place for years, and the
general view is that they have contributed to price
stability in francophone West Africa.
In their article “Africa’s Economic Morass: Will a
Common Currency Help?” Paul Masson and Heather
Milkiewicz examine issues of monetary integration in
Africa, and the ambitious plans by politicians to widen
the membership of existing monetary unions. These
include the creation of a more comprehensive union in
West Africa, which would link Nigeria and other
anglophone countries to the members of WEAMU, and
eventually help to create a common African currency.
Already, there are projects for regional monetary unions,
and the bidding process for an eventual African central
bank is about to begin. However, in their essay, Masson
and Milkiewicz ask a fundamental question: is a common
currency worth the effort, and will it provide an
important solution to Africa’s problems? The authors
argue that those problems are linked to civil conflicts
and corruption, to the absence of rule of law, to
undisciplined fiscal policies, poor infrastructure, and low
investment. Monetary union, they say, can address few
of these problems: “At best, it can produce low inflation,
but it cannot guarantee growth.” In fact, without a fiscal
iv
policy that avoids large and continued government
deficits, they contend that there is no monetary policy
that will work. The government will have to accumulate
foreign debt and face mounting debt service problems
❚ Executive Summary
or, as has frequently been the case in Africa, to run
domestic arrears and discourage private investment.
Masson and Milkiewicz consider that the New Partnership
for African Development (NEPAD) is a more promising
initiative through which African countries can exert peer
pressure to correct governance failures, and thus
contribute to the solution of Africa’s problems. It is too
early to see if that process will be effective. If it succeeds,
monetary union can crown the achievement. If not,
monetary union will almost certainly fail, and highlight
Africa’s more fundamental policy problems.
While there are legitimate doubts about a far-reaching
extension of monetary integration, it seems clear that
regional cooperation within Africa has an important role
to play in certain areas, and particularly with regard to
infrastructure. It has been recognized for some time that
improving infrastructure will favor investment, growth
and poverty reduction. In addition, improved
infrastructure in the areas of transportation and
communication will improve competitiveness and
encourage exports, by reducing those “transaction costs”
that Paul Collier has long recognized as being serious
obstacles to private business, and especially to
international transactions.
In this context, the author of “Africa’s Competitiveness
and Regional Infrastructure”, Peter Watson, contends that
the emphasis on regional infrastructure is well placed
because most of the African economies are too small to
generate the economies of scale that can be realized in
larger markets. He stresses that “the potential for
increasing economic efficiency through shared
production, management, and operations, as well as
through hubs, development corridors or poles, is
immense.” Existing studies already point to the
possibility of substantial saving from regional
cooperation projects, such as the West African Pipeline
for gas transportation and trade, the Nile Basin Initiative
for water resource management, and the Southern
African Power Pool, which seeks to provide a stable
supply of electricity to member countries in southern
Africa. However, Watson makes an important point: the
selection of infrastructure projects must be based on
economic, not on political considerations. They should
not be imposed, but solidly grounded on estimates of an
adequate rate of return of the project.
The pitfalls of regional integration are also visible in
analyzing sub-Saharan Africa’s external trade and trade
policies. In their paper “How Should Africa Position
Itself in the International Trading System?” Maria Oliva
and Luis Rivera-Batiz note that, except for South Africa,
few African countries are significantly involved in
international trade. Moreover, the continent’s share in
world merchandise trade has basically stagnated at a
very low level (2-3 percent) since 1990. Trade
participation has been hindered by insufficient education
and skills, by the high “transaction costs” of
transportation and communications, and sometimes by
over-valued exchange rates, as, for example, in the
French franc zone until 1994.
All these factors have played a role in eroding the
competitive position of African producers. But Oliva and
Rivera-Batiz suggest that Africa’s trade policy, which
focuses on preferential regional agreements among
groups of African countries and on preferences granted
to these countries by the United Sates and by the
European Union, has not promoted trade. They stress
that the policies needed for competitive integration into
large global markets are “largely inconsistent with the
customs union approach to trade integration followed by
African countries up to now.” They recommend that, in
future, African countries consider other avenues for
penetrating the world trading system, such as
participation in multilateral trade negotiations for
products of particular interest for African producers, and
unilateral trade liberalization.
Regional cooperation could also play a useful role in the
area of communications, notably, in the area of
information and communications technology (ICT). In
his article “Building Capacity to Narrow the Digital
Divide in Africa from Within”, Ewan McPhie sees ICT as
an effective “tool for social and economic development”.
He recalls that the New Partnership for African
Development (NEPAD) had set a number of ambitious
objectives, including bridging the digital divide and
developing the capacity to solve Africa’s problems from
within, with the e-Africa Commission mandated to deal
with ICT-related issues. NEPAD has also stressed the
importance of forming “strategic partnerships” between
the public and private sectors in the ICT area.
The key preoccupation of central banks in Africa has
been the avoidance of high inflation, an area in which
some countries in the region have been fairly successful
in recent years. The preoccupation is legitimate, and
fears that it might lead to an overly restrictive, “anti-
growth” monetary policy have turned out to be
mistaken. The literature on this subject suggests that
inflation, with its attendant uncertainty, is bad for
growth and for competitiveness, and is particularly bad
for the poorest segments of the population. In his article
“How the Congo Decomposed in the 1990s”, Philippe
Beaugrand vividly recounts how an exceptionally long
period of hyperinflation led to the ruin of the Congolese
economy, and the destruction of the country’s social and
political fabric. Faced with over-extended financial
commitments and a crumbling political system, the
regime of Mobutu Sese Seko sought an easy way out of
its problems by printing money. “The expedient,”
concludes Beaugrand, “slightly relieved financial
constraints for a short period, but the macroeconomic
situation quickly worsened, ultimately contributing to
the end of the Mobutu regime”.
In his paper “What Does the Growth Competitiveness
Index Say About Development in Africa?” which
concludes the Report, Augusto Lopez-Claros argues that
the main challenge facing development experts is to shed
some light on the factors that explain the sharply
different growth performances of countries in the
developing world. To gain insight into this important
question the World Economic Forum has developed a
vehicle, the Executive Opinion Survey (EOS), an annual
exercise which delivers a wealth of information about
the impediments to growth in more than 100 countries
accounting for the bulk of global GNP. This survey of
business executives aims to assess the importance of a
broad range of factors that contribute to a healthy
business environment, supportive of economic activity.
Over the years the EOS has delivered valuable country-
specific information about the varying strengths,
weaknesses and challenges faced by the business
community, as it proceeds to create jobs and contribute
to productive activity.
The Growth Competitiveness Index (GCI) identifies three
“pillars” in the evolution of growth in a country: the
quality of the macroeconomic environment, the state of
the country’s public institutions, and the level of its
technological readiness. The index uses a combination of
hard data, such as budget deficits, the level of internet
access in schools, and survey data, taking the
“temperature” in areas such as judicial independence,
the prevalence of institutionalized corruption, and the
extent of inefficient government intervention in the
economy. These various pieces are brought together
under several “sub-indexes”, each capturing a different
aspect of the growth process and aggregated to give an
overall competitiveness “score.” Lopez-Claros examines
some of the key components of this index and comments
on both the performance of African countries and the
factors that may lie behind the relatively low rankings
achieved by the majority of them. Given the importance
of a favorable environment for private sector activity,
Lopez-Claros dwells on some of the institutional
requirements for an improved growth performance in
Africa, with particular reference to foreign investment, a
central driver of growth in the developing world.
The second part of the Report contains country profiles
for the 25 African countries covered in the World
Economic Forum’s Executive Opinion Survey. These
profiles present some basic social and economic
indicators, the GCI rankings and a National
v
Competitiveness Balance Sheet, providing a useful data
complement to the analytical pieces contained in the first
part of the Report.
❚ Executive Summary
Part 1
Chapters
 Chapter 1.1
The Economic Tragedy of the Twentieth
Century: Growth in Africa

Elsa V. Artadi, Harvard University

Xavier Sala-i-Martin, Columbia University,
Universitat Pompeu Fabra, and NBER

Growth
Documenting a tragedy
There should be no doubt that the worst economic
disaster of the 20th century is the dismal growth
performance of the African continent. The newly freed
citizens had high hopes when their countries became
independent during the second half of the century, but
most of them are substantially poorer now than they
were when their nations were born. Figure 1 displays the
path of real GDP, a measure summarizing the average
performance of the continent in the clearest way, relating
it closely to income per person. The figure shows the
period from 1960 to 2002, during which a substantial
number of African countries became independent.1 We
see that, between 1960 and 1980, per capita GDP
increased slightly from US$1,500 to about US$2,000, but
since then has stagnated at this very low level.

Figure 1: GDP per capita

5,000

4,500

4,000

3,500

3,000
US Dollars

2,500

2,000

1,500

1,000

500
1

0
1960 1965 1970 1975 1980 1985 1990 1995 2000

Africa Sub-Saharan Africa North Africa

Source: Authors’ calculations from Penn World Tables data

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 The aggregate data for the entire continent masks the
fact that Northern Africa has done only slightly better
than the rest of the continent. Figure 1 also shows the
evolution of per capita GDP for sub-Saharan Africa2 and
displays a number of disturbing trends. First, the level of
GDP per capita is smaller than that of the whole
continent. This, of course, reflects the fact that the North
African countries are indeed somewhat richer than their
counterparts in the South. Second, and more
significantly, the level of GDP began a long-term decline
after its 1974 peak. Today, per capita GDP for Sub-
Saharan Africa is US$200 less than it was in 1974, a
decline of nearly 11% over a quarter of a century. This
evolution is especially worrisome, if we consider that
Africa was already extremely poor in 1974.
Figure 2 breaks down the per capita growth rates over
various sub-periods. Prior to the 1974 oil shock, the
growth rates were positive: for the whole continent,
they were around 3% in the early 60s, close to 2% in the
late 60s, and slightly below 1.5% between 1970 and
1974. The growth rates for sub-Saharan Africa were
only slightly smaller. Things changed dramatically in
the second half of the 1970s. The growth rate for the
countries south of the Sahara desert became negative
0.5% in the late 70s, negative 1.2% in the second half of
the decade, and zero between 1980 and 1985. In the
first half of the 1990s, growth dropped dramatically to a
record negative 1.5% per year. The continent seems to
have recovered slightly since then, with positive, albeit
low, growth for the second half of the 1990s, and the
first two years of the new millennium.
The African growth performance is dismal in absolute
terms, particularly if one takes into account the fact
that, during this same period, the rest of the world was
growing at an annual rate of close to 2%. Moreover,
even though the growth performance of the world’s
technological leader, the United States, was not
particularly spectacular after the oil shocks of the 1970s,
the African continent has been losing ground to
America. Figure 3 displays GDP per capita for the
African continent (and the sub-Saharan subset) relative
to the United States. The evidence of absolute
divergence is clear: Africa has been losing ground
dramatically and has been unable to catch up, owing,
perhaps, to the fact that it started from a relatively
backward position.

Figure 2: Per capita growth rates

6.0

5.0

4.0

3.0
Percent

2.0

1.0

0.0
1961 - 1965 1965 - 1970 1970 - 1974 1974 - 1980 1980 - 1985 1985 - 1990 1990 - 1995 1995 - 2000 2000 - 2002

-1.0

-2.0
2

Africa Sub-Saharan Africa North Africa

Source: Authors’ calculations from Penn World Tables data

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

Figure 3: Divergence: Per capita GDP relative to the United States

0.18

0.16

0.14

0.12

0.10

0.08

0.06

0.04

0.02

0.00
1960 1965 1970 1975 1980 1985 1990 1995 2000

Africa Sub-Saharan Africa North Africa

Source: Authors’ calculations from Penn World Tables data

Distribution of income and the politics of reform
If aggregate or average measures show that Africa has
performed dismally over the last few decades, things do
not look better when estimating individual incomes. In a
number of recent studies, Sala-i-Martin (2003) has
devised a methodology that combines individual income
surveys with aggregate national account data, to estimate
the entire distribution of income for each country in the
world. In this paper, we borrow from this work to
construct the distribution for each country in Africa,
which we then aggregate to compute the distribution for
the whole continent. Figure 4 reports the African income
distributions for 1970, 1980, 1990 and 2000. A number of
features of this figure are worth emphasizing. First, the
bottom part of the distribution “shifts to the left” over
time. This means that the incomes of the poorest citizens
of Africa have deteriorated over the last thirty years.
Second, the top part of the distribution did not change
significantly. In other words, whereas the poorest citizens
of the continent saw their economic situation worsen, the
wealthiest people did not suffer much of a change. Third,
since the poor tend to get poorer, and the rich do not
seem to get poorer, it must be the case that individual
income inequalities in Africa have been increasing. It is
easy to estimate various measures of income inequality
with the data used to construct Figure 4.

Figure 4: Distribution of income in Africa

7
Poverty Line

4
Percent

0
3

10 100 1,000 10,000 100,000

1970 1980 1990 2000 US Dollars

Source: Sala-i-Martin (2004)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 Figure 5: Gini coefficient

0.66

0.64

0.62

0.60

0.58

0.56

0.54

0.52
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

Africa Sub-Saharan Africa

Source: Sala-i-Martin (2004)

Figure 5 displays one of the most popular measures of
income inequality: the Gini coefficient. As predicted, it
shows an unambiguous trend towards greater inequality.
For the continent as a whole, the coefficient increases from
0.57 in 1970 to 0.63 in the year 2000, a rise in inequality of
over 10%. For Sub-Saharan Africa, the numbers are 0.58 and
0.65 respectively. It is interesting to note that most of the
inequality within Africa can be accounted for by inequality
within countries rather than across countries. Figure 6
shows an inequality measure that can be broken down into
its within-country component— measuring the level of
inequality that would exist in Africa if all countries had the
same level of per capita income—and its across-country
component—measuring the level of inequality that would
prevail if all citizens within each country had the same level
of income, but countries differed in their aggregate levels of
income per capita. Figure 6 shows that inequality in Africa
has increased, both because rich countries in the continent
have grown faster—indicating that across-country
inequality has deteriorated—and because rich citizens
within each country have benefited more than poor
citizens—showing that within-country inequality has also
increased. Of course, if both within and across country
inequalities have increased, it must be the case that overall
inequality in Africa has also dramatically increased. The
finding is particularly significant if one takes into account
that, as shown by Sala-i-Martin (2003), worldwide income
inequalities have been decreasing over the same period.

Figure 6: Theil Index for Sub-Saharan Africa

1.0

0.9

0.8

0.7

0.6

0.5

0.4
4

0.3
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Overall Inequality Across-Country Inequality Witin Country Inequality

Source: Sala-i-Martin (2004)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

Before leaving the discussion of the distribution of
income in Africa, it is worth mentioning one last aspect
of Figure 4. The fact that the “right-most” part of the
income distribution does not seem to decrease over time
has some potentially important implications. The reason
is that the people responsible for implementing the legal,
social and economic reforms that could potentially turn
Africa around are themselves members of the economic
and political elite, and do not seem to suffer much from
the current situation. Thus, their incentives to introduce
change are few. This phenomenon is even stronger for a
number of individual countries, where the income of the
“rich” not only does not decline, but actually increases.
The clearest example of this perverse situation is Nigeria,
whose income distribution is displayed in Figure 7. As
for most of Africa, the lower part of the Nigerian income
distribution constantly shifts to the left, meaning that the
incomes of the lowest 80% of the population deteriorate
over time. The shocking feature of this figure is that the
upper part of the distribution moves to the right. In
other words, the richest citizens of Nigeria actually
benefit from the current disastrous economic situation.
From the point of view of political economy, the problem
is that those individuals whose incomes are improving
may, in some cases, be the economic and political elites,
who will have to approve and implement the required
economic and social reforms.
The humans behind the tragedy: poverty rates
and headcounts
An additionally interesting aspect of both Figures 4 and
7 is the vertical line that represents the extreme poverty
line. The first international poverty line was defined to
be an income level of US$ 200 in 1970 prices (Ahluwalia,
Carter and Chenery, 1979). People were regarded as
poor if their incomes were lower than that figure. The
vertical line displayed in Figures 4 and 7 represents one
such international poverty line. It corresponds to the
widely accepted definition of one-dollar-per-day. The
fraction of African citizens whose income is less than one
dollar per day is represented by the area below the
distribution, and to the left of, the poverty line.
Inspection of Figure 4 shows that this fraction has been
increasing.
In 1991, the World Bank adopted a definition of poverty
in terms of consumption, and proposed what is now
widely used as the extreme poverty line: a consumption
level of one dollar per day (Ravallio, Datt and van de
Walle, 1991). Since the original definition used 1985
dollars and the data used to construct the distributions
in this paper are in 1996 dollars, we adjusted the poverty
line accordingly. Moreover, following Bhalla (2002), an
additional adjustment of 15% in the poverty line was
made to take into account the tendency of the rich to
underreport their income proportionally more than the
poor. He suggests an adjustment of an additional 15%.
We follow his advice here. Adding up the two
adjustments, we arrive at a poverty line of 570 dollars

Figure 7: Distribution of income in Nigeria

7,000
Poverty Line

6,000

5,000
Thousands of people

4,000

3,000

2,000

1,000

0
10 100 1,000 10,000
5

1970 1980 1990 2000 US Dollars

Source: Sala-i-Martin (2004)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 per year. To estimate consumption poverty, Sala-i- the poverty rates to 50% for the continent as a whole and
Martin (2004) computes individual country consumption to 60% for sub-Saharan Africa. The positive growth rates
distributions for each African country. Using these data, of the second half of the 1990s implied a small reduction
we calculate African poverty rates and headcounts, and in poverty rates during those five years.
report them in Figure 8. The fraction of the African
population whose consumption is less than one dollar a The negative evolution of African poverty rates between
day was 42% in 1970. The corresponding number for Sub- 1970 and 1995 is particularly troubling given the fact
Saharan Africa was a staggering 48%: almost one of every that, over the course of these three decades, the world as
two African citizens lived in poverty in 1970. Although a whole has been improving dramatically in this
these poverty rates reflected a terrible human tragedy, the dimension. Figure 8 shows that, while African poverty
dismal economic performance over the following three rates soared, worldwide poverty ratios fell from 37% in
decades made things worse, and by 1995 actually raised 1970 to 16% in the year 2000.

Figure 8: Absolute consumption poverty rates

70
Percentage of population living on less than US$1 a day

60

50

40

30

20

10

0
1970 1975 1980 1985 1990 1995 2000
All Africa Sub-Saharan Africa World

Source: Sala-i-Martin (2004)

Figure 9: Absolute consumption poverty head counts

1,600,000

1,400,000

1,200,000
Thousands of people

1,000,000

800,000

600,000

400,000

200,000

0
6

1970 1975 1980 1985 1990 1995 2000

All Africa Sub-Saharan Africa World

Source: Sala-i-Martin (2004)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

Figure 9 reports the overall number of poor citizens rather
than the fraction of citizens that are poor. The figure
shows that the total number of poor in the world declined
from 1.3 billion in 1975, to 900 million in 2000. During this
period of overall improvement, however, Africa’s poor
increased from fewer than 140 million in 1975, to over 360
million in the year 2000.3 Naturally, the implication is that
the fraction of the world’s poor living in Africa has
increased dramatically. In 1970, one out of every ten
(10.5%) poor citizens in the world lived in Africa. By the
year 2000, the number was close to one out of every two
(or 42%). Poverty used to be an essentially Asian
phenomenon. The excellent economic performance of
Asia, paired with the disastrous growth performance of
Africa, has turned poverty into an essentially African
problem.
Economic analysts tend to forget that negative growth
rates have important consequences for human welfare.
The case of Africa shows clearly that, when the economy
does not grow, poverty worsens and vice versa. Indeed,
the only reliable way to reduce poverty in Africa in a
permanent fashion is to jump start the continent and put
it in the pathway for positive aggregate growth. But how
can this be done?
The role of investment
To find out what could be done to lead Africa back to
growth, we need to figure out what went wrong over the
last forty years. The easiest way to improve is to correct
the mistakes of the past. So the pivotal question is: why
didn’t Africa grow?
Figure 10: Investment rates
35
30
25
Percent of GDP
20
15
10
0
1961 - 1965 1965 - 1970 1970 - 1975 1975 - 1980 1980 - 1985 1985 - 1990 1990 - 1995 1995 - 2000
Africa
Source: Authors’ calculations
In responding to this central question, the first thing
economists are tempted to answer is that Africa did not
grow because it did not invest enough. They offer a
variety of reasons to explain this answer. First, some of
the most widely accepted economic theories of economic
growth (e.g. Solow-Swan) suggest that investment in
physical capital plays a key role in the process of
economic growth and development. Second, this belief
was reinforced by the new theories of endogenous growth
developed in the 1990s. Third, international development
institutions, such as the World Bank, have long believed
that physical capital accumulation was a central element
in the process of economic development. This is why they
have long used the doctrine of the “financing gap”.
According to this doctrine, the World Bank would finance
the difference between the investment rate needed to
achieve a certain growth target, and the investment rate
that the country could finance out of their own savings, as
if the only determinant of long-term growth were physical
capital investment (see Easterly (2001)).
And finally, a simple look at the data confirms that the
investment rate (the ratio of investment to GDP) in Africa
was not only low, but that it declined over the last 40
years. Figure 10 shows that during this whole time period,
investment rates were always below 15%. Moreover, the
rate declined after 1975, and reached record lows of 7.5%
for Sub-Saharan Africa and 8.5%, for the continent as a
whole, in the first half of the 1990s. By way of comparison,
investment rates for the average-performing OECD
economies were between 20 and 25%, whereas investment
rates for the miracle East-Asian economies reached an
average of 30%.
7
OECD East Asia
Sub-Saharan Africa North Africa
1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa
 Many analysts are skeptical of the aggregate investment
rates, because they believe that it is private, rate-of-
return-driven investment that should lead to growth.
Public investment tends not to be productive, since
projects tend to be chosen according to political or non-
economic preferences. Examples of public infrastructures
that had no impact on economic performance in Africa
abound. The steel plant in Ajakouta (Nigeria) and the
Akosombo dam on the Volta river in Ghana are just two
of the most famous examples of failed giant public
investment projects. (See Easterly (2001) for a colorful
description of the gargantuan Akosombo failure).
Figure 11 shows that Africa did very poorly in that area
as well, as its ratio of private to public investment is
extremely low.4 For the overall continent, the ratio was
1.3 in the 1980s and just above 2 in the 1990s. Breaking
these continent-wide numbers into North and Sub-
Saharan regions, yields very similar results for the two
parts of the continent. These numbers are extremely
low when compared with OECD economies—with a
Figure 11: Private to public investment ratio
0
8
Africa North Africa Sub-Saharan Africa
1980s
Source: Authors’ calculations
1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa
ratio of private-to-public investment of 5.7 in the 1980s
and 6.6 in the 1990s—or with the extremely successful
economies of East Asia—with ratios of 4.8% and 5.1%,
respectively, in each of the last two decades. The central
point is that, not only were overall investment rates in
Africa extremely low, but they were skewed in the
wrong direction, in the sense that a large portion of the
investments were undertaken by the inefficient public
sector. In this sense, the information conveyed by figure
12, showing the private investment rate plotted for the
1990s, provides some comfort. Although the rate is
quite low, it picked up during the decade. This increase
in overall private investment may reflect a better
economic environment, stemming from some of the
reforms implemented in the 1990s, and may be one of
the reasons behind the slight increase in growth rates of
the second half of the decade and the first two years of
the new century. However, the level of private
investment remains too low to be a driving force for
improved growth prospects over the next several
decades.5
OECD East Asia
1990s
Figure 12: Private investment in the 1990s
5
Percent of GDP
0
1990 1991 1992 1993
Africa
Source: Authors’ calculations
Determinants of African growth:
beyond investment
Distortions and the cost of investment
A pivotal question is: why were private investment
rates so low in Africa? Why was the continent unable
to attract the kind of investment, which might have
put it back on the road of economic growth and
development? Many reasons have been given in the
literature. For example, Collier and Pattillo (2000)
argue that the rate of return to investment in Africa
was about one third below that elsewhere. They also
show that investment risk was very high for a variety
of reasons. Among them: political instability, price
volatility, the tendency of government to engage in
sweeping policy reversals, and an uncertain
macroeconomic environment. An interesting point
made by Collier and Pattillo (2000), to the effect that
the ratings of Africa may be overstating the true
1994 1995 1996 1997 1998 1999 2000
North Africa Sub-Saharian Africa
underlying risks, helps to explain the low private
investment in the region.
In recent research, Sala-i-Martin, Doppelhofer and
Miller (2003) found a number of robust determinants
of long-term economic growth over a large sample of
countries. One of the important variables found was
the investment price ratio: countries in which
investment goods tend to be expensive relative to
consumption goods are those tending to have smaller
growth rates. Figure 13 reports the average value of
this relative price for Africa, the OECD and East Asia.
For the African continent as a whole, the ratio is
slightly above 120. For sub-Saharan Africa, the ratio is
exactly 120, whereas for North Africa it is more than
150. These ratios compare unfavorably with the ratio
of 70 found in OECD or East Asia. Thus, the fact that
investment goods were very expensive in Africa is an
important explanation for its low growth
performance.6
9
1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa
 Figure 13: Relative price of investment

180

160

140

120

100

80

60

40

20

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

To estimate the impact of expensive investment goods if the price of investment had been at OECD levels. The
on overall growth in Africa, Table 1 uses the result is reported in the first row: the growth rate of
econometric estimates of Sala-i-Martin et al. (2003) to Africa would have been 0.44 percentage points higher
show the growth rate that Africa would have achieved, every year.

Table 1: Why Africa grew so little

(1) Name of variable (2) African value (3) OECD value (4) Foregone annual growth (%)
Price of Investment Goods 123 70 0.44
Human Capital (I): Primary School Enrollment 0.42 0.97 1.47
Human Capital (II): Life Expectancy 42 68 2.07
Human Capital (III): Malaria Prevalence 0.80 0.00 1.25
Geography: Fraction of Area in the Tropics 0.85 0.03 1.21
Openness 0.10 0.66 0.67
Public Spending in Consumption 0.16 0.07 0.40
Conflict: Ethno-linguistic Fractionalization 0.58 0.12 0.52

Notes: Column 1 displays the name of the variable. Column 2 shows the average value that the variable has for African countries. Column 3 reports the
corresponding value for OECD economies. Finally, Column 4 uses the empirical estimates of Sala-i-Martin, Doppelhoffer and Miller (2003) to compute the
additional annual growth rate that Africa would have enjoyed if, instead of the values reported in Column 2, it had had the OECD values reported in Column 3.
For example, the average relative price of investment for Africa was 123. The corresponding price for OECD was 70. If investment in Africa had been as low as in
OECD, Africa’s annual growth rate would have been 0.44 percentage points higher.
10

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

Figure 14: Primary school enrollment

100

80

60
Percent of GDP

40

20

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

Human capital economic growth prospects over the next three to four
decades are brighter than they were in the 1960s.
Education
We continue to use the findings of Sala-i-Martin et al.
(2002) to pin down other important empirical factors Health
determining long-term growth rates. The next item on
The other important measure of human capital is
the list is human capital, which has two important
related to the health of the population.8 In this regard,
components: education and health. The most significant
the data showed two measures to be robust
measure of human education is the Primary School
determinants of long-term growth: Life Expectancy in
Enrollment in the 1960s.7 Figure 14 shows that Africa
1960—having a positive association with growth—and
does not score well on these grounds, relative to either
Malaria Prevalence today—with a negative correlation
OECD or to Asia. For example, Sub-Saharan Africa had a
to growth. Figure 15 shows that Life Expectancy in
primary school enrollment rate of 40% in 1960, whereas
1960 was much lower in Africa than in OECD or East
North Africa had an average rate of 56%. The overall
Asia. For the overall African continent, life expectancy
African rate averaged 42%, in stark contrast with the
was just above 40 years, whereas the corresponding
nearly 100% rates in OECD or East Asia. The second
values for OECD and East Asia were 67 and 62 years
row of Table 1 shows that if Africa had had enrollment
respectively. Table 1 shows that if Africa had had a life
rates at OECD levels, the average growth rate of GDP
expectancy similar to the OECD, its annual growth
per capita would have been 1.47% larger every year. In
rate would have been 2.07 percentage points higher.
other words, instead of the annual 0.9%, the growth rate
Life expectancy in Africa has increased substantially
would have been a much healthier 2.37% per year, and
over the last 40 years, which points to possibly
per capita incomes today would be two and a half times
increased growth rates over the next few decades. The
higher than they actually are.
problem, of course, is that life expectancy began to
However, African enrollment rates have improved deteriorate in the late 1990s due to the adverse impact
11

dramatically since 1960. This, of course, means that the of AIDS.

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 Figure 15: Health (1): life expectancy

70

60

50

40
Years

30

20

10

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

Figure 16: Health (2): malaria prevalence

0.9

0.8

0.7
Percent of population

0.6

0.5

0.4

0.3

0.2

0.1

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

The other important measure of health picked up by the subcontinent). This is another important reason for the
12

data is malaria prevalence, with average indexes dismal growth performance of the continent as a whole.
displayed in Figure 16. Whereas OECD and East Asia Table 1 estimates that if Africa had no malaria over the
have virtually no malaria prevalence, the index is close last four decades, its annual growth rate would have
to 0.8 in Africa (and close to 0.9 in the Sub-Saharan been 1.25 percentage points higher than it actually was.

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

In summary, public health is one of the most important
challenges facing Africa today. The most effective way for
rich nations to help Africa would be by helping them deal
with such public health issues. Lacking both expertise and
money for R&D, Africans cannot do by themselves. If rich
nations devoted ample resources to perform research and
development on health issues—e.g. by reorienting current
aid projects that are seen as systematic failures—millions
of lives could be saved. Moreover, our estimates show
that such research would also improve the standard of
living and the welfare of those that survive.
Geography: the tropics and
institutions
Another robust determinant of the rate of economic
growth is related to geography. For example, the fraction
of a country that is located in the tropics turns out to
have a significantly negative impact on economic growth.
For some reason, tropical weather is not good for growth.
Figure 17 shows that, once again, Africa does not fare
well in this measure, since about 85% of its territory lies
within the tropics. Indeed, the fraction goes up to 92%,
considering only the Sub-Saharan countries. This picture
contrasts dramatically with the 3% of OECD, and 60% of
East Asian territory located in the tropics.
Researchers have pointed out various reasons why
tropical countries may have adverse growth prospects.
Sachs and Warner (1997), Gallup, Sachs and Mellinger
(1998) and Sachs (2003) point to debilitating tropical
diseases that reduce the productivity of workers, and
lower incentives to invest in education and health.
Other reasons cited include the fact that agriculture
tends to be less productive, and that they cannot benefit
from the technological progress enjoyed by rich
countries, whose agricultural technologies are weather-
specific. Finally, researchers like Acemoglu, Johnson and
Robinson (2001) point to the institutions left by the
retreating colonial powers. Indeed, the claim is that the
colonial governments established “extractive
institutions” in inhospitable countries plagued by
tropical diseases, whereas they introduced “European-
style institutions”, guaranteeing the rule of law and
property rights, in those areas where they could actually
move to live. When they abandoned the colonies, the
institutions remained. And the current situation still
reflects the colonial past.
Bad institutions seem to be especially dangerous in
countries where natural resources are discovered. A
recent paper by Sala-i-Martin and Subramanian (2003)
shows that natural resources that are “easy to steal”,
such as oil and minerals, turn out to have a highly
adverse impact on growth, by triggering corruption
chains that end up destroying institutions such as the
rule of law. To solve this problem, they propose that the
money generated by the sales of these natural

Figure 17: Geography: tropical area

100

90

80

70
Percent of territory

60

50

40

30

20

10
13

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 resources could be distributed to the people directly, by
making them direct owners of the oil or diamonds.
This way, corrupt officials would not have easy access
to oil money, unless they taxed people directly. They
predict that this would have a beneficial effect on
institutions and, ultimately, on growth. Table 1
estimates that Africa’s annual growth rate was reduced
by 1.21 percentage points as a result of the continent’s
disadvantageous tropical geography.
Openness
The next important determinant of economic growth of
a country is its degree of openness. It is widely believed
that economies that are open to international forces tend
to benefit from trade, and tend to have more access to
foreign technological progress through FDI. Figure 18
shows that African economies are quite closed. The
index of economic openness postulated—for example,
by Sachs and Warner (1997)—is 0.10 for the African
continent as a whole, and although slightly larger for
North Africa than Sub-Saharan Africa, still quite small
in both sets of countries. This compares very
unfavorably with the OECD, with its openness index of
0.65, or East Asia, with an even more spectacular value
of 0.83. Table 1 shows that if Africa had been as open as
OECD over the last 40 years, its annual growth rate
would have been 0.67 percentage points higher.
Excessive public spending
Another important variable is the ratio of public
consumption to GDP. Sala-i-Martin et al. (2003) show
that more public spending is bad for economic growth.
This is true for both public consumption and public
investment, but public consumption turns out to be
more robust. This is hardly surprising, given that public
consumption does not tend to have direct positive
effects on economic growth. However, it is financed
through distortionary taxes, which do have a negative
effect on growth. The same argument applies to public
investment if it is wasteful, as it is in so many instances!
Here again, Africa does not score well: the fraction of
GDP devoted to public consumption spending is 0.16—
0.164 for Sub-Saharan Africa and 0.12 for North-Africa).
The corresponding comparative numbers are 0.07 for
OECD, and 0.06 for East Asia. If Africa had had a level
of public spending similar to that of the OECD over the
last 40 years, its annual growth rate would have been
0.40 percentage points higher.

Figure 18: Openness

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1
14

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Index of Economic Openness, Sachs and Warner (1977)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

Figure 19: Government consumption share of GDP

0.18

0.16

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Authors’ calculations

Military conflict and ethno-linguistic
fractionalization
We have left one of Africa’s most obvious problems for
last: violence. No one will be surprised to hear that war
has plagued the continent since independence in the
1960s. Military conflicts have involved countries such as
Algeria, Angola, Burundi, Chad, Côte d’Ivoire, the
Democratic Republic of Congo (Zaire), the Republic of
Congo, Djibouti, Eritrea, Ethiopia, Guinea-Bissau,
Liberia, Libya, Mauritania, Morocco, Mozambique,
Namibia, Niger, Nigeria, Rwanda, Sierra Leone, Somalia,
South Africa, Sudan, Togo, Uganda and Zimbabwe.
Some of these conflicts have been short-lived. Others
have lasted decades. Whether short or long, all have
brought untold human misery in their wake. But the
tragedy goes far beyond those who suffer the immediate
effects of the violence itself, and includes the future
citizens, who have to deal with the consequences of the
negative impact such conflicts have on economic growth,
which brings with it inevitable deepening of poverty and
further misery.

Figure 20: Ethnolinguistic fractionalization

0.7

0.6

0.5

0.4

0.3

0.2

0.1
15

0
Africa Sub-Saharan Africa North Africa OECD East Asia

Source: Easterly and Levine (1997)

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 Some of the military conflicts have to do with natural
resources—eg. the Sierra Leone conflict. Others reflect
ethnic or tribal wars, such as the internecine battles
between Tutsis and Hutus in Rwanda and Burundi. Still
others combine both sets of factors, such as the Biafran
war in Nigeria, or the conflict in the Congo (Zaire), with
the latter also involving the conflicting international
interests of Rwanda and Uganda (on the rebel side) and
Angola Namibia and Zimbabwe (on the Congolese
government side).
Easterly and Levine (1997) postulate that a central
problem for most African economies has been the
unusually large ethno-linguistic fractionalization of these
communities. Such fractionalization could have arisen
from the fact that the colonial powers divided the
continent in ways that were arbitrary and unrelated to
ethnicity. But, whatever the origin, ethno-linguistic
conflicts tend to lead to inefficient economies.9 Of course,
the worst economic outcome occurs when ethnic
conflicts lead to war. But bad economic consequences
can also result when groups fight, through regular
politics or through the government budget, over the
appropriation of resources. Figure 20 shows that, indeed,
Africa, and especially Sub-Saharan Africa, is unusually
fragmented. The index lies around 0.6. This contrasts
with the values of 0.12 and 0.20 for OECD and East Asia
respectively. Easterly and Levine’s insight turns out to
be a robust finding as confirmed by Sala-i-Martin et al.
(2003). Table 1 shows that if Africa had the same amount
of ethno-linguistic fractionalization as the OECD, its
annual growth rate would have been 0.52 percentage
points larger.10
Conclusions
The economic growth performance of the African
continent has been tragically disappointing. We use the
word “tragic”, because it has had enormous
consequences for human welfare: hundreds of millions
of citizens have become poor, as a direct consequence of
this dismal economic performance.
Hopefully, this study will contribute to an
understanding of what went wrong. Perhaps, more
importantly, it may help us understand what could be
done to improve this situation. For example, it seems
clear that the massive international aid programs of the
past have not helped significantly. Easterly (2001) and
the body of research led by Paul Collier provide some
clues as to why international aid may have failed in the
past and suggest some possible ways to amend the
errors. Perhaps a more efficient way to help would be for
the rich to undertake the tasks that the poor cannot
16
possibly do. One of the most important of these is the
research needed to tackle the health problems that are
threatening to devastate the continent. Africans have
neither the resources nor the expertise to discover
1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa
vaccines that prevent AIDS or malaria. Rich countries
have little incentive to invest in these lines of research
because the discoveries will help people with little ability
to buy the resulting products. If international aid
financed by bilateral donors as well as multilateral
institutions were to be redirected towards the financing
of the most important global public good, health, and to
dealing with the epidemics currently threatening the
poorest continent in the world, the situation of Africa
might improve dramatically.
Among other factors contributing to the African tragedy,
are the dramatic and devastating military conflicts that
have plagued the continent over the last half a century.
Africa’s economies will not grow until all these conflicts
stop.
Other important factors which, if changed, will
contribute to African growth, include institutions that
can guarantee the rule of law and property rights,
investment in education, reduction of policy distortions
that make investment excessively expensive, and
reduction of wasteful consumption expenditures.
Opening up the African economies to the forces of trade,
FDI, and technological diffusion is also important.
African governments could do a great deal more to
ensure that their economies open up. But Europe, Japan
and the United States could also contribute, by
facilitating access for African products to their markets,
and by reducing subsidies of their agricultural products.
Africa’s growth performance was the largest economic
disaster of the 20th century. We can prevent it from being
the largest disaster of the 21st.
Notes
1
The African GDP per capita is constructed by aggregating the Penn World
Tables Purchasing-Power-Parity-adjusted GDP data published by
Summers-Heston-Aten (2002) for each country and dividing it by the total
population. Since the data are measured in PPP-adjusted units, it is
strictly comparable across countries and, therefore, can be aggregated.
The countries used to construct this measure of African GDP are: Algeria,
Angola, Burundi, Benin, Botswana, Burkina Faso, Cameroon, Cape Verde,
Central African Republic, Chad, Republic of Congo, Democratic Republic
of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, The Gambia, Ghana,
Guinea, Guinea-Bissau, Equatorial Guinea, Kenya, Lesotho, Madagascar,
Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia,
Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa,
Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, and Zimbabwe.
2
The set of sub-Saharan African countries are the African countries minus
Algeria, Egypt, Morocco, and Tunisia.
3
Bhalla (2002) finds very similar results. He estimates that the total number of
poor in Sub-Saharan Africa increased by 174 million between 1980 and
2000 (see his Table 9.2).
4
Collier and Gunning (1999) point to this imbalance between public and
private investment in Africa as one of the reasons behind its low rates of
economic growth.
5
Data on private and public investment shares should be interpreted with
caution, because of the lack of consistency among countries in the
classification of public enterprises.
6
Collier and Gunning (1999) reach a similar conclusion.
7
For econometric reasons, it is important to capture human capital at the
beginning of the period because of its endogeneity: as the economy grows
over time, it acquires more human capital. To alleviate endogeneity
problems, econometric analyses typically use variables at the beginning of
 the period. Since the Sala-i-Martin et al. (2003) study refers to the period
1960 to 2000, the exogenous variables such as school enrollment were
evaluated in 1960.
8
This measure was first proposed by Jeffrey Sachs and his colleagues. See, for
example, Gallup, Sachs and Mellinger (1998), Sachs (2003).
9
Collier has noted that the presence of only two large ethnic groups in a
region, such as the Tutsi and Huttu in Rwanda and Burundi, is more
likely to generate conflict than the cohabitation of a very large number of
ethnic groups (Tanzania).
10
In addition to the variables reported here, Sala-i-Martin et al. (2003)’s list
includes other variables, such as an East Asian dummy or Spanish
Colony. Since these variables take the same value for OECD and Africa,
we conclude that Africa would not have benefited from having OECD
values for such variables. Thus, we have excluded them from our
analysis.

References
Acemoglu, D., S. Johnson, and J. Robinson. 2001. “The Colonial Origins
of Comparative Development: An Empirical Investigation.” American
Economic Review 91. December. 13691401.
Ahluwalia, M., N. Carter and H. Chenery. 1979. “Growth and Poverty in
Developing Countries.” Journal of Development Economics 41 (40). 2552.
Bhalla, S. 2002. Imagine There is No Country: Poverty, Inequality and Growth
in the Era of Globalization. Washington, DC: Institute for International
Economics.
Collier, P. and J.W. Gunning. 1999. “Why Has Africa Grown so Slowly?”
Journal of Economic Perspectives 13 (3). Summer.
Collier, P.and C. Pattillo, eds. 2000. Investment and Risk in Africa. London:
Macmillan..
Easterly, W. 2001. The Elusive Quest for Growth: Economists’ Adventures and
Misadventures in the Tropics. Cambridge, MA: M.I.T. Press.
Easterly, W. and R. Levine. 1997. “Africa’s Growth Tragedy: Policies and
Ethnic Divisions.” Quarterly Journal of Economics CXII.12031250.
Gallup, J.L., J. Sachs and A. Mellinger. 1998. “Geography and Economic
Development.” Annual Bank Conference on Development Economics.
Washington, DC: World Bank. April.
Ravallion, M., G. Datt, and D. Van de Walle. 1991. “Quantifying Absolute
Poverty in the Developing World.” Review of Income and Wealth 37 (4).
December. 345361.
Sachs, J. 2003. “Institutions Don’t Rule: Direct Effects of Geography on
Per Capita Income., NBER Working Paper W9490. February.
Sachs, J. and A. Warner. 1997. “Sources of Slow Growth in African
Economies.” Journal of African Economics 6 (3). 335376.
Sala-i-Martin, X. 2003. “Convergence, Period.” Mimeo. Columbia
University.
—————— 2004. “The World Distribution of Income: Falling Poverty
and… Convergence.”
Sala-i-Martin, X., G. Doppelhoffer, and R. Miller. 2003. “The Empirical
Determinants of Growth: A Bayesian Average of Classical Estimates
(BACE) Approach.” Forthcoming. American Economic Review.
Sala-i-Martin, X. and A. Subramanian. 2003. “Addressing the Natural
Resource Curse: Nigeria.” Mimeo. Columbia University.
17

1.1 ❚ The Economic Tragedy of the Twentieth Century: Growth in Africa

 Chapter 1.2
Health, Economic Growth,
and Competitiveness in Africa
Alan W. Whiteside, Director, Health Economic and HIV/AIDS
Research Division, University of Natal, Durban1
Introduction
How important are healthy populations for economic
growth? Which way does causality work: from healthy
people to economic growth or from economic growth to
improved health? The answer is not simple and could be
debated at length by economists, planners and policy
makers. The conclusion, inevitably, would be that it
works both ways.
Typically the debate would then move on to the
measurement of the relative contributions of both
aspects. Apart from its academic interest, such a debate
would have little significant impact on policy, since we
would go on striving for economic growth and better
health, together and separately, seeing both as desirable
goals. Furthermore we could expect to see the level of
health of populations gradually improve over time, the
exceptions being due to natural catastrophes or human
ones such as war.
But in the last ten years this debate has ceased to be
academic. The expected trend of improving health, falling
child mortality and rising life expectancy can no longer be
taken for granted in Africa. The onslaught of HIV/AIDS
means that we are entering a period of declining health for
most sub-Saharan African countries. In the absence of
affordable, effective and deliverable treatment (including
Anti-retroviral Therapy) the health of Africans will
continue to deteriorate. We must now ask how this will
affect economic growth and competitiveness.
It is increasingly evident, as the HIV epidemic
evolves, that it is an immensely complex problem with
far-reaching, long term implications. It is only 22 years
since the first cases of AIDS were identified in the United
States (in 1981), and only 20 years since the cause, the
human immuno-deficiency virus, was isolated and
identified. In only one African country (Uganda) has the
number of infections peaked and declined; in all others
the number of infected people continues to rise.2 In
Uganda the level of HIV prevalence peaked in about
1992 and has been declining since—the number of
orphans however peaked in 2002/03 and the
implications of so many children growing up without
parents will not be clear for another decade or more.
The complex nature of this disease is barely understood.
For example, it is possible that AIDS is contributing to
the social, economic and political turmoil in Zimbabwe.
There is some evidence that in South Africa, the lack of
political leadership around AIDS, combined with the
high levels of infection, is contributing to a slowdown in
foreign investment. There is a tendency for the private
sector to move to out-sourcing, defined contributions
rather than defined benefits, pension plans, and, in some
instances, to more capital-intensive production, and this
may be partly due to the potential impact of AIDS. While
this makes sense for particular firms, it may have
adverse affects on individual and nations. Employment
through outsourcing is generally less advantageous in
terms of benefits for employees, and means that the costs
of ill health must be borne by individuals and families.
19
Defined benefits offer greater security to employees.
Replacing people with machinery may be logical for the
companies, but in the context of high unemployment,
may not be in the national interest.
1.2 ❚ Health, Economic Growth, and Competitiveness in Africa
 Health and economic growth
Leaving aside the issue of HIV/AIDS for a moment,
how important is health for economic growth? This
question has been most recently (and exhaustively)
addressed in the 2001 report of the Commission on
Macroeconomics and Health (World Health
Organisation, 2001). The report makes the compelling,
but not entirely convincing, argument that investing in
health will increase economic growth. It provides
evidence to suggest that good health is necessary—but
not sufficient—for economic growth. Historical
evidence, going back to the development of Europe, the
USA and other OECD countries, suggests that economic
takeoff was supported by breakthroughs in public
health, disease control, and better nutrition.
The Commission argues that “societies with a heavy
burden of disease tend to experience a multiplicity of
severe impediments to economic progress” (p. 22). Most
striking is the Commission’s statistical estimate that,
other things being equal, each 10 percent improvement
in life expectancy at birth (LEB) is associated with a rise
in economic growth of 0.3 to 0.4 percentage points per
year (p. 24). In the high income countries, life
expectancy at birth is 75 for men and 81 for women and
rising, while in Sub-Saharan Africa, it is 49 for men and
52 for women and falling (World Bank. 2000. Statistical
annex). Thus, the difference in growth will be about 11.6
percentage points per year, and this will cumulate
rapidly. “In short, health status seems to explain an
important part of the difference in economic growth
rates, even after controlling for standard macro-
economic variables” (p.24).
The report identifies four key channels through which
the disease can influence economic development:
❚ It reduces the number of years of healthy life
expectancy;
❚ It affects parental investment in children. High levels
of infant and child mortality result in families having
more children, in turn reducing the ability of a family
to invest in the health and education of the children;
❚ It reduces the rate of returns to business and
infrastructure investment in a number of sectors;
❚ It can undermine social cooperation and even political
and macro-economic stability.
The Macroeconomic Commission suggests that “the
population health of the developing countries in recent
decades has been a story of good news, bad news and
disastrous news” (p.40). The good news is the significant
improvement in global public health in most low income
countries: from 1960 and 1995, life expectancy rose by 22
years, and under-five mortality declined. The bad news
is that the total burden of preventable disease remains
20
high; even with the gains in health, there are still huge
differences in life expectancy and child mortality
1.2 ❚ Health, Economic Growth, and Competitiveness in Africa
between the rich and poor worlds, and many
preventable diseases are still widespread. Treating
communicable disease, maternal and perinatal
conditions and providing correct nutrition could do
much to reduce disease in the developing world. Clean
water alone would have a significant impact. The
disastrous news is the advent of HIV-AIDS, which is
resulting in unprecedented morbidity and mortality
across much of sub-Saharan Africa.
AIDS means that economic growth in Africa is under
threat as never before. But it means more than this.
Individual companies have to face increased illness
and mortality among employees, declines in
productivity and a change in the environment in
which they do business. International aid agencies
must recognise that AIDS is rolling back development
gains by illness as effectively as war did in Sierra
Leone and Liberia—and as is now happening in Congo
and Côte d’Ivoire. The international community is
facing a long-term humanitarian problem which will
be difficult to resolve, for, unlike drought or flood, this
one has deep roots and no simple solution. African
governments are seeing increased demand for social
services at the same time that their financial and
human resource capacity to provide them is being
eroded, while the lives of millions are being made
miserable as they face increased poverty and declining
living standards.
Although growth is understood to be essential for
poverty reduction, it is not neutral. Some forms of
development may assist the spread of HIV-AIDS. For
example the reliance of some countries on the textile
industry, employing young women at minimum wages,
has created a situation in which sexual exploitation has
increased. Economic corruption and the long-term
nature of the epidemic mean that the free market is
unlikely to provide viable solutions. Indeed, experience
is proving that that the social rate of return on fighting
AIDS is much higher than the rate of return on private
investment, and, therefore, that public investment is not
only justified but essential.
Moreover, AIDS is making Africa increasingly less
competitive, less capable of saving locally, and
increasingly less able to develop its own solutions to
these major health problems.
The HIV/AIDS epidemic in Africa
Soon after AIDS was reported in the United States, in
1981, there were already indications that it was
spreading in Eastern and Central Africa (Shilts, 1987). By
the beginning of the new millennium, it was apparent
that AIDS is the most serious epidemic to affect Africa in
centuries (Barnett et al. 2002). Indeed, HIV seems
Table 1: Regional HIV/AIDS statistics and features, end of 20034

Region Epidemic Adults and Adults and Adult prevalence % of HIV- Main mode(s) of
started children living children newly rate (*) positive adults transmission (**)
with HIV/AIDS infected with HIV (in percent) who are women for adults living
with HIV/AIDS
Sub-Saharan Africa late ’70s early ‘80s 29.4 million 3.5 million 8.8 58 Hetero
North Africa & Middle East late ‘80s 550,000 83 000 0.3 55 Hetero, IDU
South & South-East Asia late ‘80s 6.0 million 700 000 0.6 36 Hetero, IDU
East Asia & Pacific late ‘80s 1.2 million 270 000 0.1 24 IDU, hetero, MSM
Latin America late ‘70s early ’80s 1.5 million 150 000 0.6 30 MSM, IDU, hetero
Caribbean late ‘70s early ‘80s 440,000 60 000 2.4 50 Hetero, MSM
Eastern Europe & Central Asia early ‘90s 1.2 million 250 000 0.6 27 IDU
Western Europe late ‘70s early ‘80s 570 000 30 000 0.3 25 MSM, IDU
North America late ‘70s early ‘80s 980 000 45 000 0.6 20 MSM, IDU, hetero
Australia & New Zealand late ‘70s early ‘80s 15 000 500 0.1 7 MSM
TOTAL 42 million 5 million 1.2 50

* The proportion of adults (15 to 49 years of age) living with HIV/AIDS in 2002, using 2002 population numbers.
** Hetero (heterosexual transmission), IDU (transmission through drug injection), MSM (sexual transmission by men who have sex with men).
Source: UNAIDS

destined to cause maximum disruption, given its deadly
features:
❚ A sexually transmitted disease, viewed as a stigma; the
prudishness and conservatism with which such
illnesses are viewed tend to silence discussion, and
delay preventive social action;
❚ A disease which lies dormant, allowing each person to
potentially infect many others;
❚ A disease which kills most victims in the prime of
their lives, after they have completed their education,
started to work, and, in many cases, just begun to have
children.
The African epidemic is currently the most serious in the
world. Each year UNAIDS produces their latest
estimates on infections around the world.3 At the end of
2002 there were an estimated 40 million people living
with HIV/AIDS. Of these 70 percent were African.
Characteristic of the African AIDS epidemic is that the
majority of infections are transmitted through
heterosexual contact, and more women than men are
infected. In East Africa the epidemic appears to be stable
at levels of between 5 and 15 percent among adults. This
translates into horrific numbers, however: over 2 million
Ethiopians; 2.3 million Kenyans; and one million
Mozambicans are infected.
The 2002 UNAIDS Update noted the relatively low adult
HIV prevalence rates in West and Central Africa, in
countries such as Senegal (under 1%) and Mali (1.7%).
Unfortunately, “HIV prevalence is estimated to exceed 5%
in eight other countries of West and Central Africa,
reminders that no country or region is shielded from the
epidemic. The sharp rise in HIV prevalence among
pregnant women in Cameroon—more than doubling to
over 11% among those aged 20–24 from 1998 to 2000)—
shows how suddenly the epidemic can surge.” (p. 21)
For many countries, such as Angola, the Democratic
Republic of the Congo, Somalia and the Central African
Republic, data are simply not available.
The epicentre of the epidemic is southern Africa. The
expectations in the early 1990s were that HIV prevalence
would not exceed 25 percent in any country. The
countries of Southern Africa have confounded this. The
June 2002 UNAIDS Global Report states:
“Circulating in southern Africa (where the epidemic
is the most severe in the world) has been the hope
that the epidemic may have reached its ‘natural limit’
beyond which it would not grow. Thus it has been
assumed that the very high prevalence rates in some
countries have reached a plateau …If a natural HIV
prevalence limit does exist in these countries, it is
considerably higher than previously thought.”
(UNAIDS. 2002. p.23)
The December 2002 update is even more disturbing:
“The worst of the epidemic clearly has not yet
passed, even in southern Africa where rampant
epidemics are under way. In four southern African
countries, national adult HIV prevalence has been
higher than was thought possible in Botswana
(38.8%), Lesotho (31%), Swaziland (33.4%) and
21

Zimbabwe (33.7%).” (UNAIDS. 2002. p.16)

including Cameroon (11.8%), Central African Republic
(12.9%), Côte d’Ivoire (9.7%) and Nigeria (5.8%)—sobering Figure 1 shows these results for four of these countries.

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

 Figure 1: National trends in HIV prevalence

45 Botswana

40 Namibia
South Africa
35
Swaziland
% HIV positive

30
25

20
15

10
5

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: UNAIDS

Basic epidemiology
Any epidemic will follow a similar pattern: a few initial
cases, followed by further spread, until the epidemic
peaks at the point when all those who are susceptible
have been infected. Then, as people recover or die, the
epidemic curve turns down. An HIV curve is different
because people do not recover; they remain in the pool
of HIV positive people until they die. This is important,
because it means that prevalence—the number of people
infected in the population at a given time, expressed as a
percent of the population—may be stable while the
incidence—the number of new infections—remains high.
This occurs when the number of new infections equals
the number of deaths.
What also sets HIV and AIDS apart from other
epidemics is illustrated by the two curves shown in
Figure 2. With most other diseases, infection is
followed by illness within a few days, or at most
weeks. In the case of HIV, the infection curve precedes
the AIDS curve by five to eight years. This reflects the
long incubation period between infection and the onset
of illness. This is why HIV/AIDS is so lethal, as
compared to cholera, for example. Cholera victims fall
ill quickly and visibly, alerting both the general
population and public health professionals to the
dangers. With HIV, on the other hand, the long
incubation period prolongs the time when HIV
infected people are undetected and are able to
unwittingly spread the infection.

Figure 2: The two epidemic curves

22

Source: UNAIDS

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

HIV infection moves through a population giving little
sign of its presence. It is only later, when substantial
numbers are infected, that AIDS deaths begin to rise.
People do not leave the infected pool by getting better,
as there is no cure for the disease. They leave by dying
(of AIDS or other causes). This is illustrated in Figure 2.
in which the vertical axis represents numbers of
infections or cases of illness and the horizontal axis
shows time. At time T1 the level of HIV is at A1 and the
cumulative numbers of AIDS cases and deaths will be
very much lower, at B1. AIDS cases will only reach A2—
i.e. the same level as A1—at time T2. By that time, years
will have passed, and the number of people who have
been infected with HIV will have risen even higher. The
figure also shows that, even if preventive actions succeed
in lowering the number of new infections, AIDS case
numbers and deaths will continue to increase, even after
the tide of new HIV infections has been turned, if
affordable and effective treatment is not given.
Beyond the point T2, the lines are hatched. This is
because we do not know how either the HIV or the AIDS
curves will proceed. Uganda and Thailand are the only
countries where national HIV prevalence and incidence
has peaked and turned down. We know a great deal
about HIV and AIDS. Scientific knowledge about the
virus, how it works and what we need to do to combat
it, is extensive. Unfortunately, we know considerably
less about its impact on the political, social and economic
well being of societies and countries, because:
❚ The full impact has not yet been felt; the number of
infected people and the number of deaths are still
rising, and we cannot easily predict their
consequences;
❚ It is difficult to isolate the impact of AIDS from a range
of other influences, such as globalisation, trade
agreements, international instability, and domestic
upheaval.
❚ There is limited research on the impact of HIV/AIDS
on macro-economics generally5, but virtually none on
its effect on trade and investment.
AIDS, economic growth, and
competitiveness
We shall now briefly review what we actually know
about the effect of AIDS, at the macro-economic level, at
the level of the firm, and that of the single household.
We will then bring this together to assess the effect of
AIDS on economic growth and competitiveness in sub-
Saharan Africa.
Macro-economic studies6
The first assessment of the impact of HIV/AIDS on
economic growth in 30 African countries was made in
the early 1990s (Over, 1992). It examined the impact on
the labour force, capital accumulation and other factors.
The models were subsequently refined by other
macroeconomists. The headline conclusion was that total
economic output would fall as a result of the disease.
However, the findings, on a per capita basis were either
politically unpalatable—the epidemic would leave the
survivors better off—or academically uncertain—the per
capita income of survivors could either go up or down as
a result of the epidemic.
An exhaustive study by the Bureau for Economic
Research (BER) at Stellenbosch University (Bureau for
Economic Research, 2001), South Africa, offers mixed
messages. It concludes that:
“While the economic impact of HIV/AIDS is
negative, we are far from witnessing a doomsday
scenario. The negative impact on real GDP growth is
gradual and the economy could continue to register
3% average real GDP growth (or better) over the next
10 to 15 years … Having said that, the results clearly
show that the macro-economic impact of the
HIV/AIDS epidemic cannot be ignored.” (Bureau for
Economic Research. 2001. p.5)
The BER estimates that annual GDP growth in South
Africa will average between 0.3% to 0.6%, that is, lower
than it would have been in the absence of AIDS. Political
and financial leaders, who have other more pressing and
predictable crises to deal with—eg. exchange rate
fluctuations, trade wars, or labour unrest—are left
sceptical and uncertain as to how to act on this
information: Will growth be slower? What does a 0.3%
decline mean for actual policy?
Despite the uncertainties inherent in macro-economic
studies, there is growing interest in what the disease will
actually mean for economies and economic policies.
Because of the enormous numbers of infected people in
its population, most of the studies focus on South
African, with its sizable formal economy and analytical
and academic capacity.7 Of particular note, is the
renewed interest on the part of the private sector and
investment advisors, who now recognise that the impact
of the epidemic is inescapable, because:
❚ The scale and speed of the epidemic is worse than
expected, with the number of people infected with
HIV in 2000 almost twice that predicted in 1990;
❚ Demographic effects now give evidence of
unavoidable economic consequences;
❚ Evidence of impact at the micro-level supports the
23
estimates of macroeconomic studies;
❚ The complexity, scope and consequences of the disease
are better understood; e.g. the loss of key government
workers means reduced efficiency, less investment,
1.2 ❚ Health, Economic Growth, and Competitiveness in Africa
 and slower economic growth. In October 2002, Standard Bank organised a workshop
on the economic implications of AIDS In South Africa, at
which a review of the impact studies was presented8.
The headline finding was that models are correct in
indicating an adverse impact of AIDS on the economy,
but the assumptions are variable and the outcome
difficult to quantify. Firstly, because modelling involves
simplification and cannot reflect how economies actually
operate. Secondly, because the simplistic “with or
without AIDS” estimations are not realistic: there is no
“without AIDS” scenario for most of Africa.

Firm level studies

From a technical point of view, the finest firm level
studies are those by from Boston University9. This work
shows that AIDS increases payroll cost, as well as the
cost of doing business. Some of the data released at the
Barcelona Conference in 2002 and are summarised in
Table 2 (Rosen, et al. 2002). The authors estimated the
cost of AIDS to businesses and the benefits of prevention
and treatment using company-specific data on
employees, costs, and HIV prevalence for five large
enterprises in South Africa and Botswana.
What is the effect of AIDS on productivity? The effect of
health on productivity in general is not well researched.
According to researchers at the Centre for International
Health and Development of the Boston University
School of Public Health, the reason for this is that, in
most settings, neither the health nor the productivity of
an individual worker can be directly observed. The
exception is commercial agriculture in developing
countries, where workers are paid according to the
amount harvested each day, and typically receive health
care from on-site, company-owned medical facilities.
These agricultural enterprises, or estates, have data on
both the daily output and the health of each worker. The
Boston team refers to studies of schistosomiasis, malaria,
and onchocercal skin disease. They are the first to
examine the impact of AIDS on productivity (Fox, M.P.
et al. 2003).

The research on a tea plantation in the Kericho district of Kenya is pioneering, but rigorous. Records of health and
output over a five year period were reviewed by the team. The principal findings are during the last three years of tea
pluckers who died of AIDS and were absent almost twice as often as other workers. More than half of this difference
was accounted for by unpaid (and unauthorized) leave. Output began to fall as early as three years before death. Over
the last three years of life, workers who were to die due to HIV infection averaged only 91 percent of “full”
productivity. During the last year before death, productivity falls sharply, to 82 percent, and 77 percent in the last three
months.
These results show that labour is more expensive as a result of AIDS. In the mining industry in South Africa, there was
speculation that the productivity impact would go beyond the sick individual. It was suggested that if one person on a
24

15 man gang were to fall ill, his workmates would tend to cover for him, with the result that productivity for the entire
team would fall. Where people are paid for piecework or quantity of harvest, the impact of AIDS on productivity is
more evident. However, Fox et al. note that their results may be confounded because tea pluckers often have family
members who assist them, or even sub-contract to others. The impact on the productivity of other workers has not been
Source: Rosen et al. (2002)

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

addressed. Of great concern is the public sector, in which Table 2: Characteristics and results from
job security is often seen as a substitute for salary. People five companies in Southern Africa10.
accept lower pay and expect to receive other benefits,
including substantial sick leave. Under normal
Sector Heav
circumstances, this can be (and frequently is) the case,
manufacturing
but AIDS is an extraordinary phenomenon, forcing Agribusiness
governments to increasingly operate with reduced Mining
inefficiency, with serious negative consequences for the Mining
business climate, competitiveness and output. Retail
Workforce size (number of employees)
>25,000 5,000
10,000
<1,000
<1,000
<1,000
Est. HIV prevalence 2002 (%) 9.9
24.4 33.6
24.1 11.2
Cost per infection by job level (present value, 2001 US$)
Unskilled/semi-skilled
32,393 4,439
10,732 9,474
4,518
Technician/artisan
50,075 6,772
17,972

14,097 11,422
Supervisor/manager 83,789 18,956 63,271 45,515 24,149
Average cost per infection (multiple of median salary) 4.3 1.1 5.1 2.9 0.9

65 Zimbabwe

South Africa
60
Botswana

Madagascar
55

Senegal
Life expectancy (years)

50 Mali

45

40

35
25

30
1950-55 1955-60 1960-65 1965-70 1970-75 1975-80 1980-85 1985-90 1990-95 1995-00 2000-05

Source: UNAIDS, 2002. Report on the global HIV/AIDS epidemic

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

 Liability acquired in 2002 (future cost of incident infections) (% of payroll) 5.0 2.4 9.4 5.9 0.9
Undiscounted cost of prevalent infections in 2006 (% of payroll) n/a 4.8 18.1 12.2 1.8

Projected
80
population
75 structure
Males Females in 2020
70
65
Deficits due
60 to AIDS
55
Age in years

50
45
40

35
30
25
20
15
10
5
0

140 120 100 80 60 40 20 0 20 40 60 80 100 120 140

Population (thousands)

Source: UNAIDS

The household and public sector including the household, the extended family, and the
community. Although this subject is well beyond the
The full impact of the epidemic is being borne by the scope of this chapter, it should be noted that a growing
public sector and individual households. In those body of evidence suggests that it is here, that the full
countries having a health and welfare sector, people will impact of the disease is being felt.
turn to the government for assistance as they fall ill,
become impoverished and lose their access to private
support. However, we must recognise that in many
countries there is little interaction between the state and
its citizenry, even though it is an ostensible goal of all Human capital
governments to provide basic health care, education and
HIV/AIDS will, at a minimum, reduce the rate of
some degree of social welfare. The effect of AIDS is to
growth, in addition to reducing the population as a
increase the demand for social services, while
whole. AIDS is radically altering not only life
simultaneously reducing the state’s capacity to deliver
expectancy, but the whole structure of populations. As
these services. There is a growing body of data showing
was noted earlier, the majority of HIV/AIDS infections
that hospital beds are increasingly being occupied by
occur in young adults, who have completed their
people with HIV related disease, at the same time that
education and started their families. In South Africa, for
the nursing cadre is shrinking. Recent research provides
example, the highest mortality among women is among
shocking data on teacher mortality, indicating that, for
those aged 25 to 29, and among men, aged 30 to 34
example, in many countries, the number of replacement
(Dorrington et al. 2002. p.4). The result is that, in many
26

teachers being trained is well below those that are

countries, life expectancy will drop to below 40 years
dying.
and the structure of the population will change
When the state fails, or where the state is absent, people dramatically, as is shown in Figures 3 and 4,
have no choice but to rely on their own resources, respectively.

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

Figure 3: Life expectancy in selected African countries with high
and low HIV prevalence, 1950-2005

Figure 4: Projected population structure with and without the AIDS epidemic,
Botswana, 2020

In an earlier part of the chapter we looked at the impact of AIDS on measurable productivity. The Afro-barometer11, an
independent research project measuring the social, economic and political atmosphere in Africa through regular
surveys, analyses data about work in broader terms, including social reproduction of labour (Whiteside et al. 2002). It
Source:
providesWhiteside et al. (2002)
us with a useful indicator of public health. As a measure of physical health, it asked respondents: “In the last
month, how much of the time has your physical health reduced the amount of work you would normally do inside or outside your
home?” This question admittedly covers a wide range of non-HIV/AIDS-related illnesses. However, the potential
social, economic and political impact of AIDS on society stems not so much from the peculiar nature of the sickness
itself, but from the fact that it makes people very ill, incapacitates, and ultimately kills them. Thus, to the extent that
our chief interest is sickness (and subsequent mortality) a general measure of sickness is useful to track the socio-
political impact of the disease.
The types of disease brought on by immune deficiency not only make a person sick and lead to early death, but are
also likely to lead to high levels of anxiety and depression among its victims. In general, levels of stress and anxiety
tend to increase with illness. However, if people know or suspect they are ill with HIV/AIDS, the resulting stress and
depression is likely to be even greater. Those affected may face discrimination in the workplace, at school, in the
community, or even at home. They must worry about the possibility of infecting their partners, and women face the
Source: Whiteside et al. (2002)

additional anxiety of possibly infecting their newborn
children. Eventually, most people with HIV/AIDS face
permanent physical disability and the prospect of being
unable to earn an income for themselves or their
families.
Moreover, the nature of the pandemic may raise levels
of stress and mental illness even among those not
infected. As the pandemic progresses and mortality
levels rise, especially among the young, significant
strain is put on the community’s emotional and
psychological coping mechanisms. As a measure of

mental health, the Afro-barometer survey asked respondents: “In the last month, how much of the time have you felt so
worried or anxious that you felt tired, worn out, or exhausted?” The responses reveal important cross-national variations in

0.07
Zimbabwe
Zambia
0.06
Cumulative number of deaths, 1998

0.05

Botswana
0.04

0.03
Malawi

0.02
Lesotho
Namibia
0.01
South Africa

0.00
0 10 20 30 40
27

Percent of people who are both often sick and depressed

Note: 1999 for Lesotho and South Africa

Source: Whiteside et al. (2002)

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

 physical and mental illness across Southern Africa. Table 3: Physical health
(Percent of respondents answering the question: “In the
last month, has your physical health reduced the amount of
work you would normally do inside or outside your home?”)

Botswana Malawi
Namibia Zambia Zimbabwe
Lesotho South Africa
Often 15 16 9
19 31 42 7
Sometimes 29 27
37 38 27
12 25
Rarely 19 21
16 14 18
13 18
Never 36 36
36 28 23
33 49

Table 4: Mental health

(Percent of respondents answering the question: “In the
last month, how much of the time have you felt so worried or
anxious that you have felt tired, worn out, or exhausted?”)

Botswana Malawi
Namibia Zambia Zimbabwe
Lesotho South Africa
Often 15 20 8
22 36 51
12
Sometimes 34 25
36 42 29
14 32
Rarely 19 25
17 12 17
13 19
Never 32 30
37 22 16
21 37

To what extent do these measures inform us of the

effects of AIDS in particular? There is a fairly strong
correlation between physical and mental health. A
combined measure of the proportions of people in each
country who miss work often due to illness, and who
suffer from anxiety fits very closely with epidemiological
data, with the exception of Lesotho12. This suggests that
as deaths rise in number, general health among the
survivors deteriorates rapidly. This is shown in Figure 5.
This is a very significant finding because it shows that as
the disease progresses, economic activity is directly
affected.
28

Figure 5: The correlation between AIDS

deaths and physical and mental illness

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

The impact of AIDS on investment
Will AIDS put off investors? This is a real concern. In his
opening remarks to the October 2002 workshop in
Johannesburg, Iraj Abedian, Chief Economist of the
Standard Bank, noted that AIDS—and the government
response to it—is the number one concern for many
foreign institutional, individual and group investors13.
There is no published work on the impact of AIDS on
investment flows, although the BER paper notes there
will be a strong adverse effect on real private fixed
investment as a result of lower levels of economic
activity, increased interest rates, lower corporate profits
and savings, and a smaller pool of national savings
(Bureau for Economic Research, 2000. p.4).
Four broad categories of investors may be identified:
1. Local investors locked in to the local market, resources
or conditions, and having a commitment to remaining
in the country; these will, if they have information,
factor AIDS into their investment decisions.
2. Investors who are resource-dependent, exploiting local
resources and unlikely to move; Botswana’s diamonds
can be mined only in Botswana, Kenya’s tea grown
only in Kenya. Although the investors may try to
insulate themselves from the impact of AIDS, resource
constraints mean that unless the costs increase
considerably they are locked in to a country. One
response is to wall off plants, mines and oilfields and
operate in enclaves.
3. Companies who are market dependent, serving the
local market, such as banks, oil companies, and
brewers. They will need to consider the impact of
AIDS on their markets. Clever company managers can
do well even if the environment is not conducive to
economic growth – the last man standing principle.
4. Footloose investors: those (such as garment
manufacturers) who are attracted to a location because
of special incentives, preferential access to foreign
markets, and local conditions such as cheap or non-
unionised labour. Such companies are least likely to
adapt to AIDS impact and the most likely to move.
This leaves three key questions in exploring the impact
of AIDS on investment:
1. Are existing investors relocating to other places
because of the epidemic?
2. Are new investors—particularly those companies
establishing factories—being put off by HIV/AIDS
and choosing not to invest in Africa?
3. Is there a measurable impact on the investment
climate and investor perceptions?
There is only one company that has made public the fact
that it is diversifying its investment due to AIDS. This is
South Africa’s JD Group (JDG), which sells furniture and
household appliances (Whiteside et al. 2000). In 1998 the
group carried out a study that looked at issues related to
the development of a new product range, marketing
strategies, the opening and relocation of stores, lease
negotiations for stores, and employee profiles and
benefits. The report included a forecast of HIV
prevalence among customers by market segment and
store group. It concluded that the South African
customer base would grow slowly until 2010. Thereafter,
it predicted a decline in customers in all provinces,
except the Western Cape, that other countries such as
Swaziland, Lesotho and Botswana would experience a
reduction in market size by 2010, and that the increase in
illness and death would change consumption patterns,
as disposable income was re-allocated.
The JDG report concluded that:
❚ consumption patterns would change as households
diverted funds to AIDS care;
❚ relationships between GDP, personal consumption
expenditure and durable consumption expenditure
would alter;
❚ there would be considerable social impact.
Although the varied impact (by age group and market
region) was anticipated to differ, JDG decided to
reposition itself, to remain within core competencies, to
leverage existing infrastructure to cater for other
customer needs, and to diversify geographically away
from the HIV/AIDS epidemic. As a result, JDG
introduced personal services as part of its product range
and expanded into Eastern Europe.
A number of other firms have carried out, or propose to
carry out, similar studies, but none has yet released their
findings. Other companies are hedging their options:
blue chip South African companies now listed on the
London Stock Exchange include Anglo-American,
Billiton, Old Mutual, Didata, South African Breweries
and Investec. Did AIDS and the South African response
to the epidemic influence these decisions? How
important a factor was AIDS, and how did it rank
alongside other factors such as cheaper capital, better
ratings, greater liquidity and a central location? We
simply do not know.
The second question is problematic: whether investors
are being dissuaded by the epidemic—and in some
countries by the government’s response—because we are
trying to measure something that has not happened.
How can investment flows that have not taken place be
measured?14 The fact that Standard Bank hosted the
October 2002 meeting in Johannesburg clearly indicates
that AIDS is, in reality, having an effect on investment.
Investors tend, naturally, to go where the returns are
best, and will weigh many factors before deciding to
invest in a particular country (Whiteside A. ed. 1989).
Clearly, AIDS is not helping the international perception
of much of Africa. The headlines about declining GDPs
29
and the erosion of the work force must be having an
impact. A short piece in Time Magazine’s ‘Biz Watch’ in
December 2002 was headed (in small type) “AIDS in
Africa” and then (in large type) “THE WORLD’S
1.2 ❚ Health, Economic Growth, and Competitiveness in Africa
 GRIMMEST TAX”.15 Jeffery Sachs, former Director of the
Centre for International Development at Harvard
University, commented in 2001 that the government’s
handling of the crisis had undermined business
confidence in South Africa, by causing bewilderment
among investors over the policy judgement of the ruling
party (Center for International Development, 2001). The
trend toward corporate reporting on HIV/AIDS,
discussed below, will have an impact on investor
perceptions.

The “AIDS tax”

Does AIDS constitute a “tax” in the true sense of the
word, rather than a simple metaphor? If so, who is
applying the tax? In this paper, it has been used as a
metaphor, something that raises the cost of trade
and investment. But there are examples of real AIDS
taxes: Zimbabwe has had a three per cent AIDS levy
on individual and company taxes since 1999.
This money is paid into a discrete fund, administered by
the Ministry of Health and Child Welfare, and is
supposed to be used wholly and exclusively for AIDS
activities. The Namibian Government is planning
to impose a special ”orphan tax” on the general
population from April 200316. It is not clear what
the effect of these taxes will be on expenditure and
investment within a country. Who bears the burden
of the taxes, real and metaphorical? Are they
30

1.2 ❚ Health, Economic Growth, and Competitiveness in Africa

 Chapter 1.3
Africa’s Economic Morass :
Will a Common Currency Help?1
Paul R. Masson, University of Toronto2
Heather Milkiewicz, The Brookings Institution3
Introduction
Africa has suffered from decades of decline and
marginalization. The early hopes of rapid development
and enlightened government after independence were
dashed by poor economic policies, civil wars, and
kleptocratic rulers. This tragedy has led, first, to a
reexamination of the effectiveness of aid by the major
donor countries, and second to the recognition by
Africans that they need to take charge of their own
destiny. Two years ago NEPAD was launched as a
vehicle for improving economic and political governance
by Africans, and thus of assuring donors (and private
investors) that resource flows to Africa would not be
wasted. Its importance for continuing aid flows from the
rich countries was reiterated at the June 2003 summit
of the G-8 countries in Evian, France. However, if
African countries do not get their macroeconomic
policies right, they will not benefit from better economic
and political governance and the associated capital
inflows. Instead, they will continue to stagnate, and rich
countries will draw lessons from past aid ineffectiveness
and increasingly shun the continent.
One important aspect of macroeconomic policies is
the choice of the exchange rate regime and the associated
monetary policy. In this context, a policy proposal
currently receiving much attention addresses
the creation of a common African currency. The project,
though not explicitly linked to NEPAD, is intimately
associated with the newly-formed African Union (AU),
the larger institutional framework within which NEPAD
operates. A common currency was also an objective of
1.3 ❚ Africa’s Economic Morass: Will a Common Currency Help?
the Organization for African Unity and the African
Economic Community, the predecessors of the AU.
The 1991 Abuja Treaty, which established the African
Economic Community, outlines six stages— to be
completed by approximately 2028—for achieving a
single monetary zone for Africa. In the early stages,
regional cooperation and integration within Africa were
to be strengthened, and this could involve regional
monetary unions. The final stage was envisioned to be
the establishment of the African Central Bank (ACB)
and creation of a single African currency and an African
Economic and Monetary Union.
In addition to establishing the African Union (AU),
the 1999 Sirte Declaration calls for shortening
implementation periods in order to speed up the process
for creating institutions such as the African Central
Bank. Though the bank will not be created until around
2020, the bidding process for its location is likely to
begin soon. Ghana and Botswana are among those that
would like to host it. In the meantime, there are plans
for creating various regional monetary unions, which
would presumably form building blocks for the single
African Central Bank and currency. However,
the various sub-regional groupings currently in place—
which do not necessarily correspond to those that would
ultimately form the single African currency—have very
different starting points with respect to macroeconomic
31
stability, and they involve considerable intra-regional
diversity. This calls into question whether a common
currency is possible, even over the fairly long horizon
embodied in the African Union Treaty.
 Why monetary union?
There are two principal reasons for the enthusiasm for
monetary union in Africa. First, it is clear that the
successful launch of the euro has stimulated interest in
other regions. From Latin America to the Middle East and
East Asia, monetary union is seen as a way of reinforcing
regional cohesion and demonstrating a commitment to
regional solidarity. However, it is sometimes forgotten just
how long the road to monetary union in Europe actually
was. The transition was fraught with obstacles and
missteps, and even in official circles there were doubts,
until the ultimate day of the changeover, whether the
replacement of national currencies by euro notes and coins
in January 2002 would go smoothly. Designing new
institutions able to deliver stability-oriented monetary
policy—particularly the European System of Central
Banks—was complicated, as was the conclusion of the
Solidarity and Growth Pact, which provides for regional
coordination of fiscal policies. Despite the intense planning
process, the institutions are still the object of considerable
controversy and contention. If the process was so difficult
for a set of rich countries with highly competent
bureaucracies—countries which have cooperated closely
for more than fifty years—then, to be realistic, the challenge
for African countries must be considered enormous.
The second important motivation in Africa has been the
desire to counteract perceived economic and political
weakness by putting in place regional institutions, of which
a common currency and monetary union would be potent
symbols. What is not well understood is that a common
currency may be the symbol of weakness, not strength—as
was the case for the rouble in the dying days of the Soviet
Union, and at the time of the creation of the
Commonwealth of Independent States. A currency that is
ill-managed and subject to continual depreciation is not
likely to stimulate pride in the region or give the member
countries any clout on the world stage. Moreover,
as Robert Mundell, the 1999 Nobel Prize winner in
economics, emphasized, it is great countries (or great
regions) that make great currencies. While the countries in
the euro zone are important enough economically for the
euro eventually to rival the dollar, that is not likely to be
the case for an African currency even in the best
circumstances. Africa’s Gross Domestic Product (GDP) is,
and is likely to remain, only a small fraction of that of
Europe or the United States. In fact, at the present time,
it roughly equals that of Belgium.
The state of African currencies
Africa already has two functioning monetary unions:
the CFA franc zone, (composed mainly of former French
32
colonies, with the currency linked to the euro) and the
Common Monetary Area, (CMA, centered on South
Africa’s rand). Both are longstanding and have been
generally successful in providing low inflation. However,
1.3 ❚ Africa’s Economic Morass: Will a Common Currency Help?
both have also suffered from periods of instability. In 1994,
the CFA franc was devalued by 50 percent, while the rand
has experienced a marked depreciation against major
currencies since 1990, as well as a recent period (1998-2002)
of especially high volatility. Moreover, trade remains low
in the CFA zone—intra-CFA trade is only 7 percent of total
trade—and the zone has not grown noticeably faster than
neighboring countries. In southern Africa, the smaller CMA
members have tended to converge toward South Africa’s
higher per capita income. Convergence was even more
rapid for Botswana, which left the monetary union in 1976.
Prospects for
regional monetary unions
As mentioned above, there are already several projects for
new regional monetary unions in Africa. The West African
Monetary Zone is to be created in July 2005 and will lead,
in 2006, to a merger with the West African part of the CFA
franc zone. This will bring into being a single currency for
the 15-member Economic Community of West African
States (ECOWAS), which includes the eight members of the
West African CFA franc zone plus Cape Verde, the
Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone.
However, Nigeria will make a difficult partner for the rest
of West Africa. Given Nigeria’s much larger size, large
budget deficit, generally undisciplined fiscal policies, and
an export structure differing greatly from that of its
neighbors—it exports oil while the other countries export
other primary commodities—Nigeria has the potential to
influence monetary policies, in ways that potential partners
in a monetary union would find undesirable. Without an
effective way to discipline the fiscal policies of member
countries, and given that export and import prices in these
countries—and therefore terms of trade—are subject to
very different shocks, a single currency for ECOWAS
would not seem advisable.
In southern Africa, members of the Southern African
Development Community (SADC) also intend to form a
monetary union, though this is a much vaguer and more
distant project. In any case, many SADC members are very
far from macroeconomic stability. The southernmost
countries, such as South Africa and other members of the
Southern Africa Customs Union (like Namibia), are
reasonably advanced and stable. However, their neighbors
to the north include countries having not only recent or
continuing problems of civil unrest—Angola, the
Democratic Republic of the Congo, and Zimbabwe—but
also facing severe drought and deep poverty—Malawi and
Zambia, for instance. Their financial systems are generally
much less developed than those of the southernmost
countries and their corresponding share of manufactures
in production and exports is low.
The Commonwealth of Eastern and Southern Africa
(COMESA), a group of countries that cuts across two
geographical regions, is also developing a monetary union
project. Three of its members—Kenya, Tanzania, and
Uganda—plan to revive the East African Community Attempts to advance on too many fronts often result
which dissolved in the decade following independence. in inaction. Disparities among COMESA countries are
These different projects illustrate a pervasive problem in as significant as those affecting SADC; however,
Africa: overlapping commitments that are not necessarily COMESA’s drawback is that South Africa, the greatest
consistent. Within the five main regional groupings pole of monetary stability in the region, is not one of
associated with the AU—the three mentioned above along its members. Various officials have suggested merging
with the Arab Maghreb Union and the Economic or closing down some regional groupings, or having
Community of Central African States— ten countries each country choose a single arrangement to which it
belong to more than one regional grouping, with the would belong. It will be important to rationalize
Democratic Republic of the Congo holding three regional commitments to maximize their effectiveness.
memberships, as shown in Figure 1.
Rather than aiming for new, ambitious monetary
unions, a more promising strategy would be to build
Figure 1: Membership in regional on the credibility of existing monetary unions,
such as the CFA franc zone and the CMA, by adding to
arrangements
them countries that have demonstrated their
commitment and ability to deliver sound economic
policies by satisfying convergence criteria for a
significant length of time. Unfortunately, the western
African CFA franc zone has been hurt by unrest in
Côte d’Ivoire, and its central African counterpart is
composed mainly of oil-producing countries with
pronounced terms of trade swings. Extending the CMA,
where South Africa is a fairly stable, developed pole,
may be a more attractive possibility in the short run.
With a few exceptions, however, South Africa’s SADC
neighbors are too far from the degree of
macroeconomic stability necessary to converge
with South Africa and share the same currency, so
many will not be candidates to join for decades.
Moreover, the strategy of making good policies a
precondition for entrance into a monetary union
is fully consistent with the principles of NEPAD,
namely peer review by African countries. This
approach, if properly applied, can be expected to be
much more effective than external pressures
AMU - Arab Maghreb Union ECOW AS - Economic exerted by donors or by international financial
Algeria, Libya, Mauritania, Community of West institutions. But it is unlikely to favor the quick
Morocco, Tunisia African States
enlargement or de novo creation of monetary unions.
Benin, Burkina Faso, Cape
COMESA - Common Market Verde, Cote d'Ivoire, Ghana,
for Eastern and Southern Guinea, Guinea-Bissau,
Africa Liberia, Mali, Niger, Nigeria,
Angola, Burundi, Comoros, Senegal, Sierra Leone,
Democratic Republic of the Gambia, Togo
Congo, Djibouti, Egypt,
Is a common African currency
Eritrea, Ethiopia, Kenya, SADC - Southern African a good thing?
Madagascar, Malawi, Development Community
Mauritius, Namibia, Rwanda, Angola, Botswana, Democratic An important motivation for monetary union
Seychelles, Sudan, Swaziland, Republic of the Congo,
in Europe was to reduce the costs of changing money,
Uganda, Zambia, Zimbabwe Lesotho, Malawi, Mauritius,
Mozambique, Namibia,
associated with trade and tourism. However,
ECCAS - Economic South Africa, Swaziland, intra-African trade is modest, and therefore gains from
Community of Central Tanzania, Zambia, Zimbabwe a monetary union deriving from lower transactions
African States costs would necessarily be much smaller than in
Burundi, Cameroon, Central
African Republic, Chad,
Europe. Consistent with the gravity model, which
Democratic Republic of the posits that a country will trade more with countries
Congo, Equatorial Guinea, that have higher per capita incomes, most African
Gabon, Rwanda, Sao Tome, trade, as shown in Figure 2, is conducted with
33

and Principe
the richer countries of Europe, North America,
and Asia and will probably remain so.
Source: Report on the Third African Development Forum,
Economic Commission for Africa.

1.3 ❚ Africa’s Economic Morass: Will a Common Currency Help?

 Figure 2: Origin and destination of Africa’s
trade in 2000
Africa
Europe
Western Hemisphere
Asia
Middle East
Source: Direction of Trade Statistics (International Monetary Fund, 2002)
A second important reason to create a monetary union
may be to improve on the monetary policies provided
by national central banks, which have typically been
pressured to finance government deficits, and hence
have produced high inflation and depreciating
currencies. There may be some advantage to delegating
monetary policy, in order to insulate it from such
pressure. However, unless this occurs in the context of
a large, stable anchor country (e.g. South Africa) or
existing multilateral institutions with a track record of
independence and sound policies (e.g. the West African
CFA franc zone’s central bank), new institutions are
unlikely to provide a durable “agency of restraint.”
Instead, large countries (whose governments exert
an important influence over monetary policy actions)
will continue to use the central bank as a printing press,
directly or indirectly financing their spending.
This was the experience before the 1994 devaluation
of the CFA franc in both western and central CFA franc
zones. Hopefully, reinforced fiscal surveillance and
the recent agreement to eliminate completely central
bank advances to governments have solved the
problem in the CFA franc zone. However, the mere
creation of a regional central bank will not ensure its
independence from fiscal policy.
Monetary arrangements cannot provide solutions to the
profound development problems facing many African
countries. At best, a monetary regime supported by fiscal
discipline and good structural policies can provide a
framework for low inflation. But it cannot guarantee
high growth. Thus, monetary union should not be seen
as a panacea, or be driven by a grandiose political vision
that hopes to find a meaningful symbol of unity and
stability, when the reality is otherwise.
34
The way forward
The solution to African economic problems does not lie
with political gestures and grand schemes. The creation
1.3 ❚ Africa’s Economic Morass: Will a Common Currency Help?
of NEPAD shows that there is appropriate recognition
that governance problems are fundamental, and that it is
the responsibility of African governments to put their
own houses in order. It is also evidence that peer
pressure within Africa can help in that process. There
are four priority areas where actions by African
countries are most essential:
❚ Stop regional conflicts through regional peacekeeping
forces and by making concerted regional efforts
to prevent armed involvement and material support
of rebels by neighboring countries;
❚ Increase transportation and communication links to
stimulate trade and competition and to exploit
economies of scale;
❚ Adopt sustainable macroeconomic policies by making
currencies convertible and monetary policies
consistent with low inflation, reducing budget deficits,
and eliminating central bank financing of government
spending;
❚ Promote and attract investment in infrastructure,
health, and education by convincing donors and
private investors of the ability of African countries to
provide a stable, non-corrupt environment based on
the rule of law.
NEPAD must prove itself in the above four areas, and
deliver on its peer review mechanism. If it does, and
a genuine domestic consensus in favor of sound policies
emerges in African countries, Africa can benefit from
more generous aid flows from donors, as was recently
reaffirmed by the G-8 countries at their Evian summit.
Moreover, monetary union should then be easy to
achieve, to crown the reality, not only the promise,
of African unity. However, if NEPAD and African
governments fail, they risk a further decline in aid flows
as donors, noting a history of aid ineffectiveness,
pull back further. Attempts to forge a grand monetary
union would likely produce yet another failure
that harms, rather than helps, regional solidarity and
integration.
The NEPAD process has just begun. As of May 31, 2003,
fifteen African countries have agreed to submit
themselves to the African Peer Review Mechanism
(APRM), a self-monitoring organization comprised of
African Union member states. The purpose of the
peer review panel, which will have between five and
seven members, is to promote the implementation of
policies and standards that will lead to political stability,
economic growth, development, and integration on a
regional and continent-wide level. The recently selected
panel consists of six well-respected Africans from
various disciplines and includes Graça Machel,
humanitarian, former first lady of Mozambique, and
wife of former South African President Nelson Mandela.
It has yet to be seen how the APRM will be applied.
Thus far, the signals from heads of state are not
promising. If Thabo Mbeki cannot bring himself to
condemn Zimbabwe’s excesses in both the political and
the economic realm, what hope is there for frank
discussion and finger-pointing at lesser sins, like budget
deficits over 5 percent of GDP or excessive foreign
borrowing?
On the one hand, African leaders must recognize and
assume responsibility for their current financial
problems in order to pave the way toward regional
economic integration. If, on the other, nations
throughout Africa continue to be beset by civil wars,
poor infrastructure, unsustainable fiscal policies,
and low investment, related to corruption and the
absence of rule of law, a monetary union will only
accentuate the failure of Africans to tackle these more
fundamental problems.

Notes
1
This paper originally appeared as Brookings Institution Policy Brief 121.
2
Paul R, Masson was a Visiting Fellow in Economic and Governance Studies
at the Brookings Institution when this paper was written. He is now
Professor of Economics at the University of Toronto
3
Heather Milkiewicz is Research Assistant in Economic Studies at The
Brookings Institution.

35

1.3 ❚ Africa’s Economic Morass: Will a Common Currency Help?

 Chapter 1.4
Africa’s Competitiveness and
Regional Infrastructure
Peter L. Watson1, PLW Development Solutions Ltd.
Introduction
It is a well established fact2 that Africa needs to improve
its competitive position in order to penetrate global
markets, its own national markets being too small to
constitute a solid basis for sustainable growth and
poverty reduction. It has also well recognized that
infrastructure is a necessary, although not a sufficient,
condition for competitiveness. Improved infrastructure
and associated services3 reduce transaction costs that
are already high for most African countries (Bloom et
al. 1998). However, little attention has been paid to
the issue of the role that regional infrastructure can or
should play.
Why regional infrastructure?
The concept of regional infrastructure is important
because African economies are typically too small to
generate the economies of scale that can be found in
larger markets.
The potential for increasing economic efficiency, through
shared production, management and operations, as well
as through hubs, development corridors, or poles is
immense. In the power sector, this is exemplified by the
success of integrated power markets in Europe and
North America, and multi-country hydropower projects
in Latin America. Closer to home, The West Africa Gas
Pipeline project is attracting substantial private sector
involvement, and the Maputo corridor has stimulated
increased economic activity.
Opportunities for shared production and/or
management facilities are obvious in the case of trade in
electricity, a good example being the Southern African
Power Pool, which pools facilities, with the objective of
providing reliable and economical electricity to its
member countries: Angola, Botswana, the Democratic
Republic of the Congo, Lesotho, Namibia, Malawi,
Mozambique, South Africa, Swaziland, Tanzania,
Zambia and Zimbabwe. It is estimated that pooling
electricity generation facilities in Southern Africa could
generate savings for South Africa of US$80 million per
annum in operating costs and US$700 million in expansion
costs over the next 20 years (Sparrow et al. 1999).
The same applies to trade in gas, for example, by the
West African Gas Pipeline, which will transport cheap
Nigerian gas to Benin, Togo, Ghana and Côte d’Ivoire.
The World Bank estimates that Benin, Togo and Ghana
can save nearly US$500 million in energy costs over a
20-year period, as WAGP-supplied gas is substituted for
more expensive fuels in power generation.
Opportunities also exist in the areas of water resource
management, for example, the Nile Basin Initiative
(NBI). The Nile River has tremendous untapped
potential, if the ten countries: Burundi, Egypt, Eritrea,
Ethiopia, D.R. Congo, Kenya, Rwanda, Sudan, Tanzania
and Uganda, which share the river, cooperate to achieve
it. Recognizing this, the NBI represents an
unprecedented example of such cooperation in Africa,
37
under which the Nile states are exploring major
cooperative investments in power generation,
transmission and interconnection, irrigated food
production and agribusiness, navigation, fisheries,
1.4 ❚ Africa’s Competitiveness and Regional Infrastructure
 and related investments in land management, watershed
protection and environmental conservation.
Creating multi-country telecommunications markets
would encourage the private sector to invest in the
latest technology to replace current out-dated systems.
Railways linking coastal countries with the landlocked
hinterlands are by definition regional projects. And
in the roads sector, opportunities exist to undertake
development corridors associated with international
road projects, such as the Maputo Corridor
between Mozambique and South Africa. In the port
and air transport sectors, they are likely to arise through
the development of port and airline hubs in critical
locations to serve not only a single country, but also
its hinterland. Creating air transport hubs could
eliminate the need for costly airport construction in
every country, focusing investment on those hubs
that would carry large volumes of international and
regional traffic. The fact that the Abidjan airport
development cost US$32 million indicates the level
of savings that could be achieved.
Planning for regional infrastructure
It is important to emphasize, however, that the
identification of such opportunities must be, first and
foremost, an economic decision, rather than a political
one. While a political decision will be required for
implementation, the basic investment decision must rest
on the economic rate of return of the project. Such
decisions should not be imposed or centrally planned, in
the absence of an economic rationale. Shared production
facilities must produce identifiable economies of scale;
development corridors or poles must emerge through
competition as a result of the interplay of economic
forces.
The economies of scale that are sought through
regional infrastructure projects can result both from the
physical provision of infrastructure and from the
associated operations and services. Clearly, it is more
efficient to build one large, efficient, low-production
cost power station than several smaller less-efficient,
higher-cost facilities. Pooling resources across countries
also tends to reduce the risk that sub-optimum market
structures and pricing policies will compromise the
achievement of the economies of scale. Multiplying
power generation facilities across countries increases
both the staff and management required to operate them
and associated training costs.
At the operating level, additional savings can also
be achieved. Cross-border rail systems that require a
change of locomotive and crew at each border crossing
38
not only create higher than necessary operating costs—
hence, higher prices for customers. They also
create delays, increased time to market, and reduce
competitiveness.
1.4 ❚ Africa’s Competitiveness and Regional Infrastructure
In terms of infrastructure-associated services, having to
deal with multiple, different national systems with
respect to customs, transit documents, insurance
documents, etcetera, imposes a substantial burden on
producers and manufacturers, especially when they
create opportunities for corruption.
These are only a few examples of the benefits that can be
expected from regional infrastructure projects. In fact,
similar examples could be given for virtually every
infrastructure-related factor of production, and virtually
every service associated with the export/import
business. It is no wonder that Africa’s competitiveness
remains compromised and its penetration of global
markets remains weak. Yet a regional approach could
provide economies of scale, and reduce both the costs of
production and transaction in practically every area.
Where are we now?
In many of these areas, integrated reform agendas have
been designed, often through the regional economic
communities (RECs), such as the Southern African
Development Community (SADC), or the Economic
Community of West African States (ECOWAS).
The NEPAD Infrastructure Short-term Infrastructure
Plan (ISTAP) sets out an impressive agenda of regional
activities in the areas of
❚ Facilitation initiatives — the establishment of the policy,
regulatory and institutional frameworks to create a
suitable environment for investment and efficient
operations;
❚ capacity building — initiatives to empower the
implementing institutions to perform their mandates;
❚ investment — in physical and capital projects;
❚ studies — aimed at preparing future projects.
The Plan even includes the “Top Twenty” Flagship
Projects—considered by the experts who prepared the
plan to be the highest priority regional infrastructure
projects. But the program of investments and policy
reforms is not being carried through to completion at
the pace that is needed.
Taking full advantage of electricity interchange
agreements in Southern and West Africa is hindered by
suspicions at the national level. Attempts to develop
water-sharing agreements on international rivers break
down into bilateral national bickering. Unilateral actions
by Civil Aviation Authorities to protect national airlines
are preventing the increases in efficiency and reductions
in passenger and freight costs that were sought under
the Yamoussoukro Decision. The Southern Africa
Transport Protocol aimed to reduce transaction costs in
the road and rail sectors, but the necessary actions from
national ministries and operators have rarely been
forthcoming. SADC and ECOWAS have failed to
establish freedom of movement for labor and capital.
While progress has been made in some regions on tariff
harmonization, the refusal of certain states to participate
leaves the reform agenda incomplete.
What is the problem?
Why, when the evidence of the potential benefits of
integration and cooperation seems so strong, can nations
not come together to take advantage of them, to increase
their competitiveness and to improve the well being of
their citizens?
To answer this question, it is instructive to look at a
micro example. In a study of Export Processing Zones,
Jenkins et al. (1998) argued that successful entrepreneurs
are those who have the ability to master a number of
skills: production technology, management, labor
relations, access to markets, finance. Not only that, but
the entrepreneur must master them all at once, for
failure in any one domain will lead to failure of the
enterprise as a whole.
Watson (2001) has argued that the same is true for a
country wishing to establish a successful EPZ. The
government must master the creation of a pro-business
environment, the provision of infrastructure and
services, international marketing, investor relations—and
must master them all at the same time. If the argument
applies within the geographical confines of an export
processing zone, then it applies, even more, to the task of
making a whole country competitive. Moreover, the
difficulties associated with the physical provision of
infrastructure are minor, when compared with the task
of harmonizing infrastructure and infrastructure-related
services across a region.
So what is missing is management of the change process
on a broad front. Planners and decision-makers can and
do understand the economic benefits associated with the
integration of infrastructure at a regional level. What
they fail to master is the socio-political process that must
underpin the management of the changes required,
changes that inevitably have social and political
implications, costs and benefits, which are frequently
at odds with the economic costs and benefits.
Consider the debate in the transport sector over whether
the expensive construction of physical infrastructure is
more important than the low-cost removal of operational
and supply chain constraints, i.e. the numerous obstacles
associated with moving goods, especially across borders.
These obstacles include delays at border posts and
customs, incompatible paperwork requirements,
unreasonable demands for local insurance and the all too
frequent “unofficial” barriers and roadblocks that
hamper movement along transport corridors. The
authors of “Can Africa Reclaim the 21st Century” (World
Bank, 2001) argue that Africa needs US$18 billion per
year in infrastructure investment, both to improve
infrastructure services and improve competitiveness, and
to act as a spur to African economies. Others argue that,
while investment in physical infrastructure is needed,
investment alone will not solve the problem—indeed,
that it is not necessarily the highest priority—since
improved physical infrastructure will not have the
desired effect on competitiveness, if African countries do
not recognize and address explicitly the constraints
which have stunted previous initiatives. These include,
inter alia:
❚ extended logistics chains plagued by inefficiency;
❚ over-regulation and corruption;
❚ the lack of popular support for reform;
❚ the complexity of structuring and enforcing multi-
national agreements;
❚ the power of deeply entrenched vested interests;
❚ the complexity of managing public-private, integrated
facilities;
❚ the need for adequate cost recovery to service debts,
maintain the facilities and attract private investors.
The argument cannot be resolved because one side gives
greater weight to economic considerations, while the
other gives greater weight to socio-political
considerations. The conflicts are illustrated in Table 1.
Table 1: Economic versus socio-political
considerations in regional infrastructure
development
Physical Removing
Investments Constraints
Financial Cost High Low
Benefits to Industry Low High
Political Benefits High Low
Impact on Vested Interests Positive Negative
Political Cost Low High
When socio-political benefits and costs are not aligned
with economic benefits and costs, experience shows that
it is probable that the socio-political issues will
predominate, since, more often that not, they conceal the
efforts of highly placed people to protect their rents and
privileges. In fledgling democracies, it is not always easy
for leaders to follow regional approaches, when they
appear to involve giving up sovereignty. After all,
politicians need votes, and cannot do too many things
contrary to the wishes of the people—at least unless
the propaganda of the special interests can be countered
by persuasion and explanation. Even then the potential
for demagoguery is high, and hard to undermine.
What is valid for the transport sector applies equally to
the undertaking of all regionally integrated infrastructure
39
facilities and services. Overcoming the imbalance
requires an organized socio-politico-economic change
management process, involving four critical elements:
vision, consensus, concerted action, and continuity.
1.4 ❚ Africa’s Competitiveness and Regional Infrastructure
 Vision
It seems only too obvious that, in order to develop a
successful regional integration program in any area,
the countries involved must have a clear vision of where
they are going and what they want to do. To do so
across national boundaries raises the degree of difficulty
substantially. It appears easier to realize bilateral
integration projects, than to achieve projects at the level
of a regional economic community, such as ECOWAS
or SADC. Thus it seems fair to conclude that the degree
of difficulty increases exponentially with the number of
countries involved. This goes a long way in explaining
why the regional economic communities have had
limited success in bringing about integration.
In the case of regional infrastructure, the vision must be
clear, resolutely pro-business, export-oriented and aimed
at a well-defined market. Without a vision, there is no
way to rally different stakeholders in different countries
behind a strong drive for results. If different
stakeholders have different ideas about what the
objective is, then efforts will be diffused or, worse, work
against each other.
Consensus
However, vision is not enough. Several African countries
have articulated splendid visions of export-oriented
growth. But without a consensus around the vision,
progress is at best difficult, at worst impossible. If the
private sector is trying to export and the public sector is
focused on import substitution, the enabling policies,
infrastructure and services will not be put in place. If the
Ministry of Transport is building infrastructure in the
wrong places, entrepreneurs will become frustrated and
investors will not come. If the private sector is demanding
job training and apprenticeship schemes, while the
Ministry of Education is focusing on primary education,
an essential element for success will be missing.
Bringing about regionally integrated infrastructure
projects and services requires change across a broad
front. If there is not a solid consensus around the vision,
there is a high risk that critical elements will not be put
in place by one or more of the countries involved, and
the regional program will fail. Of course, failure can also
result from the inability to deal with entrenched
opposition to a program on the part of vested interests
having something to lose, but it should not be forgotten
that failure can just as easily come from the misplaced
good intentions of people doing their best, but not
knowing what objectives they are supposed to be
pursuing.
This is difficult enough when all the actors are from the
same country. When the consensus must be built across
40
countries, it is that much more difficult. Issues of
sovereignty arise, making the allocation of costs and
benefits—the question of who pays and who benefits—
much more complicated. Civil servants from one country
1.4 ❚ Africa’s Competitiveness and Regional Infrastructure
may be suspicious of the motives of their counterparts in
another country. Technicians in one country may not
trust the competence of their counterparts in another
country. All tend to evoke the age-old issue of whether it
is acceptable to put one’s country’s destiny in the hands
of others. Being dependent on a power generation plant
or a port in the next-door country could devastate a
nation’s economy if something goes wrong technically,
politically, or militarily. Given the degree of instability in
Africa today, these are risks that must be given very
serious consideration.
In the case of many regional economic community
initiatives, consensus is reached—or appears to have
been reached—at the level of the heads of state or of the
ministers concerned. Yet this consensus is not
transmitted to those who will have to implement the
changes at the operating levels of the civil services. At
that level, there may be resentment, resistance—even
outright sabotage—if the interests of the civil servants
and other stakeholders are not aligned with the vision
and consensus articulated by their leaders.
It is essential to ensure that all relevant stakeholders in all
the countries concerned know what the vision and
objectives are. Building the consensus can take time,
sometimes years. But every effort should be made to
overcome any opposition to the initiative, to neutralize
vested interests, and to bring into line misguided
supporters, any or all of whom have the potential to
undermine the initiative. It matters little whether people
act out of malice or ignorance. The result is the same,
and the program will fail.
The fundamental point is that moving forward before a
consensus has been achieved is virtually certain to be an
exercise in futility.
Concerted action
It seems axiomatic that to bring about change requires
action, yet many initiatives, both national and regional,
have failed because of inaction with respect to certain
elements of the plan. This can happen because of failures
regarding vision and consensus. It can also happen
because the people concerned do not have the ability,
or the tools, to do what they are supposed to do.
It may happen simply as a result of inertia.
Sometime, inaction stems from a lack of planning,
sometimes from a lack of political will. What is
abundantly clear is that someone needs to be in control
of the program of actions, and that person must have
political support at the highest levels. It is not enough to
assume that decisions taken at a high level will be
communicated to the people who need to act; it is not
enough to assume that they will act; and it is not enough
to assume that the decision-makers will be aware that
critical actions have not taken place. Rigorous planning,
monitoring and follow up are required, so that actions
can be concerted and timely.
Continuity
The final critical element, continuity, ensures that those
responsible for the actions do not undermine or reverse
them. Often, civil servants lose the battle to protect a
vested interest through one mechanism, but immediately
introduce a new mechanism to achieve the same
objective. Civil servants and policy-makers do change,
and it is important that the newcomers do not
undermine an initiative through well-meaning attempts
to revamp policy or programs, or because they have
self-serving reasons to derail the program. Policy advice
from development partners can also vary between
institutions, or among different advisors in the same
institution. It is vital that consistency and continuity be
maintained, unless there is a good reason to change,
which should involve establishing a new consensus
around the change. Ideally, policy-makers and civil
servants should be constantly seeking to improve
policies and programs so that the initiative is continually
strengthened.
Regional infrastructure and NEPAD
One of the key themes underlying regional infrastructure
projects is the importance of political commitment to
having countries work together to solve common
problems, and to creating shared benefits. Therefore,
the creation of the New Partnership for Africa’s
Development (NEPAD) in 2001—with precisely the goal
of generating, supporting and reinforcing such political
commitment—is both appropriate and timing. Created
by the Heads of State of African countries, NEPAD4
recognizes explicitly that Africa’s development is in its
own hands. Reinforced by declarations committing it to
the pursuit of good governance and transparency,
NEPAD has specific objectives for infrastructure:
❚ To improve access to, and to increase the affordability
and reliability of infrastructure services for both firms
and households;
❚ To enhance regional co-operation and trade, through
expanded cross-border development of infrastructure;
❚ To increase financial investments in infrastructure, by
lowering the risks facing private investors, especially
in the area of policy and regulation.
Thus, one of NEPAD’s specific objectives is to provide a
forum, a peer group and a process for beginning to
resolve the issues faced by African decision-makers and
their development partners, in the process of bringing to
fruition regional infrastructure projects. While NEPAD’s
modus operandi has yet to be made explicit, it will not
implement, finance or operate infrastructure facilities.
It intends to act as a confidence builder, risk mitigator,
catalyst, initiator, facilitator, and political leader for
multi-country programs.
Acting as a catalyst, NEPAD could support and
encourage governments, complement the private sector,
and ensure that project development is entrusted to
successful economic operators with regional scope,
adequately supported by donors.
However, a May 2003 update of the NEPAD Short-term
Infrastructure Plan by the African Development Bank
noted a lack of progress on NEPAD regional
infrastructure projects, in the year since the production
of the ISTAP, and signaled the need for greater clarity on
roles, responsibilities and expectations, particularly on
how NEPAD sees its own role in promoting and
facilitating infrastructure programs and what it expects
from the RECs. The review further highlighted the need
to be much more explicit about the relationships
between the RECs and the countries, and how they
interrelate in regional project implementation. The RECS
are urged to establish priority activities, while seeking to
apply the principle of subsidiarity, by delegating
coordination and implementation responsibilities to
either the countries, or to other technical agencies.
If the obstacles to the effective development of regional
infrastructure programs could be eliminated, NEPAD
could play a critical role, by providing leadership to
resolve political issues, bringing leaders together to work
on overcoming these issues, reporting back to heads of
state on progress, and creating constituencies and
alliances within Africa to translate the ideals of regional
cooperation into reality. This could be extremely useful
in supporting the socio-politico-economic change
management process, without which too many regional
infrastructure and integration initiatives will be doomed
to failure.
Notes
1
Dr. Watson is former Director of Infrastructure and Energy for the Africa
Region of the World Bank.
2
Most recently in World Bank. 2001.
3
This includes services associated with the supply chain, such as insurance,
freight-forwarding and documentation, customs, and standards.
4
The New Partnership for Africa’s Development, document adopted by
the African Heads of State, Abuja October 2001.
References
Bloom, D.E., and J.D. Sachs. 1998. “Geography, Demography and
Economic Growth in Africa.” Brookings Papers on Economic Activity 2.
Jenkins, M., G. Esquivel, and F.B. Larraín. 1998. “Export Processing
Zones in Latin America.” Development Discussion Paper 646, Harvard
Institute for International Development. August.
Sparrow, F.T., and W.A. Masters. 1999. “Modelling Electricity Trade in
41
Southern Africa 1999–2000.” West Lafayette, IN: Purdue University.
Watson, P. 2001. “Export Processing Zones: Has Africa Missed the Boat?
Not Yet!” Africa Region Working Paper Series 17. World Bank.
World Bank. 2001.“Can Africa Reclaim the 21st Century.” African
Development Report, Abidjan: African Development Bank, 1999.
1.4 ❚ Africa’s Competitiveness and Regional Infrastructure
 Chapter 1.5
How Should Africa Position Itself
in the International Trading System?

Maria A. Oliva, European Central Bank

Luis A. Rivera-Batiz, Columbia University, McGill University,
and University of Puerto Rico

Introduction down from 2.8 percent in 1990. Trade participation has

This paper focuses on preferential agreements involving
African countries. It examines why preferences granted
to them by the European Union and the United States
have not resulted in greater African trade and growth.
Past experience leads us to believe that Africa’s low rate
of increase in exports and lack of export diversification
cannot be expected to change fundamentally through the
operation of trade preferences alone. Moreover, recent
laws prolonging agricultural subsidization in the United
States and the European Union might hinder the Doha
Round of negotiations. These conditions suggest that
investment, as well as trade policies broadly defined,
must work hand-in-hand with each other to secure a
takeoff leading to both trade and income growth.
Unfortunately, policies for competitive integration into
large global markets are largely inconsistent with both
the current initiatives of developed countries, and the
customs union approach to trade integration, followed
by African countries up to now.
In 2001, the share of developing countries in world
merchandise exports reached 29 percent, up from the 26
percent level that had prevailed since 1995. However, the
bulk of developing country participation in world
merchandise exports is accounted for by only a few
developing countries, including China and Mexico. With
the exception of South Africa, there is no significant
been hindered by the following factors:
❚ insufficient human development;
❚ insufficient physical capital and technological
development;
❚ poor physical infrastructure, in particular transportation,
❚ dependence on commodity prices, which, except for oil,
have been falling in recent years.
Regional and other forms of trade associations constitute
one mechanism to promote trade. Indeed, the so-called
New Regionalism, coinciding with the closure of the
Uruguay Round, has given rise to a flurry of activity. With
over 170 arrangements in place in 2002, developed and
developing countries are moving beyond the rules and
commitments reached in the multilateral negotiations
agreement, seeking to increase the role of trade and foreign
investment. African countries are and have been very
active in the trade partnership field. The Southern African
Customs Union (SACU), in place since 1910, is the oldest
operating customs union in the world. There are many
other regional arrangements, including, for example, the
West African Economic and Monetary Union, as well as
partnerships between African and developed countries.
Preferential trading arrangements among African countries
have not generally led to greater trade among themselves.
This may have resulted form a combination of factors, such
as, small markets, similar comparative advantages such as
43

African participation in world trade. Africa’s share of oil, certain agricultures and low-tech labor intensive
total world merchandise exports in 2001 was only 2.4 products (see Yeats, 1998), geographic isolation, and weak
percent, down from 3.1 percent in 1990. Africa’s share in transportation infrastructures (see Foroutan and Pritchett,
world merchandise imports was only 2.2 percent in 2001, 1993 and Limão and Venables, 2001).

1.5 ❚ How Should Africa Position Itself in the International Trading System?
 In the face of such long-standing obstacles, the intra-
regional trade strategy is likely to remain unsuccessful for
the foreseeable future. In the short and medium term,
African countries could consider alternative forms of
inserting themselves into the world trading system,
including participating in preferential arrangements with
the European Union and the United States, and exploiting
one-way U.S. and EU trade preferences. This promise,
however, has not yet been fulfilled. Access to large
markets, characterized by well-developed trade
infrastructures, facilitates reaping the full benefits from
international trade. However, greater integration will
require negotiations aimed at eliminating some of the key
factors currently preventing full exploitation of
preferences granted by large trading groups.
Trade strategies to support participation in world markets
need not be based on preferences, which have both trade
creation, as well as trade diversion effects. Ozden and
Reinhard (2002) provide evidence indicating that trade
preferences have delayed trade opening in developing
countries. In fact, countries that have stopped benefiting
from the United States’ Generalized System of Preferences
(GSP) have tended to reduce barriers to trade and have
liberalised their economies.
Alternative strategies include multilateral trade
liberalization for specific products of particular interest,
and unilateral trade liberalization. Trade preferences in
the form of customs unions, which characterize the goals
of intra-African trade agreements, conflict with these
alternatives. In fact, countries that share an external tariff
common to the customs union cannot pursue the option
of unilateral liberalization, and are limited as regards
multilateral liberalization moves. Other strategies for
opening trade include the active promotion of clusters,
formulation of policies to attract foreign direct investment
(FDI), the creation conditions for the successful transfer of
technology, generation of competitive advantage, and
export diversification. These strategies would help to
expand manufacturing and enhance services, thus
lessening the adverse effects of the agricultural policies of
the developed countries, which spend some US$250
billion, annually, to subsidize their farmers. The effects of
these enormous subsidies—which are as large as the total
GDP of the largest preferential agreement in sub-Saharan
Africa—damage the competitive position of the largely
agricultural African economies. Moreover, in 2002, the
United States passed a farm bill promising to spend about
$180 billion in subsidies over ten years, while France and
Germany agreed to extend the Common Agricultural
Policy (CAP) until 2013. These initiatives could derail the
objective of supporting poor country development, the
main goal of the Doha Round of multilateral trade
liberalization, launched in 2001.
Africa’s challenges in the
international arena
A number of international initiatives have reinvigorated
trade relations among African countries, as well as those
obtaining between them and their main trading partners,
the European Union and the United States. As part of this
strengthened partnership, many developing countries,
particularly in sub-Saharan Africa, have benefited from
unilateral preferential arrangements established by the
United States and the European Union.
The record
Despite the proliferation of preferential agreements
between and among African countries, trade among them
is still very low, although higher than it was in the 1980s.
The value of intra-regional trade has increased from $3
billion in 1980 to US$6 billion in 1997, and $11 billion in
2001. The intra-regional share of total trade has increased
from 3 percent in 1980 to 7.8 percent in 2001. However,
the share of intra-regional trade flows in world
merchandise exports in 2001 was a mere 0.2 percent.
Table 1 shows the sharp contrast between the intra-
regional trade shares of the Middle East and sub-Saharan
Africa and those of other developing and developed
regions. Yes, they are different. The intra-regional trade
shares of Latin America and Eastern Europe are 17 and
26.6 percent, respectively. Over two thirds of Western
Europe’s merchandise trade takes place among EU
members. The major non-EU trading partners are the
United States and Asia, ranked in that order. The bulk of
US merchandise trade is also intra-regional, largely intra-
NAFTA, followed by trade with Asia and the European
Union, in that order.

Table 1: Intra- and inter-regional merchandise trade in Africa (in percent)

From/To North Latin Western C./E. Africa Middle Asia World

America America Europe Europe/Baltic East
States/CIS
North America 39.5 16.5 19.0 0.7 1.3 2.1 20.9 100.0
Latin America 60.8 17.0 12.1 0.9 1.2 1.2 6.3 100.0
Western Europe 10.3 2.3 67.5 5.9 2.5 2.6 7.8 100.0
C./E. Europe/Baltic States/CIS 4.2 2.1 55.2 26.6 1.0 2.8 6.6 100.0
44

Africa 17.7 3.5 51.8 0.7 7.8 2.1 14.9 100.0

Middle East 16.5 1.3 16.5 0.8 3.8 7.6 47.3 100.0
Asia 25.1 2.7 16.8 1.1 1.6 3.0 48.2 100.0
World 21.9 5.6 40.6 4.2 2.1 2.7 21.7 100.0
Source: Adapted from WTO, 2003

1.5 ❚ How Should Africa Position Itself in the International Trading System?
New preferences, granted by developed countries, could
have a substantial impact on Africa, which exports
mainly to developed countries. Western Europe and the
United States account for 52 and 18 percent of Africa’s
total merchandise trade, respectively. Thus, the relative
importance of the major developed countries in trade
with African countries cannot be underestimated. Over
60 percent of sub-Saharan exports go to the European
Union, the United States, or Japan. Sub-Saharan African
imports from developed countries accounted for over 40
percent of their total imports in 2002.
The European Union clearly dominates trade relations
with sub-Saharan countries. More than 30 percent of the
region’s exports and imports involve an EU member
country. The United States is the second major trading
partner, in terms of both exports and imports. Over 22
percent of the region’s exports go to the United States,
although imports to Sub-Saharan Africa from the United
States are lower than those from France, which has
developed a strong base in the region.
Trade relations between the United States and sub-
Saharan Africa remain volatile. Two-way trade between
African countries and the US dropped substantially in
2002. US exports to sub-Saharan Africa declined faster
than their imports from the region.
Trade flows between the US and sub-Saharan Africa are
concentrated in a few countries, with the bulk of US
imports from the region coming from either South Africa
or Nigeria.
Identifying bottlenecks
In view of the above, it is clear that one of the most
effective ways to expand trade is to strengthen Africa’s
relations with developed countries. However, as was
pointed out earlier, this will involve dealing with a
number of counterproductive elements that partially
nullify existing preferences granted to African countries:
low efficiency in the provision of services by African
governments, weak infrastructure for commerce, and
social capital bottlenecks, including attitudinal factors,
such as the lack of market-orientation, and negative
attitudes toward foreign investment.
The long-standing Generalized System of Preferences
(GSP) exempts developing countries from the Most-
Favoured-Nation principle, which requires non-
discrimination among WTO members. Developing
countries could benefit from a third arrangement,
without offering reciprocity to other WTO members, i.e.
from lower barriers to trade, in the form of lower tariffs
and larger quotas for certain products.
Two major recent initiatives address the continuing
marginalization of African economies. The first, called
the Everything But Arms (EBA) trade preferences
initiative, introduced by the European Union in 2000,
grants duty-free access to the world’s 48 least-developed
countries. In practice, it applies to agricultural products,
for which the least-developed African countries lack
1.5 ❚ How Should Africa Position Itself in the International Trading System?
comparative advantages. However, it is unlikely to affect
them to any great extent, except in the case of certain
grain products and beef.
The second, the African Growth and Opportunity Act
(AGOA), passed in 2000, represents an eight-year
commitment by the United States for major unilateral
trade preferences favouring countries engaged in pro-
market reforms. As of 31 December 2002, 38 sub-Saharan
countries were favoured. The impact of AGOA differs
across the sectors covered by the program. The AGOA
program has expanded textile exports, but has not
affected the share of machinery imports to the US.
Moreover, AGOA’s preferences are contingent upon a)
cost-increasing factors such as the purchase of fabrics
and other inports from the US, and b) an annual US
determination of progress in implementing labor
standards, among others.
Export diversification has remained an elusive goal
in sub-Saharan Africa. Neither intra-regional nor
inter-regional preferences have been able to support
export diversification. Most countries remain dependent
on the good and bad fortunes of the terms of trade
of one or a few export products. Moreover, the
predominance of agricultural production makes the
economy vulnerable to natural factors such as drought,
which affects a large part of the continent, creating
severe food shortages.
Several key factors concerning trade and investment
marginalization of Africa constitute internally set
high barriers to trade, which cannot be addressed by
preferences alone. Paul Collier (1998) stresses the
productive role of social capital, meaning the norms,
values, social interactions, cultural coherence,
and institutions that hold together the politico-economic
system. Lack of trust, leading to high transaction costs,
may be viewed as one of these social capital barriers
to economic interaction. Other social capital barriers to
regional and world market integration include:
limited education, inadequate public governance
roadblocks and other extra-legal barriers which
have negatively affected trade, foreign investment,
and therefore growth,
Sub-Saharan African countries have made dramatic
progress in boosting enrolment and school retention
rates (World Bank, 2001). Between 1960 and 1995, on
average, sub-Saharan Africa’s gross enrolment rates at
the primary level doubled from 40 to about 80 percent.
Secondary level enrolment rates also surged during the
same period, from 3.4 to 27 percent. Gender disparities
are also shrinking: between 1960 and 1995, the enrolment
rates for girls in Uganda and Malawi doubled, while
Guinea experienced a 12 percent annual increase. Much
45
work still remains to be done. The average duration of
formal schooling for adults is only 0.8 years in Mali and
Niger, and 1.1 years in Mozambique and Ethiopia. Only
21 out of 43 sub-Saharan countries are expected to reach
the 2015 target of 100 percent primary school enrolment.
 Figure 1: Corruption perception indexes for African countries (2000-2002)

7
Global
6 average

5
Regional
4 average 2000
Score

2001
3 2002

0
Botswana

Namibia

South Africa

Tunisia

Mauritius

Ghana

Ethiopia

Senegal

Malawi

Tanzania

Côte d'Ivoire

Zimbabwe

Burkina Faso
Zambia

Cameroon

Uganda

Kenya

Madagascar

Angola

Nigeria

Mozambique
Country

Source: Transparency International, 2000-2002

Another major trade-related social capital bottleneck has potential. In 2001, the share of Africa in world FDI
to do with widespread corruption, which raises the inflows was a mere 2 percent—up from 1 percent in
transaction costs of trade, encourages rent-seeking 2000—as recorded by the 2002 UNCTAD World
protectionism, and often involves the private Investment Report. The lion’s share of these investments
appropriation of fiscal revenues from trade taxes. Figure corresponded to the primary sector, accounting for over
1 shows the corruption perception indexes for African fifty percent of the total. Thus, the transfer of technology
countries during 2000-2002, a score of 10 indicating the has been reduced to a trickle and many potential trade
lowest level of corruption, and 0 the highest; in 2002, linkages remain unexploited.
only four out of the 21 African economies considered
were ranked above the average world standard (i.e. were
less corrupt than the average). Botswana is classified as The drive for preferential
the least corrupt country in Africa, and Nigeria the most arrangements: no trade, no growth
corrupt—indeed, the second most corrupt country in the
A major force behind the drive for self-reliance by means
worldwide sample. Nigeria’s abundant oil resources and
of intra-African preferential arrangements has to do with
related trade have promoted a rent-seeking society
the trade experience. African countries’ average trade-to-
characterized by monopoly of the benefits from oil
GDP ratio is close to 50 percent, close to the world
revenues, ethnic conflict over who should get the
average. Because the majority of imports are fuel and
resources, regional attempts to gain independence and
unprocessed primary sector products the trade-to-GDP is
secure a share of the oil resources, and widespread
low for trade in manufactured goods. As a result, trade
poverty.
has not generated technological change or learning-by-
The negative social and developmental impact of doing and has not been growth-promoting (Rivera-Batiz
widespread corruption is substantial. Research and Oliva, 2003). African countries are not competitive,
conducted at the African Development Bank suggests and have fallen into the static comparative advantage
that corruption could cost African governments up to 50 trap, failing to acquire the dynamic advantages stressed
percent in lost tax revenues. It also doubles the cost of by Grossman and Helpman (1991), Porter (1990), and
goods and services provided by the government, lowers Romer (1990).
their quality, and restricts their accessibility to the poor.
Given this experience, it is not surprising that trade and
The attitude toward both non-local entrepreneurs and investment strategies have stressed alternatives to trade
foreign investors is relatively tolerant in the region. In with the major developed countries. During the past
46

some places, however, the effects of within- and cross- decades, African authorities have actively sought
country ethnic strife and of nationalistic attitudes toward regional integration through preferential trading
foreign investors have been detrimental. This has arrangements, with over forty such agreements having
contributed to a reduction in FDI to well below its been signed at the intra- and inter-regional level.

1.5 ❚ How Should Africa Position Itself in the International Trading System?
Sub-Saharan Africa
At the intra-regional level, the race to form preferential
arrangements has created an overlapping structure of
economically small regional integration groups, each
having different and often contradictory rules. Olarreaga
and de la Rocha (2003) examined some of the resulting
coordination difficulties and contradictions plaguing
countries which belong, simultaneously, to more than
one customs union. Moreover, these customs unions and
common market arrangements, more often than not,
make reference to goals rather than realities. In practice,
members are moving in irregular steps toward stated
goals, beginning with the gradual establishment of free
trade areas. This uncertain environment defies the
attempt to promote true regional integration, coupled
with trade liberalization.
Tables 2 and 3 show the members of the major intra-
regional preferential arrangements involving African
countries. Several facts are salient: the arrangements
cover small markets; they substantially overlap in terms
of membership; all the groups have been operating for
decades, thus providing a record of their impact on trade.

Table 2: Regional integration within Africa

Organization Year of Formation Members

COMESA (Customs Union) 1981, 1994* Angola, Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt (since 1998), Eritrea,
Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda,
Seychelles, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe
EAC (Uncertain) 1967-77, 1996, 1999** Kenya, Tanzania, Uganda
ECCAS (Uncertain) 1983** Angola, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo,
Equatorial Guinea, Gabon, Republic of Congo, Rwanda, Sao Tomé and Principe
CEPGL (Uncertain) 1976 Burundi, Democratic Republic of Congo, Rwanda
UDEAC/CEMAC (Customs Union) 1964/1999**** (CEMAC) Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, Republic of Congo,
Benin, Côte d'Ivoire, Guinea-Bissau, Mali, Burkina Faso, Niger, Senegal, Togo
ECOWAS (Customs Union) 1975 Benin, Burkina Faso, Cape Verde, Côte d'Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia,
Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leona, Togo
UEMOA (Monetary and Economic Union ) 1994***** Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo
Entente Arrangement 1959 Benin, Burkina Faso, Côte d'Ivoire, Niger, Togo
IOC (Arrangement) 1982 Comoros, France (for Réunion), Madagascar, Mauritius, Seychelles
SADC****** (Customs Union) 1980 Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique,
Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe
SACU (Customs Union) 1969 Botswana, Lesotho, Namibia, South Africa, Swaziland
UMA (Arrangement to achieve Common Market) 1989 Algeria, Libya, Mauritania, Morocco, Tunisia

* In 1994, COMESA replaced the Preferential Trade Area for Eastern and Southern Africa (PTA), created in 1981.
** Originally, the East African Community. Disbanded in 1977, a year before Tanzania and Uganda entered into war. Renamed East African
Cooperation on 1996 and East African Community in 1999, when members agreed to re-establish a customs union within 4 years.
*** Largely inactive since 1991 due to finances and wars in Angola, Burundi, Central African Republic, Chad, Republic of Congo, the Democratic
Republic of the Congo and Rwanda.
**** UDEAC is a customs union since 1966, except for agricultural products. CEMAC (Economic and Monetary Community of Central Africa),
created in 1994, replaced UDEAC in 1999.
***** CEAO, the predecessor of UEMOA, was created in 1974 and dissolved in January 1994.
****** Former SADCC, created in 1980. This customs union can be traced back to 1910.

Table 3: Total exports by block (percent of world exports)

Trading Block 1970 1980 1985 1990 1995 1996 1997 1998 1999 2000
CEMAC 0.16 0.25 0.24 0.18 0.11 0.14 0.14 0.12 0.13 0.17
CEPGL 0.28 0.09 0.06 0.05 0.03 0.03 0.03 0.02 0.02 0.02
COMESA 1.61 0.56 0.53 0.43 0.35 0.38 0.35 0.32 0.32 0.40
Cross Border Initiative 0.80 0.28 0.23 0.18 0.17 0.18 0.16 0.15 0.14 0.14
ECCAS 0.60 0.34 0.42 0.34 0.21 0.25 0.24 0.21 0.23 0.30
ECOWAS 1.06 0.37 1.05 0.58 0.42 0.51 0.47 0.42 0.39 0.48
Indian Ocean Commission 0.08 0.05 0.04 0.05 0.04 0.04 0.03 0.04 0.03 0.04
MRU 0.14 0.04 0.06 0.08 0.03 0.03 0.03 0.03 0.02 0.02
SADC 2.15 1.65 1.18 1.01 0.76 0.79 0.78 0.69 0.63 0.57
UDEAC 0.16 0.25 0.24 0.18 0.11 0.14 0.14 0.12 0.13 0.17
UEMOA 0.28 0.26 0.24 0.14 0.11 0.13 0.11 0.13 0.11 0.09

Others
APEC 36.0 33.7 38.9 39.0 46.3 46.0 47.2 46.1 46.6 48.5
EU 45.6 41.0 37.8 44.0 39.8 39.2 38.0 39.9 39.2 35.9
NAFTA 21.7 16.6 17.4 16.2 16.8 17.4 18.3 18.7 18.8 19.1
47

Mercosur 1.7 1.6 1.9 1.4 1.4 1.4 1.5 1.5 1.3 1.4
ASEAN 2.3 3.9 3.9 4.3 6.4 6.5 6.5 6.1 6.4 6.6
GCC 1.9 8.5 3.4 2.5 2.0 2.2 2.3 1.7 1.9 2.6

Note that the percentages are not required to add up to 100 since the same country can be member of different agreements.
Source: World Development Indicators, 2002

1.5 ❚ How Should Africa Position Itself in the International Trading System?
 The groups are also relatively small economically, French-speaking countries in West Africa are members
as measured by GDP. The two largest groups are the of both the West African Economic and Monetary Union
Common Market for Eastern and Southern Africa (WAEMU) and ECOWAS. Only a few countries belong
(COMESA) and the South African Development to only one group agreement. Ghana and Nigeria,
Community (SADC), which joins the Democratic for example, are members of ECOWAS only.
Republic of the Congo with all the countries What have these multiple overlapping preferential
in the southern part of the continent. In 2001, the GDP arrangements accomplished in terms of trade? As
of these two regions (in 1990 US dollars) was US$272 regards total trade, neither intra-African preferential
billion and US$219, respectively. The GDP of the arrangements nor those with developed countries have
Economic Community of West African States not promoted/enabled an expansion of total trade
(ECOWAS), which unites the sub-Saharan West African relative to GDP.
countries, was US$60 billion—less than half the GNP
of Belgium, a country of 10 million people.
The small market syndrome, the result of slow Figure 2 depicts the relation between the GDP of
growth experience in past decades, is a great
countries involved in preferential arrangements
disadvantage for preferential arrangements, and
and the aggregate trade to GDP ratio of these countries.
generates a vicious cycle. Small markets limit
Focusing on the largest groups, this ratio is 70 percent
the exploitation of scale economies, reduce the
diversity of available products, and make it for SADC, 60 percent for ECOWAS, less than 60 percent
difficult to support specialized skills. for COMESA, and 20 percent for Economic Community
These factors, in turn, limit market expansion. of the Great Lakes Countries (CEPGL)1. These figures
are modest by world standards and leave ample
As was pointed out earlier, most African countries space for greater expansion of trade. By way of
belong simultaneously to several preferential
comparison, the total trade to GDP ratio of Belgium
arrangement groupings; for example, Angola, Benin,
was 149 percent in 1999 and 173 percent in 2000.
Ivory Coast, the Democratic Republic of Congo, and
Kenya belong to three different arrangements. Tanzania, As regards intra-bloc trade, the preferential
which has withdrawn from COMESA, currently belongs arrangements have not been able to promote trade
to both the East African Community (EAC) and SADC, within the blocs. In fact, it is striking that in most
although most of the countries in SADC also belong to arrangements trade has actually declined relative to
COMESA. Senegal, Côte d’Ivoire and several other total member exports.

Figure 2: Major intra-regional African groups (trade as a percent of GDP to GDP)

100
90 CEMAC SADC
Trade as a percent of GDP

80 IOC ECCAS
UDEAC ECOWAS COMESA
70 CBI
60
UEMOA
50
MRU
40
30 CEPGL
20
10

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

GDP (PPP, current international US$, in millions)

Source: World Development Indicators, 2002

Table 4: Share of intra-arrangement trade in its total trade

Arrangement Year of Creation GDP (PPP, in millions) 1970 1980 1990 1994
COMESA 1981 20,000 9.6* 12.1* 7.5 7.7
ECCAS 1983 13,000 2.4* 1.5* 2.1 2.4
ECOWAS 1975 17,000 3.0* 10.2* 7.9 10.7
48

SADC* 1980 45,000 2.6* 6.5* 2.6 8

COMESA (Common Market for Eastern and Southern Africa), ECCAS (Economic Community of Central African States), ECOWAS (Economic Community
of West African States), SADC (Southern African Development Community).
* Figures correspond to the pre-arrangement trade among the countries that participate in the arrangement (signed at a posterior date) relative to their total trade.
Source: UNCTAD

1.5 ❚ How Should Africa Position Itself in the International Trading System?
Table 4 shows total exports and the intra-group exports
of the preferential trade arrangements (PTAs) for
several decades. In general, intra-block trade, as a
percentage of countries’ exports, is equal to, or even
lower than, that which existed before the arrangements
were formed. The only block showing significant intra-
block trade expansion is WEAMU, in which current
members expanded trade among themselves from 6
percent of total bloc exports in 1970, to 15 percent in
2000. By contrast, trade among the members of
ECOWAS, founded in 1975, represented 10.1 percent of
total ECOWAS exports in 1980, and 10.8 percent in
2002. The countries in the Economic and Monetary
Community of Central Africa (CEMAC), the Economic
Community for Central Africa States (ECCAs), and
Central African Customs and Economic Union
(UDEAC), and COMESA, were trading more among
themselves in 1970 than in the new millennium.
Based on this evidence, we may safely say that
preferential arrangements have not been successful in
promoting trade within the region, or in stimulating
export diversification. On the contrary, the data on
African preferential trading arrangements show that,
in general, they have not promoted total trade—not
even trade among countries in the region. Moreover,
countries’ commodity trade dependence ranges from
40 percent to almost 100 percent of total exports. This
dependence has remained a constant feature for
decades, and is often even greater than it was before
independence from colonial masters. The experience of
sub-Saharan countries supports the notion that trade
and growth are positively associated. With several
significant exceptions, the growth experience of
African countries has not fundamentally improved in
decades. Growth rates have remained stagnant or
negative, while trade in value-added goods has not
taken off. This experience raises the still unsettled
chicken-and-egg question about the extent to which the
positive trade-growth association reflects the effects of
trade on growth (see Sachs and Warner, 1997) or, vice
versa, the effects of growth on trade (see Rodrik, 1999).
North Africa
Because of their common language and historic
linkages, the North African countries are often
classified together with those of the Middle East,
However, North Africa is more closely linked to the
European Union than to the rest of Africa or the
Middle East. The short distance to European markets
suggests that North African and European countries
are natural trading partners. Moreover, the scarcity of
water, coupled with the European commercial magnet,
has resulted in most of the North African population
living near the Nile banks or in valleys close to the
Mediterranean and the Atlantic (Morocco). About 95
percent of Egypt’s population lives within 12 miles of
the banks of the Nile River. Virtually 90 percent of the
population of Algeria, Libya, Morocco, and Tunisia
lives within 200 miles of the coast. The nearness of
1.5 ❚ How Should Africa Position Itself in the International Trading System?
North African population clusters to European
markets, which are often closer than other North
African markets, suggests that Europe is a more
natural trading partner than their North African
neighbours.
Are African PTAs natural
regional blocs?
Except for the successful gradual integration of the
islands in the Indian Ocean Commission (Comoros,
Madagascar, Mauritius, Seychelles and Réunion), sub-
Saharan countries do not appear to constitute natural
regional trading blocs. Members of preferential trading
arrangements not only remain separated by large
distances and weak transportation infrastructures, but
are characterized by a thousand languages for only 500
million people, long-standing ethnic and political
animosities, and other factors. Economic growth has
faltered for so long, that the average country is currently
as poor as it was before the independence wave of the
1960s, in some cases even poorer.
The lack of diversification of Africa’s exports limits its
growth through trade within the continent. Moreover,
primary products, susceptible to exchange, are similar,
which limits potential gains from trade.
Africa’s existing structures of comparative advantage are
not improved by preferential arrangements. The
overwhelming majority of exports consist of
commodities. Most of the population is engaged in
agriculture, often subsistence farming and herding, both
of which are subject to droughts in the dry climates.
However, Southern Africa and coastal regions are
amenable to export agriculture. Exploitable
manufacturing niches have not emerged yet—with the
exception of textiles (in Egypt, Tunisia, and Mauritius),
where the Chinese competition is intense—and a few
sectors such as non-electronic office, accounting and
computing machinery (for countries in SACU and
Senegal), and chemicals (in Morocco, Tunisia, Kenya,
Guinea, and Senegal).
Trade in product varieties and specialized inputs and
services provide greater choice to consumers, greater
input availability to producers, and permit the
exploitation of economies of scale. However, trade in
manufactures has not yet taken off. Instead, most African
countries export unprocessed agricultural products,
minerals, and refined petroleum. They have not
developed competitive advantages in dynamic sectors
that could produce technological change and support
growth. In many cases, the export of manufactured
49
goods represents a single digit percentage of total trade.
This helps to explain why regional trade between East
and West Africa, and trade between North and East
Africa, is close to zero.
 Table 5: Railroad miles in Sub-Saharan Africa
Railroad Miles Countries
0 Gambia, Guinea Bissau, Niger, Central African Republic, Chad, Equatorial Guinea, Burundi, Rwanda, Somalia, Lesotho
1-499 Benin, Burkina Faso, Côte d'Ivoire, Liberia, Mali, Mauritania, Sierra Leone, Togo, Congo, Gabon, Djibouti, Eritrea, Ethiopia,
Lesotho (1.6), Malawi, Swaziland
500-999 Ghana, Guinea, Senegal, Cameroon, Uganda, Botswana
1,000-3,000 Nigeria, Kenya, Angola, Mozambique, Namibia, Zambia, Zimbabwe
3,000-4,000 Democratic Republic of the Congo, Sudan, Tanzania
4,000- South Africa (13,000)
Source: Ramsay, F. Jeffress (1999), Global Studies: Africa 8th edition, Guilford, Connecticut: Dushkin/Mc-Graw-Hill.
Historically, in the sub-Saharan region, economic activities
and political power have been concentrated in the interior
of many countries rather than on the coasts. The
combination of a high concentration of the population in
the interior and the isolation of the interior from the coastal
areas represents a formidable barrier to all trade, whether
local, interregional, or international. The inland
transportation network, developed to secure access to
mineral resources, was not matched by an extensive inland
network. This condition promotes continued dependence
on mineral resources and inhibits manufacturing. The sub-
Saharan region has abundant water resources, but river
transport does not generally connect the coast and the
interior. Most rivers are only partly navigable. Falls, rapids
and irregularities along their paths have meant that only
the Niger River has been developed as a long navigable
path connecting the inland to the coast.
International trade is often favoured over interregional,
because of the high costs of transportation. Trade across the
vast regions of the African continent is both hazardous and
costly, and is hindered by geography and inadequate
means of interregional transportation—factors equally
relevant to other large regions of the world, such as China,
India, the United States, Europe and Argentina. In general,
the interior and coastal areas are not well connected by
roads and rail transportation, little enhanced by the
inadequate transportation infrastructure inherited from the
colonial past. Intra- and interregional trade is also hindered
by natural barriers such as the Great Escarpment in the
Drakenberg region of South Africa and the Sahara desert
region, where 25 percent of African people live, despite the
arduous living conditions. These formidable impediments,
at least in part, explain why the population has clustered
near the coasts and targeted European markets.
Transportation limitations within Africa are daunting. Even
the railroad, virtually ubiquitous in other parts of the
world, has yet to reach most of Africa. The number of
highway miles is quite small relative to the size of the
countries, and air transportation is scarce and costly. Table
5 describes the distribution of railroad miles in Sub-
Saharan Africa. The number of railroad miles is less than
500 in 25 out of the 43 countries in the sample.
50
The condition of roads, ports, and railways has actually
deteriorated in many countries over the past two decades.
This is the result of continuing economic stagnation,
strained government finances, inefficient state operation of
the transportation system, and violent conflict.
1.5 ❚ How Should Africa Position Itself in the International Trading System?
Table 6: Delays in customs
clearing in ports
Region Average number of days
North America 3.5
Western Europe 4.0
North Africa 5.5
East Asia and the Pacific 5.6
Latin America and the Caribbean 7.1
West Africa 11.7
East and South Africa 12.0
Source: World Development Indicators (2001).
Table 6 presents data on customs delays in ports. Such
delays in western, eastern and southern Africa are the
longest in the world. Moreover, fourteen countries in sub-
Saharan Africa are landlocked; Burkina Faso, Mali, Niger,
Chad, Central African Republic, Uganda, Zambia, Malawi,
Rwanda, Burundi, Botswana, Zimbabwe, Lesotho, and
Swaziland. The area covered by these landlocked countries
is enormous and this factor, coupled with poor
transportation and communications infrastructure, has
been found (by Limão and Venables, 2001) to seriously
inhibit international trade.
The cost of providing access to the coast is exorbitant. For
example, theover 1,000-kilometer pipeline providing Chad
with access to the Kribi port in Cameroon will require an
estimated investment of US$4.5 billion (including wells).
The Chad-Cameroon Oil Pipeline Project will be the largest
single foreign investment in Africa. It promises large gains
while at the same time raising environmental risks and the
possibility of a Nigeria-like corruption effect.
One particular factor found to be associated with close
trade relations is the presence of a common language and
culture. Despite the fact that French, English and Swahili,
provide some commonality in large parts of Africa, this
element is not present among African countries, which do
not share a common language, culture, or ethnicity. In fact,
linguistic and ethnic diversity is so great that there are
large segments of the population within one country which
have difficulty communicating amongst themselves. This
condition predates colonial rule, which, was unable or
unwilling to establish a solid national space with a
common language for all citizens. Different colonial
heritages have led to French-, English-, Spanish-,
Portuguese-, Dutch-, and Arab-speaking regions, with
minimal commonality at the sub-regional level.
To sum up: an intra-regional trade strategy of joining small
markets with similar comparative advantages in uncertain,
often mutually contradictory arrangements, which do not
constitute natural trading regions, will probably remain
unsuccessful for the foreseeable future.
Next, we explore the possibilities offered by arrangements
with developed countries.
North Africa
Several studies have examined the prospects of regional
integration among North Africa and Middle East (MENA)
countries. The comparative advantages are similar,
favouring exports of mineral fuels, labour-intensive
manufactures (POSSIBLE TO SPECIFY?) and imports of
capital-intensive and technology-intensive manufactures.
This pattern of comparative advantages is suited to trade
with the European Union, but not intra-regional
preferential arrangements.
North-South trade agreements: The
EU-Africa trade arrangements
African trade with the European Union and the United
States accounts for the bulk of trade exchanges. Coe and
Hoffmaister (1998) conclude that bilateral trade between
sub-Saharan countries and industrial countries in the 1990s
can be explained by gravity models. They find that it is not
unusually low, after controlling for the variables included
in the gravity benchmark, which stresses the role of size
and geography. The dynamic analysis done by
Subramanian and Tamirisa (2003) for 1980, 1990 and 2000
finds evidence that Anglophone, but not Francophone
Africa, is reversing a disintegration trend in trade with
countries having advanced economies. Thus, measures
taken by developed countries to ease trade relations with
Africa could have a large impact on Africa’s performance
while entailing few costs for the developed countries.
The European Union and its web of
arrangements
The European Union is the most important participant in
preferential agreements falling under the scope of the
WTO. Before 1990, the European Union participated in half
of 32 preferential arrangements. With the proliferation of
PTAs in the nineties, the EU participation increased in
absolute terms, while declining, relatively, to about 65
arrangements out of over 170 in 2002. As pointed out in
Sapir (1998), the European Union grants Most-Favoured-
Nation status to only six countries: Australia, Canada,
Japan, New Zealand, Taiwan, and the U.S. Other countries
are subject to some type of preferential treatment.
The European Union maintains a complex, in some cases
overlapping, web of agreements with African countries (see
Box 1). North African countries participate in two long-
standing arrangements: the Mediterranean Partnerships
(Egypt, Morocco, Algeria, and Tunisia) and the Free Trade
Areas, called the Euro-Mediterranean Association
arrangement (EMA), with Tunisia and Morocco.
1.5 ❚ How Should Africa Position Itself in the International Trading System?
Box 1: The European Union and its Web
of Arrangements
The European Union maintains a complex, and in cases
overlapping, web of agreements with African countries
The Mediterranean Partnerships are the 1976
bilateral partnerships with Morocco, Algeria, and
Tunisia, and a 1977 agreement with Egypt, which in
2010 will become a net of bilateral free trade areas
comprising a $5 billion EU assistance package.
Free Trade Areas, known as the Euro-Mediterranean
Association Arrangement (EMA) with Tunisia and
Morocco. Other countries concerned, but still in the
negotiation process, include other Maghreb and
Mashrak countries (Algeria, Egypt, Jordan, Lebanon,
the Palestinian Authority, Syria, and Israel). This
arrangement is part of the "Global Mediterranean
Policy" initiated by the European Union to harmonize
the various, already operating, bilateral agreements of
the 1970s. This partnership was agreed to in 1994, and
goes beyond economic and financial cooperation to
include political and security aspects as well as social
and human matters. The final economic goal is the
establishment of bilateral free trade areas between the
European Union and the countries considered by the
year 2010.
The Africa, Caribbean and Pacific (ACP)
Preferences are unilateral trade preferences granted to
47 sub-Saharan African countries and others. The
Cotonou Agreement, which replaces the Lomé
Convention, is both a trade agreement and a
development program. By 2008, these one-way
preferential arrangements will be replaced by a system
of reciprocal preferences similar to the bilateral
Mediterranean partnerships. Preferential treatment on
sugar, bananas, beef and veal will stay, though with
some changes.
Generalised System of Preferences (GSP) exempt
developing countries from the Most Favoured National
principle (requiring non-discrimination among WTO
members), so that developing countries can benefit
from lower barriers to trade (in the form of lower
tariffs for certain products, larger quotas for others)
than other WTO members. The EU grants free access to
about 3300 non-sensitive products and preferential
tariff reductions to flat rates of 3.5 percent to about
3700 sensitive products out of a total of 7,000 products
subject to positive duties. Textiles, clothing, footwear
(sensitive products subject to high tariff rates) are
subjected to 20 percent preference margin. In general,
however, agriculture products covered under the
Common Agriculture Policy (CAP) are excluded from
51
the Agreement. Since 2001, however, the least
developed countries (49 countries including 33 sub-
Saharan economies) are guaranteed quota-free access
to the EU.
 Sub-Saharan countries benefit from the Africa, Caribbean
and Pacific (ACP) unilateral trade preferences (benefiting
47 sub-Saharan countries) and the Generalized System of
Preferences (GSP). The Cotonou Agreement, which was
signed in 2000 and replaced the Lomé Convention as the
basis for the economic partnership between the ACP and
the EU, is both a trade agreement and a development
program. By 2008, these one-way preferential
arrangements will be replaced by a system of reciprocal
preferences similar to the bilateral Mediterranean
partnerships. The most recent initiative is the 2000
Everything But Arms Initiative for the least-developed
African countries, which is examined below.
On the basis of an evaluation of these arrangements, firm
conclusions cannot be drawn about the gains achieved,
especially those resulting from the GSP program. Out of
a total of 7,000 products subject to positive duties) the
EU grants free access to about 3,300 non-sensitive
products, and either preferential tariff reductions or flat
rates of 3.5 percent to about 3,700 sensitive products—
defined as those requiring higher border protection.
Textiles, clothing, and footwear are classed as sensitive
products subject to high tariff rates and a 20 percent
preference margin. In general, agricultural products,
covered under the Common Agriculture Policy (CAP),
are excluded from the agreement. Since 2001, however,
the least developed countries—49 (including 33 sub-
Saharan) countries—are guaranteed quota-free access to
the EU.
The current Generalised System of Preferences applied
by the EU limits the potential benefits to be gained by
African countries. First, products such as textiles and
clothing, in which North African countries have a
growing market share, are excluded from this
preferential access to EU markets. Moreover, these
products are subject to strict quotas determined under
the Multi-Fibre Agreement (MFA), although this
agreement is scheduled to be eliminated by year 2005.
However, it is highly probably that other measures, such
as threats to file antidumping duties on textiles, will
restrict these countries’ exports to world markets.
According to Panagariya (2002), only three African
countries, Ivory Coast, Mauritius, and Zimbabwe, have
clearly extracted benefits from the Africa, Caribbean and
Pacific (ACP) preferences. Hudec (1988) points out that
one-way liberalization has the effect of induce countries
to expand market access for their exports while keeping
barriers against imports.
European Union and Africa:
The Everything But Arms Initiative (EBA)
The European Union has recently reformed its
preferential trade arrangements with the least-developed
countries. The Everything But Arms (EBA) Initiative,
adopted in October 2000, seeks to stimulate growth in
least-developed countries by extending trade
interactions. It grants least developed countries quota-
and duty-free access to the EU market. The agreement
includes all “originating” products included in the EU
GSP system. A major factor limiting the impact of the
program is that the EBA Initiative applies, in practice, to
agricultural products for which the least-developed
African countries lack comparative advantages, such as
sugar, cotton and bananas.

Figure 3: Agriculture products price gaps between EU and world, 1999-2000

Cheese
World Prices
EU Prices
Butter

Skimmed Milk Powder

Whole Milk Powder

Mutton/Lamb

Poultry

Pork

Beef

Tomatoes

Citrus Fruit

Bananas

Sugar

Milled Rice

Maize

Wheat
52

0 500 1,000 1,500 2,000 2,500 3,000 3,500

Euros per ton

Source: USDA, World Agricultural Outlook 2001.

1.5 ❚ How Should Africa Position Itself in the International Trading System?
Figure 3 illustrates the existing gap between EU set
prices and world prices for several key agricultural
products between 1999 and 2000. With the EBA
program, few gains are expected for sensitive products,
such as bananas, rice, and sugar. Until now, only a few
countries have exported bananas to the European Union.
In 1999, Cape Verde exported 10 tons of bananas, while
traditional exporters Somalia and Madagascar exported
none at all. Rice production is dependent on ample rain
or flooding, conditions not normal for most of the least-
developed African countries. Among the least-developed
African countries, the only significant exporters of sugar
are Sudan (with net exports of over 100,000 tons per
year), and Zambia, (with exports of about 80,000 tons).
On the basis of Brenton’s (2003) follow up of the EBA
program, we can identify the following points:
❚ Many primary export products already benefit from
zero most favoured nation (MFN) duties, or from
substantially liberalized markets.
❚ Liberalization has been postponed for products such
as rice and sugar—of major importance to some
African exporters to the European Union. Bananas will
not benefit from a zero tariff until year 2006, and the
zero rate will not be applied to rice and sugar until
2009. In the meantime, tariff quotas2 on rice and raw
sugar are being expanded from 74,185 tons to 197,355
tons in 2009. Duties on fresh bananas are being cut by
an annual 20 percent, starting in 2002. Duties on rice
and sugar will be reduced by 20 percent in 2006, by 50
percent in 2007, and by 80 percent in 2008. By 2009,
quotas and tariffs will be completely eliminated.
❚ Cumbersome rules of origin legislation have become a
de facto barrier to trade, by increasing the cost of
exports to high or prohibitive levels;
❚ Requirements for “sufficient processing”—in order to
be considered as a national product—make exporting
difficult and expensive;
❚ The provision for temporary suspension of
preferences—in case of a massive increase of imports
from developing countries in relation to previous
import levels—creates uncertainty, and has the effect
of inhibiting export-oriented investment.

Table 7: Product liberalization under the EBA (2001)

Country Total Exports to the EU Eligible Exports of Products Exports of products liberalized
(in Euro thousands) Liberalized in 2001 in 2001 requesting access under EBA
ACP countries
Angola 1,944,630 91.0 0
Republic of Congo 941,784 7.0 0
Equatorial Guinea 754,865 0.0 0
Liberia 736,973 10.0 0
Madagascar 600,912 72.0 0
Guinea 579,518 41.0 0
Mozambique 530,174 248.5 0
Tanzania 395,283 35.0 0
Sudan 303,550 778.0 0
Mauritania 258,568 6.0 0
Uganda 242,524 116.3 0
Malawi 194,903 0.0 0
Ethiopia 159,389 12.0 0
Zambia 158,375 1,359.0 0
Central African Republic 152,804 0.0 0
Niger 119,613 6.0 0
Benin 63,698 69.0 0
Total ACP 8,634,365 3,344.0 0

Non-ACP Countries
Bangladesh 3,318,865 69.0 68
Cambodia 482,480 0.0 0
Laos 143,716 74.0 74
53

Nepal 135,119 0.0 0

Yemen 83,596 169.0 91
Total Non-ACP 4,225,518 313.0 234

Source: Brenton (2001)

1.5 ❚ How Should Africa Position Itself in the International Trading System?
 Table 7 reports the countries in which the EBA
program is expected to have little or no impact. In
particular, several African countries will not benefit
from the program, either because they are not eligible,
or because the products exported are already subject
to a zero-rate. Countries like Angola, Central African
Republic, Chad, and Niger, among others, will reap
few benefits from EBA, because products eligible for
tariff reductions account for less than 5 percent of their
exports to the European Union, and most of their
exports already face zero most-favoured-nation rates.
The Everything But Arms Initiative can make a
difference for Benin, Burkina Faso, Comoros, and
Zambia, for the reason that more than 30 percent of
their exports are eligible for preferential treatment and
thus, for tariff rebates. The drawback is that less than 5
percent of African exports are actually benefiting from
these rebates. In 2001, Lesotho was the only country
filling requests for more than 30 percent of exports in
order to maximize tariff rebate advantages.
Barriers to trade and rules of origin
Will the dismantling of tariffs contemplated in the
EBA improve market access for exports from African
countries? The answer to the issue of market access
covers more than just tariff removal, simplification of
tariff schemes, and limits to the use of tariff escalation
practices. The EBA program gives broad discretion to
EU authorities to impose safeguards against bananas,
sugar, and rice if their imports cause “serious
disturbance” to EU markets. Also, the rules of origin
will be tightened and imports of these products will be
subject to monitoring to avoid fraud or transhipment,
in which case preferences for these products would be
suspended.
Restrictive technical standards limit trade, and can
represent a stiff non-tariff barrier that should be
eliminated. UNIDO (2002) finds that the aflatoxin
standard introduced in the EU legislation—which
differs from the international aflatoxin standard—is
expected to have an infinitesimally small impact on
health risk. The cost of such a measure, however, is
expected to generate a drop in African exports of
cereals, dried fruit, and nuts to the EU markets to the
tune of some $670 million.
Rules of origin, uncertainties about derogations from
requirements, use of safeguard measures,
54
1.5 ❚ How Should Africa Position Itself in the International Trading System?
administrative procedures to make market access
effective and without extra costs, applicable sanitary
and health standards, are just some of the non-tariff
barriers limiting the potential gains from the initiative.
Rules of origin on packaging could substantially raise
final product costs. This is particularly true for value-
added food products competing in sophisticated
European consumer markets.
As regards the clothing sector, Brenton and Manchin
(2002) find that the EU rules of origin entail a double-
step processing requirement, under which clothing
made from fabric originating in third countries is
excluded from preferential treatment. EU rules of
origin require clothing to be made from either locally-
produced fabric or fabric from EU member countries.
Moreover, EU legislation foresees the possibility of
demanding proof, retrospectively, of the origin of
previous years’ exports. For instance, EU authorities
found that about 15,308 certificates of origin for
textiles and clothing items, which had been issued
between 1994 and 1996, did not satisfy EU rules of
origin, and retrospectively, imposed full duties on
these items.
North-South trade agreements:
US-Africa trade arrangements
In the 1990s, the US engaged in a flurry of trade
agreements. US preferential arrangements with
African countries can be classified into three major
programs: First, is the Generalised System of
Preferences (GSP), which went into effect in 1976. It
currently grants duty-free entry for more than 4,600
imported products from about 40 designated countries
and territories. Second, the Trade Capacity Building
program assists developing and transitional economies
in building the capacity to benefit from trade opening.
In 2001, sub-Saharan countries received $192 million,
which corresponds to 14 percent of the total US
support of $1.3 billion under this program. The
program addresses barriers to exports, such as
product standards that limit African exports. The
third, most recent program is the 2000 African Growth
and Opportunity Act (AGOA), which targets the least
developed African countries. Box 2 compares U.S. and
EU arrangements.
 Table 8: Ratio of duty-free exports to total
Box 2: Current Limitations of Existing exports to the US
Agreements and Preferences
Country Duty-free/total exports (percent, 1994)
Mozambique 76
The Multi-Fibre Agreement (MFA) imposes quotas Swaziland 52
until 2005. Zimbabwe 40
Namibia 23
The EU GSP excludes textiles and clothing.
Burkina Faso 16
Except for petroleum, most African countries do not Madagascar 14
exploit US GSP. Senegal 12
Sierra Leone 12
The EU’s African, Caribbean and Pacific (ACP)
South Africa 9
preferences have clearly benefited only Ivory Coast, Kenya 8
Mauritius, and Zimbabwe. Mali 8
Mauritius 7
The EU Everything But Arms (EBA) trade
Equatorial Guinea 7
preferences initiative of 2000, granting duty-free
Malawi 7
access to the world’s 48 least-developed countries,
Tanzania 7
applies in practice to agricultural products, for
Côte d'Ivoire 6
which the least-developed African countries lack Botswana 4
comparative advantages. Togo 3

The preferences under the African Growth and Total (Thirty-four SSA Countries)* 5

Opportunity Act (AGOA) are contingent on
preferential purchases of input such as fabric from
the US, implementation of labor standards, and
other cost-increasing factors.
* The other countries are Benin, Cameroon, Ghana, Zaire, Central African
Republic, Uganda, Niger, Ethiopia, Gambia, Mauritania, Zambia,
Burundi, Lesotho, Guinea, Congo, and Angola.
Source: US Department of Commerce

Only a few countries are exploiting the benefits of

AGOA. As of November 2002, only half of the
eligible countries (18 out of a total of 36) actually
exported clothing duty-free to the US. Until now,
AGOA has not affected the share of machinery
imports to the US and has had relatively little impact
on footwear.
Both EBA and AGOA have stringent rules of origin
that limits the impact of the preferences.
If the reader is surprised by the figures indicating low
duty-free exports in the face of preferences given to
specific countries, then the data on the impact of the
program on the continent as a whole will be equally
striking. Most of the countries with a high percentage of
duty-free exports (out of their total exports to the US) do
not export much to the US. By focusing on those
countries accounting for most duty free exports, it turns
out that a single country, South Africa, accounted for
over 60 percent of all duty-free exports to the US in 1994.
Well over two decades after it was launched, the GSP
program had scarcely affected the African continent at all.

Table 8 shows the percentage of total sub-Saharan

African exports to the United States, which entered duty-
free in 1994. Almost two decades after the GSP was
initiated in 1976, the average percentage of total exports
entering the US duty-free was 5.4. Only four countries
exceeded 20 percent: Mozambique (sugar cane accounts
for over 90 percent of exports to the US), Swaziland,
Zimbabwe, and Namibia. For 26 countries, the
percentage was less than 10. By contrast, the
corresponding figures for Malaysia and Thailand were
36 and 24 percent, respectively.
African Growth and Opportunity Act (AGOA)
In 2000, President Clinton signed a preferential trade
agreement, aiming to reinvigorate relations with the sub-
Saharan African economies actively engaged in market-
based reforms. This eight-year unilateral preferential
agreement, revised on an annual basis, is known as the
African Growth and Opportunity Act (AGOA). Greater
market access to US markets is granted to those
countries showing progress on “best practice“ policies:
establishing a free trade, market-based economy;
55

1.5 ❚ How Should Africa Position Itself in the International Trading System?
 improving the rule of law; fighting corruption; passing
internationally-recognised legislation on workers’ rights
protection. On 31 December 2002, there were 38 eligible
countries out of 48 sub-Saharan African countries.
AGOA extended the standard Generalized System of
Preferences—covering about 4,300 tariff-line items at
the time—to include 1,800 additional items, such as
clothing and shoes, as well as certain motor vehicle
components exported by countries in Central Africa ,
SACU, and others. AGOA eligibility is based on GSP
eligibility. That is, out of 48 sub-Saharan countries
benefiting from the standard GSP, 45 can also benefit
from the new rebates as well as the clothing provisions
stated under AGOA. Mattoo, Roy and Subramanian
(2003) estimate the cumulative medium-term benefits of
the agreement for non-oil exporting countries to range
between $100 million (about eight percent of non-oil
exports) and $140 million (about 11 percent of non-oil
exports), depending on the restrictiveness of the rules
of origin. These are very low cumulative figures.
Major gains were registered by Kenya, Swaziland, and
least-developed countries such as Madagascar and
Lesotho. Following AGOA, in 2000-2001 these
countries’ clothing exports increased from 47 to 83
percent. Restrictive rules of origin explain why clothing
exports from South Africa and Mauritius increased by
lower, albeit quite healthy rates of 9 to 14 percent,
respectively.
Stringent rules of origin
The Achilles’ heel of AGOA is the stringent impact of
the rules of origin attached to the Act. The purpose of
rules of origin is to ensure that non-eligible countries
do not have access to unilateral preferences. But
stringent rules of origin often constitute non-tariff
barriers that reduce flexibility and raise production
costs. They do not permit the choice of inputs based on
cost efficiency parameters, but rather on market
eligibility, given the rules of origin restrictions. Mattoo,
Roy and Subramanian (2003) stress the limitations to
gains due to choosing the stringent “yarn-forward”
rule— granting benefits only to the signatories of the
agreement, and not to third parties—rather than the
rule of origin of the Multi Fibre Agreement, which
requires only assembly in the beneficiary countries.
Least developed countries qualify for the Special Rule
for Lesser Developed Countries that exempts them
from all requirements until September 2004. This
exemption allows using raw materials from all over the
world, without any restrictive rule regarding place of
origin. If the Special Rule does not apply for a country,
56
1.5 ❚ How Should Africa Position Itself in the International Trading System?
then at least 35 percent of the value added must be
accounted for by AGOA countries, or by the United
States. The sub-Saharan countries benefiting from duty-
free access for manufactured garments (included in the
‘Wearing Apparel’ provisions) are required to meet
more stringent requirements than those of the MFA,
scheduled to be dismantled by the end of 2004. These
clauses are binding in the important case of the rules of
origin that clothing exporters must comply with. For
instance, with some exceptions, the use of third-country
non-eligible inputs is not allowed. By 2005-2008, least
developed countries will be subject to the “yarn
forward rule”.
The outcome of AGOA should be distinguished from the
effects of MFA dismantling. The first phase of the AGOA
program should end by the year 2004, the same year the
MFA is scheduled for elimination. AGOA’s first phase
gives eligible countries a temporary exemption from the
stringent rules of origin required by AGOA. By year
2005, just as the Multi-Fibre Agreement will phase out,
eligible countries will stop benefiting from preferential
rules of origin treatment under AGOA. Eligible countries
will be required to abide by the same rules of origin
applied to other economies. As a result, exports by
eligible African countries will be less competitive and
thus limited, and U.S. prices will remain high compared
to free market prices.
Several African countries are experiencing clear gains
from AGOA, but few eligible countries are actually
receiving the benefits available under the Act. As of
November 2002, only 18 out of a total of 36 eligible
African countries actually exported duty-free clothing to
the United States.
AGOA’s record
Total U.S. imports from sub-Saharan countries dropped
during 2001-03, but imports under AGOA have
increased during the same period. The AGOA success is
the result of duty-free imports under the current and
past GSP systems, textile and clothing duty-free
preferential treatment, and quota-exemptions. Including
account oil-related imports, up to fifty percent of all U.S.
imports from the region fall under the Act. Most of these
are petroleum products, subject to Code D under the
International Trade Commission. Code D goods are
those having AGOA GSP eligibility. The other products
are textiles and clothing, transportation equipment, and
agricultural products. Many items that are not subject to
Code D are, however, still exempt from import duties,
because they are eligible under GSP or because their
statutory import duty is zero.
Table 9: Sectoral analysis of AGOA

Products Imports under AGOA+GSP Imports under GSP Duty-free items added
(in percent) (in percent) (in percent)
Year 2000 2001 2002 2000 2001 2002 2000 2001 2002
Agricultural products 0 0 23.3 16.4 12.6 12.9 0 7.1 11.9
Forest products 0 0 24.7 16.4 20.6 27.3 0 0.1 0.2
Chemicals and related products 0 0 30.4 8.3 22.6 40.4 0 0.6 1.1
Energy-related products 0 0 58.3 21.0 19.0 28.4 0 47.8 58.3
Textiles and apparel 0 0 70.7 0.3 0.4 0.3 0 35.7 70.4
Footwear 0 0 21.8 0.0 0.0 0.0 0 16.2 21.8
Minerals and metals 0 0 13.8 9.9 8.3 9.1 0 3.0 5.1
Machinery 0 0 7.7 17.7 8.7 7.7 0 0.0 0.0
Transport equipment 0 0 87.7 41.5 14.9 9.9 0 60.4 77.8
Electronic products 0 0 17.8 36.9 25.7 17.8 0 0.0 0.0
Misc. manufactures 0 0 34.5 39.6 41.4 56.3 0 0.3 0.7
Spec. provisions 0 0 0.0 0.0 0.0 0.0 0 0.0 0.0
All sectors 0 0 49.4 17.7 16.1 22.3 0 36.0 45.9

Source: US Trade and Investment with Sub-Saharan Africa (2003)

Table 9 presents a sectoral analysis of imports under
the AGOA program. The impact of the Agreement
differs by sector. Most US imports on transport
equipment, textiles, and clothing are covered under the
AGOA and GSP programs. Most of the gains from the
Act are expected to be in clothing and textiles. In
contrast, the introduction of the AGOA program has
not affected the share of U.S. machinery imports
covered by the program.
Why is it that the US GSP program has not been
substantially utilized? First, Olarreaga and Ozden
(2003) show that export incentives are limited because
export prices have increased by only a third of the tariff
cut. They attribute this, in part, to rents obtained by
importers at the expense of African exporters. Second,
these preferences are uncertain. In the past they have
been changed when exporters exploited them. Third,
the exporting infrastructure is weak in Africa.
Government corporations control communications,
transportation, and utilities throughout the region,
because they are deemed to be strategic and must not
be ceded to the private sector, including foreign
investors. Unfortunately, the low level of efficiency on
the part of controlling public corporations limits the
scope of trade relations. Fourth, until the dismantling of
the MFA in 2005 and, with the exception of the least
developed countries, the quotas set under the MFA
limit the trade gains on clothing. Quotas restrict import
volumes to certain pre-determined levels and keep U.S.
import prices from falling.
Finally, it should be noted that non-tariff barriers are
not a good explanatory variable in this context, because
they do not substantially affect the majority of African
exports.
Conclusions
Solutions to the African tragedy must urgently be found.
Thirteen percent of the world’s population, over 800
million people, live in Africa and their number is
expected to grow to 1.3 billion by 2020.
Preferential trading arrangements among African
countries have not increased trade among their members
and have not led to greater overall international trade.
The attempt to form preferential arrangements among
economically small countries with similar comparative
advantages, separated by poor transportation
infrastructures, language, ethnicity, culture, and politics,
has not been successful. Reliance on intra-regional trade
strategies and increasing trade aggregates are likely to
remain ineffective.
Participation in preferential arrangements with
developed countries shows greater promise of success at
the present time. However, this participation has
resulted in hub-spoke structures that have not increased
openness or growth. Moreover, competitive African
agricultural products are often excluded or penalized,
since they must compete with heavily subsidized
developed country agricultural production.
57

1.5 ❚ How Should Africa Position Itself in the International Trading System?
 Africa remains mired in the static comparative
advantage trap. A host of past and present preferential
agreements have not been able to break this pattern. The
elimination of key factors currently preventing the full
exploitation of preferences with large trading groups
should result in greater trade. However, African
countries might also be well advised to consider
alternative forms of inserting themselves into the world
trading system, by participating effectively in
multilateral negotiations for products of interest to
Africa, and unilateral liberalization. For example, Chile
was able to take off economically through unilateral
liberalization in the 1980s.
Unfortunately, customs unions impede this option,
unless a country becomes an associate rather than a full
member of the union. A good example is Chile, which
became an associate member of the Mercosur customs
union, for the express purpose of escaping the restriction
on unilateral liberalization. Policy strategies to break out
of the trap of comparative advantage can also involve
the active promotion of clusters and foreign direct
investment, as well as the creation of conditions for the
successful transfer of technology, the generation of
competitive advantages, and export diversification. From
our perspective, these alternatives contrast sharply with
the route to growth by means of preferential trade
arrangements, as a means of widening opportunities for
the fuller participation of African countries in the system
of international trade.
Notes
1
Commission économique pour les pays des grands lacs.
2
A tariff quota is two-tiered. A lower in-quota tariff (t) is applied to the first
units of imports and a higher over-quota tariff is applied to all additional
imports. The terms “tariff quota” and “tariff-rate quota” are employed
interchangeably in the literature. Technically, tariff quota, a more accurate
description, includes specific tariffs, while tariff-rate quota excludes them.
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Rivera-Batiz, L.A.and M.A. Oliva. 2003. International Trade Analysis:
Theory, Strategies and Evidence. Oxford: Oxford University Press.
Rodrik, D. 1999. Trade Policy and Economic Performance in Sub-Saharan
Africa. Stockholm: Almqvist & Wiksell.
Romer, P.M. 1990. “Endogenous Technological. Change,” Journal of
Political Economy 90, SS. 1-102.
Sachs, J. and A. Warner. (1997). “Sources of Slow Growth in African
Economies,” Journal of African Economies 6. 335-376.
Sapir, A. 1998. “The Political Economy of EC Regionalism,” European
Economic Review 42. 717-732.
Subramanian, A. and N.T. Tamirisa. 2003. “Is Africa Integrated in the
Global Economy?” IMF Staff Papers 50 (3). 352-372.
UNIDO. 2002. Enabling market access. UNIDO’s engagement with
regional integration. Online at:
http://www.unido.org/userfiles/timminsk/UNIDO-
Enabling_Market_Access-Regional_Integration.pdf
World Bank. 2001. “Education Sector. Human Development Network.
2001. Education for Dynamic Economies: Accelerating Progress
Towards Education for All.” Washington, D.C.: World Bank.
World Bank and International Monetary Fund. 2001. “Education for
Dynamic Economies: Accelerating Progress Towards Education for All
(EFA).” Development Committee (Joint Ministerial Committee of the
Boards of Governors of the Bank and the Fund on the Transfer of Real
Resources to Developing Countries). DC2001-0025. Washington, D.C.:
World Bank.
World Bank. 2001. World Development Indicators. Washington, D.C.:
World Bank.
Yeats, A.J. (1998). “What Can Be Expected from African Regional Trade
Arrangements? Some Empirical Evidence.” Policy Research Working
Paper 2004. World Bank.
 Chapter 1.6
Building Capacity to Narrow
the Digital Divide in Africa from Within
Ewan McPhie, bridges.org
Introduction and background
The countries of Africa face a diverse range of
challenges and obstacles as they strive to develop their
economies, decrease their dependence on the
developed world, and ready themselves for
participation in the global economy. Key to the
process of achieving e-readiness—defined by
bridges.org as “how ready a country is to gain the
benefits offered by ICT in terms of policy,
infrastructure, and ground level initiatives”— is the
effective use of information and communications
technology (ICT) as a tool for social and economic
development. The New Partnership for African
Development (NEPAD)1 offers a vehicle for African
leaders to drive the necessary changes, and within the
NEPAD context the e-Africa Commission has been
given the mandate to deal with issues related to ICT.
NEPAD has set a number of ambitious objectives,
including bridging the digital divide and developing
the capacity to solve Africa’s problems from within.
Africa’s leaders recognise not only the part that ICT
can play in development, but also the value of forming
strategic partnerships with the public and private
sectors as contributors to their efforts. The Information
Society Partnership for Africa’s Development (ISPAD)
will be the vehicle by which the private sector and
other actors can engage in the process. However,
before anything can be achieved, there must be a clear
understanding of where things stand now, of what
still needs to be done, and a realistic time frame for
moving forward. Moreover, ground-level stakeholders
must be included in policy-making processes at the
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
outset, because their involvement and “buy-in” is
critical to empower government to make and
implement difficult, and at times conflicting, decisions.
Changes of the magnitude required do not happen
overnight, and all the partners in this process must
work together, with a long-term vision.
Collecting information on basic
e-readiness in African countries
The discussion of how best to harness the power of ICT
for development is often framed in terms of
“e-readiness”, or how ready a country is to gain the
benefits offered by ICT. There is no uniform level of
e-readiness or socio-economic development within
NEPAD. Each member state, and the continent as a
whole, must take its own path towards e-readiness, and
attempts to impose a single model would prove
ineffective. It is important that the Commission and
ISPAD have accurate, current information about
e-readiness and other factors in NEPAD countries, so
that they can frame an effective dialogue on the issues.
E-readiness strategies must be tailor-made to address
the unique local needs, priorities and ground-level
realities reflected within each state and the broader
regional goals. By looking at where their countries
stand on a number of basic e-readiness indicators,
59
African leaders can gain a realistic appreciation for
what ICT can—and cannot—do for their countries, and
plan effectively to achieve the greatest benefits in the
context of their specific situation.
 The overall objective of this paper is to lay the
foundation for an e-Readiness Policy Programme to
build on, and to inform, the efforts of NEPAD, and of the
Commission more generally. Throughout the life of the
Programme, stakeholders from government, the private
sector and civil society would be invited to review this
and other information collected, and to provide updates
and comments. Not only will stakeholder input verify
the information collected, but it can also serve as a first
step toward the creation of a group dynamic among the
stakeholders, and a sense of ownership over the
Commission’s efforts. While every effort has been made
to ensure that the information contained in this report is
accurate and up-to-date, information on many African
countries is difficult to find, and sources are often
unreliable. Readers who find inaccuracies or omissions
are invited to provide additional data, so that this
document can be updated.
Overview of basic e-readiness across Africa
Policy environment overview
There is unanimous agreement among Africa’s leaders and
pan-African structures on the benefits that ICT can bring
and the impact it can have on a wide range of development
issues. The ICT policy reform process has begun in almost
all of the countries in Africa, but there is no uniform level
of progress across the continent. The majority of countries,
especially those with more developed economies, have
embarked on programmes featuring various degrees of
liberalisation and deregulation of the telecommunications
sector. The African Information Society Initiative (AISI),
and the National Information and Communications
Infrastructure (NICI), promoted by the U.N, Economic
Commission for Africa (UNECA), have done much to
inform the process and provide guidance and support.2 But
even where there has been progress towards liberalisation,
the level of regulatory influence has not kept pace with
change, and few of the telecommunications regulators in
Africa are truly independent. Policy reforms to end fixed
line telecommunications monopolies are advanced in a
number of countries, and the rapid growth of mobile
telecommunications across the continent, largely based on
pay-as-you-go services, serves to drive change and increase
the numbers of mobile operators. Civil war and unstable
governments continue to inhibit progress in a number of
countries, notably Angola, the Democratic Republic of
Congo, Burundi and Liberia.
Infrastructure development overview
The state of infrastructure development across the
continent varies widely from country to country. While
telecommunications infrastructure plays a crucial part, it is
equally important to have stable and developed
infrastructure in the financial, transport and fiscal sectors,
as well as effective power and water distribution. For some
countries, provision of these more basic needs will remain
60
a priority, and progress towards e-readiness is dependant
on building stable infrastructure across these sectors. There
remains an imbalance in the level of infrastructure rollout
between urban and rural Africa, with rural locations
suffering at the expense of urban development. While
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
initiatives to rectify this imbalance are under way in many
countries, more needs to be done to provide basic levels of
service to rural communities. However, there are good
examples of ICT being used in Africa to overcome the
problems created by lack of infrastructure, such as the
Women Farmers Advancement Network (WOFAN) in
Nigeria, which has used radio to deliver information about
agriculture and gender issues. Their programs have not
only empowered women, but have also helped to
introduce labour-saving technology, the use of solar power,
and improved access to credit and insurance facilities.3
Ground-level projects overview
There is an extensive and diverse range of ground level
initiatives underway in Africa to promote and facilitate the
use of ICT, funded by the public and private sectors.
Projects to establish telecenters and ICT access points are
underway in most countries, run by the United States
Agency for International Development (USAID) Leland
programme, the International Telecommunications Union
(ITU), Canada’s International Development Research
Centre (IDRC), and others. There also projects in many
countries related to education and training, including the
SchoolNet programme, Cisco’s Networking Academies,
intended to increase the number of ICT skilled
professionals across the continent, UNESCO’s community
based learning programme, and their science and
technology in education initiative. Policy development
initiatives include the U.K.’s Department for International
Development (DFID) development support programme,
and IDRC’s ACACIA policy advice programme. There are
also numerous health care initiatives designed to
demonstrate and evaluate the value of ICT in health care
such as the HealthNet programme, which provides e-mail
connections to health workers, and Satellife’s evaluation of
the use of handheld devices in health care programmes in
Ghana, Kenya and Uganda.
Economic overview
There is evidence of growth in the e-commerce sector,
notably in South Africa, forecast to generate $0.5 billion
worth of business in 2002, and to grow to $6.1 billion by
2006. But if this rate of growth is extrapolated for Africa as
a whole, then the continent’s share of global e-commerce in
2006 would only be 0.05% of the world’s total. The cost of
basic telephony and Internet connections remains
disproportionately high across the continent, a major
obstacle to economic growth. At present, it is impossible
for the vast majority of Africa’s population to pay even
basic access costs.4 A detailed overview of the current
economic situation in Africa is provided in Annex 2.
E-readiness assessments conducted in Africa
Information on the status of e-readiness and other socio-
economic factors can help governments plan effective ICT
strategies to bring the greatest economic and social benefits
to their countries, and e-readiness assessment can be a
useful tool if used wisely. However, e-readiness
assessments in Africa are not used effectively overall.5
Many of the region’s most developed countries have been
assessed repeatedly: 26 have been assessed at least 4 times,
including Egypt (16 times), and South Africa (14 times).
While it is true that an e-readiness assessment is most
effective if comparative data is collected over time and
milestones are reviewed, this is seldom the reason for the
duplication of assessments in these African countries. In
most cases, assessments have been conducted by different
groups using different tools and criteria, so that the results
are rarely comparable. Moreover, few of these reports are
publicly available, and there is often little or no follow-up.
Moreover, many of the results have limited usefulness,
because information was collected by means of short
summary questionnaires, or using present statistical data
that is not thoroughly explained. At the same time, the
least developed countries, which stand to gain the most
from an assessment, rarely receive one: 2 of the 54
countries have never been assessed for e-readiness at all.
The fact that these countries have never been assessed
means that those facing the most severe problems also do
not have access to some of the key tools for comparison
that might help them put ICT to work in their countries.
These problems were highlighted in the WEF-SADC report,
but new assessments continue to be carried out in countries
that have already been assessed. Since January 2002, 8 of
the 14 countries that had already been assessed have been
assessed again. Assessments are time-consuming and
expensive to carry out, and scarce resources must be better
managed. If NEPAD is going to make a concerted effort in
the e-readiness area, it should start by seeing to it that the
results of e-readiness assessments already completed are
put to better use and not duplicated, and that resources are
directed toward those countries that have never been
assessed.
Creating a framework
for analysing the issues and
proposing country groupings
NEPAD has stressed the need for appropriate policies that
take into account the diversity of Africa’s economies and
their varying levels of development. It is unlikely that
universal strategies can be designed that would be
applicable or acceptable to all countries, yet if progress is to
be made, some common ground must be reached on how
to approach ICT. Dividing the African countries into
groupings, according to their differing levels of e-readiness,
and the various internal and external challenges they face,
would prove useful for making appropriate
recommendations. This would help the e-African
Commission develop broad solutions, which could then be
adapted for local conditions and requirements.
In this section, a framework is proposed, for use in
analysing e-readiness issues, and a suggestion made for
grouping African countries according to their level of e-
readiness. We then provide two examples of how the
framework and the groupings could be used by the
Commission, ISPAD, and others, to examine ICT policy
issues, raise awareness, and build a dialogue. First, the
framework template is used to examine a relevant e-
readiness policy issue and the different approaches that are
needed across the groupings. Then, one particular,
characteristic of the challenges affecting a particular
country grouping, is examined in more detail.
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
Framework for analysing e-readiness policy issues
The framework for the analysis of e-readiness policy issues
first presented in the WEF-SADC report has been used as
the basis for examining key issues with an African
perspective and drawing comparisons between NEPAD
countries. This template can help policy-makers and
stakeholders frame a dialogue on issues that apply to
groups of countries at comparative levels, so they can learn
from relevant experience and best practice. The framework
is intended for use as a tool throughout the life of the
Programme to examine and present useful comparative
information on key issues, to inform the efforts of the
Commission and the NEPAD member countries.
Framework template
E-readiness policy issue
<title, and brief description of issue under consideration>
(a) Widely agreed policy recommendation:
<description of the general consensus on how this
issue should be addressed, generally taken from
the international perspective>
(b) Key proponents of this recommendation:
<list of the main institutions and organisations
that recommend this agreed position on the issue>
(c) Issues affecting application in developing
countries: <explanation of why the way forward
recommended by the general consensus at the
international level may prove to be tricky given
the realities in developing countries>
(d) Recommended way forward:
<a suggestion of where a developing country
should start, once it has decided that it wants to
implement the widely agreed policy
recommendation described in (a), despite the fact
that it faces the challenges outlined in (c)>
Grouping countries according to level of e-readiness
In a review of basic e-readiness and a number of other
indicators for the African countries, three general levels
of e-readiness, or groupings, emerged, which are used in
Table 1, below. The factors considered included:
z United Nations Development Programme (UNDP)
Human Development Index score and related socio-
economic factors;
z Teledensity (fixed and mobile);
z Level of telecom deregulation and state of progress;
z Internet penetration, bandwidth availability, and cost;
z Conducive legal, regulatory, and fiscal frameworks;
z Infrastructure (communications and other);
z Economic development.
Table 1 sets out ratings for each African country in a
number of key areas, along with the number of recorded
e-readiness assessments as of December 2003. The
61
country grouping assigned for purposes of this proposed
framework appears in the last column. The Human
Development Index (HDI) for 2000 is presented first, and
ranks the countries of the world according to an index
measuring three basic dimensions of human
 development: life expectancy, knowledge, and per capita
income.6 The information on e-readiness and economic
status presented in Annex 2 was used to rate policy,
infrastructure and ICT projects. The three categories
emerged in almost all of the data reviewed, although
there were slight differences in the groupings,
depending on the criteria being measured. Within the
three groupings there is no ranking. The “1”, “2” and “3”
ratings are used to indicate where the countries stand in
relation to each other, rather than in comparison to other
parts of the world, with 1 being the highest level of e-
readiness. The table is based on objective criteria and
levels of human development, irrespective of the
ideological systems in place. 7

Table 1: African country ratings and groupings8

Country9 HDI Policy Infrastructure ICT project E-readiness Country

level level level assessments grouping
Algeria 161 3 1 1 5 2
Angola 106 3 3 2 3 3
Benin 158 3 3 3 5 3
Botswana 126 1 2 1 6 1
Burkina Faso 169 3 3 1 3 3
Burundi 171 3 3 3 2 3
Cameroon 135 2 3 2 6 2
Cape Verde n/a 2 2 3 3 3
Central African Republic 165 2 3 3 2 3
Chad 166 3 2 2 3 3
Comoros 137 3 3 2 2 3
Congo Republic 136 3 3 3 2 3
Côte d’Ivoire 156 2 2 3 4 2
Democratic Republic of the Congo 155 3 3 3 3 3
Djibouti 149 3 1 2 3 3
Egypt 115 1 1 1 16 1
Equatorial Guinea 111 3 3 2 1 3
Eritrea 157 3 3 2 3 3
Ethiopia 168 2 3 2 5 2
Gabon 117 3 2 2 3 2
Gambia 160 3 2 2 4 3
Ghana 129 1 2 2 4 2
Guinea 159 3 3 2 3 3
Guinea - Bissau 167 2 3 3 0 3
Kenya 134 1 2 2 7 2
Lesotho 132 3 3 3 2 3
Liberia n/a 3 3 3 1 3
Libya 64 3 1 2 1 2
Madagascar 147 2 3 3 7 3
Malawi 163 2 2 2 2 2
Mali 164 2 3 3 4 3
Mauritania 152 2 3 3 3 3
Mauritius 67 1 1 1 6 1
Morocco 123 2 1 2 11 2
Mozambique 170 1 3 2 6 2
Namibia 122 3 2 2 6 2
Niger 172 3 3 2 3 3
Nigeria 148 2 2 1 10 2
Rwanda 162 3 3 3 5 3
Sao Tome and Principe 119 3 3 3 1 3
Senegal 154 3 2 2 7 2
Seychelles 47 2 1 2 1 2
Sierra Leone 173 3 3 2 2 3
Somalia n/a 3 2 2 1 3
South Africa 107 1 1 1 14 1
Sudan 139 2 2 2 2 3
Swaziland 125 3 3 3 2 3
Tanzania 151 1 2 2 7 2
Togo 141 3 3 2 2 3
62

Tunisia 97 3 1 1 9 1
Uganda 150 1 3 2 8 2
Western Sahara n/a 3 3 3 0 3
Zambia 153 2 3 2 4 2
Zimbabwe 128 2 2 2 7 2

1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
Category 1: Countries with a high-level of
progress towards e-readiness:
Botswana, Egypt, Mauritius, South Africa, Tunisia.
Countries in this category have shown a commitment
towards the integration of ICT as an essential
part of their economy, and of social and academic
progress in general. To varying degrees, they have also
begun to introduce legislation that helps, rather
than hinders, the growth and affordability of, and
access to ICT. They represent some or all of the most
advanced African countries in social and economic
terms. Also evident in the case of some,
notably Egypt, is the effect of strong leadership on the
part of government to advance and promote the use
of ICT, as a tool of government, and for socio-economic
development. But it is important to remember that,
even within these countries, there remains a digital
divide, usually based on geographical (e.g. rural/urban),
socio-economic or cultural factors, or gender.
This is not meant to demean the efforts of these
countries, or to underestimate what they have
already achieved. Some, particularly South Africa,
have already enacted legislation designed to facilitate
the growth of e-commerce, and all have high rates of
fixed and mobile teledensity. For most, deregulation
and liberalisation of the telecommunications sector,
as well as the establishment of an independent and
effective regulator, remain a challenge.
Category 2: Countries with a medium-level of
progress towards e-readiness:
Cameroon, Côte d’Ivoire, Ethiopia, Gabon,
Ghana, Kenya, Libya, Malawi, Morocco,
Mozambique, Namibia, Nigeria, Senegal,
Seychelles, Tanzania, Uganda, Zambia,
Zimbabwe.
The countries in this group confront many of the
challenges faced by the previous group. In addition,
they have a less developed infrastructure and a weaker
commitment to achieving e-readiness. Tanzania has
embarked on an inclusive process, designed to achieve e-
readiness, and the methodology used is an example
which others are advised to follow. These countries,
not surprisingly, are also less developed in socio-
economic terms. Investment in ICT is expensive,
and these countries have other more pressing
challenges. They have begun to introduce ICT,
primarily in the field of telecommunications, but they
should not overlook the impact that the effective
use of ICT could have for development, and for
solving other challenges, notably healthcare,
resource management and education. Because of
a lack of capacity and institutionalization, they differ
from the first category in terms of their ability
to deliver a higher level of progress.
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
Category 3: Countries with a low-level of
progress towards e-readiness:
Algeria, Angola, Benin, Burkina Faso, Burundi,
Cape Verde, Central African Republic, Chad,
Comoros, Democratic Republic of Congo,
Djibouti, Equatorial Guinea, Eritrea, Gambia,
Guinea, Guinea-Bissau, Lesotho, Liberia,
Madagascar, Mali, Mauritania, Niger, Republic
of Congo, Rwanda, Sao Tome and Principe,
Sierra Leone, Somalia, Sudan, Swaziland, Togo,
Western Sahara.
In addition to all of the challenges described for
the first two categories, the countries in this group
face some of the greatest challenges, not only in relation
to the introduction of ICT, but more importantly in
relation to meeting basic human needs and restoring
stable political environments, although it is important
to note that the latter is not true in all of them. The
available information suggests that most have basic
levels of telecommunication and some more than that,
but access is limited to rural areas and costs are high.
In addition, lack of infrastructure in rural areas, the
effects of civil unrest, and a lack of awareness of
the impact that ICT could have on development and
society, are important factors. Yet in many of these
countries, less advanced forms of ICT could, and have
had an impact on a variety of issues and challenges. For
example, rural radio has served to empower farmers,
notably women, and has also been used to “deliver” the
Internet, where there is no telecommunications
infrastructure.
Applying the framework to an issue within the context of the
country groupings
This section uses the analysis framework to look at
a single issue faced by all of the African countries
in a structured way. It considers the range of external
challenges and offers recommendations for next steps
appropriate to each of three country groupings.
Used in this way, the framework and country grouping
represent a mechanism for studying the issues, and
for helping governments and policy-makers identify
the most realistic and appropriate policy, or set of
policies, for their particular needs. While this example
is intended to demonstrate how the framework
can be used to deal with a range of issues across
the three levels of e-readiness, it is based on an issue
that many countries struggle to address at different
levels.
63
 Example of issue analysis
Basic ICT infrastructure and access
(a) Widely agreed policy recommendation
Increased globalisation and the international
information economy require ready access to ICT
and global networks for information transfer and
trade. African countries should build ICT
infrastructure in order to compete in the global
economy and communicate with the rest of the
world. The medium must be reliable, easy to use,
and affordable.
(b) Key proponents of this recommendation
The International business community, computer
hardware and software providers, development
agencies, NEPAD, and many African leaders have
already acknowledged the importance of access
to ICT, and its role in economic and social
development.
(c) Issues affecting application in developing
countries
Given the impact of poverty and infrastructure
limitations in rural settings, high computer
penetration levels are often not feasible. Further,
the process of introducing new technology and its
cost, in the context of social, cultural and
technical aspects, must be taken into account. In
this regard, the developing world has shown a
great affinity for mobile ICT devices. In countries
with a low level of e-readiness, it is likely that
other issues will take priority over the provision
of access to ICT, except in its most basic form,
and in areas where there is already, albeit limited,
infrastructure. Middle level countries will be faced
with decisions over relative priorities, such as the
rollout of services to rural areas, versus the
provision of faster connections to urban users.
Countries with the highest level of e-readiness are
likely to be facing the challenges posed by
liberalisation of the telecommunications sector
and deregulation of services, especially where the
state monopoly provider is protecting what it sees
as its domain, and telecommunications sector
employees are concerned about the impact of
liberalisation on
their jobs.
(d) Recommended way forward:
Countries with low level e-readiness, in rural areas,
and within disadvantaged communities in the
64
medium and higher level country categories,
community-based access to computer resources
and other forms of ICT are more likely to be
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
achieved than individual access, given the cost
of installation, maintenance and training.10
Community access points providing desktop
computing should be supported by appropriate
training programmes and relevant materials.
Greater emphasis should be placed on mobile
ICT devices that are increasingly more advanced
and ubiquitous in terms of bandwidth, reach
and utility. Research should also be conducted
into the potential of mobile devices to leapfrog
earlier technologies. Projects to develop and
deliver content via wireless applications should
run concurrently.
In the medium level countries, governments
and policy-makers must develop strategic plans
for the rollout of technologies, across countries
and within cities. They should consider the
creation of high-technology access points
in cities and rural areas, rather than the blanket
provision of services—unlikely to be achieved—
and, wherever possible, they should use
existing facilities, such as libraries and
community centres, to house the access points.
Before embarking on this course of action,
they should assess which existing centres have a
high level of utilisation, in order to increase
the chances of success. The random and
unplanned provision of telecentres and other
facilities is unlikely to lead to the creation
of sustainable resources. This is all the more
important, when the resources involved
are scarce and expensive
In countries with a high level of e-readiness would
do well to explain to voters and taxpayers alike
why access to ICT is important for socio-economic
development, and why liberalisation and
deregulation of telecommunications is a key
part of the process. Increasing awareness of
the issues, and of the benefits that will accrue to
all in time, will lead to increased support for
government initiatives, and an understanding
and acceptance of policy directions which,
at first, may seem likely to create disharmony.
Liberalisation has already created tension
in a number of countries, and it is evident
that these problems could have been mitigated
had they been dealt with in a more inclusive way.
Increasing awareness is also likely to increase
demand for, and interest in, ICT access, which,
in turn, will help to make the related initiatives
more viable.
Looking deeper at ICT policy issues that apply to particular 5
Bridges.org compiles information on the e-readiness assessments, conducted
in developing countries by tracking the major international assessment
country groupings
initiatives, and inviting national and other programmes to submit
information about their assessment activities. See bridges org 2002.
The above country groupings can also be used to 6
For more information on the UNDP Human Development Index, see
examine issues in the context of the different levels of http://www.undp.org/hdr2002/.
e-readiness. For example, some of the issues that face 7
Nor has political ideology or the level of democracy in Africa’s countries
been taken into account. These issues are being addressed by NEPAD in
countries with a higher level of e-readiness, such as
other fora, and it is not for the authors of this report to make judgements
e-commerce, authentication and the provision of on these areas, regardless of their impact on e-readiness.
cryptography services, are not high-priority issues for 8
The information in this table is presented to explain some of the anomalies in
the groupings that may seem counter-intuitive. For example, Mozambique
those with a low level of e-readiness. And the reverse is
has undertaken legal and regulatory reform, and has integrated the idea
also true: issues such as basic ICT access and the of ICT, as a basic component of the national socio-economic development
provision of service to rural communities are not so strategy. However, despite these positive developments on a policy level,
Mozambique is still plagued by low levels of infrastructure development
problematic for countries with a higher level of
and low HDI value, largely as a result of the civil war.
e-readiness, although universal service and the provision 9
Not all of the countries in Africa are members of NEPAD, but for
of basic telephony to rural communities are yet to be completeness, we have included all of them in this report, including those
that have no UNDP Human Development Index.
fully achieved, even in countries such as Egypt and 10
There are initiatives to increase the number of government-supported
South Africa. telecentres, and to increase their financial sustainability. But increasing the
number of telecentres has technical infrastructure implications.
The solutions to Africa’s problems must come from
within the continent, and Africa is ready to rise to the
challenge. The vision of a few of Africa’s leaders that led References
to the formation of NEPAD recognised that the road Bridges.org 2002. E-readiness Assessments: Survey of Who is Doing What and
Where. updated 24 March.
ahead was long and challenging. But by removing
http://www.bridges.org/ereadiness/where.html/.
obstacles to development, building indigenous capacity,
United Nations Conference on Trade and Development (UNCTAD).
and fostering partnerships between government, the 2002. E-Commerce and Development Report.
private sector and civil society—both within Africa and http://www.unctad.org/en/docs//ecdr2002_en.pdf.
with the developed world—they have cut to the root of
the problem. And many of Africa’s leaders recognise the
part that ICT has to play. Indeed, it is seen as the
cornerstone on which many of the solutions to the
problems facing Africa will be built. But ICT has to be
more available to people in terms of physical access,
affordability, appropriate technology and locally
relevant content. Achieving e-readiness across Africa
will require bold and ambitious steps. Legal and
regulatory frameworks will have to be overhauled,
sometimes in the face of opposition. Innovative uses of
technology will have to be found, in order to deliver ICT
where it is needed most. Content that is relevant to local
needs must be produced and distributed. Governments
and policy-makers will need help and advice to make
tough decisions. Understanding the problems, and
having a range of recommendations and solutions that
are in a local context, will help Africa’s current and
future leaders and administrators achieve their aims.
NEPAD has the mandate, as well as the ability, to bring
about change on a hitherto unseen scale in Africa, and its
chances of success are enhanced by the commitment that
its leaders have shown.

Notes
1
NEPAD is a holistic, comprehensive and integrated strategic framework for
the socio-economic development of Africa. Its primary objective is to
eradicate poverty in Africa, and place African countries on a path of
sustainable growth and development. See http://www.nepad.org
65

2
For an overview of the NICI initiatives in Africa, see
http://www.uneca.org/aisi/nici.htm and
http://www.uneca.org/aisi/nici/NICI%20in%20Africa.htm.
3
For more information on WOFAN, see
http://www.electroniccommunity.org/wofan/contact_wofan.htm.
4
E-Commerce and Development Report. 2002.

1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
 Annex 1:
Model ICT policy issue paper
The use of radio as an appropriate technology to support
rural development in lesser-developed African states
Background and context
In order to have a positive impact on the lives of the
majority of Africans, the New Partnership for Africa’s
Development (NEPAD) must take into account both the
international context and continent-wide changes taking
place, and the stark realities of the situation on the
ground, within which actions and programmes are to be
implemented.
Africa is faced with an interconnecting web of
challenges, from the need to integrate into an
increasingly complex global economy, to the
strengthening of democracy and pluralism, while
simultaneously addressing the need to ensure food
security, to manage and protect natural resources,
improve standards of living, health and education, and
to value and preserve their cultural heritage. Over the
last three decades, Africa has experienced a major
decline in per capita food production, and in the next
two decades, the continent is projected to be the only
region in the world where malnutrition is expected to
increase by 50% from 1997-2020. Poverty, the lack of an
adequate income, and the inability to purchase or
produce enough food, affects approximately 90% of the
rural African population. Further, most African societies
are characterised by a wide range of ethnic and linguistic
groups spread over extensive geographic areas, with
limited available infrastructure and low levels of literacy
and education.
Communication, information, knowledge and
technology are essential in overcoming the constraints to
rural development and to face these challenges. Rural
communities must be empowered to use appropriate
tools, and to access and convey useful information and
knowledge. They should be able to exchange
experiences, knowledge and techniques, and be actors in
the debate on development issues.
Rural radio was introduced in Africa in the early 1960s,
and remains the most cost-efficient and effective means
of communicating and empowering rural communities,
and of crossing the barriers of distance, illiteracy and
diversity. It has been estimated that by the end of the
1990s there were approximately 12 newspapers, 52
televisions, and 198 radios for every 1,000 Africans,
highlighting the importance of radio in any strategy that
involves rural development. The use of a radio as an
appropriate technology with locally produced and
66
relevant content has proven to be a winning combination
for empowering and supporting the socio-economic
development of rural communities, and particularly for
helping to address the dire challenges of food security.
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
The use of rural radio has developed considerably over
the last twenty years. Radio content has expanded from
its earlier function of covering mostly issues of
agricultural extension, and now encompasses all
aspects of development, reflecting the social,
educational, and cultural needs of the communities that
it serves. It has grown from an instructive medium to
an interactive medium with dialogue, debate, and the
exchange of ideas. These developments have been
enhanced by the creation of regional radio stations to
address specific socio-economic and linguistic needs.
Listening and radio clubs have also been started, to
create dialogue with audiences, encouraging them to
take concrete action, and to provide input and feedback
on the rural programming produced. On a national
level, rural correspondents have been appointed to
collect local information for incorporation into national
broadcasts. Yet, despite the broad reach and recent
developments in rural radio broadcasting, challenges
still remain to ensure the optimal use of radio
communications for development, particularly in the
less developed countries of Africa.
Key challenges
In most African countries, the general framework of the
media is being redefined. Deregulation, the ending of
state monopolies, the emergence of new broadcasting
actors, and the development of enhanced broadcasting
technologies are allowing for an approach to service and
content which foster the development of rural radio
broadcasting that empowers communities and gives
them a voice in matters that directly affect their
livelihoods. However, there are some pitfalls to these
developments.
The increase in the number of broadcasters has resulted
in stations being driven by commercial, political, and
sectarian motives, to the detriment of public service
broadcasting, currently the only guarantee of equitable
access to information and the media for rural
populations. Rural radio stations are dependent on
national policy and regulations for broadcasting licences.
Deregulation of some broadcasting policies in Africa has
resulted in the granting of licences to many more rural
radio stations, yet licences, whether commercial or non-
profit, are still difficult to obtain in some countries.
Public service broadcasting provided for the inclusion of
local content quotas as a condition of licensing, similar to
license obligations placed on incumbent
telecommunication service providers, under what is
known as universal service obligations. However, radio
stations are still constrained by the lack of investment,
low quality programming, and a lack of trained staff.
Initiatives to set up rural radio stations are not properly
coordinated nationally and regionally, and this may
result in their being developed primarily in urban and
peri-urban areas where the potential for advertising
revenue is greater.
Physical infrastructure issues remain a key challenge to be
addressed throughout each NEPAD member state,
whether in terms of basic telecommunications
infrastructure, advanced fibre optic cabling, or even the
basic rollout of electricity. However, even when such
infrastructures are in place, difficulties arise when they
are poorly maintained, or are too costly to be used by
local citizens. Radio, despite its widespread nature, is not
exempt from these challenges. The setting up of rural
radio stations requires an initial capital investment for
hardware and software infrastructure. Production
equipment is often outdated, and always overused. And
since most equipment is acquired from different donors,
or through different aid mechanisms, it is often of diverse
origin, and may comprise end-of-series products. This
makes for serious problems for maintenance and the
acquisition of spare parts.
Challenges also arise in the language medium of the
information exchanges, as well as in the broadcasting
content. Most information for broadcast is available in the
languages of the developed world. Actions are needed to
address the needs of other languages and cultures, as part
of the effort to make ICT more accessible to all people.
This will involve significant investment and support for
local content production, both broadcasting and text, and
the participation of the local community in determining
its programming needs and priorities. Programmes are
usually distributed on one radio network only, and do not
reach the entire country. Coordination and network
formation between radio stations at a local, regional, and
national level will help ensure that optimum use is made
of all the existing facilities to meet the needs of the
audience, to provide the best territorial and linguistic
coverage, and ensure the participation of marginalised
groups, including women and youth. These efforts will
empower women and children who are the most likely
victims of rural poverty and food insecurity. Increasingly,
emphasis is being placed on research and development
processes that empower women farmers, such as access to
resources, and consideration of their indigenous
knowledge. Radio has provided the means for reaching
women farmers, their organisations and rural schools. A
notable example has been the success of the Women
Farmers’ Advancement Network (WOFAN) in Nigeria.
This has resulted in tangible improvements in the lives of
some of the most disadvantaged women and children in
Kano State.
Recommendations
The following recommendations outline some areas
where actions can be taken.
1. Form and support training institutions that
specialise in rural broadcasting. CIERRO (Centre
International d’études en Radios Rurales de
Ouagadougou)1 is the only such regional training
centre in rural radio. It was established in 1978 by the
URTNA (Union des Radiodiffusions et Télévisions
Nationales d’Afrique2). CIERRO has trained
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
producers and technicians in most Francophone
countries, and offers a two-year, nationally
recognised training course, as well as short training
courses. Its functions also include research,
documentation and dissemination of information in
rural radio. Community radio stations, such as Bush
Radio in Cape Town, South Africa, provide in-house
training for community radio station interns and
aspiring broadcasters from around Africa and the
world, including the developed world. There is
currently no institution similar to CIERRO in
Anglophone or Lusophone countries.
2. Consolidate extensive research and numerous
case studies on the use of rural radio for
development. Extensive research has already been
conducted, initiatives launched, and international
workshops hosted, resulting in a wealth of
information on how rural radio can be used for
development. These resources should be tabled in an
inventory, giving organisations access to a
comprehensive list of resources and available tools.
Partnerships should include the World Association of
Community Radio Broadcasters (AMARC) and the
Media Institute of Southern Africa (MISA).
3. Further enhance and support connections
between agricultural research and rural radio.
Agricultural research plays a vital role in improving
rural living standards and bringing affordable food
to all, yet the full potential of such research is not
being realised, principally because communication
between scientists, extension staff, and farmers in the
developing world is weak. The benefits from linking
research with rural radio include:
z sharing of research findings across great distances,
and in languages and terminologies familiar to
audiences in rural areas;
z radio transmission of valuable information to
farmers, including what research is available and
where;
z relay of information concerning what farmers
think
about various technologies;
z preparation for and dealing with natural disasters;
z Dissemination of weather and market information.
4. Continue to reform and coordinate regional and
national communications policy and regulation.
Opening up the airwaves should be encouraged,
and efforts made to harmonise the various existing
legal statutes that determine the legal form and status
of the new stations. Efforts are already underway
67
to examine the existing legal and regulatory
frameworks, and the findings should be
disseminated to other countries as best practice
examples. Incentives should be legislated requiring
private sector broadcasters to provide services to
 rural communities. administer matters relating to national legislation
5. Rural development projects must consider the and the allocation of broadcasting frequencies, and
wider systemic economic, social, and coordinate training and research programmes with
communication needs of rural communities. relevant training bodies.
Rural development strategies should shift from
technology-driven projects, and function on multiple Conclusions
levels, addressing numerous interlinked challenges,
Rural radio remains the only form of information and
in order to effect change. Caution should be
communications technology within the reach of the
exercised, so that unnecessarily technological—often
majority of rural Africans. It is well adapted to the local
expensive—solutions are not implemented, when the
economic, social and cultural conditions of rural
use of simpler radio technology might be able, more
communities, and provides both access to information,
effectively, to address some of these challenges.
and an avenue for expression and communication. It is
Solutions must be technologically appropriate, take
imperative that African policy makers, business and
into account the reality they seek to address, and be
development organisations grasp the importance of
compatible with the grassroots level.
radio, take the necessary steps to support confidence in
this medium, and ensure its survival in Africa,
6. Coordinate deployment, use and maintenance of
particularly at a time when it is often thought more
infrastructure. This is necessary to ensure that
fashionable to direct scarce resources at other, less
Africa does not become the technological graveyard
appropriate technological solutions. To ensure its
of the developed world. An assessment of existing
continued survival and development, radio must adapt
infrastructure should be undertaken, with
to a rapidly changing environment, the infrastructure
international technical and financial partners, to
and equipment challenges that plague its use must be
ensure that technically and economically appropriate
solved, legal and regulatory frameworks governing it
infrastructure is being deployed to meet the needs of
must be modified to enhance its capacity to meet the
the rural communities. There should be a process of
needs of listeners in local languages, and networks
standardisation, and a related development of
formed to provide adequate staff training.
industrial capacity to develop and maintain the
infrastructure.

7. Support and strengthen national regulatory

bodies. Such coordinating bodies will define the
specifications for the different rural radio stations, Annex 1 Notes
ensure components of public service broadcasting, 1
International Centre for Rural Radio Studies of Ouagadougou.
68

1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
Annex 2: Overview of the current economic situation, and cost of
telecommunications in each African country

Real GDP Inflation Population Unemployment Internet Local Telephone Costs (2000)
GDP per capita rate below Rate Access in USD
growth % US$ % poverty line % costs/pm Fixed Line Mobile Cellular
Country (2001) (2001) (2001) % (2001) (2001) (US$)2 (per minute) (per 3 minutes)
Algeria 3.8 $5,600.00 3.0 23.0 (1999) 34.00 $73.08 $0.02 $0.13
Angola 5.4 $1,330.00 110.0 n/a 1
/2 the population $75.00 3 $0.08 $0.24 4
Benin 5.4 $1,040.00 3.0 37.0 n/a $2.40/hr 5 $0.09 $1.01
Botswana6 4.7 $7,800.00 6.6 47.0 (2000) 40.00 $25.82 7 $0.60 $1.30 8
Burkina Faso 4.7 $1,040.00 3.5 45.0 n/a $63.11 9 $0.08 $0.63
Burundi 1.4 $600.00 14.0 70.0 n/a $150 $0.03 n/a
Cameroon 4.9 $1,700.00 2.0 (2000) 48.0 (2000) 30.00 $4,000 $0.06 n/a 10
Cape Verde11 3.0 $1,500.00 3.0 30.0 (2000) 21.00 (2000) n/a $0.04 $0.85
Central African Rep. 1.8 $1,300.00 3.6 n/a 8.00 $6.90/hr 12 $0.49 $0.58 13
Chad 8.0 $1,030.00 3.0 (2000) 80.0 n/a $20.00 14 $0.14 n/a
Comoros 1.0 $710.00 3.5 60.0 20.00 (1996) $573.69 $0.14 n/a 15
Congo Republic 4.2 $900.00 3.0 n/a n/a n/a $0.63 n/a
Côte d’Ivoire -1.0 $1,550.00 2.5 (2000) n/a 13.00 (1998) $4,015.82 16 $0.05 $0.63 17
Djibouti 0 $1,400.00 2.0 50.0 50.00 (2000) $295.72 $0.20 $0.59 18
DRC -4.0 $590.00 358.0 n/a n/a $100.00 $0.36 19
$0.59/min 20
Egypt 2.5 $3,700.00 2.8 22.9 (1996) 12.00 $0. 25/hr 21 $0.01 $0.78
Equatorial Guinea 6.0 $2,100.00 6.0 n/a 30.00 n/a $0.05 n/a
Eritrea 7.0 $740.00 15.0 n/a n/a $25 to $28 22 $0.02 n/a
Ethiopia 7.3 $700.00 6.8 64.0 (1996) n/a $19 and 23 $34 $0.02 $0.26
Gabon 2.5 $5,500.00 1.5 n/a 21.00 (1997) $516.31 $0.15 n/a
Gambia 5.7 $1,770.00 4.0 n/a n/a $19.60 (2000) 24 $0.27 $0.23
Ghana 3.0 $1,980.00 25.0 31.4 (1992) 20.00 (1997) $45.00 (2000) 25 $0.04 $0.90
Guinea 3.3 $1,970.00 6.0 (2000) 40.0 (1994) n/a $20.95 26 $0.09 $0.26 27
Guinea Bissau 7.2 $900.00 5.0 50.0 (1991) n/a $45.00 (10hrs) 28 $0.15 (1999) 29 n/a
Kenya 1.0 $1,000.00 3.3 50.0 (2000) 40.00 $2,500 - $3,500 $0.05 $0.59
Lesotho 2.6 $2,450.00 6.9 49.2 (1999) 45.00 (2000) $114.94 /yr 30 $0.02 $0.62/min 31
Liberia 5.0 $1,100.00 8.0 80.0 (2000) 70.0 n/a n/a n/a
Libya 3.0 $7,600.00 13.6 n/a 30.00 (2000) $45.00 (10hrs)32 $0.03/3 min (1999)33 n/a
Madagascar 5.0 $870.00 7.0 70.0 (1994) n/a Vary: $305.9734 $0.09 $0.78
Malawi 1.7 $660.00 28.635 54.0 (1991) n/a $5.2936 $0.03 $0.35/min 37
Mali 4.8 (2000) $850.00 (2000) 0.8 (2000) n/a n/a NA $0.07 $1.26
Mauritania 4.0 $1,800.00 4.4 50.0 21.00 (1999) $30.00 $0 08 n/a
Mauritius 5.2 $10,800.00 5.4 38 10.0 8.60 $3.43 39 $0.03/3min 40 $0.15
Morocco 5.0 $3,700.00 1.0 19.0 (1999) 23.00 (1999) $44.19/hr 41 $0.08 $0.56
Mozambique 9.2 $900.00 10.0 70.0 21.00 (1997) $25.00 $0.07 $0.46
Namibia 4.0 $4,500.00 8.8 n/a 40.00 (1997) $478.40 42 $0.11/min 43 $0.70/min 44
Niger 3.1 $820.00 4.2 63.0 (1993) n/a $860.53 $0.11 $0.23
Nigeria 3.5 $840.00 14.9 45.0 (2000) 28.00 (1992) n/a n/a n/a
Rwanda 5.0 $1,000.00 5.0 70.0 (2000) n/a $174 to $300 45 $0.02 n/a
Sao Tome and Principe 4.0 $1,200.00 7.0 n/a n/a n/a $0.06 n/a
Senegal 5.7 $1,580.00 3.3 54.0 48.00 n/a 46 $0.11 $0.56
Seychelles 1.5 $7,600.00 6.1 n/a n/a $46.54 47 $0.14 $0.50
Sierra Leone 3.0 $500.00 15.0 (2000) 68.0 (1989) n/a n/a 48 $0.03 n/a
Somalia 3.0 $550.00 Over 100% n/a n/a $1.00/min 49 $0. 40/min 50 n/a
South Africa 2.6 $9,400.00 5.8 50.0 (2000) 37.00 $10 - $20 51 $0.07 52 $0.30/min 53
Sudan 5.5 $1,360.00 10.0 n/a 18.70 $100 54 $0.02 $0.14
Swaziland 2.5 $4,200.00 7.5 n/a 34.00 (2000) $14.00 $0.05 $0.80
Tanzania 5.0 $610.00 5.0 51.1 (1991) n/a Vary with ISPs 55 $0.08 n/a
Togo 2.2 $1,500.00 2.3 32.0 (1989) n/a $16.09 56 $0.10 $0.75
Tunisia 57 4.8 $6,600.00 2.7 6.0 (2000) 15.60 (2000) $15.62 58 $0.03 $0.18/min 59
Uganda 5.1 $1,200.00 3.5 35.0 (2001) n/a $200.00 60
$0.14 $0.36
69

Western Sahara n/a n/a n/a n/a n/a n/a n/a n/a
Zambia 3.9 $870.00 21.5 86.6 (2000) 50.00 (2000) $25.00 61 $0.06 $0.68
Zimbabwe -6.5 $2.450.00 100.0 60.0 (1999) 60.00 $40.00 $0.05 $0.50

Source: Unless stated otherwise, indicators sourced from the CIA World Factbook, 2002 Source: ITU World Telecommunications Dev.Report’02
(for telephone costs)1, and APC/AISI database
(for Internet costs), unless otherwise stated.

1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within

Annex 2 Notes
1
International Telecommunication Union (ITU). World Telecommunication
Development Report: Reinventing Telecoms, World Telecommunication Indicators,
March 2002, ISBN 92-61-09831-2; Place des Nations, CH-1211 Geneva,
Switzerland.
2
Local currencies converted into US$ as of 20 November 2002 rates,
http://www.oanda.com/convert/classic.
3
EBONet: Dialup PPP: Setup US$99, including installation, manual and
training. Unlimited use: US$75 /month (US$64 if annual payment) 19.2kbps
analogue Leased Line: Setup: US$450, US$600/month. Netangola: Personal
account - Setup US$50, Annual subscription US$420. Corporate: Setup
US$240, Annual Sub US$1890. Email only: US$240,
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=AO,
as updated in September 2002.
4
Source: ITU 2002 ibid. Also AISI/NICI indicates the following: Connection:
US$112.9; Monthly subscription: US$37.6; Local call per 3 minutes: US$0.30
(Peak) for year 2000. http://www.uneca.org/aisi/nici/angola/anginfra.htm.
5
OPT Internet charges: Dial-up access to Internet - Startup cost: US$10 or 4,950
CFA Francs (payable once) - Usage cost: 51 CFA Francs per minute; Email
account - Account creation: 20,064 CFA Francs - Monthly subscription:
10,032 CFA Francs; Analogue Leased Line (4 wire, 28Kbps or lower) -
Account creation: 150,018 CFA Francs - Monthly subscription cost: 400,026
CFA Francs; and Digital 64Kbps Leased Line + Class C address - Router
rental: 60,010 CFA Francs/ month - Setup: 1,000,032 CFA Francs,
subscription: 2,800,050 CFA Francs/month.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=BJ.
6
See the Central Statistics Office of Botswana at http://www.cso.gov.bw/cso/.
7
Info Botswana, Dialup: Unlimited Use - BWP 150 per month, payable quarterly
or BWP 100 per month, payable annually. Email only: BWP 80 per month,
payable quarterly or BWP 53 monthly payable annually; GIA Botswana/
Abacus Computing: Dialup: Setup - BWP 140, Unlimited use - BWP 80/month
/BWP 470/year. Web space hosting: - up to 2MB for individuals free,
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=BW.
8
Public phones are charged at BWP P0.50 per 1st meter period –
See BTC charges in http://www.btc.bw/tar_psb_pp.htm, and
http://www.uneca.org/aisi/nici/botswana/botsinfra.htm.
9
ONATEL Internet Charges: Dial-up access - Startup: 6500 CFA Francs -
Connect time 1000 CFA Francs/hour; Analogue Leased Line (4 wire, 33,6K
bps - Account creation: estimate on request - subscription: 550,000 CFA
Francs/month; Digital 64Kbps Leased Line with Class C address - Account
creation: estimate on request - subscription: 850,000 CFA Francs/month;
Email Account - Account creation: 8500 CFA Francs - subscription: 5200
CFA Francs/month; All prices subject to 15% tax.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=BF.
10
No data on cellular costs, but landline cost are elaborated as follows:
IntelCam - Leased line: US$4000/month (2M CFA Francs) for a 64Kbps link;
Dialup: Setup - 20 000 CFA Francs. 2 hours/month - 6,000 CFA
Francs/month. 10 hours/month - 20,000 CFA Francs/month. 20
hours/month - 35,000 CFA Francs/month. Additional hours: 2000 CFA
Francs/hour. Ditof – Dialup: 2000 CFA Francs/hour. Uninet - Dialup: 2
hours/month - 2000 CFA Francs/hour. Analogue leased line: 400,000 CFA
Francs/month, (email only: 200,000 CFA Francs/month). Website hosting: 1-
5MB 35,000 CFA Francs, 50MB 200,000 CFA Francs/month, server co-
location 600,000 CFA Francs/month. Centre Syfed: Free for public
institutions, others: Monthly fee: - Minitel: 4,000 CFA Francs/month, Minitel
or PC: 6,000 CFA Francs; Local calls cost 40 CFA Francs / 6 minutes -
US$1.55/hour. About 30% cheaper after hours US$1.1/hour.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=CM.
11
Also see Instituto Nacional de Estatistica Cabo Verde, at
http://www.ine.cv/http://wwwindex.html.
12
Dialup Internet costs 15,000 CFA Francs to set up and 10,000 CFA
Francs/month plus 60 CFA Francs/minute (US$6.9/hour).
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=CF.
13
Estimates for year 2000. See http://www.uneca.org/aisi/nici/car/carinfra.htm.
14
CNAR provides email only facility: US$20/month. Local calls cost 100 CFA
Francs/minute (US$10.50/hour).
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=TD.
15
Dialup Internet access costs 5,000 FCM/month, unlimited time. Local calls
cost 25 FCM 3 minutes. The Comorian Franc is fixed at 75 per French franc.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=KM.
16
Centre Syfed: free to non-profit organizations Netafric - Email only: 10 email
addresses for 20,000 CFA Francs setup fee, 40,000 CFA Francs/month, 3,000
/hour, 50 email addresses 150,000 CFA Francs/month, 2,000/hour. Full
Internet + 1 email - 3000 CFA Francs/hour 8-18h, 1500 CFA Francs/hour 18-
70
8h, or 25,000 CFA Francs/month for up to 15 hours, 2000 CFA Francs/hour
for supplemental hours, or unlimited connection for 35,000 CFA
Francs/month (45,000 CFA Francs/month includes web page). Web hosting
@ 120,000 CFA Francs/Year for 200Kb, 204,000 CFA Francs/year for up to
10MB.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=CI.
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
17
Data estimates for 1999. See
http://www.uneca.org/aisi/nici/Cote%20d’Ivoire/coteinfra.htm.
18
Estimates for 1999. Connection charge US$281/month; monthly subscription:
US$50.60; PSTN three minute local call US$0.59.
http://www.uneca.org/aisi/nici/Djibouti/djbinfra.htm.
19
Dialup Full Internet – InterConnect: US$100/month for 10 hours, US$10/
hour for additional hours. Local calls via Telecell cost US$0.36/minute cell
to cell and US$0.59/minute cell to OCPT. Local calls via Comcell cost
US$0.30 cell to cell, and US$0.55 cell to OCPT.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=CD.
20
Local call via Telecel per minute – Cell to Cell: US$0.39, Cell to OCPT:
US$0.59; Local call via Comcell per minute - Cell to Cell: US$0.30, Cell to
OCPT: US$0.55 in 1999.
http://www.uneca.org/aisi/nici/DRCongo/drcinfra.htm.
21
Have a non-cost dial-up, and a US$0.25 per hour charge. Hrvoje Hrnjski,
Africa ICT Policy Monitor, Egypt boasts free Internet access, 09 September 2002,
http://www.apc.org/english/rights/africa/?-2-Egypt; Lulcas Ledwaba,
ITWeb, Egypt takes on the digital divide, 31 October 2002.
http://www.itweb.co.za/sections/quickprint/print.asp?storyID=128393;
and Mats Palmgren, Egyptians Flock to New Net Plan, Wired News, 25 June
2002. http://www.wired.com/news/business/0,1367,52993,00.html; see also
22
Setup: US$55. Subscription US$28/month for an account with a one megabyte
volume limit. Tfanus: US$25/month.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=ER.
23
Individual: Setup: US$56. Subscription US$34 /month for 15 free
hours/month, US$19/month for 8 free hours a month. US$4/hour for
additional hours. 1MB free storage. International NGOs, Embassies and
Business Sectors: Setup: US$113. Subscription US$75/month for 40 free
hours a month. US$4/hour for additional hours. 2MB free storage. Public
Education, Health and Agricultural Sectors: Setup: US$38, Subscription –
US$25/month for 40 free hours a month. US$2/hour for additional hours.
2MB free storage. All non-profit organisations: Setup: US$56. Subscription
US$38 /month for 40 free hours a month. US$2/hour for additional hours.
2MB free storage. Additional email boxes - US$5 /month. Additional Hard
disk space US$2/month/MB.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=ET.
24
See http://www.gamtel.gm/
25
See Network Computer Systems (NCS). http://www.ghana.com
26
40,000.00 GNF (= US$20.95 as of 20 November 2002,
http://www.oanda.com/convert/classic). Source: ETI-BULL.
http://www.eti-bull.net, and Mirinet: http://www.mirinet.net.gn/
27
As of 1999, connection was US$70; monthly subscription: US$14.60; 3-minute
local call (Peak: US$0.31, Off-peak: US$0.21) for mobile cellular calls.
http://www.uneca.org/aisi/nici/Guinea/guineainfra.htm.
28
See Guinea Telecom (GT). http://sol.gtelecom.gw and
http://www.uneca.org/aisi/nici/Guinea-Bissau/bisinter.htm.
29
See http://www.uneca.org/aisi/nici/Guinea-Bissau/bisinfra.htm.
30
Email, Software and extra services: email, web browser and server space for a
personal web page, cost: R 1100 (R1,100 = US$114.94 as of 20 Nov.2002,
http://www.oanda.com/convert/classic) for Internet Subscription for a year
with LEO, http://www.lesoff.co.za/services/default.htm.
31
Connection charge is US$16.40, and monthly subscription is US$16.40,
http://www.uneca.org/aisi/nici/lesotho/lesinfra.htm.
32
Costs were US$45/month, including 10 free hours / month, and a US$4/hour
for additional hours in 1999.
http://www2.sn.apc.org/africa/countdet.cfm?countries__ISO_Code=LY.
33
In 1999, PSTN connection charge (residential) was: US$124; Connection
charge: US$533; Monthly subscription (residential): US$46 and US$46.10 for
businesses, http://www.uneca.org/aisi/nici/Libya/libyinfra.htm.
34
Com#Pro Tariffs. 19.2Kbps leased line: Setup: 2500 FRF, Subscription 2000
FRF/month (2000.00 French franc (FRF) = 304.9 euro (EUR) 304.9 Euro =
305.967 US Dollar as of 20 Nov 2002,
http://www.oanda.com/convert/classic), 28.8Kbps leased line: Setup: 4 000
FRF, Subscription 2500 FRF. DTS. - Monthly fees for dial-up internet access:
36FRF. Up to 10 email boxes, plus 1Mb disk space for web hosting per email
box (36FRF/month per extra 1 Mb.) - Internet connections are taxed at
0.5FRF/min. Simicro. Dialup subscription (includes unlimited email
addresses, 1MB disk space, software and support from 7- 22hr: Setup: 20
000MGF, 5 hours/month - 84 000 MGF /month, 10 hour/month -160 000
MGF/month, 20 hour/month - 310 000 MGF/month, 30 hours/month -
450,000 MGF/month. Additional time - 300 MGF/minute. Additional MB
web space - 20,000 MGF/month; and for Sinergic. Dialup account: Setup:
20,000 MGF, 1.5hours/month - 57,000 MGF/month, 3 hours/month – 84,000
MGF/month, 5hours/month – 126,000 MGF/month, 40 hours/month -
864,000 MGF/month. Additional time - 570 MGF/minute.
http://www2.sn.apc.org/africa/countdet.cfm?countries_ISO_Code=MG.
35
Inflation rate was 16.1 in July 2002 and 16.5 in August 2002. See Malawi
Statistics in http://www.nso.malawi.net/,
http://www.un.org/Pubs/CyberSchoolBus/infonation/e_infonation.htm.
36
MalawiNet: Email only: Setup: 2000 MWK, Subscription 420 MWK/month,
Free Time - 2hours/month, additional time 2.4 MWK/minute Dialup
Internet: Setup: 4160 MWK, Subscription 2500 MWK/month, Free Time - 20
hours/month, additional time 1.6MWK/minute. Additional email addresses
- Setup 1500 MWK, 1000 MWK/month post office charge and 420
MWK/month per user id. 9.6Kbps analogue lased line. Own router Setup:
US$1,200, Subscription: US$700/month. Router included - Setup: US$1500,
Subscription US$950/month. Drop in service - 1000Mk/month. Web
hosting. 5MB storage: Setup: US$135, Subscription US$135/month, up to
25MB storage: Setup: US$400, Subscription US$300/month. Web design.
US$65/hour
http://www2.sn.apc.org/africa/countdet.cfm?countries_ISO_Code=MW.
37
“Celtel and TNM were provided with licenses, which were followed by
overwhelming reception of mobile phone technology among many
Malawians, especially the briefcase-carrying business community…while
people were initially enthused with the modern gadgets, consumers have
lately been complaining of the ever-rising tariff rates. It now costs an average
of US$0.35 per minute for a subscriber…”. Hobbs Gama, All Africa.com, 21
October 2002, http://allafrica.com/stories/200210210658.html.
38
Annual inflation rate stood at 4.2% in 2000, and 5.4% in 2001 in Mauritius. See
the Central Statistics Office (CSO) of Mauritius at
http://ncb.intnet.mu/cso.htm.
39
The cost of access is 100 MUR a month (100 MUR = US$3.43 on 20 Nov 2002,
http://www.oanda.com/convert/classic), and 100 MUR for each email
address and then 300Rs for 10 hours. The cost of web hosting is 2,000 MUR
per mega-octet. 19.2Kbps leased lines are 5000Rs setup and 11,500Rs/month
in Port Louis, 64Kbps over X.25 is available for 35,000Rs / month. Cost of a
local call is 1 MUR for 3 minutes, (1FRF=3.55 MUR), but for Internet calls
this fee is bundled into the above internet access charge and is not billed for
separately.
http://www2.sn.apc.org/africa/countdet.cfm?countries_ISO_Code=mu.
40
See also the Mauritius telecom rates at
http://ncb.intnet.mu/media/contelcm.htm#intnet.
41
ACDIM: Monthly - 450 MAD (= US$44.19 as of 20 Nov 2002,
http://www.oanda.com/convert/classic), Off Peak account: 250 MAD
(12h30, 14h00, 20h30, 7h00 every day, Email only: 150 MAD , Installation:
250 on site, 150 MAD on premises, no setup fee if user installs. Azure: Usage:
1 MAD every 2 minutes or 650MAD unlimited. Leased lines: 2500 MAD
setup + 7000 MAD/month. Diagone MarocNet: 240 MAD /month,
unlimited usage. Elan: Private acct: 300 MAD a month, corporate account
500 MAD /month (both unlimited access) Group Open SA: 500 MAD
/month for individuals, 699 MAD /month for company account. 300 MAD
/month for access only between 7h00 and 16h00. L&L: 300 MAD /month, if
paid annually. Email 100/month. + 0.80 MAD/ 3 minutes peak hours, 40
MAD/ 3 minutes off peak. MaghrebNet: 350 MAD/monthly. Leased line:
2000 MAD setup fee, 4000 MAD/month MTDS: Educational acct: 280 MAD
/15 hours, 350 MAD/20 hours, individual acct: 400 MAD/ 30 hours, 500
MAD/ 30 hours. Corporate ACCT: 720 MAD/40 hours, 900 MAD/ 60
hours. 20% discount for payment 1 yearr in advance. Additional hours 35
MAD. Wafenagoce: 300 MAD/monthly, for 8 free hours a month for
businesses, or 5 free hours a month for individuals. Additional hours 25
MAD/hour.
http://www2.sn.apc.org/africa/countdet.cfm?countries_ISO_Code=MA..
42
See http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=NA..
43
It is NAD$ 35c per minute for a local call. National calls under 100km went
up with 17.6% from 51c to 60c (excl. VAT) per minute. Calls under 200km
went down with -1% from NAD$1 to 99c per minute and calls above 200km
went down with -5.4% from NAD$1.11 to NAD$1.05 (June 2001), source:
Telecom Namibia. http://www.telecom.na/toocheap.html.
44
Connection fee is US$36.00, monthly subscription US$14.40, local call at peak
hours is US$0.70 and US$0.28 at off-peak in year 2000.
http://www.uneca.org/aisi/nici/namibia/naminfra.htm.
45
RwandaTel (http://www.rwanda1.com) tries to charge US$4,500 per ISP and
to mandate that ISPs should charge US$50.00/user per month. Based on a
population of 50 subscribers, the ISPs proposed to charge the user a
monthly fee between US$174 (proposed by one of the ISPs) and US$300
(proposed by the other); In relation to the monthly charge per ISP, the
USAID Leland Initiative asked Rwandatel to charge only US$2,500 per ISP.
A compromise between the three parties (which excluded consumers)
should lead to a mid-point price.
http://www.UNECA.org/AISI/NICI/rwanda/rwaninter.htm.
46
Setup: 25 000 CFA Francs (without sales tax - VA), Monthly: 10 000 CFA
Francs VA, 4 hours Training at Telecom-Plus: 30 000 CFA Francs VA per
person Metissacana Cybercafe: 2,000 CFA Francs/hour or 8,000/month
unlimited access.
http://www2.sn.apc.org/africa/countdet.CFM?countries__ISO_Code=SN.
47
Atlas’ access charges are: For commercial companies: 3,000 SCR setup fee,
1000 SCR a month for 4 email addresses and 20 hours of connection time.
1.6 z Building Capacity to Narrow the Digital Divide in Africa from Within
For individuals: 750 SCR setup fee, 250 SCR/month (250.00SCR = $ 46.54 as
of 20 Nov 2002. http://www.oanda.com/convert/classic) for one address
and 20 hours of connection time.
http://www2.sn.apc.org/africa/countdet.CFM?countries__ISO_Code=SC.
48
See Internet in Sierra Leone.
http://www.firstmonday.dk/issues/issue2_2/kargbo/#dep4.
49
While this may appear inexpensive compared to many other African
countries, income is very low in Somalia and affordability is still a
problem. The high cost of subscribing to the Internet is seen as the reason
why very few people have opened an account. The initial installation fee is
US$120, equivalent to the monthly income of some Somali families. It costs
US$30/month to rent a line, and $1/minute (2002) to connect to the
Internet. http://news.bbc.co.uk/1/hi/world/africa/459319.stm. See also
Abdigani Jama, Secretary General of the STA, January 2002, SW News.
http://www.somaliawatch.org/archivedec01/020111101.htm.
50
Competition is reducing international call charges in Somalia. The current
price war was started by Netexchange and TeleAtlantic in December 2002,
when they reduced their prices to US$0.40 and $0.35/minute respectively.
http://allafrica.com/stories/200203250235.html.
51
See http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=ZA.
52
Telkom costs: ZAR0.70c per minute for domestic calls (with the radius of
50km), during office hours, and lower after peak hours.
http://www.telkom.co.za/pricing/content/nationalcall.jsp.
53
Cellular charges between three operators almost similar: peak voice calls:
ZAR2, 85/min ($0.30 as of 20 Nov 2002,
http://www.oanda.com/convert/classic); off-peak voice calls: ZAR1,
55/min; SMS peak: ZAR0, 75 cents; and SMS off-peak: ZAR0, 30 cents
http://www.vodacom.co.za/prepaid/packages.asp; also see CellC
charges: ZAR2, 60 during peak hours, etc
http://www.cellc.co.za/chatpacks.asp?sPage=chatpackscharges, and MTN
at http://www.mtn.co.za/personal/payg/.
54
Sudatel Dialup Internet: Embassies, NGOs and businesses pay US$500 to
subscribe and US$100 in monthly service fees. Government ministries and
universities pay US$345 and US$145 respectively to sign up, then US$45
per month. Individual subscribers pay US$200 to subscribe with monthly
service charges of US$40,
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=SD.
55
SITA: 9.6Kbps international leased line - US$4500/month. 64Kbps -
US$14,000/month. COSTECH: US$20/month and US$0.1 per Kb of
international traffic. Datel 19.2Kbps wireless link: US$US$350/month for
each end (US$700/month total). Muhimbili: Email - US$20/month.
Installation - US$50. UDSM: Users on campus - US$10/month. External
users - US$150/month. CyberTwiga: Email only - US$50/month.
Unlimited Web/Email - US$75/month. Setup is free if self-installed.
US$200 for an on-site installation,
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=TZ.
56
An unlimited dialup account subscription costs about 10,000 CFA Francs
per month (= US$16.09 as of 20 Nov 2002,
http://www.oanda.com/convert/classic). Free access is provided to
members of the UNDP’s SDNP programme. Dialup access to the Internet
through Togotel costs 60 CFA Francs/ 4 minutes. Cafe dialup Internet
costs 50,000 CFA Francs/Month.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=TG.
57
Also see Tunisia Institut National de la Statistique at
http://www.ins.nat.tn/_private/idc/page01141.idc.
58
The cost of Internet access is 21 TND/month for unlimited access (= $15.62
as of 20 November 2002, http://www.oanda.com/convert/classic), plus 40
Dinars for software and installation. (1 TND = US$0.80 as of 20 November
2002). Calls to the Internet are a fixed price throughout the country,
regardless of the distance dialled -0.15 FRF/minute
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=TN.
59
Connection fee was US$105/month, subscription was US$13.17, and an
additional US$0.18 per minute in 1998.
http://www.uneca.org/aisi/nici/Tunisia/tunisinfra.htm.
60
BushNet: Radio equipment US$6,500 installation and training, US$1,000
running costs: No extra charge if customer is polled only once a day,
US$200/month if a customer chooses to be polled more than once a day,
US$0.3/ Kb of data (typical customer usage is currently at about US$120
per month). Infocom offers email for US$30 per month, unlimited full
Internet access for US$50. Most of the other ISPs are now providing
wireless Internet connections for as little as US$200/month. Together, the
four active ISPs had some 4100 accounts at the start of 2000, serving an
71
estimated 25,000.00 users.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=UG.
61
Zamnet: US$25/month for full Internet access. Local calls cost US$2.5/hour
peak, US$1.5/hour off-peak.
http://www2.sn.apc.org/africa/countdet.CFM?countries_ISO_Code=ZM.
 Chapter 1.7
How the Congo Decomposed
in the 1990s
Philippe Beaugrand1, International Monetary Fund
In The Economic Consequences of the Peace (1919, p. 149),
John Maynard Keynes wrote: “Lenin was certainly
right. There is no subtler, no surer means of overturning
the existing basis of society than to debauch the
currency.” Both Lenin and Keynes correctly foresaw
that high inflation and currency depreciation would
ruin a country and destroy its political and social fabric.
As a matter of historical record, however, the causality
has run both ways. The “debauched currency”
has often been the effect rather than the cause of
an “overturned society.”
Overview
The story of the Democratic Republic of the Congo—
then known as Zaïre2—in the 1990s offers a remarkable
example of hyperinflation pathology. Like the
decomposition of Weimar Germany in 1922–23, or
post-war Hungary in 1945–46, the Congo was faced
with overextended financial commitments and a
crumbling political system, and the country sought an
easy way out through the money-printing machine.
The expedient slightly relieved financial constraints
for a short period, but the macroeconomic situation
quickly worsened, ultimately contributing
to the end of the Mobutu regime. A unique feature
of the Congo’s experience in the 1990s was the
extraordinary length of the inflationary period,
with inflation remaining very high for more than
a decade.
This paper reviews the story of how the Congo
“decomposed” in the 1990s and highlights some
features of its inflationary policies. It concludes by
stressing that hyperinflation and rapid currency
depreciation are not so much the result of misguided
policies, as the consequence of a failed political
system. Economic development requires above all
a stable political and social environment, based on the
rule of law.
High inflation and hyperinflation
Following the classic study published by Phillip Cagan
in 1956, a period of hyperinflation is commonly
defined as beginning in the month when the
monthly rate of increase in prices exceeds 50 percent,
and ending in the month before the increase
in prices drops and stays below that level for at
least a year. Based on this criterion, the Congo
underwent two short episodes of hyperinflation:
from October 1991 to September 1992, and from
November 1993 to September 1994, with short-lived
bouts in August 1998 and December 1999.
In a broad sense, the country was continuously in
the vicinity of hyperinflation throughout the 1990s
73
(Figure 1). Apart from a brief lull in 1997–98,
the Congo’s annual rate of inflation remained
generally in excess of 500 percent from 1991 to 2000,
with a monthly average of 22 percent.
1.7 ❚ How the Congo Decomposed in the 1990s
 Figure 1: Monthly inflation rate

250

225

200

175

150
Percent

125

100

75

50

25

-25
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Source: Data provided by the Congolese authorities; and IMF staff estimates.

Historically, most episodes of hyperinflation last
from a few months to no more than a couple of years.
Hyperinflation tends to bring itself rapidly to an end,
because it generates the seeds of the collapse of the
financial system. As the value of money tumbles,
it loses its raison d’être and financial intermediation
is no longer possible. Over the last fifty years,
the longest episode of hyperinflation was recorded
in Nicaragua, from June 1986 to March 1991 (Fischer
and others, 2002, Table 2, p. 840). Even though
it does not strictly qualify as such in Cagan’s terms,
hyperinflation in the Congo was at least as staggering
in many respects. In particular, its period of very
high inflation lasted longer and exhibited record high
annual and quarterly increases in consumer prices.
Table 1 below shows the main characteristics of recent
episodes of very high inflation. The countries
selected were those that experienced a 12-month
rate of inflation of at least 1,000 percent over the last
few decades and the period identified was based on
a threshold of 25 percent monthly inflation;
74
i.e. the period begins when the monthly increase
in prices exceeds 25 percent, and ends in the month
before the increase in prices drops and stays below
that level for at least one year.
The Congo stands out, together with Nicaragua and
Brazil, as having experienced the highest rates and
the longest period of very high inflation in recent
times. In the 12-month period through September 1994,
consumer prices in the Congo rose by more than 90,000
percent— an increase by a factor of 900. Meanwhile,
the Congo’s currency—the new zaïre, adopted in the
wake of a monetary exchange conducted in late 1993—
depreciated as fast as prices increased: 1,000 currency
units in September 1993 were worth 1 unit only a year
later! The Congo also had a record high inflation of
3,300 percent during the three-month period ending
in January 1994.3 Its period of very high inflation lasted
longer than in any other high inflation period
recorded in history: more than ten years, with a lull
in 1997–98. However, the cumulative inflation in
the Congo (64 billion percent) was less than half the
rate recorded in Nicaragua (150 billion percent).

1.7 ❚ How the Congo Decomposed in the 1990s

Table 1: Episodes of very high inflation in the late twentieth century
(percentage changes)

Highest Inflation Average

Countries Annual1 Monthly Periods2 Duration Cumulative Monthly
(months) Inflation Inflation
Democratic Republic of the Congo 91,253 250 Oct 90 – Jan 97 76 63,727,999,422 30.6
Aug 98 – Jun 01 35 9,872 14.1
Nicaragua 63,776 261 May 85 – Mar 91 71 149,701,249,470 34.7
Armenia 27,020 438 Jan 93 – Dec 94 24 204,638 37.4
Bolivia 23,447 183 Aug 83 – Jan 86 30 643,293 34.0
Argentina 20,266 197 Aug 75 – Apr 76 9 379 19.0
Sep 84 – Jun 85 10 746 23.8
Jul 88 – Feb 91 32 218,552 27.2
Croatia 19,449 64 Jun 89 – Jan 90 8 1,433 40.7
Nov 91 – Oct 93 24 213,198 37.6
Peru 12,378 397 Jul 88 – Aug 90 26 1,153,642 43.3
Angola 12,035 303 Jan 93 – Jan 97 49 23,154,061 28.7
Ukraine 10,155 91 Jun 92 – Dec 94 31 176,036 27.3
Brazil 6,821 82 Sep 88 – Jun 94 70 1,450,671,496 26.6
Kazakhstan 3,115 55 Jan 93 – Jul 94 19 15,073 30.3
Belarus 2,796 158 Jan 92 – Feb 95 38 1,329,637 28.4
Georgia 2,668 211 Feb 94 – Sep 94 8 2,767 52.1
Bulgaria 2,019 242 Dec 96 – Feb 97 3 553 86.9
Azerbaijan 1,900 118 Apr 91 – Jan 95 46 1,532,656 23.3
Poland 1,173 77 Aug 89 – Jan 90 6 644 39.7
Russia 1,067 38 Feb 92 – Aug 93 19 3,591 20.9

1
12-month running annual rate.
2
Using a threshold of 25 percent monthly inflation. Excludes brief episodes of high inflation, especially for transition economies for which insufficient data are
available prior to 1991.
Source: Data compiled from IMF, International Financial Statistics.

Seigniorage and economic month period. Twelve-month running inflation surged

dislocation
The surge in the Congo’s inflation from late 1990 onward
reflected an attempt by the authorities to spend more
than they were able, given the state’s capacity to raise
revenue. This endeavor quickly turned into a Faustian
bargain and ultimately led to the demise of the regime.
As in many other countries in Africa and elsewhere, the
pressure toward democratization in the Congo built up
in 1990. Faced with growing discontent and widespread
demands for political change and improved living
standards, President Mobutu initiated a transition
process that was supposed to lead to multiparty
elections. His government awarded large wage increases
to civil servants, which nearly trebled the government’s
wage bill. At the same time, years of poor maintenance
resulted in a cave-in at a copper mine operated by the
parastatal company Gécamines and revenue from export
royalties fell. The government was able to settle the
promised wage increases only by resorting to money
from 40–50 percent to 500 percent in early 1991.4
The government’s attempt to extract seigniorage was
partly successful at first, but the financial situation
quickly worsened because of rising inflation and thriving
dollarization.5 As a first approximation, seigniorage can
be estimated by measuring the increase in broad money
and converting the local currency value into U.S.
dollars.6 On this basis, monthly seigniorage gains
amounted to US$10–20 million in the first half of 1990
rose to US$45 million in the third quarter, and to US$77
million in the fourth quarter. At the same time, however,
monthly inflation surged from 5–6 percent in the first
three quarters to 35 percent in the last quarter of 1990,
while the value of the stock of broad money (at the
parallel market exchange rate) fell from US$500 million
to US$380 million by year’s end. Thus, in order to
continue extracting seigniorage on a similar scale, the
Zaïrian authorities had to keep on raising the rate of
money growth, thereby pushing up inflation and
entering a vicious spiral, threatening the complete
75

collapse of the financial system.

printing on a large scale. In the six months through
March 1991, broad money—i.e. banknotes and banks In addition to the decline in mining revenue mentioned
deposits denominated in domestic currency—grew by above, the surge in inflation also had a negative effect on
225 percent, up from 60 percent during the previous six- other government revenues. Specifically, inflation

1.7 ❚ How the Congo Decomposed in the 1990s

 lowered the real value of tax and customs revenues,
given the normal lag of 4–6 weeks between assessments
and actual collections.7 Coupled with a severe
contraction in economic activity brought about by the
growing instability, this resulted in a drastic fall of
government revenue, from the equivalent of US$75
million per month in the first half of 1990, to US$55
million in the second half of that year, and to less than
US$40 million in the early months of 1991—a near-
halving in less than one year.
From the economic, social, or political points of view, the
Congo’s situation continued to deteriorate from 1991–94.
Average monthly inflation rose from 11.5 percent in 1990
to a range of 30–40 percent in 1991–93, and to 47 percent
in 1994. The Central Bank experienced serious difficulties
in continuing to expand the money supply at the fast
pace required by the government, because of the rising
cost of printing currency, and the public’s resistance to
the introduction of higher-denomination banknotes. As a
result, there were recurrent shortages of cash, which
prevented the government from meeting its financial
commitments. From 1992 onward, the issuance of
higher-denomination banknotes provoked boycotts,
often accompanied by riots, looting, and mutinies, in
which government workers and soldiers demanded back
pay and wage increases. Meanwhile, the political setting
veered toward anarchy: during most of 1993, the Congo
had two Prime Ministers and two Parliaments, but no
working government!8
In an attempt to address its predicament, the Central
Bank organized a currency exchange in October 1993,
in which the zaïre was replaced by the new zaïre at a
parity of Z 3 million = NZ 1 and an initial exchange rate
of NZ 3 per US dollar. Despite difficulties in forcing
acceptance of the new zaïre, the government succeeded in
unloading massive amounts of the new currency. The
stock of currency doubled in October 1993, again in
November, and then trebled in December, yielding a
cumulative growth of 1,100 percent in
only three months. Inflation naturally soared to
unprecedented levels, reaching 248 percent in the
month of November 1993 alone, 240 percent in
December, and 190 percent in January 1994, or a
three-monthly rate in excess of 3,300 percent! At the
same time, government revenue collapsed to US$10
million per month in the last quarter of 1993, and less
than US$5 million in January and February 1994.9
The curious case
of the missing currency
Even considering the debauch of currency issue during
the last quarter of 1993, the level of inflation was
extraordinarily high in that period. The extension of
dollarization and the rise in the opportunity cost of
holding money, due to inflation itself, translated into a
faster velocity of money, and therefore into a higher rate
of inflation for any given rate of money growth.10 Yet,
a brief look at the time series (Figure 2) suggests that
special factors may have been at play in late 1993 and
in 1994.

Figure 2: Broad money growth and inflation

1,000

900 Consumer prices (peak of

3,300 percent in January
800
1994)

700
Percentage change

600

500

400

300

200
Broad money
100

0
76

Mar Jun Sep Dec Mar Jun Sep Dec

1993 1993 1993 1993 1994 1994 1994 1994

Source: Data provided by the Congolese authorities; and IMF staff estimates.

1.7 ❚ How the Congo Decomposed in the 1990s

Indeed, there were indications in 1994 that part of the
currency issued was not accounted for in the balance
sheet of the Central Bank. The parallel issuance of
currency was facilitated by a shift to a less reputable
supplier of banknotes—ostensibly as a means to lower
printing costs— who reportedly agreed to make
supernumerary deliveries. This also coincided with an
extraordinary situation at the Central Bank, which for
many months responded only to President Mobutu but
refused to heed orders from the Prime Minister.11
It is nearly impossible to ascertain the amount of parallel
currency issued in 1993–94, but indirect estimates
suggest that it may have been as high as 10–20 percent of
the currency stock, representing a market value of about
US$1–2 million per month. While not very large in
absolute terms, it is likely that this amount contributed
significantly to further eroding confidence in the Congo’s
monetary system.
Short-lived stabilization
From late 1994, Prime Minister Kengo succeeded to some
extend in reining in inflation and restoring financial
stability. By early 1995, inflation had nearly halted and
government revenue began to recover. Positive economic
growth was recorded for the first time in seven years,
and the government was able to settle its wage bill on
time, albeit at a much depreciated rate. By the mid-1990s,
average monthly wages in the public sector had fallen to
about US$10–15 per employee, as compared with US$60
in 1990.
In spite of the noteworthy progress, the Congo’s
financial situation remained precarious. Part of the
recovery in government revenue was taking the form of
a buildup of bank deposits, which could not be spent
because of a shortage of currency. Commercial banks
held large illiquid excess reserves with the Central Bank,
and this gave rise to a steep discount—up to 50
percent—of checks over cash. In order to restore
normalcy, the government had to sterilize part of its
revenue by freezing its deposits with the Central Bank,
which would have gradually absorbed the overhang of
illiquid bank reserves. In mid-1995, however, the
pressure to settle wage arrears and resume urgent public
works became too strong and the government started
using up its accumulated balances with commercial
banks. By the end of the year, inflation had returned to
monthly rates in excess of 30 percent.
Throughout 1995 and 1996, the Central Bank continued
to face popular resistance to the issuance of large-
denomination currency. While this limited the scope for
monetary expansion, it also contributed to fueling
inflation by shrinking net seigniorage gains. In 1995, the
cost of issuing currency (including transportation
charges) was perhaps as high as US$80 million (for a
recorded total of 832 million new banknotes). Given the
depletion of its foreign asset position and the near
disappearance of domestic money market operations, the
Central Bank had virtually no income of its own. For the
whole of 1995, the increase in the currency stock
represented the equivalent of US$180 million. Therefore,
nearly half of the currency issued by the Central Bank was
used to acquire foreign exchange in order to pay for the
issuance of new currency!
Halt and resumption of inflation
Although inflation continued in the second half of 1995
and 1996, it broadly stabilized at a monthly average of
less than 20 percent. The Congo made little progress
toward political normalization, and the regime
weakened rapidly, as President Mobutu was terminally
ill and often hospitalized abroad for cancer treatment. In
late 1996, a rebellion erupted in the eastern part of the
country, actively supported by Rwanda and Uganda.
The government was unable to mount a counteroffensive
and quickly lost control of many provinces. Facing
hardly any military resistance, the rebels completed their
conquest in May 1997, and their leader, Laurent Désiré
Kabila, proclaimed himself President upon his
triumphant entrance into Kinshasa.
Inflation halted instantly and even turned into deflation
for about six months, as the demand for domestic
currency picked up (from May to October 1997,
consumer prices fell by a cumulative 36 percent and the
appreciation of the new zaïre against the U.S. dollar was
of a similar magnitude). The new authorities prepared a
comprehensive economic recovery program, including a
monetary reform in which the new zaïre would be
replaced by the Congo franc. In the run-up to the
currency exchange, which took place successfully in
August 1998 at a parity of NZ 100,000 = CF 1, the Central
Bank used available stocks of money-printing paper to
expand the supply of new zaïres. Although this involved
some risks and led to somewhat higher inflation (a
monthly average of 1.2 percent during the first half of
1998), it was needed to eliminate the overhang of illiquid
bank reserves and thus establish parity between
currency and bank deposits.12
The Central Bank’s success was short-lived, however. In
August 1998, civil war resumed between rebels (backed
by Uganda and Rwanda) and the government (this time
backed by a coalition including Angola, Namibia, and
Zimbabwe). Monthly inflation surged to 78.5 percent. In
the following months, the Congolese economy returned
to the same condition it had been in during the Zaïre
period. While inflation did not rise durably to the rates
experienced in 1991–94, it nevertheless remained near
77
hyperinflation levels for about three years (with a
monthly average of 14 percent, or 1,300 percent
annually). The economic situation worsened further, as
the country was de facto partitioned between the
1.7 ❚ How the Congo Decomposed in the 1990s
 warring factions. The authorities introduced many
economic controls, and funds were diverted to finance
the war effort.
Attempts at brokering peace yielded an agreement in
Lusaka (Zambia) in July 1999, but the military situation
on the ground turned into a stalemate and no progress
was recorded in reuniting the country. The persistent
war conditions and the strict controls imposed by the
government accentuated the economic disintegration
during 1999–2000. Following the murder of President
Laurent Désiré Kabila in January 2001, and the
appointment of his son Joseph to succeed him, the new
government made significant progress in restoring stable
conditions. However, the situation remained fragile and
the political scene unsettled.
Concluding remarks—
the importance of the rule of law
The Congo’s predicament in the 1990s was in many
respects unique, and owed much to the specific
circumstances of the time—including the fall of the
Berlin wall in November 1989 and President Mitterand’s
speech at La Baule in June 1990, in which he called for
accelerated democratization in Africa. It has had few
parallels in recent times, even though similarities may be
found with several other African countries.13 Thus, for
developing countries the main lesson from Congo’s
experience would seem to be that any process of
decomposition can go on longer and run deeper than
any rational observer would expect.
Notwithstanding its unusual features, the Congo’s
experience in the 1990s was neither accidental nor
exceptional. From the early 1960s onward, the country
belonged to that group of basket cases that are now
known as “failed states,” characterized by an unstable
political framework, the absence of the rule of law, and
pervasive corruption (see Wrong, 2000). While similar
conditions in several other countries may not have
yielded outcomes as stark as those in the Congo, they
also resulted in economic regression and widespread
destitution. Arguably, the nonexistence of a commonly
agreed social order is a major factor underlying the poor
performance of many African countries—as, conversely,
solid institutions have been the key foundation for
economic growth elsewhere (see, for example, IMF,
2003).
The onset of very high inflation in Congo in 1990 was
due to the authorities’ loss of control over the social and
political situation. Senior officials in the Ministry of
Finance and the Central Bank were well aware of the
risks associated with unbridled currency issue. Even
78
after inflation reached record levels and the financial
system ceased to function in any meaningful sense of the
word, there remained a large array of highly competent
staff in the government and Central Bank. By then,
1.7 ❚ How the Congo Decomposed in the 1990s
however, the entire country was adrift, and the wheels of
society virtually ground to a halt. Rather than try to fix
dysfunctional institutions, people learned to cope with
the situation and managed to get by as best as they
could, with little or no regard for the consequences of
their actions.14
Thus, hyperinflation in the Congo did not result from an
infernal machine switched on inadvertently, but rather
from the injection of a hard drug, administered
deliberately in order to mask unbearable political and
social conditions. The irony is that the treatment had the
effect of an instant overdose and made conditions worse,
jeopardizing prospects for a resolution of the Congolese
political quagmire. The rebel takeover of May 1997
brought new hope, and the quick financial stabilization
that followed demonstrated convincingly that there was
little inherent inertia in the hyperinflation process—as
had already been observed in early 1995. However,
hyperinflation returned in 1998, as civil war resumed
and political conditions remained unsettled.
Developments in the late 1990s showed how little the
Congo had changed in 40 years. Even a drastic shift in
political regime and the adoption of radically new
policies could not arrest its unrelenting decline. On the
contrary, the country descended further into confusion
and lawlessness, as it fell prey to its neighbors
(Braeckman, 1999). Laying the foundation for a broad-
based resumption of economic activity and improvement
in living standards would have required fundamental
changes in the organization of society, including in
particular the establishment of the rule of law. Despite
some progress in this direction since 2001, it is too early
to tell whether the new regime heralds a genuine new
beginning for the Congo.
Notes
1
The views expressed in this paper are those of the author and do not
necessarily reflect those of the International Monetary Fund. This article
draws in part on earlier studies (Beaugrand, 1997 and 2003).
2
The Democratic Republic of the Congo became independent from Belgium in
1960. It was renamed “Zaïre” in 1971, but reverted to its former name in
May 1997. Throughout this paper, the country will be referred to as “the
Congo.”
3
Croatia was the second highest, with 2,070 percent in the quarter ending
September 1992; the highest three-monthly inflation rate recorded in
Nicaragua was 820 percent in January 1989.
4
Despite the Congo’s increasing economic dislocation in the 1990s, the Central
Bank continued to maintain a large array of statistics, which the IMF staff
generally deemed broadly reliable. However, it was widely suspected that
the authorities kept financial accounts—including government budgets
and, at times, monetary data—deliberately incomplete.
5
“Dollarization” is a generic term for currency substitution through the use of
foreign currency—primarily U.S. dollar banknotes in this case, but also
CFA francs (in the provinces bordering on the Republic of Congo,
Brazzaville, and the Central African Republic), as well as Zambian kwacha
and South African rand (in the Congolese province of Katanga). Rough
estimates suggest that the rate of dollarization (i.e., the share of foreign
currency in total currency holdings) rose from about 55 percent in 1990 to
70 percent in 1991, and to 90 percent in 1994 (Beaugrand, 2003).
6
Conversions are made at the parallel market exchange rates for currency and
bank deposits. While bank deposits should normally be excluded from the
computation of seigniorage, they are taken into account here, because the
government often made large payments through bank transfers, even
though the Central Bank was unable to provide enough cash to satisfy the
 demand for withdrawals. This resulted in the emergence of a premium on Olivera, J. 1967. “Money, Prices, and Fiscal Lags: A Note on the
cash over deposits, and explains the use of two different exchange rates Dynamics of Inflation.” Banca Nationale del Lavoro Quarterly Review 20.
for estimating the amount of seigniorage. September. 258–67.
7
The impact of inflation on real tax revenue associated with the lag between Tanzi, V. 1977. “Inflation, Lags in Collection, and the Real Value of tax
assessments and collections was identified by Olivera (1967) and Tanzi (1977). Revenue.” Staff Papers 24. International Monetary Fund. March.
8
On several occasions, President Mobutu bowed to political pressure and 154–67.
appointed the leader of the opposition, Etienne Tshisekedi, as Prime
Minister, only to dismiss him within a few weeks. In January 1993, the Wrong, M. 2000. In the Footsteps of Mr. Kurtz: Living on the Brink of Disaster
President issued an ordinance removing Prime Minister Tshisekedi from in Mobutu’s Congo. London: Fourth Estate.
office; however, he refused to step down. In an episode reminiscent of the
conflict between President Kasavubu and Prime Minister Lumumba in
1960, President Mobutu charged Prime Minister Tshisekedi with high
treason, while the transition parliament stated its intention to impeach the
President.
9
Actual revenue was probably higher than recorded, because Gécamines
often made off-budget payments, especially to President Mobutu himself.
However, the resources at Gécamines’ disposal also fell considerably, as
its monthly copper output dropped from 35 thousand tons in 1990 to 5.5
thousand tons in 1993, and barely more than 2 thousand tons in 1994. The
President’s unbridled plundering of Gécamines’ accounts—documented
as early as 1981 in U.S. Congressional hearings—resulted in the demise of
the golden goose that had sustained the regime for so many years.
10
In the standard quantitative equation, M V = P y, and assuming real output
(y) to be constant in the short run, the rate of increase in prices (∆p) is
equal to the rate of increase in money (∆m) plus the rate of increase in
velocity (∆v). In a high inflation environment, the increase in money
growth tends to raise velocity (i.e., lower the demand for money), leading
to a larger-than-proportional increase in prices.
11
Prime Minister Tshisekedi was unable to establish control over Central Bank
operations. Following his appointment in June 1994, Prime Minister
Kengo suspended the governor of the Central Bank, and named his
deputy as acting governor. However, the governor refused to step down
until President Mobutu signed the revocation decree, in November. Prime
Minister Kengo named a new governor in January 1995, six months after
his decision to suspend the former governor.
12
The issuance of “new” new zaïres gave rise to a singular situation, whereby
banknotes of the same denomination but of different color schemes co-
circulated at different exchange rates. Prior to the currency reform,
exchange rates also differed among provinces, even for the same types of
banknotes, because the new authorities had maintained tight restrictions
on the movement of commodities and currencies across the country.
13
Ghana in the 1970s, Uganda in the 1980s, Kenya through most of the 1990s,
and Zimbabwe since 1999 are examples that come to mind. In some
respects, Cameroon’s experience in the 1990s was most similar to Zaïre’s,
in terms of weakened political situation and economic dislocation. Even
though its quasi currency board system (as part of the CFA franc zone)
prevented the emergence of hyperinflation, domestic arrears built up on a
large scale instead.
14
In the late 1990s, a businessman was quoted as saying “One good thing the
Congolese have learned through their suffering is to live without a
functioning government. They can keep on going like this forever.”
Gourevitch (2000), p.66.

References
Beaugrand, P. 1997. “Zaïre’s Hyperinflation, 1990–96.” IMF Working
Paper 97/50. Washington: International Monetary Fund. April.
———. 2003. “Overshooting and Dollarization in the Democratic
Republic of the Congo.” IMF Working Paper 03/105. Washington:
International Monetary Fund, May. Also available at www.imf.org
Braeckman, C. 1999. “La République Démocratique du Congo dépecée
par ses voisins.” Paris: Le Monde Diplomatique. October.
Cagan, P. 1956. “The Monetary Dynamics of Hyperinflation.” Studies in
the Quantity Theory of Money, ed. Milton Friedman. Chicago: University
of Chicago Press.
Fischer, S., R. Sahay, and C.A. Végh. 2002. “Modern Hyper- and High
Inflations.” Journal of Economic Literature 40. September. 837–80.
Gourevitch, P. 2000. “Forsaken: Congo Seems Less a Nation Than a
Battlefield for Countless African Armies.” New Yorker, LXXVI:28. 25
September.
79

International Monetary Fund. 2003. World Economic Outlook, April 2003—

Growth and Institutions. Washington, D.C. Also available at
www.imf.org
Keynes, J.M. 1919. The Economic Consequences of the Peace. The Collected
Writings of John Maynard Keynes, Vol. II. London: Macmillan/St
Martin’s Press. 1971.

1.7 ❚ How the Congo Decomposed in the 1990s

 Chapter 1.8
What Does the Growth Competitiveness
Index Say About Development in Africa?
Augusto Lopez-Claros, Global Competitiveness Programme,
World Economic Forum
Introduction
In the prologue to his book “The Elusive Quest for
Growth”, William Easterly refers to the quest by
economists “to discover the means by which poor
countries in the tropics could become rich like rich
countries in Europe and North America.” He argues
that those involved in this quest care about growth
because “it makes the lives of poor people better; it
frees the poor from hunger and disease.”1 It also
allows them, one might add, to partly shift the focus
of their lives from an undue concern with the struggle
for material existence, to other pursuits very much at
the centre of what we call “development.”
Easterly’s work is effective in conveying a sense
of the overarching importance of this quest. Higher
growth reduces infant mortality; it is actually possible
to estimate how many children’s lives could have
been saved in Africa over a given period if growth,
on average, had been a little higher—the numbers, in
the hundreds of thousands, eloquently underscore
why growth matters. The empirical evidence
linking growth to poverty is likewise overwhelming:
fast economic growth goes hand in hand with fast
poverty reduction.2 But growth matters for many
other reasons as well. Amartya Sen tells us that
poverty robs people of the freedom to satisfy hunger,
to achieve adequate levels of nutrition, to acquire
medicine for treatable illnesses, to enjoy clean water,
and to be adequately clothed. He argues that poverty
is characterised not merely by low levels of income,
1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
but more broadly, as a condition that involves
the deprivation of basic opportunities that would
allow the poor to actively participate in the
economy and the life of the nation. Thus,
development is “a process of expanding the
real freedoms that people enjoy.”3 The absence of
economic opportunity, misplaced spending
priorities of governments—leading them to neglect
the role of public services—indifference to
political and civil rights, and what Sen calls the
“over-activity of repressive states” all represent,
in one form or other, obstacles to freedom,
and thus barriers to successful development.
Thus, being able to shed some light on the question
of why some countries are able to grow for
prolonged periods of time—pulling vast segments
of the population out of poverty along the way—
while others remain stagnant, or worse, actually
see an erosion of living standards, has to be
the main challenge facing development experts,
whether in the academic community, aid agencies,
or growing number of civil society organisations
engaged in development work. Figures 1 and 2
illustrate some contrasting country growth experiences
during the last 35-year period: Ghana and Korea
had broadly similar per capita income levels in 1970;
by 2003, Korea’s GDP per capita was some 30 times
81
larger than that of Ghana. Hungary’s GDP per
capita this year is projected to be about 28 times
higher than that of oil-rich Nigeria, whereas it
was only 5 times higher in 1970.
 Figure 1: GDP per capita, current US$

12,000 GHANA

KOREA

TURKEY
10,000

8,000
Current US Dollars

6,000

4,000

2,000
South Korea:Ghana
Ratio in 1970= 1:1
Ratio in 2004= 30:1
0
70

73

76

79

82

85

88

91

94

97

00

03
19

19

19

19

19

19

19

19

19

19

20

20
Source: IMF World Economic Outlook

Figure 2: GDP per capita, current US$

10,000 COLOMBIA

HUNGARY
9,000
NIGERIA
8,000

7,000
Current US Dollars

6,000

5,000

4,000

3,000

2,000
Hungary:Nigeria
1,000 Ratio in 1970 = 5:1
Ratio in 2004 = 28:1
0
70

73

76

79

82

85

88

91

94

97

00

03
19

19

19

19

19

19

19

19

19

19

20

20

Source: IMF World Economic Outlook

The Growth Competitiveness Index
For the last two decades the World Economic Forum has
been trying to gain some insights into this important
82
representatives from the private sector and the corporate
world, on the one hand, and a broad spectrum of senior
government policy makers, on the other, it has created
opportunities for an exchange of ideas and experiences

question. There are at least two reasons why the Forum on best practices, which may have acted as an important
may be in a good position to make a contribution to the catalyst in identifying these key factors. Some of the
debate about the key building blocks for successful topics that have been at the centre of the agenda in many
development: first, by bringing together key of the summits and other interactions organized by the

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
World Economic Forum in past years have included the
role of corruption in delaying the development process,
the central importance of women’s education for
boosting per capita incomes, the interplay between
political and civil rights, the willingness of the public to
freely engage in economic activity, the role of a free
press, and safety net arrangements put in place by
governments to enhance opportunities for participation
in the economic life of the nation.
Second, the Forum has developed a vehicle, the
Executive Opinion Survey (EOS), which delivers,
annually, a wealth of information about the
impediments to growth in more than 100 countries,
which account, in aggregate, for the overwhelming
share of global GNP.4 This survey of business
executives in all these countries aims to assess the
importance of a broad range of factors that contribute
to a healthy business environment, supportive of
economic activity. A fair and simple tax and regulatory
environment, labour market legislation that provides
incentive for employment and job search, a stable
macroeconomic environment, the absence of corruption
and other irregular practices in the economy at large,
the quality of the country’s infrastructure and
education—these are only a few of the areas covered by
the EOS. Over the years the EOS has continued to
deliver a treasure trove of country-specific information
about the varying strengths, weaknesses and challenges
faced by the business community, as it proceeds to
create jobs and contribute to productive activity.
Indeed, the Country Profiles prepared by the Forum, on
the basis of the information delivered by the EOS,
contain valuable information for policymakers, aid
agencies and others, engaged in processes aimed at
improving not only economic performance but the
quality of people’s lives.
The “growth competitiveness index” (GCI), initially
designed by McArthur and Sachs, brings together a
number of complementary concepts.5 In formulating the
range of factors, the index identifies three “pillars” in
the evolution of growth in a country: the quality of the
macroeconomic environment, the state of the country’s
public institutions and, given the growing importance
of technology, the level of its technological readiness.
The index uses a combination of hard data, such as
inflation rates, budget deficits, the level of internet
access in schools, and survey data, taking the
“temperature” in areas such as judicial independence,
the prevalence of institutionalized corruption, and the
extent of inefficient government intervention in the
economy. These various pieces are brought together
under several “sub-indexes”, each capturing a different
aspect of the growth process, such as the state of
contracts and law, and the stability of the
macroeconomic environment. These are aggregated to
give an overall competitiveness “score”. McArthur and
Sachs also introduced the notion that while technology
matters a great deal, it matters in different ways for
1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
different countries, depending on the stage of
development. Innovation will be key in Finland, but the
adoption of foreign technologies and technology
transfer may be relatively more important in Ecuador, a
distinction that led them to separate countries into two
sets, so called “core innovators” and “non-core
innovators”. A third concept was the idea that those
factors that portray a given nation’s competitiveness
will vary in importance across these two sets of
countries. Thus, macroeconomic stability is likely to be
a relatively more important factor in Nigeria than in
Sweden. The methodology underlying the construction
of this index is described in Appendix 1, at the end of
this chapter; the GCI rankings for the 25 countries in
Africa are shown in Appendix 2.
In the sections that follow, we will examine some of the
key components of this index and comment on both the
performance of African countries and the factors that
may lie behind the relatively low rankings achieved by
the majority of them. Where necessary, we may refer to
other information delivered by the EOS, particularly if
it provides additional insight into the nature of
problems in Africa. Given the importance of an
enabling environment for private sector activity, we
will dwell on some of the institutional requirements for
an improved growth performance in Africa, with
particular reference to foreign investment, a central
driver of growth in the developing world.
The macroeconomic environment
However important factors such as the role of
governance, education, investment in infrastructure and
public health are for enhancing national
competitiveness, the fact remains that many of the
countries in Africa have not yet reached the stage
where short-term macroeconomic stabilisation concerns
can take a secondary role to longer-term institutional
reform. A stable financial environment is vital for the
successful implementation of broad-based reforms, and
for the establishment of a macroeconomic environment
that will support private sector activity. The adoption
of growth and efficiency as primary objectives of
economic policy necessitates that domestic policies be
directed toward achieving an appropriate growth of
aggregate demand, that keeps inflation under control
while avoiding high unemployment.
Countries should thus pursue prudent fiscal policies
that allow adequate levels of private sector credit, while
limiting the growth of total credit to levels consistent
with non-inflationary growth in the money supply and
a viable external position. These policies, by
83
contributing to low inflation and a more stable
domestic environment also contribute to business
confidence and investment, both domestic and foreign.
While the above observations have gained broad
 acceptance in the developing world and have led to Furthermore, as the data in Figure 3 show, budget
significant improvements in the policy environment, deficits in Africa remain among the highest in the
some African countries are still lagging behind in world; in fact, nine of the 12 largest deficits among the
establishing a solid foundation of macro-stability, 102 countries covered in the EOS are in Africa.
characterised by low inflation and cautious public (Argentina and Turkey also belong to this set, two
finances. countries in the midst of severe financial crises in 2002,
the reference period for purposes of this analysis.7)
Although inflation rates have been coming down
worldwide—indeed, international inflation in 2003 There are several issues worth highlighting here. First,
was at its lowest level in the post WW II period— several countries in Africa remain unduly dependent
countries like Nigeria, Malawi, Ghana, Mozambique, on aid flows to finance persistently high public sector
Zambia, Angola and Zimbabwe, continue to have deficits. This, at first, has tended to be seen as more
double-digit rates of inflation.6 Not surprisingly, these benign than seeking to finance budgetary shortfalls
same countries have exhibited other macroeconomic through some other more costly means (e.g., bank
imbalances as well, including major inefficiency and loans or the issuance of government paper or
rigidity in the financial sector. While not explicitly payments arrears); however, in practiceit has resulted
included in the definition of the GCI, African in unusually high levels of aid dependence, and may
countries, as a group, score particularly low on those have created perverse incentives against sound fiscal
survey questions which assess the level of adjustment. An interesting indication of this was
sophistication of financial markets, the soundness of recently seen in the context of official debt relief
the banking sector, and the ease with which the initiatives sponsored by the multilateral organizations
private sector has access to bank lending, all of which which have not had the effects—for fiscal
reflect, to some extent, an unsettled financial sustainability—that were initially envisaged.
environment.
Second, there is, in the African context, the issue of the
efficiency of government expenditure. Clearly fiscal
policy should give priority to public sector
expenditures that contribute directly to growth, such
Figure 3: Government fiscal surplus/deficit as outlays for human capital and spending on
(in % of GDP) essential infrastructure, as opposed, for instance, to
the maintenance of large military establishments (in
countries not facing immediate security threats).
Country (Rank)
Regrettably, there is still considerable room for
Cameroon (4)
improvement here: according to the World Bank,
Algeria (6)
military expenditures in Sub-Saharan Africa in 2001
South Africa (32)
amounted to 2% of GDP, higher than in Latin America
Morocco (35)
and in the EU, and only marginally lower than total
Kenya (51)
spending in public health. It is disturbing to note that
Nigeria (53)
there are 13 countries in Africa for which military
Angola (62)
expenditures exceed 3% of GDP, the level in the
Egypt (73)
United States.8
Tanzania (74)
Ghana (75) More generally, in an attempt to capture the concept
Madagascar (83) of “government waste”, the World Economic Forum
Zimbabwe (95) has constructed an index using the responses to three
Uganda (98) questions in the EOS which assess the extent of
Ethiopia (101) distortive government intervention in the economy,
Mozambique (102) the diversion of public funds for non-public ends, and
a measure of trust in the financial integrity of national
Korea (2) political figures.9 This measure of government waste is
Colombia (56) included in the GCI, as a component of the
Turkey (99) macroeconomic environment index. African countries
-20 -15 -10 -5 0 5 10
such as Kenya, Madagascar, Mozambique, Nigeria,
Percent of GDP Angola and Zimbabwe are among the world’s worst
performers, as can be gleaned from Figure 4. South
Sources: OECD African Economic Outlook 2002/03; IMF Country Reports Africa, the best performer in Africa, is ranked 37.
84

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Figure 4: Government waste competitiveness. Until relatively recently, however, the
investment policies of many African countries have not
been sufficiently geared to promoting direct investment
Country (Rank)
from abroad. Domestic investment has also been
South Africa (37)
discouraged through a variety of policies, including the
Tanzania (43)
administrative allocation of foreign exchange, high
Morocco (44)
marginal tax rates on company profits, inadequate
Egypt (45)
expenditures for maintenance and investment in socially
Ghana (46)
productive infrastructure, and the preservation of
Uganda (60)
inefficient public enterprises.
Senegal (62)
Ethiopia (66) The above economic policies have led to severe
Algeria (67) structural rigidities, excessive involvement of the state in
Cameroon (74) the economy, a plethora of unproductive investments
Kenya (77) and, as a consequence, widespread misallocation of
Madagascar (81) scarce resources. In turn, these problems have been
Mozambique (82) reflected in the balance of payments problems that have
Zambia (84) caused many African countries to face serious external
Nigeria (91) financing problems in recent years. The Forums EOS
Angola (92) clearly reveals the need for policy makers in Africa to
Zimbabwe (100) implement reforms aimed at encouraging greater
flexibility of the economy to respond to future economic
Korea (30) uncertainties, in particular, through trade policies aimed
Colombia (73) at the reduction or elimination of discrimination against
Turkey (75) tradables, and the development of private enterprises
1.0 2.0 3.0 4.0 5.0 6.0 7.0
that are competitive by international standards.
Score
Greater integration with the world economy also serves
Source: Executive Opinion Survey 2003 as an important channel for absorbing technological
advances from abroad, as is evident from the experience
of many outward-oriented Asian economies that have
Third, fiscal policies—indeed, all policies—should be developed strong export sectors based on new
seen as stable and consistent, rather than subject to manufacturing industries.
frequent and unpredictable swings, to offer the
assurance of macroeconomic stability and a sound
Figure 5: Hidden trade barriers
investment climate. The EOS does not have a question
that directly addresses the issue of “policy instability.”
It does, however, have many questions that address Country (Rank)
aspects of the quality of public institutions, from which South Africa (32)

we may see the extent to which the lack of stability and Angola (70)

consistency in the macroeconomic policy framework is a Ghana (72)

problem in Africa. We will return to this issue later. Morocco (74)
Egypt (76)
Although not a “macroeconomic stability” issue per se,
Algeria (78)
the question of a country’s integration with the global
Tanzania (79)
economy has acquired growing importance over the past
Kenya (80)
decade, particularly in the context of discussion about
Ethiopia (84)
the interactions between the process of globalisation and
Uganda (86)
economic development. While not explicitly
Mozambique (92)
incorporated in the GCI, the EOS provides a number of
Madagascar (94)
insights, which may be useful to review briefly here. In
Zimbabwe (97)
an increasingly interdependent world economy, a more
Cameroon (99)
outward-looking orientation has become an essential
Nigeria (100)
element of successful economic reform. In addition to
the well-known gains from international trade, relative
Korea (43)
openness and strong links with the world economy
Turkey (58)
85

impose on domestic producers the valuable discipline of

Colombia (59)
international competition, and provide opportunities for
new exports. An open orientation can also attract much 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score
needed capital and expertise, thus enhancing the
prospects for growth through increased efficiency and Source: Executive Opinion Survey 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 As seen in Figure 5, the EOS allows a ranking of
countries according to the extent to which hidden import
barriers—other than published tariffs and, where they
exist, quotas—are an obstacle to business activity. This is
a very serious problem in Africa, with 18 of the 25
countries covered in the GCI occupying a rank of 70 or
worse, among the total of 102. A similar result is
obtained in the case of a question which gauges the total
cost of importing foreign equipment, where 19 of the 25
countries sampled end up with a ranking of 70 or
worse.10
Public institutions
While acknowledging the importance of
macroeconomic stability for the creation of an
environment conducive to sustainable growth,
successful economic development strategies have
much to do with the role of government in general
and, more to the point, the exercise of political
authority in a society for the management of its
resources. Governance is the term that is increasingly
being used in the development community to
underscore the fundamental role of the quality of
government in this process. It matters a great deal
whether governments are accountable to their
respective populations. Investors seem to care
enormously whether judges and courts are reasonably
independent, or whether they are up for sale. Do
businesses have to pay bribes to clear goods through
customs or to settle their taxes? Do governments show
favouritism in their decisions, or are they fairly even-
handed in their relations with the private sector? Are
public resources being allocated for public health and
education—particularly of women—or rather to
wasteful projects and what the IMF calls,
euphemistically, “unproductive expenditures”?
The concepts of competitiveness developed by the
Forum explicitly incorporate concerns for public sector
accountability, efficiency, transparency and, more
generally, the ways in which the government interacts
with economic agents in the domestic economy,
particularly the business sector. The justification for
these concerns varies. Sometimes they reflect
reasonably well-established findings in empirical
research; at other times, they build on concepts
developed by international organizations engaged in
economic development, and whose insights into the
importance of these factors are based less on
theoretical constructs and more often reflect years of
valuable empirical observation. For instance,
regarding accountability, the idea is that the periodic
legitimisation of governments through some form of
86
popular choice is important because it makes them
more responsive to the needs of society, a notion
closely linked to that of participatory development.
Unless people feel that they have a say in who
1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
governs, and on what principles, they cannot be
expected to fully support the government's
development strategies and policies. Without such
public support, even well-designed plans are unlikely
to succeed.
The importance of the above cannot be over-
emphasised. A real life example will be useful. Sen
states that “no famine has ever taken place in the
history of the world in a functioning democracy, be it
economically rich or relatively poor.”11 But, Sen tells
us, they have occurred in ancient kingdoms and in
contemporary authoritarian societies, in modern
technocratic dictatorships, and in “colonial economies
run by imperialists.” Democracy and the greater
political freedoms that it brings—including public
discussion in an environment of freedom of
expression—help foster a climate in which early
preventive actions can be taken to avoid the
emergence of those circumstances which make famine
possible. More generally, Sen convincingly argues
that those countries in which governments operate in
an environment of political legitimacy tend to be
much better at allowing the formation of vital
understandings and beliefs among the population
that directly impinge upon aspects of the
development process; for instance, the idea that
education, employment and ownership rights of
women exert powerful influences on their ability to
control their environment and improve their
condition.
Closely linked to the issue of accountability is the
importance of the rule of law, the concept that the
rules which govern a society—and hence those that
regulate economic activity—are applicable to all. There
is increasing recognition that without a reasonably
fair, efficient, and predictable judicial system and legal
framework, accountability will have no legal
underpinnings and the goals of good governance will
be undermined. As regards the economy in particular,
it has long been recognised that the absence of an
adequate legal framework and judicial system
increases business costs, discourages investment, and
introduces an element of uncertainty into economic
activity that is detrimental to development. In his
discussion of some of the key building blocks of
successful development, Sen refers to the need for
openness and insists that societies operate better when
individual economic agents can deal with one another
under “guarantees of disclosure and honesty.” These,
in turn, are essential for curtailing corrupt practices
and various forms of abuse of the rules and
institutions underlying a market economy.
From the above discussion, it is clear that these
various elements of good governance—accountability,
transparency, the primacy of the rule of law—are not
mutually independent. Interactions are inevitable and
conflicts may arise in the short run. For example,
participatory processes implemented in an
environment of political pluralism and openness may Figure 6: Irregular payments
add an element of unpredictability to the decision- in tax collection
making process. It may take much longer to forge the
necessary consensus around a particular strategy. But
this does not detract from their intrinsic value, and the Country (Rank)

overriding importance of pursuing them as essential South Africa (41)

ingredients of good governance. The alternative, a top- Zimbabwe (56)

down approach that sees developing countries as Egypt (66)

passive recipients of aid programmes formulated in Ghana (69)

the capitals of the donor countries, has obviously Zambia (72)

failed. These observations have far-reaching Mozambique (78)

implications for Africa, where fuller cooperation is Angola (79)

vital among the key actors: government, donor Tanzania (80)

agencies, and the private sector, in order to foster the Senegal (82)

development of these key building blocks, and Morocco (85)

contribute meaningfully to unleashing processes Ethiopia (86)

aimed at improving prosperity and enhancing Algeria (87)

people’s capacity to manage change. Uganda (93)

Kenya (93)
The World Economic Forum’s central focus on public Cameroon (95)
institutions and governance derives from its view that Madagascar (96)
an approach to development that incorporates the Nigeria (98)
elements discussed above is far more likely to bear
fruit than one which concerns itself principally with Colombia (45)
macroeconomic policy. In an environment of political Korea (47)
accountability, people have much more powerful Turkey (58)
incentives to become active participants in the
1.0 2.0 3.0 4.0 5.0 6.0 7.0
economy. When they have a sense of entitlement to Score
economic transactions, various groups in society can
become engines of economic growth. Private incomes Source: Executive Opinion Survey 2003

rise, generating tax revenue that enables the state to

finance critical spending, especially in vital areas with
a high rate of social return. Higher expenditures on Figure 7: Diversion of public funds
education and health have been shown to be strongly
correlated with reductions in infant mortality and
Country (Rank)
birth rates. To the extent that improved education
Egypt (39)
reaches women, it brings about changes in women’s
South Africa (47)
fertility behaviour. Quite aside from the obvious
Tanzania (49)
benefits for women themselves, this has implications
Ghana (50)
for the environment, the pressures on which are often
Ethiopia (52)
linked to rapid population growth.
Algeria (53)
The EOS provides a wealth of information about the Morocco (54)
role played by many of the above factors in creating a Senegal (75)
sound, growth-producing business environment. Angola (83)
Figures 6-11 below present the results to six particular Zambia (81)
questions that look at different aspects of the quality Mozambique (84)
of public institutions in Africa. One set of questions Madagascar (87)
examines conditions of transparency and honesty in Uganda (90)
the management of public resources: specifically, the Kenya (93)
extent to which businesses have to make irregular Zimbabwe (94)
payments to settle their taxes, diversion of public Cameroon (95)
funds, and the extent of distortions introduced in the Nigeria (97)
economy as a result of government intervention.
Korea (32)
Turkey (70)
87

Colombia (80)

1.0 2.0 3.0 4.0 5.0 6.0 7.0

Score

Source: Executive Opinion Survey 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 Figure 8: Extent of distortive Figure 10: Efficiency of legal
government intervention framework

Country (Rank) Country (Rank)

Ghana (20) South Africa (20)
South Africa (24) Tanzania (43)
Morocco (36) Ghana (45)
Tanzania (51) Morocco (54)
Uganda (52) Zambia (56)
Mozambique (53) Uganda (57)
Cameroon (56) Senegal (61)
Egypt (61) Egypt (62)
Senegal (66) Algeria (68)
Kenya (67) Nigeria (72)
Zambia (69) Cameroon (73)
Madagascar (77) Madagascar (77)
Nigeria (90) Kenya (82)
Algeria (93) Mozambique (84)
Ethiopia (99) Ethiopia (87)
Angola (100) Zimbabwe (88)
Zimbabwe (101) Angola (96)

Colombia (38) Korea (41)

Korea (40) Colombia (59)
Turkey (94) Turkey (74)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score Score

Source: Executive Opinion Survey 2003 Source: Executive Opinion Survey 2003

Figure 9: Judicial independence Figure 11: Freedom of the press

Country (Rank) Country (Rank)

South Africa (15) South Africa (28)
Tanzania (38) Ghana (43)
Ghana (50) Senegal (46)
Zambia (56) Algeria (56)
Uganda (58) Nigeria (64)
Egypt (59) Madagascar (68)
Nigeria (61) Zambia (77)
Senegal (69) Kenya (79)
Morocco (71) Tanzania (80)
Cameroon (72) Mozambique (81)
Algeria (76) Egypt (90)
Kenya (84) Morocco (91)
Mozambique (85) Cameroon (92)
Madagascar (86) Uganda (93)
Ethiopia (87) Ethiopia (94)
Angola (91) Angola (100)
Zimbabwe (97) Zimbabwe (102)

Korea (49) Colombia (49)

Turkey (57) Korea (58)
88

Colombia (70) Turkey (70)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score Score

Source: Executive Opinion Survey 2003 Source: Executive Opinion Survey 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Two other questions deal more directly with the quality
of the judicial climate, in particular, whether businesses
may count on a fair degree of judicial honesty and
independence when dealing with the courts.
The second question deals more directly with the
efficiency of the legal framework.
less right, and once the macro economy is more or less
stable, additional improvements along these lines will
probably have little or no effect on economic growth.
This contrasts with technological progress since there do
not seem to be good arguments that would suggest that
there are diminishing returns to ideas.”14

Finally, a question assessing the extent to which the

press is free to report on development in the country
without fear of retribution may be taken as a proxy for
public sector accountability.
The results for Africa (above Figures 6-11) show that
there is room for improvement in each of these areas.
African countries typically score low and often constitute
the majority of those ranking below 70-80. These results
are largely consistent with other findings in the work of
organizations such as the World Bank, which have been
documenting over a long period the incidence of
governance factors in the development process. See, for
instance, the excellent work done by Daniel Kaufmann of
the World Bank Institute. In his latest piece he makes
two observations of particular relevance to the above
discussion. First, that there is evidence of an emerging
“governance gap,” meaning that “improvements in
governance are not keeping pace with the progress
attained in some areas, including economic policy”. He
goes on to say that shortcomings in governance have
become a “central binding constraint to growth and
development today in many settings”. In other words,
improvements in the overall macro economic
environment (lower inflation, a greater recognition of the
importance of budget constraints, a greater willingness
to deregulate, privatize, open up the economy) have not
been matched by equivalent improvements in the basic
elements of good governance. Second, he presents
empirical evidence showing that “a country that
significantly improves key governance dimensions, such
as the rule of law, corruption, the regulatory regime, and
voice and democratic accountability can expect, in the
long run, a dramatic increase in its per capita income
and other social dimensions.” Indeed, “an improvement
in governance by only one standard deviation can result,
Appendix 1 at the end of this chapter provides detailed
information on the way the GCI incorporates various
aspects of technology into a measurement of
competitiveness. In particular, it identifies the relative
weights attached to innovation, technology transfer and
the use of information and communications technology,
as well as the relative breakdown between survey and
hard data used in the construction of the overall
technology index. The figures below present a brief
overview of the performance of a few of the indicators
used and the associated scores and rankings for 17
African countries. The numbers speak for themselves.
Whether one looks at cellular mobile telephone
subscribers per 100 inhabitants, internet penetration rates
in the schools, firm level technology absorption, or
tertiary enrolment rates—a good proxy for a country’s
future capacity for innovation—the African countries
overwhelmingly occupy the lowest rankings among the
102 countries covered by the GCI (Figures 12-15,
respectively).
Figure 12: Cellular telephone subscribers
per 100 inhabitants
Country (Rank)
South Africa (46)
Morocco (53)
Egypt (74)
Senegal (75)

in the long run, in up to a fourfold increase in per capita Kenya (82)

income.”12 Cameroon (83)
Zimbabwe (84)
Ghana (86)
Mozambique (88)
Uganda (89)
The role of technological change Nigeria (90)
Zambia (91)
A full discussion of the role of technology in explaining
Algeria (92)
economic growth is outside the scope of this paper. We
Tanzania (93)
find the discussion by William Easterly to be extremely
Madagascar (95)
insightful.13 Blanke, Paua and Sala-i-Martin’s
Angola (96)
characterization is likewise useful: “Technological
Ethiopia (102)
progress is, therefore, at the heart of economic growth.
And the reason for thinking that, in the long run, no
Korea (25)
growth is possible without technological improvements
Turkey (42)
is that the other potential determinants of growth must
89

Colombia (69)
run into diminishing returns. For example, institutions
and the macroeconomic environment can have 0 10 20 30 40 50 60 70

important consequences for growth in countries with

terrible environments. But once institutions are more or Source: International Telecommunication Union, July 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 Figure 13: Internet access in schools Figure 15: Gross tertiary enrollment

Country (Rank) Country (Rank)

Egypt (42) Egypt (37)
South Africa (50) South Africa (65)
Morocco (73) Algeria (67)
Uganda (75) Morocco (73)
Zimbabwe (81) Cameroon (83)
Senegal (82) Nigeria (85)
Tanzania (84) Zimbabwe (86)
Ghana (85) Senegal (87)
Kenya (86) Ghana (89)
Zambia (88) Kenya (90)
Nigeria (90) Uganda (91)
Algeria (94) Zambia (92)
Cameroon (95) Madagascar (93)
Mozambique (97) Ethiopia (97)
Madagascar (98) Tanzania (100)
Ethiopia (99) Angola (101)
Angola (101) Mozambique (102)

Korea (4) Korea (2)

Turkey (55) Colombia (55)
Colombia (65) Turkey (66)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 0 10 20 30 40 50 60 70 80

Score Percent

Source: Executive Opinion Survey 2003 Source: UNESCO Institute for Statistics; World Bank World Development
Indicators 2003

Figure 14: Firm-level technology absorption

To be sure, using Korea as a benchmark for comparison

Country (Rank)
would appear to be unfair. By 2003 there were more
Senegal (12)
broadband users in Korea than in all of Latin America,
South Africa (39)
and the rates of internet use, personal computer use and
Morocco (43)
internet penetration in schools had actually overtaken
Nigeria (49)
those of Canada! However, as noted earlier, the
Tanzania (50)
comparison is useful given the broadly similar levels of
Madagascar (56)
per capita income between Korea and some of the
Ghana (57)
African countries in the late 1960s.
Uganda (60)
Mozambique (64) The above results highlight the extent to which
Egypt (71) macroeconomic stability and improvements in the
Algeria (76) institutional environment are likely to remain the focus
Kenya (77) of policymakers in Africa in coming years. This, of
Zimbabwe (80) course, is not to say that attention should not be given to
Cameroon (84) encouraging the development of the technology
Angola (85) infrastructure, so essential in today’s globalized
Zambia (88) economy. Indeed, policymakers in Africa should pay
Ethiopia (98) attention to these issues, for instance, in the context of
discussions about spending priorities in the budget, and
Korea (10) in the design of aid programmes as part of the
Turkey (54)
negotiation of packages of external assistance with
90

Colombia (59)
members of the donor community. Few things matter
more for the future of the African economies than
1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score empowering the populations—particularly women and
the young—to be active, literate, well-informed members
Source: Executive Opinion Survey 2003
of society, able to benefit from the use of new

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
technologies, to interact with the rest of the world, and
to gradually help push the country to the next stage of
development, as has happened in countries like Korea,
Chile, Singapore and Estonia.
Further insights from the EOS:
building a favourable environment
for the private sector
During the period 1989 to 1994, Africa accounted, on
average, for about 2% of total foreign direct investment
(FDI) inflows. By 2000, this share had fallen to 0.7% (Table
1). Moreover, roughly half of this relatively small share
was accounted for by two countries: Nigeria and Egypt.
Table 1: Regional recipients
of FDI inflows
Region % in 1989-1994 % in 2000
Africa 2.0
Asia 23.3
Europe 40.1
Latin America 8.7
North America 24.1
Other 1.8
Source: World Development Report.
Given the importance of FDI for growth (see below) and
the central role played by the quality of the business
environment in the Forum’s assessment of
competitiveness, it will be useful to examine briefly the
factors that help explain the relatively lacklustre
performance of FDI in Africa and the impact that its
significant increase might mean for the countries in the
region. Borensztein et al. (1998)15 have tested the effect of
FDI on economic growth, using data on capital flows
from industrial countries to a large set of developing
countries. Their results suggest that FDI is not only the
most important channel for technology transfer, but also
that it contributes relatively more to growth than
domestic investment.
This view is consistent with the notion, central to recent
growth theory, that a key determinant of growth in
developing countries is the catching-up process implicit,
among other things, in the adoption of new technologies,
and the acquisition of more modern management
techniques, involving not only higher levels of capital
formation in the host country, but higher levels of
efficiency in the use of resources. FDI carried out by
multinationals is seen as the primary channel for access
to these new technologies, although in African countries,
the level of the human capital stock may act as a
constraint on the absorptive capacity of the recipient
country. The importance of FDI for Africa cannot be
overestimated, particularly given the growing body of
evidence that suggests that the direction of causation is
predominantly from FDI to growth—see, for instance the
work done at the IMF by Havrylyshyn and others.16
1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Because FDI is often concentrated in import-substituting
or export industries, it may also affect the host country's
trade performance. Foreign investors are perceived to
have a number of advantages over their domestic
counterparts, which can contribute to better export
performance. Technical know-how, easier recourse to
financial resources, and long-term experience in gaining
access to markets abroad, among others, help to explain
the generally higher propensity of foreign affiliates to
produce for export markets than their competitors in the
local economy.
Market size and cost factors
The size of the domestic market and the foreign
investor's perception of its growth potential are two of
the key determinants of FDI. A large and rapidly
expanding market will attract investors because it
provides opportunities for on-site production on a level
0.7
involving economies of scale. Furthermore, because of
13.1
their technological, organisational, and marketing
50.8
expertise, foreign investors typically find themselves
6.8
well positioned to take full advantage of the
27.1
opportunities implied by a growing market, both as
1.5
regards the host country and its proximity to other
promising markets. While there is strong evidence that
both factors have played an important role in the recent
sharp expansion of FDI to countries such as China or the
transition economies in Central and Eastern Europe, the
evidence for Africa is much less positive. Individual
African markets are relatively small and, unlike
transition economies in Europe, do not offer the same
incentives to potential investors associated with their
joining a much larger market already operating as an
integrated economic space. Moreover, they also do not
offer the prospect of future political and social stability
normally associated with investments in an expanding
common market, such as the EU, which create the
conditions for longer-term planning, so essential for
investment decisions.
In addition to size, a number of cost factors have an
important bearing on the attractiveness of a given country
as a foreign investment location. It is well known that
labour costs, in particular, account for a large share of the
total costs of the typical foreign manufacturing affiliate.
The cost of material inputs and the cost of capital are also
thought to be of importance in the foreign investment
decision process. Nevertheless, little work has been done
to estimate the relative importance of these cost factors
among the many others that determine the location of
overseas production, particularly in developing
economies for which data is scarce. While, in general, the
91
cost of capital is central to the investment decision
process, it is often argued that differences in the cost of
capital faced by multinationals across countries will be
sharply reduced by the ability of the parent company to
obtain funds in more competitive markets. As such,
 differences in the local cost of capital in developing
countries may not play a central role in explaining FDI
inflows. The price of raw and other materials, however, is
likely to be more important. Relatively low labour costs
and a skilled labour force are frequently cited by foreign
investors to transition economies as one of the factors that
have made some of these countries attractive investment
locations. While Africa can certainly offer potential
foreign investors low labour costs, it has major drawbacks
in terms of skills and, more generally, the quality of the
educational system, as may be gleaned from the data
presented in Figure 16. Literacy rates and school
enrolment rates in many African countries remain among
the lowest in the world.
The regulatory framework
One of the most important factors affecting FDI—over
which host countries have the greatest control—concerns
the set of rules and regulations governing investment
activity. Because foreign participation in domestic
economic activity can sometimes give rise to special
concerns—eg. the extent of foreign control of local
industry, or the perception that the foreign investor has
advantages over his local counterparts on account of
superior technology, easier access to capital markets and
managerial resources—most developing countries have
combined a degree of regulation of FDI with incentives
designed to attract it. A number of countries have
imposed restrictions on FDI in certain sectors—eg.
banking, public utilities, defence industries—deemed to
have "strategic" importance, or on grounds of national
security. In those sectors where FDI is permitted, there
may be restrictions on the extent of foreign ownership.
Investors may be allowed to hold only minority equity
participation in enterprises, or required to release
ownership gradually through the sale of shares to
residents.
The regulatory framework in many African countries has
moved in the direction of slowly eliminating restrictions,
as well as lifting previous restrictions on remittances of
investment dividends and majority participation. African
countries have also made some progress in decentralising
and streamlining authorisation procedures. Since
investment decisions involve issues of long-range
planning, investors prefer a set of well identified, simple,
stable rules to a situation which they perceive to be
opaque or subject to unpredictable changes. The
importance of this factor seems to be increasingly
recognized in Africa, as reflected in the relative rankings
of African countries in a number of key questions in the
EOS dealing with the regulatory environment for
economic activity, including for FDI. Figure 17 shows that
restrictions on foreign ownership are not perceived to be a
particularly serious problem in many African countries.
Zambia, Nigeria, South Africa, Morocco, Uganda, Ghana
have ranks in the high 20s and low 30s.
Similar results obtain for survey data on FDI and
technology transfer (Figure 18).

Figure 16: Quality of the educational system Figure 17: Foreign ownership restrictions

Country (Rank) Country (Rank)

Ghana (57) Nigeria (21)
Zimbabwe (59) Zambia (28)
Kenya (60) South Africa (30)
Uganda (63) Morocco (31)
Egypt (67) Uganda (32)
South Africa (68) Ghana (34)
Morocco (71) Senegal (44)
Cameroon (73) Kenya (48)
Tanzania (76) Cameroon (49)
Nigeria (79) Tanzania (52)
Zambia (82) Angola (60)
Senegal (84) Mozambique (62)
Ethiopia (85) Egypt (70)
Algeria (86) Madagascar (74)
Madagascar (89) Algeria (96)
Mozambique (91) Zimbabwe (101)
Angola (102) Ethiopia (102)

Korea (47) Turkey 66)

Colombia (61) Korea (68)
92

Turkey (75) Colombia (79)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score Score

Source: Executive Opinion Survey 2003 Source: Executive Opinion Survey 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Figure 18: FDI and technology transfer Figure 19: Extent of bureaucratic red tape

Country (Rank) Country (Rank)

Nigeria (20) Senegal (47)
Kenya (21) South Africa (61)
Uganda (23) Morocco (66)
South Africa (26) Ghana (70)
Tanzania (29) Mozambique (74)
Mozambique (30) Kenya (75)
Morocco (41) Zimbabwe (80)
Ghana (42) Madagascar (83)
Egypt (57) Tanzania (89)
Zambia (71) Cameroon (93)
Zimbabwe (73) Zambia (94)
Angola (74) Egypt (95)
Cameroon (90) Ethiopia (96)
Senegal (92) Nigeria (98)
Madagascar (94) Uganda (99)
Ethiopia (98) Angola (100)
Algeria (102) Algeria (101)

Colombia (55) Colombia (35)

Korea (58) Korea (37)
Turkey (80) Turkey (69)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score Score

Source: Executive Opinion Survey 2003 Source: Executive Opinion Survey 2003

Data on the extent of bureaucratic red tape show less Figure 20: Business costs of crime and
encouraging results (Figure 19), suggesting that the
violence
reforms carried out in Africa in recent years to facilitate
the growth of investment are incomplete, and that the
quality of the regulatory framework remains an Country (Rank)
important constraint on its expansion. Morocco (33)
Egypt (44)
Ethiopia (45)
Algeria (47)
Political stability and other factors Ghana (57)
Zambia (66)
Setting aside issues that arise in connection with empirical
Tanzania (68)
testing, there is broad consensus that political stability has
Madagascar (72)
an important bearing on investment decisions. FDI is partly
Zimbabwe (74)
generated by the expectation of higher profits, and these in
Senegal (76)
turn will depend on a number of factors, including the
Uganda (77)
country's overall investment climate. Unpredictable swings
Nigeria (81)
in policies as a result of political events will introduce
Angola (88)
additional risk factors in the investment decision process.
Cameroon (90)
Regrettably, Africa has suffered from many armed conflicts
Mozambique (94)
over recent decades and, without doubt, this has greatly
South Africa (96)
contributed to reductions in FDI. The level of education of
Kenya (97)
the population, the flexibility of the labour market, the
degree of urbanization and the quality of infrastructure—
Turkey (18)
an important consideration in the case of African
Korea (30)
economies where the development of the transport and
93

Colombia (80)
telecommunications network has lagged behind the rest of
the world—the vicinity to other markets, the cost to 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score
business of crime and violence, are all further factors
affecting the investment climate (Figure 20). Source: Executive Opinion Survey 2003

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 Figure 21: Business impact of malaria Figure 22: Business impact of HIV/AIDS

Country (Rank) Country (Rank)

Algeria (59) Egypt (52)
Egypt (70) Algeria (62)
Morocco (75) Morocco (72)
South Africa (83) Madagascar (78)
Nigeria (86) Senegal (79)
Zimbabwe (87) Nigeria (82)
Madagascar (88) Angola (85)
Kenya (89) Ghana (86)
Ghana (90) Mozambique (89)
Ethiopia (92) Uganda (90)
Senegal (93) Kenya (91)
Uganda (94) Ethiopia (94)
Mozambique (95) Tanzania (96)
Zambia (96) Cameroon (97)
Tanzania (97) Zambia (99)
Cameroon (99) South Africa (100)
Angola (100) Zimbabwe (102)

Korea (37) Turkey (32)

Turkey (41) Korea (34)
Colombia (63) Colombia (55)

1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Score Score

Source: Executive Opinion Survey 2003 Source: Executive Opinion Survey 2003

In Africa, moreover, the impact of malaria and
HIV/AIDS are revealed by the EOS to be extremely
important additional factors, adding significant
uncertainty to the business environment, and possibly
discouraging all forms of investment (Figures 21 and 22).
Debt versus private investment
The composition of capital inflows into countries
undergoing a process of external adjustment has
become an increasingly important issue. The recourse
in the 1980s and 1990s by a number of countries to
more bank credit, at the expense of foreign private
investment, may have made them more susceptible to
external disturbances. The view has emerged that
foreign investment payments move more closely with a
country's ability to service them than do interest
payments on debt, which persist even if the original
loans financed unprofitable activities—a frequent
occurrence in a number of crisis economies in recent
years. A fall in the terms of trade or a sudden reduction
in the volume of exports leaves interest payments due
on the stock of external debt unchanged. The foreign
exchange needed will then have to be generated
94
expenditure reduction necessary to service investment
financed by equity will, as a rule, be smaller than that
financed by debt. Furthermore, direct investment
payments will, in general, have a maturity structure
that bears a closer relation to the life of the investment
project at hand than commercial bank credits. These
would appear to be particularly important
considerations for African countries, given the high
levels of external indebtedness and the persistence of
current account imbalances—close to a 5% of GDP
deficit in Sub-Saharan Africa according to the latest
World Economic Outlook, with considerable variation
across countries. According to the IMF, debt service
payments in Africa in 2003 accounted for over 150% of
exports of goods and services.
Conclusion
The Growth Competitiveness Index, along with the
Executive Opinion Survey that feeds it, are useful
tools for the analysis of development in Africa, with
particular reference to those factors that play a central
role in explaining the growth process: the quality of

the macroeconomic environment, the state of a

through expenditure reductions and changes in relative country’s public institutions, and the level of
prices. However, such external disturbances are likely technological readiness and sophistication. The index
to reduce profits due on equity investment, as the and the survey deliver numerous insights about the
country undergoes a period of adjustment. Thus, the relative importance of the variables that determine the

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
quality of the business environment in a given country 14
Blanke, J. et al. 2004. p.5.
15
Borensztein, E. et al, 1998.
and which, consequently, have a bearing on a 16
See Havrylyshyn, O. et al. 1999.
country’s ability to sustain high growth rates over the
long term.
African countries do not, on the whole, score well on References
the GCI. Their rankings are low across virtually all the Blanke, J., F. Paua, and X. Sala-i-Martin. 2004. “The Growth
Competitiveness Index: Analyzing Key Underpinnings of Sustained
various sub-components of the index, underscoring Economic Growth.” The Global Competitiveness Report 2003-2004. World
the region’s serious economic and institutional Economic Forum. Oxford University Press. 3-28.
problems. However, and perhaps more importantly, Borensztein, E., J. DeGregorio, and J-W Lee. 1998. “How Does FDI Affect
these low rankings identify those areas in which Economic Growth?” Journal of International Economics 45. 115-135.
policy reforms are vitally needed, if the continent is to Easterly, W. 2001. “The Elusive Quest for Growth: Economists’
Adventures and Misadventures in the Tropics.” Cambridge, MA. MIT
fulfil its potential. Through its competitiveness work— Press.
including improvements to the methodologies used to Havrylyshyn, O. et al. “Growth Experience in Transition Economies,
gain a better understanding of the determinants of 1990-98.” Occasional Paper 184. International Monetary Fund. 1999.
competitiveness—the World Economic Forum will International Monetary Fund. World Economic Outlook.
continue to remain engaged in the region, and to lend Kaufmann, D. 2004. “Governance Redux: The Empirical Challenge.” The
its support to the search for creative solutions to the Global Competitiveness Report 2003-2004. World Economic Forum.
Oxford University Press. 137-164.
many challenges that must be addressed in coming
McArthur, J.W. and J.D. Sachs. 2002. “The Growth Competitiveness
years to improve the quality of life for the people of Index: Measuring Technological Advancement and the Stages of
Africa. Development.” The Global Competitiveness Report 2001-2002. World
Economic Forum. Oxford University Press.
Sen, A. 1999. Development as Freedom. Oxford University Press.
World Bank. World Development Report.
World Economic Forum. 2004. The Global Competitiveness Report 2003-
Notes 2004. Oxford University Press.
1
Easterly, W., 2001. p.xi.
2
The question of what constitutes “economic success” (and how to measure it)
is central to the debate about current approaches to development and
policy formulation. Some have argued, for instance, that any income
accounting system which treats the depletion of natural resources as
current income, and thus as a positive contribution to the growth of GNP,
is obviously one which provides perverse incentives. However, in this
paper we deliberately stay away from examining the question of whether
GNP is a good measure of human welfare.
3
Sen, A. 1999. p.5.
4
The 102 countries covered by the Executive Opinion Survey account for
more than 95% of world GNP.
5
McArthur, J.W. et al. 2002.
6
In what is surely an eloquent indicator of recent world-wide progress in
taming high inflation, a total of 83 countries among the 102 included in
the EOS had annual inflation rates of less than 10 percent in 2002. Only
four countries (Argentina, Turkey, Angola and Zimbabwe) had annual
rates of inflation in excess of 25 percent.
7
In this and the figures that follow throughout the chapter we present the
scores and ranks for 17 countries in Africa out of the 25 covered by the
Forum’s competitiveness work. The criterion for choosing these 17 is
population, these being the most populous. (Full data on the majority of
questions for all 102 countries is available in CD-ROM format through the
World Economic Forum.) The figures also present, for comparison
purposes, the rankings for Colombia, Korea and Turkey. All of these
countries had per capita incomes in the late 1960s that were not
significantly different from those in some of the more developed African
countries. But these countries, at various times during the last several
decades, have also shared many common features with Africa, including
civil strife, political instability, haphazard macroeconomic management
and other structural rigidities.
8
The countries are Algeria, Angola, Botswana, Burundi, Eritrea, Ethiopia,
Guinea-Bissau, Lesotho, Morocco, Rwanda, Sierra Leone, Sudan and
Zimbabwe. For further details see World Development Indicators 2003,
The World Bank, 2003, Washington DC.
9
For further details in the construction of this index see The Global
Competitiveness Report 2003-2004.
10
The question is stated as follows: “When your firm needs to import foreign
equipment, the combined effect of import tariffs, license fees, bank fees,
and the time required for administrative red tape raises the cost by
95

approximately (1 = less than 10%, 2 = 11-20%, 3 = 21-30%, ……9 = greater

than 80%).
11
See Sen, op.cit. p.16.
12
Kaufmann, D. 2004.
13
See, in particular, Sen, op.cit. Chapter 3, titled “Solow’s Surprise: Investment
Is Not the Key to Growth”, pp. 47-70.

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 Appendix 1: Composition of the Growth Competitiveness Index
The Growth Competitiveness Index is composed of three Technology index components
component indexes: the technology index, the public
institutions index, and the macroeconomic environment The technology index is calculated for the core and
index. These indexes are calculated on the basis of both non-core innovators as follows:
“hard data” and “Survey data.”
The repsonses to the Executive Opinion Survey are what technology index for
core innovators = (1/2 innovation subindex)
we refer to as Survey data, with responses ranging from 1
+ (1/2 information and communication technology index
to 7 (see the chapter at the end of the Report for further
information on the Executive Opinion Survey); the hard
data were collected from various sources, described in
technology index for
the Technical Notes and Sources at the end of the Report.
non-core innovators = (1/8 innovation subindex)
All of the data used in the calculation of the Growth
+(3/8 technology transfer subindex)
Competitiveness Index can be found in the data tables
+(1/2 information and communication technology subindex)
section of the Report.
The standard formula for converting each hard data
variable to the 1-to-7 scale is:
Innovation subindex

(country value – sample minimum) innovation subindex = (1/4 Survey data)

6x +1
(sample maximum – sample minimum) +(3/4 hard data)

The sample minimum and sample maximum are the

Innovation Survey questions
lowest and highest values of the overall sample,
3.01 What is your country’s position in technology relative to world leaders’?
respectively. In some instances, adjustments were made
3.02 Companies in your country are not interested/aggressive in absorbing new
to account for extreme outliers in the data. technology?

As explained in the chapter, the sample of countries is 3.06 How much do companies in your country spend on R&D relative to other countries?

divided into two groups: the core innovators and the 3.08 What is the extent of business collaboration in R&D with local universities?

non-core innovators. Core innovators are countries with

more than 15 US utility patents registered per million Innovation hard data
population in 2002; non-core innovators are all other 3.17 US utility patents granted per million population in 2002
countries. 3.18 Gross tertiary enrollment rate in 2000 or most recent available year

For the core innovators, we place extra emphasis on the

role of innovation and technology. The weightings for
the core innovators are as follows:
Technology transfer subindex
Growth Competitiveness
Index for core innovators = (1/2 technology index) technology transfer
+(1/4 public institutions index) subindex = unweighted average of two technology transfer
+(1/4 macroeconomic environment index) Survey questions

3.03 Is foreign direct investment in your country an important source

For the non-core innovators, we calculate the Growth of new technology?
Competitiveness Index values as a simple average of the 3.04 Is foreign technology licensing in your country a common means of acquiring
three component indexes: new technology?

Growth Competitiveness
Index for non-core
innovators = (1/3 technology index)
+(1/3 public institutions index)
+(1/3 macroeconomic environment index)
96

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Appendix 1: Composition of the Growth Competitiveness Index (cont’d.)

Information and communication technology Macroeconomic environment

(ICT) subindex
index components
information and
communication
technology subindex = (1/3 information and communication technology macroeconomic
Survey data) environment index = 1/2 macroeconomic stability subindex
+(2/3 information and communication technology +1/4 country credit rating in March 2003
hard data)
+1/4 government waste in 2003

Information and communication technology Survey questions

3.12 How extensive is Internet access in schools? Macroeconomic stability subindex
3.13 Is there sufficient competition among ISPs in your country to ensure high quality,
infrequent interruptions and low prices?
macroeconomic
3.14 Is ICT an overall priority for the government? stability subindex = (5/7 macroeconomic stability hard data)
3.15 Are government programs successful in promoting the use of ICT? +(2/7 macroeconomic stability Survey data)
3.16 Are laws relating to ICT (electronic commerce, digital signatures, consumer
protection) well developed and enforced?

Macroeconomic stability Survey questions

2.01 Is your country’s economy likely to be in a recession next year?
Information and communication technology hard data
2.09 Has obtaining credit for your company become easier or more difficult over
3.19 Cellular mobile subscribers per 100 inhabitants, 2002 the past year?
3.20 Internet users per 10,000 inhabitants, 2002
3.21 Internet hosts per 10,000 inhabitants, 2002
3.22 Main telephone lines per 100 inhabitants, 2002 Macroeconomic stability hard data
3.23 Personal computers per 100 inhabitants, 2002 2.18 Government surplus/deficit in 2002
2.19 National savings rate in 2002
2.20 Inflation in 2002
2.21 Real exchange rate relative to the United States in 2002
2.22 Lending – borrowing interest rate spread in 2002

Public institutions index

components
2.17 Institutionnal Investor country credit
rating, March 2003
public institutions index = (1/2 contracts and law subindex)
+(1/2 corruption subindex) Government waste composite, 2003
2.03 Do government subsidies to business in your country keep uncompetitive industries
alive artificially or do they improve the productivity of industries?
Contracts and law subindex
7.08 In your country, how common is the diversion of public funds to companies,
6.01 Is the judiciary in your country independant from political influences of members individuals or groups due to corruption?
of government, citizens or firms?
7.10 How high is the public trust in the financial honesty of politicians?
6.03 Are financial assets and wealth clearly delineated and well protected by law?
6.08 Is your government neutral among bidders when deciding among public contracts?
6.17 Does organized crime impose significant costs on business?

Corruption subindex
7.01 How commonly are bribes paid in connection with import and export permits?
7.02 How commonly are bribes paid when getting connected with public utilities?
7.03 How commonly are bribes paid in connection with annual tax payments?
97

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
 Appendix 2: Growth Competitiveness Index and Subindex Rankings
Growth Competitiveness Index (GCI) Public institutions index
Rank Rank Score Rank Rank Score
1 Botswana 36 4.56 1 Botswana 26 5.45
2 Tunisia 38 4.49 2 Tunisia 32 5.19
3 South Africa 42 4.37 3 Malawi 38 4.79
4 Mauritius 46 4.12 4 Gambia 39 4.73
5 Namibia 52 3.99 5 South Africa 43 4.69
6 Gambia 55 3.93 6 Mauritius 44 4.61
7 Egypt 58 3.84 7 Namibia 48 4.50
8 Morocco 61 3.77 8 Egypt 57 4.18
9 Tanzania 69 3.49 9 Tanzania 59 4.15
10 Ghana 71 3.46 10 Ghana 65 3.97
11 Algeria 74 3.39 11 Algeria 66 3.92
12 Malawi 76 3.36 12 Morocco 68 3.86
13 Senegal 79 3.34 13 Zambia 69 3.86
14 Uganda 80 3.25 14 Ethiopia 73 3.69
15 Kenya 83 3.21 15 Senegal 75 3.64
16 Nigeria 87 3.10 16 Mozambique 82 3.33
17 Zambia 88 3.10 17 Mali 83 3.33
18 Cameroon 91 2.98 18 Uganda 84 3.30
19 Ethiopia 92 2.92 19 Zimbabwe 90 3.21
20 Mozambique 93 2.91 20 Angola 91 3.16
21 Madagascar 96 2.85 21 Kenya 92 3.16
22 Zimbabwe 97 2.84 22 Cameroon 95 3.04
23 Mali 99 2.79 23 Madagascar 96 3.04
24 Angola 100 2.60 24 Nigeria 98 2.99
25 Chad 101 2.31 25 Chad 101 2.36

Macroeconomic environment index Technology index

Rank Rank Score Rank Rank Score
1 Botswana 30 4.44 1 South Africa 40 4.35
2 Tunisia 32 4.38 2 Mauritius 49 4.10
3 South Africa 40 4.08 3 Tunisia 57 3.90
4 Morocco 43 3.95 4 Botswana 59 3.78
5 Gambia 46 3.85 5 Namibia 62 3.72
6 Algeria 51 3.78 6 Egypt 68 3.64
7 Namibia 53 3.75 7 Morocco 71 3.50
8 Egypt 56 3.70 8 Kenya 74 3.36
9 Mauritius 57 3.66 9 Zimbabwe 75 3.34
10 Senegal 67 3.33 10 Uganda 77 3.25
11 Ghana 68 3.29 11 Gambia 80 3.22
12 Uganda 71 3.20 12 Tanzania 81 3.22
13 Nigeria 74 3.16 13 Nigeria 82 3.16
14 Tanzania 76 3.12 14 Ghana 86 3.10
15 Kenya 77 3.10 15 Senegal 89 3.04
16 Cameroon 78 3.10 16 Zambia 90 2.96
17 Madagascar 79 3.04 17 Mozambique 92 2.84
18 Ethiopia 84 2.89 18 Cameroon 93 2.80
19 Mali 91 2.67 19 Malawi 94 2.79
20 Mozambique 95 2.57 20 Algeria 96 2.48
21 Chad 96 2.50 21 Madagascar 97 2.47
98

22 Zambia 97 2.49 22 Angola 98 2.43

23 Malawi 98 2.49 23 Mali 99 2.36
24 Angola 101 2.22 24 Ethiopia 100 2.17
25 Zimbabwe 102 1.98 25 Chad 102 2.06
Source: World Economic Forum

1.8 ❚ What Does the Growth Competitiveness Index Say About Development in Africa?
Part 2
Country Profiles
How Country Profiles Work

This section includes four-page country profiles for twenty-five African countries. Each profile summarizes important data for a
country. It displays major economic, financial, social, and trade data from both published sources and the World Economic
Forum’s Executive Opinion Survey (EOS). Country profiles are laid out as follows:
❚ the first page presents basic indicators for the country in order to give a general overview of its present economic and social development;
❚ the second page includes charts presenting key growth, investment and trade data;
❚ the third and fourth pages present selected data for each economy from the World Economic Forum’s Growth
Competitiveness Index and the EOS.

Algeria FDI Inward and

Outward Stock and Flow,
1999-2002
US$ (millions)

6000

5000

4000

3000
1 2000
Key Indicators Human Development Indicators
Total population in millions, 2002 31.40 Gross international reserves in months of imports, 2001 16.0 1000
Average annual population growth rate (%), 1992-2002 1.80 Official development assistance and official aid (in millions US dollars), 2001 182.0
Total external debt in millions US dollars, 2001 22,503 0
Total GDP in billions US dollars, 2002 54.15 FDI inward FDI outward FDI inflows FDI outflows
Total external debt (as percent of GDP), 2001 0.53
GDP per capita (PPP) in US dollars, 2002 5,536.19 stock stock
Total debt service (as percent of GNI), 2001 8.26
Real growth in GDP per capita (%), 2002 1.58
Total debt service (as percent of exports of goods and services), 2001 19.50
1999 2002
Growth of output (average annual percent growth) 1990-2001 1.64
Gross primary enrollment (percent of relevant age group), 2001 112.0
Agriculture 4.07 Source: UNCTAD Handbook of Statistics, year
Gross secondary enrollment (percent of relevant age group), 2001 70.8
Industry 1.65
Gross tertiary enrollment, 2000 or most recent 15.0
Manufacturing -0.75
Adult literacy rate age 15 and above (%) , 2001 67.8
Services 1.59
Share of population living in the income below 1 dollar a day (%), 2001 <2
Inflation (annual percent change), 2002 1.40 Population without sustainable access to an improved water source (%), 2000 89.00
Government surplus/deficit (as percent of GDP), 2002 2.20
Structure of Exports 1%
Life expectancy at birth, 2002 69.40
Gross capital formation (as percent of GDP), 2001 25.66
HIV prevalence age 15-49 (%), 2001 0.10 of Goods, 2001
Interest rate spread, 2002 3.20 1%
Reported malaria per 100,000, 2001 1.40
Real exchange rate*, 2003 137.57 Estimated TB cases per 100,000, 2001 50.40
Exports of goods and services (as percent of GDP), 2001 37.18 Fuels
Imports of goods and services (as percent of GDP), 2001
Current account balance (as percent of GDP), 2001
21.40
n/a
Infrastructure and Technology Diffusion 2 Manufactured goods
Indicators
Average external tariff rate in percent, 1998 17.30
Paved roads, (percent of total roads), 1999 68.90 Others
Electric power transmission and distribution losses (percent of output), 2000 14.53
Main telephone lines per 100 inhabitants, 2002 6.10
Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.28
Personal computers per 100 inhabitants, 2002 0.71 98%
Internet users per 10,000 inhabitants, 2002 159.78
Source: UNCTAD Handbook of Statistics, year

GDP Growth, 1970-2003

Percent
12

10

3 4

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
-2

-4

-6
2

3
*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States. -8

Sources: World Development Indicators 2003 (World Bank, 2003); World Economic Outlook Database, April 2003 (International Monetary Fund); Global Atlas (World Health Organization); Human Development Report 2002
(UNFP); Index of Economic Freedom 2003 (The Heritage Foundation, 2003) Source: World Economic Outlook Database, April 2003

2.1 ❚ Country Profiles 2.2 ❚ Country Profiles

Page 1 Page 2
Key Indicators of Country Performance, Human 1 FDI Inward and Outward Stock and Flow,
Development, Infrastructure and Technology 1999-2002
Diffusion The chart at the top of the page provides a comparison
These three sections present recent data providing estimates of of the inward and outward stocks and flows of foreign
1 the size and structure of the economy, and the stability of direct investment for the two years, 1999 and 2002.
the macroeconomic environment; The data source is the UNCTAD Handbook of Statistics,
online, March 2004.
2 the state of social development, including literacy rates
and life expectancy; 2 Structure of Exports of Goods, 2001
3 the extent to which infrastructure and technology is deve-
The chart in the middle of the page provides information
loped within the country in question.
on the export structure of each country, with each good
The primary data sources used are exported shown as a percentage of total exports.
World Development Indicators 2003, World Bank; Since this data is not available for a number of countries,
Economist Intelligence Unit; this chart does not appear in some country profiles.
World Economic Outlook Database, IMF, April 2003; The data source is the UNCTAD Handbook of Statistics,
International Financial Statistics, IMF, March 2004; online, March 2004.
State of the World Population 2002, UNFPA;
Global Atlas, World Health Organization, March 2004; 3 GDP Growth, 1970-2003
The World Health Report 2003, World Health The chart at the bottom of the page presents annual
101

Organization; real GDP growth rates since 1970. These data were obtained
Human Development Report 2003, UNDP; from the World Economic Outlook Database, IMF, April 2003.
Institute for Statistics UNESCO;
Index of Economic Freedom 2003, The Heritage
Foundation and The Wall Street Journal;
International Telecommunication Union, March 2004;
African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 Competitiveness Rankings National Competitiveness Balance Sheet

Rank out of 25 African countries Rank out of 102 countries Notable competitive Advantages Notable competitive Disadvantages
Growth Competitiveness Index Rank 11 74 Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness index 25 African countries 102 countries Growth Competitiveness index 25 African countries 102 countries
Macroeconomic Environment Index Rank 6 51 Macroeconomic Environment Macroeconomic Environment
Macroeconomic Stability Subindex Rank 1 5 2.18 Government surplus/deficit, 2002 2 6 2.03 Extent of distortive government subsidies 23 95
Government Waste Subindex Rank 8 67 2.19 National savings rate, 2002 3 6 2.09 Access to credit 13 74
2.20 Inflation, 2002 3 17 2.17 Country credit rating, 2003 8 68
Country Credit Rating Rank Rank 14 68
2.22 Interest rate spread, 2002 1 19 7.08 Diversion of public funds 10 53
2.01 Recession expectations 12 29 7.10 Public trust of politicians 10 53
1 Public Institutions Index Rank
Contracts and Law Subindex Rank
11
13
66
59 2.21 Real exchange rate, 2002 11 42

Corruption Subindex Rank 9 72

Public Institutions Public Institutions
Technology Index Rank 20 96 6.08 Favoritism in decisions of government officials 4 25 7.03 Irregular payments in tax collection 18 87
6.17 Organized crime 10 48 7.02 Irregular payments in public utilities 12 80
Innovation Subindex Rank 6 74
7.01 Irregular payments in exports and imports 6 50 6.01 Judicial independence 18 76
ICT Subindex Rank 16 91
6.03 Property rights 14 70
Technology Transfer Subindex Rank* (out of 77 non-core innovators) 25 76
Source: GCR
Technology
3.16 Laws relating to ICT 24 100
3.13 Quality of competition in the ISP sector 22 96
GCI Algeria 3.12 Internet access in schools 18 94
Relative performance: 3.19 Cellular telephones, 2002 18 92
102 country average
GCI scores and GDP 6 3.15 Government success in ICT promotion 23 91
3.21 Internet hosts, 2002 16 90

4 3.08 University/industry research collaboration 20 89

3.01 Technological sophistication 18 89
GDP per capita (normalized on a Technology index 3.06 Company spending on research and development 18 87
2
2 scale from 1 to 7) 3.23
3.14
Personal computers, 2002
Government prioritization of ICT
12
19
83
80
0
3.20 Internet users, 2002 9 80
3.03 FDI and technology transfer 25 77
3.02 Firm-level technology absorption 16 76
3.22 Telephone lines, 2002 7 73
3.17 Utility patents, 2002 8 72
3.04 Prevalence of foreign technology licensing 20 67
Macroeconomic environment index Public institutions index
3.18 Tertiary enrollment 4 67
Source: World Economic Forum and World Economic Outlook Database, April 2003
Other indicators Other indicators
8.09 Wage equality of women in the workplace 11 21 6.09 Extent of bureaucratic red tape 25 101
3.10 Availability of scientists and engineers 2 23 10.02 Value chain presence 24 101
The Most Problematic Factors for Doing Business 6.18 Informal sector 3 39 10.01 Nature of competitive advantage 24 100
6.13 Reliability of police services 5 40 8.01 Intensity of local competition 23 98
4.08 Impact of HIV/AIDS on FDI 3 46 5.06 Telephone infrastructure quality 17 90
Access to financing
6.14 Business costs of crime and violence 9 47 5.04 Air transport infrastructure quality 20 88
Inefficient government bureaucracy
2.06 Soundness of banks 22 87
Policy instability
10.12 Extent of staff training 21 87
Restrictive labor regulations
2.07 Ease of access to loans 17 85
Inadequate supply of infrastructure
5.07 Postal efficiency 15 82
Tax regulations

3 Inadequately educated workforce

5.03
5.01
Port infrastructure quality
Overall infrastructure quality
11
11
72
69
Corruption
6.15 Government effectiveness in reducing poverty 17 68
Tax rates
4.02 Quality of public schools 9 68
Government instability/coups
8.08 Private-sector employment of women 12 66
Inflation
5.05 Quality of electricity supply 8 66
Poor work ethic in national labour force 10.15 Reliance on professional management 14 64
Foreign currency regulations 4.06 Business impact of tuberculosis 3 64
Crime and theft 4.07 Business impact of HIV/AIDS 4 62
4

5
0% 30%
4.05 Business impact of malaria 2 59
% of responses
5.02 Railroad infrastructure development 9 58
6.05 Freedom of the press 7 56
Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5.
The bars in the figure show the responses weighted according to their rankings. *Source: Global Competitiveness Report 2003-2004, World Economic Forum.
Source: World Economic Forum, Executive Opinion Survey 2003

2.3 ❚ Country Profiles 2.4 ❚ Country Profiles

Page 3 Page 4
1 Competitiveness Rankings National Competitiveness Balance Sheet
The table at the top of the page presents the overall This page forms a country competitiveness balance sheet,
Growth Competitiveness Index (GCI) Rankings for (1) the providing detailed information on the relative
25 African countries covered in this Report, strengths and weaknesses of each economy.
and (2) the entire group of 102 countries covered in The balance sheet is broken into two main sections:
The Global Competitiveness Report 2003-2004. one including all of the variables included in the
Details on the calculation of the GCI can be found calculation of the Growth Competitiveness Index and
in Chapter 8, Appendix 1 of this Report. one including a list of other noteworthy indicators
about the economic environment of each country.
The rankings for each variable are given for the 25
2 Relative Performance: GCI Scores and GDP
African countries included in this Report,
The chart in the middle of the page compares as well as for the entire group of 102 countries
❚ the country’s overall GCI score; included in The Global Competitiveness
Report 2003-2004.
❚ each GCI subindex score (technology, public institutions
and the macroeconomic environment); The rule for deciding whether variables are advantages
❚ GDP per capita in 2003 or disadvantages is based on the methodology used
for the 102-country sample employed in The Global
to the average values of the 102 countries included in Competitiveness Report. For top-ranked countries
The Global Competitiveness Report 2003-2004. in the GCI, variables ranked between 1 and 10 are
Note that all scores are on a scale from 1 to 7, with 1 considered an advantage. For those countries ranked
representing the least competitive and 7 the most from 11 to 51 overall in the GCI, variables ranked better
competitive end of a spectrum. The GDP data than the country’s own rank are considered to be
were obtained from the World Economic Outlook advantages. For those countries with an overall GCI rank
Database, IMF, April 2003. lower than 51, any variables ranked equal to or better
than 51 are considered as advantages.
3 The Most Problematic Factors for Doing
Business
The chart at the bottom of the page summarizes those
factors seen by CEOs and top executives as the most
problematic for doing business in their country.
102

The information is drawn from a question in the Executive

Opinion Survey in which respondents were presented
with 14 different factors and asked to rank those they
considered the most problematic on a scale from 1 to 5.
The responses were tabulated and weighted
according to the rank assigned by the respondents.

2 ❚ Country Profiles
List of Countries

Algeria ........................................................................................104
Angola ........................................................................................108
Botswana....................................................................................112
Cameroon ...................................................................................116
Chad ...........................................................................................120
Egypt ..........................................................................................124
Ethiopia ......................................................................................128
Gambia.......................................................................................132
Ghana.........................................................................................136
Kenya..........................................................................................140
Madagascar................................................................................144
Malawi .......................................................................................148
Mali ............................................................................................152
Mauritius ....................................................................................156
Morocco......................................................................................160
Mozambique...............................................................................164
Namibia ......................................................................................168
Nigeria........................................................................................172
Senegal.......................................................................................176
South Africa................................................................................180
Tanzania .....................................................................................184
Tunisia ........................................................................................188
Uganda.......................................................................................192
Zambia........................................................................................196
Zimbabwe...................................................................................200 103

2 ❚ Country Profiles
 Algeria
Key Indicators Human Development Indicators
Total population in millions, 2002 31.40 Gross primary enrollment (percent of relevant age group), 2001 112.0
Average annual population growth rate (%), 1992-2002 1.8 Gross secondary enrollment (percent of relevant age group), 2001 70.8
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 54.15 2000 or most recent year available 15.0
GDP per capita (PPP) in US dollars, 2002 5,536 Adult literacy rate age 15 and above (%) , 2001 67.8
Real growth in GDP per capita (%), 2002 1.6 Percent of population living on income below 1 dollar a day, 2001 <2

Growth of output (average annual percent growth) 1990-2001 1.6 Population with sustainable access to an improved water source (%), 2000 89

Agriculture 4.1 Life expectancy at birth, 2002 69.4

Industry 1.6 HIV prevalence age 15-49 (%), 2001 0.1

Manufacturing -0.7 Reported malaria per 100,000, 2001 1.4

Services 1.6 Estimated TB cases per 100,000, 2002 50.4

Inflation (annual percent change), 2002 1.4

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 2.2 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 24.7
Paved roads (percent of total roads), 1999 69
Interest rate spread, 2003 2.8
Electric power transmission and distribution losses (percent of output), 2000 16
Real exchange rate*, 2003 137.6 Main telephone lines per 100 inhabitants, 2002 6.1
Exports of goods and services (as percent of GDP), 2002 35.6 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.3
Imports of goods and services (as percent of GDP), 2002 25.6 Personal computers per 100 inhabitants, 2002 0.8
Current account balance (as percent of GDP), 2001 n/a Internet users per 10,000 inhabitants, 2002 159.8
Average external tariff rate in percent, 1998 17.3
Gross international reserves in months of imports, 2001 16.0
Official development assistance and official aid (in millions US dollars), 2001 182.0
Total external debt in millions US dollars, 2001 22'503
Total external debt (as percent of GDP), 2001 41.2
Total debt service (as percent of GNI), 2001 8.3
Total debt service (as percent of exports of goods and services), 2001 19.5
104

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003 (World Bank, 2003); World Economic Outlook Database, April 2003 (International Monetary Fund); Global Atlas (World Health Organization); Human Development Report 2002
(UNFP); Index of Economic Freedom 2003 (The Heritage Foundation, 2003)

2 ❚ Country Profiles
 US$ (millions)
FDI Inward and
6,000
Outward Stock and Flow,
1999-2002 5,000

4,000

3,000

2,000

1,000

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 1%
of Goods, 2001
1%

Fuels

Manufactured goods

Others

98%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

GDP Growth, 1970-2003

Percent
12

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

5
96

97

98

99

00

01

02

03
9
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-2

-4
105

-6

-8

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries

Growth Competitiveness Index Rank 11 74

Macroeconomic Environment Index Rank 6 51

Macroeconomic Stability Subindex Rank 1 5
Government Waste Subindex Rank 14 67
Country Credit Rating Rank Rank 8 68

Public Institutions Index Rank 11 66

Contracts and Law Subindex Rank 13 59
Corruption Subindex Rank 9 72

Technology Index Rank 20 96

Innovation Subindex Rank 6 74
ICT Subindex Rank 16 91
Technology Transfer Subindex Rank* (out of 77 non-core innovators) 25 76
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Algeria

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, April 2003

The Most Problematic Factors for Doing Business

Access to financing
Inefficient government bureaucracy
Policy instability
Restrictive labor regulations

Inadequate supply of infrastructure

Tax regulations
Inadequately educated workforce

Corruption
Tax rates
Government instability/coups
Inflation

Poor work ethic in national labour force

Foreign currency regulations
106

Crime and theft

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5.
The bars in the figure show the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.18 Government surplus/deficit, 2002 2 6 2.03 Extent of distortive government subsidies 23 95
2.19 National savings rate, 2002 3 6 2.09 Access to credit 13 74
2.20 Inflation, 2002 3 17 2.17 Country credit rating, 2003 8 68
2.22 Interest rate spread, 2002 1 19 7.08 Diversion of public funds 10 53
2.01 Recession expectations 12 29 7.10 Public trust of politicians 10 53
2.21 Real exchange rate, 2002 11 42

Public Institutions Public Institutions

6.08 Favoritism in decisions of government officials 4 25 7.03 Irregular payments in tax collection 18 87
6.17 Organized crime 10 48 7.02 Irregular payments in public utilities 12 80
7.01 Irregular payments in exports and imports 6 50 6.01 Judicial independence 18 76
6.03 Property rights 14 70

Technology
3.16 Laws relating to ICT 24 100
3.13 Quality of competition in the ISP sector 22 96
3.12 Internet access in schools 18 94
3.19 Cellular telephones, 2002 18 92
3.15 Government success in ICT promotion 23 91
3.21 Internet hosts, 2002 16 90
3.08 University/industry research collaboration 20 89
3.01 Technological sophistication 18 89
3.06 Company spending on research and development 18 87
3.23 Personal computers, 2002 12 83
3.14 Government prioritization of ICT 19 80
3.20 Internet users, 2002 9 80
3.03 FDI and technology transfer 25 77
3.02 Firm-level technology absorption 16 76
3.22 Telephone lines, 2002 7 73
3.17 Utility patents, 2002 8 72
3.04 Prevalence of foreign technology licensing 20 67
3.18 Tertiary enrollment 4 67

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 11 21 6.09 Extent of bureaucratic red tape 25 101
3.10 Availability of scientists and engineers 2 23 10.02 Value chain presence 24 101
6.18 Informal sector 3 39 10.01 Nature of competitive advantage 24 100
6.13 Reliability of police services 5 40 8.01 Intensity of local competition 23 98
4.08 Impact of HIV/AIDS on FDI 3 46 5.06 Telephone infrastructure quality 17 90
6.14 Business costs of crime and violence 9 47 5.04 Air transport infrastructure quality 20 88
2.06 Soundness of banks 22 87
10.12 Extent of staff training 21 87
2.07 Ease of access to loans 17 85
5.07 Postal efficiency 15 82
5.03 Port infrastructure quality 11 72
5.01 Overall infrastructure quality 11 69
6.15 Government effectiveness in reducing poverty 17 68
4.02 Quality of public schools 9 68
8.08 Private-sector employment of women 12 66
5.05 Quality of electricity supply 8 66
10.15 Reliance on professional management 14 64
4.06 Business impact of tuberculosis 3 64
107

4.07 Business impact of HIV/AIDS 4 62

4.05 Business impact of malaria 2 59
5.02 Railroad infrastructure development 9 58
6.05 Freedom of the press 7 56
*Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Angola
Key Indicators Human Development Indicators
Population in millions, 2002 13.90 Gross primary enrollment (percent of relevant age group), 2001 74.0
Average annual population growth rate (%), 1992-2002 2.9 Gross secondary enrollment (percent of relevant age group), 2001 17.6
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 11.63 2000 or most recent year available 0.7
GDP per capita (PPP) in US dollars, 2002 2,053 Adult literacy rate age 15 and above (%) , 2001 42
Real growth in GDP per capita (%), 2002 n/a Percent of population living on income below 1 dollar a day, 2001 n/a

Growth of output (average annual percent growth) 1990-2001 1.5 Population with sustainable access to an improved water source (%), 2000 38

Agriculture 1.2 Life expectancy at birth (years), 2002 39.9

Industry 3.3 HIV prevalence age 15-49 (%), 2001 5.5

Manufacturing -0.5 Reported malaria per 100,000, 2001 6,594

Services -1.6 Estimated TB cases per 100,000, 2002 201

Inflation (annual percent change), 2002 108.9

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 -4.5 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 34.0
Paved roads (percent of total roads), 1999 10
Interest rate spread, 2003 70.1
Electric power transmission and distribution losses (percent of output), 2000 15
Real exchange rate, 2003* 77.9 Main telephone lines per 100 inhabitants, 2002 0.6
Exports of goods and services (as percent of GDP), 2001 74.0 Cellular mobile telephone subscribers per 100 inhabitants, 2002 0.9
Imports of goods and services (as percent of GDP), 2001 62.3 Personal computers per 100 inhabitants, 2002 0.2
Current account balance (as percent of GDP), 2001 -3.7 Internet users per 10,000 inhabitants, 2002 29.4
Average external tariff rate in percent n/a
Gross international reserves in months of imports, 2001 1.2
Official development assistance and official aid (in millions US dollars), 2001 268.4
Total external debt in millions US dollars, 2001 9,600
Total external debt (as percent of GDP), 2001 101.4
Total debt service (as percent of GNI), 2001 23.7
Total debt service (as percent of exports of goods and services), 2001 26.5
108

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
14,000
Outward Stock and Flow,
1999-2002 12,000

10,000

8,000

6,000

4,000

2,000

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

96

97

98

99

00

01

02

03
9
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
-5

-10

-15

-20

-25

-30

Source: World Economic Outlook Database, IMF, April 2003

109

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 24 100

Macroeconomic Environment Index Rank 24 101

Macroeconomic Stability Subindex Rank 24 100
Government Waste Subindex Rank 24 92
Country Credit Rating Rank Rank 19 95

Public Institutions Index Rank 20 91

Contracts and Law Subindex Rank 23 90
Corruption Subindex Rank 18 91

Technology Index Rank 22 98

Innovation Subindex Rank 25 102
ICT Subindex Rank 23 100
Technology Transfer Subindex Rank (out of 77 non-core innovators) 20 66

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Angola

Relative performance:
Growth Competitiveness 102 country average
6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inflation

Corruption

Inadequate supply of infrastructure

Inadequately educated workforce

Inefficient government bureaucracy

Policy instability

Foreign currency regulations

Poor work ethic in national labour force

Tax rates

Tax regulations

Government instability/coups

Crime and theft

110

Restrictive labor regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet
Notable Competitive Advantages Notable Competitive Disadvantages
Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.01 Recession expectations 1 8 2.22 Interest rate spread, 2002 25 101
2.20 Inflation, 2002 24 101
2.21 Real exchange rate, 2002 24 99
2.03 Extent of distortive government subsidies 24 98
2.17 Country credit rating, 2003 19 95
7.10 Public trust of politicians 23 88
2.19 National savings rate, 2002 16 84
2.09 Access to credit 17 84
7.08 Diversion of public funds 16 83
2.18 Government surplus/deficit, 2002 11 62

Public Institutions
6.03 Property rights 23 95
6.01 Judicial independence 23 91
7.01 Irregular payments in exports and imports 20 90
7.02 Irregular payments in public utilities 17 90
6.08 Favoritism in decisions of government officials 22 89
7.03 Irregular payments in tax collection 13 79
6.17 Organized crime 15 63

Technology
3.06 Company spending on research and development 25 102
3.08 University/industry research collaboration 25 102
3.12 Internet access in schools 24 101
3.21 Internet hosts, 2002 25 100
3.18 Tertiary enrollment 23 100
3.01 Technological sophistication 23 99
3.14 Government prioritization of ICT 24 97
3.16 Laws relating to ICT 23 97
3.19 Cellular telephones, 2002 21 96
3.13 Quality of competition in the ISP sector 21 95
3.23 Personal computers, 2002 21 95
3.20 Internet users, 2002 17 93
3.22 Telephone lines, 2002 17 93
3.15 Government success in ICT promotion 22 90
3.02 Firm-level technology absorption 20 85
3.17 Utility patents, 2002 8 72
3.04 Prevalence of foreign technology licensing 21 71
3.03 FDI and technology transfer 17 54

Other Indicators
3.10 Availability of scientists and engineers 25 102
8.01 Intensity of local competition 25 102
10.01 Nature of competitive advantage 25 102
10.02 Value chain presence 25 102
8.09 Wage equality of women in the workplace 25 101
6.09 Extent of bureaucratic red tape 24 100
5.01 Overall infrastructure quality 24 100
5.05 Quality of electricity supply 24 100
6.05 Freedom of the press 24 100
4.05 Business impact of malaria 23 100
8.08 Private-sector employment of women 25 99
6.18 Informal sector 25 99
5.04 Air transport infrastructure quality 24 97
10.15 Reliance on professional management 24 97
5.06 Telephone infrastructure quality 22 96
4.06 Business impact of tuberculosis 19 96
4.02 Quality of public schools 24 95
10.12 Extent of staff training 22 93
5.02 Railroad infrastructure development 23 92
5.03 Port infrastructure quality 19 92
5.07 Postal efficiency 20 91
2.06 Soundness of banks 24 89
2.07 Ease of access to loans 18 89
111

6.14 Business costs of crime and violence 21 88

6.15 Government effectiveness in reducing poverty 22 86
4.07 Business impact of HIV/AIDS 10 85
4.07 Business impact of HIV/AIDS 10 85
4.08 Impact of HIV/AIDS on FDI 10 80
4.08 Impact of HIV/AIDS on FDI 10 80
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 6.13 Reliability of police services 15 66

2 ❚ Country Profiles
 Botswana
Key Indicators Human Development Indicators
Population in millions, 2002 1.60 Gross primary enrollment (percent of relevant age group), 2001 108.0
Average annual population growth rate (%), 1992-2002 2.1 Gross secondary enrollment (percent of relevant age group), 2001 79.1
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 5.04 2000 or most recent year available 4.7
GDP per capita (PPP) in US dollars, 2002 8,244 Adult literacy rate age 15 and above (%) , 2001 78.1
Real growth in GDP per capita (%), 2002 2.1 Percent of population living on income below 1 dollar a day, 2001 24

Growth of output (average annual percent growth) 1990-2001 5.4 Population with sustainable access to an improved water source (%), 2000 95

Agriculture -0.5 Life expectancy at birth (years), 2002 40.4

Industry 4.4 HIV prevalence age 15-49 (%), 2001 38.8

Manufacturing 4.2 Reported malaria per 100,000, 2001 2,836

Services 8.2 Estimated TB cases per 100,000, 2002 664

Inflation (annual percent change), 2002 5.5

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 -4.0 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 24.2
Paved roads (percent of total roads), 1999 55
Interest rate spread, 2003 5.7
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 156.5 Main telephone lines per 100 inhabitants, 2002 8.7
Exports of goods and services (as percent of GDP), 2001 50.9 Cellular mobile telephone subscribers per 100 inhabitants, 2002 24.1
Imports of goods and services (as percent of GDP), 2001 34.7 Personal computers per 100 inhabitants, 2002 4.1
Current account balance (as percent of GDP), 2001 8.4 Internet users per 10,000 inhabitants, 2002 297.5
Average external tariff rate in percent, 1999 8.5
Gross international reserves in months of imports, 2001 25.3
Official development assistance and official aid (in millions US dollars), 2001 29.1
Total external debt in millions US dollars, 2001 370
Total external debt (as percent of GDP), 2001 7.1
Total debt service (as percent of GNI), 2001 1.1
Total debt service (as percent of exports of goods and services), 2001 1.7
112

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)

2,500
FDI Inward and
Outward Stock and Flow, 2,000
1999-2002
1,500

1,000

500

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 3% 1%
of Goods, 2001 5%

Manufactured goods
Ores and metals
All food items
Others

91%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
35

30

25

20

15

10
113

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 1 36

Macroeconomic Environment Index Rank 1 30

Macroeconomic Stability Subindex Rank 2 23
Government Waste Subindex Rank 2 17
Country Credit Rating Rank Rank 1 38

Public Institutions Index Rank 1 26

Contracts and Law Subindex Rank 1 16
Corruption Subindex Rank 1 36

Technology Index Rank 4 59

Innovation Subindex Rank 8 80
ICT Subindex Rank 5 65
Technology Transfer Subindex Rank (out of 77 non-core innovators) 6 24

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Botswana

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, April 2003

The Most Problematic Factors for Doing Business

Poor work ethic in national labour force

Inadequately educated workforce

Access to financing

Inefficient government bureaucracy

Restrictive labor regulations

Inadequate supply of infrastructure

Inflation

Crime and theft

Tax rates

Policy instability

Tax regulations

Foreign currency regulations

Government instability/coups
114

Corruption

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.19 National savings rate, 2002 2 5 2.20 Inflation, 2002 14 70
7.10 Public trust of politicians 1 9 2.18 Government surplus/deficit, 2002 10 56
2.01 Recession expectations 5 17 2.22 Interest rate spread, 2002 6 51
2.21 Real exchange rate, 2002 8 17 2.03 Extent of distortive government subsidies 8 38
2.09 Access to credit 1 20 2.17 Country credit rating, 2003 1 38
7.08 Diversion of public funds 2 24

Public Institutions Public Institutions

6.01 Judicial independence 1 11 7.02 Irregular payments in public utilities 1 41
6.08 Favoritism in decisions of government officials 2 17 7.01 Irregular payments in exports and imports 3 38
6.03 Property rights 1 21
6.17 Organized crime 3 24
7.03 Irregular payments in tax collection 1 30

Technology
3.04 Prevalence of foreign technology licensing 2 10
3.15 Government success in ICT promotion 7 29

Technology
3.13 Quality of competition in the ISP sector 20 93
3.18 Tertiary enrollment 9 84
3.12 Internet access in schools 8 76
3.16 Laws relating to ICT 12 73
3.20 Internet users, 2002 5 72
3.17 Utility patents, 2002 8 72
3.02 Firm-level technology absorption 13 69
3.08 University/industry research collaboration 11 68
3.22 Telephone lines, 2002 5 68
3.06 Company spending on research and development 11 64
3.21 Internet hosts, 2002 4 63
3.23 Personal computers, 2002 5 59
3.01 Technological sophistication 5 53
3.19 Cellular telephones, 2002 3 51
3.03 FDI and technology transfer 10 39
3.14 Government prioritization of ICT 9 36

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 1 2 4.08 Impact of HIV/AIDS on FDI 24 99
2.06 Soundness of banks 1 16 4.07 Business impact of HIV/AIDS 21 98
10.15 Reliance on professional management 2 23 6.09 Extent of bureaucratic red tape 15 88
8.08 Private-sector employment of women 3 23 3.10 Availability of scientists and engineers 18 87
6.15 Government effectiveness in reducing poverty 3 25 10.02 Value chain presence 16 87
5.07 Postal efficiency 1 26 4.06 Business impact of tuberculosis 10 85
5.01 Overall infrastructure quality 3 28 8.01 Intensity of local competition 16 80
10.01 Nature of competitive advantage 1 30 5.06 Telephone infrastructure quality 11 77
6.14 Business costs of crime and violence 4 32 4.05 Business impact of malaria 5 74
5.02 Railroad infrastructure development 3 33 5.03 Port infrastructure quality 12 73
6.13 Reliability of police services 4 34 10.12 Extent of staff training 7 61
5.04 Air transport infrastructure quality 8 56
6.05 Freedom of the press 6 55
4.02 Quality of public schools 2 49
2.07 Ease of access to loans 6 49
5.05 Quality of electricity supply 4 37
6.18 Informal sector 2 36
115

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Cameroon
Key Indicators Human Development Indicators
Population in millions, 2002 15.50 Gross primary enrollment (percent of relevant age group), 2001 108.0
Average annual population growth rate (%), 1992-2002 2.4 Gross secondary enrollment (percent of relevant age group), 1999 19.6
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 9.04 2000 or most recent year available 4.9
GDP per capita (PPP) in US dollars, 2002 1,712 Adult literacy rate age 15 and above (%) , 2001 72.4
Real growth in GDP per capita (%), 2002 1.5 Percent of population living on income below 1 dollar a day, 2001 33

Growth of output (average annual percent growth) 1990-2001 1.1 Population with sustainable access to an improved water source (%), 2000 58

Agriculture 4.4 Life expectancy at birth (years), 2002 48.1

Industry -0.6 HIV prevalence age 15-49 (%), 2001 11.8

Manufacturing 1.8 Reported malaria per 100,000, 2001 2,900

Services -0.4 Estimated TB cases per 100,000, 2002 145

Inflation (annual percent change), 2002 4.5

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 3.0 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 17.8
Paved roads (percent of total roads), 1999 13
Interest rate spread, 2002 13.0
Electric power transmission and distribution losses (percent of output), 2000 22
Real exchange rate, 2003* 135.0 Main telephone lines per 100 inhabitants, 2002 0.7
Exports of goods and services (as percent of GDP), 2001 31.8 Cellular mobile telephone subscribers per 100 inhabitants, 2002 4.3
Imports of goods and services (as percent of GDP), 2001 29.2 Personal computers per 100 inhabitants, 2002 0.6
Current account balance (as percent of GDP), 2001 -1.7 Internet users per 10,000 inhabitants, 2002 37.9
Average external tariff rate in percent, 2000 18.4
Gross international reserves in months of imports, 2001 1.4
Official development assistance and official aid (in millions US dollars), 2001 397.7
Total external debt in millions US dollars, 2001 8,338
Total external debt (as percent of GDP), 2001 98.1
Total debt service (as percent of GNI), 2001 4.3
Total debt service (as percent of exports of goods and services), 2001 12.6
116

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
1,600
Outward Stock and Flow,
1,400
1999-2002
1,200
1,000
800
600
400
200
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

5%

Structure of Exports
of Goods, 2001 21%

52%

Fuels
Others
Agricultural raw materials
Manufactured goods

22%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

117
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 18 91

Macroeconomic Environment Index Rank 16 78

Macroeconomic Stability Subindex Rank 10 59
Government Waste Subindex Rank 16 74
Country Credit Rating Rank Rank 14 87

Public Institutions Index Rank 22 95

Contracts and Law Subindex Rank 20 82
Corruption Subindex Rank 22 97

Technology Index Rank 18 93

Innovation Subindex Rank 12 85
ICT Subindex Rank 17 92
Technology Transfer Subindex Rank (out of 77 non-core innovators) 19 65
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Cameroon

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Corruption

Tax regulations

Tax rates

Inefficient government bureaucracy

Inadequate supply of infrastructure

Poor work ethic in national labour force

Inflation

Inadequately educated workforce

Crime and theft

Policy instability

Restrictive labor regulations

118

Government instability/coups

Foreign currency regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.18 Government surplus/deficit, 2002 1 4 2.09 Access to credit 23 96
2.01 Recession expectations 6 18 7.08 Diversion of public funds 23 95
2.19 National savings rate, 2002 10 43 2.17 Country credit rating, 2003 14 87
2.21 Real exchange rate, 2002 13 48 2.22 Interest rate spread, 2002 17 84
2.03 Extent of distortive government subsidies 14 61
2.20 Inflation, 2002 9 60
7.10 Public trust of politicians 11 54

Public Institutions
7.02 Irregular payments in public utilities 24 99
6.17 Organized crime 24 95
7.03 Irregular payments in tax collection 21 95
7.01 Irregular payments in exports and imports 21 92
6.03 Property rights 20 88
6.01 Judicial independence 17 72
6.08 Favoritism in decisions of government officials 12 59

Technology Technology
3.08 University/industry research collaboration 3 39 3.12 Internet access in schools 19 95
3.14 Government prioritization of ICT 13 46 3.20 Internet users, 2002 18 94
3.22 Telephone lines, 2002 16 92
3.01 Technological sophistication 19 90
3.23 Personal computers, 2002 16 89
3.21 Internet hosts, 2002 15 89
3.16 Laws relating to ICT 17 87
3.02 Firm-level technology absorption 19 84
3.19 Cellular telephones, 2002 11 83
3.18 Tertiary enrollment 8 83
3.06 Company spending on research and development 16 75
3.15 Government success in ICT promotion 18 73
3.17 Utility patents, 2002 8 72
3.13 Quality of competition in the ISP sector 10 68
3.03 FDI and technology transfer 19 65
3.04 Prevalence of foreign technology licensing 18 63

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 3 4 4.05 Business impact of malaria 22 99
3.10 Availability of scientists and engineers 3 36 4.06 Business impact of tuberculosis 22 99
5.06 Telephone infrastructure quality 24 98
5.05 Quality of electricity supply 22 98
4.07 Business impact of HIV/AIDS 20 97
5.04 Air transport infrastructure quality 22 94
10.01 Nature of competitive advantage 21 94
6.09 Extent of bureaucratic red tape 18 93
6.05 Freedom of the press 20 92
6.14 Business costs of crime and violence 22 90
5.07 Postal efficiency 18 88
10.12 Extent of staff training 19 85
4.08 Impact of HIV/AIDS on FDI 13 85
2.07 Ease of access to loans 16 84
5.01 Overall infrastructure quality 16 84
8.01 Intensity of local competition 17 81
5.03 Port infrastructure quality 14 79
10.02 Value chain presence 13 79
4.02 Quality of public schools 14 76
10.15 Reliance on professional management 20 75
5.02 Railroad infrastructure development 15 74
119

6.13 Reliability of police services 17 73

6.18 Informal sector 12 67
6.15 Government effectiveness in reducing poverty 15 62
2.06 Soundness of banks 13 59
8.08 Private-sector employment of women 7 58
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Chad
Key Indicators Human Development Indicators
Population in millions, 2002 8.40 Gross primary enrollment (percent of relevant age group), 2001 73.0
Average annual population growth rate (%), 1992-2002 3.1 Gross secondary enrollment (percent of relevant age group), 2000 11.5
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 1.94 2000 or most recent year available 0.9
GDP per capita (PPP) in US dollars, 2002 1,008 Adult literacy rate age 15 and above (%) , 2001 44.2
Real growth in GDP per capita (%), 2002 8.2 Percent of population living on income below 1 dollar a day, 2001 n/a

Growth of output (average annual percent growth) 1990-2001 3.9 Population with sustainable access to an improved water source (%), 2000 27

Agriculture 4.4 Life expectancy at birth (years), 2002 47.7

Industry 2.7 HIV prevalence age 15-49 (%), 2001 3.6

Manufacturing 4.7 Reported malaria per 100,000, 2001 4,683

Services 2.2 Estimated TB cases per 100,000, 2002 226

Inflation (annual percent change), 2002 4.5

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 -11.0 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 41.6
Paved roads (percent of total roads), 1999 1
Interest rate spread, 2002 13.0
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 108.2 Main telephone lines per 100 inhabitants, 2002 0.2
Exports of goods and services (as percent of GDP), 2001 14.3 Cellular mobile telephone subscribers per 100 inhabitants, 2002 0.4
Imports of goods and services (as percent of GDP), 2001 52.8 Personal computers per 100 inhabitants, 2002 0.2
Current account balance (as percent of GDP), 2001 -41.3 Internet users per 10,000 inhabitants, 2002 19.1
Average external tariff rate in percent, 2000 18.4
Gross international reserves in months of imports, 2001 1.5
Official development assistance and official aid (in millions US dollars), 2001 179.0
Total external debt in millions US dollars, 2001 1,104
Total external debt (as percent of GDP), 2001 69.0
Total debt service (as percent of GNI), 2001 1.5
Total debt service (as percent of exports of goods and services), 2001 7.9
120

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and 1,600
Outward Stock and Flow,
1,400
1999-2002
1,200
1,000
800
600
400
200
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
-5

-10

-15

-20

-25

Source: World Economic Outlook Database, IMF, April 2003

121

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 25 101

Macroeconomic Environment Index Rank 21 96

Macroeconomic Stability Subindex Rank 20 91
Government Waste Subindex Rank 22 90
Country Credit Rating Rank Rank 21 97

Public Institutions Index Rank 25 101

Contracts and Law Subindex Rank 25 101
Corruption Subindex Rank 25 101

Technology Index Rank 25 102

Innovation Subindex Rank 24 101
ICT Subindex Rank 25 102
Technology Transfer Subindex Rank (out of 77 non-core innovators) 24 75
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Chad

Relative performance:
Growth Competitiveness 102 country average
6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inadequate supply of infrastructure

Corruption

Tax rates

Tax regulations

Inefficient government bureaucracy

Policy instability

Inadequately educated workforce

Crime and theft

Restrictive labor regulations

Inflation

Government instability/coups
122

Poor work ethic in national labour force

Foreign currency regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.01 Recession expectations 3 14 2.19 National savings rate, 2002 25 101
2.09 Access to credit 24 97
2.17 Country credit rating, 2003 21 97
2.18 Government surplus/deficit, 2002 21 97
7.08 Diversion of public funds 24 96
7.10 Public trust of politicians 22 87
2.22 Interest rate spread, 2002 17 84
2.03 Extent of distortive government subsidies 21 82
2.21 Real exchange rate, 2002 21 75
2.20 Inflation, 2002 9 60

Public Institutions
7.01 Irregular payments in exports and imports 25 102
7.02 Irregular payments in public utilities 25 100
7.03 Irregular payments in tax collection 24 99
6.03 Property rights 25 98
6.08 Favoritism in decisions of government officials 25 97
6.17 Organized crime 25 97
6.01 Judicial independence 24 96

Technology
3.12 Internet access in schools 25 102
3.22 Telephone lines, 2002 25 102
3.13 Quality of competition in the ISP sector 24 101
3.19 Cellular telephones, 2002 24 101
3.01 Technological sophistication 24 100
3.02 Firm-level technology absorption 25 99
3.06 Company spending on research and development 23 99
3.15 Government success in ICT promotion 25 98
3.20 Internet users, 2002 22 98
3.18 Tertiary enrollment 21 98
3.08 University/industry research collaboration 23 97
3.21 Internet hosts, 2002 22 97
3.14 Government prioritization of ICT 23 96
3.23 Personal computers, 2002 22 96
3.16 Laws relating to ICT 20 93
3.03 FDI and technology transfer 24 75
3.04 Prevalence of foreign technology licensing 24 75
3.17 Utility patents, 2002 8 72

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 5 9 2.07 Ease of access to loans 25 102
6.09 Extent of bureaucratic red tape 1 46 5.01 Overall infrastructure quality 25 102
5.04 Air transport infrastructure quality 25 102
5.05 Quality of electricity supply 25 102
4.05 Business impact of malaria 24 101
4.07 Business impact of HIV/AIDS 24 101
5.03 Port infrastructure quality 24 101
4.06 Business impact of tuberculosis 23 100
3.10 Availability of scientists and engineers 22 99
10.02 Value chain presence 23 98
6.13 Reliability of police services 24 97
6.15 Government effectiveness in reducing poverty 24 97
10.12 Extent of staff training 23 97
4.08 Impact of HIV/AIDS on FDI 21 96
5.07 Postal efficiency 23 95
6.05 Freedom of the press 23 95
5.06 Telephone infrastructure quality 21 95
8.01 Intensity of local competition 21 95
4.02 Quality of public schools 23 90
10.01 Nature of competitive advantage 18 90
123

5.02 Railroad infrastructure development 21 89

10.15 Reliance on professional management 22 87
8.08 Private-sector employment of women 20 84
6.14 Business costs of crime and violence 20 83
2.06 Soundness of banks 20 81
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 6.18 Informal sector 19 79

2 ❚ Country Profiles
 Egypt
Key Indicators Human Development Indicators
Population in millions, 2002 70.30 Gross primary enrollment (percent of relevant age group), 2001 100.0
Average annual population growth rate (%), 1992-2002 1.9 Gross secondary enrollment (percent of relevant age group), 2001 85.7
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 85.55 2000 or most recent year available 39.0
GDP per capita (PPP) in US dollars, 2002 3'701 Adult literacy rate age 15 and above (%), 2001 56.1
Real growth in GDP per capita (%), 2002 0.0 Percent of population living on income below 1 dollar a day, 2001 3

Growth of output (average annual percent growth) 1990-2001 3.5 Population with sustainable access to an improved water source (%), 2000 97

Agriculture 3.5 Life expectancy at birth (years), 2002 67.1

Industry 5.7 HIV prevalence age 15-49 (%), 2001 0.1

Manufacturing 6.2 Reported malaria per 100,000, 2001 0

Services 3.8 Estimated TB cases per 100,000, 2002 38

Inflation (annual percent change), 2002 2.5

Infrastructure and
Government surplus/deficit (as percent of GDP), 2002 -5.9 Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 17.7
Paved roads (percent of total roads), 1999 78
Interest rate spread, 2002 4.5
Electric power transmission and distribution losses (percent of output), 2000 12
Real exchange rate, 2003* 120.6 Main telephone lines per 100 inhabitants, 2002 11.0
Exports of goods and services (as percent of GDP), 2002 18.2 Cellular mobile telephone subscribers per 100 inhabitants, 2002 6.7
Imports of goods and services (as percent of GDP), 2002 21.8 Personal computers per 100 inhabitants, 2002 1.7
Current account balance (as percent of GDP), 2002 0.7 Internet users per 10,000 inhabitants, 2002 282.3
Average external tariff rate in percent, 1998 13.7
Gross international reserves in months of imports, 2001 7.2
Official development assistance and official aid (in millions US dollars), 2001 1,255.2
Total external debt in millions US dollars, 2001 29,234
Total external debt (as percent of GDP), 2001 29.7
Total debt service (as percent of GNI), 2001 1.9
Total debt service (as percent of exports of goods and services), 2001 8.9
124

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
25,000
Outward Stock and Flow,
1999-2002 20,000

15,000

10,000

5,000

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

5%
Structure of Exports
of Goods, 2002 3%

12% 39%
Fuels
Manufactured goods
Others
All food items
Ores and metals

41%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

125
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 7 58

Macroeconomic Environment Index Rank 8 56

Macroeconomic Stability Subindex Rank 12 63
Government Waste Subindex Rank 7 45
Country Credit Rating Rank Rank 6 53

Public Institutions Index Rank 8 57

Contracts and Law Subindex Rank 9 47
Corruption Subindex Rank 8 67

Technology Index Rank 6 68

Innovation Subindex Rank 1 39
ICT Subindex Rank 6 69
Technology Transfer Subindex Rank (out of 77 non-core innovators) 11 44
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Egypt

Relative performance:
102 country average
Growth Competitiveness 6

Index scores and GDP

4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Policy instability

Inefficient government bureaucracy

Tax regulations

Foreign currency regulations

Tax rates

Corruption

Inadequately educated workforce

Inflation

Restrictive labor regulations

Poor work ethic in national labour force

Inadequate supply of infrastructure

126

Government instability/coups

Crime and theft

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.22 Interest rate spread, 2002 2 35 2.09 Access to credit 15 78
7.08 Diversion of public funds 4 39 2.18 Government surplus/deficit, 2002 12 73
2.03 Extent of distortive government subsidies 9 40 2.19 National savings rate, 2002 12 73
2.20 Inflation, 2002 6 40 2.01 Recession expectations 20 61
7.10 Public trust of politicians 8 41 2.21 Real exchange rate, 2002 17 61
2.17 Country credit rating, 2003 6 53

Public Institutions Public Institutions

6.08 Favoritism in decisions of government officials 5 26 7.02 Irregular payments in public utilities 14 84
6.17 Organized crime 8 45 7.03 Irregular payments in tax collection 9 66
6.01 Judicial independence 12 59
6.03 Property rights 10 58
7.01 Irregular payments in exports and imports 8 54

Technology Technology
3.13 Quality of competition in the ISP sector 1 33 3.21 Internet hosts, 2002 12 86
3.15 Government success in ICT promotion 10 35 3.23 Personal computers, 2002 8 74
3.18 Tertiary enrollment 1 37 3.20 Internet users, 2002 7 74
3.04 Prevalence of foreign technology licensing 11 40 3.19 Cellular telephones, 2002 7 74
3.12 Internet access in schools 2 42 3.02 Firm-level technology absorption 14 71
3.14 Government prioritization of ICT 11 42 3.17 Utility patents, 2002 4 64
3.03 FDI and technology transfer 13 46 3.16 Laws relating to ICT 7 63
3.22 Telephone lines, 2002 3 61
3.08 University/industry research collaboration 7 54
3.06 Company spending on research and development 8 52
3.01 Technological sophistication 4 52

Other Indicators Other Indicators

10.01 Nature of competitive advantage 3 33 6.09 Extent of bureaucratic red tape 20 95
10.02 Value chain presence 3 33 6.05 Freedom of the press 18 90
8.09 Wage equality of women in the workplace 15 40 2.06 Soundness of banks 23 88
6.13 Reliability of police services 6 42 4.06 Business impact of tuberculosis 4 71
5.01 Overall infrastructure quality 6 43 10.15 Reliance on professional management 17 70
6.14 Business costs of crime and violence 7 44 4.05 Business impact of malaria 4 70
5.02 Railroad infrastructure development 5 46 8.01 Intensity of local competition 7 67
2.07 Ease of access to loans 5 48 5.04 Air transport infrastructure quality 11 66
6.15 Government effectiveness in reducing poverty 10 48 10.12 Extent of staff training 9 66
5.03 Port infrastructure quality 6 49 5.06 Telephone infrastructure quality 6 64
4.08 Impact of HIV/AIDS on FDI 4 50 4.02 Quality of public schools 7 62
5.07 Postal efficiency 4 50 8.08 Private-sector employment of women 9 62
3.10 Availability of scientists and engineers 7 57
5.05 Quality of electricity supply 7 56
6.18 Informal sector 7 55
4.07 Business impact of HIV/AIDS 3 52
127

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Ethiopia
Key Indicators Human Development Indicators
Population in millions, 2002 66.00 Gross primary enrollment (percent of relevant age group), 2001 64.0
Average annual population growth rate (%), 1992-2002 2.8 Gross secondary enrollment (percent of relevant age group), 2001 18.0
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 5.99 2000 or most recent year available 1.6
GDP per capita (PPP) in US dollars, 2002 724 Adult literacy rate age 15 and above (%) , 2001 40.3
Real growth in GDP per capita (%), 2002 2.2 Percent of population living on income below 1 dollar a day, 2001 82

Growth of output (average annual percent growth) 1990-2001 3.5 Population with sustainable access to an improved water source (%), 2000 24

Agriculture 3.2 Life expectancy at birth (years), 2002 48.0

Industry 3.1 HIV prevalence age 15-49 (%), 2001 6.4

Manufacturing 3.5 Reported malaria per 100,000, 2001 621

Services 5.6 Estimated TB cases per 100,000, 2002 292

Inflation (annual percent change), 2002 -7.2

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -14.9 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 18.0
Paved roads (percent of total roads), 1999 13
Interest rate spread, 2002 4.6
Electric power transmission and distribution losses (percent of output), 2000 10
Real exchange rate, 2003* 162.5 Main telephone lines per 100 inhabitants, 2002 0.5
Exports of goods and services (as percent of GDP), 2001 15.4 Cellular mobile telephone subscribers per 100 inhabitants, 2002 0.1
Imports of goods and services (as percent of GDP), 2001 31.2 Personal computers per 100 inhabitants, 2002 0.2
Current account balance (as percent of GDP), 2001 -4.4 Internet users per 10,000 inhabitants, 2002 7.4
Average external tariff rate in percent n/a
Gross international reserves in months of imports, 2001 2.9
Official development assistance and official aid (in millions US dollars), 2001 1,079.8
Total external debt in millions US dollars, 2001 5,697
Total external debt (as percent of GDP), 2001 91.4
Total debt service (as percent of GNI), 2001 3.0
Total debt service (as percent of exports of goods and services), 2001 18.7
128

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
1,200
Outward Stock and Flow,
1999-2002 1,000

800

600

400

200

-200
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

1%
Structure of Exports 14%
of Goods, 2002

All food items

All food items Others
16% Manufactured goods
Ores and metals
69%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
129

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 19 92

Macroeconomic Environment Index Rank 18 84

Macroeconomic Stability Subindex Rank 15 74
Government Waste Subindex Rank 13 66
Country Credit Rating Rank Rank 22 98

Public Institutions Index Rank 14 73

Contracts and Law Subindex Rank 15 68
Corruption Subindex Rank 11 76

Technology Index Rank 24 100

Innovation Subindex Rank 23 100
ICT Subindex Rank 24 101
Technology Transfer Subindex Rank (out of 77 non-core innovators) 22 73
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Ethiopia
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inefficient government bureaucracy

Access to financing

Inadequate supply of infrastructure

Policy instability

Tax regulations

Corruption

Inadequately educated workforce

Poor work ethic in national labour force

Tax rates

Foreign currency regulations

Restrictive labor regulations

Crime and theft

130

Government instability/coups

Inflation

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.20 Inflation, 2002 1 1 2.18 Government surplus/deficit, 2002 24 101
2.21 Real exchange rate, 2002 7 14 2.19 National savings rate, 2002 24 100
2.22 Interest rate spread, 2002 3 37 2.17 Country credit rating, 2003 22 98
2.09 Access to credit 22 95
2.03 Extent of distortive government subsidies 22 91
2.01 Recession expectations 23 86
7.10 Public trust of politicians 12 58
7.08 Diversion of public funds 9 52

Public Institutions Public Institutions

6.17 Organized crime 7 39 6.01 Judicial independence 22 87
7.03 Irregular payments in tax collection 17 86
6.03 Property rights 19 83
7.02 Irregular payments in public utilities 13 81
6.08 Favoritism in decisions of government officials 17 66
7.01 Irregular payments in exports and imports 9 61

Technology
3.01 Technological sophistication 25 102
3.13 Quality of competition in the ISP sector 25 102
3.19 Cellular telephones, 2002 25 102
3.20 Internet users, 2002 25 102
3.16 Laws relating to ICT 25 101
3.06 Company spending on research and development 24 101
3.21 Internet hosts, 2002 24 99
3.12 Internet access in schools 22 99
3.02 Firm-level technology absorption 24 98
3.23 Personal computers, 2002 23 97
3.18 Tertiary enrollment 20 96
3.22 Telephone lines, 2002 19 95
3.08 University/industry research collaboration 22 92
3.14 Government prioritization of ICT 21 86
3.15 Government success in ICT promotion 21 84
3.04 Prevalence of foreign technology licensing 23 74
3.03 FDI and technology transfer 23 73
3.17 Utility patents, 2002 8 72

Other Indicators Other Indicators

5.04 Air transport infrastructure quality 3 38 10.12 Extent of staff training 24 101
6.14 Business costs of crime and violence 8 45 5.03 Port infrastructure quality 23 99
8.09 Wage equality of women in the workplace 17 45 4.08 Impact of HIV/AIDS on FDI 23 98
8.08 Private-sector employment of women 24 97
10.02 Value chain presence 22 97
4.06 Business impact of tuberculosis 20 97
2.07 Ease of access to loans 22 96
3.10 Availability of scientists and engineers 21 96
6.09 Extent of bureaucratic red tape 21 96
6.05 Freedom of the press 22 94
5.06 Telephone infrastructure quality 20 94
4.07 Business impact of HIV/AIDS 17 94
5.01 Overall infrastructure quality 21 93
8.01 Intensity of local competition 20 93
4.05 Business impact of malaria 15 92
5.02 Railroad infrastructure development 20 88
4.02 Quality of public schools 20 87
5.05 Quality of electricity supply 13 86
10.15 Reliance on professional management 21 84
131

10.01 Nature of competitive advantage 17 84

2.06 Soundness of banks 19 79
6.15 Government effectiveness in reducing poverty 21 78
6.18 Informal sector 17 76
5.07 Postal efficiency 12 69
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 6.13 Reliability of police services 9 53

2 ❚ Country Profiles
 Gambia
Key Indicators Human Development Indicators
Population in millions, 2002 1.40 Gross primary enrollment (percent of relevant age group), 2001 82.0
Average annual population growth rate (%), 1992-2002 3.3 Gross secondary enrollment (percent of relevant age group), 2001 37.4
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 0.35 2000 or most recent year available 1.9
GDP per capita (PPP) in US dollars, 2002 1,723 Adult literacy rate age 15 and above (%) , 2001 37.8
Real growth in GDP per capita (%), 2002 2.0 Percent of population living on income below 1 dollar a day, 2001 59.3

Growth of output (average annual percent growth) 1990-2001 4.3 Population with sustainable access to an improved water source (%), 2000 62

Agriculture 5.2 Life expectancy at birth (years), 2002 57.1

Industry 3.2 HIV prevalence age 15-49 (%), 2001 1.6

Manufacturing 1.8 Reported malaria per 100,000, 2001 10,096

Services 3.7 Estimated TB cases per 100,000, 2002 280

Inflation (annual percent change), 2002 7.1

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -9.4 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 17.9
Paved roads (percent of total roads), 1999 35
Interest rate spread, 2002 11.5
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 200.0 Main telephone lines per 100 inhabitants, 2002 2.8
Exports of goods and services (as percent of GDP), 2001 54.4 Cellular mobile telephone subscribers per 100 inhabitants, 2002 7.3
Imports of goods and services (as percent of GDP), 2001 71.5 Personal computers per 100 inhabitants, 2002 1.4
Current account balance (as percent of GDP), 2001 -13.5 Internet users per 10,000 inhabitants, 2002 188.3
Average external tariff rate in percent, 2000 14.8
Gross international reserves in months of imports, 2001 3.5
Official development assistance and official aid (in millions US dollars), 2001 50.9
Total external debt in millions US dollars, 2001 489
Total external debt (as percent of GDP), 2001 125.3
Total debt service (as percent of GNI), 2001 2.8
Total debt service (as percent of exports of goods and services), 2001 3.8
132

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
300
Outward Stock and Flow,
1999-2002 250

200

150

100

50

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

2%
Structure of Exports
of Goods, 2000
17%

All food items

Manufactured goods
Others

81%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
25

20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
133

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 6 55

Macroeconomic Environment Index Rank 5 46

Macroeconomic Stability Subindex Rank 16 75
Government Waste Subindex Rank 3 24
Country Credit Rating Rank Rank n/a n/a

Public Institutions Index Rank 4 39

Contracts and Law Subindex Rank 3 23
Corruption Subindex Rank 7 58

Technology Index Rank 11 80

Innovation Subindex Rank 20 96
ICT Subindex Rank 8 73
Technology Transfer Subindex Rank (out of 77 non-core innovators) 17 58
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Gambia

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inflation

Inadequate supply of infrastructure

Inadequately educated workforce

Foreign currency regulations

Tax rates

Poor work ethic in national labour force

Tax regulations

Inefficient government bureaucracy

Policy instability

Corruption

Government instability/coups
134

Crime and theft

Restrictive labor regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 3 5 2.18 Government surplus/deficit, 2002 17 91
2.03 Extent of distortive government subsidies 4 19 2.22 Interest rate spread, 2002 15 82
7.10 Public trust of politicians 3 28 2.19 National savings rate, 2002 15 81
7.08 Diversion of public funds 3 29 2.20 Inflation, 2002 16 77
2.01 Recession expectations 19 59
2.09 Access to credit 8 56

Public Institutions Public Institutions

6.17 Organized crime 1 18 7.02 Irregular payments in public utilities 9 73
6.08 Favoritism in decisions of government officials 3 20 7.03 Irregular payments in tax collection 8 61
6.01 Judicial independence 3 30
6.03 Property rights 4 34
7.01 Irregular payments in exports and imports 4 46

Technology Technology
3.15 Government success in ICT promotion 2 9 3.08 University/industry research collaboration 24 101
3.14 Government prioritization of ICT 3 13 3.06 Company spending on research and development 22 96
3.02 Firm-level technology absorption 4 42 3.18 Tertiary enrollment 19 95
3.03 FDI and technology transfer 12 44 3.01 Technological sophistication 17 87
3.13 Quality of competition in the ISP sector 2 46 3.16 Laws relating to ICT 16 83
3.20 Internet users, 2002 11 83
3.22 Telephone lines, 2002 9 83
3.12 Internet access in schools 9 78
3.23 Personal computers, 2002 10 78
3.19 Cellular telephones, 2002 6 73
3.17 Utility patents, 2002 8 72
3.21 Internet hosts, 2002 5 69
3.04 Prevalence of foreign technology licensing 19 65

Other Indicators Other Indicators

6.15 Government effectiveness in reducing poverty 2 16 4.05 Business impact of malaria 25 102
8.09 Wage equality of women in the workplace 10 16 3.10 Availability of scientists and engineers 23 100
6.14 Business costs of crime and violence 2 27 5.05 Quality of electricity supply 20 95
6.13 Reliability of police services 3 33 4.06 Business impact of tuberculosis 15 91
10.15 Reliance on professional management 5 35 4.07 Business impact of HIV/AIDS 9 83
2.06 Soundness of banks 7 38 10.12 Extent of staff training 17 82
5.04 Air transport infrastructure quality 4 44 8.01 Intensity of local competition 15 79
5.03 Port infrastructure quality 5 44 10.02 Value chain presence 12 78
6.18 Informal sector 5 50 5.07 Postal efficiency 14 74
10.01 Nature of competitive advantage 16 71
5.02 Railroad infrastructure development 13 71
6.05 Freedom of the press 11 71
4.08 Impact of HIV/AIDS on FDI 6 69
5.06 Telephone infrastructure quality 8 67
6.09 Extent of bureaucratic red tape 6 63
2.07 Ease of access to loans 8 59
4.02 Quality of public schools 5 57
8.08 Private-sector employment of women 6 54
135

5.01 Overall infrastructure quality 7 53

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Ghana
Key Indicators Human Development Indicators
Population in millions, 2002 20.20 Gross primary enrollment (percent of relevant age group), 2001 80.0
Average annual population growth rate (%), 1992-2002 2.4 Gross secondary enrollment (percent of relevant age group), 2001 36.2
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 6.06 2000 or most recent year available 3.3
GDP per capita (PPP) in US dollars, 2002 2,050 Adult literacy rate age 15 and above (%) , 2001 72.7
Real growth in GDP per capita (%), 2002 1.9 Percent of population living on income below 1 dollar a day, 2001 45

Growth of output (average annual percent growth) 1990-2001 4.4 Population with sustainable access to an improved water source (%), 2000 73

Agriculture 2.9 Life expectancy at birth (years), 2002 57.6

Industry 3.3 HIV prevalence age 15-49 (%), 2001 3.0

Manufacturing 0.0 Reported malaria per 100,000, 2001 17,143

Services 5.9 Estimated TB cases per 100,000, 2002 201

Inflation (annual percent change), 2002 14.5

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -6.2 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 23.7
Paved roads (percent of total roads), 1999 30
Interest rate spread, 2002 11.4
Electric power transmission and distribution losses (percent of output), 2000 1
Real exchange rate, 2003* 169.00
Main telephone lines per 100 inhabitants, 2002 1.3
Exports of goods and services (as percent of GDP), 2001 52.2
Cellular mobile telephone subscribers per 100 inhabitants, 2002 2.1
Imports of goods and services (as percent of GDP), 2001 70.5
Personal computers per 100 inhabitants, 2002 0.4
Current account balance (as percent of GDP), 2001 -4.7
Internet users per 10,000 inhabitants, 2002 78.4
Average external tariff rate in percent n/a

Gross international reserves in months of imports, 2001 1.3

Official development assistance and official aid (in millions US dollars), 2001 651.8
Total external debt in millions US dollars, 2001 6,759
Total external debt (as percent of GDP), 2001 127.5
Total debt service (as percent of GNI), 2001 6.2
Total debt service (as percent of exports of goods and services), 2001 12.7
136

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
2,000
Outward Stock and Flow,
1999-2002
1,500

1,000

500

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

5%
9%
Structure of Exports
of Goods, 2000

Others
43% All food items
12%
Ores and metals
Manufactured goods
Fuels

31%
Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
137

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 10 71

Macroeconomic Environment Index Rank 11 68

Macroeconomic Stability Subindex Rank 14 70
Government Waste Subindex Rank 8 46
Country Credit Rating Rank Rank 10 79

Public Institutions Index Rank 10 65

Contracts and Law Subindex Rank 10 50
Corruption Subindex Rank 13 79

Technology Index Rank 14 86

Innovation Subindex Rank 10 83
ICT Subindex Rank 13 88
Technology Transfer Subindex Rank (out of 77 non-core innovators) 12 45
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Ghana

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inflation

Inadequate supply of infrastructure

Inefficient government bureaucracy

Corruption

Poor work ethic in national labour force

Tax rates

Foreign currency regulations

Government instability/coups

Inadequately educated workforce

Policy instability

Tax regulations
138

Crime and theft

Restrictive labor regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 6 13 2.20 Inflation, 2002 21 92
2.03 Extent of distortive government subsidies 5 20 2.22 Interest rate spread, 2002 14 81
2.01 Recession expectations 8 22 2.17 Country credit rating, 2003 10 79
2.19 National savings rate, 2002 9 37 2.18 Government surplus/deficit, 2002 14 75
7.10 Public trust of politicians 9 46 2.09 Access to credit 12 71
7.08 Diversion of public funds 8 50

Public Institutions Public Institutions

6.01 Judicial independence 9 50 7.02 Irregular payments in public utilities 15 87
6.17 Organized crime 11 50 7.01 Irregular payments in exports and imports 12 69
7.03 Irregular payments in tax collection 10 69
6.03 Property rights 11 61
6.08 Favoritism in decisions of government officials 10 55

Technology Technology
3.14 Government prioritization of ICT 4 17 3.20 Internet users, 2002 21 97
3.15 Government success in ICT promotion 4 22 3.21 Internet hosts, 2002 19 93
3.03 FDI and technology transfer 8 34 3.23 Personal computers, 2002 18 92
3.04 Prevalence of foreign technology licensing 13 47 3.18 Tertiary enrollment 13 89
3.22 Telephone lines, 2002 12 88
3.19 Cellular telephones, 2002 13 86
3.12 Internet access in schools 13 85
3.01 Technological sophistication 10 74
3.17 Utility patents, 2002 8 72
3.13 Quality of competition in the ISP sector 9 65
3.08 University/industry research collaboration 8 57
3.02 Firm-level technology absorption 9 57
3.06 Company spending on research and development 9 56
3.16 Laws relating to ICT 4 53

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 9 14 5.06 Telephone infrastructure quality 18 91
10.15 Reliance on professional management 6 38 4.05 Business impact of malaria 13 90
6.15 Government effectiveness in reducing poverty 8 40 4.07 Business impact of HIV/AIDS 11 86
6.05 Freedom of the press 4 43 4.06 Business impact of tuberculosis 9 84
6.13 Reliability of police services 8 46 4.08 Impact of HIV/AIDS on FDI 12 83
3.10 Availability of scientists and engineers 16 80
4.02 Quality of public schools 16 80
5.02 Railroad infrastructure development 17 79
5.05 Quality of electricity supply 10 78
6.18 Informal sector 16 75
8.08 Private-sector employment of women 14 75
5.04 Air transport infrastructure quality 12 74
8.01 Intensity of local competition 12 74
10.12 Extent of staff training 12 72
5.01 Overall infrastructure quality 12 71
2.07 Ease of access to loans 12 70
6.09 Extent of bureaucratic red tape 8 70
5.03 Port infrastructure quality 9 67
10.02 Value chain presence 6 64
5.07 Postal efficiency 7 62
6.14 Business costs of crime and violence 11 57
139

2.06 Soundness of banks 11 53

10.01 Nature of competitive advantage 9 51

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Kenya
Key Indicators Human Development Indicators
Population in millions, 2002 31.90 Gross primary enrollment (percent of relevant age group), 2001 94.0
Average annual population growth rate (%), 1992-2002 2.3 Gross secondary enrollment (percent of relevant age group), 2001 30.6
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 11.76 2000 or most recent year available 3.0
GDP per capita (PPP) in US dollars, 2002 992 Adult literacy rate age 15 and above (%) , 2001 83.3
Real growth in GDP per capita (%), 2002 -0.7 Percent of population living on income below 1 dollar a day, 2001 23

Growth of output (average annual percent growth) 1990-2001 1.9 Population with sustainable access to an improved water source (%), 2000 57

Agriculture 1.0 Life expectancy at birth (years), 2002 50.9

Industry 1.7 HIV prevalence age 15-49 (%), 2001 15.0

Manufacturing 2.1 Reported malaria per 100,000, 2001 545

Services 3.0 Estimated TB cases per 100,000, 2002 515

Inflation (annual percent change), 2002 2.0

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -3.4 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 13.1
Paved roads (percent of total roads), 1999 12
Interest rate spread, 2002 12.5
Electric power transmission and distribution losses (percent of output), 2000 22
Real exchange rate, 2003* 111.4 Main telephone lines per 100 inhabitants, 2002 1.0
Exports of goods and services (as percent of GDP), 2002 26.5 Cellular mobile telephone subscribers per 100 inhabitants, 2002 4.2
Imports of goods and services (as percent of GDP), 2002 30.6 Personal computers per 100 inhabitants, 2002 0.6
Current account balance (as percent of GDP), 2001 -2.8 Internet users per 10,000 inhabitants, 2002 125.3
Average external tariff rate in percent, 2000 12.4
Gross international reserves in months of imports, 2001 3.0
Official development assistance and official aid (in millions US dollars), 2001 452.6
Total external debt in millions US dollars, 2001 5,833
Total external debt (as percent of GDP), 2001 51.2
Total debt service (as percent of GNI), 2001 4.1
Total debt service (as percent of exports of goods and services), 2001 15.4
140

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
1,200
Outward Stock and Flow,
1999-2002 1,000

800

600

400

200

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
of Goods, 2002
13%

32%
All food items
Fuels
Manufactured goods
24% Others

31%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
18

16
14

12
10

8
6

4
141

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-2

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 15 83

Macroeconomic Environment Index Rank 15 77

Macroeconomic Stability Subindex Rank 11 60
Government Waste Subindex Rank 17 77
Country Credit Rating Rank Rank 11 82

Public Institutions Index Rank 21 92

Contracts and Law Subindex Rank 19 80
Corruption Subindex Rank 21 95

Technology Index Rank 8 74

Innovation Subindex Rank 11 84
ICT Subindex Rank 11 86
Technology Transfer Subindex Rank (out of 77 non-core innovators) 2 17
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Kenya

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Corruption

Access to financing

Inadequate supply of infrastructure

Tax rates

Crime and theft

Inefficient government bureaucracy

Policy instability

Tax regulations

Inflation

Poor work ethic in national labour force

Inadequately educated workforce

Government instability/coups
142

Restrictive labor regulations

Foreign currency regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.01 Recession expectations 4 15 7.08 Diversion of public funds 21 93
2.20 Inflation, 2002 4 28 2.19 National savings rate, 2002 18 87
2.22 Interest rate spread, 2002 16 83
2.17 Country credit rating, 2003 11 82
2.09 Access to credit 16 80
2.21 Real exchange rate, 2002 19 70
7.10 Public trust of politicians 16 67
2.03 Extent of distortive government subsidies 13 60
2.18 Government surplus/deficit, 2002 8 51

Technology Public Institutions

3.04 Prevalence of foreign technology licensing 3 18 7.02 Irregular payments in public utilities 21 96
3.03 FDI and technology transfer 2 19 7.03 Irregular payments in tax collection 19 93
3.06 Company spending on research and development 4 41 7.01 Irregular payments in exports and imports 18 88
6.01 Judicial independence 19 84
6.17 Organized crime 22 83
6.08 Favoritism in decisions of government officials 18 77
6.03 Property rights 13 67

Technology
3.18 Tertiary enrollment 14 90
3.22 Telephone lines, 2002 13 89
3.12 Internet access in schools 14 86
3.23 Personal computers, 2002 14 86
3.19 Cellular telephones, 2002 10 82
3.14 Government prioritization of ICT 20 81
3.20 Internet users, 2002 9 80
3.02 Firm-level technology absorption 17 77
3.21 Internet hosts, 2002 8 77
3.15 Government success in ICT promotion 19 75
3.13 Quality of competition in the ISP sector 11 73
3.01 Technological sophistication 9 72
3.17 Utility patents, 2002 7 70
3.16 Laws relating to ICT 9 67
3.08 University/industry research collaboration 9 60

Other Indicators Other Indicators

8.01 Intensity of local competition 2 29 6.14 Business costs of crime and violence 25 97
10.01 Nature of competitive advantage 6 41 4.08 Impact of HIV/AIDS on FDI 22 97
5.04 Air transport infrastructure quality 7 48 5.06 Telephone infrastructure quality 19 93
4.07 Business impact of HIV/AIDS 15 91
6.13 Reliability of police services 22 89
5.07 Postal efficiency 19 89
4.05 Business impact of malaria 12 89
5.01 Overall infrastructure quality 18 88
4.06 Business impact of tuberculosis 11 87
8.08 Private-sector employment of women 21 86
5.05 Quality of electricity supply 11 82
6.18 Informal sector 20 81
6.05 Freedom of the press 14 79
2.07 Ease of access to loans 13 77
2.06 Soundness of banks 18 76
6.09 Extent of bureaucratic red tape 12 75
5.03 Port infrastructure quality 13 74
5.02 Railroad infrastructure development 12 70
4.02 Quality of public schools 10 70
6.15 Government effectiveness in reducing poverty 18 69
143

10.02 Value chain presence 7 65

8.09 Wage equality of women in the workplace 20 63
10.12 Extent of staff training 8 63
3.10 Availability of scientists and engineers 5 54
10.15 Reliance on professional management 10 52
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Madagascar
Key Indicators Human Development Indicators
Population in millions, 2002 16.90 Gross primary enrollment (percent of relevant age group), 2001 103.0
Average annual population growth rate (%), 1992-2002 2.9 Gross secondary enrollment (percent of relevant age group), 1999 14.3
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 4.48 2000 or most recent year available 2.2
GDP per capita (PPP) in US dollars, 2002 735 Adult literacy rate age 15 and above (%) , 2001 67
Real growth in GDP per capita (%), 2002 -14.5 Percent of population living on income below 1 dollar a day, 2001 49

Growth of output (average annual percent growth) 1990-2001 2.3 Population with sustainable access to an improved water source (%), 2000 47

Agriculture 2.0 Life expectancy at birth (years), 2002 56.3

Industry 2.6 HIV prevalence age 15-49 (%), 2001 0.3

Manufacturing 2.4 Reported malaria per 100,000, 2001 n/a

Services 2.7 Estimated TB cases per 100,000, 2002 251

Inflation (annual percent change), 2002 4.5 Infrastructure

Government surplus/deficit (as percent of GDP), 2002 -7.7 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 16.1
Paved roads (percent of total roads), 1999 12
Interest rate spread, 2002 13.3
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 93.1 Main telephone lines per 100 inhabitants, 2002 0.4
Exports of goods and services (as percent of GDP), 2002 16.2 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.0
Imports of goods and services (as percent of GDP), 2002 25.4 Personal computers per 100 inhabitants, 2002 0.4
Current account balance (as percent of GDP), 2002 -6.8 Internet users per 10,000 inhabitants, 2002 34.6
Average external tariff rate in percent, 1995 5.2
Gross international reserves in months of imports, 2001 25.5
Official development assistance and official aid (in millions US dollars), 2001 353.9
Total external debt in millions US dollars, 2001 4,160
Total external debt (as percent of GDP), 2001 90.4
Total debt service (as percent of GNI), 2001 1.5
Total debt service (as percent of exports of goods and services), 2001 43.3
144

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
500
Outward Stock and Flow,
1999-2002 400

300

200

100

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
-5

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

145

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 21 96

Macroeconomic Environment Index Rank 17 79

Macroeconomic Stability Subindex Rank 18 87
Government Waste Subindex Rank 19 81
Country Credit Rating Rank Rank n/a n/a

Public Institutions Index Rank 23 96

Contracts and Law Subindex Rank 22 88
Corruption Subindex Rank 20 94

Technology Index Rank 21 97

Innovation Subindex Rank 18 93
ICT Subindex Rank 19 94
Technology Transfer Subindex Rank (out of 77 non-core innovators) 21 72
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Madagascar

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inadequate supply of infrastructure

Corruption

Inefficient government bureaucracy

Policy instability

Tax regulations

Inflation

Tax rates

Government instability/coups

Inadequately educated workforce

Poor work ethic in national labour force

Restrictive labor regulations

146

Foreign currency regulations

Crime and theft

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.01 Recession expectations 7 21 2.19 National savings rate, 2002 22 98
2.09 Access to credit 21 94
2.21 Real exchange rate, 2002 23 90
2.22 Interest rate spread, 2002 20 87
7.08 Diversion of public funds 18 87
2.18 Government surplus/deficit, 2002 16 83
7.10 Public trust of politicians 20 80
2.03 Extent of distortive government subsidies 15 62
2.20 Inflation, 2002 9 60

Public Institutions
6.03 Property rights 24 97
7.03 Irregular payments in tax collection 22 96
7.02 Irregular payments in public utilities 20 94
6.01 Judicial independence 21 86
7.01 Irregular payments in exports and imports 17 86
6.08 Favoritism in decisions of government officials 20 80
6.17 Organized crime 18 72

Technology Technology
3.14 Government prioritization of ICT 12 44 3.22 Telephone lines, 2002 23 100
3.15 Government success in ICT promotion 13 50 3.12 Internet access in schools 21 98
3.19 Cellular telephones, 2002 20 95
3.16 Laws relating to ICT 21 94
3.23 Personal computers, 2002 20 94
3.18 Tertiary enrollment 17 93
3.21 Internet hosts, 2002 17 91
3.20 Internet users, 2002 14 90
3.06 Company spending on research and development 17 86
3.08 University/industry research collaboration 18 85
3.01 Technological sophistication 15 85
3.13 Quality of competition in the ISP sector 15 79
3.04 Prevalence of foreign technology licensing 22 73
3.17 Utility patents, 2002 8 72
3.03 FDI and technology transfer 21 69
3.02 Firm-level technology absorption 8 56

Other Indicators Other Indicators

2.06 Soundness of banks 5 33 2.07 Ease of access to loans 24 101
8.08 Private-sector employment of women 5 44 5.02 Railroad infrastructure development 25 96
8.09 Wage equality of women in the workplace 16 44 5.01 Overall infrastructure quality 22 96
3.10 Availability of scientists and engineers 8 60 5.07 Postal efficiency 21 93
10.01 Nature of competitive advantage 20 93
5.05 Quality of electricity supply 19 93
5.04 Air transport infrastructure quality 21 92
6.18 Informal sector 22 91
5.03 Port infrastructure quality 18 90
5.06 Telephone infrastructure quality 16 89
4.02 Quality of public schools 21 88
4.05 Business impact of malaria 11 88
10.12 Extent of staff training 20 86
6.13 Reliability of police services 20 85
6.09 Extent of bureaucratic red tape 14 83
4.06 Business impact of tuberculosis 7 82
10.02 Value chain presence 14 81
8.01 Intensity of local competition 14 78
147

4.07 Business impact of HIV/AIDS 6 78

4.08 Impact of HIV/AIDS on FDI 7 73
10.15 Reliance on professional management 18 72
6.14 Business costs of crime and violence 14 72
6.05 Freedom of the press 10 68
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 6.15 Government effectiveness in reducing poverty 16 64

2 ❚ Country Profiles
 Malawi
Key indicators Human Development Indicators
Population in millions, 2002 11.80 Gross primary enrollment (percent of relevant age group) n/a
Average annual population growth rate (%), 1992-2002 1.9 Gross secondary enrollment (percent of relevant age group), 2001 35.7
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 1.93 2000 or most recent year available 0.3
GDP per capita (PPP) in US dollars, 2002 586 Adult literacy rate age 15 and above (%) , 2001 61
Real growth in GDP per capita (%), 2002 -0.2 Percent of population living on income below 1 dollar a day, 2001 42

Growth of output (average annual percent growth) 1990-2001 3.2 Population with sustainable access to an improved water source (%), 2000 57

Agriculture 7.3 Life expectancy at birth (years), 2002 40.2

Industry 2.3 HIV prevalence age 15-49 (%), 2001 15.0

Manufacturing 1.4 Reported malaria per 100,000, 2001 20,080

Services 2.6 Estimated TB cases per 100,000, 2002 432

Inflation (annual percent change), 2002 14.1

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -9.9 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 10.9
Paved roads (percent of total roads), 1999 19
Interest rate spread, 2002 19.5
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 111.54
Main telephone lines per 100 inhabitants, 2002 0.7
Exports of goods and services (as percent of GDP), 2001 26.0
Cellular mobile telephone subscribers per 100 inhabitants, 2002 0.8
Imports of goods and services (as percent of GDP), 2001 38.0
Personal computers per 100 inhabitants, 2002 0.1
Current account balance (as percent of GDP), 2001 -30.4
Internet users per 10,000 inhabitants, 2002 25.9
Average external tariff rate in percent, 1998 11.5

Gross international reserves in months of imports, 2001 2.4

Official development assistance and official aid (in millions US dollars), 2001 401.5
Total external debt in millions US dollars, 2001 2,602
Total external debt (as percent of GDP), 2001 148.8
Total debt service (as percent of GNI), 2001 2.3
Total debt service (as percent of exports of goods and services), 2001 7.8
148

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
250
Outward Stock and Flow,
1999-2002 200

150

100

50

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
of Goods, 2001 2%
9%

All food items

Manufactured goods
Others

89%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
149

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 12 76

Macroeconomic Environment Index Rank 23 98

Macroeconomic Stability Subindex Rank 23 99
Government Waste Subindex Rank 15 68
Country Credit Rating Rank Rank 17 90

Public Institutions Index Rank 3 38

Contracts and Law Subindex Rank 6 42
Corruption Subindex Rank 3 43

Technology Index Rank 19 94

Innovation Subindex Rank 19 95
ICT Subindex Rank 22 98
Technology Transfer Subindex Rank (out of 77 non-core innovators) 15 52
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Malawi

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inadequate supply of infrastructure

Inflation

Tax rates

Inefficient government bureaucracy

Poor work ethic in national labour force

Policy instability

Tax regulations

Foreign currency regulations

Corruption

Inadequately educated workforce

Crime and theft

150

Restrictive labor regulations

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Public Institutions Macroeconomic Environment
6.17 Organized crime 6 32 2.19 National savings rate, 2002 23 99
7.01 Irregular payments in exports and imports 1 36 2.22 Interest rate spread, 2002 23 97
6.01 Judicial independence 7 40 2.01 Recession expectations 24 95
7.03 Irregular payments in tax collection 4 43 2.18 Government surplus/deficit, 2002 18 92
6.03 Property rights 7 50 2.20 Inflation, 2002 20 91
2.17 Country credit rating, 2003 17 90
2.03 Extent of distortive government subsidies 20 79
2.21 Real exchange rate, 2002 18 69
7.10 Public trust of politicians 17 68
2.09 Access to credit 9 62
7.08 Diversion of public funds 13 62

Public Institutions
6.08 Favoritism in decisions of government officials 16 65
7.02 Irregular payments in public utilities 4 56

Technology Technology
3.03 FDI and technology transfer 9 35 3.18 Tertiary enrollment 25 102
3.23 Personal computers, 2002 25 99
3.19 Cellular telephones, 2002 22 97
3.21 Internet hosts, 2002 21 96
3.20 Internet users, 2002 19 95
3.01 Technological sophistication 20 93
3.02 Firm-level technology absorption 22 92
3.12 Internet access in schools 17 92
3.22 Telephone lines, 2002 15 91
3.16 Laws relating to ICT 19 90
3.14 Government prioritization of ICT 22 89
3.08 University/industry research collaboration 16 83
3.15 Government success in ICT promotion 20 76
3.17 Utility patents, 2002 8 72
3.06 Company spending on research and development 10 62
3.13 Quality of competition in the ISP sector 5 55
3.04 Prevalence of foreign technology licensing 15 54

Other Indicators Other Indicators

2.06 Soundness of banks 2 20 4.06 Business impact of tuberculosis 21 98
8.09 Wage equality of women in the workplace 13 28 4.07 Business impact of HIV/AIDS 18 95
10.15 Reliance on professional management 3 29 5.03 Port infrastructure quality 20 93
6.15 Government effectiveness in reducing poverty 12 50 4.05 Business impact of malaria 14 91
10.01 Nature of competitive advantage 8 50 6.09 Extent of bureaucratic red tape 17 90
5.05 Quality of electricity supply 16 89
4.08 Impact of HIV/AIDS on FDI 14 87
4.02 Quality of public schools 19 85
5.06 Telephone infrastructure quality 15 84
2.07 Ease of access to loans 14 80
5.01 Overall infrastructure quality 13 79
8.08 Private-sector employment of women 16 78
8.01 Intensity of local competition 13 77
5.04 Air transport infrastructure quality 13 75
6.05 Freedom of the press 12 73
3.10 Availability of scientists and engineers 10 70
10.12 Extent of staff training 11 69
10.02 Value chain presence 8 69
151

6.18 Informal sector 13 68

5.02 Railroad infrastructure development 10 66
5.07 Postal efficiency 9 65
6.13 Reliability of police services 10 57
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.
6.14 Business costs of crime and violence 10 54

2 ❚ Country Profiles
 Mali
Key Indicators Human Development Indicators
Population in millions, 2002 12.00 Gross primary enrollment (percent of relevant age group), 2001 61.0
Average annual population growth rate (%), 1992-2002 2.8 Gross secondary enrollment (percent of relevant age group), 1999 15.0
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 3.09 2000 or most recent year available 1.9
GDP per capita (PPP) in US dollars, 2002 878 Adult literacy rate age 15 and above (%) , 2001 26
Real growth in GDP per capita (%), 2002 7.1 Percent of population living on income below 1 dollar a day, 2001 73

Growth of output (average annual percent growth) 1990-2001 3.4 Population with sustainable access to an improved water source (%), 2000 65

Agriculture 1.9 Life expectancy at birth (years), 2002 44.8

Industry 8.9 HIV prevalence age 15-49 (%), 2001 1.6

Manufacturing 2.8 Reported malaria per 100,000, 2001 741

Services 2.6 Estimated TB cases per 100,000, 2002 320

Inflation (annual percent change), 2002 4.9

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -10.5 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 18.6
Paved roads (percent of total roads), 1999 12
Interest rate spread, 2002 11.3
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 137.3 Main telephone lines per 100 inhabitants, 2002 0.5
Exports of goods and services (as percent of GDP), 2002 31.6 Cellular mobile telephone subscribers per 100 inhabitants, 2002 0.5
Imports of goods and services (as percent of GDP), 2002 33.6 Personal computers per 100 inhabitants, 2002 0.1
Current account balance (as percent of GDP), 2001 -10.3 Internet users per 10,000 inhabitants, 2002 23.5
Average external tariff rate in percent, 2000 12.0
Gross international reserves in months of imports, 2001 3.4
Official development assistance and official aid (in millions US dollars), 2001 349.9
Total external debt in millions US dollars, 2001 2,890
Total external debt (as percent of GDP), 2001 109.2
Total debt service (as percent of GNI), 2001 3.2
Total debt service (as percent of exports of goods and services), 2001 8.8
152

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
800
Outward Stock and Flow,
1999-2002 700
600
500
400
300
200
100
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
-5

-10

Source: World Economic Outlook Database, IMF, April 2003

153

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 23 99

Macroeconomic Environment Index Rank 19 91

Macroeconomic Stability Subindex Rank 19 89
Government Waste Subindex Rank 18 78
Country Credit Rating Rank Rank 18 91

Public Institutions Index Rank 17 83

Contracts and Law Subindex Rank 14 62
Corruption Subindex Rank 23 98

Technology Index Rank 23 99

Innovation Subindex Rank 22 98
ICT Subindex Rank 21 97
Technology Transfer Subindex Rank (out of 77 non-core innovators) 23 74
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Mali

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inadequate supply of infrastructure

Inadequately educated workforce

Inefficient government bureaucracy

Corruption

Tax regulations

Tax rates

Poor work ethic in national labour force

Foreign currency regulations

Policy instability

Restrictive labor regulations

Inflation
154

Crime and theft

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 12 43 2.09 Access to credit 25 99
2.18 Government surplus/deficit, 2002 19 95
7.08 Diversion of public funds 20 92
2.17 Country credit rating, 2003 18 91
2.19 National savings rate, 2002 17 85
2.22 Interest rate spread, 2002 13 80
2.01 Recession expectations 21 74
2.03 Extent of distortive government subsidies 16 66
7.10 Public trust of politicians 15 66
2.20 Inflation, 2002 13 66

Public Institutions Public Institutions

6.17 Organized crime 5 28 7.03 Irregular payments in tax collection 25 100
7.02 Irregular payments in public utilities 22 97
6.03 Property rights 22 94
7.01 Irregular payments in exports and imports 19 89
6.08 Favoritism in decisions of government officials 15 63
6.01 Judicial independence 14 63

Technology Technology
3.14 Government prioritization of ICT 5 21 3.19 Cellular telephones, 2002 23 100
3.12 Internet access in schools 23 100
3.23 Personal computers, 2002 24 98
3.22 Telephone lines, 2002 21 98
3.01 Technological sophistication 22 98
3.16 Laws relating to ICT 22 96
3.06 Company spending on research and development 21 95
3.18 Tertiary enrollment 18 94
3.02 Firm-level technology absorption 23 94
3.21 Internet hosts, 2002 18 92
3.20 Internet users, 2002 15 91
3.08 University/industry research collaboration 21 90
3.13 Quality of competition in the ISP sector 16 84
3.04 Prevalence of foreign technology licensing 25 77
3.03 FDI and technology transfer 22 72
3.17 Utility patents, 2002 8 72
3.15 Government success in ICT promotion 17 71

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 7 11 5.03 Port infrastructure quality 25 102
6.14 Business costs of crime and violence 3 31 10.12 Extent of staff training 25 102
6.05 Freedom of the press 2 36 10.15 Reliance on professional management 25 100
2.06 Soundness of banks 8 41 5.06 Telephone infrastructure quality 25 99
2.07 Ease of access to loans 23 99
10.01 Nature of competitive advantage 23 98
4.05 Business impact of malaria 21 98
5.04 Air transport infrastructure quality 23 95
5.02 Railroad infrastructure development 22 91
5.01 Overall infrastructure quality 19 91
8.01 Intensity of local competition 19 91
10.02 Value chain presence 17 89
5.05 Quality of electricity supply 15 88
4.07 Business impact of HIV/AIDS 12 87
5.07 Postal efficiency 17 86
4.06 Business impact of tuberculosis 8 83
4.02 Quality of public schools 17 82
3.10 Availability of scientists and engineers 15 79
155

4.08 Impact of HIV/AIDS on FDI 9 78

8.08 Private-sector employment of women 15 76
6.15 Government effectiveness in reducing poverty 19 74
6.13 Reliability of police services 12 60
6.09 Extent of bureaucratic red tape 4 60
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 6.18 Informal sector 9 59

2 ❚ Country Profiles
 Mauritius
Key Indicators Human Development Indicators
Population in millions, 2002 1.20 Gross primary enrollment (percent of relevant age group), 2001 109.0
Average annual population growth rate (%), 1992-2002 1.1 Gross secondary enrollment (percent of relevant age group), 2001 77.1
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 4.53 2000 or most recent year available 11.4
GDP per capita (PPP) in US dollars, 2002 10,530 Adult literacy rate age 15 and above (%) , 2001 84.8
Real growth in GDP per capita (%), 2002 4.2 Percent of population living on income below 1 dollar a day, 2001 n/a

Growth of output (average annual percent growth) 1990-2001 5.7 Population with sustainable access to an improved water source (%), 2000 100

Agriculture 1.1 Life expectancy at birth (years), 2002 71.9

Industry 5.8 HIV prevalence age 15-49 (%), 2001 0.1

Manufacturing 5.5 Reported malaria per 100,000, 1999 1

Services 6.3 Estimated TB cases per 100,000, 2002 67

Inflation (annual percent change), 2002 6.0

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -6.5 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 22.1
Paved roads (percent of total roads), 1999 96
Interest rate spread, 2003 11.5
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 134.4 Main telephone lines per 100 inhabitants, 2002 27.0
Exports of goods and services (as percent of GDP), 2002 62.3 Cellular mobile telephone subscribers per 100 inhabitants, 2002 28.9
Imports of goods and services (as percent of GDP), 2002 58.6 Personal computers per 100 inhabitants, 2002 11.7
Current account balance (as percent of GDP), 2001 5.5 Internet users per 10,000 inhabitants, 2002 991.3
Average external tariff rate in percent, 1998 23.8
Gross international reserves in months of imports, 2001 3.7
Official development assistance and official aid (in millions US dollars), 2001 21.7
Total external debt in millions US dollars, 2001 1,724
Total external debt (as percent of GDP), 2001 38.3
Total debt service (as percent of GNI), 2001 4.5
Total debt service (as percent of exports of goods and services), 2001 6.9
156

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and 800
Outward Stock and Flow,
700
1999-2002
600
500
400
300
200
100
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
1%
of Goods, 2002

26%
Manufactured goods
All food items
Others

73%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
25

20

15

10

0
157
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 4 46

Macroeconomic Environment Index Rank 9 57

Macroeconomic Stability Subindex Rank 13 64
Government Waste Subindex Rank 10 58
Country Credit Rating Rank Rank 4 46

Public Institutions Index Rank 6 44

Contracts and Law Subindex Rank 4 36
Corruption Subindex Rank 6 57

Technology Index Rank 2 49

Innovation Subindex Rank 5 73
ICT Subindex Rank 1 40
Technology Transfer Subindex Rank (out of 77 non-core innovators) 13 48
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Mauritius

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inefficient government bureaucracy

Corruption

Inadequately educated workforce

Poor work ethic in national labour force

Restrictive labor regulations

Access to financing

Inflation

Tax regulations

Inadequate supply of infrastructure

Policy instability

Crime and theft

Tax rates
158

Foreign currency regulations

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.19 National savings rate, 2002 4 16 2.22 Interest rate spread, 2002 12 79
2.01 Recession expectations 15 40 2.18 Government surplus/deficit, 2002 15 76
2.03 Extent of distortive government subsidies 11 45 7.10 Public trust of politicians 18 75
2.20 Inflation, 2002 15 73
7.08 Diversion of public funds 12 59
2.09 Access to credit 7 54
2.21 Real exchange rate, 2002 14 49
2.17 Country credit rating, 2003 4 46

Public Institutions Public Institutions

6.17 Organized crime 4 27 7.01 Irregular payments in exports and imports 14 79
6.03 Property rights 5 40 7.02 Irregular payments in public utilities 5 59
7.03 Irregular payments in tax collection 3 42
6.08 Favoritism in decisions of government officials 6 42
6.01 Judicial independence 8 44

Technology Technology
3.14 Government prioritization of ICT 1 4 3.13 Quality of competition in the ISP sector 23 99
3.15 Government success in ICT promotion 3 13 3.08 University/industry research collaboration 14 77
3.16 Laws relating to ICT 3 32 3.06 Company spending on research and development 15 73
3.04 Prevalence of foreign technology licensing 10 35 3.17 Utility patents, 2002 8 72
3.20 Internet users, 2002 1 38 3.18 Tertiary enrollment 5 71
3.22 Telephone lines, 2002 1 41 3.02 Firm-level technology absorption 11 63
3.23 Personal computers, 2002 1 41 3.03 FDI and technology transfer 18 62
3.19 Cellular telephones, 2002 1 43 3.01 Technological sophistication 6 60
3.21 Internet hosts, 2002 2 49
3.12 Internet access in schools 4 49

Other Indicators Other Indicators

5.03 Port infrastructure quality 1 21 5.02 Railroad infrastructure development 24 94
4.06 Business impact of tuberculosis 1 22 8.09 Wage equality of women in the workplace 24 81
10.02 Value chain presence 1 22 6.09 Extent of bureaucratic red tape 9 71
2.07 Ease of access to loans 1 24 3.10 Availability of scientists and engineers 9 66
5.04 Air transport infrastructure quality 2 26 8.08 Private-sector employment of women 8 61
10.12 Extent of staff training 3 31 6.13 Reliability of police services 11 59
4.05 Business impact of malaria 1 32 10.15 Reliance on professional management 11 57
4.07 Business impact of HIV/AIDS 1 33 5.07 Postal efficiency 5 55
4.08 Impact of HIV/AIDS on FDI 1 33 5.06 Telephone infrastructure quality 3 52
6.15 Government effectiveness in reducing poverty 6 33 4.02 Quality of public schools 3 50
5.01 Overall infrastructure quality 5 35 8.01 Intensity of local competition 3 50
10.01 Nature of competitive advantage 4 36 2.06 Soundness of banks 10 48
6.14 Business costs of crime and violence 6 38 5.05 Quality of electricity supply 6 47
6.05 Freedom of the press 3 41
6.18 Informal sector 4 42
159

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Morocco
Key Indicators Human Development Indicators
Population in millions, 2002 31.00 Gross primary enrollment (percent of relevant age group), 2001 94.0
Average annual population growth rate (%), 1992-2002 1.7 Gross secondary enrollment (percent of relevant age group), 2000 39.3
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 37.15 2000 or most recent year available 10.3
GDP per capita (PPP) in US dollars, 2002 3'767 Adult literacy rate age 15 and above (%) , 2001 49.8
Real growth in GDP per capita (%), 2002 3.2 Percent of population living on income below 1 dollar a day, 2001 <2

Growth of output (average annual percent growth) 1990-2001 2.9 Population with sustainable access to an improved water source (%), 2000 80

Agriculture 5.2 Life expectancy at birth (years), 2002 70.8

Industry 3.4 HIV prevalence age 15-49 (%), 2001 0.1

Manufacturing 3.5 Reported malaria per 100,000, 2001 0.2

Services 3.5 Estimated TB cases per 100,000, 2002 115

Inflation (annual percent change), 2002 2.8

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -2.0 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 22.9
Paved roads (percent of total roads), 1999 56
Interest rate spread, 2002 9.2
Electric power transmission and distribution losses (percent of output), 2000 6
Real exchange rate, 2003* 134.2 Main telephone lines per 100 inhabitants, 2002 3.8
Exports of goods and services (as percent of GDP), 2002 29.2 Cellular mobile telephone subscribers per 100 inhabitants, 2002 20.9
Imports of goods and services (as percent of GDP), 2002 32.2 Personal computers per 100 inhabitants 2002 2.4
Current account balance (as percent of GDP), 2002 4.1 Internet users per 10,000 inhabitants, 2002 236.1
Average external tariff rate in percent, 2000 25.8
Gross international reserves in months of imports, 2001 7.7
Official development assistance and official aid (in millions US dollars), 2001 516.5
Total external debt in millions US dollars, 2001 16'963
Total external debt (as percent of GDP), 2001 49.6
Total debt service (as percent of GNI), 2001 7.9
Total debt service (as percent of exports of goods and services), 2001 17.8
160

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
12,000
Outward Stock and Flow,
1999-2002 10,000

8,000

6,000

4,000

2,000

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 4% 2%
of Goods, 2001
8%

Manufactured goods
All food items
Ores and metals
21% Fuels
65%
Others

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

161
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 8 61

Macroeconomic Environment Index Rank 4 43

Macroeconomic Stability Subindex Rank 5 37
Government Waste Subindex Rank 6 44
Country Credit Rating Rank Rank 5 50

Public Institutions Index Rank 12 68

Contracts and Law Subindex Rank 11 55
Corruption Subindex Rank 17 85

Technology Index Rank 7 71

Innovation Subindex Rank 4 71
ICT Subindex Rank 7 71
Technology Transfer Subindex Rank (out of 77 non-core innovators) 9 40
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Morocco
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inadequate supply of infrastructure

Tax regulations

Corruption

Inefficient government bureaucracy

Tax rates

Inadequately educated workforce

Restrictive labor regulations

Poor work ethic in national labour force

Policy instability

Foreign currency regulations

Government instability/coups
162

Inflation

Crime and theft

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.03 Extent of distortive government subsidies 6 22 2.22 Interest rate spread, 2002 11 69
2.19 National savings rate, 2002 6 24 7.08 Diversion of public funds 11 54
2.09 Access to credit 2 27
2.18 Government surplus/deficit, 2002 4 35 Public Institutions
7.10 Public trust of politicians 7 36 7.03 Irregular payments in tax collection 16 85
2.01 Recession expectations 16 41 7.01 Irregular payments in exports and imports 15 82
2.20 Inflation, 2002 7 44 7.02 Irregular payments in public utilities 10 75
2.17 Country credit rating, 2003 5 50 6.01 Judicial independence 16 71
2.21 Real exchange rate, 2002 15 50 6.08 Favoritism in decisions of government officials 11 56
6.03 Property rights 9 56
Public Institutions
6.17 Organized crime 9 47

Technology Technology
3.15 Government success in ICT promotion 8 32 3.22 Telephone lines, 2002 8 80
3.03 FDI and technology transfer 7 33 3.21 Internet hosts, 2002 10 79
3.06 Company spending on research and development 3 38 3.20 Internet users, 2002 8 78
3.02 Firm-level technology absorption 5 43 3.23 Personal computers, 2002 9 75
3.04 Prevalence of foreign technology licensing 12 45 3.13 Quality of competition in the ISP sector 12 74
3.12 Internet access in schools 6 73
3.18 Tertiary enrollment 6 73
3.17 Utility patents, 2002 8 72
3.01 Technological sophistication 7 64
3.14 Government prioritization of ICT 15 63
3.16 Laws relating to ICT 6 57
3.19 Cellular telephones, 2002 4 53
3.08 University/industry research collaboration 6 53

Other Indicators Other Indicators

8.08 Private-sector employment of women 2 10 6.05 Freedom of the press 19 91
8.09 Wage equality of women in the workplace 12 24 4.06 Business impact of tuberculosis 5 76
6.15 Government effectiveness in reducing poverty 5 31 4.05 Business impact of malaria 6 75
6.13 Reliability of police services 2 32 4.08 Impact of HIV/AIDS on FDI 8 74
5.07 Postal efficiency 3 32 4.07 Business impact of HIV/AIDS 5 72
5.06 Telephone infrastructure quality 1 33 10.15 Reliance on professional management 16 69
6.14 Business costs of crime and violence 5 33 10.01 Nature of competitive advantage 15 69
5.05 Quality of electricity supply 5 40 8.01 Intensity of local competition 8 68
2.06 Soundness of banks 9 47 6.09 Extent of bureaucratic red tape 7 66
5.02 Railroad infrastructure development 6 48 5.01 Overall infrastructure quality 10 65
4.02 Quality of public schools 8 64
2.07 Ease of access to loans 10 62
5.04 Air transport infrastructure quality 9 57
3.10 Availability of scientists and engineers 4 53
6.18 Informal sector 6 53
10.02 Value chain presence 4 51
10.12 Extent of staff training 5 51
5.03 Port infrastructure quality 7 51
163

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Mozambique
Key Indicators Human Development Indicators
Population in millions, 2002 19.00 Gross primary enrollment (percent of relevant age group), 2001 92.0
Average annual population growth rate (%), 1992-2002 2.6 Gross secondary enrollment (percent of relevant age group), 2001 11.9
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 3.92 2000 or most recent year available 0.6
GDP per capita (PPP) in US dollars, 2002 1'237 Adult literacy rate age 15 and above (%) , 2001 45.2
Real growth in GDP per capita (%), 2002 7.3 Percent of population living on income below 1 dollar a day, 2001 38

Growth of output (average annual percent growth) 1990-2001 6.0 Population with sustainable access to an improved water source (%), 2000 57

Agriculture 3.9 Life expectancy at birth (years), 2002 42.6

Industry 13.0 HIV prevalence age 15-49 (%), 2001 13.0

Manufacturing 18.8 Reported malaria per 100,000, 2001 19'842

Services 3.1 Estimated TB cases per 100,000, 2002 265

Inflation (annual percent change), 2002 16.8

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -18.4 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 12.3
Paved roads (percent of total roads), 1999 19
Interest rate spread, 2002 7.2
Electric power transmission and distribution losses (percent of output), 2000 10
Real exchange rate, 2003* 127.1 Main telephone lines per 100 inhabitants, 2002 0.5
Exports of goods and services (as percent of GDP), 2002 13.1 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.4
Imports of goods and services (as percent of GDP), 2002 19.0 Personal computers per 100 inhabitants, 2002 0.5
Current account balance (as percent of GDP), 2001 -44.5 Internet users per 10,000 inhabitants, 2002 27.4
Average external tariff rate in percent, 1997 17.4
Gross international reserves in months of imports, 2001 1.9
Official development assistance and official aid (in millions US dollars), 2001 934.8
Total external debt in millions US dollars, 2001 4'466
Total external debt (as percent of GDP), 2001 123.8
Total debt service (as percent of GNI), 2001 2.6
Total debt service (as percent of exports of goods and services), 2001 3.4
164

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
2,000
Outward Stock and Flow,
1999-2002
1,500

1,000

500

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
5%
of Goods, 2001 8%

Ores and metals

10%
All food items
54% Fuels
Manufactured goods
Others
23%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10
165

-15

-20

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 20 93

Macroeconomic Environment Index Rank 20 95

Macroeconomic Stability Subindex Rank 22 97
Government Waste Subindex Rank 20 82
Country Credit Rating Rank Rank 16 89

Public Institutions Index Rank 16 82

Contracts and Law Subindex Rank 21 87
Corruption Subindex Rank 15 83

Technology Index Rank 17 92

Innovation Subindex Rank 21 97
ICT Subindex Rank 20 95
Technology Transfer Subindex Rank (out of 77 non-core innovators) 14 49
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Mozambique

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Corruption

Access to financing

Inefficient government bureaucracy

Inadequate supply of infrastructure

Inadequately educated workforce

Restrictive labor regulations

Crime and theft

Inflation

Tax rates

Tax regulations

Poor work ethic in national labour force

Foreign currency regulations

166

Policy instability

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Technology Macroeconomic Environment
3.03 FDI and technology transfer 6 26 2.18 Government surplus/deficit, 2002 25 102
2.20 Inflation, 2002 22 94
2.17 Country credit rating, 2003 16 89
2.09 Access to credit 19 87
7.08 Diversion of public funds 17 84
7.10 Public trust of politicians 19 78
2.19 National savings rate, 2002 13 75
2.03 Extent of distortive government subsidies 17 69
2.01 Recession expectations 18 58
2.22 Interest rate spread, 2002 8 58
2.21 Real exchange rate, 2002 16 57

Public Institutions
7.01 Irregular payments in exports and imports 22 93
6.17 Organized crime 23 86
6.01 Judicial independence 20 85
6.08 Favoritism in decisions of government officials 21 83
6.03 Property rights 16 78
7.03 Irregular payments in tax collection 12 78
7.02 Irregular payments in public utilities 8 72

Technology
3.18 Tertiary enrollment 24 101
3.20 Internet users, 2002 23 99
3.21 Internet hosts, 2002 23 98
3.12 Internet access in schools 20 97
3.22 Telephone lines, 2002 20 97
3.01 Technological sophistication 21 95
3.06 Company spending on research and development 20 92
3.13 Quality of competition in the ISP sector 19 92
3.16 Laws relating to ICT 18 89
3.08 University/industry research collaboration 19 88
3.23 Personal computers, 2002 15 88
3.19 Cellular telephones, 2002 14 88
3.17 Utility patents, 2002 8 72
3.02 Firm-level technology absorption 12 64
3.04 Prevalence of foreign technology licensing 17 59
3.14 Government prioritization of ICT 14 55
3.15 Government success in ICT promotion 14 53

Other Indicators
3.10 Availability of scientists and engineers 24 101
8.01 Intensity of local competition 24 100
6.18 Informal sector 24 98
5.07 Postal efficiency 24 96
8.08 Private-sector employment of women 23 96
10.02 Value chain presence 21 96
4.05 Business impact of malaria 18 95
6.14 Business costs of crime and violence 23 94
2.07 Ease of access to loans 20 94
4.08 Impact of HIV/AIDS on FDI 19 94
5.01 Overall infrastructure quality 20 92
10.01 Nature of competitive advantage 19 91
5.05 Quality of electricity supply 17 91
4.06 Business impact of tuberculosis 14 90
4.07 Business impact of HIV/AIDS 13 89
5.03 Port infrastructure quality 16 86
6.13 Reliability of police services 19 84
2.06 Soundness of banks 21 83
4.02 Quality of public schools 18 83
10.12 Extent of staff training 18 83
5.04 Air transport infrastructure quality 17 82
6.05 Freedom of the press 16 81
167

5.06 Telephone infrastructure quality 12 78

8.09 Wage equality of women in the workplace 23 76
5.02 Railroad infrastructure development 16 76
10.15 Reliance on professional management 19 74
6.09 Extent of bureaucratic red tape 11 74
6.15 Government effectiveness in reducing poverty 14 60
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Namibia
Key Indicators Human Development Indicators
Population in millions, 2002 1.80 Gross primary enrollment (percent of relevant age group), 2001 112.0
Average annual population growth rate (%), 1992-2002 2.7 Gross secondary enrollment (percent of relevant age group), 2001 61.7
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 2.87 2000 or most recent year available 5.9
GDP per capita (PPP) in US dollars, 2002 6,410 Adult literacy rate age 15 and above (%) , 2001 82.7
Real growth in GDP per capita (%), 2002 -0.3 Percent of population living on income below 1 dollar a day, 2001 35

Growth of output (average annual percent growth) 1990-2001 4.1 Population with sustainable access to an improved water source (%), 2000 77

Agriculture 5.1 Life expectancy at birth (years), 2002 49.3

Industry 2.4 HIV prevalence age 15-49 (%), 2001 22.5

Manufacturing 3.5 Reported malaria per 100,000, 2000 1,502

Services 4.3 Estimated TB cases per 100,000, 2002 626

Inflation (annual percent change), 2002 11.3

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -3.0 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 24.0
Paved roads (percent of total roads), 1999 14
Interest rate spread, 2002 6.0
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 190.3 Main telephone lines per 100 inhabitants, 2002 6.5
Exports of goods and services (as percent of GDP), 2001 53.7 Cellular mobile telephone subscribers per 100 inhabitants, 2002 8.0
Imports of goods and services (as percent of GDP), 2001 66.2 Personal computers per 100 inhabitants, 2002 7.1
Current account balance (as percent of GDP), 2001 -0.2 Internet users per 10,000 inhabitants, 2002 266.7
Average external tariff rate in percent, 1999 8.5
Gross international reserves in months of imports, 2001 1.3
Official development assistance and official aid (in millions US dollars), 2001 109.1
Total external debt in millions US dollars, 2001 n/a
Total external debt (as percent of GDP), 2001 n/a
Total debt service (as percent of GNI), 2001 n/a
Total debt service (as percent of exports of goods and services), 2001 n/a
168

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
1,600
Outward Stock and Flow,
1,400
1999-2002
1,200
1,000
800
600
400
200
0
-200
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
4%
of Goods, 2001 1%

9%

Manufactured goods
All food items
50% Ores and metals
Others
Fuels
36%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
169

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 5 52

Macroeconomic Environment Index Rank 7 53

Macroeconomic Stability Subindex Rank 7 49
Government Waste Subindex Rank 9 48
Country Credit Rating Rank Rank 7 57

Public Institutions Index Rank 7 48

Contracts and Law Subindex Rank 7 45
Corruption Subindex Rank 5 55

Technology Index Rank 5 62

Innovation Subindex Rank 7 76
ICT Subindex Rank 4 64
Technology Transfer Subindex Rank (out of 77 non-core innovators) 8 33
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index Namibia

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inadequately educated workforce

Poor work ethic in national labour force

Access to financing

Crime and theft

Inefficient government bureaucracy

Inflation

Corruption

Restrictive labor regulations

Tax rates

Tax regulations

Government instability/coups

Inadequate supply of infrastructure

170

Foreign currency regulations

Policy instability

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 4 7 2.20 Inflation, 2002 18 86
2.19 National savings rate, 2002 6 24 2.17 Country credit rating, 2003 7 57
2.01 Recession expectations 10 25 2.22 Interest rate spread, 2002 7 53
7.10 Public trust of politicians 5 34 2.03 Extent of distortive government subsidies 12 51
2.09 Access to credit 6 41
2.18 Government surplus/deficit, 2002 7 45
7.08 Diversion of public funds 6 48

Public Institutions Public Institutions

6.01 Judicial independence 4 32 6.17 Organized crime 14 58
6.03 Property rights 6 45 7.02 Irregular payments in public utilities 3 55
7.03 Irregular payments in tax collection 6 55
6.08 Favoritism in decisions of government officials 9 54
7.01 Irregular payments in exports and imports 7 53

Technology Technology
3.04 Prevalence of foreign technology licensing 5 22 3.18 Tertiary enrollment 7 81
3.01 Technological sophistication 2 41 3.02 Firm-level technology absorption 15 75
3.06 Company spending on research and development 5 43 3.20 Internet users, 2002 6 73
3.12 Internet access in schools 3 46 3.19 Cellular telephones, 2002 5 72
3.03 FDI and technology transfer 14 48 3.17 Utility patents, 2002 8 72
3.23 Personal computers, 2002 3 50 3.22 Telephone lines, 2002 6 72
3.08 University/industry research collaboration 12 71
3.14 Government prioritization of ICT 17 70
3.16 Laws relating to ICT 10 68
3.15 Government success in ICT promotion 15 66
3.13 Quality of competition in the ISP sector 8 61
3.21 Internet hosts, 2002 3 52

Other Indicators Other Indicators

5.01 Overall infrastructure quality 2 20 3.10 Availability of scientists and engineers 20 93
5.03 Port infrastructure quality 2 27 4.08 Impact of HIV/AIDS on FDI 17 92
5.02 Railroad infrastructure development 2 28 4.07 Business impact of HIV/AIDS 16 92
10.01 Nature of competitive advantage 2 32 4.06 Business impact of tuberculosis 13 89
2.07 Ease of access to loans 3 33 4.05 Business impact of malaria 8 85
5.05 Quality of electricity supply 3 35 6.14 Business costs of crime and violence 18 78
2.06 Soundness of banks 6 35 10.02 Value chain presence 11 77
5.04 Air transport infrastructure quality 6 46 6.13 Reliability of police services 18 76
6.15 Government effectiveness in reducing poverty 11 49 6.09 Extent of bureaucratic red tape 10 72
8.01 Intensity of local competition 9 69
5.07 Postal efficiency 10 66
6.05 Freedom of the press 9 65
8.08 Private-sector employment of women 10 63
5.06 Telephone infrastructure quality 4 59
10.15 Reliance on professional management 12 58
6.18 Informal sector 8 56
10.12 Extent of staff training 6 53
4.02 Quality of public schools 4 52
171

8.09 Wage equality of women in the workplace 18 50

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Nigeria
Key Indicators Human Development Indicators
Population in millions, 2002 120.00 Gross primary enrollment (percent of relevant age group) n/a
Average annual population growth rate (%), 1992-2002 2.8 Gross secondary enrollment (percent of relevant age group) n/a
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 42.73 2000 or most recent year available 4.0
GDP per capita (PPP) in US dollars, 2002 851 Adult literacy rate age 15 and above (%) , 2001 65.4
Real growth in GDP per capita (%), 2002 -2.2 Percent of population living on income below 1 dollar a day, 2001 70

Growth of output (average annual percent growth) 1990-2001 3.3 Population with sustainable access to an improved water source (%), 2000 62

Agriculture 3.6 Life expectancy at birth (years), 2002 48.8

Industry 2.1 HIV prevalence age 15-49 (%), 2001 5.8

Manufacturing 2.2 Reported malaria per 100,000, 2000 30

Services 3.8 Estimated TB cases per 100,000, 2002 235

Inflation (annual percent change), 2002 12.9

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -3.6 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 27.6
Paved roads (percent of total roads), 1999 31
Interest rate spread, 2002 8.0
Electric power transmission and distribution losses (percent of output), 2000 32
Real exchange rate, 2003* 275.2 Main telephone lines per 100 inhabitants, 2002 0.6
Exports of goods and services (as percent of GDP), 2001 48.3 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.3
Imports of goods and services (as percent of GDP), 2001 49.0 Personal computers per 100 inhabitants, 2002 0.7
Current account balance (as percent of GDP), 2001 n/a Internet users per 10,000 inhabitants, 2002 35.0
Average external tariff rate in percent, 1995 20.0
Gross international reserves in months of imports, 2001 7.1
Official development assistance and official aid (in millions US dollars), 2001 184.8
Total external debt in millions US dollars, 2001 31,119
Total external debt (as percent of GDP), 2001 75.2
Total debt service (as percent of GNI), 2001 6.7
Total debt service (as percent of exports of goods and services), 2001 12.0
172

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
25,000
Outward Stock and Flow,
1999-2002
20,000

15,000

10,000

5,000

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports
of Goods, 2000

Fuels

100%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
35
30

25
20
15

10
5
0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

173
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10
-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 16 87

Macroeconomic Environment Index Rank 13 74

Macroeconomic Stability Subindex Rank 4 32
Government Waste Subindex Rank 23 91
Country Credit Rating Rank Rank 14 87

Public Institutions Index Rank 24 98

Contracts and Law Subindex Rank 18 78
Corruption Subindex Rank 24 99

Technology Index Rank 13 82

Innovation Subindex Rank 15 88
ICT Subindex Rank 18 93
Technology Transfer Subindex Rank (out of 77 non-core innovators) 3 20
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Nigeria
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inadequate supply of infrastructure

Corruption

Access to financing

Policy instability

Inefficient government bureaucracy

Crime and theft

Inflation

Government instability/coups

Inadequately educated workforce

Poor work ethic in national labour force

Foreign currency regulations

Restrictive labor regulations

174

Tax rates

Tax regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 1 2 7.08 Diversion of public funds 25 97
2.19 National savings rate, 2002 5 19 7.10 Public trust of politicians 24 89
2.01 Recession expectations 11 28 2.20 Inflation, 2002 19 89
2.17 Country credit rating, 2003 14 87
2.03 Extent of distortive government subsidies 19 73
2.09 Access to credit 10 65
2.22 Interest rate spread, 2002 9 64
2.18 Government surplus/deficit, 2002 9 53

Public Institutions
7.01 Irregular payments in exports and imports 24 100
7.02 Irregular payments in public utilities 23 98
7.03 Irregular payments in tax collection 23 98
6.08 Favoritism in decisions of government officials 23 91
6.03 Property rights 18 82
6.17 Organized crime 19 75
6.01 Judicial independence 13 61

Technology Technology
3.03 FDI and technology transfer 1 18 3.20 Internet users, 2002 24 100
3.04 Prevalence of foreign technology licensing 6 23 3.21 Internet hosts, 2002 20 94
3.15 Government success in ICT promotion 12 39 3.22 Telephone lines, 2002 18 94
3.02 Firm-level technology absorption 6 49 3.12 Internet access in schools 16 90
3.19 Cellular telephones, 2002 16 90
3.18 Tertiary enrollment 10 85
3.01 Technological sophistication 14 84
3.23 Personal computers, 2002 13 84
3.13 Quality of competition in the ISP sector 13 77
3.08 University/industry research collaboration 13 76
3.16 Laws relating to ICT 13 75
3.17 Utility patents, 2002 6 68
3.06 Company spending on research and development 12 69
3.14 Government prioritization of ICT 16 67

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 4 6 5.07 Postal efficiency 25 100
8.08 Private-sector employment of women 4 42 5.01 Overall infrastructure quality 23 99
10.15 Reliance on professional management 9 45 5.05 Quality of electricity supply 23 99
6.09 Extent of bureaucratic red tape 22 98
4.02 Quality of public schools 25 96
6.18 Informal sector 23 94
6.13 Reliability of police services 23 93
6.15 Government effectiveness in reducing poverty 23 91
10.02 Value chain presence 18 91
4.05 Business impact of malaria 9 86
5.02 Railroad infrastructure development 19 84
5.06 Telephone infrastructure quality 14 83
2.07 Ease of access to loans 15 82
4.08 Impact of HIV/AIDS on FDI 11 82
4.07 Business impact of HIV/AIDS 8 82
6.14 Business costs of crime and violence 19 81
5.03 Port infrastructure quality 15 81
4.06 Business impact of tuberculosis 6 79
5.04 Air transport infrastructure quality 15 78
175

2.06 Soundness of banks 17 74

10.12 Extent of staff training 10 68
6.05 Freedom of the press 8 64
10.01 Nature of competitive advantage 12 60
3.10 Availability of scientists and engineers 6 55
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 8.01 Intensity of local competition 4 54

2 ❚ Country Profiles
 Senegal
Key Indicators Human Development Indicators
Population in millions, 2002 9.90 Gross primary enrollment (percent of relevant age group), 2001 75.0
Average annual population growth rate (%), 1992-2002 2.4 Gross secondary enrollment (percent of relevant age group), 1999 17.0
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 5.11 2000 or most recent year available 3.8
GDP per capita (PPP) in US dollars, 2002 1,535 Adult literacy rate age 15 and above (%) , 2001 38
Real growth in GDP per capita (%), 2002 -0.4 Percent of population living on income below 1 dollar a day, 2001 26

Growth of output (average annual percent growth) 1990-2001 3.6 Population with sustainable access to an improved water source (%), 2000 78

Agriculture 3.1 Life expectancy at birth (years), 2002 55.8

Industry 4.9 HIV prevalence age 15-49 (%), 2001 0.5

Manufacturing 3.8 Reported malaria per 100,000, 2000 11,925

Services 3.5 Estimated TB cases per 100,000, 2002 167

Inflation (annual percent change), 2002 2.2

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -2.2 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 20.0
Paved roads (percent of total roads), 1999 29
Interest rate spread, 2002 9.0
Electric power transmission and distribution losses (percent of output), 2000 17
Real exchange rate, 2003* 145.8 Main telephone lines per 100 inhabitants, 2002 2.2
Exports of goods and services (as percent of GDP), 2001 29.6 Cellular mobile telephone subscribers per 100 inhabitants, 2002 5.5
Imports of goods and services (as percent of GDP), 2001 37.6 Personal computers per 100 inhabitants, 2002 2.0
Current account balance (as percent of GDP), 2001 -6.4 Internet users per 10,000 inhabitants, 2002 104.2
Average external tariff rate in percent, 2000 12.0
Gross international reserves in months of imports, 2001 2.8
Official development assistance and official aid (in millions US dollars), 2001 418.9
Total external debt in millions US dollars, 2001 3,461
Total external debt (as percent of GDP), 2001 74.5
Total debt service (as percent of GNI), 2001 4.7
Total debt service (as percent of exports of goods and services), 2001 13.3
176

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and 1,000
Outward Stock and Flow,
1999-2002 800

600

400

200

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 6%
of Goods, 2002 4%

Manufactured goods
16% Fuels
51%
All food items
Ores and metals
Others

23%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

177
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 13 79

Macroeconomic Environment Index Rank 10 67

Macroeconomic Stability Subindex Rank 8 56
Government Waste Subindex Rank 12 62
Country Credit Rating Rank Rank 9 76

Public Institutions Index Rank 15 75

Contracts and Law Subindex Rank 16 71
Corruption Subindex Rank 12 78

Technology Index Rank 15 89

Innovation Subindex Rank 9 82
ICT Subindex Rank 10 81
Technology Transfer Subindex Rank (out of 77 non-core innovators) 18 64
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Senegal
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Tax rates

Corruption

Inefficient government bureaucracy

Restrictive labor regulations

Inadequately educated workforce

Poor work ethic in national labour force

Policy instability

Inadequate supply of infrastructure

Tax regulations

Inflation

Government instability/coups
178

Crime and theft

Foreign currency regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.20 Inflation, 2002 5 32 2.09 Access to credit 18 86
2.21 Real exchange rate, 2002 9 33 2.19 National savings rate, 2002 14 77
2.18 Government surplus/deficit, 2002 5 36 2.17 Country credit rating, 2003 9 76
2.03 Extent of distortive government subsidies 10 43 7.08 Diversion of public funds 14 75
2.01 Recession expectations 17 48 2.22 Interest rate spread, 2002 10 67
7.10 Public trust of politicians 14 64

Public Institutions
7.03 Irregular payments in tax collection 15 82
7.02 Irregular payments in public utilities 7 82
6.03 Property rights 17 81
7.01 Irregular payments in exports and imports 13 74
6.01 Judicial independence 15 69
6.17 Organized crime 17 68
6.08 Favoritism in decisions of government officials 13 60

Technology Technology
3.02 Firm-level technology absorption 1 12 3.06 Company spending on research and development 19 89
3.14 Government prioritization of ICT 6 23 3.18 Tertiary enrollment 12 87
3.15 Government success in ICT promotion 11 36 3.13 Quality of competition in the ISP sector 17 86
3.22 Telephone lines, 2002 11 86
3.20 Internet users, 2002 12 85
3.21 Internet hosts, 2002 11 83
3.12 Internet access in schools 11 82
3.16 Laws relating to ICT 14 78
3.01 Technological sophistication 11 78
3.19 Cellular telephones, 2002 8 75
3.17 Utility patents, 2002 8 72
3.23 Personal computers, 2002 7 71
3.03 FDI and technology transfer 20 67
3.08 University/industry research collaboration 10 63
3.04 Prevalence of foreign technology licensing 16 57

Other Indicators Other Indicators

2.06 Soundness of banks 4 28 5.05 Quality of electricity supply 21 96
10.01 Nature of competitive advantage 7 43 2.07 Ease of access to loans 21 95
6.13 Reliability of police services 7 44 4.05 Business impact of malaria 16 93
6.05 Freedom of the press 5 46 5.01 Overall infrastructure quality 17 87
6.09 Extent of bureaucratic red tape 2 47 4.06 Business impact of tuberculosis 11 87
3.10 Availability of scientists and engineers 17 84
5.02 Railroad infrastructure development 18 82
8.08 Private-sector employment of women 17 80
10.12 Extent of staff training 15 80
4.02 Quality of public schools 15 79
4.07 Business impact of HIV/AIDS 7 79
6.14 Business costs of crime and violence 16 76
10.02 Value chain presence 9 74
8.09 Wage equality of women in the workplace 22 73
8.01 Intensity of local competition 11 73
6.18 Informal sector 15 70
10.15 Reliance on professional management 15 66
179

4.08 Impact of HIV/AIDS on FDI 5 65

5.07 Postal efficiency 8 64
5.06 Telephone infrastructure quality 5 62
6.15 Government effectiveness in reducing poverty 13 58
5.03 Port infrastructure quality 8 58
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 5.04 Air transport infrastructure quality 10 58

2 ❚ Country Profiles
 South Africa
Key Indicators Human Development Indicators
Population in millions, 2002 44.20 Gross primary enrollment (percent of relevant age group), 2001 111.0
Average annual population growth rate (%), 1992-2002 1.5 Gross secondary enrollment (percent of relevant age group), 2001 87.3
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 104.77 2000 or most recent year available 15.2
GDP per capita (PPP) in US dollars, 2002 10,132 Adult literacy rate age 15 and above (%) , 2001 85.6
Real growth in GDP per capita (%), 2002 1.0 Percent of population living on income below 1 dollar a day, 2001 <2

Growth of output (average annual percent growth) 1990-2001 1.7 Population with sustainable access to an improved water source (%), 2000 86

Agriculture 0.7 Life expectancy at birth (years), 2002 50.7

Industry 0.5 HIV prevalence age 15-49 (%), 2001 20.1

Manufacturing 0.5 Reported malaria per 100,000, 2001 61

Services 2.4 Estimated TB cases per 100,000, 2002 556

Inflation (annual percent change), 2002 10.0

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -1.4 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 15.0
Paved roads (percent of total roads), 1999 20
Interest rate spread, 2002 5.0
Electric power transmission and distribution losses (percent of output), 2000 8
Real exchange rate, 2003* 202.3 Main telephone lines per 100 inhabitants, 2002 10.7
Exports of goods and services (as percent of GDP), 2002 33.3 Cellular mobile telephone subscribers per 100 inhabitants, 2002 30.4
Imports of goods and services (as percent of GDP), 2002 29.9 Personal computers per 100 inhabitants, 2002 7.3
Current account balance (as percent of GDP), 2002 0.3 Internet users per 10,000 inhabitants, 2002 682.0
Average external tariff rate in percent, 1999 8.5
Gross international reserves in months of imports, 2001 2.5
Official development assistance and official aid (in millions US dollars), 2001 428.5
Total external debt in millions US dollars, 2001 24,050
Total external debt (as percent of GDP), 2001 21.2
Total debt service (as percent of GNI), 2001 4.0
Total debt service (as percent of exports of goods and services), 2001 11.6
180

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
60,000
Outward Stock and Flow,
1999-2002 50,000

40,000

30,000

20,000

10,000

-10,000
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 4%
of Goods, 2002
11%

Manufactured goods
Fuels
11% All food items
Ores and metals
62% Others

12%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
8

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

181
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-2

-4

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 3 42

Macroeconomic Environment Index Rank 3 40

Macroeconomic Stability Subindex Rank 6 41
Government Waste Subindex Rank 4 37
Country Credit Rating Rank Rank 2 40

Public Institutions Index Rank 5 43

Contracts and Law Subindex Rank 5 40
Corruption Subindex Rank 4 48

Technology Index Rank 1 40

Innovation Subindex Rank 3 58
ICT Subindex Rank 2 44
Technology Transfer Subindex Rank (out of 77 non-core innovators) 1 3
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Growth Competitiveness Index South Africa

Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inadequately educated workforce

Crime and theft

Restrictive labor regulations

Poor work ethic in national labour force

Inefficient government bureaucracy

Access to financing

Foreign currency regulations

Inflation

Tax rates

Corruption

Policy instability

Tax regulations
182

Inadequate supply of infrastructure

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.21 Real exchange rate, 2002 2 4 2.20 Inflation, 2002 17 84
2.01 Recession expectations 2 9 2.19 National savings rate, 2002 11 71
2.03 Extent of distortive government subsidies 3 18 7.08 Diversion of public funds 5 47
2.09 Access to credit 3 28 2.22 Interest rate spread, 2002 4 45
2.18 Government surplus/deficit, 2002 3 32
7.10 Public trust of politicians 6 35
2.17 Country credit rating, 2003 2 40

Public Institutions Public Institutions

6.01 Judicial independence 2 15 6.17 Organized crime 20 81
6.03 Property rights 3 31 7.02 Irregular payments in public utilities 6 61
7.03 Irregular payments in tax collection 2 41 7.01 Irregular payments in exports and imports 5 48
6.08 Favoritism in decisions of government officials 8 45

Technology Technology
3.04 Prevalence of foreign technology licensing 1 2 3.18 Tertiary enrollment 3 65
3.06 Company spending on research and development 1 21 3.22 Telephone lines, 2002 4 65
3.08 University/industry research collaboration 1 21 3.20 Internet users, 2002 2 52
3.03 FDI and technology transfer 4 23 3.13 Quality of competition in the ISP sector 3 50
3.16 Laws relating to ICT 2 24 3.12 Internet access in schools 5 50
3.17 Utility patents, 2002 1 31 3.23 Personal computers, 2002 2 48
3.15 Government success in ICT promotion 9 34 3.19 Cellular telephones, 2002 2 46
3.14 Government prioritization of ICT 8 35 3.21 Internet hosts, 2002 1 44
3.01 Technological sophistication 1 39
3.02 Firm-level technology absorption 3 39

Other Indicators Other Indicators

5.04 Air transport infrastructure quality 1 12 4.08 Impact of HIV/AIDS on FDI 25 101
10.15 Reliance on professional management 1 16 4.07 Business impact of HIV/AIDS 23 100
5.01 Overall infrastructure quality 1 19 6.14 Business costs of crime and violence 24 96
5.02 Railroad infrastructure development 1 24 4.06 Business impact of tuberculosis 16 92
5.05 Quality of electricity supply 1 24 6.13 Reliability of police services 21 86
10.12 Extent of staff training 1 25 4.05 Business impact of malaria 7 83
2.06 Soundness of banks 3 26 3.10 Availability of scientists and engineers 12 74
6.05 Freedom of the press 1 28 8.09 Wage equality of women in the workplace 21 67
8.01 Intensity of local competition 1 28 10.01 Nature of competitive advantage 14 67
5.03 Port infrastructure quality 3 32 5.07 Postal efficiency 11 67
2.07 Ease of access to loans 4 34 5.06 Telephone infrastructure quality 7 66
8.08 Private-sector employment of women 11 64
6.18 Informal sector 11 62
6.09 Extent of bureaucratic red tape 5 61
4.02 Quality of public schools 6 60
10.02 Value chain presence 5 53
6.15 Government effectiveness in reducing poverty 9 42
183

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Tanzania
Key Indicators Human Development Indicators
Population in millions, 2002 36.80 Gross primary enrollment (percent of relevant age group), 2001 63.0
Average annual population growth rate (%), 1992-2002 2.6 Gross secondary enrollment (percent of relevant age group), 2001 5.8
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 9.39 2000 or most recent year available 0.7
GDP per capita (PPP) in US dollars, 2002 557 Adult literacy rate age 15 and above (%) , 2001 76
Real growth in GDP per capita (%), 2002 3.8 Percent of population living on income below 1 dollar a day, 2001 20

Growth of output (average annual percent growth) 1990-2001 3.5 Population with sustainable access to an improved water source (%), 2000 68

Agriculture 3.4 Life expectancy at birth (years), 2002 46.5

Industry 3.5 HIV prevalence age 15-49 (%), 2001 7.8

Manufacturing 2.8 Reported malaria per 100,000, 1999 1,207

Services 3.3 Estimated TB cases per 100,000, 2002 344

Inflation (annual percent change), 2002 4.7

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -6.1 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 16.8
Paved roads (percent of total roads), 1999 4
Interest rate spread, 2002 13.1
Electric power transmission and distribution losses (percent of output), 2000 22
Real exchange rate, 2003* 99.7 Main telephone lines per 100 inhabitants, 2002 0.5
Exports of goods and services (as percent of GDP), 2001 15.6 Cellular mobile telephone subscribers per 100 inhabitants, 2002 2.0
Imports of goods and services (as percent of GDP), 2001 24.3 Personal computers per 100 inhabitants, 2002 0.4
Current account balance (as percent of GDP), 2001 -7.9 Internet users per 10,000 inhabitants, 2002 23.2
Average external tariff rate in percent, 2000 14.2
Gross international reserves in months of imports, 2001 6.0
Official development assistance and official aid (in millions US dollars), 2001 1,233.4
Total external debt in millions US dollars, 2001 6,676
Total external debt (as percent of GDP), 2001 71.5
Total debt service (as percent of GNI), 2001 1.6
Total debt service (as percent of exports of goods and services), 2001 10.3
184

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
2,500
Outward Stock and Flow,
1999-2002
2,000

1,500

1,000

500
n/a
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 6%
of Goods, 2001

12%
All food items
45% Others
Manufactured goods
Ores and metals

37%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
8
7

6
5
4

3
2
1
185

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-1
-2

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 9 69

Macroeconomic Environment Index Rank 14 76

Macroeconomic Stability Subindex Rank 17 79
Government Waste Subindex Rank 5 43
Country Credit Rating Rank Rank 12 83

Public Institutions Index Rank 9 59

Contracts and Law Subindex Rank 8 46
Corruption Subindex Rank 10 73

Technology Index Rank 12 81

Innovation Subindex Rank 16 90
ICT Subindex Rank 15 90
Technology Transfer Subindex Rank (out of 77 non-core innovators) 5 23
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Tanzania
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inadequate supply of infrastructure

Access to financing

Tax rates

Corruption

Tax regulations

Inefficient government bureaucracy

Inadequately educated workforce

Crime and theft

Poor work ethic in national labour force

Policy instability

Foreign currency regulations

Inflation
186

Restrictive labor regulations

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.01 Recession expectations 9 23 2.19 National savings rate, 2002 19 91
7.10 Public trust of politicians 4 32 2.22 Interest rate spread, 2002 19 86
2.03 Extent of distortive government subsidies 7 35 2.21 Real exchange rate, 2002 22 83
7.08 Diversion of public funds 7 49 2.17 Country credit rating, 2003 12 83
2.09 Access to credit 14 77
2.18 Government surplus/deficit, 2002 13 74
2.20 Inflation, 2002 12 63

Public Institutions Public Institutions

6.01 Judicial independence 6 38 7.03 Irregular payments in tax collection 14 80
6.08 Favoritism in decisions of government officials 7 44 7.02 Irregular payments in public utilities 11 78
7.01 Irregular payments in exports and imports 10 62
6.17 Organized crime 13 53
6.03 Property rights 8 53

Technology Technology
3.04 Prevalence of foreign technology licensing 7 24 3.18 Tertiary enrollment 22 99
3.03 FDI and technology transfer 5 25 3.22 Telephone lines, 2002 22 99
3.15 Government success in ICT promotion 6 27 3.19 Cellular telephones, 2002 19 93
3.14 Government prioritization of ICT 7 28 3.20 Internet users, 2002 16 92
3.06 Company spending on research and development 6 46 3.23 Personal computers, 2002 17 90
3.08 University/industry research collaboration 5 50 3.21 Internet hosts, 2002 13 87
3.02 Firm-level technology absorption 7 50 3.12 Internet access in schools 12 84
3.01 Technological sophistication 12 82
3.17 Utility patents, 2002 8 72
3.13 Quality of competition in the ISP sector 6 56
3.16 Laws relating to ICT 5 55

Other indicators Other indicators

8.09 Wage equality of women in the workplace 6 10 4.05 Business impact of malaria 20 97
6.15 Government effectiveness in reducing poverty 4 28 4.07 Business impact of HIV/AIDS 19 96
10.15 Reliance on professional management 7 42 4.06 Business impact of tuberculosis 18 95
5.02 Railroad infrastructure development 7 50 5.05 Quality of electricity supply 18 92
6.09 Extent of bureaucratic red tape 16 89
4.08 Impact of HIV/AIDS on FDI 15 88
10.02 Value chain presence 15 85
8.08 Private-sector employment of women 19 83
6.05 Freedom of the press 15 80
5.04 Air transport infrastructure quality 16 79
5.06 Telephone infrastructure quality 10 76
4.02 Quality of public schools 13 75
10.12 Extent of staff training 13 73
3.10 Availability of scientists and engineers 11 73
2.06 Soundness of banks 15 71
6.14 Business costs of crime and violence 13 68
2.07 Ease of access to loans 11 68
5.03 Port infrastructure quality 10 68
6.13 Reliability of police services 13 63
187

10.01 Nature of competitive advantage 13 62

6.18 Informal sector 10 61
5.01 Overall infrastructure quality 8 61
5.07 Postal efficiency 6 58
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 8.01 Intensity of local competition 5 57

2 ❚ Country Profiles
 Tunisia
Key Indicators Human Development Indicators
Population in millions, 2002 9.70 Gross primary enrollment (percent of relevant age group) 117.0
Average annual population growth rate (%), 1992-2002 1.3 Gross secondary enrollment (percent of relevant age group), 2001 78.3
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 21.25 2000 or most recent year available 21.7
GDP per capita (PPP) in US dollars, 2002 6,579 Adult literacy rate age 15 and above (%) , 2001 72.1
Real growth in GDP per capita (%), 2002 0.6 Percent of population living on income below 1 dollar a day, 2001 <2

Growth of output (average annual percent growth) 1990-2001 5.0 Population with sustainable access to an improved water source (%), 2000 80

Agriculture 5.4 Life expectancy at birth (years), 2002 71.6

Industry 4.6 HIV prevalence age 15-49 (%), 2001 n/a

Manufacturing 3.3 Reported malaria per 100,000, 2001 n/a

Services 5.4 Estimated TB cases per 100,000, 2002 34

Inflation (annual percent change), 2002 3.1

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -2.5 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 26.1
Paved roads (percent of total roads), 1999 64
Interest rate spread, 2002 5.0
Electric power transmission and distribution losses (percent of output), 2000 11
Real exchange rate, 2003* 144.6 Main telephone lines per 100 inhabitants, 2002 11.7
Exports of goods and services (as percent of GDP), 2002 44.8 Cellular mobile telephone subscribers per 100 inhabitants, 2002 5.2
Imports of goods and services (as percent of GDP), 2002 49.1 Personal computers per 100 inhabitants, 2002 3.1
Current account balance (as percent of GDP), 2002 -3.5 Internet users per 10,000 inhabitants, 2002 516.8
Average external tariff rate in percent 28.8
Gross international reserves in months of imports, 2001 2.1
Official development assistance and official aid (in millions US dollars), 2001 377.7
Total external debt in millions US dollars, 2001 10,884
Total external debt (a percent of GDP), 2001 54.4
Total debt service (as percent of GNI), 2001 7.1
Total debt service (as percent of exports of goods and services), 2001 12.9
188

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
16,000
Outward Stock and Flow,
14,000
1999-2002
12,000
10,000
8,000
6,000
4,000
2,000
n/a
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 1%
1%
of Goods, 2001
8%

9% Manufactured goods
Fuels
All food items
Ores and metals
Others

81%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

5
189

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 2 38

Macroeconomic Environment Index Rank 2 32

Macroeconomic Stability Subindex Rank 3 31
Government Waste Subindex Rank 1 11
Country Credit Rating Rank Rank 3 45

Public Institutions Index Rank 2 32

Contracts and Law Subindex Rank 2 22
Corruption Subindex Rank 2 42

Technology Index Rank 3 57

Innovation Subindex Rank 2 50
ICT Subindex Rank 3 59
Technology Transfer Subindex Rank (out of 77 non-core innovators) 7 31
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Tunisia
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Poor work ethic in national labour force

Inefficient government bureaucracy

Restrictive labor regulations

Tax regulations

Foreign currency regulations

Inadequate supply of infrastructure

Inadequately educated workforce

Tax rates

Corruption

Inflation

Policy instability
190

Government instability/coups

Crime and theft

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.03 Extent of distortive government subsidies 1 4 2.20 Inflation, 2002 8 47
7.10 Public trust of politicians 2 11 2.22 Interest rate spread, 2002 5 46
7.08 Diversion of public funds 1 21 2.17 Country credit rating, 2003 3 45
2.09 Access to credit 4 29 2.18 Government surplus/deficit, 2002 6 40
2.19 National savings rate, 2002 8 30 2.01 Recession expectations 14 38
2.21 Real exchange rate, 2002 10 34

Public Institutions Public Institutions

6.08 Favoritism in decisions of government officials 1 11 7.03 Irregular payments in tax collection 5 48
6.17 Organized crime 2 21 7.02 Irregular payments in public utilities 2 47
6.03 Property rights 2 28
6.01 Judicial independence 5 33
7.01 Irregular payments in exports and imports 2 37

Technology Technology
3.15 Government success in ICT promotion 1 3 3.21 Internet hosts, 2002 14 88
3.14 Government prioritization of ICT 2 5 3.19 Cellular telephones, 2002 9 77
3.16 Laws relating to ICT 1 19 3.23 Personal computers, 2002 6 65
3.04 Prevalence of foreign technology licensing 4 19 3.17 Utility patents, 2002 2 62
3.02 Firm-level technology absorption 2 23 3.22 Telephone lines, 2002 2 60
3.08 University/industry research collaboration 2 31 3.13 Quality of competition in the ISP sector 7 60
3.12 Internet access in schools 1 33 3.18 Tertiary enrollment 2 57
3.06 Company spending on research and development 2 33 3.20 Internet users, 2002 3 55
3.01 Technological sophistication 3 42
3.03 FDI and technology transfer 11 41

Other Indicators Other Indicators

6.15 Government effectiveness in reducing poverty 1 3 6.05 Freedom of the press 17 87
8.09 Wage equality of women in the workplace 2 3 4.05 Business impact of malaria 3 65
8.08 Private-sector employment of women 1 6 8.01 Intensity of local competition 6 64
3.10 Availability of scientists and engineers 1 13 10.15 Reliance on professional management 13 62
6.13 Reliability of police services 1 17 2.06 Soundness of banks 12 56
6.14 Business costs of crime and violence 1 21 4.06 Business impact of tuberculosis 2 56
6.18 Informal sector 1 21 6.09 Extent of bureaucratic red tape 3 55
4.02 Quality of public schools 1 22 10.01 Nature of competitive advantage 10 52
10.02 Value chain presence 2 24 5.06 Telephone infrastructure quality 2 49
10.12 Extent of staff training 2 26 4.07 Business impact of HIV/AIDS 2 46
5.07 Postal efficiency 2 28 5.04 Air transport infrastructure quality 5 45
2.07 Ease of access to loans 2 29
5.05 Quality of electricity supply 2 31
5.01 Overall infrastructure quality 4 33
4.08 Impact of HIV/AIDS on FDI 2 36
5.02 Railroad infrastructure development 4 36
5.03 Port infrastructure quality 4 37
191

* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

2 ❚ Country Profiles
 Uganda
Key Indicators Human Development Indicators
Population in millions, 2002 24.80 Gross primary enrollment (percent of relevant age group) n/a
Average annual population growth rate (%), 1992-2002 3.0 Gross secondary enrollment (percent of relevant age group), 2000 15.2
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 5.87 2000 or most recent year available 3.0
GDP per capita (PPP) in US dollars, 2002 1,354 Adult literacy rate age 15 and above (%) , 2001 68
Real growth in GDP per capita (%), 2002 4.2 Percent of population living on income below 1 dollar a day, 2001 82

Growth of output (average annual percent growth) 1990-2001 6.7 Population with sustainable access to an improved water source (%), 2000 52

Agriculture 3.9 Life expectancy at birth (years), 2002 49.3

Industry 10.4 HIV prevalence age 15-49 (%), 2001 5.0

Manufacturing 11.0 Reported malaria per 100,000, 2000 46

Services 7.3 Estimated TB cases per 100,000, 2002 324

Inflation (annual percent change), 2002 -2.0

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -12.6 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2002 22.2
Paved roads (percent of total roads), 1999 7
Interest rate spread, 2002 13.4
Electric power transmission and distribution losses (percent of output), 2000 n/a
Real exchange rate, 2003* 171.7 Main telephone lines per 100 inhabitants, 2002 0.2
Exports of goods and services (as percent of GDP), 2002 11.8 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.6
Imports of goods and services (as percent of GDP), 2002 28.4 Personnal computers per 100 inhabitants, 2002 0.3
Current account balance (as percent of GDP), 2001 -6.5 Internet users per 10,000 inhabitants, 2002 40.5
Average external tariff rate in percent, 2000 6.1
Gross international reserves in months of imports, 2001 7.3
Official development assistance and official aid (in millions US dollars), 2001 782.6
Total external debt in millions US dollars, 2001 3,733
Total external debt (as percent of GDP), 2001 65.8
Total debt service (as percent of GNI), 2001 0.9
Total debt service (as percent of exports of goods and services), 2001 7.4
192

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and 2,000
Outward Stock and Flow,
1999-2002 1,500

1,000

500

-500
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 2%
of Goods, 2002 6%

7%

All food items

Others
Manufactured goods
21% Fuels
64%
Ores and metals

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

193

-5

-10

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 14 80

Macroeconomic Environment Index Rank 12 71

Macroeconomic Stability Subindex Rank 9 58
Government Waste Subindex Rank 11 60
Country Credit Rating Rank Rank 13 85

Public Institutions Index Rank 18 84

Contracts and Law Subindex Rank 17 73
Corruption Subindex Rank 19 93

Technology Index Rank 10 77

Innovation Subindex Rank 13 86
ICT Subindex Rank 14 89
Technology Transfer Subindex Rank (out of 77 non-core innovators) 4 22
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Uganda
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a Technology index

2
scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Corruption

Tax rates

Inadequate supply of infrastructure

Inefficient government bureaucracy

Policy instability

Tax regulations

Government instability/coups

Inflation

Crime and theft

Poor work ethic in national labour force

Inadequately educated workforce

194

Foreign currency regulations

Restrictive labor regulations

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.20 Inflation, 2002 2 3 2.18 Government surplus/deficit, 2002 22 98
2.21 Real exchange rate, 2002 5 12 2.19 National savings rate, 2002 21 94
2.03 Extent of distortive government subsidies 2 17 7.08 Diversion of public funds 19 90
2.01 Recession expectations 13 33 2.22 Interest rate spread, 2002 21 88
2.17 Country credit rating, 2003 13 85
2.09 Access to credit 11 69
7.10 Public trust of politicians 13 61

Technology Public Institutions

3.03 FDI and technology transfer 3 20 7.01 Irregular payments in exports and imports 23 95
3.15 Government success in ICT promotion 5 25 7.03 Irregular payments in tax collection 19 93
3.04 Prevalence of foreign technology licensing 9 26 7.02 Irregular payments in public utilities 18 92
3.14 Government prioritization of ICT 10 39 6.17 Organized crime 21 82
3.08 University/industry research collaboration 4 43 6.08 Favoritism in decisions of government officials 19 79
6.03 Property rights 15 75
6.01 Judicial independence 11 58

Technology
3.22 Telephone lines, 2002 24 101
3.20 Internet users, 2002 20 96
3.23 Personal computers, 2002 19 93
3.18 Tertiary enrollment 15 91
3.19 Cellular telephones, 2002 15 89
3.01 Technological sophistication 16 86
3.21 Internet hosts, 2002 9 78
3.12 Internet access in schools 7 75
3.16 Laws relating to ICT 8 66
3.17 Utility patents, 2002 5 66
3.02 Firm-level technology absorption 10 60
3.13 Quality of competition in the ISP sector 4 53
3.06 Company spending on research and development 7 51

Other Indicators Other Indicators

8.09 Wage equality of women in the workplace 14 31 6.09 Extent of bureaucratic red tape 23 99
6.15 Government effectiveness in reducing poverty 7 39 4.05 Business impact of malaria 17 94
6.05 Freedom of the press 21 93
4.06 Business impact of tuberculosis 17 93
10.15 Reliance on professional management 23 91
4.08 Impact of HIV/AIDS on FDI 16 91
2.06 Soundness of banks 25 90
8.08 Private-sector employment of women 22 90
4.07 Business impact of HIV/AIDS 14 90
5.03 Port infrastructure quality 17 87
5.07 Postal efficiency 16 85
5.05 Quality of electricity supply 12 84
5.04 Air transport infrastructure quality 18 83
5.01 Overall infrastructure quality 14 80
6.14 Business costs of crime and violence 17 77
10.12 Extent of staff training 14 77
3.10 Availability of scientists and engineers 13 77
10.02 Value chain presence 10 75
4.02 Quality of public schools 12 74
5.02 Railroad infrastructure development 14 73
5.06 Telephone infrastructure quality 9 73
195

6.13 Reliability of police services 16 72

8.01 Intensity of local competition 10 72
6.18 Informal sector 14 69
2.07 Ease of access to loans 9 61
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.
10.01 Nature of competitive advantage 10 52

2 ❚ Country Profiles
 Zambia
Key Indicators Human Development Indicators
Population in millions, 2002 10.90 Gross primary enrollment (percent of relevant age group), 2001 78.0
Average annual population growth rate (%), 1992-2002 2.1 Gross secondary enrollment (percent of relevant age group), 2001 23.5
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 3.74 2000 or most recent year available 2.5
GDP per capita (PPP) in US dollars, 2002 806 Adult literacy rate age 15 and above (%) , 2001 79
Real growth in GDP per capita (%), 2002 0.9 Percent of population living on income below 1 dollar a day, 2001 64

Growth of output (average annual percent growth) 1990-2001 0.3 Population with sustainable access to an improved water source (%), 2000 64

Agriculture 4.2 Life expectancy at birth (years), 2002 39.7

Industry -1.3 HIV prevalence age 15-49 (%), 2001 21.5

Manufacturing 2.2 Reported malaria per 100,000, 2001 18,877

Services 2.2 Estimated TB cases per 100,000, 2002 653

Inflation (annual percent change), 2002 22.2

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -14.4 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 18.7
Paved roads (percent of total roads), 1999 n/a
Interest rate spread, 2002 21.9
Electric power transmission and distribution losses (percent of output), 2000 3
Real exchange rate, 2003* 111.1 Main telephone lines per 100 inhabitants, 2002 0.8
Exports of goods and services (as percent of GDP), 2001 27.1 Cellular mobile telephone subscribers per 100 inhabitants, 2002 1.3
Imports of goods and services (as percent of GDP), 2001 37.3 Personal computers per 100 inhabitants, 2002 0.7
Current account balance (as percent of GDP), 2001 n/a Internet users per 10,000 inhabitants, 2002 48.2
Average external tariff rate in percent, 1997 13.1
Gross international reserves in months of imports, 2001 1.2
Official development assistance and official aid (in millions US dollars), 2001 373.5
Total external debt in millions US dollars, 2001 5,671
Total external debt (as percent of GDP), 2001 155.8
Total debt service (as percent of GNI), 2001 3.7
Total debt service (as percent of exports of goods and services), 2001 11.7
196

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and
3'000
Outward Stock and Flow,
1999-2002 2'500

2'000

1'500

1'000

500
n/a n/a
0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 2%
of Goods, 2002 6%

9%
Ores and metals
Manufactured goods
All food items
Others
19% 64% Fuels

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
15

10

0
70
71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
197

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 17 88

Macroeconomic Environment Index Rank 22 97

Macroeconomic Stability Subindex Rank 21 96
Government Waste Subindex Rank 21 84
Country Credit Rating Rank Rank 19 95

Public Institutions Index Rank 13 69

Contracts and Law Subindex Rank 12 56
Corruption Subindex Rank 14 82

Technology Index Rank 16 90

Innovation Subindex Rank 17 92
ICT Subindex Rank 12 87
Technology Transfer Subindex Rank (out of 77 non-core innovators) 16 55
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Zambia
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a 2 Technology index

scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Access to financing

Inflation

Tax rates

Inadequate supply of infrastructure

Corruption

Tax regulations

Inefficient government bureaucracy

Poor work ethic in national labour force

Inadequately educated workforce

Foreign currency regulations

Policy instability

Crime and theft

198

Restrictive labor regulations

Government instability/coups

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.19 National savings rate, 2002 1 4 2.18 Government surplus/deficit, 2002 23 100
2.22 Interest rate spread, 2002 24 98
2.20 Inflation, 2002 23 96
2.17 Country credit rating, 2003 19 95
2.09 Access to credit 20 92
7.10 Public trust of politicians 21 83
2.01 Recession expectations 22 82
7.08 Diversion of public funds 15 81
2.21 Real exchange rate, 2002 20 71
2.03 Extent of distortive government subsidies 18 71

Public Institutions
7.02 Irregular payments in public utilities 16 89
7.03 Irregular payments in tax collection 11 72
7.01 Irregular payments in exports and imports 11 67
6.03 Property rights 12 64
6.08 Favoritism in decisions of government officials 14 62
6.01 Judicial independence 10 56
6.17 Organized crime 12 52

Technology
3.18 Tertiary enrollment 16 92
3.19 Cellular telephones, 2002 17 91
3.22 Telephone lines, 2002 14 90
3.20 Internet users, 2002 13 89
3.02 Firm-level technology absorption 21 88
3.12 Internet access in schools 15 88
3.08 University/industry research collaboration 17 84
3.01 Technological sophistication 13 83
3.23 Personal computers, 2002 11 82
3.14 Government prioritization of ICT 18 79
3.13 Quality of competition in the ISP sector 14 78
3.21 Internet hosts, 2002 7 76
3.16 Laws relating to ICT 11 72
3.17 Utility patents, 2002 8 72
3.06 Company spending on research and development 13 71
3.15 Government success in ICT promotion 16 67
3.03 FDI and technology transfer 15 52
3.04 Prevalence of foreign technology licensing 14 52

Other Indicators Other Indicators

10.01 Nature of competitive advantage 5 39 4.06 Business impact of tuberculosis 24 101
8.09 Wage equality of women in the workplace 8 12 4.02 Quality of public schools 22 89
10.15 Reliance on professional management 8 43 4.07 Business impact of HIV/AIDS 22 99
5.03 Port infrastructure quality 22 96
4.08 Impact of HIV/AIDS on FDI 20 95
6.15 Government effectiveness in reducing poverty 20 75
10.02 Value chain presence 20 95
2.07 Ease of access to loans 19 93
4.05 Business impact of malaria 19 96
6.09 Extent of bureaucratic red tape 19 94
6.18 Informal sector 18 77
8.01 Intensity of local competition 18 82
10.12 Extent of staff training 16 81
5.01 Overall infrastructure quality 15 82
2.06 Soundness of banks 14 62
3.10 Availability of scientists and engineers 14 78
5.04 Air transport infrastructure quality 14 76
6.13 Reliability of police services 14 64
5.06 Telephone infrastructure quality 13 82
199

5.07 Postal efficiency 13 73

6.05 Freedom of the press 13 77
5.05 Quality of electricity supply 9 70
8.08 Private-sector employment of women 13 69
6.14 Business costs of crime and violence 12 66
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 5.02 Railroad infrastructure development 11 69

2 ❚ Country Profiles
 Zimbabwe
Key Indicators Human Development Indicators
Population in millions, 2002 13.10 Gross primary enrollment (percent of relevant age group), 2001 95.0
Average annual population growth rate (%), 1992-2002 1.5 Gross secondary enrollment (percent of relevant age group), 2001 44.5
Gross tertiary enrollment (percent of relevant age group),
Total GDP in billions US dollars, 2002 19.30 2000 or most recent year available 3.9
GDP per capita (PPP) in US dollars, 2002 1,993 Adult literacy rate age 15 and above (%) , 2001 89
Real growth in GDP per capita (%), 2002 -15.1 Percent of population living on income below 1 dollar a day, 2001 36

Growth of output (average annual percent growth) 1990-2001 0.5 Population with sustainable access to an improved water source (%), 2000 83

Agriculture 3.4 Life expectancy at birth (years), 2002 37.9

Industry -0.8 HIV prevalence age 15-49 (%), 2001 33.7

Manufacturing -1.4 Reported malaria per 100,000, 2000 5,410

Services 2.3 Estimated TB cases per 100,000, 2002 628

Inflation (annual percent change), 2002 140.0

Infrastructure
Government surplus/deficit (as percent of GDP), 2002 -10.5 and Technology Diffusion Indicators
Gross fixed capital formation (as percent of GDP), 2001 7.7
Paved roads (percent of total roads), 1999 47
Interest rate spread, 2002 18.3
Electric power transmission and distribution losses (percent of output), 2000 21
Real exchange rate, 2003* 37.6 Main telephone lines per 100 inhabitants, 2002 2.5
Exports of goods and services (as percent of GDP), 2001 21.8 Cellular mobile telephone subscribers per 100 inhabitants, 2002 3.0
Imports of goods and services (as percent of GDP), 2001 20.7 Personal computers per 100 inhabitants, 2002 5.2
Current account balance (as percent of GDP), 2001 n/a Internet users per 10,000 inhabitants, 2002 429.8
Average external tariff rate in percent, 1998 16.4
Gross international reserves in months of imports, 2001 0.7
Official development assistance and official aid (in millions US dollars), 2001 159.0
Total external debt in millions US dollars, 2001 3'780
Total external debt (as percent of GDP), 2001 41.7
Total debt service (as percent of GNI), 2001 1.5
Total debt service (as percent of exports of goods and services), 2001 6.8
200

*2002 period average real exchange rate relative to the United States (1995 = 100). Values greater (less) than 100 indicate depreciation (appreciation) relative to the United States.

Sources: World Development Indicators 2003, World Bank; Economist Intelligence Unit; World Economic Outlook Database, IMF, April 2003; International Financial Statistics, IMF, March 2004; State of the
World Population 2002, UNFPA; Global Atlas, World Health Organization, March 2004; The World Health Report 2003, World Health Organization; Human Development Report 2003, UNDP; Institute for
Statistics UNESCO; Index of Economic Freedom 2003, The Heritage Foundation and The Wall Street Journal; International Telecommunication Union, March 2004; African Economic Outlook 2002/03, OECD.

2 ❚ Country Profiles
 US$ (Millions)
FDI Inward and 1,200
Outward Stock and Flow,
1999-2002 1,000

800

600

400

200

0
FDI inward FDI outward FDI inflows FDI outflows
stock stock

1999 2002

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Structure of Exports 1%
of Goods, 2002
20%
35% Manufactured goods
All food items
Others
Ores and metals
Fuels

21%
23%

Source: UNCTAD Handbook of Statistics online (accessed March 2004)

Real GDP Growth, 1970-2003

Percent
20

15

10

0
70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

-5
201

-10

-15

Source: World Economic Outlook Database, IMF, April 2003

2 ❚ Country Profiles
 Competitiveness Rankings

Rank out of 25 African countries Rank out of 102 countries *

Growth Competitiveness Index Rank 22 97

Macroeconomic Environment Index Rank 25 102

Macroeconomic Stability Subindex Rank 25 101
Government Waste Subindex Rank 25 100
Country Credit Rating Rank Rank 23 100

Public Institutions Index Rank 19 90

Contracts and Law Subindex Rank 24 93
Corruption Subindex Rank 16 84

Technology Index Rank 9 75

Innovation Subindex Rank 14 87
ICT Subindex Rank 9 80
Technology Transfer Subindex Rank (out of 77 non-core innovators) 10 41
* Source: Global Competitiveness Report 2003-2004, World Economic Forum.

Zimbabwe
Growth Competitiveness Index
Relative performance:
102 country average
Growth Competitiveness 6
Index scores and GDP
4

GDP per capita (normalized on a 2 Technology index

scale from 1 to 7)

Macroeconomic environment index Public institutions index

Sources: World Economic Forum and World Economic Outlook Database, IMF, April 2003

The Most Problematic Factors for Doing Business

Inflation

Foreign currency regulations

Policy instability

Corruption

Government instability/coups

Inefficient government bureaucracy

Crime and theft

Restrictive labor regulations

Inadequate supply of infrastructure

Access to financing

Poor work ethic in national labour force

Tax regulations
202

Tax rates

Inadequately educated workforce

0 5 10 15 20 25 30
% of responses

Note: From a list of 14 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show
the responses weighted according to their rankings.
Source: World Economic Forum, Executive Opinion Survey 2003

2 ❚ Country Profiles
National Competitiveness Balance Sheet

Notable Competitive Advantages Notable Competitive Disadvantages

Rank out of Rank out of Rank out of Rank out of
Growth Competitiveness Index 25 African countries 102 countries* Growth Competitiveness Index 25 African countries 102 countries*
Macroeconomic Environment Macroeconomic Environment
2.09 Access to credit 5 30 2.01 Recession expectations 25 102
2.20 Inflation, 2002 25 102
2.21 Real exchange rate, 2002 25 102
2.03 Extent of distortive government subsidies 25 101
2.17 Country credit rating, 2003 23 100
7.10 Public trust of politicians 25 97
2.22 Interest rate spread, 2002 22 96
2.18 Government surplus/deficit, 2002 19 95
7.08 Diversion of public funds 22 94
2.19 National savings rate, 2002 20 92

Public Institutions
6.01 Judicial independence 25 97
6.08 Favoritism in decisions of government officials 24 94
6.03 Property rights 21 93
7.02 Irregular payments in public utilities 19 93
7.01 Irregular payments in exports and imports 16 84
6.17 Organized crime 16 64
7.03 Irregular payments in tax collection 7 56

Technology Technology
3.04 Prevalence of foreign technology licensing 8 25 3.14 Government prioritization of ICT 25 99
3.15 Government success in ICT promotion 24 97
3.13 Quality of competition in the ISP sector 18 87
3.18 Tertiary enrollment 11 86
3.22 Telephone lines, 2002 10 85
3.19 Cellular telephones, 2002 12 84
3.16 Laws relating to ICT 15 82
3.12 Internet access in schools 10 81
3.02 Firm-level technology absorption 18 80
3.08 University/industry research collaboration 14 77
3.06 Company spending on research and development 14 72
3.21 Internet hosts, 2002 6 71
3.01 Technological sophistication 8 69
3.17 Utility patents, 2002 3 63
3.20 Internet users, 2002 4 62
3.23 Personal computers, 2002 4 53
3.03 FDI and technology transfer 16 53

Other Indicators Other Indicators

10.15 Reliance on professional management 4 30 4.06 Business impact of tuberculosis 25 102
10.12 Extent of staff training 4 35 4.07 Business impact of HIV/AIDS 25 102
6.05 Freedom of the press 25 102
6.13 Reliability of police services 25 98
6.15 Government effectiveness in reducing poverty 25 98
5.06 Telephone infrastructure quality 23 97
10.01 Nature of competitive advantage 22 97
8.01 Intensity of local competition 22 96
5.03 Port infrastructure quality 21 95
5.07 Postal efficiency 22 94
10.02 Value chain presence 19 94
4.08 Impact of HIV/AIDS on FDI 18 93
3.10 Availability of scientists and engineers 19 88
5.05 Quality of electricity supply 14 87
4.05 Business impact of malaria 10 87
5.04 Air transport infrastructure quality 19 85
6.18 Informal sector 21 83
8.08 Private-sector employment of women 18 82
6.09 Extent of bureaucratic red tape 13 80
6.14 Business costs of crime and violence 15 74
203

2.06 Soundness of banks 16 72

4.02 Quality of public schools 11 72
5.01 Overall infrastructure quality 9 63
2.07 Ease of access to loans 7 55
8.09 Wage equality of women in the workplace 19 52
* Source: Global Competitiveness Report 2003-2004, World Economic Forum. 5.02 Railroad infrastructure development 8 52

2 ❚ Country Profiles
Partner Institutes

The World Economic Forum would like to thank the following Partner Institutes of the Global Competitiveness Programme
for their invaluable support in the 2003 Executive Opinion Survey process:

Algeria Mali
Centre de Recherche en Economie Appliquée pour le Groupe de Recherche en Economie Appliquée et Théorique
Développement (CREAD) (GREAT)
Professor Yassine Ferfera Massa Coulibaly, Coordinator

Angola Mauritius
SOF - Serviços de Organização e Finanças Joint Economic Council of Mauritius
Marcolino Meireles, Manager Raj Makoond, Director
Manuel José Alves Da Rocha, Consultant
Emil Moreso Grion, Consultant Morocco
Université Hassan II
Fouzi Mourji, Professor of Economics
Botswana
Botswana Institute for Development Policy Analysis (BIDPA) Mozambique
Dr. N. H. Fidzani, Executive Director EconPolicy Research Group, Lda
Kedikilwe P. Maroba, Programme Coordinator Dr. Peter Coughlin, Partner
Professor Dr. Paulo N. Mole, Partner
Cameroon
Centre d’Etudes et de Recherches en Economie et Gestion Namibia
Professor Seraphin Magloire Fouda, Director Namibian Economic Policy Research Unit
Dr. Christoph Stork, Senior Researcher
Chad Antony N. Masarakufa, Researcher
Groupe de Recherches Alternatives et de Monitoring du
Projet Pétrole-Tchad-Cameroun (GRAMP-TC) Nigeria
Professor Gilbert Maoundonodji, Director Nigerian Economic Summit Group (NESG)
Chris Onyemenam, Director, Operations & Administration
Dr. Felix Ogbera, Associate Director, Research
Egypt
Mayowa Obilade, Research Consultant
Egyptian Center for Economic Studies
Dr. Ahmed Galal, Executive Director
Senegal
Centre de Recherches Economiques Appliquées (CREA)
Ethiopia Abdoulaye Diagne, Director
Ethiopian Economic Association/Ethiopian Economic Policy Dr. Gaye Daffé, Scientific Coordinator
Research Institute
Berhanu Nega, Director South Africa
Kibre Moges, Senior Researcher Business South Africa
Worku Gebeyehu, Assistant Researcher Ben Van Der Ross, Chief Executive Officer
Friede Dowie, Secretary General
Gambia
Gambia Economic and Social Development Research Institute Tanzania
(GESDRI) Economic and Social Research Foundation
Makaireh A. Njie, Director Professor Haidari Amani, Executive Director
John Ulanga, Coordinator, Commissioned Studies
Ghana Department
The International Institute for IT (INIIT) Moses Msuya, Research Assistant, Commissioned Studies
Professor Clément Dzidonu, President and Senior Research Department
Fellow
Eliza Sam, Projects Officer Tunisia
Institut Arabe des Chefs d’Entreprises
Faycal Lakhoua, Conseiller
Kenya
Institute of Policy Analysis and Research (IPAR) Uganda
Dr. T. Nzioki Kibua, Executive Director Makarere Institute for Social Research
John Omiti, Senior Research Fellow and Coordinator, Professor J. C. Munene
Real Sector
R. Njeri Chacha, Resource Centre Manager Zambia
INESOR: Institute of Economic and Social Research -
Madagascar University of Zambia
205

University of Antananarivo Chileshe L. Mulenga, Director

Pépé Andrianomanana, Director, Centre of Economic Studies
Zimbabwe
Malawi University of Zimbabwe
Malawi Investment Promotion Agency Professor A. M. Hawkins, Director, Graduate School of
Alick C. E. Sukasuka, Director of Operations Management

❚ Acknowledgements
 COMMITTED TO
IMPROVING THE STATE
OF THE WORLD

While the political landscape in most of sub-Saharan Africa has improved

considerably in recent years, the long awaited renaissance of the African
economy has not yet taken place. Indeed, with few exceptions, it is difficult
to point to a single group of African economies that has experienced high,

The Africa Competitiveness Report 2004

sustained per capita income growth.

The Africa Competitiveness Report 2004 highlights the prospects for

Africa
The
growth in the region and, more importantly, the obstacles to improving Competitiveness
competitiveness in the region. Through in-depth analysis of regional trends Report 2004
and detailed country profiles, the Report assesses the comparative
strengths and weaknesses of 25 African countries. It also contains essays
from prominent academics and development experts on a variety of issues Ernesto Hernández-Catá
relevant to Africa’s development agenda. The Africa Competitiveness The Johns Hopkins University
Report 2004 is an invaluable tool for policy-makers, business strategists
Klaus Schwab
and other important stakeholders, as well as essential reading for all those World Economic Forum
with an interest in the region.
Augusto Lopez-Claros
World Economic Forum

COMMITTED TO
IMPROVING THE STATE
OF THE WORLD ISBN 92-95044-00-2