Africa The Competitiveness Report 2017 Insight Report The Africa Competitiveness Report 2017 Addressing Africa’s Demographic Dividend The Africa Competitiveness Report 2017 is a special project TERMS OF USE AND DISCLAIMER within the framework of the World Economic Forum’s The Africa Competitiveness Report 2017 (herein: “Report”) Global Competitiveness and Risks Team. It is the result presents information and data that were compiled and/or of collaboration between the World Economic Forum, the collected by the World Economic Forum (all information and International Bank for Reconstruction and Development/ data referred herein as “Data”). Data in this Report is subject to the World Bank, and the African Development Bank. change without notice. Visit The Africa Competitiveness Report The terms country and nation as used in this Report do not in page at www.weforum.org/acr. all cases refer to a territorial entity that is a state as understood by international law and practice. 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Users who intend to sell World Economic Forum Data as part of a database or as a standalone product must first obtain the permission from the World Economic Forum (gcp@weforum.org). ii | The Africa Competitiveness Report 2017 Contents Preface .......................................................................................................................................................................................................v by Akinwumi Adesina (African Development Bank), Jim Yong Kim (World Bank Group), and Klaus Schwab (World Economic Forum) Acknowledgments....................................................................................................................................................................................vii Contributors...............................................................................................................................................................................................ix Partner Institutes.......................................................................................................................................................................................xi Overview...................................................................................................................................................................................................xiii PART 1: ADDRESSING AFRICA’S DEMOGRAPHIC DIVIDEND 1.1 Tracking Progress in Africa’s Competitiveness: Removing Obstacles to Reap the Demographic Dividend............................. 3 by Roberto Crotti and Margareta Drzeniek Hanouz (World Economic Forum), El-hadj M. Bah and Audrey Verdier-Chouchane (African Development Bank), and Barak Hoffman (World Bank) 1.2 Jobs in Africa: Designing Better Policies Tailored to Countries’ Circumstances........................................................................ 35 by Barak Hoffman and Jean Michel Marchat (World Bank) 1.3 Competitive African Cities for Better Living Standards................................................................................................................. 53 by El-hadj M. Bah and Audrey Verdier-Chouchane (African Development Bank) PART 2: COUNTRY PROFILES How to Read the Country Profiles......................................................................................................................................................... 75 Technical Notes and Sources................................................................................................................................................................. 77 Index of Countries................................................................................................................................................................................... 87 Country Profiles....................................................................................................................................................................................... 88 About the Authors................................................................................................................................................................................. 159 The Africa Competitiveness Report 2017 | iii Preface Akinwumi Adesina President, African Development Bank Group Jim Yong Kim President, World Bank Group Klaus Schwab Executive Chairman, World Economic Forum The 2017 edition of The Africa Competitiveness Report comes based growth, taking into account rapid demographic out at a challenging time for the continent. In recent years, changes. Africa’s working-age population is expected to soar growth in several African countries has been subdued after by 450 million people, or close to 70 percent, by 2035. The more than a decade of solid expansion. The slowdown is Report examines how this population growth can either help to largely due to the protracted low commodity prices as well as achieve broader shared prosperity and improve the livelihood of the reduced growth in emerging markets such as China, and in African people or become a source of fragility, social tension, advanced economies. However, this situation has also given and economic hardships. It does so by examining the potential impetus to reforms and economic diversification. The strong of Africa’s fast-growing youth population to catalyze economic economic performance of a number of African countries development through accelerating rates of job creation. It also demonstrates Africa’s resilience and brings optimism about discusses the potential of cities to transform, strengthen, and Africa’s future growth prospects. diversify Africa’s economies by creating more dynamic urban Looking ahead, the continent’s young and increasing manufacturing and service sectors. The Report emphasizes population presents an unprecedented opportunity to spur the importance of ensuring that the youth of today and rapid development. A growing labor force and a large and tomorrow possess the skills they need to build vibrant and emerging consumer market hold the promise of significant inclusive economies. It further delivers detailed competitiveness growth opportunities. Yet challenges to reaping these potential profiles for 35 African countries, and provides a comprehensive gains and achieving greater shared prosperity remain. Most summary of the drivers of productivity and competitiveness economies in the region still need to promote more productive within the continent. activities that generate quality employment opportunities for We hope that this year’s Report will stimulate discussion their growing populations and contribute to improving the among development stakeholders to bring about sustained livelihoods of African people. Africa can make this happen, and growth and shared prosperity in Africa. Well-targeted decisions and actions taken today will determine whether investments in physical and human capital will be key factors governments and the private sector in the region can meet the that need to be further reinforced by a sound institutional growing economic and social aspirations of its population. framework and an enabling business environment. Businesses Published on a biennial basis, The Africa Competitiveness can advocate for reforms that enhance firm productivity and Report highlights areas requiring policy action and investment engage in a dialogue with policymakers about the type of to ensure that Africa lays a solid foundation for sustained and reforms required for firms to prosper. Governments can ensure inclusive growth. The Report, which is the result of a long- sustained investments in infrastructure, health, and education; standing collaboration, leverages the knowledge and expertise provide the legal and regulatory framework for a sound of the African Development Bank, the World Bank Group, and business environment for trade and investment; and, most the World Economic Forum to present a joint policy vision that importantly, ensure that policies and their implementation are can help Africa transform its economies. consistent across time and national boundaries. By conducting a comprehensive analysis of Africa’s most Africa’s growing young population offers the prospect of pressing competitiveness challenges, the Report discusses the transforming the continent. The analysis in the 2017 Africa barriers and challenges to putting Africa’s economies onto a Competitiveness Report aims to contribute toward seizing this solid footing and helping them to achieve sustainable, broad- opportunity for Africa’s current and future generations. The Africa Competitiveness Report 2017 | v Acknowledgments The Africa Competitiveness Report 2017 was prepared by a Sector, Infrastructure and Industrialization; the Macroeconomic joint team comprised of Margareta Drzeniek Hanouz, Ciara Policy, Forecasting and Research Department; and the Browne, Roberto Crotti, and Liana Melchenko from the World Statistics Department, who have provided comments on the Economic Forum; Barak Hoffman and Jean Michel Marchat chapter. Administrative assistance was also provided by Eve from the World Bank; and El-hadj M. Bah, and Audrey Verdier- Kra and Abiana Nelson. Laetitia Yattien-Amiguet and Justin Chouchane from the African Development Bank. Kabasele proposed high-quality services in designing the cover. The work was carried out under the general direction of From the World Bank, we thank Najy Benhassine, Richard Samans, Managing Director at the World Economic Shantayanan Devarajan, Anabel Gonzalez, Catherine Masinde, Forum; Anabel Gonzales, Senior Director of Global Trade and Rashmi Shankar, Klaus Tilmes, and Albert Zeufack for their Competitiveness Practice; Shantayanan Devarajan, Chief enthusiastic support of the World Bank’s participation in The Economist for the Middle East and North Africa Region, and Africa Competitiveness Report. We also thank our peer Albert Zeufack, Chief Economist for sub-Saharan Africa at the reviewers: Paul Brenton, César Calderón, Youssouf World Bank; and Abebe Shimeles, Acting Director Kiendrebeogo, and Jacques Morisset for their extremely helpful Macroeconomic Policy, Forecasting and Research Department guidance. We similarly appreciate the inputs and suggestions at the African Development Bank. we received from Jonathan Coony, Lucy Fye, and James We are similarly grateful to all staff from our institutions who Seward. We would like to express our gratitude to Irene have worked so hard to make this joint report possible and who Marguerite Nnomo Ayinda-Mah for her invaluable administrative have provided comments at different stages of the report support. preparation. In particular, we thank Issa Faye, John Anyanwu, From the World Economic Forum, we thank Silja Baller, and Anthony Simpasa from the African Development Bank for Oliver Cann, Piyamit Bing Chomprasob, Gemma Corrigan, their invaluable guidance and comments; and Anna von Attilio Di Battista, Thierry Geiger, Daniel Gomez Gaviria, Max Wachenfelt (Consultant) and Zeke Geh (Consultant) for their Hall, Elsie Kanza, Till Leopold, Vanessa Moungar, Patrick excellent research assistance. We would like to acknowledge McGee, Vesselina Stefanova Ratcheva, Dieynaba Tandian, the contribution of colleagues from the Complex of Private Huguette Umutoni, Stephanie Verrin, and Saadia Zahidi. The Africa Competitiveness Report 2017 | vii Contributors The Africa Competitiveness Report 2017 is the result of collaboration between the World Economic Forum, the World Bank, and the African Development Bank. AT THE WORLD ECONOMIC FORUM AT THE AFRICAN DEVELOPMENT BANK Richard Samans Abebe Shimeles Head of the Centre for the Global Agenda, Acting Director, Macroeconomic Policy, Member of the Managing Board Forecasting and Research Department Margareta Drzeniek Hanouz Issa Faye Head of Global Competitiveness and Risks, Officer in Charge, African Development Institute & Manager, Member of the Executive Committee Microeconomic, Institutional & Development Impact Division Ciara Browne John Anyanwu Head of Partnerships, Global Competitiveness and Risks Lead Research Economist, Macroeconomic Policy, Forecasting and Research Department Roberto Crotti Economist, Global Competitiveness and Risks Team Audrey Verdier-Chouchane Chief Research Economist, Microeconomic, Elsie Kanza Institutional & Development Impact Division Head of Africa, Member of the Executive Committee El-hadj Mamadou Bah Liana Melchenko Principal Research Economist, Microeconomic, Acting Head of Partnerships, Economic Growth and Institutional & Development Impact Division Social Inclusion, Global Competitiveness and Risks AT THE WORLD BANK GROUP Anabel Gonzalez Senior Director, Trade and Competitiveness Global Practice Klaus Tilmes Director, Trade and Competitiveness Global Practice Shantayanan Devarajan Chief Economist, Middle East and North Africa Region Albert Zeufack Chief Economist, Sub-Saharan Africa Region Jean Michel Marchat Lead Economist, Trade and Competitiveness Global Practice Barak Hoffman Consultant, Trade and Competitiveness Global Practice The Africa Competitiveness Report 2017 | ix Partner Institutes The World Economic Forum’s Global Competitiveness and Risks Team is pleased to acknowledge and thank the following organizations as valued Partner Institutes, without which the realization of The Africa Competitiveness Report 2017 would not have been feasible: Algeria Egypt Centre de Recherche en Economie Appliquée pour le The Egyptian Center for Economic Studies (ECES) Développement (CREAD) Abla Abdel Latif, Executive Director and Director of Research Mohamed Yassine Ferfera, Director Mohsen Adel, Consultant Khaled Menna, Research Fellow Maye Ehab, Economist Benin Ethiopia Institut de Recherche Empirique en Economie Politique (IREEP) African Institute of Management, Development and Governance Richard Houessou, Research Associate Tegegne Teka, Senior ExpertAdugna Girma, Operations Manager Romaric Samson, Research Assistant Gabon Léonard Wantchekon, Director Confédération Patronale Gabonaise Botswana Madeleine E. Berre, President Botswana National Productivity Centre Regis Loussou Kiki, General Secretary Letsogile Batsetswe, Research Consultant and Statistician Gina Eyama Ondo, Assistant General Secretary Baeti Molake, Executive Director Gambia, The Phumzile Thobokwe, Manager, Information and Research Services Gambia Economic and Social Development Research Institute Department (GESDRI) Burundi Makaireh A. Njie, Director Faculty of Economics and Management, Research Centre for Ghana Economic and Social Development (CURDES), National University Association of Ghana Industries (AGI) of Burundi James Asare-Adjei, President Ferdinand Bararuzunza, Director of the Centre John Defor, Senior Policy Officer Gilbert Niyongabo, Head of Department Seth Twum-Akwaboah, Chief Executive Officer Léonidas Ndayizeye, Dean of the Faculty Kenya Cameroon Institute for Development Studies, University of Nairobi Comité de Compétitivité (SELPI) Paul Kamau, Senior Research Fellow Lucien Sanzouango, Permanent Secretary Dorothy McCormick, Research Professor Guy Yakana, Expert Junior Winnie Mitullah, Director and Associate Research Professor Samuel Znoumsi, Expert Senior Lesotho Cape Verde Private Sector Foundation of Lesotho Center for Applied Statistics and Econometrics Research – INOVE Nthati Mapitsi, Researcher Júlio Delgado, Director Thabo Qhesi, Chief Executive Officer Jerónimo Freire, Project Manager Kutloano Sello, President, Researcher José Mendes, Chief Executive Officer Madagascar Chad Centre of Economic Studies, University of Antananarivo Groupe de Recherches Alternatives et de Monitoring du Projet Ravelomanana Mamy Raoul, Director Pétrole-Tchad-Cameroun (GRAMP-TC) Razato Rarijaona Simon, Executive Secretary Antoine Doudjidingao, Researcher Gilbert Maoundonodji, Director Malawi Celine Nénodji Mbaipeur, Programme Officer Malawi Confederation of Chambers of Commerce and Industry Hope Chavula, Manager, Head, Public Private Dialogue Congo, Democratic Republic of Chancellor L. Kaferapanjira, Chief Executive Officer Congo-Invest Consulting (CIC) Teza Bila, Managing Director Mali Alphonse Mande, Project Coordinator Groupe de Recherche en Economie Appliquée et Théorique Daddy Nsiku, Project Coordinator (GREAT) Massa Coulibaly, Executive Director Côte d’Ivoire Chamber of Commerce and Industry of Côte d’Ivoire Mauritania Marie-Gabrielle Boka Varlet, General Manager Mauritania Bicom-Service Commercial Anzoumane Diabakate, Head of Communication Oumou El Khairy Youssouf, Administrative Financial Director Jean-Rock Kouadio-Kirine, Head of Territories and sustainable Ousmane Samb, Technical and Marketing Director development Habib Sy, Analyst The Africa Competitiveness Report 2017 | xi Partner Institutes Mauritius Zimbabwe Board of Investment, Mauritius Fulham Economics, Harare Manaesha Fowdar, Investment Executive, Competitiveness A. M. Hawkins, Chairman Ken Poonoosamy, Managing Director Liberia and Sierra Leone Business Mauritius FJP Development and Management Consultants Raj Makoond, Director Omodele R. N. Jones, Chief Executive Officer Morocco Confédération Générale des Entreprises du Maroc (CGEM) Meriem Bensalah Cheqroun, President Si Mohamed Elkhatib, Project Head, Commission Climat des Affaires et Partenariat Public Privé Ahmed Rahhou, President, Commission Climat des Affaires et Partenariat Public Privé Mozambique EconPolicy Research Group, Lda. Peter Coughlin, Director Mwikali Kieti, Project Coordinator Namibia Institute for Public Policy Research (IPPR) Graham Hopwood, Executive Director Leon Kufa, Research Associate Lizaan van Wyk, Research Associate Nigeria Nigerian Economic Summit Group (NESG) Olaoye Jaiyeola, Chief Executive Officer Olajiire Onatade-Abati, Research Analyst Wilson Erumebor, Research Analyst Rwanda Private Sector Federation (PSF) Benjamin Gasamagera, Chairman Fiona Uwera, Head of Research and Policy Analysis Senegal Centre de Recherches Economiques Appliquées (CREA), University of Dakar Ahmadou Aly Mbaye, Director Ndiack Fall, Deputy Director Youssou Camara, Administrative Staff South Africa Business Leadership South Africa Friede Dowie, General Manager Thero Setiloane, Chief Executive Officer Business Unity South Africa Khanyisile Kweyama, Chief Executive Officer Olivier Serrao, Director, Economic Policy Tanzania Policy Research for Development, REPOA Cornel Jahari, Assistant Researcher Blandina Kilama, Senior Researcher Donald Mmari, Executive Director Tunisia Institut Arabe des Chefs d’Entreprises Ahmed Bouzguenda, President Majdi Hassen, Executive Counsellor Uganda Kabano Research and Development Centre Robert Apunyo, Program Manager Delius Asiimwe, Executive Director Anna Namboonze, Research Associate Zambia Institute of Economic and Social Research (INESOR), University of Zambia Patricia Funjika, Research Fellow Jolly Kamwanga, Senior Research Fellow and Project Coordinator Mubiana Macwan’gi, Director and Professor xii | The Africa Competitiveness Report 2017 Overview The 2017 edition of The Africa Competitiveness Report comes Tracking Progress in Africa’s Competitiveness out at a transitional time for the region. Low commodity prices Chapter 1.1 provides an update of Africa’s competitiveness and reduced growth in emerging markets and advanced performance, based on 2015 and 2016 data. This analysis economies have contributed to slow growth in the majority of is conducted at both the aggregate and country levels as African countries, following a decade of sustained GDP growth assessed by the Global Competitiveness Index (GCI). Trends (above 5 percent).1 However, slower GDP growth has also given in Africa’s competitiveness remain largely stagnant: the impetus to reforms and economic diversification in some overall Africa GCI score is substantially the same as the one countries. Such reforms continue to be necessary because of reported in 2015 and has only improved by 5 percent since the demographic changes the continent is undergoing. Africa is 2008. Most competitiveness challenges highlighted in the expected to double its population over the next 25 years, and it is Africa Competitiveness Report series since its first publication, the only region in the world where the working-age population is almost 10 years ago, persist. These include large infrastructure projected to continue expanding beyond 2035.2 Africa is also deficits, significant skill mismatches, slow adoption of new urbanizing rapidly, and more than half of its population will live in technologies, and weak institutions. These factors, in addition cities over the same period. Such rapid growth of Africa’s to weak financial sector development and low levels of regional working-age population has been hailed as a possible boost to trade and integration, emerge as the main bottlenecks that regional economic growth. However, there is no teleology prevent African economies from offering an environment that leading from population growth to job creation. The incidence of facilitates better employment and entrepreneurship unemployment and underemployment among African youth is opportunities to its citizens as well.4 high.3 Absent a policy environment that supports rapid job These broad trends notwithstanding, Africa has made creation, large youth and working-age cohorts can constitute a significant progress on a number of crucial competitiveness potential source of social and political vulnerability. dimensions over the past decade. The positive trends on Economists, policymakers, and business leaders largely governance and the business environment, highlighted by the agree that slow progress in raising competitiveness and 2015 edition of The Africa Competitiveness Report, for the most productivity are at the heart of the limited ability of African part, are continuing, especially in areas such as the quality economies to offer better employment opportunities. A of macroeconomic policy and human capital development. significant body of analysis has identified the main bottlenecks Progress on health and literacy has been particularly remarkable: to improving these factors. These have also been identified and in a decade, child mortality sharply declined from 83 to 47 discussed in previous editions of The Africa Competitiveness percent, and primary school enrollment has grown to above 80 Report. The 2011 edition focused on how to reinforce percent. Moreover, a number of countries in Africa are making managerial skills and higher education, the 2013 edition impressive progress in improving their competitiveness: Côte discussed export diversification, and the 2015 edition examined d’Ivoire, Ethiopia, Rwanda, and Tanzania, for example, have all constraints to structural transformation. This year’s Report improved their competitiveness ranking by five places or more leverages the research and expertise in job creation and since 2015, and their real GDP is forecasted to grow close to urbanization that have been carried out by its partner or above 7 percent over the next few years. Not surprisingly, organizations—the African Development Bank, the World Bank, these countries are also those that are trying to diversify their and the World Economic Forum—to explore what policies need economies more, relative to others in the region. Diverging to be implemented to enable Africa to reap its potential country trajectories reinforce wide regional competitiveness demographic dividend. disparities: the most competitive African economy, Mauritius, at 45th globally, is ranked more than 90 places higher than the In this Report, competitiveness constitutes the factors, lowest one, Mauritania, at 137th. Similar patterns are identified institutions, and policies that determine a country’s level of across the 12 pillars, looking both at performance level and productivity. Productivity, in turn, sets the sustainable level changes over time. and path of prosperity that a country can achieve. The Africa Competitiveness Report 2017 | xiii Overview Jobs in Africa: Designing Better Policies Tailored to shortages of other urban infrastructure such as electricity, Countries’ Circumstances transport networks, and water and sewerage systems. A key The working-age population in Africa is expected to grow by factor contributing to those shortages is the outdated and close to 70 percent, or by approximately 450 million people, inadequate urban plans that fail to take into account the social, between 2015 and 2035. If current trends continue, only about political, economic, and environmental contexts of urban 100 million of them can expect to find stable employment development in Africa. opportunities. Countries that are able to enact policies Beyond the standard recommendations to reduce the conducive to job creation are likely to reap significant benefits infrastructure deficit; improve the business environment though from this rapid population growth. Those that fail to implement better institutions, governance, and regulatory frameworks; and such policies are likely to suffer demographic vulnerabilities increase the availability of skills, this chapter makes three resulting from large numbers of unemployed and/or specific recommendations to improve competitiveness of underemployed youth. African cities. First, governments or city officials need to update New research is providing governments in the region with their cities’ urban plans to reflect local realities. Second, insights into how they can address the coming rise in the investment in housing construction is critical to reduce the large working-age populations. African countries will need to find housing backlogs in various cities and improve the lives of ways to expand aggregate demand for labor and improve urban dwellers. Finally, creating special economic zones can be supply-side factors at the same time. Beyond the traditional an effective tool to jump start manufacturing, increase exports, prescriptions—such as stable macroeconomic policy, a and create jobs. However, strategic planning with special supportive investment climate, and improving the quality of attention to comparative advantage and linkages with the rest human and physical capital—countries can facilitate more rapid of the economy is necessary for achieving the potential benefits and better job creation as well as accelerate the development of industrial parks. of their manufacturing sector by implementing policies suited to their specific circumstances. Since almost all new jobs in Africa The need for faster policy implementation today are in agriculture and microenterprises, improving the Echoing the recommendations from the series of consultations business environment in these sectors is a high priority. Fragile that culminated with the “Competitiveness Action Agenda”,6 countries can create jobs as well as promote growth and following the launch of the 2015 Africa Competitiveness Report, stability through targeted support to vulnerable regions and/or the main roadblocks for Africa’s economic development remain populations. Open trade policies and developing value chain slow progress in improving education quality, building links to extractive sectors are crucial for encouraging infrastructure (especially in cities), adopting new technologies, diversification and job creation in resource-rich countries. deepening capital markets, and accelerating the rate of Finally, policies that foster regional trade and integration can be structural change. a major source of new jobs as well as improve firm-level All these factors, however, require long processes to be productivity and economic competitiveness. modified and will manifest their impact only many years from now, while the need to offer better opportunities to the large Competitive African Cities for Better Living Standards and growing cohorts of young African people is imminent. Rapid population growth and urbanization are putting Therefore, this Report reinforces the urgency of starting the significant pressure on the urban infrastructure of African cities. reform process right away to ensure better prospects for the The demographic transition, characterized by the youth bulge, next generation. requires sharp increases in job creation and infrastructure, More efforts and emphasis should be put on policy including affordable housing in urban centers. For cities to play implementation, rather than policy definition, to circumvent one their role as poles of economic growth and providers of quality of the main weaknesses of Africa’s development programs. jobs, they need to become more competitive. This chapter Strengthening institutions is therefore a necessary pre- focuses on the constraints and opportunities for creating condition to enable faster and incisive policy implementation competitive African cities and eventually improving the living and to spark private-sector action. Despite progress that has standards of urban dwellers. In other words, it focuses on been made in some countries, the average quality of public and policy options for improving the livelihood of African people in a private institutions remains low and represents an overarching context of population and urban growth and highly resonate hindrance to the implementation of reforms. More specifically, with the African Development Bank’s High 5s.5 as discussed in Chapter 1.2, development programs in Africa in Comparing African cities along several indicators of general, and particularly in fragile and conflict-affected states, economic progress—namely population dynamics, income and take a long time to be executed. Against this backdrop, better growth performance, employment, and the costs of housing public and private institutions as well as coordination and and utilities—reveals interesting findings. For instance, over dialogue is needed to speed up the reform process. 2000–16, cities in economies dominated by natural resources In addition, the Report provides some specific short-term experienced very fast growth in per capita GDP, yet they were policies recommendations. less successful in improving households’ disposable incomes. First, it proposes adopting sector-specific policies to In addition, high employment growth has not necessarily increase labor demand. Chapters 1.2 and 1.3 emphasize the translated into higher household disposable income, indicating need to focus on labor-intensive sectors, such as agribusiness a slow growth in wages and/or a fast increase in the number of and construction, in order to speed up job creation. With households. A number of cities witnessed an explosion of improved access to finance, stronger linkages and coordination slums and large housing backlogs that not only undermines among actors in their value chains, and training, these sectors household welfare but also increases matching costs between have the potential to create a large number of skilled and employers and employees and hinders labor productivity. The unskilled jobs. Agribusiness development also will help negative effects of housing shortages are compounded by accelerate the growth of Africa’s manufacturing sector. xiv | The Africa Competitiveness Report 2017 Overview Moreover, because small and micro-businesses represent the Notes most important source of labor demand, policies tailored to the 1 AfDB 2016. needs of this segment of the private sector is particularly 2 UN DESA 2015. necessary. Specifically, those firms require better access to 3 In Northern Africa unemployment is at 29.3 percent. In sub-Saharan finance, capacity building, and linkages to value chains. Africa unemployment is at 10.8 percent, but the vast majority of new job Second, it suggests improving the competitiveness of cities creation is in self-employment or in microenterprises. ILO 2016. through better urban planning. Outdated and inadequate urban 4 For example, although the use of mobile phones grew to 94 plans are preventing African cities from benefiting from rapid subscriptions per 100 people in 2015, broadband mobile subscriptions urbanization and associated economies of scale. New urban are still as low as 26 per 100 people. planning should take into account recent economic, 5 The AfDB five priority areas, referred to as the High 5s are: (1) Light up demographic, and urban developments. Advanced planning and Power Africa, (2) Feed Africa; (3) Industrialize Africa; (4) Integrate Africa; and (5) Improve the Livelihood of African People. can lower infrastructure costs and increasing density can help address the issue of urban gridlock with its associated 6 World Economic Forum, AfDB, OECD, and World Bank 2016. productivity costs, and can reduce the urban sprawl that is putting pressure on agricultural land and the environment. References Moreover, the creation of special economic zones with better AfDB. 2016. African Economic Outlook 2016: Sustainable Cities linkages to the rest of the economy can promote job creation and Structural Transformation. Available at http://www. africaneconomicoutlook.org/en/home. and increased productivity through the higher growth of firms. However, the creation of these zones should be an integral part ILO (International Labour Organization). 2016. “World Employment and Social Outlook Trends 2016: Africa Briefing Note.” Available at http:// of the urban planning efforts in order to maximize the www.ilo.org/wcmsp5/groups/public/---africa/---ro-addis_ababa/ competitiveness outcomes, including job creation. documents/genericdocument/wcms_444480.pdf Third, it recommends reducing the housing backlog to UN DESA (United Nations Department of Economic and Social Affairs). 2015. improve the lives of urban dwellers, create jobs, and enhance World Population Prospects, the 2015 Revision. Population Division. productivity. Because of its extensive linkages with Available at https://esa.un.org/unpd/wpp/ manufacturing, financial sector, and other service subsectors, World Economic Forum, AfDB, OECD, and World Bank (World residential housing construction in developing countries is very Economic Forum, African Development Bank, Organisation for Economic Co-operation and Development, and World Bank). 2016. labor intensive and has high output multiplier effects. To “An Action Agenda for Africa’s Competitiveness.” World Economic address bottlenecks in the sector, better urban planning with Forum Document. Geneva: World Economic Forum. Available at adapted building codes, efficient regulation with reduced http://www3.weforum.org/docs/Africa_Competitiveness_2016.pdf. procedures and costs, improved governance, and better coordination between stakeholders will be necessary. Moreover, capacity building and financing for small and medium-sized developers can improve their productivity and their ability to deliver large-scale housing programs. Fourth, it advises reducing the growing skills mismatch through effective technical vocational education and training (TVET) programs and better regional cooperation. Policies, cited above, aimed at increasing labor demand will not be effective at increasing youth employment if the supply of skills is not adequately addressed. There is a growing shortage of technicians, engineers, and other high-skilled workers. This can be addressed through better emphasis and reforms of TVET programs that can supply the skills demanded by the labor market. Moreover, the upcoming increased demand for education services due to larger populations will require more trained teachers. Regional coordination among African countries to adopt common standards and recognition of qualifications, as well as reforms of immigration policies for skilled workers, can help the continent prevent shortages of teachers in the short run. Following the discussions above, the final section of the Report provides detailed competitiveness profiles for the 35 African countries included in the World Economic Forum’s Global Competitiveness Index that allow for a detailed assessment country-specific context and unique challenges. These profiles present the detailed rankings that underlie the broader global competitiveness rankings. The Africa Competitiveness Report 2017 | xv Part 1 Addressing Africa’s Demographic Dividend Chapter 1.1 This edition of The Africa Competitiveness Report comes out at a time of reduced enthusiasm about African growth prospects. Tracking Progress in The robust expansion experienced by the region over the past two decades may not continue over the next few years, Africa’s Competitiveness: reducing expectations about the continent’s employment outlook. Since the publication of the last Africa Competitiveness Removing Obstacles to Report in 2015, the region’s growth prospects have been affected by multiple external shocks: for example, oil exporters Reap the Demographic such as Nigeria have begun to be affected by lower oil prices over the past few years, and other mineral exporters,1 such as Dividend South Africa, have been hit by the slowdown of emerging economies, especially China. From 2004 to 2014, the region as Roberto Crotti a whole averaged a growth above 5 percent a year, but it is now about 2.2 percent. Growth is expected to pick up in 2018 Margareta Drzeniek Hanouz but will most likely remain below 4 percent over the next few World Economic Forum years. Over that same period, growth of GDP per capita, however—the main indicator of economic development—was El-hadj M. Bah well above 5 percent only between 2004 and 2007.2 Relatively few jobs have been added to African economies over almost 20 Audrey Verdier-Chouchane years of strong output expansion, mainly because of an African Development Bank overreliance on the primary sector (mineral extraction and agricultural products), little diversification, and low productivity. Barak Hoffman From 2004 to 2014, employment grew by only 1.7 percent in World Bank total—an average of less than 0.2 percent a year.3 This level of job creation has been barely sufficient to absorb the approximately 100 million additional African workers aged 20–59 who entered the job market in this period,4 which meant that the formal unemployment rate remained virtually unchanged amid continuing high rates of informal and vulnerable employment. Over the next decade, both GDP and the working-age population are expected to increase by about 3 percent per year.5 If it was possible to increase employment by only 1 percent in the past decade, when GDP growth was higher, it could be harder to add jobs over the next few years when economic performance is expected to be softer. Looking ahead, the main question for Africa will be how to improve its competitiveness while absorbing a continuously expanding labor force in a scenario of lower growth. Moving toward a demographic dividend or social fragility? The phrase demographic dividend captures how a population structure characterized by more people of working age and fewer dependents (children and elders) can boost economic growth simply because a larger share of the population is productive. However, even when the demographics are suitable for such a scenario, in the context of a weaker economic outlook, questions remain about the ability of African economies to provide such opportunities. If the low GDP growth and low employment expectations are confirmed, African economies could face the risk that a larger unemployed young population could become a source of instability in already fragile societies. The capacity to offer African people greater opportunities and better living conditions will largely depend on how successful the region is at increasing competitiveness. Persistently low productivity levels and stagnant competitiveness—issues that this Report has been raising for almost a decade—are underlying causes of insufficient private-sector development and structural transformation that are at the root of Africa’s limited ability to offer higher paid jobs. Although the current picture for the region as a whole looks The Africa Competitiveness Report 2017 | 3 Chapter 1.1 Box 1: An Action Agenda for Africa’s competitiveness challenge International organizations, nongovernmental organizations, 3. Improve skills development by reforming and harmonizing and academic research agree that improving competitiveness curricula to match demand for skills; establishing regional and productivity in Africa is needed to improve living standards. training centers of excellence; increasing technical vocational Previous editions of The Africa Competitiveness Report have education and training; and supporting the school-to-market tracked progress made on the drivers of competitiveness and transition by creating linkages between training, education, discussed various ways to boost the continent’s competitiveness. and the business sector. For example, the 2011 Report examined Africa’s human 4. Facilitate the movement of goods, services, and people by resources—in particular, considering how to reinforce managerial introducing common business and single-entry tourist visas, skills and higher education to increase the capacity to generate, establishing an information-sharing and revenue collection transfer, and utilize new knowledge, especially among women. mechanism, and harmonizing standards. The 2013 Report looked at how export diversification would be 5. Champion small and medium-sized enterprises (SMEs), important to reduce vulnerability to commodity price swings— investing in building their capacity to formalize, adopt tightening regional integration was identified as instrumental to accounting standards, and integrate in regional value chains. diversification, along with simplifying import-export procedures and 6. Improve access to financing and integrate financial markets by investing in upgrading information and communication technologies enabling the cross-listing of firms in different stock markets, (ICTs), energy, and transportation infrastructure. developing non-banking finance (e.g., venture capital funds, The 2015 Report discussed the sustainability of Africa private equity), and establishing credit reference bureaus to de-industrializing and becoming more reliant on a service-driven reduce information asymmetry. development model. It suggested that to increase sectoral 7. Promote regional trade through regional and global value productivity and structural change, African economies should start chains by identifying sectors with comparative advantages by developing agri-value chains and increasing access to land and regional complementarities and developing export through land reform. At the same time, tapping into global value support services. chains and creating backward linkages would depend on trade 8. Improve productivity and profitability in the agriculture sector facilitation, investment policies, better infrastructure, and finance. by developing rural infrastructure, removing restrictions on the This analysis was complemented by a year of public- acquisition and transfer of land property and bank lending; private consultations on how to improve competitiveness in promote mechanization through credit, subsidies, and tax the region. This process, called the Action Agenda for Africa’s relief to facilitate the acquisition of machinery; increase the Competitiveness,1 resulted in specific recommendations in eight development of high-yield seeds through regional R&D areas: and improve extension services to facilitate the adoption of 1. Strengthen institutions and governance by using more new seeds and farming technologies and techniques; and effectively government services online to raise efficiency, and develop support mechanisms for small farmers’ organizations, simplifying administrative procedures to reduce corruption and cooperatives, and associations to give them greater voice in increase transparency. the market. 2. Develop a common regional infrastructure strategy by Note increasing air travel coordination, standardizing railway systems and water supply systems, and creating autonomous 1 For the full list of recommendations and details of the program, see funds that ensure infrastructure maintenance. http://www3.weforum.org/docs/Africa_Competitiveness_2016.pdf. Source: World Economic Forum et al. 2016. challenging, there are wide variations among countries: some Previous editions of this Report have looked at have made great strides in some important dimensions of diversification and regional transformation, and demonstrated competitiveness—such as better health conditions; sounder how Africa’s diversification from agriculture is occurring mainly macroeconomic policies; more efficient and open goods via the service sector, often in lower-value-added segments, markets; and, in some cases, stronger institutions, which have rather than by building a solid manufacturing sector. This year’s started to build the foundations for more resilient economies edition focuses on how the minor and incomplete structural and better opportunities for the next generation. change that has taken place in Africa so far has resulted in The advent of the Fourth Industrial Revolution (4IR) is adding limited employment opportunities and the promise of a complexity to the future of African economies and their demographic dividend has not yet been realized. employment outcomes.6 On one hand, Africa could capture the After providing a working understanding of the concept of opportunities offered by the new economy, leapfrogging the demographic dividend, this chapter analyzes the directly to a more digital and service-based development competitiveness landscape at the regional and subregional model. On the other hand, Africa could find it harder to develop levels, comparing trends and highlighting variations across a manufacturing sector because automatization may reduce countries and over time, while taking into account demographic the relevance of low labor cost advantages, while at the same changes and related challenges. This analysis will inform the time the new production systems will require greater process of further developing the Action Agenda for Africa’s coordination and sophistication to participate in global value Competitiveness, which aims to make concrete chains.7 The combination of reduced relevance of low labor recommendations from public-private consultations on how to costs (enhanced by automatization) and African technological improve specific channels of competitiveness (see Box 1 for a backwardness may prevent Africa from linking into value chains summary of this Action Agenda). and hinder its structural transformation. 4 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Figure 1: Trend in working-age population (15–64) in Africa 1a: Working-age population (total) 1b: Change in working-age population share Millions Percent 1500 0.04 0.03 1200 0.02 0.01 900 0.00 600 –0.01 –0.02 300 –0.03 0 –0.04 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 Key Sub-Saharan Africa Southeast Asia Latin America Source: Author’s calculations, based on UN DESA, Population Division, 2015. Although the analysis in this Report is conducted at the Africa level, (including both sub-Saharan Africa and North Africa), Figures 1a and 1b show only sub-Saharan Africa because it drives most of projected population growth after 2020. The demographic dividend in Africa demographic dividend has taken place, fertility fell to fewer than Over the past 30 years, Africa’s population has almost three children per woman, so that dependency ratios (the share doubled, growing from about 550 million in 1985 to 1.2 of children and elders to the working-age population) fell to less billion in 2015.8 Going forward, the United Nation’s World than 60 percent. In Africa, the persistently high fertility rate and Population Prospects, the 2015 Revision estimates that East dependency ratios that remain about 80 percent raise and West Africa will continue growing at a similar rate in the questions about the actual status of the demographic transition future, bringing these two areas to almost double their in Africa. population every 25 years.9 In almost all regions of Africa Assuming that such demographic change is taking place, (except the Southern part), all segments of populations grow, the demographic dividend can generate competitiveness and but with a faster increase of the 15- to 39-year old cohort. The additional growth through four main channels:10 Southern Africa region instead will see a relative aging of the • Output per capita can increase simply because a larger population, with an increase of the cohort aged 40+ and little growth of the younger cohorts. Overall, Africa’s population is share of people is working. Since GDP per capita equals expanding at a fast rate and its working-age population (15–64) (Productivity) × (Employed workers)/[(Employed workers) has been increasing more than its total population since the + (Non-employed)], if the number of employed workers 1990s. The upshot is that today Africa is the only region in the is proportional to the number of working-age population, world where the working-age population is expected to the growth in GDP per capita is equal to the change in continue expanding well beyond 2035, especially sub-Saharan productivity plus the change in the share of employed Africa (see Figures 1a and 1b). workers to total population. Even if productivity remains These trends in population have been sustained by constant, GDP per capita growth will be equal to the improving health conditions with declining but still high fertility change in the share of employed workers. rates. One of the most successful Millennium Development Goals has been the reduction in child mortality by two-thirds • As birth rates decrease, families can invest more funds between 1990 and 2015. Although more needs to be done, on education and health for each child, who will in turn Africa has seen significant progress in reducing child mortality, become more skilled and productive once they enter the which fell from 140 infant deaths per 1,000 live births to 56 labor force. between 1970 and 2014 (Figure 2a). Fertility has also declined in Africa, from an average of • Because younger individuals tend to be more productive about seven children per woman in 1970 to under five in 2015. than older individuals, a larger share of young adults However, this decline has been slow enough that—combined in the employed labor force tends to generate some with the reduction in mortality—population growth in Africa has productivity gain.11 remained the fastest in the world. In economies where the The Africa Competitiveness Report 2017 | 5 Chapter 1.1 Figure 2: Drivers of the demographic dividend 2a: Trends in infant mortality and fertility 2b: Trend in dependency ratio Deaths/1000 live births Average children/woman Dependents/working-age population 160 8 100 140 7 80 120 6 100 5 60 80 4 40 60 3 40 2 20 20 1 0 0 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 Key Key Sub-Saharan Africa infant mortality Sub-Saharan Africa Southeast Asia infant mortality Latin America Sub-Saharan Africa fertility Southeast Asia Southeast Asia fertility Source: World Bank, World Development Indicators. Although the analysis of this Report is conducted at the Africa level, Figures 2a and 2b show only sub-Saharan Africa because these statistics are not readily available for all of Africa. • If more people are working and can save, the aggregate dividend. Employment rates remain low and many people who pool of savings in the economy will increase and more are not formally unemployed are nonetheless engaged in investments can take place, which in turn can generate vulnerable occupations, the informal sector, or subsistence more growth because the capital stock increases and/or jobs. Official statistics show an incidence of about 13 percent the investments generate productivity gains. unemployment among young (15 to 24 years old) males and 15 percent among young women across the continent; in South All these channels are amplified if they are accompanied by Africa, about 30 percent of youth are NEET (Not in Education, a contemporaneous sectoral transformation that leads to more Employment or Training).12 Statistical measurements are, people being employed in higher-productivity sectors. however, inaccurate in Africa, and these estimates are the best The concrete possibility of “reaping the demographic efforts to monitor the labor market in a reality where a large dividend” depends crucially on the extent to which the working- share of the population is engaged in informal activities and age population is actually employed. High unemployment rates therefore does not appear in labor force statistics. According to counterbalance the potential benefits of larger shares of the more direct household surveys, such as the Afrobarometer working-age population, and consequently limit the possible Survey,13 most people do not have a full-time job that pays cash increase in GDP per capita. Benefitting from the change in income; and in some countries, fewer than 10 percent of demographics also depends on the extent to which workers respondents received an income from a formal job (Figure 3). are employed in occupations that generate above-subsistence One important driver of the demand for highly skilled and incomes. If employment is low, informal, or provides only well-paid jobs is the economic structure and competitiveness. subsistence levels of income, there is no “demographic In 2011, agriculture was still Africa’s largest employer by far— dividend” and an increasing population can actually become a and although the growth of employment in agriculture has burden to development: it may reduce the availability of diminished in the past decade compared to growth in other resources for investment; become a source of social instability sectors, almost 100 million Africans still depend on small-scale and institutional fragility; and create additional pressure on farming to make a living. Looking more specifically at youth infrastructure, especially in urban context (as described in employment, the situation is similar: about 40 percent of African Chapter 1.3). youth work in the agriculture sector, another 33 percent in Despite the significant progress already made on health services and sales, 13 percent are owners of a business of any conditions and markets efficiency, and while acknowledging size, and 8 percent work in the construction and manufacturing large differences across countries, Africa as a region does not sector (Figure 4).14 Across all sectors, the share of youth (age yet seem to be in the best position to reap the demographic 15–24) who earn less than US$2 a day shrank dramatically from 43 percent to 30 percent—but still, a third of youth are 6 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness poor and almost 60 percent of them earn less than US$3 a Figure 3: Respondents with a full-time job that pays cash day.15 income Employment growth in manufacturing, finance, tourism, and Percent logistics are encouraging but not yet creating sufficient jobs to 100 realize the demographic dividend. Migration statistics also show how young Africans under 30 are looking for better 80 opportunities than their economies can offer. Migration of this cohort increased from around 24.3 million in 2005 to 32.6 million in 2015.16 Most of these people are searching for 60 better job opportunities. About two-thirds (16.4 million) moved within Africa, especially to Côte d’Ivoire, Ethiopia, 40 Kenya, Nigeria, and South Africa; another third (9.2 million) moved to Europe.17 How can more and better employment opportunities be 20 created? And can it be done quickly enough to reap a demographic dividend, especially when growth is low? Based 0 on the experience of Southeast Asia and Latin America, the Guinea Mali Leostho Burundi Nigeria Togo Burkina Faso Zambia Senegal Benin Sierra Leone Côte d'Ivoire Swaziland Cameroon Libya Zimbabwe Sudan Mozambique Botswana Tanzania Malawi Madagascar Kenya Uganda Namibia Egypt Morocco South Africa Tunisia Cape Verde Algeria Niger Ghana Mauritius demographic dividend window—the period during which the share of working-age population grows—is expected to last approximately 50 years. For Africa, given its still-high fertility Source: Afrobarometer, Round 5 (2011–13). levels, it may last longer. However, the first generation that could determine a demographic dividend scenario has already been born. Africa needs to act now to put in place the structural changes necessary to build the foundations of more resilient and prosperous societies. It will not be possible to create employment and increase living standards without first boosting productivity, which in turn will allow economies to become more sophisticated and diversified across value chains. To make this happen, Africa needs to develop a Figure 4: Employment by sector 4a: Number of workers 4b: Growth in workers Thousands Percent 100 10 8 80 6 60 4 2 40 0 20 –2 0 –4 Agriculture Mining Manufacturing Utilities Construction Trade, tourism Transport, storage Finance, r.e., business serv. Gov. services Community & social serv. Agriculture Mining Manufacturing Utilities Construction Trade, tourism Transport, storage Finance, r.e., business serv. Gov. services Community & social serv. Key Key ■ 1990 ■ 2000 ■ 2010 ■ 1990–2000 ■ 2001–2010 Sources: The Groningen Growth and Development Centre (GGDC) 10-Sector Database, http://www.rug.nl/ggdc/productivity/10-sector/; de Vries et al. 2013. The Africa Competitiveness Report 2017 | 7 Chapter 1.1 largely based on agriculture, and growth in adjacent sectors, Figure 5: Trends in productivity, by region such as agri-business and agricultural products processing, Production per worker in 2011, US$ (GK PPP) remains minimal. A second important limitation to Africa’s 1.0 development, also highlighted in the 2015 Report, is the slow growth of productivity in African agriculture. Despite its primary importance for the economy, there has been no green 0.8 revolution as occurred in East Asia, where cereal yields almost quadrupled between 1960 and 1990. At the same time, a large 0.6 difference in labor productivity has remained between the two regions, and competitiveness has not converged over the 0.4 period covered by the Global Competitiveness Index (GCI) assessment. Because Southeast Asian economies had started to improve the structural factors that enable structural change 0.2 50 years ago, by the time the GCI was introduced (in 2006) they already had an higher level of competitiveness than Africa in all 0.0 pillars of the Index. Even since 2006, Southeast Asian economies have continued to improve their financial markets, 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 goods markets, infrastructure, and macroeconomic environment, while Africa has generally progressed very little. Key Improving productivity and its drivers has been critical Sub-Saharan Africa to countries’ abilities to increase their standards of living. Developing Asia Therefore identifying and measuring the drivers of OECD average productivity is the goal of the GCI, which defines competitiveness as the set of institutions, policies, and Source: The Conference Board, Total Economy Database™ - Output, Labor and Labor Productivity, 1950–2016 (Adjusted version). factors that determine a country’s level of productivity— and, in turn, determines the sustainability of its economic growth and prosperity in the medium to long term. For a review of the evolution of the concept of competitiveness over time, refer to Box 3 on page 22. Measuring competitiveness is a complex task because stronger ecosystem where the private sector can develop on many different factors matter. This is reflected by the division of the basis of effective institutional coordination, sound the Index into 12 distinct pillars:18 institutions (public and infrastructure, well-educated human capital, efficient markets, private); infrastructure; the macroeconomic environment; health and modern technological uptake. In other words, Africa’s path and primary education; higher education and training; goods toward offering a better future to its youth passes through market efficiency; labor market efficiency; financial market improving competitiveness. development; technological readiness; market size; business sophistication; and innovation (see Figure 6). Africa needs to Benchmarking productivity drivers: The Global improve competitiveness across the 12 GCI pillars to achieve Competitiveness Index in a context of changing sustainable growth and reap the demographic dividend. demographics As Figure 6 shows, the GCI takes into account the fact that Economic theory suggests that growth is linked to productivity: countries are at different stages of economic development, in other words, countries become richer only if the factors of which are reflected in three different subindexes (see Appendix production generate proportionally more output. This, in turn, A). A country’s development path starts off with securing basic depends on factors such as improvements in technology and requirements, and as it proceeds it becomes more how well markets work, among others. Measuring productivity sophisticated and has to rely increasingly on innovation to is important because it explains how efficiently capital and grow. This framework is used to give general guidance on the labor are used—and consequently how much additional priority areas for reforms at each of three stages: income they can generate. • In the first stage, represented by the basic requirements Productivity has grown far less in Africa than it has in more subindex in Figure 6, economies are factor-driven advanced economies: its relative labor productivity decreased and their competitiveness is based on their factor between 1960 and the late 1990s, and since then it has endowments—primarily unskilled labor and natural remained stagnant. Meanwhile, Southeast Asia has managed to increase its labor productivity faster than advanced resources. Maintaining competitiveness depends relatively economies, starting to close the gap with them (Figure 5). If this more on well-functioning public and private institutions trend continues, Southeast Asia will reach similar standards of (pillar 1), well-developed infrastructure (pillar 2), a stable living as more advanced economies while Africa remains at the macroeconomic environment (pillar 3), and a healthy and same development level as today. literate workforce (pillar 4). Why have Asian countries managed to improve their productivity, while most African countries have not? • As wages rise with advancing development, countries As discussed in the 2015 edition of this Report, while East move into the second, efficiency-driven stage of and Southeast Asia have relied on industrialization as the development, when they must begin to develop more primary driving force of economic development since the efficient production processes and increase product 1960s, Africa has not. Most African economies today are still quality. At this stage, competitiveness depends more on 8 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Figure 6: The structure of the GCI GLOBAL COMPETITIVENESS INDEX Basic requirements Efficiency enhancers Innovation and sophistication subindex subindex factors subindex Pillar 1. Institutions Pillar 5. Higher education Pillar 11. Business sophistication Pillar 1. Institutions Pillar 5. Higher education and and training Pillar 11. Business sophistication Pillar 2. Infrastructure training Pillar 12. Innovation Pillar 2. Infrastructure Pillar 12. Innovation Pillar 6. Goods market efficiency Pillar 3. Macroeconomic Pillar 6. Goods market efficiency Pillar 3. Macroeconomic environment Pillar 7. Labor market efficiency environment Pillar 7. Labor market efficiency Pillar 4. Health and primary Pillar Pillar 4. Health and primary Pillar 8. 9. Technological Financial marketreadiness education education development Pillar 8. Financial market developmentreadiness Pillar 9. Technological Pillar 10. Market Pillar size 10. Market size Key for Key for Key for factor-driven efficiency-driven innovation-driven economies economies economies higher education and training (pillar 5), an efficient goods level of productivity only if their businesses are able to and services market (pillar 6), frictionless labor markets compete with new and unique products and services. (pillar 7), developed financial markets (pillar 8), the ability At this stage, companies must compete by using the to make use of the latest technological developments most sophisticated management methods (pillar 11) and (pillar 9), and the size of the domestic and foreign markets innovation (pillar 12). available to the country’s companies (pillar 10). The GCI classifies most African economies as factor-driven • As countries move into the third, innovation-driven stage, (Figure 7),19 suggesting that their competitiveness agenda they are able to sustain higher wages and the associated should prioritize the fundamentals as the first necessary step Figure 7: African countries in the sample, by stage of development Stage African countries Subindex weights Stage 1 (factor-driven) Mauritania, Benin, Burundi, Cameroon, Chad, Congo, Basic requirements (60%), Efficiency enhancers (35%) GDP per capita US$17,000 Innovation factors (30%) Source: World Economic Forum 2016a. The Africa Competitiveness Report 2017 | 9 Chapter 1.1 Figure 8: Global Competitiveness Index, by region 8a: Ten-year trend 8b: Percent change Relative distance from the OECD average 100 Africa avg. score +5% since 2008 80 60 40 Africa avg. score since ACR 2015 0% 20 1 2 3 4 5 6 7 0 Units 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 Key ■ 2016–2017 ■ Previous period Key Africa ASEAN–5 OECD Source: World Economic Forum, The Global Competitiveness Report, various editions. toward improving productivity. Four countries (Algeria, 23 African economies included in the GCI since 2007 against the Botswana, Gabon, and Nigeria) are currently transitioning to the average of the 35 Organization of Economic Co-operation and second (efficiency-driven) stage of development, and seven Development (OECD) economies, representing the world’s most others have already reached that stage, where higher advanced economies, and Southeast Asia, the region that has education and market efficiencies (goods, labor, and financial) developed most over the past 10 years while still sharing some play a more prominent role. Mauritius is currently the only characteristics with African economies. African country transitioning to the innovation-driven stage. It is Despite a 5 percent improvement, compared to 10 years ago important to bear in mind that these classifications serve only in its GCI absolute score (Figure 8b), Africa’s gap with OECD as guidelines, and defining a holistic competitiveness agenda countries has closed by less than 2 points in that time, and has with clear policy suggestions should be based on a deeper started widening again this year (see Figure 8a). In contrast, the country analysis that takes into account specific contexts and group of five economies of the Association of Southeast Asian challenges. Nation (ASEAN) assessed by the GCI—which are starting from a The next section assesses Africa’s overall competitiveness stronger position—have more quickly reduced their gap with and compares it with other relevant regions and countries. It advanced economies, with improvements in productivity leading covers the 35 African economies included in The Global to higher standards of living. In Africa, standards of living have Competitiveness Report 2016–2017 (GCR). The sample has improved only slightly compared with 10 years ago, reflecting changed slightly from the last edition of this Report: Democratic lack of progress in creating a more conducive environment for Republic of Congo was included in the GCR for the first time, private-sector development and economic transformation. In the and three previously covered countries—Guinea, Seychelles, past two years there has been even less dynamism in African and Swaziland—were omitted because of insufficient data from economies, which have registered virtually no change in the Executive Opinion Survey, on which parts of the GCI are competitiveness performance. based. Within the continent, East Africa, although starting from a low base, is the subregion that has managed to improve its Africa’s performance in an international context competitiveness performance the most (it has gained 8 percent This section assesses Africa’s overall regional competitiveness in score since 2007), followed by Southern Africa (it has gained 6 performance over time and in comparison with other regions.20 A percent since 2007). West Africa and North Africa, after a short regional perspective is valuable because several African period of improvement, are today at the same level of countries share development bottlenecks, and region-wide competitiveness they used to be 10 years ago. progress may have a positive effect on the development of Similarly, competitiveness performances vary considerably individual economies through positive externalities from more between those economies that have traditionally relied heavily on dynamic neighboring economies. mineral exports,21 which have registered almost no progress, Overall, Africa’s competitiveness performance has again and more diversified economies that have improved their stagnated, and the continent has fallen further behind average competitiveness score by about 5 percent. advanced economies. Figure 8a compares the average of the 10 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Figure 9: Performance of African countries on the Global Competitiveness Index 9a: High expected GDP growth and GCI performance 9b: GDP growth forecast and improvement in GCI score Expected average Change in GCI score GDP growth 2017– between 2014–2015 and Average GCI score change Country 2018 (percent change) 2016–2017 (score change) in African countries with expected GDP growth +0.06% Ethiopia 8.1% 0.17 Second most improved greater than or equal to 5% (2016–2020) Côte d'Ivoire 7.6% 0.19 Most improved Average GCI score change Tanzania 7.0% 0.11 Seventh most improved in African countries with expected GDP growth –0.03% lower than 5% Senegal 6.9% 0.04 Fifteenth most improved (2016–2020) Rwanda 6.5% 0.13 Fourth most improved –0.04 0.00 0.04 0.08 GCI average performance Source: Africa Development Bank Group, African Economic Outlook projections 2016–2018; World Economic Forum 2016a. At the country level, against the weak regional outlook a the future. These results suggest that, if supported by the right handful of countries are expected to continue to grow in policies, African economies can maintain high economic growth GDP at a sustained rate (Figures 9a and 9b). Côte d’Ivoire, despite headwinds from external factors. Ethiopia, Rwanda, and Tanzania are all expected to grow at an average rate of close to 7 percent over the next few years. These Pillar analysis countries have managed to diversify their economies a bit more The differences among African countries are particularly stark than others in the region, and have made significant efforts to when observing performance differences across the GCI pillars. improve competitiveness. On average, there is a correlation Figure 10 summarizes the distance between the best and the between countries having improved their competitiveness levels worst performers in Africa on each of the 12 components of the in recent years and those able to expect faster growth rates in GCI, and shows how large the differences between countries in Figure 10: GCI score dispersion among African economies, OECD comparison GCI Score (1–7) 7 Botswana 6 Rwanda Mauritius Rwanda South Africa Egypt 5 Mauritius South Mauritius Mauritius Africa Best performing Mauritius OECD average South South Africa median 4 Africa Africa Worst performing 3 Egypt Mauritania Chad Nigeria Chad Mauritania 2 Malawi Mauritania Mauritania Mauritania Chad Congo, Dem. Rep. 1 Gambia, The Technolgical readiness Macroeconomic Health and p[rimary edu GCI Institutions Infrastructure environment Higher edu and training Goods market efficiency Labor market efficiency Financial market development Market size sophistication Business Innovation Source: World Economic Forum 2016a. The Africa Competitiveness Report 2017 | 11 Chapter 1.1 Figure 11a: Change in Africa’s average GCI pillar scores Figure 11b: Africa’s competitiveness gaps with ASEAN-5 average score, by pillar Technological readiness since Health andlast report primary education 2016 Health and primary education Infrastructure since 2008 2008 Innovation Macroeconomic environment Higher education and training Goods market efficiency Technological readiness Infrastructure Quality of education Institutions Financial market development Business sophistication Goods market efficiency Macroeconomic environment Institutions Labor market efficiency Financial market development Labor market efficiency –15 –10 –5 0 5 10 15 20 0 1 2 3 Percent Percent Key Key ■ Since 2008 ■ Since the ACR 2015 ■ 2008 ■ 2016 The five ASEAN countries covered by the GCI are Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. This idea is confirmed by looking at changes over time in the Figure 11c: Africa’s competitiveness gaps with OECD performance of Africa across the 12 components of the GCI average score, by pillar (Figures 11a, b, and c). Notably, Africa has improved the most in Technological readiness those areas covered by the Millennium Development Goals, such 2008a as education, child mortality and maternal health. For example, Infrastructure on average 2016a Africa has improved its performance on health and Health and primary education primary education by more than 12 percent over the past Quality of education decade. This has been driven mainly by much lower infant mortality (from 83 to 47 percent), lower incidence of tuberculosis Institutions (from 406 to 313 cases per 100,000 population), and higher Financial market development enrollment in primary school (from 76 percent to 83.5 percent). Macroeconomic environment Africa has also improved the efficiency of its goods markets, especially through better competition and lower tariffs and taxes. Goods market efficiency For example, the rating of business executives of local Labor market efficiency competition intensity has increased by 13 percent, also facilitated 0 1 2 3 by less administrative red tape to start a business (reduced by 47 percent), and the average taxation of profits has almost halved in Percent 10 years.22 Key Technological readiness has also gained considerable ■ 2008 ■ 2016 ground in the last 10 years, yet—because most countries have Source: World Economic Forum, The Global Competitiveness Report, various expanded their ICT capabilities much more than Africa has in this editions. period—the technological gap has widened. Similarly, The OECD economies covered by the GCI are Australia, Austria, Belgium, Canada, improvements in higher education, infrastructure, and institutions Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Rep., Latvia, Luxembourg, have been too small to reduce Africa’s competitiveness gaps in Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak these areas. In infrastructure, Africa’s progress has been even Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. smaller, and the continent has seen no improvement at all in this area since 2015. In addition, the global reduction of commodity prices in the past two years has weakened the macroeconomic the same region can be. For example, gaps between the best environment of most African countries; this price drop has also and least African performer are particularly large in financial negatively affected the financial sector, contributing to reduce the development, macroeconomic conditions, and health. already declining regional performance in financial market Development is uneven across pillars also when compared development. to international standards. On some dimensions, some African In other pillars the picture is more blurred. The gap in labor countries can attain performances at a similar level as the OECD market efficiency with Southeast Asia is now very small, but the average (i.e., labor market or goods market efficiency), but there large amount of informal economic activity that occurs in Africa is no African country achieving a strong performance in makes it hard to measure how efficiently talent is actually being infrastructure, higher education, technological readiness, or used in the continent, and the informality may be contributing to innovation, suggesting that these are some of the factors where brain drain. Finally, innovation has shown some encouraging policy intervention is needed the most. signs of improvement, but realizing its potential depends again 12 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness on improving the overall ecosystem—including infrastructure, Figure 12: Change in government revenue average between finance, skills, and productive capacity. the 2010–14 and 2015–16 (average) In order to shed more light on those factors where Africa has either made the least progress (or even regressed) or is less Mauritania developed, the remainder of this section will focus on pillar Liberia performance over time, while the full ranking of African countries Côte d'Ivoire South Africa by pillar is provided in Appendix B. These factors emerge as Mali those where policy intervention should be prioritized. They are Senegal Uganda the macroeconomic environment and financial development, Mauritius infrastructure, technological readiness, higher education, and Ghana Namibia institutions; this is also apparent from the score distribution Cabo Verde shown in Table 1 on pages 14–15. The Gambia Ethiopia Madagascar Macroeconomic environment and financial development Zambia Tanzania Since the last assessment, the end of the commodity price Kenya cycle has negatively impacted current accounts and Sierra Leone Zimbabwe financial markets, which may have a deep impact on future Rwanda competitiveness-enhancing investments. Yet most African Cameroon Morocco economies have been successful in keeping inflation in Egypt check. Tunisia Benin During the commodity “super-cycle” that began in the early Mozambique 2000s, the public and private sectors experienced significant Botswana Malawi liquidity and economic planning was conducted under the Congo, Dem. Rep. of assumption that growth would continue at a similar rate. Since Lesotho the decline in commodity prices in 2014, revenues have not Nigeria Gabon managed to keep up with expenditures. The drop in prices has Algeria affected almost all mineral exports, but oil-exporters have been Chad Burundi hit harder by the combination of weak international demand and Angola* –20 –15 –10 –5 0 5 10 oversupply. Members of the Organization of the Petroleum Exporting Countries (OPEC) have recently responded to the new Percent change market situation by agreeing to reduce production until demand Source: Authors’ calculations, based on IMF, World Economic Outlook 2016. picks up. However, for the next few years, low demand will keep Values are calculated as 2015–16 government revenues to GDP average minus oil price expectations much lower than their peak in 2013. 2010–14 government revenue to GDP. Similarly, the International Monetary Fund (IMF) forecasts prices * Not assessed by the GCI 2016–2017. of iron ore, copper, and coal to stay on a lower base until 2021.23 Lower prices have translated to lower export values and lower government revenues in the majority of commodity- exporting countries. It has not been easy for African countries to adjustments. As suggested by the Bank of International adjust to a diminishing inflow of capital, with the attendant Settlements,25 during commodity price booms, country risk ramifications on government finance and the banking sector. The premiums shrink and consequently credit increases. When most direct effect has been on fiscal policy: declining general economic conditions worsen, it becomes more difficult commodities exports have caused a reduction in public for companies to repay their debts and banks suffer higher revenues in half of the African countries covered by the GCI. non-performing loans rates that, in turn, decrease their Despite efforts to build counter-cyclical reserves, authorities have profitability. In parallel, if the income generated during a responded to shrinking budgets with a mix of public expenditure commodity boom is saved in local banks, there could be a large cuts and an increase in public debt. Expenditure cuts, especially withdrawal of cash when commodity prices drop, further draining in investment, have in turn reduced GDP and employment. As a liquidity from local banks. These conditions lead to more fragile by-product, most African countries have recorded increasing banks, which create financial stability concerns and at the same public debt since 2015 and are continuing to run deficits. time exacerbate the difficulty of the private to access credit. Because many governments have issued bonds in US dollars, Over the past two years, the aggregate macroeconomic the currency depreciation associated with decreasing export environment of Africa has worsened, due to higher government values has increased the value of the debt that countries have to debt (+9.0 percent), higher public deficit (+1.3 percent), and lower repay. At the same time, to keep inflation under control, most savings (–2.4 percent), expressed as a percentage of GDP.26 countries have maintained a tight monetary policy.24 However, some countries have been hit harder than others. In many cases, governments have financed deficits by Among the most affected, Algeria saw a decrease in its borrowing more from international or local banks. This has macroeconomic environment score by almost 25 percent (63rd produced a second indirect effect on African economies: higher in this pillar); in Chad (105th) and Nigeria (108th) it declined by 13 borrowing costs for the private sector. Companies face higher percent, and in Mozambique (125th) by 14 percent. Other interest on their loans, driven by both tight monetary policy and countries have not suffered loss of government revenues, and the “crowding out” of private capital to finance public debt. This even among countries more dependent on mineral exports the dynamic contributes to reducing investment and employment. severity of the impact varies significantly. For example, the A third effect is on the financial sector, which is negatively impact on Botswana has been much milder than it has been on impacted by the collateral effects of commodity price Nigeria (Figure 12). The Africa Competitiveness Report 2017 | 13 Chapter 1.1 Table 1: The Global Competitiveness Index 2016–2017, selected pillars: Score dispersion among African economies Basic requirements 3rd pillar: 4th pillar: Global 1st pillar: 2nd pillar: Macroeconomic Health and primary Country Competitiveness Index Institutions Infrastructure environment education MIDDLE INCOME Mauritius 4.49 4.50 4.74 4.89 6.06 South Africa 4.47 4.46 4.18 4.52 4.30 Botswana 4.29 4.50 3.49 6.18 4.66 Morocco 4.19 4.21 4.25 5.07 5.63 Namibia 4.01 4.47 4.09 4.58 4.56 Tunisia 3.92 3.81 3.73 4.16 5.92 Cape Verde 3.76 3.96 3.39 4.01 5.92 Senegal 3.74 3.96 3.01 4.27 4.18 Ghana 3.67 3.94 2.87 2.89 4.64 Egypt 3.67 3.64 3.36 2.68 5.45 Zambia 3.60 4.02 2.43 4.00 4.21 Lesotho 3.57 4.17 2.61 5.33 3.49 Middle-income average 3.95 4.14 3.51 4.38 4.92 LOW INCOME Rwanda 4.40 5.56 3.34 4.51 5.54 Kenya 3.89 3.64 3.34 3.56 4.65 Ethiopia 3.76 3.85 2.76 4.52 4.71 Uganda 3.68 3.54 2.43 4.59 4.58 Tanzania 3.67 3.76 2.67 4.62 4.23 Gambia, The 3.47 4.18 3.41 2.82 3.84 Benin 3.46 3.53 2.22 3.95 4.63 Mali 3.46 3.50 2.86 4.95 2.99 Liberia 3.20 3.80 2.61 3.28 3.09 Sierra Leone 3.16 3.24 2.32 3.55 4.09 Mozambique 3.12 3.15 2.47 3.48 3.48 Malawi 3.07 3.54 1.88 2.11 4.56 Low-income average 3.53 3.77 2.69 3.83 4.20 FRAGILE Côte d’Ivoire 3.86 3.82 3.61 4.73 3.70 Zimbabwe 3.40 3.34 2.49 4.12 4.56 Madagascar 3.32 3.09 1.96 4.11 4.31 Burundi 3.05 2.88 1.92 3.54 4.75 Mauritania 2.94 2.81 2.18 4.02 3.83 Fragile average 3.32 3.19 2.43 4.10 4.23 OIL-EXPORTING Algeria 3.98 3.50 3.27 4.82 5.71 Gabon 3.78 3.72 3.09 5.55 4.84 Cameroon 3.58 3.49 2.15 4.24 4.67 Nigeria 3.39 3.28 2.09 4.01 2.84 Congo, Democratic Rep. 3.28 3.29 1.72 4.79 3.48 Chad 2.94 2.68 1.75 4.06 3.83 Oil-exporting average 3.49 3.32 2.34 4.58 4.23 (Continued) Source: World Economic Forum 2016a. Colors are based on the score distribution of each pillar at the global level. Scores are computed on a 1-to-7 scale. 14 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Table 1: The Global Competitiveness Index 2016–2017, selected pillars (continued) Innovation and Efficiency enhancers sophistication factors 5th pillar: 8th pillar: Higher 6th pillar: 7th pillar: Financial 9th pillar: 11th pillar: education and Goods market Labor market market Technological 10th pillar: Business 12th pillar: Country training efficiency efficiency development readiness Market size sophistication Innovation MIDDLE INCOME (cont’d.) Mauritius 4.68 4.89 4.39 4.28 4.16 2.71 4.35 3.33 South Africa 4.21 4.76 3.94 5.19 4.70 4.89 4.51 3.84 Botswana 4.07 4.29 4.54 3.99 3.57 2.88 3.61 3.22 Morocco 3.55 4.37 3.54 3.79 3.69 4.26 3.81 3.11 Namibia 3.32 4.23 4.61 4.22 3.56 2.76 3.72 3.28 Tunisia 4.01 3.93 3.24 3.21 3.72 3.78 3.61 3.03 Cape Verde 4.14 4.07 3.67 3.37 3.75 1.37 3.52 3.10 Senegal 3.29 4.19 3.97 3.71 3.16 2.92 3.85 3.48 Ghana 3.77 4.15 4.22 3.78 3.38 3.70 3.91 3.31 Egypt 3.26 3.95 3.15 3.38 3.26 5.02 3.70 2.74 Zambia 2.99 4.20 3.99 3.78 2.83 3.24 3.54 3.33 Lesotho 3.03 4.17 3.95 2.61 2.66 1.90 3.50 2.94 Middle-income average 3.69 4.27 3.93 3.77 3.54 3.29 3.80 3.23 LOW INCOME (cont’d.) Rwanda 3.22 4.67 5.36 4.59 3.24 2.44 3.96 3.56 Kenya 3.85 4.23 4.61 4.20 3.55 3.73 4.23 3.83 Ethiopia 2.78 4.00 4.24 3.50 2.42 3.83 3.66 3.39 Uganda 2.73 3.91 4.65 3.87 2.77 3.37 3.48 3.25 Tanzania 2.60 3.92 4.33 3.54 2.59 3.72 3.53 3.19 Gambia, The 3.38 4.20 4.49 3.52 2.92 1.34 3.84 2.99 Benin 3.08 3.72 4.42 3.46 2.48 2.58 3.39 3.21 Mali 2.92 3.97 3.77 3.42 2.84 2.82 3.37 3.15 Liberia 2.73 4.17 4.21 3.88 2.43 1.69 3.66 3.16 Sierra Leone 2.56 3.77 3.79 3.10 2.41 2.08 3.14 2.59 Mozambique 2.28 3.87 3.98 2.97 2.54 2.99 3.19 2.84 Malawi 2.61 3.80 4.53 3.25 2.25 2.54 3.28 2.81 Low-income average 2.90 4.02 4.36 3.61 2.70 2.76 3.56 3.16 FRAGILE (cont’d.) Côte d’Ivoire 3.35 4.16 4.18 3.87 3.38 3.40 3.67 3.38 Zimbabwe 3.15 3.54 3.37 3.07 2.72 2.71 3.17 2.61 Madagascar 2.85 3.80 4.39 3.13 2.48 2.88 3.31 3.11 Burundi 2.29 3.62 4.13 2.56 2.01 1.69 3.07 2.54 Mauritania 1.90 3.21 3.25 2.21 2.31 2.42 2.55 2.19 Fragile average 2.71 3.67 3.86 2.97 2.58 2.62 3.15 2.77 OIL-EXPORTING (cont’d.) Algeria 3.86 3.51 3.24 2.88 3.07 4.72 3.31 2.92 Gabon 2.97 3.73 3.88 3.49 3.06 2.81 3.16 2.70 Cameroon 3.43 3.97 4.16 3.65 2.59 3.29 3.48 3.18 Nigeria 2.86 4.07 4.53 3.69 3.14 4.99 3.61 2.89 Congo, Democratic Rep. 2.77 3.71 4.40 3.24 2.29 3.16 3.16 2.84 Chad 2.20 2.99 3.78 2.88 1.93 2.75 2.70 2.49 Oil-exporting average 3.02 3.66 4.00 3.30 2.68 3.62 3.24 2.84 The Africa Competitiveness Report 2017 | 15 Chapter 1.1 Figure 13: Trends in public finance, sub-Saharan Africa Figure 14: Physical capital stock per person employed aggregate 2011 US$ PPP Units 80 80 70 70 60 60 50 50 40 30 40 20 30 10 20 0 10 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Key Key Africa General government gross debt (% GDP) Southeast Asia General government total expenditure (% GDP) Source: World Bank, World Development Indicators, http://data.worldbank.org/ General government revenue (% GDP) data-catalog/world-development-indicators Source: IMF, World Economic Outlook, October 2016. In general, countries that have put in place sound fiscal and in the soundness of its banks. Rwanda’s financial market (32nd) monetary policies—keeping inflation, debt, and current is continuing the progress it began in 2008 after a liquidity crisis accounts in check—have tended to see improvements in their forced the government to intervene; since then, the country’s macroeconomic environment, counterbalancing the negative banks have taken considerable steps forward to improve their effects of shrinking revenues. This is an aspect where many breadth and update their financial products offerings. Yet African countries have improved significantly, having better Rwanda remains at a considerable distance from South Africa control of inflation and government accounts compared to 20 in terms of size and depth, and its banks have been somewhat years ago, and in some cases achieving a performance in line affected by declining government revenues. with advanced economies. For example, despite a significant How does macroeconomic and financial development reduction of government revenue and consequential doubling impact the chance of reaping the demographic dividend? The debt over the past two years, Gabon (25th) still has a low simultaneous reduction in public funds (Figure 13), due to inflation rate, relatively high national savings, and a contained government budget cuts, and in private funds, due to lower budget deficit. Botswana, also impacted by shrinking mineral bank credit availability, will translate into less availability of exports, ranks 10th globally thanks to good management of its finance for infrastructure building, innovation, skills resource fund, low public debt and inflation, and high national development, and company expansion. This in turn limits the savings. As a result, Botswana and Gabon, followed by employment opportunity outlook and the skills level of the Mauritius, have developed the soundest macroeconomic workforce in the longer run. At the same time, increased environments in Africa. volatility in financial markets might further discourage private As discussed above, macroeconomic conditions in general investments and capital inflow on the continent, hindering and public revenue in particular are having a significant impact economic activity and employment prospects. on the banking sector. Not surprisingly, the countries where the soundness of banks assessment has declined the most are Infrastructure those affected the most by commodity price adjustments: The development of transport and energy infrastructure Lesotho (137th), Botswana (68th), Gabon (89th), Nigeria (83rd), has stagnated, widening the gap with advanced and Chad (130th) are the five countries that have lost most economies and developing Asia. Africa’s performance in ground in terms of banks’ soundness. transport infrastructure quality has dropped by 6 percent while Beyond the specific banking channel, financial markets in ASEAN has, on average, improved by 7 percent. As a result, Africa—despite some efforts to increase depth27—have the gap between Africa and ASEAN has almost doubled in the generally become less strong. More than half of the countries last decade. Similarly, the assessment of African executives of assessed by the GCI have seen their performance decline in the quality of the energy supply has dropped by almost 3 the financial market development pillar compared to two years percent over the past 10 years, increasing the gap with OECD ago, and a total of 19 countries rank lower than the 100th and ASEAN by a proportional amount. position. South Africa (ranked 11th in this pillar) is the only Physical capital has built up in Africa, especially after the strong regional financial center, and its banks have not yet been mid-2000s, but on a much slower trajectory than in other affected significantly by commodity price shocks; it ranks 2nd developing areas such as developing Asia (Figure 14). Progress 16 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness three years to improve its infrastructure.30 Regulatory or Figure 15: Trends in selected Infrastructure indicators, institutional bottlenecks are at times more problematic hurdles Africa average than scarcity of financial means. The African Development Score (1–7) Kw( in thousands) Bank has been encountering significant difficulties in disbursing 7 18 its loans and grants, half of which are committed to infrastructure building. From 93.8 percent of the total funds 6 allocated in 2012, disbursement declined to 70.1 percent in 15 2014.31 5 Tighter public budgets and banking sector liquidity will 12 make financing gaps even wider, raising the need for new 4 solutions. Recent experience in Africa shows that private- 9 sector investment and public-private partnerships have played 3 only a marginal role in building transport and utility 6 infrastructure, so new models for public finance have to be 2 found. The first step could be the optimization of existing 3 resources: as suggested by a case study in Nigeria, public- 1 0 private partnerships, at times effective, can also sometimes Quality Quality Quality Quality Electricity lead to “waste of resources due to project delay and cost of roads of port of air of electricity production infrastructure transport supply per capita escalation”— which slows the completion of infrastructure infrastructure projects.32 Other possible solutions that emerged from the Key series of Africa competitiveness workshops (see Box 1) in 2016 ■ 2007–2008 ■ 2014–2015 ■ 2016–2017 include pooling public resources by developing a common regional infrastructure strategy and standardizing railway and water supply systems. Source: Authors’ calculations, based on World Economic Forum, Executive As can be seen by looking at infrastructure quality in Opinion Survey, various editions; and CIA Factbook, various years. single countries, intra-regional differences are very large, and at the same time best performers in Africa lag significantly behind international averages. Transport has differed widely across types of fixed capital: the region’s infrastructure (a subset of the overall infrastructure pillar) is well development of water, electricity, and transport infrastructure developed only in South Africa (30th); while in Morocco (47th), has been reported as “limited” or “disappointing” by various the second-best performer in Africa, is already about 15 international organizations,28 although comparatively better percent less sound than in the OECD average, and Chad’s outcomes have been seen in telephony and communication infrastructure (136th) is about 50 percent less efficient than that and, to some extent, sanitation. Overall, infrastructure of Morocco, and more than 60 percent less efficient than the continues to be rated as one of the top three constraints for OECD average. Namibia, Kenya, and Ghana (the fourth-, fifth-, Africa’s development. and sixth-best African performers) have average scores that According to the opinion of African business leaders, are 5 to 30 percent lower than the level attained by Morocco. only the quality of roads has improved over the past 10 years, Most countries are not closing these gaps: over the past 10 while the quality of ports, airports, and electricity infrastructure years only South Africa and Botswana have managed to reduce has remained poor (see Figure 15). In some cases new the gap in transport infrastructure with the advanced investments are just sufficient to keep up with increasing economies. demand but not sufficient to reach the level required to support The results vary considerably by type of infrastructure, economic growth. For example, electricity production has however. Across Africa, electricity is the least developed type, expanded overall but is at the same per capita level as it was in as evidenced by the frequent power crises registered in 2015 2007. and 2016 in many African countries, including Ghana, Kenya, Certainly, financial limits remain an important constraint, Nigeria, and South Africa. Several African countries are also especially in a low-growth scenario. Public-sector intervention particularly underdeveloped in aviation infrastructure, as is necessary to finance transport and electricity infrastructure indicated by their very low air traffic and by security concerns: because this type of infrastructure is complex and often lack of competition has kept travelling by plane very requires large investments, making it less attractive to private- expensive,33 and security concerns have caused 108 airlines sector involvement, especially when weak institutions lack the from 14 African countries to be banned from European Union capacity to lead effective coordination. The particular financial airspace.34 These facts show that the bottlenecks in air characteristics of transport and energy projects explain why it transport are not limited to airport construction, but extend to was not possible for these sectors to achieve the same fast market regulation, plane maintenance and upgrading, and development and private-sector participation observed in business management. telecommunication infrastructure building (see the next On a more positive note, in the quality of seaports section). Even while acknowledging these challenges and and roads, some African countries perform relatively well: public budget constraints, the total investment in infrastructure the quality of roads in Namibia and ports in South Africa is is insufficient to bridge the infrastructure gap. According to a in line with average levels in advanced economies. Yet the recent report, the public and private sectors together have gaps within the region on these dimensions are outstanding invested an average of US$90 billion a year between 2012 (Figure 16). Although lack of data precludes a complete and 2015;29 in contrast, the Chinese government alone is assessment of the situation in each country, it is still planning to invest about US$240 billion a year over the next problematic in most: 13 of the 31 countries assessed by The Africa Competitiveness Report 2017 | 17 Chapter 1.1 Figure 16: Gaps in Africa infrastructure, by type Figure 17: Distance in selected ICT indicators performance from the OECD average level Performance score ratio Performance score ratio 100 100 80 80 60 60 40 40 20 20 0 –20 0 Quality of Quality of Available Quality of Individuals Fixed– Int’l Internet Mobile– roads port airline seat electricity using Internet, broadband bandwidth, broadband infrastructure kilometers supply percent Internet kb/s per user subscriptions subscriptions per 100 pop. per 100 pop. Key Key ■ Least African performer to best African performer score ratio ■ Africa to OECD performance ratio 2013 ■ Best African performer to OECD average score ratio ■ Africa to OECD performance ratio 2015 ■ ASEAN–5 to OECD performance ratio 2013 Source: World Economic Forum 2016a. ■ ASEAN–5 to OECD performance ratio 2015 Source: Author’s calculations, based on World Economic Forum 2016a. the GCI this year are landlocked and can connect to ports the continent to embrace the Fourth Industrial Revolution. only by constructing massive ground infrastructure that Figures 11a, 11b, and 11c show that technological readiness spans national borders, while others have simply not been (especially mobile phone penetration) is one of the areas where able to develop sufficient capacity. Although some efficiency Africa has improved the most in absolute terms. The gains can be obtained through greater cross-country combination of the decreasing costs of mobile devices and collaboration and the optimization of facilities serving multiple tariffs and the low electricity and skills required to operate a countries, the development of transport and utility infrastructure mobile phone, along with investments that have been made in is still holding back the development of most African countries. the grid infrastructure, have made this rapid diffusion possible. How does the infrastructure deficit impact the chance Access to mobile-phone technology has equipped millions of of reaping the demographic dividend? Lack of appropriate Africans with new tools for managing their businesses and infrastructure in areas such as transport, electricity, and households.35 For example, mobile banking has created a water prevents people from accessing markets and holds concrete and feasible reason for African households to acquire back the development of industry and agri-business, limiting and use a mobile phone, which at the same time fosters their ability to create employment opportunities across the financial inclusion. continent. More specifically, infrastructure backwardness in Yet gaps with advanced economies and ASEAN are large rural areas prevents rapid connection between farmers and (Figure 17)—possibly even larger today than 10 years ago. markets; in urban areas, infrastructure deficits in transport, Although mobile coverage has improved significantly,36 Africa is housing, and electricity—as discussed in Chapter 1.3—limit lagging on broadband speed as only 1.4 percent of Africans intra-city connection and the efficiency of the labor force. In have a fixed broadband connection.37 The construction of fixed addition, the slow progress being made in addressing housing broadband lines does not seem to be proceeding as fast as backlogs in African cities represents a missed opportunity to mobile technology hardware, despite a relatively large increase create more job opportunities in the shorter run. in investments from public-private partnerships (Figure 18).38 At the same time, data package subscriptions are still relatively Technological readiness expensive. As a consequence, only about 20 percent of the ICT infrastructure and usage have improved significantly, African population has regular access to the Internet—which enabling many Africans to access services that they could not will be a critical issue for future development. Because most imagine before the wide uptake of mobile phones. Despite economic activity conducted online—such as cloud computing these advances, the gap with advanced economies and video content—requires greater data usage, bandwidth on ICT usage has increased, hindering the capacity of and computation power, low access to fast Internet reduces 18 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness make possible the transfer of the labor force and resources to Figure 18: Trend in private participation in infrastructure in other productive occupations. Furthermore, as modern sub-Saharan Africa industry and service sectors become increasingly dependent US$ (billions) on ICTs, the lack of ICT infrastructure is another hurdle to their 15 development. Leapfrogging on these technologies could give an advantage to African economies that do not need to 12 de-industrialize and could directly embrace a 4IR economic model. More job opportunities, enabled by ICTs—as has already begun in Ghana, Kenya, and South Africa40—would 9 come from the greater possibilities of leveraging foreign markets and integrating more easily with value chains, both in 6 services and in 4IR production systems. Higher education and skills 3 Despite some progress in reducing education gaps, skills remain an important barrier for development in the 0 continent. Over the past 10 years, Africa has improved its 2000 2004 2008 2012 2016 participation rate in primary and secondary education by 8 percent and 27 percent respectively, but the levels remain low Key in absolute terms: average enrollment in secondary education Airports Ports is only 43 percent, and only 60 percent of adults are literate.41 If Electricity Railways ICT Roads secondary enrollment continues to increase at the same pace, Natural gas Water and sewerage it will take another 15 years to achieve the level of advanced economies, while some adult illiteracy will remain. Since Source: World Bank, Private Participation in Infrastructure database, advanced economies have achieved almost full participation in https://ppi.worldbank.org/. primary and secondary education, any progress in these domains means Africa is reducing the gap. When it comes to tertiary education, however, the gap is widening: the participation rate in advanced economies is still growing, while in Africa it has progressed only from approximately 6.5 percent to 8.5 percent. The fact that a large fraction of the workforce is undereducated by international standards is an important barrier to private-sector development. Ten years ago, Southeast Asian countries had, the size of digital markets and limits the possibilities for on average, twice as many secondary and almost three times providing online services.39 Lack of high-speed connectivity is as many tertiary graduating students as Africa, a fact that also a critical bottleneck for developing 4IR models of played a role in its recent fast growth. production, which are inevitably built on the infrastructure of the The availability of skilled workers is essential to start new digital revolution. companies or attract foreign companies and to compete in an As a consequence, African countries are not equipped increasingly interconnected world. Over the last five years, to transition to a Fourth Industrial Revolution economy. Even business leaders in Africa have consistently rated the the most tech-savvy countries in the region—South Africa workforce’s inadequate level of education as am`ong the top six (ranked 58th in ICT use), Mauritius (72nd), Botswana (83rd), most problematic factors for doing business.42 This is Namibia (96th), and Kenya (105th)—are still far behind the especially true if the hypothesis that automation may reduce frontier in the adoption of ICT technologies. The availability the possibility that poor countries can develop on the back of and use of broadband technologies and infrastructure remain cheap labor is confirmed. In the case of Africa, where the limited even among the regional leaders. Because participating competitive advantage in low wages is counterbalanced by in the digital economy requires adopting international ICT high transport costs and inefficiencies, joining the ICT standards, it will be difficult for any African economy to revolution can represent an immense opportunity.43 compete in providing services or to benefit fully from receiving Furthermore, given the small size of manufacturing today, there services. There is certainly encouraging anecdotal evidence: will be little disruption and more to gain in leapfrogging to 4IR for example, some tech start-ups in Ghana, Kenya, Namibia, models of production. and South Africa have captured international attention, If these scenarios of automation and the need to move to appearing in Forbes lists of emerging companies. However, the 4IR models are confirmed, in order to meet the need of the challenge for these countries is to restructure their economies private sectors, the types of skills and quality of the education to become competitive in a modern world, and pockets of obtained by the workforce will be as important as the average excellence may not suffice to achieve this goal. education level (see also Box 2 on page 20). However, the How does technological readiness impact the chance of exact definitions of relevant skills and education quality are reaping the demographic dividend? ICTs can transform and moving targets. Because skills requirements change at the modernize the agriculture sector, fostering greater integration speed of technological progress, curricula need to be updated into value chains and increasing productivity, and consequently frequently to make sure that education systems continue to be increasing the revenues of the millions of African youth relevant for a changing employment environment. Despite the employed in this sector. Greater agriculture productivity will progress that has been made in the last 10 years on the quality The Africa Competitiveness Report 2017 | 19 Chapter 1.1 Box 2: Increasing education quality to bridge the skills mismatch Availability of quality job opportunities, especially those requiring Figure B: Enrolled students who are not learning higher skills, is central for reaping Africa’s demographic dividend. Percent Yet the large bulk of Africa’s youth are neither employed nor in education or training (NEET). This group encompasses over a third Madagascar of youth in countries such as Namibia, South Africa, and Tanzania, Cameroon Gabon and over two-fifths of young women in Egypt (40.7%) and Algeria Mauritius (34.7%),1 while many more are in unpaid or vulnerable employment. Kenya At the same time, employment in high-skilled occupations is not Tanzania Senegal increasing: compared to the pre-global financial crisis period Botswana (2003–06), employment in Africa has increased in low-skilled Burkina occupations by about 9.5 percent but decreased in medium- and Zimbabwe Africa average high-skilled occupations by 5 percent and 0.2 percent respectively Mozambique (Figure A).2 Many highly educated people struggle to find relevant Chad Benin job opportunities even in middle-income countries. For instance, Uganda unemployment levels among workers holding a tertiary education South Africa degree are as high as 18.5 percent in Morocco, 19.9 percent in Ghana Côte d’Ivoire Mauritius, 23 percent in Algeria, 30.1 percent in Tunisia, and 31.1 Nigeria percent in Egypt. Ethiopia Zambia 0 10 20 30 40 50 60 70 80 Figure A: Change between 2003–06 average and 2013–15 Key average in employment by skill level ■ Math ■ Overall Percent change as a ratio to total employment Source: Loeb 2016. 0.10 0.05 As a consequence, Africa’s skills gap at the secondary level 0.00 is high. According to local business executives, in most African countries, the students graduating from secondary school do not -0.05 possess, on average, the skills companies need.6 Even Africa’s best-performing country, Rwanda, attains a score that is only -0.10 about 60 percent of Switzerland’s (the global best performer) and High skills Medium skills Low skills business leaders struggle to find the type of talent they need. Source: Authors’ calculations, based on the International Labour More has to be done to equip young Africans with the Organization (ILO) ILOSTAT database, available at http://ilo.org/global/ relevant skills that will enable them to compete in increasingly statistics-and-databases/lang--en/index.htm interconnected and technology-dense labor markets. Effective public-private collaboration such as the Regional Skills Project can contribute to reduce skill-gaps at national and regional level.7 Although data limitations on both labor demand and supply factors impede a comprehensive evaluation of African job markets, Notes there is sufficient evidence to indicate that the quality of education 1 Data for Egypt are from ILO 2016; data for Algeria are from the ILOSTAT plays an important role in determining such outcome. The Global database, and refer to 2014. Competitiveness Index shows that education quality in Africa is low and improvements are taking place at a much lower rate than 2 The latest ILO statistics refer to the period 2013–15. increases in enrollment. 3 These figures are calculated by the Center for Universal Education Lack of qualified teachers (see Box 2 in Chapter 1.2), limited at Brookings using data from regional examinations, such as the funding, and unequipped and overcrowded classrooms reduce the Programme d’Analyse des Systèmes Educatifs de la CONFEMEN quality education in elementary schools, leading to a significant (PASEC) and the Southern and Eastern Africa Consortium for Monitoring proportion of children not learning basic literacy or numeracy skills Educational Quality (SACMEQ), as well as national assessments of 4th by fifth or sixth grade (Figure B).3 Consequently, students often lack or 5th grade students. the building blocks necessary for maximizing further investment in 4 World Economic Forum 2016b. education, exacerbating the deficiencies of secondary and tertiary school systems. 5 Government of South Africa 2016. In addition, curricula are often outdated and do not provide 6 The skills gap refers to the indicator derived from the World Economic the students with the new skills needed by modern economies.4 Forum’s Executive Opinion Survey question: “In your country, to what Skills in higher demand in future are likely to include computer extent do graduating students possess the skills needed by businesses literacy, coding, and creativity, but only now are only few countries at the following levels: Secondary education (1 = not at all; 7 = to a great (i.e., South Africa) are starting to consider introducing compulsory extent)”. computer classes in secondary school.5 7 For details about this project, see https://www.weforum.org/projects/ closing-the-skills-gap-regional-skills-projects. 20 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Figure 19: Education in Africa and OECD average, selected indicators 19a: Quantity of education indicators 19b: Quality of education indicators Performance score ratio Score (1–7 scale) 100 7 6 80 5 60 4 40 3 20 2 0 1 Primary Secondary Tertiery Quality of Quality of Quality of Quality of Extent of enrollment enrollment enrollment primary the education math and management staff rate (net) rate (gross) rate (gross) education system science schools training education Key ■ Africa 2007–2008 ■ Africa 2016–2017 ■ OECD 2016–2017 Source: World Economic Forum 2016a. of primary and management schools and training, on this front Figure 20: Trend in higher education, selected African also the divide between Africa and advanced economies countries remains large (Figure 19). At the country level, there are encouraging trends in some African economies but gaps remain large. Mauritius (ranking 100 OECD average level 52nd), South Africa (77th), and Botswana (88th) lead the higher education and training pillar. Kenya (97th) and Ghana (99th) follow closely, while in most of the other Africa countries 80 significant gaps remain: Cameroon (105th), the region’s sixth-best performer, is four basis points below Ghana at 5th 60 place, and the lowest-ranked country scores are only half of the score of leader Mauritius (Figure 20). 40 Mauritius has managed to improve its talent pool past South Africa. Despite hosting six of the top 15 African universities,44 South Africa’s skills level is not improving sufficiently. It increased 20 its secondary and tertiary enrollment rates by only a relatively small amount, while in Mauritius both enrollment rates increased 0 significantly. Over the past 10 years, South Africa’s higher 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 education quality levels have decreased relative to the expectations of employers, while in Mauritius they have improved steadily. Key Other countries showing positive trends include Ghana, one South Africa Cameroon of the most improved on both a ten-year and a two-year horizon. Ghana Botswana Cameroon, Botswana, and Ethiopia have also improved, Ethiopia Mauritius although to a lesser extent. The progress made in all four Source: World Economic Forum, The Global Competitiveness Report, various countries points to the possibility of positive employability editions. outcomes in at least some African countries. Even here, however, the challenge will be to improve the type and intensity of skills of young Africans to enable them to compete in a more integrated, digital, and technological savvy world, while and employability is straightforward. The level and quality of continuing to make education more inclusive and increase education directly impacts the likelihood of being hired or, to participation by reaching rural and other less-served areas. some extent, becoming an entrepreneur. Because new How does higher education and training impact the chance generations of Africans will increasingly be more exposed to of reaping the demographic dividend? The link between skills international competition and the effects of digitalization, their The Africa Competitiveness Report 2017 | 21 Chapter 1.1 employment possibilities will crucially depend on the level, type, Box 3: The concept of competitiveness over time and quality of their skills. The concept of a country’s competitiveness has radically Institutions changed over time. In the mid-1980s, the term was mainly The quality of institutions in Africa remains low but is understood as a country’s ability to trade internationally and slowly improving. However, this improvement could to compete with other countries in international markets.1 At experience a severe setback if leaders are not able to that time, the focus of competitiveness moved from the firm respond to the demand of the growing young population level to the country level with the idea of maximizing returns on a country’s own resources and benefitting from comparative for better economic opportunities. A combination of small advantages. In the 1990s, Paul Krugman (1994) referred to improvements in Africa’s institutional quality and lower competitiveness as an agenda too heavily focused on trade, standards in advanced economies has reduced the gap which had become “a dangerous obsession.” He challenged between the OECD average and Africa’s performance on this the idea that countries have to compete with one another like dimension (Figure 21). Although starting from a low base and companies, asserting that such idea can eventually lead to although some countries remain very fragile, governments trade wars and protectionism and move governments away across Africa have started to mature and are now better from adopting adequate macroeconomic policies. By 1995, the concept of competitiveness had evolved to encompass some equipped to coordinate economic activity than they used to be. elements of productivity and efficiency.2 Less instability and better policy coordination may boost “Competitiveness” has turned out to be another way of investors’ confidence and private-sector development. This saying “economic growth” or “productivity” and no longer new maturity offers some cautious optimism that African has something to do with international competition. The economies will be able to move past the ending of the World Economic Forum—which has pioneered work on commodity super-cycle and begin to rely on a more diversified competitiveness since 1979, with Klaus Schwab’s publication of growth model. the Report on the Competitiveness of European Industry 19793— defined competitiveness as the capacity of the national economy The recent positive trend should not, however, overshadow to achieve sustained economic growth over the medium term, the significant problems that persist in most African countries. controlling for the current level of economic development;4 On protecting property rights, for example, despite some it focused on institutions, suitable policies, and economic progress there is still the need to guarantee asset control to the characteristics to promote such growth. The World Economic owner—especially in agricultural land, which remains a problem Forum proposed measuring competitiveness by integrating for improving agricultural productivity in many countries.45 two subindexes into the single Global Competitiveness Index: Similarly, although slowly being curbed, corruption remains very (1) the macroeconomic aspect of competitiveness, based on Jeffrey Sachs’s Growth Development Index,5 and (2) the micro/ widespread and impacts several aspects of economic activity business aspect of competitiveness, based on Michael Porter’s including infrastructure building, which tends to be much slower, Business Competitiveness Index.6 Starting in 2004, with the more costly, and more inefficient than in other regions.46 contribution of Sala-i-Martín,7 the concept of competitiveness Remarkably, despite the instability in parts of North Africa, became intrinsically linked to productivity and was defined as the and terrorism activity in several areas of Africa, the average set of institutions, policies, and factors that determine the level of security levels of the group of African countries assessed by the productivity of a country. This was measured on the basis of the GCI has remained virtually unchanged since the 2015 Global Competitiveness Index methodology, using 12 pillars and 115 indicators at the country level, to provide a comprehensive assessment. picture of a country’s productivity. Throughout The Africa At the country level, although institutions remain fragile Competitiveness Report, competitiveness is understood and in most countries, in more than half of them business measured according to this concept. In Chapter 1.3 of this leaders see some small improvement compared to two Report, the notion of a competitive city is also closely linked years ago. to factors that determine its level of productivity. It is defined Southern African countries (Botswana, Lesotho, Mauritius, as an urban area that offers affordable housing and adequate Namibia, and South Africa) and Rwanda continue to lead the infrastructure for private-sector development, decent job creation, and a better quality of life. In both its national and city African ranking for institutional quality, all appearing in the level articulation, competitiveness/productivity is considered as a upper half of the global rankings. In terms of performance means to achieve better quality of life and social welfare dynamic, Figure 22 shows changes in institutional quality over the past couple of years. Geography or economic Notes diversification does not determine common trends across 1 Scott and Lodge 1985; OECD 1992; Tyson 1992. countries in any group. Some countries (such as Lesotho and 2 Competitiveness Advisory Group 1995; Porter 1990. Mali) are improving because they are emerging from a 3 World Economic Forum 1979. particularly dire situation; some (such as Nigeria) are going through economic headwinds, and others (such as Tanzania) 4 World Economic Forum 1997. are energized by recent elections. In Ethiopia, because the data 5 World Economic Forum 2001. are antecedent to July 2016, when Oromo protests expanded, 6 World Economic Forum 2008. figures reflect improvements in public-sector efficacy gained over the previous two years. The next few years will test the 7 Sala-i-Martín and Artadi 2004. capacity of African institutions to respond to growing young populations without the windfall of high commodity exports. Further institutional strengthening will be a key factor in determining whether the path leads toward more prosperity or toward social and economic collapse. 22 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness Figure 21: Trend in public institutions quality factors, Africa average 21a: Public-sector performance 21b: Property rights 7 7 Key 6 6 OECD 5 5 Africa constant 4 4 ASEAN–5 3 3 2 2 1 1 2007–2008 2014–2015 2016–2017 2007–2008 2014–2015 2016–2017 21c: Ethics and corruption 21d: Security 7 7 6 6 5 5 4 4 3 3 2 2 1 1 2007–2008 2014–2015 2016–2017 2007–2008 2014–2015 2016–2017 Source: World Economic Forum, The Global Competitiveness Report, various editions. The five ASEAN countries covered by the GCI are Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. The OECD economies covered by the GCI are Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Rep., Latvia, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Figure 22: Institutions’ performance in Africa 22a: Institutions pillar score 22b: Percentage change since 2015 Rwanda Ethiopia Mauritius Mali Botswana Nigeria Namibia Lesotho South Africa Tanzania Morocco Uganda Gambia, The Egypt Lesotho Rwanda Zambia Namibia Senegal Côte d'Ivoire Cape Verde Senegal Ghana Tunisia Ethiopia Algeria Côte d'Ivoire Ghana Tunisia Mauritania Tanzania Cape Verde Gabon Zimbabwe Kenya Chad Egypt Botswana Uganda Morocco Malawi Gabon Mali Mozambique Algeria South Africa Cameroon Cameroon Zimbabwe Madagascar Nigeria Burundi Sierra Leone Mauritius Mozambique Kenya Madagascar Zambia Burundi Gambia, The Mauritania Sierra Leone Chad Malawi 1 2 3 4 5 6 7 –0.10 –0.06 –0.02 0.02 0.06 0.10 Institutional pillar score (1–7 scale) Percent change Source: World Economic Forum 2015, 2016a. The Africa Competitiveness Report 2017 | 23 Chapter 1.1 Figure 23: The most problematic factors for doing business in Africa Key Access to financing Corruption ■ 2016 Tax rates ■ 2015 Inefficient government bureaucracy ■ 2014 Inadequate supply of infrastructure Policy instability Inadequately educated workforce Inflation Foreign currency regulations Poor work ethic in national labor force Insufficient capacity to innovate Tax regulations Restrictive labor regulations Crime and theft Government instability/coups Poor public health 0.00 0.05 0.10 0.15 0.20 Source: World Economic Forum, Executive Opinion Survey 2014, 2015, 2016. From the list of factors above, 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 figures show the responses weighted according to their rankings. MPF = most problematic factors. How do institutions impact the chance of reaping the place, yet remaining a very important obstacle, is the demographic dividend? Sound and accountable institutions are insufficient supply of infrastructure. the backbone of a functioning society; they provide stability Rising in the list of concerns for African executives, albeit and the implementation of policy programs that support youth not yet ranking as particularly severe, are foreign currency in the short run and modernization in the longer run. Political regulations and difficulties in innovating. The growing concern leadership is particularly needed in this phase of African here reflects the attempts of central banks to manage development, which is characterized by high population growth exchange rates in response to capital flow fluctuations, and the and economic slowdown. Offering better economic reality that innovation has started to affect the success of opportunities and credible development strategies for African businesses in developing countries as much as it does in youth will be crucial to avoid a situation where many will join advanced economies. destabilizing political movements that could lead to social breakdown. Conclusions This chapter has assessed Africa’s progress on the 12 drivers The most problematic factors for doing business in composing the Global Competitiveness Index, as an input into Africa the debate about how to improve the employment outlook for To capture the concerns of business leaders, every year the African youth. World Economic Forum conducts the Executive Opinion Analyzing the results of 35 African economies included in Survey, asking business leaders around the world to rate the The Global Competitiveness Report 2016–2017 reveals that factors they consider most problematic for doing business in African competitiveness is still lower than in other regions and their country. Their perceptions are captured through a section convergence has stagnated. The insufficient progress made by of the Executive Opinion Survey, and published every year in African countries on needed structural reforms during the past The Global Competitiveness Report as an integral part of decades of sustained growth has put Africa on a weaker assessing countries, complementing the Index benchmarking. footing, less able to respond to a less positive economic From a list of 16 factors, respondents are asked to rank their outlook going forward and less well-equipped to take top five (Figure 23). advantage of the demographic shifts that will increase the In 2016, access to financing was again considered the shares of the continent’s young population. most problematic factor for doing business in Africa, Over the past decades, employment in Africa has not kept followed by corruption. These two factors have topped the up with output expansions. Now that the continent’s growth list every year since 2012. However, tax rates emerged as the prospects have shrunk, many African economies are struggling third-ranked concern, a significantly higher priority in 2016 than to provide sufficient job opportunities to meet the needs of the it had been in the past four years. This could reflect the fact that burgeoning workforce. governments are looking for new sources of financing (such as A mix of short-term solutions and longer-term strategies is increasing taxes) to balance public budgets. Falling to fourth needed so that population growth does not become a source 24 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness of instability but a competitive advantage. As also highlighted 4 Author’s calculations, based on UN-DESA population statistics. by the African Development Bank’s Strategy for Jobs for Youth 5 UN DESA and AfDB. African Economic Outlook estimates. in Africa 2016–2025,47 in order to attain concrete results for 6 The Fourth Industrial Revolution (4IR) can be referred to as the global youth employment, policymakers should move away from transformation characterized by the convergence of digital, physical, and one-off specific projects and move toward an “ecosystem biological technologies, built on the infrastructure of the digital revolution, which will enable transition to entirely new systems of production, approach.” Structural reforms and investments in consumption communication, transport, energy generation, and human competitiveness-enhancing factors are of paramount interaction. For a more complete examination and discussion, see importance to improve the business environment and Schwab 2016. consequently Africa’s capacity to develop a stronger private 7 AfDB 2014b. sector with more productive and better paid opportunities for 8 Population projection estimates are from UN DESA, World Population youth. Prospects, the 2015 Revision, available at https://esa.un.org/unpd/wpp/. As highlighted in previous editions of The Africa 9 UN DESA, World Population Prospects, the 2015 Revision, available at Competitiveness Report, most African countries need to https://esa.un.org/unpd/wpp/. reinforce their basic requirements—such as sound institutions, 10 AfDB et al. 2016. adequate infrastructure, and a healthy and educated 11 Aiyar et al. 2016. workforce—to establish a solid basis for sustainable growth and economic diversification. At the same time, with the advent 12 ILO Key Indicators of the Labour Market (KILM), available at http://www. ilo.org/global/statistics-and-databases/research-and-databases/kilm/ of the 4IR, technological readiness is becoming a necessary lang--en/index.htm. factor even for economies that are still developing. Both basic 13 Afrobarometer is a pan-African, non-partisan research network that requirements and technological readiness emerge as the areas conducts public attitude surveys on democracy, governance, economic where Africa maintains biggest gaps with the most advanced conditions, and related issues in more than 35 countries in Africa. economies (OECD) and also with some emerging regions (such The data used in this chapter are from Round 5 of the Afrobarometer Survey, conducted between 2011 and 2013, interviewing about 50,000 as Southeast Asia) households in 34 countries. For further information refer to http://www. Although the aggregate picture is less positive than it was afrobarometer.org/. two years ago, there are some positive stories. Côte d’Ivoire, 14 AfDB et al. 2012; data based on Gallup World Poll, 2010, available at Ethiopia, Rwanda, and Tanzania have improved their http://www.gallup.com/services/170945/world-poll.aspx. competitiveness levels and are all expected to continue 15 ILO modelled estimates, employment by sex, age and economic class, growing their GDP at close to 7 percent over the next few November 2016. See the ILOSTAT database at http://www.ilo.org/global/ years. The larger economies are, conversely, struggling statistics-and-databases/lang--en/index.htm. relatively more. South Africa, while it continues to be one of the 16 UN DESA, World Population Prospects, the 2015 Revision, available at two most competitive economies in the region, has slowed its https://esa.un.org/unpd/wpp/. progress and growth expectations; Nigeria, hit hard by 17 AfDB 2014a. commodity price shocks, has seen its competitiveness decline 18 The 12 pillars are measured using both quantitative data from public while recovering from 2016’s GDP contraction. In general, as sources (such as inflation, Internet penetration, life expectancy, and anticipated in 2015 edition of the Report, mineral exporters school enrollment rates) and data from the World Economic Forum’s Executive Opinion Survey (the Survey), conducted annually among top have performed less well than more diversified economies. executives in all of the countries assessed. The Survey provides crucial Even within the countries heavily relying on mineral exports, data on a number of qualitative issues (e.g., corruption, confidence in the there are significant differences in competitiveness public sector, quality of schools) for which no hard data exist. performance, depending on how well these countries have 19 In order to capture the resource intensity of an economy, we use as invested during the years of high prices. a proxy the exports of mineral products as a share of overall exports according to the sector classification developed by the International Having identified the main competitiveness challenges, the Trade Centre in their Trade Performance Index. In addition to crude oil following chapters discuss specific aspects that impact the and gas, this category contains all metal ores and other minerals as well economic perspective of African youth. Chapter 1.2 offers an as petroleum products, liquefied gas, coal, and precious stones. The data used cover 2009 through 2013 or the most recent year available. overview on policies that African countries can adopt to Further information can be found at http://legacy.intracen.org/appli1/ address potential vulnerabilities coming from the coming rise in TradeCom/Documents/ TradeCompMap-Trade%20Performance%20 working-age populations. Chapter 1.3 studies the Index-Technical%20 Notes-EN.pdf. competitiveness of African cities and examines bottlenecks and 20 To be able to track regional progress across time, we take the average of opportunities for youth employment in the specific context of those African economies assessed in the GCI in all the years from 2008 to 2016: Algeria, Botswana, Burundi, Cameroon, Chad, Egypt, Ethiopia, the African urban environment. The Gambia, Kenya, Lesotho, Madagascar, Mali, Morocco, Mauritius, Mozambique, Namibia, Nigeria, Senegal, South Africa, Tanzania, Notes Uganda, Zambia, and Zimbabwe. 1 Some of the main minerals exported by African economies include: 21 In this context, high mineral exporters are those countries for which copper (Democratic Republic of Congo and Zambia), iron (Liberia, Sierra minerals (fuels and metals) represent more than 35 percent of their total Leone, and South Africa), coal (Mozambique and South Africa), diamonds exports. Analysis is based on International Trade Center statistics. (Angola, Botswana, Namibia, South Africa), gold (Burkina Faso, Ghana, Mali, South Africa, and Tanzania), and platinum (South Africa). 22 World Economic Forum’s Executive Opinion Summary, various editions. 2 GDP growth statistics are from Africa Development Bank Group, African 23 IMF 2016a. Economic Outlook 2017, available at http://dataportal.opendataforafrica. org/xedzxdg/afdb-socio-economic-database-1960-2016. GDP per capita statistics are authors’ calculations, based on aggregated sub-Saharan PPP evaluation of GDP per capita levels from IMF, World Economic Outlook, October 2016 edition online. 3 Author’s calculations, based on employment statistics “employment to population ratio, 15+, total (%) (modeled ILO estimate),” provided by the World Bank, World Development Indicators online, October 2016. The Africa Competitiveness Report 2017 | 25 Chapter 1.1 24 The 2015 IMF World Economic Outlook,October edition, shows that ———. 2014c. Study on Road Infrastructure Costs: Analysis of Unit Costs and loose monetary policy in countries where commodity prices dropped Cost Overruns of Road Infrastructure Projects in Africa. AfDB Market and the exchange rate depreciated may lead to high inflation and limited Study Series. Available at https://www.afdb.org/fileadmin/uploads/ growth. When commodity prices drop, the reduced inflow of capital from afdb/Documents/Publications/Study_on_Road_Infrastructure_Costs-_ exports causes a depreciation of the exchange rate. In countries with a Analysis_of_Unit_Costs_and_Cost_Overruns_of_Road_Infrastructure_ developed manufacturing sector, the depreciation of the exchange rate Projects_in_Africa.pdf. would make non-mineral exports cheaper; therefore, after an adjustment period, increased non-mineral exports would counterbalance the loss ———. 2015a. Annual Report 2014. Abidjan, Côte d’Ivoire: AfDB. Available in mineral exports. However, in countries where minerals’ share of at https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic- exports is very large, the exchange rate depreciation is not sufficient Documents/Annual_Report_2014_-Full.pdf. to boost non-mineral exports; at the same time, imports become more ———. 2015b. “The Banking System in Africa: Main Facts and Challenges.” expensive and trigger inflationary pressure. In addition, De Gregorio Africa Economic Brief Chief Economist Complex 6 (5). Available at http:// (2016) notes: “The pass-through from exchange rate to inflation depends www.afdb.org/fileadmin/uploads/afdb/Documents/Knowledge/AEB_ on the credibility of monetary policy.” Under these circumstances, loose Vol_6_Issue_5_2015_The_Banking_System_in_Africa__Main_Facts_ monetary policy would have a limited effect on productive investments, and_Challenges-10_2015.pdf. and would only inject liquidity, which would lead to inflation and little growth. Inflation would lead to instability, which would hamper growth— ———. 2016a. Africa Infrastructure Development Index 2016. Available at http:// hence in these circumstances the IMF recommends a policy of keeping www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Africa_ inflation under control. Infrastructure_Development_May_2016.pdf. 25 Christensen 2016. ———. 2016b. Jobs for Youth in Africa: Strategy for Creating 25 Million Jobs and Equipping 40 Million Youth 2016–2025. AfDB. Available at https:// 26 IMF 2016a. www.afdb.org/fileadmin/uploads/afdb/Documents/Boards-Documents/ 27 AfDB 2015b. Bank_Group_Strategy_for_Jobs_for_Youth_in_Africa_2016-2025_Rev_2. pdf—. 28 See for example IMF 2016a and AfDB 2016a. ———. African Economic Outlook 2017. Available at http://dataportal. 29 ICA 2016. opendataforafrica.org/xedzxdg/afdb-socio-economic- database-1960-2016. 30 Lockett 2016. AfDB, OECD, and UNDP (African Development Bank, Organisation for 31 AfDB 2015a. 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Available at https://www.imf.org/external/pubs/ft/wp/2016/wp16238. database, available at https://ppi.worldbank.org/data, there were over pdf. 2,000 private participation projects for a total of over US$160,000 billion in South Africa. ICT 66 percent and electricity (19 percent) account for Augustinus, C. and K. Deininger. 2005. “Innovations in Land Tenure, Reform the great majority of these investments. & Registration in Africa.” Presentation at the UNDP-International Land Coalition Workshop: Land Rights for African Development: 39 Lewin et al. 2009. From Knowledge to Action, Nairobi, October 31–November 3, 2005. 40 IYF 2013. Available at https://dlc.dlib.indiana.edu/dlc/bitstream/handle/10535/709/ HabitatBank.pdf?sequence=1. 41 World Bank, World Development Indicators database, available at http:// data.worldbank.org/. Christensen, B. V. 2016. “Challenges of Low Commodity Prices for Africa.” BIS Papers No. 87. BIS (Bank for International Settlements), Monetary and 42 World Economic Forum, Executive Opinion Survey, 2012, 2013, 2014, Economic Department, September. Available at http://www.bis.org/publ/ 2015, and 2016. bppdf/bispap87.pdf. 43 Escribano et al. 2010. CIA (Central Intelligence Agency). The World Factbook. Available at https:// www.cia.gov/library/publications/the-world-factbook. 44 According to the Times Higher Education World University Rankings, available at https://www.timeshighereducation.com/world-university- Competitiveness Advisory Group—Ciampi Group. 1995. Enhancing European rankings/best-universities-in-africa-2016. Competitiveness. First report to the President of the Commission, the Prime Ministers and the Heads of State. Available at http://aei.pitt. 45 Augustinus and Deininger 2005. edu/2866/1/2866.pdf. 46 AfDB 2014c. The Conference Board. No date. Total Economy Database™ - Output, Labor 47 AfDB 2016b. and Labor Productivity, 1950–2016 (Adjusted version). 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The Fourth Industrial Revolution. Geneva: World Economic Forum. Available at https://www.amazon.com/Fourth-Industrial- Revolution-Klaus-Schwab/dp/1944835008. Scott, B. R. and G. C. Lodge. 1985. “US Competitiveness in the World Economy.” The International Executive 27 (1): 26–26. The Africa Competitiveness Report 2017 | 27 Tracking Progress in Africa’s Competitiveness Appendix A: Computation and structure of the Global Competitiveness Index 2016–2017 This appendix presents the structure of the Global the indicators are converted to a 1-to-7 scale in order to Competitiveness Index 2016–2017 (GCI). The numbering of align them with the Survey results. We apply a min-max the indicator matches the numbering of the data tables. The transformation, which preserves the order of, and the relative number preceding the period indicates to which pillar the distance between, country scores.c indicator belongs (e.g., indicator 1.11 belongs to the 1st pillar Indicators that are followed by the designation “1/2” and indicator 9.04 belongs to the 9th pillar). enter the GCI in two different pillars. In order to avoid double The computation of the GCI is based on successive counting, we assign a half-weight to each instance.d aggregations of scores from the indicator level (i.e., the most disaggregated level) all the way up to the overall GCI score. Weight (%) within Unless noted otherwise, we use an arithmetic mean to immediate parent category aggregate individual indicators within a category.a For the higher aggregation levels, we use the percentage shown next to each BASIC REQUIREMENTS............................... 20–60% b category. This percentage represents the category’s weight 1st pillar: Institutions........................................... 25% within its immediate parent category. Reported percentages A. Public institutions................................................................75% are rounded to the nearest integer, but exact figures are used 1. Property rights..................................................................20% in the calculation of the GCI. For example, the score a country 1.01 Property rights achieves in the 11th pillar accounts for 50 percent of this 1.02 Intellectual property protection 1/2 country’s score in the innovation and sophistication factors 2. Ethics and corruption........................................................20% subindex, irrespective of the country’s stage of development. 1.03 Diversion of public funds Similarly, the score achieved on the transport infrastructure 1.04 Public trust in politicians subpillar accounts for 50 percent of the score of the 1.05 Irregular payments and bribes infrastructure pillar. 3. Undue influence................................................................20% 1.06 Judicial independence Unlike the case for the lower levels of aggregation, 1.07 Favoritism in decisions of government officials the weight put on each of the three subindexes (basic 4. Government efficiency.......................................................20% requirements, efficiency enhancers, and innovation and 1.08 Wastefulness of government spending sophistication factors) is not fixed. Instead, it depends on each 1.09 Burden of government regulation country’s stage of development, as discussed in the chapter.b 1.10 Efficiency of legal framework in settling disputes For instance, in the case of Burundi—a country in the first 1.11 Efficiency of legal framework in challenging regulations stage of development—the score in the basic requirements 1.12 Transparency of government policymaking subindex accounts for 60 percent of its overall GCI score, 5. Security.............................................................................20% while it represents just 40 percent of the overall GCI score 1.13 Business costs of terrorism 1.14 Business costs of crime and violence of Egypt, a country in the second stage of development. For 1.15 Organized crime countries in transition between stages, the weighting applied 1.16 Reliability of police services to each subindex is reported in the corresponding profile at B. Private institutions...............................................................25% the end of this volume. For instance, in the case of Gabon, 1. Corporate ethics...............................................................50% currently in transition from stage 1 to stage 2, the weight on 1.17 Ethical behavior of firms each subindex is 51.5 percent, 41.4 percent, and 7.1 percent, 2. Accountability...................................................................50% respectively, as reported in the country profile on page 181 of 1.18 Strength of auditing and reporting standards The Global Competitiveness Report 2016–2017. 1.19 Efficacy of corporate boards Indicators that are not derived from the Executive Opinion 1.20 Protection of minority shareholders’ interests Survey (the Survey) are identified by an asterisk (*) in the 1.21 Strength of investor protection* following pages. The Technical Notes and Sources section at the end of the Report provides detailed information about each of these indicators. To make the aggregation possible, The Africa Competitiveness Report 2017 | 29 Chapter 1.1 2nd pillar: Infrastructure...................................... 25% 2. Foreign competition................................................ variable h 6.09 Prevalence of trade barriers A. Transport infrastructure.......................................................50% 6.10 Trade tariffs* 2.01 Quality of overall infrastructure 6.11 Prevalence of foreign ownership 2.02 Quality of roads 6.12 Business impact of rules on FDI 2.03 Quality of railroad infrastructure e 6.13 Burden of customs procedures 2.04 Quality of port infrastructure 6.14 Imports as a percentage of GDP* j 2.05 Quality of air transport infrastructure 2.06 Available airline seat kilometers* B. Quality of demand conditions.............................................33% 6.15 Degree of customer orientation B. Electricity and telephony infrastructure.............................50% 6.16 Buyer sophistication 2.07 Quality of electricity supply 2.08 Mobile telephone subscriptions* 1/2 7th pillar: Labor market efficiency...................... 17% 2.09 Fixed telephone lines* 1/2 A. Flexibility..............................................................................50% 3rd pillar: Macroeconomic environment............ 25% 7.01 Cooperation in labor-employer relations 3.01 Government budget balance* 7.02 Flexibility of wage determination 3.02 Gross national savings* 7.03 Hiring and firing practices 3.03 Inflation* f 7.04 Redundancy costs* 3.04 Government debt* 7.05 Effect of taxation on incentives to work 3.05 Country credit rating* B. Efficient use of talent...........................................................50% 7.06 Pay and productivity 4th pillar: Health and primary education............ 25% 7.07 Reliance on professional management 1/2 A. Health...................................................................................50% 7.08 Country capacity to retain talent 4.01 Business impact of malaria g 7.09 Country capacity to attract talent 4.02 Malaria incidence* g 7.10 Female participation in labor force* 4.03 Business impact of tuberculosis g 4.04 Tuberculosis incidence* g 8th pillar: Financial market development........... 17% 4.05 Business impact of HIV/AIDS g A. Efficiency..............................................................................50% 4.06 HIV prevalence* g 8.01 Availability of financial services 4.07 Infant mortality* 8.02 Affordability of financial services 4.08 Life expectancy* 8.03 Financing through local equity market B. Primary education...............................................................50% 8.04 Ease of access to loans 4.09 Quality of primary education 8.05 Venture capital availability 4.10 Primary education enrollment rate* B. Trustworthiness and confidence.........................................50% 8.06 Soundness of banks 8.07 Regulation of securities exchanges EFFICIENCY ENHANCERS......................35–50% b 8.08 Legal rights index* 5th pillar: Higher education and training......17% 9th pillar: Technological readiness..................... 17% A. Quantity of education...................................................33% A. Technological adoption.......................................................50% 5.01 Secondary education enrollment rate* 9.01 Availability of latest technologies 5.02 Tertiary education enrollment rate* 9.02 Firm-level technology absorption 9.03 FDI and technology transfer B. Quality of education............................................................33% 5.03 Quality of the education system B. ICT use.................................................................................50% 5.04 Quality of math and science education 9.04 Internet users* 5.05 Quality of management schools 9.05 Broadband Internet subscriptions* 5.06 Internet access in schools 9.06 Internet bandwidth* 9.07 Mobile broadband subscriptions* C. On-the-job training..............................................................33% 2.08 Mobile telephone subscriptions* 1/2 5.07 Local availability of specialized research and training 2.09 Fixed telephone lines* 1/2 services 5.08 Extent of staff training 10th pillar: Market size........................................ 17% 6th pillar: Goods market efficiency.................... 17% A. Domestic market size..........................................................75% 10.01 Domestic market size index* k A. Competition..........................................................................67% B. Foreign market size.............................................................25% 1. Domestic competition............................................. variable h 10.02 Foreign market size index* l 6.01 Intensity of local competition 6.02 Extent of market dominance 6.03 Effectiveness of anti-monopoly policy 6.04 Effect of taxation on incentives to invest 6.05 Total tax rate* 6.06 Number of procedures required to start a business* i 6.07 Time required to start a business* i 6.08 Agricultural policy costs 30 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness d For those categories that contain one or several half-weight variables, INNOVATION AND SOPHISTICATION country scores are computed as follows: FACTORS......................................................... 5–30% b (sum of scores on full-weight variables) 1 3 (sum of scores on half-weight variables) 11th pillar: Business sophistication .................. 50% (count of full-weight variables) 1 3 (count of half-weight variables) 11.01 Local supplier quantity 11.02 Local supplier quality e “N/Appl.” is used for economies where there is no regular train service 11.03 State of cluster development or where the network covers only a negligible portion of the territory. 11.04 Nature of competitive advantage Assessment of the existence of a network was conducted by the World 11.05 Value chain breadth Economic Forum based on various sources. 11.06 Control of international distribution f In order to capture the idea that both high inflation and deflation are 11.07 Production process sophistication detrimental, inflation enters the model in a U-shaped manner as follows: 11.08 Extent of marketing for values of inflation between 0.5 and 2.9 percent, a country receives the 11.09 Willingness to delegate authority highest possible score of 7. Outside this range, scores decrease linearly 7.07 Reliance on professional management 1/2 as they move away from these values. g The impact of malaria, tuberculosis, and HIV/AIDS on competitiveness 12th pillar: R&D Innovation................................. 50% depends not only on their respective incidence rates but also on how 12.01 Capacity for innovation costly they are for business. Therefore, in order to estimate the impact of each of the three diseases, we combine its incidence rate with the Survey 12.02 Quality of scientific research institutions question on its perceived cost to businesses. To combine these data we 12.03 Company spending on R&D first take the ratio of each country’s disease incidence rate relative to the 12.04 University-industry collaboration in R&D highest incidence rate in the whole sample. The inverse of this ratio is 12.05 Government procurement of advanced technology then multiplied by each country’s score on the related Survey question. products This product is then normalized to a 1-to-7 scale. Note that countries with zero reported incidence receive a 7, regardless of their scores on 12.06 Availability of scientists and engineers the related Survey question. In the case of malaria, countries receive a 7 12.07 PCT patent applications* if the World Health Organization (WHO) has classified them as malaria- 1.02 Intellectual property protection 1/2 free countries or included them in the supplementary list of areas where malaria has never existed or has disappeared without specific measures. NOTES h The competition subpillar is the weighted average of two components: domestic competition and foreign competition. In both components, a Formally, for a category i composed of K indicators, we have: the included indicators provide an indication of the extent to which K competition is distorted. The relative importance of these distortions ⌺ indicatork depends on the relative size of domestic versus foreign competition. k=1 categoryi ϭ This interaction between the domestic market and the foreign market is K captured by the way we determine the weights of the two components. Domestic competition is the sum of consumption (C), investment (I), b As described in the chapter, the weights are as specified below. Refer government spending (G), and exports (X), while foreign competition is to Table 2 of the chapter for country classification according to stage of equal to imports (M). Thus we assign a weight of (C + I + G + X)/(C + I + development: G + X + M) to domestic competition and a weight of M/(C + I + G + X + M) to foreign competition. Stage of development Factor-driven Transition Efficiency- Transition Innovation- i Indicators 6.06 and 6.07 combine to form one single indicator. stage (1) from stage 1 driven from stage 2 driven j For indicators 6.14, imports as a percentage of GDP, we first apply a log- to stage 2 stage (2) to stage 3 stage (3) transformation and then a min-max transformation. GDP per capita (US$) thresholds* k The size of the domestic market is constructed by taking the natural log <2,000 2,000–2,999 3,000–8,999 9,000–17,000 >17,000 of the sum of the gross domestic product valued at purchased power parity (PPP) plus the total value (PPP estimates) of imports of goods and Weight for basic requirements services, minus the total value (PPP estimates) of exports of goods and services. Data are then normalized on a 1-to-7 scale. PPP estimates of 60% 40–60% 40% 20–40% 20% imports and exports are obtained by taking the product of exports as Weight for efficiency enhancers a percentage of GDP and GDP valued at PPP. The underlying data are 35% 35–50% 50% 50% 50% reported in the data tables section (see Tables 10.03, 6.14, and 10.04). Weight for innovation and sophistication factors l The size of the foreign market is estimated as the natural log of the total value (PPP estimates) of exports of goods and services, normalized 5% 5–10% 10% 10–30% 30% on a 1-to-7 scale. PPP estimates of exports are obtained by taking the product of exports as a percentage of GDP and GDP valued at PPP. The * For economies with a high dependency on mineral resources, GDP per capita is underlying data are reported in the data tables. not the sole criterion for the determination of the stage of development. See text for details. c Formally, we have: country score – sample minimum 6 x ( sample maximum – sample minimum ) + 1 The sample minimum and sample maximum are, respectively, the lowest and highest country scores in the sample of economies covered by the GCI. In some instances, adjustments were made to account for extreme outliers. For those indicators for which a higher value indicates a worse outcome (e.g., disease incidence, government debt), the transformation formula takes the following form, thus ensuring that 1 and 7 still corresponds to the worst and best possible outcomes, respectively: country score – sample minimum –6 x ( sample maximum – sample minimum ) + 7 The Africa Competitiveness Report 2017 | 31 Chapter 1.1 Appendix B: The Global Competitiveness Index 2016–2017: Africa and comparator economies, by pillar BASIC REQUIREMENTS 3rd pillar: 4th pillar: 5th pillar: 1st pillar: 2nd pillar: Macroeconomic Health and Higher education GCI 2016–2017 Institutions Infrastructure environment primary education and training Country/Region Rank Value Rank Value Rank Value Rank Value Rank Value Rank Value Morocco 70 4.20 50 4.21 58 4.25 49 5.08 77 5.63 104 3.55 Algeria 87 3.98 99 3.50 100 3.28 63 4.83 73 5.71 96 3.87 Tunisia 95 3.92 78 3.81 83 3.74 99 4.16 59 5.92 93 4.02 Egypt 115 3.67 87 3.65 96 3.36 134 2.68 89 5.45 112 3.27 North Africa average 3.95 3.79 3.66 4.19 5.68 3.68 Mauritius 45 4.49 36 4.51 41 4.74 59 4.89 48 6.06 52 4.68 South Africa 47 4.47 40 4.46 64 4.18 79 4.52 123 4.30 77 4.22 Rwanda 52 4.41 13 5.56 97 3.35 80 4.51 84 5.54 114 3.22 Botswana 64 4.29 37 4.50 90 3.49 10 6.18 113 4.66 88 4.07 Namibia 84 4.02 39 4.47 66 4.10 74 4.59 121 4.56 110 3.33 Kenya 96 3.90 86 3.65 98 3.35 122 3.57 114 4.66 97 3.86 Côte d’Ivoire 99 3.86 77 3.82 87 3.62 66 4.73 132 3.71 109 3.36 Gabon 108 3.79 85 3.72 107 3.09 25 5.55 109 4.85 121 2.98 Ethiopia 109 3.77 75 3.85 115 2.77 78 4.52 111 4.72 127 2.79 Cape Verde 110 3.76 71 3.97 94 3.39 107 4.02 58 5.92 79 4.15 Senegal 112 3.74 69 3.97 109 3.01 92 4.28 126 4.18 111 3.29 Uganda 113 3.69 93 3.55 126 2.43 73 4.60 118 4.58 129 2.74 Ghana 114 3.68 72 3.95 111 2.88 132 2.90 115 4.64 99 3.77 Tanzania 116 3.67 83 3.76 118 2.67 70 4.62 124 4.23 132 2.60 Zambia 118 3.60 61 4.02 125 2.44 109 4.01 125 4.22 120 2.99 Cameroon 119 3.58 101 3.49 131 2.15 95 4.25 112 4.68 105 3.43 Lesotho 120 3.57 53 4.18 119 2.62 36 5.33 133 3.50 119 3.03 Gambia, The 123 3.47 52 4.18 93 3.42 133 2.83 129 3.85 108 3.39 Benin 124 3.47 95 3.54 128 2.22 111 3.95 116 4.63 117 3.09 Mali 125 3.46 98 3.50 112 2.86 52 4.96 137 3.00 122 2.93 Zimbabwe 126 3.41 108 3.35 123 2.50 101 4.12 119 4.57 115 3.15 Nigeria 127 3.39 118 3.28 132 2.10 108 4.01 138 2.85 125 2.86 Madagascar 128 3.33 127 3.10 133 1.97 102 4.12 122 4.32 126 2.85 Congo, Dem. Rep. 129 3.29 117 3.29 138 1.72 64 4.80 135 3.48 128 2.77 Liberia 131 3.21 79 3.81 120 2.61 127 3.29 136 3.10 130 2.73 Sierra Leone 132 3.16 121 3.24 127 2.33 123 3.56 127 4.10 133 2.56 Mozambique 133 3.13 124 3.15 124 2.47 125 3.49 134 3.48 135 2.29 Malawi 134 3.08 94 3.54 135 1.88 137 2.11 120 4.57 131 2.61 Burundi 135 3.06 134 2.89 134 1.92 124 3.55 110 4.75 134 2.29 Chad 136 2.95 136 2.68 137 1.75 105 4.07 131 3.83 137 2.21 Mauritania 137 2.94 135 2.81 129 2.19 106 4.02 130 3.84 138 1.90 Sub-Saharan Africa average 3.60 3.74 2.78 4.19 4.30 3.10 ASEAN-5 average 4.60 4.04 4.26 5.50 5.66 4.54 China 28 4.95 45 4.30 42 4.71 8 6.19 41 6.17 54 4.64 India 39 4.52 42 4.36 68 4.03 75 4.55 85 5.54 81 4.12 Russian 43 4.51 88 3.63 35 4.87 91 4.30 62 5.92 32 5.09 Federation Brazil 81 4.06 120 3.24 72 3.98 126 3.49 99 5.30 84 4.11 BRICS average 4.51 3.88 4.40 4.63 5.73 4.49 32 | The Africa Competitiveness Report 2017 Tracking Progress in Africa’s Competitiveness INNOVATION AND EFFICIENCY ENHANCERS SOPHISTICATION FACTORS 6th pillar: 7th pillar: 8th pillar: 9th pillar: 11th pillar: Goods market Labor market Financial market Technological 10th pillar: Business 12th pillar: efficiency efficiency development readiness Market size sophistication Innovation Country/Region Rank Value Rank Value Rank Value Rank Value Rank Value Rank Value Rank Value Morocco 64 4.38 124 3.55 83 3.79 81 3.69 55 4.26 76 3.82 96 3.11 Algeria 133 3.52 132 3.25 132 2.89 108 3.08 36 4.73 121 3.31 112 2.93 Tunisia 113 3.93 133 3.24 119 3.21 80 3.73 69 3.79 101 3.61 104 3.03 Egypt 112 3.95 135 3.15 111 3.39 99 3.26 25 5.03 85 3.71 122 2.75 North Africa average 3.94 3.30 3.32 3.44 4.45 3.61 2.96 Mauritius 26 4.90 57 4.39 44 4.29 66 4.17 118 2.71 37 4.36 67 3.34 South Africa 28 4.77 97 3.94 11 5.19 49 4.70 30 4.89 30 4.52 35 3.85 Rwanda 35 4.68 7 5.37 32 4.60 100 3.25 127 2.45 64 3.97 47 3.56 Botswana 73 4.29 36 4.54 66 3.99 86 3.58 105 2.89 100 3.61 84 3.22 Namibia 79 4.23 32 4.61 49 4.22 87 3.56 113 2.76 83 3.73 74 3.29 Kenya 77 4.23 31 4.62 50 4.20 89 3.55 70 3.74 47 4.23 36 3.83 Côte d’Ivoire 92 4.16 75 4.19 75 3.88 94 3.39 80 3.40 89 3.68 61 3.38 Gabon 125 3.74 101 3.89 103 3.50 109 3.06 112 2.81 131 3.17 124 2.71 Ethiopia 105 4.01 70 4.24 102 3.51 131 2.43 66 3.83 93 3.67 57 3.40 Cape Verde 97 4.08 116 3.67 112 3.37 78 3.76 137 1.37 108 3.52 98 3.11 Senegal 84 4.20 94 3.97 88 3.71 103 3.17 103 2.92 70 3.86 50 3.48 Uganda 115 3.91 29 4.66 77 3.88 118 2.78 81 3.38 111 3.49 77 3.26 Ghana 93 4.16 72 4.23 85 3.78 95 3.39 72 3.70 68 3.91 69 3.32 Tanzania 114 3.93 62 4.33 98 3.55 125 2.59 71 3.73 106 3.53 88 3.20 Zambia 83 4.20 90 4.00 84 3.78 115 2.83 88 3.25 105 3.55 66 3.34 Cameroon 109 3.97 76 4.16 91 3.66 124 2.60 85 3.29 112 3.49 90 3.18 Lesotho 88 4.18 96 3.96 134 2.61 123 2.67 132 1.90 110 3.50 111 2.95 Gambia, The 82 4.21 46 4.49 100 3.52 112 2.92 138 1.34 71 3.85 106 3.00 Benin 126 3.72 50 4.42 106 3.47 129 2.48 123 2.59 116 3.39 86 3.21 Mali 110 3.97 112 3.77 109 3.42 113 2.84 111 2.83 118 3.38 92 3.16 Zimbabwe 132 3.54 127 3.37 126 3.08 120 2.73 117 2.72 130 3.17 129 2.61 Nigeria 98 4.07 37 4.54 89 3.69 105 3.15 26 4.99 99 3.61 113 2.90 Madagascar 120 3.81 56 4.40 121 3.13 128 2.49 107 2.89 120 3.32 97 3.11 Congo, Dem. Rep. 127 3.72 53 4.41 117 3.24 134 2.30 95 3.17 132 3.17 115 2.85 Liberia 90 4.17 74 4.21 74 3.89 130 2.43 134 1.70 90 3.67 91 3.16 Sierra Leone 123 3.77 110 3.79 123 3.11 132 2.41 131 2.08 133 3.15 130 2.59 Mozambique 118 3.88 92 3.98 128 2.98 127 2.54 102 2.99 128 3.19 117 2.84 Malawi 119 3.81 38 4.53 115 3.26 135 2.26 125 2.54 122 3.28 120 2.81 Burundi 130 3.62 78 4.13 135 2.57 137 2.01 135 1.69 135 3.07 131 2.55 Chad 137 3.00 111 3.79 133 2.88 138 1.93 115 2.76 137 2.70 134 2.49 Mauritania 136 3.21 131 3.26 137 2.21 133 2.32 128 2.42 138 2.56 137 2.20 Sub-Saharan Africa average 4.00 4.19 3.55 2.91 2.89 3.53 3.09 ASEAN-5 average 4.52 4.23 4.36 3.95 5.14 4.31 3.76 China 56 4.43 39 4.53 56 4.16 74 3.96 1 7.00 34 4.41 30 4.04 India 60 4.39 84 4.10 38 4.41 110 2.99 3 6.43 35 4.39 29 4.05 Russian 87 4.19 49 4.43 108 3.43 62 4.30 6 5.90 72 3.85 56 3.40 Federation Brazil 128 3.70 117 3.67 93 3.63 59 4.37 8 5.73 63 4.01 100 3.10 BRICS average 4.18 4.18 3.91 3.91 6.26 4.16 3.65 The Africa Competitiveness Report 2017 | 33 Chapter 1.2 Adverse changes in the external economic environment have slowed Africa’s rapid growth over the past 15 to 20 Jobs in Africa: Designing years and highlighted challenges many countries in the region continue to face.1 The fall in commodity prices over the Better Policies Tailored to past few years has made these impediments clear, especially among the region’s largest economies such as Nigeria and Countries’ Circumstances South Africa.2 In particular, Africa’s economies were generating far too few productive jobs during periods of rapid growth, and the pace has slowed alongside weaker growth rates. Sustained Barak Hoffman stagnation in job creation is occurring as Africa’s working-age Jean Michel Marchat population continues to expand quickly. The working-age World Bank population in Africa is expected to grow by close to 70 percent between 2015 and 2035, or approximately 450 million people. Countries that are able to enact policies conducive to job creation are likely to reap significant benefits from this rapid population growth (see also Chapter 1.1). Those countries that fail to implement such policies are likely to suffer demographic vulnerabilities resulting from large numbers of unemployed and/ or underemployed youth. This chapter examines Africa’s population trends and analyzes the policies—especially those pertaining to trade and competitiveness—needed to facilitate more rapid job creation in the region. The next section of this chapter examines population data from Africa. The subsequent section analyzes several studies that link population growth to economic and social outcomes. Based on these findings, the chapter then discusses the policies that governments in Africa need to put in place to create jobs for their rising populations. The chapter argues that standard advice, such as improving the business environment and education—although still needed and extremely useful—is not enough, given the challenges most countries in the region face. Rather, governments also need to enact policies targeted much more narrowly to their specific circumstances, such as chronic fragility, dependence on natural resources, and/or high rates of self-employment. Population projections: Some key features Africa’s population growth rates have remained remarkably stable over the past 50 years at about 2.6 percent per year (2.7 percent in sub-Saharan Africa and 2.1 percent in North Africa). Until the early 1980s, Africa’s population growth rate was similar to that of other developing regions, with the exception of slower rates in East Asia. Since then Africa has become an increasingly large outlier. Currently, the continent is growing by about 1.5 percentage points per year faster than the average of East Asia, Latin America and the Caribbean, and South Asia—about 1.2 percent versus 2.7 percent.3 This means that the population will double in the latter set of countries in approximately 60 years, while it will do so in Africa in about 25 years (Figure 1). The working-age population is growing quickly. As a consequence, Africa’s working-age population should grow in absolute terms by about 70 percent between 2015 and 2035, reaching roughly 1.1 billion.4 Fifteen countries are expected to experience growth above 80 percent. Niger is likely to witness The authors would like to thank Rashmi Shankar (Practice Manager, Trade and Competitiveness, World Bank), Najy Benhassine (Practice Manager, Trade and Competitiveness, World Bank), Catherine Masinde (Practice Manager, Trade and Competitiveness, World Bank), Jonathan. Cooney (Global Lead for Green Competitiveness, World Bank), Lucy Fye (Senior Private Sector Development Specialist, Trade and Competitiveness, World Bank), Cesar Calderon (Lead Economist, Africa Chief Economist Office, World Bank), Youssouf Kiendrebeogo (Economist, Middle East and North Africa Chief Economist Office, World Bank), Jacques Morisset (Program Leader, World Bank), and James Seward (Practice Manager, Finance and Markets, World Bank). We are most grateful to Paul Brenton (Lead Economist, Trade and Competitiveness, World Bank) for his continuous support and advice during the preparation of this chapter. The Africa Competitiveness Report 2017 | 35 Chapter 1.2 Figure 1: Population growth by region, 1970–2015 Figure 2: Working-age population by region, 1960–2050 Percent Percent of total population 4 75 70 3 65 2 60 1 55 0 50 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Key Key East Asia and Pacific East Asia and Pacific Latin America and the Caribbean Latin America and the Caribbean Middle East exclduing North Africa Middle East exclduing North Africa South Asia South Asia Africa Africa Source: World Bank, World Development Indicators, February 2017 update. Source: World Bank, World Health Nutrition and Population Statistics: Population Countries are weighted by their population. Estimates and Projections, October 2016 update. the highest growth of its working age population: 129 percent Chapter 1.3 on competitive cities by the African Development (Figure A1 in Appendix A). Cumulative population growth is Bank examines the challenges and opportunities urbanization highly concentrated in a small number of countries. Democratic creates in detail. Republic of Congo, Egypt, Ethiopia, Nigeria, and countries that Migration remains important. A traditional response to make up the East African Community account for 55 percent of large population growth and limited economic opportunity is the total growth.5 migration. In 2013, sub-Saharan Africa’s emigrant population The working-age population as a share of total was estimated to be about 23.2 million people, or close to 2.5 population is likely to increase slightly over 2015–35, from percent of the population, while for North Africa it was 57 percent to about 61 percent (Figure 2). However, only a estimated to be around 9 million persons, or 5.1 percent of the few countries will see the share of their working-age population population.10 Current estimates show that about half of Africa’s rise to between 65 and 70 percent by 2035, 6 a range migrants stay within the continent and the other half are historically associated with a demographic dividend (i.e., concentrated in France, Saudi Arabia, the United Kingdom, and accelerated economic growth rates due, in part, to a growing the United States. Côte d’Ivoire and South Africa are the top working-age population share).7 The reason the observed rapid destinations for migrants within Africa. Cape Verde, Eritrea, population growth is not leading to a faster rising share of the Equatorial Guinea, Sao Tome and Principe, and Seychelles working-age population is that fertility rates remain high in most have the largest share of their population as migrants, while the African countries, even among those with falling infant mortality largest absolute number are from Algeria, Burkina Faso, Egypt, rates.8 Falling infant mortality rates combined with sustained Morocco, Somalia, and Sudan.11 high fertility rates will cause younger cohorts to be larger than The job gap—the difference between the number of their predecessors and the share of the working age population people looking for jobs and the number of jobs likely to will not rise. This is occurring in many African countries at the exist—under current policies is likely to be large over the moment. coming decades. Based on recent trends and International Africa’s population is urbanizing rapidly. About 40 Monetary Fund (IMF) projections, Fox et al. forecast that percent of Africans currently live in urban areas; that proportion between 2010 and 2020, 75 percent of new entrants to the is likely to reach 50 percent by 2030. Perhaps more impressive labor market will work either in agriculture or household is the rate of growth of the region’s 20 largest cities (Figure A2 enterprises (e.g., self-employment and microenterprises).12 Just of the Appendix). On average, they are expected to grow by over 20 percent will work for wages in the service sector, and about 50 percent between 2010 and 2025,9 from an average only about 4–5 percent will find a wage-paying job in the size of 4.5 million people to 6.6 million. Ouagadougou has the industrial sector. If these trends continue, and despite highest expected growth rate, 126 percent. Dar es Salaam, migration, only about 100 million of the expected 450 million Nairobi, Kinshasa, and Luanda are projected to grow by over person increase in the size of the working-age population by 70 percent. By 2025, Kinshasa and Lagos should each have 2035 can expect to find a stable wage-paying job. In addition, approximately 15 million people, followed closely by Cairo. the largest projected growth in the working-age population is 36 | The Africa Competitiveness Report 2017 Jobs in Africa Figure 3: Working-age population growth 2015–35 and Box 1: Demographic dividend and demographic current self-employment rate vulnerability Percent growth in working-age population The demographic dividend is the accelerated economic growth 150 that may result from a decline in a country’s population growth rate and the subsequent change in the age structure of the Niger 120 population resulting in a larger share of working age population.1 Uganda There is no automatic mechanism that leads from declining Tanzania Chad population growth rates to higher rates of per capita income 90 growth. Rather, a series of intermediate steps must also occur simultaneously.2 A reduction in fertility and infant mortality rates reduces average family size, so allows parents to invest 60 more in each child. In addition, fewer children can allow female labor market participation to rise because women do not need Tunisia to spend as much time raising children. As a result, a slowing 30 population growth rate can produce a temporary larger labor South Africa force and a permanently higher skilled one; this in turn may 0 have a positive impact on savings and investment.3 Moving from Mauritius a larger and better-educated labor force to greater economic 0 20 40 60 80 100 output requires complementary policies to create new jobs; Percent currently self-employed these can include supporting investment in infrastructure, sound economic policy, a favorable investment climate, and the Source: World Bank, World Development Indicators, February 2017 update. promotion of policies favorable to trade and competitiveness.4 These are detailed later in the chapter. A second strand of literature focuses on the social and political vulnerabilities deriving from rapid population growth. This is the literature on demographic vulnerability. likely to occur in countries that currently have the lowest rates These studies argue that rapid population growth in countries of formal sector employment (Figure 3), which casts doubt on with weak institutions is a very strong predictor of social and/ their ability to create enough jobs in the future.13 or political instability because a large number of youth with poor job prospects are much more likely to protest, become criminals, and/or join insurgent movements than youth with good Demographic changes: Possible dividends and employment opportunities.5 For example, data from the 2013 vulnerabilities World Development Report show that unemployment and lack A four-phase typology is useful to describe the process of of economic opportunity are a far greater motivation for joining demographic change and the ability of countries to a criminal gang or rebel movement than ideology and desire capture and harness demographic dividend:14 for power combined.6 Studies on demographic vulnerability focus on the set of interventions that can help mitigate the • Pre-Dividend: Countries with high dependency, fertility, stresses population growth can cause as well. Reducing rates and population growth rates. They are predominantly low- of population growth, empowering women, and increasing income countries. economic opportunity are the more common suggestions.7 Notes • Early Dividend: Countries with falling dependency, fertility 1 Bloom et al. 2003. and population growth rates. These are mainly lower- middle-income countries. 2 Bloom et al. 2003. 3 World Bank 2016b. • Late Dividend: These countries have a very high working- 4 Bloom et al. 2003; Bloom et al. 2007; Fox et al. 2013. age share of the population, and fertility and population growth that are stabilizing at low levels. These are mainly 5 Cincotta et al. 2003; Goldstone 2002; Goldstone, et al. 2014; Urdal 2006, 2011; Walker 2015; World Bank 2013. upper-middle-income countries. 6 World Bank 2013. • Post-Dividend: Countries with low fertility and population 7 Cincotta et al. 2003; Goldstone et al. 2014; State Failure Task Force growth rates and falling shares of their working age 1999; Walker 2015. population as a result of ageing. These are mainly upper- income countries. Based on their demographic characteristics, data suggest that most countries in Africa currently fall into the pre-dividend and early dividend categories, with Morocco the potential impacts of changes in working-age populations and Tunisia being the only countries in a late dividend stage.15 (Box 1). One set focuses on achieving a demographic Most countries are currently at stages where the working-age dividend,17 while a second strand focuses on demographic share of the population has yet to increase or is just beginning vulnerability when dividends cannot be achieved.18 to increase. This growth in the working-age population is neither inherently beneficial nor detrimental. Rather, the policy Pathways to demographic dividend and vulnerability environment defining the ability of economies to create jobs will There are various pathways to demographic dividend and ultimately determine the nature of the outcome.16 There are two vulnerability (Table A1 of the Appendix) derived from the broad and somewhat overlapping sets of studies that examine crucial factors that link population growth to either outcome. The Africa Competitiveness Report 2017 | 37 Chapter 1.2 Figure 4: Working-age population growth (2015–35) Figure 5: Population growth and basic requirements of and fragility competitiveness Percent Percent Uganda 150 Malawi 100 Chad Mali Angola Niger 120 80 Guinea Nigeria Uganda Rwanda Chad Mali 90 60 Gabon Namibia 60 40 Central African Republic 30 20 Libya South Africa South Africa Tunisia Tunisia Mauritius Mauritius 0 0 0 30 60 90 120 150 2.5 3.0 3.5 4.0 4.5 5.0 Rank in the Fragile States Index Basic requirements components Source: World Bank, World Health Nutrition and Population Statistics: Population of global competitiveness subindex score Estimates and Projections, October 2016 update. Source: World Bank, World Health Nutrition and Population Statistics: Population The Fragile States Index (formerly the Failed States Index) assesses states’ estimates and projections, October 2016 update and World Economic Forum, vulnerability to conflict or collapse, ranking all sovereign states with membership in Global Competitiveness Index. the United Nations where there are enough data available for analysis. Ranking is based on the sum of scores for 12 indicators; each indicator is scored on a scale The World Economic Forum’s Global Competitiveness Index is based on three of 0 to 10, with 0 being the lowest intensity (most stable) and 10 being the highest subindexes, in line with three main stages of development: basic requirements, intensity (least stable). The Fragile States Index is compiled by The Fund for Peace efficiency enhancers, and innovation and sophistication factors. The basic and is available at http://fsi.fundforpeace.org/. requirements subindex, considered here, is built around four pillars: institutions, infrastructure, macroeconomic environment, and health and primary education. In the best-case scenario (scenario 1 in Table A1), to and Sierra Leone—have above-average working-age population achieve a demographic dividend, reductions in fertility and growth. Average working-age population growth in fragile mortality occur alongside an increase in per child countries is 77 percent; it is 60 percent in non-fragile ones.21 spending on health and education, higher levels of female Data also suggest an inverse relation between the labor force participation, and a policy environment projected working-age population growth through 2035 conducive to job creation. These factors lead to a one- and the basic requirements subindex of the World generation rapid rise in overall GDP growth as the youth bulge Economic Forum’s Global Competitiveness Index (Figure 5). enters the labor force and to a permanent rise in the rate of per Countries with a high working-age population growth appear to capita growth. East Asia is the best example of this type of lack key foundations of competitiveness compared to those outcome.19 In the case of Africa, where most of the countries with low population growth rates. This is perhaps not that are in a pre-dividend stage, a decline in fertility is a key surprising. First, education and health outcomes among poor prerequisite for reaching any kind of demographic dividend. children from large families are likely to be lower than among Alternatively, the most likely pathway to a demographic those for smaller families, all else being equal. Second, high vulnerability (scenario 4 in Table A1) is a fall in infant mortality fertility rates correlate negatively with women’s empowerment, alone, which leads to rapid and sustained increases in and the latter correlates positively with economic population growth rates in a poor policy environment, causing development.22 Third, women’s empowerment correlates each younger age cohort to be larger than the one preceding it positively with the quality of governance.23 As a result, it is and rising competition for scarce economic opportunity.20 logical that high rates of working-age population growth may Several countries in Africa are following this path. correlate negatively with economic competitiveness in Africa. Correlation between fragility and population growth The current situation does not imply clear causality from one to the other. Data suggest that the countries in Africa with the largest Rather, there is an endogenous relationship between the two projected working-age population growth are also those and other factors can mediate the relationship as well, such as least able to deal with the pressures that emanate from it the quality of governance. A similar relationship exists between (Figures 3–5). In general, countries with high working-age population growth and competitiveness. On the one hand, population growth are typically more fragile than those with low Walker’s meta-analysis of the causes of demographic working-age population growth rates (Figure 4), although there vulnerability finds that “rapid population growth is a leading are a few outliers (e.g., Central African Republic and Libya are cause” of state fragility.24 On the other hand, Goldstone et al. very fragile, but they have relatively low population growth rates). argue that rapid population growth can be one manifestation of Moreover, all but three countries on the World Bank’s list of fragility and poor economic competitiveness: fragile countries in Africa—Central African Republic, Comoros, 38 | The Africa Competitiveness Report 2017 Jobs in Africa Figure 6: Estimates of average labor productivity across Figure 7: Comparative enrollment and investment rates regions, 2015 Percent Annual output/worker (US$ PPP, in thousands) 100 100 80 80 60 60 40 40 20 20 0 East Asia Latin Middle East South Africa 0 and America excluding Asia Africa Central East Latin Middle South Pacific and the North Africa and Asia America East Asia Caribbean Eastern and and the (excluding Europe Pacific Caribbean North Key Africa) ■ Investment/GDP ■ Gross secondary school enrollment rate Source: The Conference Board Total Economy Database, available at Source: World Bank, World Development Indicators, February 2017 update. https://www.conferenceboard.org/data/economydatabase/index.cfm?id=27762. Labor productivity measures annual output per person employed in 2015 in US dollars at purchasing power parity. High labor productivity in the Middle East reflects the economic importance of the extractive sector. Extractive industries tend to have high output per person, but limited employment opportunities. the benefits of large youth cohorts and the chance to rates of investment, tend to lack access to credit, and reap a demographic dividend are in general only realized encounter high costs to export. Bigsten and Soderbom argue: when a country’s government is able to provide political stability, strong support for education through secondary Countries that cannot break out of the current situation— and vocational education, increasing employment in the in which most manufacturing firms focus on supplying formal sector and stable macro-economic conditions. These the domestic market with low value-added products— are also the conditions that are conducive to falling fertility are unlikely to see a significant expansion of jobs in the and progress through the demographic transition, and are manufacturing sector or to have manufacturing play a major the conditions that fragile states most lack. . . . 25 role in reducing poverty.27 Which countries are best placed to achieve a To create new jobs, firms in Africa must increase demographic dividend and which are more likely to productivity. Productivity is a function of human and physical encounter stress from rapid population growth? High- capital accumulation, the investment climate, and the level of quality policy and high projected growth rates offer best efficiency in which an economy utilizes its inputs (i.e., total opportunity for demographic dividend. Figure 5 suggests that factor productivity). It thus classically follows that countries that Namibia, Rwanda, and perhaps Gabon seem to be well wish to have more productive economies need to first invest in prepared at the moment. By contrast, high projected growth human and physical capital, and to employ both types of rates and weak policies are a likely indicator of possible capital efficiently. Africa’s generally weak productivity may demographic vulnerability. This may constitutes the case for reflect, at a minimum, low levels of education and investment. countries in the upper left side of Figure 5, such as Angola, Africa’s combined level of human and physical capital Chad, Guinea, Malawi, Mali, and Uganda. accumulation is lower than all other regions of the world. Figure 7 plots rates of investment (specifically, gross capital Policies to foster jobs formation) and secondary school enrollment rates by region. Rapid growth in Africa’s working-age population is Although investment-to-GDP rates are somewhat below the occurring in a context of low levels of productivity among average for some other regions, secondary school enrollment the existing labor force. Average labor productivity in Africa is rates are far below all other regions.28 The quality of education well below the levels observed in East Asia, Latin America and in Africa is also generally low. For example, according to the the Caribbean, and Central and Eastern Europe and somewhat Brookings Institution’s Africa Learning Barometer, only about below levels in South Asia (Figure 6). one-third of children enrolled in schools are able to “read or A large literature examines why productivity in Africa is write fluently or successfully complete basic numeracy tasks” in lower than it is in other regions of the world.26 Bigsten and the countries the database covers (see Box 2).29 Soderbom find that firms in African manufacturing have low The Africa Competitiveness Report 2017 | 39 Chapter 1.2 Box 2: More and better teachers will be needed in the future Population growth brings about additional demand for education to the current 8 million. This is a 250 percent increase over the services. Sustainable Development Goal (SDG) 4, which calls for current number of teachers. Of these 19 million, countries will need universal secondary as well as primary education by 2030, aims to replace about 9 million because of attrition; the other 10 million for pupil-teacher ratios of no more than 40:1 and 25:1 for primary are needed to accommodate increases in enrollment rates and and secondary levels, respectively. Using population forecasts decreases in pupil-teacher ratios. The largest increase, by far, is and SDG target enrollment ratios, along with current numbers of for new secondary school teachers in sub-Saharan Africa. There teachers and expected teachers’ attrition rates, it is possible to are currently about 2.2 million secondary school teachers in sub- estimate the number of teachers that will be needed in the future. Saharan Africa. To meet SDG 4 by 2030 will require hiring close to Table A shows that that, by 2030, Africa will need to have hired 11 million new ones. Countries in North Africa will need to nearly approximately 19 million teachers to achieve SDG 4, compared double their current number of teachers to meet this goal. Table A: Total number of teachers needed in Africa to meet SDG 4 by 2030 (thousands) Number Replacement School level Current (2014) needed by 2030 for attrition New Percent increase Primary Northern Africa 912 844 694 150 93% Sub-Saharan Africa 3,799 6,288 3,885 2,403 166% Subtotal 4,711 7,132 4,579 2,553 151% Secondary Northern Africa 1,039 1,845 1,087 758 178% Sub-Saharan Africa 2,247 10,755 3,673 7,083 479% Subtotal 3,286 12,600 4,760 7,841 383% Total Northern Africa 1,951 2,689 1,781 908 138% Sub-Saharan Africa 6,046 17,043 7,558 9,486 282% Total 7,997 19,732 9,339 10,394 247% Source: Authors, based on UNESCO Institute for Statistics. The required number of new teachers would be less Notes forbidding if attrition rates among could be reduced. According to 1 Teachers for EFA 2010. current projections, over 9 million teachers will leave the profession in the next 15 years and need to be replaced. The drivers of such 2 According to UNESCO Institute for Statistic’s (UIS) research, in 19 of 23 sub-Saharan African countries studied, more than 60 percent of schools high attrition rates include family responsibilities,1 low pay,and poor lack access to electricity; in 10 of the countries, more than 60 percent working conditions (i.e., large classes and deficient facilities and of schools lack access to water; in seven countries, more than half of equipment).2 schools lack access to toilets. UNESCO 2012. A complementary and now standard way to analyze the Figure 8: Most importance obstacles to firms’ growth policies that governments need to put in place to promote job Percent of respondents creation is to examine impediments to business creation from 25 the perspectives of employers or the perceived quality of the investment climate. Figure 8 reports Enterprise Survey data 20 from Africa and the rest of the world on the biggest business 15 obstacles for all firms. The data show that access to finance 10 and poor supply of electricity (see Box 3 for examples) are 5 perceived as the biggest obstacles to business growth in Africa. On average, these two impediments account for about 0 34.8 percent of responses over the last decade. These two Access to Finance Tax Rates Access to land Tax administration Transportation Electricity Political Instability Practices of the Informal Sector Corruption Crime, theft, disorder Customs, trade regulations Inadquately educated workforce Licensing Permits Labor regulations Courts factors are perceived to be more problematic for the business environment in Africa than they are in other regions.30 Based in part on the previous data, academics, professionals, and international organizations have developed a standard and familiar set of recommendations to encourage Key more rapid job creation in Africa that typically include: ■ Africa ■ Rest of the world Source: World Bank Enterprise Surveys. Averages are reported for 46 countries in Africa and 95 countries from the rest of the world. Surveys cover the 2006–16 period. 40 | The Africa Competitiveness Report 2017 Jobs in Africa Box 3: Two key traditional investment climate constraints for firms in Africa Access to finance: The example of Senegal. In the 2014–2015 Electricity cost provided by diesel generators ranges from three to Senegal Enterprise Survey, 55.4 percent of firms rated access six times higher than the price grid consumers typically pay.1 to finance as a major/very severe problem, making it the second The situation of sub-Saharan Africa’s power sector largely leading constraint (behind competition from the informal sector), Figure A: Electricity outcomes for firms in manufacturing and 42 percent indicated that access to finance was the single biggest obstacle affecting their operations. Senegal’s weak Percent regulatory environment is part of the problem, particularly its weak 50 legal rights, lack of an operational credit information systems, 40 and burdensome procedures for contract enforcement. Small firms complain significantly more than large ones about access to 30 finance. 20 Indeed, for now, obtaining bank loans is difficult and time- consuming. Information and collateral requirements from banks 10 are high. Lending conditions are also difficult because of the type 0 of guarantees required by banks, with land and real estate being Outages Average Average Firms Electrical the leading forms (53.1 percent of guarantees requested). This is per month duration losses with a connection (hours) (% of generator (days to an additional hurdle, because securing this type of collateral is annual sales) (%) obtain) Key extremely difficult for smaller firms and may be near impossible ■ North Africa ■ Rest of the world ■ Sub-Saharan Africa for young firms. That relatively few firms subject their accounts to an independent auditing process exacerbates the problem. Not surprisingly, very few firms even apply for a loan—most of the firms comes from insufficient generation capacity. An important finance their cash flow or their investments outside the formal obstacle to the increase in electricity generation is the high cost banking system. Out of the 601 firms surveyed, only 14.6 percent of production. The industry is dominated by small-scale power applied for a loan—yet 70 percent of these applications were systems, leading to higher transmission and distribution costs. In approved. More than half the firms in the survey needed finance, addition, fossil-fuel-based power generation is the largest source but did not apply for a loan because of a lack of collateral and of electricity generation. Unfortunately, this is also very expensive. burdensome processes. In other words, a very large proportion of As a result, utilities are often cash strapped and many have allowed firms self-selected themselves out of the market. some of their assets to fall into disrepair. The Government of Senegal is now well aware of the issue Improving energy supply in Africa will likely require exploiting and intends to solve it. In response, it has included in the country’s renewable energy sources, liberalizing the energy sector to further development plan the promotion of financial development and attract private-sector participation, improving the state of power stability. The Financial Sector Action Plan calls for strengthening infrastructures, and improving overall operational efficiency of the resilience of the banking system, reducing information utilities. This may require tariff adjustment and the use of targeted asymmetries, broadening the types of acceptable collaterals and cross-subsidies to help increase affordability and speed up access guarantees, and improving credit information with the development expansion.2 of credit bureaus. Notes Electricity supply. Electricity issues in Africa are largely a sub-Saharan Africa issue. Indeed, in 2012, access to electricity 1 McKinsey 2015. was close to 100 percent for North African countries while it was 2 World Bank 2016c. only about 35.3 percent in sub-Saharan Africa and 84.6 percent worldwide. Firms in sub-Saharan Africa typically face more outages Sources: McKinsey 2015; World Bank 2016c, 2017a; World Bank Enterprise of longer duration yielding larger annual losses (Figure A), as well Surveys (available at http://www.enterprisesurveys.org/); World Bank, World as high prices. As a result, close to half of the firms in sub-Saharan Development Indicators (available at http://databank.worldbank.org/data/ Africa have a generator to compensate for an uncertain supply. reports.aspx?source=world-development-indicators). • Maintain a focus on increasing productivity. This remains • Implement policies that encourage export diversification. important for almost all counties in Africa It will require a Improved infrastructure and reductions in non- continued focus on human capital development as well tariff barriers are especially important for expanding as investment policy and incentives. opportunities for trade. • Increase the quality of the labor force and labor force All of these are sensible recommendations, strongly participation rates. The latter also requires specific supported by existing data, some of which were presented efforts to create greater educational and employment above. However, there are a few problems with them. opportunities for women. First, they have been standard suggestions to most countries in the region over the past two decades, including • Improve the business environment in key areas. Priority in many previous versions of The Africa Competitiveness ones are access to finance and electricity, as well as Report. Are there reasons to believe that governments in Africa regulatory reforms (such as those the Doing Business will be more prepared to act on them now than they were a few Indicators cover),31 and those aimed at promoting years ago, or that they will be more effective? Perhaps this competition and innovation. answer is a cautious yes. The fall in commodity prices over the The Africa Competitiveness Report 2017 | 41 Chapter 1.2 resource-rich countries also tend to have challenges to job Box 4: Examples of programs for fragile and conflict- creation that standard prescriptions are likely to overlook. affected states Finally, besides the issue of applicability to existing situations on the continent, the recommendations above The literature on conflict and development offers a number of also tend to neglect the capacity for regional integration examples of programs that have been effective in very fragile and intra-African trade to spur job creation as well as the states.1 A number of promising approaches exist: potential of microenterprises and agroindustry. These The United Nation’s Policy for Post-Conflict Employment areas are discussed below. Creation, Income Generation, and Reintegration offers a sophisticated and integrated approach to supporting sustainable job creation efforts in fragile and conflict-affected states.2 It Policies targeted at fragile and conflict-affected states recommends a three-track approach. Track A targets conflict- Africa is host to more than half of all the fragile and affected populations and focuses on stability, security, and short- conflict-affected states in the world (19 out of 35 term labor-intensive public works programs. Track B aims to countries).33 With the exception of Libya, all of them (18) are in consolidate peace through rebuilding communities, rehabilitating sub-Saharan Africa and most are in a pre-demographic infrastructure, enhancing local government capacity, and creating dividend situation. Hence, fragile and conflict-affected states local-level employment opportunities. Track C, which operates simultaneously with Tracks A and B, focuses on sustainability are a class of countries of special relevance for the continent. through activities to foster private-sector development, such as From a private-sector perspective, fragility results in a very risky through improvements in the business environment. environment shaped by pervasive market and government Dudwick et al. promote value chain development as a failures that increase costs, reduce demand, and compromise source of employment creation in fragile and conflict-affected the appropriability of investment returns because of policy states “because value chains don’t depend on government uncertainty or corruption.34 Job creation is a difficult task in interventions or officials.” As a result, as “long as there is a these environments. modicum of security and some market activity beyond a black market, market development can begin immediately after Traditional programs in fragile and conflict-affected a crisis or conflict.” They further claim that because value states tend to be modest in scope and scale. As a result, chain development helps restore “legitimate market links and they often fail to have a significant material impact on job relationships of trust among different social groups in fragile and creation and private-sector development.35 They tend to post conflict environments, value chain development offers both have a limited impact because they often do not have a economic and peace-building benefits.”3 They cite a number of coherent focus on sustainability. Short-term public works successful examples from fragile and conflict-affected states in programs are an obvious example. Fixing local infrastructure is Africa, including fisheries as well as gums and resin in Somalia, cotton and shea butter in South Sudan, and cotton in northern unlikely on its own to lead to a thriving local private sector. As a Uganda. result, when the funding ends, local economic activity slumps. Furthermore, the standard advice to improve the business Notes environment, the quality of education, and/or build government 1 See, for example, Blattman et al. 2014; Holmes et al. 2013; World capacity alone is insufficient for these countries. First, fragile Bank 2011a, 2014. and conflict-affected states have weak capacity, which implies 2 UN 2009. that policies may take a long time to be executed, yet these 3 Dudwick et al. 2013, p. 61. countries face immediate economic, political, and social challenges that need to be addressed right away to maintain stability in the short and medium term. Second, even if governments are serious about enacting reforms, the private sector may not respond until it is convinced the policies are effective and credible. For these reasons, governments and international past few years has revealed the underlying fragility of many development agencies argue that there is a need to enact African economies. It was easy to ignore these weaknesses targeted sets of policies that can focus on ensuring when headline growth rates and revenue levels were high. They political and social stability in the short term alongside are more difficult to ignore now. Moreover, governance along a broader, longer-term institutional reforms (Box 4).36 More range of dimensions, such as macroeconomic policy and specifically, according to the World Bank’s Integrated political stability, has been steadily improving for a number of Framework for Jobs in Fragile and Conflict Situations:37 years in Africa. In addition, governments in the region are aware of the potentially destabilizing impact of growing idle youth • The fundamental prescription of ensuring that education, populations.32 Awareness alone does not signal imminent macro/fiscal and investment policies, and business action, yet it does provide a useful starting point for environment reforms are properly implemented remains constructive policy dialogue. valid. However, it makes sense to adopt a “jobs and Second, the more important problem with the fragility lens” to ensure that these reforms will lead to job aforementioned recommendations is that they tend to creation and/or reduce fragility in the short to medium apply best to countries that already have reasonably term. dynamic private sectors and effective public-sector institutions. They do not apply well to fragile countries or to • Active labor market programs might have an important countries where the vast majority of labor market entrants face role to play in fragile and conflict-affected states. no realistic alternative to self-employment or employment in Programs addressing inadequate skills, insufficient microenterprises, yet most countries on the African continent fit into either or even both of these categories. In addition, 42 | The Africa Competitiveness Report 2017 Jobs in Africa information about job opportunities, and limited mobility can prove useful. Box 5: Small- and medium-sized enterprises linkages programs • Targeted policies that promote job creation or increase the quality of jobs are likely to be appropriate. Programs A first step toward a long-term path of economic diversification— helping to address obstacles facing vulnerable groups but one that can yield quick results in terms of job creation—is (such as women at risk of being cut out of the labor the implementation of linkages programs. The International Finance Corporation (IFC) has been implementing such programs market, ex-combatants and youth at risk of engaging in recent years. in violence, or the displaced) and targeted interventions Typically, African small- and medium-sized enterprises promoting investments and growth in certain subsectors, (SMEs) can be key drivers of growth and job creation provided value chains, or geographic regions are particularly they receive appropriate support. However, they are often held back by a lack of knowledge, resources, and technical expertise. worthwhile to consider. In addition, they also often lack the financial resources necessary to acquire new technologies or skills. Linkages programs create Policies targeted at resource-rich countries business opportunities for SMEs at national, regional, and/ Resource-rich countries face distinct challenges in or community levels through the IFC’s relationship with large large-scale job creation: production linkages with the rest corporate entities in which it has invested. These programs help of the economy are relatively limited and direct SMEs adopt practices and systems to satisfy the standards employment creation in the resource sector is often required by these large corporations. When large firms source locally, SMEs are provided with income-generating opportunities, minimal.38 Africa has a number of resource-rich countries. so they can improve their productivity and create jobs. Apart from Algeria and Libya, all of them (16) are in sub- For example, a linkages program in Guinea involved local Saharan Africa.39 With the exception of Algeria and Libya, supplier development, the creation of local management training which are in the early stages of the demographic dividend, they market and capacity building for training firms, and improved are all in the pre-dividend stage of the process. access to information on opportunities in the mining sector. In Usually policymakers wish to limit the size of the 2012, after five years of existence, (1) over 700 new jobs were natural resource sector and diversify their economy. This is created in local businesses as a part of the mining sector’s supply chain, (2) US$9.1 million in new contracts were signed the result of the instability of returns from commodities and the between local businesses and international mining companies, resulting problems of unemployment and output loss during and (3) over 100 local SMEs received training and individualized periods of low prices; a perception that the rate of technological coaching. All of this took place in a remote part of Guinea where change in resource-dependent activities may be lower than in business opportunities and jobs were rare. manufactures or services; and, finally, concerns that resource- Sources: Dodd 2013; IFC 2009. intensive production may promote rent-seeking activities, lower growth rates, and increase the risk of conflict.40 Although country specifics vary widely, existing research suggests specific types of policies that can be useful in supporting economic diversification, creating jobs, and helping countries avoid a potential resource economy can prove useful. These can include specific curse in resource-rich countries. They include:41 infrastructure investments, tax measures and incentives, • The key prescription of ensuring that macro/fiscal mechanisms to promote technology-upgrading, support and investment policies and business environment for access to external markets, support for value chain reforms are properly implemented remains valid. Sound development for countries whose wealth is based on macroeconomic management is paramount to contain agricultural commodities, and support for linkages boom-bust commodity cycles, and exchange rate development to non-extractive sectors (see Box 5). All policy should be geared toward avoiding long periods these activities should have a gender angle to create of overvaluation. Business environment reforms that conditions underlying a potential demographic dividend. contribute to improve firms’ environment are critical to Policies to facilitate regional integration and trade ensure a level playing field and to limit opportunities for Currently, most African countries have small domestic rent-capture. markets and limited, although growing, purchasing power. • Trade policy needs to remain fairly open (limited protection, Many countries are also landlocked, thereby compounding openness to foreign direct investment to foster spillover, their limited size. For these reasons, firms in Africa often cannot participation in trade agreements to ensure a level playing achieve efficiency gains resulting from economies of scale by producing for domestic markets alone. Rather, greater regional field) to make sure that new activities compatible with integration is crucial for improving firm productivity in Africa. As changes in comparative advantage can emerge. of now, integration of African economies is limited, as shown by • Policies that focus on developing human and physical the low scores on the various dimensions of the Africa Regional capital and improved governance need to be supported Integration Index (Figure 9). Even trade integration, which has and implemented. the highest score of 0.54, is low. Trade and regional integration can become a major • Finally, targeted vertical/sector-level policies—in line with source of job creation and improved well-being in Africa. comparative advantages for traded sectors—to develop Closer trade links can stabilize food markets, reduce consumer linkages from natural resources sectors to the rest of the prices, create economies of scale that will help increase the The Africa Competitiveness Report 2017 | 43 Chapter 1.2 holds the promise of creating many new jobs in agro- Figure 9: African Regional Integration Index processing and a wide range of services, such as Trade Integration transport, distribution, and retailing. Similarly, the apparel 1.0 sector—a traditionally female employment–intensive 0.8 manufacturing sector—could benefit from such measures. 0.6 0.4 • Support trade in services. Service exports can help Financial and Regional macroeconomic 0.2 infrastructure improve access to crucial services necessary to integration increase productivity, such as healthcare, education, and other professional services.47 Exports of services are particularly important for landlocked countries for which opportunities to diversify into the export of manufactures are more limited by the high costs of transporting Free movement of people Productive integration goods.48 Some countries in Africa already export a Source: AU et al. 2016. far greater level of high value-added services, such as The Regional Integration Index is made up of five dimensions (trade integration, communication and finance, than most other countries at regional infrastructure, productive integration, free movement of people, and their level of income (see Box 6 on trade in services). This financial and macroeconomic integration) and 16 underlying indicators. Dimension scores range from 0 (low) to 1 (high). Values reported are the average of the eight should be encouraged. regional economic communities of the continent. The eight communities are CEN-SAD (Community of Sahel–Saharan States), COMESA (Common Market for Eastern and Southern Africa), EAC (East African Community), ECCAS (Economic • Ease restrictions on freedom of movement in Africa. Community of Central African States), ECOWAS (Economic Community of West This can help improve firm productivity on the continent African States), IGAD (Intergovernmental Authority on Development), SADC (Southern African Development Community), and UMA (Arab Maghreb Union). because it would allow employers to be better able to attract high-quality talent. Countries that face shortages of essential service providers, such as teachers and healthcare professionals, would also benefit from allowing greater freedom of movement because this would help improve the quality and productivity of labor (see Box 2 competitiveness of Africa’s private sector, and foster the development of regional value chains.42 on the need for more teachers in Africa). The current situation in this area is difficult because the • Finally, improve regional integration. Better integration can cost of moving goods between countries remains high, contribute to job creation by facilitating the development transit times are uncertain, and delays can be of labor-intensive regional value chains for manufactured exceptionally long. Africa has the weakest performance of exports.49 Countries in Africa can improve progress on any region in the 2016 Logistics Performance Index (LPI),43 and regional integration by designing more flexible integration it ranks low on Doing Business indicators of time and cost of trade.44 In part, this poor showing is a result of insufficient agreements and focusing on areas where countries infrastructure, especially transport, telecommunications, and can more easily reach policy consensus. Recent energy. However, empirical evidence suggests that only about improvements in border efficiency and easing regulations a quarter of the delays along major transport corridors are a in trade in services in the East African Community are two result of inadequate and/or low-quality physical infrastructure. prominent examples. Non-tariff barriers and poor trade facilitation, by contrast, account for the remaining 75 percent.45 Research therefore Policies targeted at microenterprises, agriculture, and suggests that to achieve the job gains resulting from greater agroindustry intra-Africa trade and regional integrations, countries should: Given projected demographic patterns and under existing policies, around 75 percent of new entrants in the labor • Improve efforts at trade facilitation alongside building market are likely to work in microenterprises or agriculture. more physical infrastructure that links regional markets. Hence, there is a need to enact programs that target Infrastructure creation is also crucial for supporting the specifically the needs of these types of firms. A new set of growth of Africa’s manufacturing sector. studies explicitly recognizes this reality.50 • Ease regulation on small traders, many of whom are Microenterprises women, by “simplifying border procedures, limiting Microenterprises are an important source of employment the number of agencies at the border . . . increasing for people with low levels of education, as these firms are the professionalism of officials . . . and assisting in the typically labor intensive and require fewer technical skills than spread of new technologies such as cross-border mobile more established firms. Although their contribution to total banking.”46 production is small, they constitute the largest number of businesses in Africa. Microenterprises are an especially • Encourage regional trade by eliminating onerous non- important source of female economic empowerment because tariff barriers; reducing bans on exports; and improving barriers to entry into the labor market are often lower among customs performance, coordination, and trade logistics. these firms than they are in more formal ones. For example, greater regional trade in agriculture 44 | The Africa Competitiveness Report 2017 Jobs in Africa Box 6: Service exports from Africa: An overlooked Box 7: Creating jobs in microenterprises with a area of job opportunities? business plan competition: Nigeria’s YouWiN! competition Because levels of education and information and communication technology (ICT) connectivity are improving in Africa, service The Youth Enterprise With Innovation in Nigeria (YouWiN!) exports are becoming an increasingly realistic growth sector. program is a business plan competition for young entrepreneurs Relatively low wages as well as large populations fluent in French in Nigeria. It aims to encourage innovation and job creation by and English provide Africa with additional advantages in this generating new businesses and expanding existing ones, and area. Although direct service exports from Africa still remain a was launched in late 2011. To be eligible, applicants had to be relatively small portion of overall exports, services already play Nigerian citizens aged 40 or younger. a large indirect role in the form of inputs into exports of primary The first year, 23,844 applications were received, with the goods and manufacturing. Countries in the region can build on top 6,000 being selected to receive a four-day business plan these foundations to expand into higher levels of direct service training course. From those initial applications, 4,510 business exports. plan applications were then received and scored, and 1,200 To maximize gains from trade in services, most winners were selected to receive prizes averaging US$50,000 governments in Africa need to reduce direct barriers to trade in each. services, as well as indirect ones that result from poor regulation. Results from a rigorous impact evaluation showed that that These reforms are also necessary for Africa to deepen its a business plan competition can be successful in identifying integration into global value chains. entrepreneurs with the potential to use the large amounts of Some African governments—such as Mauritius, Senegal, capital offered as prizes, and that these individuals appear to and Tunisia—have implemented policies that create a more be otherwise constrained from realizing this potential. The prize enabling business environment for service exports. These money generates employment and firm growth that would not countries currently export a much higher level of services than have otherwise happened. most other countries at their level of development. Some notable By the end of the third year of YouWiN! activity, the 1,200 successes include: winners are estimated to have generated more than 7,000 new jobs. The cost per job created compares favorably to similar • Mauritius is performing well in exports of business services, programs in the United States and developing countries. finance, and transport. The CIM Group, a leader in the financial sector, is a particularly strong example. Source: McKenzie 2015. • Senegal does well in exports of business services, communications, and finance. Premium Contact Center International, a provider of call center services, illustrates this trend. • Tunisia is doing well in communications, distribution, and transport service exports. TTS Group, a leader in the tourism and transport sectors, is a good example. business plan competitions, matching grants, and access to apprenticeships) (Box 7). Support for agriculture and agro-processing Increasing agricultural productivity and further developing agro-processing is central for job creation in rural areas where still 60 percent of the continent’s population Typically, microenterprises face more acute business currently live. At the most basic level, governments need to environment impediments than their larger counterparts, adopt a more dynamic approach to fostering agricultural as well as significant obstacles to acquiring high-quality human transformation. Many governments still take a “static,” classic and physical capital. Supporting microenterprises in view of agricultural development as increasing the productivity overcoming these barriers involves a two-pronged approach:51 of small farmers. This lends itself to programs that focus on • On an economy-wide basis, microenterprises would increasing access to inputs for small farmers, such as fertilizer benefit from policy measures aimed at improving access and seed, to coax more output from small areas of land. to human and physical capital, and the businesses Programs to increase access to credit—such as value-chain finance from buyers—and to help small farmers receive higher environment in which they operate. The most immediate prices for their crops—such as Warehouse Receipt needs are the provision of quality education and Systems54—are becoming more common as well. Contract training,52 access to adequate finance, inclusive industrial farming is another way to raise productivity and employment policies, and access to quality infrastructure as well among this segment of the working population.55 as reforms in the design and enforcement of business Truly unlocking Africa’s agricultural potential will, regulations. however, require complementing the above necessary efforts with those to sustainably transform the sector from • Targeted vertical policies to address specific constraints low-productivity small farms (producing mainly for would be also useful. Examples are policies that assist household local consumption) into larger farms and more microenterprises in accessing particular markets, intensive agro-processing activities.56 This will also require support them in developing linkages with larger firms, further developing packaging and handling industries. Adding provide knowledge on the implementation of new quality value to agricultural products through processing, packaging, standards for exports, establish youth development and handling is not only a major potential source of job creation funds,53 and support entrepreneurship development (with in Africa, it also is crucial for developing the region’s The Africa Competitiveness Report 2017 | 45 Chapter 1.2 manufacturing sector. This requires developing a proper • For fragile and conflict-affected states, targeted support enabling environment for agro-processing,57 which can be to vulnerable regions and/or populations such as women based on three layers of interventions: can be both stabilizing—via the creation of jobs—and growth enhancing. • The first layer includes essential enablers for the sector. Reforming trade policies are central to improving • For resource-rich countries, open trade policies and industrial competitiveness because they may lower developing value chain links to natural resource sectors costs of production and facilitate market access. At a (be they agricultural commodities or extractives) can minimum, this requires governments to set reasonable encourage diversification and job creation. tariffs and limit the use of non-tariff barriers. Improving infrastructure (transportation, water and sanitation, • Fostering regional trade and integration is a major electricity, communications, and irrigation) is also a high potential source of jobs, can help improve firm-level priority for creating competitive agro-processing firms. productivity and economic competitiveness, and support Not unexpectedly, ensuring proper access to finance the development of manufacturing. (see the earlier discussion) is also key to ensure firms can • Support of microenterprises and agroindustry, key invest and remain competitive. Finally, land is a key asset sectors of job creation in Africa, is absolutely needed for the sector. Reforms in areas such as title, leasing, and but requires sector-specific interventions to increase rental are vital to ensure accessible land for large farms productivity. Access to finance and appropriate skills and agroindustries.58 is crucial for the former. Developing the latter requires • A second of set of interventions requires raising standards reforms that envision agriculture not as a subsistence and regulations to international best practices because activity, but as a potentially dynamic commercial sector. this will facilitate export competitiveness. Fostering Developing and effectively implementing these policies to and providing incentives for research and development help attain a demographic dividend takes time. If countries wait and the use of technology is essential to ensure the until today’s youth reach working age, it will probably already competitiveness of the sector as well. be too late to avoid demographic vulnerabilities. • A final layer includes supportive business regulations. Notes Access to business development services, such as 1 Africa here includes sub-Saharan Africa and North Africa (including finance, accounting, marketing management, economics, Algeria, Egypt, Libya, Morocco, and Tunisia). law, and other technical expertise, plays an important 2 For example, the average yearly price of crude oil (Brent) went from role in helping firms to become more productive US$98.9 per barrel in 2014 to US$44 per barrel in 2016; World Bank and competitive. Finally, vertical linkages (between 2017b. enterprises at different levels of the supply chain) should 3 Data are from the World Bank’s World Development Indicators. See https://datahelpdesk.worldbank.org/knowledgebase/articles/906519- be encouraged and policy support should be directed world-bank-country-and-lending-groups for a list of the countries in toward the formation of farmer groups so as to reduce each World Bank group. the risk of insufficient supply and to generate income. 4 The working-age population is defined as those aged 15 to 64. 5 Countries in the East African Community are Burundi, Kenya, Rwanda, Conclusions Tanzania, and Uganda. Projections suggest that Africa’s working-age population will 6 These countries are Algeria, Botswana, Cape Verde, Djibouti, Egypt, grow massively over the next two decades. Approximately 450 Lesotho, Libya, Mauritius, Morocco, Seychelles, South Africa, and million Africans will enter the labor force over this time period. Tunisia. This is close to three times the current number of people who 7 For example, this is low compared to East Asia, the region that work for steady wage-paying jobs in the region. If the status benefitted most from a demographic dividend with a working-age share of its population reaching just over 70 percent. By contrast, under quo endures, only about 100 million of these new entrants to current projections, the working-age share of Africa’s population is the labor force will find a steady wage-paying job. The other likely to rise slowly to about 65 percent by 2050 (The Rand Corporation nearly 350 million will need to resort to self-employment or 2002). Therefore, Africa’s demographic dividend, even under ideal conditions, is likely to be more modest than that of East Asia (Bloom et employment in microenterprises. To expect this new generation al. 2007; Cleland 2012; Eastwood and Lipton 2011). of increasingly educated and urban youth to quietly accept 8 Although infant mortality rates are, on average, higher in Africa than scarce economic opportunity is risky. they are in other parts of the world, the gap is narrowing rapidly— Fortunately, new research is providing governments in the especially since 2000. Africa remains, however, a large outlier in fertility region with insight into how they can address the coming rise in rates (Bongaarts and Casterline 2013). Whereas East Asia, Latin America and the Caribbean, the Middle East, and South Asia have their working-age populations. This chapter argues that beyond converged to an average fertility rate of about 2.5, Africa’s is twice as the traditional—though still valid and required—prescriptions large. This is not only because Africa is poorer, on average, than other (such as providing stable macroeconomic policy and a regions. Controlling for infant mortality rates, countries in Africa have a fertility rate that is 20 percent higher than those outside it. Several other supportive investment climate; improving the quality of human factors may explain this, such as a high demand for children, unmet and physical capital; and promoting measures to foster a needs for family planning, a relatively young age at first union, obstacles reduction in fertility), countries can facilitate increased job to contraception, and limited family planning services (World Bank 2010). creation by implementing specific policies more suited to their particular circumstances: 9 UN Habitat 2014. 46 | The Africa Competitiveness Report 2017 Jobs in Africa 10 World Bank 2016a. World Bank (2011a, 2016a) notes that migration 35 Examples of these programs are: data from Africa are generally of low quality: “Data on migration in Africa are often missing, out of date, or inconsistent with definitions used in • short-term labor-intensive programs, such as Community-Driven other countries. Intraregional migration flows are often informal and not Development, and Disarmament, Demobilization, and Reintegration, captured in official statistics” (World Bank 2016a). Hence, although the that focus on public works and repairing infrastructure; broad trends are probably valid, numbers have to be interpreted with • skills training sometimes, unfortunately, without concomitant efforts caution. to determine true local skills needs; 11 World Bank 2011b, 2016a. • short-term public works programs combined with efforts to improve 12 Fox et al. 2013. the national business climate and/or build government capacity. 13 Figure 3 presents simple correlation results. The relationship even 36 Pritchett and de Weijer 2010. strengthens when controlling for real GDP per capita. 37 World Bank 2016d. 14 World Bank 2016b. 38 Gelb 2010. 15 World Bank 2016b. 39 These include Algeria, Angola, Cameroon, Chad, Côte d’Ivoire, 16 Bloom et al. 2003. Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Liberia, Mali, Mauritania, Niger, Nigeria, Republic of Congo, Sudan, and 17 Bloom et al. 2003; Gribble and Bremner 2012; Filmer and Fox 2012; Fox Zambia (IMF 2012, p. 48). et al. 2013. 40 Martin 2007. 18 Cincotta, et al. 2003; Goldstone 2002; Goldstone et al. 2014; Urdal 2005, 2006; Walker 2015. 41 Arezki et al., eds. 2012; Gelb 2010; Martin 2007. 19 Bloom et al. 2003. 42 Brenton, ed. 2012; Brenton and Isik, eds. 2012; Brenton et al., eds. 2013; Brenton and Hoffman, eds. 2015; Dihel and Grover, eds. 2016. 20 Goldstone et al. 2014; Walker 2015. 43 The World Bank’s Logistics Performance Index (LPI) is based on a 21 Difference in means test has a p-value of 0.051. worldwide survey of operators (global freight forwarders and express carriers), providing feedback on the logistics “friendliness” of countries. 22 Duflo 2012. The LPI consists of both qualitative and quantitative measures. It 23 King and Mason 2001. covered 160 countries in 2016. The best region is Europe and Central Asia with a 2016 LPI score of 3.23 while Africa has the lowest score: 24 Walker 2015, p. 24. Walker backs up this claim from additional 2.49. Details about the LPI can be found at http://lpi.worldbank.org/. information from the Fragile States Index (FSI; see Figure 4 note for FSI calculations). According to Walker’s analysis, “Of the 10 states ranked 44 For example, for sub-Saharan Africa—because of border compliance— highest on the 2014 FSI, all scored 8.6 or higher [out of a maximum of it takes, on average, 144 hours to import and 103 hours to export 10] for ‘demographic pressures;’ five scored 9.0 or higher. Each of the goods across borders, whereas the time needed to import and export 20 countries that scored highest for state fragility are experiencing a is much less in other regions. Similarly, the cost of trading across high rate of population growth”; Walker 2015, p. 23. borders is higher in sub-Saharan African than it is in other regions. Although the performance of North Africa countries is better in some 25 Goldstone et al. 2014, p. 126. areas than in others—for example, on average it takes 188 hours to import but 64.3 hours to export goods across borders—the continent 26 See Ramachandran et al. 2009; and Iacovone et al. 2013 and as a whole does not fare well. Ramachandran 2014 for a synthesis. 45 Brenton and Isik, eds. 2012. 27 Bigsten and Soderbom 2006, p. 261. 46 Brenton and Isik, eds. 2012, p. 2. 28 As mentioned earlier in this chapter, Africa also lags behind other regions on a range of health indicators as well. 47 Dihel and Grover, eds. 2016. 29 See https://www.brookings.edu/interactives/africa-learning-barometer/. 48 Brenton et al. 2012, p. 123. The issue is often further compounded by difficulties in early childhood development that create further difficulties for children. 49 Brenton and Isik, eds. 2012. The development of labor-intensive light manufactures is also an important possible venue for job creation in 30 Perception data have well-known limitations. Among others, cultural Africa. Countries such as Senegal, with the creation of a new industrial differences or differences in expectations about how the investment zone in Diamniadio, and Côte d’Ivoire, with the creation of massive climate should look can affect perceptions. Hence cross-country enhancing infrastructures, are making a push to develop this sector. comparisons of such data can be difficult and results have to be treated Tunisia and Morocco have sizeable industrial sectors. Possible actions carefully. In addition, firms’ heterogeneity may bias the perception to further develop the sector, besides trade policy and investment generation mechanism. For example, the views of managers of existing climate reforms, may include the development of industrial parks, the enterprises might not reflect the obstacles that potential entrepreneurs support of key input industries, and training and entrepreneurship and new entrants may have to deal with. However, although these development. On this see Dinh et al. 2012 concerns are real, they should not be overdone. Typically, most firms’ perceptions line up historically relatively well with the reality of every 50 Dudwick et al. 2013; Fox et al. 2013; Reeg 2015. day businesses: that is, they still provide useful information. See Clarke 51 Reeg 2015. 2011. 52 A pressing area that governments in Africa need to address to help 31 Details about the World Bank’s Doing Business publication and foster job creation for urban youth is changes in education systems. database are available at http://www.doingbusiness.org/. Not only do far too few children in Africa receive the types of basic 32 The proliferation of youth development funds is perhaps the clearest education in areas such as literacy and numeracy they need to manifestation of this concern; see Ahaibwe and Kasiyre 2015. acquire to be economically productive, but even those who do obtain secondary and tertiary education often receive training in areas 33 The May 2016 World Bank list of fragile and conflict-affected states in where there is little labor demand. University education in many Africa includes Burundi, Central African Republic, Chad, Comoros, Côte African countries trains students to join the government or other large d’Ivoire, Democratic Republic of Congo, Eritrea, The Gambia, Guinea- bureaucracies even though there are very few jobs in these areas. In Bissau, Liberia, Libya, Madagascar, Mali, Sierra Leone, Somalia, addition, technical and vocational education systems tend to receive South Sudan, Sudan, Togo, and Zimbabwe. See the Harmonized inadequate funding and curricula tend not to provide the type of List of Fragile Situations FY16 at http://pubdocs.worldbank.org/ training that entrepreneurs need to be successful. Rather, educational en/700521437416355449/FCSlist-FY16-Final-712015.pdf. institutions need to provide training in areas such as market analysis, financial literacy, and small business management. Ramachandran 34 World Bank 2016d, p. 6. et al. 2009 go as far as to argue that the main credit constraint for entrepreneurs and microenterprises in Africa is not a shortage of capital but poor financial literacy, market analysis, and business development skills. The Africa Competitiveness Report 2017 | 47 Chapter 1.2 53 Youth development funds are a potentially useful way to enhance the Blattman, C., N. Fiala, and S. Martinez. 2014. “Generating Skilled Self- quality of self-employment and of employment in microenterprises Employment in Developing Countries.” The Quarterly Journal of (see Ahaibwe and Kasiyre 2015 for a recent review). Although details Economics 129 (2): 697–752. vary across countries, a common approach is to provide young entrepreneurs with grant or loan finance to create and/or expand a Bloom, D., D. Canning, G. Fink, and J. Finlay. 2007. Realizing the small business. These funds can have great appeal to governments Demographic Dividend. Cambridge, MA: Program on the Global because they allow them to address an important social concern—lack Demography of Aging, Harvard University. of youth economic opportunity—through programs that are relatively Bloom, D., D. Canning, and J. Sevilla. 2003. The Demographic Dividend. easy to implement. So far, the impact of these funds, in general, has Santa Monica, CA: The Rand Corporation. been relatively modest because they treat some causes of youth underemployment (i.e., lack of access to finance), yet often ignore Bongaarts, J. and J. Castreline. 2013. “Fertility Transition: Is sub-Saharan arguably more binding constraints (e.g., lack of skills). As a result, youth Africa Different?” Population Development Review 38 (Supplement 1): development funds tend to be more successful when they pair access 153–68. to finance with necessary business management and/or vocational skills. Brenton, P., ed. 2012. Africa Can Help Feed Africa. Washington, DC: World Bank. 54 A warehouse receipt system enables farmers to deposit storable goods in exchange for a warehouse receipt. This is a document issued by Brenton P., N. Dihel, L. Hinkle, and N. Strychacz. 2012. “Africa’s Trade in warehouse operators as evidence that specified commodities of stated Services and the Opportunities and Risks of Economic Partnership quantity and quality have been deposited at a particular location. Agreements.” In De-Fragmenting Africa, P. Brenton and G. Isik, eds. Usually prices slump right after harvesting time. By deciding to sell the Washington, DC: World Bank. goods at a later time, when prices have picked up, the depositor can Brenton, P., E. Gamberoni, and C. Sear, eds. 2013. Women and Trade in avoid price risk. Africa. Washington, DC: World Bank. 55 In contract farming, a farmer and a buyer agree to a price and/or Brenton, P. and G. Isik, eds. 2012. De-Fragmenting Africa. Washington, DC: quantity at the end of a harvest. In exchange, a farmer may receive World Bank. credit, inputs, and/or technical assistance. However, to date, contract farming has sometimes proven difficult to implement in many countries Brenton, P. and B. Hoffman. 2015. “Introduction.” In Brenton and Hoffman, in Africa due, in part, to high monitoring costs and/or poor legal eds., The Political Economy of Regional Integration in Sub-Saharan systems. High monitoring costs may make it difficult for buyers to Africa. Washington, DC: The World Bank. detect side selling, for example, while poor legal systems may render post-harvest contract enforcement difficult. Brenton, P. and B. Hoffman, eds. 2015. The Political Economy of Regional Integration in Sub-Saharan Africa. Washington, DC: World Bank. 56 Risks from climate change are expected to increase in coming decades, particularly in low-income countries where adaptive capacity Cincotta, R., R. Engelman, and D. Anastasion. 2003. The Security is weaker. This threatens food security and agriculture’s pivotal role in Demographic. Washington, DC: Population Services International. rural livelihoods and broad-based development, and allows inefficient/ Clarke, G. 2011. “Are Managers’ Perceptions about Constraints Reliable? unclean technologies to be used in productive sectors, making them Evidence from a Natural Experiment in South Africa.” Journal of less competitive. Innovative solutions have been developed (e.g., clean Globalization and Development 2: 1–28. tech revolution) to counteract this. Many farmers increasingly rely on the application of existing techniques in new ways that have been Cleland, J. 2012. Will Africa Benefit from a Demographic Dividend? Oxford, adapted for developing country conditions with novel business models UK: Health and Education Advice and Resource Team. (for example, drip irrigation, solar-powered pumping, weather forecast by micro-region, and remote monitoring and sensing of crops). To Da Silva, C. A., D. Baker, A. W. Shepherd, C. Jenane, and S. Miranda-da- implement these new applications, the participation of local SMEs and Cruz. 2009. Agro-Industries for Development. Wallingford, Oxfordshire, entrepreneurs is essential. Instruments such as the Climate Innovation UK and Cambridge, MA: FAO and UNIDO. Centers that support local private sectors to commercialize climate- Dihel, N. and A. Grover, eds. 2016. The Unexplored Potential of Trade in friendly products for local markets are a promising tool. For more on Services in Africa. Washington, DC: World Bank. Climate Innovation Centers see http://www.infodev.org/climate. Dinh, H. T., V. Palmade, V. Chandra, and F. Cossar. 2012. Light Manufacturing 57 Da Silva et al. 2009. in Africa: Targeted Policies to Enhance Private Investment and Create 58 Improving land security is also vital for accessing credit. Governments Jobs. Washington, DC: World Bank. in many countries in Africa are sometimes reluctant to engage in Dodd, D. 2013. Bridging the Gap between Small Businesses and Mining these efforts not only because they are costly and difficult, but also Companies to Increase Local Impact in Guinea. Washington, DC: IFC because they raise sensitive political issues. In addition, some argue Solutions/Stories of Impact. that land reform can lead to exploitation and landlessness. While these are valid concerns and reform efforts ought to take into account the Dudwick, N. and R. Srinivasan with J. Cuesta and D. Mandani. 2013. potential for exploitation, they do not justify maintaining a status quo. In Creating Jobs in Africa’s Fragile States. Washington, DC: World Bank. addition, concerns about loss of access to land as a result of creating markets for it offers only an incomplete analysis. Creating thriving agro- Duflo, E. 2012. “Women Empowerment and Economic Development.” Journal processing firms in Africa that can compete with imports requires, of Economic Literature 29: 1051–79. among other factors, high quality and consistent agricultural products. Eastwood, R. and M. Lipton. 2011. “Demographic Transition in Africa.” Larger farms are a central part of this solution. Population Studies 65 (1): 9–35. Filmer, D. and L. Fox. 2014. Youth Employment in Sub-Saharan Africa. References Washington, DC: World Bank. AfDB (African Development Bank). 2014. African Development Report 2014. Fox, L., C. Haines, J. Huerta Muñoz, and A. Thomas. 2013. Africa’s Got Work Abidjan: African Development Bank. to Do: Employment Prospects in the New Century. Washington, DC: Ahaibwe, G. and I. Kasirye. 2015. Creating Youth Employment through International Monetary Fund. Entrepreneurship Financing. Kampala: Economic Policy Research Gelb, A. 2010. Economic Diversification in Resource Rich Countries. Mimeo, Center. Center for Global Development, Washington, DC. Arezki, R., T. Gylfason, and A. Sy, eds. 2012. Beyond the Curse: Policies to Goldstone, J. 2002. “Population and Security.” Journal of International Affairs Harness the Power of Natural Resource. Washington, DC: International 56 (1): 3–21. Monetary Fund. Goldstone, J., M. Marshall, and H. Root. 2014. “Demographic Growth in AU, AfDB, and UNECA (African Union, African Development Bank, and Dangerous Places.” International Area Studies Review 17: 120–33. United Nations Economic Commission for Africa). 2016. Africa Regional Integration Index Report 2016. Abidjan, Côte d’Ivoire: AU, AfDB, and Gribble, J. and J. Bremner. 2012. Achieving a Demographic Dividend. UNECA. Washington, DC: Population Reference Bureau. Bigsten, A. and M. Soderbom. 2006. “What Have We Learned from a Decade Holmes, R., A. McCord, and J. Hagen-Zanker with G. Bergh and F. Zanker. of Manufacturing Enterprise Surveys in Africa?” World Bank Research 2013. What Is the Evidence on Employment Creation on Stability and Observer 21 (2): 241–65. Poverty in Fragile States? London: Overseas Development Institute. 48 | The Africa Competitiveness Report 2017 Jobs in Africa Iacovone, L., V. Ramachandran, and M. Schmidt. 2013. “Stunted Growth: ———. 2016c. Making Power Affordable for Africa and Viable for Its Utilities. Why Don’t African Firms Create More Jobs?” Working Paper 353. Washington, DC: World Bank. Washington, DC: Center for Global Development. ———. 2016d. An Integrated Framework for Jobs in Fragile and Conflict IFC (International Finance Corporation). 2009. The IFC Oil, Gas and Mining Situations. Washington, DC: World Bank. Linkages Program. Washington, DC: IFC. ———. 2017a. Republic of Senegal: An Assessment of the Investment Climate, IMF (International Monetary Fund). 2012. Macroeconomic Frameworks for Washington, DC: World Bank. Resource Rich Countries. Washington, DC: IMF. ———. 2017b. World Bank Commodities Price Data, March 2, 2017 Issue, King, E. and A. Mason. 2001 Engendering Development through Gender Washington, DC: World Bank. Equality in Rights, Resources, and Voices. Washington, DC: World Bank. MacKinsey & Company. 2015. Brighter Africa: The Growth Potential of the Sub-Saharan Electricity Sector. McKinsey & Company. Available at https://www.icafrica.org/fileadmin/documents/Knowledge/Energy/ McKensey-Brighter_Africa_The_growth_potential_of_the_sub-Saharan_ electricity_sector.pdf. Martin, W. 2007. “Outgrowing Resource Dependence: Theory and Developments.” In Natural Resources: Neither Curse nor Destiny, D. Lederman and W. F. Maloney, eds. Palo Alto, CA and Washington, DC: Stanford University Press and World Bank. McKenzie, D. 2015. “Creating Jobs through a Business Plan Competition: Evidence from Nigeria’s YouWiN! Competition.” Finance & PSD Impact Note No. 33. Washington, DC: World Bank. Pritchett, L. and F. de Weijer. 2010. Fragile States. Washington, DC: World Bank. Ramachandran, V. 2014. Productivity, Jobs and Growth in Africa: Six Pieces of the Puzzle. DPRU Policy Brief: PB 14/41, University of Cape Town. Ramachandran, V., A. Gelb, and S. Manju. 2009. Africa’s Private Sector: What’s Wrong with the Business Environment and What to Do about It. Washington, DC: Center for Global Development. The Rand Corporation. 2002. Banking the “Demographic Dividend.” Santa Monica, CA: The Rand Corporation. Reeg, C. 2015. “Micro and Small Enterprises as Drivers for Job Creation and Decent Work.” German Institute for Development Discussion Paper 10/2015. Bonn: German Institute for Development. Seedat, M., A. Van Niekerk, R. Jewkes, S. Suffla, and K. Ratele. 2009. “Violence and Injuries in South Africa.” The Lancet 374 (9694): 1011–22. State Failure Task Force. 1999. State Failure Task Force: Phase Two Findings. College Park, MD: Center for International Development and Conflict Management. Teachers for EFA. 2010. 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The Africa Competitiveness Report 2017 | 49 Jobs in Africa Appendix: Supplemental table and figures Table A1: Paths to demographic dividend and vulnerability Reduction in Reduction in Per child Female labor Scenario child mortality fertility spending force participate Policy environment Outcome Example 1 Yes Yes Up Up Supportive for jobs One generation East Asia demographic dividend 2 Yes Yes Up Up Not supportive for jobs Temporary vulnerability Latin America due to youth bulge 3 Yes No No change No change Supportive for jobs Demographic dividend; None difficult to maintain because youth cohorts are growing 4 Yes No No change No change Not supportive for jobs Ever-growing cohorts of Nigeria poorly employed youth; likely to lead to political/ social instability Figure A1: Working-age population growth in Africa: Figure A2: Population growth of the 20 largest cities 2015–35 in Africa: 2010–25 Percent Millions Percent growth 150 20 120 Niger 120 15 90 Uganda Chad 90 10 60 60 5 30 30 Morocco Tunisia 0 0 0 Mauritius Addis Ababa Abidjan Accra Algiers Alexandria Ouagadougou Dar es Salaam Nairobi Kinshasa Luanda Khartoum Ibadan Kano Lagos Dakar Douala Casablanca Cairo Johannesburg Cape Town 0 20 40 60 80 100 120 Percent Source: World Bank, World Health Nutrition and Population Statistics: Population Estimates and Projections, October 2016 update Key ■ Population 2010 ■ Population 2025 ● Growth Source: UN Habitat 2014. The Africa Competitiveness Report 2017 | 51 Chapter 1.3 Rapid population growth and urbanization are putting significant pressure on the infrastructure of African cities. Competitive African Cities The population has grown at an annual rate of 2.53 percent from 1950 to 2015 and is predicted to increase from 1.18 billion for Better Living Standards in 2015 to 2.44 billion in 2050.1 At the same time, the continent is experiencing rapid urbanization, at the rate of 3.5 percent during the period 2000–15. It is estimated that by 2030 more El-hadj M. Bah than 50 percent of the population in Africa will be living in cities, Audrey Verdier-Chouchane and this percentage is expected to increase even further, to reach over 60 percent by 2050.2 The expected demographic African Development Bank transition, characterized by a decline in fertility and mortality rates, will translate into a large labor force living in urban centers. This demographic transition has the potential to turn into a demographic dividend that will increase economic growth and living standards, or it could become a source of social instability if appropriate policies are not implemented (see Chapter 1.1). Two key implications of the demographic transition are sharp increases in the need for job creation and for urban infrastructure (including affordable housing). It is estimated that although about 10–12 million young people enter the labor market each year, only 3 million formal jobs are created. Thus many African cities face situations where large numbers of the population are either unemployed or underemployed, and are often engaged in informal self-employment. Moreover, African cities experience shortages of transport networks; electricity, water, and sewer systems; and affordable housing. These shortages reduce productivity by limiting the creation and growth of firms and hence lower labor demand. For cities to play their role as poles of economic growth and providers of quality jobs, they need to become more competitive. Indeed, urbanization can contribute to structural transformation and, by extension, improved competitiveness through economic linkages and social innovation. The concentration of people in urban areas can create economies of scale and facilitate innovation through the concentration of high-skilled and talented workers. Economic development can be enhanced through extended and improved urban services; foreign direct investment (FDI) in urban corridors; and social development through the provision of cost-efficient transport systems, safer housing, social safety nets, and an enhanced businesses environment.3 Furthermore—through increased and improved connectivity, technology, and know-how transfer—urbanization can raise productivity and produce more attractive areas for investments.4 This chapter focuses on the constraints and opportunities for creating competitive African cities that will be required to reap the demographic dividend and, ultimately, improve the living standards of urban dwellers. It is noted that there is no consensus on the meaning of a competitive city. The World Bank notes that a competitive city is “a city that successfully facilitates its firms and industries to create jobs, raise productivity, and increase incomes of citizens over time,”5 while the World Economic Forum adds the dimension of sustainability.6 The Forum states that competitiveness is “the set of factors—policies, institutions, The authors gratefully acknowledge the very useful comments provided by Celestin Monga, Chief Economist/Vice President, Economic Governance and Knowledge Management, AfDB; Abebe Shimeles, Acting Director, Macroeconomic Policy, Forecasting and Research Department; Issa Faye, Officer in Charge, African Development Institute & Manager, AfDB Microeconomic, Institutional & Development Impact Division; John Anyanwu, Lead Research Economist, Macroeconomic Policy, Forecasting and Research Department; and Anthony Simpasa, Chief Research Economist, Macroeconomic Policy, Debt Sustainability & Forecasting Division. Thanks also go to Research Seminar participants at the AfDB. In particular, the authors would like to thank Charlotte Karagueuzian, Anna von Wachenfelt, and Zeke Geh (AfDB Consultants) for their excellent research assistance. The Africa Competitiveness Report 2017 | 53 Chapter 1.3 Figure 1: Distribution of cities by population size Overview of competitiveness in selected African cities Number of cities African cities vary widely by population size, wealth, and 60 economic dynamism. This section uses city-level data from the Oxford Economics database to compare cities across Africa 50 over the period 2000–16 along four dimensions that impact competitiveness: population dynamics, income and growth 40 performance, employment, and costs of housing and utilities.10 30 Urbanization trends There is a sharp reduction in the number of small cities 20 concomitant with a strong increase in the number of large cities. Figure 1 shows that the number of small cities—those 10 with fewer than 500,000 inhabitants—decreased from 31 in 2000 to 18 in 2016 and is expected to drop by half by 2030. To 0 a lesser extent, the number of medium-size cities—those with –0.5M 0.5M–1M 1M–5M 5M–10M 10M+ between 0.5 and 1.0 million inhabitants—has also been Population size diminishing, from 32 in 2000 to 28 in 2016, and is expected to decrease further to 23 by 2030. The decline in those two Key subgroups indicates that cities are becoming larger. The ■ 2000 ■ 2016 ■ 2030 number of large cities, with populations between 1 and 5 Source: Authors’ calculations, based on data from Oxford Economics. million, continue to be the largest group, growing from 35 in 2000 to 48 in 2016, and is expected to increase by seven additional cities by 2030. However, the number of megacities with populations above 10 million inhabitants is still very small; it increased from one in 2000 (Cairo) to three in 2016 (Cairo, Kinshasa, and Lagos). By 2030 two other cities (Khartoum and Luanda) are expected to join this group. Analyzing cities’ population growth shows that, between 2000 and 2016, almost strategies and processes—that determines the level of 30 percent of the cities in the sample increased their population sustainable productivity of a city.”7 Furthermore, the Asian by over 50 percent, while almost 17 percent doubled their Development Bank asserts that “cities become competitive population. Between 2000 and 2030, the populations of 24 out though shared services and infrastructure.”8 This chapter of 102 cities are expected to triple while those of an equal defines a competitive city as an urban area that offers number of cities are expected to double. These projections affordable housing and adequate infrastructure for private- suggest that most cities need to find ways to provide sector development, decent job creation, and a better quality of infrastructure and jobs for a larger number of urban dwellers. life. Cities have different ways of enhancing their competitiveness through institutions, regulations, infrastructure, Income and growth performance skills, innovation, enterprise support, and finance. However, our There is a large variation of gross domestic product (GDP) definition resonates with the African Development Bank per capita and household disposable income across (AfDB)’s High 5s, particularly the one related to improving the cities.11 The top 10 richest cities in terms of GDP per capita quality of life of the African people. It is line with Glaeser’s view share similar characteristics: they are located either in oil- that urban policies should emphasize people as the ultimate exporting countries or in the most developed countries in the beneficiaries.9 continent (see Figure 2a). The two richest cities, Malabo The next section compares African cities along several (US$18,400 GDP per capita) and Libreville (US$17,600), are dimensions of competitiveness. The subsequent section both located in oil-exporting countries with small populations; addresses constraints to competitiveness that prevent reaping another oil-exporting country, Algeria, has three cities in the top the demographic dividend, including the lack of urban planning, 10. The other five cities are from the advanced countries of low access to basic infrastructure, and the deficit of both Botswana, Mauritius, Namibia, and South Africa. The average adequate and affordable housing. The section that follows GDP per capita for the top 10 is US$13,360, which is 16.7 times provides three main avenues to overcome these challenges the average income per capita of the bottom 10 cities. and increase the competitiveness of African cities. It starts by Common characteristics for the bottom 10 are their location in highlighting how urban planning can improve city low-income and mostly fragile countries (see Figure 2b). In most competitiveness to benefit from the demographic changes, cases—including Burundi, Central African Republic, and followed by a focus on how residential housing construction Liberia—political instability, civil war, or dictatorship have can produce economic linkages and create jobs. Finally, the prevented these countries from developing and increasing their analysis explores how special economic zones (SEZs) can be a wealth. catalyst for competitiveness. The conclusion offers a summary Relative to GDP per capita, diversified cities provide of findings and policy recommendations made in the chapter as larger disposable incomes to their households. Although well as ways to move forward. the GDP per capita of cities located in oil-rich countries is high, their households are not particularly wealthy. For example, the GDP per capita for Malabo is almost six times the average 54 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards Figure 2: Cities in Africa by wealth: Per capita GDP and household disposable income, 2016 2a: Top 10 2b: Bottom 10 US dollars (in thousands) US dollars (in thousands) 25 3.0 2.5 20 2.0 15 1.5 10 1.0 5 0.5 0 0.0 Algiers Malabo Libreville Port Louis Gabarone Constantine Oran Johannesburg Pretoria Bissau Freetown Bangui Banjul Kinshasa Lomé Blantyre City Lilongwe Monrovia Bujumbura Windhoek Key Key ■ GDP per capita ■ Household disposable income ■ GDP per capita ■ Household disposable income Source: Authors’ calculations, based on data from Oxford Economics. household disposable income (a ratio of 1:6); for Libreville, the Figure 3: Per capita GDP growth versus household ratio is 1:1.6, and for the Algerian cities it is around 1:1.3. disposable income growth, 2000–16 (percent) However, for the other five cities located in non-oil-exporting countries, disposable income is often higher than GDP per capita. This shows that oil wealth does not necessarily trickle 15 y = 0.6435x + 0.0031 R² = 0.38431 down to the household level and that citizens benefit most from 12 Monrovia diversified economies. The comparison for the bottom 10 Average household disposable countries shows a similar pattern, where household disposable 9 Kigali Addis Ababa income is higher than GDP per capita—an indication of 6 income growth diversified income sources for households, dominated by the 3 informal sector (Figure 2b). On average, household disposable Malabo income is higher than GDP per capita for the whole sample: 0 US$6,600 versus US$4,700. However, there is large gap in –6 –4 –2 0 2 4 6 8 10 household income between the wealthiest and poorest cities. Tripoli –3 Rabat Disposable household income for the top 10 richest cities is 10 –6 times that of the 10 poorest. Asmara High growth of GDP per capita in the period 2000–16 –9 did not translate into higher disposable income for GDP per capita growth households in a few cities. Although, on average, per capita GDP grew faster than household disposable income, there is a Source: Authors’ calculations, based on data from Oxford Economics. strong positive correlation (Figure 3). Nevertheless, a few cities experienced positive growth in per capita GDP while households’ incomes declined during the same period. For instance, Rabat experienced a 33 percent decline in household disposable income while GDP per capita increased by 24 long civil war had decimated livelihoods of Liberians and the percentage points. Similarly, Kumasi saw household peace dividend translated into higher household disposable disposable income decline by around 15 percent against a 40 incomes, albeit from a very low base. Other cities, such as percent increase in GDP per capita. The average and median Brazzaville, Huambo, and Pointe-Noire, almost doubled their growth rate of household disposable income for the 102 cities incomes. In contrast, 22 cities either stagnated or had long-run in the Oxford Economics database was 2 percent. However, declines in their per capita household disposable income. eight countries had average growth rates higher than 5 percent. Asmara saw its income per capita decline by 66 percent The top growth performer was Monrovia, which multiplied its between 2000 and 2016. The reasons for the declines are household disposable income by more than five. A decade- diverse and include conflict and economic stagnation. The Africa Competitiveness Report 2017 | 55 Chapter 1.3 Figure 4: Employment growth, 2000–16 4a: Top performers 4b: Bottom performers Percent Percent 12 2.0 10 1.5 8 1.0 6 0.5 4 0.0 2 –0.5 0 –1.0 Yamoussoukro Abuja Addis Ababa Antananarivo Abeokuta Tripoli Lusaka Kigali Bloemfontein Ouagadougou Lilongwe Kaduna Bujumbura Bamako Blantyre City Nouakchott Khartoum Dakar Monrovia Dar Es Salaam Mwanza Kitwe Malabo Johannesburg Ilorin Kano Jos Cape Town Fès Maiduguri Bangui Durban Port Louis Maseru Zaria Kimberley Kumasi Port Elizabeth Djibouti Windhoek Source: Authors’ calculations, based on data from Oxford Economics. slow growth while Nigeria’s economy is highly dependent on oil Figure 5: Employment growth versus household price fluctuations. disposable income growth, 2000–16 The correlation between employment growth and 15 y = 0.2376x + 0.0119 growth of household disposable income, despite being positive, is fairly moderate (Figure 5). For example, both Household disposable income growth R² = 0.0467 Monrovia Lusaka and Kigali saw increases in employment of more than 10 10 percent on average over the 16-year period. However, while Brazzaville Huambo Luamda Pointe-Noire Addis Ababa Kigali Kigali had a very strong growth in household income (6.9 5 percent) and per capita GDP (9.3 percent), Lusaka saw a Lukasa modest growth in household income of 2.6 percent and per Ouagadougou capital GDP of 3.8 percent. Employment grew strongly in 0 0 –2 2 4 6 8 Bamako 10 12 Bamako (7.8 percent) and Yamoussoukro (6.3 percent) while Tripoli household incomes declined, on average, by 2.0 percent and –5 0.1 percent, respectively. Asmara For employment growth to translate into higher disposable income for households, an increase in wages –10 must accompany the rise of employment. Another issue Employment growth relevant for Africa is the dramatic increase in the total number of Source: Authors’ calculations, based on data from Oxford Economics. households. Although the average cumulative growth of employment is 79.5 percent, the number of households grew on average by 75 percent. This implies that employment growth barely stayed ahead of growth in the number of households. Growth in employment Other factors, such as income taxes and the high incidence of For the 102 African cities studied, employment grew on informality, may explain the low correlation between household average by 3.4 percent per year for the period 2000–16, wealth and employment. Unfortunately, the database does not with large variation across countries. The top 20 cities for contain information on these variables. job creation all had yearly employment growth rates ranging from 5.03 percent in Kumasi to 10.74 percent in Lusaka Housing and utilities costs (Figure 4a). This group includes cities at different levels of On average, households spend 21 percent of their income and geographic location. On the other end, the rates for disposable income on housing and utility costs, although the bottom performers varied between –0.88 percent in Port there is a large variation across cities. The share ranges Elizabeth to 1.65 percent in Johannesburg (Figure 4b). The from 8 percent in Nairobi to 39 percent in Polokwane. In bottom performers include several cities in South Africa and general, South Africans spend more than citizens of all other Nigeria. South Africa’s economy has experienced a decade of African nations on these items. Although this is an important 56 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards Figure 6: Annual household expenditure on rent, 2016 6a: Top 20 6b: Bottom 20 Annual rent (US dollars) Annual rent (US dollars) 3000 350 2500 300 250 2000 200 1500 150 1000 100 500 50 0 0 Al-Mansura Alexandria Tunis Accra Port Louis Mahalla el-Kubra Luxor Johannesburg Pretoria Cairo Suez Libreville Sfax Cape Town Port Said Sousse Durban Casablanca Praia Kimberley Cotonou Blantyre City Malabo Nouakchott Beira Kumasi Lilongwe Bissau Bamako Monrovia Kinshasa Niamey Banjul N'Djaména Ouagadougou Lomé Freetown Bujumbura Bangui Windhoek Source: Source: Authors’ calculations, based on data from Oxford Economics. indicator for city competitiveness, this comparison should competitiveness of African cities and their ability to make the nonetheless be treated with caution since data on access and demographic dividend a reality, namely: a lack of urban quality of housing and utilities are either not available or planning, a shortage of urban infrastructure, and a shortage of non-contextualized. For instance, although it is estimated that adequate and affordable housing. Similar issues are inhabitants of Bangui spend only 9 percent of their disposable emphasized by a recent report by the World Bank that argues income on these items, more than 80 percent of urban dwellers that cities are crowded in terms of people but they have in the Central African Republic live in slum conditions and only underinvested in infrastructure, affordable housing, and 15 percent have access to electricity.12 It is thus not surprising industrial and commercial structures.13 that a low share of Central African Republic households’ incomes is spent on housing and utilities. Lack of urban planning Ranking cities in terms of households’ annual spending Urban planning practices and strategies in many African on rent shows a very large variation. In Bangui (Central African cities rarely reflect the realities of urban Africa because Republic), renting households spend just US$75 per year on they fail to take into account the social, political, housing while renters in Port-Louis (Mauritius) spend US$2,953 economic, and environmental context of the continent’s per year. Figure 6a shows that the top 20 most expensive rental urban development. The bulk of urban planning and building cities in Africa are mostly located in countries with higher income codes are a mix of often contradictory, complex, and per capita. The opposite is true for the bottom 20 (Figure 6b). In outmoded colonial planning standards; customary practice; fact, the correlation between GDP per capita and household and unregulated regimes. Weak capacity and lack of strategic expenditure on rent is high, at 0.6. The average and median for focus have resulted in cities being built from “back to front” the whole sample are US$937 and US$724, respectively. The because construction occurs prior to urban planning. Besides caution noted above is also valid here. being disconnected from the reality of urban experiences in After this brief overview of competitiveness in African cities, many African cities, inherited planning practices and zoning the next section analyzes key constraints of competitiveness of rules have increased pressure on urban infrastructure such as cities in the context of the demographic transition. water, sanitation, and road networks as well as exacerbated urban sprawl.14 Besides, poor urban planning lowers Constraints to competitiveness in African Cities productivity because it leads to congestion, sprawl, and poor This section aims to explain the reasons behind the limited spatial connectivity, further eroding the competitiveness of performance of African cities in terms of competitiveness. The firms and leading to environmental degradation. Poor planning lack of infrastructure, poor business environment, and shortage also poses serious challenges for sustainable urban of skills (as noted in Chapter 1.1) are among the perennial development and contributes to the high costs of real estate, problems hindering the competitiveness of African countries, and housing in particular, on the continent, thereby hindering thus limiting the potential to take advantage of demographic the quality of life of city dwellers as well as firms’ and workers’ changes. The same issues constrain African cities. This chapter competitiveness.15 As a result, today much of Africa’s urban focuses on three main constraints specifically limiting the The Africa Competitiveness Report 2017 | 57 Chapter 1.3 Table 1: Africa’s infrastructure deficit compared with the Box 1: Productivity killer: The increasing costs of rest of the world congestion in Nairobi Latin America and OECD countries the Caribbean Nairobi is a prime example of the difficulties of congestion South Asia facing fast-growing African cities, where traffic has become one of the biggest issues in terms of productivity. The Kenyan Africa capital, whose economy grew with 6 percent in 2016, is one Infrastructure of the fastest-growing economies of the continent and has simultaneously seen rapid rates of urbanization. Although the Access to electricity 46 78 96 100 (% of population) population of Nairobi Metropolitan Area was around 6,658,000 in 2009, it is estimated that it will reach approximately 14 million Electric power consumption by 2030.1 At the same time, car-based transportation more 570 655 2,071 8,082 (kWh per capita) than doubled between 2012 and 2016, reaching 700,000, with estimates of up to 9 million car users by 2050.2 Combining Improved water source this with low levels of infrastructure investments, an inherited 72 92 95 93 (% of population with access) colonial infrastructure, and a spatial-economic structure with an almost exclusive focus on the central business district have Improved sanitation facilities created a situation where most citizens spend at least two 39 45 83 98 (% of population with access) hours commuting each day,3 with a large impact on the city’s competitiveness. Source: ADB Statistics Department based on data from the World Bank, World The consequences have been plentiful. Nairobi’s traffic Development Indicators, AFREC (The African Energy Commission), the WHO/ problems cause increased costs, longer travel times, lower UNICEF Joint Monitoring Programme for Water Supply and Sanitation, and the International Energy Agency, latest year available. economic productivity, and a substantial negative impact on health and the environment. It is expected that the congestion leads to an estimated US$578,000 a day of lost productivity in the city, and as many as 13,000 people killed in road accidents Africans. The largest infrastructure deficit of the continent is in a year.4 Moreover, should the city keep adding cars at the the power sector: over 570 million people, or about 54 percent current rate without expanding its infrastructure, the average of Africans, do not have access to energy.16 Power speed of driving will be cut in half by 2030, to 20 kilometers an hour (so it will take twice as long to get anywhere).5 Another consumption in Africa remains very low, at 570 kilowatt hours related problem is the deteriorating air quality in the city, where per capita (181 kilowatts in sub-Saharan Africa, excluding 30 percent more diesel is burned today than it was five years South Africa). This represents only a fraction of power ago. The bad air quality also stems from the fact that few cars consumption in both developed and emerging economies (see are new: the large majority of cars are old ones imported from Table 1). Similar problems plague the continent’s information Japan and Europe. Following this, respiratory diseases are one and communication technology (ICT) network, water and now the number one type of disease in Kenya.6 To curb the sanitation, and transport network (Box 1). All these constraints massive congestion, several initiatives are needed, including the construction of new ring roads, re-engineering of the public limit job creation and the economic opportunities needed to transportation system and investing in rail services, developing reap the demographic dividend. multiple city centers, and using smart technology to control road Africa’s infrastructure shortfall has been widely traffic. identified as a major bottleneck for doing business across Notes the continent. It increases indirect costs of manufacturers, making them less competitive vis-a-vis their peers from other 1 Gachanja 2015. world regions. Regular power outages remain a major 2 MacGregor et al. 2014. infrastructure bottleneck that plagues businesses. Moreover, 3 Gachanja 2015; Otuki 2017. lack of access to a reliable electricity supply increases the use of environmentally unfriendly alternatives such as diesel- 4 Gachanja 2015; McGregor et al. 2014. powered generators. 5 Honan 2016. 6 Vidal 2016. Deficit of adequate and affordable housing Africa’s rapid urbanization and population growth has led Source: Authors, based on Gachanja, 2015; Honan, 2016; McGregor and to a severe affordable housing shortage and a rise in Doya, 2014: Otuki, 2017; and Vidal, 2016. informal settlements. Today, over 330 million Africans live in slum conditions. The housing backlog is estimated to be over 51 million affordable housing units, with 17 countries experiencing a housing backlog of over 1 million units.17 On one hand, countries such as Botswana, Mauritius, and Tunisia have expansion is occurring through an unplanned and low-density no housing deficit, while Nigeria is estimated to have a housing transformation of rural land into urban land. shortage of at least 17 million units, the highest in the continent (Table 2). The socioeconomic impact of the housing shortage is Low access to basic infrastructure services clear. It causes overcrowding, increases the incidence of Africa suffers from a severe infrastructure deficit. The diseases, and hinders the provision of basic social and public continent’s infrastructure deficit is a major impediment to the services such as water, sanitation, education, and physical continent’s growth because it hinders domestic private safety. In such a situation, high population growth and a youth investments, deters FDI, impedes industrialization, reduces bulge tend to be liabilities rather than dividends. productivity, and limits the provision of services. Consequently In addition to the shortage of adequate housing, this deficit hinders the improvement of the quality of life of affordability is a major issue facing households across 58 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards Table 2: Housing backlogs in selected countries Box 2: The shortage of skills in the Kenya construction Housing Housing sector backlog backlog Country (millions of units) Country (millions of units) In the construction sector, both skilled and unskilled labor Central African Rep. 1.0 Madagascar 2.0 together generally represent 30 percent of overall construction costs. Whereas unskilled labor is often widely available, there is Ethiopia 1.0 Mozambique 2.0 a shortage of skilled workers, especially well-trained technicians such as carpenters, electricians, general construction workers, Cameroon 1.2 Kenya 2.0 plumbers, and—in some countries—architects and engineers. Algeria 1.2 South Africa 2.3 These skills shortages are having a negative impact on housing costs and quality.1 In turn, the poor-quality supply and high cost Zimbabwe 1.3 Tanzania 3.0 of housing undermine countries’ productivity by reducing labor Zambia 1.5 Congo, Dem. Rep. 3.0 market flexibility, increasing mortgage spending, and preventing investment from being redirected toward more productive Uganda 1.6 Egypt 3.5 activities. In Kenya, the Federation of Master Builders, representing Ghana 1.7 Nigeria 17.0 2,500 contractors, highlights the important skills gap in the Angola 1.9 adequacy, productivity, and quality of human resources. This is largely the result of high training costs that are not affordable for many young people, but the curricula of most training institutions Source: Faye et al. forthcoming (2017). are also out of touch with industry needs. In consequence, local artisans construct housing units without respecting building codes, increasing the cost of construction and limiting their ability to construct decent, safe dwellings. A shortage of managerial skills was also cited as a big constraint to scaling up affordable housing delivery. Habitat for Humanity in Kenya African cities. A substantial number of households cannot observes that the lack of training and skills locks low-income afford an entry-level home supplied by the market. A recent households into a cycle of poor-quality, self-built housing.2 They plead for policymakers to expand the technical and vocational African Development Bank (AfDB) study estimates that 81.5 training of youth in the skills needed by the construction and million households can only afford a house that costs US$3,750 manufacturing sectors, ideally in close partnership with the or less.18 Besides providing jobs for the continent’s unemployed private sector to ensure that needs are identified correctly and youth and building a solid industrial base, closing the housing training is delivered effectively. It is of utmost importance to have gap would significantly contribute toward Sustainable the right skills mix throughout the housing supply chain because Development Goal 11 of making cities safe and sustainable. it means faster construction with less rework and hence results The reasons for the shortage of affordable and in lower construction costs. adequate housing can be traced throughout the steps of Notes the housing delivery value chains. Lack of urban planning 1 Faye et al. forthcoming (2017). and adequate building standards are causing a shortage of 2 Habitat for Humanity in Kenya 2014. urban land, resulting in high prices and urban sprawl. Direct and indirect evidence shows that land use regulations, defined Source: Faye et al. forthcoming (2017). in urban plans, explain the majority of the differences in housing supply across space.19 These regulations create market failures that prevent the housing market from functioning properly as theory would suggest, especially the no-arbitrage equilibrium condition.20 An overreliance on imported building materials, and monopoly pricing in some cases, contribute to very high prices. The dominance of small- and medium-sized developers focuses on the spillover effects of residential housing and artisanal construction methods with low capacity investment. It specifically shows that residential investment is lengthens construction time, lowers quality, increases an enabler of housing provision, job creation, and economic construction costs, and limits the supply of housing (Box 2). growth. Finally, it discusses the provision of an attractive Lack of financing for developers and housing customers, along business environment through the creation of special economic with high financing costs for those that qualify for loans, add to zones (SEZs), which are recognized as a way to support the overall housing costs. All these issues are amplified by competitive private-sector development. This section does not inadequate institutional and regulatory frameworks and poor specifically discuss policies dealing with the shortage of governance.21 This constitutes an environment not conducive infrastructure such as power and transport systems nor the for reaping the demographic dividend. financing mechanisms to fill this gap, which have been more extensively discussed elsewhere.22 Increasing African city competitiveness for making the demographic dividend a reality Urban planning to lay the foundations of competitive cities This section provides policy recommendations for how to The adoption of comprehensive and up-to-date urban plans leverage the competitiveness of African cities to address the that reflect recent economic and demographic challenges related to demographic changes. First, concrete developments is crucial for laying the foundations of and immediate policies for adequate urban planning competitive cities better equipped to benefit from addressing the demographic issues and economic changing urbanization. UNECA (2017) highlights that urbanization and landscape of African cities are discussed. Next the section industrialization can be closely associated in a mutually beneficial The Africa Competitiveness Report 2017 | 59 Chapter 1.3 manner. However, in Africa, industrialization requires better- that urban expansion is faster than population growth, at functioning cities. Although some cities, such as Addis Ababa 7.7 percent and 4.6 percent, respectively, for the period and Casablanca, have updated their urban plans, a number are 2003–15. This lowers the density in African cities, leading still using master plans from the colonial era.23 These master to high costs of urban infrastructure and lower benefits plans do not include increased urban population or changes in of urbanization through limited economies of scale. Yet, economic structures. They also lack good transport networks to in several cities, large plots of land near the urban center connect workers and employers. New urban plans need to pay remain empty. For instance, Lall et al. report that more than special attention to the following issues: (1) providing land for 30 percent of land within 5 kilometers of the city centers public infrastructure and green space; (2) including informal of Harare (Zimbabwe) and Maputo (Mozambique) remains settlements as integral parts of cities; (3) increasing urban density; unbuilt.27 Urban planning should seek to increase urban and (4) increasing connectivity between workers and firms. The density by reducing minimum plot sizes and infill, whereby World Bank notes that urbanization strategies should depend on housing developments occur in unbuilt areas in the city. each country’s share of urban population and should focus on However, for this to be effective, tax policies and land providing good land policies at early stages of urbanization and reforms may be necessary. For instance, governments can providing connective infrastructure for areas that are urbanizing adopt high taxes for unbuilt land in urban centers, which fast. These strategies should then adopt targeted interventions to can push land owners to develop their land or sell it to deal with slums for highly urbanized areas.24 housing and commercial developers. 1. Providing land for public infrastructure and green 4. Increasing connectivity between workers and firms: space: UN-Habitat notes that the share of public space Urban sprawl and lack of mass transit systems means and roads in urban land in Africa is 15–20 percent, that workers in many cities need long commute times which is half the global average of 30–40 percent.25 The each day between their places of work and residence. shortage of urban land earmarked for urban infrastructure This not only decreases productivity but also increases increases the costs of building roads, airports, and other pollution. For instance, residents of Kilamba and Zango, public infrastructure on previously settled land, because near Luanda, Angola, spend up to two hours each way to inhabitants are compensated for the destruction of their commute the 25 to 40 kilometers to reach their places of dwellings. This ultimately leads to a lower road network work in Luanda. This type of geographic divide between density. Moreover, the shortage of public spaces where work places and workforce should be avoided for cities urban dwellers can meet to socialize or undertake to become competitive. New satellite towns should recreational activities lowers the quality of life in cities. It is provide land for mixed use, residential, and commercial not rare to see roads in several African cities transformed purposes. Industrial corridors or SEZs need to provide into soccer fields during the weekend. Urban planning places for residential housing or build mass transit systems that anticipates these needs ahead of time will not only between populated areas and SEZs. Better connectivity allow for lower infrastructure cost but also provides a between workers and firms, and between producers better quality of life for future residents. and consumers, are necessary to reap benefits from economies of scale and agglomeration.28 Urban planning is 2. Including informal settlements as integral parts an important starting point to achieve better connectivity. of cities: Cities around the world have had varying responses to informal settlements, ranging from neglect Leveraging residential housing construction to forced evictions. However, since the early 2000s, the Addressing the large urban infrastructure deficit, including concept of “Right to the Cities” has been adopted by the housing backlog, is an opportunity for African cities to different international organizations. Today, the World tackle wider economic development issues. However, this Charter for the Right to the City recognizes that all opportunity will lead to benefits only if cities regularly update population subgroups, including the poor, women, youth, their urban plans to take into account new realities. Updated refugees, immigrant workers, and so on have equal rights urbans plans will lower costs of urban infrastructure and to benefits from urbanization. This implies that, instead increase the supply of urban land for housing. It will also allow of forced evictions of slum dwellers, governments must for the introduction of mechanisms to generate more fiscal improve the living conditions in slums. This change in revenues for the provision of urban infrastructure, which should mentality has led many African governments to adopt precede housing construction. slum upgrading programs that consist of providing urban In addition to providing shelter to a growing urban infrastructure and land security. With their very high share population, housing construction has large economic of informal settlements, urban planning in African cities externalities. The impact of housing investment on economic must seek ways to improve urban infrastructure without development has been widely studied.29 All studies shows a necessarily moving people out of their community. correlation between housing investment and economic growth. 3. Increasing urban density: As previously discussed, rapid However, disagreement exists on the direction of causality and urbanization and lack of planning have led to urban sprawl some evidence shows that causality in both directions.30 in many African cities. Agricultural land is being transformed Neoclassical growth theory suggests that housing investment is into urban land at a very fast pace, while commute times a driver of economic growth through its impact on capital and traffic jams are increasing. For instance, Bamako’s formation. Arku and Harris argue that housing investment affects population growth between 2000 and 2013 was almost economic development though its effects on employment, matched by the growth of its urban expansion, 5.7 percent savings, total investment, and labor productivity.31 In many and 5.1 percent, respectively, implying a low increase in countries, housing represents the main wealth of households. In urban density.26 The averages for sub-Saharan Africa show the analysis below, we focus on three channels through which 60 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards Table 3: Employment and output effects of housing construction in selected countries, selected years Economic effects Employment effects Jobs created/million Country Output multiplier invested (in local currency) Jobs created/housing unit Data source Argentina n/a 40† n/a Freire et al. 2006 Australia 2.90‡ 37‡ n/a ABS 2007 Canada n/a n/a 1.90† Altus Group Economic Consulting 2009 Ethiopia n/a n/a 2.24* Faye et al. forthcoming (2017) India 3.84‡ 40.6‡ 2.34* NCAER 2014 Philippines 16.61‡ n/a n/a Uy 2006 South Africa n/a n/a 5.62† Viruly 2014 United Kingdom n/a n/a 3.01‡ Home Builders Federation and Nathaniel Litchfield & Partners 2015 United Kingdom n/a n/a 4–6‡ Kleinman 2014 United States n/a n/a 4.91‡ NAHB 2015 Two sources of data for the United Kingdom provide a range of estimates. n/a = not available; * = direct effect only; † = direct and indirect effects; ‡ = direct, indirect, and induced effects. housing investment affect the economy: financial sector emerging and advanced countries, that the median share development, increased economic activity through extensive of mortgages in household credit was 70 percent.33 linkages with the local economy, and job creation. However, there is a wide variation in the mortgage-to-GDP ratio, ranging from below 1 percent in Russia to above 1. Financial sector development: A housing purchase is 80 percent in Switzerland. Financial sector development, one of the largest investments that most households measured as debt-to-GDP ratio, explains 60 percent of ever make during their lifetime. Such an investment this variation. A number of countries have adopted policies is often not feasible without the participation of the aimed at developing housing finance markets not only to financial sector, through mortgages and other housing increase access to home ownership but also to develop finance instruments. Because of the long-term nature the financial sector. For instance, in the United States, of housing finance, financial intermediaries use different mortgage interests are deductible from tax liabilities. channels to raise the required funding, which facilitates the development of the financial sector. Housing loans, 2. Linkages with the local economy: Housing backed by collateral, are also safer than other consumer construction has significant linkages throughout the loans and provide resilience to the financial sector. In economy. The construction sector uses inputs from addition, homebuyers are obliged to save for months mining and quarrying, manufacturing, and services. and years to meet the required down payment of 10–20 Subsectors such as building materials manufacturing percent of the house price. This increases savings and (cement, steel bars, wood, etc.), furniture making, thus the availability of funds in the financial system. architectural services, and rental and leasing activities Housing purchase and housing finance is also associated depend heavily on housing construction. Polenske with financial market innovation and the development of and Sivinitades compiled estimates of direct backward the secondary mortgage market. It provides additional linkages found in different studies where, for developed financial securities (e.g., mortgage-backed securities) for countries, the sector ranked in the top five of sectors diversifying risks to institutional investors such as pension with the highest direct backward linkages.34 For instance, funds and insurance companies.32 Insurance companies in 1977, intermediate inputs represented 58 percent also benefit though increased business opportunities of US construction output, making it the third most because mortgage customers are required to purchase linked sector. For Turkey, direct backward linkages are homeowner’s insurance, mortgage insurance, or life estimated at 50.6 percent.35 insurance in several countries. Moreover, home equity The high level of linkages with other sectors means serves as collateral for consumer borrowing for different that investments in housing yield high benefits purchases. This stimulates lending and financial sector throughout the economy. Table 3 shows estimates of development. Cerutti et al. report, for a sample of 52 output and employment effects of housing construction The Africa Competitiveness Report 2017 | 61 Chapter 1.3 from various studies. A study by UN-Habitat and ILO finds of the demographic dividend. Moreover, the extensive that the output multiplier of housing construction is linkages of the construction sector imply that productivity between two and three times the initial investments in growth in housing construction will spill over into other sectors most developing countries.36 This is confirmed by a recent in manufacturing and services, thus lifting overall productivity. study on India noting that residential construction For example, Ethiopia’s Integrated Housing Development generates an output multiplier of 3.84 when considering Program has been important for job creation, manufacturing both indirect and induced effects.37 Numbers reported by development, and economic growth in general. The program is Uy for the Philippines are an order of magnitude higher.38 not seen as just a tool to address housing shortages but also In the United States and Canada, the economic impact of as part of the broader development policy. residential housing construction was estimated by Another important link between housing construction assessing the additional income and taxes generated by and city competitiveness is through government revenues. the construction of a given number housing of units. The Housing and land assets, being immobile, are easier to tax to National Association of Home Builders (NAHB) in the generate revenues for local and national governments. The United States estimates that the construction of 100 revenues can then be used to improve urban infrastructure and single-family homes in a typical local area generates address social programs, such as upgrading slums. A policy of US$28.7 million in local income and US$3.6 million in local land value capture is needed to rationalize the use of land and taxes.39 Similarly, the estimate for Canada is CA$33 million for budgetary reasons. However, it would need a lot of (about US$24 million).40 Because of its large multiplier upstream effort for land demarcation, registration, titling, and effects, residential construction is seen as leading indicator valuation. Improving urban infrastructure will facilitate the of economic activity. In the United States, housing starts movement of people in cities and reduce the high productivity (total new private housing units started) is a key economic costs of transport gridlock. Other inputs can also be taxed for indicator published monthly to gauge the direction of the addressing challenges in the housing sector. In Morocco, a economy. small tax on cement is used to constitute a guarantee fund for low-income housing and to support the program of slums 3. Job creation: A key factor behind the high-output elimination (“Villes sans bidonvilles”). This fund has been multipliers observed across countries is the labor successful in increasing mortgage access for households in the intensity of the construction sector as a whole and informal sector and reducing the number of slums in the of residential housing in particular. In the Organisation country. of Economic Co-operation and Development (OECD) countries, the construction sector employed 36.4 million Special economic zones for competitive African cities people in 2016. For the United States alone, the sector Special economic zones (SEZs) are a practical way to employed 10.3 million people as of December 2016.41 circumvent poor business environment limiting private- The sector is also a big employer in South Africa, with sector development and competitiveness in many cities. 1.4 million employees in 2016. The sector is one of the The recommendation to improve the business environment in most labor intensive in developing countries. Housing Africa has been made for decades, yet African businesses are construction creates direct, indirect, and induced still constrained with inadequate regulatory frameworks, lack of employment.42 Estimates for full-time equivalent (FTE) energy, poor distribution systems, and poor access to finance. direct jobs per housing unit constructed are 2.24 in The supply of adequate infrastructure and simplification of Ethiopia and 2.34 for India.43 Considering direct and regulatory business systems in a specific urban area can indirect jobs, the estimates are 1.90 FTE jobs for Canada enhance private-sector development and increase job creation, and 5.62 jobs for South Africa.44 Including induced effects, hence improving city competitiveness. The analysis in this the estimate for the United States is 4.91 FTE jobs per chapter takes into account lessons learned from various parts of housing unit and 3 to 6 FTE jobs for the United Kingdom.45 the world with the purpose of identifying factors of success and There are also estimates of employment creation per sharing lessons, focusing on city-wide SEZs. It acknowledges million of local currency invested in housing. The estimates that SEZs need not only a coherent and flexible policy shown in Table 3 are all around 40 FTE jobs per million. environment, but also competitive urban locations with sufficient It is 40 for Argentina (direct and indirect), 37 in Australia quality infrastructure together with a capable financial system. (overall effects), and 40.6 in India (overall effects). Successful SEZs, as observed in China, support, in turn, the These numbers show that investment in housing economic development and industrialization of the city where construction will be crucial for increasing job creation they operate.47 The analysis therefore explores the opportunities in African cities. Estimates by Faye et al. show that and challenges faced by city-wide SEZs in Africa and discusses addressing the huge shortage of over 51 million housing policy recommendations to improve their implementation. units across the continent would add 288 million jobs over 10 years or 29 million per year, on average.46 Given the The benefits of special economic zones for city competitiveness projected increase in population and labor force presented SEZs are perceived to be a means of enhancing the in Chapter 1.2, housing construction will be critical for competitiveness of the local economy by reducing Africa to benefit from the demographic dividend. production costs, increasing trade and investment, and creating jobs within national economies. Through reduced Housing construction and city competitiveness regulatory burden, tax incentives, and low tariffs, SEZs provide a Investment in residential housing construction will lead to more favorable business environment, facilitate access to new job creation, financial sector development, and economic markets, and encourage the concentration of industrial growth growth; in turn, these are expected to increase city (see Box 3). They are eventually able to attract more FDI through competitiveness in Africa and facilitate the materialization favorable policies and locations, thereby triggering industrial 62 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards Box 3: Definition and main characteristics of special Box 4: Successful Chinese special economic zones: economic zones Favorable policies and adequate location in cities Special economic zones (SEZs) are designated areas where The standard model of special economic zones (SEZs) economic regulations are different from those of the rest of the developed in China are government-run export enclaves offering country. The term refers to free trade zones, free ports, export low taxation and appropriate logistical and infrastructure processing zones, free enterprises zones, industrial parks, incentives to enterprises, most of them focusing on light economic cooperative zones, or specialized zones (science and manufacturing and shipping. The central government decided to technology parks, petrochemical zones, logistics zones). All SEZs establish the first four SEZs to act as experimental laboratories share the following four characteristics: (1) construction relies for reducing poverty and promoting growth. The initial success on attracting and utilizing foreign capital; (2) the main forms of with SEZs in Shenzhen (in southeast China) was replicated in companies are joint ventures with foreign capital, partnerships, other parts of the country and has played a key role in China’s and wholly foreign-owned enterprises; (3) products are overall economic development. Chinese SEZs eventually primarily export-oriented; and (4) government-led infrastructure expanded across an entire city or province. Among the key development is sufficiently advanced and progress is being success factors of Shenzhen are its favorable public policies and made toward a market-based economic system. According the location of the city (near the sea and close to Hong Kong to the Foreign Investment Advisory Service (FIAS),1 SEZs are SAR, an international center for finance, trade, transportation, typically established with the goal of achieving one or more of the and travel), making it the most open and export-oriented city in following objectives: (1) attract foreign direct investment, (2) serve China. Location is key, which reinforces the importance of urban as a “pressure valve” to alleviate large-scale unemployment, (3) planning. support a wider economic reform strategy, and (4) act as an In the early 1980s, China’s SEZs accounted for around experimental laboratory for the application of new policies and 60 percent of the country’s foreign direct investment (FDI) approaches. and 5 percent of its gross domestic product (GDP). They also increased the share of the industrial sector in GDP as well as Note the standards of living of the Chinese population.1 In terms of 1 FAIS 2008. foreign investment, SEZs improved and extended the scale, quality, and channels of attracting investments through favorable Source: Authors, based on FIAS 2008 and Woolfrey 2013. policies and locations. For example, FDI in Shenzhen increased from US$5.5 million in 1979 to US$5.3 billion in 2012,2 and its total exports and imports reached US$537.4 billion in 2013, an increase of 15.1 percent over the previous year.3 According to World Bank, the city of Shenzhen has experienced the fastest growth of all Chinese cities and attracted a large young labor force specializing in electronic goods into the city.4 Notes spillover as well as promoting technology transfer and 1 Zeng 2015. contributing to human upgrading at the local level through the 2 China Statistics Press 2013. development of backward and forward linkages.48 Furthermore, 3 UNDP and IPRCC 2015. they create waged employment and promote exports together with enhanced foreign exchange earnings, and economic 4 World Bank 2009. diversification.49 Currently, around 3,000 SEZs operate in more Source: Authors, based on Tao et al. 2016. than 130 countries, mainly in the developing world. They have created 70 million jobs and raised US$500 billion annually in direct trade-related value addition.50 In China, SEZs have been associated with rapid economic growth in the 1990s and 2000s, exports revenues, technological and skills spillovers, employment creation, and economic linkages at the local level (Box 4). As such, SEZs policymaking, the use of preferential trade agreement, stand as a clear way to reap demographic dividends in specialization, and insular geography.54 competitive cities. This success story has set the stage for a A few African countries have established a city-wide basic SEZ policy model guiding subsequent SEZ SEZ model (as opposed to the Mauritius nation-wide implementation across the developing world.51 model) and are performing particularly well. They have African countries started implementing SEZs in the successfully harnessed the concentration of production in the 1970s but the process accelerated in the 1990s–2000s, cities where they have been operating, and are seeing following the Mauritian success (see Table 4 on page 64). subsequent economic integration resulting from growing Many of the African SEZs focus on textile, apparel, and urbanization.55 For example, targeted annual investments for agro-processing industries. As of 2008, the Foreign Investment SEZ developments in Ethiopia and the creation of industrial Advisory Service (FIAS) identified 114 SEZs in sub-Saharan parks for textiles in that country amount to US$1 billion over Africa and 53 in Egypt.52 In Mauritius, SEZs’ development next decade.56 Industrial parks are supported by a strong contributed to the country’s structural transformation, the commitment from the Ethiopian government, which has diversification of quantity and quality of exports increased, and considered SEZs to be an essential part of the industrialization job creation in terms of both quantity and diversity of items process of the country since 2007 and has provided, in this exported.53 According to Baissac, the success of Mauritian context, various financial and technical partnerships.57 For SEZs is partly the result of appropriate government instance, as of 2015, the Bole Lemi Industrial Zone in Addis- Ababa was hosting 12 international textile-related companies The Africa Competitiveness Report 2017 | 63 Chapter 1.3 Table 4: Overview of SEZs in Africa by decade of launch Sector Decade Country Agro-processing Textile Apparel Service Mining, Oil & Gas Others Liberia l l l Mauritius l l 1970s Senegal l l l Egypt l l Djibouti l l l 1980s Togo l l l Algeria l l Cameroon l l Ghana l l l l Kenya l l Madagascar l l Malawi l l l Morocco l l l 1990s Mozambique l Namibia l l l Nigeria l l l Seychelles l l l Tunisia l l l Zimbabwe l l l l Burundi, Cape Verde, Equatorial Guinea, Rwanda, Sudan and Uganda 2000s Botswana, Democratic Republic of Congo, Eritrea, Ethiopia, Gabon, the Gambia, Mali, Mauritania, South Africa, Tanzania, and Zambia Source: Tao et al. 2016. and has created around 3,000 jobs.58 In terms of employment Table 5: SEZ employment creation and exports worldwide, creation, the Thema Export Processing Zone in Ghana and the by region Tangier Free Zone in Morocco are other successful examples. Employment Thema’s SEZ, which houses over 200 companies, including (millions of Exports Nestle and L’Oréal, had created about 30,000 jobs by the end Region workers) (US$ millions) of 2012, of which only 1,000 were held by expatriates. Nearly Sub-Saharan Africa 1.0 8,605 522 companies were established in Tangier, representing Asia and the Pacific 61.1 510,666 US$830 million in investments, and more than 50,000 direct jobs by end of 2010.59 Americas 3.1 72,636 African SEZs have, nonetheless, generally Central and East Europe and Central Asia 1.6 89,666 underperformed their counterparts in other developing Middle East and North Africa 1.5 169,459 countries (Table 5). They generated lower amounts of investment, exports, and employment as well as less economic Source: FIAS 2008. diversification, technological upgrading, and structural transformation.60 Reasons for the underperformance of African SEZs include many political factors such as poor governance, lack of adequate institutional framework and coordination, weak political commitment and implementation capacity, and policy unpredictability, as well as a lack of proper monitoring and evaluation mechanisms. The following section discusses three important factors needed to enhance the performance of 64 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards African SEZs. First, it reviews the need to integrate SEZs into a Table 6: Unskilled labor costs and wages, selected African broader trade and industrialization strategy. Second, it and Asian SEZs highlights the importance of establishing strong links between Wage increase SEZs and the cities where they are located. This implies both Unskilled labor relative to national developing skills and choosing a geostrategic location where costs (US$/ minimum wage Country worker/month) (percent) infrastructure allows for trade facilitation and avoids remoteness from markets. Finally, it addresses the strong need to enhance Bangladesh 46 25 labor productivity to make African SEZs competitive on an Vietnam 102 10 international market. Ghana 118 135 Improving the performance of African SEZs Kenya 117 22 To increase the positive spillover effects of SEZs on the Lesotho 150 17 economic development, industrialization, and competitiveness of the local economy, policymakers need to carefully consider Nigeria 202 300 the following issues: Senegal 225 75 1. Establish a consistent strategic planning based Tanzania 133 60 on national comparative advantage: African governments have been unable to continuously reform Source: Farole 2011. and upgrade their administrative capacities and to The wage increase shows the difference between the average wage of a worker create a competitive business environment for SEZs. in an SEZ compared with the minimum wage of the country as a percent. For example, in Bangladesh the wages in SEZs are 25 percent higher than the According to two studies,61 poor legal, regulatory, and country’s minimum wage. institutional framework and the lack of strategic planning are significant obstacles to SEZ development in Africa. African governments have not proved successful in focusing on economic sectors where the country has a comparative advantage.62 Furthermore, SEZs often poor trade facilitation, and land tenure and registration.67 rely on a single export market. Policymakers need to be Environmental standards should be in line with the United more coherent and integrate SEZs into national economic Nations Industrial Development Organization’s Guidelines and urbanization plans. High-level political commitment for Green Industry Parks.68 and effective inter-ministerial collaboration are crucial to 3. Focus on labor productivity: Currently, African SEZs support industries that have a comparative advantage face a big competitiveness challenge that, in addition through SEZ development.63 to limiting their own development, prevents them from 2. Link SEZs to local economies and cities: Maximizing contributing significantly to the urban areas where they the spillover effects of African SEZs on cities should not are operating and, more globally, to national economies. merely be based on tax reduction and the promotion Most African SEZs focus on traditional labor-intensive of technology and know-how transfer at the SEZ level. manufacturing sectors such as garments, electronics, Policymakers should provide incentives for the creation textiles, agro-processing, and metal and wood working. of joint ventures between foreign SEZ companies and However, the wages that they offer to the local labor local companies as well as establish low minimum force tend to be high compared with wages offered in investment thresholds for local companies.64 In order Asian SEZs, while productivity is lagging (see Table 6).69 for SEZs to rely on a productive local labor and capital, This lack of labor productivity and high wages partly African cities would need to provide necessary skills explains why SEZs on the continent do not perform well. and basic and efficient infrastructure (see Box 5 on According to the World Bank, SEZs are more productive page 66). Skills, for instance, are key to a competitive if they exploit advantages both in natural and economic business environment and to attract FDI into SEZs. geographies.70 The latter includes infrastructure; physical In turn, FDI and concentration of an industry in one endowments; human capital accumulation; and the location would attract good management, technology, agglomeration of workers, entrepreneurs, and markets and talent, thereby triggering know-how transfer, skills accessibility. development, and competitiveness. The literature has, It is, however, noted that a shortage of skills is an indeed, pointed out that the mitigated results of SEZs important constraint in many cities. This can be addressed were due to their inappropriate location and a lack of through the design and implementation of effective consideration of specific technical factors of the hosting technical and vocational education and training programs region or country.65 Aggarwal demonstrates that the (see Box 5). limited catalytic effects of SEZs on domestic economies pertained to insufficient linkage development, technology Conclusions and recommendations transfer, and human capital upgrading.66 Indeed, The response of African cities to the increased demand of developing linkages with the local economy would benefit jobs, housing, and other urban infrastructure caused by and enhance the competitiveness of both cities and the continent’s demographic transition will be crucial for SEZs. Farole argues that the overall poor performance Africa to achieve a successful demographic dividend. in African SEZs is partly the result of the poor business Competitive cities require carefully designed strategies and environment within the zone, including lack of their effective implementation. However, there is no single infrastructure, such as downtime due to power shortages, strategy that cities can follow to achieve competitiveness. Each The Africa Competitiveness Report 2017 | 65 Chapter 1.3 Box 5: Increasing the availability of skills through technical vocational education and training (TVET) programs Although technological change is creating some uncertainty With the exception of lower-secondary vocational programs, TVET about the future of jobs and the relevant skills needed by the enrollment rates declined from 2000 to 2014 (Table A). They are next generation of workers,1 certainly technical professions will below the world average and far below the figures for Middle East remain in high demand in Africa. According to a 2015 survey and North Africa, East Asia and Pacific, and the European Union. conducted by South Africa’s Department of Higher Education To change this situation, African governments need to deal and Training, the most in-demand occupations include engineers, with key factors hindering the sector. First, a cultural attitude shift is physical technicians, and electricians as well as project or finance needed to emphasize the importance of TVET relative to university managers.2 At the same time, as shown by World Economic education. Indeed, TVET is seen as offering lower prestige and Forum’s Executive Opinion Survey, the availability of scientists and social status than other higher education options, despite the engineers declined in many African countries between 2008 and overwhelming evidence that it should be treated as a priority.4 2016. Expanding and improving technical vocational education and Second, TVET programs are underfunded by governments and training (TVET) programs may play an important role in filling this not affordable to students. On average, only 5 percent of public specific type of skill gap. education expenditure goes to TVET.5 There is scope to increase Well-designed TVET programs can in fact trigger productive private financing and participation in TVET in Africa, a strategy employment by increasing the pool of technical skills available that some governments are already pursuing.6 Apprenticeship or in a country and creating better links with formal employment. dual training may ultimately be less expensive and more efficient Recognizing the importance of improving the supply of technical than center-based training.7 Most importantly, the quality of TVET skills, many developing countries have taken a stronger stance programs and the delivery mechanism need to improve. Better on expanding TVETs and improving partnerships with the private quality with better aligned with skills demand and assistance job sector. The African Union’s Plan of Action for the Second Decade placement upon graduation will be the best mechanism to increase of Education (2006–2015) encouraged TVET as a policy tool to the status of TVET programs and lower youth unemployment. reduce youth unemployment.3 Although a few African countries Better monitoring systems will be important in this process.8 have heeded this call, TVET programs are still underused in Africa. Table A: Students enrolled in vocational programs by level of education (percent of total per level) Lower secondary Secondary Upper secondary Region 2000 2014 2000 2014 2000 2014 World 0.92 1.50 10.06 10.68 25.28 22.43 Sub-Saharan Africa 2.34 3.04 7.51 6.34 16.09 11.80 Middle East and North Africa 2.43 2.72 12.62 11.16 27.77 22.53 East Asia and Pacific 0.40 0.33 13.60 17.51 41.37 38.89 South Asia 0.00 0.00 0.96 1.64 2.38 3.59 Latin America and the Caribbean 3.60 5.33 7.87 8.86 15.10 14.23 North America 0.00 0.00 0.09 0.44 0.19 0.89 European Union 0.46 4.03 23.92 27.07 49.44 48.85 Source: UNESCO Institute for Statistics, UIS.Stat database, http://data.uis.unesco.org/. Notes 1 World Economic Forum 2016. 5 Walther 2012. 2 Republic of South Africa, Department of Higher Education 2016. 6 AFD and ADEA 2014. 3 African Union 2006. 7 Walther 2012. 4 AfDB et al. 2008. 8 AfDB et al. 2008. city’s strategy will be based on its own constraints and between economic growth and disposable household income comparative advantages. in the sample of 102 African cities considered in this chapter. Data analysis of African cities’ competitiveness for the Another interesting finding is that high employment growth has period 2000–16 reveals that the performance of cities not always been accompanied by household disposable across the continent varied widely. Cities in economies income growth, an indication of slow growth in wages and/or a dominated by natural resources had a very fast growth in per fast increase in the number of households. capita GDP, yet they were less successful in improving The analysis of the constraints to city competitiveness households’ disposable incomes. The opposite occurred in has highlighted the negative consequences of the lack of more diversified economies, a finding that emphasizes the urban planning and the deficit of urban infrastructure, need for African cities to diversify their economies to achieve including affordable housing. Poor urban infrastructure, such inclusive growth. However, there is a strong correlation as lack of electricity access or inadequate transportation, 66 | The Africa Competitiveness Report 2017 Competitive African Cities for Better Living Standards reduces business formation and productivity. Combined with 5 World Bank 2015. poor urban planning and rapid urban population growth, a 6 World Economic Forum 2014. number of cities have witnessed an explosion of slums and 7 World Economic Forum 2014. large housing backlogs. This housing shortage not only lowers 8 Choe and Roberts 2011. household welfare but also increases matching costs between employers and employees and hinders labor productivity. 9 Glaeser 2007. Another factor contributing to the lack of competitiveness is the 10 The database is available for 102 cities from 49 African countries poor business environment that is a result of heavy regulation, (see the list in the Appendix) and includes demographic, economic, and labor market variables as well as detailed household income widespread corruption, and low access to finance. Moreover, distribution. The database compiles data from different sources but the issue of youth unemployment is becoming acute in a also uses macroeconomic models to make forecasts for up to 2030. number of cities. Included in these constraints, among the For further information, please consult http://www.oxfordeconomics. com/forecasts-and-models/cities/middle-east-and-african-cities-and- perennial major factors contributing to the lack of regions/overview. competitiveness of African economies are insufficient 11 GDP = wages + interest + rent + profits – net factor income from infrastructure development, insufficient human capital, and abroad + capital consumption allowance + indirect business taxes. weak governance. Addressing these obstacles will certainly Household income includes wages, interest income going to improve the competitiveness of countries in general and of households, and rent earned by households. A big difference between household income and GDP is the amount of profits earned by firms. cities in particular. In addition, African cities must create jobs and provide decent affordable housing for their growing urban 12 Faye et al. forthcoming (2017); World Bank WDI online database. population in order to achieve a demographic dividend. 13 Lall et al. 2017. Up-to-date and adequate urban planning is necessary 14 AfDB et al. 2016. not only to address the large shortage of affordable 15 Faye et al. forthcoming (2017). housing in cities but also to increase the density of transport networks at lower costs, thereby increasing the 16 AfDB 2016. connectivity between workers and firms, and between 17 Faye et al. forthcoming (2017). producers and consumers. This will ultimately help firms 18 Faye et al. forthcoming (2017). benefit from economies of scale and agglomeration. The 19 Glaeser and Ward 2006; Katz and Rosen 1987. analysis also indicates that residential housing investment is important for city competitiveness: it not only provides shelter 20 Glaeser 2007. for the growing urban population but also creates a large 21 Faye et al. forthcoming (2017). number of jobs. It is a very labor intensive sector with extensive 22 AfDB et al. 2016; AfDB 2016. backward linkages, including linkages with the financial sector. 23 AfDB et al. 2016. Job creation requires policies that address both the supply and demand sides of labor markets, and must 24 World Bank 2009. include special emphasis on the housing sector and the 25 UN-Habitat 2013. development of city-wide SEZs. Policies should increase the 26 Atlas of Urban Expansion. supply of a skilled workforce and reduce the skills mismatch. 27 Lall et al. 2016. On the demand side, policies favoring the development of the private sector are required. This chapter focuses on policies to 28 Collier 2016. circumvent the constraints of the poor business environment 29 Arku and Harris 2005; Burns and Grebler 1977; Chen and Zhu, 2008; and places special emphasis on labor-intensive sectors, Dolin et al. 2013; Leung 2004; Lopes et al. 2002; Polenske and Sivinitades 1990; Terzi and Bolen, 2007; Turin 1973; Wells 1985. particularly housing. Another recommendation would be to improve the business environment and build better 30 Chen and Zhu 2008. infrastructure in specific urban areas to create successful SEZs 31 Arku and Harris 2005. as a catalyst for competitive private-sector development. The 32 Dubel 2007. chapter has provided a thorough analysis of the reasons for the 33 Cerutti et al. 2015. success and failure of SEZs around the world and in Africa in particular, with a spotlight on city-wide SEZs. It has shown that 34 Polenske and Sivinitades 1990. the success of the SEZs and their positive spillover effects on 35 Coban et al. 2015. the local economy depends on careful planning and 36 UN-Habitat and ILO 1995. understanding of comparative advantage as well as linkages 37 NCAER 2014. between the particular SEZ and the rest of economy. In other words, policymakers should avoid geographic and economic 38 Uy 2006. isolation and should pay special attention to labor markets, 39 Home Builders Federation and Nathaniel Litchfield & Partners 2015. including skills and capital costs in urban areas where SEZs are 40 Altus 2009. located. 41 OECD statistics, Employment by activity. Available at https://data.oecd. org/emp/employment-by-activity.htm. Notes 42 Induced employment is the consequence of construction. For example, 1 UN Population Division, World Population Prospects, 2015 revision. to construct a house, a carpenter (direct job) is needed; furniture is also 2 UN-Habitat and UNECA 2015. bought, providing (indirect) employment. The people who have these jobs have salaries they spend on consumer goods, services, transport, 3 AfDB et al. 2016. and so on. This spending generates demand for goods and service. To satisfy this demand you need employees—hence the induced 4 Collier 2016. employment. The Africa Competitiveness Report 2017 | 67 Chapter 1.3 43 Faye et al., forthcoming (2017); NCAER 2014. Arku, G. and R. Harris. 2005. “Housing as a Tool of Economic Development since 1929.” International Journal of Urban and Regional Research 29 44 Altus Group Economic Consulting 2009; Viruly 2014. (4): 895–915. 45 Estimates for constructing single-family homes are much higher than Altus Group Economic Consulting. 2009. “Economic Impacts of those for multifamily rental apartments. See Home Builders Federation Residential Construction.” Report for the Canada Mortgage and and Nathaniel Litchfield & Partners 2015; Kleinman 2014; NAHB 2015. Housing Corporation, Ottawa. Available at http://www2.hamilton. 46 Faye et al. forthcoming (2017). ca/NR/rdonlyres/1F84E3C3-009A-46AF-B95E-7F6D3F05D697/0/ Jun17Item88iieconomicimpact.pdf. 47 Farole 2011. Atlas of Urban Expansion. Available at http://www.atlasofurbanexpansion. 48 O’ Flaherty 2008. org/. 49 Cheesman 2012. Auty, R. 2011. “Early Reform Zones: Catalysts for Dynamic Market Economies in Africa.” In Special Economic Zones: Progress, Emerging Challenges, 50 Cheesman 2012. and Future Directions, T. Farole, and G. Akinci, eds. Washington, DC: 51 Brautigam and Xiaoyang 2011; Gupta et al. 2010. World Bank. 207–24. 52 FIAS 2008. Baissac, C. 2011. “Brief History of SEZs and Overview of Policy Debates.” In Special Economic Zones in Africa: Comparing Performance and 53 Aggarwal 2004. Learning from Global Experience, T. 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The Africa Competitiveness Report 2017 | 69 Competitive African Cities for Better Living Standards Appendix: Selected African Cities (alphabetical order) Country Cities Country Cities Algeria Algiers, Constantine, Oran Lesotho Maseru Angola Huambo, Luanda Libya Tripoli Benin Cotonou Madagascar Antananarivo Botswana Gabarone Malawi Blantyre City, Lilongwe Burkina Faso Ouagadougou Mali Bamako Burundi Bujumbura Mauritania Nouakchott Cameroon Douala, Yaoundé Mauritius Port Louis Cape Verde Praia Morocco Agadir, Casablanca, Fès, Marrakech, Meknès, Rabat, Tanger Central African Bangui Rep. Mozambique Beira, Maputo Chad N’Djaména Namibia Windhoek Congo Brazzaville, Pointe-Noire Niger Niamey Côte d’Ivoire Abidjan, Yamoussoukro Nigeria Aba, Abeokuta, Abuja, Benin City, Enugu, Ibadan, Ilorin, Jos, Kaduna, Kano, Lagos, Maiduguri, Ogbomosho, Congo, Dem. Kinshasa Onitsha, Port Harcourt, Zaria Rep. Rwanda Kigali Djibouti Djibouti Senegal Dakar Egypt Alexandria, Al-Mansura, Cairo, Luxor, Mahalla el-Kubra, Port Said, Suez Sierra Leone Freetown Equatorial Malabo South Africa Bloemfontein, Cape Town, Durban, Johannesburg, Port Guinea Elizabeth, Pretoria, Kimberley, Nelspruit, Polokwane Eritrea Asmara Sudan Khartoum Ethiopia Addis Ababa Swaziland Mbabane Gabon Libreville Tanzania Arusha, Dar Es Salaam, Dodoma, Mwanza Gambia Banjul Togo Lomé Ghana Accra, Kumasi Tunisia Sfax, Tunis, Sousse Guinea Conakry Uganda Kampala Guinea-Bissau Bissau Zambia Kitwe, Lusaka, Ndola Kenya Mombasa, Nairobi Zimbabwe Bulawayo, Harare Liberia Monrovia Source: Oxford Economics, African and Middle Eastern Cities Forecasts. Available at http://www.oxfordeconomics.com/forecasts-and-models/cities/ middle-east-and-african-cities-and-regions/overview. The Africa Competitiveness Report 2017 | 71 Part 2 Country Profiles How to Read the Country Profiles The Country Profiles section presents a two-page profile for each of the 35 countries covered in The Africa Competitiveness Report 2017. PAGE 1 Part 2 Algeria 87 th / 138 Global Competitiveness Index 2016-2017 edition Country/Economy Profiles Algeria The Global Competitiveness Index in detail Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Rank / 138 Value Trend Rank / 138 Value Trend 1st pillar: Institutions 6th pillar: Goods market efficiency   Key indicators  99 3.5  133 3.5 Population (millions) 39.9 GDP per capita (US$) 4318.1 1.01 Property rights 117 3.6 6.01 Intensity of local competition 136 3.8 1.02 Intellectual property protection 108 3.4 6.02 Extent of market dominance 87 3.4 GDP (US$ billions) 172.3 GDP (PPP) % world GDP 0.51 1.03 Diversion of public funds 81 3.3 6.03 Effectiveness of anti-monopoly policy 113 3.1 1.04 Public trust in politicians 83 2.8 6.04 Effect of taxation on incentives to invest 92 3.4 Performance overview 1.05 Irregular payments and bribes 1.06 Judicial independence 101 94 3.3 3.4 6.05 Total tax rate % profits 6.06 No. of procedures to start a business 135 126 72.7 12 1.07 Favoritism in decisions of government officials 70 3.0 6.07 Time to start a business days 103 20.0 The first section presents a selection of key indicators for the Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 1.08 Wastefulness of government spending 75 3.1 6.08 Agricultural policy costs 112 3.2 Global Competitiveness Index 87 4.0 Rank 110 / 144 100 / 148 79 / 144 87 / 140 87 / 138 1.09 Burden of government regulation 86 3.2 6.09 Prevalence of non-tariff barriers 125 3.6 1.10 Efficiency of legal framework in settling disputes 67 3.6 6.10 Trade tariffs % duty 127 13.8 Subindex A: Basic requirements 88 4.3 Score 3.7 3.8 4.1 4.0 4.0 1.11 Efficiency of legal framework in challenging regs 75 3.4 6.11 Prevalence of foreign ownership 132 3.1 1.12 Transparency of government policymaking 127 3.2 6.12 Business impact of rules on FDI 135 3.0  1st pillar: Institutions 99 3.5 1.13 Business costs of terrorism 102 4.5 6.13 Burden of customs procedures 114 3.4 1.14 Business costs of crime and violence 71 4.6 6.14 Imports % GDP 85 36.0 economy under review. All data in this section are for 2015 2nd pillar: Infrastructure 100 3.3 1st pillar: Institutions 1.15 Organized crime 80 4.6 6.15 Degree of customer orientation 130 3.7  3rd pillar: Macroeconomic environment 63 4.8 12th pillar: 2nd pillar: 1.16 Reliability of police services 60 4.7 6.16 Buyer sophistication 90 3.1 Innovation 7 Infrastructure 1.17 Ethical behavior of firms 107 3.4 7th pillar: Labor market efficiency  132 3.2  4th pillar: Health and primary education 73 5.7 6 1.18 Strength of auditing and reporting standards 135 3.1 7.01 Cooperation in labor-employer relations 115 3.8 5 1.19 Efficacy of corporate boards 136 3.4 Subindex B: Efficiency enhancers 110 3.6 11th pillar: 3rd pillar: 7.02 Flexibility of wage determination 113 4.3 4 1.20 Protection of minority shareholders’ interests 100 3.7 Business Macroeconomic 7.03 Hiring and firing practices 111 3.3 96 3.9 1.21 Strength of investor protection 0-10 (best) 133 3.3 and sourced from the April 2016 edition of the International  5th pillar: Higher education and training sophistication environment 3 7.04 Redundancy costs weeks of salary 74 17.3 2 2nd pillar: Infrastructure 100 3.3 7.05 Effect of taxation on incentives to work 89 3.7  6th pillar: Goods market efficiency 133 3.5 10th pillar: 4th pillar: 2.01 Quality of overall infrastructure 101 3.3 7.06 Pay and productivity 122 3.3 1 Market size Health and primary 132 3.2 2.02 Quality of roads 96 3.2 7.07 Reliance on professional management 135 3.0  7th pillar: Labor market efficiency education 2.03 Quality of railroad infrastructure 57 3.0 7.08 Country capacity to retain talent 116 2.7  8th pillar: Financial market development 132 2.9 9th pillar: 5th pillar: 2.04 Quality of port infrastructure 105 3.2 7.09 Country capacity to attract talent 125 2.2 Technological Higher education 2.05 Quality of air transport infrastructure 117 3.2 7.10 Female participation in the labor force ratio to men 136 0.24 Monetary Fund (IMF)’s World Economic Outlook (WEO)  9th pillar: Technological readiness 108 3.1 readiness and training 2.06 Available airline seat kilometers millions/week 64 233.2  8th pillar: Financial market development 132 2.9 2.07 Quality of electricity supply 92 4.0  10th pillar: Market size 36 4.7 8th pillar: 6th pillar: 8.01 Financial services meeting business needs 131 3.1 2.08 Mobile-cellular telephone subscriptions /100 pop. 77 113.0 8.02 Affordability of financial services 95 3.5 Financial market Goods market Subindex C: Innovation and sophistication factors 119 3.1 development efficiency 2.09 Fixed-telephone lines /100 pop. 89 8.0 124 2.5 7th pillar: 8.03 Financing through local equity market Labor market  3rd pillar: Macroeconomic environment 63 4.8 8.04 Ease of access to loans 122 2.9  11th pillar: Business sophistication 121 3.3 efficiency 3.01 Government budget balance % GDP 135 -15.3 8.05 Venture capital availability 85 2.6 112 2.9 10 34.6 123 3.6 Database.  12th pillar: Innovation 3.02 Gross national savings % GDP 8.06 Soundness of banks Algeria Middle East and North Africa 3.03 Inflation annual % change 99 4.8 8.07 Regulation of securities exchanges 129 3.0 3.04 Government debt % GDP 4 8.7 8.08 Legal rights index 0-10 (best) 108 2 3.05 Country credit rating 0-100 (best) 70 - 9th pillar: Technological readiness 108 3.1  Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016  4th pillar: Health and primary education 73 5.7 9.01 Availability of latest technologies 125 3.7 4.01 Malaria incidence cases/100,000 pop. 11 0.1 9.02 Firm-level technology absorption 128 3.6 Inefficient government bureaucracy 17.5 Access to financing 13.7 4.02 Business impact of malaria 45 4.5 9.03 FDI and technology transfer 121 3.6 Corruption 13.3 4.03 Tuberculosis incidence cases/100,000 pop. 86 78.0 9.04 Internet users % pop. 95 38.2 Policy instability 6.5 4.04 Business impact of tuberculosis 125 4.0 9.05 Fixed-broadband Internet subscriptions /100 pop. 84 5.6 Foreign currency regulations 6.2 4.05 HIV prevalence % adult pop. 1 0.1 9.06 Internet bandwidth kb/s/user 80 30.1 Poor work ethic in national labor force 5.7 4.06 Business impact of HIV/AIDS 113 4.3 9.07 Mobile-broadband subscriptions /100 pop. 85 40.1 Inadequately educated workforce 5.7 4.07 Infant mortality deaths/1,000 live births 93 21.9 10th pillar: Market size 36 4.7 Inflation 5.7  4.08 Life expectancy years 65 74.8 10.01 Domestic market size index 33 4.6   Performance overview Inadequate supply of infrastructure 5.6 4.09 Quality of primary education 102 3.3 10.02 Foreign market size index 43 5.1 Restrictive labor regulations 5.3 4.10 Primary education enrollment rate net % 40 97.3 Tax regulations 4.6 10.03 GDP (PPP) PPP $ billions 33 578.7  5th pillar: Higher education and training 96 3.9 10.04 Exports % GDP 102 24.0 Tax rates 4.5 Insufficient capacity to innovate 2.5 5.01 Secondary education enrollment rate gross % 46 99.9 11th pillar: Business sophistication 121 3.3  Crime and theft 2.2 5.02 Tertiary education enrollment rate gross % 78 34.6 11.01 Local supplier quantity 108 4.0 Government instability/coups 0.6 5.03 Quality of the education system 85 3.4 11.02 Local supplier quality 130 3.4 Poor public health 0.5 5.04 Quality of math and science education 99 3.5 score 11.03 State of cluster development 115 3.1 This section details the economy’s performance on the main 5.05 Quality of management schools 127 3.3 11.04 Nature of competitive advantage 93 3.1 0 5 10 15 20 5.06 Internet access in schools 124 3.1 11.05 Value chain breadth 109 3.4 5.07 Local availability of specialized training services 120 3.6 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to 11.06 Control of international distribution 112 3.0 rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 5.08 Extent of staff training 131 3.1 11.07 Production process sophistication 108 3.2 11.08 Extent of marketing 125 3.7 11.09 Willingness to delegate authority 124 3.1 components of the Global Competitiveness Index (GCI). The  12th pillar: Innovation 112 2.9 12.01 Capacity for innovation 112 3.7 12.02 Quality of scientific research institutions 99 3.4 12.03 Company spending on R&D 113 2.8 12.04 University-industry collaboration in R&D 120 2.7 12.05 Gov't procurement of advanced tech. products 105 2.9 12.06 Availability of scientists and engineers 81 3.8 table on the upper left of this section shows the evolution in 12.07 PCT patent applications applications/million pop. 94 0.2 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ 88 | The Africa Competitiveness Report 2017 The Africa Competitiveness Report 2017 | 89 the economy’s overall GCI rank and score since the 2012– 2013 edition (or the earliest edition available). On the right- hand side, a chart shows the economy’s performance in the 12 pillars of the GCI (blue line) measured against the region’s See Appendix A of Chapter 1.1 for the detailed structure of the average scores. See page xiii of The Global Competitiveness GCI and methodology. Report 2016–2017 for group composition. For selected Indicators derived from the Survey are always expressed economies, a brief commentary of the performance appears as scores on a 1–7 scale, with 7 being the most desirable at the bottom part of this section. outcome. For those, units are omitted for the sake of readability. For indicators that are not derived from the Survey,   The most problematic factors for doing business the units are displayed next to the indicator name. A line This chart summarizes those factors seen by business depicts the evolution of this value since the 2012–2013 edition executives as the most problematic for doing business in their of the Report (or the earliest period available). economy. The information is drawn from the World Economic Forum’s Executive Opinion Survey (the Survey). From a list of ONLINE RESOURCES 16 factors, respondents were asked to select the five most Interactive profiles and sortable rankings with detailed meta problematic and rank them from 1 (most problematic) to 5. information, as well as downloadable datasets, are available at The results were then tabulated and weighted according to http://wef.ch/acr. the ranking assigned by respondents. PAGE 2   The Global Competitiveness Index in detail This page details the country’s performance on each of the indicators entering the composition of the GCI. Indicators are organized by pillar. For indicators entering the GCI in two different pillars, only the first instance is shown on this page. The Africa Competitiveness Report 2017 | 75 Technical Notes and Sources This section provides detailed definitions and sources for 1.05 Irregular payments and bribes all the indicators that enter the Global Competitiveness Average score across the five components of the following Executive Opinion Survey question: In your country, how common is it for firms Index 2016–2017 (GCI). The data used represent the best to make undocumented extra payments or bribes connected with available estimates at the time The Global Competitiveness (a) imports and exports; (b) public utilities; (c) annual tax payments; (d) awarding of public contracts and licenses; (e) obtaining favorable Report 2016–2017 was prepared. It is possible that some judicial decisions? In each case, the answer ranges from 1 [very data will have been updated or revised by the sources after common] to 7 [never occurs] | 2015–16 weighted average publication. The title of each indicator appears on the first line, Source: World Economic Forum, Executive Opinion Survey. For more preceded by its number to allow for quick reference. Below details, refer to Chapter 1.3 of The Global Competitiveness Report is a description of each indicator or, in the case of Executive 2016–2017. Opinion Survey data, the full question and associated 1.06 Judicial independence answers. If necessary, additional information is provided In your country, how independent is the judicial system from underneath. influences of the government, individuals, or companies? [1 = not independent at all; 7 = entirely independent] | 2015–16 weighted average Pillar 1: Institutions Source: World Economic Forum, Executive Opinion Survey. For more 1.01 Property rights details, refer to Chapter 1.3 of The Global Competitiveness Report In your country, to what extent are property rights, including financial 2016–2017. assets, protected? [1 = not at all; 7 = to a great extent] | 2015–16 weighted average 1.07 Favoritism in decisions of government officials In your country, to what extent do government officials show Source: World Economic Forum, Executive Opinion Survey. For more favoritism to well-connected firms and individuals when deciding upon details, refer to Chapter 1.3 of The Global Competitiveness Report policies and contracts? [1 = show favoritism to a great extent; 7 = do 2016–2017. not show favoritism at all] | 2015–16 weighted average 1.02 Intellectual property protection Source: World Economic Forum, Executive Opinion Survey. For more In your country, to what extent is intellectual property protected? [1 = details, refer to Chapter 1.3 of The Global Competitiveness Report not at all; 7 = to a great extent] | 2015–16 weighted average 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more 1.08 Wastefulness of government spending details, refer to Chapter 1.3 of The Global Competitiveness Report In your country, how efficiently does the government spend public 2016–2017. revenue? [1 = extremely inefficient; 7 = extremely efficient in providing goods and services] | 2013–14 weighted average 1.03 Diversion of public funds In your country, how common is illegal diversion of public funds to Source: World Economic Forum, Executive Opinion Survey. For more companies, individuals, or groups? [1 = very commonly occurs; 7 = details, refer to Chapter 1.3 of The Global Competitiveness Report never occurs] | 2015–16 weighted average 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more 1.09 Burden of government regulation details, refer to Chapter 1.3 of The Global Competitiveness Report In your country, how burdensome is it for companies to comply 2016–2017. with public administration’s requirements (e.g., permits, regulations, reporting)? [1 = extremely burdensome; 7 = not burdensome at all] | 1.04 Public trust in politicians 2015–16 weighted average In your country, how do you rate the ethical standards of politicians? [1 = extremely low; 7 = extremely high] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 1.10 Efficiency of legal framework in settling disputes In your country, how efficient are the legal and judicial systems for companies in settling disputes? [1 = extremely inefficient; 7 = extremely efficient] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. The Africa Competitiveness Report 2017 | 77 Technical Notes and Sources 1.11 Efficiency of legal framework in challenging regulations 1.19 Efficacy of corporate boards In your country, how easy is it for private businesses to challenge In your country, to what extent is management accountable to government actions and/or regulations through the legal system? [1 = investors and boards of directors? [1 = not at all; 7 = to a great extent] extremely difficult; 7 = extremely easy] | 2015–16 weighted average | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 1.12 Transparency of government policymaking 1.20 Protection of minority shareholders’ interests In your country, how easy is it for companies to obtain information In your country, to what extent are the interests of minority about changes in government policies and regulations affecting their shareholders protected by the legal system? [1 = not protected at all; activities? [1 = extremely difficult; 7 = extremely easy] | 2015–16 7 = fully protected] | 2015–16 weighted average weighted average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 1.21 Strength of investor protection 1.13 Business costs of terrorism Strength of Investor Protection Index on a 0–10 (best) scale | 2015 In your country, to what extent does the threat of terrorism impose This variable is a combination of the Extent of disclosure index costs on businesses? [1 = to a great extent, imposes huge costs; 7 = (transparency of transactions), the Extent of director liability index no costs at all] | 2015–16 weighted average (liability for self-dealing), and the Ease of shareholder suit index (shareholders’ ability to sue officers and directors for misconduct). For Source: World Economic Forum, Executive Opinion Survey. For more more details about the methodology employed and the assumptions details, refer to Chapter 1.3 of The Global Competitiveness Report made to compute this indicator, visit http://www.doingbusiness.org/ 2016–2017. methodologysurveys/. 1.14 Business costs of crime and violence Source: World Bank/International Finance Corporation, Doing Business In your country, to what extent does the incidence of crime and 2016: Measuring Regulatory Quality and Efficiency violence impose costs on businesses? [1 = to a great extent, imposes huge costs; 7 = no costs at all] | 2015–16 weighted average Pillar 2: Infrastructure Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2.01 Quality of overall infrastructure 2016–2017. How do you assess the general state of infrastructure (e.g., transport, communications, and energy) in your country? [1 = extremely 1.15 Organized crime underdeveloped—among the worst in the world; 7 = extensive and In your country, to what extent does organized crime (mafia-oriented efficient—among the best in the world] | 2015–16 weighted average racketeering, extortion) impose costs on businesses? [1 = to a great Source: World Economic Forum, Executive Opinion Survey. For more extent, imposes huge costs; 7 = no costs at all] | 2015–16 weighted details, refer to Chapter 1.3 of The Global Competitiveness Report average 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2.02 Quality of roads 2016–2017. In your country, how is the quality (extensiveness and condition) of road infrastructure [1 = extremely poor—among the worst in the 1.16 Reliability of police services world; 7 = extremely good—among the best in the world] | 2015–16 In your country, to what extent can police services be relied upon to weighted average enforce law and order? [1 = not at all; 7 = to a great extent] | 2016 Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 2.03 Quality of railroad infrastructure 1.17 Ethical behavior of firms In your country, how is the quality (extensiveness and condition) of the In your country, how do you rate the corporate ethics of companies railroad system [1 = extremely poor—among the worst in the world; 7 (ethical behavior in interactions with public officials, politicians, and = extremely good—among the best in the world] | 2015–16 weighted other firms)? [1 = extremely poor—among the worst in the world; 7 average = excellent—among the best in the world] | 2015–16 weighted average For economies where there is no regular train service or where the network covers only a negligible portion of the territory this indicator Source: World Economic Forum, Executive Opinion Survey. For more is not used in the calculation, and in the Country Profiles of these details, refer to Chapter 1.3 of The Global Competitiveness Report economies, N/Appl is used for this indicator. 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more 1.18 Strength of auditing and reporting standards details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. In your country, how strong are financial auditing and reporting standards? [1 = extremely weak; 7 = extremely strong] | 2015–16 2.04 Quality of port infrastructure weighted average In your country, how is the quality (extensiveness and condition) of Source: World Economic Forum, Executive Opinion Survey. For more seaports (for landlocked countries, assess access to seaports) [1 = details, refer to Chapter 1.3 of The Global Competitiveness Report extremely poor—among the worst in the world; 7 = extremely good— 2016–2017. among the best in the world] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 78 | The Africa Competitiveness Report 2017 Technical Notes and Sources 2.05 Quality of air transport infrastructure Pillar 3: Macroeconomic environment In your country, how is the quality (extensiveness and condition) of airports [1 = extremely poor—among the worst in the world; 7 = 3.01 Government budget balance extremely good—among the best in the world] | 2015–16 weighted General government budget balance as a percentage of GDP | 2015 average General government budget balance is calculated as general government revenue minus total expenditure. This is a core Government Finance Source: World Economic Forum, Executive Opinion Survey. For more Statistics (GFS) balance that measures the extent to which the general details, refer to Chapter 1.3 of The Global Competitiveness Report government is either putting financial resources at the disposal of other 2016–2017. sectors in the economy and nonresidents (net lending), or utilizing the financial resources generated by other sectors and nonresidents (net 2.06 Available airline seat kilometers borrowing). This balance may be viewed as an indicator of the financial Airline seat kilometers (in millions) available on all flights (domestic and impact of general government activity on the rest of the economy and international service) originating in country per week (year average) | nonresidents. Revenue consists of taxes, social contributions, grants Monthly average for 2016 receivable, and other revenue. Revenue increases a government’s net This indicator measures the total passenger-carrying capacity of all worth, which is the difference between its assets and liabilities. General scheduled flights, including domestic flights, originating in a country. government total expenditure consists of total expenses and the net It is computed by multiplying the number of seats available on each acquisition of nonfinancial assets. flight by the flight distance in kilometers and summing the result across all scheduled flights in a week. The final value represents the weekly Source: International Monetary Fund, World Economic Outlook Database average for the year (Jan–Dec), taking into account flights scheduled (April 2016 edition) beforehand by airline companies. 3.02 Gross national savings Source: International Air Transport Association, SRS Analyser Gross national savings as a percentage of GDP | 2015 or most recent year available 2.07 Quality of electricity supply Gross national savings is expressed as a ratio of gross national savings in In your country, how reliable is the electricity supply (lack of current local currency and GDP in current local currency. It corresponds interruptions and lack of voltage fluctuations)? [1 = extremely to gross disposable income less final consumption expenditure after unreliable; 7 = extremely reliable] | 2015–16 weighted average taking account of an adjustment for pension funds. For many economies, the estimates of national savings are built up from national accounts data Source: World Economic Forum, Executive Opinion Survey. For more on gross domestic investment and from balance of payments–based details, refer to Chapter 1.3 of The Global Competitiveness Report data on net foreign investment. 2016–2017. Sources: International Monetary Fund, World Economic Outlook 2.08 Mobile-cellular telephone subscriptions Database (April 2016 edition); US Central Intelligence Agency, The World Number of mobile-cellular telephone subscriptions per 100 population Factbook (accessed August 12, 2016); national sources | 2015 Mobile-cellular telephone subscriptions refers to the number of 3.03 Inflation subscriptions to a public mobile telephone service that provides Annual percent change in consumer price index (year average) | 2015 access to the public switched telephone network (PSTN) using cellular or most recent year available technology. It includes both the number of postpaid subscriptions and the number of active prepaid accounts (i.e., that have been active during Source: International Monetary Fund, World Economic Outlook Database the past three months). It includes all mobile-cellular subscriptions that (April 2016 edition) offer voice communications. It excludes subscriptions via data cards or USB modems, subscriptions to public mobile data services, and private 3.04 Government debt trunked mobile radio, telepoint, radio paging, and telemetry services. Gross general government debt as a percentage of GDP | 2015 or most recent year available Source: International Telecommunication Union, ITU World Gross debt consists of all liabilities that require payment or payments of Telecommunication/ICT Indicators June 2016 (June 2016 edition) interest and/or principal by the debtor to the creditor at a date or dates in the future. This includes debt liabilities in the form of special drawing 2.09 Fixed-telephone lines rights, currency and deposits, debt securities, loans, insurance, pensions Number of fixed-telephone lines per 100 population | 2015 and standardized guarantee schemes, and other accounts payable. Thus Fixed-telephone subscriptions refers to the sum of active analogue all liabilities in the Government Finance Statistics Manual (GFSM) 2001 fixed-telephone lines, voice over IP (VoIP) subscriptions, fixed wireless system are debt, except for equity and investment fund shares, financial local loop (WLL) subscriptions, ISDN voice-channel equivalents, and derivatives, and employee stock options. For Australia, Belgium, Canada, fixed-public payphones. It includes all accesses over fixed infrastructure Hong Kong SAR, Iceland, New Zealand, and Sweden, government debt supporting voice telephony using copper wire, voice services using coverage also includes insurance technical reserves, following the GFSM Internet Protocol (IP) delivered over fixed (wired)-broadband infrastructure 2001 definition. (e.g., DSL, fiber optic), and voice services provided over coaxial-cable television networks (cable modem). It also includes WLL connections, Source: International Monetary Fund, World Economic Outlook Database which are defined as services provided by licensed fixed-line telephone (April 2016 edition) and Article IV Consultation Staff Reports operators that provide last-mile access to the subscriber using radio technology, when the call is then routed over a fixed-line telephone 3.05 Country credit rating network (and not a mobile-cellular network). In the case of VoIP, it refers Institutional Investor’s Country Credit Ratings™ assessing the to subscriptions that offer the ability to place and receive calls at any probability of sovereign debt default on a 0–100 (lowest probability) time and do not require a computer. VoIP is also known as voice-over scale | March 2016 broadband (VoB), and includes subscriptions through fixed-wireless, Institutional Investor’s Country Credit Ratings™ developed by Institutional DSL, cable, fiber optic, and other fixed-broadband platforms that provide Investor are based on information provided by senior economists and fixed telephony using IP. sovereign-debt analysts at leading global banks and money management and security firms. Twice a year, the respondents grade each country on Source: International Telecommunication Union, ITU World a scale of 0 to 100, with 100 representing the least chance of default. Telecommunication/ICT Indicators June 2016 (June 2016 edition) Source: Institutional Investor’s “Country Credit Ratings” is a trademark of Institutional Investor, LLC. No further copying or transmission of this material is allowed without the express written permission of Institutional Investor publisher@institutionalinvestor.com. Copyright © Institutional Investor, LLC 2016. The Africa Competitiveness Report 2017 | 79 Technical Notes and Sources Pillar 4: Health and primary education 4.06 Business impact of HIV/AIDS How serious an impact do you consider HIV/AIDS will have on your 4.01 Malaria incidence company in the next five years (e.g., death, disability, medical and Estimated number of malaria cases per 100,000 population | 2013 or funeral expenses, productivity and absenteeism, recruitment and most recent year available training expenses, revenues)? [1 = a serious impact; 7 = no impact at For economies that: (1) were declared free of malaria by the World all] | 2013–14 weighted average Health Organization (WHO) (except in the case of Hong Kong SAR, Source: World Economic Forum, Executive Opinion Survey. For more for which malaria assessment is from CDC); (2) are included in the details, refer to Chapter 1.3 of The Global Competitiveness Report WHO’s supplementary list of areas where malaria has never existed 2016–2017. or has disappeared without specific measures; or (3) are currently in the prevention of reintroduction phase as identified by the WHO, this 4.07 Infant mortality indicator is excluded from the calculation of the GCI. Infant (children aged 0–12 months) mortality per 1,000 live births | In the Country profiles of these economies, the following abbreviations 2015 or most recent year available are used: M.F. for malaria-free economies; P.R. means the economy is in Infant mortality rate is the number of infants dying before reaching one the prevention of reintroduction phase; and S.L. means the economy is year of age per 1,000 live births in a given year. on the WHO’s supplementary list. Sources: The World Bank, World Development Indicators (accessed July Sources: The World Health Organization, World Malaria Report 2012 and 5, 2016); national sources 2015 editions; United States Centers for Disease Control and Prevention (CDC), Malaria Information and Prophylaxis information (accessed July 4.08 Life expectancy 29, 2016). Life expectancy at birth (years) | 2014 Life expectancy at birth indicates the number of years a newborn infant 4.02 Business impact of malaria would live if prevailing patterns of mortality at the time of its birth were to How serious an impact do you consider malaria will have on your stay the same throughout its life. company in the next five years (e.g., death, disability, medical and Sources: The World Bank, World Development Indicators (accessed July funeral expenses, productivity and absenteeism, recruitment and 5, 2016); national sources training expenses, revenues)? [1 = a serious impact; 7 = no impact at all] | 2013–14 weighted average 4.09 Quality of primary education For economies that are considered free of malaria; that are included in the World Health Organization’s supplementary list; or that are in In your country, how do you assess the quality of primary education the prevention of reintroduction phase (see indicator 4.01 above), this [1 = extremely poor—among the worst in the world; 7 = excellent— indicator is excluded from the calculation of the GCI. In the Country among the best in the world] | 2015–16 weighted average Profiles of these economies, N/Appl. is used for this indicator. Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 4.10 Primary education enrollment rate 4.03 Tuberculosis incidence Net primary education enrollment rate | 2014 or most recent year Estimated number of tuberculosis cases per 100,000 population | available 2014 or most recent year available The reported value corresponds to the ratio of children of official primary Incidence of tuberculosis is the estimated number of new pulmonary, school age (as defined by the national education system) who are smear positive, and extra-pulmonary tuberculosis cases. enrolled in primary school. Primary education (ISCED level 1) provides children with basic reading, writing, and mathematics skills along with an Sources: The World Bank, World Development Indicators (accessed elementary understanding of such subjects as history, geography, natural May19, 2016); national sources science, social science, art, and music. 4.04 Business impact of tuberculosis Sources: UNESCO Institute for Statistics, Data Centre (accessed July 12, 2016); Organisation for Economic Co-operation and Development How serious an impact do you consider tuberculosis will have on (OECD), Education at a Glance 2015; UNICEF; national sources your company in the next five years (e.g., death, disability, medical and funeral expenses, productivity and absenteeism, recruitment and training expenses, revenues)? [1 = a serious impact; 7 = no impact at Pillar 5: Higher education and training all] | 2013–14 weighted average Source: World Economic Forum, Executive Opinion Survey. For more 5.01 Secondary education enrollment rate details, refer to Chapter 1.3 of The Global Competitiveness Report Gross secondary education enrollment rate | 2014 or most recent year 2016–2017. available The reported value corresponds to the ratio of total secondary 4.05 HIV prevalence enrollment, regardless of age, to the population of the age group that HIV prevalence as a percentage of adults aged 15–49 years | 2014 or officially corresponds to the secondary education level. Secondary most recent year available education (ISCED levels 2 and 3) completes the provision of basic education that began at the primary level, and aims to lay the HIV prevalence refers to the percentage of people aged 15–49 who are foundations for lifelong learning and human development by offering infected with HIV at a particular point in time, no matter when infection more subject- or skills-oriented instruction using more specialized occurred. Economies with a prevalence rate equal to or less than 0.2 teachers. percent are all ranked first. Sources: UNESCO Institute for Statistics, Data Centre (accessed July 12, Sources: The World Bank, World Development Indicators (accessed May 2016); national sources 18, 2015, and May 19, 2016); UNAIDS, UNAIDS Global Report on the Global AIDS Epidemic (2008, 2010, 2012, and 2013 editions); UNAIDS, IUNAIDS Gap Report 2014; national sources 80 | The Africa Competitiveness Report 2017 Technical Notes and Sources 5.02 Tertiary education enrollment rate Pillar 6: Goods market efficiency Gross tertiary education enrollment rate | 2014 or most recent year available 6.01 Intensity of local competition The reported value corresponds to the ratio of total tertiary enrollment, In your country, how intense is competition in the local markets? [1 = regardless of age, to the population of the age group that officially not intense at all; 7 = extremely intense] | 2015–16 weighted average corresponds to the tertiary education level. Tertiary education (ISCED levels 5 and 6), whether or not leading to an advanced research Source: World Economic Forum, Executive Opinion Survey. For more qualification, normally requires, as a minimum condition of admission, the details, refer to Chapter 1.3 of The Global Competitiveness Report successful completion of education at the secondary level. 2016–2017. Sources: UNESCO Institute for Statistics, Data Centre (accessed July 12, 6.02 Extent of market dominance 2016); national sources In your country, how do you characterize corporate activity? [1 = dominated by a few business groups; 7 = spread among many firms] | 5.03 Quality of the education system 2015–16 weighted average In your country, how well does the education system meet the needs of a competitive economy? [1 = not well at all; 7 = extremely well] | Source: World Economic Forum, Executive Opinion Survey. For more 2015–16 weighted average details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 6.03 Effectiveness of anti-monopoly policy 2016–2017. In your country, how effective are anti-monopoly policies at ensuring fair competition? [1 = not effective at all; 7 = extremely effective] | 5.04 Quality of math and science education 2015–16 weighted average In your country, how do you assess the quality of math and science education? [1 = extremely poor—among the worst in the world; 7 Source: World Economic Forum, Executive Opinion Survey. For more = excellent—among the best in the world] | 2015–16 weighted average details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 6.04 Effect of taxation on incentives to invest 2016–2017. In your country, to what extent do taxes reduce the incentive to invest? [1 = to a great extent; 7 = not at all] | 2015–16 weighted 5.05 Quality of management schools average In your country, how do you assess the quality of management schools? [1 = extremely poor—among the worst in the world; 7 = Source: World Economic Forum, Executive Opinion Survey. For more excellent—among the best in the world] | 2015–16 weighted average details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 6.05 Total tax rate 2016–2017. This variable is a combination of profit tax (% of profits), labor tax and contribution (% of profits), and other taxes (% of profits) | 2015 5.06 Internet access in schools The total tax rate measures the amount of taxes and mandatory In your country, to what extent is the Internet used in schools for contributions payable by a business in the second year of operation, learning purposes? [1 = not at all; 7 = to a great extent] | 2015–16 expressed as a share of commercial profits. The total amount of taxes weighted average is the sum of five different types of taxes and contributions payable after accounting for deductions and exemptions: profit or corporate income Source: World Economic Forum, Executive Opinion Survey. For more tax, social contributions and labor taxes paid by the employer, property details, refer to Chapter 1.3 of The Global Competitiveness Report taxes, turnover taxes, and other small taxes. For more details about the 2016–2017. methodology employed and the assumptions made to compute this indicator, visit http://www.doingbusiness.org/methodologysurveys/. 5.07 Local availability of specialized training services vIn your country, how available are high-quality, professional training Source: World Bank/International Finance Corporation, Doing Business services? [1 = not available at all; 7 = widely available] | 2015–16 2016: Measuring Regulatory Quality and Efficiency weighted average 6.06 Number of procedures required to start a business Source: World Economic Forum, Executive Opinion Survey. For more Number of procedures required to start a business | 2015 details, refer to Chapter 1.3 of The Global Competitiveness Report For details about the methodology employed and the assumptions 2016–2017. made to compute this indicator, visit http://www.doingbusiness.org/ methodologysurveys/. 5.08 Extent of staff training In your country, to what extent do companies invest in training and Source: World Bank/International Finance Corporation, Doing Business employee development? [1 = not at all; 7 = to a great extent] | 2015– 2016: Measuring Regulatory Quality and Efficiency 16 weighted average 6.07 Time required to start a business Source: World Economic Forum, Executive Opinion Survey. For more Number of days required to start a business | 2015 details, refer to Chapter 1.3 of The Global Competitiveness Report For details about the methodology employed and the assumptions 2016–2017. made to compute this indicator, visit http://www.doingbusiness.org/ methodologysurveys/. Source: World Bank/International Finance Corporation, Doing Business 2016: Measuring Regulatory Quality and Efficiency The Africa Competitiveness Report 2017 | 81 Technical Notes and Sources 6.08 Agricultural policy costs 6.16 Buyer sophistication In your country, how do you assess the agricultural policy? [1 = In your country, on what basis do buyers make purchasing decisions? excessively burdensome for the economy; 7 = balances well the [1 = based solely on the lowest price; 7 = based on sophisticated interests of taxpayers, consumers, and producers] | 2015–16 weighted performance attributes] | 2015–16 weighted average average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 6.09 Prevalence of non-tariff barriers Pillar 7: Labor market efficiency In your country, to what extent do non-tariff barriers (e.g., health and 7.01 Cooperation in labor-employer relations product standards, technical and labeling requirements, etc.) limit the ability of imported goods to compete in the domestic market? [1 = In your country, how do you characterize labor-employer relations? strongly limit; 7 = do not limit at all] | 2015–16 weighted average [1 = generally confrontational; 7 = generally cooperative] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 6.10 Trade tariffs 7.02 Flexibility of wage determination Trade-weighted average tariff rate | 2015 or most recent year available In your country, how are wages generally set? [1 = by a centralized An applied tariff is a customs duty that is levied on imports of bargaining process; 7 = by each individual company] | 2015–16 merchandise goods. This indicator is calculated as a weighted average weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the Source: World Economic Forum, Executive Opinion Survey. For more importing country’s reference group. details, refer to Chapter 1.3 of The Global Competitiveness Report Sources: International Trade Centre; Trade Competitiveness Map Data 2016–2017. 6.11 Prevalence of foreign ownership 7.03 Hiring and firing practices In your country, how prevalent is foreign ownership of companies? [1 In your country, to what extent do regulations allow flexible hiring = extremely rare; 7 = extremely prevalent] | 2015–16 weighted average and firing of workers? [1 = not at all; 7 = to a great extent] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 6.12 Business impact of rules on FDI 7.04 Redundancy costs In your country, how restrictive are rules and regulations on foreign direct investment (FDI)? [1 = extremely restrictive; 7 = not restrictive at Redundancy costs in weeks of salary | 2015 all] | 2015–16 weighted average This variable estimates the cost of advance notice requirements, severance payments, and penalties due when terminating a redundant Source: World Economic Forum, Executive Opinion Survey. For more worker, expressed in weekly wages. For more details about the details, refer to Chapter 1.3 of The Global Competitiveness Report methodology employed and the assumptions made to compute this 2016–2017. indicator, visit http://www.doingbusiness.org/methodologysurveys/. 6.13 Burden of customs procedures Sources: World Bank/International Finance Corporation, Doing Business 2016: Measuring Regulatory Quality and Efficiency; World Economic In your country, how efficient are customs procedures (related to Forum’s calculations the entry and exit of merchandise)? [1 = extremely inefficient; 7 = extremely efficient] | 2015–16 weighted average 7.05 Effect of taxation on incentives to work Source: World Economic Forum, Executive Opinion Survey. For more In your country, to what extent do taxes and social contributions details, refer to Chapter 1.3 of The Global Competitiveness Report reduce the incentive to work? [1 = to a great extent; 7 = not at all] | 2016–2017. 2015–16 weighted average 6.14 Imports as a percentage of GDP Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Imports of goods and services as a percentage of gross domestic 2016–2017. product | 2015 or most recent year available Total imports is the sum of total imports of merchandise and commercial 7.06 Pay and productivity services. In your country, to what extent is pay related to employee Sources: World Trade Organization, Online Statistics Database (accessed productivity? [1 = not at all; 7 = to a great extent] | 2015–16 weighted June 08, 2016); International Monetary Fund, World Economic Outlook average Database (April 2016 edition); national sources Source: World Economic Forum, Executive Opinion Survey. For more 6.15 Degree of customer orientation details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. In your country, how well do companies treat customers? [1 = poorly—mostly indifferent to customer satisfaction; 7 = extremely 7.07 Reliance on professional management well—highly responsive to customers and seek customer retention] | 2015–16 weighted average In your country, who holds senior management positions in companies? [1 = usually relatives or friends without regard to merit; 7 Source: World Economic Forum, Executive Opinion Survey. For more = mostly professional managers chosen for merit and qualifications] | details, refer to Chapter 1.3 of The Global Competitiveness Report 2015–16 weighted average 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 82 | The Africa Competitiveness Report 2017 Technical Notes and Sources 7.08 Country capacity to retain talent 8.06 Soundness of banks To what extent does your country retain talented people? [1 = not In your country, how do you assess the soundness of banks? [1 = at all—the best and brightest leave to pursue opportunities abroad; extremely low—banks may require recapitalization; 7 = extremely 7 = to a great extent—the best and brightest stay and pursue high—banks are generally healthy with sound balance sheets] | 2015– opportunities in the country] | 2015–16 weighted average 16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 7.09 Country capacity to attract talent 8.07 Regulation of securities exchanges To what extent does your country attract talented people from In your country, to what extent do regulators ensure the stability of abroad? [1 = not at all; 7 = to a great extent—the country attracts the the financial market? [1 = not at all; 7 = to a great extent] | 2015–16 best and brightest from around the world] | 2015–16 weighted average weighted average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 7.10 Female participation in the labor force 8.08 Legal rights index Ratio of women to men in the labor force | 2015 Degree of legal protection of borrowers’ and lenders’ rights on a 0–12 This measure is the percentage of women aged 15–64 participating (best) scale | 2015 in the labor force divided by the percentage of men aged 15–64 This index measures the degree to which collateral and bankruptcy laws participating in the labor force. protect borrowers’ and lenders’ rights and thus facilitate lending. For more details about the methodology employed and the assumptions Sources: International Labour Organization, Key Indicators of the Labour made to compute this indicator, visit http://www.doingbusiness.org/ Markets, 9th Edition; national sources methodologysurveys/. Source: World Bank/International Finance Corporation, Doing Business Pillar 8: Financial market development 2016: Measuring Regulatory Quality and Efficiency 8.01 Financial services meeting business needs In your country, to what extent does the financial sector provide the Pillar 9: Technological readiness products and services that meet the needs of businesses? [1 = not at all; 7 = to a great extent] | 2015–16 weighted average 9.01 Availability of latest technologies In your country, to what extent are the latest technologies available? Source: World Economic Forum, Executive Opinion Survey. For more [1 = not at all; 7 = to a great extent] | 2015–16 weighted average details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 8.02 Affordability of financial services 2016–2017. In your country, to what extent does the cost of financial services (e.g., insurance, loans, trade finance) impede business activity? [1 = 9.02 Firm-level technology absorption impedes business to a great extent; 7 = not at all] | 2015–16 weighted In your country, to what extent do businesses adopt the latest average technologies? [1 = not at all; 7 = to a great extent] | 2016 Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 8.03 Financing through local equity market 9.03 FDI and technology transfer In your country, to what extent can companies raise money by issuing To what extent does foreign direct investment (FDI) bring new shares and/or bonds on the capital market? [1 = not at all; 7 = to a technology into your country? [1 = not at all; 7 = to a great extent] | great extent] | 2015–16 weighted average 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 2016–2017. 8.04 Ease of access to loans 9.04 Internet users In your country, how easy is it for businesses to obtain a bank loan? Percentage of individuals using the Internet | 2015 [1 = extremely difficult; 7 = extremely easy] | 2016 Individuals using the Internet refers to people who used the Internet from any location and for any purpose, irrespective of the device and network Source: World Economic Forum, Executive Opinion Survey. For more used, in the last three months. It can be via a computer (i.e., desktop details, refer to Chapter 1.3 of The Global Competitiveness Report computer, laptop computer or tablet, or similar handheld computer), 2016–2017. mobile phone, games machine, digital TV, etc. Access can be via a fixed or mobile network. 8.05 Venture capital availability In your country, how easy is it for start-up entrepreneurs with Source: International Telecommunication Union, ITU World innovative but risky projects to obtain equity funding? [1 = extremely Telecommunication/ICT Indicators June 2016 (June 2016 edition) difficult; 7 = extremely easy] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. The Africa Competitiveness Report 2017 | 83 Technical Notes and Sources 9.05 Fixed-broadband Internet subscriptions 10.02 Foreign market size index Fixed-broadband Internet subscriptions per 100 population | 2015 or Value of exports of goods and services, normalized on a 1–7 (best) most recent year available scale | 2015 or most recent year available Fixed (wired)-broadband subscriptions refers to the number of The size of the foreign market is estimated as the natural log of the total subscriptions for high-speed access to the public Internet (a TCP/IP value (PPP estimates) of exports of goods and services, normalized on a connection). Highspeed access is defined as downstream speeds equal 1–7 scale. PPP estimates of exports are obtained by taking the product to, or greater than, 256 kbit/s. Fixed (wired)-broadband includes cable of exports as a percentage of GDP and GDP valued at PPP. modem, DSL, fiber, and other fixed (wired)-broadband technologies— Source: World Economic Forum. For more details, refer to the Appendix such as Ethernet LAN, and broadband over powerline (BPL) of Chapter 1.1 of this Report communications. Subscriptions with access to data communications (including the Internet) via mobile-cellular networks are excluded. 10.03 GDP (PPP) Source: International Telecommunication Union, ITU World Gross domestic product valued at purchasing power parity in billions Telecommunication/ICT Indicators June 2016 (June 2016 edition) of international dollars | 2015 9.06 Internet bandwidth Source: International Monetary Fund, World Economic Outlook Database International Internet bandwidth (kb/s) per Internet user | 2015 or most (April 2016 edition) recent year available International Internet bandwidth refers to the total used capacity of 10.04 Exports as a percentage of GDP international Internet bandwidth, in megabits per second (Mbit/s). It is Exports of goods and services as a percentage of gross domestic measured as the sum of used capacity of all Internet exchanges offering product | 2015 or most recent year available international bandwidth. If capacity is asymmetric, then the incoming Total exports is the sum of total exports of merchandise and commercial capacity is used. International Internet bandwidth (kbit/s) per Internet services. user is calculated by converting the speed from megabits to kilobits per Sources: World Trade Organization, Online Statistics Database (accessed second and dividing by the total number of Internet users. June 08, 2016); International Monetary Fund, World Economic Outlook Source: International Telecommunication Union, ITU World Database (April 2016 edition); national sources Telecommunication/ICT Indicators June 2016 (June 2016 edition) 9.07 Mobile-broadband subscriptions Pillar 11: Business sophistication Active mobile-broadband subscriptions per 100 population | 2015 11.01 Local supplier quantity Active mobile-broadband subscriptions refers to the sum of standard In your country, how numerous are local suppliers? [1 = largely mobile-broadband subscriptions and dedicated mobile-broadband nonexistent; 7 = extremely numerous] | 2015–16 weighted average data subscriptions to the public Internet. It covers actual subscribers, not potential subscribers, even though the latter may have broadband- Source: World Economic Forum, Executive Opinion Survey. For more enabled handsets. Standard mobile-broadband subscriptions refers details, refer to Chapter 1.3 of The Global Competitiveness Report to active mobile-cellular subscriptions with advertised data speeds of 2016–2017. 256 kbit/s or greater that allow access to the greater Internet via HTTP and that have been used to set up an Internet data connection using 11.02 Local supplier quality Internet Protocol (IP) in the past three months. Standard SMS and MMS messaging do not count as an active Internet data connection, even if In your country, how do you assess the quality of local suppliers? [1 = the messages are delivered via IP. Dedicated mobile-broadband data extremely poor quality; 7 = extremely high quality] | 2015–16 weighted subscriptions refers to subscriptions to dedicated data services (over a average mobile network) that allow access to the greater Internet and that are Source: World Economic Forum, Executive Opinion Survey. For more purchased separately from voice services, either as a standalone service details, refer to Chapter 1.3 of The Global Competitiveness Report (e.g., using a data card such as a USB modem/dongle) or as an add-on 2016–2017. data package to voice services that requires an additional subscription. All dedicated mobile-broadband subscriptions with recurring subscription 11.03 State of cluster development fees are included regardless of actual use. Prepaid mobile-broadband plans require use if there is no monthly subscription. This indicator could In your country, how widespread are well-developed and deep also include mobile WiMAX subscriptions. clusters (geographic concentrations of firms, suppliers, producers of related products and services, and specialized institutions in a Source: International Telecommunication Union, ITU World particular field)? [1 = nonexistent; 7 = widespread in many fields] | Telecommunication/ICT Indicators June 2016 (June 2016 edition) 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more Pillar 10: Market size details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 10.01 Domestic market size index Sum of gross domestic product plus value of imports of goods and 11.04 Nature of competitive advantage services, minus value of exports of goods and services, normalized on On what is the competitive advantage of your country’s companies in a 1–7 (best) scale | 2015 or most recent year available international markets based? [1 = primarily low-cost labor or natural The size of the domestic market is calculated as the natural log of the resources; 7 = primarily unique products and processes] | 2015–16 sum of the gross domestic product valued at PPP plus the total value weighted average (PPP estimates) of imports of goods and services, minus the total Source: World Economic Forum, Executive Opinion Survey. For more value (PPP estimates) of exports of goods and services. Data are then details, refer to Chapter 1.3 of The Global Competitiveness Report normalized on a 1–7 scale. PPP estimates of imports and exports are 2016–2017. obtained by taking the product of exports as a percentage of GDP and GDP valued at PPP. Source: World Economic Forum. For more details, refer to the Appendix of Chapter 1.1 of this Report 84 | The Africa Competitiveness Report 2017 Technical Notes and Sources 11.05 Value chain breadth 12.04 University-industry collaboration in R&D In your country, how broad is companies’ presence in the value In your country, to what extent do business and universities chain? [1 = narrow, primarily involved in individual steps of the value collaborate on research and development (R&D)? [1 = do not chain (e.g., resource extraction or production); 7 = broad, present collaborate at all; 7 = collaborate extensively] | 2016 across the entire value chain (e.g., including production, marketing, distribution, design, etc.)] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 12.05 Government procurement of advanced technology products In your country, to what extent do government purchasing decisions 11.06 Control of international distribution foster innovation? [1 = not at all; 7 = to a great extent] | 2015–16 In your country, to what extent do domestic companies control the weighted average international distribution of their products? [1 = not at all; 7 = to a great extent] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 12.06 Availability of scientists and engineers In your country, to what extent are scientists and engineers available? 11.07 Production process sophistication [1 = not available at all; 7 = widely available] | 2015–16 weighted In your country, how sophisticated are production processes? [1 = average not at all—production uses labor-intensive processes; 7 = highly— production uses latest technologies] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report Source: World Economic Forum, Executive Opinion Survey. For more 2016–2017. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 12.07 PCT patent applications Number of applications filed under the Patent Cooperation Treaty 11.08 Extent of marketing (PCT) per million population | 2012–2013 average In your country, how successful are companies in using marketing to This indicator measures the total count of applications filed under the differentiate their products and services? [1 = not successful at all; 7 = Patent Cooperation Treaty (PCT), by priority date and inventor nationality, extremely successful] | 2015–16 weighted average using fractional count if an application is filed by multiple inventors. The average count of applications filed in 2012 and 2013 is divided by Source: World Economic Forum, Executive Opinion Survey. For more population figures for 2013. details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. In the absence of reliable data on PCT applications for Taiwan, China and Hong Kong SAR, two advanced economies that are not signatories 11.09 Willingness to delegate authority of the Treaty, the number of applications is estimated as follows: first, we In your country, how do you assess the willingness to delegate compute the average number of all utility patent applications filed with authority to subordinates? [1 = not willing at all—senior management the United States Patents and Trademarks Office (USPTO) for 2012 and takes all important decisions; 7 = very willing—authority is mostly 2013. We then compute the average number of PCT applications for delegated to business unit heads and other lower-level managers] | 2012 and 2013, before computing the ratio of the two averages (1.67). 2013–14 weighted average For the computation of the two averages, only economies with a two- year average number of at least 100 USPTO applications and 50 PCT Source: World Economic Forum, Executive Opinion Survey. For more applications are considered. Taiwan, China and Hong Kong are excluded details, refer to Chapter 1.3 of The Global Competitiveness Report in both cases. We then divide the 2012–2013 average number of USPTO 2016–2017. applications filed by residents of Taiwan, China (20,766) and Hong Kong (1,118), respectively, by the ratio above in order to produce estimates for Pillar 12: Innovation PCT applications. As a final step, we compute the estimates per million population—that is, 531.6 for Taiwan, China and 92.6 for Hong Kong. The estimates are used in the computation of the respective Innovation 12.01 Capacity for innovation pillar scores of the two economies. In your country, to what extent do companies have the capacity to innovate? [1 = not at all; 7 = to a great extent] | 2015–16 weighted Sources: World Intellectual Property Organization (WIPO) PCT Data, average sourced from Organisation for Economic Co-operation and Development (OECD), Patent Database (situation as of June 2016), http://www.oecd. Source: World Economic Forum, Executive Opinion Survey. For more org/sti/inno/oecdpatentdatabases.htm; for population: International details, refer to Chapter 1.3 of The Global Competitiveness Report Monetary Fund, World Economic Outlook Database (April 2016 edition); 2016–2017. World Economic Forum’s calculations. 12.02 Quality of scientific research institutions In your country, how do you assess the quality of scientific research institutions? [1 = extremely poor—among the worst in the world; 7 = extremely good—among the best in the world] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. 12.03 Company spending on R&D In your country, to what extent do companies invest in research and development (R&D)? [1 = do not invest at all in R&D; 7 = invest heavily in R&D] | 2015–16 weighted average Source: World Economic Forum, Executive Opinion Survey. For more details, refer to Chapter 1.3 of The Global Competitiveness Report 2016–2017. The Africa Competitiveness Report 2017 | 85 Index of Countries Country Page Country Page Country Page Algeria 88 Gambia, The 112 Namibia 136 Benin 90 Ghana 114 Nigeria 138 Botswana 92 Kenya 116 Rwanda 140 Burundi 94 Lesotho 118 Senegal 142 Cameroon 96 Liberia 120 Sierra Leone 144 Cape Verde 98 Madagascar 122 South Africa 146 Chad 100 Malawi 124 Tanzania 148 Congo, Democratic Rep. 102 Mali 126 Tunisia 150 Côte d'Ivoire 104 Mauritania 128 Uganda 152 Egypt 106 Mauritius 130 Zambia 154 Ethiopia 108 Morocco 132 Zimbabwe 156 Gabon 110 Mozambique 134 The Africa Competitiveness Report 2017 | 87 Part 2 Global Competitiveness Index Algeria 87 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 39.9 GDP per capita (US$) 4318.1 GDP (US$ billions) 172.3 GDP (PPP) % world GDP 0.51 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 87 4.0 Rank 110 / 144 100 / 148 79 / 144 87 / 140 87 / 138 Subindex A: Basic requirements 88 4.3 Score 3.7 3.8 4.1 4.0 4.0  1st pillar: Institutions 99 3.5 2nd pillar: Infrastructure 100 3.3 1st pillar: Institutions  3rd pillar: Macroeconomic environment 63 4.8 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 73 5.7 6 5 Subindex B: Efficiency enhancers 110 3.6 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 96 3.9 sophistication 3 environment 2  6th pillar: Goods market efficiency 133 3.5 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 132 3.2 education  8th pillar: Financial market development 132 2.9 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 108 3.1 readiness and training  10th pillar: Market size 36 4.7 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 119 3.1 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 121 3.3 efficiency  12th pillar: Innovation 112 2.9 Algeria Middle East and North Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Inefficient government bureaucracy 17.5 Access to financing 13.7 Corruption 13.3 Policy instability 6.5 Foreign currency regulations 6.2 Poor work ethic in national labor force 5.7 Inadequately educated workforce 5.7 Inflation 5.7 Inadequate supply of infrastructure 5.6 Restrictive labor regulations 5.3 Tax regulations 4.6 Tax rates 4.5 Insufficient capacity to innovate 2.5 Crime and theft 2.2 Government instability/coups 0.6 Poor public health 0.5 score 0 5 10 15 20 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 88 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Algeria Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 99 3.5  6th pillar: Goods market efficiency 133 3.5 1.01 Property rights 117 3.6 6.01 Intensity of local competition 136 3.8 1.02 Intellectual property protection 108 3.4 6.02 Extent of market dominance 87 3.4 1.03 Diversion of public funds 81 3.3 6.03 Effectiveness of anti-monopoly policy 113 3.1 1.04 Public trust in politicians 83 2.8 6.04 Effect of taxation on incentives to invest 92 3.4 1.05 Irregular payments and bribes 101 3.3 6.05 Total tax rate % profits 135 72.7 1.06 Judicial independence 94 3.4 6.06 No. of procedures to start a business 126 12 1.07 Favoritism in decisions of government officials 70 3.0 6.07 Time to start a business days 103 20.0 1.08 Wastefulness of government spending 75 3.1 6.08 Agricultural policy costs 112 3.2 1.09 Burden of government regulation 86 3.2 6.09 Prevalence of non-tariff barriers 125 3.6 1.10 Efficiency of legal framework in settling disputes 67 3.6 6.10 Trade tariffs % duty 127 13.8 1.11 Efficiency of legal framework in challenging regs 75 3.4 6.11 Prevalence of foreign ownership 132 3.1 1.12 Transparency of government policymaking 127 3.2 6.12 Business impact of rules on FDI 135 3.0 1.13 Business costs of terrorism 102 4.5 6.13 Burden of customs procedures 114 3.4 1.14 Business costs of crime and violence 71 4.6 6.14 Imports % GDP 85 36.0 1.15 Organized crime 80 4.6 6.15 Degree of customer orientation 130 3.7 1.16 Reliability of police services 60 4.7 6.16 Buyer sophistication 90 3.1 1.17 Ethical behavior of firms 107 3.4 7th pillar: Labor market efficiency 132 3.2  1.18 Strength of auditing and reporting standards 135 3.1 7.01 Cooperation in labor-employer relations 115 3.8 1.19 Efficacy of corporate boards 136 3.4 7.02 Flexibility of wage determination 113 4.3 1.20 Protection of minority shareholders’ interests 100 3.7 7.03 Hiring and firing practices 111 3.3 1.21 Strength of investor protection 0-10 (best) 133 3.3 7.04 Redundancy costs weeks of salary 74 17.3 2nd pillar: Infrastructure 100 3.3 7.05 Effect of taxation on incentives to work 89 3.7 2.01 Quality of overall infrastructure 101 3.3 7.06 Pay and productivity 122 3.3 2.02 Quality of roads 96 3.2 7.07 Reliance on professional management 135 3.0 2.03 Quality of railroad infrastructure 57 3.0 7.08 Country capacity to retain talent 116 2.7 2.04 Quality of port infrastructure 105 3.2 7.09 Country capacity to attract talent 125 2.2 2.05 Quality of air transport infrastructure 117 3.2 7.10 Female participation in the labor force ratio to men 136 0.24 2.06 Available airline seat kilometers millions/week 64 233.2 8th pillar: Financial market development 132 2.9  2.07 Quality of electricity supply 92 4.0 8.01 Financial services meeting business needs 131 3.1 2.08 Mobile-cellular telephone subscriptions /100 pop. 77 113.0 8.02 Affordability of financial services 95 3.5 2.09 Fixed-telephone lines /100 pop. 89 8.0 8.03 Financing through local equity market 124 2.5  3rd pillar: Macroeconomic environment 63 4.8 8.04 Ease of access to loans 122 2.9 3.01 Government budget balance % GDP 135 -15.3 8.05 Venture capital availability 85 2.6 3.02 Gross national savings % GDP 10 34.6 8.06 Soundness of banks 123 3.6 3.03 Inflation annual % change 99 4.8 8.07 Regulation of securities exchanges 129 3.0 3.04 Government debt % GDP 4 8.7 8.08 Legal rights index 0-10 (best) 108 2 3.05 Country credit rating 0-100 (best) 70 - 9th pillar: Technological readiness 108 3.1   4th pillar: Health and primary education 73 5.7 9.01 Availability of latest technologies 125 3.7 4.01 Malaria incidence cases/100,000 pop. 11 0.1 9.02 Firm-level technology absorption 128 3.6 4.02 Business impact of malaria 45 4.5 9.03 FDI and technology transfer 121 3.6 4.03 Tuberculosis incidence cases/100,000 pop. 86 78.0 9.04 Internet users % pop. 95 38.2 4.04 Business impact of tuberculosis 125 4.0 9.05 Fixed-broadband Internet subscriptions /100 pop. 84 5.6 4.05 HIV prevalence % adult pop. 1 0.1 9.06 Internet bandwidth kb/s/user 80 30.1 4.06 Business impact of HIV/AIDS 113 4.3 9.07 Mobile-broadband subscriptions /100 pop. 85 40.1 4.07 Infant mortality deaths/1,000 live births 93 21.9 10th pillar: Market size 36 4.7  4.08 Life expectancy years 65 74.8 10.01 Domestic market size index 33 4.6 4.09 Quality of primary education 102 3.3 10.02 Foreign market size index 43 5.1 4.10 Primary education enrollment rate net % 40 97.3 10.03 GDP (PPP) PPP $ billions 33 578.7  5th pillar: Higher education and training 96 3.9 10.04 Exports % GDP 102 24.0 5.01 Secondary education enrollment rate gross % 46 99.9 11th pillar: Business sophistication 121 3.3  5.02 Tertiary education enrollment rate gross % 78 34.6 11.01 Local supplier quantity 108 4.0 5.03 Quality of the education system 85 3.4 11.02 Local supplier quality 130 3.4 5.04 Quality of math and science education 99 3.5 11.03 State of cluster development 115 3.1 5.05 Quality of management schools 127 3.3 11.04 Nature of competitive advantage 93 3.1 5.06 Internet access in schools 124 3.1 11.05 Value chain breadth 109 3.4 5.07 Local availability of specialized training services 120 3.6 11.06 Control of international distribution 112 3.0 5.08 Extent of staff training 131 3.1 11.07 Production process sophistication 108 3.2 11.08 Extent of marketing 125 3.7 11.09 Willingness to delegate authority 124 3.1  12th pillar: Innovation 112 2.9 12.01 Capacity for innovation 112 3.7 12.02 Quality of scientific research institutions 99 3.4 12.03 Company spending on R&D 113 2.8 12.04 University-industry collaboration in R&D 120 2.7 12.05 Gov't procurement of advanced tech. products 105 2.9 12.06 Availability of scientists and engineers 81 3.8 12.07 PCT patent applications applications/million pop. 94 0.2 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 89 Part 2 Global Competitiveness Index Benin 124 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 10.9 GDP per capita (US$) 780.1 GDP (US$ billions) 8.5 GDP (PPP) % world GDP 0.02 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2015-16 2016-17 Global Competitiveness Index 124 3.5 Rank 119 / 144 130 / 148 122 / 140 124 / 138 Subindex A: Basic requirements 122 3.6 Score 3.6 3.4 3.5 3.5  1st pillar: Institutions 95 3.5 2nd pillar: Infrastructure 128 2.2 1st pillar: Institutions  3rd pillar: Macroeconomic environment 111 4.0 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 116 4.6 6 5 Subindex B: Efficiency enhancers 125 3.3 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 117 3.1 sophistication 3 environment 2  6th pillar: Goods market efficiency 126 3.7 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 50 4.4 education  8th pillar: Financial market development 106 3.5 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 129 2.5 readiness and training  10th pillar: Market size 123 2.6 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 107 3.3 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 116 3.4 efficiency  12th pillar: Innovation 86 3.2 Benin Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 21.4 Corruption 19.8 Tax rates 16.5 Tax regulations 7.4 Inefficient government bureaucracy 7.4 Restrictive labor regulations 4.9 Poor work ethic in national labor force 4.6 Inadequate supply of infrastructure 3.3 Insufficient capacity to innovate 2.7 Policy instability 2.6 Inflation 2.2 Crime and theft 1.9 Foreign currency regulations 1.8 Inadequately educated workforce 1.3 Government instability/coups 1.1 Poor public health 1.0 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 90 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Benin Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 95 3.5  6th pillar: Goods market efficiency 126 3.7 1.01 Property rights 105 3.8 6.01 Intensity of local competition 89 4.8 1.02 Intellectual property protection 83 3.8 6.02 Extent of market dominance 82 3.5 1.03 Diversion of public funds 104 2.9 6.03 Effectiveness of anti-monopoly policy 127 2.7 1.04 Public trust in politicians 82 2.8 6.04 Effect of taxation on incentives to invest 128 2.7 1.05 Irregular payments and bribes 132 2.5 6.05 Total tax rate % profits 125 63.3 1.06 Judicial independence 96 3.4 6.06 No. of procedures to start a business 76 7 1.07 Favoritism in decisions of government officials 66 3.1 6.07 Time to start a business days 73 12.0 1.08 Wastefulness of government spending 68 3.2 6.08 Agricultural policy costs 114 3.2 1.09 Burden of government regulation 81 3.3 6.09 Prevalence of non-tariff barriers 133 3.2 1.10 Efficiency of legal framework in settling disputes 77 3.5 6.10 Trade tariffs % duty 107 9.9 1.11 Efficiency of legal framework in challenging regs 81 3.2 6.11 Prevalence of foreign ownership 114 3.7 1.12 Transparency of government policymaking 114 3.5 6.12 Business impact of rules on FDI 96 4.2 1.13 Business costs of terrorism 97 4.7 6.13 Burden of customs procedures 118 3.3 1.14 Business costs of crime and violence 82 4.3 6.14 Imports % GDP 69 40.8 1.15 Organized crime 103 4.2 6.15 Degree of customer orientation 67 4.7 1.16 Reliability of police services 86 4.1 6.16 Buyer sophistication 134 2.2 1.17 Ethical behavior of firms 97 3.5 7th pillar: Labor market efficiency 50 4.4  1.18 Strength of auditing and reporting standards 126 3.6 7.01 Cooperation in labor-employer relations 101 4.1 1.19 Efficacy of corporate boards 75 4.8 7.02 Flexibility of wage determination 33 5.4 1.20 Protection of minority shareholders’ interests 108 3.6 7.03 Hiring and firing practices 83 3.6 1.21 Strength of investor protection 0-10 (best) 117 4.0 7.04 Redundancy costs weeks of salary 42 11.6 2nd pillar: Infrastructure 128 2.2 7.05 Effect of taxation on incentives to work 75 3.8 2.01 Quality of overall infrastructure 127 2.4 7.06 Pay and productivity 116 3.3 2.02 Quality of roads 114 2.9 7.07 Reliance on professional management 124 3.4 2.03 Quality of railroad infrastructure 100 1.6 7.08 Country capacity to retain talent 111 2.8 2.04 Quality of port infrastructure 85 3.7 7.09 Country capacity to attract talent 97 2.9 2.05 Quality of air transport infrastructure 118 3.2 7.10 Female participation in the labor force ratio to men 8 0.97 2.06 Available airline seat kilometers millions/week 127 15.0 8th pillar: Financial market development 106 3.5  2.07 Quality of electricity supply 134 1.7 8.01 Financial services meeting business needs 105 3.7 2.08 Mobile-cellular telephone subscriptions /100 pop. 113 85.6 8.02 Affordability of financial services 114 3.1 2.09 Fixed-telephone lines /100 pop. 115 1.8 8.03 Financing through local equity market 79 3.4  3rd pillar: Macroeconomic environment 111 4.0 8.04 Ease of access to loans 130 2.6 3.01 Government budget balance % GDP 123 -7.9 8.05 Venture capital availability 129 2.0 3.02 Gross national savings % GDP 86 16.7 8.06 Soundness of banks 95 4.4 3.03 Inflation annual % change 44 0.3 8.07 Regulation of securities exchanges 110 3.6 3.04 Government debt % GDP 45 37.5 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 119 - 9th pillar: Technological readiness 129 2.5   4th pillar: Health and primary education 116 4.6 9.01 Availability of latest technologies 126 3.6 4.01 Malaria incidence cases/100,000 pop. 62 29249.5 9.02 Firm-level technology absorption 103 4.1 4.02 Business impact of malaria 62 3.4 9.03 FDI and technology transfer 127 3.3 4.03 Tuberculosis incidence cases/100,000 pop. 78 61.0 9.04 Internet users % pop. 131 6.8 4.04 Business impact of tuberculosis 128 3.9 9.05 Fixed-broadband Internet subscriptions /100 pop. 111 0.7 4.05 HIV prevalence % adult pop. 106 1.1 9.06 Internet bandwidth kb/s/user 126 3.0 4.06 Business impact of HIV/AIDS 125 3.9 9.07 Mobile-broadband subscriptions /100 pop. 136 4.2 4.07 Infant mortality deaths/1,000 live births 129 64.2 10th pillar: Market size 123 2.6  4.08 Life expectancy years 125 59.5 10.01 Domestic market size index 122 2.4 4.09 Quality of primary education 120 2.9 10.02 Foreign market size index 124 3.3 4.10 Primary education enrollment rate net % 62 95.9 10.03 GDP (PPP) PPP $ billions 122 22.9  5th pillar: Higher education and training 117 3.1 10.04 Exports % GDP 96 25.9 5.01 Secondary education enrollment rate gross % 114 54.4 11th pillar: Business sophistication 116 3.4  5.02 Tertiary education enrollment rate gross % 108 15.4 11.01 Local supplier quantity 116 3.9 5.03 Quality of the education system 131 2.4 11.02 Local supplier quality 86 4.1 5.04 Quality of math and science education 102 3.5 11.03 State of cluster development 99 3.3 5.05 Quality of management schools 103 3.8 11.04 Nature of competitive advantage 94 3.0 5.06 Internet access in schools 122 3.2 11.05 Value chain breadth 95 3.5 5.07 Local availability of specialized training services 65 4.3 11.06 Control of international distribution 121 2.9 5.08 Extent of staff training 123 3.4 11.07 Production process sophistication 137 2.4 11.08 Extent of marketing 86 4.2 11.09 Willingness to delegate authority 126 3.1  12th pillar: Innovation 86 3.2 12.01 Capacity for innovation 34 4.7 12.02 Quality of scientific research institutions 78 3.7 12.03 Company spending on R&D 97 3.0 12.04 University-industry collaboration in R&D 98 3.1 12.05 Gov't procurement of advanced tech. products 83 3.1 12.06 Availability of scientists and engineers 104 3.5 12.07 PCT patent applications applications/million pop. 121 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 91 Part 2 Global Competitiveness Index Botswana 64 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 2.1 GDP per capita (US$) 6041.0 GDP (US$ billions) 12.9 GDP (PPP) % world GDP 0.03 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 64 4.3 Rank 79 / 144 74 / 148 74 / 144 71 / 140 64 / 138 Subindex A: Basic requirements 55 4.7 Score 4.1 4.1 4.2 4.2 4.3  1st pillar: Institutions 37 4.5 2nd pillar: Infrastructure 90 3.5 1st pillar: Institutions  3rd pillar: Macroeconomic environment 10 6.2 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 113 4.7 6 5 Subindex B: Efficiency enhancers 84 3.9 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 88 4.1 sophistication 3 environment 2  6th pillar: Goods market efficiency 73 4.3 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 36 4.5 education  8th pillar: Financial market development 66 4.0 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 86 3.6 readiness and training  10th pillar: Market size 105 2.9 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 90 3.4 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 100 3.6 efficiency  12th pillar: Innovation 84 3.2 Botswana Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Poor work ethic in national labor force 16.2 Access to financing 13.3 Inadequately educated workforce 10.8 Inadequate supply of infrastructure 10.1 Inefficient government bureaucracy 9.5 Restrictive labor regulations 8.6 Insufficient capacity to innovate 8.1 Corruption 7.9 Crime and theft 3.8 Policy instability 2.8 Inflation 2.8 Tax rates 1.9 Poor public health 1.5 Government instability/coups 1.4 Foreign currency regulations 0.7 Tax regulations 0.6 score 0 5 10 15 20 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 92 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Botswana Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 37 4.5  6th pillar: Goods market efficiency 73 4.3 1.01 Property rights 36 5.0 6.01 Intensity of local competition 50 5.3 1.02 Intellectual property protection 56 4.3 6.02 Extent of market dominance 109 3.2 1.03 Diversion of public funds 39 4.3 6.03 Effectiveness of anti-monopoly policy 63 3.7 1.04 Public trust in politicians 38 3.9 6.04 Effect of taxation on incentives to invest 26 4.5 1.05 Irregular payments and bribes 46 4.6 6.05 Total tax rate % profits 26 25.1 1.06 Judicial independence 41 4.7 6.06 No. of procedures to start a business 108 9 1.07 Favoritism in decisions of government officials 44 3.6 6.07 Time to start a business days 127 48.0 1.08 Wastefulness of government spending 26 4.1 6.08 Agricultural policy costs 49 4.1 1.09 Burden of government regulation 67 3.5 6.09 Prevalence of non-tariff barriers 45 4.6 1.10 Efficiency of legal framework in settling disputes 29 4.7 6.10 Trade tariffs % duty 80 6.4 1.11 Efficiency of legal framework in challenging regs 30 4.4 6.11 Prevalence of foreign ownership 27 5.3 1.12 Transparency of government policymaking 34 4.7 6.12 Business impact of rules on FDI 60 4.7 1.13 Business costs of terrorism 34 5.8 6.13 Burden of customs procedures 48 4.5 1.14 Business costs of crime and violence 83 4.3 6.14 Imports % GDP 44 54.0 1.15 Organized crime 54 5.2 6.15 Degree of customer orientation 124 3.9 1.16 Reliability of police services 50 4.8 6.16 Buyer sophistication 76 3.3 1.17 Ethical behavior of firms 40 4.4 7th pillar: Labor market efficiency 36 4.5  1.18 Strength of auditing and reporting standards 59 4.8 7.01 Cooperation in labor-employer relations 69 4.4 1.19 Efficacy of corporate boards 52 5.0 7.02 Flexibility of wage determination 75 4.9 1.20 Protection of minority shareholders’ interests 42 4.4 7.03 Hiring and firing practices 62 3.9 1.21 Strength of investor protection 0-10 (best) 73 5.5 7.04 Redundancy costs weeks of salary 96 21.7 2nd pillar: Infrastructure 90 3.5 7.05 Effect of taxation on incentives to work 22 4.6 2.01 Quality of overall infrastructure 77 4.0 7.06 Pay and productivity 100 3.6 2.02 Quality of roads 62 4.1 7.07 Reliance on professional management 43 4.6 2.03 Quality of railroad infrastructure 51 3.2 7.08 Country capacity to retain talent 58 3.7 2.04 Quality of port infrastructure 109 3.0 7.09 Country capacity to attract talent 36 3.9 2.05 Quality of air transport infrastructure 89 4.0 7.10 Female participation in the labor force ratio to men 20 0.93 2.06 Available airline seat kilometers millions/week 132 8.3 8th pillar: Financial market development 66 4.0  2.07 Quality of electricity supply 108 3.3 8.01 Financial services meeting business needs 65 4.3 2.08 Mobile-cellular telephone subscriptions /100 pop. 9 169.0 8.02 Affordability of financial services 83 3.6 2.09 Fixed-telephone lines /100 pop. 92 7.8 8.03 Financing through local equity market 52 3.9  3rd pillar: Macroeconomic environment 10 6.2 8.04 Ease of access to loans 69 3.9 3.01 Government budget balance % GDP 35 -1.6 8.05 Venture capital availability 72 2.8 3.02 Gross national savings % GDP 6 37.1 8.06 Soundness of banks 68 4.8 3.03 Inflation annual % change 41 3.0 8.07 Regulation of securities exchanges 59 4.5 3.04 Government debt % GDP 11 17.8 8.08 Legal rights index 0-10 (best) 68 5 3.05 Country credit rating 0-100 (best) 45 - 9th pillar: Technological readiness 86 3.6   4th pillar: Health and primary education 113 4.7 9.01 Availability of latest technologies 84 4.4 4.01 Malaria incidence cases/100,000 pop. 27 45.0 9.02 Firm-level technology absorption 76 4.4 4.02 Business impact of malaria 38 4.8 9.03 FDI and technology transfer 93 4.0 4.03 Tuberculosis incidence cases/100,000 pop. 130 385.0 9.04 Internet users % pop. 99 27.5 4.04 Business impact of tuberculosis 132 3.7 9.05 Fixed-broadband Internet subscriptions /100 pop. 101 1.8 4.05 HIV prevalence % adult pop. 137 25.2 9.06 Internet bandwidth kb/s/user 104 11.4 4.06 Business impact of HIV/AIDS 133 3.2 9.07 Mobile-broadband subscriptions /100 pop. 45 67.3 4.07 Infant mortality deaths/1,000 live births 109 34.8 10th pillar: Market size 105 2.9  4.08 Life expectancy years 113 64.4 10.01 Domestic market size index 112 2.5 4.09 Quality of primary education 73 4.0 10.02 Foreign market size index 93 4.0 4.10 Primary education enrollment rate net % 98 91.0 10.03 GDP (PPP) PPP $ billions 107 34.8  5th pillar: Higher education and training 88 4.1 10.04 Exports % GDP 25 56.4 5.01 Secondary education enrollment rate gross % 91 83.9 11th pillar: Business sophistication 100 3.6  5.02 Tertiary education enrollment rate gross % 89 27.5 11.01 Local supplier quantity 120 3.9 5.03 Quality of the education system 66 3.7 11.02 Local supplier quality 105 3.8 5.04 Quality of math and science education 87 3.8 11.03 State of cluster development 93 3.4 5.05 Quality of management schools 107 3.7 11.04 Nature of competitive advantage 74 3.4 5.06 Internet access in schools 106 3.6 11.05 Value chain breadth 107 3.4 5.07 Local availability of specialized training services 72 4.2 11.06 Control of international distribution 98 3.2 5.08 Extent of staff training 48 4.2 11.07 Production process sophistication 94 3.5 11.08 Extent of marketing 102 4.1 11.09 Willingness to delegate authority 98 3.4  12th pillar: Innovation 84 3.2 12.01 Capacity for innovation 87 3.9 12.02 Quality of scientific research institutions 96 3.5 12.03 Company spending on R&D 86 3.1 12.04 University-industry collaboration in R&D 72 3.4 12.05 Gov't procurement of advanced tech. products 39 3.6 12.06 Availability of scientists and engineers 107 3.5 12.07 PCT patent applications applications/million pop. 97 0.2 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 93 Part 2 Global Competitiveness Index Burundi 135 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 9.4 GDP per capita (US$) 305.8 GDP (US$ billions) 2.9 GDP (PPP) % world GDP 0.01 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 135 3.1 Rank 144 / 144 146 / 148 139 / 144 136 / 140 135 / 138 Subindex A: Basic requirements 130 3.3 Score 2.8 2.9 3.1 3.1 3.1  1st pillar: Institutions 134 2.9 2nd pillar: Infrastructure 134 1.9 1st pillar: Institutions  3rd pillar: Macroeconomic environment 124 3.5 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 110 4.8 6 5 Subindex B: Efficiency enhancers 137 2.7 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 134 2.3 sophistication 3 environment 2  6th pillar: Goods market efficiency 130 3.6 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 78 4.1 education  8th pillar: Financial market development 135 2.6 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 137 2.0 readiness and training  10th pillar: Market size 135 1.7 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 134 2.8 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 135 3.1 efficiency  12th pillar: Innovation 131 2.5 Burundi Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Policy instability 23.4 Corruption 18.2 Access to financing 15.3 Inflation 9.2 Government instability/coups 4.8 Tax rates 4.8 Inadequate supply of infrastructure 4.2 Inefficient government bureaucracy 3.9 Insufficient capacity to innovate 3.7 Crime and theft 3.1 Inadequately educated workforce 3.0 Foreign currency regulations 2.5 Poor public health 1.6 Poor work ethic in national labor force 1.6 Tax regulations 0.5 Restrictive labor regulations 0.3 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 94 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Burundi Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 134 2.9  6th pillar: Goods market efficiency 130 3.6 1.01 Property rights 135 2.8 6.01 Intensity of local competition 123 4.4 1.02 Intellectual property protection 136 2.7 6.02 Extent of market dominance 85 3.5 1.03 Diversion of public funds 131 2.1 6.03 Effectiveness of anti-monopoly policy 109 3.2 1.04 Public trust in politicians 88 2.6 6.04 Effect of taxation on incentives to invest 121 2.9 1.05 Irregular payments and bribes 115 3.0 6.05 Total tax rate % profits 81 40.3 1.06 Judicial independence 135 1.7 6.06 No. of procedures to start a business 11 3 1.07 Favoritism in decisions of government officials 107 2.5 6.07 Time to start a business days 15 4.0 1.08 Wastefulness of government spending 116 2.3 6.08 Agricultural policy costs 135 2.6 1.09 Burden of government regulation 102 3.0 6.09 Prevalence of non-tariff barriers 130 3.4 1.10 Efficiency of legal framework in settling disputes 104 3.0 6.10 Trade tariffs % duty 98 9.6 1.11 Efficiency of legal framework in challenging regs 113 2.7 6.11 Prevalence of foreign ownership 134 2.9 1.12 Transparency of government policymaking 133 2.8 6.12 Business impact of rules on FDI 132 3.2 1.13 Business costs of terrorism 108 4.4 6.13 Burden of customs procedures 119 3.3 1.14 Business costs of crime and violence 119 3.3 6.14 Imports % GDP 92 34.5 1.15 Organized crime 124 3.3 6.15 Degree of customer orientation 122 3.9 1.16 Reliability of police services 136 2.2 6.16 Buyer sophistication 138 1.8 1.17 Ethical behavior of firms 129 2.9 7th pillar: Labor market efficiency 78 4.1  1.18 Strength of auditing and reporting standards 115 3.8 7.01 Cooperation in labor-employer relations 114 3.8 1.19 Efficacy of corporate boards 76 4.8 7.02 Flexibility of wage determination 18 5.8 1.20 Protection of minority shareholders’ interests 113 3.5 7.03 Hiring and firing practices 117 3.2 1.21 Strength of investor protection 0-10 (best) 96 4.7 7.04 Redundancy costs weeks of salary 68 15.9 2nd pillar: Infrastructure 134 1.9 7.05 Effect of taxation on incentives to work 108 3.4 2.01 Quality of overall infrastructure 133 2.2 7.06 Pay and productivity 134 2.9 2.02 Quality of roads 117 2.9 7.07 Reliance on professional management 128 3.3 2.03 Quality of railroad infrastructure N/Appl. N/Appl. 7.08 Country capacity to retain talent 131 2.2 2.04 Quality of port infrastructure 123 2.3 7.09 Country capacity to attract talent 134 1.8 2.05 Quality of air transport infrastructure 134 2.6 7.10 Female participation in the labor force ratio to men 4 1.03 2.06 Available airline seat kilometers millions/week 136 1.4 8th pillar: Financial market development 135 2.6  2.07 Quality of electricity supply 129 2.1 8.01 Financial services meeting business needs 134 2.7 2.08 Mobile-cellular telephone subscriptions /100 pop. 134 46.2 8.02 Affordability of financial services 109 3.2 2.09 Fixed-telephone lines /100 pop. 132 0.2 8.03 Financing through local equity market 131 2.3  3rd pillar: Macroeconomic environment 124 3.5 8.04 Ease of access to loans 133 2.4 3.01 Government budget balance % GDP 118 -6.9 8.05 Venture capital availability 114 2.2 3.02 Gross national savings % GDP 137 -4.4 8.06 Soundness of banks 131 3.1 3.03 Inflation annual % change 105 5.6 8.07 Regulation of securities exchanges 134 2.5 3.04 Government debt % GDP 47 38.4 8.08 Legal rights index 0-10 (best) 108 2 3.05 Country credit rating 0-100 (best) 117 - 9th pillar: Technological readiness 137 2.0   4th pillar: Health and primary education 110 4.8 9.01 Availability of latest technologies 137 2.9 4.01 Malaria incidence cases/100,000 pop. 52 12942.8 9.02 Firm-level technology absorption 138 2.9 4.02 Business impact of malaria 64 3.3 9.03 FDI and technology transfer 132 3.2 4.03 Tuberculosis incidence cases/100,000 pop. 99 126.0 9.04 Internet users % pop. 134 4.9 4.04 Business impact of tuberculosis 126 3.9 9.05 Fixed-broadband Internet subscriptions /100 pop. 133 0.0 4.05 HIV prevalence % adult pop. 106 1.1 9.06 Internet bandwidth kb/s/user 118 5.7 4.06 Business impact of HIV/AIDS 121 3.9 9.07 Mobile-broadband subscriptions /100 pop. 131 7.6 4.07 Infant mortality deaths/1,000 live births 126 54.1 10th pillar: Market size 135 1.7  4.08 Life expectancy years 131 56.7 10.01 Domestic market size index 132 1.7 4.09 Quality of primary education 125 2.7 10.02 Foreign market size index 138 1.8 4.10 Primary education enrollment rate net % 64 95.4 10.03 GDP (PPP) PPP $ billions 132 7.7  5th pillar: Higher education and training 134 2.3 10.04 Exports % GDP 138 5.0 5.01 Secondary education enrollment rate gross % 130 37.9 11th pillar: Business sophistication 135 3.1  5.02 Tertiary education enrollment rate gross % 130 4.4 11.01 Local supplier quantity 134 3.5 5.03 Quality of the education system 125 2.7 11.02 Local supplier quality 132 3.3 5.04 Quality of math and science education 94 3.6 11.03 State of cluster development 128 2.9 5.05 Quality of management schools 114 3.6 11.04 Nature of competitive advantage 115 2.8 5.06 Internet access in schools 136 1.9 11.05 Value chain breadth 120 3.2 5.07 Local availability of specialized training services 137 2.6 11.06 Control of international distribution 117 3.0 5.08 Extent of staff training 134 3.0 11.07 Production process sophistication 132 2.6 11.08 Extent of marketing 134 3.4 11.09 Willingness to delegate authority 133 2.8  12th pillar: Innovation 131 2.5 12.01 Capacity for innovation 133 3.2 12.02 Quality of scientific research institutions 136 2.2 12.03 Company spending on R&D 125 2.6 12.04 University-industry collaboration in R&D 115 2.8 12.05 Gov't procurement of advanced tech. products 111 2.7 12.06 Availability of scientists and engineers 122 3.2 12.07 PCT patent applications applications/million pop. 121 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 95 Part 2 Global Competitiveness Index Cameroon 119 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 23.1 GDP per capita (US$) 1232.4 GDP (US$ billions) 28.5 GDP (PPP) % world GDP 0.06 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 119 3.6 Rank 112 / 144 115 / 148 116 / 144 114 / 140 119 / 138 Subindex A: Basic requirements 119 3.6 Score 3.7 3.7 3.7 3.7 3.6  1st pillar: Institutions 101 3.5 2nd pillar: Infrastructure 131 2.2 1st pillar: Institutions  3rd pillar: Macroeconomic environment 95 4.2 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 112 4.7 6 5 Subindex B: Efficiency enhancers 114 3.5 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 105 3.4 sophistication 3 environment 2  6th pillar: Goods market efficiency 109 4.0 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 76 4.2 education  8th pillar: Financial market development 91 3.7 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 124 2.6 readiness and training  10th pillar: Market size 85 3.3 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 103 3.3 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 112 3.5 efficiency  12th pillar: Innovation 90 3.2 Cameroon Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Corruption 16.8 Access to financing 15.2 Tax rates 11.4 Inadequate supply of infrastructure 9.8 Tax regulations 8.9 Inefficient government bureaucracy 8.9 Poor work ethic in national labor force 5.6 Inadequately educated workforce 5.5 Insufficient capacity to innovate 4.9 Restrictive labor regulations 2.9 Inflation 2.8 Foreign currency regulations 2.3 Poor public health 1.9 Crime and theft 1.4 Policy instability 1.1 Government instability/coups 0.4 score 0 5 10 15 20 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 96 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Cameroon Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 101 3.5  6th pillar: Goods market efficiency 109 4.0 1.01 Property rights 85 4.1 6.01 Intensity of local competition 88 4.8 1.02 Intellectual property protection 60 4.3 6.02 Extent of market dominance 49 3.9 1.03 Diversion of public funds 126 2.3 6.03 Effectiveness of anti-monopoly policy 90 3.4 1.04 Public trust in politicians 72 3.0 6.04 Effect of taxation on incentives to invest 105 3.2 1.05 Irregular payments and bribes 123 2.9 6.05 Total tax rate % profits 104 48.8 1.06 Judicial independence 111 3.0 6.06 No. of procedures to start a business 41 5 1.07 Favoritism in decisions of government officials 98 2.7 6.07 Time to start a business days 87 15.0 1.08 Wastefulness of government spending 85 2.8 6.08 Agricultural policy costs 78 3.7 1.09 Burden of government regulation 78 3.4 6.09 Prevalence of non-tariff barriers 131 3.3 1.10 Efficiency of legal framework in settling disputes 66 3.6 6.10 Trade tariffs % duty 132 14.6 1.11 Efficiency of legal framework in challenging regs 71 3.4 6.11 Prevalence of foreign ownership 64 4.5 1.12 Transparency of government policymaking 67 4.1 6.12 Business impact of rules on FDI 83 4.4 1.13 Business costs of terrorism 124 3.6 6.13 Burden of customs procedures 108 3.4 1.14 Business costs of crime and violence 103 3.9 6.14 Imports % GDP 111 29.7 1.15 Organized crime 95 4.3 6.15 Degree of customer orientation 94 4.3 1.16 Reliability of police services 69 4.3 6.16 Buyer sophistication 123 2.7 1.17 Ethical behavior of firms 118 3.2 7th pillar: Labor market efficiency 76 4.2  1.18 Strength of auditing and reporting standards 119 3.7 7.01 Cooperation in labor-employer relations 100 4.1 1.19 Efficacy of corporate boards 69 4.9 7.02 Flexibility of wage determination 79 4.9 1.20 Protection of minority shareholders’ interests 75 4.0 7.03 Hiring and firing practices 46 4.1 1.21 Strength of investor protection 0-10 (best) 108 4.3 7.04 Redundancy costs weeks of salary 88 19.9 2nd pillar: Infrastructure 131 2.2 7.05 Effect of taxation on incentives to work 34 4.4 2.01 Quality of overall infrastructure 134 2.2 7.06 Pay and productivity 115 3.4 2.02 Quality of roads 130 2.5 7.07 Reliance on professional management 125 3.3 2.03 Quality of railroad infrastructure 82 2.4 7.08 Country capacity to retain talent 119 2.6 2.04 Quality of port infrastructure 112 3.0 7.09 Country capacity to attract talent 108 2.6 2.05 Quality of air transport infrastructure 130 2.7 7.10 Female participation in the labor force ratio to men 44 0.88 2.06 Available airline seat kilometers millions/week 97 58.1 8th pillar: Financial market development 91 3.7  2.07 Quality of electricity supply 128 2.1 8.01 Financial services meeting business needs 91 4.0 2.08 Mobile-cellular telephone subscriptions /100 pop. 127 71.8 8.02 Affordability of financial services 103 3.2 2.09 Fixed-telephone lines /100 pop. 106 4.5 8.03 Financing through local equity market 86 3.3  3rd pillar: Macroeconomic environment 95 4.2 8.04 Ease of access to loans 98 3.4 3.01 Government budget balance % GDP 109 -5.8 8.05 Venture capital availability 103 2.4 3.02 Gross national savings % GDP 92 16.0 8.06 Soundness of banks 93 4.4 3.03 Inflation annual % change 1 2.8 8.07 Regulation of securities exchanges 101 3.8 3.04 Government debt % GDP 28 33.5 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 96 - 9th pillar: Technological readiness 124 2.6   4th pillar: Health and primary education 112 4.7 9.01 Availability of latest technologies 120 3.8 4.01 Malaria incidence cases/100,000 pop. 60 22834.0 9.02 Firm-level technology absorption 110 4.0 4.02 Business impact of malaria 55 3.8 9.03 FDI and technology transfer 117 3.6 4.03 Tuberculosis incidence cases/100,000 pop. 117 220.0 9.04 Internet users % pop. 112 20.7 4.04 Business impact of tuberculosis 121 4.1 9.05 Fixed-broadband Internet subscriptions /100 pop. 131 0.1 4.05 HIV prevalence % adult pop. 126 4.8 9.06 Internet bandwidth kb/s/user 137 1.0 4.06 Business impact of HIV/AIDS 118 4.0 9.07 Mobile-broadband subscriptions /100 pop. 135 4.3 4.07 Infant mortality deaths/1,000 live births 128 57.1 10th pillar: Market size 85 3.3  4.08 Life expectancy years 132 55.5 10.01 Domestic market size index 83 3.2 4.09 Quality of primary education 61 4.2 10.02 Foreign market size index 105 3.7 4.10 Primary education enrollment rate net % 94 91.6 10.03 GDP (PPP) PPP $ billions 86 72.6  5th pillar: Higher education and training 105 3.4 10.04 Exports % GDP 120 17.8 5.01 Secondary education enrollment rate gross % 113 56.4 11th pillar: Business sophistication 112 3.5  5.02 Tertiary education enrollment rate gross % 111 11.9 11.01 Local supplier quantity 101 4.2 5.03 Quality of the education system 79 3.6 11.02 Local supplier quality 104 3.8 5.04 Quality of math and science education 63 4.3 11.03 State of cluster development 105 3.2 5.05 Quality of management schools 47 4.6 11.04 Nature of competitive advantage 120 2.7 5.06 Internet access in schools 94 3.8 11.05 Value chain breadth 99 3.5 5.07 Local availability of specialized training services 67 4.3 11.06 Control of international distribution 99 3.2 5.08 Extent of staff training 74 3.8 11.07 Production process sophistication 121 2.9 11.08 Extent of marketing 51 4.6 11.09 Willingness to delegate authority 107 3.4  12th pillar: Innovation 90 3.2 12.01 Capacity for innovation 44 4.4 12.02 Quality of scientific research institutions 88 3.6 12.03 Company spending on R&D 85 3.1 12.04 University-industry collaboration in R&D 91 3.2 12.05 Gov't procurement of advanced tech. products 91 3.0 12.06 Availability of scientists and engineers 110 3.4 12.07 PCT patent applications applications/million pop. 110 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 97 Part 2 Global Competitiveness Index Cape Verde 110 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 0.5 GDP per capita (US$) 3038.5 GDP (US$ billions) 1.6 GDP (PPP) % world GDP 0.00 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 110 3.8 Rank 122 / 144 122 / 148 114 / 144 112 / 140 110 / 138 Subindex A: Basic requirements 89 4.3 Score 3.5 3.5 3.7 3.7 3.8  1st pillar: Institutions 71 4.0 2nd pillar: Infrastructure 94 3.4 1st pillar: Institutions  3rd pillar: Macroeconomic environment 107 4.0 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 58 5.9 6 5 Subindex B: Efficiency enhancers 121 3.4 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 79 4.1 sophistication 3 environment 2  6th pillar: Goods market efficiency 97 4.1 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 116 3.7 education  8th pillar: Financial market development 112 3.4 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 78 3.8 readiness and training  10th pillar: Market size 137 1.4 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 105 3.3 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 108 3.5 efficiency  12th pillar: Innovation 98 3.1 Cape Verde Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 21.6 Tax rates 17.2 Inefficient government bureaucracy 11.3 Tax regulations 9.8 Restrictive labor regulations 7.5 Inadequately educated workforce 6.9 Inadequate supply of infrastructure 6.4 Insufficient capacity to innovate 4.3 Crime and theft 4.0 Poor work ethic in national labor force 3.0 Corruption 3.0 Poor public health 2.2 Inflation 1.7 Foreign currency regulations 0.5 Government instability/coups 0.5 Policy instability 0.1 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 98 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Cape Verde Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 71 4.0  6th pillar: Goods market efficiency 97 4.1 1.01 Property rights 70 4.3 6.01 Intensity of local competition 120 4.4 1.02 Intellectual property protection 91 3.7 6.02 Extent of market dominance 68 3.7 1.03 Diversion of public funds 52 3.9 6.03 Effectiveness of anti-monopoly policy 88 3.5 1.04 Public trust in politicians 50 3.5 6.04 Effect of taxation on incentives to invest 119 2.9 1.05 Irregular payments and bribes 58 4.2 6.05 Total tax rate % profits 66 36.5 1.06 Judicial independence 53 4.3 6.06 No. of procedures to start a business 76 7 1.07 Favoritism in decisions of government officials 52 3.4 6.07 Time to start a business days 56 10.0 1.08 Wastefulness of government spending 44 3.6 6.08 Agricultural policy costs 48 4.1 1.09 Burden of government regulation 52 3.6 6.09 Prevalence of non-tariff barriers 99 4.0 1.10 Efficiency of legal framework in settling disputes 89 3.3 6.10 Trade tariffs % duty 94 8.8 1.11 Efficiency of legal framework in challenging regs 76 3.4 6.11 Prevalence of foreign ownership 78 4.4 1.12 Transparency of government policymaking 69 4.1 6.12 Business impact of rules on FDI 70 4.6 1.13 Business costs of terrorism 70 5.2 6.13 Burden of customs procedures 94 3.6 1.14 Business costs of crime and violence 95 4.1 6.14 Imports % GDP 43 54.1 1.15 Organized crime 84 4.5 6.15 Degree of customer orientation 126 3.8 1.16 Reliability of police services 77 4.3 6.16 Buyer sophistication 85 3.2 1.17 Ethical behavior of firms 59 4.0 7th pillar: Labor market efficiency 116 3.7  1.18 Strength of auditing and reporting standards 102 4.0 7.01 Cooperation in labor-employer relations 107 4.0 1.19 Efficacy of corporate boards 112 4.3 7.02 Flexibility of wage determination 64 5.1 1.20 Protection of minority shareholders’ interests 90 3.8 7.03 Hiring and firing practices 86 3.6 1.21 Strength of investor protection 0-10 (best) 126 3.7 7.04 Redundancy costs weeks of salary 121 29.5 2nd pillar: Infrastructure 94 3.4 7.05 Effect of taxation on incentives to work 87 3.7 2.01 Quality of overall infrastructure 86 3.6 7.06 Pay and productivity 103 3.5 2.02 Quality of roads 66 4.1 7.07 Reliance on professional management 116 3.5 2.03 Quality of railroad infrastructure N/Appl. N/Appl. 7.08 Country capacity to retain talent 76 3.4 2.04 Quality of port infrastructure 95 3.4 7.09 Country capacity to attract talent 79 3.2 2.05 Quality of air transport infrastructure 102 3.7 7.10 Female participation in the labor force ratio to men 101 0.65 2.06 Available airline seat kilometers millions/week 98 55.6 8th pillar: Financial market development 112 3.4  2.07 Quality of electricity supply 107 3.3 8.01 Financial services meeting business needs 118 3.5 2.08 Mobile-cellular telephone subscriptions /100 pop. 51 127.2 8.02 Affordability of financial services 101 3.3 2.09 Fixed-telephone lines /100 pop. 78 11.5 8.03 Financing through local equity market 85 3.4  3rd pillar: Macroeconomic environment 107 4.0 8.04 Ease of access to loans 107 3.2 3.01 Government budget balance % GDP 100 -4.8 8.05 Venture capital availability 74 2.8 3.02 Gross national savings % GDP 17 31.5 8.06 Soundness of banks 86 4.5 3.03 Inflation annual % change 51 0.1 8.07 Regulation of securities exchanges 78 4.1 3.04 Government debt % GDP 132 119.3 8.08 Legal rights index 0-10 (best) 108 2 3.05 Country credit rating 0-100 (best) 103 - 9th pillar: Technological readiness 78 3.8   4th pillar: Health and primary education 58 5.9 9.01 Availability of latest technologies 79 4.5 4.01 Malaria incidence cases/100,000 pop. 20 9.7 9.02 Firm-level technology absorption 87 4.3 4.02 Business impact of malaria 20 5.5 9.03 FDI and technology transfer 65 4.4 4.03 Tuberculosis incidence cases/100,000 pop. 100 138.0 9.04 Internet users % pop. 90 43.0 4.04 Business impact of tuberculosis 81 5.3 9.05 Fixed-broadband Internet subscriptions /100 pop. 96 3.0 4.05 HIV prevalence % adult pop. 106 1.1 9.06 Internet bandwidth kb/s/user 96 17.1 4.06 Business impact of HIV/AIDS 74 5.4 9.07 Mobile-broadband subscriptions /100 pop. 38 72.9 4.07 Infant mortality deaths/1,000 live births 92 20.7 10th pillar: Market size 137 1.4  4.08 Life expectancy years 84 73.1 10.01 Domestic market size index 137 1.0 4.09 Quality of primary education 60 4.2 10.02 Foreign market size index 135 2.4 4.10 Primary education enrollment rate net % 24 98.2 10.03 GDP (PPP) PPP $ billions 137 3.4  5th pillar: Higher education and training 79 4.1 10.04 Exports % GDP 68 34.8 5.01 Secondary education enrollment rate gross % 69 92.6 11th pillar: Business sophistication 108 3.5  5.02 Tertiary education enrollment rate gross % 95 23.0 11.01 Local supplier quantity 130 3.6 5.03 Quality of the education system 58 4.0 11.02 Local supplier quality 119 3.6 5.04 Quality of math and science education 71 4.0 11.03 State of cluster development 85 3.5 5.05 Quality of management schools 62 4.3 11.04 Nature of competitive advantage 67 3.5 5.06 Internet access in schools 59 4.5 11.05 Value chain breadth 71 3.7 5.07 Local availability of specialized training services 75 4.2 11.06 Control of international distribution 103 3.1 5.08 Extent of staff training 113 3.4 11.07 Production process sophistication 106 3.2 11.08 Extent of marketing 108 4.0 11.09 Willingness to delegate authority 109 3.3  12th pillar: Innovation 98 3.1 12.01 Capacity for innovation 109 3.7 12.02 Quality of scientific research institutions 93 3.5 12.03 Company spending on R&D 88 3.1 12.04 University-industry collaboration in R&D 95 3.2 12.05 Gov't procurement of advanced tech. products 59 3.4 12.06 Availability of scientists and engineers 102 3.5 12.07 PCT patent applications applications/million pop. 121 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 99 Part 2 Global Competitiveness Index Chad 136 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 11.6 GDP per capita (US$) 941.9 GDP (US$ billions) 10.9 GDP (PPP) % world GDP 0.03 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 136 2.9 Rank 139 / 144 148 / 148 143 / 144 139 / 140 136 / 138 Subindex A: Basic requirements 135 3.1 Score 3.1 2.9 2.8 3.0 2.9  1st pillar: Institutions 136 2.7 2nd pillar: Infrastructure 137 1.8 1st pillar: Institutions  3rd pillar: Macroeconomic environment 105 4.1 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 131 3.8 6 5 Subindex B: Efficiency enhancers 135 2.8 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 137 2.2 sophistication 3 environment 2  6th pillar: Goods market efficiency 137 3.0 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 111 3.8 education  8th pillar: Financial market development 133 2.9 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 138 1.9 readiness and training  10th pillar: Market size 115 2.8 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 137 2.6 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 137 2.7 efficiency  12th pillar: Innovation 134 2.5 Chad Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 20.4 Corruption 16.4 Tax rates 13.1 Inadequate supply of infrastructure 10.0 Inefficient government bureaucracy 6.6 Inadequately educated workforce 5.3 Poor work ethic in national labor force 5.1 Crime and theft 4.8 Insufficient capacity to innovate 4.3 Policy instability 3.8 Tax regulations 3.5 Poor public health 2.1 Inflation 2.0 Restrictive labor regulations 1.7 Government instability/coups 0.9 Foreign currency regulations 0.1 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 100 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Chad Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 136 2.7  6th pillar: Goods market efficiency 137 3.0 1.01 Property rights 133 3.0 6.01 Intensity of local competition 137 3.6 1.02 Intellectual property protection 133 2.8 6.02 Extent of market dominance 138 2.1 1.03 Diversion of public funds 137 1.6 6.03 Effectiveness of anti-monopoly policy 135 2.5 1.04 Public trust in politicians 105 2.4 6.04 Effect of taxation on incentives to invest 129 2.6 1.05 Irregular payments and bribes 136 2.1 6.05 Total tax rate % profits 127 63.5 1.06 Judicial independence 130 2.2 6.06 No. of procedures to start a business 108 9 1.07 Favoritism in decisions of government officials 113 2.3 6.07 Time to start a business days 131 60.0 1.08 Wastefulness of government spending 100 2.6 6.08 Agricultural policy costs 125 3.0 1.09 Burden of government regulation 95 3.2 6.09 Prevalence of non-tariff barriers 135 3.1 1.10 Efficiency of legal framework in settling disputes 105 3.0 6.10 Trade tariffs % duty 131 14.3 1.11 Efficiency of legal framework in challenging regs 114 2.7 6.11 Prevalence of foreign ownership 131 3.1 1.12 Transparency of government policymaking 135 2.7 6.12 Business impact of rules on FDI 129 3.2 1.13 Business costs of terrorism 136 2.6 6.13 Burden of customs procedures 137 2.4 1.14 Business costs of crime and violence 123 3.0 6.14 Imports % GDP 83 36.9 1.15 Organized crime 128 3.1 6.15 Degree of customer orientation 138 3.0 1.16 Reliability of police services 124 2.9 6.16 Buyer sophistication 131 2.3 1.17 Ethical behavior of firms 135 2.7 7th pillar: Labor market efficiency 111 3.8  1.18 Strength of auditing and reporting standards 136 2.8 7.01 Cooperation in labor-employer relations 130 3.5 1.19 Efficacy of corporate boards 134 3.7 7.02 Flexibility of wage determination 88 4.8 1.20 Protection of minority shareholders’ interests 130 3.3 7.03 Hiring and firing practices 105 3.3 1.21 Strength of investor protection 0-10 (best) 120 3.8 7.04 Redundancy costs weeks of salary 50 13.0 2nd pillar: Infrastructure 137 1.8 7.05 Effect of taxation on incentives to work 99 3.6 2.01 Quality of overall infrastructure 137 1.7 7.06 Pay and productivity 136 2.5 2.02 Quality of roads 127 2.6 7.07 Reliance on professional management 137 2.4 2.03 Quality of railroad infrastructure N/Appl. N/Appl. 7.08 Country capacity to retain talent 112 2.7 2.04 Quality of port infrastructure 131 2.0 7.09 Country capacity to attract talent 90 3.0 2.05 Quality of air transport infrastructure 125 2.9 7.10 Female participation in the labor force ratio to men 63 0.82 2.06 Available airline seat kilometers millions/week 130 10.2 8th pillar: Financial market development 133 2.9  2.07 Quality of electricity supply 131 1.9 8.01 Financial services meeting business needs 135 2.7 2.08 Mobile-cellular telephone subscriptions /100 pop. 137 40.2 8.02 Affordability of financial services 134 2.4 2.09 Fixed-telephone lines /100 pop. 136 0.1 8.03 Financing through local equity market 126 2.5  3rd pillar: Macroeconomic environment 105 4.1 8.04 Ease of access to loans 131 2.6 3.01 Government budget balance % GDP 102 -4.9 8.05 Venture capital availability 132 2.0 3.02 Gross national savings % GDP 105 14.4 8.06 Soundness of banks 130 3.2 3.03 Inflation annual % change 66 3.6 8.07 Regulation of securities exchanges 132 2.8 3.04 Government debt % GDP 50 39.3 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 135 - 9th pillar: Technological readiness 138 1.9   4th pillar: Health and primary education 131 3.8 9.01 Availability of latest technologies 138 2.7 4.01 Malaria incidence cases/100,000 pop. 53 13983.9 9.02 Firm-level technology absorption 137 3.1 4.02 Business impact of malaria 70 2.8 9.03 FDI and technology transfer 136 2.8 4.03 Tuberculosis incidence cases/100,000 pop. 106 159.0 9.04 Internet users % pop. 137 2.7 4.04 Business impact of tuberculosis 135 3.4 9.05 Fixed-broadband Internet subscriptions /100 pop. 128 0.1 4.05 HIV prevalence % adult pop. 121 2.5 9.06 Internet bandwidth kb/s/user 130 2.6 4.06 Business impact of HIV/AIDS 132 3.4 9.07 Mobile-broadband subscriptions /100 pop. 138 1.4 4.07 Infant mortality deaths/1,000 live births 137 85.0 10th pillar: Market size 115 2.8  4.08 Life expectancy years 136 51.6 10.01 Domestic market size index 111 2.5 4.09 Quality of primary education 129 2.5 10.02 Foreign market size index 118 3.4 4.10 Primary education enrollment rate net % 124 84.4 10.03 GDP (PPP) PPP $ billions 113 30.5  5th pillar: Higher education and training 137 2.2 10.04 Exports % GDP 101 24.5 5.01 Secondary education enrollment rate gross % 138 22.4 11th pillar: Business sophistication 137 2.7  5.02 Tertiary education enrollment rate gross % 134 3.4 11.01 Local supplier quantity 104 4.1 5.03 Quality of the education system 129 2.5 11.02 Local supplier quality 136 3.0 5.04 Quality of math and science education 121 2.8 11.03 State of cluster development 136 2.6 5.05 Quality of management schools 131 3.1 11.04 Nature of competitive advantage 129 2.4 5.06 Internet access in schools 138 1.7 11.05 Value chain breadth 137 2.4 5.07 Local availability of specialized training services 130 3.3 11.06 Control of international distribution 138 2.3 5.08 Extent of staff training 136 2.9 11.07 Production process sophistication 138 2.0 11.08 Extent of marketing 136 3.2 11.09 Willingness to delegate authority 135 2.4  12th pillar: Innovation 134 2.5 12.01 Capacity for innovation 132 3.2 12.02 Quality of scientific research institutions 127 2.6 12.03 Company spending on R&D 127 2.6 12.04 University-industry collaboration in R&D 128 2.6 12.05 Gov't procurement of advanced tech. products 123 2.6 12.06 Availability of scientists and engineers 136 2.7 12.07 PCT patent applications applications/million pop. 121 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 101 Part 2 Global Competitiveness Index Congo, Democratic Rep. 129 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 81.7 GDP per capita (US$) 475.9 GDP (US$ billions) 38.9 GDP (PPP) % world GDP 0.06 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2016-17 Global Competitiveness Index 129 3.3 Rank 129 / 138 Subindex A: Basic requirements 128 3.3 Score 3.3  1st pillar: Institutions 117 3.3 2nd pillar: Infrastructure 138 1.7 1st pillar: Institutions  3rd pillar: Macroeconomic environment 64 4.8 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 135 3.5 6 5 Subindex B: Efficiency enhancers 127 3.3 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 128 2.8 sophistication 3 environment 2  6th pillar: Goods market efficiency 127 3.7 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 53 4.4 education  8th pillar: Financial market development 117 3.2 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 134 2.3 readiness and training  10th pillar: Market size 95 3.2 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 125 3.0 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 132 3.2 efficiency  12th pillar: Innovation 115 2.8 Congo, Democratic Rep. Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 18.4 Corruption 16.7 Inadequate supply of infrastructure 13.4 Tax rates 12.1 Tax regulations 8.7 Policy instability 7.9 Inadequately educated workforce 4.5 Restrictive labor regulations 4.3 Poor work ethic in national labor force 3.8 Government instability/coups 2.6 Insufficient capacity to innovate 2.5 Inefficient government bureaucracy 2.2 Poor public health 1.2 Inflation 0.8 Crime and theft 0.6 Foreign currency regulations 0.5 score 0 5 10 15 20 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 102 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Congo, Democratic Rep. Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 117 3.3  6th pillar: Goods market efficiency 127 3.7 1.01 Property rights 114 3.7 6.01 Intensity of local competition 102 4.7 1.02 Intellectual property protection 106 3.5 6.02 Extent of market dominance 106 3.3 1.03 Diversion of public funds 113 2.6 6.03 Effectiveness of anti-monopoly policy 93 3.4 1.04 Public trust in politicians 102 2.4 6.04 Effect of taxation on incentives to invest 100 3.2 1.05 Irregular payments and bribes 131 2.6 6.05 Total tax rate % profits 118 54.6 1.06 Judicial independence 131 2.2 6.06 No. of procedures to start a business 54 6 1.07 Favoritism in decisions of government officials 89 2.8 6.07 Time to start a business days 67 11.0 1.08 Wastefulness of government spending n/a n/a 6.08 Agricultural policy costs 127 3.0 1.09 Burden of government regulation 53 3.6 6.09 Prevalence of non-tariff barriers 136 2.9 1.10 Efficiency of legal framework in settling disputes 85 3.3 6.10 Trade tariffs % duty 112 10.2 1.11 Efficiency of legal framework in challenging regs 120 2.6 6.11 Prevalence of foreign ownership 51 4.8 1.12 Transparency of government policymaking 102 3.7 6.12 Business impact of rules on FDI 65 4.7 1.13 Business costs of terrorism 59 5.4 6.13 Burden of customs procedures 110 3.4 1.14 Business costs of crime and violence 89 4.2 6.14 Imports % GDP 119 24.7 1.15 Organized crime 88 4.3 6.15 Degree of customer orientation 103 4.2 1.16 Reliability of police services 100 3.7 6.16 Buyer sophistication 136 2.0 1.17 Ethical behavior of firms 128 3.0 7th pillar: Labor market efficiency 53 4.4  1.18 Strength of auditing and reporting standards 132 3.5 7.01 Cooperation in labor-employer relations 88 4.2 1.19 Efficacy of corporate boards 84 4.7 7.02 Flexibility of wage determination 58 5.2 1.20 Protection of minority shareholders’ interests 85 3.8 7.03 Hiring and firing practices 102 3.4 1.21 Strength of investor protection 0-10 (best) 133 3.3 7.04 Redundancy costs weeks of salary 35 10.3 2nd pillar: Infrastructure 138 1.7 7.05 Effect of taxation on incentives to work 23 4.6 2.01 Quality of overall infrastructure 136 1.9 7.06 Pay and productivity 137 2.4 2.02 Quality of roads 137 2.1 7.07 Reliance on professional management 93 3.8 2.03 Quality of railroad infrastructure 101 1.5 7.08 Country capacity to retain talent 121 2.6 2.04 Quality of port infrastructure 124 2.3 7.09 Country capacity to attract talent 96 2.9 2.05 Quality of air transport infrastructure 127 2.8 7.10 Female participation in the labor force ratio to men 6 0.99 2.06 Available airline seat kilometers millions/week 108 38.3 8th pillar: Financial market development 117 3.2  2.07 Quality of electricity supply 136 1.6 8.01 Financial services meeting business needs 129 3.2 2.08 Mobile-cellular telephone subscriptions /100 pop. 132 53.0 8.02 Affordability of financial services 127 2.8 2.09 Fixed-telephone lines /100 pop. 138 0.0 8.03 Financing through local equity market 134 2.3  3rd pillar: Macroeconomic environment 64 4.8 8.04 Ease of access to loans 119 3.0 3.01 Government budget balance % GDP 3 1.9 8.05 Venture capital availability 96 2.5 3.02 Gross national savings % GDP 129 5.5 8.06 Soundness of banks 126 3.4 3.03 Inflation annual % change 1 1.0 8.07 Regulation of securities exchanges 97 3.8 3.04 Government debt % GDP 12 18.8 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 134 - 9th pillar: Technological readiness 134 2.3   4th pillar: Health and primary education 135 3.5 9.01 Availability of latest technologies 130 3.4 4.01 Malaria incidence cases/100,000 pop. 61 28046.0 9.02 Firm-level technology absorption 125 3.7 4.02 Business impact of malaria N/Appl. n/a 9.03 FDI and technology transfer 124 3.5 4.03 Tuberculosis incidence cases/100,000 pop. 128 325.0 9.04 Internet users % pop. 136 3.8 4.04 Business impact of tuberculosis n/a n/a 9.05 Fixed-broadband Internet subscriptions /100 pop. 137 0.0 4.05 HIV prevalence % adult pop. 104 1.0 9.06 Internet bandwidth kb/s/user 138 0.4 4.06 Business impact of HIV/AIDS n/a n/a 9.07 Mobile-broadband subscriptions /100 pop. 129 8.5 4.07 Infant mortality deaths/1,000 live births 135 74.5 10th pillar: Market size 95 3.2  4.08 Life expectancy years 126 58.7 10.01 Domestic market size index 88 3.0 4.09 Quality of primary education 86 3.6 10.02 Foreign market size index 110 3.6 4.10 Primary education enrollment rate net % 115 87.0 10.03 GDP (PPP) PPP $ billions 90 62.9  5th pillar: Higher education and training 128 2.8 10.04 Exports % GDP 122 16.6 5.01 Secondary education enrollment rate gross % 122 43.5 11th pillar: Business sophistication 132 3.2  5.02 Tertiary education enrollment rate gross % 125 6.6 11.01 Local supplier quantity 122 3.8 5.03 Quality of the education system 113 3.0 11.02 Local supplier quality 114 3.7 5.04 Quality of math and science education 84 3.8 11.03 State of cluster development 116 3.0 5.05 Quality of management schools 108 3.7 11.04 Nature of competitive advantage 127 2.4 5.06 Internet access in schools 130 2.9 11.05 Value chain breadth 136 2.5 5.07 Local availability of specialized training services 119 3.6 11.06 Control of international distribution 137 2.3 5.08 Extent of staff training 116 3.4 11.07 Production process sophistication 136 2.4 11.08 Extent of marketing 39 4.8 11.09 Willingness to delegate authority n/a n/a  12th pillar: Innovation 115 2.8 12.01 Capacity for innovation 106 3.7 12.02 Quality of scientific research institutions 107 3.2 12.03 Company spending on R&D 114 2.8 12.04 University-industry collaboration in R&D 113 2.9 12.05 Gov't procurement of advanced tech. products 130 2.4 12.06 Availability of scientists and engineers 103 3.5 12.07 PCT patent applications applications/million pop. 121 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 103 Part 2 Global Competitiveness Index Côte d'Ivoire 99 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 23.7 GDP per capita (US$) 1314.7 GDP (US$ billions) 31.2 GDP (PPP) % world GDP 0.07 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 99 3.9 Rank 131 / 144 126 / 148 115 / 144 91 / 140 99 / 138 Subindex A: Basic requirements 104 4.0 Score 3.4 3.5 3.7 3.9 3.9  1st pillar: Institutions 77 3.8 2nd pillar: Infrastructure 87 3.6 1st pillar: Institutions  3rd pillar: Macroeconomic environment 66 4.7 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 132 3.7 6 5 Subindex B: Efficiency enhancers 96 3.7 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 109 3.4 sophistication 3 environment 2  6th pillar: Goods market efficiency 92 4.2 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 75 4.2 education  8th pillar: Financial market development 75 3.9 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 94 3.4 readiness and training  10th pillar: Market size 80 3.4 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 75 3.5 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 89 3.7 efficiency  12th pillar: Innovation 61 3.4 Côte d'Ivoire Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 22.0 Corruption 17.5 Inefficient government bureaucracy 15.2 Tax rates 14.8 Inadequate supply of infrastructure 6.3 Inadequately educated workforce 4.7 Crime and theft 4.6 Inflation 3.0 Restrictive labor regulations 2.7 Insufficient capacity to innovate 2.1 Tax regulations 2.0 Poor work ethic in national labor force 2.0 Policy instability 1.6 Government instability/coups 1.1 Foreign currency regulations 0.3 Poor public health 0.1 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 104 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Côte d’Ivoire Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 77 3.8  6th pillar: Goods market efficiency 92 4.2 1.01 Property rights 72 4.2 6.01 Intensity of local competition 95 4.8 1.02 Intellectual property protection 90 3.7 6.02 Extent of market dominance 79 3.5 1.03 Diversion of public funds 82 3.3 6.03 Effectiveness of anti-monopoly policy 76 3.6 1.04 Public trust in politicians 48 3.6 6.04 Effect of taxation on incentives to invest 118 2.9 1.05 Irregular payments and bribes 88 3.6 6.05 Total tax rate % profits 116 51.9 1.06 Judicial independence 87 3.6 6.06 No. of procedures to start a business 22 4 1.07 Favoritism in decisions of government officials 62 3.2 6.07 Time to start a business days 42 7.0 1.08 Wastefulness of government spending 39 3.7 6.08 Agricultural policy costs 19 4.6 1.09 Burden of government regulation 27 4.0 6.09 Prevalence of non-tariff barriers 128 3.4 1.10 Efficiency of legal framework in settling disputes 41 4.2 6.10 Trade tariffs % duty 105 9.9 1.11 Efficiency of legal framework in challenging regs 63 3.6 6.11 Prevalence of foreign ownership 46 5.0 1.12 Transparency of government policymaking 50 4.4 6.12 Business impact of rules on FDI 57 4.8 1.13 Business costs of terrorism 84 4.9 6.13 Burden of customs procedures 68 4.1 1.14 Business costs of crime and violence 106 3.8 6.14 Imports % GDP 76 38.7 1.15 Organized crime 127 3.2 6.15 Degree of customer orientation 88 4.4 1.16 Reliability of police services 87 4.1 6.16 Buyer sophistication 104 2.9 1.17 Ethical behavior of firms 73 3.8 7th pillar: Labor market efficiency 75 4.2  1.18 Strength of auditing and reporting standards 98 4.1 7.01 Cooperation in labor-employer relations 58 4.5 1.19 Efficacy of corporate boards 80 4.8 7.02 Flexibility of wage determination 67 5.0 1.20 Protection of minority shareholders’ interests 68 4.1 7.03 Hiring and firing practices 65 3.8 1.21 Strength of investor protection 0-10 (best) 120 3.8 7.04 Redundancy costs weeks of salary 53 13.1 2nd pillar: Infrastructure 87 3.6 7.05 Effect of taxation on incentives to work 29 4.4 2.01 Quality of overall infrastructure 60 4.2 7.06 Pay and productivity 82 3.8 2.02 Quality of roads 42 4.7 7.07 Reliance on professional management 63 4.3 2.03 Quality of railroad infrastructure 71 2.7 7.08 Country capacity to retain talent 61 3.6 2.04 Quality of port infrastructure 28 5.2 7.09 Country capacity to attract talent 48 3.7 2.05 Quality of air transport infrastructure 38 5.2 7.10 Female participation in the labor force ratio to men 102 0.65 2.06 Available airline seat kilometers millions/week 93 65.5 8th pillar: Financial market development 75 3.9  2.07 Quality of electricity supply 100 3.6 8.01 Financial services meeting business needs 104 3.7 2.08 Mobile-cellular telephone subscriptions /100 pop. 62 119.3 8.02 Affordability of financial services 90 3.5 2.09 Fixed-telephone lines /100 pop. 118 1.3 8.03 Financing through local equity market 44 4.1  3rd pillar: Macroeconomic environment 66 4.7 8.04 Ease of access to loans 126 2.7 3.01 Government budget balance % GDP 70 -3.2 8.05 Venture capital availability 77 2.7 3.02 Gross national savings % GDP 87 16.4 8.06 Soundness of banks 66 4.9 3.03 Inflation annual % change 1 1.2 8.07 Regulation of securities exchanges 67 4.4 3.04 Government debt % GDP 34 34.7 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 93 - 9th pillar: Technological readiness 94 3.4   4th pillar: Health and primary education 132 3.7 9.01 Availability of latest technologies 59 4.9 4.01 Malaria incidence cases/100,000 pop. 67 37459.8 9.02 Firm-level technology absorption 69 4.5 4.02 Business impact of malaria 40 4.6 9.03 FDI and technology transfer 60 4.5 4.03 Tuberculosis incidence cases/100,000 pop. 109 165.0 9.04 Internet users % pop. 110 21.0 4.04 Business impact of tuberculosis 119 4.1 9.05 Fixed-broadband Internet subscriptions /100 pop. 117 0.5 4.05 HIV prevalence % adult pop. 124 3.5 9.06 Internet bandwidth kb/s/user 120 5.2 4.06 Business impact of HIV/AIDS 107 4.5 9.07 Mobile-broadband subscriptions /100 pop. 84 40.4 4.07 Infant mortality deaths/1,000 live births 132 66.6 10th pillar: Market size 80 3.4  4.08 Life expectancy years 135 51.6 10.01 Domestic market size index 84 3.2 4.09 Quality of primary education 69 4.1 10.02 Foreign market size index 81 4.2 4.10 Primary education enrollment rate net % 131 74.7 10.03 GDP (PPP) PPP $ billions 81 78.6  5th pillar: Higher education and training 109 3.4 10.04 Exports % GDP 64 35.4 5.01 Secondary education enrollment rate gross % 125 40.1 11th pillar: Business sophistication 89 3.7  5.02 Tertiary education enrollment rate gross % 119 8.7 11.01 Local supplier quantity 96 4.2 5.03 Quality of the education system 49 4.1 11.02 Local supplier quality 71 4.3 5.04 Quality of math and science education 43 4.6 11.03 State of cluster development 131 2.8 5.05 Quality of management schools 51 4.5 11.04 Nature of competitive advantage 99 3.0 5.06 Internet access in schools 98 3.7 11.05 Value chain breadth 74 3.7 5.07 Local availability of specialized training services 46 4.7 11.06 Control of international distribution 123 2.9 5.08 Extent of staff training 37 4.4 11.07 Production process sophistication 83 3.6 11.08 Extent of marketing 53 4.6 11.09 Willingness to delegate authority 83 3.6  12th pillar: Innovation 61 3.4 12.01 Capacity for innovation 58 4.3 12.02 Quality of scientific research institutions 45 4.2 12.03 Company spending on R&D 45 3.6 12.04 University-industry collaboration in R&D 86 3.3 12.05 Gov't procurement of advanced tech. products 70 3.2 12.06 Availability of scientists and engineers 77 3.9 12.07 PCT patent applications applications/million pop. 107 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 105 Part 2 Global Competitiveness Index Egypt 115 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 88.4 GDP per capita (US$) 3740.2 GDP (US$ billions) 330.8 GDP (PPP) % world GDP 0.92 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 115 3.7 Rank 107 / 144 118 / 148 119 / 144 116 / 140 115 / 138 Subindex A: Basic requirements 117 3.8 Score 3.7 3.6 3.6 3.7 3.7  1st pillar: Institutions 87 3.6 2nd pillar: Infrastructure 96 3.4 1st pillar: Institutions  3rd pillar: Macroeconomic environment 134 2.7 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 89 5.5 6 5 Subindex B: Efficiency enhancers 100 3.7 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 112 3.3 sophistication 3 environment 2  6th pillar: Goods market efficiency 112 4.0 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 135 3.2 education  8th pillar: Financial market development 111 3.4 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 99 3.3 readiness and training  10th pillar: Market size 25 5.0 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 111 3.2 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 85 3.7 efficiency  12th pillar: Innovation 122 2.7 Egypt Middle East and North Africa Egypt remains stable at 115th position this year. To create growth and Other priorities include higher education and training (112th), which is below employment, Egypt could build on its large market size (25th); its business the performance of peer economies, particularly in terms of quality (134th); sector, which by some accounts appears more sophisticated than those of as well as the overall security situation (133rd), which remains fragile and neighboring countries (85th); and its geographical proximity to the large imposes significant cost for business. Support for reform efforts comes from European market. To do so, Egypt needs to step up its reform efforts and the recent drop in oil prices that could open up the fiscal space to address the major rigidities that plague its goods, labor, and financial consolidate the public budget by reducing energy subsidies, which make up markets, on which the country ranks 112th, 135th, and 111th, respectively. a significant part of the public spending. Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2015 Policy instability 21.0 Government instability/coups 12.5 Access to financing 10.2 Foreign currency regulations 8.4 Corruption 7.7 Inadequate supply of infrastructure 5.5 Poor work ethic in national labor force 5.4 Inadequately educated workforce 5.4 Crime and theft 4.3 Restrictive labor regulations 4.1 Tax rates 3.9 Inflation 3.2 Tax regulations 3.1 Inefficient government bureaucracy 2.7 Insufficient capacity to innovate 1.7 Poor public health 0.9 score 0 6 12 18 24 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 106 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Egypt Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 87 3.6  6th pillar: Goods market efficiency 112 4.0 1.01 Property rights 100 3.9 6.01 Intensity of local competition 127 4.2 1.02 Intellectual property protection 124 3.2 6.02 Extent of market dominance 103 3.3 1.03 Diversion of public funds 67 3.5 6.03 Effectiveness of anti-monopoly policy 78 3.6 1.04 Public trust in politicians 84 2.8 6.04 Effect of taxation on incentives to invest 84 3.4 1.05 Irregular payments and bribes 64 4.1 6.05 Total tax rate % profits 96 45.0 1.06 Judicial independence 47 4.5 6.06 No. of procedures to start a business 76 7 1.07 Favoritism in decisions of government officials 28 4.1 6.07 Time to start a business days 48 8.0 1.08 Wastefulness of government spending 122 2.2 6.08 Agricultural policy costs 130 2.9 1.09 Burden of government regulation 63 3.5 6.09 Prevalence of non-tariff barriers 100 4.0 1.10 Efficiency of legal framework in settling disputes 81 3.4 6.10 Trade tariffs % duty 126 13.6 1.11 Efficiency of legal framework in challenging regs 72 3.4 6.11 Prevalence of foreign ownership 125 3.4 1.12 Transparency of government policymaking 97 3.7 6.12 Business impact of rules on FDI 114 3.8 1.13 Business costs of terrorism 135 2.7 6.13 Burden of customs procedures 80 3.8 1.14 Business costs of crime and violence 124 2.9 6.14 Imports % GDP 120 24.7 1.15 Organized crime 119 3.7 6.15 Degree of customer orientation 55 4.9 1.16 Reliability of police services 114 3.3 6.16 Buyer sophistication 116 2.8 1.17 Ethical behavior of firms 77 3.8 7th pillar: Labor market efficiency 135 3.2  1.18 Strength of auditing and reporting standards 84 4.3 7.01 Cooperation in labor-employer relations 96 4.1 1.19 Efficacy of corporate boards 131 3.9 7.02 Flexibility of wage determination 72 5.0 1.20 Protection of minority shareholders’ interests 83 3.9 7.03 Hiring and firing practices 61 3.9 1.21 Strength of investor protection 0-10 (best) 101 4.5 7.04 Redundancy costs weeks of salary 129 36.9 2nd pillar: Infrastructure 96 3.4 7.05 Effect of taxation on incentives to work 104 3.4 2.01 Quality of overall infrastructure 108 3.1 7.06 Pay and productivity 125 3.2 2.02 Quality of roads 107 3.0 7.07 Reliance on professional management 133 3.1 2.03 Quality of railroad infrastructure 73 2.6 7.08 Country capacity to retain talent 104 2.9 2.04 Quality of port infrastructure 58 4.3 7.09 Country capacity to attract talent 103 2.7 2.05 Quality of air transport infrastructure 52 4.8 7.10 Female participation in the labor force ratio to men 133 0.31 2.06 Available airline seat kilometers millions/week 41 590.1 8th pillar: Financial market development 111 3.4  2.07 Quality of electricity supply 102 3.5 8.01 Financial services meeting business needs 54 4.5 2.08 Mobile-cellular telephone subscriptions /100 pop. 82 111.0 8.02 Affordability of financial services 72 3.8 2.09 Fixed-telephone lines /100 pop. 95 7.4 8.03 Financing through local equity market 58 3.8  3rd pillar: Macroeconomic environment 134 2.7 8.04 Ease of access to loans 136 1.9 3.01 Government budget balance % GDP 132 -11.7 8.05 Venture capital availability 98 2.5 3.02 Gross national savings % GDP 121 10.9 8.06 Soundness of banks 70 4.8 3.03 Inflation annual % change 130 11.0 8.07 Regulation of securities exchanges 105 3.7 3.04 Government debt % GDP 117 87.7 8.08 Legal rights index 0-10 (best) 108 2 3.05 Country credit rating 0-100 (best) 98 - 9th pillar: Technological readiness 99 3.3   4th pillar: Health and primary education 89 5.5 9.01 Availability of latest technologies 117 3.9 4.01 Malaria incidence cases/100,000 pop. N/Appl. P.R. 9.02 Firm-level technology absorption 121 3.8 4.02 Business impact of malaria 1 6.8 9.03 FDI and technology transfer 71 4.4 4.03 Tuberculosis incidence cases/100,000 pop. 38 15.0 9.04 Internet users % pop. 96 35.9 4.04 Business impact of tuberculosis 16 6.7 9.05 Fixed-broadband Internet subscriptions /100 pop. 87 4.5 4.05 HIV prevalence % adult pop. 1 0.1 9.06 Internet bandwidth kb/s/user 105 11.3 4.06 Business impact of HIV/AIDS 1 6.9 9.07 Mobile-broadband subscriptions /100 pop. 72 50.7 4.07 Infant mortality deaths/1,000 live births 91 20.3 10th pillar: Market size 25 5.0  4.08 Life expectancy years 93 71.1 10.01 Domestic market size index 19 5.1 4.09 Quality of primary education 134 2.1 10.02 Foreign market size index 49 5.0 4.10 Primary education enrollment rate net % 28 98.0 10.03 GDP (PPP) PPP $ billions 23 1047.9  5th pillar: Higher education and training 112 3.3 10.04 Exports % GDP 132 11.2 5.01 Secondary education enrollment rate gross % 85 86.1 11th pillar: Business sophistication 85 3.7  5.02 Tertiary education enrollment rate gross % 81 31.7 11.01 Local supplier quantity 64 4.5 5.03 Quality of the education system 135 2.1 11.02 Local supplier quality 106 3.8 5.04 Quality of math and science education 130 2.6 11.03 State of cluster development 32 4.3 5.05 Quality of management schools 138 2.5 11.04 Nature of competitive advantage 89 3.2 5.06 Internet access in schools 133 2.6 11.05 Value chain breadth 72 3.7 5.07 Local availability of specialized training services 136 2.7 11.06 Control of international distribution 116 3.0 5.08 Extent of staff training 137 2.7 11.07 Production process sophistication 105 3.2 11.08 Extent of marketing 121 3.8 11.09 Willingness to delegate authority 34 4.2  12th pillar: Innovation 122 2.7 12.01 Capacity for innovation 135 3.1 12.02 Quality of scientific research institutions 128 2.6 12.03 Company spending on R&D 133 2.4 12.04 University-industry collaboration in R&D 137 2.4 12.05 Gov't procurement of advanced tech. products 72 3.2 12.06 Availability of scientists and engineers 46 4.3 12.07 PCT patent applications applications/million pop. 74 0.8 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 107 Part 2 Global Competitiveness Index Ethiopia 109 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 89.8 GDP per capita (US$) 686.6 GDP (US$ billions) 61.6 GDP (PPP) % world GDP 0.14 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 109 3.8 Rank 121 / 144 127 / 148 118 / 144 109 / 140 109 / 138 Subindex A: Basic requirements 106 4.0 Score 3.6 3.5 3.6 3.7 3.8  1st pillar: Institutions 75 3.9 2nd pillar: Infrastructure 115 2.8 1st pillar: Institutions  3rd pillar: Macroeconomic environment 78 4.5 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 111 4.7 6 5 Subindex B: Efficiency enhancers 117 3.5 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 127 2.8 sophistication 3 environment 2  6th pillar: Goods market efficiency 105 4.0 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 70 4.2 education  8th pillar: Financial market development 102 3.5 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 131 2.4 readiness and training  10th pillar: Market size 66 3.8 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 74 3.5 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 93 3.7 efficiency  12th pillar: Innovation 57 3.4 Ethiopia Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Corruption 14.4 Access to financing 10.7 Foreign currency regulations 10.4 Tax rates 9.3 Inefficient government bureaucracy 7.3 Inadequate supply of infrastructure 7.1 Inflation 6.9 Tax regulations 6.4 Government instability/coups 5.6 Poor work ethic in national labor force 4.7 Insufficient capacity to innovate 4.2 Inadequately educated workforce 4.2 Crime and theft 3.6 Policy instability 2.2 Restrictive labor regulations 2.0 Poor public health 0.9 score 0 4 8 12 16 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 108 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Ethiopia Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 75 3.9  6th pillar: Goods market efficiency 105 4.0 1.01 Property rights 90 4.0 6.01 Intensity of local competition 135 3.9 1.02 Intellectual property protection 88 3.8 6.02 Extent of market dominance 58 3.8 1.03 Diversion of public funds 49 4.0 6.03 Effectiveness of anti-monopoly policy 57 3.8 1.04 Public trust in politicians 41 3.8 6.04 Effect of taxation on incentives to invest 50 3.9 1.05 Irregular payments and bribes 93 3.5 6.05 Total tax rate % profits 46 32.1 1.06 Judicial independence 73 3.8 6.06 No. of procedures to start a business 122 11 1.07 Favoritism in decisions of government officials 34 3.9 6.07 Time to start a business days 98 19.0 1.08 Wastefulness of government spending 55 3.4 6.08 Agricultural policy costs 45 4.1 1.09 Burden of government regulation 55 3.6 6.09 Prevalence of non-tariff barriers 123 3.6 1.10 Efficiency of legal framework in settling disputes 55 4.0 6.10 Trade tariffs % duty 122 13.0 1.11 Efficiency of legal framework in challenging regs 53 3.7 6.11 Prevalence of foreign ownership 109 3.8 1.12 Transparency of government policymaking 98 3.7 6.12 Business impact of rules on FDI 117 3.7 1.13 Business costs of terrorism 117 4.2 6.13 Burden of customs procedures 96 3.6 1.14 Business costs of crime and violence 91 4.1 6.14 Imports % GDP 77 38.4 1.15 Organized crime 93 4.3 6.15 Degree of customer orientation 132 3.7 1.16 Reliability of police services 92 3.9 6.16 Buyer sophistication 60 3.5 1.17 Ethical behavior of firms 63 3.9 7th pillar: Labor market efficiency 70 4.2  1.18 Strength of auditing and reporting standards 112 3.8 7.01 Cooperation in labor-employer relations 117 3.8 1.19 Efficacy of corporate boards 132 3.8 7.02 Flexibility of wage determination 116 4.2 1.20 Protection of minority shareholders’ interests 91 3.8 7.03 Hiring and firing practices 87 3.6 1.21 Strength of investor protection 0-10 (best) 129 3.5 7.04 Redundancy costs weeks of salary 84 19.1 2nd pillar: Infrastructure 115 2.8 7.05 Effect of taxation on incentives to work 50 4.2 2.01 Quality of overall infrastructure 94 3.4 7.06 Pay and productivity 79 3.8 2.02 Quality of roads 83 3.7 7.07 Reliance on professional management 107 3.6 2.03 Quality of railroad infrastructure 48 3.4 7.08 Country capacity to retain talent 63 3.6 2.04 Quality of port infrastructure 90 3.5 7.09 Country capacity to attract talent 43 3.8 2.05 Quality of air transport infrastructure 105 3.7 7.10 Female participation in the labor force ratio to men 41 0.88 2.06 Available airline seat kilometers millions/week 52 398.3 8th pillar: Financial market development 102 3.5  2.07 Quality of electricity supply 104 3.4 8.01 Financial services meeting business needs 113 3.6 2.08 Mobile-cellular telephone subscriptions /100 pop. 136 42.8 8.02 Affordability of financial services 70 3.8 2.09 Fixed-telephone lines /100 pop. 124 0.9 8.03 Financing through local equity market 61 3.7  3rd pillar: Macroeconomic environment 78 4.5 8.04 Ease of access to loans 79 3.7 3.01 Government budget balance % GDP 52 -2.5 8.05 Venture capital availability 35 3.4 3.02 Gross national savings % GDP 36 27.0 8.06 Soundness of banks 116 3.8 3.03 Inflation annual % change 129 10.1 8.07 Regulation of securities exchanges 94 3.8 3.04 Government debt % GDP 70 48.6 8.08 Legal rights index 0-10 (best) 97 3 3.05 Country credit rating 0-100 (best) 123 - 9th pillar: Technological readiness 131 2.4   4th pillar: Health and primary education 111 4.7 9.01 Availability of latest technologies 123 3.7 4.01 Malaria incidence cases/100,000 pop. 46 3919.2 9.02 Firm-level technology absorption 130 3.5 4.02 Business impact of malaria 33 5.0 9.03 FDI and technology transfer 102 3.9 4.03 Tuberculosis incidence cases/100,000 pop. 116 207.0 9.04 Internet users % pop. 127 11.6 4.04 Business impact of tuberculosis 114 4.3 9.05 Fixed-broadband Internet subscriptions /100 pop. 113 0.7 4.05 HIV prevalence % adult pop. 111 1.2 9.06 Internet bandwidth kb/s/user 134 2.0 4.06 Business impact of HIV/AIDS 116 4.2 9.07 Mobile-broadband subscriptions /100 pop. 123 11.9 4.07 Infant mortality deaths/1,000 live births 117 41.4 10th pillar: Market size 66 3.8  4.08 Life expectancy years 115 64.0 10.01 Domestic market size index 61 3.8 4.09 Quality of primary education 107 3.1 10.02 Foreign market size index 96 3.9 4.10 Primary education enrollment rate net % 120 85.8 10.03 GDP (PPP) PPP $ billions 65 161.6  5th pillar: Higher education and training 127 2.8 10.04 Exports % GDP 133 10.8 5.01 Secondary education enrollment rate gross % 133 36.2 11th pillar: Business sophistication 93 3.7  5.02 Tertiary education enrollment rate gross % 121 8.1 11.01 Local supplier quantity 131 3.6 5.03 Quality of the education system 83 3.5 11.02 Local supplier quality 121 3.6 5.04 Quality of math and science education 97 3.5 11.03 State of cluster development 84 3.5 5.05 Quality of management schools 120 3.5 11.04 Nature of competitive advantage 59 3.6 5.06 Internet access in schools 99 3.7 11.05 Value chain breadth 55 3.9 5.07 Local availability of specialized training services 101 3.9 11.06 Control of international distribution 45 4.0 5.08 Extent of staff training 99 3.6 11.07 Production process sophistication 84 3.6 11.08 Extent of marketing 122 3.8 11.09 Willingness to delegate authority 108 3.4  12th pillar: Innovation 57 3.4 12.01 Capacity for innovation 104 3.7 12.02 Quality of scientific research institutions 70 3.8 12.03 Company spending on R&D 39 3.8 12.04 University-industry collaboration in R&D 39 3.8 12.05 Gov't procurement of advanced tech. products 50 3.5 12.06 Availability of scientists and engineers 73 3.9 12.07 PCT patent applications applications/million pop. 114 0.0 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/ The Africa Competitiveness Report 2017 | 109 Part 2 Global Competitiveness Index Gabon 108 th / 138 2016-2017 edition Key Indicators, 2015 Source: International Monetary Fund; World Economic Outlook Database (April 2016) Population (millions) 1.9 GDP per capita (US$) 7735.9 GDP (US$ billions) 14.3 GDP (PPP) % world GDP 0.03 Performance overview Rank / 138 Score (1-7) Trend Distance from best Edition 2012-13 2013-14 2014-15 2015-16 2016-17 Global Competitiveness Index 108 3.8 Rank 99 / 144 112 / 148 106 / 144 103 / 140 108 / 138 Subindex A: Basic requirements 91 4.3 Score 3.8 3.7 3.7 3.8 3.8  1st pillar: Institutions 85 3.7 2nd pillar: Infrastructure 107 3.1 1st pillar: Institutions  3rd pillar: Macroeconomic environment 25 5.6 12th pillar: 2nd pillar: Innovation 7 Infrastructure  4th pillar: Health and primary education 109 4.8 6 5 Subindex B: Efficiency enhancers 122 3.3 11th pillar: 3rd pillar: Business 4 Macroeconomic  5th pillar: Higher education and training 121 3.0 sophistication 3 environment 2  6th pillar: Goods market efficiency 125 3.7 10th pillar: 4th pillar: 1 Market size Health and primary  7th pillar: Labor market efficiency 101 3.9 education  8th pillar: Financial market development 103 3.5 9th pillar: 5th pillar: Technological Higher education  9th pillar: Technological readiness 109 3.1 readiness and training  10th pillar: Market size 112 2.8 8th pillar: 6th pillar: Financial market Goods market Subindex C: Innovation and sophistication factors 128 2.9 development 7th pillar: efficiency Labor market  11th pillar: Business sophistication 131 3.2 efficiency  12th pillar: Innovation 124 2.7 Gabon Sub-Saharan Africa Most problematic factors for doing business Source: World Economic Forum, Executive Opinion Survey 2016 Access to financing 17.7 Inadequately educated workforce 15.3 Inadequate supply of infrastructure 11.9 Inefficient government bureaucracy 9.2 Corruption 7.8 Restrictive labor regulations 7.5 Poor work ethic in national labor force 6.3 Insufficient capacity to innovate 5.8 Tax regulations 5.6 Tax rates 4.9 Inflation 4.9 Foreign currency regulations 1.0 Crime and theft 1.0 Policy instability 0.7 Poor public health 0.5 Government instability/coups 0.0 score 0 5 10 15 20 Note: From the list of factors, respondents to the World Economic Forum's Executive Opinion Survey were asked to select the five most problematic factors for doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the responses weighted according to their rankings. 110 | The Africa Competitiveness Report 2017 The Global Competitiveness Index in detail Country Profiles The Global Competitiveness Index in detail Gabon Rank / 138 Value Trend Rank / 138 Value Trend  1st pillar: Institutions 85 3.7  6th pillar: Goods market efficiency 125 3.7 1.01 Property rights 83 4.1 6.01 Intensity of local competition 134 4.0 1.02 Intellectual property protection 102 3.6 6.02 Extent of market dominance 131 2.8 1.03 Diversion of public funds 100 2.9 6.03 Effectiveness of anti-monopoly policy 103 3.3 1.04 Public trust in politicians 71 3.0 6.04 Effect of taxation on incentives to invest 65 3.7 1.05 Irregular payments and bribes 98 3.5 6.05 Total tax rate % profits 97 45.7 1.06 Judicial independence 108 3.1 6.06 No. of procedures to start a business 76 7 1.07 Favoritism in decisions of government officials 78 3.0 6.07 Time to start a business days 128 50.0 1.08 Wastefulness of government spending 66 3.2 6.08 Agricultural policy costs 122 3.1 1.09 Burden of government regulation 79 3.4 6.09 Prevalence of non-tariff barriers 132 3.3 1.10 Efficiency of legal framework in settling disputes 84 3.4 6.10 Trade tariffs % duty 124 13.4 1.11 Efficiency of legal framework in challenging regs 97 3.0 6.11 Prevalence of foreign ownership 23 5.4 1.12 Transparency of government policymaking 61 4.3 6.12 Business impact of rules on FDI 72 4.6 1.13 Business costs of terrorism 61 5.4 6.13 Burden of customs procedures 92 3.6 1.14 Business costs of crime and violence 73 4.6 6.14 Imports % GDP 106 30.5 1.15 Organized crime 73 4.9 6.15 Degree of customer orientation 118 3.9 1.16 Reliability of police services 90 3.9 6.16 Buyer sophistication 94 3.0 1.17 Ethical behavior of firms 82 3.7 7th pillar: Labor market efficiency 101 3.9  1.18 Strength of auditing and reporting standards 100 4.1 7.01 Cooperation in labor-employer relations 98 4.1 1.19 Efficacy of corporate boards 32 5.4 7.02 Flexibility of wage determination 101 4.5 1.20 Protection of minority shareholders’ interests 63 4.1 7.03 Hiring and firing practices 98 3.4 1.21 Strength of investor protection 0-10 (best) 120 3.8 7.04 Redundancy costs weeks of salary 80 18.8 2nd pillar: Infrastructure 107 3.1 7.05 Effect of taxation on incentives to work 21 4.6 2.01 Quality of overall infrastructure 119 2.9 7.06 Pay and productivity 131 3.1 2.02 Quality of roads 121 2.8 7.07 Reliance on professional management 97 3.8 2.03 Quality of railroad infrastructure 64 2.8 7.08 Country capacity to retain talent 93 3.2 2.04 Quality of port infrastructure 101 3.2 7.09 Country capacity to attract talent 59 3.5 2.05 Quality of air transport infrastructure 108 3.6 7.10 Female participation in the labor force ratio to men 92 0.70 2.06 Available airline seat kilometers millions/week 111 33.3 8th pillar: Financial market development 103 3.5  2.07 Quality of electricity supply 114 2.9 8.01 Financial services meeting business needs 122 3.4 2.08 Mobile-cellular telephone subscriptions /100 pop. 10 168.9 8.02 Affordability of financial services 128 2.7 2.09 Fixed-telephone lines /100 pop. 120 1.1 8.03 Financing through local equity market 87 3.3  3rd pillar: Macroeconomic environment 25 5.6 8.04 Ease of access to loans 118 3.0 3.01 Government budget balance % GDP 48 -2.3 8.05 Venture capital availability 118 2.2 3.02 Gross national savings % GDP 9 34.8 8.06 Soundness of banks 89 4.4 3.03 Inflation annual % change 55 0.1 8.07 Regulation of securities exchanges 96 3.8 3.04 Government debt % GDP 62 43.9 8.08 Legal rights index 0-10 (best) 46 6 3.05 Country credit rating 0-100 (best) 89 - 9th pillar: Technological readiness 109 3.1   4th pillar: Health and primary education 109 4.8 9.01 Availability of latest technologies 113 4.0 4.01 Malaria incidence cases/100,000 pop. 55 20738.6 9.02 Firm-level technology absorption 107 4.1 4.02 Business impact of malaria 66 3.2 9.03 FDI and technology transfer 113 3.7 4.03 Tuberculosis incidence cases/100,000 pop. 134 444.0 9.04 Internet users % pop. 104 23.5 4.04 Business impact of tuberculosis 105 4.4 9.05 Fixed-broadband Internet subscriptions /100 pop. 114 0.6 4.05 HIV prevalence % adult pop. 125 3.9 9.06 Internet bandwidth kb/s/user 107 8.5 4.06 Business impact of HIV/AIDS 117 4.1 9.07 Mobile-broadband subscriptions /100 pop. 99 33.1 4.07 Infant mortality deaths/1,000 live births 113 36.1 10th pillar: Market size 112 2.8  4.08 Life expectancy years 114 64.4 10.01 Domestic market size index 110 2.5 4.09 Quality of primary education 87 3.6 10.02 Foreign market size index 111 3.6 4.10 Primary education enrollment rate net % 67 95.2 10.03 GDP (PPP) PPP $ billions 108 34.6  5th pillar: Higher education and training 121 3.0 10.04 Exports % GDP 85 30.1 5.01 Secondary education enrollment rate gross % 115 53.3 11th pillar: Business sophistication 131 3.2  5.02 Tertiary education enrollment rate gross % 120 8.4 11.01 Local supplier quantity 133 3.5 5.03 Quality of the education system 116 2.9 11.02 Local supplier quality 124 3.5 5.04 Quality of math and science education 95 3.6 11.03 State of cluster development 132 2.8 5.05 Quality of management schools 98 3.8 11.04 Nature of competitive advantage 100 3.0 5.06 Internet access in schools 121 3.2 11.05 Value chain breadth 132 2.9 5.07 Local availability of specialized training services 128 3.4 11.06 Control of international distribution 134 2.7 5.08 Extent of staff training 84 3.7 11.07 Production process sophistication 126 2.8 11.08 Extent of marketing 120 3.8 11.09 Willingness to delegate authority 121 3.2  12th pillar: Innovation 124 2.7 12.01 Capacity for innovation 118 3.6 12.02 Quality of scientific research institutions 109 3.2 12.03 Company spending on R&D 117 2.7 12.04 University-industry collaboration in R&D 130 2.6 12.05 Gov't procurement of advanced tech. products 119 2.7 12.06 Availability of scientists and engineers 134 2.8 12.07 PCT patent applications applications/million pop. 85 0.4 Note: Values are on a 1-to-7 scale unless indicated otherwise. Trend lines depict evolution in values since the 2012-2013 edition (or earliest edition available). For detailed definitions, sources, and periods, consult the interactive Country/Economy Profiles and Rankings at http://gcr.weforum.org/