Your Excellency, Madam Dlamini-Zuma, Chairperson of the African Union,
Ladies and Gentlemen,
It is a great pleasure for me to address this special gathering to celebrate the 50th anniversary of the African Union, and to offer a few reflections on the development of my continent.
For five decades, the African Union has captured the hopes and aspirations of millions of Africans for unified efforts to achieve peace, progress and prosperity. And in many ways, this fiftieth anniversary falls at a time when there is much to celebrate.
After two "lost decades" since the 1980, when average per capita incomes on the continent actually declined, the last decade brought noticeable progress. Since 2000, African countries have achieved average growth of almost 5%. Even after the global financial and economic crisis in 2009, Africa was able to recover quickly, and has regained growth of almost the same rate. This was also reflected in trade and investment figures: Since 2006, sub-Saharan exports have expanded by almost 80%. In 2012, Africa was one of the few regions that registered an increase in FDI inflows. It attracted US$ 50 billion in FDI, an increase of 5% over 2011, and thus almost returned to its all time high of US$ 53 billion in 2007. The continent has further benefited from rising commodity prices, which have rapidly recovered after the crisis, and which continue to boost export revenues. This period of economic growth has also contributed to wider development progress, including towards achievement of several MDGs. Indeed, in 2012, 15 out of the 20 countries that made the most progress towards the MDGs were in Africa. Particular progress has been made on achieving universal enrolment in primary education, promoting gender equality, and combating HIV/AIDS as well as other diseases such as tuberculosis and malaria. Indeed, a recent UNDP report noted that were progress towards the MDGs measured by effort, African countries would rank among the best. Thus, after decades of development pessimism in Africa, there are many things to celebrate.
However, despite this good news, there is no reason for complacency. A closer examination of Africa's performance reveals that many challenges remain, and that efforts are still required to firmly place the continent on a sustainable and irreversible growth path. Allow me to only outline some of the challenges:
While it is true that African countries have achieved average growth rates of 5% in the past decade (with a short drop due to the financial crisis), much of this growth is due to the commodities boom. Thus the benefits have largely accrued to exporters of primary commodities, who have been able to export increasing volumes of commodities at rising prices to fast-growing developing countries, particularly in Asia. Similarly, within these countries, most of the windfall profits from these opportunities were concentrated in the extractive industries, which often do not have strong links with the wider economy. This partly explains a second characteristic of Africa's growth performance over the past decade, which is that it was largely "jobless". Despite growing trade, investment and GDP, comparatively few new employment opportunities have arisen. Indeed, over the past 10 years, Africa's labour-force has grown by 91 million people, while only 37 million jobs in wage-paying sectors have been created. This is in large part because the extractive sectors that benefited from the fastest growth are not very employment-intensive. The "jobless growth", as it has been called, is also related to a second issue of concern, namely the rise in inequality. Increasing concentration of wealth in rapidly expanding extractive sectors combined with mass youth unemployment is threatening to create an explosive mix that can undermine social cohesion and development progress.
As many of you know, the problem of commodity-dependence of many developing countries, and its deleterious effects on growth patterns, was also one of the key concerns that led to the creation of my own organization, UNCTAD, only one year after the Organization of African Unity, in 1964. It is thus a key challenge also for UNCTAD, that fifty years later, even after a decade of economic expansion, the number of countries who are relying on exports of primary commodities for more than 50% of their export revenues has actually increased, from 85 in 2002 to 91 in 2010. Of course, in an environment of high commodity prices, the incentives to diversify out of what is proving to be a highly profitable sector are diminishing. And yet, a truly inclusive development path that creates higher-value added can only be achieved through diversification. We must therefore find innovative ways of encouraging countries to use the current windfall gains to strengthen other sectors, which will create more opportunities for employment and productivity gains. This challenge is particularly acute for Africa.
Similarly, while the recent trade and investment performance of Africa is encouraging, the gains cannot paper over the fact that the continent remains marginalized in the global economy. After all, even in 2012, the African continent as a whole accounted for about 3% of world trade, and about 3.7% of global FDI inflows. And a closer look at the distribution of these flows reveals that much of it is concentrated in commodities sectors. Indeed, the bulk of FDI to African countries is flowing to countries with large deposits in natural resources, and is focused on the extractive industries.
With regard to the MDGs, while progress is notable in areas such as education and health, the key goal of halving extreme poverty seems beyond reach even despite a decade of growth. It is true that the percentage of people in extreme poverty has declined in Sub-Saharan Africa from 56.5% in 1990 to 48.5% in 2010, but this is still 20 percentage points off target. And much of this reduction is due to the fact that overall population growth exceeds the growth in the number of the poor. But until recently, the absolute number of poor in Sub-Saharan Africa has increased. Some 124 million have joined their ranks between 1990 and 2010. Thus, while the world has already achieved MDG1 thanks to the fast growth of China, Africa is at risk of becoming a new locus of poverty. Our efforts should therefore be focused on addressing the needs of these most vulnerable.
Finally, Africa continues to be the home of the majority of the world's least developed countries, whose structural disadvantages make progress particularly difficult to achieve. In 1971, when the special needs of the poorest countries were recognized through the creation of the special LDC category of countries, there were 25 countries fulfilling the criteria for this group. 16 of them were African countries. Today, 42 years later, there are 49 LDCs, of whom 34 are African. In this context, I am pleased that at the UNLDC IV conference in Istanbul in 2011, the international community made a commitment to ensure that at least half of the LDCs will meet the criteria for graduation from this category by 2020. Given that in the past 42 years, only 3 countries have graduated, this is undoubtedly an ambitious goal. But with concerted and focused efforts, it is not impossible.
Ladies and Gentlemen,
UNCTAD sometimes has been called the "Cassandra" among international economic organizations, always seeing economic cataclysms around the corner, and pointing out imminent doom. I do not think that this is warranted for Africa, as indeed there are many positive signs. However, we need to be aware of the challenges in front of us, in order to better be able to tackle them.
The African Union has a key role to play in ensuring a more inclusive and prosperous future for Africa. It can ensure African ownership of its development commitments. I am particularly pleased that it has recently strengthened its attention to economic issues. One key issue I would highlight is the recent commitment by Heads of State and Government to the Action Plan to boosting Intra-African Trade, including by fast-tracking the establishment of a continental pan-African FTA (CFTA) by 2017.
Since 1995, the share of intra-African trade has remained at around 9-12 per cent, far lower than that within any other developing region. Thus, there is great potential for expanding this share. Indeed, this potential is highlighted by the fact that despite a slowdown in demand in advanced economies, Africa continued to exhibit a robust import demand growth of 8 per cent in 2012. Thus, boosting intra-African trade remains a viable avenue for Africa's trade recovery, growth and development. More importantly, UNCTAD research has found that intra-regional trade tends to be more intensive in manufacturing - as opposed to primary commodities - and thus provides additional incentives for diversification.
Several attempts have been made to boost intra-African trade in the past, with sometimes limited success. However, I am confident that the high-level commitment by Heads of State, as well as the proactive involvement of the African Union can help to achieve this goal.
As we have done in the past, UNCTAD stands ready to continue and scale-up its support to African countries' efforts to boost its intra-African trade and fast-tracking the establishment of pan-African CFTA. UNCTAD has contributed to the assessment and conceptualization of African regional integration processes, as well as to the consideration of possible modalities to fast-tracking the formation of CFTA. Therefore we stand ready to further strengthen our engagement and contribution to your efforts to boosting intra-African trade consistent with the African Union Action Plan. In this regard, a project "strengthening capacities of African countries in boosting intra-African trade" is expected to start the implementation in early 2014. We have also devoted this year's Economic Development in Africa Report to this cause. The report makes a number of practical policy recommendations on how to drive this agenda forward. I hope it can be a useful contribution.
Ladies and Gentlemen,
Allow me to extend my heartfelt congratulations to the African Union on this anniversary. Its founding principles remain relevant to this day. With our joined commitment, its goal of a prosperous and peaceful African continent will be within reach.
Thank you very much.