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1. ABCs of the IFIs: The African Development Fund’s 16th Replenishment

Author:
Jocilyn Estes and Erin Collinson
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
Many African countries, particularly those in sub-Saharan Africa, continue to grapple with the consequences of the COVID-19 pandemic while simultaneously confronting the challenges posed by slowing global growth, private capital outflows, debt distress, and the impacts of climate change. An estimated 55 million people on the continent have been pushed into extreme poverty since the onset of the pandemic. This devastating trend has been exacerbated by the ripple effects of Russia’s invasion of Ukraine—supply chain disruptions, tightening fiscal space, and growing pressure on the cost of food, fuel, and fertilizer. International financial support for the continent has fallen woefully short of levels required to prevent the current crisis from derailing long-term development. The African Development Bank (AfDB) is the largest regional multilateral development finance institution on the continent. It provides critical financial support to countries across the region, including investment in vital infrastructure projects. The African Development Fund (AfDF) is the Bank’s concessional window, providing financing in the form of grants and concessional loans to resource-constrained governments responding to the growing challenges on the continent, including gaps in critical infrastructure and rising debt burdens. Amid ongoing and overlapping global emergencies, the stakes for the AfDF’s upcoming replenishment could hardly be higher. The AfDF is making the case to donors—who will come together later this year for a final meeting of the AfDF’s 16th replenishment (AfDF-16)—that the Fund needs substantial new resources to continue to support African people, businesses, and governments and make up lost ground in the fight against poverty. An ambitious 16th replenishment—coupled with policy and governance reform commitments—presents an opportunity for donors, including the United States, to complement long-standing investments in regional growth and infrastructure, offer a sustainable alternative to non-concessional Chinese lending, and make headway on the long road to economic recovery from the pandemic and worsening food security crisis.
Topic:
Development, Investment, Pandemic, and COVID-19
Political Geography:
Africa

2. Recommendations for US-Africa Space Cooperation and Development

Author:
Rose Croshier
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
Center for Global Development
Abstract:
The United States, a leader in space exploration and innovation, has a unique opportunity to establish enduring diplomatic, commercial, and security ties with African nations through space cooperation—with the potential to yield substantial development benefits. The U.S. space sector is robust, an area of comparative strength vis-à-vis Europe, Russia, and China. By driving space cooperation, the U.S. can reinforce the rules-based order as articulated in international agreements like the Artemis Accords. Expanded space capabilities can also support the achievement of several of the UN Sustainable Development Goals, which range from improving data-driven governance to closing the global digital gap. U.S. policymakers have an opportunity to implement a collaborative approach with emerging African space actors both to grow a peaceful and law-abiding community in space and to benefit from Africa's contributions to the global space ecosystem. Space capability can also serve a crucial infrastructure role, yielding similar benefits to “traditional” infrastructure—including facilitating access to 5G connectivity through low orbit satellites and addressing clean water and food security needs through remote sensing and satellite communications.
Topic:
Development, International Cooperation, Space, and Territory
Political Geography:
Africa, North America, and United States of America

3. Convergence, Development, and Energy-Intensive Infrastructure: Getting Africa to High-Income Status

Author:
Vijaya Ramachandran
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The structural changes in an economy that accompany its growth to high-income status have been predictable in Europe, the United States, and Asia, characterized by declining employment in agriculture and rising levels of urbanization driven by jobs in the modern industrial sector. As agricultural productivity rises, the share of people employed in agriculture declines, and both urbanization and employment in manufacturing increase. Food prices fall relative to wages, causing the share of income spent on food to decline to very low levels. Asian countries have followed a similar path, although at a much faster pace. Africa, however, is different. Despite a high share of the population in urban areas, most African countries have yet to see significant increases in agricultural productivity that might drive industrial growth and jobs. In most African countries, the rising share of urban population has not been matched by increases in agricultural productivity, falling food prices, or the emergence of a viable industrial sector. Available evidence shows that agricultural yields in Africa are low and food is costly, while the share of employment in agriculture remains high. For the process of structural transformation to get underway, African countries must manufacture of fertilizer, develop better methods of water control, improve transportation, and invest in cold storage. Each of these interventions requires significant amounts of energy, including energy from fossil fuels. And they are not replaceable—countries have managed structural transformation in different ways but, to date, none have leapfrogged the process.
Topic:
Agriculture, Development, Energy Policy, and Infrastructure
Political Geography:
Africa

4. Identifying Binding Constraints on Digital Payment Services in Ethiopia: An Application of a Decision Tree Framework

Author:
Getnet Alemu, Tadele Ferde, and Alejandro Fiorito
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
While several comparable countries in sub-Saharan Africa have seen a significant increase in financial inclusion, mainly driven by digital financial services, Ethiopia still performs poorly. Even digital payment and transfer services, which lower-income and less literate segments of the population could benefit from, are rarely used. Given the low development level of Ethiopia, numerous supply and demand factors could explain this disappointing outcome. We use a decision tree framework to isolate and analyze potential constraints to find which are binding—that is, which constraints limit the expansion of digital payment services in Ethiopia. Our analysis indicates that supply-side problems are pervasive, and we find that competition problems in the essential digital infrastructure market and in the financial sector are responsible for the inadequate provision of digital payment services in Ethiopia. However, the root cause of inadequate competition, and therefore of low financial inclusion through digital payment services, is institutional deficiencies. The two key institutional deficiencies are the lack of capacity of regulatory and supervisory institutions, and the unwillingness of the central government to enable and promote competition. The dominance of public enterprises, Ethio Telecom and the Commercial Bank of Ethiopia, has kept the prices of digital payment services high, particularly for low-income populations, as fees charged for undertaking low-value transactions are very high and the cost of digital infrastructure (mobile phones and plans) is also substantial. Unless these institutional binding constraints are removed, digital payment services in Ethiopia, and digital financial services more generally, will hit a very short ceiling that limits their enormous potential to improve livelihoods in the country.
Topic:
Development, Finance, Digital Economy, and Digitalization
Political Geography:
Africa and Ethiopia