Sub-Saharan Africa must focus on agriculture, health and education, says World Bank

In its new edition of its famous Africa’s Pulse report unveiled on 4 October, the World Bank has revised its forecasts downwards compared to last April. In sub-Saharan Africa, the development bank forecasts a deceleration of growth from 4.1% in 2021 to 3.3% in 2022. The low per capita income growth (+0.7%) for the region in 2022 is considered insufficient to meet the poverty reduction targets.

As of 31 July, 29 of the 33 sub-Saharan African countries for which data is available had inflation rates above 5%, while 17 countries had double-digit inflation. Citing figures from its Global Food Crisis Report – updated mid-year – the World Bank said that more than one in five Africans now suffers from hunger. The number of acutely food-insecure people has been estimated at 140 million in 2022, up from 120 million in 2021. In East Africa alone, 55 million people will be acutely food insecure, up from 41 million in 2021.

“The impact of high food prices on people struggling to feed their families is the most worrying aspect, as it threatens long-term human development. This situation calls for urgent policy measures to restore macroeconomic stability and support the poorest households while redirecting spending in the agriculture and food sector to build future resilience,” says Andrew Dabalen, the World Bank chief economist for Africa.

Average debt in Africa exceeds 59% of GDP

These food and agricultural crises come at a time when governments have little or no fiscal space to fund an effective response. While some countries with natural resources have been able to take advantage of high commodity prices to improve their balance sheets, many others have depleted public reserves with programmes previously put in place to counter the pandemic’s economic impact, Africa’s Pulse reports.

In 2021, African governments spent 16.5% of their revenues on external debt service, up from less than 5% in 2010.

Thus, by 2022, the average debt in sub-Saharan Africa is expected to reach 59.5% of GDP, with 8 of the 38 countries in the region eligible for IDA (World Bank) assistance in debt distress, and 14 at high risk of joining them. According to the World Bank, consolidation efforts to reduce debt are expected to slightly reduce the primary deficit to an average of 4.8% of GDP in the region.

This situation is deteriorating by the day as external borrowing costs rise and tighter global financial conditions weaken currencies, says the report.

Ending subsidies across the board

In these difficult circumstances, the World Bank says it is “essential to improve the efficiency of existing resources and optimise taxes”.

In particular, the institution encourages the use of data and digital technologies to improve tax administration (such as taxpayer registration, electronic tax filing and payment) in order to minimise costs and processing times, and reduce the risk of corruption and tax evasion. In addition, the report highlights the importance of promoting market competitiveness and contestability, and diversifying the continent’s trading partners: “Global evidence shows that a one standard deviation increase in the diversification of trading partners is associated with a 1 to 1.5 percentage point increase in growth.”

At the same time, the Bank believes that governments should stop misdirected subsidies and shift public spending to programmes “where the return on investment is known to be high”, such as education, public transport, health, water and waste management, and especially agriculture, in order to “protect human capital and promote more climate-resilient production”.

“This kind of reprioritisation maintains spending in key sectors, while increasing productivity, building resilience to climate change and working to ensure food security for all,” Africa’s Pulse report says. According to the David Malpass-led institution, the benefits of irrigation investments have great potential in sub-Saharan Africa. On average, it says, a dollar invested in agricultural research generates $10 worth of returns.