The challenge

The economic landscape of developing countries is gradually changing. Africa, in particular, has registered steady economic growth in many places. Nonetheless, the continent continues to face major socio-economic challenges, as it struggles to convert its economic expansion into sustainable and inclusive transformation.

For economic growth to have meaningful impact on poverty and development, it must be accompanied by a transformation towards more productive and sustainable activities. Ultimately, it needs to generate more and better employment and shared wealth. To this end, many African countries are putting economic policy reforms into place, aiming to strengthen their institutions and stimulate their economies. Governments are increasingly reorienting their national policies to promote further private sector development, enhanced industrialisation, better integration into regional and global value chains, and improvement of the business and investment climate.

Many international partners are changing the focus of their cooperation efforts too, placing more emphasis on structural factors to accompany their partners in paving a viable way to long-term sustainable development. Discussions on what is needed to realise this have intensified. Topics such as the roles of the private sector and natural resources 

management in sustainable economic transformation are now priorities on the international cooperation agenda. 

Despite recognition that structural change is needed, and notwithstanding past efforts to realise this transformation, the road to sustainable and inclusive development remains long in most African countries. Many of Africa’s economies still operate within weak regulatory, institutional and governance frameworks, which hampers progress, particularly in terms of private sector development.

Economic governance is needed, alongside responsible private sector activity, trade and regional integration, and the efficient, transparent and sustainable management of natural resources. Economic benefits must flow to the general population in the form of decent employment and efficient public services. To achieve this, it is essential to better understand the institutional, political and social factors that drive change. To get there, attention must be paid to the political economy dynamics and governance of the transformation process, not just to appropriate economic measures. 

"Economic growth is a necessary, but not a sufficient condition for poverty reduction and long term inclusive development outcomes. Economic growth must be accompanied by economic transformation towards more sustainable activities, a vibrant private sector, diversification away from over-reliance on natural resources, and integration into regional and global value chains."

San Bilal, Head of the Economic Transformation and Trade programme (pictured)       

ECDPM's role

The Economic Transformation and Trade programme facilitates and informs the economic transformation process in developing countries. Formed by the merger of the Centre’s previous ‘Economic Governance’ and ‘Trade and Regional Integration’ programmes, its activities are anchored in ongoing global dynamics, with a particular focus on Africa. The programme engages mainly with stakeholders in Africa and Europe to facilitate informal dialogues and provide timely information, analyses and case studies. It focuses not only on the policy to practice dimension, but also on the underlying political economy dynamics. In 2013, the programme’s work was organised in four main streams:
  • Promoting the role of the private sector
  • Promoting effective natural resources management
  • Exploring the political economy of regional integration
  • Facilitating trade processes
Promoting the role of the private sector

In 2013, ECDPM intensified its work in private sector development, elevating this to a core programme activity. We expanded our networks and strengthened relations with European donor agencies, international and domestic firms, government representatives and civil society organisations. We arranged a series of informal donor dialogues, providing stakeholders opportunities to meet in an informal setting for open, concrete and frank discussions on issues related to their day-to-day work and overarching strategies and grander visions.

We actively contributed to the international debates on private sector development through a range of podcasts, interviews, blog posts and other media. These covered topics such as private firms’ corporate social responsibility (CSR), industrial and export policies, taxation and development finance, public-private partnerships and multi-stakeholder partnerships. We also highlighted the role and impact of domestic and foreign investments in spatial development initiatives. Together with the ECDPM Food Security programme, for instance, we investigated the potential role of Tanzania’s and Mozambique’s corridor initiatives to improve the productivity, risk management and income of agricultural small and medium-sized enterprises (SMEs) and farming operations. We focused on employment and job creation, too, not only for inclusive growth and development, but also as a necessary factor in fragile states’ transformative pathway towards stability.

ECDPM contributed to a more informed and open dialogue among donors on ways to support the private sector for development. This helped, in particular, several European donor agencies in shaping their own policies and identifying appropriate modalities. Our contributions also helped the European Commission to better identify its approach to private sector development, which will be formulated in an official Communication in 2014. Moreover, our contributions helped to frame the debate. Civil society actors built on ECDPM analysis to better structure their own engagement on private sector issues. More generally, we contributed to a greater awareness and experience-sharing among public and private sector stakeholders on public-private collaboration.

Promoting effective natural resources management

The role of the extractive sector in Africa’s economic transformation agenda was the core theme of major policy debates and flagship reports in 2013. Examples were the 2013 African Economic Outlook and the 2013 United Nations Economic Commission for Africa (UNECA) Economic Report on Africa. Throughout the year, we were active in most African and European policy spheres related to the role of effective natural resources management and diversification.

We contributed to influential publications, including the African Economic Outlook mentioned above. This input was based on an ECDPM study of the dynamics of reforms in resource-rich countries. We also published a theme issue of ECDPM’s monthly magazine GREAT insights on the role of the extractive sector in economic transformation. Furthermore, we authored a study on linking extractive sectors to productive value chains. This last report highlighted the importance of bridging the gap between the extractive sector and the rest of the economy in order to foster sustainable structural transformation.

Together with the Organisation for Economic Co-operation and Development (OECD), we facilitated a closed-door roundtable on management of natural resources and the role that multilateral and private sector stakeholders can play in catalysing structural transformation. We increased our visibility at high-level fora. The European Parliament invited us to speak at various events on the role of the extractive sector in Africa and to participate in policy debates concerning resource governance. In Africa, we accepted invitations to participate in high-level panels, such as at UNCTAD’s (United Nations Conference on Trade and Development) 16th Annual Ministerial Conference on OilGasMine in Niger.

We expanded our outreach beyond the European and African frontiers as well. We participated in an experts’ panel in Bangkok to share the African experience of the ‘resource curse’ – this is the paradox that countries rich in natural resources tend to experience less sustainable economic development than countries with less natural resources. Asian stakeholders from the German Agency for International Cooperation (GIZ) Asian Resource Network were in attendance at that event.

Exploring the political economy of regional integration

African governments have repeatedly declared their aspiration for regional and continental integration. In reality, however, implementation has been very slow. Political promises and policy commitments made at the regional level have proven difficult to implement nationally, despite ambitious action plans, political declarations and various donor support instruments.

One of ECDPM’s 2013 activities was to look beyond the official rhetoric, to examine the underlying dynamics of country cooperation in the Southern African region. We asked what stimulates cooperation, and what prevents progress. Together with the South African Institute of International Affairs (SAIIA), we entered into dialogue with regional stakeholders to document examples of effective cross-border cooperation and functional integration. This led to an in-depth study and repository of informative cases.

Building on this work, we developed a tool that allows for better assessment of political economy actors and factors driving or blocking regional integration processes. The approach suggests five important ‘lenses’ through which specific regional integration dynamics can be analysed. The African Development Bank drew on this work in reflections on its new ten-year strategy on regional integration. Furthermore, this work contributed to the forthcoming 2013 African Development Report. Partners such as the UK’s Department for International Development (DFID) and the World Bank, have shown continued interest in our findings. Currently, we are collaborating with these institutions to improve understanding of the real traction of regional integration in Africa. This work also aims to learn where these institutions’ support can be most effective and ultimately lead to sustained economic growth and poverty alleviation.

ECDPM’s analysis and dialogues have enhanced understanding of some of the drivers and incentives for regional integration, especially in Southern Africa. Our inputs were used by national planning commissions in Southern Africa and policymakers elsewhere in the region. Finally, ECDPM inputs have raised awareness of pragmatic approaches to regional integration among private sector actors, European donors and African regional stakeholders.

Facilitating trade processes

Trade and development issues were a central thrust of ECDPM’s work throughout 2013, a year shadowed by the impending deadline for implementation of interim ACP-EU Economic Partnership Agreements (EPAs). As negotiations accelerated, we continued to be a key source of independent, publicly available information on the proceedings. A series of publications, blog posts and podcasts simultaneously strived to raise the political profile of the EPAs while stressing the importance of reaching mutually satisfying outcomes in 2014 for broader Africa-EU relations. This new message seems to have influenced the debate in Brussels and beyond, especially as the April 2014 EU-Africa Summit neared.

We actively participated in EPA-related meetings organised by like-minded European member states and African bodies. For example, we took part in an informal meeting in Berlin of the so-called ‘Friends of the EPAs’ and in the AU’s EPA negotiations coordination meeting in Gabon. At these events we provided a fresh perspective on the EPAs and their potential consequences for diplomatic relations between the two continents, while also presenting cutting edge technical analyses of the surrounding legal and economic concerns.

During this critical year in the EPA negotiations, our information to African negotiators indirectly helped them to frame solutions and strategies towards the negotiations’ satisfactory conclusion. Similarly, we informed the internal reflections and strategies of several EU member states on the way forward in the EPA negotiations and on options for responding to their technical, legal and political challenges.

ECDPM remains one of the few Centres working on the regional dimensions of Aid for Trade (AfT), which is a global initiative to help developing countries become better integrated in global value chains. Building on last year’s work, we continued to advise policymakers in the design of effective regional AfT plans. For example, we contributed to a meeting of the AfT experts group of the Economic Community of West African States (ECOWAS) in Abuja in May. We carried out a major research project on AfT, funded by the Bill & Melinda Gates Foundation. Its findings were published by the Commonwealth Secretariat and publicised on external platforms including the Business Fights Poverty blog. Our contributions were also drawn upon for the Fourth Aid for Trade Global Review of the World Trade Organization (WTO).