Fishing boat in Mombasa, Kenya, Oleg Oprisco.
ECA THE BLUE ECONOMY 40
2.1 Introduction
This chapter provides an overview of the macroeconomic situation in Eastern Africa. It particularly focuses on those aspects that relate to the Blue Economy. Eastern Africa1 includes 14 countries and 367 million people over approximately 7.3 million square kilometres. With about a third of Africa's population, it covers only a quarter of its land area.2 The two African countries with the longest coastlines - Madagascar and Somalia (see Table 2.1 below) – are to be found in the region, as are five land-locked countries - Burundi, Ethiopia, Rwanda, South Sudan and Uganda. Seychelles and Ethiopia are both in Eastern Africa, but the former is an island state with the smallest population of any African country while the latter is land-locked and has the second largest population of the continent. The region also includes the second largest African country by area, the Democratic Republic of the Congo (DRC), as well as the most densely populated country on the continent (Rwanda). Ethiopia has one of the fastest growing economies in the world, but South Sudan, its neighbour in Eastern Africa, has had negative growth.
Despite the contrasts, there are a number of commonalities to be included in a detailed discussion of the Blue Economy in Eastern Africa. The next sub-section explains how the region as a whole grew faster than the African average (3.7 per cent) from 2008 to 2013 and nearly three times faster than the world average (2.0 per cent) over the same period. Subsequent sub-sections provide an overview of a number of trade, fiscal and labour indicators and a final sub-section evaluates the analysis through the lens of structural transformation.
1 The Eastern Africa region is defined as including fourteen countries: Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda
2 As at 2013. Authors calculations based on data in (AfDB, AU & ECA, 2014)
TABLE 2.1 Length of coastline in Eastern Africa
Source: (CIA, 2014)
Countries Total coastline (km)
Comoros 340
DRC 38
Djibouti 314
Eritrea 2,234
Kenya 536
Madagascar 4,828
Seychelles 491
Somalia 3,025
Tanzania 1,424
Total 13,229
41 FIGURE 2.1 Growth in Eastern Africa
10.2%
12% Average annual real GDP growth (2009 - 2014)
EA11 (6.6%) World (2.0%) Africa (3.7%) Ethiopia
Source: National authorities, unless unavailable, in which case, UNDESA data is used. Data for South Sudan in 2014 is missing so its regional average is for the period 2009-2013
Note: EA11 includes all countries in Eastern Africa except Djibouti, Somalia and South Sudan. The regional average is calculated using weightings based on GDP Purchasing Power Parity values provided by the IMF
2.2 Macro-economic Performance
2.2.1 Economic Growth
Most economies in Eastern Africa are growing rapidly. The region’s real Gross Domestic Product (GDP) grew at an estimated 6.6 per cent during the period 2009 to 2014. As shown in Figure 2.1 this is faster than the African average (3.7 per cent) and three times faster than the world average (2.0 per cent). Leaving aside South Sudan and Somalia for lack of official data, Ethiopia, Rwanda and Uganda were the regional growth leaders, while Madagascar was the slowest growing economy. Kenya is the largest economy in the region, while Comoros, Eritrea and the Seychelles are the three smallest.
The region’s impressive growth rates are part of a broader trend in Africa. According to the Africa Progress Panel (APP), the average income in sub-Saharan Africa will double over the next 22 years if current growth rates are maintained (APP, 2014). However, much of the growth is from a low base. In particular, apart from Djibouti, Kenya and the Seychelles, all countries are low-income or least developing countries. Ethiopia and Rwanda tripled and doubled their economies, respectively, between 2005 and 2013, yet both remain classified as least developing countries.
Furthermore, growth has generally not been accompanied by broad-based structural transformation of the economy. For example, Ethiopia’s growth has largely been driven by productivity improvements within sectors, particularly agriculture and services, rather than movements across sectors (Martins, Forthcoming), while Uganda’s growth
ECA THE BLUE ECONOMY 42
has been accompanied by only a small increase in higher-valued added sectors, such as manufacturing.3 More promisingly, growth in Rwanda has been driven mainly by the industry and services sectors,4 although agriculture remains the primary source of employment for most Rwandans.
Of the eight slowest growing economies in sub-Saharan Africa between 2000 and 2012, four were in Eastern Africa (APP, 2014). They were Eritrea, Comoros, Madagascar and Burundi; with the exception of the last, they are coastal or island states. By
contrast, the two fastest growing economies in the region, Ethiopia and Rwanda, are landlocked. On this basis alone, there would be some scope for the development of the region’s Blue Economy.
3 The share of industry increased slightly, from 17.7 per cent in 2008/09 to 18.3 per cent in 2013/14. However, manufacturing - a sub-component of industry - declined from 8.6 per cent of GDP in 2008/09 to 7.6 per cent in 2013/14. The service sector’s share increased from 48.2 per cent to 50.2 per cent, while the agriculture share decreased from 26.7 per cent in 2008/09 to 22.8 per cent in 2013/14 (ECA, Forthcoming)
4 Industry in Rwanda grew 9.6 per cent, on average, each year between 2008 and 2013, while services grew 7.9 per cent.
Agriculture is the lagging sector growing at 4.9 per cent slower than the GDP growth rate over the same period (ECA, Forthcoming)
Burundi, $8
Comoros, $1 DRC, $56
Eritrea, $8 Ethiopia, $139
Kenya, $135
Madagascar, $34
Rwanda, $19
Seychelles, $2 South Sudan, $23
Tanzania, $93
Uganda, $67
Gross Domestic Product (billions of current international dollars using PPPs, in 2014)
Source: IMF World Economic Outlook (October 2014)
Note: Kenya, Uganda and Tanzania have since rebased their economies
FIGURE 2.2 GDP for 2014 (billions of current international dollars using Purchasing Power Parities)
43 TABLE 2.2 Annual merchandise trade balance, 2008-2014 (current prices and
exchange rates)
Country Percentage of GDP
2008 2014
Burundi -16.5 -17.9
Comoros -31.6 -29.7
DRC 0.7 2.8
Djibouti -51.9 -49.7
Eritrea -43.7 -15.5
Ethiopia -21.4 -19.1
Kenya -15.9 -19.1
Madagascar -20.1 -6.1
Rwanda -13.0 -16.8
Seychelles -41.7 -34.5
Somalia -18.1
Tanzania -9.2 -8.6
Uganda -12.3 -11.3
Source: (UNCTAD, 2016)
Note: Data missing for South Sudan
2.2.2 Merchandise Trade
An important indicator of participation in global markets is the flow of merchandise trade. The annual balance is the difference between merchandise exports and imports for the year. As Table 2.2 shows, the merchandise-trade deficit relative to GDP fell for half of the countries in the region between 2008 and 2014. In particular, Djibouti, Eritrea, Ethiopia, Madagascar, Seychelles, Tanzania and Uganda all experienced a
decrease in the size of their merchandise trade deficit relative to GDP. This represents a relative improvement in the performance of their merchandise exports.
Eastern Africa’s exports are largely based on the exploitation of abundant natural resources. Fresh food made up 40 per cent or more of national exports for six of the fourteen countries in the region during 2009 to 2013. Minerals constituted 20 per cent or more of national exports for four countries during the same period. However, basic manufactures made up 10 per cent or more of national exports for only two countries in the region - DRC and Uganda. Thus, the region is a commodity exporter, with little value-added processing in the country of origin.
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