Africa 2010-2020: poverty reduction beyond the global crisis

Joe Ballantyne, Andrew Curry and Andy Sumner

Joe Ballantyne is Associate Director and Andrew Curry is Director, both at The Futures Company, London, UK. Andy Sumner is Research Fellow at the Institute of Development Studies, University of Sussex, UK.

Abstract Purpose What are the implications of the global nancial crisis and its aftermath, regionally and globally, for Africa taking a 5-15 year view? The purpose of this paper is to outline a set of four post-crisis global economic scenarios to 2020, and will consider their impacts across a range of low income countries. Design/methodology/approach The scenarios were developed using a version of the morphological scenarios approach, Field anomaly relaxation (FAR). This approach creates a backdrop of internally consistent futures for policy formation and decision making through identifying and analysing the most signicant drivers of change within the global nancial and political system. This was then linked to a modelling approach to identify country impacts. The work was developed and tested with stakeholders in the United Kingdom and Kenya. Findings Scenarios are plausible, coherent, multiple views of the future, which enable policy-makers and managers to evaluate strategy or policy choices under conditions of uncertainty. The work creates a structured approach to reviewing outcomes for growth, poverty reduction and the Millennium Development Goals for different types of developing economies, against the background of the nancial crisis. Research limitations/implications The work was conducted for a public sector client in the United Kingdom, with a limited budget and a limited timescale. Practical implications The combination of scenarios and modelling, applied to the eld of development, enables greater clarity about the choices presently facing developing African nations. In particular, the economic typology used shows that for the majority of African countries, strategies which improve resilience in the face of rising energy costs and possible food shortages will also generate economic opportunities. Originality/value Innovatively, the scenarios were tightly connected to a soft model which identies possible pathways, causal linkages and transmission variables between the scenarios and associated levels of economic growth and poverty reduction via key economic variables. This permits more granular interpretation of the scenario outcomes than conventional scenario analysis techniques. Keywords Africa, Futures markets, Sustainability, Economics, Culture Paper type Research paper

1. Introduction
Development futures are an emerging area of interest in international development research and policy with regard to Africa. This is arguably a response to a sense that the crisis marked an end to a benign era for Africa of relative stability, strong economic growth and fairly buoyant aid budgets and the beginning of a different world or new normal in the post-crisis context which may be one of multiple, inter-linked crises, stressors and uncertainties. Various current projects seek to make sense of meta-trends in development global and regional trends such as demography, climate change and so on, and their complex interactions[1]. There is already emerging evidence that the economic crisis itself is leading to signicant changes in the overall context for development. For example:

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VOL. 13 NO. 3 2011, pp. 24-37, Q Emerald Group Publishing Limited, ISSN 1463-6689

DOI 10.1108/14636681111138749

New economic and social policies. There is likely to be a greater tendency for developing countries to explore new development models; approaches from China are more likely to be taken up than Western prescriptions; the scale of food and nancial crises has made a powerful case for better social protection systems, but building ownership in governments and civil societies remains a challenge in securing long-term budget allocations. Challenges to nancial governance. There is increasing political pressure to curb the political inuence of privately-owned nancial actors such as investment banks and hedge funds. This has included campaigns for a nancial activities tax (for example, the model proposed by Tobin), for regulatory change to separate (once again) domestic banking from investment banking, and for restrictions to speculation in areas such as food markets and other essential commodities. Changes in global governance. The G8 to G20 shift means more representation and power for large developing nations, but changes in the IMF and World Bank will be crucial for wider changes in governance.

As Jones et al. noted (2009, p. 51) the era in which the seven major industrial economies could meet with Russia and act collectively to solve global problems is over. The rise of the G20, and its institutionalisation at the G20 Pittsburgh summit as the global body for economic coordination, marks a fundamental shift from the era when the OECD countries were the primary decision makers in global economic affairs. On a broader policy note, the Washington consensus has been declared dead (again) but the nature of the shift to a Beijing model, in which there is a greater role for state-led or state-managed global integration and policy experimentation is, as yet, unclear. The IMF (2010a, 2010b) most recently has broken with its own orthodoxy by questioning ination targeting, capital controls, and nancial activity taxes. If this opens up discussion of a wider range of policy instruments for development, then there are, potentially, huge implications particularly for expanding the range of any future agreement beyond the social sectors and to thinking how to promote development of infrastructure and the productive sectors. Beyond this shorter-term political-economic context, of course, are a number of highly disruptive, large-scale issues such as climate change, population growth, urbanisation, resource shortage, and so on. All of this speaks to a political and economic environment of increasing uncertainty over the next decade or more (see for discussion, Evans, 2010; Evans et al., 2010). Scenarios multiple coherent and plausible futures are a vehicle both for acting on scenarios and interpreting their implications for action. To this end, The Futures Company and the Institute for Development Studies collaborated during 2009 on a DFID-funded project to develop scenarios and modelling to address the following question: What are the implications of the global nancial crisis and its aftermath, regionally and globally, for low income countries (LICs) taking a 5-10 year view? The scenarios and modelling were developed via interviews and workshops with a range of stakeholders in Kenya, India and the UK. The project was designed to look at outcomes for LICs in both Africa and Asia, but for the purpose of this special edition of foresight, we have focussed on issues and implications for Africa, and especially so in the concluding section on implications. A version of some of the material included in this paper was previously published in a United Nations Development Programme IPC-IG Working Paper (Sumner, Ballantyne and Curry, 2010a). This has been developed further in some respects for this paper.

2. Methodology
Our scenarios were developed using a version of a method known as eld anomaly relaxation (FAR), which is a type of morphological analysis. This approach focuses on identication and analysis of the most signicant drivers of change within a given system, in this case within the global nancial and political system over the next 5-15 years, and it enabled the project team to identify and develop four coherent and internally consistent scenarios, and to extend this analysis through economic modelling. Morphological analysis

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is a deductive process, in that the scenarios are deduced from an analysis of the drivers of change[2]. Following Coyle (2009), a core assumption of the methodology is that we live in elds of interactions with other people and events. These elds can include structural factors such as political stability, social organisations or economic growth and exchange rates, as well as individual variables such as personal interactions and decisions. Some combinations of elds present a coherent frame for understanding the future, while other combinations lack coherence. (For example: a combination of high economic growth with high-energy prices and high levels of political instability, for example, would be considered internally inconsistent). Through examination of different combinations of elds, combinations, which are internally inconsistent are eliminated, while those which appear plausible and coherent are used as the basis to develop the scenarios. Like other scenarios approaches, morphological methods aim to create a range of internally consistent futures for policy formation and decision-making. Reecting the breadth of the project question, it allowed a greater level of depth and variety to be incorporated into the scenario narratives than the traditional 2 2 scenario approach and, importantly, enabled a tighter connection between scenarios and modelling. Our modelling was based on a categorisation of countries. The specic approach used is described more fully later in this paper. For present purposes, it is sufcient to note that we settled on a classication method which ensured that it was possible to create a clear link between the state of the global economy and a given countrys key macro-economic variables, and that the critical conditions which determined the degree of vulnerability of a low-income country were incorporated into the analysis.

3. Developing the scenarios

The project involved an initial scanning phase, based on the STEEP framework[3], during which the project team developed a long list of around 60 relevant drivers of change identied through a combination of prior analysis, desk research and interviews with development experts[4]. Clusters of these drivers of change formed the elds, or factors, of interaction central to the morphological approach. A number of techniques were used to rene this initial list. A workshop-based approach with stakeholders ltered the initial 60 drivers down to a shorter list of around 30 which after review and testing were considered to have greater impact on the shape of the global economy and development over the next decade. This assessment was largely qualitative in approach. Relationships between these drivers were subsequently analysed through an impact matrix, based on the work of Godet (2001) to identify both contextual drivers (high impact, and relatively independent of the other drivers) and those drivers which were important and also uncertain (high impact and relatively interdependent). This analysis was cross-checked by using Decision Explorer, a software tool which maps and analyses relationships within systems (Eden and Ackerman, 1998). Together, these three stages have been found, in The Futures Companys practice, to give sufciently robust analysis of drivers and their inter-relationships in scenarios development processes. The important and uncertain drivers were then grouped into factor themes, as follows, to describe the overall landscape. The six core factors identied were: 1. shifts in global wealth distribution; 2. trends in multilateralism; 3. polarisation of wealth/income inequality; 4. changes in the nature of aid and development funding; 5. rising energy prices (over the long-term); and 6. trends in information ows.

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A range of future uncertainties associated with these issues over the period covered by the scenarios was then identied, and these uncertainties assembled in plausible combinations creating the outline scenario narratives. The scenarios are described more fully later in this paper. In summary, however, the process generated four distinctive scenarios as follows: 1. South by South East. China and India continue to drive substantial growth in the Asian economy, while Europe and the USA are trapped in a lost decade of high indebtedness and low economic growth. 2. Western (Re)invention. Politicians in the richer countries run with the Green New Deal as a way to recharge their faltering economies; at the same time Asian economies slow because of resource and political challenges. 3. The Odd Couple. The nancial imbalances between China and the USA lock them together, and China uses the leverage it gains from this to increase its inuence in international institutions. 4. Rollercoaster. The world moves from using the dollar as its reserve currency to the euro but in an unplanned and unpredictable way. The result is two decades of disruption, protectionism, and skirmishing. Each scenario included, at core, plausible combinations of the ranges of uncertainties outlined above (see Table I). The factor combinations, initially identied through analysis by The Futures Company and IDS, were tested at stakeholders workshops as part of the scenario development workshop. It should be noted that a full morphological analysis was not possible for reasons of time; the main morphological correspondences were identied through mapping of variables. The use of this factor-based approach also created a straightforward way to connect the scenarios to the modelling (sometimes an issue in the application of scenarios-based futures work). Before proceeding to expand on the scenarios, it is worth making some observations on the scenarios, which emerged from the process, in the light of the prevailing assumptions about the future of the global economy. There are currently two main stories in the popular economic and business literature, both of which are reected in the scenarios. The rst is the Chindia story, of the continuing rise of Asia and the apparent inevitability that China will, on the basis of continuing high economic growth rates, become the largest economy in the world sooner rather than later. Indias growth is expected to follow, but more slowly. It would, say analysts, be the rst time in (measured) economic history that the largest global economy was not also, broadly, the richest by per capita income.

Table I Scenarios by factors

Sector Shifts in global wealth distribution Trends in multilateralism Polarisation of wealth/income inequality Changes in the nature of aid and development funding Rising energy prices (over the long-term) Trends in information ows Rollercoaster Collapse of the US$ Bi-ltilateralism Continued polarisation of wealthy/poor Reductions in aid expenditure as aid processes lack public accountability Greater volatility in energy prices Decline/stagnation of penetration of information ows Western (Re)Invention Global wealth shift slows Western-led multilateralism Stabilisation at present levels of inequality Asset transfer to poorer countries via carbon trading system Slow/steady increase in energy prices Continued growth in information ows South by Southeast The Odd Couple

Rapid shift in global Rise in national wealth from west to east protectionism Mini-lateralism Mini-lateralism Political action taken to reduce inequality Continued fragmentation of aid Stabilisation at present levels of inequality Vertical integration/concentration of aid Slow/steady increase in energy prices Greater state control of information ows

Sharp rise in energy prices Continued growth in information ows

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The second is the story of G2, or Chimerica, represented here by the Odd Couple scenario, in which China and America continue to be locked together by currency imbalances and the debtor/creditor relationship that follows from this, an uncomfortable and often edgy embrace that resembles the handcufng together of Robert Donat and Madeleine Carroll in the Alfred Hitchcock lm The 39 Steps. The scenarios suggest that the rst of these is less straightforward than portrayed. Even over the next decade, resource issues, environmental externalities and the political pressures created by increasing inequality and corruption may make the Chindia story less compelling. Analysis of the G2 scenario, The Odd Couple, also generates insight. In this case, it is that the scenario is at least as unstable as its name implies. It is a bridging scenario, which is unlikely to persist. However, any of the other three scenarios can emerge from it. The Western (Re)Invention scenario is often discounted, but certainly appears plausible when analysed. The basis of such re-invention is that the bulk of the worlds wealth, and knowledge, remains in Europe and north America, and that for this reason these countries are most likely to be able to free the investment capital needed to build the green new deal economies which would act as the engines of change. Finally, the Rollercoaster scenario is too easy to disregard, and it created most scepticism in stakeholder discussions (held some time before the bailouts of Greece and Ireland). But as Urry (2003) reminds us, the global system is a complex one, and is open to both emergent and non-linear behaviours. Once disrupted, there are likely to be unintended outcomes, through incomplete information between actors, positive feedback, and so on. A global scenario set without at least one non-linear scenario might be thought of as incomplete. In the next section we describe the scenarios in more detail, before proceeding to the modelling. But before moving on it is also worth reecting briey on the nature of scenarios. Glenn (2009), following Kahn, reminds us that:
Good scenarios are those that are: plausible (a rational route from here to there that make causal processes and decisions explicit); internally consistent (alternative scenarios should address similar issues so that they can be compared; and sufciently interesting and exciting to make the future real enough to affect decision making.

Further, in the exercise no scenario is thought to be more probable than another, and the probability of a future evolving exactly as described in a scenario is small. Decisions should be made with reference to a set of scenarios, rather than one preferred future; together, the scenario set should represent a coherent range of uncertainty against which prospective decisions can be assessed and evolving events can be monitored. The role of uncertainty in a scenario set also enables strategies, which increase resilience to be identied more clearly. Scenario I: South by Southeast or stagnating West, resurgent East South by Southeast describes a world in which the recession of 2008-2010 accelerates the nancial rebalancing away from Western powers towards the East. Hampered by debt, Western economies stagnate. Their growth is slow, and stimulus expenditure unsuccessful. The outcome is a Japan-style lost decade. In contrast, many developing countries handled the fallout of the nancial crisis better. Cash-rich China increased its domestic investments, leveraging their signicant foreign exchange reserves to buy foreign assets, provide direct nancial assistance and making long term deals with resource rich countries, many in Africa. This move proved adroit given the sharp increase in the price of oil and energy prices, driven largely by increasing demand from emerging economies. African LICs lacking in signicant natural resources typically nd themselves left out of major trading blocs in this scenario. Resource-rich African countries tend to focus their diplomatic energies and calls for FDI on one or other of the regional trading blocs. In the face of competing capitalisms, the idea of a single international community comprised of nation states is no longer plausible. Rather, a series of de facto trading blocs

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emerged. In developed markets economic stagnation led to a resurgence of nationalism, and growing calls for economic protectionism: Buy Local campaigns grow in popularity in Europe and the USA. Scenario II: Western (Re)invention or US and EU reinvention Western (Re)invention describes a world in which macro-economic intervention works. Policies put in place to manage recession prove successful in developed markets, and many return to robust levels of economic growth by 2013/2014 their economies proving resilient and adaptive. The US dollar and the euro have fallen against a basket of international currencies, increasing the competitiveness of exports. Oil and commodity prices have risen, which creates challenges for exporters such as China. A push for renewable energy in the EU and USA has reduced their demand for fossil fuels, reducing trade surpluses with Russia and Middle Eastern countries, while efforts to develop a more sustainable national infrastructure provide further economic stimulus, shifting the developed economies to investment-led growth. As a result, while emerging economies continued to grow, the levels of growth were lower than in previous decades, inuenced by resource shortages, limits on the productive capacity of the land, and infrastructure bottlenecks, along with a global carbon trading system, which penalised energy-inefcient production. The G20 proved too complex a structure to manage international negotiations, and many policymakers argued that given the scale of the global nancial and environmental challenges, effectiveness and efciency were more important than representativeness and negotiations tended to involve The Quartet of the EU, USA, Japan and China. One of the most signicant outcomes of this was a global agreement on a common framework for regulating carbon emissions including some asset transfer from wealthy to poor countries via a carbon credits system. Centred in London and New York, the trading system effectively provided a subsidy to LICs with small carbon emissions. Green technologies have led many commentators to refer to the new world order as the hourglass world as LICs at the bottom beneting from asset transfer via carbon credits and the growth of new green manufacture and energy generation, while developed countries at the top maintained their global share of GDP and signicant inuence over global institutions. Middle-income countries are squeezed. Scenario III: The Odd Couple or the rise of Chimerica The Odd Couple describes a world in which the delicate economic relationship between the USA and China continues, in which Chinese trade and capital surplus support Americas continuing debts, thereby underpinning the global economy. Because the USA is vulnerable in the wake of the global nancial crisis, China is able to turn its economic leverage into greater political and diplomatic inuence. Chinese corporations and diplomats are more active on the world stage not least in an ongoing search to satisfy the countrys increasing energy and food needs. These moves are controversial; resource deals are often signed with autocratic states. The big gain for China is in its increasing power and inuence over international organisations, gained with American support. Chinese investment in US corporations also continued to grow, with the implicit support of US regulators. Closeness with China has increased the distance between the USA and Europe, with ever broadening trans-Atlantic policy splits. Driven by steadily rising energy costs and slower demand, the level of global trade ows do not return to the volumes of 2005/2006, staying consistently around 15-20 per cent below its peak. Politicians in developed countries were tempted to re-introduce trade barriers often under the rubric of environmental legislation. Although 2010 saw some agreement on a common framework for signicantly cutting carbon emissions by 2050, neither the USA or China wholly signed up to this, preferring to implement carbon cuts outside of the international framework. One unexpected outcome

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was that NGOs in Europe and Latin America were energised. American and Chinese corporations found themselves boycotted outside of their home markets. For African LICs, the headlines are mixed. The relative recovery of global prosperity mean that levels of international donations to LICs also recover. Chinas increasing role in the International Monetary Fund means a new pragmatism about approaches to structural change in countries which nd themselves in difculties. Because of agreement reached on climate change, NGOs are effective in aligning funds from European governments and private foundations with sustainability projects, which have good outcomes for development. But how long China is happy with holding Americas bills is an open question. Scenario IV: Rollercoaster or a nancially unstable world Rollercoaster describes a world in which the globe moves away from the dollar as a reserve currency, and eventually replaces it with the euro. The continuing economic and political instability, which this creates becomes the overwhelming feature of this scenario. The catalyst is an increase in the level of hostility towards the USA among younger Muslims in the Gulf. Yemen starts migrating oil contracts to euro-pricing as the opportunity arises. Iran follows. The sabre-rattling that follows from the USA makes their decision far too visible. Attempts by governments to shore up the dollars decline are washed away by the wall of speculative money that bets against the dollar, and the USA is living on empty. One early cost is a quick contraction of inuence of multilateral institutions, as countries turn to traditional allies and trading partners to help them through the crisis. Bilateral and other local regional arrangements rapidly replace larger scale regional and multilateral arrangements. The most immediate casualty is the USA, which suffers heavy exchange rate decline, despite the best efforts of dollar-holding allies to support it. While its exports are cheaper, and its grainbelt is a strategic asset, the shock to America is also psychological; its politics turns in on itself. The euro gains because it is the only currency with a large enough economic base to take the weight. It uses the opportunity to reate the struggling EU economies. Frankfurt has become an increasingly important nancial services centre. Americas economic constraints leads to a general reduction of the capability of NATO. In a world of increasing tensions, skirmishes tend to are up more quickly and persist for longer. In a volatile economic world, volumes of spam and electronic fraud and theft have soared; it is no longer safe to use the internet without encryption. At the same time, international institutions regarded as sympathetic to the USA have become less inuential. The headlines for LICs are poor: none of the principal actors are looking out for the interests of LICs, and the overall level of aid declines. There are no diplomatic processes which enable countries can be co-opted into to support a development agenda. Aid ows generally decline, although there are come increases in aid tied to political and diplomatic objectives. Outcomes for LICs without natural resources are also poor.

4. The modelling
The modelling needed to be able to translate the high level views of the global economy portrayed in the different scenarios through to country level outcomes to household impacts. Any categorisation of countries is contentious; (see Harris et al., 2009) for a recent review of developing country classications. While we examined several existing classications, none enabled this clear articulation of global economic outcomes through to household impacts, and for this reason we developed for the project a classication which enabled the dynamics of LICs to be understood in terms of their underlying economic drivers, while also ensuring that the process did not become overwhelmed by complexity. The classication therefore concentrates on fuel dependency (or not); dependence on primary commodity exports (or not); and dependency on development aid (or not)[5] (Table II). The rationale for this approach was that it enables each country to be analysed through its relationship to the global economy through its balance of payments. The resulting classication, and of African countries in each category, is outlined below. It

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Table II Combinations of aid and non-fuel commodity dependent countries

Is the country non-fuel commodity export dependent? No Yes Is the country aid dependent? No Yes (Group B) None (Group C) (Group D)

should be noted that because the client, the Department for International Development, wished to understand potential impacts on those countries which were covered by its then PSA [Public Service Agreement] targets, the list is incomplete. It covers only a selection of African and Asian countries, although the selection is substantial enough to enable initial conclusions to be drawn wider. We deal with fuel exporters as one grouping (rather than combinations of fuel exporter with aid and non-fuel commodity exporters) because under all scenarios fuel prices are rising, implying that fuel revenues will accrue to those countries (the use and distribution of those fuel revenues is then a governance question). The thresholds for these variables were quantied during the process, although, as in the development of all such typologies, they are not without contention[6]. More information on these denitions, along with much of the more detailed analysis is contained in Sumner (2010). Here, due to space, we summarise. The nal result is a set of country groupings as follows, based on countries included in PSA targets at the time the work was done, in 2009:
B

Net fuel exporters [Group A]. In Africa: Nigeria, South Africa, Sudan. And, for reference elsewhere: Indonesia, Vietnam, Yemen. Net fuel importers: With neither primary commodity export dependency nor aid dependency [Group B]. In Africa, none. For reference elsewhere: Bangladesh, India, Nepal, Pakistan, and China. With primary commodity dependency but without aid dependency [Group C]. In Africa, Kenya. For reference elsewhere: Jamaica. with aid dependency but without primary commodity dependency. No country ts this category so it is redundant. With both primary commodity export dependency and aid dependency [Group D]. There are many PSA countries in this grouping in Africa, including Ethiopia, Ghana, Malawi, Mozambique, Rwanda, Sierra Leone, Tanzania, Uganda, Zambia. For reference elsewhere: Afghanistan, Guyana.

B B

It is worth noting the preponderance of African states in the last of these categories, especially since it is the category which is most vulnerable to changes in external conditions. To develop the modelling, we took these country groupings and considered each future scenario, exploring each scenario in terms of trends in key transmission variables linking the scenarios and country types as follows: fuel prices, non-fuel primary commodity prices, the size and composition of aid ows; the size and composition of private capital ows (notably foreign direct investment and remittances). From this, we made high-level assumptions, based on this analysis, for trends in medium term economic growth prospects, and trends in public budgets (based on fuel prices, non-fuel commodity prices, aid ows). Actual outcomes, of course, would also be inuenced by governance and policy factors, and by internal political considerations. We then aggregated these trends to consider three poverty indicators based on the MDGs: the dollar-a-day indicator; primary enrolment; and child mortality. Although the timeline is extends beyond 2015, we chose the MDGs to make the modelling more concrete, and to enable the scenarios to be linked to present policy considerations. Further, household

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income poverty, child education and child mortality are likely to remain core dimensions of poverty reduction after 2015. Income poverty is linked to growth, labour demand and trends in food prices (assuming signicant linkage of food to fuel prices). Education and health poverty are linked to growth, and to public budgets (for more detail see Sumner et al., 2010a).

5. Outlining implications of the scenarios for country types

From the modelling and analysis of country type, it is possible to review the specic outcomes for low-income countries in each type under each scenario, and from this to identify conclusions. The arrows in Table III below are intended only to be indicative, to enable a quick dashboard-style assessment to be made, rather than denitive.

Table III
Scenarios South by South-east Fuel prices b Non-fuel commodity prices b b Aid ows d Private capital ows ! Impacts A scenario of transitions Fuel prices rise sharply These rise due to signicant demand from China and India and greater protectionism may increase prices too Are falling overall due to declining inuence of the West but offset by non-traditional donors as aid ows change in composition Stagnate overall, but there is a shift in composition as non-OECD capital ows increase at the same time as a decline/stagnation in OECD capital ows. Regional investment patterns become more pronounced; remittances from the EU stagnate or fall but remittances from MICs to LICs increase and regional migration expands in growth centres A generally benign scenario Fuel prices rise steadily Rise as the return of strong economic growth in the West (c. 3-4 per cent) drives an increase in non-fuel commodity prices Rise dramatically and shift in composition. Traditional aid ows are dwarfed as carbon/climate aid and trading comes to be viewed as an appropriate substitute Increase, as a result both of high commodity prices and asset transfer via carbon trading. Some LICs are able to capitalise on the demand for low carbon technologies, and to leapfrog countries with legacy dirty infrastructure (e.g. via signicant investment in solar). One result of this is greater FDI into LICs with natural resources Trade and aid ows are increasingly difcult to disaggregate. While traditional ows decline, there is a combination of resource transfer to poorer countries via carbon trading and continued FDI (driven primarily by high priced commodities). Carbon credits tend to displace other ows of aid, meaning that there is an increase in inuence for organisations that become involved in brokering those ows A scenario of stand-offs Fuel prices rise steadily Stagnate due to growth and trade volume stagnation and sluggish recovery (commodity price declines may be slowed by protectionism Decline and change in composition due to a lack of multilateralism. Aid is more typically tied to trade and investment. However, climate change aid could dwarf other ows Are static/declining and changing in composition (as a result of protectionism). If trade volumes fall, capital ows will probably fall too, but not necessarily. Increased regional investment could be more signicant A scenario of decline and instability Fuel prices are volatile and rising Are falling due to declining demand and recession. However, the impact on commodities which represent stores of value (gold, diamonds) usually rise in these periods. Prices for food and water increase as reduced trade exacerbates food shortages Decline due to recession, and global mistrust increases. There may be an increase in some bilateral ows, especially where these are linked to diplomatic, strategic or political objectives. Aid ows from foundations will also fall. Regional aid may become more important Decline overall, particularly from OECD countries due to recession, which might be partially offset by non-OECD ows as Chinas investments take advantage of non-fuel commodity price trends

Western (Re)invention Fuel prices b Non-fuel commodity prices b Aid ows b b Private capital ows b b

The Odd Couple Fuel prices b Non-fuel commodity prices ! Aid ows d Private capital ows d

Rollercoaster Fuel prices b b Non-fuel commodity prices d

Aid ows d d

Private capital ows d

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The impact on country types By combining the scenarios analysis and the modelling, one can identify the impacts on the different country types of each scenario, and thereby construct a futures landscape for each type. In terms of Africas future, it is striking the extent to which its countries are clustered in two country types. On the one hand, there is a small group of net fuel exporters; on the other, a much larger group of fuel importers who are also primary commodity export dependent and aid dependent. (Kenya sits between these, as commodity dependent and not aid dependent on our denitions). Fuel exporters (Group A)
B

For fuel exporters South by South-east is a potentially positive scenario as rising fuel prices push growth and public spending. Labour demand may benet from fuel-led growth and/or from robust demand from the BRICs but be constrained by a lack of private capital. As a result income poverty, education and health indicators have the potential to improve steadily. Western (Re)invention is a potentially positive scenario because steadily rising fuel prices support growth and fund healthy public budgets; labour demand is buoyant due to global growth and private capital ows and as a result income poverty, education and health indicators are all likely to improve. For fuel exporters The Odd Couple is a world of good prospects. There are good general growth prospects because of fuel price rises; labour demand prospects are poorer because growth is energy-led, while commodity prices, aid, and private capital inows stagnate. Public budgets, assuming the fuel revenue is used productively, should be healthy (there may be an impact on poverty because higher fuel costs increase food prices). These impacts may be mitigated by creating scal space for public expenditures, which could also maintain education and health budgets and secure some progress of the education and health MDGs. The core policy issue is whether the fuel revenues are channelled into social spending. Rollercoaster is potentially a world of good prospects due to rising (if volatile) fuel prices. Growth will be fuelled by the fuel price rise (this may be stop-start growth); labour demand prospects are more mixed if growth is fuel-led and the prolonged global recession leads to depressed export markets for manufacturing and services. The outlook for public budgets is good but the picture is likely to be volatile because of erratic fuel price trends. The prospects for income poverty reduction are mixed.

Fuel importers with neither primary commodity export dependency nor aid dependency (Group B)
B

The outlook under South by South-East is potentially positive; robust growth in the BRICs fuels growth and labour demand. Again, as a result income poverty, education and health indicators could improve steadily. Western (Re)invention is largely a potentially positive scenario because growth is led by global recovery and private capital ows. Public budgets are healthy as a result and income poverty, education and health all improve as a result. The Odd Couple is potentially not too bad because although the fuel price rise slows growth there may be better prospects for non-commodity exports (manufactures and services) from these countries; growth, labour demand, and public budgets may not bear the impact as much as other groupings. Income, education and health poverty may not come under such signicant pressure because of this, although this depends on the impact of food prices rises on consumption poverty and health. In Rollercoaster high fuel prices will dampen growth, which is unlikely to be offset by other export markets due to a global recession, so labour demand will also be weak and public budgets under pressure, leading to likely potentially adverse impacts on income poverty, education and health indicators.

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Fuel importers with commodity dependence but without aid dependency (Group C)
B

South by South-east is a potentially positive scenario because higher non-fuel commodity prices would support growth and healthier public budgets, and thus income poverty reduction and improved education and health indicators. Western (Re)invention is also a potentially positive scenario because non-fuel commodity prices are rising, supporting growth; labour demand is buoyant due to global growth; and as a result public budgets are healthy and income poverty, education and health all improve gradually. The Odd Couple represents a potential double whammy in fuel and commodity prices; growth, labour demand, public budgets are all likely to stagnate whilst food prices rise. These countries may become aid dependent as a result. Income poverty is hit by lower growth, and education and health are under pressure due to loss of scal space. Under Rollercoaster things are potentially worse due to the stagnation of non-fuel commodity prices as a result of the recession combined with the fuel price rise. Both will dampen growth; labour demand and depress scal space potentially leading to adverse impacts on income poverty, education and health indicators.

Fuel importers with commodity dependence and aid dependency (Group D)

B

South by South-east is potentially more negative because although rising commodity prices would support growth and public spending, the impact of drastically declining aid budgets could have greatly inuenced income poverty, and education and health. Western (Re)invention is a potentially benign scenario with the same caveat on fuel price trends. This group of countries benet hugely from climate aid and trade as well as rising non-fuel commodity prices. Growth is strong as a result as is labour demand and public budgets are healthy. As a result there is real progress on income poverty, education and health indicators. The Odd Couple represents a potential triple whammy of rising fuel prices, stagnating commodity prices and declining aid. Income poverty may increase as a result of lower growth, and scal pressures curtail education and health spending. Rollercoaster has similar hazards. The triple-shock of fuel price rises; declining non-fuel commodity prices and falling aid budgets overall (even with rises in non-traditional aid) make this scenario particularly bleak for this group of countries.

Before moving to some overall conclusions, it is worth making one further observation. Of the countries which are fuel importers the country type which is most likely to have greater levels of resilience to the changing economic environment (those which are dependent neither on primary commodity exports or aid) are hugely under-represented within Africa.

6. Conclusions for Africa

The combination of scenarios and modelling analysis identies a stark set of outcomes for Africa. As noted above, it is striking that most of the countries analysed fall either into the camp of fuel exporters or of those fuel importers who are also dependent on both primary commodity exports and aid. This second group is the most vulnerable to changes in the external global economic environment. It should be observed that this is not just an effect of the research, which analysed a particular group of countries of interest to DfID. A wider scan suggests a similar outcome. So strategies which help to improve resilience are both essential and urgent. Energy In all of the scenarios, energy prices are expected to increase over the decade to 2020. For fuel exporters, this is clearly a positive outcome, increasing revenues at country level. The quality of governance will be crucial in ensuring the benets are wide spread.

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For poor, energy importing countries, the rise in energy prices has layered effects, all of which are negative. First, it makes the poor poorer, by increasing costs, including food costs. Beyond that, as people look for substitutes, there are typically adverse health and biodiversity effects. However, solar technologies are falling rapidly in price and performance. (Even in temperate climates they will shortly achieve grid parity, making them a cost-efcient energy input). In Africa, solar offers opportunities to develop cost-effective local energy systems, reducing energy dependence. As Scheer (2002) argues, this also creates local work, new skills, and also new trade opportunities, both South-South and to the countries of the North. Reading the scenarios, there is a leapfrogging opportunity. Although Scheer believes that this could be done from internal investment ows, it could be accelerated with support from aid partners. Food As Sumner et al. (2010b) observe, one of the critical global issues in the coming decade is over food. A world with more people, and more afuent people, will eat more, and will eat foodstuffs which are more water- and carbon-intensive. Demand for food intensies more rapidly in all scenarios than supply, suggesting an intensication of existing trends towards acquisition of extra-territorial agricultural land, and of food production for export by poorer countries, potentially (but not always) at the expense of their own citizens. For some African countries with land to spare, this represents a development opportunity, provided appropriate legal, land ownership, and judicial arrangements are in place to ensure local title and regulation of extra-territorial land management. There are economic development opportunities in food processing. The governance of resource disputes between those growing for export and those growing for domestic use also becomes signicant. Exports When we tested the scenarios in Kenya, there was concern that the pair of scenarios in which China was decisively more inuential would create a situation in which Kenyan exports would be undercut by those from China. In our view this is unlikely: there is already evidence that its wage levels, like those in India, are rising in response to industrialisation. In this they are following a familiar pattern (Coats, 2005). The competing exporters, in contrast, are more likely to come from the second-tier of industrialising countries, such as Indonesia, Bangladesh, or Vietnam. There is a different threat here: that increasing afuence in Asia will change the types of goods for which there is demand. More afuent Asian consumers are not just mini-models of Western consumption (HSBC/The Futures Company, 2010). The implication is that African exporters, like their European counterparts, need to ensure a better understanding of Asian markets. Success here creates the opportunity to move into the more resilient Group B set of countries, which are fuel importers but neither primary commodity or aid dependent. Carbon credits One of the merits of the morphological approach is that where there are strong positive outcomes within a scenario, it is easier to trace the reasons for this than it is within the more familiar double uncertainty (2 2) scenario sets. The reason that Western (Re)Invention scenario is more benign setting aside risks of cultural interpretation of a group of white afuent authors based in the UK is because it is the only scenario in which continuing multi-lateralism has led on to agreements on carbon trading which have created an asset class for countries such as those in Africa whose carbon consumption per head is strongly below the global average. Across the whole scenario set, this is the only change which is both substantial and positive for the poorest countries. Politics In most of the scenarios, NGOs are more marginalised, although they will nd opportunities more locally. Although the scenarios are economic in their origin, they have political outcomes. They project a period of relatively rapid change, in which looking across the whole set there are more losers than winners. Such situations inevitably lead to strong contention. Questions of distribution and of entitlement are there likely to become far more

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acute (this is true also of the fuel exporting countries). In countries with under-developed political systems, and weak civil society organisation, this is likely to lead to violence. Values The scenarios were developed in 2009, when it was possible to believe, at least for a moment, that policy intervention in terms both of macro-economic policy and nancial sector governance might lead to the early evolution of the Western (Re)invention scenario. Since then, the austerity economics seen across Europe suggest that the neo-liberal version of globalisation is more resistant to challenges. From more recent analysis, The Futures Company has concluded that this scenario which represents both a re-balancing of economies towards investment and away from consumption, and also a more inclusive approach to welfare and distribution will emerge only through a politicised response to a longer period of economic stagnation. Apart from having lessons for scenario-builders, there is another important insight in this. The politics which sit behind this interpretation of the Western (Re)invention story are also those which are most likely to encourage domestic support in afuent Northern countries for the continuing idea that we are all in this together, that the richer have a responsibility to the poorer, not just nationally but globally. The nal policy implication is that African advocates (not just leaders) need to continue to articulate the case for global social, environmental, and economic justice and they will nd it amplied in other countries.

Notes
1. Take for example, the US National Intelligence Councils (USNIC) 2020 Project and related Global Trends 2010, 2015 and 2025 and the EADI European Development Co-operation (EDC) 2010 and 2020 projects. See respectively www.dni.gov/nic/NIC_2020_project.html and www.edc2020.eu. For those who like a long term view, the University of Denvers Pardee Centre for International Futures may be of interest. Available via their web site is a long term integrated modelling system covering demographic, economic, energy, agricultural, socio-political, and environmental subsystems for 182 countries interacting in the global system. One can download the software and explore alternative future scenarios oneself. The centre conducts work for the US NIC, EC and UNEP. It is currently estimating development in the mid twenty-rst century and beyond. See: www.ifs.du.edu/ 2. For a more detailed overview of a version of morphological based scenarios by one of the methods leading practitioners, please see Coyle (2009). 3. Social, Technological, Economic, Environmental, Political 4. Drivers of change are forces (which can be social, technological, economic, environmental, or political) which are likely to inuence the outcome for the overall system or subject dened by the project question over the specied time period. They may inuence it positively or negatively. In addition, a driver of change can be characterised by the way it impedes the rate of change: e.g. the low rate of investment in new technology. The processes of rst scanning for drivers, and then analysing them for importance and degrees of uncertainty, are the platforms on which scenarios work (and futures work more generally) are based. 5. The word dependency is perhaps problematic but it is used extensively by the UNCTAD, and the OECD DAC in dening commodity and aid relationships. When we use the term low income country it refers in a general sense rather than the World Banks strict denition of a Low-income country under $995 per capita (see for discussion, Sumner, 2010). 6. The best indicator of aid dependency would be ODA/Final Absorption, (Absorption Household consumption Investment spending government consumption), which shows the share of total spending on nal goods and services effectively nanced by ODA. However, the well-known OECD (2003, p. 111) volume, Harmonising Practices for Effective Aid Delivery, which denes, high aid dependency as aid (net ODA) greater than 9 per cent of GNI and low aid dependency as under 3 per cent. UNCTAD (2008, p. 26) notes on the (mean) average ODA as a per cent of GNI in all Least Developed Countries as 7.9 per cent of GNI. Maxwell (2006, p. 1) identies the 20 per cent club and the 0.2 per cent club. In the former aid accounts for around 20% of GDP [. . .] [which is] [. . .] indicative rather than statistically precise [. . .] 20 per cent is the average aid/GNP gure for sub-Saharan Africa and 0.2 per cent is the aid/GNP ratio for India (in 2003 according to UNDP 2005).

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Corresponding author
Andrew Curry can be contacted at: andrew.curry@thefuturescompany.com

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