Are African economies growing?

Last week a World Bank official confided in me that he thinks a lot of the supposedly impressive growth shown in national accounts for LDCs in Africa is illusory. He thinks that a big part of this ‘growth’ is just formalisation; bringing small and/or rural enterprises into the formal economy where they are paying taxes etc. Nobody is claiming this is a bad thing – indeed it is an excellent thing – but coupled with the undoubted resource boom (which does not distribute wealth very widely) it does suggest that for many ordinary Africans stellar economic growth is about as far away as the stars.

Comments welcomed from anyone who has a better clue than me, which is probably most readers of this blog.

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3 responses to this post.

  1. Seems to be easily measurable: look at the growth in the tax base. I’m suspicious that African economies are formalising as quickly as your WB friend suggests….

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  2. I also wonder about the statistics cited to support the growth story– especially the rates of growth vs. the relatively minuscule sizes of the GDP (ie is it really at all remarkable that a tiny, post-conflict country like Liberia is one of the fastest growing countries in the world? Especially when it is still MUCH smaller in size and per capita than the pre-war heights of the 1970s?); the rates of increases when also considering the high population growth rates (a 5% growth rate is great, but not all that impressive if the population is expanding at above 3%); and whether these gigantic investment deals for resource extraction actually impact the local/domestic economy very much (just how much of a $1.5b mining deal is being infused into the local economy/ends up in the hands of the country’s workers?).

    The very approximate measurement of the sizes of developing economies, especially over time is, as you say, another reason to question the figures. I don’t doubt that African economies are growing, and some of this is translating into improved livelihoods for locals, but so many actors (National Gov’ts, DFIs, Foreign Investors, etc) have such an incentive to broadcast bonanza headlines rather than undertaking the more challenging business of actually quantifying any improvement in the prospects of Africans and accurately representing this statistically.

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  3. There has been visible economic development in Juba and Kampala over the past few years. There are also new industries, notably telecoms, which embody growth. How about that measuring growth by lights seen from satellites? Finally Matt’s point on high population growth rates is borne out in official stats, per capita growth rates aren’t nearly as high.

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