African economic growth is not necessarily leading to prosperity

Tom Murphy, Humanosphere, 7 June 2016: Economic growth in sub-Saharan Africa fell to a 15-year low in 2015, and the downward trend is predicted to hold for 2016. It is a troubling trend for the region. With more that half of all Africans projected to be living in cities by 2050, attention is being placed on supporting urban development and getting economic growth back on track. However, some new research provides more evidence that the years of economic growth that preceded the downturn did not necessarily translate to improvements for all Africans.

Angola is among the top 10 economies in Africa, yet it ranks 33rd in the 2016 Africa Prosperity index. By looking at how countries perform in areas like health, education and freedom the index goes beyond measures of wealth to see the quality of life for people in each place. Eighty-nine variables are considered to determine the level of prosperity for a given country. The findings show that wealth is does not predict prosperity.

“That delivery matters more in determining the level of a country’s prosperity than its wealth is a strong message for leaders and their policymakers in a slower growth climate,” according to the accompanying report.

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When compared with countries in East Asia and Eastern Europe, most of Africa performs poorly in terms of creating prosperity. Oil has propelled the Angolan economy to high wealth in the years since its civil war with China-like rates of growth. Yet the country of 6 million people has an extreme poverty rate of roughly 70 percent. All that wealth created has yet to transform poverty rates.

On the other hand, there are countries that manage to create high levels of prosperity despite smaller economies. Rwanda, Senegal, Morocco and Burkina Faso are the four greatest over-performers, according to the index. It comes as slightly good news. Rwanda’s autocratic government is not the perfect model for developing countries, but the fact that democracies Kenya and Ghana are among the top over-performers shows that it is possible for democracies to do well too.

Setting aside a few outliers, the worst performing countries also happen to be the places with the most significant problems. The Central African Republic comes in at the bottom of the index. It is a country still recovering from the takedown of its government and years of fighting. Burundi, the Democratic Republic of the Congo and Sudan all struggle with instability and security. Then there are countries like Liberia and Guinea, which dealt with an Ebola outbreak, and Chad situated in the middle of the extremely dry Sahel band.

In the annual economic outlook for the continent, the African Development Bank focused heavily on urban population growth and its associated needs. It calls the rapid growth of cities “a megatrend transforming African societies profoundly.” The opportunity for transformative change within countries may just start in cities, it suggests. Yet much of the language focuses on economic growth.

“We need to invest in building economic opportunities, especially those of women of which 92 percent work in the informal sector. Cities and towns have a key role to play in that process, but only if governments take bold policy action,” said Abdoulaye Mar Dieye, the director of the regional bureau for Africa at the United Nations Development Program, in a news release.

It is estimated that when the average income in a country grows by 10 percent, poverty is cut between 20 percent and 30 percent. There is clearly a place for economic growth in the list of factors that contribute to helping lift people out of poverty.

“Historically nothing has worked better than economic growth in enabling societies to improve the life chances of their members, including those at the very bottom,” wrote Harvard economist Dani Rodrik in his 2007 economics book.

The Prosperity Index does not necessarily rebut Rodrik’s sentiment. Rather, it shows that economic growth alone is not sufficient. Everyone does not necessarily benefit, as rates of income and wealth inequality increase at the country level prove. Reducing maternal mortality and getting more kids through school takes more than just money to achieve.

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