IS AFRICA RICHER THAN WE THINK?

IS AFRICA RICHER THAN WE THINK?

Africa might be a lot richer than we think! Most people interested in African development are not economists. However, it is important to understand the economic headlines and add some good old street sense to the messages.

Morten Jerven has published widely on African economic development. His recent book ‘Poor Numbers -How We Are Misled by African Development Statistics and What to Do about It’ is a study of the production and use of African economic development statistics. It is also a minefield.

What is clear, is that much less is known about African economic development than is stated. Mismeasurements are huge. The population of Nigeria is said to be 15m lower than World Bank figures.  the population more than doubled in the 10 years following independence,  which is well nigh impossible.

GDP is the most important measure. A decline in GDP led the Economist to run its now famous ‘The Hopeless Continent’ headline. A rise in GDP led to the same publication’s ‘Africa Rising’ headline.  Morten Jerven says that poor countries find it relatively difficult to measure GDP. There is a huge lack of direct tax receipts, recording information, lack of GDP research funding, little inclusion of the large, informal economy and of course there are shocks to the system due to structural adjustment programmes etc. So in a nutshell, it is unclear where the data comes from, and it’s accuracy and reliability are questionable.

On the 5th November 2010, Ghana’s GDP was revised upwards by over 60 percent  from 25.6 billion cedis to 44.8billion in one day!  A substantial amount of economic activity had been missed. A change that took the country from a low to lower middle-income status with the stroke of a pen!

What is known about the poorest of countries is very small. The base line for the comparison of GDP is sometimes so old that it is completely irrelevant. Some countries have not yet even published their own data. There are also gaps. Some massive. Then there are problems of validity.  Can the Ghana of today for instance compare itself with the Ghana of yesterday credibly?

Africa rising is based on aggregated data.  As with many things in Africa, there is a great deal of need for investment in this area.

So why is all this important? Because allocation of resources and investment decisions are made on the basis of the numbers. It pays to get them right.