Revealing Africa’s hidden growth

Edwina Assan, owner of EdTek Batiks in Accra, Ghana

Strong economic growth in Africa is no longer a new or unexpected story. Between 2000 and 2010, Africa was home to six of the world’s ten fastest-growing economies. Last year, growth across sub-Saharan Africa was almost 5 percent, and total GDP was $1.27 trillion. What’s more, these trends are set to continue, with regional growth predicted to average 5.4 percent per year in 2012 and 2013, outpacing almost everywhere else in the world. With many rich countries struggling to escape recession, this impressive fact is not lost on investors.

However, while national growth figures are important, they are not the whole picture. They don’t tell us whether that growth has translated into improved living standards and rising real consumption among ordinary families. However, the data that could tell us is often dubious or missing entirely, especially for Africa. For example, one widely-used estimate of purchasing power parity – the Penn World Tables – does not provide benchmark studies for 24 African countries. Instead, expatriate allowance indices were used to extrapolate price studies to the missing countries (now supplemented using a worldwide study of prices from 2005). When Mozambique conducted its first ever national survey of the informal sector in 2004, this led to adoubling of previous estimates of household consumer spending, revealing just how wide the margins of error can be in such estimates.

An innovative new study,The African Growth Miracle, by Professor Alwyn Young draws on information not normally used in this type of analysis. These findings reveal that growth of real household consumption in sub-Saharan Africa since 1990 could be as much as 3.7 percent per year – four times previous estimates. What this study does differently is to use direct, simple and obvious measures of real consumption at a household level – ownership of goods such as televisions, refrigerators, cars and bicycles; as well as the quality of housing, education of young people, health and mortality of children, and allocation of women’s time in the family – rather than estimating total nominal consumption and setting it against price indices. It draws on two decades’ worth of data from the international Demographic and Health Survey, focusing on 29 sub-Saharan African countries and 27 other developing countries, covering a total of 1.6 million households. Even accounting for big variations in different countries, the study uncovered a pattern of surprisingly high growth across sub-Saharan Africa.

READ THE STUDY HERE

The overall health and mortality of children is improving, school attendance is rising, and family consumption of a variety of material goods is growing at a rapid rate. According to the study’s author, these achievements should be seen as a hidden growth miracle. Nevertheless, heartening as these trends are, the study also showed that consumption levels in Africa fall far below those in other developing countries. Continuing high levels of poverty and inequality remind us not to be complacent about Africa’s “miraculous” growth.