We Have No Idea if Africa Is Rising

It’s been fascinating to watch FP’s recent debate on economic growth in Africa. Some commentators argue that African economies are destined to remain trapped in the bottom billion unless some sort of fundamental change occurs. Others beg to differ, speaking of a continent that’s showing every indication of rapid progress. Yet, despite their wildly different interpretations, what’s striking is that both camps base their arguments on the same set of numbers.

Let’s start by taking a look at the GDP time series evidence (data collected regularly over time) available from the World Bank and other data sources. According to these numbers, African economies have been growing at a rapid pace for more than a decade. Nor is that a new trend, if we trust the numbers. The statistics suggest, indeed, that Africa has experienced recurring periods of growth throughout its recent history.

But what if we aren’t sure about the GDP statistics? In fact, it turns out that these numbers are eminently debatable. Some recent statistical events remind us that African growth and income evidence doesn’t tell us as much as we would like to think.

In November 2010, the statistics office of the government in Ghana announced that it was revising its GDP estimates upwards by over 60 percent, suggesting that previous estimates had left out economic activities worth about $13 billion. After the revision a range of new activities were accounted for, and as a result Ghana was suddenly upgraded from a low-income country to a (lower) middle-income country. In the fall of 2011 Nigeria also announced an upward revision of its GDP. This revision isn’t complete yet, but once it is it’s likely to cause a similarly large jump in growth figures. Several observers have raised the possibility that such a revision could actually double Nigeria’s GDP — which, given the size of Nigeria’s economy, would bump up the size of Sub-Saharan Africa’s economy by more than 15 percent. Just to give some perspective: The value of the increase would be roughly equivalent to 40 Malawi-sized economies.

The revisions have caused confusion and disbelief in the development community. If we know so little about growth and income in Ghana, one of the best studied economies in Africa, how are we supposed to interpret the data from other African economies? Shanta Devarajan, the World Bank’s Chief Economist for Africa, refers to the current state of affairs as “Africa’s statistical tragedy.”

In my book, Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It, I studied the measurement problems in African economies. I conducted in-depth analysis of the methods and sources underlying the different GDP estimates that have been made since independence.

Upon achieving statehood, African states moved to expand their statistical capacity. They performed population censuses, business surveys, and agricultural censuses. But their ability to do this was hit hard by the economic crisis of the 1970s. The administrations faced large external imbalances, high rates of inflation and general shortage of funds which weakened government bureaucracies around the region, leaving many of them unable to measure their economies. Moreover, the statistical offices fell into further neglect during liberal policy reform that followed the economic crisis in the 1980s and 1990s (the period of “structural adjustment”). Read More

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