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High African growth rates distort the real development image

How many times have you heard that many of the fastest-growing economies in the world at the moment are in Africa? At almost every African conference these days this is trotted out as a way of highlighting the fact that Africa is the go-to place for investment.

Dianna Games

Dianna Games

A new list of the fastest-growing economies in Africa — and by extension, the world — put out recently by the African Development Bank in its African Economic Outlook 2013 includes some of the poorest countries in Africa, some of which are developing off an extremely low base. At the top are Libya (11.6%), Sierra Leone (9.6%), Chad (9.5%), Côte d’Ivoire (9.3%), Democratic Republic of Congo (8.8%) and Ghana (8.4%). Growth rates are used by fund managers, investment bankers and others to portray Africa as the new frontier for growth, in essence to talk up their book.

But high levels of poverty are pervasive across these same economies. Not only is underdevelopment a potential security threat, not fully understanding the nature and spread of that growth also presents investment risks.

Take development indicators of these economies. Last year, Sierra Leone sat at 177 out of 187 countries ranked by the United Nations on its Human Development Index on education, life expectancy, health, per capita incomes, poverty and inequality, among other things. Per capita gross national income (GNI) was US$881 last year. Its high growth rates are based on a few large deals in the resources sector — mostly in iron ore and diamonds — yet about 70% of people live below the poverty line. Chad ranks at 184 on the list, with a life expectancy of 49.9 years, mean years of schooling an extremely low 1.5 and national income per capita at $1,258. Côte d’Ivoire, finally stabilising after a long-running civil conflict, is ranked at 168.

The Democratic Republic of Congo is ranked at 142, while Mozambique, at number seven on the African Development Bank list and a top destination for investment, sits at 185. Its per capita GNI is just $906. In Chad, the government reneged on a deal with the World Bank to spend a portion of oil profits on alleviating poverty in return for bank funding of a pipeline to take oil from the landlocked country to the sea. Chad remains one of the poorest countries in the world.

Chad, Congo and Côte d’Ivoire are in the bottom 10 of the World Bank’s ease-of-doing-business rankings.

Angola, eighth on the African Development Bank list, saw its growth rate plummet to 2.4% in 2009 after the oil price crashed in 2008, from more than 20% in 2007, highlighting the undiversified nature of its economy.

Despite the sorry state of the human development statistics in most of these rapidly growing countries, there is no shortage of investment in resources. But lifestyle improvements tend to be reflected almost entirely in the big cities, with limited trickle-down of new wealth and opportunity beyond these “city states” unless it is in towns close to resources.

There is no doubt much has changed and there is starting to be a rising tide effect of growing, and increasingly diversified, investment in Africa. But the growth is resting on shaky pillars.

Governments, on the whole, are not investing their increasing take from resources and corporate tax in providing quality education and health facilities, despite the evidence in successful nations everywhere that these are key underpinnings of development. Political and business elites tend to get their medical treatment abroad and educate their children in private schools, often outside Africa.

It’s fine to celebrate high growth rates in Africa, but to look at them in isolation is to distort the real picture. Assessing the statistics from five-star hotels in African capitals or glossy office blocks in foreign cities can be misleading. Even in improving African cities, ordinary people still struggle to get power, potable water, financial support and other services.

Inclusive growth (the buzz word that has crept into the debate lately) is not happening at the same pace. This raises issues of governance and the commitment of leaders to invest in a sustainable future.

This article was first published in Business Day.

Dianna Games is the CEO of Africa @ Work, a South African-based company that aims to facilitate and improve business in Africa through the provision of research, information and networking opportunities. She is also a columnist for Business Day.

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