Why Africa’s rise has not been inclusive; or has it? Part 2 #Africa, #Nigeria, #WEF, #MDGs, #PovertyAlleviation

A dimension to this debate that is not enjoying, as much attention is the possibility that perhaps there has been more economic growth inclusion in Sub-Saharan Africa (SSA) than the data suggests. Perhaps, it is not only the GDP data that hitherto weren’t reflective of the actual size of some SSA economies. Poverty statistics may very well be inaccurate on the upside as well. Of course, more could be done to accelerate poverty alleviation. But if the data doesn’t reflect more accurately the true state of affairs, some winning strategies may be unknowingly jettisoned as a result. Thus, as mundane as it may seem, getting the data right is a crucial step towards increasing economic and financial inclusion on the sub-continent. The IMF/World Bank and the Bill & Melinda Gates Foundation have been working with some of SSA’s statistical bodies to improve the accuracy and promptness of data coming out of the sub-continent.

 

A case in point is Nigeria (a discussion on Africa inevitably leads back to its largest and most intriguing economy). According to the Nigerian Bureau of Statistics, 72.3% of the country’s households buy mobile phone recharge cards every month. The only other non-food items that enjoyed such a priority in household expenditure were kerosene (72.7%) and soap & washing powder (90.9%). With more than 50% of Nigeria’s populationreported to be below the poverty line, it begs the question of where more than 70% of its households find the money to buy that much recharge cards or even find it in their budgets to purchase them in the first place. Much more revealing is how much they spend.

 

The mean expenditure on phone recharge cards by more than 70% (about the same percentage of its population supposedly living below the poverty line) of Nigeria’s households is 20,874 Nigerian Naira (140 US dollars). Isn’t the much-touted poverty line 1.25 US dollars a day and thus 37.5 US dollars a month? So if we summed up those non-food items that more than 70% of the country’s households spend money on (soap & washing powder, kerosene, and recharge cards), one gets a sense of the typical expenditure of the average Nigerian. The NBS reports monthly mean expenditure of Nigeria’s households on those items as follows: kerosene (6,660 naira (US$44)), soap & washing powder (5,510 naira (US$37)), and as earlier highlighted, US$140 on recharge cards. Thus, Nigerians spend more than 200 US dollars (US$221) on non-food items every month. That is approximately 6 times the poverty line. And one is not aware that they’ve gone hungry as a result.

 

A consumables, services (or in fact aspirational goods) multinational company thus looking to invest in the country (or sub-continent) before the above data was available would have come to the most erroneous decision that there was not enough consumer spending power to warrant a major capital allocation. This is why some of the international corporates already invested on the sub-continent do their own consumer research; earning bountiful profits as a result of course. And who in their right minds would make it widely known that there was such bountiful harvest to be had in what one widely read magazine once dubbed “the hopeless continent”. Well, the cat is out of the bag as they say. The world now knows of the opportunities that abound in Africa. The narratives (or questions) therefore these days about SSA opportunities are not so much if? But where? When? How long? Is it sustainable? How do I manage risks? So if the world is genuinely determined to reduce inequality and increase economic and financial inclusion on the continent, simple! Invest more. Increased investment in the various sectors of the continent’s economies is definitely one way to increase the inclusivity of its continuing high growth.

 

A point to note, however, is how the Africa’s economic evolution has been counterintuitive. Typically an economy should evolve from a primary extractive industry base to manufacturing & construction (secondary industry) and eventually services (tertiary industry). In Africa, the extractive industry remains dominant. In countries where some progress has been made, it has largely been in the services sector (with relatively fewer jobs created). The development of a manufacturing-led economy thus remains a continuing struggle for most countries on the continent. It is a significant factor in one’s view for why SSA’s high growth has not been as inclusive as it could (or should) be. So, another measure to addressing the inclusion question is for African governments and their partners to implement policies aimed at building a strong industrial base. The one policy area that has the most potential of achieving this would be a disproportionate focus on ramping up the continent’s power production capacity. No amount of investments in the continent’s power sector is too much. Of course, it needs to be pointed out that it is the labour-intensive type of manufacturing that is pertinent for Africa at this time.

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