05 July 2011

Africa: A Lot of Growth and Little Poverty Reduction

The recent report from the Organisation for Economic Cooperation and Development shows that economic indicators have shown that Africa has experienced plenty of growth. Despite this, poverty alleviation does not seem to be matching the rate of economic growth. From All Africa:
Around 75 percent of foreign investment in Africa has been in oil-rich countries and in so-called extractive industries with few links with the rest of the domestic economy or with poor people.

Rielaender said that the weak response of "poverty reduction" to economic growth was caused partially because growth was not strongly linked to activities and economic sectors where the poor are. Numerous African countries are therefore trapped in a contradiction of resistant poverty despite high economic growth.

The AEO reports that high fuel and mineral commodity prices have strongly influenced economic growth in many of the fastest growing African economies in the period from 1996 to 2008, given that fuels and minerals account for the largest share of Africa's exports.

But this growth and its limited impact in reducing poverty creates a vicious cycle, for higher poverty diminishes even further the effects of economic growth in reducing poverty, the report says...

To tackle this lack of correlation between "growth and poverty reduction", the AEO also encouraged African governments to "take simultaneous actions on several fronts. Economic growth will improve human development only if it is inclusive and pro-poor.

"Investing in social sectors will produce sustainable human development, if investment is accompanied by efforts to create more economic opportunities that benefit a large segment of population."
This goes to show that tracking GDP growth is simply not enough. Even considering average salaries cannot be an adequate measure of the majority of the change takes place within the higher economic classes.
In an interview with IPS, Rielaender said that the lack of correlation between growth and poverty reduction in African countries should force "African governments to concentrate their immediate efforts in creating jobs, invest in basic social services and promote gender equality".
Achieving all of the goals set out by Rielaender is not easy, but they can at least be the targets that can be brought into the conversation when trying to measure the progress of nations towards eradicating poverty. To that extent, I must say that the MDGs are a good marker in providing a more well-rounded set of information for evaluating a nation's progress. Job creation is not sexy, but it is a vital part to development.