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Sunday, 14 March 2010 10:34

African Poverty Falling "Faster Than We Thought"

By Ed Cropley, African Investment Correspondent

JOHANNESBURG, March 4 (Reuters) - Africans are getting wealthier more quickly than previously believed, according to a new study that also suggests the poorest continent's riches are spreading beyond the narrow confines of its elite.

 

"Africa is reducing poverty, and doing it much faster than we thought," the study by U.S.-based economists Xavier Sala-i-Martin and Maxim Pinkovskiy said.

 

"The growth from the period 1995-2006, far from benefiting only the elites, has been sufficiently widely spread that both total African inequality and African within-country inequality actually declined over this period."

 

The research, which assesses poverty levels and income distribution from 1970 to 2006, lends weight to a belief among local and foreign investors that Africa is finally getting its act together 50 years after shaking off the colonial shackles.

 

The study also challenges the suggestion that strong African growth over the last decade or more has done little to alleviate grassroots poverty due to the countervailing effect of equally strong population expansion.

 

Going by an inflation-adjusted $1 per person per day yardstick, the study, using statistical analysis pioneered by the two authors said 32 percent of Africans were in poverty in 2006, compared to 42 percent in 1995 and 40 percent in 1970.

 

By contrast, the United Nations' population agency estimates the average African is 22 percent worse off now than in the mid-1970s because "20 years of an almost 3 per cent annual population growth has outpaced economic gains".

 

Similarly, in 2008 the U.N. Development Programme said sub-Saharan Africa had made "little progress" in reducing extreme poverty as part of a Millennium Development Goal bid to halve it between 2000 and 2015.

 

The new study, published by the private, non-profit U.S.-based National Bureau of Economic Research, analysed the shift in distribution curves of African incomes, derived from standard data sources over more than three decades.

 

On Track

 

Africa's failings appear particularly stark when compared with the tens of millions who have benefitted from the economic boom in Asia, most notably China and India.

However, the study suggests Africa is on track to achieve its goal only two years late -- and if the impact of civil war in the Democratic Republic of Congo in the last decade is stripped out, it would get there two years early.

 

"The main point is that Africa has been moving in the right direction and, while progress has not been as substantial and spectacular as in Asia, poverty has been falling and it has been falling substantially," the authors wrote.

 

They also cast doubt on the perception that wealth continues to be concentrated in the hands of the few, be they from the politics, the military or big business.

 

According to the study, Africa's Gini coefficient -- a statistical measure of income distribution -- fell from 0.66 in 1990 to 0.63 in 2006, suggesting wealth is being spread more evenly, although inequality is still higher than any other region of the world.

 

"Contrary to the commonly held idea that African growth is largely based on natural resources and helps only the rich and well-connected, we show that Africa's income distribution has become less rather than more unequal than it was in 1995," the study said.

 

Besides the commodity boom, other economists have pointed to positive effects on African growth of debt forgiveness, massive Chinese investment, an opening up of economies to international trade and capital, and the spread of mobile phones.

 

 
AfricnGrowthWorldSafaris_

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