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Home > Blogs > Ian Fraser > Without a statistical revolution, Africa’s renaissance is built on shaky ground

Without a statistical revolution, Africa’s renaissance is built on shaky ground

Without a statistical revolution, Africa’s renaissance is built on shaky ground Ian Fraser

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The economic historian Morten Jerven has set several cats among the continent’s pigeons by arguing that aspects of Africa’s economic renaissance are a mirage. Norwegian-born Jerven says this is because many African countries are producing inaccurate GDP numbers which, at worst, are deliberately bogus.

An associate professor at Simon Fraser University in Canada and a former PhD student at the London School of Economics, Jerven was galvanized into writing his book, Poor Numbers: How We Are Misled by African Development Statistics and What to Do about It, after Ghana’s statistical office declared it was upwardly revising the country’s GDP by over 60% in 2010. The West African nation was thereby implying it had missed $13bn of output in its earlier figures! Conveniently, the sudden rise in output meant Ghana jumped from being a low to lower-middle-income country.

This growth spurt was followed by an 89% upswing in Nigeria’s declared GDP in the second quarter of 2014. The move enabled Nigeria to overtake South Africa as Africa’s biggest economy, and to bolster its chances of being upgraded from a ‘frontier’ market to an ‘emerging’ market by the stock market indexers at MSCI.

With Poor Numbers, which implies that some African governments are no less creative with their accountancy than developed world banks, Jerven has certainly ruffled feathers. The continent’s political elite and the African development establishment were nonplussed that someone was seeking to undermine their statistical verisimilitude. Jerven, whose book was first published by Cornell University Press in January 2013, has already suffered the indignity of being barred from addressing the UN Economic Commission for Africa after the South African government raised objections.

In a letter to the Financial Times, chief economist at the African Development Bank Mthuli Ncube recently sought to trash Jerven’s analysis. Ncube insisted that “Africa is rising” on a great many fronts – including the reduction of poverty, foreign direct investment, economic development and infrastructure development. He added:

“For investors, for visitors, for Africans themselves, seeing is believing. The growth is tangible. Come and see for yourself.”

But Jerven refuses to give ground. In a recent blog published by the Oxford University Press (“Why measurement matters”), he said:

“[...] for many countries the decline in economic growth in the 1980s was overstated, as was the improvement in economic growth in the 1990s. [... My findings suggest] the importance of sound economic policies has been overstated, and that the importance of the external economic conditions have been understated in the prevailing explanation of African economic performance.”

In a recent piece for the Financial Times' Beyond Brics Jerven went on to cite five reasons why African growth is slower than the official data would have us believe. Having already criticized many African countries for using baseline years that are ten or more years in the past, contrary to best practice when compiling GDP, he listed the reasons as follows:-

1) When the baseline is outdated, there is a big chance that ‘new growth’ is just ‘previously unrecorded’ growth. Also, when the base is too small, percentage growth will be overstated.
2) When statisticians and politicians know that their numbers are understating total GDP, they find it tempting to add a bit each year to pre-empt a large upward revision when the numbers are eventually corrected.
3) When you project growth backwards from a new baseline to an old baseline, you have the option of re-adjusting total GDP in the old baseline upwards or re-adjusting GDP growth in the interim upwards. It is easier to accept higher growth than to redo the old baseline with new definitions – so growth is artificially raised.
4) Because only parts of an economy are recorded, growth is driven by easily observed items such as exports and foreign direct investment. Meanwhile, important sectors that may be moving less quickly – such as food production – are under-observed.
5) GDP numbers for 2013 are not official estimates, they are preliminary forecasts. […] So when the IMF and the World Bank issue new numbers for the continent, they are based on guesstimates from a sample of countries. The average rates of growth of the reporting countries are extrapolated to the non-reporting countries. Because reporting countries (such as Rwanda and Ghana) may be doing better than non-reporting countries (such as Somalia and Guinea-Bissau), growth is systematically overstated.

Overall Jerven believes that opaque processes, poor benchmarking, bureaucracies with inadequate tools for the job, a lack of investment in basic surveys and data collection, poor institutions and even a lack of appetite for finding out and disseminating the truth about economic progress, poverty and inequality reduction – meant that African countries’ GDP stats are unreliable and cannot be used as a basis for sound economic and development policies – and might even be positively dangerous.

He said mining the national accounts of individual countries, as published by their statistical offices, is a more reliable way of compiling accurate economic growth statistics about individual African countries than using published GDP statistics, though he did warn it is laborious and time-consuming.

Of course, the economies of sub Saharan countries are stronger now than they were back in 2000 when, in a seminal cover story, The Economist described Africa as the ‘hopeless continent’. There has been significant progress in infrastructure development and foreign direct investment, with much greater levels of democracy, greater social and political stability, better fiscal management, less war, and fewer people with HIV/Aids right across the continent.

But what matters, says Jerven, is that the continent’s official GDP statistics are unreliable and he warned that, unless they are improved, they will continue to mislead investors and providers of aid. In the conclusion to his Beyond Brics piece, Jerven wrote:

“Yes: many African countries may be a lot richer than we think. But that does not mean that Africa is growing faster than the data tell us. Rather the opposite.”

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