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African poverty falling faster than thought?

March 4, 2010

NIGERIA/The old image of an Africa doomed to get ever poorer has certainly lost credence over the past decade even if it is a view still held by some.

Well, according to a new study, Africans are getting wealthier more quickly than previously believed and the poorest continent’s riches are also 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, published by the private, non-profit U.S.-based National Bureau of Economic Research, 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.

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.

How realistic a picture do you think the new research paints?

A woman works on an open groundnut field in Nigeria’s northern state of Katsina. REUTERS/Akintunde Akinleye

I think eventually, Africa holding a great deal of undiscovered resources will probably hold more wealth than many developed places.

Posted by TheMagHouse | Report as abusive

I believe we sit on the Cusp of an Inflexion Point and that Africa is probably the last Convergence Trade going in the c21st. Its quite disjunctive and hence it is difficult to model. The Speed with which it is happening is quite breath taking. In Kenya, 10 years ago There were 15,000 Mobile Phones and Today There are more than 17.4m. The SMS Curve [and you can use it as a Proxy for the arrival of the Information century] is surely parabolic and Off the charts. It is the Phone that knitted this previously fragmented and non scaleable Continent into Scale. The Recent Pace of Urbanisation has also bulked up our Cities. The Demographic Skew [very low average] also lends itself to a fast pace of Change and Convergence.

There are many problems that swirl over Africa and there exists an inherent Bias which has crimped the Continent. Symbolically, this was pierced with the Election of President Obama, which was probably the mostintense Political Moment for this Continent, since Independence.

Africa is a very rich Continent. It has had a very Rentier Based Architecture. Today it sits on the Runway. The Old Architecture was about what was in the Ground. The New Architecture and Prosperity will come from those who walk on it. The Phone and the Internet are plucking People from the Village watching life go by right into the c21st. Its an Option Trade.

I remain supremely optimistic and believe recent Activity [Bharti Purchase of Zain 2nd biggest Purchase after Corus by India Inc.] is confirming a Deluge of Buy Side Interest. The Bourses from the Cape to Cairo, from Nairobi to Lagos have been on a Tear. Consider Nigeria’s run higher in the context of a President holed up in an ICU in the grounds of the Presidential Palace guarded by the First Lady Turai.

Africa will be built by the Entrepreneurs and the drag on per Capita which has been Population is its biggest advantage.

Its a very rare Moment.

Aly-Khan Satchu

Posted by AlyKhanSatchu | Report as abusive

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