Shared Frustrations: How to Make Economic Growth in Sub-Saharan Africa More Inclusive
IMF Blog, October 19, 2011
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Bibliographic details
- Authors: Antoinette M Sayeh
- Published: October 19, 2011
Context and framing
- Income inequality—both between and within countries—has become a prominent global concern, with social unrest cited in North Africa and the Middle East and political movements in advanced economies.
- In sub-Saharan Africa, sustained economic growth has produced advances, yet a large proportion of the population remains in poverty, generating shared frustrations about the inclusiveness of growth.
Data, scope, and approach
- IMF analysis in the Regional Economic Outlook for Sub-Saharan Africa examines how living standards for the poorest households have been changing in some countries in the region.
- Household survey data were used to track changes in consumption (including self-produced food) over five or six year intervals in six countries: Cameroon, Ghana, Mozambique, Tanzania, Uganda, and Zambia.
- The analysis compares poverty incidence and growth performance across the region and drills down into household-level consumption changes and employment patterns, especially in rural and agricultural sectors.
Key empirical findings
- Regional poverty and growth trends:
- The percentage of the population living on less than $1.25 a day—at 2005 international prices—fell from 59 percent in 1996 to 51 percent in 2005.
- The region’s average growth rate more than doubled, from 2¼ percent before 1995 to over 5 percent in the early 2000s.
- The relationship between faster growth and larger average reductions in poverty was observed among better-performing countries, though the relationship was less powerful than in other world regions but still significant.
- Household-level consumption and growth inclusiveness:
- Among the poorest 25 percent of the population, per capita consumption levels increased substantially faster than inflation in three of the four higher growing countries studied—annual increases averaged nearly 4 percent in real terms.
- The two low-growth countries in the sample showed much less improvement in per capita consumption of poor households.
- Results for the sixth country were ambiguous because of uncertainty about the measurement of price changes.
- Employment and rural dynamics:
- Job creation in rural areas, particularly in the agricultural sector, is associated with more inclusive growth, increasing poor households’ consumption growth and improving living standards.
- Rural households account for about two-thirds of the population in the six countries studied.
- Country examples:
- Uganda and Cameroon: real per capita consumption increased faster among poor households than among rich households, coinciding with strong growth in agricultural employment.
- Mozambique and Zambia: the poorest households experienced weak or negative per capita consumption growth while rural agricultural employment opportunities declined.
Policy considerations and recommendations
- Target health and education: Providing budget resources for improving and targeting health and educational services can greatly improve vulnerable individuals’ well being and earning potential.
- Well-targeted transfers: Well targeted transfer programs can help make growth more inclusive by redistributing its benefits more widely.
- Boost agricultural productivity and rural infrastructure: Policies to enhance agricultural productivity—through improved inputs or infrastructure investment in energy, irrigation, or transportation—will contribute to improved inclusiveness.
- Use household and employment data to guide policy: Characteristics such as levels of educational attainment and household location explain much of the differences in consumption, offering guidance for policy targeting.
Conclusion
- Measured reductions in poverty and household-level consumption gains indicate that growth has produced benefits for many poor households, especially where growth has been higher and rural agricultural employment has expanded.
- Nonetheless, gains have been fewer than desirable, and policy action to improve targeting of health, education, transfers, and agricultural and infrastructure investments is needed to make growth more equitable and lasting.
Source: Antoinette M. Sayeh, "Shared Frustrations: How to Make Economic Growth in Sub-Saharan Africa More Inclusive," October 19, 2011.