Are Africa’s GDP Statistics Misleading?

Are Africa’s GDP Statistics Misleading?

Difficulties in accurately measuring gross domestic product are not restricted to the developing world, but they are particularly evident in Africa, where poorer economies are likely to have lower-quality statistics, says Morten Jerven, a Canadian researcher on African economic development.

GDP is the development indicator with the greatest influence on policy and public debates, Jerven said in a report in SciDev.net. It is used to rank countries’ progress and wealth — but its interpretation and measurement are tricky.

For Africa, in particular, countries’ economic development statistics are misleading. The poorer the economy, the less likely it is to have resources for an official statistics office.

The quality and availability of data, and therefore the cost of collecting robust statistics, depend on individuals and companies keeping formal records — less likely in poorer countries.

In sub-Saharan Africa, the problem is aggravated by historical factors. For example, most countries on the continent have not been collecting taxes on property and incomes, but on goods crossing borders — therefore states have had weak incentives to monitor production and domestic economic transactions.

Knowledge about growth in African economies is limited.

Anyone can download GDP data for 2012 from the World Bank covering 47 Sub-Saharan African countries and then rank and compare them. But due to the uneven application of methods and poor availability of data, any comparisons will be highly misleading, Jerven said.

This became evident in 2010 when Ghana updated data and methods that had been unchanged since 1993, to publish a new GDP estimate. It switched to using 2006 rather than 1993 as the benchmark year for calculating growth and almost doubled its GDP.

As with any index, when the base year is out of date, GDP estimates become unreliable as they may no longer reflect a sizeable part of the economy.

It is expected that when Nigeria revises its GDP data, probably in 2014, it may surpass South Africa as Sub-Saharan Africa’s largest economy. The problem is that not all countries in the region use a recent base year, Jerven said.

The International Monetary Fund recommends updating it every five years, but countries struggle to do so. By that rule, Ghana’s GDP estimate is already out of date.

Jerven recommends data users question the evidence. And data disseminators, such as World Bank with its World Development Indicators, need to label their data correctly and clearly acknowledge knowledge gaps, Jerven said in the report. A great deal of information sold as data is only weak guesses and projections.

But the biggest challenge, Jerven said, is to invest in countries’ capacity to produce better data. While funds have been available for statistical offices in Africa, partly due to the Millennium Development Goal agenda, they have tended to divert resources from economic statistics towards social statistics more relevant to MDG monitoring.

Millennium Development Goals are are international goals that were established following the U.N. Millennium Summit of 2000. All 189 U.N. member states and at least 23 international organizations agreed to achieve these goals by 2015. The goals are:

  1. Eradicating extreme poverty and hunger.
  2. Achieving universal primary education.
  3. Promoting gender equality and empowering women.
  4. Reducing child mortality rates.
  5. Improving maternal health.
  6. Combating HIV/AIDS, malaria, and other diseases.
  7. Ensuring environmental sustainability.
  8. Developing a global partnership for development.
  9. Halve by 2015 the proportion of people without sustainable access to safe drinking water.