World Economy

African Incomes to Decline

African Incomes to DeclineAfrican Incomes to Decline

If African countries are to take advantage of the enormous number of young people who will be entering the job markets with great energy and entrepreneurial talent at a time when the rest of the world will be getting older, they must create healthier economies that can produce far more growth and jobs.

Between 2004 and 2014, sub-Saharan Africa grew by almost 6% a year. However, according to IMF projections, in 2018, the region will likely endure the fourth year in a row where growth does not markedly exceed population increases. Roughly 40% of the continent’s one billion people, overwhelmingly poor, will experience per capita income decline this year, AllAfrica reported.

Why this reversal of fortunes after years when analysts and consulting companies proclaimed just a few years ago that Africa was rising?

The immediate cause of Africa’s distress is the end of the almost 15 year “supercyle” of high natural resource prices driven predominantly by Chinese demand. However, the deeper issue is the continuing failure of almost all African governments to promote good governance–including stable macroeconomic policies, rule of law, consistent and efficient government regulation, limited corruption, and well-managed state enterprises–that have proven to be the necessary conditions for long-term growth and job creation.

Those who were mesmerized by Africa’s performance thought that governance had improved and that period of high growth could continue when prices came down. But they were wrong.

The Heritage Foundation’s Index of Economic Freedom provides a comprehensive measure of how countries govern their economy. Forty-seven African countries are among the 180 ranked, but only three (Mauritius, Botswana and Rwanda) are in the top quarter and only another four are in the top half of all countries.

This poor performance is aggravated by the fact that the high achievers are generally not populous. The 21st position achieved by Mauritius (between Chile and Malaysia) is impressive but the island country has only 1.3 million people. Indeed, the seven African countries in the top half possess only 13.5% of Africa’s population.

African countries dominate the bottom ranks of world governance. Twelve of the 21 lowest ranked countries are in Africa. The score of all African countries averaged together is equivalent to Pakistan (ranked 131st). Nigeria (population 186 million), Ethiopia (102 million) and Democratic Republic of the Congo (79 million)–the three most populous countries that together account for 36% of the region’s entire population–are ranked, respectively, 104th, 142nd and 147th.


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