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Pulling Away


What about me? Last week we kicked the notion that the pickup in average African growth rates over the last 15 years was driven by a few outperformers such as Ethiopia, Rwanda and Tanzania firmly into touch. Anyway it's arguable that there has been too much focus on GDP growth per se and not enough on how this expansion has actually converted into living standards.

Different strokes. A rough indicator of progress on this front is to look at GDP per head. Of course, it says nothing about the distribution of national income. which is important. For example, the latest figures from the World Bank place South Africa and Namibia at the top of the global inequality league despite their relatively high incomes per head. Nonetheless, this measure does shed light on the potential to raise living standards for all and is a guide to household spending power, which, along with market size, is of much greater interest to consumer-facing businesses.

Upward trend. As expected, the figures show that GDP per head, in both dollar terms and when adjusted for local exchange rates and prices (purchasing power parity), has been rising for the last three decades with a particularly notable acceleration since 2000. But the concomitant divergence in per capita output across the countries is also striking.

Leaders & laggards. A simple way of getting further insight into this divergence of output per head across countries is to look at the ratio of the growth in output and the growth in population. If this ratio exceeds one then output has picked up faster than the population and vice-versa. A ranking of nations shows that most have managed to raise output well in excess of headcount since 2000, led by Lesotho (a huge beneficiary of the US African Growth and Opportunity Act), Mauritius and Ethiopia. However, Zimbabwe and Central African Republic are at the other end of the spectrum having seen absolute declines in output over the period, partly on the back of economic mismanagement and internal conflicts. Output gains in Eritrea, Comoros, Madagascar, Gabon and the Gambia have also failed to keep pace with the population.

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