Revisiting the African Economic Growth Agenda: Focus on Inclusive and Pro-poor Growth?

Abstract

This paper determines whether the recent growth trajectory in Sub-Saharan Africa (SSA) has been inclusive and pro-poor and discusses potential policies in making growth more inclusive. The motivation for the study is that in the economic literature, economic growth is viewed as fundamental in achieving poverty reduction, changes in income distribution are expected to lead to improving the poverty reduction outcome stemming from growth, and initial inequality would reduce the impact of growth on poverty reduction. Two conventional definitions commonly used in the literature to measure whether economic growth is pro-poor require knowledge of whether there have been distributional changes in income and whether those changes have improved the welfare of the poor. First, regional analyses show that compared to the rest of the world’s regions, SSA experienced negative per capita growth from 1985 through 2000, and that this was accompanied by significant decline in income distribution such that by 2000 the average income of an African in the lowest quintile of economic distribution was only 90 % of the income in 1985. Second, country-specific analyses show that unlike many East Asian economies that recorded average income growth along with their poorest quintile, in SSA economies even when growth in average income occurred, the incomes of the poorest Africans fell. The exceptions were in Gabon and to a smaller extent Ghana. Third, analyses of recent data showed that like the rest of the world’s developing regions, after realizing rising poverty rates from 1981 to 1999, SSA also saw steady declines in extreme poverty rate by 10 % from 1999 through 2010. However, it was the only region where the number of extreme poor rose from 205 million in 1981 to 414 million in 2010 with its global share rising from 11 to 34 %. The average gap of the extremely poor in SSA rose from $0.53 per day in 1981 to $0.54 a day compared to the $1.25 per day threshold for the extremely poor, and compared to the developing country average of $0.51 per day to $0.29 per day for the same time period. Therefore, the aggregate SSA extreme poverty gap doubled from $40 billion in 2005 PPP terms in 1981 to $82 billion in 2005 PPP terms in 2010 compared to the aggregate for all developing countries that fell by half from $362 to $169 billion all in 2005 PPP terms during the same time period. Therefore, the paper concludes that recent growth in SSA has not been pro-poor. Suggestions are provided to sustain growth across the SSA region to make growth more inclusive.