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Africa GDP growth rates often misleading – Professor

Africa GDP growth rates often misleading – Professor

19th November 2013

By: Leandi Kolver
Creamer Media Deputy Editor

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While Africa’s gross domestic product (GDP) growth seemed to indicate that the continent was rising in the global economic space, these figures did not provide the full picture, University of Pretoria political science Professor Lorenzo Fioramonti said on Tuesday.

Speaking at a breakfast hosted by the Institute of Internal Auditors of South Africa, he said GDP figures were often misleading, as it ignored values such as social cohesion and the environment. 

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He added that, should one look at the World Bank adjusted net saving sustainability indicator, African countries were actually showing a decline, which meant that, despite the GDP growth, societies were still not seeing the full benefits of that growth.

Further, despite the continent’s higher economic growth, the levels of perceived poverty in Africa had not changed in the past ten years, which meant that individuals did not feel that they were significantly better off than they were previously, Fioramonti explained.

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“While extreme poverty has decreased, the continent still has high levels of deprivation, which means that the people still feel extremely poor compared with others in their country,” he pointed out, adding that South Africa had one of the highest levels of deprivation on the continent.

Africa was also facing some significant developmental challenges that could hamper economic growth. These challenges included that the continent was experiencing its period of development during a time of global recession, the continent’s largely rural nature, the fact that the economy was not sufficiently diversified and the fact that it had limited economies of scale.

Further, Fioramonti said Africa should be weary of following the China model of economic growth, which was often seen as the “way to go”.

“China is currently experiencing the consequences of [its] development model through the severe pollution it faces, with an estimated 1.2-million people a year dying of pollution-related causes,” he said.

He added that China also had to spend an estimated 10% of its GDP a year on environmental clean-up initiatives.

GLOBAL ECONOMY
Meanwhile, Fioramonti commented that the global economy was also largely inefficient at the moment.

“Currently, we have producers who produce more goods than [are] needed, which leads to an oversupply and a significant amount of waste, while access barriers are also growing, meaning that goods and services do not reach those who needed it.

“Further, we are moving more and more towards centralised forms of production, where certain products are only produced in certain countries, which increases environmental and energy costs. However, these costs are often not factored in, which leads us to believe that centralised production is cheaper, when it is actually not,” he said.

This centralised production system also led to the loss of local knowledge, which in effect meant that citizen users were disempowered, and should, for example, their food supply be affected, they would not be able to deal with the situation themselves.

Therefore, Fioramonti believed that countries should strive for a networked economy, as was currently manifesting in the information sector, where open access and collaboration prevailed.

He explained that, in a networked economy, product and service delivery would be localised, "horizontal development" would take place and there would be a move towards customisation as opposed to mass production, which would be good for the labour market.

This economic model would also ensure the reuse, recycling and repair of products, which would reduce waste.

“A networked economy would also empower us, as we will move towards food sovereignty, and energy democracy and a healthy approach to common resources,” he said.

For such an economy to be established, governments would have to support small-scale business activities, remove subsidies to “big business” and reward consumers that are also producers and especially in the labour-intensive sectors.

Further, it would also have to support small-scale, community-based renewable-energy systems and encourage the sustainable use of land.

Government and economic structures should also be decentralised and regional partnerships built, he stated.

He added that Africa did have the potential to lead and grow in a networked economy, as it had renewable-energy sources, land and small-holder farming potential.

Further, it also had the propensity for labour-intensive sectors and its cultures were based on collective identities and belonging.

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