Economic growth in Africa
Since increasing income is one of the keys to reduce poverty, it is important to look at how average
incomes of African peoples have evolved in the long-run. Economists study the relative wealth of
countries with the help of so-called national income accounts. ‘National income’ refers to the total
value of all income earned, or the total value of all the commodities and services produced, in a
particular country and in a particular period of time (usually one calendar year). To estimate
average income levels, national income is divided by the total population to obtain ‘average income
per capita’. In academic literature and media reports national income is commonly referred to as
GDP (Gross Domestic Product). The national income earned in a society is more or less equal to
the total value of domestic production.
17
In Figure 1 we compare the GDP. per capita figures of Sub-Sahara Africa in 2018 with other world
regions. These GDP data are expressed in US dollars with a constant value, that is, US dollars
valued at 2011 price-levels. Figure 1 shows that Sub-Sahara Africa is the poorest region of the
world. Africa is much poorer than Western Europe or the US, where average annual incomes often
exceed $40,000. But also compared to the average levels of Asian and Latin American GDP per
capita, African income levels lag behind. Average incomes in Sub-Sahara Africa are ca. $3,500.
Yet, there are some reasons to believe that Africa is richer than figure 1 actually suggests. National
income accounts tend to include the income that is earned via market transactions, that is, the value
of goods and services that receive a price in the market and whose exchange is recorded by national
statistical offices. A lot of economic activity that is taking place within households, the farm or the
village community does not involve market transactions. These activities, that are central to the
lives of many Africans (and especially the African poor) tend to be excluded from official statistics
and if we would include these activities GDP would be higher. However, whereas the average
African may be richer than suggested in this graph, there is no doubt that Africa remains the region
with the largest share of poor people in the world. According to World Bank estimates ca. 40
percent of all Africans are living on less than 1.90$ a day. This is regarded as extreme poverty and
it is visible in virtually every country south of the Sahara.
That the average African today is poorer than the average world citizen does not mean that this has
always been the case. A large part of the gap between Africa and other developing regions has
emerged during the final three decades of the 20th century. Figure 2 shows the development of GDP
per capita in Sub-Sahara Africa, South and Southeast Asia & East Asia 1900 to 2018. Up to circa
1960 the income levels of Africa and Asia were comparable, around $1,500 per person per year
expressed in US$ at price levels of 2011. Indeed, small-holder farmers or urban dwellers in Africa
were not necessarily poorer than their colleagues in India or China. Japan was the only Asian
country that was considerably richer in 1960. In the 1980s the Chinese economy also began to grow
at very high rates. Today, the average Chinese is considerably richer than the average African.
Especially after 1980, African economies have also lost much ground compared to economies in
South and Southeast Asia, which includes large countries such as India and Indonesia
Why did African incomes not rise in a similar way as Asian incomes? There exists no simple
answer to this big and important question. As we have stated in the introduction of this textbook,
we cannot even begin to think about an answer without looking at different episodes in African
history. Many African economies stagnated, or even collapsed, in the period between 1975 and
- Of all 52 African countries for which data exist, 29 countries have experienced negative
19
growth rates in the last quarter of the 20th century, which means that in more than half of all African
countries the economy contracted.
The deeper causes of this economic collapse must be traced further back in history. What we know
for sure is that there are multiple causes for Africa’s growth collapse and that these causes are
interrelated. To give one example of ‘multi-causality’: many African economies were suffering
from declining world market prices of their export commodities since the early 1970s. The prices
of coffee, cotton, cocoa and minerals, like copper ore, fell sharply compared to the prices of
imported manufactured products. At the same time African governments accumulated huge debts
on loans that they were unable to pay back. The African debt crises was thus reinforced by declining
export and custom revenues