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Oct 19, 2012

Poverty rate a worry despite Africa’s middle-income transition

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As many as 38 of sub-Saharan Africa's 48 countries could be regarded as ‘middle income’ by 2025, but World Bank chief economist for Africa Shantayanan Devarajan has warned that such an advancement would not necessarily translate into a reduction in poverty.

Currently, 21 countries, collectively with 400-million citizens, have middle-income status, which the World Bank defines as countries with yearly per-capita income levels of higher than $1 000.

Devarajan notes that at least ten countries, representing 200-million people, were poised to transition to middle-income status over the coming 13 years on the back of prevailing growth rates. Included in the list are countries such as Zimbabwe and Comoros, which would require both growth and stablisation.

Over the past 15 years, the continent had expanded at a rate of two percentage points better than the average global growth rate, and the bank is still expecting sub-Saharan Africa to expand by 4.8% in 2012 – excluding slow-growing South Africa, the region’s largest economy, average growth for the region was forecast at closer to 6% for the year.

But there is potential for a further seven countries, with 70-million citizens, to be included in the middle-income mix over the period if rates of growth accelerated beyond levels achieved over the past 15 years.

Only ten African countries, representing 230-million people, almost certainly will not achieve middle-income status by 2025.

But while Africa’s recent growth spurt has resulted in the first overall reversal in the continent’s poverty rate since the 1970s – from 58% in 1999 to 47.5% in 2008 – the bank cautions that continued progress would depend on continued macroeconomic prudence and improved governance, particularly in the area of natural resources.

In its latest Africa Pulse publication, the bank shows that resource-rich countries have seen a strengthening of economic growth, but poverty rates and inequality levels have not performed as impressively. “Some countries, such as Angola, the Republic of Congo and Gabon, have actually witnessed an increase in the percentage of the population living in extreme poverty.”

“Resource-rich African countries have to make the conscious choice to invest in better health, education and jobs, and less poverty for their people because it will not happen automatically when countries strike it rich,” Devarajan says. “Gabon, for example, with a per-capita income of $10 000 has one of the lowest child immunisation rates in Africa.”

To ensure that the benefits of rising growth are ‘pro-poor’, more jobs will need to be created. And, in the context of high levels of informal sector employment, efforts will also need to be made to improve access to finance and skills in the informal sector.

Edited by: Creamer Media Reporter
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