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The “Right” Growth for Africa

Africa has the highest level of poverty in the world and is one of the two regions where poverty has not declined in the past twenty years. As the United Nations Economic Commission for Africa’s forthcoming Economic Report on Africa 2005 shows, the proportion of the poor – those living on less that one dollar a day – halved between 1980 and 2003 at the global level, from 40% to 20%. But in Africa, the share of the poor increased slightly, from 45% to 46%. Africa’s poverty rate in 2003 exceeds that of the next poorest region, South Asia, by 17 percentage points.

Recognizing the link between economic growth and poverty reduction, those who crafted the UN’s Millennium Development Goals (MDG’s) estimated that halving poverty by 2015 in Africa requires countries to achieve an average minimum growth rate of 7% annually. Whether or not African countries will reach this goal is an open question.

Since the mid-1990’s, African economies have been recording growth rates that are higher than world averages. According to the World Bank, the average growth rate for the period 1996-2002 in Africa was about 3.6%, compared to the world average of 2.7%. Growth in Africa in 2004 averaged 5.1%, the fastest in eight years. Growth rates this year and in 2006 are projected at 4.7% and 5.2%, respectively.

These average rates mask stark differences between countries. In 2004, for example, Chad’s 39.4% annual growth rate contrasted sharply with Zimbabwe’s -6.8% economic contraction. Nevertheless, there is no doubt that African economies, taken together, have recovered from the dark years of the 1980’s. So the big question is why growth hasn’t translated into poverty reduction.