Redistribution 'not the answer'

2004-07-21 11:40

Helmo Preuss

Johannesburg - The 34 countries of Sub-Saharan Africa (SSA) cannot beat poverty solely through redistribution, the United Nations Industrial Development Organisation (Unido) said in its 2004 Industrial Development Report released in Vienna on Tuesday.

"Average per capita income is simply too low to achieve the intended scale of poverty reduction solely through redistribution. In the richer regions substantial reductions in absolute poverty might hypothetically be achieved purely through redistribution, and even in Africa some of the other Millennium Development Goals (MDGs), such as primary education and gender equality, can be achieved without growth. But growth is going to be necessary for massive poverty reduction in Africa," the authors said.

Sub-Saharan Africa is the only part of the world where extreme poverty has been spreading steadily for a quarter of a century. Unless this disturbing trend is reversed, the MDGs are unattainable for Africa.

The trend is all the more remarkable because it is exceptional: the other regions that around 1980 were characterised by low per capita income - South and East Asia - have on average grown rapidly.

Yet the decline is not merely relative. SSA is not just failing to converge with other regions, its decline is absolute: per capita incomes are significantly lower now than a quarter-century ago.

Nor was this decline the result of a sudden, dated catastrophe across the continent, or a disastrous performance in a few countries. Rather, decline has been fairly continuous over the entire period.

Brief periods of positive growth have been interspersed with longer periods of decline. While decline has not been universal, it has been the growth successes that have been exceptional: decline has been the norm in SSA.

Economic transformation and industrialisation are largely based on the accumulation of human and technological capital. This requires building capabilities and learning, which in turn leads to higher earnings for a wide spectrum of the population in increasingly open economies.

Africa's overall economic decline is linked with its economic structure and its trade patterns. Africa has not significantly industrialised, it has not reduced its initial dependence upon primary commodities for exports, and it has not "formalised".

Again, this is in contrast to the rest of the developing world. In only two decades the structure of developing countries' exports has changed to an astonishing degree. In 1980, manufactures accounted for only around 25% of their exports; now they account for 80%.

The breakthrough by important developing countries into the global market for manufactures has probably been the main structural economic event of the past quarter-century - and Africa is the main low-income region not to have shared in this transformation.

Africa's weak industrial performance reflects deep-rooted problems in economic structure and governance, which policy makers must address.

- I-Net Bridge (Business)