How To Measure Poverty in Africa
“Whether measured by per capita income or by the gross domestic product of its nations, Africa is the poorest place on earth.”
This is a quote taken from an author who recently attended the TED conference in Tanzania. After describing how terribly poor Africa is, he then goes on to talk about the founder of Vodacom Congo, a Mr. Alieu Contou, who started a mobile phone revolution in Congo by using $1.5 million dollars of his own money as seed capital.
As I’m reading this, I’m thinking to myself….“well..this reporter/author, who just described Africa as the “poorest place on earth”, would not be able to come up with $1.5 million in cash (since reporters really don’t make that much money). In fact, very few Americans could come up with $1.5 million dollars in cash without first, having to take out a loan or take out a second mortgage on their house. However, this Congolese coffee exporter was able to come up with that kind of loot.
So, are people over estimating the real poverty rates in Africa? or are Americans over estimating their real wealth? Everyone knows that the average American has very little in the way of savings. The bulk of their wealth is tied up in the value of their homes (very few Americans can come up with one million dollars just like that).
I don’t think the reporter who wrote this story caught this dichotomy (i.e. in an effort to highlight Africa’s unending poverty, he actually may have ended up conveying the opposite effect by portraying an African who was able to finance his own start-up with a million dollars of his own money!!)
I go by the published figures of income per capita…
US = $44,000
Tanzania = $800
Perhaps you would be surprised by the proportion of US citizens who could, in fact, raise $1.5m without too much trouble.
One millionaire in Congo doesn’t put a dent in poverty rates in Africa. Or in child mortality rates.
KE,
BLESS YOU FOR RAISING THIS ISSUE! You have definitely opened a pandora’s box!!!! Let me first address this question of inflating poverty rates……..we have all heard the DIRE comparisons, in fact let me use the previous poster’s example:
U.S. = $ 44,000
TZ = $ 800
Let’s use a perfect example of a Maasai living in a community in Tarangire. Does the $ 800 per capita capture the fact that he owns his house and grazing lands outright? What about the value of his herd stock? Let’s take it further, in terms of tradable commodities in the market economy, does the $ 800 capture the fact that he is self sufficient or is able to purchase the few consumer goods he desires in exchange for a cow here, a goat there? What about his ability to procure health services, education for his children? If you visit a Maasai in Tarangire who owns 100 head of cattle, his own house, his 50 hectares of grazing land and is able to procure those consumerables that are compatible with his lifestyle yet in raw numbers his per capita income is $800 compared to an American suburbanite earning $ 44,000, can you look him in his face and call him poor?
Certainly, MANY AFRICANS do not have the LUXURY OF CHOICE that most Maasai have, and definitely their ability to be self sufficient and procure those goods and services that they deem essential is non existent or limited BUT what about the wide swathe of Africans who fit in to the mold of the Maasai? I’ll use my own grandfather as an example, same characteristics in terms of owning the equity that defines his lifestyle outright, yet hifalutin economists have the temerity to call him poor!!!!!!
This harkens back to the ongoing discussion about ‘external’ saviours for Africa. Part of the reason Africans are ‘poor’ is because they have allowed themselves to be brainwashed in to accepting foreign benchmarks for ‘wealth and development’ that in many instances are incongruent with their indigenous benchmarks for self sufficiency and self actualization. For me, it comes down to choices, AN AFRICAN IS POOR IF HE DOES NOT HAVE THE ABILITY OR RESOURCES TO CHOOSE HIS PREFERRED LIFESTYLE, AN AFRICAN IS NOT POOR IF HIS PURCHASING POWER IN TERMS OF RAW COMPARISONS IS A TENTH OR A ONE HUNDREDTH OF HIS COUNTERPARTS IN THE WEST.
It is as absurd for a Maasai to be told he needs $44,000 to feel ‘middle class’ as it is for him to be regarded as self sufficient yet poor. The tradgedy has been failing to quantify or recognize ‘informal capital and assets’ (many times deliberately because people must be made to understand that they are poor) and worse still limiting the opportunities for people to capitalize on those assets in the mainstream economy (Hernando De Soto is spot on with ‘dead capital’).
stories like this add insult to injury:
http://www.bdafrica.com/index......temid=5056
or the one whereby NSSF advertised the sale of 650 apartments/flats in Embakasi recently, and each unit being sold between Ksh 2.5 million and Ksh. 4 million……..people lined up from 5 a.m and they received cash offers for 3000 units yet they only advertised 650. They were forced to allocate them based on first come first serve CASH BASIS
Those with guaranteed mortgages were turned away.
There is plenty of cash in the informal economy, the one where 70% of Kenyans reside, what beats logic is why the government continually underexploits this segment. Instead of making banks consolidate with the new Ksh. 1 billion threshold, they should focus on creating 100 more Equity Banks by targeting the SACCOs, MFIs, cooperative societies etc. I like this idea of forming investment funds for the Jua Kali sector inaugurated by K-Rep Bank, they should get generous tax concessions for bringing such ideas to market, GOK should up the incentives for such schemes.
Gillian:
The question is whether that raw per capita income number of $44,000 a year is really capturing the full picture of what’s happening. I’m sure they are many Americans who have a few millions in savings after 40 years of frugal living and astute saving, but guess what? that’s a dying generation.
There’s another group of Americans who are making way above the per capita income, but who are saddled with educational debt, high mortgage payments, car loans, credit card debt, etc, etc.. all the statistics are saying that Americans have a negative savings rate. I just don’t think these numbers are capturing what’s really happening. I mean, private colleges now cost $40,000 dollars a year! you can’t pay for that on an average joe salary unless you take out loans.
I’m not saying Africa isn’t poor, but maybe the measurement of poverty needs to be redefined.
Yes, it’s good to question the simple dollar measures. The income figures do not include assets, as pointed out above by Sijui.
But I wonder whether many Africans really believe that the income figures are worthless as measures of relative wealth and poverty.
Perhaps those who question the value of the income figures might find health statistics more useful?
Life expectancy
US=78
Tanzania=51
Infant mortality
US=6 per 1,000 (twice as high among black Americans as white Americans by the way)
Tanzania=71 per 1,000
Perhaps some Africans would dismiss these measures as not relevant to Africa, but I can’t imagine any mother, African or not, prepared to say that they are quite satisfied when one child in five dies before their fifth birthday as is the case in Tanzania.
In many ways, the dollars are a shorthand measure for health outcomes. Imperfect, but a reasonable rough indicator.
A commonly accepted measure of poverty is $1 per day, or $2 per day, calculated as ‘purchasing parity’ – i.e. the amount of goods that can be bought in the local country with US$1. $1 a day is extreme poverty — this is just enough money to buy food and basic shelter. There are no countries where this amount will cover things like education, health care, water supply, electricity, etc.
Thankyou, everyone, for contributing. I’m glad to be part of the discussion.
The concept of poverty according to different organizations such as the UN includes different dimensions of deprivation. In general, it is the inability of people to be able to meet economic, social and other standards of well-being. The multi dimensionality of poverty is now widely accepted. It covers measures of absolute poverty such as child and infant mortality rates, and relative poverty, as defined by the differing standards of each society. However, would a healthy Maasai family living in manyattas and tending to their herds of cattle be considered as living in “poverty”, backward/primitive?
The concept of poverty is yet to be critically addressed bearing in mind the different characteristics of societies all over the world.
I am not saying that the statistics are worthless. I understand the need for some form of measurement. I guess what I am really wondering is whether these western based statistical models work well in Africa, a continent, as Sijui pointed out, that has a large informal economic sector.
In terms of assets, when you buy a house, you really don’t “own” it. The bank owns it until or unless you clear that mortgage. Yes, if you sell it for a profit, you can make some money. However, if you go on to buy yet another house, with yet another mortgage, a bank will still own it. and on this point, isn’t the Kenyan system better as well? i.e. you build a house slowly and pay for it as you come into some money. So, even if it takes you 10 years to finish building, that house will be paid off and will be yours at the end of the process. So, are “assets” really “yours” if you OWE money on them?
Liz:
So, we should include, as dimensions of poverty, food, shelter and healthcare (things beyond these basics would then be considered luxuries?)
Gillian,
Your citation of health statistics are valid, definitely there is no argument that measures like infant mortality rates and general mortality rates of the population are good barometers of socio-economic well being. And if you use the example I gave of the Maasai lifestyle, it is imperative that there be supporting social and physical infrastructure so that again the family has the ability to choose between modern conventional medicine and traditional provision should the need arise.
That being said, again I have little faith in all statistics espoused by the international development industry. A classic example is AIDS. This disease is the most overhyped, overblown malady of the past two decades. I remember when I left Kenya in 1996, we were all made to believe that the prevalence rate was like 20 to 25%, granted this was an important catalyst in mobilizing the requisite resources including political to aggressively combat the disease. A more comprehensive study was done two to three years ago and it found out that at best no more than 8-10% of the population had it. And this was not because of a dramatic decrease in infection rates, it was purely a factor of original inflation as well as increased awareness. More importantly, many I believe have a strong argument when they say the government was ‘compelled’ to pour an inordinate amount of resources in to AIDS when more strategic investments could have been made in addressing the more serious but conventional prevalence of malaria, TB, measles.
Ditto for dire statistics made about AIDS IN AFRICA, AIDS is an epidemic in Southern Africa (20 to 30%), it is NOT an epidemic in West Africa with prevalence rates of 3-5%, North Africa 5% and East Africa 5-8% (notable exception Uganda where it definitely had reached epidemic proportions but is now down to a 8-10% range).
My point, Africa has many shades of grey, and if you take the continent as a whole, those shades of grey make up a bare majority……….they’re making it tenuously but neither are they destitute and desperate. Unfortunately they are not captured by the BLACK AND WHITE FRAME that paints the continent and hence their potential is either underexploited or plain ignored by their own governments and the international development industry.
P.S.
“i.e. the amount of goods that can be bought in the local country with US$1. $1 a day is extreme poverty — this is just enough money to buy food and basic shelter.”
As Liz pointed out, poverty is multi-dimensional…..if you use this yardstick its clear to see that it based on a consumer market driven variable, what of people who own and grow their food and shelter hence would not need to purchase these basic staples? Again I’m not saying the $1 a day benchmark is invalid, what I am saying is I would like to see it encapsulate the function of tradable assets to acquire food and basic shelter when there is no direct need to purchase those items. In other words does purchasing power capture your ability to trade your assets to acquire $ 1 in the market place or is it limited to having $ 1 raw currency or cash equivalent in your bank account in any given day to purchase consumerables?
P.P.S My apologies, I grossly overinflated North Africa, the official prevalence rate is 0.1%, Sudan has highest at 1.6%.
Sijui, thank you so much for providing those figures for AIDS. They are certainly very different from the figures that are widely circulated. What is that phrase?… “there are lies, damned lies, and statistics”!!
Regarding the published income figures, I believe that they are worked out by calculating GDP and dividing by population. I don’t know whether the GDP calculations include production that is outside the market system. As you suggest, the figures would be more comparable across countries if they included those non-traded goods.
I believe that the $1 a day measure is derived from GDP per capita. If GDP includes non-traded goods (e.g. homegrown produce) then it does ‘capture the ability to trade assets’ as you suggest it should. I wonder how we find out whether this is the case? Does anyone know?
Shades of grey always seem to resolve into ‘black and white’ simplification as the messages get reduced to headlines and sound bites.
KE — you’ve got me wondering whether it is better to build a house by borrowing the money and then paying it back, or to build it bit by bit as you save the money. I’m not sure that one way is better than the other. In the first case you get to live in the completed house straight away, and the cost is the interest you pay on the debt. The other case is that you don’t get the completed house for years, and you save the interest costs. Which is better? Depends what you choose, I guess.
Sijui:
You mentioned the international development INDUSTRY. You see, if these people don’t hype the dire consequences, they’ll be out of work! it’s in their capitalistic interest to over-hype everything even though they themselves are against the forces of capitalism.
Gillian:
Watch the interview I’ve posted below with India’s finance ministers. It’s quite informative on the issues discussed above.
on building houses: Debt is debilitating and those interest payments are financial killers. So, I think that in the long-term the kenyan model is better. You can pass the paid for house on to your kids and their kids, kids, …all paid for.