Further, it has become increasingly difficult for people in 60 percent of the regions to have access to basic social services such as healthcare and drinking water. However, the good news is that the Gabonese government has taken steps to improve the situation. SIHG aims to assist low-income people to increase their income and reduce inequalities in access to basic public services. Photo: Flickr. Why is Gabon poor? This is a question that is, unfortunately, stereotypically asked about any African country. What is even more unfortunate is that Gabon fits this stereotype very well, as it is one of the poorer countries in the world.
While there has been a decreasing trend in these figures, they are still substantial. The answer, it turns out, is centered around income inequality. As an illustration, governments or their appointees hold property rights to natural resource wealth, in which case, the immediate effect of the supply chain is self-enrichment of the property rights holders.
Second, in a case where the private sector is allowed to be among the stakeholders, selfish interest of the government through excessive taxation might discourage investment required to discover natural resources in the first place. Another channel is if the political elite or other powerful groups were given preferential access to the resource wealth, they would use it for their own benefit without investing the generated wealth for overall growth Warner Also, the exact macroeconomic effect of natural resource abundance is difficult to unravel. In the short term, there is existence of volatility in the revenue accruable from the exploitation, exploration and sales of these resources.
This makes it difficult to conduct macroeconomic stabilization policies. The long run challenge relates to the ample evidences that have shown that resource-endowed countries tend to have slower economic growth rate as compared with resource-scarce countries Frankel ; Oyinlola et al. It should be noted that the RCH debate is inconclusive, as studies have argued and documented evidences on both sides of the argument See Frankel for a survey.
The problem identified by the studies that have refuted RCH is due to the fact that they concentrate on aggregate growth. In the sub-Saharan African SSA case, there are ample evidences that have proved that a selected proportion of the population, mostly the political elite and urban dwellers, enjoy these proceeds.
What’s the future of economic growth in Africa? | World Economic Forum
Also, a large chuck of this revenue is spent on recurrent and administrative expenditures, which is biased against the poor and unemployed. Thus, this being the case is an indication that these categories of citizenry i. Hence, it could then be summarily stated that natural resource abundance would not lead to inclusive growth, 2 as this might be a plausible candidate in explaining the RCH.
The existence of inclusive growth ensures that all the sections of the country are active in the growth process of the economy. To this end, there would be increase in the tax-based revenue of the government, through increase in job creation.
African Development Bank’s Economic Outlook shows decline in regional economies
Hence, government would have more funds to formulate and implement developmental policies. The importance of inclusive growth has been demonstrated on a global, regional and national levels. Also, in May , European Commission emphasized the important role of the private sector led strategy in achieving inclusive growth. Examples of such papers include OECD whose report identified three problems: poverty, 4 unemployment 5 and inequality, 6 that growth from s to date had failed to tackle.
OECD a , b , c also emphasizes the importance of inclusive growth. G20 have confirmed the absence of inclusive growth in the region and further argued not only for a strong, sustainable and balanced growth but also for a more inclusive pattern of growth that will mobilize the talents of the citizenry. Also, Anand et al. HCD is a broad concept and cannot be measured holistically.
However, we postulate that education and health are key indicators of HCD. This claim has also been backed by the fact that they education and health have retained their prominence by being among the nine objectives of Millennium Development Goals MDGs and recently, Sustainable Development Goals SDG. Based on the foregoing, this study seeks to achieve two broad objectives. Firstly, to empirically examine the possibility of achieving inclusive growth through increase in government expenditures on health and education. The second objective is to examine the potential benefit of investing the natural resources rent on HCD indicators.
To this end, the study uses financing gap model and simulation methodology under certain assumptions to estimate the potential economic growth accruable by investing natural resource rent on human capital indicators. The novelty this study brings forth is based on its objective. Most of the existing papers on inclusive growth are policy papers, which is less empirical, as it is not driven by econometric or other scientific approaches.
The reasons adduced to limiting the scope to SSA are because 1 with the exception of very few countries Botswana, Namibia and may be South Africa , statistics have shown that resource-rich countries in SSA are ensnared with RCH; 2 resource rents have been the major source of revenue for SSA countries; 3 the region is the least in the global HDI rankings and 4 the region has the highest prevalence of poverty and inequality. The selected countries are based on data availability.
The rest of the paper is structured as follows: section two dwells on inclusive growth issues and further argued for the beneficial effects of inclusive growth. In section three, we discuss the data and provide a detailed trend analysis of the key variables in the study. Model specification and methodological related issues are offered in section four. Sections five and six house the empirical result and conclusion respectively. More than ever before, institutions, governments and organizations have been actively talking about inclusive growth. This is a fall out of the fact that it has been observed that increase in income GDP of countries does not necessarily mean growth in the first instance, not to talk of sustainable growth.
This notion is justified because in most developing countries, there is high unemployment rate, wide income disparity as well as increasing rate of poverty. Despite this, such countries still record incidence of growth. Hence, the growth recorded is the product of a section of the population and not the entire population. To ensure justice and equity, the burgeoning arguments have tilted towards ensuring that all economic agents contribute their quota to the growth process of their country.
Although, there is no absolute acceptable definition of inclusive growth, a situation that cut across all branches of economics in agreeing to common definition s of any term, there is however, near unison in terms of what inclusive growth generally meant. It could also be argued that the economic growth that solves these problems is inclusive in nature. That is, such growth must have a steady and relatively stable trend. In order to have a sound understanding of the concept of inclusive growth, we limit our review to the two leading advocates of inclusive growth-the OECD and UNDP.
Starting with the OECD, special attention was devoted to the socioeconomic adversities unemployment, inequality and poverty confronting the global economy. They defined inclusive growth as the one that reduces poverty and inequality and benefits the most marginalized section of the population.
The poverty-inequality-growth debate has long been contested and this study does not attempt to delve into it. Rather, it attempts to demonstrate how this debate might lead to inclusive growth. Inclusive growth is linked to the debate in that it proves to the governments that growth is just a process and not an end i. Growth should be seen as a tool to achieving wider objectives. Also, it helps to erase the notion that growth would eradicate these socio-economic problems.
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Hence, concerned stakeholders are put on their toes to forge policies that would enhance poverty and inequality-resistant growth. Irrespective of the fact that inclusive growth has varying definitions across organizations, there are however, some common positions as regard its determinants. To this end, variables such as investment in human capital, 10 job creation, structural transformation and broad-based growth, 11 good institutions 12 and social protection 13 have been found to aid the desired growth.
The assumption that achieving growth first, and that the effect would later trickle down to alleviate poverty and inequality is rather unrealistic. Discussions on inclusive growth would be incomplete without a mention of structural transformation. History has shown that structural transformation is critical to economic development. There are diverse forms of structural transformation: it could be diversification of the economy from an agrarian-based to manufacturing based.
This is the first stage of transformation process. It could also be as a result of industrialization process of countries. This is evidenced considering the antecedents of China, Japan and South Korea. Even though, Africa has witnessed major structural transformation as well as industrialization process, this has not translated to expected growth or growth rate compatible with other developing regions in the world. This is to say that structural transformation is not a homogenous process Osei and Jedwab Productivity growth is quite essential to structural change and hence economic development.
Data reveals that the productivity gap in Africa is about 2. This gap could have been reduced to 1. This gap would have also been reduced to 1. To further drive home the importance of structural transformation, McMillan and Rodrik while using dataset for 38 developing countries, it was found that structural transformation is growth-enhancing for Asian countries while it is growth-reducing for Africa.
Having given an overview of the concept of inclusive growth as well as its determinants, the next area that should be explored is the measurement related issues. Just as there is no consensus as regards a workable definition, measuring inclusive growth suffers similar fate. This function gives greater weight to the poor. As such, opportunities created for the poor are more important than the non-poor. The increase in these opportunities would lead to inclusive growth. Anand et al. Their measure provides a framework to study equity and efficiency together. The measure is equally used to study the dynamics and determinants of inclusive growth in low-income countries and emerging markets.
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The model assumes that inclusive growth depends on income growth and distribution. The underlying social welfare function must satisfy two properties to capture these features: 1 it is increasing in its argument to capture growth dimension and 2 it satisfies the transfer property—any transfer of income from a poor person to a richer person reduces the value of the function to capture distributional dimension.
The extant literature precludes any attempt to explicate the theoretical association between HCD measures and inclusive growth. This implies ample vagueness in the precise mechanisms through which the effects of HCD is transmitted to inclusive growth. Nonetheless, we lay out a plausible transmission mechanism, which is presumed to work via the fiscal behavior of the government. Specifically, it hinges on the effectiveness of both government tax efforts and government expenditures.
On the revenue side, the government has to be able to tax the natural resource rents and allocate the tax revenue productively into the education and health sectors.
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For government spending, government priorities should be set in such a fashion that is de-linked from the gyration of resource revenues. However, the management of resource wealth in this manner is more difficult than depicted. Some of the challenges include, but are not limited to, the well-known volatility of resource prices; the non-renewable status of some of these natural resources and its implication on the optimality of expenditures; weak institutional quality and attendant narrow fiscal space.
The lack of development and infrastructure means that little of this potential is actually in use today. Petroleum and petroleum products are the main export of 14 African countries. Petroleum and petroleum products accounted for a Lack of infrastructure creates barriers for African businesses. By far, most of these projects are in the production and transportation of electric power. Many other projects include paved highways, railways, airports, and other construction.
Telecommunications infrastructure is also a growth area in Africa. As of , it was estimated that ,, mobile phones of all types were in use in Africa, including 15,, " smart phones ". The mineral industry of Africa is one of the largest mineral industries in the world. Africa is richly endowed with mineral reserves and ranks first or second in quantity of world reserves of bauxite, cobalt, industrial diamond, phosphate rock, platinum-group metals PGM , vermiculite, and zirconium. Gold mining is Africa's main mining resource. African mineral reserves rank first or second for bauxite, cobalt, diamonds, phosphate rocks, platinum-group metals PGM , vermiculite, and zirconium.
Many other minerals are also present in quantity. Both the African Union and the United Nations have outlined plans in modern years on how Africa can help itself industrialize and develop significant manufacturing sectors to levels proportional to the African economy in the s with 21st-century technology. This hope, coupled with the rise of new leaders in Africa in the future, inspired the term "the African Century ", referring to the 21st century potentially being the century when Africa's vast untapped labor, capital, and resource potentials might become a world player.
This hope in manufacturing and industry is helped by the boom in communications technology   and local mining industry  in much of sub-Saharan Africa. Namibia has attracted industrial investments in recent years  and South Africa has begun offering tax incentives to attract foreign direct investment projects in manufacturing.
Countries such as Mauritius have plans for developing new "green technology" for manufacturing. The manufacturing sector is small but growing in East Africa. China and India  have showed increasing interest in emerging African economies in the 21st century. Reciprocal investment between Africa and China increased dramatically in recent years   amidst the current world financial crisis. The increased investment in Africa by China has attracted the attention of the European Union and has provoked talks of competitive investment by the EU.
Remittances from the African diaspora and rising interest in investment from the West will be especially helpful for Africa's least developed and most devastated economies, such as Burundi, Togo and Comoros. Angola has announced interests in investing in the EU, Portugal in particular. Both use the CFA franc as their legal tender. The idea of a single currency union across Africa has been floated, and plans exist to have it established by , though many issues, such as bringing continental inflation rates below 5 percent, remain hurdles in its finalization.
As of , Africa has 23 stock exchanges , twice as many as it had 20 years earlier. Between and , a total of 72 companies were launched on the stock exchanges of 13 African countries. During the s, Ghanaian politician Kwame Nkrumah promoted economic and political union of African countries, with the goal of independence. Recent decades have brought efforts at various degrees of regional economic integration.
There are currently eight regional organizations that assist with economic development in Africa: . From Wikipedia, the free encyclopedia. This article needs to be updated. Please update this article to reflect recent events or newly available information. July All values, unless otherwise stated, are in US dollars. This audio file was created from a revision of the article " Economy of Africa " dated , and does not reflect subsequent edits to the article. Audio help. More spoken articles. This section does not cite any sources.
Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. July Learn how and when to remove this template message. Further information: Economic history of Africa and Scramble for Africa. Main article: Colonisation of Africa. This box: view talk edit. Further information: Economy of the African Union. See also: Women and agriculture in Sub-Saharan Africa. Further information: Energy in Africa. Main article: Mineral industry of Africa.
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