African countries such as Zambia are failing to grow their economies to fulfil their potential because governments are poorly targeting the available resources to key growth sectors, says economist Professor Oliver Saasa.
Last week, African Development Bank (AfDB) president Dr Akinwumi Adesina said that Africa’s economies were growing strongly, but that growth alone could not meet the needs of the continent’s poorest citizens because “nobody eats GDP,” as he unveiled the 2020 African Economic Outlook (AEO), the bank’s flagship economic report.
Dr Adesina, a former Nigerian Agriculture Minister, argued that growth must be visible and equitable, and that it must be felt in people’s lives.
The AEO showed that the continent’s economies were growing well, higher than the global average, and projected a steady rise in growth in Africa from 3.4 per cent last year to 3.9 per cent in 2020, and 4.1 per cent next year.
But according to the report, these figures did not reveal the full African economic growth story as the poor were not seeing enough of the benefits of the robust growth.
Relatively few African countries posted significant declines in extreme poverty and inequality, which remain higher than in other regions of the world, AEO data shows.
Commenting on Dr Adesina’s GDP analysis, Prof Saasa observed that one of Zambia’s biggest challenges was successive governments’ failure to target the nation’s resources and the gross dividends to the right channels that aggressively targeted poverty reduction.
“…So, it means that even in the sector where the largest number of people derive their livelihoods, you are not doing the right things, so, yes, the AfDB president (Dr Adesina) is right that, ‘you can grow the economy, but if you are not targeting the resources and, therefore, the gross dividends, the benefits of that growth to the right channels that really target poverty reduction, you cannot make a difference, and that is really one of the biggest challenges in Zambia. So, the level of growth in terms of GDP is important, but the pattern of growth is actually more fundamental because it tells you where are you growing the economy, who benefits from that economy. It speaks to what, sometimes, we refer to as re-distributional element growth and development; you have to distribute the benefits of growth to target those areas that promise much higher returns towards poverty reduction. If you don’t do that, you can be very rich as a country if GDP growth should measure richness, but you find that poverty levels are worsening and that is really the situation that we have in many African countries, including Zambia,” Prof Saasa said in an interview.
“It (Zambia’s economy) grew by less than two per cent last year, but you remember up to 2013, 2012, we were growing exponentially at almost six per cent per annum for more than a decade. So, the Zambian economy is growing, the problem, then, becomes, for agriculture as an example, the fact that the majority of people living in agriculture means we should have that focus if we are talking about poverty reduction to harvest those growth dividends to target in agriculture if you want to improve the livelihood of the majority of the people. If you are growing a sector like mining that does not have the largest number of poor people benefiting from it directly, then you know that the economy is growing, but is growing in a segment or in a section of the economy that does not house the largest number of people.”
He explained that having access to a large quantum of funds, both at household and national-levels, was not equivalent to wealth creation.
Zambia received a combined total of US $3 billion worth of Eurobonds since 2012, but economic growth has steadily declined since then.
“You could have the resources that you need to make a difference. In fact, having money, at whatever level, does not in itself create wealth. You can be given a US $1 million today and I can be given the same, two years later, you may actually have made US $3 million and I have lost all of it! In other words, once you get the money, you must know how you apply it, you must be able to account for it, you must be able to target properly, you must be able to diagnose where the problems are and where the money must go. If you are talking about poverty like, for example in the Zambian case, the majority of the Zambian people that are classified as poor are in the rural areas, they are dependent on agriculture, when we get money, when we grow the economy, the Zambian economy does grow, not the level that, actually, you can make a major difference, but the Zambian economy is growing,” Prof Saasa observed.
“Many times, we miss the developmental equation, when you hear the economy is growing, for the less-informed, they assume that GDP (Gross Domestic Product) growth itself translates itself on its own into social welfare dividends in a manner that would, ultimately, on its own without other interventions, lead to improvement or significant reduction in poverty and growth, generally. Now, I think what is important to recognize that growth, GDP growth, is very important, we shouldn’t underrate it, we cannot grow the economy, we cannot have a significant reduction in poverty without actually your economy growing. It’s very important and when whatever I am going to say, it does not minimize the significance of that growth.”
He further said the government’s focus on maize production through huge budgetary commitments alone was not developing Zambia’s agricultural sector as there were other crops that could be grown in agro-ecological zones that were not subsidized.
“So, resource distribution; once you have grown the GDP, is important. But if you go to the sector itself, agriculture, for example, then you say, ‘how are we using the money that goes to agriculture?’ At the moment, more than 63 per cent of the budget that we allocate to agriculture goes to growing maize and we are forcing people to grow maize even in agro-ecological zones that do not support maize-growing; they may be, perhaps, better-placed to grow groundnuts or rice or other things that are not presently being subsidized. So, the subsidy, if you look at the FISP (Farmer Input Support Programme) or the e-voucher, which is an integral part of the FISP, you find that much of that money is just focused on growing maize. When we talk about the beginning of the agricultural season, we are actually talking about the beginning of the maize season. So, this is a sector that houses the largest number of people,” said Prof Saasa.
“Now, when you look at that, you have a problem because, firstly, you are supporting a sector, yes, it’s a staple food, but agriculture is more than crops, and crops are more than maize, then you have a problem because the people who are farmers that go into livestock, whether we are talking about cattle, whether you are talking about piggeries, you are talking about aquaculture; you are talking about poultry, they are also agriculture. But they do not get as much support in terms of the subsidies you get through FISP.”