News Column

Missing Link Between Economic Growth, Poverty Reduction

July 1, 2014

Ngwegwe Mussa



THE much celebrated economic growth in Tanzania and other African countries that are said to make good progress can only have a meaning if there will be myriad poverty alleviation indicators.

For ordinary citizens, to sense the economic growth which is only being interpreted by economists and the elites, there should be visible improvements in the living standards. Living standards are mainly measured in terms of poverty and hunger.

Probably, that is why developers of the Millennium Development Goals put eradication of hunger and poverty as number eight on their list of 15 areas requiring global attention.

According to the World Bank data of 2013, Tanzania's economy was growing at 4.9 per cent in 2000 and 6.9 per cent in 2012. A recent report shows that the country is among the fastest growing economies in the East African region, recording 7 per cent rate of growth last year.

It is projected that the economy will grow at the rate of 7.2 per cent this year and will continue growing at an annual average of 7.7 per cent in the medium term. Tanzania has been placed among the 17 fastest countries with growing economies.

Cote d'Ivoire records the highest per cent of its GDP (9.8 per cent) followed by Angola (8.4 per cent), Mozambique (7.5 per cent), Congo DRC, (7.1 per cent) and Ghana (7 per cent).

However, Dr Bitrina Diyamett, the Executive Director of STIPRO, a nonprofit organization dealing with researches on science, technology and innovation issues says that the growth has not impacted on poverty alleviation as stipulated in MDG's goals.

"The rapid growth could have markedly reduced the number of poor people but this is not the case for most countries. For instance, despite high economic growth, Tanzania's household income poverty has remained virtually unchanged," Dr Diyamett says.

She continues to note that the headcount fell by just 2.1 per cent from 35.7 per cent in 2000-2001 to 33.6 per cent in 2007 and according to the United Nations Development and Population (UNDP), there is no prospect of Tanzania decreasing the proportion of its population which earns below $ 1 per day to 19.5 per cent by 2015 as targeted in the MDG agenda.

Dr Diyamett further opinions that the paradox is even more obvious if one looks at the trends in the purchasing power of Tanzanians which has drastically declined at a time of consistent GDP growth over the past decade.

The current study by STIPRO dubbed "Is the current booming growth in Africa worth celebrating? Some evidence from Tanzania" notes that failure of the economic growth to reduce poverty is due to that the growth is not pro-poor.

"The failure of current economic growth to translate into a corresponding reduction of poverty and purchasing power as witnessed in Tanzania indicates that the growth has not been propoor."

Part of the research reads. Musambya Mutambala, a researcher with STIPRO also comments by saying "the growth is not coming from sectors that are employment generators and the poor have not fully been involved in both production and consumption in the national economy."

He also points at premature structural transformation where there was a sharp decline of agricultural contribution to GDP and an increase of services from 199, as among the reasons why the economic growth doesn't reflect itself in the living standards of wananchi.

"The Tanzanian economy is now-service-oriented. We call this as premature transformation because there was no prior productivity increase in either agriculture or manufacturing.

Conventional transformation starts with agricultural transformation, leading to growth in the industrial and then service sectors." Mutambala stresses.

Other African countries, according to the World Bank, have the same sequence, including Mozambique, Zambia and Ghana with figures of 47.2 per cent, 43.2 per cent and 48.5 per cent respectively.

The other important sector which must ensure there is collocation between economic growth and poverty reduction according to STIPRO is manufacturing, especially in terms of its structure and technological readiness and innovation.

"Technological change and innovation are essential to productivity growth, proper structural transformation and employment generation," says STIPRO in part.

In its report of global competitive 2012-2013, World Economic Forum places Tanzania at the rank of 122nd in 144 countries in terms of technology readiness and 78th in 144 at innovation among the African Fastest Growing Nations, according to Technology Readiness and Innovation.

Minister in the President's office, Social Relations and Coordination, Mr Stephen Wassira was recently quoted in parliament as saying the failure of economic growth to collocate with common man's life was due to slow pace of growth of agricultural sector, the sector which employs about 80 per cent of Tanzanians in rural areas.

"The economic growth of the nation is not reflected in the common man's life due to the slow growth of agricultural sector. The sector has registered a 4.3 per cent growth only while the economy is abundantly enjoying a 7 per cent rate, " Minister Wassira said.

Tanzania is projected to reach a middle income status by 2025 as envisaged in National Development Vision, with an income per capita of 3,000 US dollars provided to massive discovery of new lucrative business of oil and gas in the southern part of the country.

The Big Results Now programme is acting as a good vibrator to sectors under the program as many initiatives are seen to yield fruits. Sectors like infrastructure and transportation are recording superb improvements.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters