Ongolo Proud African

GDP per capita is a better measure of development

Author: Muloongo Muchelemba
24 September 2021

The International Monetary Fund (IMF) recently released data that showed two contrasting ways of measuring development in Africa. When measured by the total Gross Domestic Product (GDP), the richest countries in Africa are: Nigeria ($514b), Egypt ($394b), South Africa ($330b), Algeria ($151b), Morocco ($124b), Kenya ($106b), Ethiopia ($94b), Ghana ($74b), Cote d’Ivoire ($71b). In contrast the richest countries in Africa using GDP per capita are: Seychelles ($26,120), Mauritius ($22,030), Equatorial Guinea ($18,240), Botswana ($18,110), Gabon ($16,240), Madagascar ($13, 720), Egypt ($13,080), South Africa ($12,440), Algeria ($11,430), Tunisia ($10,590). Nigerians may argue that as the most populous country in Africa with over 201m people, landing on the top 10 GDP per capita list would be a mathematical challenge. Egypt, which is the second most populous country in Africa with over 100m people, still made the list. The key question is which measure is more accurate.

GDP is an important measure for comparing the economic growth of countries, but the concept puts the country before its people. It overlooks who benefits from economic growth, should there have been any, or what GDP means in practice for ordinary citizens. Therefore, GDP should not be assumed to be the only reflector of development in a country. A growing number of experts now prefer to be more specific and rely on GDP per capita instead.

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Kenya is the 6th richest country in Africa and also has the continent's largest slum called Kibera, which is located in Nairobi

This indicator is derived by dividing the overall GDP by the population of a country and it provides a more accurate estimate of the standard of living therein. Seychelles and Mauritius top the GDP per capita list and are both considered some of the best places to live in Africa with beautiful beaches, well-laid infrastructure and a comfortable lifestyle for locals and expatriates. Their small size means their economies will never top the GDP list and both countries therefore get missed in development discussions.

When it comes to continental Africa, the only country that has recorded an increase in both its GDP and GDP per capita is South Africa in part because it recently changed the way it calculates its GDP. The local statistics office now uses 2015 as its base reference year, thereby including new categories of business to reflect the modern economy more. As a result, the contribution of personal services more than tripled, while finance, real estate, and business services provided more than 26% each.

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A satellite image of Africa at night which shows basic infrastructure such as electricity is the norm

South Africa also wins in terms of standard of living. Safety issues and political volatility aside, Cape Town and Johannesburg are consistently ranked amongst the top 100 of the world’s best cities and remain attractive destinations for locals, expats and tourists alike. It also a leading country in Africa for infrastructure, connectivity to the rest of Africa and the world. It also has the largest stock market on the continent.

The lesson for Africa is while its important to strive for a higher GDP for the country, what is even more important is to ensure that economic growth at the macro level trickles down to improved living standards and wellbeing of its citizens at the micro level. For many countries in Africa, it is fair to say that this does not happen in practice.

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