The problem with African development statistics

Author: Morten Jerven

Since the publication of Poor Numbers a healthy debate on the meaning of development statistics in the African context has ensued. Predictably the emphasis in the media has been on the politics of the numbers. Inspired by the eternal phrase, lies, damned lies and statistics commentators and headlines have focused on the dark forces that tamper with numbers and consciously mislead the public discourse on development in Africa.

My main message is much simpler. We know less than we would like to think about growth and development in Africa based on the official numbers. The problem starts with the basic input – information. The fact of the matter is that the great majority of economic transactions whether in the rural agricultural sector and in the medium and small scale urban businesses goes by unrecorded.

For all composite measures and indexes the baseline estimate and the base year is of great importance. The reality is that at all GDP measures are an approximation, but in for most African economies the statistical offices simply do not have all the information needed.  What is usually done is that one picks a ‘base year’, the statistical office chooses a year when it has more information on the economy than normally available; such as data from a household, agricultural or industrial survey. The information from these survey instruments is added to other administrative data to form a new GDP estimate. This total is then weighted by sectors, thereafter other indicators and proxies are used to calculate or guess at new annual estimates.

Sectors that were important in the base year will continue to appear important despite structural changes that may have occurred, while sectors that were unimportant or not existing will barely have an impact on GDP. The data sources and the use of proxies are set in the base year – so even when information is becoming available, national accountants may be unable to add them. When the base year is out of date, the GDP series is becoming unreliable. The IMF statistical division recommends a change of base year every five years. In the case of Ghana, their previous base year was made in 1993. Quite obviously, the structure of the economy has changed radically since then. It turned out that since 1993 almost half of the Ghanaian economy had gone missing from the official count. Currently, only a handful of countries have a base year within the past 5 years. The median base year is 2000, whereas some countries, like Nigeria with a base year from 1990, has not had a reasonably up to date picture of their economy for more than two decades.

My book, 'Poor Numbers: how we are misled by African development statistics and what to do about it', presents a study of the production and use of African economic development statistics. I emphasise that this is just not a matter of technical accuracy - the arbitrariness of the quantification process produces observations with very large errors and levels of uncertainty. This ‘numbers game’ has taken on a dangerously misleading air of accuracy and the resulting figures are used to make critical decisions that allocate scarce resources. International development actors are making judgments based on erroneous statistics. Governments are not able to make informed decisions because existing data is too weak or the data they need does not exist.

It is a real tragedy that the statistical capacities of Sub-Saharan African economies are in such a poor state. African development statistics tell us less than we would like to think about income, poverty and growth in Sub-Saharan Africa. One of the most urgent challenges in African economic development is to devise a strategy for improving statistical capacity. This system currently causes more confusion than enlightenment. However, governments, international organizations and independent analysts do need these development statistics to track and monitor efforts at improving living conditions on the African continent.

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Tim Jones

A few comments from a practitioner in the field:

1          The problem is certainly not limited to Africa.  Even many so-called developed economies cannot do national accounts to the accuracy generally expected or implied.

2          It is not fair to ask how many countries have a base year within the last five years.  It will normally take at least three years for any country to compile a new benchmark.  This time needs to be added to the recommended five-yearly interval, so 8 to 10 years would be more reasonable period for measuring success.

3          The challenge (not to mention the necessity) of compiling a reliable benchmark and seems to be universally underestimated.  Few countries recognise the difficulties and few seek sufficient expert support.  Effective support is scarce (and expensive), but would you build a new car assembly plant for the first time without it?

4          On a global scale, the total national income of a majority of countries is still minute and government revenues miniscule.  So how much national resource is it appropriate to allocate to economic statistics?  No doubt more than at present, but there are limits, including the ability to manage additional resources effectively.

5          The formal sector is less than half the economy, comprising only a few thousand enterprises.  But even this is challenging to measure, as the law of large numbers does not apply.  Economic surveys are typically subject to huge sampling errors and even worse non-sampling errors (monetary values with a large number of digits are easily mis-captured) and non-response.  And this is not to mention the long-standing problem of how to measure agricultural production to the accuracy implicitly expected.

Things are not going to change any time soon. The challenge for National Statistical Institutes and the international community is to identify what steps should be taken now so that progress can be made in the longer term.  Despite the pressure, some things should definitely not be among them, like pretending to be able to go beyond the IMF’s General Data Dissemination System or trying to implement the United Nations System of National Accounts in all its complexity.  One minor step could be a far simpler, practical, achievable, cut-down, short-cut version of the SNA and associated classifications, designed for small economies with limited resources.

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Ferdinand

It is true that the African countries need to make a revolution on statistics capacity strengthening. Most of the economic activities go unrecorded (not sort of black market) due to poor management and low capacity from the governments. The National statistics offices are just relying on mere assumptions, they do not work hard enough to develop statistics in an effort to reduce poverty, hunger, illiteracy rate, e.t.c..! The data collected do no reflect the real situation as most of them are cooked and thus they are inaccuracy and they cannot be used to make informed decisions for economic development, please African countries try to figure out oh how we can overcome these simple mistakes in our NSO's

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