“The Social Progress Index is a winner. Without it, we can tinker with the edges of the problem instead of transforming [societies] or even monitoring development: education, health, housing, electricity.”
38 An Absa Investment publication
of Canada (sixth) and Finland (second) when it comes to social progress. This is, in part, due to the latter’s focus on inclusion and pillars like “basic human needs” and “opportunity”, which underpin wellness more than is the case in the wealthier nations of Kuwait and the United States. For the record, South Africa’s SPI ranking is 66th
.
As the likes of Coyle and acclaimed Harvard professor Michael Porter will attest: the realities of emerging markets illustrates that, as a barometer of output, GDP is inaccurate. As Porter noted in a Guardian interview in 2013: “The Arab Spring of 2011 and the challenges in Mexico over the past decade have illustrated the shortcomings of economic growth as a proxy for social progress.”
Indeed, GDP is hardly a perfect measure when applied to advanced economies either, given flaws that include the inability to track development. Although often underplayed, the point is that GDP was, to start with, designed to quantify output, not economic performance or progress.
For Godfrey Mwanza, Head of Pan-Africa Listed Equities at Absa, the failure to produce accurate figures to track activity in informal markets serves as confirmation that, notwithstanding the fact that GDP is invaluable, traditional indicators are insufficient. “One critical technical limitation of GDP is that it values output at market prices. Since a lot of economic activities happen outside the market, the values of their outputs need to be somehow calculated,” contends Mwanza. He singles out subsistence agriculture as a case in point, since in the majority of cases, farmers’ families consume most of their produce.
“Economists have to estimate that amount and add it to GDP,” he says.
Mwanza worries that the “real economic value” generated by about 600 million Africans is “some economist’s best guess”. The gaps are glaring.
Staring down the gap
Questioning the misplaced focus on this set of numbers, Gordon Institute of Business Science professor Adrian Saville recently wrote in the business school’s Acumen magazine that a 5% GDP growth per year translates into an improved income per person over time, spread well through the population. That assumption, he observes, is flawed because it pretends that incomes are spread evenly. They are not. South Africa, with its unwanted status as the world’s most unequal society on the planet, according to the Gini index (and where organised labour still decries pay disparities for same jobs), is a case in point.
According to Manu Bhaskaran, CEO of Singapore-based consultancy Centennial Asia Advisors, measuring economic development is
all-important, as this “means real transformation, such as upgrading workers’ skills, moving firms and production up the value curve, strengthening institutions, and so on”. He adds:
“It’s a lot more than increasing the number of widgets produced,” taking a swipe at “lazy growth” – a mathematical function of higher commodity prices, but one which hurts the environment and does nothing to transform or uplift nations.
Sharing this sentiment, Saville worries that
“pulling ore out of the ground” is recorded as a positive to economic growth, despite the “destructive and unsustainable” form of all extractive activities. Like emerging markets, developed countries also celebrate what they see as growth, even if it is driven by extractive and unsustainable industries. “If we look around the world, we find some stand-out examples of countries whose growth or economy is influenced disproportionately by extractive industries: chief among them Chile, Australia, Brazil, Russia and South Africa,” he writes.
The lazy growth that Bhaskaran decries could explain why living standards remain poor for many in some mineral-rich countries, despite the commodity price bonanza. Three in five people in the DRC, one of the poorest nations on earth, languish below the breadline versus a 2% poverty headcount in Chile, a fellow copper-producer. That contrast is the crux of the resources-blessing- and-resources-curse debate. The latter explains the protracted, low-intensity conflict that has taken scores of lives and forced many more into exile in the DRC. However, despite a common, yet misinformed tag of a failed Africa, good examples far exceed the bad ones.
Botswana, where President Mokgweetsi Masisi recently replaced Ian Khama as the first citizen of the diamond-rich and landlocked state, emerged in 2018 – following a study commissioned by broadcaster BBC – as among the best countries to live, alongside Canada, Denmark and New Zealand. “Botswana consistently ranks as one of the strongest-governed countries in Africa, especially in its role in containing corruption, regionally ranking the highest in both the World Bank assessment and Rule of Law index,” the report read.
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