NUMBERS DON'T FEED NATIONS; RETHINKING GDP IN AFRICA

When African States attained independence from the colonial masters, there was a general feeling of empowerment among the general population having shaken off the colonial influence and attained the autonomy to organize their own affairs in the best way the know. However, colonial legacies remained deeply rooted in all aspect of African ethos. Its shocking for instance to note that ‘Nam Lolwe’ as it was known since antiquity was trashed not only by the white man but also by the African themselves when the name Lake Victoria, in honor of a queen ruling a kingdom thousand miles away, was imposed on the astounding historical landmark by John Speke in 1858. Many of such aspect of colonial legacies has been used to erroneously determine and represent development, economic advancement, social structures, civilization, education and governance in the African spectrum. Gross Domestic Product (GDP), as we know it today, is a concept developed by an economist Simon Kuznet in 1934 during the Great Depression, to measure national income and economic activity, is one of the historical imprints of colonialism that has defined African economies in a fundamentally flawed manner using entirely baseless economic indicators. 1GDP is the most commonly used single measure of a country’s economic activity, it represents the total value of final goods and services produced within a country during a specified time period, such as one year. Simply put, ²GDP is a measure of the net value of all final goods and services in monetary terms produced within the borders of a country in a given period of time. GDP set out to determine the measure of the new economic value created in a country in a specified period; say quarterly or yearly basis. Economist determine the GDP of a country by three main approaches, that is; adding up the output of goods and services less intermediate consumption (production approach), accounting for the income to factors of production (income approach) and tracking final spending by households a, government and non-profit institutions serving households, investment and the net exports (exports-imports). In Simon Kuznets second report to the US Congress, in an address titled ‘Uses and Abuses of National Income Measurement’ he stated that “…statements of national income are subject to this a type of illusion and resulting abuse, especially since they deal with matters that are center of conflict of opposing social groups where the effectiveness of an argument is often contingent upon oversimplification.” Such kind of abuse are avid among politicians seeking re-election and those defending their illusionary success despite the disgruntlement by the general citizenry. I find it rightfully upsetting when Kenyan leaders standing atop their high-end automobiles, blabbing how the Kenyan economy is witnessing an era of economic golden days solely based on a recent World Bank report. In one of president William Ruto’s addresses on 12 December 2023, ³he stated that Kenya’s GDP has grown by 5.4% in the past six month, which made Kenya the 29th fastest growing economy in the world. This was against the backdrop of extreme economic hardships exacerbated by the enactment of the Finance Act 2023 which had introduced a new set taxes and levies to add to the already burdened mwananchi. Such assertions are in most cases not easy to rebut, as the adage goes, numbers don’t lie. But Africans have for the longest time been misled by such statistics since they do not take into account the eccentric nature of the African economies. One of the most common characteristics of the novel African economies is the vast uneven distribution of income. This has been for the longest time been a pressing issue across the African continent. ⁴Top 10% income earners in Africa accounted for a substantial share of total income across the continent. South Africa, which is reported to have the largest economy in Africa with a GDP of $403 billion, ⁵has the highest inequality in the world with a Gini coefficient of around 0.67%. This is empirical evidence that the economic development has disproportionately benefited a handful, leaving the vast majority languishing in poverty. In Kenya, ⁶the gap between the richest and the poorest individual is one of the highest in Africa and was widened between 1997 and 2005/06. A poverty report released in 2023 showed that a fifth of the country’s rich population accounted for over 40% of the country’s total spending. ⁷Interestingly, Kenya’s richest county, Nairobi and the poorest, Turkana, according to the data have the highest and the second highest inequality respectively. Inequality in the two counties are higher than the national rate. While GDP gives a snapshot of economic activity, it fails to account for the income distribution in an economy. In developing nations economies with widespread disparity in income distribution, high GDP can harmoniously exist alongside wide spread poverty, which makes GDP as an economic indicator totally irrelevant. Furthermore, currency fluctuation is a defining characteristic of African economies. ⁸It refers to changes in exchange rate between one currency and another overtime driven by various political, economic and market factors. Significant currency variation renders it an imperfect metric for assessing the economy’s health. For instance, over the past decade, Kenyan Shilling has registered consistent depreciation against the major trading currencies, particularly the US Dollar (USD). ⁹In October 2018, the exchange rate stood at approximately 100 KES to 1 USD. In October 2023, the rate declined to 150 KES to 1 USD marking a 50% depreciation in 5 years. Since GDP valuation is done in dollars in most instances, if the amount of product produced in the Kenyan economy remained the same during those 5 years, the GDP valuation (nominal GDP) would have been lower occasioned by currency fluctuation. Since GDP is highly susceptible to currency fluctuation, exclusive dependance on it as an economic indicator can be utterly deceptive especially in the developing economies with erratic exchange rates as is the case in African states. The time is nigh for African leaders, economist and policy makers to have an Afrocentric view of matters economy by paying attention to details previously looked over by the Eurocentric approaches to such issues. A more pragmatic framework should be adopted including adoption of the Human Development Index (HDI) which takes into account; health, education and standard of living which have totally been omitted by GDP as an economic indicator. A typical African economy could be such that a few major companies or a particular sector being the key economic growth engine against a back drop an ailing education sector coupled with socio economic hardships. HDI attempts to draw a more precise state of affairs without whitewashing the failing economic policies put in place and the impact on the citizenry.