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Finding the Real Size of African Economies

Discussion in 'International Forum' started by Akwaba, Feb 2, 2012.

  1. Akwaba

    Akwaba Senior Member

    Feb 2, 2012
    Joined: Sep 26, 2010
    Messages: 113
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    For some time it has been becoming more and more obvious to me that the GDP numbers used to gauge the size of many African economies are nonsense. Most African economies are significantly bigger than the GDP numbers let on. Some of you might wonder how this is possible given the "amazing expertise" of the IMF and World Bank. I think they are two reasons. Firstly the IMF and World Bank aren't as talented as we give them credit for. Secondly both the developing countries and the IMF have an Agenda to keep the GDP numbers artificially low. We have plenty of historical examples of the lack of talent that sometimes borders on incompetence.

    1. The Chinese "Miracle" that was totally missed at the beginning. Note it was called a miracle because the guys in the West did not understand how it could be possible. To the Chinese it was simple economic management.

    2. The recent global meltdown fiasco. Many saw this coming a mile away. But the IMF and World Bank were caught flat footed.

    Regarding keeping the GDP numbers artificially low. The developed countries like them low as it allows them to qualify for preferential rates, and least developing country treatment from the IMF and World Bank. They Basically get more free money or very low interest money. For the IMF and World Bank it ensures they have clients. Its kinda like the AID industry can't exists without poor countries.Some of the more recent glaring examples of this fact is Ghana. Recently Ghana realized it made more sense to finance their budget from Debt markets than from preferential lending. The IMF and World Bank bureaucracy and conditions were just not compensating for the very low rates. However ın the debt markets the debt to GDP ratıo for Ghana was consıdered quıte hıgh. So the Ghanaıans went ahead and looked more closely at theır economy and they realızed ıt was much bıgger than they thought. They readjusted theır statistıcs and overnıght the sıze of Ghana's economy doubled. All of a sudden their balance sheet looked much better. The they realized that their tax collection was not as good as they thought. A lot of work was done in this area, and within a year the tax collection significantly improved. Basically Ghana went from the mentality of being a beggar nation to a self reliant nation.

    As a side note this happened because along the way somewhere Ghana's GDP growth was severely under reported. I have a sense it is due to the IMF's belief that a GDP growth rate of more than 7% with low inflation is impossible. Oh, and China does not count.They are many other African economies that still have very reported GDP. However, there is one very easy approach that can be used to sniff out the low GDP countries. The countries cement consumption is a very good indicator of comparative economic sizes. As soon as someone has cash the first thing they do is go build a house. In addition it provides a good idea of the degree of fixed asset creation, which is form of saving and investment in the future. One of the more obvious countries with an artificially low GDP is Ethiopia. They are a couple of reasons for this, the country prints money to finance many development projects and in addition does not export many goods leading to a low exchange rate.

    Looking at Ethiopia's cement consumption we see that it is around 8 million tons (GDP $35 Billion)
    Ethiopian Cement Plants to Double Capacity Amid Construction-Industry Boom - Bloomberg
    New Factories to Enhance Cement Production in Ethiopia

    Now for comparison Nigeria's cement consumption is around 20 million tons (GDP $250 Billion)

    Tanzania's Cement consumption is around 1.6 million tons (GDP $30 Billion)

    Angola Cement consumption is around 7.5 million tons (GDP $ 110 billion)
    Angola to More Than Double Cement Output, Industry Association Chair Says - Bloomberg

    For Reference Turkey has a cement consumption of 50 million tons (GDP $ 800 billion)

    So if we used Turkey is the base line since it is also a fast expanding economy. The GDP for the mentioned African countries would be:

    Ethiopia = $128 Billion
    Nigeria = $320 Billion
    Tanzania = $25.6 Billion
    Angola = $120 Billion

    Notice how close Angola, and Tanzania are to the actual GDP numbers and how far Ethiopia is. I expect we will all be surprised by Ethiopia on many levels in the very near future. Just check the other threads and see all the infrastructure projects. Something is going on.