metadata: authors: 0: author: Arbache,Jorge Saba
1: author: Page,John
count: Africa
docna: 0: docna: Hunting for Leopards : long run country
            income dynamics in Africa
docty: Policy Research Working Paper
subtopic: Economic Theory & Research,Industrial Economics,Urban Water & Waste Management,Poverty Reduction Strategies,Economic Development,Economic Growth,Inequality
teratopic: Macroeconomics and Economic Growth,Poverty Reduction
abstracts: cdata!: This paper examines the country-level
            dynamics of long-run growth in Africa between 1975 and 2005.
            The authors examine how growth has affected mobility and the
            distribution of income among countries.  They analyze
            changes in cross-country income structure and convergence,
            and look for evidence of the formation of country groups or
            "clubs." Using a novel method of breaking up the
            growth histories of African economies into medium-term
            spells of growth accelerations and declines, the authors
            investigate whether a group of African "leopards"
            - the regional equivalent of Asia's "tigers"
            - is beginning to emerge.
repnme: repnme: Hunting for Leopards : long run country
            income dynamics in Africa
display_title: Hunting for Leopards : long run
            country income dynamics in Africa
listing_relative_url: /research/2008/09/9840056/hunting-leopards-long-run-country-income-dynamics-africa
topicv3: Economic Growth m1326241 471,Natural Capital Accounting m1326632 606,Poverty m1326687 695,Income Inequality m1503891 2668,Dutch Disease m1583679 4708
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Macroeconomics and Economic Growth,Poverty Reduction
no_of_pages: 38
author_keys: 0: author_key: 806932
1: author_key: 91200
model_extractions: WPS4715 Policy ReseaRch WoRking PaPeR 4715 Hunting for Leopards: Long Run Country Income Dynamics in Africa _Jorge Saba Arbache John Page_ The World Bank Africa Region Office of the Chief Economist September 2008
Policy ReseaRch WoRking PaPeR 4715

# **Abstract**

This paper examines the country-level dynamics of long-run growth in Africa between 1975 and 2005. The authors examine how growth has affected mobility and the distribution of income among countries. They analyze changes in cross-country income structure and convergence, and look for evidence of the formation of country groups or “clubs.” Using a novel method of breaking up the growth histories of African economies into medium-term spells of growth accelerations and declines, the authors investigate whether a group of African “leopards”—the regional equivalent of Asia’s “tigers”—is beginning to emerge.

This paper—a product of the Office of the Chief Economist, Africa Region—is part of a larger effort in the department to investigate growth and poverty in Africa. Policy Research Working Papers are also posted on the Web at http://econ. worldbank.org. The author may be contacted at jarbache@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Hunting for Leopards: Long Run Country Income Dynamics in Africa**

Jorge Saba Arbache and John Page<sup>1</sup> Keywords: GDP per capita, Growth, Sub-Saharan Africa. JEL Code: O11, O47, O55, O57.

Corresponding author: Jorge Saba Arbache, The World Bank, 1800 H St, NW, Washington, DC, 20433; email jarbache@worldbank.org.

> 1 Office of the Chief Economist, Africa Region, The World Bank, and The Brookings Institution, Washington DC and The World Bank, respectively.  The findings and interpretations of this paper are those of the authors.  They do not represent the views of the World Bank, its Executive Directors or the countries they represent.  We would like to thank participants at the World Institute for Development Economics Research “Southern Engines of Global Growth: China, India, Brazil, and South Africa” conference, held in Helsinki, Finland, September 7–8, 2007 for helpful comments and suggestions on an early version of this paper.
# **1. Introduction**

After stagnating for much of its post-colonial history, economic performance in Sub-Saharan Africa (Africa) has markedly improved. Since 1995, average economic growth has been close to 5 percent per a year. Countries with at least 4 percent GDP growth now constitute about 70 percent of the region’s total population and 80 percent of its GDP. Per capita income grew by 1.6 percent a year in the late 1990s and by 2 to 3 percent in each year since 2000.

Recent popular and academic writing has suggested that Africa may be at a turning point in its long economic decline (see for example Commission for Africa 2005; Ndulu et al. 2007). But, predictions of Africa’s imminent economic recovery or demise have proved wrong on numerous occasions in the past 40 years. Growth in Africa since 1975 has been lower and more volatile than in any other region of the world – developed or developing (table 1). And, unlike East and (more recently) South Asia it has had few regional “champions” to serve as models of successful, rapidly growing economies.<sup>2</sup>

**<u>Table 1:  GDP per capita and  growth by region (weighted data)</u>**

|**Region**|**1975-80**|**1981-85**|**1986-90**|**1991-95**|**1996-00**|**2001-05**|
|---|---|---|---|---|---|---|
||||**GDP pe**|**r capita**|||
|Sub-Saharan Africa|1,928|1,844|1,782|1,648|1,668|1,768|
|EastAsia &Pacific|905|1,227|1,686|2,407|3,399|4,595|
|Latin America & Caribbean|6,020|6,295|6,315|6,450|6,978|7,205|
|MiddleEast & North Africa|4,179|4,180|4,055|4,326|4,651|5,197|
|South Asia|1,132|1,268|1,505|1,745|2,110|2,530|
|Low &middleincome|2,278|2,560|2,881|3,045|3,513|4,219|
||||**Gro**|**wth**|||
|Sub-Saharan Africa|-0.06|-1.60|-0.21|-1.64|0.79|1.79|
|EastAsia &Pacific|5.26|6.12|5.76|9.10|5.63|7.06|
|Latin America & Caribbean|3.31|-0.95|-0.43|1.61|1.53|1.21|
|MiddleEast & North Africa|-0.20|2.41|-1.20|1.18|1.91|2.78|
|South Asia|1.03|3.14|3.89|3.01|3.59|4.65|
|Low &middleincome|2.79|1.99|1.93|1.56|3.23|4.58|

Note: All Sub-Saharan African countries are included in calculations.

Using the most recent purchasing power parity (PPP) data for 44 sub-Saharan African countries, this paper examines country-level dynamics of long-run growth in Africa between 1975 and 2005. The next section describes our data and the characteristics of Africa’s long-run growth. Here we confirm previous findings that the

> 2 Botswana and Mauritius are notable exceptions to this statement, a theme to which we shall return below.

2
major characteristics of growth in Africa are its low long run trend and its extreme volatility at the country level. We find no persuasive evidence of growth persistence within countries and only weak evidence of persistence at the regional level since 1990.

Section 3 examines how the growth recovery has affected the distribution of income among countries in the region. We describe the country level distribution of income in Africa and test for convergence in per capita income levels between richer and poorer countries. We find no evidence that poorer countries in Africa are converging to the income levels of their richer neighbors. We find persuasive evidence of inertia in per capita incomes for economies in Africa. Where countries began in terms of relative income in 1975 is an excellent predictor of where they ended up in 2005. Because the rich economies are growing faster than their poorer neighbors we also find that the intercountry distribution of income has become less equal over time.

The fourth section of the paper presents our hunt for the leopards. One indication that Africa has indeed reached a turning point, would be evidence that a group of African economies with high and accelerating long run growth – “leopards”, the regional equivalent of Asia’s “tigers” – is beginning to emerge. We first identify four groups of countries according to their income levels and growth experiences, and we look for some common characteristics that are associated with these groups. Two distinct and stable income groups or “clubs”, rich and poor, are identifiable in the data. Our most striking finding is that transitions from low income to higher income levels have been rare in the last 30 years. Only 2 countries, both oil exporters, made the transition. We then use the approach to growth accelerations and decelerations developed by Arbache and Page (2007) to see if a subset of countries with a high frequency of rapid, growth accelerations emerges during 1995-2005. Based on our results for income transitions, growth thresholds, and growth accelerations we identify six economies that show the potential to be Africa’s growth leaders. Section 6 concludes.

# **2.  Chaos without Change:  Africa’s Long Run Growth 1975-2005**

This section describes long run trends in per capita income growth for 44 African economies. Data on GDP per capita at 2000 international PPP prices are taken from the 3
_World Development Indicators_ and span the years 1975 to 2005.<sup>3</sup> Our sample contains all sub-Saharan African countries for which PPP GDP data exist. There are no GDP per capita PPP data for Liberia, San Tomé and Principe, and Somalia, and they are excluded from the analysis.<sup>4</sup> The un-weighted mean GDP per capita between 1975 and 2005 for the 44 countries in our sample was $2,306. Mean GDP per capita using GDP weighted data was $1,702.<sup>5</sup> Table A1 in the appendix presents descriptive statistics for income and growth at the country level.

Figure 1 presents the time paths of un-weighted and GDP weighted per capita income growth rates.<sup>6</sup> Although the trajectories of the un-weighted and weighted series appear similar, their means and variances are significantly different. The region’s unweighted average growth rate was 0.71 percent and its standard deviation (SD) was 6.32 per cent. The mean and SD of the weighted data are –0.17 percent and 1.7 percent, respectively, reflecting the fact that Africa’s bigger economies grew more slowly than its smaller ones. Between 1975 and 2005, South Africa, which represents on average 42

**Figure 1: GDP per capita growth 1975-2005**

<!-- Start of picture text --> Figure 1 a: Un weighed d ata<br>8<br>4<br>0<br>8<br>-4<br>4<br>0<br>-4<br>-8<br>1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004<br>Growth Trend Cycle<br><!-- End of picture text -->

> 3 !975 is the first year available for this indicator.

> 4 We, thus, have a panel of data with 44 countries and 31 periods.  Our sample accounted for 98.4 percent of population and 99 percent of regional GDP in 2005.  Although Equatorial Guinea is in our sample, we removed the country from charts, econometrics, and aggregate descriptive statistics because its extremely high growth rates in recent years distort many of the results.

> 5 Although there are differences between GDP per capita at PPP and non-PPP, those differences are confined to levels and do not affect growth trajectories.  PPP and non-PPP growth data share similar statistical properties.  See Arbache and Page (2008) for a fuller discussion.

> 6 We employ the Hodrick-Prescott filter in Figure 1 to smooth the estimate of the long term trend component of the GDP growth series.

4
<!-- Start of picture text --> Figure 1b: Weighted da ta<br>4<br>4<br>0<br>2<br>-4<br>0<br>-2 -8<br>-4<br>1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004<br>Growth Trend Cycle<br><!-- End of picture text --> percent of the region’s GDP, grew in per capita terms by an average of only 0.12 percent a year; and Nigeria, the region’s second-largest economy, (13.50 percent of GDP) grew by 0.28 percent.

Both the un-weighted and weighted series show a positive trend beginning in the mid-1990s. In the period 1995–2005, un-weighted average GDP growth per capita was 1.81 percent, more than twice the long-term average. In order to test for statistically meaningful breaks in mid-1990s, we ran recursive residual estimations and other stability tests. Figure 2 shows the recursive estimation for the growth series. There is statistical evidence that growth accelerated around 1995. Both the Chow breakpoint and forecast tests support the conclusion that a structural break in the income growth series occurred in mid-1990s.<sup>7</sup>

**Figure 2 – Stability test – Recursive residual estimation of growth rates**

<!-- Start of picture text --> 4<br>2<br>0<br>-2<br>-4<br>78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05<br>Recursive Residuals ± 2 S.E.<br><!-- End of picture text -->

> 7 We also find evidence of a structural break in the per capita income series at about the same time.

5
Growth rates for individual countries were low, and the coefficient of variation was high, indicating that growth was highly erratic (table A1). Figure 3 shows that African economies have by far the least predictable growth globally, as measured by the coefficient of variation (CV). Countries with different levels of income (like South Africa and Malawi), geographical locations (like Mali and Senegal), resource endowments (like Nigeria and Ethiopia), and long-term GDP per capita growth patterns (like Gabon, Niger, Madagascar, and Swaziland) share a common characteristic, high growth volatility.

**Figure 3: GDP per capita growth - mean, standard deviation and coefficient of variation by region (GDP weighted data), 1975-2005**

<!-- Start of picture text --> 8<br>6<br>4<br>2<br>0<br>Mean<br>Sub-Saharan East Asia & Latin America Low & middle South Asia Middle East &<br>-2 Africa Pacific & Caribbean income North Africa SD<br>CV<br>-4<br>-6<br>-8<br>-10<br>-12<br><!-- End of picture text --> Table 2 decomposes the standard deviation of GDP per capita and its growth into within and between country components. Growth is highly unstable in individual countries; the ratio of the within-country SD to the total SD of growth rates is 94 percent. The Comoros (–22.6), Ethiopia (18.4), Guinea-Bissau (–11.9), Malawi (24.6), Mauritania (34.6), Namibia (19.8), Nigeria (18.7), and South Africa (20.6) are notable for their extremely high volatility, even by regional standards.

Only three economies – Botswana (0.5), Cape Verde (0.8), and Mauritius (0.4) – have coefficients of variation of less than 1.0. These three economies are also notable for 6
their high long term growth rates, ranking second through fourth out of the sample in terms of their overall rate of per capita income growth 1975-2005.<sup>8</sup>

|**Table 2: Decomp**|**osition of standa**|<br>**rd deviation of G**|<br>**DPper capita and growt **|<br>**h - 1975-2005**|
|---|---|---|---|---|
|**Variable**|**Mean**|**SD overall**|**SD between countries**|**SD within countries**|
|GDPper capita|2,306|2,633|2,490|809|
|GDPper capitagrowth|0.71|6.32|2.26|5.95|

Notes: Statistics calculated from panel data.

Kernel densities of the distribution of per capita GDP growth rates at ten year intervals are shown in figure 4. The growth acceleration of 1995-2005 is clearly visible in the rightward shift of the distribution.

**Figure 4: Density of GDP per capita growth across countries**

<!-- Start of picture text --> Figure 4a: 1976 vs. 2005 Figure 4b: 1976 vs. 1985<br>-10 0 10 20 -10 0 10 20<br>Growth Growth<br>kdensity growth_1976 kdensity growth_2005 kdensity growth_1976 kdensity growth_1985<br>Figure 4c: 1985 vs. 1995 Figure 4d: 1995 vs. 2005<br>-10 0 10 20 -10 0 10 20<br>Growth Growth<br>kdensity growth_1985 kdensity growth_1995 kdensity growth_1995 kdensity growth_2005<br>.2 .08<br>.15 .06<br>.1 .04<br>Kernel density Kernel density<br>.05 .02<br>0 0<br>.15 .2<br>.15<br>.1<br>.1<br>Kernel density Kernel density<br>.05<br>.05<br>0 0<br><!-- End of picture text --> The most striking change in the distribution over time, however, is the extent to which growth rates have converged (figure 4a). The 1976 distribution is remarkably flat. Since then, there have been increasingly more acute peaks around the mean (figures 4b - 4d). The SD of growth rates dropped from 8.2 percent in 1976 to 3.6 percent in 2005.

8 Equatorial Guinea, which ranks first, and Lesotho, which ranks fifth, have the same coefficient of variation of growth of about 1.7.

7
Two sets of outliers – high performers and economies in decline – also appear to be emerging in the 1995 and 2005 distributions (figures 4c and 4d).

An important question with respect to long-term growth is whether it has been persistent. Figure 5 shows the results of regressing average GDP per capita growth on growth in the first year of our series, 1975-1976: where Δ<sup>_Y_</sup> _i_ is the average growth of country _i_ , and Δ<sup>_Y_</sup> _i_ 76 is the growth rate of country _i_ in 1976, the first year in our series. Not surprisingly, given the extreme variability of growth rates, there is no evidence of growth persistence. The coefficient of β is close to zero and insignificant ( β = 0.061, _t_ = 1.65).<sup>9</sup> Growth in 1976 for the representative African country fails on to predict average growth in the subsequent 30 years.

**Figure 5: GDP per capita growth as a function of initial conditions**

<!-- Start of picture text -->
-10 0 10 20 30<br>GDP growth 1976<br>95% CI Fitted values<br>gdp growth mean<br>6<br>4<br>2<br>0<br>Average GDP growth<br>-2<br>-4<br><!-- End of picture text -->

We also stratified the data before and after 1995 to assess whether there was evidence of persistence during either of the two sub-periods:

> 9 Gabon grew 31 percent in 1976, biasing the results. So, we removed it from the regression.

8
where Δ<sup>_Y_</sup> _i_ 76 − 94 is average GDP per capita growth between 1976 and 1994, Δ<sup>_Y_</sup> _i_ 95 − 05 is average GDP per capita growth between 1995 and 2005, and Δ<sup>_Y_</sup> _i_ 76 and Δ<sup>_Y_</sup> _i_ 95 are the growth rate of country _i_ in 1976 and 1991.

> The results are shown in figures 6a and 6b.  The coefficients of β are 0.06 (1.38) and 0.21 (3.06), respectively, for the first and second periods, suggesting that growth became more predictable from the mid-1990s on, a result that is in line with the kernel density exercises.<sup>10</sup>

**Figure 6: Average growth as a function of initial conditions by time period**

<!-- Start of picture text --> Figure 6a Figure 6b<br>-10 0 10 20 30 -10 -5 0 5 10 15<br>GDP growth 1976 GDP growth 1995<br>95% CI Fitted values 95% CI Fitted values<br>growth_mean_76_94 growth_mean_95_05<br>15 10<br>10<br>5<br>5<br>0<br>0<br>Average GDP growth 1976-1994 Average GDP growth 1995-2005<br>-5 -5<br><!-- End of picture text --> As an additional check for persistence at the individual country level we calculated the correlation coefficients of growth over time for individual countries. Statistically significant coefficients indicate that country growth rates follow predictable patterns. The very large majority of correlation coefficients before 1995 are not statistically significant, but about a third of the coefficients of 1995-2005 are significant (Arbache and Page, 2008). This suggests that at the individual country level growth was generally erratic, although there was increased persistence between 1995 and 2005.<sup>11</sup> 10 We removed Rwanda from regression and figure 6b because it grew 37.5 percent in 1995 distorting the results.

11 Easterly et al. (1993) found for a worldwide sample that correlation of growth across decades is also very low, averaging 0.3.

9
In sum for the region as a whole, and for the vast majority of African economies, growth from 1975 to 2005 has been both disappointing and volatile. Growth on average has accelerated and has shown a weak tendency to become more persistent over time, but for the individual African country, past growth helps very little to predict future growth.

# **3.  Rich Country, Poor Country**

Africa’s mean GDP per capita had a slowly rising long-term trend, consisting of about 20 years of virtual stagnation with an inflexion point upward in the mid 1990s (figure 7).<sup>12</sup> Income per person in the average African economy declined into the middle of the 1990s and then recovered. Weighting by GDP (figure 7b) gives a U-shaped pattern of GDP per capita, reaching a minimum in the mid-1990s. Africa’s largest economies, measured in terms of GDP, experienced some of its greatest income declines between 1975 and 1994. By 2005, income weighted GDP per capita had not yet recovered to the levels observed in mid-1970s.

**Figure 7: GDP per capita 1975-2005**

<!-- Start of picture text --> Figure 7a: Unweighted data<br>2800<br>2400<br>100<br>2000<br>0<br>-100<br>1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004<br>GDP per capita Trend Cycle<br><!-- End of picture text -->

> 12 We employ the Hodrick-Prescott filter in Figure 7.

10
<!-- Start of picture text --> Figure 7b: Weighted data<br>1900<br>1800<br>1700<br>80<br>1600<br>40<br>1500<br>0<br>-40<br>-80<br>1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004<br>GDP per capita Trend Cycle<br><!-- End of picture text --> For most individual African economies GDP per capita registered only modest increases between 1975 and 2005, and many countries – such as the Democratic Republic of Congo, Cote D’Ivoire, and Zimbabwe – had declining per capita incomes over the period. The SD of income per capita was generally low, and the CV of many countries is close to zero. Most of the variation (69 percent) in Africa’s average income per person occurs between countries (table 2) rather than within them.

Figure 8 shows comparative kernel density plots of GDP per capita for at ten year intervals between 1975 and 2005. The kernel plot is helpful in identifying shifting patterns in the distribution of country level incomes per capita, such as the formation of identifiable groups or “clubs” (Quah 1993a, 1993b). The slight movement toward the right of the GDP per capita plot of 2005 compared with that of 1975 (figure 8a) reflects the region’s slow economic growth. Most of that movement took place between 1995 and 2005, when we observe a noticeable slide to the right, reflecting increasing incomes throughout Africa (figure 8d). Since the mid-1990s, the variance of income per capita also appears to have declined.

Since 1975 there has been a pronounced bimodality in the distribution of income among countries in Africa. The twin peaks observed in each of the panels of figure 8 define two groups of countries, rich and poor, which are relatively stable over the thirty year period. The most significant shift toward polarization of the country level distribution occurred between 1985 and 1995 (figure 8c), a period when many countries were devastated by conflicts. Polarization was reduced somewhat between 1995 and 2005.

11
**Figure 8: Density of GDP per capita across countries**

<!-- Start of picture text --> Figure 8a: 1975 vs. 2005 Figure 8b: 1975 vs. 1985<br>6 7 8 9 10 6 7 8 9<br>Log GDP per capita Log GDP per capita<br>kdensity ln_gdp_1975 kdensity ln_gdp_2005 kdensity ln_gdp_1975 kdensity ln_gdp_1985<br>Figure 8c: 1985 vs. 1995 Figure 8d: 1995 vs. 2005<br>6 7 8 9 10 6 7 8 9 10<br>Log GDP per capita Log GDP per capita<br>kdensity ln_gdp_1985 kdensity ln_gdp_1995 kdensity ln_gdp_1995 kdensity ln_gdp_2005<br>.8 .8<br>.6 .6<br>.4 .4<br>Kernel density Kernel density<br>.2 .2<br>0 0<br>.6<br>.6<br>Kernel density .4 Kernel density .4<br>.2 .2<br>0 0<br><!-- End of picture text --> The second peak virtually disappears in each ten year period when we remove Botswana, Cape Verde, Gabon, Mauritius, Namibia, the Seychelles, and South Africa from the data. Thus these seven countries form a stable, rich country club.<sup>13</sup> With the exception of South Africa the members of the club are small economies, and they have relatively little in common with one another. Botswana, Cape Verde and Mauritius had high growth – even by global standards – and low growth volatility. The Seychelles had more moderate growth with high volatility. Namibia and South Africa hardly grew but were highly erratic growers, and Gabon declined with high volatility. Cape Verde Mauritius and the Seychelles are islands. Botswana is landlocked and resource rich.

Table 3 shows the ratio of 43 countries’ GDP per capita to that of South Africa, the richest African economy in 1975. These data show little upward income mobility among African countries. Despite South Africa’s long period of slow growth, only 9

> 13 In 2005, those countries hosted about 8.5 percent of the regional population, but produced 44 percent of regional GDP.

12
countries – Botswana, Cape Verde, Equatorial Guinea, Lesotho Mauritius, the Seychelles, Sudan, Swaziland and Uganda – had an increase in their GDP per capita of at least 5 percentage points relative to South Africa. Of these only Sudan and Uganda are not members of the rich country club identified above. Botswana, Mauritius and the Seychelles were the only economies to overtake South Africa in terms of per capita income. An important “neighborhood effect” is apparent in the data. Botswana, Lesotho, and Swaziland, all to a large degree integrated into the South African economy, are among the faster converging economies.

**<u>Table 3: GDP per capita relative to South Africa</u>**

|**Country**|**1975 or**<br>**earliest**<br>**year**|**2005 (or**<br>**most recent**<br>**year)**|**Country**|**1975 or**<br>**earliest**<br>**year**|**2005 (or**<br>**most recent**<br>**year)**|
|---|---|---|---|---|---|
|Angola|0.19|0.21|Lesotho|0.12|0.30|
|Benin|0.09|0.10|Madagascar|0.13|0.08|
|Botswana|0.19|1.12|Malawi|0.06|0.06|
|BurkinaFaso|0.08|0.11|Mali|0.08|0.09|
|Burundi|0.08|0.06|Mauritania|0.20|0.20|
|Cameroon|0.18|0.21|Mauritius|0.40|1.14|
|Cape Verde|0.23|0.52|Mozambique|0.07|0.11|
|Central African<br>Republic|0.17|0.11|Namibia|0.65|0.68|
|Chad|0.10|0.13|Niger|0.10|0.07|
|Comoros|0.19|0.18|Nigeria|0.10|0.10|
|Congo,Dem.Rep.|0.23|0.06|Rwanda|0.09|0.11|
|Congo,Rep.|0.10|0.11|Senegal|0.15|0.16|
|Cote d'Ivoire|0.25|0.15|Seychelles|0.76|1.45|
|EquatorialGuinea|0.13|0.73|SierraLeone|0.10|0.07|
|Eritrea|0.09|0.10|Sudan|0.12|0.19|
|Ethiopia|0.09|0.09|Swaziland|0.32|0.43|
|Gabon|0.97|0.63|Tanzania|0.05|0.07|
|Gambia,The|0.16|0.17|Togo|0.18|0.14|
|Ghana|0.20|0.22|Uganda|0.08|0.13|
|Guinea|0.19|0.21|Zambia|0.14|0.09|
|Guinea-Bissau|0.11|0.07|Zimbabwe|0.29|0.18|
|Kenya|0.10|0.11||||

Note: The ratio is the fraction of GDP per capita to South Africa's.

Twenty three countries experienced little or no change in their income levels relative to South Africa, and 11 – including Cote d’Ivoire, Gabon, Madagascar, and Zimbabwe – had sharp deteriorations. The increase in income divergence was particularly sharp in Cote d’Ivoire, the Democratic Republic of Congo and Gabon. It is 13
interesting to note that a majority of resource-rich countries (including oil exporters) did not improve their relative positions (Angola, Chad, Democratic Republic of the Congo, Nigeria and Zambia), providing support to the arguments of Collier (2007) and others that the “natural resource curse” is particularly relevant in Africa.

A more formal test of whether the income per capita of poorer African countries is converging toward the regions’ richer ones can be conducted using the following unconditional convergence model: where Δ<sup>_Y_</sup> _i_ is the average growth rate of country _i_ , and<sup>_Y_</sup> _i_ 75 is the GDP per capita of country _i_ in 1975. For convergence to occur, poor countries have to grow faster (Barro 1991; Barro and Sala-i-Martin 1991), making the predicted sign of β in equation (4) negative.

<!-- Start of picture text --> Figure 9: Average growth as a function of initial conditions<br>6.5 7 7.5 8 8.5 9<br>Log GDP 1975<br>95% CI Fitted values<br>gdp growth mean<br>.<br>6<br>4<br>2<br>0<br>-2<br>Average GDP per capita growth<br>-4<br><!-- End of picture text --> The regression – shown graphically in figure 9 – offers no evidence of unconditional convergence. The estimated coefficient is not significantly different from zero ( β = –0.122, _t_ = –0.29), indicating that in Africa the initial level of income alone has 14
no effect on the growth rate.<sup>14</sup> These results confirm our heuristic evidence of substantial inertia in the income distribution and are consistent with other research. McCoskey (2002) for example found no evidence of unconditional convergence in Africa using long run panel data.

We also tested for convergence in the period 1995-2005 – due to the structural break that took place in the growth series at about that point – by regressing average growth during 1995-2005 on income in 1995. The results ( β = 0.43, _t_ = 0.19) are essentially the same as those reported for equation (4).<sup>15</sup> Africa’s poorer economies were not converging toward the income levels of their richer neighbors, even after the growth acceleration.

**Figure 10: Lorenz curves – GDP per capita**

<!-- Start of picture text --> 0 .2 .4 .6 .8 1<br>Cumulative population proportion<br>Year==1975 Year==1985<br>Year==1995 Year==2005<br>1<br>.8<br>.6<br>.4<br>Lorenz GDP (by Year)<br>.2<br>0<br><!-- End of picture text --> The lack of income convergence over the past 30 years has led to an increase in inequality of per capita incomes among countries across Africa. Lorenz curves of the GDP per capita at ten year intervals 1975-2005 are presented in figure 10. These show

> 14 The statistical and qualitative results remain the same when we remove outliers such as Botswana and the Democratic Republic of Congo from the regression.

> 15 We also split the sample into sub periods before 1990 and after 1990 and regressed average growth in each period on the level of income in 1975.  The estimated coefficients of both equations are not significant.

15
increasing income inequality in each ten year period. The sharpest rise in inter-country inequality took place between 1985 and 1995. This is consistent with the growing polarization of income and the emergence of the rich country club shown in the kernel densities.

The ratio of income of the richest 10 percent of countries to the poorest 10 percent of countries rose from 10.5 in 1975 to 18.5 in 2005. In 1975–80 South Africa’s GDP per capita (then the highest in the region) was 17 times higher than that of Malawi. In 2000– 05, the gap between the highest GDP per capita country – the Seychelles – and Malawi had grown to 24 times.

# **4.  Where You Start Is Where You End Up**

The previous sections identified some stylized facts about long-term GDP per capita growth and the distribution of income at the country level in Africa. These stylized facts – low and volatile growth, the formation of clubs, lack of convergence in income levels, and rising inter country income inequality – point toward little dynamism in income growth. In this section, we examine the income dynamics of countries in greater detail.

We begin by asking the question: how stable is the per capita income of a typical country in Africa? To test for income stability we run the following regression: where<sup>_Y_</sup> _i_<sup>is the mean GDP per capita of country</sup><sup>_i_, and</sup><sup>_Y_</sup> _i_ 75 is the GDP per capita of country _i_ in 1975. Given our prior evidence of little income dynamism, we expect that average income in a typical African economy will be close to its initial income in 1975.16 If so, the coefficient estimate of β should be close to 1. A region with a large number of dynamic economies would have an estimated coefficient of significantly more than 1, indicating that initial income under predicts average income.

> 16 For countries for which GDP data was not available in 1975 we used the earliest available year.

16
<!-- Start of picture text --> Figure 11: Mean GDPpc as a function of GDPpc in 1975<br>6.5 7 7.5 8 8.5 9<br>Log GDP 1975<br>95% CI Fitted values<br>Log GDP mean 1975-2005<br>10<br>9<br>8<br>Mean GDP per capita7<br>6<br><!-- End of picture text --> The result, presented in figure 11, shows a line near 45 degrees ( β = 0.901, _t_ = 7.41). Apart from a few cases, the average GDP per capita 1975-2005 closely mirrors that of 1975, reflecting a high degree of inertia.<sup>17</sup> There are some positive outliers, such as Botswana, Cape Verde, Lesotho, Mauritius and Namibia, whose average GDP per capita are well above their 1975 levels. Negative outliers such as the Cote d’Ivoire, Democratic Republic of the Congo, Eritrea, Gabon, Madagascar and Zambia, had average GDP per capita well below their initial levels of income.<sup>18</sup> To check whether there was a change in income stability accompanying the growth acceleration after 1995 we ran the same stability tests for average GDP per capita for the sub periods 1975-1994 and 1995-2005 by regressing average income in those periods on the initial level of income in 1975. The results are highly significant and close to 1 (estimated coefficients of 0.891 and 0.909, respectively). These are virtually identical to the results of equation 5, implying that the income structure remained highly stable, even after the break in the income and growth series in around 1995.

> 17 We also calculated the year to year correlation coefficients of GDP per capita within countries over time. Most coefficients are large and significant, thus supporting the finding of significant inertia in income levels.

> 18 We also ran the same model while controlling for growth SD, and the results were virtually the same.

17
# **5.  Hunting for Leopards**

Our results to this point are somewhat discouraging from the perspective of identifying a major turn-around in Africa’s economic fortunes. We find no evidence of income convergence and very little evidence of significant income mobility across countries in the region. Low and volatile growth in Africa has been associated with a remarkably stable structure of incomes. For the most part initial income in 1975 equals average income for the entire period 1975-2005 and average income during 1995-2005.

It is possible, however, that within this stable overall structure individual countries stand out by exhibiting more dynamic behavior. These “leopards” – Africa’s equivalent of Asia’s “tigers” – might be expected to have made the transition, common to China, Korea, Malaysia, and other newly industrializing Asian economies, from low income to higher income status. Korea for example began its rapid growth period at levels of income well below that of the average Asian economy (and equal to that of Ghana) and finished at levels well above.

In an attempt to identify dynamic economies we constructed a typology based on income levels. We split the time-series into two sub periods, 1975–94 and 1995–2005. For each year, we calculated Sub-Saharan Africa’s median GDP per capita and then checked whether each country’s GDP per capita was above or below the median. A country whose GDP per capita remained above the median for the majority of years in 1975–94 was assigned to category “A,” meaning that its GDP per capita was generally “above” the benchmark. A country whose GDP per capita remained below the median for most years was assigned category “B,” meaning “below”.<sup>19</sup> The same exercise was carried out for 1995–2005. Because it is possible for a country to switch categories, we have four possible combinations:<sup>20</sup>

> 19 Bosworth and Collins (2003) had a similar method for grouping countries. They grouped 84 countries from all regions as higher income and lower income, according to the per capita income above or below the median. However, they took the income per capita in 1960, their first year, as reference for grouping. Garner (2006) used average long-term growth rates to classify African countries. We also tested other criteria for grouping countries, using means instead of medians, growth instead of GDP per capita level, and clustering analysis, among others; but the present exercise provided the most robust results. We ran the median exercise removing South Africa, but the classification of countries remained basically the same.

> 20 Table A2 in the annex shows the countries’ GDP per capita and median by year and respective assignments to country groups.

18
- **AA** – Countries with GDP per capita above Africa’s median GDP per capita for most years of the first and second periods;

- **BB** – Countries with GDP per capita below Africa’s median GDP per capita for most years of the first and second periods;

- **BA** – Countries with GDP per capita that switches from below to above Africa’s median GDP per capita from the first to the second period;

- **AB** – Countries with GDP per capita that switches from above to below Africa’s median GDP per capita from the first to the second period.

The results of this classification exercise are presented in Table 4. Figure 12 shows the GDP per capita by country group over time. Basic statistics on the country groups are presented in Table A3 in the appendix.

**Table 4: Countries by country-group, growth, and other characteristics**

|**Country-**<br>**group**|**Shrinking economies (avrg. growth**<br>**below 0)**|**Stagnant (avrg. growth between 0**<br>**and 0.71%)**|**Growers (avrg. growth above**<br>**0.71%)**|
|---|---|---|---|
|AA|$ Comoros (-0.14)<br># Cote d'Ivoire (-1.57)<br># Gabon (-0.91)<br>$ Togo (-0.60)<br>% Zimbabwe (-1.26)|# Angola (0.70)<br>$ Gambia (0.29)<br>$ Ghana (0.60)<br>& Guinea (0.62)<br>$ Mauritania (0.10)<br>$ Senegal (0.36)<br>$ South Africa (0.12)|& Botswana (6.24)<br>$ Cape Verde (3.26)<br># Cameroon (0.81)<br>% Lesotho (3.27)<br>$ Mauritius (4.22)<br>& Namibia (1.15)<br>$ Seychelles (2.47)<br>% Swaziland (1.15)|
|BB|% Burundi (-0.46)<br>$ Guine Bissau (-0.70)<br>$ Madagascar (-1.38)<br>% Niger (-1.00)<br>& Sierra Leone (-0.57)<br>& Zambia (-1.16)|$ Benin (0.60)<br># Congo (0.61)<br>% Ethiopia (0.42)<br>$ Kenya (0.48)<br>% Malawi (0.22)<br># Nigeria (0.28)|% Burkina Faso (1.21)<br># Chad (1.34)<br>$ Erithrea (1.96)<br>% Mali (0.86)<br>$ Mozambique (2.07)<br>% Rwanda (1.68)<br>$ Tanzania (1.69)<br>% Uganda (1.92)|
|BA|||# Equatorial Guinea (10.55)<br># Sudan (1.72)|
|AB|% Central African Rep. (-1.27)<br>% DRC (-3.95)|||

Notes: 0.71% is the average growth rate in 1975-2005. Average growth rate in parentheses. # Oil exporter.

& Non-oil resource intensive.

$ Non-resource intensive, coastal country.

% Non-resource intensive, landlocked country.

19
Again, we find evidence of two clubs – rich nations and poor nations – with little mobility between them.<sup>21</sup> GDP per capita is four times higher in AA countries than in BB countries, and _t_ -statistics reject the equality of means of GDP per capita between the two groups. There was also increasing divergence in income levels between the two groups over time (figure 12). Income per capita on average remained largely stagnant for AA countries between 1975 and 1995, but it increased substantially thereafter. The average per capita income of the BB countries declined until around 1995 after which there was a slight recovery, but the average real income of the BB group was the same in 2005 as in 1975. The CV of GDP per capita of AA countries increased from 0.77 in 1975-94 to 0.87 in 1995-2005. The CV of the BB group increased from 0.26 to 0.30. Thus, part of the increasing income inequality identified in section 3 is driven by the large and rising income dispersion among countries in the richer group.

**Figure 12: GDP per capita by country-group**

<!-- Start of picture text --> 5000<br>4500<br>4000<br>3500<br>AA<br>3000<br>2500<br>AB BA<br>2000<br>Median<br>1500<br>1000<br>BB<br>500<br>0<br>1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005<br><!-- End of picture text --> 21 To test the robustness of the country group classification we estimated pooled and fixed-effect regression models. Country group coefficients for income levels are statistically significant at the 5 percent level; they are sizable and have the expected signs. These results suggest that the country group classifications are relevant and highly stable in predicting income levels (Arbache and Page, 2008).

20
The AA group had higher mean growth over the whole period 1975-2005 (0.85 percent) than BB (0.39 percent). Growth was more erratic in the poorer countries. The coefficient of variation of growth is 4.67 for the BB category and 1.37 for the AA group. Given the high variance of growth rates, we cannot reject the hypothesis of equal mean growth rates in AA and BB countries between 1975 and 2005. Between 1995 and 2005 the two groups had virtually identical growth rates of about 1.60 percent per year. Within each group there is a wide diversity of growth performance. Growth rates in the AA group for example range from 6.24 percent for Botswana to -1.26 percent for Zimbabwe. The range of growth outcomes is somewhat more compact for the BB group, varying between 2.07 percent for Mozambique and -1.38 percent for Madagascar. All five of the region’s fastest growing economies for the period 1975-2005 are in the AA group.

One striking – and disappointing - feature from the point of view of hunting for leopards is the small number of transitional cases (BA or AB). BA countries comprise only Equatorial Guinea and Sudan, both oil exporters. These economies grew on average by 4.4 percent a year over the entire period, but their expansion was driven by very rapid growth in 1995-2005, when annual growth was 8.3 percent (from 1.8 percent in the first period). That boom enabled their GDP per capita to increase by 60 percent between 1975 and 2005. The AB economies – the Central African Republic and the Democratic Republic of the Congo – collapsed, mainly as a result of conflicts, leading average GDP per capita to shrink by more than half.

Given the diversity of growth experiences within our stable lower and higher income groups, it is possible our leopards are emerging within rather than between the groups. To continue our search for growth leaders we use a variation of the methodology developed by Hausmann, Pritchett, and Rodrik (2005) to identify growth accelerations (good times) and decelerations (bad times). Our approach (Arbache and Page, 2007) differs from theirs and that of researchers applying their method to Africa (IMF, 2007) in two important respects. First, it identifies both growth accelerations _and_ decelerations in a cross-section of countries. Second, it does not use a common threshold growth rate to identify growth accelerations. Instead, it defines good and bad times relative to each country’s long run economic performance. In Africa’s volatile, low growth environment this seems appropriate.

21
Four conditions define good times for a given country:

- First, the four-year forward-moving average of GDP per capita growth minus the four-year backward-moving average is greater than zero for a given year.

- Second, the four-year forward-moving average of growth is above the country’s long-run trend.

- Third, the four-year forward-moving average of GDP per capita exceeds the four-year backward-moving average.

- Fourth, the first three conditions are satisfied for at least three years in a row, followed by the three subsequent years after the last year that satisfies the first three conditions.

Growth decelerations – bad times – are defined by the opposites of the first three conditions for good times, and the presence of the fourth.

Table 5 shows the relative frequency of accelerations and decelerations, and their respective growth rates, for different periods. Between 1975 and 2005, there was a slightly higher probability that the representative African economy was in a growth acceleration than a deceleration: 25 percent of the 1,243 total observations per country per year identify growth accelerations, while 22 percent identify growth decelerations.<sup>22</sup> The remaining country-year observations reflect normal economic times with countries growing at about their trend growth rate. Countries that experienced growth accelerations managed to grow on average by 3.6 percent per year during those episodes, compared with the region-wide average of 0.7 percent. During decelerations, countries contracted on average by -2.7 percent. Consistent with the region’s long run growth trend, the period 1995-2005 saw a substantial increase in the frequency of growth accelerations and a corresponding reduction in growth declines compared to the previous 20 years.

> 22 As a means of checking the robustness of the results, growth accelerations and decelerations were also identified by replacing 0 with +1 percent and −1 percent for acceleration and deceleration, respectively, in condition 1, but the results did not change substantially. Therefore, only the base-case results are reported, because they are less restrictive

22
**Table 5:  Likelihood and growth rates of economic acceleration and deceleration in Africa,  1975-2005**

||**All country**<br>**in the pe**|**-years**<br>**riod**|<br>**Country-ye**<br>**growth acc**|**ars with**<br>**eleration**|**Country-ye**<br>**growth dec**|**ars with**<br>**eleration**|**Country-**<br>**years with**<br>**trend**<br>**growth**|
|---|---|---|---|---|---|---|---|
|**Period**|**Observations**<br>**(country-**<br>**years)**|**Growth**<br>**rate**|**Frequency**<br>**(of**<br>**country**<br>**years)**|**Growth**<br>**rate**|**Frequency**<br>**(of**<br>**country-**<br>**years)**|**Growth**<br>**rate**|**Frequency**<br>**(of**<br>**country-**<br>**years)**|
|1995-2005 (after trend break)|494|1.88|0.42|3.76|0.12|-1.29|0.46|
|1975-1994 (before trend break)|749|-0.07|0.14|3.39|0.29|-3.14|0.57|
|1985-1994|433|-0.23|0.21|3.21|0.36|-3.18|0.43|
|1975-1984|316|0.13|0.04|4.61|0.18|-3.06|0.78|
|1975-2005 (allyears)|1,243|0.7|0.25|3.64|0.22|-2.74|0.53|

Table 6 shows the frequency of growth accelerations by country for the three periods of our analysis. Most countries experienced a higher frequency of growth accelerations after 1995 compared with 1975-1994. Burkina Faso and Ghana were in a growth acceleration during the entire period 1995-2005, and Mali, Namibia, Nigeria, Sao Tome and Principe, Sudan, and Tanzania accelerated at a frequency above 70 percent. Burundi, Congo, Guinea-Bissau, Kenya, Lesotho, Mauritius, and Swaziland in contrast had a reduction in the frequency of growth accelerations relative to earlier periods. Table 7 presents information on growth rates by country on average and during acceleration episodes for the relevant time periods. The last two columns show the deviation of the growth rate during accelerations from trend (1975-2005).<sup>23</sup> We could attempt to use the increase in the relative frequency of growth accelerations as a criterion for identifying potential leopards. Using that criterion alone would lead us toward picking such dramatically improved performers as Burkina Faso, Ghana, Mali, Sudan and Tanzania, for example. It would, however, also lead us to exclude such historically strong economies as Botswana, Lesotho and Mauritius. This is partly an artifact of our method of identifying growth accelerations. Because we define an acceleration (or deceleration) relative to an economy’s own long run trend growth rate,

> 23 Burundi, Cote d’Ivoire, Malawi and Mali show negative average growth rates during accelerations in 1975-1994. This is due to negative growth rates in the first year(s) of the acceleration episodes.

23
a sustained small improvement from a low long run trend, while clearly beneficial, would not qualify for leopard status.

Rather, we identify potential leopards as those countries that had both sustained long term growth and a high frequency of growth accelerations using the following four criteria:

- The average growth for the economy equals or exceeds average per capita growth for the entire period 1975-2005 (0.71 percent).

- The average growth rate for the economy in the period 1995-2005 equals or exceeds average per capita growth for 1995-2005 (1.88 percent).

- The frequency of growth accelerations for the economy during 1995-2005 equals or exceeds the average frequency for 1995-2005 (0.42).

- The growth rate of the economy during growth accelerations in 1995-2005 equals or exceeds the average for all growth accelerations 1975-2005 (3.64 percent).

We believe that these criteria reflect some of the most important characteristics of successful countries to emerge from our analysis of growth dynamics. A country meeting all four criteria would have grown faster than the regional average, both from 1975 to 2005, showing some growth persistence, and during 1995-2005, showing average growth above the rising trend. It would also have had a higher than average frequency of growth accelerations in 1995-2005 and would have grown during those accelerations at a rate that exceeded the overall regional average.

Eight countries – Angola, Botswana, Cape Verde, Chad, Mozambique, Equatorial Guinea, Sudan, and Tanzania – (18.2 percent of our sample) meet all four criteria.<sup>24</sup> This is a small enough set of countries, set sufficiently apart from their regional neighbors to provide a basis for identifying them as high performers.<sup>25</sup> The criteria are sufficiently restrictive that only an additional four counties in the sample – Cameroon, Mali, Rwanda and Uganda – meet three out of four. The remaining 32 countries (73 percent of the sample) meet two or fewer criteria.

There are some surprises in the results, at least from the perspective of popular views on recent African growth. Burkina Faso, Ethiopia, Ghana, Rwanda, Senegal and Uganda, all praised in recent donor publications as good performers (see for example

> 24 Actually, Angola did not meet the first criterion by only 0.01, but we decided to include it in the list.

> 25 These countries represented 16.5 percent of the population and 15.6 percent of regional GDP in 2005.

24
World Bank, 2007), do not appear among our leopard candidates, although most meet at least two of the criteria and Rwanda and Uganda meet three. Mauritius and Lesotho, sustained growers for the past 30 years, fail to make the cut due to the absence of growth accelerations in 1995-2005.

25
||||**Table 6: Likelihood of gr**<br>**Frequency of growth**<br>**acceleration in 1995-2005**<br>**above the region's average of**|**owth acceleration**<br>|**by country**|||**Frequency of growth**<br>**acceleration in 1995-2005**<br>**above the region's average of**|
|---|---|---|---|---|---|---|---|---|
|**Country**|**1975-05**|**1975-94**|**1995-05**<br>**0.42?**|**Country**|**1975-05**|**1975-94**|**1995-05**|**0.42?**|
|Angola|0.48|0.43|0.55<br>yes|Madagascar|0.00|0.00|0.00|no|
|Benin|0.27|0.11|0.55<br>yes|Malawi|0.23|0.16|0.36|no|
|Botswana|0.43|0.37|0.55<br>yes|Mali|0.33|0.05|0.82|yes|
|Burkina Faso|0.43|0.11|1.00<br>yes|Mauritania|0.00|0.00|0.00|no|
|Burundi|0.20|0.32|0.00<br>no|Mauritius|0.28|0.50|0.00|no|
|Cameroon|0.23|0.00|0.64<br>yes|Mozambique|0.32|0.07|0.64|yes|
|Cape Verde|0.42|0.23|0.64<br>yes|Namibia|0.32|0.00|0.73|yes|
|Central African|0.23|0.00|0.64<br>yes|Niger|0.00|0.00|0.00|no|
|Chad|0.20|0.00|0.55<br>yes|Nigeria|0.53|0.37|0.82|yes|
|Comoros|0.24|0.00|0.55<br>yes|Rwanda|0.20|0.00|0.55|yes|
|Congo, Dem. Rep.|0.00|0.00|0.00<br>no|Senegal|0.27|0.05|0.64|yes|
|Congo, Rep.|0.20|0.32|0.00<br>no|Seychelles|0.53|0.53|0.55|yes|
|Cote d'Ivoire|0.20|0.05|0.45<br>yes|Sierra Leone|0.20|0.00|0.55|yes|
|Equatorial Guine|0.42|0.22|0.60<br>yes|South Africa|0.23|0.00|0.64|yes|
|Eritrea|0.00|0.00|0.00<br>no|Sudan|0.30|0.00|0.82|yes|
|Ethiopia|0.25|0.15|0.36<br>no|Swaziland|0.27|0.42|0.00|no|
|Gabon|0.00|0.00|0.00<br>no|Tanzania|0.47|0.00|0.73|yes|
|Gambia, The|0.00|0.00|0.00<br>no|Togo|0.20|0.05|0.45|yes|
|Ghana|0.43|0.11|1.00<br>yes|Uganda|0.30|0.25|0.36|no|
|Guinea|0.37|0.25|0.45<br>yes|Zambia|0.23|0.00|0.64|yes|
|Guinea-Bissau|0.23|0.37|0.00<br>no|Zimbabwe|0.20|0.11|0.36|no|
|Kenya|0.20|0.32|0.00<br>no|Total|0.25|0.14|0.42||
|Lesotho|0.23|0.37|0.00<br>no||||||

26
In terms of our prior classification of countries by income groups, both transitional (BA) economies, Equatorial Guinea and Sudan, meet our four criteria. The remaining countries are drawn equally from the growing economies of both the AA and BB classifications (table 4). Angola, Botswana and Cape Verde are growing AA economies; Chad, Mozambique and Tanzania are growing BB economies. Angola, Chad, Botswana, Equatorial Guinea and Sudan are resource rich. Cape Verde, Mozambique and Tanzania are more diversified, coastal economies. Botswana is the only land locked country.

**Table 7: Growth rate during acceleration, by country**

||||||||**Deviation f**|**rom growth**|
|---|---|---|---|---|---|---|---|---|
|**Country**|**Gr**|**owth rate (**|**%)**|**Growth rat**|**e during acce**|**leration (%)**|**acceleratio**|**n trend (%)**|
||**Average**|**1975-1994 **|**1995-2005**|**1975-2005**|**1975-1994**|**1995-2005**|**1975-94**|**1995-05**|
|Angola|0.70|-3.34|5.84|3.93|1.55|6.30|-60.49|60.49|
|Benin|0.60|0.07|1.50|1.60|0.22|2.07|-86.43|28.81|
|Botswana|6.24|6.50|5.78|6.87|7.41|6.24|7.85|-9.16|
|Burkina Faso|1.21|0.96|1.66|1.39|-0.06|1.66|-104.39|18.98|
|Burundi|-0.46|0.58|-2.26|1.48|1.48|na|na|na|
|Cameroon|0.81|0.14|1.97|2.21|na|2.21|na|0.00|
|Cape Verde|3.26|3.14|3.40|3.57|3.19|3.73|-10.52|4.51|
|Central African Republic|-1.27|-1.81|-0.34|0.89|na|0.89|na|0.00|
|<br>Chad|1.34|-0.30|4.18|7.66|na|7.66|na|0.00|
|Comoros|-0.14|-0.36|0.13|0.11|na|0.11|na|0.00|
|Congo, Dem. Rep.|-3.95|-4.85|-2.38|na|na|na|na|na|
|Congo, Rep.|0.61|0.75|0.37|10.05|10.05|na|0.00|na|
|Cote d'Ivoire|-1.57|-2.47|-0.02|1.82|-2.12|2.61|-216.47|43.29|
|Equatorial Guinea|10.55|0.66|19.45|20.88|3.09|26.81|-85.19|28.40|
|Eritrea|1.96|17.24|-0.82|na|na|na|na|na|
|Ethiopia|0.42|-1.37|2.54|3.71|8.16|1.49|119.81|-59.90|
|Gabon|-0.91|-1.43|-0.01|na|na|na|na|na|
|Gambia, The|0.29|0.04|0.73|na|na|na|na|na|
|Ghana|0.60|-0.40|2.31|2.15|1.30|2.31|-39.67|7.21|
|Guinea|0.97|0.31|1.46|1.78|0.28|2.39|-84.30|33.72|
|Guinea-Bissau|-0.70|0.08|-2.05|0.76|0.76|na|0.00|na|
|Kenya|0.48|0.39|0.64|1.76|1.76|na|0.00|na|
|Lesotho|3.27|3.78|2.39|3.83|3.83|na|0.00|na|
|Madagascar|-1.38|-2.26|0.14|na|na|na|na|na|
|Malawi|0.22|-0.89|2.15|1.68|-3.54|5.59|-310.57|232.93|
|Mali|0.86|-0.29|2.85|2.75|-1.75|3.25|-163.73|18.19|
|Mauritania|0.10|-0.42|0.99|na|na|na|na|na|
|Mauritius|4.22|4.67|3.65|5.65|5.65|na|0.00|na|
|Mozambique|2.07|-0.61|5.49|5.08|3.08|5.37|-39.32|5.62|
|Namibia|0.15|-1.12|1.75|2.14|na|2.14|na|0.00|
|Niger|-1.00|-1.55|-0.07|na|na|na|na|na|
|Nigeria|0.28|-0.57|1.74|1.99|2.01|1.97|1.09|-0.85|
|Rwanda|1.68|-0.51|5.47|2.27|na|2.27|na|0.00|
|Senegal|0.36|-0.64|2.08|1.75|0.22|1.96|-87.61|12.52|
|Seychelles|2.47|3.58|0.54|4.01|4.27|3.58|6.43|-10.72|
|Sierra Leone|-0.57|-1.56|1.15|7.95|na|7.95|na|0.00|
|South Africa|0.12|-0.61|1.38|1.96|na|1.96|na|0.00|
|Sudan|1.72|0.39|4.02|3.90|na|3.90|na|0.00|
|Swaziland|1.15|1.56|0.45|4.63|4.63|na|0.00|na|
|Tanzania|1.69|-0.69|2.98|3.69|na|3.69|na|0.00|
|Togo|-0.60|-1.39|0.76|4.27|12.03|2.71|182.01|-36.40|
|Uganda|1.92|0.73|3.21|3.69|2.67|4.45|-27.66|20.74|
|Zambia|-1.23|-2.60|1.13|2.35|na|2.35|na|0.00|
|Zimbabwe|-1.26|-0.18|-3.14|2.61|2.95|2.45|12.89|-6.45|

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Have we found the leopards in these six economies? In light of the income dynamics described in sections 1-4 we should be cautious before declaring the hunt over. Perhaps the most worrying feature of our set of high performers is the presence of five resource rich economies among the eight. One of these, Botswana, is a perennial growth leader, not just in Africa but globally. It certainly has much to offer to other resource rich countries in Africa in terms of lessons of 30 years of experience in transforming natural resource wealth into economic growth. But, given the history of resource abundant economies in Africa – and the negative income dynamics we found for several mineral dependent economies – we are somewhat reluctant to identify the other resource rich economies in the sample as long term growth leaders. Elsewhere (Arbache and Page, 2007) we have shown that conflicts are associated with a higher probability of growth declines. It is noteworthy that Angola, Chad and Sudan all have a recent history of conflicts, making the durability of their growth uncertain.

Of the diversified, coastal economies Cape Verde has the longest history of economic success, but it is extremely small (although so too were Hong King and Singapore at one time) and highly dependent on international migrant remittances for much of its income growth. Mozambique and Tanzania, both of which are diverse relatively large economies by African standards, may offer greater prospects of emerging as models for other coastal countries.

We may also have excluded some longer term good performers such as Lesotho, Mauritius, Rwanda and Uganda unfairly, by placing substantial weight on the frequency and pace of recent growth accelerations. Because our definition of growth accelerations is relative to the long run rate of growth of the economy, these long term growers may be victims of their own success; by growing relatively fast achieving further accelerations is made that much more difficult. Alternatively, had we placed even greater weight on growth accelerations, we might have included Burkina Faso, Ghana, Mali, Namibia and Nigeria among the list of countries with increasing growth potential, given the high frequency with which they experienced accelerated growth in 1995-2005.

To sum up, we believe that our hunt for leopards has been a moderate success. Not surprisingly, many of Africa’s potential growth leaders are rich in natural resources. For them – to the extent that oil and minerals prices remain high – the challenge will be 28
less about maintaining growth than about using resource rents well. Botswana has shown that this is possible, but, given the history of natural resource revenue management in Africa, it may be the only true leopard to emerge from this group. We are somewhat more optimistic about the group of diversified economies. Cape Verde has a long track record of good and accelerating economic growth. Mozambique and Tanzania clearly have shown growth potential. If we add the “near misses” – Lesotho, Mauritius, Rwanda and Uganda – to the list we have a group of economies from which some leopards seem likely to emerge.

# **6.  Conclusions**

This paper has described some long-term features of the growth and distribution of GDP per capita among countries in sub-Saharan African. Our main goal was to identify the long-term patterns and regularities in income dynamics across countries and to search for leopards – economies that stood out with respect to the speed and persistence of their growth. Our main findings are the following:

- _Growth has been low and volatile_ . African countries have erratic growth around a low mean.  Growth is extremely volatile across Africa, and this phenomenon is not restricted to economies with any specific economic or geographic attributes.

- _Growth has accelerated since the mid 1990s._ A structural break in both the per capita income and growth series for the region took place around 1995, when the growth rate accelerated significantly across the continent.  More countries experienced more frequent growth accelerations relative to their long term trend, and the distribution of growth rates began to converge.

- _There is significant inertia in the distribution of income across countries_ .  Our econometric results indicate that there is no convergence of incomes taking place across Africa, and that at the individual country level there is a high degree of inertia in average per capita incomes.  Income in 1975 is a good predictor of average income for both the whole of 1975-2005 and for 19952005.

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- _Africa’s cross-country income distribution is becoming less equal_ .  Africa can be divided into rich and poor income clubs.  Despite recent improvements in growth performance in poor countries, the richest countries have grown more in the long run, and that has increased the income gap.  As a consequence, the distribution of incomes among countries in Africa is becoming less equal.

- _Initial conditions matter a great deal for income distribution but not for growth_ .  Initial conditions, represented by the economy’s 1975 level of income, seem to be the single most important factor explaining income levels. Whatever the mechanics behind this phenomenon, it exerts a strong and persistent influence on income determination and on the structure of income among countries.  We did not find evidence that initial conditions are associated with long-run growth.

- _A small number of countries have emerged as possible “leopards”, but we_

- _remain uncertain as to the durability of their growth._ Using a combination of income transitions, growth thresholds, and growth accelerations we identified eight economies as Africa’s potential growth leaders.  Five of the eight, however, are resource rich economies, which our analysis of growth dynamics suggests may under perform their potential.  One of these, Botswana, is a long time high performer.  The four other resource-rich economies – Angola, Chad, Equatorial Guinea and Sudan – meet our criteria, but we are somewhat reluctant to identify them as leopards.  Of the diversified coastal economies Cape Verde has the longest history of economic success, but it is highly dependent on international remittances for much of its income growth. Mozambique and Tanzania may offer prospects of emerging as models for other African economies.

We began this paper by asking whether the growth turn around in Africa marked a reversal of the nearly three decade decline in Africa’s economic fortunes. We found evidence of a statistically significant rise in growth and per capita incomes for the region, but we are left wondering whether the good times will last. While growth on average has accelerated and volatility has declined since 1995, we still find considerable inertia in 30
Africa’s income dynamics, even post 1995. Where the typical country started in 1975 pretty much determined where it ended up in terms of average income. The rich and poor country clubs were remarkably stable and there were very few transitional cases. The rich were getting a bit richer, but the poor were getting richer more slowly, which led to rising inequality in the country-level distribution of incomes. We identified a small number of high performing economies, but most of these were resource rich. And, while we found some potential leopards among the region’s more diversified economies, Africa will need more growth leaders, drawn from a wider variety of geological and geographical circumstances before we can confidently assert it has turned the corner.

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