Revelations of bigger economy sizes overnight, after later than usual GDP rebasing exercises by African countries, were understandably met with scepticism in the past; even as they were done in collaboration with international agencies and in accordance with best practices and were indeed better representations of statistical reality. More regular rebasing and survey exercises since have been met with less jarring responses; albeit they are still not as frequent and consistent as desired. That said, and as recently put by The Economist, businesses and investors still “take shots in the dark when investing in new markets” on the continent.
Thus, the importance of the quality of African statistics for investment and development cannot be overemphasised. Clearly in light of these still undesirable realities, the World Bank is dedicating its 2021 World Development Report (WDR) to “Data for Development”, its first WDR on the subject. The World Bank is also putting its money where its mouth is. In late March 2020, the World Bank allocated $379 million to seven West African countries (Burkina Faso, Cabo Verde, Cote d’Ivoire, Ghana, Liberia, Sierra Leone and Togo) to strengthen their statistical systems.
For sure, the lead-time of the full investment decision takes longer consequently, with the risk that a decision may be made not to venture all together, with losses of potential income and jobs to the host country and its government in tandem
At this point, it is important to point out that the solution may not necessarily lie in more funding and increased capacity for national statistical agencies. That is, even as these are necessary and urgently so. For instance, Kinyondo & Pelizzo (2018) show that even well-funded and highly distinguished global institutions and think tanks have found the task of producing valid and reliable African statistics to be quite a herculean task. Surely, these do not lack for funds or expertise, the duo argues. Kinyondo & Pelizzo’s intuition is that the lack of “a proper research culture” on the continent may instead be the problem. Their exposition is all very well and good. But what should businesses and investors do in the interim?
READ ALSO: Four lessons African countries learnt working together in fight against coronavirus
We have established that African statistics, both social and economic, have been improving, albeit they remain relatively poor and inadequate. Understandably, businesses and investors continue to view them with some level of distrust. Our view is that before making capital allocation decisions, businesses and investors must look at multiple sources of data and if they can afford it, conduct their own surveys.
Inevitably, a risk-based approach may be their best bet. How do we mean? Upon assessing the official data and comparing them with more readily available real-time data like mobile phone subscriptions, spatial data, social media user data, and so on, there is little much else the prospective investor or firm can do but to take the plunge and invest in the country/sector of interest; in a pilot, say. Information from the small-scale pilot venture would then determine whether a bigger risk should be taken or not.
For sure, the lead-time of the full investment decision takes longer consequently, with the risk that a decision may be made not to venture all together, with losses of potential income and jobs to the host country and its government in tandem. But that is the reality. There are cautionary tales of international firms, which overestimated the consumption potential of many an African countries but later had to roll back their ambitions when evidence on the ground proved otherwise. And in some of these examples, the subject firms had operated on the continent for decades.
Finally, there is clearly much that African statistical agencies need to do to gain the trust of users of their data. And until current and prospective businesses and investors on the continent are able to trust what they produce implicitly, there is still a long road ahead.
Edited version of the article was first published by the NTU-SBF Centre for African Studies of Nanyang Business School, Singapore. References are in the original article.\
