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PER CAPITA GROSS NATIONAL PRODUCT (GNP) VERSUS PARITY PURCHASING POWER (PPP)

Since two decades there is a tendency to "measure" the wealth of countries around the world considering the Parity Purchasing Power instead of Gross National Product.

Let us quickly analyze both indicators to see if it is correct to use PPP instead of per Capita GNP - for African developing countries.

Comparison Between Per Capita GNP and Party Purchasing Power
	1983-1993			1993-2003
Countries	Per Capita GNP*	PPP*	Poverty Level*	Per Capita GNP*	PPP*	Poverty Level*
Benin	390	1,050	55	385	1,020	50
Côte d'Ivoire	1,200	2,510	35	610	1,430	55
Senegal	720	2,102	45	470	1,510	50
Cameroon	1,100	2,450	38	560	1,640	45
CentralAfrica	485	1,850	68	260	1,190	80
Tanzania	450	750	60	300	550	65
Kenya	990	2,050	35	680	1,020	45
Malawi	280	690	70	220	670	75
South Africa	2,950	11,200	35	2,600	9,870	10
Per Capita GNP in US$ Parity Purchasing Power in US$ Poverty Level: Percentage of the Population living with less than US$ 1 (One) per day
Source: World Bank Reports

DEFINITIONS

In short, Per capita GNP represents the total of riches produced by the different economic sectors (Agriculture, Industries, Services and Administration) of a country divided by the number of citizens.

On its part, PPP is based on a theory, which states the exchange rate between two currencies adjusts - over a long term - to relative price levels (to purchasing the same category of goods or services in different countries). Thanks to the extra-purchasing bonus gained by the national currency of a developing country versus the currency of a developed one, developing country's consumers may "enjoy" the same living standard as the one from a developed country.

In other words, with one US$ a consumer buys more quantity of services or goods in a developing country than in a developed one. That is for the basic concept behind PPP.

In a way, PAP evaluates the "welfare" or "well-being" enjoyed by a category of citizens in underdeveloped countries. Measuring "welfare" or "well-being" of people is a subjective undertaking. You will certainly agree. Well.

The application of the theory to developing countries results most of the times in attributing them PPP value higher than the per capita GNP. As shown on above Table for sampled African countries.

PPP IS THE TREE THAT HIDES THE FOREST OF POVERTY IN AFRICAN COUNTRIES

One is entitled to question the representativeness of PPP to "benchmarking" the purchasing power of a developing country's citizen - not to speak of the alleged "welfare" measuring.

Indeed, how many people in any African country could "enjoy" the same living standard as a citizen from a developed world?

Figures on the Table above represent the whole spectrum of African countries from Africa "economic super power" South Africa to the Least Developed countries such as Benin and Malawi.

Poverty Level In African Countries Percentage of People Living With Less Than US$ 1 Or 2 Per Day

You will notice South Africa had been "allocated" a hefty PPP, which is 3.8 times its "normal" per capita GNP. Benin got a PPP that is 2.7 times its normal per capita Gross National GNP.

However, when you consider the Level of Poverty (the percentage of people living with less than US$ one per day or with less than US$ 2 per day - see Figure below), you see that it run high for any African country - South Africa included.

Therefore how much credit can one gives to PPP to benchmarking the purchasing power in developing African countries, when the majority of the populations cannot afford rubbing one dollar against another?

In fact, how many people in a developing country can enjoy a living standard similar to the one existing in developed country? A minority of "privileged" comprising high-rank civil servants, business People and black marketers. They make up no more than 5% of the populations.

Could an impartial observer aware of the existing economic situation in South Africa believe that the "normal" South African citizen "enjoys" a PPP equals to US 9,890? By normal we mean the south African citizen who is not part of the elite and is living in remote villages without descent housing, no permanent electricity supply, no running water (not to speak of dwellers of sprawling shanty towns around the push cities). A person who believes that is not aware.

PPP is good for the ego of African rulers and "elite". They are satisfied when their country PPP is higher than the normal distressing per capita GNP. PPP is good for ego. No one can deny that. However, PPP does not mirror the reality of economic developing in Africa.

Per capita GNP does not also tell the whole truth. Is it reasonable and congruous to the reality that South Africa's per capita Gross National Product is "calculated" equal to US 2,600? The remark is the same for African countries that show "marvellous" per Capita GNP based solely on the "harvest" of oil fields.

That said per capita GNP is "more accurate" than PPP to evaluating the wealth at the disposal of an African country's citizen than PPP. Particularly for developing countries that have per capita GNP value between US$ 100 and US$ 3.500.

PPP on its part is closer to the economic reality when applied to countries that have per capita GNP equal to US 4,000 and above. Those are the Intermediary Income Countries. On the condition that said countries do really manufacture goods and do not garner their apparent wealth from the harvest of natural resources. Of course PPP is accurate when applied to developed countries.

No African country should be proud when granted a higher PPP versus its normal per capita GNP. The calculated GNP is simply the mirror of the current state of the economy that does not create jobs and does not build up riches to help fighting against poverty.

There is no need to be ashamed when per capita GNP of our respective countries is "distressing". We should accept the Reality conveyed by these figures, which reads as follows: Our countries are not developed. They are poor countries. Once accepted, the truth leads to solutions. We should start brainstorming to boost the performance of our economies. It is urgent that we target double-digit economic growth rates.

The only truth conveyed by PPP is that a tourist (from a developed country) when visiting a developing one enjoys a higher standard of living than he may not afford in his own country. Anything else - trying to attribute to African countries PPP higher that the normal per capita GNP - is only diversion from existing economic reality.

"CONTRIBUTOR'S GUIDELINES" are available here. We invite you to contribute to AFRICABIZ ONLINE MONTHLY ISSUE - with articles related to "How Africa Could Bridge The Developing Gap".

Many thanks for subscribing to Africabiz. See you on April 15, 2004.

Dr. B.M. Quenum
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Business Opportunities

TROPICAL ROOTS AND TUBERS (PART VI): AS COMPONENTS TO A STRATEGIC INTEGRATED SCHEME

On the online monthly page of AFRICABIZ are listed four processed cassava's products, which highlight the fact that cassava could be an important components - an Economic Catalyst - to the Integrated Economic Development Scheme

Briefs on the preparation of fresh cassava prior to the production of chips and pellets are reported here. Operating conditions to producing cassava ships on a small-scale basis are posted here. Last issue dealt with Investment briefs to producing cassava floor with small-scale industrial units. Each unit can create 60 jobs. That means 60,000 jobs if 1,000 units are installed. That is a lot for rural areas in a developing country.

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MORE ON ROOTS AND TUBERS
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