The 2007 UNCTAD report entitled: ‘Reclaiming Policy Space Domestic Resource Mobilisation and Developmental States’ has revealed that Sub-Saharan Africa has the lowest savings rate of all developing regions in the world.
Savings rate is the ratio of personal savings to disposable personal income. Disposable personal income is personal income less personal tax and non-tax payments.
In 2005, gross domestic savings in the region represented 17.6 per cent of GDP, compared with 26.0 per cent in South Asia, 24.0 per cent in Latin America and the Caribbean, and nearly 42.9 per cent in East Asia and Pacific countries.
The report said this average savings rate for Africa, however, masks important disparities across the continent.
In 2005, Algeria and the Republic of the Congo both achieved gross domestic savings rates of more than 50 per cent of their GDP, while Eritrea and Sao Tome and Principe both had rates far below minus 20 per cent, indicating dissaving on a massive scale.
The report said the savings rate for sub-Saharan Africa had broadly evolved over the years in the following pattern. From 1960 to 1974, it increased steadily from 17.5 per cent to 24.3 per cent of GDP. It then experienced much higher volatility before reaching its highest rate (nearly 26 per cent) in 1980.
‘Then came Africa’s “savings collapse” (Eldabawi and Mwega, 2000), as the rate fell to under 15 per cent in 1992,’ the report reiterated.
Since then, there had been a tentative recovery, yet the rate had remained low, and was only 17.6 per cent in 2005 (World Bank, 2007).
Prof George Gyan Baffour, the Deputy Minister of Finance and Economic Planning, who launched the report on Wednesday, said there was the need to mobilise resources domestically for the country’s development and to reduce over reliance on donors.
Touching on the report, and especially on domestic revenue mobilisation, Prof George Gyan Baffuor believed strongly that while increasing domestic revenue was necessary, it might not be a sufficient factor for economic growth and development, and that would counter productive.
“It is worth noting that the growth of the economy, to a very large extent, depends on the strength of the private sector,” he stressed.
He said it was the private sector that grows the economy. Thus it is my view that governments should provide the enabling environment for the private sector to propel the growth of the economy and limit its investment to those that facilitate the process; increased resource mobilisation through excessively taxing resources away from the private sector operators should be eschewed.
On remittances, he said the report identified workers remittances as a good source of revenue for development in Africa. “We need to re-examine this issue critically. The motivation for these remittances is not for development,” he pointed out. He said these remittances are for subsistence and social security issues. For these reasons, harnessing them might be an uphill task unless we properly understand the factors that motivate those who remit and the reasons why those who receive the remittances ask for them.
The launch was attended by Dr. Nii Moi Thompson, a renowned economist; Dr. Yao Graham, Coordinator of the Third World Network (TWN) and Mr. Adu Amankwah, Secretary-General of Trade Union Congress (TUC).
