The discussion on rebasing of a number of economies in Africa has let both critics and supporters with varied points of the discussion. Ghana did it. Nigeria has done it! Reports indicate Kenya will do it by quarter 4 of 2014! A number of countries in Africa are about to do it! What is rebasing and what are of the implications to the marketing fraternity? Rebasing refers to a change in the base year for volume estimates within an economy, which may cause changes in growth as the estimates are updated in line with the new data.
The approach and process of determining the estimates is guided by the System of National Accounts (SNA) as adopted by the United Nations Statistical Commission. The system provides some form of uniform guidance for economies to adopt – hence making it possible to compare GDP figures across countries. A look at history of SNAs shows most countries in Africa have been using the 1968 guidelines. There were no major revisions to SNAs until 1993 – for 25 years, countries used the same guidelines to estimate their GDP figures. However, there were major revisions in 1993, mainly to align the data with economic realities and to harmonise the SNA and other international statistical standards.
Most African countries have been using the 1968 framework. In addition, the challenge of collecting data across most countries within the continent has been going on for a long time. By using the 1968 framework, most countries have been leaving out a huge chunk of economic activities that have emerged and have a higher impact than previously estimated. Here are a few examples of how previous approach left out some part of the contribution:
Example 1: For a long time, Agriculture has been the main contributor to the estimates. However, after revisions, service sector now contributes a larger proportion.
Example 2: Transport, Storage and Communication were all clubbed together in the estimates (e.g. in Ghana). However, we all know the evolution and growth of ICT sector in the past 15 years and the subsequent impact in the economy, especially through ‘m-economy’.
Implications
Demand for data will force countries to put more effort in providing valid output. From a marketer’s perspective, there are a number of implications to consider as countries continue with the rebasing exercise.
- Increased investors’ confidence: As positive sentiments emerge, more investors will be keen to not only understand, but also take part in developing their pie. As understated sectors re-benchmark, players will be eager to invest, develop and develop their share within the sub-sectors.
- Communication – ‘not just about Agriculture / raw-industries’! For a long time, most of the communication in Sub-Sahara Africa, on products has been on a background of farmlands, rigs and other raw material production areas. For instance, for a long time, Kenya has been known as an agricultural country! This arises from the sector’s high contribution to GDP in line with the 1968 SNA’s. Most communication has included the lush green highlands with acreage of crops. With the new dispensation, there will be a need to include diverse sectors.
- Demand estimates & projections: Marketers will need to go back to the drawing board and re-estimate demand for their goods and services. This will arise as the previously understated base from which they made their estimates will have changed to a larger base. For instance, in Ghana, players in the real estate sector may have had a challenge trying to estimate demands in the market. The sector fell under same classification as finance and insurance, all estimated at USD519.59M. After rebasing, real estate services only were estimated at USD391.40M while financial intermediation (new terms!), were estimated at USD472.86M. The re-classification not only provides focused definition, but also higher values. Hence, in evaluating the market, marketers also have to ‘rebase their estimates’.
- Planning: Related to the above but on a wider scale is the need for flexible planning. As new data emerges, marketers will need to be flexible and incorporate the same in their plans, whether within the medium or long term plans.
- More markets: Markets that were previously not within the radar will now start to emerge. Sectors in some countries that were previously perceived to be of low priority may all of a sudden emerge as important sub-pillars of a particular country’s economy.
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