Income inequality trends in sub-Saharan Africa: Divergence, determinants and consequences
Opening remarks by Abdoulaye Mar Dieye, UNDP Assistant Administrator and Regional Director for Africa, at the inaugural launch of the UNDP study on “Income inequality trends in sub-Saharan Africa: Divergence, Determinants and Consequences”
I am pleased that we are having this launch at the margin of our ministerial meeting, as TICAD has, since its inception, always put at the heart of its agenda, the reduction of inequalities as sine qua none conditions for peace and development.
As development practitioners, we have all seen how inequality is frustratingly putting a break on development and how it dangerously fuels exclusion, insecurity, instability, and at the moment, violent extremism.
Nelson Mandela was right when he said that “massive poverty and obscene inequality are such terrible scourges of our times... that they have to rank alongside slavery and apartheid as social evils.”
Hence, if we don’t radically address this disease of our modern civilization, all our efforts to move forward the Universal Agenda 2030, Africa’s Agenda 2063, and the various national development strategies, maybe in vain.
This is what prompted us, in UNDP, to further revisit this very critical issue, which has been certainly widely studied in the literature, but not investigated with enough empirical depth and statistical refinement to guide effective policy making.
In this regard, the book we are launching today, being the first comprehensive income inequality study on Africa, systematically explores income inequality and draws lessons to reduce income inequality in Africa. To accomplish this objective, the book presents an Integrated Inequality Dataset for Sub-Saharan Africa, an innovation that helps overcome persistent problems of scarcity and inconsistency of data on income inequality.
The book also helps to crystalize the indivisibility of the SDGs and the centrality of low income inequality in accelerating the achievement of the 2030 Agenda for Sustainable Development and in helping operationalize the implementation of SDG 10 in Africa.
In spite of economic progress achieved over the past one and a half decades, with GDP growing at approximately annual average of about 5.0 percent, poverty remains very high in Africa – 41 percent compared to other developing regions – 3.54 percent for East Asia and the pacific and 5.4 per cent for Latin America and the Caribbean. The high level of inequality weakens the poverty-reducing power of economic growth in the continent. Although the average unweighted Gini for Sub-Saharan Africa declined from about 0.47 to 0.43 between 1991 and 2011, Sub-Saharan Africa remains one of the most unequal regions in the world – with, of the 19 most unequal countries in the world, 10 residing in Africa.
This book explores the dynamics and complexities of income inequality and offer solutions around the following five key messages.
First, seven outlier countries (South Africa, Botswana, Namibia, Zambia, Central African Republic, Comoros and Lesotho) drive income inequality in Africa, making the continent’s Gini significantly higher than the global average.
Second, the determinants of income inequality in SSA are multi-dimensional and complex. The basic structural drivers of inequality in the continent can be divided into three groups: (i) the highly dualistic economic structure, where high income sectors, such as multinational companies and the extractive sector, offer limited capacity to generate employment compared to the informal sector, where the majority of workers earn far lower incomes; (ii) the high concentration of physical capital, human capital, and land, especially in the economies of Eastern and Southern Africa, as well as in specific groups and regions; and (iii) the limited distributive capacity of the state, which often manifests in a ‘natural resource curse’, an urban bias of public policy, and ethnic and gender inequalities.
Third, there is no single, ‘silver bullet' to decreasing income inequality – multiple actions are required. This book establishes the policy actions to accelerate a reduction in income inequality: (i) Improving distribution of human capital (particularly secondary education), which positively affects inequality, therefore encouraging state authorities to increase the supply of secondary education to build a fairer society; (ii) Increasing direct taxation and efficiency of tax administration, as well as increasing well-targeted social expenditures, all of which reduce inequality; (iii) Enhancing productivity in the agricultural sector, which is important to reallocating labour to other sectors of the economy and helps to reduce rural poverty, rural poverty gaps, and income inequality; and (iv) Implementing structural transformation, which is path-dependent. A country’s current productive capabilities embodied in its export structure influences the extent to which a country can shift production toward increasing manufacturing activity.
Fourth, this book brings to the fore an important policy lesson to policymakers: Policies that reduce poverty are not necessarily the same as those that reduce income inequality. For instance, quality education and enhanced productivity help accelerate reduction in poverty, but can raise income inequality – if not accompanied by a progressive tax system and effective social protection programmes.
Finally, this book offers policies that could help plant and nurture the TREE of EQUITY in Africa by suggesting four strategic approaches to reducing income inequality: 1) making growth inclusive and pro-equity; 2) enhancing the inequality-reducing power of the population dynamics; 3) accelerating equity through quality investment in human development; and 4) building supportive macroeconomic and institutional environments. The various policy actions for advancing equity are addressed during the presentation of the book.
In conclusion; I want to quote President Franklin Delano Roosevelt’s conclusion on the role of the State in addressing inequality:
“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”
In this regard, both states and markets have distinct roles to play in accelerating equity in Africa. In the process of generating prosperity through the market, hard-to-reach communities, excluded groups, and marginalized individuals do not benefit from this growth. Therefore, the State has an unequivocal role to play in ensuring that these excluded groups benefit from development by expanding and targeting equalizing social protection mechanisms and promoting progressive taxation. These tools are powerful to achieve Roosevelt’s ambition to provide enough to those who have too little and the global agenda of leaving no one behind by 2030.
We trust this report will infuse added and effective dynamism and inspiration in inequality reduction policies in Africa.