Experts call for better policies to promote income distribution in Africa

03/11/2015
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Economists have called for better policies to promote income distribution in Africa at the ongoing the 10th edition of the African Economic Conference, titled Addressing Poverty and Inequality in the Post-2015 Development Agenda, taking place in Kinshasa, Democratic Republic of Congo.

While Africa as a whole has made considerable progress on poverty reduction since the mid-1990s due to rapid economic growth, it has yet to have a significant impact on income distribution.

Since mid-2000, Africa’s GDP growth has been high, averaging five per cent, and well above the global average of three per cent per year, instilling optimism about the continent’s economic prospects. However, the growth has not been inclusive or equitable, and has made little impact on poverty.

Yet growth without redistribution cannot eliminate poverty or bolster sustainable development.

However, better social policies can enhance income growth and income distribution including improving the complementarity between physical capital and education especially at the basic educational level.

For instance, this would entail a focus on vocational training in the last three years of basic education.

In addition, there is need for policymakers in Africa to put greater emphasis on addressing income inequality, empowering women, narrowing down the gaps in health, nutrition and education, and challenging prejudices and stereotypes which feed discrimination and marginalization.

According to a paper titled “Growth and Poverty Reduction in Africa: The Context and Evidence” presented during a plenary session on Monday titled “The Poverty, Inequality and Growth Nexus in Africa”, over 70 per cent of the 39 African countries in the sample analyzed have reduced their poverty levels since about the late 1990s, and income growth has been the main driver of this progress.

Yet, there are considerable disparities across African countries, with certain countries, albeit a relatively small number, relying primarily on improving income distribution to reduce poverty.

However, worsening income distribution was the major culprit in the majority of countries experiencing poverty exacerbation.

More so, there is also further complication that per capita Gross Domestic Product (GDP) may understate income in certain countries, but overstate it in others.

In addition, social protection programs that insure against downside risks of economic undertakings would help. 

In his remarks during the session, Steve Kayizzi-Mugerwa, the Acting Vice-President and Chief Economist of AfDB, underscored the need to take in account the political economy to effectively address income inequalities.

“Public policy needs to take in account the role of local bureaucracy because they are affected by the same policies,” Kayizzi-Mugerwa said, pointing out that economic managers need to consult the local administrative structures in policy formulation to make it effective.

According to experts, small number of African countries is relying primarily on improving income distribution to reduce poverty. However, worsening income distribution is the major culprit in the majority of countries experiencing poverty exacerbation. 

Statistics also show that other regions of the world have performed better, thus exposing an increasing Africa’s gap with the rest of the developed world. This suggests that Africa must perform even better and set up measures to address income inequalities to catch up with the rest of the world.

During his presentation, Resource Dependence and Inequality in Africa :Impact, Consequence and Solutions, Professor Haroon Bhorat, University of Cape Town, South Africa, argued that there is a greater risk of high inequality in resource dependent countries as 55 per cent of resource-rich countries have experienced an increase in inequality compared to 50 per cent non-resource-rich countries.

In addition, he pointed out that high resource-dependent economies are associated with lower levels of civil society organization, less transparent electoral processes and less effective government. 

He argued that drivers of inequality in resource dependency economies include high initial capital cost of entry into natural resources and poor employment generation.

“There is need for strong institutions and good governance to manage resources. There is also need for greater emphasis on social protection,” Prof. Bhorat said, pointing out that while there are no clear success stories, countries like Ghana and Botswana can provide some positive lessons to guide institutional arrangements that govern resource wealth.

Working with international initiatives for transparency and accountability can strengthen governance at the country level.

This is addition to putting in place taxation systems that are progressive can help to alleviate poverty in particular governments must ensure that multinationals in the extractives sector pay the required amount of tax. 

Using tax revenues to fund social transfers for the poor are also feasible interventions for many countries in Africa can significantly reduce poverty and inequality.

Following the adoption of the 2030 Agenda for Sustainable Development by world leaders in September, policymakers, development practitioners, and researchers are convening to lay out policy options to eradicate poverty and tackle inequality in Africa, in line with the new universal anti-poverty goals.

The annual African Economic Conference is organized by the African Development Bank (AfDB), the United Nations Development Programme (UNDP) and the UN Economic Commission of Africa (ECA).