“All for ourselves, and nothing for other people seems, in every age of the world, to have been the vile maxim of the masters of mankind” – Adam Smith.
Oxfam released a report during the 2017 World Economic Forum noting that just eight individuals, own as much wealth as the poorest half of the world’s population. This implies they own the same wealth as the 3.6 billion people who make up the poorest half of humanity. Oxfam described this gap as obscene and I couldn’t agree more. It has also been observed that the wealth gap is wider than ever and new data from China and India shows that the poorest half of the world owns less than previously estimated. Economic growth data from these countries tells a totally different story. India’s economic growth is over 7% while China has enjoyed growth rates, until recently, averaging 10% for three decades. Both countries are considered engines of global economic growth.
Economic growth as a measure of economic landscape does not take into account the welfare of the masses. From an overall point of view, economic growth is meant to create jobs and boost purchasing power through a rise in disposable income. However, we have the “paradox of economic growth” where the economy grows but so does income inequality typically characterized by a rising gap between the haves and the have-nots. GDP growth alone does not portray the true picture that needs to be visible to influence policy makers to come up with policies that will bolster Economic Development rather than focus on Gross Domestic Product alone. Policies need to address per capita incomes as well.
In 2009, the United Nations’ Human Development Index showed that 22 of 24 nations identified as having “Low Human Development”, were in Sub-Saharan Africa. A comparative analysis of share of income also shows Africa’s share has been consistently dropping over the past century. The gap between the rich and the poor in Africa is widening every new day. Millions still flounder in poverty surviving on less than a dollar a day while few can afford to fly in private jets and enjoy caviar while cruising at 39,000 feet altitude.
According to a report by New World Wealth, a South African market research firm, the combined holdings of high net worth individuals – those with net assets of $1m or more – in Africa totaled $660bn at the end of 2014. Meanwhile, World Bank data shows that the number of poor people in Africa – defined as those living on less than $1.25 a day – increased from 411.3 million in 2010 to 415.8 million in 2011.
Going by these numbers, it is important to note that at the end of 2014, there were 169,000 millionaires in Africa. Out of a population of circa 1.2 billion people, the number of the millionaire as a fraction of the entire population is depressing. There is more than meets the eye. Policy makers need to broaden their scope to address basic fundamental issues that will see the several elements in the economic system functioning properly. There are rudiments in the system that need to complement each other for the system to succeed.
Bridging the income inequality gap requires addressing various issues affecting the continent that are an obstacle to equitable distribution of incomes. These obstacles lead to burgeoning wealth of few members of the society and derailing the majority from moving up the social hierarchy.
Fiscal Policy: Africa has a large pool of semi-skilled and unskilled labor, most of who fall under people surviving on less than a $1 a day, that can be empowered through government projects directly aimed at boosting the purchasing power of this category. Expansionary monetary policies such as increasing government expenditure in labor intensive sectors, agriculture and employing rural poverty reduction incentives will boost incomes in most parts of Africa. A progressive tax system will also ensure distribution of wealth from the rich to the poor.
Corruption: This vice has become synonymous with most African countries and these countries usually grace several governance indices on the negative front as a result of mega scandals that have seen public coffers being swindled millions of dollars for personal gains.
Stemming corruption will always meet an extraordinary degree of resistance from perpetrators. However, sealing loopholes through proper vetting of public officials and ensuring that public institutions work in an efficient and transparent manner aimed at rooting out corruption will result in public funds and funds from donors performing the work they were intended to perform. Embezzlement will be curtailed and funds will not end up in the pockets of predetermined few. This will boost income distribution and consequently improve social well-being.
Social Integration: Governments need to promote inclusivity in policy formulation to ensure that certain members of the society are not left out. These include the youth, people with disability and women. There has to be a common purpose in the discharge of public duties. Social integration guarantees a just and peaceful society that focuses on economic activities that contribute to the national cake directly or indirectly.
Infrastructure: Developing new infrastructure and upgrading existing infrastructure is paramount in bridging the gap between the rich and the poor. This will enable efficient movement of goods and services. Agriculture plays an important role in Africa’s economy. 70% of Africans make a living through agriculture. Most agricultural produce is perishable. A proper road network becomes vital. Investment in efficient machinery and technology in industries to process agricultural produce will bolster value addition leading to better incomes for farmers, companies, industry workers and the government through taxation enabling it to offer better services to citizens.
Access to financial services: Financial services are an essential part of any society. Having an efficient and reliable financial sector guarantees accessing financial services with ease. For Africa, it is important to have a system that will ensure financial services are accessible to people residing in areas that don’t enjoy the services of or have limited access to banks and other conventional financial services. Kenya is leading the pack through the enormous impact and usage of Mpesa. Both urban and rural folks can access Mpesa services with relative ease making it a very essential and efficient platform.