Income disparity puts Africa’s future at risk

Posted on October 11, 2013 02:44 pm

It does not require a rocket scientist to see wide disparities that exist in African societies be it in South Africa the continent economic powerhouse or Niger statistically the poorest country in the world. This is not confined to African countries alone and only a handful of few wealthy countries have minimal disparities. African countries have actually fallen back in their drive for equitable income distribution and that is why latest statistics shows that the continent harbors the second highest unemployed population in the world despite accounting for more than half the mineral wealth and natural resources in the world. The Gini Coefficient of Africa has worsened largely because of many years of economic mismanagement and corruption that has hit the poor hardest. In countries like Tanzania and Uganda poverty has been mitigated by the agricultural producers who have brought helped brought down the cost of basic food. The poor in Ethiopia and Kenya have been helped by the existence of both formal and informal agriculture.The recent rise in unemployment and poverty in Africa is a surprise to many because statistically the continent accounts for more than half of the top ten fastest growing economies in the world and few would expect that inequality could actually be rising.

According to Economist magazine research last year and the world bank statistics for 2012 the labor-intensive have grown by more than 10% annually and capital intensive have grown by more than 15% in the period between 2002 and 2012. It is no wonder that most sub-Saharan Africa countries are experiencing average economic growth of 5-6% per annum but despite the impressive figures few jobs are being created and the few available the salaries are meager compared to similar job descriptions in western or developing world. An increase in poverty levels in Africa is blamed on increasing food prices. Another factor is the growth pattern that largely favor capital driven sectors of the economy and that is why African economists have been arguing that the economic growths do not reflect the reality on the ground and there are no enough jobs being created for the young, well-educated population. Many research papers on highly publicized economic growth have lambasted the equality statistics because unlike in Finland or Australia problem practically there is no credible income statistics existing in African countries with exception of cosmeticized figures in the rainbow nation of South Africa. In east African countries of Tanzania, Uganda and Kenya statistician have been using data on expenditure and not income used to measure inequality which is absolutely wrong even to financial world amateurs like me. A research conducted in Kibera in Kenya, which is one of the world’s largest slum areaa, the low income earners, expenditure and income are more or less the same. When it came to higher income earners, expenditure was much lower than income.

I cannot imagine myself developing a software solution based on theoretical market survey rather than scientifically backed. That equates to having an actuarial scientists calculating income disparity based on expenditure. There is no way someone can use expenditure data and capture the income of those unbanked population. In most African countries higher wage unskilled workers is not uncommon but the practice in developed world demands skilled worker to earn higher wages than their unskilled counterparts. According to IMF, evidence on the ground means that inequality first rise and then slowly reverses in direction once income rises above a certain threshold. When it comes to trade liberalization with regional economic bloc like East African Community, COMESA, SADC, and ECOWAS have done very little to significantly help income equality in Africa. The rise in the finance and banking, telecom industries has been cited as the reason as that explains the last decade growth recently and that has disproportionately benefited skilled workers in these sectors at the expense of mass population. The best way to address this problem is to reduce rural-urban poverty by providing sustainable income-generating activities. There is also need for education reforms, massive investments in housing and health services, transport, water and sewerage infrastructures. African countries disparity is growing at alarming rate despite the economic growth and with a gap in awareness of the problem there is need to address the chronic problem immediately otherwise dilly dallying will lead to economic disaster for the 1 billion people continent.

Contador Harrison