Perspective: The race against Africa’s ‘stubbornly high’ extreme poverty

While absolute poverty has been reducing rapidly globally, it remains stubbornly high in Africa, sobering facts and  figures from research by the United Nations Economic Commission for Africa (ECA) reveal. Saurabh Sinha analyses the problem.

Globally there has been extraordinary progress in reducing extreme poverty since the 1990s. Nearly 1.2bn people were lifted out of extreme poverty, and rates declined from 35.9% in 1990 to 10% by 2015. Much of the progress was in East and South-east Asia, with China’s economic rise responsible for most of the decline in poverty. More recently, South Asia has also made impressive inroads against extreme poverty, helping to reduce the global rate further.

In contrast, poverty in Africa increased from 54.3% in 1990 to 55.6% in 2002. Since then the pace of poverty reduction has picked up and Africa’s poverty declined to 41% in 2013 and to 36% in 2016. Though the extent of poverty is still unacceptably high, the period 2002-2016 witnessed poverty in Africa declining at a faster pace (at 1.4% per year) than the global average of 1.2%.

While the share of the African population in extreme poverty has reduced over the years, nearly one in three Africans, 422m, is still in extreme poverty. Of the world’s 28 poorest countries, 27 are in Africa, all with poverty rates above 30%.

 

Global poverty is now concentrated in Africa

From less than 15% in 1990, Africa accounted for 56% of the world’s poor people in 2015. On current trends, 86% of the extremely poor people in the world in 2030 will be in Africa, and the top 10 poorest countries in the world will be African, both in terms of absolute numbers and  share of the extreme poor as a percentage of the total population.

However, Africa is enormously varied and many countries are making progress towards ending extreme poverty. Four countries already have poverty rates of below 3%: Equatorial Guinea, Gabon, Mauritius, and Seychelles.

Projections from the World Data Lab suggest that on current trends, the Gambia and Mauritania are projected to achieve the Sustainable Development Goal of eradicating extreme poverty (SDG 1) by 2030; Ethiopia and Kenya by 2032; Angola, Côte d’Ivoire, and Ghana in 2033; while Djibouti will achieve it a year later in 2034.

Yet, Nigeria has already overtaken India as the country with the largest number of extremely poor in early 2018, and the Democratic Republic of Congo (DRC) could soon take over the number two spot. Extreme poverty in Nigeria is growing by six people every minute, and together with DRC, it will have more than half of Africa’s poor by 2030.

Despite faster growth in many countries since the early 2000s, and the recent uptick in the poverty reduction rate, extreme poverty is declining much too slowly for Africa to meet SDG 1 by 2030. It is important to understand why this is so.

 

Slow decline in  poverty in Africa

Research at the United Nations Economic Commission for Africa (UNECA) reveals that at least five factors may be responsible for the slow decline of poverty in Africa:

Incomplete demographic transition: Africa’s population grew at an average rate of 2.6% per annum during 1990–2015, more than twice the world average. Fertility rates in Africa are falling, but not fast enough, and fertility rate gaps between Africa and the rest of the world are large, and projected to remain wide.

While most of the world has experienced a dramatic decline in both mortality and fertility rates, and therefore in population growth rates, Africa’s mortality, fertility and population growth rates remain high.

Of the 21 ‘high fertility’ countries in the world with total fertility rates in excess of five children per woman, 19 are in Africa. These countries account for around two-thirds of the region’s population. Projections suggest that Africa will account for 14 of the 15 countries with the highest fertility rates in the world in 2025-2030.

High fertility rates pose several serious challenges to Africa’s long-term economic growth and poverty reduction efforts, emphasising the need for the economic growth rate to consistently exceed the population growth rate and so make a dent on poverty levels.

Limited job creation and economic diversification: It is not only economic growth that matters, but also where the sources of growth are located. Africa’s growth has depended on global demand for its commodities. This constrains poverty reduction by reducing aggregate income and creates a more unequal income distribution favouring commodity owners.

Evidence has shown that growth in labour-intensive sectors such as agriculture or manufacturing is typically more poverty-reducing than growth in capital-intensive sectors such as mining.

Overall, Africa’s transition out of the primary sector into tertiary sector activities has not resulted in the desired structural transformation as these activities are largely informal and with low productivity. Often, labour has moved from low productive agriculture to an equally low productive urban, informal sector which limits poverty reduction.

High levels of informal employment, which contributes 55% of the GDP, can make it difficult for people to find a route out of poverty and may explain the slow decline in poverty reduction in Africa in recent years.

Constraints of gender equality and women’s economic empowerment: In spite of significant progress in Africa since 2000, gender inequality remains a key development challenge.

Improving women’s access to education and health care, and removing barriers to their productive employment are essential first steps towards reducing inequalities, improving the poverty-reducing impact of growth, generating productivity gains and unlocking women’s potential for meaningful contribution to Africa’s structural transformation.

Empowering women and girls has a multiplier effect and helps drive a country’s economic growth and overall development. Gender inequalities in the labour market have been estimated to result in annual economic losses of $60bn for sub-Saharan Africa. Women’s work, both paid and unpaid, is often the single most important poverty-reducing factor in many countries.

Closing gender gaps in education, income, employment, resource control and access is associated with increased economic growth and well-being. For instance, raising female employment to the male employment level is expected to raise the GDP over time by 2% in Tanzania, 10% in South Africa and 34% in Egypt.

High levels of inequality: Inequality levels remain high in Africa, with the unweighted average Gini coefficient of 0.43. In some countries, inequality has been rising – Guinea-Bissau, Central African Republic, Zambia, Malawi and South Africa recorded the largest rise in inequality.

Seven of the world’s 10 most unequal countries are in Africa: Botswana, Central African Republic, Eswatini, Lesotho, Namibia, South Africa, and Zambia. 

Inequality undermines the poverty reducing effect of growth. For Africa in particular, inequality of opportunities – unequal access to education, health care, jobs – is leading to inequality of outcomes in terms of income, wealth, consumption, health and jobs.

For instance, limited access to secondary education (completion rates at this level are much lower than for primary education) leads to poor quality education. As a result, poorly skilled youths join the labour force with few skills to enter the formal sector.

The lack of access to basic social services and assistance leads to vulnerable employment whereby poorly educated workers, mostly youths and women, are involuntarily drawn into the informal sector as this is the only alternative to unemployment.

Further, even though many countries on the continent such as Ethiopia, Kenya, and Ghana have made significant progress in improving access to electricity for both urban and rural populations, three out of five people in Africa have no access to electricity.

This, among other deficits, limits the opportunities for children to study, with a consequent impact on educational attainments in the immediate term and the building of strong human capital in the long run.

The situation is worse in the case of access to clean cooking solutions, with more than eight out of 10 people on the continent continuing to depend on traditional biomass for cooking. This has catastrophic health consequences, and on national GDPs, with nearly 400,000 deaths attributed to complications related to indoor smoke.

High levels of depth of poverty: UNECA’s analysis reveals that Africa’s poverty gap index (15.2) is almost twice the global poverty gap index (8.8) and reflects the fact that poor people in Africa are much further below the poverty line and may not benefit sufficiently from poverty reduction efforts.

Nine countries – Burundi, Central African Republic, DRC, Guineau-Bissau, Lesotho, Madagascar, Malawi, Mozambique and Zambia – have the poverty gap index more than twice the African average.

In addition, according to a World Bank study, the average consumption of the poor in Africa (other than North Africa) is $1.16 a day (2011 PPP), which is $0.74 below the international poverty line and indicates why poverty in Africa has reduced only slowly.

Inadequate public spending on the social sectors: Ensuring access to quality health care for all at affordable rates is constrained by a scarcity of public resources.

Although Africa has made significant progress in health outcomes, particularly since 2000, out-of-pocket expenditure – the single largest component of total healthcare expenditure at an average of 36% – creates barriers to health services and puts people at risk of impoverishment; it slows down poverty reduction and exacerbates inequalities.

Redistributive fiscal policy reduces inequality by one third in advanced economies, mostly through public spending on social sectors. In Africa, fiscal redistribution is low, reflecting low revenues and social spending.

Challenges of poverty and inequality are further compounded by limited social protection for the most vulnerable – social protection programmes in Africa currently cover less than 20% of the poorest quintile.

Social protection spending is also low, especially among lower-income groups. For instance, total spending on health in Africa is in the narrow range of 5-6 % of GDP (2000-2015), less than half the global average.

Carefully designed redistribution policies, broadly defined as the use of tax and cash-transfer policies, can help reduce both poverty and income inequality in Africa.

 

What can be done?

With only 11 years to go, urgent steps are needed to accelerate progress on ending extreme poverty in Africa by 2030. Because of numerous constraints, the task is as difficult as it is necessary to improve the well-being of the people.

At the same time, the impressive progress in enhancing child survival has not yet led to a decline in fertility. The slow overall decline in fertility can delay Africa’s demographic transition that is necessary to unlock the demographic dividend.

Improving access to reliable and affordable electricity and clean cooking solutions can significantly improve education and health outcomes.

African countries need to urgently invest in secondary education to increase the skills level of workers and accelerate the decline in fertility. This would kick off a virtuous circle in which, as fertility declines, more money could be invested per student and worker, raising productivity further and leading to sustained economic growth and rapid poverty reduction.