Squaring up to inequality in Africa. Is a fairer future achievable?

While it is true that the rising tide of wealth has lifted all boats – including Africa which saw an increase of 4.4% from 2017, amounting to $108bn, that is about as far as it goes –  writes Anver Versi in this overview to our  Special Edition examining inequality in Africa.

 

While the world is enjoying unprecedented wealth, little of this prosperity is finding its way to Africa. In addition to the global inequality, the distribution of income in Africa itself is badly skewed, leaving the majority stuck in poverty. This is a slap in the face of human dignity and history shows us that the situation can be a powder keg ready to explode.

There is a great irony in the fact that while the world as a whole has never been more prosperous than over the past decade, income inequality has also never been greater.

Since the turn of the millennium, according to Credit Suisse’s Global Wealth Report 2018, global wealth has increased sharply, from $117tn to the current $317tn – despite a significant decrease due to the financial crisis of 2008.

While it is true that the rising tide of wealth has lifted all boats – including Africa which saw an increase of 4.4% from 2017, amounting to $108bn, that is about as far as it goes. Africa’s total wealth in 2018 came to $2,553bn; compare this to that of North America which recorded total wealth of $106,513bn, reflecting an increase of 4.6% (or $6,486bn) over 2017.

Per capita figures for the two regions give a stark reflection of this anomaly. In 2018, the average per capita wealth for adults in Africa was $4,138; in North America, it was $391,690.

Of course, per capita wealth averages are little more than statistical shorthand to provide a quick reference point – in reality, not every African adult has over $4,000 and certainly not every North American has over $300,000 but the point is made.

How much individuals have or earn, or can earn or should earn, depends on the size of the regional economic pie. The bigger the pie, the larger the slice everyone gets – at least in theory. In reality, the size of the slices varies enormously – both in high as well as low income countries.

This income inequality, or even the perception of it, is both highly emotive as well as motivational. Many political scientists trace global history as the unending struggle between classes for income equilibrium. The great economic systems – communism and capitalism – are based on how the pie is made and distributed. Revolutions, wars, colonial adventures – in fact, virtually all clashes between groups of people are conducted over the ownership and distribution of the common pie.

Oldest ailment of societies

The Greek philosopher Plato wrote that extreme poverty and excessive wealth was the product of great evil in society. Plutarch warned that imbalances between rich and poor are “the oldest and most fatal ailment of all republics”.

Even today, when as a result of enormous technological leaps and globalisation, the world is far more prosperous than it has ever been, the question of income inequality is a political flashpoint. The growing gap between the very rich and the rest is believed to be stoking the political flames such as Brexit and the rise of the hard right, in parts of Europe and the US.

While it is clear that inequality in the rich regions and in developing regions such as Africa is very different in its forms, severity and outcomes, the perception of inequality is a driving force that takes political expression. Where this expression is bottled up, as we have seen so often, it tends to explode in often violent, revolutionary outbursts.

Some economists have likened this phenomenon to being stuck in a traffic jam, going nowhere, while others are allowed to use a free lane and speed away. There is an inherent feeling of injustice that goes to the core of human nature – that some are more equal than others.

This is a very powerful human emotion and it typically tends to place the blame on ‘the other’, very often, as we have seen recently in South Africa, on foreigners, or migrants, or a particular ethnic or religious group. It leads to ‘demonisation’, hate and unprovoked attacks and in the worst cases, full-scale civil wars.

In 2017, the World Economic Forum warned that rising inequality and social polarisation posed two of the biggest risks to the global economy and could result in the rolling back of globalisation.

This is why the issue of inequality has become a major preoccupation of political and economic communities worldwide.

The Chinese example

Over the past three decades, emerging markets which have felt the negative impact of inequality more severely than the industrialised nations of the North, have indeed succeeded in breaking the vicious cycle of poverty with some ingenious as well as relentless policies.

China is, of course, the outstanding example. In three decades, more than 850m people have been lifted out of extreme poverty; the country’s poverty rate fell from 88% in 1981 to 0.7% in 2015. In less than 20 years, says the Global Wealth Report, China’s wealth has climbed from $3.7tn to $51.9tn – double the rate of any other country during that same period.

China’s almost miraculous achievement has closed the income gap between the emerging and the rich world to some extent. In 2000, North America, Europe, and the Asia-Pacific region (without China and India) held 92% of global assets. This has now reduced to 78%. China’s share has risen from 3.1% to 16.4%.

The success of China – and to a lesser extent India – in reducing poverty rates and more significantly, raising income levels (the mean wealth per adult today is $47,810) is a clear demonstration that poverty is not set in stone. For Africa, the example of China must serve as a constant inspiration for the way it has brought about a sea-change in its fortunes

What is even more encouraging is that both China and India have denser populations and neither are blessed with the wealth of natural resources that the continent has. Africa also has a young workforce hungry to fulfil its creative potential and in terms of adapting to new technology, Africa is proving as adept as China and India (although it has some way to go in terms of manufactured output).

That said, there are glaring inequalities that continue to hamper the continent’s progress. In the global context, as we have seen, Africa’s total wealth is miniscule compared to North America, Asia–Pacific, China, India and Latin America. Africa’s share of the global pie – only $2,553bn of the world’s $317,084bn – is far too small to adequately satisfy the needs of its population of 1.6bn.

Given this position, it is inevitable there will be vast inequalities within African countries (South Africa, with a Gini coefficient of 63 is the world’s most unequal country) with income in all its manifestations clustering around small elites.

Nevertheless, as this report shows, the battle against inequality has been well and truly joined and is being fought at state level in some instances, by institutions like the African Development Bank, by African and foreign multinational companies, by dedicated men, women and youth working individually or as NGOs, by Africa’s international partners and global philanthropies like the Melinda & Bill Gates Foundation and the continent’s academics and think tanks.

A fascinating cross-section of the views and achievements of these stalwart African champions follows in the pages of this report. The Sustainable Development Goals framework, with a target date of 2030, provides the blueprint for both the conceptualisation and implementation of projects.

As history has amply proved, inequality has the potential to destroy societies. Eradicating inequality, on the other hand, has the potential to open up a world of possibilities and prosperity for all. Nothing is more important as a continental goal than to work towards that end. This report, which brings together a very wide diversity of views all dedicated to this single subject, is our contribution to the endeavour.