Starting with people: a human economy approach to inclusive growth in Africa
High levels of inequality across Africa have prevented much of the benefits of recent growth from reaching the continent’s poorest people. To combat inequality in Africa, political and business leaders have to shape a profoundly different type of economy. It must start with the needs of Africa’s women and young people for good quality sustainable jobs, rather than the needs of the richest and of foreign investors. Leaders must use economic policy, taxation policy and social spending to build a human economy for Africa.
The issue of ‘inclusive growth’ will dominate discussions as leaders gather at the World Economic Forum (WEF) on Africa this month. This is a double challenge. The IMF forecasts for sub- Saharan African growth are at their lowest level for 20 years. However, even when GDP was rising at impressive levels across the continent, it was far from inclusive.
Despite decades of unprecedented growth, the proportion of populations living in poverty declined more slowly in Africa than in any other region.
A growing population meant that there were 50 million more people living in extreme poverty in sub- Saharan Africa in 2012 than there were in 1990. At the same time, for the lucky few, these decades were boom years. Oxfam found in January that j ust three billionaires in South Africa have the same wealth as the bottom 50 percent of the population, while South Afri ca's richest one percent owns 42 percent of the country’s total wealth. New data from Brookings reinforces the picture of extreme economic inequality across Africa. Seven of the 20 most unequal countries in the world are African: Swaziland is the world’s most unequal, now closely followed by Nigeria. If African leaders use this meeting to take stock and forge a different path, this could be an opportunity to shape fundamentally more equal economies. With youthful workforces that are increasingly educated and healthy, a long- term trend towards more democratic and stable governance, and room for vastly increased productivity in areas such as agriculture, there is much reason for hope.
But to deliver for Africa’s poorest people, attendees at WEF need to think beyond ‘inclusive growth’. Instead of focusing solely on GDP and hoping to tweak it to make it more inclusive, leaders should focus directly on reducing inequality and eliminating poverty, in ways that lead to economic prosperity for all.
These aims should be placed above GDP growth – not because grow th is unimportant, but because poverty and inequality represent the most significant barriers in Africa to achieving sustainable and inclusive growth.
Women and young people
The shape of many of the continent’s economies – characteri zed by an overreliance on the extractive sector, inadequate investment in agriculture and large informal sectors 5 – has meant that the consequences of inequality have mostly been felt by the young and by women. Despite being recognized as the future of Africa’s economic success , it is women and young people who work predominantly in the informal sector and agriculture, or are last in line for quality jobs, investment and training. Around 70 percent of Africa’s young workforce can be classified as being in in- work poverty.
Furthermore, it is women and young people who suffer most when governments make questionable spending choices. Oxfam’s forthcoming Commitment to Reducing Inequality index (see Box 1, page 13 ) will measure government action on policies shown to reduce inequalit y, such as spending on health and education, progressive taxation and strengthening labour rights. Nigeria and Swaziland, the most unequal countries in Africa, are found to have a very poor mix of policies, which have serious consequences: for example, ove r ten million children do not go to school in Nigeria and one in ten do not reach their fifth birthday .
In contrast, Namibia has made major investments in strategically important areas such as education, and has therefore been reducing inequality since 1993. This paper argues that, despite the undoubted legacy of colonialism and structural adjustment policies in increasing inequality in Africa, current African leaders have choices and tools available to them to reduce poverty and inequality levels – somet hing they must urgently do by prioriti zing a human economy approach to inclusive growth in Africa.