COMMENT: Africa rising, who benefits?

Indeed, Africa is experiencing a tremendous economic growth and is rated as one of the fastest-growing regions in the world. This has however left many with unanswered questions. A new economic growth momentum has been established, but what does this mean to the people on the continent? What, actually, are the strengths and patterns of growth on the continent? Is the growth trajectory inclusive enough --or better still, addressing the issue of income inequality?

It is clear as an open book that the economic growth being experienced on the continent is not inclusive enough, and it is leading to a higher rate of income inequality. The consequences of inequality I would say are overwhelming -- but they are surmountable. I will dwell on the analysis of lack of inclusive growth and income inequality as the main factors on which the doubts by people are premises in questioning economic growth on the continent.

The major doubt people have expressed about the current economic growth of Africa is that it is not inclusive enough, hence causing increasing income-inequality on the continent. Many have described the growth as being jobless in nature, and that the numbers do not reflect reality as being felt by the ‘real’ people of the continent. A popular saying in pidgin-English goes: “Na growth we go chop?” Indeed, such individuals are within their rights to ask such question; after all, what meaning can we attach to numbers we have on papers if they do not have real economic meanings.

I previously did an article on the critical need for the continent at this point in time to pursue an inclusive growth agenda, as this is a means of avoiding the conundrum inherent in a concentrated benefits and dispersed/diffused costs system -- as is happening now; i.e. income inequality.

Accordingly, inclusive growth is economic growth that results in a wider access to sustainable socio-economic opportunities for a broader number of people, countries, or regions while protecting the vulnerable: all being done in an environment of fairness, equal justice, and political plurality. Again, inclusive growth would make the poverty reduction efforts more effective by explicitly creating productive economic opportunities for the poor and vulnerable sections of the society. It would decrease the rising level in income inequality in countries and increase the involvement of people in the growth process.

The phenomenon of concentrated benefits and dispersed costs is has serious effects on society -- enough to warrant many Governmental programmes on the continent.

However, I believe this does not go far enough to explain the kind of situation in which we now are. The current rising income inequality amidst a tremendous growth rate reverses the quotation by Abraham Lincoln, who talked about ‘a Government of the people, by the people, for the people’. What we now have is ‘a Government of the people, by the bureaucrats, including the legislators who have become bureaucrats, for the bureaucrats’. Simply put, the economic success is fought for by the people, but the benefits are concentrated at the top -- leaving the majority of people in poverty. So, in essence, while the majority poor are working assiduously to increase the national income, the minority elites and rich are also working in what is vitually reverse -- increasing their share of the national income. This indeed is something that the continent wants to put a stop to. To show that income inequality has become a global phenomenon that requires attention from all quarters, it is interesting to note that the top-100 billionaires added US$240billion to their wealth in 2012 -- enough to end world-poverty four times over.

From an independent opinion on the current rate of income inequality on the continent that is premised on lack of inclusive growth, I am left with no doubt that the continent urgently needs to set goals to tackle the extreme inequality and extreme wealth. It is now widely accepted that rapidly growing extreme wealth and inequality are harmful to human progress, and that something needs to be done. Already this year, the World Economic Forum’s Global Risk Report has rated inequality as one of the top global risks of 2013. The IMF has said that inequality is dangerous and divisive, and could lead to civil unrest.

While many people are pointing to the fact that a certain level of inequality may benefit growth by rewarding risk-takers and innovation, the levels of inequality now being seen are in fact economically damaging and inefficient. They limit the overall amount of growth, and at the same time mean that growth fails to benefit the majority. If national income is instead more evenly spread across the population, then it would give more people spending power -- which in turn would drive growth and reduce inequality. Moreover, unequal societies represent a threat to meaningful democracy. Extreme wealth and inequality undermines societies and lead to far less social mobility.

If you are born poor in a very unequal society, you are much more likely to end your life in poverty.

The growth on the continent should therefore be looked at from two angles: who gets involved in the production, and how the growth is distributed. These two scenarios have a critical bearing on poverty reduction on the continent and strategically reversing the increasing rise in income inequality. Remember, the main objective of achieving inclusive growth is to bridge the gap between the rich and poor -- thus reducing poverty and inequality on the continent.

Whatever the combination of policies pursued, the first step is for Africa to recognise this as the goal. There are many steps that can be taken to make growth on the continent inclusive enough and to reverse inequality. The benefits would be huge for the poorest -- but also for the richest. We cannot afford to have a continent of extreme wealth and extreme inequality. We cannot afford to have a continent in which inequality continues to grow, in the majority of countries, amidst increasing economic success after the salient question “Na growth we go chop?”

By Paul Frimpong