Curbing Africa’s socio-economic inequality for collective prosperity

“If you wish to move mountains tomorrow, you must start by lifting stones today.” As the goliath of socio-economic inequality continues to rise, exposing the ever-widening gulf between the haves and have-nots, one should take heart from this solutions-driven African proverb.

Here are some facts to bear in mind when we discuss the issue of inequality: Africa is considered the second most inequitable region in the world. While the number of dollar millionaires has increased two-fold since the year 2000, those living on less than US$1,25 has increased from 358 million in 1996 to 415 million in 2011. Over the past 14 years, the number of high-net-worth individuals in Africa has grown by 145%, much higher than the global average rate of 73%. Speaking globally, poverty has been reduced, but it remains widespread in sub-Saharan Africa. While the number of African millionaires is projected to increase by 45% by 2024, most of the world’s poor will be living in Africa by 2030. This is compounded by climate change, which constricts the productivity of the economic sectors that are central to inclusive growth.

Solving inequality in Africa – the two-pronged strategy

We must maximise the productivity of catalytic sectors – this should be the foundation of our attempts to solve inequality. Catalytic sectors are those sectors of the continent’s economy that are capable of creating socio-economic opportunities for the majority while at the same time enhancing the resilience of ecosystems and mitigating our carbon footprint to combat climate change.

Equally important is the need to achieve regional integration. Such integration should aim to balance out inter-regional inequalities. This would also serve to buttress the maximisation of productivity mentioned in the previous paragraph.

1. a) Maximizing the productivity of catalytic sectors

The 16^th African Ministerial Conference on the Environment (AMCEN) took place in 2017. The goal was to establish development trajectories that would accelerate socio-economic transformation. At this conference, and guided by science, government Ministers from across the African continent adopted clean energy and ecosystems-based adaptation (EBA)-driven agriculture as the strategic sectors that would accelerate development on the continent. These two sectors are also prioritised in the African Union’s (AU) Agenda 2063.

To maximise the productivity of these sectors, policy makers identified the need to amalgamate them so that they would operate in a complementary manner, instead of developing the various sectors separately, as if they were silos.

Such an amalgamation has the potential to maximise the productivity of agriculture through value addition to cut post-harvest losses (PHLs), which are as high as US$48 billion annually. When we compare Africa’s PHLs with the continent’s US$35 billion food import bill, you find that reversing PHLs and recovering lost food would enhance food security for more than 48 million people. It would also inject an extra US$35 billion into the economy annually, which could be used to capitalise those sectors that are critical to equality, such as universal education, for which Africa needs US$26billion annually.

Value addition is set to increase Africa’s productivity, which is currently 20 times lower than that of developed regions, by creating income opportunities along the entire agro-value chain and in the ancillary chains of clean energy and logistics to further combat inequality. And given the urgent need to combat climate change, these productivity enhancements will occur simultaneously with the offsetting of carbon through scaled clean energy and adaptation through scaled EBA.

Africa is reported to have lost about 33% – a third – of its human capital in the brain drain.

African countries have the most visa requirements in the world.

There are already pockets of success that demonstrate the potency of this integrated approach. For example, in Cameroon’s Jakiri municipality, through the Ecosystems-based Adaptation for Food Security Assembly (EBAFOSA) policy-action framework, the UN Environment Programme is catalysing policy and operational partnerships for amalgamation. Stakeholders are linking off-grid small-hydro power producers to power EBA-produced cassava and Irish potato processing into varied product lines. These products are then linked to markets and supply chains using ICT mobile apps.

This project is not only offsetting carbon in energy generation and incentivising the use of EBA, but is also creating income opportunities along the agro-value chain and ancillary chains of clean energy and ICT. Studies indicate that EBA boosts food security with yield increases of up to 128%. EBA also produces healthier food that contains more immune-boosting compounds.

Job creation is another positive spin-off: 10 youth groups each of 700 are engaging in ICT, clean energy and marketing to create green jobs for approximately 1 000 young people. Over 5 000 women now have access to value-addition services and as a result have cut their PHLs to enhance income stability and the food security of their communities. This practical approach is reducing inequality and poverty in the Jakiri community.

East African Unity.  Photo courtesy of Anonymous

1. b) Enhanced regional integration as a strategy to reduce inequality

Consolidating financial, labour, goods and services markets is a critical factor in freeing up the potential of Africa’s catalytic sectors to maximise income and even out inequality.

Setting standards that would result in a regional market

With Africa’s 300 million-strong middle class demanding more value-added and differentiated agro-products, a consolidated agro-market could potentially earn the region up to US$20 billion annually at present and US$150 billion by 2030. This represents a significant domestic market for the growth of local agro value-addition industries. In contrast, Africa as a continent has the lowest level of intra-trade, which stands at a mere 12%, compared to 65% in Europe, 45% in North America and 25% in South East Asia. The lack of universally applicable quality standards is partly responsible for this fragmentation.

The UN Environment Programme EBAFOSA is catalysing country-driven policy and operational multi-stakeholder partnerships to introduce a compliance standard based on the catalytic sectors. Called the “EBAFOSA Compliance Standard”, this will guarantee quality control along the entire EBA-based, clean energy-powered agro-value addition continuum to create a consolidated market spanning 40 countries on the continent. The standard builds on internationally acclaimed ISO standards and National Standards applied by regulators in each country. It is set to be applied universally across 40 countries and enforced by National Standards regulators in each country. This would mean that certified products automatically qualified for access to a market in any of the 40 countries. Practically, this means that a farmer in southern Africa can, through certification, sell their goods to markets in neighbouring southern Africa and in East, West, Central and Northern Africa.

For example, through this standard, attieke, which is a staple food in Cote d’Ivoire and is made from processed cassava using clean energy, is set to be marketed in Kenya and the rest of East Africa. This standard is set to be established in all 54 African countries. This is the start of consolidating the food market on the African continent, which is projected to grow to over US$150 billion by 2030, with great potential to create income and so reduce inequality.

Open skies – efficient connectivity would consolidate markets

With 12% of the global population, Africa accounts for less than 1% of the global air service market. A key reason for this under-served status is that Africa has not consolidated its air market. If we consider the following facts, it becomes clear that Africa’s share of the global air services market can be significantly enhanced: By 2013, Africa’s air transport had grown at a rate of 6,6% over a decade to become the fastest-growing region globally. In addition, with improved intra-Africa flights, it has the potential to grow at 5,7% annually over and above the global average of 4,9%. Given that efficient air travel is critical for enhanced economic growth, this will have a direct impact on the reduction of reducing inequality. For example, an “open skies” model between just 12 African countries, and the resulting efficient movement of goods and services, could result in the creation of more than 150 000 jobs and add up to US$1,3 billion to Africa’s GDP. Having 100% “open skies” across the continent will double and triple these benefits figures.

However, many African countries restrict their air services markets to protect the share held by local airlines, specifically state-owned air carriers. The Yamoussoukro Decision, which was signed off by 44 African nations and became binding in 2002, was meant to address this. It commits its signatories to put in place policies to deregulate air services and to promote liberalised intra-Africa airspace, a regional air market open to transnational competition. Going forward, governments should, through the AU, prioritise the implementation if this decision as a strategy to combat inequality.

African governments, through the African Union, need to establish a central banking institution that is dedicated to credit control and the risk management of commercially viable loans.

An African central bank

Financing climate-resilient and inequality-reducing growth in Africa entails astronomical sums. For example, a minimum of US$25 billion is needed to achieve universal access to modern energy; US$18 billion is needed for climate change adaptation, and US$210 billion is needed for basic infrastructure, food security, health, security and climate-change mitigation. Notwithstanding these astronomical amounts, Africa cannot rely on traditional public assistance, including official development assistance – which has dropped to a mere 1% of all capital inflows into the continent. At the GDP level, official development assistance now accounts for only 3% of Africa’s GDP.

The implication is that Africa needs to steer away from traditional financing approaches and embrace innovative, market-driven financing approaches. For this, three key functions of a central bank positions it as central to market-driven financing: credit control; the management of cash reserves; and the “lender of last resort” concept.

In implementing the Sirte Declaration of 1999, African governments, through the African Union, need to establish a central banking institution that is dedicated to credit control and the risk management of commercially viable loans that would bridge the financing gap and help maximise the productivity of the catalytic sectors. This central bank will leverage on a continental cash reserve, its lending capacity and a unitary credit policy to guarantee commercial loans that are competitively issued to capitalise enterprises based on Africa’s catalytic sectors – such as in Jakiri and other higher-order industries – to create inclusive incomes.

The importance of a common visa

African countries have the most visa requirements in the world. Only 11 of 54 countries, which is a mere 20% of countries, offer 100% liberal access to all African citizens. This is in contrast to the EU, where the citizens of member states enjoy 100% freedom of movement in each other’s territories.

This scenario constricts how continental labour can be deployed to even out developmental inequalities. Integrating Africa’s work force could potentially reduce the brain drain and the emigration of talent out of Africa to ensure adequate manpower to solve inequality challenges. Africa is reported to have lost about 33% – a third – of its human capital and continues to lose its skilled personnel at an increasing rate. The brain drain that many African countries experience could instead become the transfer of talent across our borders to combat inequality. For example, an unemployed nurse from Ghana could earn a decent living in Liberia. This would enhance that family’s income and help reduce inequality in that community while contributing to better health services in the host country – which would reduce health inequalities there. A young graduate from Tunisia’s technical schools could find a decent job in the plumbing industry in South Africa. The free movement of labour will also create opportunities for Africa’s youth by encouraging trading, new business and job creation.

To make this a reality, the AU should prioritise the full implementation of its continent-wide passport scheme. This is indeed in line with the AU’s own strategic priority of visa-free travel for African citizens within their own continent by 2020.

Conclusion

In conclusion, two African proverbs set the tone for what should be the continent’s next steps in addressing inequality: “To get lost is to learn the way” and “If you close your eyes to facts, you will learn through accidents.” For 54 years since independence, Africa has lagged behind the rest of the globe in closing the inequality gap. Nevertheless, over the years, the continent has demonstrated that it is maturing. The adoption of landmark policy trajectories, including the AU Agenda 2063, the Yamoussoukro Decision, the Sirte Declaration and, recently, the 16^th AMCEN Decision on Innovative Environmental Solutions, prove that the continent is not short of facts needed to reduce inequality. But one step remains: Africa must “open its eyes” to these facts and start “lifting stones” to implement the necessary strategies.

Dr Richard Munang is an Africa Climate Change & Development Policy Expert. He tweets as @RichardMunang

Mr Robert Mgendi is an Adaptation Policy Expert

The views expressed here are those of the authors and do not necessarily represent those of the institution with which they are affiliated.

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