Inclusive Growth In Africa

Making The Case For Inclusive Growth In Africa

By Emmanuel Awosika

Since the start of the 2000s, Africa has enjoyed unprecedented economic growth, averaging 4.6% growth annual GDP between 2000 and 2016 alone. However, these economic gains have hardly translated into better lives for ordinary citizens, a recent African Economic Outlook Report shows.

The Organization for Economic Cooperation and Development (OECD) defines inclusive growth thus: “Economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.”

This definition underscores the major preoccupation of the inclusive growth ideal, that is, every citizen must be able to share in a nation’s prosperity. It is not enough for a country to experience economic development; the resultant growth must affect all citizens positively.

Why is inclusive growth important for countries? When economic growth is non-inclusive and benefits only some, poverty and economic inequality will rise. This partly explains why Africa has continued to see high poverty rates even as it experiences economic advancement. Presently, Africa’s share of the world’s poor is nearly 70%, and experts expect it to grow to 90% by 2030.

Moreover, the gap between the rich and the poor continues to widen. According to the AEO

report, per capita consumption growth rate was lower among Africa’s poor (3.04%) compared to the general population (3.325%). Indeed, Africa has the highest rate of income inequality in the world – the top 10 percent earn 30 times what the bottom 50 percent earn.

With the Covid-19 pandemic affecting African economy negatively, the continent must re-evaluate its economic strategy. Already, the economic fallout from the pandemic is predicted to impoverish 23 million people in Sub-Saharan Africa. To avoid this fate, African countries must proactively encourage inclusive growth.

First, we must build up human capital on the continent, which has remained dismally low for years. This requires investment in education to boost productivity and increase output per person. Also, we must make education accessible to everyone – even the poor. With this, individuals will acquire in-demand skills and get better-paid jobs, ultimately reducing income inequality in the society.

Second, we must encourage structural transformation on the continent. Structural transformation is the reallocation of resources from one (low-productivity) sector to another (high-productivity) sector. Currently, about seventy percent of Africans are involved in agriculture, which is problematic because agriculture – at least, in Africa – is a low-productivity, low-income sector. African nations should endeavor to re-allocate resources, particularly labor, from the agriculture to other high-productivity sectors such as manufacturing and services.

Third, we must create social safety nets targeted at the poor. According to reports, about 44 African nations have introduced financial measures to help cushion the effects of the economic downturn on the poorest citizens. However, just two countries – Egypt and South Africa – account for over 85 percent of the $37.8 billion earmarked for these social protection schemes. Other African nations must increase investment in social safety nets. Or else, the poor will continue to get poorer, and economic inequality will persist.

From all indications, it is obvious that inclusive growth is needed more than ever in Africa. Inclusive growth will encourage positive economic development, reduce the population of Africa’s poor, and create a fair and prosperous society for all.