Income gap widens

Namibia is the third most unequal country in the world and the second most unequal country in Africa, a study on income inequality trends released by the United Nations Development Programme (UNDP) has found.

The inequality findings are based on the Gini coefficient, an economic tool that measures income inequality by indexing the gap between the top income earners and the poorest of the poor.

The UNDP book, 'Income Inequality Trends in sub-Saharan Africa: Divergence, Determinants and Consequences', is the product of more than two years of research.

It was released in September in an effort to ensure that the region is able to address income disparities, which the UNDP believes are crucial to reaching the sustainable development goals.

The book found that South Africa is the most unequal country, with Haiti in second place and Namibia third.

In Africa, South Africa and Namibia are followed by Botswana in third place, all of which have Gini coefficients of more than 0.6.

At the launch of the publication, Abdoulaye Mar Dieye of the UNDP stated that high levels of inequality “weaken the poverty-reducing power of economic growth in the continent. It can put in jeopardy the aspiration to leave no one behind.”

He noted that the UNDP book presents the first comprehensive income inequality study on Africa and.

“[It] systematically explores income inequality and draws lessons to reduce income inequality in Africa. To accomplish this objective, the book presents an Integrated Inequality Dataset for Sub-Saharan Africa, an innovation that helps overcome persistent problems of scarcity and inconsistency of data on income inequality. This is unique. And this is a first,” he said.



Unfair

Although the sub-Saharan African region achieved an average reduction in its unweighted Gini coefficient, from about 0.47 to 0.43 between 1991 and 2011, “the region remains one of the most unequal in the world – with 10 of its countries listed among the 19 most unequal in the world,” the book's introduction notes.

Researchers further found that Namibia and six other sub-Saharan countries - Zambia, Botswana, South Africa, Central African Republic, Comoros and Lesotho – which are marked by concentration of land in the hands of a few, and weak access to agricultural assets - are leading the continent in income inequality.

These seven outlier countries have exceptionally high income inequalities, “making Africa's Gini coefficient significantly higher than the global average.”



The authors also note that all seven countries are marked by the concentration of land and economic assets in the hands of a few and if all seven were removed Africa would be the same level of inequality as other developing countries.







Going forward







“Ultimately, for Africa to significantly reduce poverty, the economic structure must shift more toward light manufacturing and industrialisation to create employment and a more sustainable human development path for the continent,” the book states.



The study found that a lack of economic diversification, high concentration of means of production and limited distributive capacity of the state are key drivers of inequality in the region.

“Income inequality in African countries stems from a higher dualistic economic structure, where high-income sectors, such as multinational companies and the extractive sector, offer limited capacity to generate employment compared to the informal sector, where most of the workforce earns far lower incomes.”

Another factor is a “high concentration of physical capital, human capital and land, especially in Eastern and Southern Africa, and the limited distributive capacity of the state, which often manifests ion a 'natural resource curse', an urban bias public policy and ethnic and gender inequalities.”

The book states that although there is no one-size-fits-all approach to addressing income disparities a number of approaches should be looked at.

They include improving distribution of human capital, particularly secondary education, to positively affect inequality, increasing direct taxation and efficiency of tax administration, as well as increasing well-targeted social expenditures.

The book's authors also recommend enhancing productivity in the agricultural sector, which is seen as critical in reallocating labour to other sectors of the economy and reducing rural poverty, rural poverty gaps and income inequality.

Ayodele Odusola, head of strategy and analysis and chief economist for UNDP Africa and a lead editor of the study, said the “key message from the book is there is no silver bullet for addressing inequality on the continent. You have to take countries' context into consideration and realise that policies that accelerate the reducing of poverty may not necessarily be the same policy that reduces inequality.”

JANA-MARI SMITH