Wednesday, April 23, 2014
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Africa’s Poverty Amid Plenty

PRETORIA – Poverty and inequality still blight much of the developing world, especially Africa, and breed other social ills, including crime and social instability. But considerable progress has been made in addressing both problems, and with more investment, they can be eradicated in our lifetime.

The United Nations Millennium Development Goals, established in 2000, aim at halving global poverty by 2015, a target that was achieved in many countries five years ahead of schedule. Many people are now optimistic that poverty can be reduced even faster in coming years.

Much of the progress made thus far can be attributed to sound macroeconomic policy, stronger social-welfare programs, and above-average economic growth. China has made the most progress in absolute terms, having lifted some 680 million people out of poverty from 1981 to 2010, with the share of its population living in extreme poverty (less than $1.25 per day) plummeting from around 84% to 10% over that period.

In Africa, too, strong economic growth, macroeconomic reform, fiscal prudence, and improved governance have helped to reduce poverty. Governments have become more democratic, and economies have become more open. Longstanding violent conflicts – in Mozambique, Angola, Rwanda, and elsewhere – have ended. Once a sorry tale of corruption and hunger, Africa’s development narrative has become overwhelmingly positive.

Foreign investors now view the continent as their next frontier. The US investment bank Goldman Sachs, for example, points out that Africa’s potential includes much more than natural resources. The continent is now ascending “the consumption, urbanization, and perhaps industrialization curves that the BRICs [Brazil, Russia, India, and China] have climbed.” Indeed, household consumption in some parts of Africa has overtaken that of the BRICs.

But, amid Africa’s new growth and dynamism, too many of its people – what the economist Paul Collier calls the “Bottom Billion” – continue to suffer from poverty, unemployment, illiteracy, and curable diseases. Africa scores poorly in the United Nations Development Program’s latest Human Development Index – only Mauritius, at 80, and Seychelles, at 46, rank in the top 100 countries.

In other words, while some people are making the most of the new opportunities, the gap between them and those left behind has widened. The construction cranes and skyscrapers in Nairobi, Lagos, and Luanda are juxtaposed with the grim reality of poverty and helplessness in these cities’ hinterlands and beyond.

A high degree of inequality within countries correlates with greater poverty, unemployment, and crime. Excluding Africa’s neediest from essential services erodes social cohesion and undermines what are still fragile democratic systems. So efforts to boost economic growth must be accompanied by concerted action to reduce inequality.

There are no quick fixes, but action can, and should, be taken. First, civil-society organizations should form an essential part of any anti-poverty program. Although non-governmental groups are only as effective as African leaders allow them to be, they can hold local politicians to account, even in the face of severe resistance, thereby establishing a stronger foundation for the implementation of anti-poverty initiatives.

Second, policymakers need to focus on “inclusive” growth, job creation, and social protection as buffers against poverty, inequality, and economic volatility. In recent years, we have seen that even developed countries are vulnerable to the destabilizing effects of high youth unemployment (an experience that should foster a sense of common cause with less-developed countries).

Third, public-private partnerships can help to ease bottlenecks that constrain trade. Governments can and should work with multinational companies to improve business conditions, especially in such areas as agriculture, energy, and transport, which have the greatest knock-on effects for other economic sectors.

Finally, if poverty and extreme inequality are to be eradicated, Africans must not allow themselves to become entirely dependent on rich-world investors and expertise in the quest to modernize their economies. Local firms, with government help, must be ready to innovate, develop products for their domestic consumers, and find homegrown ways to raise living standards.

For all the value that they bring to a host country, Western companies and governments should recognize that sustainable development will come through the application of local investment, ingenuity, and labor. Africans should not try to do everything alone, but ultimately they must be the masters of their economic destiny.

Read more from "Unequal at Any Speed?"

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  1. Commentedtemesgen abate

    some nuance is usually lost when ``vuvuzela``-ing much on the continent`s recent ascendancy.one potent point lacking in such analytics is how to fill- in the dearth in legal regimes underpinning capitalization.

  2. CommentedAbdisalam Mohamed

    Seems to be that you are over exaggerating about Africa's economic status. Nothing has been done so far when it comes to employment, natural resource management, technology adaption etc. Corruption is prevalent in many African countries and civil war still continues in some countries. You are very optimistic about the future of Africa, but I doubt whether Africans can do well in the future given their politicians tendency for corruption, embezzlement of public funds etc.

  3. Commentedjerome camblain

    I agree partially on your last point. Don't rely on foreign investors for modernization, but by all mean, do rely on foreign money to build the great education system that will help you not relying on outside money in the future

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