Build inclusive African economies now to stop rising inequality

by William Pollen | Invest in Africa
Monday, 27 September 2021 16:21 GMT

A woman harvests grass seeds in a field on the shore of lake Baringo, Kenya, August 26, 2020. REUTERS/Baz Ratner

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Despite signs of the economic tailspin slowing, analysts see a fragile future for even more of Africa’s most vulnerable income groups

By William Pollen, programme director at Invest in Africa

The journey from tree to toast for avocado aficionados might seem like a seamless process of sophisticated supply chains. However, this simplification downplays the struggles of some suppliers.

Rosemary Muita, CEO of Kenya-based Great Global Traders, will attest to those hardships. As a woman, cultural hindrances limiting land ownership prevent her from securing loans - reducing access to finance and curtailing prospects of growth.

Unfortunately, Rosemary’s story is not unique across Africa, nor the world - where an economy with equal opportunities for women would be 26% larger by 2025. Women are among the most marginalised demographic on the continent, alongside youth and the poor. This chronic lack of opportunities can be remedied by building inclusive economies, under which growth is broad-based, offers no distinct advantage to specific groups, and empowers those on the fringes of society.

In 1990, GDP per capita across sub-Saharan Africa was $644. Three decades later, it is nearly $1,500. During that period, the number of Africans in extreme poverty grew and it continues to do so under the deleterious effects of COVID-19 and climate change. What seemed like a staggering development was a widening of income inequality.

Crippling effects of COVID-19 and climate change

The pandemic has forced 40 million more Africans into extreme poverty, primarily participants in the informal economy - mostly women and youth. This segment of society has the least access to income opportunities and are most affected by the lack of social safety nets. Despite signs of the economic tailspin slowing, analysts see a fragile future for even more of Africa’s most vulnerable income groups.

The estimated 514 million Africans who will be in extreme poverty by the end of 2021 could worsen under the crippling effects of climate change. Africa faces a significant decrease in GDP due to warmer, drier climates, despite claiming responsibility for only 4% of global greenhouse emissions. Agriculture, the largest employer of women and youth, will be severely affected. Crop production and food security will remain perilously low, while access to mitigation mechanisms – like drought resistant seed varieties - becomes harder under widescale economic hardship.

Crop yield will reduce by between 8-13%, making livelihoods in the fields less productive and profitable. Given that a lower percentage of employment in agriculture, combined with higher output, is indicative of structural economic development, the continent faces the threat of backsliding. With over half of employed women working in agriculture, this places many in a precarious position.

Structural reform

The African Continental Free Trade Agreement (AfCFTA) brings concerns of further entrenchment of existing inequalities. It is expected that the Agreement will prioritise higher-value, male-dominated crops, like maize, potentially crowding out women.

There is no discernable policy-led antidote to that threat, and this encapsulates the need for broader, systemic change from the continent’s heavy-hitters. The African Union’s Agenda 2063 sets out hopes for a more equal society, while the African Development Bank has prioritised inclusive growth through its many interventions. In spite of this, external influences are widening the chasm of inequalities.

Urgent need for action

The case for improved inclusivity is obvious, so why is it not happening? Social and cultural resistance - which stopped Rosemary from owning land - is not so easily overcome. Increased opportunities for women improve their economic independence and savings, strengthening financial security. Family structures are changing, and others are waking up to the detrimental impact of sidelining certain demographics.

This is why the youth carry our hopes, dissolving these barriers through access to technology and progressive outlooks. Shaping the future around them is essential. That also means making 20 million jobs annually for this increasingly aspirational section of society. Moving away from the primary sector such as farming, these digital natives will benefit from investment in increased access to digital tools.

One of Africa’s greatest strengths, often neglected by outsiders, has been her diversity. It is time we tapped into that in a structured way. The results will be astonishing. We owe it to Africans to take a non-negotiable stance on this to develop inclusively.