Ten of the most unequal countries in the world are from Africa. This is despite the fact that a majority of the countries are fast growing in terms of economic growth and development in general. South Africa leads as the most unequal country followed closely by Namibia and Botswana. Economic inequality is as a result of inequality in wealth and income distribution.
Income inequality looks at how big the gap is in what people get paid in an economy. In 2017, a troubled Kenya airways saw the former chief executive take home 104.8 million when he left the airline. In a country categorized by few job opportunities in the formal sector that pay more and more job opportunities in the informal sector that pay less inequality is on the rise. This also affects how wealth is distributed among the population of a country.
Wealth inequality focuses on how a small group of people in the world own most ‘stuff’ as compared to the rest. This mostly focuses on assets. According to a study done by Oxfam, less than 0.01% Kenyans which loosely translates to around eight thousand three hundred of the total population own more wealth than 99.9% of the population. Moreover, the gap between the rich and the poor continues to widen each and every day drawing us away from achieving sustainable development goal no. 10
What leads to economic inequality?
Tax systems in some African countries do not favor the poor leading to inequality. The poor in a society pay more taxes as compared to the rich given the percentage of their total income. Due to generous tax incentives a lot of revenue is foregone. This is compensated by issuing a higher tax on consumption- the value added tax in a majority of African countries sees the tax burden affecting the economy. Tax incentives cause Kenya, Uganda, Rwanda and Tanzania an estimated 2.8 billion dollars annually. This money could be used to boost the health sectors and other pressing issues that pose a threat on sustainability. International loopholes and corruption make it easy for the ‘top society people’ engage in tax evasion strategies and avoidance, pushing the burden to the poor in the society.
Investigations were conducted by Global Witness which alleged that the government of the democratic republic of Congo had sold off major mining concessions in secret. This was said to be below the market value equivalent to the education and health budgets combines. In the process, they lost an estimated one billion dollars. A number of offshore companies were said to have received the money. Siphoning of public resources leads to economic inequality as only a few people benefit from the resources.
Unfair distribution of public expenditure and investment leads to economic inequality as well. In Kenya for instance ‘politics of identity’ led to violence after the 2007 general elections. Some ethnic groups are superior as compared to the rest in terms of assets and investments. Inequality increases when some groups are given better access to services that hinder growth such as health and education. This has been the case for some countries such as Uganda, Kenya and D.R. Congo.
In some countries the networks of patronage have benefited and sabotaged specific groups of a given population. Factors such as ethnicity and nepotism have increased inequality. Some communities lack a fair access to land which is key to Africa’s main source of income-agriculture.
Land concentration in the hands of the rich and powerful in a trend in most African countries. Grabbing of land by the rich and foreign investors has affected the poor reducing their chances of experiences any chances of equality. Every now and then developing countries loose land equivalent to a football pitch to private investors. This land would otherwise be used to boost food security through agriculture. Most citizens are left in the dark without knowledge of the opportunities these lands create.
The possibility to survive and strive in today’s Africa is determined by one’s access to capital, technology and knowledge. It explains the vulnerability in arid and semi-arid areas of some African countries. These three pillars determine the ability of one to venture in entrepreneurship access to better paying jobs in minute formal sector. However the resources needed for this are unavailable in some parts of different countries. Other resources have been privatized.
Privatization of some resources has led to inequality especially by those who cannot afford the resources. They end up spending most their low income in accessing these resources. In South Africa for example, water services have been privatized. This has seen a good number struggle to secure good health as lack unequal access of water has its consequences. This is mostly attributed to exclusion of the public from public decision making.
Solution to economic inequality
People with differences in their income level should not pay the same amount of tax otherwise economic growth will be noted but the income inequality will reduce the growth-poverty elasticity of African countries. Policy and law makers need to regulate this in that tax rates are dependent on the income of an individual. This will help reduce economic inequality.
Transparency and integrity should also be employed in distribution of resources as well as public expenditure. This will reduce the amount of public resources siphoned by those in a ‘higher rank’ in the society. Policies should be established to combat unequal access to natural resources and land as they are key to achieving food security. Quality education and services such as health should also be embraced so to ensure equal opportunities for all in terms of personal growth and development.
Understanding the effects of inequality and its causes will help reduce it. It takes time to reduce income inequality amid growth of countries as compared to poverty reduction.