Irony of eastern Africa: As countries get wealthier, more people rated poor

Given the difficult global context, the continued resilience of economic growth in the Eastern Africa region over the past few years has been quite remarkable.                 

Countries in the region comprise Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, The Seychelles, Somalia, South Sudan, Tanzania and Uganda.                  

But this strong performance by regional countries has increasingly been accompanied by growing concerns over the quality of the growth — particularly the extent to which this growth has been conducive to broad-based poverty reduction and employment creation.                 

Countries are confronting a number of major economic and social challenges — rising urbanisation, population pressures, and, as pointed out by the recent State of East Africa Report, high degrees of income inequality.

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Despite a much improved economic performance in the 2000s after two decades of economic stagnation across the region, a lot of social and economic aspirations have still not been fulfilled.               

One revealing manifestation of all this, cited in the United Nations Economic Commission for Africa’s (UNECA) Tracking Progress Report 2013 – Towards High Quality Growth and Structural Transformation in the Eastern Africa Region is that, although $1.25-a-day poverty has been reduced in relative terms in the region (from 65 per cent of the population in 2000 to 54 per cent of the population in 2011), the absolute number of citizens living below the international poverty line has increased from 155 million to 166 million over the same period.                 

This paradox — growing wealth but more poor people — is a sure testimony that more needs to be done to ensure that the proceeds of growth are invested well for the future development of the region.                 

The majority of the countries in Eastern Africa have articulated elaborate plans to reach middle-income status over the next 10-20 years. Such ambition is laudable and should be supported.                 

With the generally favourable macroeconomic context and on the strengths of our important natural resources endowments and improving risk profiles, we have a window of opportunity to change our fortunes permanently, and move out of the aid-dependent low-income countries status into the middle income status.                  

But that window may not remain open indefinitely. The risks to regional growth are multiple, and too numerous to enter into detail here. Some are exogenous — for example, global commodity prices (upon which part of the improvement in regional performance has depended on) may decline, or demand from Asia — which cushioned the region from the negative impact of the slowdown in the US and Europe since 2008 — may slow. Arguably, however, the more serious risks come from within.                 

For instance, if job creation does not manage to keep pace with the rapidly expanding workforce, social unrest could end up undermining the whole growth process.      

At the heart of all this then is the need to create more employment opportunities. In our Economic Report on Africa 2011, UNECA was one of the first organisations in the region to coin the term “jobless growth.”             

The list of things that governments need to do to address this problem is long. It entails getting the basics right (such as macro-economic fundamentals, rule of law, strong and capable institutions that can stay the course and operate over long-term horizons), reviving planning, raising investment rates, enabling creativity and entrepreneurship development, and using local content judiciously to promote the establishment of domestic lead firms and fostering the creation of small and medium-sized enterprises which are the seedbed of job creation.                 

Education                  

Of equal importance is the need to raise the ambition and quality of our educational programmes, expand Africa’s infrastructure to reduce transaction costs and boost competitiveness, prioritise manufacturing and domestic value addition (of commodities), explore economies of scale arising from regional value chains, and make Africa’s rapid urbanisation a driver for the continent’s growth, innovation and economic and social transformation.

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