Tackling Inequalities and Promoting Structural Transformation

There is a dominant narrative in Africa about ‘Africa rising’, however the bulk of the African people are not really feeling this growth in their pockets. Why? What Africa is rising?
African growth has doubled the average growth rate of the 1990s. Between 2000 and 2011, six of the world’s fastest growing economies were in Africa—Angola, Chad, Ethiopia, Mozambique, Nigeria, and Rwanda. However, this is a ‘jobless’ growth. Africa presents the highest level of unemployment among world regions with a high ratio of working poor (46.5%). The industrial sector is unable to create jobs, value addition is limited and labor productivity low. Some signals of slight de-industrialization have also emerged. Despite some positive signs of improvement over the last decade, inequality is still high.
Africa is experiencing an unprecedented transformation, however the quality of this growth and its impact on poverty reduction and inequalities is unclear.
When we talk about inequalities, we are talking about a multidimensional reality encompassing the economic domain (access to income, assets distribution, disparity of wages), social (access to health and education), political and spatial (disparities between different groups and geographies).

Inequalities are normally equated with jobs. However, the creation of jobs does not necessarily imply addressing all the dimensions of the equation, like the issues of  women concentration in labor intensive export industries, the increase of informal work and the lack of care services, to mention a few.
From a multidimensional perspective, the creation of decent jobs cannot happen without improving labor productivity,  the  creation of value addition, participation in the value chain, the enforcement of minimum standards, the reduction of urban-rural disparities, the improvement of health and education.
The debate around job only considers jobs in traditional terms without considering also all the potentials coming from entrepreneurship and people’s self-initiatives, which are either not explored enough or simply left in the domain of informal economy. Including different type of jobs and entrepreneurship in the discussion, would imply reconsidering and creating the linkages with other domains like for instance education, vocational training, access to financing and infrastructure.
When it comes to the political dimension of inequality, the agenda becomes even more complicated. Tackling inequalities means challenging existing power relationships and structures. These have a strong incentive to resist any reform agenda that reduces their advantage.
In some countries the structural ownership is so concentrated that the political challenge eclipses the economic one. Inequality is normally viewed from an income distribution perspective (economies of wages). Arguably, the more fertile place to begin to understand the structure and drivers of inequality is by looking at the distribution of the wealth and assets that generate rents (interest, dividends and actual rents). This is precisely where the policy making should increasingly look at, but this implies challenging the existing political structures and privileges.

Moreover, the difference between inclusion and equity is often omitted in the global discourse. On one hand there is an unanimous convergence about an inclusive ‘no one left beyond’ objective. However, there is less agreement about an equity objective which would articulate how the benefits of economic, social ad political engagement could be more equitably shared among the various groups of the population.
The quest for beneficial structural transformation must deliberately focus on inequalities and propose policies and initiatives that deliberately steer an economy/society towards greater equity, as well as inclusion, and not just robust growth

In the East African region Rwanda ranks as the most unequal, while Burundi, the country with the smallest economy in the region, is the least unequal.  East Africa has witnessed a rapid structural change. In 2003 Kenya was the only country in which the service sector had a bigger share of the economy than agriculture. Ten years later all East African economies were in a similar position. Burundi has moved, in just seven short years, from an agricultural to a service led economy as measured by the contribution to overall national income.

The speed of change in East Africa is overwhelming the capacity of the industrial and services sectors to provide the needed jobs and alternative livelihood opportunities. Looking at employment and formal wage earners, a very small portion of the population  is in the formal job market (1.6% in Uganda, 4% in Burundi, 5% in Tanzania), while the majority are informal workers. The probability of being paid a minimum wage is very low. The median monthly wage is often lower than individual countries’ official poverty lines. The middle majority of the population is not necessarily the middle class.

Structural transformation in East Africa has worsened the agricultural sector, has not reduced the levels of malnutrition, and has not improved people’s  opportunities (access to jobs, education, health, etc).

What is the future of inequalities in East Africa? The ongoing transformation in East Africa suggests that growth is a necessary but not a sufficient condition for reducing inequalities. The intersection of social, political and economic domains is crucial to address inequalities and to foster a structural transformation that is sustainable, people focused and development oriented. Each agenda must be advanced while staying linked to the others. While the economic agenda will be influenced by divergent political interests, and the social agenda will depend on the capacity to mobilize economic revenues and to deepen citizen empowerment, it is fundamental that the intersection of these agenda inform the entire process of  transformation.