Africa`s Income Inequalities: The reality of a “A Few Big Men”

Home » AFRICA » Africa`s Income Inequalities: The reality of a “A Few Big Men”

By Perry Munzwembiri on February 10, 2014. No Comments

OPINION (Zimbabwe Investor) – Economic inequality has dominated international economic debate recently, and with good reason. Developmental charity organisation Oxfam International made headlines not too long ago with its report which noted that the 85 richest people in the world own the wealth of half of the world`s population. The report further suggests that this is no accident either, as more often than not; these wealthy elites “co-opt the political process to rig the rules of the economic system in their favour.”

In America, the wealthiest 1 % of the population accounted for 95% of the increase in total income since the financial crisis of 2008. Yet even in the world’s largest economy, this is a very topical issue, and could yet be the flashpoint of the next Presidential election amongst the America`s electorate.  Sub-Saharan Africa sees, nearly 50% of its population live on less than US$1 a day: the world`s highest rate of extreme poverty according to the African Development Bank. What truly drives economic growth is a thriving middle class that spends on goods and services, which in turn stimulates businesses. This ultimately leads to a robust economy, with solid growth prospects going forward.

Be that as it may, here in Africa, increasingly we are seeing the emergence of an elite obscenely rich section of society; “A few big men” with virtually all control of the economic factors of production. Perhaps unlike in the developed lands of Europe or America, in Africa, usually these wealthy elites have risen to prominence not because of the noble virtues of hard work and innovation. Of course to be fair, this is a broad generalisation which may not hold true for all the continent`s rich. However evidence would seem to suggest that they have leveraged off their political connections to climb up the economic ladder. Nowhere else is this fact clearer, than in South Africa which undisputedly, is economically to Africa what America is to the world. Tokyo Sexwale, Cyril Ramaphosa, Mathews Phosa among a host of other ANC ‘cadres’ have emerged to be leaders of the pack; enjoying a greater piece of the economic pie.

China`s Deng Xiaoping, leader of People`s Republic of China after Chairman Mao`s death is still famous among other things for preaching the gospel of, “Let some people get rich first.” Ironically more than three decades later China still has to contend with the burden of massive income disparities among its population. For the first time in some 12 years, the Chinese government released its Gini coefficient (a measure of income inequality with 0 being perfect equality and 1 being perfect inequality) which stood at 0.474 in 2012. This underscoring the great schism between China`s haves and have not`s, more so after following a model that pushes one particular class to get rich at the expense of another.

What is fundamentally wrong with an approach that allows a select few individuals to get rich first and get ahead of the curve as it were, is that it breeds a sense of entitlement among the wealthy elites which can be particularly hard to get rid of in the long run. Inevitably, the incidences of corruption and graft tend to become commonplace as the politically connected wealthy elite seek to consolidate their hold on the economy. Wealth will therefore never be equitably distributed in the economy.

Equitable growth, which sees a thriving middle class also enjoying a larger cut of the pie, would be most desirable. After all, it is this class that creates sustained demand for goods and services produced in an economy. Their financial well-being or lack thereof has a direct bearing on any economy as it is the middle class in essence, which creates a ready market. However, evidence on the ground would seem to suggest that this elementary tenet of political economy is increasingly being overlooked today. In Zimbabwe for instance, there has been scandalous revelations of CEOs of quasi government organisations like ZBC (the country’s sole broadcaster), PSMAS (a medical insurance society to which most civil servants are signed up to) awarding themselves hefty salaries when workers of the same organisations have gone for months on end without pay, or as in the case of PSMAS, members being denied medical service as the society fails to settle claims.

As a result, economic activity at the lower base of the pyramid, which by the way accommodates a significant portion of the population, is stifled, as with no money, there is no spending power. This invariably fans a self- perpetuating economic system dominated by a few wealthy elites at the expense of the greater masses. Growth therefore will never be sustainable as it is not at all inclusive. These “few big men” can never drive real economic growth and whatever growth that may be seen in the short term is only but a mirage as not every member of society is catered for.

“Africa grew at a faster rate in the last decade than most other regions, but the impact on poverty is much less than we would`ve liked. Africa`s growth has not been as powerful in reducing poverty as it could have been because of the high levels of inequality ,” says Francisco Ferreira, acting Chief Economist, World Bank Africa Region in  ‘Africa`s Pulse’, a bi-annual analysis of the continent`s economic prospects.

A shift in the mind-set of policymakers and responsible authorities is thus critical, to effect economic structural reforms that would ensure inclusive growth with less income inequalities, if economies particularly those in Sub-Saharan Africa where statistics show most of the world`s poor will live in by 2030 according to the World bank, are to develop. The current model of a few wealthy elites enriching themselves while the masses suffer under the vagaries of poverty will curtail growth in the long run.

Renowned political commentator Moeletsi Mbeki makes this point in his book ‘Architects of Poverty’, “If the African sub-continent is to develop, it needs a new type of democracy that will empower not only the political elites but also the region`s private sector producer`s most of whom are peasants. The new democracy should be able to restore the growth of an independent and productive middle class too.” Hence the reality facing Africa of the elite nouveau riche has to be transformed to that of a growing and empowered middle class.