By: Jacob N.B. Parley
Latest estimates by World Data Lab show that, for the first time in history, the world will enter 2019 with the lowest level of extreme poverty, at 8%. However, single digit numbers hide underlying differences, especially for African countries. 600 million people globally will start 2019 living in extreme poverty and only 20 million will come out of this situation by the end of the year.
The estimates also show that Africa still has much of its population living in poverty or vulnerable. Projections from the ECA’s recently unveiled Africa Poverty Clock estimate that, in 2019, 70% of the world’s poor will live in Africa, up from 50% in 2015.
The situation suggests that by 2023, share of Africa’s poor will increase to over 80% of global share.
In other words, Africa will be adding more poor people to the world. The African Poverty Clock provides real-time poverty estimates for every country on the continent, with forecasts until 2030. Current projections indicate that almost all of Africa is off track for ending extreme poverty by 2030.
According to an ECA release, thirteen countries are projected to see an increase in absolute numbers. Seven out of the top ten countries in the world with the poorest people are in Africa. This is expected to rise to nine out of ten by 2030. Four main factors drive Africa’s diverging progress with the rest of the world.
The poor in Africa start further below the poverty line than those in other global regions. So even if incomes rise, it is rarely enough to push a significant proportion out of poverty. Africa’s poverty gap index, which is a measure of the intensity or depth of poverty, is nearly double the global average at 15.2 per cent in 2013 (global averages is 8.8 per cent). The average consumption of the poor across the East, Southern, West and Central regions is $1.16 a day, which is $0.74 below the international poverty line, thus posing a challenge to achieving the SDGs target of eliminating poverty by 2030.
Poverty reduction is further impacted by high inequality levels. When inequality levels are high, economic growth delivers less impact for poverty. Across many countries in Africa, the richest 20% controls up to 60% of the wealth, as a consequence, growth has not been inclusive. Africa’s inequality landscape is also characterized by high average inequality, extreme inequality (South Africa, Namibia, Botswana) and a bifurcation of inequality trends that sees substantial variations in ‘within-country’ trends.
The mismatch between sectors of growth and employment remains a challenge. Agriculture continues to be an important contributor to economic growth and the transition to industry remains slow. In Burundi, Burkina Faso, and Madagascar, more than 80 percent of the labor force works in agriculture. Africa’s manufacturing sector employed only 9% of women and 16% of men on average over the decade. However, most of Africa’s working poor are predominantly found in the informal sector characterized by low productivity and low incomes. Despite the increase in employment within the services sector, the reality is that people are moving from low productivity agriculture to similar low productivity urban informal activities thus there is little impact on rising incomes.
The economic growth recorded for the last 20 years has made minimal impact due to rapid population growth. With 2.6% population growth rate, on average, is accounted for, annual per capita growth in the last quarter century comes in at just 1.1%, which is insufficient to reduce poverty quickly. However, it is important to note that the rate of population growth witnessed over the last two decades is unlikely to repeat itself in the coming decades, thus presenting unique opportunities for countries to make significant impact on poverty reduction.
Nonetheless, 2019 may prove a significant turning point in Africa’s progress towards the elimination of extreme poverty by 2030. For the first time, in 2019, the absolute number of people living in extreme poverty in Africa will be reduced. But there is no guarantee that this pace will continue in the absence of the right public policies and actions. Sustained economic growth of the magnitude of at least 8-10% is necessary for the quantum leap needed for faster poverty reduction and to achieve the SDGs.
Africa’s focus on the African Continental Free Trade Area (AfCFTA), digital economy and the scaled up push for gender inclusion bode well for inclusive growth over the next decade if governments adopt adequate fiscal and structural policies to crown in the private sector and improve infrastructure.