Open borders will eliminate inequality in EAC – experts

The State of East Africa 2013 report may not reflect the current economic situation of the region, but it paints a fair picture of the existing gap between the rich and poor.

The State of East Africa 2013 report may not reflect the current economic situation of the region, but it paints a fair picture of the existing gap between the rich and poor.

It shows that Burundi is the least unequal country in EAC, followed, in order of rising inequity by Tanzania, Uganda, Kenya and Rwanda. Trends in the last 20 years point to Rwanda and Burundi reducing inequality more recently, even if “from a very high level in Rwanda.”

However, the gap seems to be widening among Kenyans and Tanzanians while the difference between rich and poor Ugandans has remained the same for two decades.

Considering economic drivers of inequality alone, the rapid change in the region’s economic structure is “one of the most important drivers both of the region’s economic performance and the uneven distribution of income and other benefits of growth.” This has seen half of the population (71 million) live on $1.6 a day and the poorest (56 million) make ends meet with $0.63 per day.

High unemployment, poor quality education and low investment in agriculture, the sector that many depend on, are the main drivers of this situation.

Understanding inequality

According to Andrew Mold, the chief of Sub-Regional Data Centre at the UN Economic Commission for Africa, the report raises an issue that “is a problem all over the world. This, he says, requires focus on “the depth and impact” fiscal policy and social welfare programmes.

Prof Herman Musahara agrees, saying that inequality is a form of social justice that has affected almost all societies from time immemorial.

He reasons that inequality is not poverty, but inequality is one of the attributes of relative poverty. 

“A common measure of inequality is the Gini Coefficient, a figure between 0 and 1. A country with a Gini of more than 0.5 has a high level of inequality and is common with countries like Brazil, Namibia and South Africa.”

For James Shikwati, a Kenyan economist and director of the Inter Region Economic Network (IREN), a leading independent African think tank promoting ideas and strategies geared towards causing prosperity in Africa, inequality “is the nature of life” because human beings do not necessarily boast similar potential.

However, he says, artificial inequality is unacceptable since it leads to many living in deplorable conditions 

Shikwati told The New Times that inequality was partly caused by the clash between indigenous institutions and modern institutions. 

“For example, the aspect of property rights in the modern sense disenfranchised many women for close to 40 years; only men could own land and transact credit in banks using land as collateral. The opening up of space on this issue has led to women competing with men in real estate business and land ownership in Kenya,” he said.

Drivers of inequality, he says, include an educational system where the privileged few go to schools that give them a head start in networks and opportunities. Another is bad politics; where entrepreneurial individuals are suffocated by virtue of their political affiliations. 

Others are “bad exclusionary policies” that make it difficult for a country or a region to pull together in the same direction, and international systems that sustain the region in primary goods production (say, extraction of minerals; agricultural production) and make it difficult for EAC countries to engage in value added production for the global market thereby limiting the space for opportunities.

He however lauds EAC governments for opening borders to allow free movement of people. “Free movement is a good starting point for people to explore and grow opportunities. Governments need to invest in security of the citizenry; for through secure countries, citizens will invest without fear,” Shikwati said.

“Governments should provide incentives for East African investors that go out to put up enterprises in rural and marginal areas; and those that invest in demonstrated life transforming initiatives. Governments should simply nurture an environment where each citizens’ dream becomes valid regardless of which family, tribe and political affiliation they come from,” he added.

According to Shikwati, bad policies prescribed by donors and a skewed economic landscape that breeds primary production while it celebrates consumption of goods made from elsewhere, is also to blame for inequity.

This “supermarket” economy, he says, limits space for others to play in.

Musahara adds that there are two ways to look at the dynamics of inequality. For example, there may be a small middle class in a country driving high levels of investment and resulting in rapid economic gains but leaving a relatively large part of the population behind.

Another possibility is regressive policies or lack of redistributive ones resulting in a small group amassing wealth and assets such as land. The latter, he says, can happen even if there is not much growth in the economy.

“In much of Sub Saharan Africa it may be both. In countries where high growth has not been adequately pro poor, resulting in inequality, social policies are used to address the effect. The ‘tunnel effect’ means you use the gains of the few to get safety nets and welfare support to those in the lower quintiles.”

Local solutions 

According to Musahara, Rwanda initiated a wide range of social protection measures including grants through Vision 2020 Umurenge Programme. The other intervention include land reform and taxation policies that aim at goods consumed by the rich or directly taxing their incomes.

“In Rwanda, inequality by Gini Coefficient fell considerably in the last 10 years. In Scandinavian countries the levels of inequalities are minimum. Welfare policies including gender equality are most likely the drivers,” he said.

 

Have Your SayLeave a comment