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The East African : November 25th 2013
4 STATE OF EAST AFRICA REPORT 2013 Rising inequality tests growth prospects East Af≥ica’s ≥ichest billionai≥es Expe≥ts say the widening inequality, mainly in incomes and gende≥, p≥esents a dilemma fo≥ policy make≥s By CHRISTABEL LIGAMI Special Correspondent T he East African Community’s integration project has helped more than double economic growth in the region, but inequality has worsened over the past five years. In fact, the gap between the rich and poor in the region is so stark that the two are literally living in different worlds. The richest 10 per cent of East Africans are living a lifestyle similar to a moderately well-off country in Latin America, while the poorest 40 per cent may as well be living in Somalia or the Democratic Republic of Congo — at the lowest points of the two countries’ conflictridden past, according to the State of East Africa Report 2013, published by the Society for International Development (SID) on Friday. Experts said the widen- ing inequality, mainly in incomes and gender, presents a dilemma for policy makers as it could compromise the economic gains achieved over the past few years. Weakened households dogged by inequalities where education, health and other crucial services are a preserve of the rich, have far-reaching implications for the economy as only a small proportion of the total households have enough disposable income to drive growth. A common characteristic of developing economies is the falling share of the agricultural sector in the overall economy, but the trouble in East Africa is that the speed of change is overwhelming the capacity of the industrial and services sectors to provide the needed jobs and alternative opportunities. “When you take a macro view of the state of East Africa, everything looks rosy, East Africa is rising, there’s economic growth, potential and promise of mineral discoveries. But the reality is that there are three East Africas,” said Aidan Eyakuze, the associate regional director of SID. “We talk a lot about integration, but integration is not an end in itself. It’s a tool to improve the welfare of the people of East Africa. We can have a perfectly integrated East Africa, which is falling apart on the real issues — education, health, opportunities. The issue of inequality is becoming a major challenge to integration and if not well addressed will hinder a smooth integration process,” he said. Economists said inequality was widening due to the failure of the benefits of recent growth to trickle down to lower income groups, leaving household incomes lagging far behind the rate of inflation and the cost of living. While East African econo- mies are growing adequately by global standards, they are not creating enough jobs or making life significantly better for the region’s poor, the data shows, calling into question the effectiveness of the bloc’s economic policies. Hence the level of risk in East Africa is high due to the surging dissatisfaction among households and business people, a situation made worse by the rapid population growth, high levels of inequality and widespread poverty, says the latest Afrobarometer study titled Africa Rising? Popular Dissatisfaction with Economic Management Despite a Decade of Growth. SID researchers argue that if the East African Community were a single country — call it the “Federal Republic of East Africa” — and its combined $83 billion income in 2011 were distributed between wealth quintiles (the richest, upper-middle income, middle, lower-middle and the poorest) the richest 10 per cent of the population would share $29 billion, or a hefty 35 per cent of the region’s total income among themselves — receiving almost $2,100 a year. With that level of per capi- ta income, their lives are comparable to a lower-middle income country. The poorest 40 per cent — almost 57 million East Africans — would have shared $12.7 billion among TURN TO PAGE 8 Top 5 exports Five business people from the EAC region were last month ranked by the Nigeria-based Ventures Magazine on the list of Africa’s 55 richest billionaires, whose combined fortune stands at $143.8 billion, highlighting the level of inequality between the rich and the poor. Four are from Kenya: Formerly powerful Cabinet minister Nicholas Biwott, industrialist-cum-philanthropist Manu Chandaria, industrialist Naushad Merali and President Uhuru Kenyatta’s mother, Mama Ngina. Tanzanian Mohammed Dewji completes the list of the richest East Africans. The $143.8 billion combined fortune of the 55 richest individuals is 3.5 times more than the combined annual budget for the five EAC countries. The five states together allocated $40 billion for spending in the current financial year that started in July. THE PEOPLE OF EAST AFRICA EA Population Median Age The EastAfrican NEWS NOVEMBER 23-29,2013 East Africa’s population is overwhelmingly young. The age that divides the population exactly into two equal halves above and below it ranges from 15 years in Uganda to 19 years in Kenya and Rwanda. More than 62 per cent of East Africans are younger than 25 years of age. EAST AFRICA’S ECONOMY No.1 Export partner (2011) Despite an increase in intra-EAC trade over the past few years, the majority of East African countries still have their single biggest export partner outside the EAC. Only Kenya has its single leading export destination within the EAC, exporting goods worth $811 million to Uganda. Inequality in EA The richest 10% earned this number of times the income of the poorest 40% Agriculture has traditionally been the source of the bulk of East Africa’s exports, but this is changing. Mining is becoming the most lucrative sector, with gold being Tanzania and Burundi’s single biggest export earner. In Rwanda, tin ore is the biggest export earner. Only in Kenya (tea) and Uganda (coffee) does an agricultural commodity constitute the largest export earner. Burundi is the least unequal country in the region, followed, in order of rising inequality by Tanzania, Uganda Kenya and Rwanda. To put these figures in perspective, South Africa is the most unequal country in Africa, where the richest 10 per cent earn seven times more than the poorest 40 per cent.
November 18th 2013
December 2nd 2013