A few big men stifle Africa’s growth

Economic inequality has dominated international economic debate recently, and with good reason. Developmental charity Oxfam International made headlines not too long ago with its report that the 85 richest people in the world own the wealth of half of the world`s population. The report further suggests that 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 top 1 % of the population earns 95% of the total income. Even in the world’s largest economy, this is a very topical issue, and could be the flashpoint of the next Presidential election. Sub-Saharan Africa sees nearly 50% of its population live on less than $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.

In Africa, we are increasingly seeing the emergence of an obscenely rich section of society – “A few big men” with virtually all control of the economic factors of production. 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 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 pie.

What is fundamentally wrong with an approach that allows a select few individuals to get rich first is that it breeds a sense of entitlement among wealthy elites that can be particularly hard to get rid of in the long run. Inevitably, corruption tends to become commonplace as the politically-connected elite seek to consolidate their hold on the economy.

Equitable growth, which sees a thriving middle class also enjoying a larger cut of the pie, is most desirable. This is the class that creates sustained demand for goods and services. Their financial well-being or lack thereof has a direct bearing on any economy. It would seem that this elementary fact is increasingly being overlooked today – with the scandalous revelations of CEOs of quasi government organisations like ZBC and PSMAS awarding themselves hefty salaries when workers have gone for months on end without pay,

As a result, economic activity at the lower end of the pyramid is stifled, as with no money, there is no spending power. Growth will never be sustainable as it is not at all inclusive. These “few big men” can never drive real economic growth.

“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 of the World Bank Africa Region.

A shift in the mind-set of policymakers and responsible authorities is critical to effect economic structural reforms that would ensure inclusive growth with less income inequalities. 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 producers – most of whom are peasants. The new democracy should be able to restore the growth of an independent and productive middle class too.”

Post published in: Analysis

Leave a Reply

Your email address will not be published. Required fields are marked *