Economists aim to strike Kinshasa Consensus on ending poverty in Africa

Increasing government spending on healthcare, education and support to vulnerable groups like the elderly has emerged at the top of the agenda for a new deal sought by experts attending the 10^th African Economic Conference (AEC) from November 2-4 in Kinshasa, to address rising poverty and inequality in Africa.

Amid growing fears that policies to ensure economic growth for all are lacking, economists are seeking a “Kinshasa Consensus” to deal with the possible loss of Africa’s economic gains.

“We need to act. It is clear it is not enough to record growth. We have experienced double-digit economic growth but fair distribution of remains,” President Joseph Kabila said in a speech delivered for him by Senate President Leon Kendo Wa Dondo, at the opening session of the African Economic Conference on Monday.

The issues proposed for approval in the Kinshasa Consensus include an African Single Currency Federation to cushion the poor from local currency depreciation linked to foreign exchange markets.

Local currencies across Africa have weakened by up to 20 per cent against the world’s major currencies since early 2015. Fear is also rising drought and crop failure will spread food insecurity and poverty.

“Africa should get away from the business as usual and use aggressive industrial investments,” Carlos Lopes, the Executive Secretary of the UN Economic Commission for Africa (ECA), said Monday. “We should take advantage of these inequalities and modernize our cities for the future.”

The 10^th African Economic Conference, which is being dedicated to “Addressing Poverty and Inequality in the Post-2015 Development Agenda,” is examining the reasons behind the failure of high growth rates in Africa to control poverty.

Policymakers, donor organizations and international economic policy planners agreed elements such as policy-specific approaches to increasing production of minerals were still required even if the prices were down by 14 per cent due to reduced demand from key importers in China and elsewhere.

President Kabila said efficient service delivery – such as increased access to water, education and progress in more areas – would enable the Democratic Republic of Congo to normalize relations with donors, grow its economy and continue to modernize key roads and electricity infrastructure.

Organized jointly by the African Development Bank (AfDB), the UN Development Programme (UNDP) and the UN Economic Commission for Africa (ECA), the conference is discussing how Africa could use focus its policies on industrialization.

Rampant poverty in Africa dropped drastically in 22 out of 29 countries, according to Bartholomew Armah, ECA’s Chief of Planning Section.

The return of poverty is mostly linked to the income inequality. At least 70 per cent of African countries reduced poverty due to rising incomes, but did not reduce income gaps.

In the Kinshasa Consensus, the economic experts have argued a re-examination is required to determine whether the use of traditional measurements such as the per capita income actually provided accurate measurements of the national income.

Armah said the new policies are required to help improve financial and human capital. This could be done by laying more emphasis on vocational training to improve the ability of the youth to find jobs.

To succeed in the job-creation venture, the economists proposed the use of financial policies to support economic growth. They also proposed effective policy responses that would support job-creation in industries that require more labourers. This would respond to the challenge of having economies growing without creating jobs.

Armah said studies by the World Bank have shown most African countries grew, but job-creation declined from 57.7 per cent to 44.4 per cent between 2000 and 2012.

To deal with this trend, it was proposed the governments should remove tax waivers. They also sought mechanisms to ensure all taxes are directed to the government. The government should also seek to direct revenue from taxes to sectors that can ensure steady growth as a way of escaping volatile international currency price fluctuation.

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African Economic Conference presents plans to fight deepening poverty

During discussions on the “Determinants of Poverty and Inequalities,” on Day 1 of the conference, economic researchers said that evidence showed the right policies could address the causes of inequality and its impacts.

“The economic growth in the top-performing economies of Africa is not distributed evenly,” Ayodele Odusola, Chief Economist and Head of Strategy and Analysis at the UNDP Regional Bureau for Africa, said while presenting a research paper on Poverty, Inequality and Fiscal Space in Africa, on Monday, November 2.

With Africa home to seven of the world’s fastest-growing economies, recent economic research has shown income gaps between the rich and the poor remain wide. These gaps are worsened by a lack of social protection systems, such as the protection of the poor from job losses and promotion of efficient job markets.

The researchers presented papers showing how the over-concentration of investments in certain sectors in Africa, such as mining, affected economic growth whenever international prices of the key commodities such as oil and minerals dropped.

The researchers called for diversion of more economic resource allocation to the manufacturing sector to grow the value chains which would help create jobs. They also sought mechanisms to ensure income inequalities, such as those favouring men earning more than women for the same jobs, are addressed.

Abebe Shimeles, Acting Director of Development Research Department at the AfDB, while speaking on Why is inequality high in Africa?, said research pointed to ethnic biases in the distribution of key economic resources and means of production within most of Africa.

“Ethnicity is the most significant reason behind the numbers. There is moral inequality that is accompanied by the struggle for distributive justice by the people left behind by circumstances beyond their control and inequality caused by structural market forces,” Shimeles said.

The research shows countries which have been benefited from high rates of economic growth backed by heavy financial inflows from mining activity such as Botswana have managed to reduce poverty, but income inequalities and the gaps still persist.

However, countries in northern Africa have managed to balance economic growth with poverty reduction by spending more money in capital development. Capital development signifies the process of using public funds to provide business start-up capital to businesses that are already past the start-up stage to allow them to further stabilize.

To deal with the income gaps, the UNDP’s Odusola said financial policies, such as raising public expenditure, re-directing funds obtained from direct taxation measures and ensuring stable currency exchange rates, were amongst the most effective tools to enable financial resources to move to other sectors, such as training of the youth in new skills to keep economies vibrant.

Other measures proposed to deal with the rising income inequalities include opening up the preparation of national budgets to public participation, which has been implemented in Burkina Faso, Kenya and South Africa with good results in reducing the income gaps and redirecting taxes.

The African Economic Conference is discussing responses to the deepening inequality after a recent report by the World Bank showed a 20.8% decline in poverty in Africa from 1990 to 2015. The continent saw poverty drop from 56% to 35%, but those gains were marred by increased high school dropout rates and more job losses.