How to build a human economy for a continent where inequality is hardwired

Every generation places its hope in its children. For Africa, this could not be more evident as our largest and best-educated generation is coming of age.

By 2025, half of Africa’s people will be under the age of 25. They stand at the epicentre of the African Union’s people-driven agenda for the next half-century; it is they who will build an integrated, prosperous and peaceful Africa.

These young people will need jobs, challenges, and outlets for their creativity. Investing in them, and building the “human economies” that can support them with opportunities, is paramount.

Yet storm clouds are gathering on the economic horizon for a number of African countries; the continent faces economic challenges not seen for many years. The need for African government leaders to act and intervene to tackle the inequality crisis, is urgent.

We had been assured that the continent’s positive future would be funded by the resources boom. The appetite for Africa’s oil, gas, and minerals, especially in China, was insatiable.

As the world economy continued to grow, we were told, Africa would surely benefit. After all, a rising tide lifts all boats. But the reality has not worked out so smoothly.

Growth on the continent is slowing. Governments allowed the wealth that Africa accrued during the resource boom to end up in the hands of the few, not the many; the main beneficiaries of Africa’s minerals have been foreign companies.

Commodities are no longer in such demand, and the countries that relied upon them are suffering. Zambia, for example, thought it could reap the benefit of the copper boom, and until recently could borrow dollars cheaper than Spain. Now it faces rates of about 10 per cent. Debt levels are high across the continent.

It is clear that longer-term solutions are needed that do not rely upon the whims of the global economy. And as Oxfam’s new paper “Building a Human Economy for Africa” makes clear, tackling economic inequality is paramount.

Ordinary Africans are currently prevented from benefiting from the spoils of economic growth, which instead of reducing poverty and delivering shared prosperity is benefiting an exclusive class of elites with more money and power than ever before.

The richest 10 people in Africa now have a combined wealth equivalent to the GDP of Kenya, while the number of people living in poverty in Africa has increased by 50 million since 1990. Seven of the world’s most unequal countries are in Africa. It is a disparity that is preventing the emergence of a strong and vibrant middle class.

Current tax systems across Africa seem almost designed to entrench inequality rather than decrease it. VAT, a regressive tax paid disproportionately by the poor, makes up on average 67 per cent of state revenues in sub-Saharan Africa. Oxfam is calling for African governments to increase their tax-to-GDP ratio, and to do so through progressive taxation.

African governments should concentrate on ensuring that those with the broadest shoulders carry their fair share. The IMF, among others, recommends ensuring better compliance from high-income individuals and companies, alongside other measures.

Removing unproductive tax exemptions is another step that African governments can take – tax exemptions to foreign firms are estimated to be costing the Kenyan government $1 billion a year.

Crucially, African governments must ensure they prioritise the eradication of tax evasion and tax avoidance. Action plans at a regional and national level must come to fruition.

It has been estimated that across the continent $38 billion is lost annually in corporate tax revenues. Meanwhile almost a third of rich Africans’ wealth - a total of $500 billion - is estimated to be held offshore, costing an estimated $14 billion in lost tax revenues every year. 

It is sometimes possible to read these large figures and not fully take in the gross abuse of human rights that this robbery represents.

In people terms, as our research shows, the lost revenue from individuals and corporations would generate enough to pay for healthcare to save the lives of four million children, and employ enough teachers to get every African child into school.

The global tax reform agenda is yet evolving, as a new tax platform launched by the UN, IMF, World Bank and OECD shows; African governments must play a role in ensuring it delivers concrete results.

To build more human economies in Africa, governments must be far more strategic, wise and forward-looking in their expenditure, and build diverse economies that can deliver the jobs for the next generation.

They must give space to citizens to hold them accountable, and listen carefully to their voices; the voices of the marginalised must especially be amplified.

Investing in vital infrastructure will help to build more sustainable, equitable economies. Core to this for Oxfam is strategic investment in agriculture targeted at the needs of small-scale agricultural producers that meets the Malabo commitment; in publicly funded and publicly provided healthcare systems; and in free, universal quality education for all.

Tertiary education remains only available to those in Africa who have money. This is not the path of a prosperous Africa that harnesses the abilities of its people.

The biggest winners of such a transformation would be Africa’s women and youth. We cannot let their energy go to waste because too many remain uneducated and unable to realise their potential.

These steps are proven means by which to liberate women and girls from the gender inequality that keeps them out of the classroom, and prevents us all from missing out on their talents.

For many years, the people of Africa have been asked to look beyond the headlines — the poverty and unrest that have hurt this continent for so long — and instead envision an optimistic future.

That brighter future is within reach. But it must begin with the right investments, in the future of the next generation. Africa has the talent, the resources; its people certainly hold the ambition. Africa’s leaders must now chart the path to a more human economy.

Winnie Byanyima is the international executive director of Oxfam.