Poverty Headwind




With the year 2015 – the Millennium Development Goals (MDGs) finishing line – approaching, post-2015 goals as they impact Africa need to be firmed. The goal of ending extreme poverty remains paramount.

In this context, extreme poverty means living on a less than 1.25 dollars a day (in Purchasing Power Parity, 2005 prices). Given the continent’s potential and the track record, the extreme poverty reduction agenda beyond the MDGs should focus on building prosperous and resilient Africa. This can be achieved with strong, sustained and inclusive growth.

Globally, in 2013, the World Bank adopted two goals to guide its work for the next decade and beyond: to end extreme, chronic poverty by 2030; and to promote shared prosperity in every society. The specific targets are: to bring the share of global population living below this threshold to less than three percent; and in each country, foster the per capita income growth of the poorest 40pc of the population. These goals are to be pursued in environmentally, socially and fiscally sustainable ways.

Under plausible assumptions on consumption growth and redistribution, eliminating poverty by 2030 is out of sub-Saharan Africa’s (SSA) reach. Even under the ‘best case’ scenario of accelerated growth and redistribution from the richest 10pc to the poorest 40pcof the population, the poverty rate in 2030 would still be around 10pc.

From the perspective of Africa and especially Sub-Saharan Africa, the globally appealing targets mask differences among regions, with Sub-Saharan Africa expected to fare notably less favorably than other regions except perhaps South Asia. While by 2030 the extreme poverty could be eliminated at the global level, the rate in Sub-Saharan Africa is likely to be well above three percent even under optimistic scenarios.

Over time, poverty in Sub-Saharan Africa will be increasingly concentrated in several countries. For example, in 2010, the top four contributors to poverty (Nigeria, Democratic Republic of Congo, Tanzania and Ethiopia) accounted for more than half of the poor living in the region. At the same time, some of the frontier market countries that were among top 10 contributors to Africa’s poverty in 2010 are projected to leave the group of top 10 contributors by 2030, such as Ethiopia and Uganda. Overall, today’s fragile states are projected to have highest poverty rates in 2030.

The main message is that while the region is unlikely to eliminate poverty by 2030, it can make a serious dent in its reduction. Effective social protection could go a long way in reducing inequality and poverty in the region.

In the area of domestic resource mobilisation, such programs could be funded from taxation of the more prosperous segments of the society. There is also a need to put fragile and large countries in the centre of poverty-reduction efforts. For reaching these objectives, the importance of building transparent and well-functioning state institutions cannot be emphasized enough.

A more realistic goal for the region would be reducing poverty by a range from half to two thirds. At this rate, especially if in part achieved by lowering inequality, the Africa region would meaningfully contribute to the global agenda. Policies need to focus on mutually reinforcing objectives of making growth stronger, resilient to shocks, and inclusive.

Policies accelerating growth and reducing inequalities need to be successfully implemented to achieve significant reduction in extreme poverty. Social protection could go a long way in reducing inequalities and poverty, especially if the programs are funded from domestic revenue mobilization from the more prosperous segments of the society.

Africa can also tap into its own successful experiences. For example, the resilience that the region exhibited during the recent global financial crisis and its aftermath has reiterated the role of macroeconomic stability and buffers in progress with growth and poverty reduction. Social protection schemes were also successful in selected low-income countries.

 



By Mthuli Ncube
Mthuli Ncube (PhD) is chief economist and vice president of the African Development Bank (AfDB).

Published on November 02, 2014 [ Vol 15 ,No 757]


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