Tag Archives: economy

Rising Inequality – Impact on Africa?

 

Isabelle Alenus-Crosby

“Average wages have barely budged. Inequality has deepened; upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by — let alone get ahead. And too many still aren’t working at all.” – Obama’s State of the Union address on January 28th, 2014.

A lot of the gains of the global economic recovery that we’ve seen have gone to the people at the very top, particularly the top 1 %. – The Economist, one day later.

In the past week, economic inequality has been all over the news. As always, I read everything with interest whilst wearing my Africa hat.

Economic growth in Sub-Saharan Africa remains strong with almost a third of countries in the region growing at more than 6% according to the World Bank’s new Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects. However, as Africa’s growth rates continue to surge, Africa’s Pulse notes that poverty and inequality remain “unacceptably high and the pace of reduction unacceptably slow.”

So, what is being done?

Africa’s pulse states that following the global financial crisis, “a growing number of African countries are setting up social safety nets to protect the health and livelihoods of poor and vulnerable people during periods of adversity”. In addition, “the steady growth of the Middle class is also translating growth into much less inequality”.

However, most of what I’ve read in the mainstream papers on the subject is very pessimistic indeed, and often refer to the United Nation’s Human Development Report of 1999:

“Poverty is everywhere. Gaps between the poorest and the richest people and countries have continued to widen. In 1960, the 20% of the world’s people in the richest countries had 30 times the income of the poorest 20% . In 1977, 74 times as much. What will it be in 50 years’ time?”

I think that the whole world, in particular Africa, is therefore watching the US quite closely to see what answers they come up with. 

 

Happy New Year

 

Isabelle Alenus-Crosby

The good news is that Africa’s economic outlook for 2014 remains promising with an overall projected growth of 5.3%. Should the global economy recover faster than predicted, then sub-Saharan Africa’s economy might expand by as much as 6.0% according to the IMF. This is consistent with the average long-term trend growth rate of approximately 5.5% between 2000 and 2010.

According to the World Bank, an economic rebound would also scale up investments in much-needed infrastructure (physical and economic) which will lead to policy reforms that will improve the overall business environment. In addition, African market performances in 2013 have proven that investments into Africa can continue to offer a sound return. Investment levels are expected to remain buoyant (again according to the World Bank), with private investments expected to double in areas such as consumption and infrastructure.

Happy New Year indeed!

 

Mandela – Hero of Africa’s booming economy

 

Isabelle Alenus-Crosby

At Nelson Mandela’s memorial yesterday, President Obama hailed the former South African President as “the last great liberator of the 20th century”.

He is also being remembered for the formidable role he played in building up Africa’s largest economy. Mandela famously believed in the link between economic and political progress, and as a result, South Africa’s gross domestic product grew from less than 1.5 % from 1980 to 1994 to almost 3 % from 1995 to 2003. South Africa is now proudly the “S” in BRICS, and its economy is still going strong 20 years after Mandela first came to power.

Aside from all this, Mandela ensured that South Africa became an important source of economic opportunity for its neighbouring countries too. It can be argued that their successes, in turn, influenced the rest of the continent. Mandela was certainly therefore the great liberator of Africa. According to the latest statistics by the IMF, the continent’s economy is projected to have grown by 4.8% in 2013 and accelerate further to 5.3% in 2014.  He didn’t merely bring South Africa into the global economy, but was key in making sure the rest of Africa would also thrive one day.

Last but certainly not least, it is important to note the effect that Mandela had on successive generations of investors, who  in order to support him in his struggle against apartheid, came to recognize the power of investment to change things for the better, as well as the impact sustainable and responsible investments could have on anything from fighting injustice to empowering women and combating climate change.

Nelson Mandela has therefore left us with resounding legacies and the world is undoubtedly a much better place thanks to him.