With record growth having being experienced in Africa over the last few years, averaging above 5% per year for the continent as a whole, one of the main benefits that has been theorized is a reduction in income inequality, and with that, reduced poverty levels, but has this been the case? Using the Kuznets theory, inequality in Africa should be low due to the high population levels in agriculture and land being in plentiful supply.
Income inequality is measured by the Gini-coefficient, that is how income is distributed in a country, all incomes summed and divided by how much people earn each amount, and is normally illustrated in a Lorenz Curve format. The common measurement is 0, that is complete equality, and 1, complete inequality, that is one person earns all the income in the country.
Income inequality is important as it shows the distribution of equity, this has a vital role in political and economic stability, and in economic growth levels. A recent study has also found that income inequality found that despite Cuba being derided for trying to be an equal society, they are only a few months off the life expectancy of the USA. Africa as a continent is the second most unequal continent after South America. In 2003, this figure was 0.47 in Africa and 0.50 in South America. Europe is around 0.3 and the USA at around 0.4.
So why is this the case? Since the 1960′s, inequality decreased significantly, partly because of newly independent states and income moving from a few powerful elites and strata of society to the newly empowered, but also because the increased growth and levels of global trade that enabled more incomes. By the 1980′s, the Gini was 0.41, down from 0.48 in the 1960′s, but his began to increase, as political instability led to stronger elites and the residue of the lost decade began to increase inequality, eventually returning it to current levels. Conflicts have also eroded employment bases and left a few in control of the main income earners like agriculture-industry and mining.
Individual countries though bring up interesting issues, for instance, Botswana, one of the most prosperous countries on the continent with a Gini of 0.60, yet they still have decent and admirable Human Development Index Indicators (although rampant HIV infection rates are going to challenge these). Another country that has a high Gini is South Africa with 0.57, a clear legacy of the apartheid era. Maybe it just goes further to prove that the rich are the ones that will always benefit from increased economic growth.
With the impact of the Global Financial Recession only just about to impact on Africa, it will take some time before we can assess if inequality will increase more, or if it will not be as high as in previous years.