Tackling inequality to combat poverty

BY: Caroline Kende-Robb, Executive Director, Africa Progress Panel.

Already enjoying increased macroeconomic stability and more democratic politics, Africa has also been touched by the so-called global commodities super-cycle. Strong demand for the continent’s oil, gas, and minerals have combined with high prices to fuel economic growth in many of its resource-rich countries, including Equatorial Guinea and Angola. Across the continent, progress has accelerated on education, child survival, and on the fights against killer diseases such as HIV/AIDS and malaria.

Unfortunately, much of this progress remains too slow and uneven. Inequality has become a pressing issue for the continent, slowing both economic growth and poverty reduction. In the long-term, this inequality will also fuel dangerous social and political pressures. Oil-rich Equatorial Guinea saw its GDP grow by an average 16.9% every year in the first decade of this century. Its average income is now higher than that of Poland. But three-quarters of Equatorial Guinea’s population still live in poverty and child mortality rates are among the highest in the world.

So how can African governments and the international community pursue growth in Africa that is more equitable and inclusive? Chaired by former UN Secretary-General, Kofi Annan, the Africa Progress Panel released a report in May on precisely this theme. The report Equity in Extractives – Stewarding Africa’s natural resources for all found that few Africans have benefitted from their countries’ natural resources and inequality has increased. This rising inequality is slowing the rate at which growth reduces poverty and in many countries, the poor have seen their share of income shrink. Equity in Extractives recommends a series of policies which, if implemented, will help ensure that Africa’s natural resource wealth brings more inclusive and equitable growth.

As a starting point, African governments must link extraction of their natural resources with plans to reduce inequality and boost inclusive growth. They must identify extractive projects that can generate more jobs, through linkages with the local economy. By processing natural resources before export, they can also bring extra value to the national economy. But public spending is the key mechanism that connects government revenues with the wider population. And African governments must spend their revenue more fairly. Too often, public spending is heavily skewed against the poor.

Nigeria spends around 6% of its GDP on education. That is a relatively high share by international standards, but unequal allocations across states, a strong emphasis on grants for tertiary students, and the bypassing of urban slums leaves millions of the country’s poorest children without schooling. Nigeria has an estimated 10 million children out of school.

Misguided priorities can also distort public spending on basic services. Nigeria’s fuel subsidies reached US$9 billion in 2011, or 4% of its GDP. But the benefits often go to the richest households, which consume the most fuel. And they reduce the amount of cash available for urgently needed public spending on infrastructure such as power, ports, and roads. This limits growth and critical job creation, too.

Crucially, African governments must put transparency and accountability at the heart of their natural resource policies. Transparency is so critical, because it reduces the opportunities for corruption. This corruption is facilitated, of course, by the behaviours, norms, and laws of others within the international community. G8 and G20 governments in particular must do more to ensure transparency and accountability, especially in the extractives industries. Some extractive companies generate healthy profits that do not translate into commensurate government revenues. They benefit unfairly from excessive tax concessions, tax evasion and the undervaluation of assets.

By itself, trade mispricing, the misrepresentation of export and import values to lower tax payments, now costs Africa an estimated US$38 billion per year, more than the continent receives in either international aid or foreign direct investment. Too many trusts and companies are owned by anonymous individuals, effectively hiding the illegal payments between corrupt business people and government officials.

Equity in Extractives described five deals in the Democratic Republic of the Congo (DRC), involving the sale of national mining assets to anonymous individuals. Together these five deals cost the DRC an estimated US$1.4 billion, equal to twice the combined annual budgets for health and education – a tragedy in a country where seven million children are out of school.

But momentum is accelerating towards greater transparency. The United States and Europe have introduced legislation to require greater financial disclosure from extractive companies. African governments, such as Guinea, Liberia, and Ghana, are now publishing their contracts. Currently reviewing its money laundering rules, with a fourth anti-money laundering directive expected later this year, the European Union has a major role to play in tackling the non-transparent ownership of companies and trusts.

Tax evasion, illicit transfers of wealth and unfair pricing practices are sustained by global trading and financial systems. But international action can create an enabling environment for strengthened governance in Africa. And global problems need multilateral solutions. With the right political will and building on the continent’s many successes, African societies will become more prosperous, fair and equal. This is a prize which we will all share, wherever we live.

Originally published in: http://thebrokeronline.eu/Blogs/Spurring-economic-transition/Tackling-inequality-to-combat-poverty

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Chaired by Kofi Annan, former Secretary-General of the United Nations, the ten-member Africa Progress Panel advocates at the highest levels for equitable and sustainable development in Africa. The Panel releases its flagship publication, the Africa Progress Report, every year in May.

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Africa has world's highest rate of adolescent pregnancies, UNFPA says

Africa has the world’s highest rates of adolescent pregnancy, a factor that affects the health, education, and earning potential of millions of African girls, according to a report released last month by the United Nations Population Fund (UNFPA).

Niger tops the list with 51 percent of women between 20 and 24 reporting a birth before the age of 18. And of 20 countries with the highest rates of adolescent pregnancy, 18 are African, the report, “Motherhood in Childhood: Facing the challenge of adolescent pregnancy”, says.

When a girl becomes pregnant or has a child, her health, education, earning potential and her entire future may be in jeopardy, trapping her in a lifetime of poverty, exclusion and powerlessness, the report says.

“Adolescent pregnancy is intertwined with issues of human rights. A pregnant girl who is pressured or forced to leave school, for example, is denied her right to education”, UNFPA’s Executive Director, Babatunde Osotimehin, explains in the report foreword.

“There are 580 million adolescent girls in the world. Four out of five of them live in developing countries. Investing in them today will unleash their full potential to shape humanity’s future,” he adds.

Africa’s women and girls offer enormous untapped potentials to drive African development. Women account for two thirds of our smallholder farmers, for example. So this report shines light on a critical issue.

The distorted transitioning of girls into womanhood as a result of early pregnancy ought to be seen as a significant economic loss.

In its 2012 report “Jobs, Justice and Equity: Seizing opportunities in times of global change”, the Africa Progress Panel challenges African leaders to scale up efforts to achieving the MDGs while keeping the post-2015 development agenda in mind. 

African governments must pursue policies that bridge the gender disparity between boys and girls in access to health care, education and other basic social services. Leaders must also accelerate efforts towards universal primary education that gives particular focus to girls.

Blog is originally published at : http://www.africaprogresspanel.org/africa-has-worlds-highest-rate-of-adolescent-pregnancies-unfpa-says/

African Extractives on the Frontline of Global Struggle for Tax and Commodities

Guest post by: Edward Harris, Head of Communications, Africa Progress Panel

Smart politicians talk about reform but they understand the value of promise without delivery, one academic told participants at a conference in Oxford last week. Organised by Oxfam and Oxford University, the one-day conference discussed how extractive industries can work for African people.

Reinforcing the conclusions in this year’s Africa Progress Report, the conference also highlighted the wider, global struggles for control of commodities and tax revenue.

Both struggles are better understood by examination of Africa’s oil, gas, and mining sectors, where tax avoidance is a major issue. One participant noted that extractive industries account for some 60 percent of illicit financial flows from Africa.

In the struggle for commodities, the big question is – and always has been – how government and business divide the mineral revenues. The private sector must focus on profit, of course, but multinationals have often negotiated grossly unfair deals with African governments, who are more confident now than ever before. Contract renegotiations by African governments have become a major threat to multinational profit.

Keen to head off this major risk, business displays both increased transparency and good intentions – “talking the talk”, at least. But have their incentives really changed? It’s still about the profit.

The struggle for tax payments is more nuanced. Tax justice has become a hot issue, and future regulation will likely require the multinationals to pay fair amounts of tax. The struggle is for control of those future tax revenues.

Assuming they are eventually restricted from using tax havens and offshore shell companies, should multinationals pay tax based on their headquarter location, for example?  Or based on the location of the minerals that they extract? It’s revealing that rich world clubs – the G20 and OECD – are setting the agenda for global tax reform. This can only work to their advantage.

The UK received a major PR boost with this year’s G8 agenda on tax and transparency, but a British official raised doubts in Oxford when he said that implementation of these promises could take a decade.

Business and government may be making the right noises, but actions speak louder than words.

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Chaired by Kofi Annan, former Secretary-General of the United Nations, the ten-member Africa Progress Panel advocates at the highest levels for equitable and sustainable development in Africa. The Panel releases its flagship publication, the Africa Progress Report, every year in May.