As the African Union and regional economic communities gather to discuss their economies, the gulf between the rich and the rest in West Africa needs to be top of the agenda, says Mohamadou Fadel Diop – and that conversation must give serious attention to inequality-busting policies such as reversing austerity and debt cancellation.
In the first 17 months of the pandemic, the three richest men in West Africa saw their wealth surge by $6.4 billion: that is more than the funds needed to vaccinate every West African. That jump in wealth has come as thousands fall into famine in the region due to spiralling food prices.
Sadly, West African countries are among the worst performers at tackling this rampant inequality. Five of the bottom ten countries in the global Commitment to Reducing Inequality Index are in West Africa: Liberia, Nigeria, Guinea, Côte d’Ivoire and Sierra Leone. In fact, the index – produced by Oxfam and Development Finance International and which covers 161 countries – ranks all states in the region, with the exception of Cape Verde, in the bottom 50 for reducing inequality.
As African Union states gather for their mid-year summit to discuss their economies, why is this gulf between the rich and the rest not higher up the agenda? In this blog I’ll set out why West Africa has sunk to the bottom of the table for tackling inequality and the policies those gathering at the summit this week need to embrace to tackle it.
Rising inequality is not inevitable
Inequality in West Africa is not inevitable. Building an egalitarian society, which makes essential public services available to all citizens and provides opportunities for everyone to lead a dignified life, is a matter of choice. It is not something that has to wait for economic progress, or a luxury only for developed countries.
In fact, the presence of some of the wealthiest countries in the region at the bottom of the CRI ranking shows once again that the fight against inequality is not just a question of means but one of will. Despite having one of the most productive economies on the continent, Nigeria is the second-least committed to reducing inequality in the region.
Mining companies earn huge tax exemptions; multinationals hold monopolies that kill competitiveness; and businesses of all sizes innovate in tax evasion
Other nations are showing there is an alternative. The Occupied Palestinian Territory (OPT), a country with high levels of fragility still managed to increase social spending to address inequality from 37% to 47% of its budget during the Covid-19 pandemic.
In fact, in recent years, OPT has halved the proportion of its citizens who pay more than 10% of their income for health care. On top of that, for the first time in 10 years, it increased its minimum wage by 33% of GDP per capita.
Unfortunately, in West Africa, we don’t have many of these shining examples. Why?
The wrong policies, especially on tax and spending
West African states have generally not pursued policies to reduce inequality. Increasingly regressive taxes, cuts in spending on education and health, and limitations on social protection have all perpetuated the status quo in societies governed by the rich for the rich. As a result, there has been an explosion of inequality in West Africa, especially during the pandemic.
Taxation puts corporate interests first leaving little money to fund social progress as states race to the bottom, competing with each other to have the most attractive tax regime to attract external investment. That means mining companies earning huge exemptions; multinationals holding monopolies that kill competitiveness; and businesses of all sizes innovating in tax evasion as fast as Silicon Valley, paying far less tax as a proportion of their income that ordinary citizens. This is significant wealth that could build hospitals, schools, educate citizens, finance projects, reduce youth migration, etc.
The role of IMF, the World Bank and austerity
It is also important to examine the relationship of international institutions and African states, as in the post-COVID recovery, low-income countries had to turn the IMF and World Bank, to support their economies and avoid financial collapse.
An Oxfam review of IMF COVID-19 loans to 85 countries between March 2020 and March 2021 found that the fund encouraged 73 countries, including 14 West African countries, to adopt austerity measures.
The IMF and World Bank must stop promoting austerity and increasing regressive indirect taxes in the region, and instead encourage progressive taxes and help to combat illicit financial flows. Urgent steps must be taken to provide ambitious debt relief and to combat the conditions that aggravate poverty in Africa.
But states can still act individually, as well as in regional groups
But while the chains of austerity and debt reinforce the enslavement of West African states and limit the resources they can invest in essential services, they can still take progressive action, just as the Occupied Palestinian Territory has.
Of course, regional groupings such as the 15 nations in the Economic Community of West African States (ECOWAS) and the eight states (all also within ECOWAS) who are part of the West African Economic and Monetary Union (UEMOA) are crucial in moving towards more pro-poor public policies. These bodies can be the intellectual and institutional leaders of a paradigm shift, especially as they are partly responsible for the implementation of the African free trade area, which will shape the economic and social trajectories of West African countries.
But states cannot simply point the finger at ECOWAS and WAEMU: each national government must take the actions necessary to not only ensure economic growth, but also to boost the well-being of its own population. Without intentional policy in every country to address inequality, growth will only serve to enrich the already rich.
Five ways to tackle inequality in West Africa
We hope the summit this week can spark tangible action to create a more equal and just West Africa. We suggest ministers and policy makers in the region start with these five broad actions:
- Recognize and plan to address the inequality crisis in West Africa by developing national action plans for reducing inequality.
- Immediately reverse planned fiscal austerity, with a focus on increasing spending levels on health, education, and social protection for quality universal public services that narrow the gap between rich and poor, and between men and women.
- Increase government support for small-scale food agriculture.
- Provide full debt cancellation to ECOWAS countries to reduce debt service to low levels and ensure that they have sufficient financing to achieve the SDGs.
- Direct aid flows to policies that address inequality.