Rising inequality tests EAC growth prospects and integration agenda

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By CHRISTABEL LIGAMI, Special Correspondent

posted  Saturday, November 23  2013 at  15:00

The East African Community’s integration project has helped more than double economic growth in the region, but inequality has worsened over the past five years.

In fact, the gap between the rich and poor in the region is so stark that the two are literally living in different worlds.

The richest 10 per cent of East Africans are living a lifestyle similar to a moderately well-off country in Latin America, while the poorest 40 per cent may as well be living in Somalia or the Democratic Republic of Congo — at the lowest points of the two countries’ conflict-ridden past, according to the State of East Africa Report 2013, published by the Society for International Development (SID) on Friday.

Experts said the widening inequality, mainly in incomes and gender, presents a dilemma for policy makers as it could compromise the economic gains achieved over the past few years.

Weakened households dogged by inequalities where education, health and other crucial services are a preserve of the rich, have far-reaching implications for the economy as only a small proportion of the total households have enough disposable income to drive growth.

A common characteristic of developing economies is the falling share of the agricultural sector in the overall economy, but the trouble in East Africa is that the speed of change is overwhelming the capacity of the industrial and services sectors to provide the needed jobs and alternative opportunities.

“When you take a macro view of the state of East Africa, everything looks rosy, East Africa is rising, there’s economic growth, potential and promise of mineral discoveries. But the reality is that there are three East Africas,” said Aidan Eyakuze, the associate regional director of SID.

“We talk a lot about integration, but integration is not an end in itself. It’s a tool to improve the welfare of the people of East Africa. We can have a perfectly integrated East Africa, which is falling apart on the real issues — education, health, opportunities. The issue of inequality is becoming a major challenge to integration and if not well addressed will hinder a smooth integration process,” he said.

Economists said inequality was widening due to the failure of the benefits of recent growth to trickle down to lower income groups, leaving household incomes lagging far behind the rate of inflation and the cost of living.

While East African economies are growing adequately by global standards, they are not creating enough jobs or making life significantly better for the region’s poor, the data shows, calling into question the effectiveness of the bloc’s economic policies.

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