World Bank: Poverty reduction in Africa stalls as widening inequality slows economic progress

Efforts to reduce extreme poverty across African countries have stalled over the past decade, according to a new World Bank report titled "Levelling the Playing Field", which highlights the continent’s struggle with deep-rooted structural inequalities and fragile economic progress, despite significant global advances in poverty eradication.

It notes that Africa has seen little improvement since the mid-2010s, with the region now home to more than 60 per cent of the world’s extremely poor.

“Although the incidence of extreme poverty was rapidly reduced to single digits worldwide, the pace in Africa slowed down and flatlined in the past decade,” the report reads.

“As of 2022, Africa’s extreme poverty rate stands at 38 per cent, the highest of all regions.”

Poverty reduction pace

More alarmingly, the report notes that the pace of poverty reduction in Africa is not only slow but also increasingly inefficient, as economic growth has had minimal impact on improving the lives of the region’s poorest people.

“A one per cent growth in per capita gross domestic product is associated with only a one per cent reduction in the poverty rate in Africa, whereas it is associated with a 2.1 per cent reduction in the rest of the world.”

The lender attributes this limited impact to the continent’s entrenched inequality.

Nevertheless, the World Bank describes the region as not just with the highest rate of extreme poverty, but also one of the most unequal.



Second-most-unequal region

It says Africa is the world’s second-most-unequal region after Latin America, as more than half of African countries have a Gini index above 40, indicating high levels of inequality.

The Gini index measures income inequality on a scale from 0 to 100, where 0 means perfect equality and 100 means extreme inequality.

A higher score indicates a more unequal distribution of income.

The aforementioned evidence, according to the report, suggests that the sources of the inequality are mainly structural.

Structural inequality stems from inherited or unchangeable characteristics, such as where people are born, their ethnicity, religion, gender, or their parents’ level of education.

It is also driven by market and institutional distortions that give certain firms, farms and workers unfair access to markets, jobs and opportunities while limiting access for the majority.

Limitations

Ideally, these structural inequalities limit access to markets, jobs, quality education, and healthcare, reinforcing a cycle of poverty and exclusion.

The World Bank argues that such distortions are not accidental but result from legal, institutional and economic systems that systematically favour a small segment of the population while leaving the majority behind.

Notably, since 2014, Africa's economic growth has been volatile and largely unable to keep pace with rapid population growth.

The Covid-19 pandemic further exposed the continent’s vulnerability to external shocks.

Coupled with rising debt burdens and limited fiscal space, governments are reportedly struggling to invest in critical services and infrastructure needed to reduce poverty and stimulate inclusive growth.

Despite these challenges, the World Bank sees a path forward.

It outlines a three-part policy framework in the report, focused on boosting productivity, expanding job and income opportunities, and leveraging fair and effective fiscal policy.

These measures, the lender argues, are essential to break the cycle of inequality and unlock Africa’s development potential.

The report highlights that Africa holds considerable potential, thanks to its young and expanding population, abundant natural resources, and growing links to global markets.

With inclusive policies in place, the continent’s youth are poised to drive innovation and economic growth, particularly as the global economy shifts toward greener practices.

However, with the population expected to approach 2.5 billion by 2050, experts caution that without swift action to tackle deep-rooted inequality, Africa may continue to lag.