East African countries have seen impressive economic growth in the past two decades, with significant reductions in poverty in most of the countries. However, the region continues to have high levels of inequality. Wealth is increasingly concentrating in the hands of a tiny few, while a majority are struggling to meet their most basic needs, such as education and healthcare.
The Covid-19 pandemic, compounded by locust infestations and climate crises, has brought the region’s worst economic crisis in decades, with millions losing their jobs and incomes, exacerbating poverty and food insecurity.
Yet, instead of taxing the wealthy, East African governments are planning to slash their public spending on pro-poor services like healthcare, education, agriculture and social protection in the coming years. These cuts will worsen East Africa’s economic crisis, and deepen poverty and inequality in the region, but it is not too late to change direction.
The COVID-19 pandemic pushed millions into poverty
Most countries in East Africa seemed to be less hard hit by the COVID-19 pandemic in 2020, but the first half of 2021 saw a surge in infection and death rates, forcing some countries to reintroduce containment measures. East African countries have also suffered major economic fallout from the pandemic. It is estimated that the region lost $15.7bn in GDP in 2020 due to lower-than-expected growth, and 7.2% working hours, which is the equivalent of 10 million full-time jobs.
The COVID-19 pandemic pushed millions into poverty and dramatically increased inequality in East Africa, but not all were equally affected. Today, the richest 10% of East Africans are earning an average of 47% of pre-tax national income across the region. Meanwhile, the poorest 50% of citizens earn 13.3%.
The situation has been further compounded by the locust infestations that swept across some countries in 2020, destroying food crops and livestock pastures. Erratic weather patterns including drought and flooding have not helped, bringing severe food insecurity especially for rural and nomadic communities.
Let's look at the numbers
Today, the richest 10% of East Africans are earning an average of 47% of pre-tax national income across the region. Meanwhile, the poorest 50% of citizens earn 13.3%.
In Rwanda, the richest 1% of the population earns 20% of national income, nearly double the share held by the bottom 50%.
Only 4% of East African citizens had been fully vaccinated against COVID-19, compared with 71% in high-income countries by mid-January 2022.
In South Sudan, only 1% of the poorest children finish secondary school, and just 31% of citizens have access to healthcare.
The UN estimates that the pandemic will result in 11 million more people living in poverty in the Democratic Republic of Congo.
Hamstrung by high debt and budget deficits
COVID-19 revealed that East African countries were unprepared for a pandemic. When it hit, half of their citizens had inadequate access to healthcare, 90% lacked social protection and 80% lacked labour rights to cope with the pandemic. Protracted school closures have affected millions of learners, especially the poorest who could not switch to online learning.
While COVID-19 has since slowly abated, there is still the risk of another resurgence due to global vaccine inequality. As of mid-January 2022, a dismal 4% of the population had been fully vaccinated in the region, compared with 71% in high-income countries.
To make matters worse, many governments are having to use an increasing share of their budget to service growing debts, rather than investing in their populations. Even before COVID-19, debt servicing was reaching astronomical levels in many East African countries, with governments spending on average five times as much on domestic and external debt repayment as on health, with South Sudan spending 28 times as much.
Concerning long-term plans for austerity
During the COVID-19 crisis, many governments increased their spending on health and social protection. But now they have long-term plans to slash public spending, in order to reduce their budget deficits and debt levels, and which are being encouraged by lending bodies such as the IMF.
From 2022 to 2026, nine East African countries plan to reduce annual public spending by $4.7bn compared to 2021. This will stop them combating the increases in poverty and inequality that have resulted from COVID-19. Not implementing these cuts would allow them to quadruple health spending from now until 2026.
“With these spending cuts, the region risks spiralling into a never-ending cycle of inadequate health services, poor education facilities, economic decline with women and youth caught at the centre of the fall out, unable to maximize and indeed shape the future that the continent has potential for.”
East Africa lagging behind in its commitment to fighting inequality
The third edition of Oxfam and DFI’s Commitment to Reducing Inequality Index (CRII) ranks 158 governments across the world on their commitment to reducing inequality. The Index measures government policies and actions in three areas that are proven to reduce inequality significantly: public services, progressive taxation, and workers’ rights.
The data show that compared with the four other regions of Africa, East Africa has the third-highest commitment to reduce inequality. In other words, the average East African citizen is living under a government one third less committed to reducing inequality than their counterparts in North and Southern Africa, and doing only one third as well as the best performers globally.
A once-in-a generation opportunity for East Africa to build back after the pandemic
East Africa is at a crossroads. The pandemic has dramatically increased poverty and inequality in the region, and post-pandemic budget cuts will make this worse. But there is a way out of this crisis.
By increasing taxation on the wealthiest individuals and largest corporations, East African countries could spend more on public services that reduce inequality, especially by preventing people living in poverty from having to pay out of their own pockets. This would allow them to beat both austerity and the pandemic, and better protect themselves against future pandemics.
If East African governments increased their tax revenues by just 1% of their GDP, they would raise an additional $4.9bn each year for the next five years, which would be enough to raise health spending by an average of 77% annually.
Building back during and after the pandemic offers East African governments a once-in-a-generation opportunity to do what their citizens want: to make their economic systems fairer. With external support, including through comprehensive debt relief and more aid, they can reduce inequality drastically and eliminate extreme poverty by 2030.