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Africa

Poverty gap still a big issue in Africa, says World Bank

Africa’s biggest gathering of business people, analysts and political leaders, the World Economic Forum (WEF) on Africa is underway in South Africa. DW spoke to the World Bank's chief economist on Africa.

DW: According to your organization, Africa's working age population is expected to double to one billion in the next 25 years. A huge number of Africans will be looking for work. Does it look as if there will be enough jobs to go around?

Francisco Ferreira: If you're thinking about formal jobs – the kind of jobs that you and I would like people to have – jobs with contracts, pensions and security, then the answer is most certainly not. We are aware of the fact that most employment in sub-Sahara Africa in the next foreseeable future will remain of an informal kind. Nevertheless, there has been enough growth in Africa, that even the quality of those informal jobs has been improving. Our key concern is making those jobs that exist better and better paid, so that the process of reducing poverty in Africa can continue.

How important is it for African governments to tackle inequality and narrow the gap between rich and poor?

The gap between rich and poor is a big issue. It's a political issue, but also an economic issue in the world. In Africa, there is a wide range of inequality issues. Eight out of the ten most unequal countries in the world are in Africa. All of those are in southern Africa or in island states. Elsewhere in the continent, the measured levels of consumption and income inequality are considerably lower. That said, there is also another important inequality between men and women, across different regions and between urban and rural areas. Most poverty in Africa remains rural and a lot of the emphasis reducing the poverty gap, has to be on agriculture and people living in rural areas.

Francisco Ferreira

Eight out of the ten most unequal countries in the world are in Africa, says Ferreira.

Foreign Direct Investment is instrumental in promoting growth in Africa, but do African governments still need to offer tax incentives to foreign companies in order to encourage it?

Each case is its own individual case and its hard to give blanket policy advice to a region that consists of 48 countries. That said, our general bias is against additional tax incentives for foreign direct investment. If anything, Africa collects very little of its revenues from taxation. At a time when oil prices have fallen and the fiscal revenues that come from oil and other resources are down, this has been reminding governments in Africa how important it is to have a domestic taxing system in place. So providing additional tax incentives runs the risk of generating a race to the bottom, where you are competing against your neighbor for investment from abroad. And we don't think that is what the region needs at the moment.

What are the essential ingredients for growth and prosperity?

The sources of growth are as diverse as the region. In many countries growth has been propelled by mining and extractives and oil and gas and by the investment that goes into those sectors and the infrastructure they need. But that's not true of the whole region. And some of the countries that have been making quite remarkable progress against poverty and furthering human development, like Ethiopia and Rwanda, have actually done that with growth in services and agriculture and not so much in resources.

What are the risks to that growth?

The primary risk is probably to do with natural resources and commodity prices. Oil prices have now stabilized and are rebounding a little bit but still at a much lower level than last year. That is a problem for countries like Nigeria, Angola, Equatorial Guinea, Gabon, a number of the big exporters of that commodity. Elsewhere in the continent there are other problems. South Africa, which is the second largest economy in the continent, has been struggling for a period with labor unrests , with difficulties in the electricity sector and a number of other issues, which has meant that its growth is lower than the African average.

Francisco Ferreira is the World Bank's chief economist for Africa.

Interview: Mark Caldwell

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