African governments risk losing the economic gains they’ve made unless countries broaden the base of growth by educating poor children and creating jobs, African Development Bank President Donald Kaberuka said.
Countries that don’t bring more people into the economy may end up in a middle-income trap, in which productivity and income growth can stall as annual per capita incomes reach $5,000 to $10,000, Kaberuka said in an interview at the African Union summit in Ethiopia’s capital, Addis Ababa.
“Unless you broaden the base, you include more people, you actually get stuck,” he said on May 25.
Africa is the world’s second-most inequitable region after Latin America, the African Development Bank said in a report last year. In 2010, six out of the 10 most unequal countries worldwide were in southern Africa, the Tunis-based lender said.
“The biggest single important thing to do to ensure inclusive growth is to make sure that the children of poor people end up in education,” Kaberuka said. “That is how you break the inter-generational transmission of poverty.”
Economic growth in Africa averaged 5.2 percent from 2003 to 2011, while average gross domestic product per capita on the continent stood at $3,025, according to the Organization for Economic Cooperation and Development.
Failure to generate equitable growth could result in “a demographic disaster marked by rising levels of youth unemployment, social dislocation and hunger,” former United Nations Secretary-General Kofi Annan, who chairs the Africa Progress Panel, said this month in a report.
African states should adopt policies like former Brazilian President Luiz Inacio Lula da Silva’s program to pay families to keep children in school, Kaberuka said. Two donor-funded programs that provide cash transfers for work to low-income Ethiopian families and its government’s focus on education and supporting farmers are the right approaches, he said.
“They are putting in place in my judgment one of the most interesting social safety nets that combines everything,” he said. “If you can figure out how to do agriculture, education and small businesses you are truly on the way.”
The issue will be discussed by African finance ministers at the annual meeting of the bank that began today and runs until May 31 in Marrakech, Morocco, he said.