Inequality In Africa: Southern Africa’s ‘Enclave Economies’ Most Unequal

SOUTHERN Africa is one of the most unequal regions not just in Africa, but in the world – data from the African Development Bank shows that in Namibia and South Africa, the richest 10% are responsible for more than half (50%+) of total consumption in the economy.

By contrast, Africa’s least unequal countries are Sao Tome & Principe, Mali and Egypt, where the same income group is responsible for about a quarter of total consumption.

Inequality in southern Africa is a legacy of colonialism (and apartheid, in South Africa’s case), where the region experienced a special type of social formation, where the capitalist sector of the economy was grafted wholesale onto pre-capitalist, traditional forms of production, without much integration between the two.

It resulted in an ‘enclave’ economy – a small, well-resourced formal sector that was very dependent of external factors, such as access to markets in Europe. Meanwhile, the rest of the economy is underdeveloped, poor and informal (especially relative to the wealthy formal sector in those same countries).

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The region’s governments have tried to fix the problem of inequality by various social welfare programs, such as grants and cash transfers to poor households.  But the structure of the economy remains unchanged, and so inequality continues to grow.

This policy brief by the Open Society Foundation argues that it is time for governments in southern Africa to change their focus away from being providers of favourable investment conditions for (largely foreign) investors, and towards becoming regulators and economic players that can achieve explicitly pro-poor growth.

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