What you need to know:
- The 1,000 richest people in the world recovered their Covid-19 losses within just nine months, but it could take more than a decade for the world’s poorest to pull through the economic impacts of the pandemic.
- Nine out of the 11 Sub-Saharan Africa dollar billionaires have seen their fortunes increase by about US$13.1 billion (Sh1.44 trillion) since March 2020, enough to give all 20 million people forced into poverty by Covid-19 in the region a cheque of about US$655 (Sh72,050) each.
- Last year, the main bread winner in one in six Kenyan households lost their source of income due to the coronavirus pandemic.
Rigged economic systems are enabling the super-rich to amass wealth in almost every country at once while billions of people are struggling to make ends meet.
The 1,000 richest people in the world recovered their Covid-19 losses within just nine months, but it could take more than a decade for the world’s poorest to pull through the economic impacts of the pandemic, reveals a new Oxfam report out today.
The world’s 10 richest men saw their combined wealth increase by half a trillion dollars (Sh55 trillion) since the pandemic began — more than enough to pay for a Covid-19 vaccine for everyone and to ensure no one is pushed into poverty by the pandemic, according to the report Inequality Virus.
Extreme inequality is not inevitable, but a policy choice.
Some of the well-meaning measures taken by governments to mitigate the effects of the crisis have contributed to widening inequality. Kenya, for instance, last year responded to the crisis with tax cuts for the wealthiest and big business and limited additional funding for social protection and health measures.
The Government lost $595 million (Sh65.4 billion) in revenue through tax cuts implemented from April to December to cushion people and businesses from the adverse economic effects of Covid-19.
This effort helped many people cope but also handed personal income tax cut to the richest employees who did not face any economic hardships and made the government revenue shortfall worse. For example, the 10 highest-paid CEOs of companies listed in the Nairobi Securities Exchange saved nearly Sh61 million (over $550,000) in PAYE reprieve.
The money saved, had the government excluded the 10 top earners from the tax relief, could have paid for full personal protective gear (protective suits, medical masks, gloves, shields, footwear, etc.,) for about 12,169 healthworkers finds a Nation Newsplex analysis . Lack of proper PPE is one of the reasons medical workers are on strike.
Alternatively, the money could have been spent on additional 24,337 specialised desks for primary schools to help them comply with Covid-19 protocols.
Nine out of the 11 Sub-Saharan Africa dollar billionaires have seen their fortunes increase by about US$13.1 billion (Sh1.44 trillion) since March 2020, enough to give all 20 million people forced into poverty by Covid-19 in on the continent a cheque of about US$655 (Sh72,050) each.
South Africa’s four billionaires (Nicky Oppenheimer and family, Johann Rupert and family, Koos Bekker and Patrice Motsepe) have collectively seen their fortunes increase by $4.8 billion (Sh528 billion) since March, enough to give each of the 5.9 million poorest South Africans a cheque for $814 (Sh89,492).
Nigerian’s three billionaires (Aliko Dangote, Mike Adenuga and Abdulsamad Rabiu) have seen their fortunes increase by about $6.7 billion (Sh737 billion) since March, sufficient to give each of the 20.6 million poorest Nigerians a cheque for $325 (Sh35,777).
In neighbouring Uganda, the top paid CEO (Stanbic Bank Managing director) is paid in a day what a nurse earns in a year. Eswatini billionaire Nathan Kirsh increased fortunes since March could give everyone of the 0.1 million poorest people in the country a cheque for $14,049 (over Sh1.5 million) while Egypt’s six billionaires could write a $355 (Sh39,079) cheque to the 10.2 million poorest Egyptians.
As the rich get richer, the pandemic has ushered in the worst global job crisis in over 90 years with hundreds of millions of people now underemployed or out of work.
Back home in Kenya, last year, the main bread winner in one in six households lost their source of income due to the coronavirus pandemic, indicates data from a special round of Twaweza’s Sauti za Wananchi mobile phone panel survey. This is equivalent to 2.4m families, a finding similar to that of another survey on the socio-economic impact of Covid-19 by the Kenya National Bureau of Statistics.
This has resulted in more families struggling to make ends meet, according to Twaweza, an East African based NGO. The survey, which is based on a random sampling with statistical weightings to establish a representative panel of Kenya’s population, also revealed a five percentage point drop in number of households reporting that their income was sufficient to meet basic needs in 2020 than in 2017 and 2018. One out of four said their income was enough to meet daily needs in the past year compared to one in three in 2017-2018.
Rising inequality means it could take at least 14 times longer for the number of people living in poverty to return to pre-pandemic levels than it took for the fortunes of the top 1,000, mostly white male, billionaires to bounce back, according to the Oxfam report.
The virus could intensify economic inequality in almost every country simultaneously, the first time this has happened since records began over a century ago.
A global survey of 295 economists from 79 countries, commissioned by Oxfam, shows that 87 per cent of respondents, including celebrated ones like Jeffrey Sachs, Jayati Ghosh and Gabriel Zucman, expect an ‘increase’ or a ‘major increase’ in income inequality in their country as a result of the pandemic.
“Africa can rise and build back economies that care for the people and the planet. Our political leaders must have the courage to tackle inequality by investing in universally accessible public services like health, education and social protection financed by progressive tax systems that ensure rich corporations, and the wealthy pay their fair share of tax," says Oxfam Pan Africa Program Director, Peter Kamalingin.
“Its high time we tackled haemorrhage of public resources and the flow of illicit finance out of the continent.”
The World Bank simulated what the impact of an increase in inequality in almost every country at once would mean for global poverty. The bank finds that if inequality (measured by the Gini coefficient) increases by two percentage points annually and global per capita GDP growth contracts by eight percent, 501 million more people will still be living on less than $5.50 (Sh605) a day in 2030 compared with a scenario where there is no uptick in inequality.
As a result, global poverty levels would be higher in 2030 than they were before the pandemic struck, with 3.4 billion people still living on less than $5.50 (Sh605)a day. In the World Economic Outlook released last October, the International Monetary Fund’s worst-case scenario does not see GDP returning to pre-crisis levels until the end of 2022 while the OECD has warned this will lead to long-term increases in inequality unless action is taken.
But even before the virus struck over half of workers in poor countries were living in poverty, and three-quarters of workers globally had no access to social protections like sick pay or unemployment benefits.
Fairer economies are the key to a rapid economic recovery from Covid-19. A temporary tax on excess profits made by the 32 global corporations that have gained the most during the pandemic could have raised $104 billion (Sh11.44 trillion) in 2020, according to Oxfam. This is enough to provide unemployment benefits for all workers and financial support for all children and elderly people in low- and middle-income countries.
“Extreme inequality is not inevitable, but a policy choice. Governments around the world must seize this opportunity to build more equal, more inclusive economies that end poverty and protect the planet,” said Gabriela Bucher, Executive Director of Oxfam International.
Meanwhile, billionaires’ fortunes rebounded as stock markets recovered despite continued recession in the real economy. Their total wealth hit $11.95 trillion in December 2020, equivalent to G20 governments’ total Covid-19 recovery spending, indicates the Oxfam report.
The road to recovery will be much longer for people who were already struggling before the Covid-19.