Boosting Africa's Growth Potential The Power of Reducing Poverty and Inequality

Economic growth in Sub-Saharan Africa has slowed significantly since its impressive momentum of the early 2000s. Even during the high growth period, the region experienced slower poverty reduction than other parts of the world. More than a third of the region's population still live on less than $2.15/day as of 2019. Average household disposable incomes are also low, which in turn constrains the size of domestic markets, the private sector, and the ability of governments to provide public goods. Moreover, incomes are highly concentrated, making Africa one of the most unequal regions in the world. High poverty and inequality not only imply an unacceptable human cost -- they also dampen economic growth, which is essential for reducing poverty in the region. This report draws on the latest data on poverty and inequality to examine countries' growth potential from the bottom up. It revisits Africa's poverty, inequality, and growth patterns and explores how these are shaped through three key channels: inequality of opportunities; inequality in market power, and distortions that shape how much workers earn and where they work; and the limited use of fiscal policy tools to equalize opportunities, invest in public goods, and raise revenues. The findings lead to a set of pro-growth poverty and inequality reduction policies that are crucially needed to revitalize growth in the region.