What role for business in tackling inequality?

'Africa Rising' advocates boast that the sub-Saharan Africa region hosts six of the world's fastest-growing economies. Yet it also holds six of the world's most unequal societies in income terms, according to the African Development Bank.

This week Oxfam released a report on the growing wealth and/or income gap around the world.

This is ahead of the annual Davos gathering.

If the inequality gap raises serious social policy (and even security) issues for governments to respond to, what is a responsible role for the private sector on this issue?

That is, what role should organised businesses play in addressing structural income inequality in African economies, beyond their duties as taxpayer and employer? Would shifting the focus onto business (and re-framing inequality as a corporate responsibility issue) wrongly detract from the proper locus of responsibility?

That lies in the complex social contract between citizen and state. Corporates should be neither excluded nor exempt in such a debate.

I wrote on this (... here ...) almost exactly a year ago -- also ahead of Davos, also about inequality, and also unsure where exactly 'responsible business' meets 'redistributive fiscal policy'.

There have since the last Davos been many reports on how Africa's fast (average) GDP growth rates have not reduced income inequality and may have only exacerbated it (see, for example, this report and this IMF Policy Paper, both from a year ago).

However, among all the policy prescriptions and advocacy points, few offer insights into what it is business could be doing more of, or less of, other than the obvious issues (where foreign firms are concerned) around tax evasion or avoidance.

Income inequality raises serious longer-term business growth and investment strategy issues in Africa, since it affects the pace, quality and sustainability of growth (for example, of new urban middle classes)*.

This 'bottom line' element suggests that business leaders will continue to give the issue attention. In weaker governed states in Africa, that could in theory (if somewhat counter-intuitively) extend to corporate taxpayers helping to increase the capacity of their host governments to levy and distribute fair and viable corporate taxes more efficiently.

For many African economies, it is arguable that growth rather than income inequality is the priority: without the tax income from sustainable, broad-based growth these economies will struggle with distributive policies. The current focus on 'inclusive growth' need not be a simplistic 'growth and redistribution' model, which posits citizens as passive recipients; if its ideals are realised, inclusive growth is economic empowerment not wholly based on state provision of income. Firms can contribute to this through their hiring and procurement policies. 

Jo

* Oxford Analytica, 7 November 2014