East Africa’s ride to Middle Income statusFollow @MadeItInAfrica
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You have embarked on a long train ride in Africa. The train is in bad shape, the ride is bumpy and breakdowns frequent. You wonder when you will arrive at your destination or if you ever will. But after a tortuous first half of the trip, the train is starting to gain speed. There are still a number of unnecessary stops but the destination is now in sight and passengers are becoming upbeat. Just as the train is about to enter the station you are overtaken by three trains, which had been accelerating even faster.
This train could be Kenya in East Africa’s race to Middle Income. The country remains the richest in East Africa and with almost US$800 income per capita is the closest to meeting the international Middle Income threshold of US$1000. But its East African Community (EAC) partners Rwanda, Uganda and Tanzania are catching up fast.
Kenya could be the first EAC country to reach Middle Income status by 2020, but only if it achieves its potential of about 6% uninterrupted economic growth. However, if Kenya’s economy only grows at 3.7% (the average of the last decade), the train will likely be overtaken by Rwanda, Tanzania and Uganda in the next ten years. Middle Income status would still be possible, but only by 2037.
Today, Rwanda, Tanzania and Uganda have per-capita incomes of around US$550, substantially below Kenya’s. If past trends continue, Kenya would still be ahead in 2020, but the gap would gradually narrow (see table) and by 2022, Rwanda would take first place soon followed by Tanzania and Uganda.
The fact that most of East Africa can reach Middle Income in the next ten years is remarkable and more important than the ultimate ranking of the frontrunners.
Today, the EAC is one of the fastest growing regions in the world. If Rwanda, Tanzania and Uganda maintain their ongoing growth momentum and if Kenya accelerates, all four countries will reach Middle Income status within the next ten years. For the first time since independence, sustainable development appears possible for East Africa, even for countries that started off from very difficult positions.
Making it to the Middle Income station is not the end of the journey. Most economic challenges will remain, including fighting poverty. At an annual income of US$1000 the average East African would only “earn” US$83 per month, or less than US$3 per day. However, being a middle income country brings you into a new league of countries, and the right to be compared with the so-called “emerging economies”.
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