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THE STATE OF EAST AFRICA REPORT SERIES

Economic Dimensions of Inequalities in East Africa

Trends in income inequality in East Africa (1985 – 2011)

Figure 1 below shows the trends of the Palma Ratio in the East African countries. It responds to the question of how much more does the richest 10 per cent of the population in each country earn compared to the poorest 40 per cent of the population in that same country?i The earliest data is from 1985 for Rwanda, 1989 for Uganda and 1992 for Burundi, Kenya and Tanzania. The most recent data is from 2011 for Rwanda, 2009 for Uganda, 2007 for Tanzania, 2006 for Burundi and 2005 for Kenya.

palma-index

Burundi is the least unequal country in the region. In 2006, the richest 10 per cent of Burundi’s citizens earned 1.35 times the income of the poorest 40 per cent. The trend shows that Burundi’s income inequality rising from 1992 to 1998, after which it returned back to its level of a decade earlier.

Tanzania follows as the next least unequal country. In 2007, the richest 10 per cent of Tanzanians earned 1.65 times the income of the poorest 40 per cent of their compatriots. However, the trend shows income inequality rising in with the Palma Ratio moving from 1.36 in 1992 through 1.41 in 2000 to the most recent level of 1.65.

The degree of Uganda’s inequality has been variable for the past two decades. By 2009, Uganda’s richest 10 per cent earned 2.3 times more than the poorest 40 per cent of their compatriots. Interestingly, notwithstanding the variations, the level of Uganda’s income inequality in 2009 was almost identical to that of two decades earlier.

Kenya’s inequality trend is striking. Between 1992 and 1995, the gap between the richest 10 per cent and the poorest 40 per cent closed substantially. However from 1995 to 2005, the income gap widened ending up with the richest 10 per cent of Kenyans earning 2.8 times more than the poorest 40 per cent of their compatriots.

Rwanda is East Africa’s most unequal country. In 2011, the richest 10 per cent of Rwandans earned 3.2 times the income of the poorest 40 per cent of their compatriots. Income inequality rose between 1985 and 2006, taking Rwanda from the most equal to the most unequal country in the region. After 2006, inequality is trending downwards.

To put these figures in perspective, the two African countries with significant income disparities are South Africa and Namibia. In South Africa, the richest 10 per cent earn seven times more than the poorest 40 per cent of South Africa, and in Namibia that figure is 6.7 times. The most unequal country in the world on this measure is Jamaica, where the richest 10 per cent earn more than 14 times the income of the poorest 40 per cent. The least unequal countries are Romania and Ukraine where, with Palma indexes of 0.95 and 1.04 respectively, the richest 10 per cent of the population have the same income as the poorest 40 per cent of the population.

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iData sourced from http://www.indexmundi.com/facts/topics/poverty which takes as its source the World Bank, Development Research Group. Data are based on primary household survey data obtained from government statistical agencies and World Bank country departments.

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