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Relaunching Africa: The Call For Pro-Poor Growth November 17, 2013

Posted by OromianEconomist in Africa, Development, Economics, Economics: Development Theory and Policy applications, Oromia, Oromiyaa, Oromo, Oromo Nation, Oromo Social System, Self determination, The Colonizing Structure & The Development Problems of Oromia, The Oromo Governance System, Theory of Development, Uncategorized.
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“Policies aimed at enhancing agricultural productivity and increasing food availability, especially when smallholders are targeted, can achieve hunger reduction even where poverty is widespread. When they are combined with social protection and other measures that increase the incomes of poor families, they can have an even more positive effect and spur rural development, by creating vibrant markets and employment opportunities, resulting in equitable economic growth.” F.A.O.

“Poor people feeding their babies better and sending their children to school, while also building a new chicken coop. Let governments ensure that there are teachers there to actually teach the children, and you could be on to a really promising combination. It may look less impressive than a new oil platform or a shiny airport, but it will reduce poverty just the same, if not more!”

The new Deputy Chief Economist for the World Bank in Africa in his call for evidence based debate in pursuit of African development states the following arguments and calls for pro-poor development policies:

In 1990, poverty incidence (with respect to a poverty line of $1.25) was almost exactly the same in sub-Saharan Africa and in East Asia: about 57%. Twenty years on, East Asia has shed 44 percentage points (to 13%) whereas Africa has only lost 8 points (to 49%). And this is not only about China: poverty has also fallen much faster in South Asia than in Africa. These differences in performance are partly explained by differences in growth rates during the 1990s, when emerging Asia was already on the move, and Africa was still in the doldrums. But even in the 2000s, when Africa’s GDP growth picked up to 4.6% or thereabouts, and a number of countries in the region were amongst the fastest-growing nations in the world, still poverty fell more slowly in Africa than in other regions. Why is that? Part of the answer is that Africa’s population growth rates are still very high: 2.7% per year, versus 0.7% in East Asia. So a 4.6% growth rate for GDP translates into a much more modest sounding 1.9% growth in per capita GDP – less than the developing country average in 1999-2012. But an even bigger part is that Africa just seems less efficient at transforming economic growth into poverty reduction. That conversion is measured by what economists call the “growth elasticity of poverty”, a number that tells us by how much poverty falls for each percentage point in economic growth. According to a recent (and as yet unpublished) estimate by my colleagues Luc Christiaensen, Punam Chuhan-Pole and Aly Sanoh, that elasticity was about 2.0 in the developing world as a whole (excluding China) during the 2000s, but only 0.7 in Africa. At this rate, even if countries in Africa continue to grow at the same rates as in the 2000s – a period when the external environment was particularly benign, with rising commodity prices and abundant liquidity – poverty in 2030 would be in the 26%-30% range (assuming constant inequality). Under similar assumptions for other countries, somewhere between 60% – 80% of the world’s poor would live in Africa. Why is growth in Africa apparently less pro-poor than elsewhere? And what can be done about it? At first blush, at least part of the answer (beyond rapid population growth) has to do with both levels and changes in inequality. Inequality is relatively high in Africa: seven of the world’s 10 most unequal countries in the latest data in Povcalnet are in the region – despite the fact that African inequality is almost invariably measured for consumption, rather than income, while the opposite is true in Latin America. In addition, inequality has actually been rising in a number of countries. (Although the truth is that infrequent household surveys and changing methodologies are so common that we actually know relatively little about real changes in inequality in Africa – despite the impression you may get from various sources…)This clearly reflects a growth pattern that is less inclusive than we might like. In our latest Africa’s Pulse and in our recent presentation on the State of the Africa Region to the Annual Meetings of the Bank and the Fund in Washington, we reviewed some of these data, and suggested a four-part strategy for better sharing Africa’s growth in the future:

• First, preserve macroeconomic stability. Africa’s growth success in the 2000s reflects policy improvements, but also a benign external environment. During this period, fiscal deficits and current account deficits grew in most countries (Figure 1). While that is understandable, given plentiful capital flows, the risk is that those capital flows cease – or reverse – precisely at a time when commodity prices have stopped rising and are, in many cases, falling. Countries with large fiscal and current account deficits are inevitably more vulnerable to those risks.

• Second, build more – but mostly better – human and physical capital. Of course, alongside increases in total factor productivity – this is what drives economic growth everywhere. Despite progress, the needs in Africa are enormous, in everything from health and education to transport and energy. Our emphasis here is on quality: there have been real gains in access, but children won’t learn unless the teachers show up at school and, in addition, actually teach! Similarly, the costs of power, water, transport and communications remain excessively high. That is partly due to sheer scarcity, and partly to geographic fragmentation, but not only. The way contracts are designed, the way competition is (or isn’t) promoted, and the way subsidies interact with firm incentives all need looking at as well.

• Third, promote growth in the places and sectors where the poor live and work. For most of Africa, that means in rural areas – both by finding better ways to promote higher yields in agriculture, and by strengthening the off-farm economy. Linkages to small and medium-sized towns seem to be an important ingredient. This suggests that “local investments” – in rural roads and electrification, for example – is likely to be as important as big flagship projects. Even if the political economy tends to favor the latter.

• Fourth, harness the power of growth that takes place elsewhere for investments near – or in – the poor. That is particularly pertinent for (the large and growing group of) countries with large natural resource sectors. Oil and mining are not intensive in unskilled labor and could, if left alone, develop almost as “enclave sectors”. The main policy concern with these resources is to invest as much as possible of the rents they generate into other forms of capital, to replace the natural capital being depleted. But countries should be imaginative and comprehensive in their choice of investment portfolio. The portfolio should obviously include infrastructure, health and education projects, to build physical and human capital. But it may also include foreign assets, to help with the risk of exchange-rate appreciation and “Dutch disease”.
And it should also include some cash transfers made directly to poor people. The prevailing evidence is that poor households tend to use the resources from small cash transfers rather wisely. They buy more and better food. They send their kids to school more often. And they even invest some of it in their own (very) small businesses: they buy chickens in Mexico, or goats in Tanzania.

That’s pro-poor growth for you! Poor people feeding their babies better and sending their children to school, while also building a new chicken coop. Let governments ensure that there are teachers there to actually teach the children, and you could be on to a really promising combination. It may look less impressive than a new oil platform or a shiny airport, but it will reduce poverty just the same, if not more!

For more details refer to:

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‘Despite the progress made worldwide, marked differences in hunger reduction persist. Sub-Saharan Africa has made only modest progress in recent years and remains the region with the highest prevalence of undernourishment, with one in four people (24.8 per cent) estimated to be hungry. No recent progress is observed in Western Asia, while Southern Asia and Northern Africa witnessed slow progress. More substantial reductions in both the number of hungry and prevalence of undernourishment have occurred in most countries of East Asia, Southeastern Asia, and in Latin America.’

“Terms like ‘peasant farming’ or ‘traditional farming’ evoke for many people the notion of subsistence agriculture, and peasants living in blissful harmony with nature. The truth is that many peasant farmers struggle, many are poor and ironically constitute the majority of the undernourished in the world.  Smallholder farmers need what other businesses need—access to finance, markets, infrastructure, technology, the tools and knowledge to grow their businesses, get their product to market and increase their incomes. That is their route out of poverty. It’s important to avoid black-and-white dichotomies between ‘big ag’ and ‘little ag’, industrial or traditional etc. Agricultural research, for example, can be of benefit to small farms as much as large.  Small farmers need new technologies, adapted to their farming circumstances. Smallholder farming needs support; the question remains of who’s going to provide that support. There are critical roles for government, the private sector, development agencies and consumers. Integration of smallholders into higher-value market chains calls for a proactive role by national governments in terms of food safety standards, building infrastructure, and making the policy and legal environment conducive. That includes protecting the rights of small farmers—a large proportion of whom are women who face inequality and barriers to access to land, credit, education and advice. Strong producers’ associations managed and owned by small farmers can make working with small farmers more attractive to the private sector and also help safeguard their interests. And the private sector has to come equipped not only with finance but also with respect for rural people and the local context. To achieve food security, a sustained increase in agricultural productivity is required,  with more focus on those small farmers who tend to be the most neglected: youth, women, other disadvantaged social groups and indigenous peoples.  ”

‘The continent’s burgeoning middle class has driven much of that discourse. Stories about its growth, increasing wealth and expanding expenditure have contributed to portray an Africa on the ascent. Prospects are so promising that Mthuli Ncube, chief economist of the African Development Bank (AfDB), suggested that we recalibrate our development priorities[Aid and development strategy] will have to concentrate less on the bottom of the pyramid and move to the middle, which means it has to be supportive of private sector initiatives, which then are the way middle class people conduct their lives.This sentiment is echoed regularly by development institutions. Never mind that the middle class is a precarious and expansive category lumping together people spending $2 to $20 a day. Let’s also ignore that the so-called ‘floating class’ at the bottom end of the spectrum represent almost 40% of said middle class, people who contend with questions like affording school fees and medical treatment on a regular basis. If we cherry pick the middle, what happens to the rest? It is one thing to use the middle class to unpack singular depictions of the continent, it is another to pivot all development policies and priorities towards them. On the continent, despite improvements in national economies, technology, and certain human development indicators, almost 2 Africans out of 3 remain affected by poverty. The number of poor people has doubled since 1980s and among the world’s 10 most unequal countries, six are in Africa. In a recent survey of more than 50,000 people in 34 African countries about current economic conditions, half say they struggle to meet daily needs like food, clear water, and medicine.’

Copyright © Oromianeconomist 2013 and Oromia Quarterly 1997-2013. All rights reserved. Disclaimer.



1. Rashid Faridi - October 25, 2013

Reblogged this on Jugraphia Slate.

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