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QZ: China in Africa: One Belt One Road May 15, 2017

Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, China in Africa, Uncategorized.
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Odaa OromooOromianEconomistChinaAfrica

 



There’s one drawback to the project observers are calling China’s Marshall Plan. The One Belt One Road initiative, marketed as a modern-day recreation of the ancient Silk Road trading route, is about gaining access to new markets for Chinese goods. (Soft power and finding work for Chinese construction companies are important factors too.)

In this way, One Belt, One Road is similar to Britain’s colonial trade routes, used to take natural resources from its outposts as well as ship finished goods back to its colonial subjects, Eric Olander and Cobus van Staden at the China Africa podcast have observed.

African countries are already flooded with Chinese products. Chinese exports to African countries reached $103 billion in 2015, a figure that is likely much higher because of underreporting and smuggled goods. African countries are exporting far less to China than they’re importing. After years of falling commodity prices, now only 10 out of 53 sub-Saharan African countries have a trade surplus with China, according to 2015 data.–  qz.com



China’s campaign to build a massive network of land and sea links connecting Asia, Europe, the Middle East, and Africa is expected to benefit the African countries along the route. Chinese companies will spend at least $1 trillion on roads, ports, and other updates to infrastructure in more than 60 countries that make up the…

via There’s one major pitfall for African countries along China’s new Silk Road — Quartz



 

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The NY Times: Africa Rising’? ‘Africa Reeling’ May Be More Fitting Now October 17, 2016

Posted by OromianEconomist in #OromoProtests.
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Odaa OromooOromianEconomist


 

‘Africa Rising’? ‘Africa Reeling’ May Be More Fitting Now
By JEFFREY GETTLEMAN, OCT. 17, 2016

orompoprotests-picture-from-the-economist-13-october-2016

A protest in Bishoftu, Ethiopia, on Oct. 2. No place exposes the cracks in the narrative of Africa’s rising better than Ethiopia, which is one of the continent’s fastest-developing but most repressive nations. Credit Associated Press
NAIROBI, Kenya — For decades Africa was eager for a new narrative, and in recent years it got a snappy one.

The Economist published a cover story titled “Africa Rising.” A Texas business school professor published a book called “Africa Rising.” And in 2011, The Wall Street Journal ran a series of articles about economic growth on the continent, and guess what that series was called?

“Africa Rising.”

The rise seemed obvious: You could simply stroll around Nairobi, Kenya’s capital, or many other African capitals, and behold new shopping malls, new hotels, new solar-powered streetlights, sometimes even new Domino’s pizzerias, all buoyed by what appeared to be high economic growth rates sweeping the continent.

For so long Africa had been associated with despair and doom, and now the quality of life for many Africans was improving. Hundreds of thousands of Rwandans were getting clean water for the first time. In Kenya, enrollment in public universities more than doubled from 2007 to 2012. In many countries, life expectancy was increasing, infant mortality decreasing.

 

But in recent months, as turmoil has spread across the continent, and the red-hot economic growth has cooled, this optimistic narrative has taken a hit. Some analysts are now questioning how profound the growth actually was.

“Nothing has changed on the governance front, nothing has changed structurally,” said Grieve Chelwa, a Zambian economist who is a postdoctoral fellow at Harvard.

“Africa rising was really good for some crackpot dictators,” he added. “But in some ways, it was a myth.”

 

A cafe in Addis Ababa, Ethiopia’s capital, in October. Credit Mulugeta Ayene/Associated Press
No place exposes the cracks in the “Africa rising” narrative better than Ethiopia, which had been one of the fastest risers.

Ethiopia is now in flames. Hundreds have been killed during protests that have convulsed the country.

The government, whose stranglehold on the country is so complete that not a single opposition politician sits in the 547-seat Parliament, recently took the drastic step of imposing a state of emergency.

Many of the Ethiopia’s new engines of growth — sugar factories, textile mills, foreign-owned flower farms — now lie in ashes, burned down in a fury of anti-government rage.

At the same time, a report by the McKinsey Global Institute, an arm of the consulting firm McKinsey & Company, just listed Ethiopia as the fastest growing economy on the continent from 2010 to 2015. The Democratic Republic of Congo, which is also rapidly sliding toward chaos — again, was second.

Political turmoil on the one hand, rosy economic prospects on the other. Can both be true?

“It comes down to how sustained the turmoil is,” said Acha Leke, a senior partner at McKinsey.

In Ethiopia’s case, the unrest appears to be just beginning. Videos show demonstrations of hundreds of thousands of Ethiopians chanting antigovernment slogans, giving a sense of the depth of discontent. The protesters hail from Ethiopia’s two largest ethnic groups, a population of more than 60 million, leading many analysts to predict that this is no passing fad.

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Deadly Stampede at an Ethiopian Festival
Police fired on antigovernment demonstrators at a religious festival in Bishoftu earlier this month, triggering a stampede that killed more than 50 people.
It seems the continent as a whole is heading into a tough period. Nigeria, Africa’s most populous country, faces its gravest economic crisis in years because of low oil prices. At the same time, it is trying to fight off Boko Haram, one of the most bloodthirsty insurgent groups on the planet.
South Africa, the continent’s most developed nation, has been wracked by waves of unrest. Troops with assault rifles stomp around college campuses, trying to quell student protests. The country’s currency, the rand, hovers near a record low.

South Sudan, which topped The Economist’s list in 2013 of the world’s fastest-growing economies, is now a killing field, the site of one of Africa’s worst civil wars.

Mr. Leke, one of the authors of the McKinsey report, says that political turbulence can drag down any economy, and that the growth of recent years has not been shared among the people nearly as widely as it could have been. According to a recent report by the African Development Bank, unemployment in sub-Saharan Africa remains close to 50 percent and is a “threat to social cohesion.”

As Mr. Leke said, “You can’t eat growth.”

Still, he says, there have been fundamental — and positive — changes on the continent, like increases in disposable income for many African consumers.

Mr. Chelwa, the Zambian economist, has a different view. The fundamentals of African economies have not changed nearly as much as the “Africa rising” narrative implied, he said, with Africa still relying too heavily on the export of raw materials and not enough on industry.

“In Zambia, we import pencils,” he said.

He also points out that some of the fastest-growing economies, like Ethiopia, Angola and Rwanda, are among the most repressive. These governments can move ahead with big infrastructure projects that help drive growth, but at the same time, they leave out many people, creating dangerous resentments.

In Ethiopia, that resentment seems to be growing by the day.

The trouble started last year when members of Ethiopia’s largest ethnic group, the Oromo, began protesting government land policies. Soon Ethiopia’s second largest ethnic group, the Amhara, joined in, and the protests have now hardened into calls to overthrow the government, which is led by a small ethnic minority.

If you track the news coming out of Ethiopia, you would not be a fool to think it is two totally different countries. One day, there is a triumphant picture of a new electric train, with Chinese conductors standing next to shiny carriages (China remains a huge investor in Ethiopia.) The next, there are grisly images of dead bodies that witnesses said were people gunned down by police.

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A light-rail station in Addis Ababa this month. A report by the McKinsey Global Institute, an arm of the consulting firm McKinsey & Company, recently listed Ethiopia as the fastest-growing economy in Africa from 2010 to 2015. Credit Mulugeta Ayene/Associated Press
Several witnesses said the security forces might be beginning to split, with some officers taking off their uniforms and joining the protests.

The most recent economic data shows Africa’s growth slowing because of political instability and a global slump in commodity prices. Morten Jerven, a Norwegian economic historian who has studied statistics from across Africa, argues that the growth was never as robust as had been believed.

He said that the economic indicators for many African economies in the 1990s and early 2000s were inaccurate, and that the economic progress in the last five to 10 years that appeared to have been sudden was, in fact, gradual.

In other cases, Mr. Jerven said, African governments made bold economic assumptions or simply used fake numbers to make themselves look good. “The narrative had been too rosy,” he said.

Africa Yearning or Africa Struggling might be a more apt characterization, but neither of these is especially new. Whatever narrative emerges should include what Mr. Chelwa calls the continent’s “ghastly inequality,” and the sharp increase in the number of people who are now better equipped with technology and information and are demanding more from their governments.

Of course, it is difficult to apply a sweeping narrative to all 54 countries in Africa, where analysts agree that the picture is mixed. For instance, Rwanda remains stable with new businesses and floods of tourists while its neighbor, Burundi, teeters on the edge of chaos.

Some of the same economic factors that investors cite as grounds for optimism, like Africa’s growing cities, cut both ways. According to Mr. Jerven, rapid urbanization in Africa often leads to sprawling slums, low wages and legions of disenfranchised youth.

“All the economic variables for turmoil are there,” he said.

 

Youth Employment in Africa: what policy makers can do January 25, 2016

Posted by OromianEconomist in Africa, Youth Unemployment.
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Odaa Oromoo


 


 

Sub-Saharan Africa is experiencing a learning crisis: While more children are attending school, many learn very little. By grade 3, many students cannot recognize a single word of a simple paragraph. At the end of the primary cycle, results from an assessment of math skills in 14 Southern and Eastern African countries found that 60% did not get beyond the designation of “basic numeracy,” and arecent assessment in 10 Western and Central (francophone) African countries found that 60% did not get beyond the ability to answer brief questions by calling upon factual knowledge or a specific procedure (defined by the authors as the “sufficient” competency threshold). By addressing these urgent education issues, governments could ensure that young Africans have the basic skills to build on through further education or on-the-job experience. Other dimensions of human capital merit action. Governments should put in place programs that ensure early child development; young children who start off with appropriate nutrition and stimulation have greater success later in life. Also, employers demand workers with high levels of socioemotional skills, which are also rewarded in household enterprises. There should be attention to developing these skills; for example, “life skills” training for adolescent girls has resulted in higher earnings.


 

Youth Employment in Africa: what policy makers can do


 

 By  

 

Just under two years ago, I—along with a team from across the World Bank—co-authored a report, Youth Employment in Sub-Saharan Africa, which tackled the growing gap between the aspirations of African youth and the realities of the job markets—and what governments should do about it. With an expected 11 million young Africans entering the labor market every year well into the next decade, the findings and main messages of the report remain relevant.

Boosting youth employment is not a one-dimensional task that can be solved, for example, by merely increasing training opportunities—a frequently touted response. The key is to ensure that young people—and other workers—can earn a decent income in whatever work they do. Young people need strong foundational skills—human capital—to bring to their jobs; farm and business owners, entrepreneurs and investors need a conducive environment to create more productive opportunities. Governments must address the quality of basic education and remove obstacles that hinder progress in agriculture, household enterprises, and manufacturing.

Nearly 80% of Africans work in the informal sector on small farms or in household enterprises. Most people in these sectors earn meager incomes. The challenge is beyond unemployment it is that of boosting earnings across the board.


Africa’s impressive economic growth
over the past 15 years (about 7% a year) was not associated with large-scale job creation or poverty reduction. Much of this growth was in the extractive industries that are less labor-intensive. Although the formal wage sector grew quickly in some countries (10% a year in Ghana) even in the best-case scenario, this sector will not create enough jobs in the near future. The report featured estimates of what kinds of jobs workers would have in 2020 based on optimisticprojections of overall economic growth, andhigh estimates of the formal sector wage job creation that would be associated with that growth—using the cases of countries such as Bangladesh and Vietnam as sources (Fox et al. 2013). The results were sobering: while the number of jobs created would be impressive, the structure of the labor force would remain remarkably similar to what it is today—low-income African countries would have close to 60% of workers in agriculture, 20% in household enterprises, 13% working for wages in the services sector, and only 6% working for wages in the industrial sector. Demography and the difference between stocks and flows mean that any change will take a long time.

What, then, is a government to do? The report provides a framework for systematically assessing constraints to higher earnings related to the human capital that workers bring to their jobs, and the business environment that ensures that those jobs are productive. The framework looks not just at the formal wage sector, but also at how to increase productivity in agriculture and in household enterprises. It recommends what should be “done now for now” and what should be “done now for results later.”

Key recommendations for policy makers include:

  • Carry out business environment reforms that attract investment into large enterprises that can create a lot of formal wage jobs, and help make these firms more competitive. Priority reforms include improving access to finance and infrastructure services, improving trade logistics, and easing regulatory constraints to entrepreneurship.
  • Ramp up efforts to support the informal sector. Recognize its importance and ensure the legal status of those who work in it. Provide support by ensuring access to (i) land or (legal) space to operate a business, (ii) public services (such as security services) and infrastructure (such as electricity) so that small businesses can be secure and have a predictable operational environment, and (iii) finance so that even smallholder farmers and household enterprises can invest in their businesses to make them more productive.
  • Ensure that youth have solid foundational skills. Sub-Saharan Africa is experiencing a learning crisis: While more children are attending school, many learn very little. By grade 3, many students cannot recognize a single word of a simple paragraph. At the end of the primary cycle, results from an assessment of math skills in 14 Southern and Eastern African countries found that 60% did not get beyond the designation of “basic numeracy,” and arecent assessment in 10 Western and Central (francophone) African countries found that 60% did not get beyond the ability to answer brief questions by calling upon factual knowledge or a specific procedure (defined by the authors as the “sufficient” competency threshold). By addressing these urgent education issues, governments could ensure that young Africans have the basic skills to build on through further education or on-the-job experience. Other dimensions of human capital merit action. Governments should put in place programs that ensure early child development; young children who start off with appropriate nutrition and stimulation have greater success later in life. Also, employers demand workers with high levels of socioemotional skills, which are also rewarded in household enterprises. There should be attention to developing these skills; for example, “life skills” training for adolescent girls has resulted in higher earnings.
  • Promote the dynamic private market for vocational education and training(which includes apprenticeships). Priorities include providing information and facilitating access to existing training for disadvantaged youths as well as well as ensuring the availability of better training options (this does not necessarily mean providing these services). In the presence of active training markets, public interventions need to be selective, performance driven, and evidence-based. One interesting finding is that programs that combine training with access to finance (to start or invest in a business) seem to show substantial promise.

While there is no silver-bullet that will solve the challenge of youth employment, a number of actions can, and should, be taken to ensure that young Africans are well-prepared for work—and that the work that they will engage in will yield substantially higher incomes than it does today.

Read more at source:-

http://ideas4development.org/en/youth-employment-in-africa-what-policy-makers-can-do/

 

 

Ethiopia’s fake economic growth borrows from ENRON’s accounting December 28, 2015

Posted by OromianEconomist in Uncategorized.
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Odaa Oromoo

the-grim-reality-behind-ethiopia-rise-hype1ethiopia_03Dounle digit EthiopiaEthiopia is the one of the lowest in social Progress 2015

Ethiopia’s fake economic growth borrows from ENRON’s accounting

J Bonsa analyses Ethiopia’s economic growth over the last ten years.  Africa At LSE

More than 70 people have been killed and dozens wounded in an ongoing crackdown on peaceful protesters in Oromia. One of the underlying causes of the prevailing tense political situation is Ethiopia’s bogus claim about “miraculous” economic growth in the last decade.

The youth is not benefitting from the country’s supposed growth and doesn’t anticipate the fulfillment of those promises given the pervasive nepotism and crony capitalism that underpins Ethiopia’s developmentalism.

Courtesy: OPride

Courtesy: OPride

The ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) came to power in 1991 and briefly experimented with democratic transition. However, a little over a decade into its rule, the party’s former strongman, the late Meles Zenawi, realized that their pretentious experiment with liberal democracy was not working. Zenawi then crafted a dubious concept called, “developmental state.”

Stripped of the accompanying jargon and undue sophistication, Zenawi was simply saying that he had abandoned the democratic route but would seek legitimacy through economic development guided by a strong hand of the state. This was a ploy, the last ditch attempt to extend EPRDF’s rule indefinitely.

Using fabricated economic data to seek legitimacy and attract foreign direct investments, the regime then advanced narratives about its double-digit economic growth, described with such catchphrases as Ethiopia rising, the fastest growing economy in the world and African lioness. The claims that EPRDF has delivered economic growth at miraculous scales has always been reported with a reminder that it takes several decades to build democratic governance. The underlining assumption was that, as long as they deliver economic growth, Ethiopia’s leaders could be excused on the lack of democracy and human rights abuses associated with the need for government intervention in the economy.

EPRDF spent millions to retain the services of expensive and well-connected Western lobbying firms to promote this narrative and create a positive image of the country. These investments were also accompanied with a tight grip on the local media, including depriving foreign reporters’ access if they cross the government line. Ethiopia’s communication apparatus was so successful that even serious reporters and analysts started to accept and promote EPRDF’s narrative on rapid economic growth.

However, a few recent events have tested the truthfulness of Ethiopia’s economic rise. Drought and the resulting famine remain the Achilles heels of the EPRDF government. The government can manipulate data on any other sector, including the aggregate Gross Domestic Product, and get away with it, but agriculture is a tricky sector whose output is not so easy to lie about. The proof lies in the availability of food in the market, providing the absolute minimum subsistence for the rural and urban population.

The sudden translation of drought into famine raises serious questions.  For example, it is proving difficult to reconcile the country’s double-digit economic growth with the fact that about 15 million Ethiopians are currently in need of emergency food aid.

Rampant famine

Except for some gullible foreign reporters or parachute consultants, who visit Addis Ababa and depart within days, serious analysts and students of Ethiopian economy know that authorities have often fabricated economic statistics in order to generate fake GDP growth.  To the trained eye, it does not take a lot to find inconsistencies in the data series. In fact, Ethiopia’s economic growth calculus is so reminiscent of Enron accounting.  (See my recent pieces questioning EPRDF’s economic policies, including anomalies in the alleged achievements of millennium development goals, crony businesses, devaluation, external tradeand finance.)

The tacit understanding in using GDP as a measure of economic growth is that responsible governments generate such data by applying viable international standards and subjecting the data to scrutiny and consistency checks.

Unfortunately, these standards are not foolproof; irresponsible governments with mischievous motives can abuse them. There is credible evidence that shows Ethiopian authorities deliberately inflated economic statistics to promote feel-good, success stories.

Let’s take the agricultural data, which is timely and topical given the ongoing famine. This came to light recently as the European Union tried to understand anomalies in Ethiopia’s grain market, particularly persistent food inflation which the EU found incompatible with the agricultural output reported by the Central Statistical Authority (CSA) of Ethiopia.

The EU’s Joint Research Centre (JRC) then developed the technical specification for studying the scope of the Cereal Availability Study in order to account for the developments in the Ethiopian cereal markets. The International Food Policy Research Institute (IFPRI) was selected to carry out the study.

ethiopiagraph_images_growth1Figure 1 (above) compares the EU-sponsored survey and the Ethiopian government’s survey produced by the CSA. I am using the data for 2007/08 for comparison. The negative numbers indicate that the IFPRI estimates were consistently lower than the CSA data. For instance, CSA overstated cereal production by 34 percent on average.  This ranged from 29 percent for maize to 44 percent for sorghum. The actual amount of Teff produced is lower by a third of what’s reported by the CSA.

The research team sought to explain this “puzzle” by examining the sources of the confusion, the methodological flaws that might have led CSA to generate such exaggerated economic data. Toward that end, they compared CSA’s crop yield estimates with comparable data from three neighboring countries:  Kenya, Tanzania, and Uganda (see Figure 2).

ethiopiagraph_images_growth2

From 2000 to 2007, the average increase in cereal yield for these countries, including Ethiopia, was 19 percent. Yet the CSA reported a whopping 66 percent for Ethiopia’s yield growth. The country was not experiencing an agricultural revolution to justify such phenomenal growth.  It is unrealistic that Ethiopia’s yield growth would be greater than the neighboring East African countries, particularly Kenya, where the agricultural sector is at a much more advanced stage. If anything, the reality in Ethiopia is closer to Uganda, which did not report any yield increase during that period.

This reveals the extents of data manipulation by Ethiopian authorities to create an inexistent economic success story and seeks political legitimacy using a bogus record. We now know the widespread distortions in official statistics on cereal production thanks, in no small part, to EU’s intervention in sponsoring a study and explaining the disparities. Cereals represent only a sub-sector in the agricultural realm. It is likely that worse distortions would be revealed if similar studies were done on Ethiopia’s growth statistics in other sectors, including manufacturing and service divisions.

‘Poverty reduction’

The IMF has praised Ethiopia for achieving accelerated growth with a focus on equity and poverty reduction, a challenging dilemma for most countries. However, a closer look at three interconnected facts turns this claim on its head.

First, as noted above, Ethiopia’s agricultural output has been inflated by 34 percent on average. Second, a33 percent poverty reduction since 2000 is widely reported. Third, there is a consensus that poverty reduction has happened mostly in rural Ethiopia. Now we put these three facts together and apply a simple logic to establish that the 33 percent poverty reduction is explained by the 34 percent exaggerated agricultural outputs. Notice that it is not by accident that the two percentage points are almost identical. Therefore, the ups and downs cancel each other out. In the best-case scenario, poverty rate must remain at the same level as in 2000.

The World Bank, IMF and other donors have often anchored their conclusions on poverty reduction on alleged changes in the agricultural sector, where the bulk of the poor live and work. Little do they know that the data they used to compute the poverty index comes from agricultural statistics with hugely inflated yield assumptions as shown above.

This raises the question: where has the billions of dollars in bilateral and multilateral aid pumped into Ethiopia in the name of poverty reduction and the millennium development goals gone?

‘The enclave economy’

The ‘Ethiopia rising’ storyline is a standard set by foreign correspondents who often repurpose official government press releases, or reports based on the construction projects in the capital, Addis Ababa.

For example, Bloomberg Africa’s William Davison, often uses the proliferating high-rise buildings in Addis Ababa as tangible evidence of Ethiopia’s double-digit economic growth. In his latest whitewash, Davison writes, “such growth is already visible in parts of the capital, where shopping malls and luxury hotels are sprouting up.” That a veteran reporter for a business website unashamedly passes judgment on economic success by referring to heights and width of buildings underscores his shallow understanding of the country’s social and political fabric.

Here are some of the questions that reporters aren’t asking and seeking answers for:  Who owns those building?  Where did the investment money come from?  Are there any firm linkages between these physical infrastructures and the rest of the Ethiopian economy? I have partially answered some of these questions in a previous piece and will soon provide additional insights.

For now, I would like to draw attention to the existence of an “enclave economy” within the mainstream Ethiopian economy. This enclave is made up of highly interconnected crony businesses, which are owned and operated by Tigrean elites, who also have a tight grip on the political and military command structures. Take, for example, the Endowment Fund for Rehabilitation of Tigray (EFFORT), a business conglomerate affiliated with the Tigrean People’s Liberation Front (TPLF). EFFORT has its humble origin in the relief and rehabilitation arm of the TPLF. However, it has undergone amorphous growth and now controls the commanding heights of the Ethiopian economy. By some estimates, EFFORT now controls more than 66 business entities.

The EFFORT controlled enclave and related military engineering complexes have created a semi-autonomous economy in Ethiopia. They made smart choices and specialized in engineering and construction businesses. This means they do not have to rely on the Ethiopian public for their products; instead, each specialize in separate industrial branches and buy from each other and also sell to the government, which is also in their hand. The huge government infrastructural projects necessitated by the “developmental state” model create business opportunities for these engineering companies.

The enclave economy is only loosely linked to the mainstream economy and it does not benefit the bulk of the Ethiopian people in any meaningful way. The luxury hotels and supermarkets that Davison refers to cater for the needs of the affluent business classes, their families, and the expatriate community.

In other words, Ethiopia’s miraculous economic growth, if it in fact exists, must have happened only in the enclave economy. Statistically, it is possible to generate a double-digit economic growth at the national level through a combination of some real astronomical growth in the enclave component and stagnation or declines hidden, through some accounting tricks, in the rest of the economy.

Lock-in style of reporting

Unfortunately, the unquestioned reporting on Ethiopia’s economic success has continued. Even the EU study appears to have been shelved, or deliberately ignored despite the significant findings. Even as a fifth of the population is in need of emergency aid, the World Bank is sticking with the outdated data and has recently released a sensationalized report entitled “Ethiopia’s Great Run: the growth acceleration and how to pace it.”

The ensuing famine has shaken the foundation of Ethiopia’s growth narrative, yet western NGOs and media outlets appear to suffer from the lock-in effect in adopting consistent storylines. They continue to link and refer to the World Bank, IMF and others reports and indexes by multilateral organizations.

That’s why we continue to see comical headlines such as “Ethiopian Drought Threatens Growth as Cattle Die, Crops Fail,” which assumes that Ethiopia’s growth is actually occurring. This acquiescence does not only display ignorance, but it also underscores an effort to evade accountability for previous mistakes and failure to report accurate information.

In a recent interview with The Ethiopian Reporter, Prime Minister Hailemariam Desalegn made a rare and fateful admission: “if we crave for too much praise for our achievements, we might run the risk of undermining the challenges we are facing. These challenges could grow bigger and become irreversible and that would be detrimental.”

Over the past 25 years, the EPRDF worked tirelessly to create a distorted image of the country and began craving and lobbying foreigners for praises.

Enron’s success involved an elaborate scam, but the firm was named “America’s Most Innovative Company” for six consecutive years. This fame did not stop Enron from crumbling. EPRDF’s fate will not be any different. The Oromo uprising has already started the unraveling of its elaborate scams devised to attain legitimacy on the back of non-existent economic and democratic advancement.

 J. Bonsa is a researcher based in Asia.

 

This article was first published on OPride.

 

http://blogs.lse.ac.uk/africaatlse/2015/12/24/ethiopias-fake-economic-growth-borrows-from-enrons-accounting/

Africa Rising: Africa is locked into a form of growth which is all about making the rich even more rich and the poor even more poor August 7, 2015

Posted by OromianEconomist in Free development vs authoritarian model, Poverty, Youth Unemployment.
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???????????Africa is still struggling with poverty

Africa wealth report 2015: rich get richer even as poverty and inequality deepen

Campaign group criticises development strategies as research shows the number of millionaires in Africa has more than doubled since 2000
 By  and, Guardian Global development, 31st July 2015
Africa is now home to more than 160,000 people with personal fortunes worth in excess of $1m (£642,000), a twofold increase in the number of wealthy individuals since the turn of the century that highlights the problem of deepening inequality as some of the world’s poorest nations register strong economic growth. The combined wealth holdings of high-net-worth individuals – those with net assets of $1m or more – in Africa totalled $660bn at the end of 2014, according to a report by New World Wealth, a South African market research firm. Meanwhile, the number of poor people in Africa – defined as those living on less than $1.25 a day – increased from 411.3 million in 2010 to 415.8 millon in 2011,World Bank data shows. By 2024, the number of African millionaires is expected to rise 45%, to approximately 234,000, according to the report. During the past 14 years, the number of high-net-worth individuals in Africa has grown by 145%. The rate for the Middle East over the same period was 136%, while in Latin America it was 278%. The global average was 73%. The report said that by the end of 2014, the number of people worldwide worth more than $1m had reached 13 million with a combined worth of $66tn, although the number of millionaires can vary depending on what assets are included anddifferent methods have produced different figures. New World Wealth, for example, do not include primary residences when assessing wealth or net assets. The World Bank has forecast an average of 5.5% economic growth for sub-Saharan Africa over the next year, though it warned that “extreme poverty remains high across the region”. Nick Dearden, director of the advocacy group Global Justice Now, said the report shows deepening inequality across the continent. “It’s no wonder that rich individuals in Africa are getting richer, because we’re seeing a form of ‘development’ … which hugely benefits the wealthy but makes the lives of the poor even harder. Aid money, trade agreements and corporate ‘investment’ pushed by Britain are locking countries into a form of growth which is all about making the rich even more rich and the poor even more poor.” Mauritius has the wealthiest individuals in Africa, with average per-capita wealth of $21,470, according to the report. The rankings show that people in theDemocratic Republic of the Congo are the poorest, at $230 a person.

To put Africa’s wealth into context: the global average wealth per capita is $27,600, with top-ranking countries such as Switzerland and Australia boasting per-capita wealth of more than $200,000. “Over the last year there’s been very strong growth in places like Mozambique, Zambia and Tanzania. Going forward, we expect Mozambique to continue to be the fastest growing market for high-net-worth individuals in percentage growth terms. So I’d say that Mozambique stands out in this report,” said Andrew Amoils, head of research at New World Wealth. Angola, where per-capita wealth rose from $620 a person in 2000 to $3,920 in 2014, recorded the highest growth over the 14-year period analysed.

In Zimbabwe, the worst performing country, wealth per capita dropped from $630 a person in 2000 to $550 a person in 2014. Zimbabweans have until September to turn in theirZimbabwean dollars before the currency is discarded. The southern African country was one of the wealthiest countries in sub-Saharan Africa on a wealth-per-capita basis, said the report’s authors, but the country is now bottom of the rankings. They also note that while other low-ranked countries on the list such as Libya and Tunisia have been affected by uprisings and political instability, Zimbabweremains under the same leadership. The study identifies erosion of ownership rights in Zimbabwe, ongoing political intimidation, election fixing and investor confusion arising from the banning of the independent media in the early 2000s as key reasons for the country’s poor performance. South Africa is home to the highest number of millionaires on the continent at 46,800 in 2014. Egypt comes in second with more than 20,000, followed by Nigeria in third place.

Amoils said African economies benefit from rich citizens: “A lot of [high-net-worth individuals] keep their wealth locally, so normally, for most African countries, it’s between 50% and 70% local wealth. There’s lots of advantages because a lot of [these individuals] are business owners and a lot of them start businesses even if they are in corporate environments..” Dearden said: “From Nigeria to Mozambique you can see poverty rising at the same time as rapid growth. What does this mean? The growth is being gobbled up by the super-rich and transnational capital. And that means ordinary people, by comparison, find their lives even more impoverished. “It could be different: with decent government spending on public services, progressive taxation, regulation to control capital and regional trading relationships to wean countries off dependency on western markets.”

Sector breakdown of African individuals worth $1m or more

  • Angola: 41% in oil and gas, 13% in financial services, 12% in real estate and construction, 8% in basic materials, 6% in transport.
  • Ghana: 24% in financial services, 16% in real estate and construction, 13% in fast-moving consumer goods, 10% in basic materials, 7% in retail.
  • Kenya: 19% in real estate and construction, 18% in financial services, 10% in manufacturing.
  • South Africa: 20% in financial services, 16% in real estate and construction, 14% in basic materials, 8% retail.
  • Nigeria: 24% oil & gas, 16% basic materials, 13% transport, 10% financial services.
  • Zambia: 22% in basic materials, 16% real estate and construction, 12% financial services, 9% transport.
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Nostalgic Patriotism is a luxury: The Danger of A Single Story on Africa Rising July 28, 2015

Posted by OromianEconomist in Africa Rising.
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manyminimusings

“Last time I saw you, you looked like apocalypse
Hell and then Genesis combined
Last time I saw you, you were stripping me of
Anything and anyone that was mine

See that’s how I remember you
That’s how I remember you

So please forgive me if
I never call you home again
So please forgive me
If I never call you home again”                            ~~Corneille: I’ll Never Call you Home Again

Yesterday I attended a conference where we met this year’s fellows from the Mandela Young African Leadership Initiative (YALI). The hot topic of course was discussing how to build and maintain a bridge between the diaspora and residents of the homeland, to leverage a superpower that will engender great change. One of them was of the opinion that those living on the continent had been let down…

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Why Namibia doesn’t want to be called an upper middle income country July 16, 2015

Posted by OromianEconomist in Africa, Development, Development & Change, Namibia, Theory of Development.
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Africa is still struggling with poverty July 9, 2015

Posted by OromianEconomist in Africa, Africa Rising, African Poor.
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???????????Africa is still struggling with poverty

http://www.pewglobal.org/2015/07/08/a-global-middle-class-is-more-promise-than-reality/

Over the last few years, sub-Saharan countries have seen significant economic growth. Seven of the ten fastest growing economies in the world between 2011-2015 come from Africa.

But this economic growth has not quite translated into significant poverty reduction. As analysts point out, the number of people on the continent living under $1.25 a day has risen from 358 million in 1996 to 415 million in 2011.

Tanzania for example, which saw an average of 6% GDP growth over the last several years, has grappled with this disconnect. “At the macro-level, we may be doing well, but it does not touch the unemployed or those involved in the informal economy,” a former cabinet minister told Quartz.

However, the latest data from the Pew Research Centre shows that there has been significant poverty reduction in some African countries.

The reduction of poverty and increase in the ranks of the slightly better-off “low-income” category is good news, but the challenge remains that many African countries have not been able to transition people into the middle class.

Africa is still the poorest region in the world overall: With nine out of 10 people either poor or low-income, the continent his home to 20% of the world’s poor, the data show. In some countries virtually the entire population is poor or low-income. The picture is somewhat brighter in Seychelles, Tunisia, South Africa, Morocco and Egypt, where 20% are either middle income or better

  Africa is still struggling with poverty   Read more at: http://qz.com/449199/africas-economic-growth-still-isnt-creating-enough-of-a-middle-class/

Africa remains the poorest region

(Gulf News, NEW YORK, 10 July 2015): The dramatic lurch of hundreds of millions of people from poverty since the millennium began has not resulted in a truly global middle class, a new report says.

Instead, the improvement in living conditions for almost 700 million people has been a step forward from the desperate existence of $2 or less a day into a low-income world of living on $2 to $10 daily, the Pew Research Center says.

Its report, released Wednesday, looks at changes in income for more than 110 countries between 2001 and 2011, the latest that data for such a large range of countries was available.

The report comes just two days after the United Nations announced success in key development goals adopted by world leaders at the start of the millennium, including the lifting of more than one billion people out of extreme poverty.

Also worth noting: Europe and North America’s global share of the upper-middle income population fell from 76 per cent to 63 per cent by 2011 as the Asia-South Pacific region got richer. Africa remained the poorest region, with 92 per cent of its population either poor or low-income by 2011, and in Cote d’Ivoire, Kenya, Madagascar and Zambia, “poverty actually increased significantly.”

For years, reaching middle class has been held out as a goal for people in a growing number of countries. China’s rise in particular, with 203 million people there moving into a middle-income life over the decade starting in 2001, has resulted in what the report calls a “pivot to the east.”

More than half of the world’s middle-class population was living in the Asia and South Pacific region by 2011. That’s a jump from 31 per cent to 51 per cent in a decade. Largely because of Asia, the report says the world’s middle-income population nearly doubled over that time, from 399 million to 784 million.

But the gains are hardly seen everywhere. The report shows that while commodity-rich South America and a strengthening Eastern Europe, including Russia, also made strides into the middle class, Africa, India and many parts of Asia have yet to do the same.

The Pew report calls its overall findings “the uneven geography of the emerging middle class.”

The poverty rate for India, Asia’s other population giant, fell from 35 per cent to 20 per cent over the report’s period, but its middle class only grew from 1 per cent to 3 per cent. The report notes that India’s economic reforms began in 1991, 13 years after China, though the scope and pace of the countries’ reforms have varied.

South America almost reached the point where half of its population is at or above middle-income, at 47 per cent.

And despite China’s rise, more than three-fourths of its people were still poor or low-income. The only other countries seeing a significant shift into the middle class, where the poverty rate fell by at least 15 per cent and the middle-income population grew by at least 10 per cent, were Bhutan, Moldova, Ecuador, Argentina and Kazakhstan.

Among countries with a large number of high-income people, or those living on more than $50 a day, the United States stood out from its Western peers by slipping as its economy stalled. Its high-income population actually edged down, from 58 per cent in 2001 to 56 per cent in 2011.

Factors like conflict and falling oil prices likely have affected the findings for some economies, such as Russia’s, in the past few years, the report notes.

http://gulfnews.com/news/americas/usa/africa-remains-the-poorest-region-1.1547689#.VZ60puHsczY.twitter

IMF and USA set to ruin Ghana June 28, 2015

Posted by OromianEconomist in Africa, Africa Rising, Energy Economics, Ghana.
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Aletho News

By Craig Murray | June 27, 2015

Just ten years ago, Ghana had the most reliable electricity supply in all of Africa and the highest percentage of households connected to the grid in all of Africa – including South Africa. The Volta River Authority, the power producer and distributor was, in my very considerable experience, the best run and most efficient public utility in all of Africa. Indeed it was truly world class, and Ghana was proud of it.

Obviously the sight of truly successful public owned and run enterprise was too much of a threat to the neo-liberal ideologues of the IMF and World Bank. When Ghana needed some temporary financial assistance (against a generally healthy background) the IMF insisted that VRA be broken up. Right wing neoliberal dogma was applied to the Ghanaian electricity market. Electricity was separated between production and distribution, and private sector Independent Power Producers…

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The rhetoric of #Africa’s economic ‘rise’ does not reflect reality June 19, 2015

Posted by OromianEconomist in Africa, Africa Rising.
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???????????Dounle digit Ethiopia

 Ethiopia Least competetive GCI 002

‘African economies consistently underperform the Southeast Asian average across all the pillars. The most critical gaps continue to be seen in the areas of basic requirements of competitiveness: institutions, infrastructure, and education and skills.19 This is troubling because the majority of African economies are classified as factor-driven economies (see Table 1), so these areas are currently the most critical areas for the competitiveness of these countries. On a more positive note, Africa’s financial, goods, and labor markets function comparatively well (on par, or nearly on par, with Latin America). However, ease of entry and exit from low-wage, low-productivity jobs will not lead to improved competitiveness. It will be important to build upon the region’s comparatively efficient markets by investing in  other competitiveness-enhancing reforms. A particular point of concern is the continent’s weak institutions. Although Africa’s performance is similar to that of Southeast Asia and Latin America and the Caribbean in this pillar, the institutions in all three regions receive scores below 4 out of 7. This suggests that more effort should be made to increase the capacity of the institutional framework, as it provides a critical foundation for the other dimensions of competitiveness. Indeed, the quality of institutions has actually been deteriorating in both OECD and African economies according to the GCI. This might explain in part why Africa’s competitiveness seems to have stagnated in comparison to OECD economies
(see Figure 11a). In Africa, a decline in security and government efficiency—two components of the public institutions subpillar—would appear to be at the core of this decline. Sound public institutions and governance are an important prerequisite for economic development.’-    
Africa_Competitiveness_Report_2015

Is Africa really rising? History and facts suggest it isn’t

Grieve Chelwa, Africa is A Country
In the year 2000, the Economist ran a cover story with the title “Hopeless Africa”. Four years later, Robert Guest, who served as the newspaper’s Africa Editor, published “The Shackled Continent”, a book that pretty much concluded that, absent any miracles, Africa’s future was bleak. The book was widely praised, not least of all by all-round Africa expert Bob Geldof who said “[it] was written with a passion for Africa and Africans”.  Then in 2011, the current era of Afro-euphoria signalled its triumphant entrance with the Economist’s Africa Rising cover story. In contrast to their cover story of just a couple of years back, this one declared that there was hope for the hopeless continent (TIME did exactly the same thing in 2012).

We’ve written about the Africa Rising meme on this site, from culture to politics to music to fashion, again and again and again and again and again and again andagain and again. Now for the economics.

To be sure, African economies have begun growing again after contracting for most of the 1980s and 1990s. According to the World Bank, real GDP per capita shrank at a rate of 1% per year over the period 1980 to 2000 for sub-Saharan Africa as a whole. Since 2000, real GDP per capita has grown at the more respectable rate of 2% per year. And it appears that the incidence of poverty, at least as measured by the World Bank, also declined, although marginally, during the last decade.

Many so-called Africa watchers seem to have caught the “Africa rising” bug. There is now wide expectation, undergirded of course by the likes of the Economist, that growth will continue unabated going forward. Africa’s time is now! So declared a piece in the trendy Harvard Business Review.

The “Africa rising” narrative suggests the continent is now well on its way to self-sustaining growth. The kind of growth that the East Asian “tigers” and the countries known as the West experienced during the times they were rising. The kind of growth that has led to a massive reduction in poverty in China within a generation. Unfortunately here is where reality stands at odds with the euphoria.

Africa’s current growth revival (the continent did grow, and healthily so, from the 1960s to the 1970s) seems to be largely driven by external factors: China’s spectacular growth and along with it an increase in the price of commodities, whose exports Africa relies on to a great extent. So any slowdown in China’s growth, as is likely to happen as its economy matures, is likely to impact greatly on Africa’s performance.

To be sure, there have also been some internal drivers of growth: price distortions have been reduced in agriculture, macroeconomic stability has been restored (inflation rates are low and stable across most of the continent) and political institutions have improved (democracy and elections are now more common on the continent than before). But the prospects of these internal policies to sustain long-run growth are dismal. The Harvard economist Dani Rodrik, in a highly insightful essay titled “An African Growth Miracle?”, points out that the relationship between standard measures of good policies (macroeconomic stability, reduced price distortions, etc…) and economic growth tends to be weak. At best, good policies make economic crises less prevalent but cannot sustain and drive growth on their own. The same is also true of institutions, which following the much publicized work of Daron Acemoglu and friends, has become the be all and end all of development thinking. Rodrik points out that Latin America has experienced positive institutional changes within the last 20 years with a small payoff in growth. On the other hand, impressive growth in South Korea (until the 1990s) and China (today) has occurred alongside rampant cronyism and corruption.     

According to Rodrik, self-sustaining growth begins to occur when an economy undergoes a structural transformation from relying less on agriculture to relying more on industry. That is, self-sustaining growth is underpinned by large-scale industrialization. This is the historical lesson of the East Asian tigers, of China, and of even the West. Unfortunately the facts for Africa point in the opposite direction. Yes, African labour has moved out of agriculture in large numbers, but the beneficiary has not been manufacturing but services. The service sector tends not to be as “productive” as the manufacturing sector. And productivity, which is the ability to produce ever more output from the same amount of inputs, is what drives and sustains growth. The share of manufacturing in the economies of most African countries has declined from about 15% in the 1970s to around 10% today. That is Africa has in fact deindustrialized! And even the 10% of GDP that is manufacturing is mostly made up of small informal firms that are not particularly productive and are unlikely to evolve into big formal firms. Rodrik sums up his prospects for Africa thus:

“To sum up, the African pattern of structural change is very different from the classic pattern that has produced high growth in Asia, and before that, the European industrializers. Labour is moving out of agriculture and rural areas. But formal manufacturing industries are not the main beneficiary. Urban migrants are being absorbed largely into services that are not particularly productive and into informal activities. The pace of industrialization is much too slow to [spurn self-sustaining growth].”   

So what can be done? Rodrik suggests that industrialization can be helped along by improving the “business climate” in Africa. But the problem with the business climate argument, apart from being vague, is that it does not confront the fact that Africa was more industrialized in the 1970s, at a time when the business climate was likely no different from what it is today. In my opinion, the Structural Adjustment Policies (SAPs) that were administered beginning in the early 1980s are largely responsible for halting the pace of industrialization on the continent. With SAPs, Africans were told by their betters to stop supporting industry because doing so was “wasteful”. Subsidies to industry were reduced. Protective trade barriers were removed. Planning for industry was done away with. All this advice was dispensed in spite of the fact that today’s developed countries industrialized behind a veil of considerable state support. For instance, the historian Sven Beckert points out that Britain’s cloth manufacturing industry, which was largely responsible for the Industrial Revolution, was shielded from competition from India for most of the 18thCentury. The Cambridge economist Ha-Joon Chang has called this phenomenon of rich countries forcing policies on poor countries that they themselves did not implement during their time of take-off as “kicking away the ladder”.   

Africa needs to industrialize for it to really rise. Unfortunately the rhetoric around “Africa rising” is giving us a false sense of comfort and distracting us from the real work that needs to happen.

Source:

http://africasacountry.com/is-africa-really-rising-history-and-facts-suggest-it-isnt/

Ethiopia’s Economy: Time for the West to Call a Spade a Spade June 11, 2015

Posted by OromianEconomist in Uncategorized.
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???????????Ethiopia is the one of the lowest in social Progress 2015AUTHORITARIAN OVER SPEECH

From Where I Sit...

Dounle digit EthiopiaThe western media and its sponsors have gone to great lengths to present Ethiopia as a democratic nation whose economy is growing by “double digits”. The suffering Ethiopian people know better but have been muffled and prevented from expressing their aspirations and dreams by a minority mercenary regime. Over the last decade, Ethiopia has been hailed as the “fastest growing non-oil economies” in Africa, maintaining a double-digit annual economic growth rate. Ethiopia’s Gross Domestic Product may have grown (court is still out on that) but according to Simon Kuznets, “the welfare of a nation can scarcely be inferred from a measure of national income.” The measure was never intended as much more than a useful accounting device.

Reports on Ethiopia’s GDP say:

  • “…For the past 10 years, the country has registered an average 10.9 real GDP (Gross Domestic Product) growth rate and this trend has shown us that the country…

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Africa Rising: From Burkina Faso to Burundi, Africa’s Cheetah Generation rises against corrupt and failed rule. #TPLF. #Ethiopia May 12, 2015

Posted by OromianEconomist in Africa, Corruption in Africa, Dictatorship.
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Ocheetas

The greatest crisis facing Africa is a leadership crisis in all areas of people activity.In terms of natural resources, Africa is the world’s richest continent. It has 50% of the world’s gold, most of the world’s diamonds and chromium, 90% of the cobalt, 40% of the world’s potential hydroelectric power, 65% of the manganese, millions of acres of untilled farmland, as well as other natural resources.   Yet, despite this vast resource the bulk of African people live as if they were citzens of deserts. Despite being home to millions of skilled and talented innovators, African leadership struggles to stimulate and retain it strongest resource — the people: They either live in unnecessary frustration, hopelessness and poverty, die of preventable disease, or run to the West to gain appreciation. The greatest crisis in Africa is not due to HIV, religion, or famine, or even war. Because all of those things are tied to leadership in some capacity. The failure to produce an African brand from the billions of tons of raw material Africa exports to the West, is primarily due to the Faustian, myopic, selfish, backward type of non-progressive leaders who are planted as candidates in post-colonial empires. Top traits are either naive, vision-less, proxy implants, opportunistic/parasitic and totally compromised.

– African Holocaust Society

http://www.africanholocaust.net/news_ah/africanleadership.html

“The Cheetah Generation refers to the new and angry generation of young African graduates and professionals, who look at African issues and problems from a totally different and unique perspective. They are dynamic, intellectually agile, and pragmatic. They may be the ‘restless generation’ but they are Africa’s new hope. They understand and stress transparency, accountability, human rights, and good governance. They also know that many of their current leaders are hopelessly corrupt and that their governments are contumaciously dysfunctional and commit flagitious human rights violations.” George Ayittey, the distingushed Ghanaian economist.
 http://theafricaneconomist.com/ethiopia-2013-year-of-the-cheetah-generation/#.VVHnoI5Viko
 From Burkina Faso to Burundi, jobless young Africans rise against corrupt and failed rule

Pauline Bax,  Bloomberg

TALL ORDER: An extra 450 million jobs need to be created in the next 20 years to match expansion in the number of working-age people in the region.
Young people without opportunities are getting angry all over Africa - and there are hundreds of millions of them. (Photo/AFP).

PROTESTS from Burkina Faso to Burundi have been sparked by youthful populations with little hope of employment and by leaders who have in some cases ruled for decades.

The discontent, which began in Burkina Faso in October, spread to the Democratic Republic of Congo (DRC) in January, and has now crossed the continent to Burundi, prompting regional leaders to call an emergency meeting after two weeks of protests and at least 14 deaths. Mass demonstrations in Burkina Faso ended Blaise Compaore’s 27 years in power.

“Underpinning a lot of these protests is anger about stalled development, rising food prices and cutting fuel subsidies,” Clive Gabay, an expert on African politics at the Queen Mary University of London, said. “You have this youthful, unemployed population that has been sidelined.”

While sub-Saharan Africa has grown faster than every region except developing Asia in the past 10 years, there aren’t enough jobs for the 1 billion people on the continent. An extra 450 million jobs need to be created in the next 20 years to match the expansion in the number of working-age people in the region, the International Monetary Fund said last month.

About 40% of people in Africa are under 15 years old, the most of any region, according to the U.S. Census Bureau. The unemployment rate for people 15 to 25 years old living in Burundi’s capital, Bujumbura, is three times higher than the rest of the working population, according to the African Development Bank (AfDB).

Rwanda President Paul Kagame has warned that the violence in neighbouring Burundi threatens stability in East Africa. Youth have led two weeks of protests to prevent President Pierre Nkurunziza from seeking a third term in office next month. The Constitutional Court approved his request, despite the opposition claiming it violates a 15-year-old peace agreement that sets a two-term limit.

Protest risk

The nations that will likely watch closely what happens in Burundi are those with elections scheduled in the next two years, Yolande Bouka, a researcher on conflict prevention at the Institute for Security Studies in Johannesburg, said. Congo, Rwanda and Tanzania and Uganda all have polls during that period.

There is “serious discontent with the type of governance offered by the leaders,” Bouka said. Given the large youth population and unemployment rate “it is not surprising that people take the street to address unresponsive government.”

Burundi ranks eighth-lowest on the United Nations Human Development Index, which measures indicators such as income, child mortality and education. Congo is second-to-last on the 190-member list.

“In many countries it’s a risky thing to go on a protest and you’re not going to risk getting arrested or shot unless there’s something real at stake,” Gabay said. “There’s something else that’s propelling people onto the street and for me they’re economic issues.”

https://magic.piktochart.com/embed/6055699-africa-bombUsing social media like Twitter and Facebook, young activists can mobilise faster than in years gone by and can collaborate across borders. The movements in Congo and Burkina Faso draw inspiration from Senegalese artists, who began protests in 2011 against power outages. The Senegalese movement was key in mobilising youth to vote President Abdoulaye Wade, who had ruled for 12 years, out of power a year later.

Demonstrations erupted in Congo in January when lawmakers tried to change electoral laws in a way that could have delayed elections. That would have extended the 14-year rule of President Joseph Kabila, who took over when his father was assassinated in 2001.

Congolese activists met with artists and musicians from Senegal and Burkina Faso in March. The police arrested them in the Congolese capital and accused them of “promoting violence.” Kabila, who faced criticism from Human Rights Watch, said he will not run for office next year.

Presidents for life

While there are countries in sub-Saharan Africa with leaders who have been in power for more than three decades, including Zimbabwe, Angola and Equatorial Guinea, political opposition there says they are suppressed.

Rwanda’s Kagame, who has been president since 2000, also hasn’t faced popular opposition as he says he is open to staying another term. Parliament is reviewing a petition signed by 2 million people who support changing the constitution to allow for a third term.

“African people are tired of presidents who aren’t delivering to their people and they’re tired of presidents who want to stay for life,” Thierry Vircoulon, Central Africa director for the International Crisis Group, said by phone. “There’s a sort of exasperation because governments aren’t delivering.”

-With assistance from David Malingha Doya in Nairobi and Michael J. Kavanagh in Kinshasa.

http://m.mgafrica.com/article/2015-05-11-from-burkina-to-burundi-jobless-young-africans-rise-against-corrupt-and-failed-rule#.VVHSKY5Vikp

The Tigray only and unbalanced discriminatory growth: Severity of poverty increases in Ethiopia, UNDP reveals in its National Human Development Report 2014 which was launched on 1st May 2015. May 3, 2015

Posted by OromianEconomist in Africa, African Poor, Amnesty International's Report: Because I Am Oromo, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Free development vs authoritarian model, Poverty, Schools in Oromia, The State of Food Insecurity in Ethiopia.
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“All animals are equal, but some animals are more equal than others.”

-George Orwell, Animal Farm

“The very common way that the EPRDF and its agents try to shift the public attention from lack of human and democratic rights and the daylight looting of the country’s resources, is by referring to the ‘impressive’ economic development registered in their rule. If they are talking about the only region that they are exclusively devoted to developing, then, they are absolutely right.”

https://oromianeconomist.wordpress.com/2015/04/07/opinion-why-ethiopias-growth-rhetoric-is-faulty-africa/

In TPLF /Tigray dominated minority tyrannic regime of Orwellian social and development policy, all nations and nationalities  in theory are equal in Ethiopia, but in reality Tigray  is more equal than others. This is not a development process.

According to UNDP report, while more than  45% of children in Tigray have achieved Net Lower Secondary Enrollment, the statistics for Oromia is only 16.9%, very huge inequality variations. The report indicated that  while Human development Index (HDI) of Tigray is the highest (above national average),  states  such as Oromia,  Afar, Ogaden and Amhara have the lowest HDIs, below the national HDI of 0.461. These are the outcomes of Tigray only, exclusionist, social, economic and development policies of the ruling regime. UNDP is not exposing the Tigray only growth and development strategy but we can read from its data and graphs.

Ethiopia, expected years of schooling Ethiopia, National Human Development Report 2014 expected year of schooling by regions

As the TPLF has been engaged (https://oromiaeconomist.wordpress.com/2014/10/30/amnesty-internationals-report-because-i-am-oromo-a-sweeping-repression-in-oromia/) in destabilizing, robbing and massive evictions of people from their ancestral home and land grabs in Oromia, by all sorts of engagement, resource and soil transfers,   it has conducting massive  subsidized development  in its Tigray home. In other studies,  BBC Magazine in its 20th April 2015 publication  under the title ‘ Turning Ethiopia’s desert green,’reports: ” A generation ago Ethiopia’s Tigray province was stricken by a famine that shocked the world. Today, as Chris Haslam reports, local people are using ancient techniques to turn part of the desert green. In the pink-streaked twilight, a river of humanity is flowing across Tigray’s dusty Hawzien plain. This cracked and desiccated landscape, in Ethiopia’s far north, occupies a dark corner of the global collective memory. Thirty years ago, not far from here, the BBC’s Michael Buerk first alerted us to a biblical famine he described as “the closest thing to hell on earth”. Then Bob Geldof wrote Do They Know It’s Christmas? – a curious question to ask of perhaps the world’s most devoutly Christian people – and thereafter the name Tigray became synonymous with refugees, Western aid and misery. The Tigrayan people were depicted as exemplars of passive suffering, dependent on the goodwill of the rest of the planet just to get through the day without dying. But here, outside the village of Abr’ha Weatsbaha, I’m seeing a different version. From all directions, streams of people are trickling into that human river.” http://www.bbc.co.uk/news/magazine-32348749.

Martin Plaut’s analysis which is based on world banks report is also interesting and important to refer here which is as follows:-

The World Bank has just published an authoritative study of poverty reduction in Ethiopia. The fall in overall poverty has been dramatic and is to be greatly welcomed. But who has really benefited?

This is the basic finding:

In 2000 Ethiopia had one of the highest poverty rates in the world, with 56% of the population living on less than US$1.25 PPP a day. Ethiopian households experienced a decade of remarkable progress in wellbeing since then and by the start of this decade less than 30% of the population was counted as poor.

There are of course many ways of answering the question – “who benefited” – were they men or women, urban or rural people. All these approaches are valid.

The Ethnic Dimension

But in Ethiopia, where Ethic Federalism has been the primary driver of government policy one cannot ignore the ethnic dimension.

Here this graph is particularly telling:

Ethiopia poverty reduction

Tigray first

The answer is clear: it is the people of Tigray, whose party, the TPLF led the fight against the Mengistu regime and took power in 1991, who benefited most. What is also striking is that the Oromo (who are the largest ethnic group) hardly benefited at all.

This is what the World Bank says about this: “Poverty reduction has been faster in those regions in which poverty was higher and as a result the proportion of the population living beneath the national poverty line has converged to around one in 3 in all regions in 2011.”

The World Bank does little to explain just why Tigray has done (relatively) so well, but it does point to the importance of infrastructure investment and the building of roads. It also points to this fact: “Poverty rates increase by 7% with every 10 kilometers from a market town. As outlined above, farmers that are more remote are less likely to use agricultural inputs, and are less likely to see poverty reduction from the gains in agricultural growth that are made. The generally positive impact of improvements in infrastructure and access to basic services such as education complements the evidence for Ethiopia that suggests investing in roads reduces poverty.”

Not surprisingly, the TPLF under Prime Minister Meles Zenawi and beyond concentrated their investment on their home region – Tigray. The results are plain to see.  https://martinplaut.wordpress.com/2015/01/23/ethiopias-poverty-reduction-who-benefits/

In its  2014 National Human Development Report, which has been written on the theme of “Accelerating Inclusive Growth for Sustainable Human Development in Ethiopia,”  UNDP indicates that 25 million Ethiopians currently remain trapped in poverty and vulnerability. This and many Ethiopians just above the poverty line are vulnerable to shocks and food insecurity. Maternal health care has lagged well behind other health statistics and the availability of effective health care is inconsistent across the country. UNDP’s educational indicators suggest ongoing problems with the quality of education, as shown by retention rates and educational performance markers.  UNDP says, perhaps most worrying from the standpoint of inclusive growth are the high rates of un- and underemployment in both urban and rural areas, especially as large numbers of productive jobs for the poor and near-poor are needed under current and projected labour market trends. Economic growth over the past decade has generally meant an increase in productivity and output levels in some parts of the economy, but these have been accompanied by increasing severity of poverty.  The absolute number of the poor is roughly the same as 15 years ago and a significant proportion of the population hovers just above the poverty line and is vulnerable to shocks. Moreover, the severity of poverty 2 increased from 2.7 per cent in 1999/2000 to 3.1 per cent in 2010/11 (MoFED, 2013b). The prevalence of vulnerabilities  and food insecurity are  on the rise.

According to UNDP report, during the last three years (2010/11-2012/13), inflation was in double digits. The inflation rate, which was 18 per cent in 2010/11, increased to 33.7 per cent in 2011/12, declined to 13.5 per cent in 2012/13 and fell further to 8.1 per cent in December 2013. Other studies demonstrate that inflation figures have always been in double digits including 2013 and 2014 and at present.

Further,  UNDP says with a Human Development Index (HDI) of 0.435 in 2013, the country is still classified as a “low human development” country, based on UNDP’s Human Development Index. Even though Ethiopia is one of the 10 countries globally that has attained the largest absolute gains in its HDI over the last several years,  in the most recent Human Development Report (2014) Ethiopia ranks 173rd out of 187 countries. Thus,  its Human Development Index (HDI) has not moved appreciably during the past decade, when compared with other developing countries that have registered similar growth rates. Looking at the HDI values of Seychelles, Tunisia and Algeria, which are in the high HDI bracket, and the other 12 African countries, which are in the medium HDI bracket, the major reasons why Ethiopia is still in the low HDI bracket are low education performance (particularly low mean years of schooling) and low GNI per capita. The minimum mean years of schooling and GNI per capita for medium HDI countries were 3.5 years and US$3,000, respectively in contrast to Ethiopia’s mean years of schooling of 2.6 years and GNI per capita of US$1,300. The inequality-adjusted Human Development index (IHDI), which is basically the HDI discounted for inequalities, is also computed for Ethiopia. Between 2005 and 2013, the IHDI increased from 0.349 to 0.459 indicating an average human development loss of 0.5 per cent per annum due to inequalities in health, access to education and income. According to (UNDP 2014), Ethiopia’s IHDI for 2013 was 0.307 in contrast to HDI of 0.435 indicating an overall human development loss of 29.4 per cent.

With regard to regional disparities in HDI values, while Tigray is significantly above national average,  the four states of Afar, Somali, Amhara and Oromia have the lowest HDIs, below the national HDI of 0.461.

The outcome of the development  strategy of Tigray only when mathematically averaged to the whole  regions cannot hide TPLF’s Apartheid policy  on Oromia and the rest as it is only the development focus for 5% of the  94 million population. Thus, Tigray is rich but Ethiopia is poor. Ethiopia is rich and fast growing only for development tourists those who lodge in Finfinne and  tour to Tigray to take  a sample and conclude the result for the whole states.

With regard to regional disparities in HDI values, while Tigray is significantly above national average,  the four states of Afar, Somali, Amhara and Oromia have the lowest HDIs, below the national HDI of 0.461.

Another social indicator which  demonstrates that Tigray is more equal than others is  health services. UNDP’s report confirms that there are wide inequalities in the immunization status of children in Ethiopia. Children of educated women, rich households, and  Finfinnee (Addis Ababa) and Tigray State have higher chances of being fully immunized. Children from the richest and middle income households are less likely to have no immunization at all (by 74 per cent and 57 per cent respectively) compared with those from the poorest households. Children from SNNPR, Oromiya and Amhara are 3.82, 7.00 and 3.65 times less likely to be fully immunized compared with those from Tigray, which has the second highest proportion of fully immunized children.  According to UNDP,  a report by Save the Children (2014) also raises concerns about equity in health services citing how immunization coverage is different among different income groups, and between urban and rural areas. According to the report, children from richest households are twice as likely to be immunized compared to those from the poorest households and children in urban areas are twice as likely to be immunized as those in rural areas. Based on revised data from the National Water Sanitation and Health Inventory, national potable water supply coverage increased from 58 per cent to 68.4 per cent between 2009/10 and 2012/13, reflecting an increase in both rural and urban coverage. Even though many health outcomes have improved significantly over the last decade, Ethiopia is still lagging behind on some measures. For example, Ethiopia has still higher than expected shares of malnutrition compared with countries at the same income level. What is especially striking about Ethiopia’s health data is the exceptionally high level of maternal mortality, given Ethiopia’s income level.

UNDP argues that that development can be inclusive and reduce poverty only if all people contribute to creating opportunities, share the benefits of development and participate in decision making.

Ethiopia at a Glance (UNDP Report Data)

Ethiopia at glance, UNDP Data

Population: 85.8 million (2013)

GDP: US$46.6 billion (2013)

GDP per capita: US$550 (2013)

Annual Average Br/US$ exchange rate: 18.3 (2012/13)

Life expectancy at birth (years): 62.2 (2013)

Primary school gross enrolment rate (%): 95.3 (2012/13)

Births attended by skilled health professional (%): 23.1 (2012//13)

Contraceptive prevalence rate (%): 28.6 (2011)

Literacy rate (% of both sexes aged 15 and above): 46.7 (2011)

Unemployment rate (urban) (%): 16.5 (2012/13)

Unemployment rate among urban youth (15-29) (%): 23.3 (2011/12)

Areas further than 5 km from all-weather roads (%): 45.8 (2012/13)

Mobile phone subscribers (million): 23.8 (2012/13)

Poverty incidence (%): 26.0 (GTP/APR 2012/13)

HD Index: 0.435 (2013) HDI rank: 173/187 (2013)

http://hdr.undp.org/sites/default/files/nhdr2015-ethiopia-en.pdf

Poverty and Underdevelopment in Low Income Countries May 2, 2015

Posted by OromianEconomist in Africa, Economics, Economics: Development Theory and Policy applications, The extents and dimensions of poverty in Ethiopia.
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OEthiopia poverty reductionEthiopia

Poverty can be an outcome of inefficient use of common resources and a result of exclusive mechanisms. Weak policy environment, inadequate infrastructures, weak access to technology and credits can cause poverty. Poverty can also result from the use of mechanisms by some groups in a society or community to exclude others from participating in democratic and economic development process (Ajakaiye and Adeyeye, 2002). This is defined by Hazell and Haddad ( 2001) as social deprivation…From the different reasons mentioned above in relation to poverty in developing countries, it is clear that strategies to alleviate poverty and help poor people must aim at improving the productivity and the living conditions of smallholder farmers and landless agriculture workers who constitute the majority of poor people. Furthermore, agriculture is seen as central to rural development. It is the major economic driver, the hub of rural activities, and permanent estate (IRG, 2002). The improvement in agriculture productivity is based on agricultural research and improved technologies. In many developing counties government must play an important role in this domain. However poor people may benefit from agriculture productivity only if favorable macroeconomic and trade policies good infrastructure and access to credit, land, and markets is in place.

As far as land is concerned, government in many developing countries must undertake land reform program not only for a better distribution of land but also to create mechanism capable to define and enforce property right. Land reform can promote smallholder entry into the market, reduce inequalities in land distribution, increase efficiency and thus boost output.

africagrowthdiscourse

poverty1

The ubiquitous problem of poverty continues to confound development practitioners, politicians and researchers alike. In spite of countless efforts to eliminate poverty over the past decade, 2.5 billion people live on less than $2 a day and 880 million people still live on less than $1. Most of these depend on agriculture for their livelihoods (World Development Report, 2008). While some progress has been made in some countries, the ambitious goal of halving poverty by the year 2015 appears like it will not be achieved. The objective of this paper is to characterize the problem of poverty and attempt to proffer possible insights on pathways that may jettison the rural poor out of misery into prosperous economic agents with a brighter hope for the future.

An Anatomy of Poverty

Poverty is a multifaceted concept. It affects many aspects of the human conditions, including physical, moral and psychological. povertyAccording to Sen…

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Africa, resource curse and weakest institutions: International mining companies contrive with local African elites to strip the continent of its resources. April 13, 2015

Posted by OromianEconomist in Africa, Africa Rising, Illicit financial outflows from Ethiopia, Land Grabs in Africa, Land Grabs in Oromia.
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OA shocking investigative journey into the way the resource trade wreaks havoc on Africa, ‘The Looting Machine’ explores the dark underbelly of the global economy.

The Looting Machine

AFRICANS ask many questions about what ails a continent that abounds with natural riches yet suffers, too, from greedy rulers, bad government and entrenched poverty. The replies they get range from the outright racist to the climatic (countries in the tropics suffer from more parasites and disease than in more temperate latitudes) to the political, with many blaming colonialism or so-called neo-colonialism for the continent’s woes.

For Tom Burgis, a journalist with the Financial Times, the problem is, paradoxically, Africa’s wealth of natural resources. He is not the first to write about countries with the “resource curse”. Nor does his book add to the copious academic literature on the subject. But Mr Burgis sees Africa—with a third of the Earth’s mineral deposits and some of its weakest institutions—as being particularly vulnerable to the predations that arise from the combination of mineral wealth and poor governance.

“The Looting Machine” is the fruit of Mr Burgis’s many travels through Africa, from bars in Port Harcourt to gleaming new office towers in Luanda, as well as his work as an investigative journalist. He presents a lively portrait of the rapacious “looting machine” in which international mining companies contrive with local African elites to strip the continent of its resources. In doing so he is not short of anecdotes (nor copious footnotes). In Angola he points to a small group that controls the state and has amassed great wealth. In parts of Nigeria these resource rents are shared between an elite that controls the state and armed warlords who held it to ransom through blowing up pipelines and kidnapping oil workers.

“In the place of the old empires are hidden networks of multinationals, middlemen and African potentates,” Mr Burgis says. “These networks fuse state and corporate power. They are aligned to no nation and belong instead to the transnational elites that have flourished in the era of globalisation.”

Yet for all the rhetorical flourish, Mr Burgis fails to explain why some states with bountiful natural resources manage them in ways that deepen democratic institutions and benefit the poor. One need not look as far as Norway for this. Botswana gets a mention for its economic dependence on diamonds (it is a major producer), but less so for its democratic traditions, excellent health and education systems and stability.

“The Looting Machine” reads partly like a mystery thriller and partly like a court submission, with its detailed descriptions of the corporate connections between Chinese companies with interests across the continent. Mr Burgis offers a rich collage of examples showing the links between corrupt companies and African elites. But he fails to argue convincingly that natural resources are the primary, or even a major, source of Africa’s troubles.  http://www.economist.com/news/books-and-arts/21647954-huge-natural-resources-and-poor-governance-are-dreadful-combination-blood-earth?fsrc=scn/tw/te/pe/ed/LootingMachine

OPINION: Why Ethiopia’s Growth Rhetoric Is Faulty? #Africa April 7, 2015

Posted by OromianEconomist in Africa Rising, African Poor, Corruption in Africa, Ethiopia the least competitive in the Global Competitiveness Index, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Free development vs authoritarian model.
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OEthiopia Least competetive GCI 002     While the majority of the population is getting poorer and poorer every year, a minority of the population, especially those loyal to the ruling party, are becoming millionaires overnight. The exaggerated economic development rhetoric of EPRDF is unsubstantiated for it is not based on facts and is against what is happening on the ground. It is simply a means to cover up the unspeakable atrocities they are inflicting up on the people. The inflation that we, ordinary people, are suffering from is mainly their own making. Because of inflation, an item which used to cost one Birr a year ago now costs one birr and 40 cents. This shows that the value of one Birr is approximately 72 cents.    http://allafrica.com/stories/201504071221.html

Ethiopia: Why EPRDF’s Growth Rhetoric Is Faulty

Eidmon Tesfaye*

OPINION, allafrica.com
By and large, Ethiopia recorded 17 years of economic stagnation under the leadership of the Dergue, a military government. For example, in 1990/91, the growth rate of the Ethiopian gross domestic product (GDP) was negative 3.2pc, whereas cyclical unemployment was about 12pc, the rate of inflation was about 21pc, and the country’s budget was at a deficit of 29pc of GDP. For the last five years, Ethiopia has gathered momentum by recording steady economic growth. Along with this growth, however, the country has seen an accelerated, double-digit increase in the price of goods and services. The very common way that the EPRDF and its agents try to shift the public attention from lack of human and democratic rights and the daylight looting of the country’s resources, is by referring to the ‘impressive’ economic development registered in their rule. If they are talking about the only region that they are exclusively devoted to developing, then, they are absolutely right.

The reality in other regions of the country, however, speaks quite the opposite. Even if we believe the double digit economic growth that the EPRDF claims to have registered in the last five years, it all will be dwarfed by the sky high rate of inflation, the second highest in Africa – the first being Zimbabwe which is actually experiencing a currency collapse. Thus, inflation has remained a scourge of the Ethiopian economy. Stated in simple words, Ethiopia, at this juncture, is faced with an overheating economy. With the global soaring prices of oil, wheat, corn, and minerals, this condition cannot be regarded as unique to the Ethiopian situation. What makes the Ethiopian case a special one is that Ethiopia is a low-income country. The increase in the Consumer Price Index (the main gauge of inflation), has become very detrimental to the low-income groups and retirees who live with fixed incomes. The risk of inflationary pressure is reducing the purchasing power of the Ethiopian Birr. Because of inflation, an item which used to cost one Birr a year ago now costs one birr and 40 cents. This shows that the value of one Birr is approximately 72 cents. As it stands, financial liberalisation is not an option. Financial intermediaries may accelerate inflation if the National Bank of Ethiopia (NBE) relaxes its financial and monetary policies that regulate them to maintain the statutory liquidity requirement of demand and time deposits. In addition, an increase in money supply could accelerate inflation if the central bank substantially reduces the discount rate or buys existing government bonds from investors. The discount rate is the interest rate charged by the NBE when member banks borrow from it. Ethiopian banks overuse their reserve facilities to boost their credit portfolio. The excess reserve in Ethiopia was due to more savings. The demand for bank credit rose sharply to finance large scale investment projects by the public enterprises and the rapidly expanding private sector. Substantial negative real interest rates and commercial banks’ excess reserves facilitated the rapid expansion of credit. The link between money supply and other determinants of growth is not an automatic process. However, if we abide by the principles of the transmission mechanism, we might argue that the increase in money supply in Ethiopia might have contributed to an increase in investment. However, the problem of inflation in the Ethiopian economic environment cannot be tackled without addressing the large budget deficit.

More signs are appearing to suggest that what the EPRDF says regarding the economic development is incredible. For instance, recently, the Ministry of Finance & Development (MoFED) blamed the Central Statistics Agency (CSA) for its inefficiency in providing accurate data. This accusation is long overdue. An agency which cannot determine the size of population can never be trusted to give us the accurate measure of a relatively complicated matter – growth. At the time when the price of everything was doubling and tripling within a year, the inflation rate instead of being 200pc or 300pc or even more, the same statistics agency reported a much lower inflation rate. This rate is the basic component in calculating the economic development. In order to determine the change in growth, the value of domestic production has to be discounted at the current rate of inflation. If the rate of inflation assumed in discounting is far less than the actual rate, a country will, wrongly, be considered to have registered a higher rate than the actual. This is how, against World Bank and IMF predictions and the economic reality of the world, which is slowly hitting the third world, the authorities are telling us the country will register double digit growth again. While the majority of the population is getting poorer and poorer every year, a minority of the population, especially those loyal to the ruling party, are becoming millionaires overnight. The exaggerated economic development rhetoric of EPRDF is unsubstantiated for it is not based on facts and is against what is happening on the ground. It is simply a means to cover up the unspeakable atrocities they are inflicting up on the people. The inflation that we, ordinary people, are suffering from is mainly their own making. EPRDF companies and their affiliates, of course, have hugely benefitted from the manipulation and exploitation of the very thing that made our life worse and worse, inflation. So this talk of double digit economic development is simply a joke and a bluff. If Ethiopia is to achieve long-term sustainable growth, its developmental process has to be rooted in the Ethiopian system of thought and its people-centered approach, rather than depending on the Western capitalist or Chinese models of industrialisation by invitation to gain various forms of external assistance. Since agriculture is the backbone of the Ethiopian economy, its sustainable development model must be one of self-sufficiency to feed its own people instead of producing environmentally insensitive horticultural products to amass foreign currency.

Contrary to expectations, given the resources and techniques of production, the Ethiopian agricultural sector seems to have exhausted its productivity growth. To improve productivity under these conditions would require substantial investment in research and development. For example, since deforestation, desertification, increase in population, shortage of water, and air-related disease are to a large extent the symptoms of poverty, the poor need to be organised to formulate and implement their own development strategies and ensure that their basic needs are fulfilled. If policymaking is to be based on land security and adhering to environmentally-sensitive, cooperative systems, it is reasonable to assume that Ethiopia would not only achieve growth and equity (with full employment and modest inflation) but could also empower the Ethiopian people to fully participate in the design and management of long-lasting development paradigms. *Eidmon Tesfaye He Is an Expert With Master’s Degree in Agricultural Economics & Rural Development (aerd); He Can Be Contacted Via:Edimondrdae@gmail.com Source: http://allafrica.com/stories/201504071221.html

Africa’s middle-class and income statistics are questionable November 5, 2014

Posted by OromianEconomist in Africa Rising, Aid to Africa, Corruption in Africa, The 2014 Ibrahim Index of African Governance.
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Africa’s middle class: until data collection and analysis used to measure income distribution improve, the continent’s statistics are unreliable.

by Morten Jerven, 1st  November 2014 @  Good Governance Africa

On September 30th Kenya announced that it had revised its GDP upwards by 25%. Earlier this year Nigeria’s National Bureau of Statistics made an even bigger splash when a similar exercise showed the Nigerian economy to be 89% bigger than previously thought, displacing South Africa’s as the continent’s largest economy.
In 2011 the African Development Bank (ADB) declared that not only was Africa rising, but that statistics on income distribution revealed a sizeable middle class now comprising 34% of Africa’s population—or nearly 327m people. Earlier that year, The Economist announced that IMF forecasts predicted that seven of the ten fastest-growing economies in the world over the next five years would be in Africa. In 2010 Ghana revised its GDP by 63%.
These statistical earthquakes, while good news, have shattered trust in Africa’s numbers. Shanta Devarajan, chief economist of the World Bank’s Africa region, called it “Africa’s statistical tragedy” when he reflected on the quality and availability of quantitative evidence in the aftermath of Ghana’s GDP revision.

In retrospect it may seem puzzling that bewilderment has greeted what has essentially been good news – Africa’s economies and its middle class are bigger than we thought. But, for too long, we have neglected the accuracy of African economic statistics. We are only now waking up to the size of the knowledge gap because suddenly the numbers on African economies matter.

Investors and social scientists rely on accurate measurements. If 327m middle-class Africans really existed, investors would consider Africa a potentially lucrative market for making deals in real estate,retail, wholesale and communications. These huge numbers would force social science scholars to redefine and jettison hackneyed development phrases such as “subsistence”, “informal economies”, “food security” and “poverty eradication”.

However, the AfDB’s 2011 report conceded that about 60% of Africa’s middle class, approximately 199m people, were barely out of poverty. This startling admission was based on its expansive definition of the middle class: individuals who spend between US$2 and $20 daily.

For political scientists, the middle class is the backbone of a democratic society. In Marxist theory the rise of the bourgeoisie permits progressive modernisation and industrialisation. For investment banks, multinational corporations, real estate developers and traders, the middle class is defined by purchasing power and signifies a potentially untapped market.

For this reason, a more accurate definition of the middle class requires a higher purchasing-power bracket that shows that households are living beyond subsistence and that its members are also high school and university graduates.

Researchers affiliated with international organisations and investment banks have also tried counting Africa’s middle class. Some surveys, such as accounting firm EY’s 2012 Africa by numbers report, dance around the actual size, and prefer instead to refer to “a growing middle class”. Similarly, The rise of the African consumer, a 2012 report from McKinsey, a consulting and research company, stays out of the numbers game altogether and never mentions the middle class. Standard Bank released a report in June assessing 11 sub-Saharan economies, or half this region’s total GDP, to measure the size of the continent’s middle class.

Based on these reports, the size of Africa’s middle class stretches from as few as 15.7m households, as estimated by McKinsey, to the 327m people the AfDB assessed in 2010. Completely different monetary definitions of the middle class drive these differences. The AfDB’s bottom threshold of $2 per day is much lower than McKinsey’s $55, Standard Bank’s $23 or the $10 per day used by the OECD, a Paris-based intergovernmental think-tank. In addition, the OECD and AfDB report their statistics in total number of people, while McKinsey and Standard Bank report on households without specifying their size.

It may appear puzzling that Standard Bank defines the middle class as households that spend between $8,500 and $42,000, while McKinsey’s 2010 Lions on the move report defines this group as households that spend above $20,000 a year. This can be reconciled: McKinsey includes all households above $20,000 in disposable income. This means that they also count very rich households, which explains why their estimate is higher.

In its other report, The rise of the African consumer, McKinsey contends that 40% of spending-power growth will come from households that earn above $20,000 annually. They note that “this group currently accounts for just 1-2% of total households” but that this income cluster is “growing faster than the overall average, both in numbers and in average income”.

So what are we left with? We went from a middle class that represents 34% of Africa’s population to one that represents 1-2%. But this tiny group is not middle class: they are very rich households that have the fastest-growing incomes. Ultimately, what we are seeing is not a pyramid bulging in the middle as in the picture drawn by the AfDB. The numbers from McKinsey and Standard Bank describe a society where the top spenders are getting richer. This may be good news for some banks and investors, but it does not carry the same connotations for social scientists.

None of the above, however, explains how these numbers were calculated or whether they are trustworthy. It is highly likely that many of the GDP growth numbers exaggerate actual increases in productivity and improvements in living standards.

Both Ghana’s and Nigeria’s GDP ballooned following the introduction of new benchmark years for estimating GDP in 2010 and 2014. How confident can one be about a 7% growth rate in a country likeNigeria when almost half of the economy was missing in the official baseline?

Some commentators proclaim that Africa is growing faster than its outdated measurements suggest. Indeed, some countries’ economies are larger than those shown by these old numbers. But that does not mean that recent growth has been faster too. The opposite is likely.

An outdated baseline means that “new” growth is more than likely “previously unrecorded” growth. When the base is too small, the proportion of economic growth will be overstated. Moreover, when statisticians and politicians know that their numbers are minimising total GDP, it is tempting to add a bit each year to pre-empt a large upwards revision when the GDP numbers are ultimately corrected.

GDP growth estimates are also misleading because only parts of the economy are recorded. Changes in exports and foreign direct investment are quantifiable and easily measured, while other important sectors that may be moving less quickly, such as food production, often remain unobserved.

In developed countries, like Norway, individuals’ and companies’ income, production and expenditure are reasonably well recorded and available through administrative records. The government routinely collects this information as part of its day-to-day operations.

In poorer countries, few companies and even fewer individuals, households and farms record or report income, production and expenditure. To get a measure of how income is distributed in a country and how many people earn less than $2 a day requires drawing a graph with income on the X-axis and population on the Y-axis. On such a graph the share of households that earn below $2, $3 or $4 a day can be seen, as well as the income ratio of the top 1% and bottom 10%.

Drawing this graph presumes this information is reliable. In practice, however, these numbers are mostly non-existent because data collection is expensive and time consuming. The most common audit, the Living Standards Measurement Study, is used by the World Bank to obtain poverty statistics. It requires each household to spend a day filling out a long questionnaire. A typical survey with a sample of about 2,000 households costs a few million dollars. From data collection to dissemination takes another two years.

According to a May 2013 report by the Brookings Institution, a Washington, DC-based think-tank, six of sub-Saharan Africa’s 49 countries have never conducted a household survey and only 28 countries have done one in the past seven years. Surveys measuring social indicators such as health and demographics have similar gaps. Moreover, only about 60 countries in the world have vital registration systems required to monitor trends in social indicators, and none of these are in Africa, according to an article by Amanda Glassman, a senior fellow at the Washington, DC-based think-tank Center for Global Development. Any statement about the size and direction of poverty and income in the world, particularly in Africa, relies on many assumptions and extrapolations, a practice that can lead to gross inaccuracies.

Reports on the size of Africa’s middle class highlight these presumptions and (mis)calculations. The Standard Bank report, which provides a conservative estimate of the size of the middle class, is based on a sample of 11 sub-Saharan African countries. The problem is that data availability is not random – it is biased because we know more about the richer economies, such as Nigeria and Ghana, than we know about poorer, more problematic countries such as the Democratic Republic of Congo, Somalia or Côte d’Ivoire. Another complication is that we do not know how Standard Bank determined middle-class growth rates for years that lack official information on income distribution, nor how it dealt with the very well-known discrepancies and incoherencies in Nigeria’s household surveys.

It is undeniable that more goods are leaving and entering the African continent today than 15 years ago. But does the increase in the volume of transactions result in a sustained lift in living standards? Some might argue that a positive African narrative and the power of self-fulfilling prophecies can make the vision of a huge middle class in Africa come true.

A fact-based outlook, however, is the best path. Does Africa’s population really have more spending power? Are fewer Africans hungry?

The evidence on income distribution does not provide accurate answers. Everyone wants to know if the continent is better off, but proclaiming that it is without solid proof may backfire – particularly if poverty reduction and income distribution are slower and more unequal than what has been publicised. Impartial and inaccurate numbers too often lead to poor policy decisions.

 

Read more @ http://gga.org/stories/editions/aif-28-making-up-the-middle/who2019s-counting

As The 1960s Euphorea, The Current Africa Rising Optimism Is Illusionary Than Real: Let Us Actually Think How Africa Can Become Truly Prosperous. February 13, 2014

Posted by OromianEconomist in Africa, Africa Rising, African Poor, Aid to Africa, Corruption, Culture, Development, Dictatorship, Economics, Food Production, Human Rights, Ideas, Land Grabs in Africa, Ogaden, Omo, Oromia, Oromiyaa, Oromo, Oromo Nation, Self determination, Slavery, South Sudan, The Tyranny of Ethiopia, Tyranny, Uncategorized, Youth Unemployment.
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‘Much of the “Africa Rising” narrative is based on the cyclical growth in income revenues from commodities. But who knows how long this will last? Dr Moghalu wants African governments to grasp hold of their future by creating industrial manufacturing so that Africans can consume what they produce. If that could be achieved, the continent will have moved away from being an import-driven consumer-driven economy. It is only then, he argues, that we can say Africa has truly risen.’
The term “Africa Rising” is on the lips of many these days particularly as seven of the world’s fastest growing economies are believed to be African. But can this current wave of Afro-optimism bring genuine prosperity to the African continent? Dr Kingsley Chiedu Moghalu, the Deputy Governor of the Central Bank of Nigeria thinks not.

“Hope is good,” he says. “But hope must be based on concrete substantive strategy going forward, so I pour a little bit of cold water of the Africa Rising phenomenon. I think it could lead to illusionary thinking. I recall that when African countries became independent that there was a huge sense of euphoria around the continent that independence guaranteed economic growth, political development and stability. But this did not happen in the following 30 to 40 years.”

In his latest book, Emerging Africa: How the Global Economy’s ‘Last Frontier’ can prosper and matter, Dr Moghalu presents his own ideas on how Africa can become truly prosperous. He describes it as “a vision for Africa’s future based on a fundamental analysis of why Africa has fallen behind in the world economy”.

In doing so, the LSE alumnus discusses some fundamental misunderstandings about which African states need to revise their assumptions.

The first is the idea that globalisation is automatically good. Rather, Dr Moghalu describes it as a huge and influential reality which Africans must engage with a sense of sophistication and self-interest. It is important to find a way to break that stranglehold because globalisation is neither benign in its intention nor agnostic in its belief. It is driven by an agenda and there are people who drive it.

Economist Dambisa Moyo caused controversy with her first book, Dead Aid: Why foreign aid isn’t working and how there is another way for Africa. Dr Moghalu echoes some of her arguments describing foreign aid as one of the leading reasons why Africa is impoverished. “It has removed the incentive of many African nations to seek solutions for their economic challenges and create wealth for their citizens,” he argues. “Instead it has perpetuated poverty because they are simply content to survive from one day to the next.”

Foreign aid does have its place, Dr Moghalu admits, but “it should always be within a limited time frame and it should focus on economic wealth creation activities rather than just helping people survive”. On the day we meet, the UK Secretary of State for International Development Justine Greening is in the news revealing that there will be a radical shift in future UK aid into economic development, concentrating on economic growth and jobs. Dr Moghalu expressed great pleasure at this announcement remarking that “it is very interesting that British policy is catching up with the recommendations in my book”.

Another fundamental understanding that the central banker develops in his book is the importance of understanding the four different kinds of capitalism and the implications they have for Africa’s growth. The first is state capitalism which is not very common, although it is practised by China. It is, in fact, an oxymoron. Many African states do not have the capacity to run state capitalism because you need an all-knowing state with a huge reserve of strategic thinking capacity to be able to direct wealth creation for the purposes defined by the state. There is also oligarchic or crony capitalism in Russia and some African states. This can be turned into strategic activity if cronyism is not rampant. South Korea did that by creating the Chaebols, the family-held businesses which today dominate the South Korea economy. Welfare capitalism is the norm is Europe. Some African states have practised welfare capitalism without generating the type of revenue that will sustain it into the future. Now it is out of favour. Entrepreneurial capitalism is what made America wealthy and this is what Dr Moghalu recommends for most African economies because it suits the African culture. Along with a certain amount of oligarchic and welfare capitalism, it would do Africa a world of good, he adds.

Much of the “Africa Rising” narrative is based on the cyclical growth in income revenues from commodities. But who knows how long this will last? Dr Moghalu wants African governments to grasp hold of their future by creating industrial manufacturing so that Africans can consume what they produce. If that could be achieved, the continent will have moved away from being an import-driven consumer-driven economy. It is only then, he argues, that we can say Africa has truly risen. http://blogs.lse.ac.uk/africaatlse/2014/02/12/afro-optimism-will-not-transform-africa/