January 2013

Has Africa outgrown Aid?

Africa’s emergence is the new consensus. For the second time in a just few months, a major international journal has run a cover illustrating newfound optimism about the continent. After The Economist’s mea culpa (correcting its previous assessment of a “hopeless continent”), TIME magazine just re-ran an earlier title: “Africa rising”.

This is no fluke: Africa’s economies are growing and the continent is much wealthier today than it ever was – even though, collectively, it remains the poorest on the planet. Many African nations (22 to be precise) have already reached Middle Income Country (so called “MIC”) status and more will do so by 2025. Today, Africa includes a diverse “mix” of countries, ranging from the poorest in the world to the fastest growing; from war-torn countries to vibrant democracies; from oil-rich economies to ICT champions, and the list goes on.

IMF Chief Economist Olivier Blanchard created quite a stir at the recent American Economics Association Meetings when he presented his joint paper with Daniel Leigh that showed that, for 26 European countries, the fiscal multipliers—the amount by which output expands with an increase in the fiscal deficit—were considerably higher than previously thought. Whereas these multipliers were previously thought to be around 0.5, they find them to be above 1.0. Applying these figures to a reduction in the fiscal deficit (sometimes called “fiscal consolidation”), Olivier and Daniel suggest that people may have underestimated the extent to which European economies would contract in the wake of their fiscal consolidation.

Let's think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.

For many Tanzanians the fear of crime is a daily reality, especially for those living in urban areas. It negatively affects their quality of life as it makes them feel insecure and vulnerable as they go about otherwise normal activities. A few facts:

- In 2010/11 about 390,000 households (four per cent) reported that they had been severely affected by hijacking, robbery, burglary or assault (over the previous year).
- Residents of urban areas are about three times more likely than those in rural areas to be victims of these crimes.

Let's think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.

About three out of four households report to have agriculture as their main activity. Even urban households are still involved in crop production.

Indeed, agriculture is an important sector for Tanzania contributing up to 26 per cent of GDP. Typically, farmers produce to feed their families but they also expect to gain revenues by selling their output. When farmers make more income from the sale of their produce this leads to more development in the rural areas which ultimately impacts positively on the overall economy. This is what has been surmised from the success stories of predominantly agricultural countries, such as Malaysia and Vietnam.

Sudhir Anand and co-authors recently published a fascinating book, The Costs of Inaction, which looks at cost-benefit analysis in a different way. All cost-benefit analysis requires the analyst to specify a counterfactual—how the world would have evolved in the absence of the project of program. This is critical. An evaluation in Kenya included increased use of cellphones as an indicator of project success — neglecting the fact that cellphone use in neighboring villages was just as widespread.

In many cases, the counterfactual could be “doing nothing.” For a number of important areas such as health and education in Africa, The Costs of Inaction calculates the costs of doing nothing in terms of lives lost or under-educated children.

Most of the literature about Africa’s growth, “Africa Rising”, “Lions on the Move”, etc., refer to the present or the future. An oft-quoted World Bank report said, “Africa could be on the brink of an economic takeoff, much like China was 30 years ago and India 20 years ago.”

Meanwhile, Alwyn Young has recently published a paper that claims that per-capita consumption on the continent has been growing at 3.4-3.7 percent a year for the last two decades—about three to four times the growth rates documented in other studies. Instead of using national accounts data (which, as we know, suffer from several deficiencies), Alwyn adopts the Demographic and Health Surveys (DHS), which calculate the households’ ownership of assets and other indicators of well-being (ownership of a car or bicycle; material of the house floor; birth, death or illness of a child, etc.).

Last October, the Government of Nigeria committed to save one million lives by 2015 by increasing access to cost-effective health services and commodities, a bold goal.

Crucially, the Federal Ministry of Health is coupling the scale-up of services and commodities with a focus on knowledge, using rigorous impact evaluation strategically and systematically across their programs (in partnership with the World Bank’s Development Impact Evaluation Unit and the Gates Foundation). Each evaluation adapts promising evidence from elsewhere in the world to fit the Nigerian context, letting the Government and its partners see which interventions are most effective in saving lives.

Pregnancy and childbirth can be a tremendously exciting time for a family if the expectant mother and her unborn child benefit from quality medical services and the baby is delivered in a safe environment.

However, it can also be a traumatizing experience if the mother loses her life during childbirth or if the newborn is sick or dies.

In Tanzania many mothers and mothers-to-be are dying young and unnecessarily as illustrated by the following statistics:

This is the time of year when we make resolutions and you may be wondering what you can do better and more efficiently in 2013.A lot of books have been written on the topic but one of the best is 7 Habits of Highly Effective People by Stephen Covey who died in 2012. The 7 habits are: Be proactive; Begin with the end in mind; Put first things first; Think win-win; Seek first to understand, then to be understood; Synergize; Renew yourself.

Covey’s son – also called Stephen – wrote another remarkable book called The Speed of Trust, which includes this noteworthy statement: “You need to trust yourself before you can trust others.”

The dawn of a new year is a good time to reflect on the past year and look ahead. As it turns out, 2012 was a pretty average year for Kenya, mainly because the much anticipated national and regional elections, which will determine the course of the nation and its economy for years to come, were postponed to March next year.

Why do I say that 2012 was such a normal economic year for Kenya? Let’s rewind 12 months back. Kenya was facing major macroeconomic challenges: inflation stood at almost 20 per cent, the exchange rate was volatile and public debt increased markedly due to the weakening shilling. Economic pessimists predicted a global economic storm as the challenges in the euro-zone seemed unmanageable.

Let’s think together: Every Sunday the World Bank in Tanzania in collaboration with The Citizen wants to stimulate your thinking by sharing data from recent official surveys in Tanzania and ask you a few questions.

For many Tanzanians households, producing food for their family’s consumption remains their prime concern. About eight out of 10 Tanzanians are still involved in an agricultural activity, with only a marginal fraction of this production being commercialized. When Tanzanian households do something else, they generally earn just enough money to cover their food expenses. Other purchasing categories, such as housing and basic durable goods come a distant second, except for a few privileged households.

If you are raising your children by focusing on giving them what they want, don’t read this blog. Today most governments want to help the firms operating in their country. But because this task is a complex one, their strategy has been to ask businessmen directly.

In Tanzania, almost every week, there is a new survey reporting firms’ concerns or wishes. If this has proved useful to understand better the entrepreneurs' motivation, in my view it may have led to some misguided policy actions, at least in the formulation of priorities, by the authorities.

In 1884, the General Act of Berlin Conference established borders of African colonies. Many of these “exogenous” borders brought about by Scramble of Africa could be still found on modern maps, now separating sovereign states. About one third of all countries of Sub-Saharan Africa – much larger portion compared to other parts of the world – are landlocked.

Since trade with other countries is important for economic development, and since transportation by sea is much cheaper than any other type of transportation, the evolutionary process of “endogenous” formation of the nation states in other regions left few countries without access to sea. It was not impossible, but certainly more difficult, to develop as a nation without such.

It struck me to find out that according to the UN’s official projections, populations of Tanzania and Uganda would exceed one billion people by 2100 (up from 45 and 33 million, respectively, in 2010) if total fertility rates in each of these countries remain constant at their 2010 levels (5.6 and 6.4 children per woman, respectively).

To be sure, this “constant fertility scenario” is not a likely one. For a number of reasons, fertility rates tend to fall as economies develop, and the process of demographic transition from high mortality and high fertility to low mortality and low fertility is already under way in both countries. Still, even under assumption that total fertility rates will gradually decline to about 2 children per woman (and there is no international migration), the UN estimates that there will be 171 million Ugandans and 316 million Tanzanians in 2100.

January 2013

Has Africa outgrown Aid?

Multipliers in Europe and Africa

Law and Order: Countering the threat of crime in Tanzania

Why Tanzanian farmers don’t sell what they produce?

The Costs of Inaction

Has the African Growth Miracle Already Happened?

What is the best way to save one million lives?

Perilous pregnancies: How to improve maternal health in Tanzania?

What can we learn from successful companies and teams?

What will 2013 look like for Kenya’s economy?

How much are Tanzanians paying for their food?

Promoting private sector development in Tanzania: Don’t ask the firms what they want!

The World Changes, but Cities Do Not Move: on East Africa’s Economic Geography and Integration

One Billion Tanzanians, One Billion Ugandans

January 2013

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