Poverty

Africa needs more knowledge not just more money and projects

It is now widely understood that achieving a sustained acceleration of GDP growth over the long term is a prerequisite for eradicating mass poverty. In most developing countries, fiscal policies, including expenditure and tax policies, provide some of the most feasible tools available to governments for achieving their development objectives. Hence the role of fiscal policies as instruments for promoting long term sustainable economic growth is of great importance, an issue that was discussed at the “Fiscal Policy, Equity and Long Term Growth” conference which took place at the IMF on April 21-22, 2013. What matters in this context is how fiscal policies are designed and implemented such that they affect the long term growth of the supply side of the economy, rather than as a tool of short run demand management. The quality of fiscal policy is of critical importance in this regard.

There is a large volume of academic research, both theoretical and empirical, on the effects of different aspects of fiscal policy on economic growth (Easterly and Rebelo, 1993; Gemmel, 2001; Moreno-Dodson, 2012; World Bank, 2007, etc to cite just a few). This research has yielded broad fiscal policy advice for developing countries. For example, governments should avoid excessive fiscal deficits and public debt, allocate budgets towards human capital development and public investment in infrastructure which provides “public goods and services” and levy taxes on as broad a base as possible without distorting incentives to save and invest.

Imagine that you are in an elevator. It stops to pick up the next passenger going up. It turns out to be H.E. Jayaka Mrisho Kikwete, yes, the President of Tanzania himself, accompanied by a group of high anking officials. The President turns and asks you what you think is the most important thing that he could do for his country. You have less than three minutes to convince him. What would you tell him?

I know what I would say, loud and clear: “Your Excellency, that would have to be improving the performance of the port of Dar es Salaam.”

No doubt there are plenty of issues that matter for Tanzania’s prosperity: rural development, education, energy, water, food security, roads, you name it. They are all competing for urgent attention and effort; yet it is also true that each of them involves complex solutions that would take time to produce impact on the ground, and it is hard to know where to begin and to focus priority attention.

This is not the case for the Dar es Salaam port, as most experts know what to do.

So why the port of Dar es Salaam?

The port represents a wonderful opportunity for his country. The port handles about 90% of Tanzania’s international trade and is the potential gateway of six landlocked countries. I would tell him that almost all citizen and firms operating in Tanzania are currently affected, directly and indirectly, by the performance of this port.

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.
Easy access to markets, public services, and jobs is indispensable for citizens to take advantage of economic opportunities and achieve progress. In Tanzania, as in most other countries in the region, roads are the predominant mode of transport for people and goods. However, insufficient transportation facilities and limited mobility are an everyday reality:
- In 2010, only 1.8 per cent of Tanzanian households owned a car; significantly less than in Kenya (5.6 per cent in 2008/09) or Uganda (3.2 per cent in 2011).
- Motorbike ownership is also not common – only 2.9 per cent of households on Mainland claimed ownership of this vehicle in 2010. The situation in Zanzibar though was different with one in ten households owning a motorcycle or scooter.
- Affordable public transport remains elusive for many Tanzanians: In 2010, more than 40 per cent of women who recently gave birth at home cited distance and lack of transport as the factors that prevented them from delivering at a health facility.

Co-authored with Luc Christiaensen and Aly Sanoh

For a decade and a half now, Africa has been growing robustly, and the region’s economic prospects remain good. In per capita terms, GDP has expanded at 2.4 percent per year, good for an average increase in GDP per capita of 50 percent since 1996.

But the averages also hide a substantial degree of variation. For example, GDP per capita in resource-rich countries grew 2.2 times faster during 1996-2011 than in resource-poor countries (Figure 1). Though not the only factor explaining improved performance—fast growth has also been recorded in a number of resource-poor countries such as Rwanda, Ethiopia and Mozambique (before its resource discoveries)—buoyant commodity prices and the expansion of mineral resource exploitation have undoubtedly played an important role in spurring growth in several of Africa’s countries. Even more, with only an expected 4 or 5 countries on the African continent without mineral exploitation by 2020, they will continue to do so in the future. Yet, despite the better growth performance, poverty declined substantially less in resource-rich countries.

Agriculture is the mainstay of Tanzania’s rural economy and the livelihood of most of the country’s poor. As a result, rural incomes and poverty reduction are closely linked to agricultural productivity. Yet, according to FAO, yields for important staple crops in Tanzania remain very low:
- With a maize yield of 1.3 metric tons per hectare (mt/ha) in 2011, Tanzania ranks behind Kenya and Ghana (1.6 mt/ha); and way behind Vietnam (4.3 mt/ha) or China (5.7 mt/ha).
- A similar pattern holds for rice (paddy), with Tanzania’s yield of 2.0 mt/ha in 2011 being comparable to only about half of Kenya’s (4.0 mt/ha), and less than one third of China’s (6.7 mt/ha) in that year.
- It is noteworthy too that there has been no general upward trend in yields over the past two decades, though there is considerable annual variation due to rainfall patterns.

What will the world look like in 2030? Clearly, it will be very different from today and some of these changes can already be anticipated. Most of us can remember the year 1996 which is as far back in the past as 2030 is forward in the future. Today’s emerging trends will shape the world over the next two decades.

Every five years, the US’s National Intelligence Council publishes its analysis of “Global Trends”. This time, the analysis looks forward to 2030 and highlights four “megatrends” all of which will probably feel quite intuitive to people living in Africa.

Tanzania has been growing steadily over the past ten years and 2012 was no different. The economy expanded by 6.9 percent, which is close to the historical average. A look at national accounts reveals that five sectors contributed to almost 60 per cent of Tanzania’s economic growth between 2008 and 2012:

- Communication GDP almost doubled in less than four years, growing on average by over 20 per cent per year.
- Banking and financial services have expanded by 11 per cent per year since 2008.
- Retail trade increased by almost 40 percent between 2008 and 2012.
- Construction surged by an average of 9 percent per year over the same period.
- Manufacturing grew annually by 8.4 percent during the last four years.

If user fees for health have been so vilified (including in comments on this blog), why are we bringing the subject up again? Because new evidence calls into question the prevailing view, namely that removing user fees leads to: (i) increased use of health services and hence to (ii) improved health outcomes. Confirming (i), the recent literature shows that (ii) does not always follow.

Principles

Raising the price of a good or service has two effects: it reduces demand and increases supply. In the case of user fees for health, it was thought that paying for a service also makes people use it more appropriately (you don’t go to the doctor for minor ailments) and value it more than if they obtained it for free.

Speaking about the often unruly behavior of his talented young players, Arsene Wenger, the famous Arsenal coach, said: "Some are wrong because they are not strong enough to fight temptation and some are wrong because they don't know."

"The youth of today are the leaders of tomorrow", so the old adage goes. All countries, including Tanzania, need to invest in and build a strong, healthy, well educated, dynamic and innovative youth. In Africa, the number of youths (aged 14 to 25 years) have grown significantly over the past decades, contributing to the bulk of the labor force.

Poverty

Africa needs more knowledge not just more money and projects

If I had three minutes with President Jakaya Kikwete…

(Not) On the Move: Road Transport in Tanzania

Making the most of Africa’s growth momentum

Can Tanzania achieve its Green Revolution?

2030: Global shifts and Kenya's transformation

Is Tanzania’s economic growth an urban phenomenon?

User fees and abuser fees

Is Tanzania strong enough to resist temptation?

Youth in Tanzania: a growing uneducated labor force

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