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Poverty

Big shifts and what they mean for Africa and Kenya

Wolfgang Fengler's picture

Can Africa claim the 21st century? When the World Bank’s Africa department published this book in April 2000, most observers were doubtful that African countries would ever be in a position to become emerging markets. That year, The Economist called Africa “The hopeless continent” and global attention was focused mainly on Africa’s problems: HIV/Aids in Southern Africa; the relentless war in Somalia; and, droughts in the Sahel—which gave the pessimists plenty of ammunition. 

But over the last several years, something remarkable has happened: Africa’s fragile and conflict-affected countries remain a major development challenge, but besides these, a Stable Africa has emerged. Most of this Stable Africa has experienced continued high growth for a decade, and major improvements in social indicators. Africa is becoming an investment destination, and there is hardly a week which goes by without a major investor dropping by my office, to discuss the region’s economic fundamentals.

How has Africa changed over the last decades?

Will oil be a blessing or a curse for Kenya? – Lessons from Indonesia and the rest of the world

Wolfgang Fengler's picture

This piece was co-authored with Günther Schulze1.

Kenya may have found oil in Turkana that could change the development trajectory for the country. In 2011, Kenya spent US$ 4.1 billion on oil imports, equivalent to approximately 100,000 barrels per day. For Kenya to become a net oil exporter, the resources in Turkana would need to be substantial and similar to those of Sudan or Chad. 

If indeed Kenya has substantial oil reserves, will they benefit the country in the long-term?

Some observers are predicting similar problems as in Nigeria, Equatorial Guinea and many other resource-rich African countries where corruption has been amplified.

Others argue that this need not be the case. Countries as diverse as Botswana, Chile and Norway have shown that natural resources can be a blessing. If managed well, they can even support the fight against poverty by providing the resources needed to scale up the delivery of public services. In the last ten years, many of the world’s fastest growing economies, including in Africa, have benefitted from exporting natural resources.

So who should we believe?

Cassava as an income-earning crop for small farmers

 

Sub-Saharan Africa produces more than 50 percent of the world’s cassava (aka manioc, Tapioca, and Yucca), but mainly as a subsistence crop.  Consumed by about 500 million Africans every day, it is the second most important source of carbohydrate in Sub-Saharan Africa, after maize. The leaves can also be consumed as a green vegetable, which provides protein and vitamins A and B. As an economy advances, cassava is also used for animal feed and industrial applications.

 

Described as the “Rambo of food crops” cassava would become even more productive in hotter temperatures and could be the best bet for African farmers threatened by climate change.

 

Cassava is drought resistant, can be grown on marginal land where other cereals do not do well, and requires little inputs. For these reasons it is grown widely by African small and poor farmers as a subsistence crop. However, cassava’s potential as an income-earning crop has not been widely tapped.

 

Cassava presents enormous opportunities for trade between areas with food surplus and food deficit. Currently, a large shortfall of the regional food supply is filled by cereals bought in the international market. For cassava to become an income-earning crop at intra-regional market for small farmers in Africa, two main obstacles remain: post-harvest processing and regional trade barriers.

Zambia: Decisions with unintended consequences?

Asumani Guloba's picture

Since the start of 2012, expectations in Zambia have been running high: stable economy; a newly elected government; recently crowned African football champions.  Everything seems possible.  For the new government, fulfilling election promises will require well thought through development decisions. Are the decisions taken so far having the intended consequences?

The Zambian economy has been remarkably resilient, with growth averaging 6.6% in the past five years, supported by strong macroeconomic policies, high copper production and favorable prices. End-year inflation has been in single digits for four of the last five years, the debt and fiscal positions well within sustainable levels. In addition, since independence, the country has witnessed five peaceful elections leading to four changes in government. These factors auger well for the future economic prospects of the country. Or do they?

When are macroeconomic stability and exceptionally high returns not enough for private investors?

Sandeep Mahajan's picture

South Africa appears to be mired in a cycle of modest growth, high inequality and record unemployment. This, despite an exemplary record on macroeconomic management and deepening integration with the global economy. 

Inflation remains nestled within the target range of 3-6 percent and fiscal and debt management outcomes have been impressive.

Remarkably, there is broad political consensus on the issue of macroeconomic stability, recent calls for a looser stance by the labor unions notwithstanding. 

A sustained pattern of high, broad-based and inclusive growth is yet to emerge, however.  Despite a pick-up in per capita GDP growth from negative rates to an average of 1.6 percent per year during 1994-2011, per capita GDP is currently only 10 percent higher than in 1980: a period over which other developing countries have seen much more meaningful increases in their income levels.

Kenya’s tourism – Still an unpolished diamond

Wolfgang Fengler's picture

When I first came to Kenya, in August 1990, I was a backpacker on a shoestring budget. At midcourse between Cape-town and Cairo, I got accommodation at the New Kenya Lodge in River Road for US$ 2.50. After spending two nights there, I continued to Garissa and Liboi, heading to Somalia.

In 1994, I returned with my wife, and in downtown Nairobi, urban chaos and poverty struck her so much, that she was reluctant to come back 15 years later, when I was offered a job.

Today, I enjoy the full beauty of Kenya with my family, and we all agree—my wife included!—that this is one of the most beautiful countries in the world. If you created an index of "natural beauty per square-kilometer" Kenya would probably come up on top of the list. Starting from Nairobi, within a few hours of driving, you enjoy the most amazing nature: the Masai Mara, Mt Kilimanjaro, Mt Kenya, and Lake Victoria, are all within reach. Nairobi is surprisingly pleasant, with one of the best climates in the world: it is one of the few cities where you neither need air-conditioning nor heating—all year long (well, it will soon get “cold” in July but the fireplace will help).

Tanzania can benefit from natural gas by empowering people

Jacques Morisset's picture

If you are looking for a house in Dar es Salaam, hurry up. With the recent discovery of massive natural gas reserves, affordable houses will soon become a rarity. The cost of living in African countries with abundant natural resources (Angola, Gabon, etc) is among the highest in the world. Today Tanzania sits on about 15 trillion cubic feet of proven natural gas reserves, equivalent to approximately US$150 billion at current prices, or 6 times Tanzania's current GDP.

These proved and potential reserves can be a game changer for Tanzania. Yet, extracting and producing is not a simple affair. Massive up-front investments (larger than the country’s current GDP of US$22 billion) and new technologies are necessary, while benefits will typically spread over 25 to 30 years. Short of cash and expertise, Tanzania will have to partner with global companies. Potential candidates (British Gas, Statoil) are already knocking on the door.

100% pass rate in South Africa’s township schools?

Sandeep Mahajan's picture

Residents of the pukka houses (formerly temporary shacks) in front of the apartment complex where my family lives in New Delhi have decided to send their kids to private, English-medium schools, cutting corners to save enough to be able to afford it.

How to kick-start Kenya’s second growth engine

Wolfgang Fengler's picture

Last year, Kenya’s economy was behaving like a plane flying through a storm on one engine. After a lot of turbulence, especially when the shilling reached a record low against the dollar, the Central Bank intervened forcefully, and brought the plane back to stability.

But Kenya’s exchange rate woes are just the tip of the iceberg (see figure). Kenya’s big challenge is to reduce the gap between the import bill and exports revenues, what economists call the “current account deficit” (which remains large, even when services—such as tourism—are included). Last year, the deficit reached more than ten percent of GDP, approximately Ksh 400 billion (US$ 4.5 billion). This is larger than Greece’s.

Africa is rising - is poverty falling?

Shanta Devarajan's picture

Several people, from The Economist to this blog, have been highlighting Africa's accelerated GDP growth of about 5 percent a year for the decade before the 2008-9 global economic crisis, and the two years since the crisis. But has this growth served to reduce poverty?

The latest globally consistent estimate of poverty rates has an answer: Yes. 

Using the measure of people living on $1.25 a day or less, the World Bank's poverty measurement team, led by my colleague Martin Ravallion, estimates that the percentage of poor Africans fell from 58 percent in 1999 to 47.5 percent in 2008.  This rate of decline of about one percentage point a year is a welcome change from the previous decade when growth was much slower and the poverty rate increased. 

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