Despite Africa’s great diversity of cultures and climates, countries on the continent often speak the same language when it comes to tackling common development challenges. Senegal and Uganda recently did just that, teaming up to exchange best practices to boost agricultural productivity and employment on both sides of the continent.
I witnessed this knowledge exchange firsthand as I accompanied a Ugandan delegation led by Hon. Maria Kiwanuka, Uganda’s minister of finance, planning, and economic development, on its visit to Senegal. Their core mission was to seek out innovative ways to boost economic growth and create job opportunities for the country’s burgeoning youth, a challenge faced by Uganda and Senegal alike. As both countries continue to experience an increase in urbanization and population growth, and currently have economies that are predominantly based on agriculture, one common answer to this rising challenge is the enhancement of agricultural productivity and the development of agricultural value chains.
From time to time, countries experience rapid economic growth without a significant decline in poverty. India’s GDP growth rate accelerated in the 1990s and 2000s, but poverty continued to fall at the same pace as before, about one percentage point a year. Despite 6-7 percent GDP growth, Tanzania and Zambia saw only a mild decline in the poverty rate. In the first decade of the 21st century, Egypt’s GDP grew at 5-7 percent a year, but the proportion of people living on $5 a day—and therefore vulnerable to falling into poverty—stagnated at 85 percent.
In light of this evidence, the World Bank has set as its goals the elimination of extreme poverty and promotion of shared prosperity. While the focus on poverty and distribution as targets is appropriate, the public actions required to achieve these goals are not very different from those required to achieve rapid economic growth. This is not trickle-down economics. Nor does it negate the need for redistributive transfers. Rather, it is due to the fact that economic growth is typically constrained by policies and institutions that have been captured by the non-poor (sometimes called the rich), who have greater political power. Public actions that relax these constraints, therefore, will both accelerate growth and transfer rents from the rich to the poor.
Some examples illustrate the point.
Stretching for more than 1,800 kilometers across Guinea, Mali, Senegal and Mauritania, the Senegal River is the third longest river in Africa. In a region such as the Sahel, which is plagued by drought, poverty, and underdevelopment, access to a water resource such as the Senegal River is critical to local populations who rely on it for energy production, land irrigation, and potable water.
A big idea can be rejected. It might be illegal. It might mean political suicide. In the words of Marcelo Giugale, the World Bank’s director of Economic Policy and Poverty Reduction Programs for Africa, challenging conventional wisdom isn’t always easy. But in the realm of big ideas, the risk is part of the reward.
Is bigger always better? Economists have long debated what size firms are more likely to drive business expansion and job creation. In industrial countries like the United States, small (young) firms contribute up to two-thirds of all net job creation and account for a predominant share of innovation. (Source: McKinsey, Restarting the US small-business growth engine, November 2012). In developing countries, evidence from Ethiopia, Ghana and Madagascar shows that the vast majority of small operators remain small, and so are unlikely to create many decent jobs over time [Source: World Bank, Youth Employment, 2014]. By contrast, ‘big’ enterprises are seen as the best providers of employment opportunities and new technologies.
The difference in role and performance of small firms in developing and industrial countries reflects to a large extent their owners’ characteristics. In the US, small firm owners are generally more educated and wealthier than the average worker, while the opposite is true in most developing countries. This point was emphasized by E. Duflo and A. Banerjee in their famous book ‘Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty’ (Penguin, 2011). Most business owners in developing countries are considered to be ‘reluctant’ entrepreneurs; essentially unskilled workers that are pushed into entrepreneurship for lack of other feasible options for employment.
This is also very much a reality in Tanzania where small business owners have few skills and limited financial and physical assets. Of the three million non-farm businesses operating in the country, almost 90% of business owners are confined in self-employment. Only 3% of business owners possess post-secondary level education. As a result, their businesses are generally small, informal, unspecialized, young and unproductive. They also tend to be extremely fragile with high exit rates, and operate sporadically during the year. Put simply, most small businesses are not well equipped to expand and become competitive.
If Mwalimu Julius Nyerere, the Father of the Nation, visited Dar es Salaam today, there is no doubt he would be surprised at what the city has morphed into since his time. From less than one million people in the early 1990s, Dar es Salaam’s population has grown at an average rate of 5.8 percent annually to reach 4.4 million people today, making it one of the fastest growing cities in the world. It is now estimated that the city will be home to over 10 million inhabitants by 2027.
The urbanization process in Tanzania is a tale of two cities, as illustrated by the recent growth of Dar es Salaam. At first glance, Dar es Salaam looks like a modern city with a panoramic skyline of tall new buildings. But this façade of the modern metropolis quickly gives way to sights of congestion in the city slums, highlighting the realities of poor urban planning and inadequate public services.
Photo Credit: @Gates Foundation. A girl plays with a bicycle tire in the slum of Korogocho, one of the largest slum neighborhoods of Nairobi, Kenya
This is an impressive decrease from 58% in 1999, but at the same time there is a general sense that progress has been too slow. Africa is rising, with GDP growth rates upwards of 6% between 2003 and 2013 (if one excludes richer and less dynamic South Africa) but the poor’s living standards are not rising as fast as GDP.
In 1974, onchocerciasis -- a parasitic disease that causes blindness and is transmitted by black flies -- was raging in many parts of West Africa. The disease, also known as river blindness, was concentrated in the villages lying close to the rivers where the black fly breeds. In such villages, the spectre of young children leading blind adults with a stick was a common sight. Indeed, the high levels of blindness and the weight of parasitic burden on the population led to the abandonment of many villages and the cultivation of land in otherwise fertile river valleys.
Taking the example of the major public health advances supported by donors, advances in the measurement of health impacts in the early 2000s led to major costs savings and efficiencies in HIV/AIDS and malaria programs, the Global Polio Eradication Initiative had clear impact, the annual Human Development Reports have charted some truly outstanding areas of progress and there has been some, halting, progress towards attainment of the Millennium Development Goals. However, it seems that few of these gains seem have deep roots in the improved performance of governments. Development assistance seems able to trigger improvements through standalone arrangements outside of the public sector and through logistical efforts to move material (pumps, vaccinations, and medical supplies). It does not seem to be so good at large scale governance and public sector management (GPSM) improvements.