Africa’s statistical tragedy

Africa's statistical tragedy

Africa Can... - End Poverty

Fifteen years ago, Easterly and Levine published "Africa's Growth Tragedy", highlighting the disappointing performance of Africa's growth, and the toll it has taken on the poor. Since then, growth has picked up, averaging 5-6 percent a year, and poverty is declining at about one percentage point a year. The "statistical tragedy" is that we cannot be sure this is true.

Take economic growth, which is measured in terms of growth in GDP.  GDP in turn is measured by national accounts.  While there has been some progress, today, only 35 percent of Africa's population lives in countries that use the 1993 UN System of National Accounts; the others use earlier systems, some dating back to the 1960s. 

To show that this is not an arcane point, consider the case of Ghana, which decided to update its GDP last year to the 1993 system.  When they did so, they found that their GDP was 62 percent higher than previously thought.  Ghana's per capita GDP is now over $1,000, making it a middle-income country. 

The "tragedy" is that we were happily publishing GDP statistics and growth figures for Ghana over the last decades, when in fact the national accounts were understating GDP by 62 percent.

GDP statistics are actually not that bad when compared with poverty statistics.  As said earlier, Africa's poverty rate, defined as the percentage of people living on $1.25 a day, declined from 59 percent in 1995 to 50 percent in 2005.  Economists have been patting themselves on the back for these results, because they confirm the basic principle that growth reduces poverty.

The situation becomes gloomier when we try to see what those percentages represent.  The 2005 estimate, for instance, represents robust statistics for only 39 countries for whom we have internationally comparable estimates.  And they are not even comparable over the same year. Only 11 African countries have comparable data for the same year. For the others, we need to extrapolate to 2005, sometimes (as in the case of Botswana) from as far back as 1993.

In short, even the economists' celebratory estimate of poverty declining in Africa during a period of growth needs to be taken with a grain of salt.  In reality, there are many countries for which we simply don't know.
What's going on here? 

The proximate causes of the problem with statistics are: weak capacity in countries to collect, manage and disseminate data; inadequate funding; diffuse responsibilities; and fragmentation, with many diffuse data collection efforts.

But I would submit that the underlying cause is that statistics are fundamentally political. Take the poverty estimates.  They assess whether people are better off today than they were five years ago.  If the estimate takes place during an election year, there is a strong tendency to keep the results under wraps.  Worse still, there is a tendency to drag their feet in completing the survey.  And the raw data of household surveys are almost never publicly available (so there is little chance of being able to replicate them).

There is another, equally political, aspect to the statistical tragedy.  After a lot of bad experiences, the international community has decided that African countries should develop their own National Statistical Development Strategies (NSDS), and that all statistical activities should be consistent with the NSDS. 

The tragedy is that donors, including the World Bank, undertake statistical activities without ensuring that they are consistent with the NSDS.  Why?  Because they need data for their own purpose—to publish reports—and this means getting it faster, with little time to strengthen the countries' statistical capacity.
 
But just as Africans turned around their growth tragedy, they can turn around their statistical tragedy.  By recognizing that the problem is political, we can attack it at its roots. 
Let me suggest three things.  First, insist that all data be openly accessible and transparent.  Kenya just did this (and so did Bangladesh's central bank).  If these countries--not known for their strong governance performance--can do it, so can others. 

Second, put in place standards akin to those with PRSPs, whereby all statistical activities have to be filtered through the NSDS.  The NSDS should be reviewed at the highest level—analogously with the PRSP—and deviations from it should be reported at an equally high level. 

And third, the behavior of donors with respect to statistics should be evaluated, much like the Center for Global Development's commitment to development index, and made public.

Note:  This is a summary of my keynote speech at the recent IARIW-SSA conference on "Measuring National Income, Wealth, Poverty and Inequality in African Countries."  For a video, see below:

 

Sent with Reeder

 

Taxing the poor… through inflation

Taxing the poor… through inflation

Africa Can... - End Poverty

Imagine you are spending half of your income on something whose price suddenly increases by a quarter. Seems impossible? This is how in fact inflation has hit the poor in many developing countries, especially Kenya.

This September, overall inflation reached a record high of 17.3 percent. One year ago it was just above 3 percent. Why has it increased so sharply even though Kenya has followed prudent macro policies? The short answer is: food and fuel. In Kenya, food accounts for 36 percent of the average person's expenditures; energy and transport another 27 percent. The urban poor spend more than 43 percent on food. Since January, food prices have increased by almost 25 percent (see figure), partly as a result of international trends but also due to Kenya's- agriculture policies. Maize prices tripled between January and June until they retreated a little once the government waived import duties and the 2011 harvest started trickling in. 

Figure – Rising inflation in Kenya

 

 

 

 

 

 

 

 

 So if you are exposed to high inflation, there is no choice but to cut down on food or on other expenses, many of which are vital, such as school fees or health care. This is why inflation is the worst tax on the poor.

Kenya's National Bureau of Statistics is calculating inflation for different income groups in Kenya and it is interesting –although perhaps not surprising- to see that the rich and the middle class only have a moderate problem. They experience price increases of about 10 percent. But for the poor, those who earn less than Ksh 200 a day, inflation now stands close to 20 percent. The rich can also move their money out of the country if inflation becomes too high – an option the poor don't have. What about poor farmers? Don't they benefit from higher food prices? They should but often they don't. Two thirds of Kenyan farmers are net food consumers and are therefore hurt by rising food prices – although to a lesser extent.

High inflation is also a major headache for Central Banks. The Central Bank's core mandate is to fight inflation, and there are several tools to do this, such as setting interest rates which will influence the amount of money in the economy. When interest rates go up, then the cost of borrowing money increases as well, discouraging borrowing and subsequent expenditure. This should normally bring inflation down. The Central Bank of Kenya has begun to increase interest rates but inflation is still going up.  How come?

The reason is "supply shocks": higher import prices that are the result of external factors beyond Kenya's control. An example was the spike in international oil prices following the "Arab Spring". The tools available to the Central Bank mainly affect "core inflation" which is all the items beyond food and fuel which people use and consume (phones, rent, cement, etc.). This year, the fuel bill alone will likely be as large as Kenya's total exports. Investors become wary of investing in countries with high inflation, which is one of the reasons why the exchange rate has been plummeting, and why it is so important for any country, not just Kenya, to focus squarely on fighting inflation.

What will happen in the coming months? There are many reasons to believe that Kenya has reached the peak of inflation and, in the absence of any additional shocks we can expect moderate inflation in the coming months. First, food and fuel prices have started to come down and there is a possibility that global commodity prices will decline further if Europe's economies enter a full-fledged crisis. Second, the "base effect" will materialize in the first quarter of next year – 12 months after relatively high inflation.  Third, the Central Bank has embarked on tighter monetary policies, increasing the core interest rate to 7 percent.

What can Kenyan policymakers do, especially as they cannot influence the price of several key import prices, especially petroleum? In the short-term, the Central Bank could still tighten monetary policy further to slow down domestic expenditure and avoid price increases of other goods and services.

This is often an unpopular measure because it cools the economy and could lead to increased unemployment. However, such "tough love" measures are often critical to lowering inflation and restoring consumer and investor confidence. In the medium-term, a reform of Kenya's maize sector would help a lot. Kenya's traditional high-price policy and inefficient marketing systems are hurting the average Kenyan enormously. If Kenyan maize prices simply came down to international levels, which is in fact what one would expect to see, it would already give the poor and the middle class enormous relief. In the long-term, Kenya will only rid itself from inflation and shocks through growing richer and developing a more robust export sector.

This is easier said than done, but the country's Vision 2030 agenda provides the right framework and emphasis on clean government and better performing infrastructure, especially the port, rail and energy. Kenya will still not be able to influence international food and fuel prices but higher incomes would protect Kenyans as they would only spend a smaller share of their income to meeting essential needs. High food and fuel prices may still be reason for complaint but not a source of suffering.
 

Sent with Reeder

 

Millennium Villages Project: does the 'big bang' approach work? | Madeleine Bunting

Millennium Villages Project: does the 'big bang' approach work? | Madeleine Bunting

Global development news, comment and analysis | guardian.co.uk

Backers of the Millennium Villages Project say their model is successful, and can be replicated across Africa. But critics of their development strategy beg to differ

Jeffrey Sachs is Marmite. Some love him, while others grumble about his high-handedness. But what no one can deny is his extraordinary energy and drive and how he makes things happen. He announced this week at the UN a second and final stage of the Millennium Villages Project (MVP) with another $72m. Not only has George Soros committed his Open Society Foundation to another huge tranche of cash, $47.4m, but Sachs managed to secure the presence of the man himself on the platform with him, along with the UN secretary general, Ban Ki-moon. Sachs is one of the few people who can pull connections across business, politics, global diplomacy and celebrity for the cause of tackling poverty. That is quite an achievement.

The MVP covers more than 500,000 people in 14 villages in different environments across rural Africa, and works on the principle of multiple interventions across health, education, enterprise and agriculture. I visited a project in south-west Uganda, and the results were certainly impressive. The aim is to show how the millennium development goals can be achieved by 2015 with a limited amount of aid that is matched by community investment (in labour or in kind) and the commitment of local and national government.

As part of the announcement this week, the MVP proudly claimed that malaria in its villages had fallen by 72%, access to clean water had more than tripled, and average maize yields had doubled. All of this was achieved on a budget of $60 a head per year, according to the project. The next stage of funding will build on business and enterprise to help villages to link better to the wider market. Soros punched the point of this huge programme home: here was a model that was replicable and could be scaled up across Africa.

But it is on this last point that questions continue to dog the project. Is it replicable and does it really serve as the model for development? The handling of those questions has been pretty brusque. Sachs's UN appearance prompted some digs on Twitter.

Part of the problem is that some of the questions have been put by two very reputable figures in development, Michael Clemens at the Centre for Global Development and Gabriel Demombynes, a senior economist at the World Bank. Yet their carefully argued points have been dismissed as "armchair criticism".

The nub of the issue was well put by Chris Blattman when he asked on his blog what the MVP will prove. That "a gazillion dollars in aid and lots of government attention produces good outcomes"? This is hardly surprising, says Blattman. The point, he adds, is how we test "the theory of the big push: that high levels of aid simultaneously attacking many sectors and bottlenecks are needed to spur development; that there are positive interactions and externalities from multiple interventions".

As Blattman says, the reverse could be true – "that marginal returns to aid may be high at low levels and that we can also have a big impact with smaller sector-specific interventions". There has been plenty of development along the latter lines in recent years, such as mass distribution of malaria bed nets for example. Which is the most effective, sustainable form of aid? It's a very good question.

The problem for the likes of Blattman, Clemens and Demombynes is that, for a number of reasons, the MVP – despite the huge investment of resources, expertise and effort – is not going to help answer the question one way or the other. The evaluation process is simply not rigorous and open enough, argued Clemens 18 months ago in a careful critique that he has repeated more recently.

Clemens urged two things: long term follow-up and comparison with villages in the MVP with other villages, both randomly selected. He argues that many of the places where the MVP villages are sited are undergoing dramatic changes anyway, and that without comparisons, it will be hard to identify what changes are attributable to the project.

The MVP villages are to be evaluated at the end of year five, but no longer than that; for Clemens this timespan was too short. To develop his argument, he refers to a study of a project in China in the late 1990s which followed a village-led development package that similarly tried multiple interventions over five years. At the end of five years, income levels had been significantly boosted, but five years after the project ended, this difference with other villages had disappeared. Despite the massive investment, there was little to show for it.

Clemens argues that, of course, there will be short-term impacts, and that is hardly surprising given that "the size of the intervention is the same order of magnitude as the size of the entire economy of each village; that is, the MVP intervention is roughly 100% of local income per capita".

Since then, Clemens has picked up on several aspects of the MVP report that he says overstates the impacts of the project.

He also criticises the evaluation as inadequate. He has further added that the data is not transparent. Earlier this year, there was a suggestion that Clemens and Sachs were going to discuss their differences of opinion in a public event but, as far as I am aware, that has not yet happened. There was a discussion of some of the issues in Oxford between Demombynes and John MacArthur, one of Sachs's team.

All of this is of particular interest to those of us at the Guardian who were involved in the Katine project from 2007 to 2011. Like the MVP, the project with the NGO Amref took a specific geographical area and followed an approach of multiple interventions.

Amref are completing the four-year project this month, and the question is what has been left behind that will be sustainable and how long the impacts of the project will last. Does this kind of "big bang" approach work?

Any chance of reviving that idea of a public discussion, Jeffrey and Michael?

• Aid

Madeleine Bunting

guardian.co.uk © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

Sent with Reeder

 

Open conversations (or close them)

Open conversations (or close them)

Seth's Blog

A guy walks into a shop that sells ties. He's opened the conversation by walking in.

Salesman says, "can I help you?"

The conversation is now closed. The prospect can politely say, "no thanks, just looking."

Consider the alternative: "That's a [insert adjective here] tie you're wearing, sir. Where did you buy it?"

Conversation is now open. Attention has been paid, a rapport can be built. They can talk about ties. And good taste.

Or consider a patron at a fancy restaurant. He was served an old piece of fish, something hardly worth the place's reputation. On the way out, he says to the chef,

"It must be hard to get great fish on Mondays. I'm afraid the filet I was served had turned."

If the chef says, "I'm sorry you didn't enjoy your meal..." then the conversation is over. The patron has been rebuffed, the feedback considered merely whining and a matter of personal perspective.

What if the chef said instead, "what kind of fish was it?" What if the chef invited the patron back into the kitchen to take a look at the process and was asked for feedback?

Open conversations generate loyalty, sales and most of all, learning... for both sides.

Sent with Reeder

 

The forever recession (and the coming revolution)

The forever recession (and the coming revolution)

Seth's Blog

There are actually two recessions:

The first is the cyclical one, the one that inevitably comes and then inevitably goes. There's plenty of evidence that intervention can shorten it, and also indications that overdoing a response to it is a waste or even harmful.

The other recession, though, the one with the loss of "good factory jobs" and systemic unemployment--I fear that this recession is here forever.

Why do we believe that jobs where we are paid really good money to do work that can be systemized, written in a manual and/or exported are going to come back ever? The internet has squeezed inefficiencies out of many systems, and the ability to move work around, coordinate activity and digitize data all combine to eliminate a wide swath of the jobs the industrial age created.

There's a race to the bottom, one where communities fight to suspend labor and environmental rules in order to become the world's cheapest supplier. The problem with the race to the bottom is that you might win...

Factories were at the center of the industrial age. Buildings where workers came together to efficiently craft cars, pottery, insurance policies and organ transplants--these are job-centric activities, places where local inefficiencies are trumped by the gains from mass production and interchangeable parts. If local labor costs the industrialist more, he has to pay it, because what choice does he have?

No longer. If it can be systemized, it will be. If the pressured middleman can find a cheaper source, she will. If the unaffiliated consumer can save a nickel by clicking over here or over there, then that's what's going to happen.

It was the inefficiency caused by geography that permitted local workers to earn a better wage, and it was the inefficiency of imperfect communication that allowed companies to charge higher prices.

The industrial age, the one that started with the industrial revolution, is fading away. It is no longer the growth engine of the economy and it seems absurd to imagine that great pay for replaceable work is on the horizon.

This represents a significant discontinuity, a life-changing disappointment for hard-working people who are hoping for stability but are unlikely to get it. It's a recession, the recession of a hundred years of the growth of the industrial complex.

I'm not a pessimist, though, because the new revolution, the revolution of connection, creates all sorts of new productivity and new opportunities. Not for repetitive factory work, though, not for the sort of thing ADP measures. Most of the wealth created by this revolution doesn't look like a job, not a full time one anyway.

When everyone has a laptop and connection to the world, then everyone owns a factory. Instead of coming together physically, we have the ability to come together virtually, to earn attention, to connect labor and resources, to deliver value.

Stressful? Of course it is. No one is trained in how to do this, in how to initiate, to visualize, to solve interesting problems and then deliver. Some see the new work as a hodgepodge of little projects, a pale imitation of a 'real' job. Others realize that this is a platform for a kind of art, a far more level playing field in which owning a factory isn't a birthright for a tiny minority but something that hundreds of millions of people have the chance to do.

Gears are going to be shifted regardless. In one direction is lowered expectations and plenty of burger flipping... in the other is a race to the top, in which individuals who are awaiting instructions begin to give them instead.

The future feels a lot more like marketing--it's impromptu, it's based on innovation and inspiration, and it involves connections between and among people--and a lot less like factory work, in which you do what you did yesterday, but faster and cheaper.

This means we may need to change our expectations, change our training and change how we engage with the future. Still, it's better than fighting for a status quo that is no longer. The good news is clear: every forever recession is followed by a lifetime of growth from the next thing...

Job creation is a false idol. The future is about gigs and assets and art and an ever-shifting series of partnerships and projects. It will change the fabric of our society along the way. No one is demanding that we like the change, but the sooner we see it and set out to become an irreplaceable linchpin, the faster the pain will fade, as we get down to the work that needs to be (and now can be) done.

This revolution is at least as big as the last one, and the last one changed everything.

Sent with Reeder

 

Q&A on coltan

Q&A on coltan

Texas in Africa

One of the most fascinating books I read this year is about one mineral: Coltan. Authored by Congo expert Michael Nest, the book is a comprehensive discussion of an extrodinarily complex issue. Nest does an admirable job of explaining what the commodity is, why it matters, and of dissecting the debates around coltan. The book is a must-read for anyone interested in conflict minerals or advocacy in general as it points to both successes and failures in the DRC-focused movement.

Nest was kind enough to take the time for a Q&A about Coltan:

TiA: What was the most surprising thing you learned in researching Coltan?

Nest: The enormous gulf in communication and understanding between activists and industry. Industry pays little attention to what activists say and are not very aware of academic debates about natural resources and conflict. Yet activists and these debates have an impact of the legislation and regulations that eventually affect them, such as the 'conflict minerals' clause in Washington's recent Dodd-Frank Wall Street Reform and Consumer Protection Act. Similarly, activists pay little attention to industry and are often dismissive and cynical about industry views. Yet, industry can be an excellent source of data about mining and of analysis of how the global resources sector works. When I was researching the book I felt like I was going back and forth between different worlds. Both sides could learn from listening to the other, and anyone who wants to understand the political economy of the minerals sector needs to read information from these sources.

TiA: In the book, you mention that the oft-repeated statistic about 80% of the world's coltan supply being in Congo is incorrect. Can you give a brief summary as to why and how that incorrect statistic became so well-known?

Nest: That is a good question! I still scratch my head about how this figure, which I am positive is incorrect, has been so widely propagated. I think activists and others interested in the link between coltan and conflict do themselves a great disservice by repeating such statistics without questioning them or researching them. Inaccurate statistics can undermine an argument, even if it is motivated by a moral imperative. People in industry and government who might initially listen to what activists or journalists say often switch off when they hear statistics that are not supported by evidence.

As to how the statistic came about…I really do not know the origin of the figure, other than it was probably first produced in either a BBC or Agence France Presse news report from the late 1990s/early 2000s. Possibly the 80% refers to the amount of coltan on the spot market (ie, open market and not tied up in long-term contracts) coming from the DRC. This figure may have then been misinterpreted by others to refer to world reserves or world production. However, most writers about coltan appear unaware of the role of the spot market in the coltan trade, which makes me wonder whether this really was the origin of the figure. I'm guessing that the figure of 80% fitted in with journalists' desire to dramatise what at first glance appears to be another story of Africans as victims: having a precious resource sought after by rich countries that will do anything to obtain it. The truth is more complicated and nuanced than this.

The DRC's share of global tantalite production remains unclear. However, the figure is likely to be between 20-30% at the current time. Historically it is more likely to have been around 15-20%. In regards to reserves, there has been no comprehensive geological survey work in the DRC since the early 1990s as a result of war and instability. However, there is certainly no evidence that the DRC has 80% of the world's reserves.

TiA: What led you to write a book about one specific mineral?

Nest: I was asked to write this book by Polity Press, which is bringing out a series of the geopolitics of six natural resources: oil, food, fish, water, timber and coltan. My previous book focused on the economic dimensions of the Congo War (1998-2003) and this is one reason they asked me to write about coltan.

Writing a book about a specific mineral, especially one linked to conflict and violence like coltan, is a challenge. Solutions to conflict and violence in the DR Congo and other countries where armed groups profit from natural resources, require integrated approaches that take into account all resource exploitation and all minerals. Isolating a commodity and analysing it out of its sectoral context can result in one losing track of its importance and significance relative to other commodities.

However, in order to develop both theories of natural resources and conflict and policy responses to such conflicts, it is analytically important to understand and be able to distinguish the political economy of individual commodities. Because there has been so little good analysis, yet so much debate, on the tantalite global supply chain, I thought it was important to lay out the facts for this particular mineral and not simply lump it together in an analysis of other 'conflict minerals'. The editors at Polity Press were aware there was a market for such a book that focused on one specific mineral.

TiA: What's your take on the advocacy efforts surrounding Congolese minerals, including the proposed SEC and OECD regulations? What have advocates, legislators, and regulators gotten right and what have they gotten wrong?

Nest: I think these efforts are well-intentioned, but not especially well-thought out. This means they may not achieve their desired goal of bringing peace to the DRC.

Gotten right:

• Relentless activism by the Enough Project, Global Witness and others have raised the profile of the Congo War and increased governments' and the public's willingness to focus on it – a good thing.
• The push by the SEC and OECD to increase transparency in the commodity chains that go into manufactured goods can also only be a good thing, as I think it is incumbent on us all to be aware of what we consume and where it comes from.
• Placing the reporting burden onto global corporations – rather than poor governments or artisanal miners – is reasonable.
  

Gotten wrong:

• Activist efforts fail to take into account the significant number of conflicts in DRC that are not related to resources, e.g., conflict over land (for agriculture, not minerals) or for local political control. Restricting the export of coltan and other 'conflict minerals' might reduce profits to armed groups, but it will not have any effect on groups fighting for other reasons.

• The SEC regulations focus on minerals that have been handled by armed groups. The flaw in this is that the DRC army, which is one of the worst perpetrators of human rights abuses, extrajudicial killings and sexual violence, is not classified by the State Department as an 'armed group'. Perversely, this means that tantalite that has passed through the DRC army's hands could be imported into the US and legitimately labeled 'conflict free'.

• Activists in rich countries who advocate for consumer boycotts of products that cannot be 100% verified as being free of coltan from Congo assume that western consumers remain the most important in the world, and therefore have the power to change corporations' sourcing practices. Markets in rich countries for electronic goods will remain important, but in terms of size they have been overtaken by developing country markets, e.g., there are more mobile phones in Africa than the US, and China has double the number of internet subscribers than the US. Activists of the future must work out how to engage with developing country consumers and corporations (especially metals processing and manufacturing firms from China), and get them to care about the origin of commodities.

Thanks to Michael Nest for taking the time to chat about Coltan. It's well worth your time to read.

Sent with Reeder