Tag Archives: development

The private sector is betting that Kenya will survive 2012

16 June 2011

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As I occasionally care to point out, Kenya is making meaningful progress towards institutionalization of government. According to Joel D. Barkan, the Kenyan parliament is the strongest in Africa. Its judiciary has just undergone radical reforms which saw outsiders from civil society appointed to the country’s newly created Supreme Court. The country’s provincial administration (with pith helmets and all), in the past the key tool of executive repression and control, is in its twilight and will be replaced by a devolved system of counties. The counties will elect their own assemblies, governors and will be funded directly from the consolidated fund.

But many fear that all these reforms could go up in flames in next year’s general election. President Kibaki is term limited and will be stepping down. The frontrunner is Raila Odinga. But new electoral rules – requiring a majority of 50% +1 – complicates matters a bit. Ethnic arithmetic point to an inevitable second round which will be closely fought between pro and anti-Raila factions. Raila is perhaps the most divisive figure in Kenyan politics. Most people tend to either love him or hate him, with a passion.

The prospect of another closely fought election has got many observers worried. 2007-08 is still fresh on many people’s minds.

That is why it is encouraging that the private sector is sending signals that they have confidence in the political system. Multibillion Shilling projects in construction, manufacturing and retail such as this and this are signs that businesspeople do not see that much political risk moving into next year.

These investments are also a vote of confidence in the nation’s property rights regime. The outcome of next year’s general election being unclear, it is significant that businesspeople have faith that their investments will be protected regardless of the outcome.

africa is open for business

13 May 2011

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There has been a lot of positive talk about business in Africa lately.

Mckinsey came out with its big report in June 2010. That was followed by the release of Steve Radelet’s Emerging Africa, a story of the 17 African countries that have the political and economic fundamentals right. Most recently the Economist has highlighted the fact that among the top ten fastest growing economies in the world over the next decade, seven will be African.

Keeping in the same vein the innovative African Leadership Academy has organized a conference at the Stanford Institute for Economic Policy Research (SIEPR).

The keynote address this morning was by Jeff Sachs via skype. Sachs noted that microfinance was oversold to the global south and that the current backlash is sort of warranted, but that it is overblown.

He also pointed out, rightfully, that pro-poor growth as currently understood “cannot refashion the economy.”

I oftentimes disagree with Sachs’ proposals for ending poverty, but on this point (and as I have written before) he is right. The eradication of poverty in Africa is contingent on sustainable job creation by SMEs and big business.

Other big names at the conference include the Bank’s Devarajan, Mckinsey’s Leke, Africa.com’s Clarke, Chris Udry of Yale, Paul Romer of Stanford, among others.

The conference website is here.

More on this later tonight (west coast time).

second hand clothes

15 February 2011

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Thanks to a view from the cave I just found out that there is an Oxfam study out there on the effects of second hand clothes (SHC) in the African markets. The findings are largely predictable: the poor benefit from the trade, the trade has created opportunity for fraud and most importantly, it has contributed to the death of local textile industries. The big question then is how to transition from the over-reliance on SHC.

In my view textiles is a sector in which countries would be justified in going nationalist and financing or facilitating the financing of local firms and industries. It is unacceptable that up to 90% of Ghanaians buy second hand clothing despite high unemployment and abundant cotton in the West African region.

Here are some snippets from the Oxfam paper:

The trade has clear consumer benefits. This is especially in countries with low purchasing power, and for poorer consumers, though in many sub-Saharan African countries it seems that almost ALL socio-economic groups are choosing to buy SHC. …. over 90% of Ghanaians purchase SHC.

The trade supports thousands of livelihoods…. These include jobs in trading, distributing, repairing, restyling and washing clothes. Oxfam’s research in Senegal estimates that 24,000 people are active in the sector in that country…. 1,355 people work in formal sector textile/clothing in Senegal.

SHC trade in recipient countries is mainly informal and is poorly regulated. In some instances it has facilitated considerable customs fraud, as new clothing imports have been passed off as used clothing.

textual presence

16 December 2010

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Google has digitized more than 5 million books in a project that also enables users to track changes in scholarly attention to particular topics. I did a few searches and came up with these results. They obviously do not mean much and are only useful in knowing what scholars paid more attention to at any given time.

There was a time when Africa was cooler than Asia

 

 

 

 

 

 

Positive trends: investment outbids aid

 

 

 

 

 

 

institutions beat democracy?

 

the mdgs

21 September 2010

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Since everyone is currently talking about the MDGs and how they may or may not be achieved on time here is a nice piece from Bill Easterly.

According to an Oxfam study, eliminating US cotton subsidies would “improve the welfare of over one million West African households – 10 million people – by increasing their incomes from cotton by 8 to 20 per cent”.

I may not always agree with Bill but I think his basic approach to development is spot on. Just like in most human endeavors (politics, economics, sports) systems based on human goodwill are bound to fail while those based on self-interestedness thrive. There is no magic bullet in development, but there is definitely a better approach than is currently being employed. Lets not forget that aid is supposed to eventually lead to self-reliance.

It is already clear that the goals will not be met by their target date of 2015. One can already predict that the ruckus accompanying this failure will be loud about aid, but mostly silent about trade. It will also be loud about the failure of state actions to promote development, but mostly silent about the lost opportunities to allow poor countries’ efficient private business people to lift themselves out of poverty.

Bono has a slightly less realistic more hopeful take on the progress towards achieving the MDGs.

blair commission on african poverty recommends more billions in aid

13 September 2010

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The Blair Commission set up to find British solutions to African poverty has recommended that the Continent get more billions in aid. There is no doubt that Africa needs all the money it can get, aid cynics’ criticisms notwithstanding. But that money, if it ever comes, should come with new ideas.

Perhaps for a change the money slated for development programs should be channeled as credit to the nascent African middle class. I have previously criticized pro-poor development initiatives for their habit of merely keeping the poor afloat (Think of your average mother of six selling vegetables in a generic African slum). What Africa and its development partners need to do is channel the little development money it has in releasing the talent and aspirations of the middle class to create more jobs. This is not to slight Africa’s poor for lack to talent. It is a mere acknowledgment of the fact that it is the middle class that oftentimes has the education and connections to grow their small start-ups into businesses that create even more jobs.

And in other news, Kenya has struck commercially viable gold. The hunt for oil and gas in the north and north east of the country is still on. One hopes that all the exploration craze will be accompanied by an even greater craze when it comes to investing in Kenya’s human capital.

And yeah, I appreciate the irony in writing about foreign aid and Africa’s vast mineral wealth at the same time.

back in business…

29 August 2010

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Dear readers, sorry for the long silence. I blame it on the super-slow internet connectivity offered by Safaricom in western Kenyan. Back here in Nairobi things are a bit more normal. Over the next few days I shall post a series of blogs that I wrote but never published for one reason or another.

As promised, here is the comparison between Siaya and Bondo.

Siaya is the older town, and has been district headquarters in the wider Alego and Ugenya areas for quite some time. Bondo on the other hand is a “younger” town (I use ‘young’ here loosely, I don’t quite know when it was founded) and only became district headquarters due to the influence of the Odinga family which calls it its home town. A son of the older Odinga, Raila Odinga, is Kenya’s Prime Minister.

The contrast between the two towns is a lesson in African/Kenyan political economy of development. Siaya, lacking a big man in the capital (Aringo was forever in the opposition and Yinda and Weya are total non-starters) has lagged behind Bondo in many respects. Bondo has a teachers’ training college that has recently been made into  a university college. It has a nice tarmac road linking it to Kisumu, the provincial capital. Right now the roads within Bondo are being done. The road linking Bondo and Siaya is also being done. But within Siaya nothing is happening as far as the roads are concerned, despite the sizable motorcycle and matatu traffic. The road linking Siaya and Kisumu is full of pot holes. The lesson here is that it matters to have someone high up in Nairobi.

The similarities, to me at least, are more interesting. Both towns are filled with small scale shops selling the same stuff – small dukas and “supermarkets”, bicycle and motorcycle repair shops, hardware stores, mobile airtime shops etc. Diversification has not taken root in either town. Even the good roads do not appear to have helped Bondo in this respect. There is also a serious shortage of green vegetables in both. I am told the shortages in kales in particular last between August and March (Kenyan entrepreneurs, are you reading?). I asked if there is a close place nearby where one can source vegetables but was told that the best way to go about it is to “import” the stuff all the way from Nairobi.

My two-day focus on this vegetable thing has taught me that the problem appears to be the fact that all the vegetable farming in this area is rain-fed and are therefore highly seasonal. No one has so far bothered to go large-scale and use some irrigation. Digging a borehole or pumping water from a nearby stream is not that hard. The cost of digging a borehole in the village is no more than $ 800. It is not the cost that is prohibitive, it is collective action that remains elusive – even in this ethnically homogenous part of Kenya.

Just as an aside, my experiences in Siaya so far have made me come to the conclusion that poverty and underdevelopment are, to a large extent, a state of mind. I have mingled with a few local people from Nairobi’s upper middle class and even they seem to traffic in the notion that it is the duty of government and God to run their lives.

Urban Poverty

8 July 2010

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This is the kind of story that makes you sick in the stomach. The story is about the plight of women in Nairobi’s slums and focuses on one Ms Kambura:

In 2006, she was gang-raped by four men who infected her with the Aids virus, hardy 100 metres from her one-room home. She had gone to the “toilet” in Athara, one of the open fields that residents of this informal settlement run to for lack of sanitary facilities. It was 8pm, but for residents here, that is late enough to be mugged, raped, even killed by gangs that roam the slums.

Kenyan urban poverty is a tinderbox waiting for a lighter, especially in light of the ever rising income disparities in major towns and cities.

In related news, the business pages of the Nation report that despite the downturn in the housing markets in the developed world home markets in places like Kenya, and Nairobi in particular, are still lucrative.

Currently, the rental market in Kenya is facing an upward pressure as a result of a rising middle class.The demand is believed to be higher than the supply of housing units. Statistics from the government and private sector players indicate that the annual demand for housing in Kenya stands at 150,000 units.This demand far outstrips the supply, which is estimated at about 35,000 units a year. The index shows that investing in Kenya’s housing industry has better returns than in the United States and the United Kingdom.

I wonder if the people at the city councils of Nairobi and other cities ever think of how they could exploit this huge gap between demand and supply to provide housing for their residents and make profits while at it – profits that they can then steal 20% of (if they REALLY have to) instead of resorting to rent-seeking practices like inflating the cost of cemeteries.

Links I liked

8 June 2010

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A nice piece by Moussa Blimpo on Aid Watch highlights the urgent need to improve general conditions at African universities. On a related note, I totally agree with Ugandan journalist Andrew Mwenda’s position that Aid should be more targeted – and perhaps at times even to the middle class – if it is to make much impact in Africa. African development in the 21st century will not come from subsistence farmers and vegetable kiosks in the informal settlements. The Continent needs big business. I am not downplaying the entrepreneural ability of those target by pro-poor development initiatives. Far from that, all I am suggesting is that the better educated African middle class have a higher chance of being able to scale up their enterprises and create the kind of firms that will create much needed jobs in most of Africa.

Also, check out Texas in Africa’s posts on the increasingly authoritarian Rwandan government and the goings on in Kivu on the eastern reaches of the DRC. The Ethiopian Strongman Meles Zenawi seems to have gotten away with sham elections (the Ethiopian economy is doing well enough, I guess, so enough Ethiopians still love him) but it is not clear if Kagame will this August or his next door neighbor Museveni next year. Given Rwanda’s recent history the Rwandans will most likely opt for stability at the expense of an open free and fair democratic process. Whatever happened to Kagame, Zenawi and Museveni being the new generation of “enlightened” African leaders….