How to Eliminate Malaria

Sri Lanka is the latest country to be declared malaria free by the WHO.

How did they do it?

According to the New York Times:

In 2000, outside the rebel-controlled areas in the northeast, malaria cases began dropping as the government, with donor help, deployed a mix of indoor spraying, bed nets, rapid diagnostic kits and medicines that combined artemisinin, an effective treatment, with other drugs.

The government also screened blood samples drawn — for any reason — in public clinics and hospitals for malaria infection, and officials established a nationwide electronic case-reporting system.malariaeradication

In war-torn areas, the disease retreated more slowly, although the Tigers often cooperated with malaria-control teams because their villages and fighters also suffered.

Nonetheless, in a population of 20 million, it took years to get rid of the last few hundred annual cases. Most were soldiers and itinerant laborers, often from India, who worked in remote slash-and-burn farming areas and in logging and gem-mining camps.

Someone tell African policymakers that bed nets and behavior change are not enough.

Every other region of the world appears to be willing and able to combine vector (mosquito) control with other strategies of containing malaria with success (and enthusiastic donor support). But for some reason mosquito control is still lagging in Africa, even in otherwise strong and stable states. In some instances this has been due to environmental concerns while in others it has been due to the misplaced priorities of public health officials, donors, development agencies, and academic researchers.

The result:

About 3.2 billion people – nearly half of the world’s population – are at risk of malaria. In 2015, there were roughly 214 million malaria cases and an estimated 438 000 malaria deaths. Increased prevention and control measures have led to a 60% reduction in malaria mortality rates globally since 2000. Sub-Saharan Africa continues to carry a disproportionately high share of the global malaria burden. In 2015, the region was home to 89% of malaria cases and 91% of malaria deaths. 

214 million malaria cases amount to lots and lots of lost productivity. Also, losing one Miami every year in deaths is simply unacceptable.

More on this here. 

Mozambique may have squandered up to $2b of borrowed money

Public Finance is emerging to be one of the biggest development challenges of our age. Here’s Africa Confidential on Mozambique’s hidden loans, which may amount to more than $2b.

Screen Shot 2016-05-12 at 1.38.32 PMSources close to Rosário Fernandes, ex-head of the revenue authority, the Autoridade Tributária de Moçambique, have told us of systematic diversions of taxes straight into the pockets of the Frelimo elite, especially in the later years of President Guebuza’s term of office, when he exercised enormous patronage. Massively inflated contracts were commonplace. The latest to emerge is the extravagant, nearly complete, Bank of Mozambique building in Maputo, which boasts a helicopter landing pad on the roof. Originally estimated to cost $90 mn., the final cost is reckoned at at least $300 mn., with kickbacks and ‘commissions’ accounting for the cost inflation, say Frelimo sources.

Guebuza engaged in an ultimately doomed attempt to extend his term of office, which ended in October 2014, and this partly explains the extraordinary scale of his liberality towards loyalists, sources formerly close to him told us (AC Vol 53 No 18, The Putin option). The schemes became increasingly brazen, and the creation in 2013 and 2014 of three companies – Empresa Moçambicana de Atum (Ematum), Proindicus and Mozambique Asset Management (MAM) – was the culmination of this programme. The companies, which received the totality of the $2 bn. now owed by the state, were mainly in the field of maritime security, even though it was the intelligence and security services that provided the management. They bypassed parliament, illegally, and defence procurement, effectively privatising, as one commentator put it, national security while lining the pockets of the elite into the bargain. Yet the ill-equipped companies could not cope and quickly collapsed. Ematum, which originally claimed to be focused on tuna fishing, is no longer operating its few licensed vessels because it cannot pay salaries (AC Vol 56 No 24, Nyusi’s nightmare).

Kenya, Zambia, among others, have also borrowed enormous amounts of money that have not been properly accounted for. Several of these countries have recently gotten cover from the IMF that all is well. But the IMF has strong incentives to save face and maintain confidence that it does its job.

If Mozambique could do it, what stops more sophisticated treasuries elsewhere on the Continent?

I am increasingly convinced that Africa’s newfound love with international creditors is a bond bubble waiting to happen. The 1980s and early 1990s sucked. And we might be headed for a repeat if the African states floating eurobonds continue on the same path.

This graph doesn’t tell us what you think it does (Because stateness matters)

You probably saw this graph in your undergraduate development class — almost invariably as a demonstration of South Korea’s massive growth relative to countries that were allegedly at similar levels of “development” in the early 1960s.

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But were these countries really at the same level of development as South Korea?

The simple answer is no.

And to know why you need to read States and Markets: The Advantage of an Early Start:

A longer history of statehood might prove favorable to economic development under the circumstances of recent decades for several reasons. There may be learning by doing in the ways of public administration, in which case long-standing states, with larger pools of experienced personnel, may do what they do better than newly formed states. The operation of a state may support the development of attitudes consistent with bureaucratic discipline and hierarchical control, making for greater state (and perhaps more broadly, organizational) effectiveness. An experienced state like China seems to have been capable of fostering basic industrialization and the upgrading of its human capital stock even under institutions of government planning and state property in the 1960s and 1970s, whereas an inexperienced state like Mozambique sowed economic disaster when attempting to pursue similar policies a few years later. Such differences may carry over to a market setting — contrast, for instance, the late 20th century economic development of Japan and South Korea, modern countries with ancient national histories, with that of the Philippines, a nation that lacked a state before its 16th century colonization by Spain.

Development is not just about income. It also involves a lot of intangible socio-political variables. Going back to the graph, a key difference in 1960 between Ghana, India, and South Korea was the degree of coherent stateness. On this measure South Korea was way ahead of its developing country peers.

For more on this Dani Rodrik has a delightfully concise take on how South Korea and Taiwan grew rich.

Even within Africa, historical stateness makes a difference in development outcomes. A neat recent example can be found in Ethiopia’s ability to build a light rail in Addis in record time as Nigeria floundered.

Some Africanist inside baseball

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Former HIPC countries are back in the red

The Journal reports:

Mozambique was one of the biggest benefactors of debt forgiveness, with its debt slashed from 86% of gross domestic product in 2005 to 9% the next year. The country has built it back up since then to 61% of GDP.

Ghana’s debt was 82% of GDP in 2005 just before the international community forgave about half of it. It’s now up to 73% of GDP and growing, according to the IMF.

The burgeoning debt burdens are putting more pressure on African budgets. The cost of servicing Ghana’s debt will consume nearly 40% of government revenue this year, according to an analysis by Fitch Ratings — twice what is considered sustainable under the rule of thumb used by the IMF and many analysts.

More on this here and here and here.

Oct 10, 1957: Eisenhower apologizes to Ghanaian Minister kicked out of a Howard Johnson’s restaurant

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Time Magazine quoted Komla Agbeli Gbedemah, the Ghanaian Finance Minister as saying:

“If the Vice President of the U.S. can have a meal in my house when he is in Ghana,” (he had entertained Vice President Nixon during his tour of Africa the previous spring), “then I cannot understand why I must receive this treatment at a roadside restaurant in America.”

Eisenhower was quick to diffuse tensions over the incident in order to get ahead of Soviet criticism over the ugly overt racism of 1950s America.

White House summits over racism are not a new thing, after all.

Africa’s looming debt crises

The 1980s are calling. According to Bloomberg:

Zambia’s kwacha fell the most on record after Moody’s Investors Service cut the credit rating of Africa’s second-biggest copper producer, a move the government rejected and told investors to ignore…..

Zambia’s economy faces “a perfect storm” of plunging prices for the copper it relies on for 70 percent of export earnings at the same time as its worst power shortage, Ronak Gopaldas, a credit risk analyst at Rand Merchant Bank in Johannesburg, said by phone. Growth will slow to 3.4 percent in 2015, missing the government’s revised target of 5 percent, Barclays Plc said in a note last week. That would be the most sluggish pace since 2001.

The looming debt crisis will hit Zambia and other commodity exporters hard. As I noted two years ago, the vast majority of the African countries that have floated dollar-denominated bonds are heavily dependent on commodity exports. Many of them are already experiencing fiscal blues on account of the global commodity slump (see for example Angola, Zambia and Ghana). This will probably get worse. And the double whammy of plummeting currencies and reduced commodity exports will increase the real cost of external debt (on top of fueling domestic inflation). I do not envy African central bankers.

Making sure that the looming debt crises do not result in a disastrous retrenchment of the state in Africa, like happened in the 1980s and 1990s, is perhaps the biggest development challenge of our time. Too bad all the attention within the development community is focused elsewhere.

A Commentary on Research Priorities in Development Economics

Over at the Bank’s Future Development blog, Princeton Economist Jeffrey Hammer writes:

The Chief Minister posed serious questions that have traditionally been the bread and butter of the economics profession. Unfortunately, we are not even trying to answer them any more. The specific question was “Should I put more money into transport? Infrastructure (power, roads, water)? Law and order? Social services? Or what? And where am I going to get the money?” What questions could be more solidly part of the core of economics than these? Unfortunately none of these were even remotely the focus of the “evidence-based” policy making discussed.

Almost all of the cases analyzed were  single, simple policy “tweaks” that were, first of all, isolated from the broader market context in which they occurred and, second, had no conception of opportunity cost – what we would have to give up to pursue these things? We had an answer to “how to improve a public food distribution system” but even with a precise answer (to whether a tweak would work) we had no idea whether the substantial amount of money funding such a system is a good idea. Maybe the Chief Minister would be better off improving education or road networks or police or rural electricity. Some of these alternative policies could have more impact on food consumption than food distribution if we thought about how the world worked. Getting food to market securely (roads, better cold storage, trustworthy police and safe roads – this is Pakistan, which no one seemed to notice) may increase food availability much more than any tunnel-visioned food program Or not – maybe the food distribution system is better. We just don’t know. And none of us “experts” are trying to find out.

When someone says “we should have more “X” because we have evidence that it works”, the response should be “compared to what?” What should we cut in order to promote your particular interest? My hobby horse these days is more sanitation in South Asia. I should have to defend it against (at least) a few alternatives.

What’s your justification for your latest hobby horse?

My take on the gap highlighted by Hammer is that what is good for reviewers is seldom useful to policymakers. The incentive for academics is to publish. And this will always be reflected in the design and implementation of interventions headed by academics. This is not necessarily a bad thing [For obvious reasons we should firewall academic research from the actual process of policymaking. The latter should be the political process that it is, albeit informed by the former]. I think the widespread acceptance of rigorous evidence-based policymaking has been a net benefit for the developing world. What it means though, is that the “public sector” development research community — i.e. the IMF, the World Bank, & host country research institutes — should do more to ensure that funding for hyper-targeted interventions do not detract from broader macro research (like, when and why did the rain start beating Ghana?)

However, in the long run, developing countries will be better served by having more and more of their own/country-based politically relevant macroeconomists.

This is because answering the types of questions posed by Hammer requires one to also take a political stand (on account of a lack of consensus among economists). Economists who can’t do this will invariably resort to “technical” solutions that can be perceived as “apolitical” by both host governments and the sponsoring foreign development agencies. Again not necessarily a bad thing, just a reflection of the politics of knowledge production.

H/T William Easterly.

The potential impact of a Chinese slowdown on Africa’s economies

The FT reports:

For Africa’s non-oil exporters, the collapse in crude prices has provided a cushion. But, with many African countries import-dependent, the depreciation of currencies affects inflation and the cost of imports. It will also put a strain on those nations that have taken advantage of investors’ search for yields to tap into international capital markets.

The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years. “In the past, foreign exchange weakness in Africa was largely shrugged off. Economies adapted and found a way to cope with it, but the recent surge in eurobond issuance has been a game-changer,” says Razia Khan, chief economist for Africa at Standard Chartered.

“Now, when currencies depreciate, external risks are magnified, public debt ratios rise, and perceptions of sovereign creditworthiness alter quite dramatically.”

Prof. Deborah Brautigam of SAIS sees the following happening:

  • Prices for African commodities will worsen, then improve. In recent years, China’s slower growth has pushed down prices for gold, crude oil, copper, platinum and iron ore. South Africa’s mining sector was expected to lose over 10,000 jobs due to lower demand
  • Africa will import even more from China. Cheaper Chinese exports will please African consumers while putting Africa’s manufacturers at a further disadvantage. There will be more pressure for tariff protections
  • [L]ow wages in Ethiopia and elsewhere had been attracting significant factory investment from China. With costs now relatively lower in China, the push to relocate factories overseas will slow. This will save Chinese jobs, but postpones Africa’s own structural transformation.

And concludes that:

In the short term it is hard to see how this devaluation can help Africa, notably its productive and export sectors.

The thing to note is that different African countries have different kinds of exposure to China. The commodity exporters (both petroleum and metals) will be hit hard. The effects will be somewhat attenuated in countries exposed primarily through Chinese FDI and infrastructure loans. Domestic fiscal reorganization and resources from the AfDB and other partners should plug a fair bit of the hole left by declining Chinese investments (although certainly nowhere near all of it). And with regard to sovereign debt, a Chinese downturn might persuade the US Central Bank to delay its planned rate hike — which would be good for African currencies and keep the cost of borrowing low.

Lastly, for geopolitical reasons I don’t see China rapidly reducing its footprint on the Continent. In any case, as Howard French makes clear in his latest book, there is a fair bit of (unofficial) private Chinese investment in Africa. Turmoil back home may incentivize these entrepreneurs to plant even deeper roots in Africa and expatriate less of their profits. The net result will be slower growth in Africa. And like in China, slower growth will challenge prevailing political bargains in democracies and autocracies alike.

The Anatomy of Tax Evasion in Africa

Africa Confidential has a great piece analyzing leaked documents from PwC, the professional services firm, showing the various arrangements that enable multinational companies to evade taxes in Africa. You can read the whole piece here (gated).

  • One of the measures PwC advised multinationals to take was to create a wholly-owned Luxembourg-based subsidiary which would hold the rights to intellectual property used by the rest of the group. The rest of the group would then pay licensing fees to the Luxembourg-based subsidiary which, by agreement with the authorities, would be granted tax relief of up to 80%……
  • A second tax avoidance mechanism simply involved the companies becoming incorporated in Luxembourg. In 2010, Luxembourg concluded an agreement with several companies of the Socfin (Société financière) agribusiness group, which was founded during the reign of Belgian King Leopold II by the late Belgian businessman Adrien Hallet. The companies chose Luxembourg as their base and made an agreement under which their dividends were subject to a modest 15% withholding tax, a lower figure than those in force where their farms are located (20% in Congo-K and Indonesia, 18% in Côte d’Ivoire).

The art of hiding profits

Altogether, Socfin subsidiaries in Africa [in Sierra Leone, Nigeria, Liberia, Cote d’Ivoire, and Cameroon] and Indonesia produced 123,660t. of rubber and 380,770t. of palm oil in 2012. The combined turnover of its main African subsidiaries reached €271 mn. in 2013. The list also includes the 100%-owned Plantations Socfinaf Ghana Ltd. (PSG) and Socfin-Brabanta (Congo-Kinshasa). Socfin also holds 88% of Agripalma in São Tomé e Príncipe and 5% of Red Lands Roses (Kenya).

  • A third mechanism involves cross-border lending within a group of companies. Companies registered in Luxembourg are exempt from tax on income from interest.

According to the Thabo Mbeki High Level Panel report between 1980 and 2009 between 1.2tr and 1.4tr left Africa in illicit flows. These figures are most likely an understatement. Multinationals, like the ones highlighted by Africa Confidential, accounted for 60% of these flows.

Alex Cobhan, of the Tax Justice Network, has a neat summary of the various components of illicit financial flows (IFFs) and how to measure them. He also proposes measures that could help limit IFFs, including: (i) eliminating anonymous ownership of companies, trusts, and foundations; (ii) ensuring that all bilateral trade and investment flows occur between jurisdictions which exchange tax information on an automatic basis; and (iii) making all multinational corporations publish data about their economic activity and taxation on a country-by-country basis.

Alex Cobham blogs here.