Why has economic growth reduced poverty in some African states but failed in others?

This is from an excellent paper by Rumman Khan, Oliver Morrissey and Paul Mosley:

Between 1990 and 2012, for most of the developing world, poverty has halved or more than halved except in sub-Saharan Africa (SSA). The simple poverty headcount fell from about 60% to 15% in East Asia; 50% to 25% in South Asia; 20% to 10% in Latin America; but only from 57% to under 43% in SSA (Beegle, Christiaensen, Dabalen and Gaddis, 2016: 21- 22). This is despite more than a decade of impressive growth in SSA, averaging 5-6 per cent per year since the late 1990s (Devarajan, 2013: S9). Some countries did (almost) halve poverty, such as Ghana (McKay and Osei-Assibey, 2017) and Uganda (Kakande, 2010), and many achieved significant reductions. In contrast, populous countries such as South Africa and Nigeria, on the available evidence, have not achieved significant poverty reduction.

The authors note that the effects of growth on poverty reduction across Africa has been bimodal. And this is their explanation:

povertyTo explain variation within SSA in poverty reduction, we consider aspects of colonial experience associated with the emergence of differing potential for redistributive policies to emerge after independence. Following the approach of Myint (1976) and others, we classify SSA countries into two groups according to the economic strategies used by the colonial authorities, using pre-independence data on factors such as inequality, land ownership by Europeans and political participation by Africans (the process is detailed in Appendix A, with validation by cluster analysis). In smallholder production economies, African agricultural smallholders had economic and some political participation. In contrast, extractive production economies dominated by foreign-owned mines and large-scale farms fostered the emergence of an elite politics characterised by urban bias and capital-intensive production technologies. During the colonial period African economies became clustered around a bimodal structure, which provided better opportunities to the poor in countries whose production was based on the development of labour-intensive smallholder exports than in countries whose growth strategy was based more on capital-intensive mines and large farms. We then test if the growth elasticity of poverty differs between these two groups of countries, using available (PovcalNet) poverty data since 1985, noting that mean growth rates for the two groups were very similar. The analysis shows that the smallholder group significantly outperformed the extractive group, smallholder experience is a significant predictor of poverty reduction, and inclusion of other potential explanatory variables does not alter the conclusion.

I recommend you read the whole paper (including the very rich appendix).

African countries account for over 45.6% of global mobile money activity

This is from Wiza Jalakasi on Medium:

There is nowhere else in the world that moves more money on mobile phones than Sub-Saharan Africa

The region is currently responsible for an astonishing 45.6% of mobile money activity in the world — an estimate of at least $26.8 billion in transaction value in 2018 alone — this figure excludes bank operated solutions.

Mobile money operators like MTN, who also own the mobile network, typically charge in between 0.5–3% for their various digital services, a small price to pay for the convenience and luxury.

The whole thing is worth reading if you want to know about the current state (and future) of mobile money on the Continent.

Africa-China Fact of the Day

This is from the South China Morning Post:

The number of students globally joining Chinese universities surged sixfold in the 15 years to 2018, rising from 77,715 in 2003 to 492,185 last year, according to the Chinese Ministry of Education.

Over the same period, the number of African students in Chinese higher-education institutions increased an astounding fortyfold, jumping from about 1,793 in 2003 to 81,562, last year, according to the Chinese education ministry’s statistics.

With that increase, Africa had the most students in China of any region after Asia, which sent 295,043 students to Chinese universities last year.

The Future of Tax Administration?

Low-income states struggle to collect taxes. And with low fiscal capacity comes the inability to spend any money on vital public goods and services. Take Nigeria, Africa’s biggest economy. The country struggles to collect income tax, and heavily relies on revenues from oil (58.1% of revenues in 2018) and indirect taxes. Nigeria also spends precious little on its people. In 2018, general public expenditures added up to a paltry 10.9% of GDP (believe it or not, Nigeria is a libertarian paradise!). In comparison, public expenditures in Kenya amount to about a quarter of GDP. In 2018, income tax accounted for 47.9% of Kenya’s total tax revenue haul.

The demand for public expenditures will only continue to rise as African countries get richer. Overall, government expenditures as a share of GDP tend to rise with income. For instance, in 2017 the expenditures among OECD states ranged from a low of 26% of GDP in Ireland to 56.4% in France. It goes without saying that any future increases in government spending in countries like Nigeria will require ever more efficient means of tax collection. But such moves will likely be hampered by the illegibility of taxpayers.

Enter Russia. According to the FT, Moscow is pioneering real time tax administration:

taxrusStanding in front of a huge video wall, Mikhail Mishustin, head of the tax service, prepares to show off its capabilities. “Where did you stay last night?” he asks. When I reply, his staff zoom in on a map to Hotel Budapest on the screen. “Did you have a coffee?” His staff then click on the food and drink receipts in the hotel from the previous evening. “Look, it sold three cappuccinos, one espresso and a latte. One of those was yours,” Mr Mishustin declares triumphantly. He was right.

This is the future of tax administration — digital, real-time and with no tax returns. The authorities receive the receipts of every transaction in Russia, from St Petersburg to Vladivostok, within 90 seconds. The information has exposed errors, evasion and fraud in the collection of its consumption tax, VAT, which has allowed the government to raise revenues more quickly than general Russian economic performance.

The new system is directed more at shopkeepers than oligarchs. Russia still scores poorly on international league tables of corruption, being ranked only 138 out of 180 on the Transparency International corruption perceptions index, with concerns including cronyism, a lack of independent media and a biased judiciary. But reducing tax evasion among ordinary Russians and highlighting corrupt tax officials have helped raise revenues and clean up the system.

Reasonable people should worry about the potential misuse of these government powers. But remedies to this problem must be tempered with an understanding of the deep structural barriers to poverty alleviation caused by low fiscal capacity (not to mention a weakened fiscal pact between citizens and their governments).

If no taxation without representation is true, then no representation without taxation must also be true.

Finally, as correctly noted in the FT piece, technology cannot fix the problem of tax avoidance by the politically-connected. If Russia’s system catches on in low-income countries, it will most likely be effective in widening the tax base among diffused average taxpayers. The hope then would be that higher levels of tax compliance among average taxpayers will create political pressure for the same from the big fish.

Nigeria’s President Buhari sets himself up for failure in second term

This summary of Nigerian president Muhammadu Buhari ‘s cabinet picks says it all:

With an extra five members, stuffed with party loyalists and an average age of 60, President Muhammadu Buhari‘s new ministerial team cannot be accused of exuding dynamism or imagination. Announced two days after about a dozen people were killed in the capital when Shiite protestors clashed with armed police, the composition of the new government reinforced the sense of a lack of executive urgency as the country’s national security crisis was spiraling out of control.

The list reinforces the view that President Buhari’s second term will blike his first: tortuously slow decision-making, a reluctance to sanction bad performance in the security services or in the ministries, personal loyalty trumping competence and a tolerance for politicians facing serial corruption charges.

…. The youngest nominee at 46 – five years older than France’s current president – is Ali Isa Ibrahim Pantami (Gombe), a world class technology expert and trained Imam who has led the National Information Technology Development Agency since 2016.

The median age in Nigeria is 17.9 years (which is not to say that cabinet ministers should be in their twenties).

The problem with having such an old cabinet is that ministers are likely to employ equally old lieutenants, with the outcome being that everyone in government ends up being either too tired to put in the much needed work or too busy with their personal “businesses”.

The trouble with Nigeria is simply and squarely one of leadership.

Nigerians of Guangzhou: Institutional Adaptation in a Foreign Land

This is an old piece that is nonetheless fascinating:

Large-scale Nigerian migration to China began in the aftermath of the 1980s Deng Xiaoping reforms, which opened China to the international community. The first wave of Nigerian migrants to China arrived in the late 1990s.

…. The Nigerian community in China has elected officials who preside over matters affecting their members. The post of ‘President General’ is an elected position, in line with a Constitution that gives anyone holding office term limits of two tenures. As of March 2016, the President General had completed the tenure of his predecessor who stepped down and another election was planned towards the end of the year. The President General organizes the community, ensuring that safety, representation and support are accessible. The Nigerian migrant community is also made up of sub-communities between which the President General solves power imbalances.

….. There is an informal justice system within the Nigerian community in China that facilitates dispute resolution at a micro level—which, practically, the Chinese government cannot enforce due to the clandestine existence of many individuals. In my interview with Mr. T (not real name), he stated that the Nigerian community has a task force that handles policing on behalf of the community.

The justice system is presided over by executives (judges) who settle cases brought before them. According to a member of the community, the judges are elected and not appointed. They are often people well respected within and outside the community; as a result, people obey their directives.

Read the whole thing here.

How quickly can you regrow a forest?

Apparently, 20 years.

Here’s evidence from Brazil:

reforestation….. Salgado was to take over his family’s sprawling cattle ranch in Minas Gerais—a region he remembered as a lush and lively rainforest. Unfortunately, the area had undergone a drastic transformation; only about 0.5% was covered in trees, and all of the wildlife had disappeared. “The land,” he tells The Guardian, “was as sick as I was.”

Then, his wife Lélia had an idea: they should replant the forest. In order to support this seemingly impossible cause, the couple set up the Instituto Terra, an “environmental organization dedicated to the sustainable development of the Valley of the River Doce,” in 1998. Over the next several years, the Salgados and the Instituto Terra team slowly but surely rebuilt the 1,754-acre forest, transforming it from a barren plot of land to a tropical paradise.

Now a Private Natural Heritage Reserve, hundreds of species of flora and fauna call the former cattle ranch home. In addition to 293 species of trees, the land now teems with 172 species of birds, 33 species of mammals, and 15 species of amphibians and reptiles—many of which are endangered. As expected, this rejuvenation has also had a huge impact on the ecosystem and climate. On top of reintroducing plants and animals to the area, the project has rejuvenated several once dried-up springs in the drought-prone area, and has even positively affected local temperatures.

forestcover

Here is the Guardian story.

Perhaps there is hope for countries like Nigeria (see graph) to eventually reverse the deforestation trends across the Continent over the last five decades.

Urbanization might help in the medium-to-long term, although its effects will be moderated by what happens to agricultural productivity. Climate change will matter, too. Finally, Kenya and Ethiopia provide suggestive evidence that the Continent’s ongoing population explosion might not decimate its forests after all. On Nigeria, it would be interesting to determine if the decline in forest cover is due to population growth or climate change effects in its central and northern regions.

What explains the low turnout in Nigeria’s 2019 presidential election?

Consider this:

At 35 per cent, the turn-out for Nigeria’s general election in February was the lowest for any presidential (and parliamentary) ballot since democracy succeeded military rule twenty years ago.

Screen Shot 2019-04-28 at 11.14.16 PM.pngAccording to the International IDEA electoral turnout database, Nigeria’s turnout in the February presidential election was the worst recorded among African states (Click on image to enlarge. Figures indicate the most recent presidential election). That is, it was lower than even in dictatorships where presidential elections are often pro forma exercises designed to stroke autocrats’ egos.

Given what is at stake, one would have expected Nigerian elites to do all they could to make sure that their voters made it to the polls. The fact that they did not suggest a major political market failure, or specific interventions by powerful actors to keep voters from the polls.

Adewale Maja-Pearce, writing in the LRB, provides one possible explanation:

Oshodi is one of the big markets in central Lagos with many Igbo traders. To their exasperation, Tinubu shut it down two days before polling, while he strolled around protected by ‘security agents’, i.e. police. This show of power – which had been preceded by threats of new ‘taxes’ on the traders if they proved ‘stubborn’ – prefigured what was to happen when voting began. A lengthy complaint by PDP agents from several of the polling stations described how ‘hoodlums and miscreants led by Musliu Akinsanya … took over the conduct of the election at the polling units … with arms and ammunition.’ They carried other ‘dangerous weapons such as machetes, charms and amulets’ but the police made no attempt to arrest them. Independent observers concurred, as did YouTube, where you can see the ‘hoodlums and miscreants’ casually trashing ballot boxes while voters flee. In other parts of the state many voters simply stayed at home. The result was that Lagos reported the lowest turnout of any state at just 17 per cent of almost seven million registered voters.

I recommend reading the whole thing. It is a fantastic meditation on the state of Nigeria’s electoral democracy.

You would think that voters in Lagos, the wealthiest state in Nigeria (with a sizable revenue base) would have more skin in the game, and therefore register a higher turnout rate. However, Nigeria is no different than most low-income democracies where turnout rates among relatively poorer voters is often higher than among the rich.

Kasara and Suryanarayan explain why this is so:

The conventional wisdom that the poor are less likely to vote than the rich is based upon research on voting behavior in advanced industrialized countries. However, in some places, the relationship between turnout and socioeconomic status is reversed. We argue that the potential tax exposure of the rich explains the positive relationship between income and voting in some places and not others. Where the rich anticipate taxation, they have a greater incentive to participate in politics, and politicians are more likely to use fiscal policy to gain support. We explore two factors affecting the tax exposure of the rich—the political salience of redistribution in party politics and the state’s extractive capacity. Using survey data from developed and developing countries, we demonstrate that the rich turn out to vote at higher rates when the political preferences of the rich and poor diverge and where bureaucratic capacity is high.

 

On Jumia’s IPO on the NYSE

This is from Quartz:

jumuiaJumia, the largest e-commerce operator in Africa, has today (April 12th) launched its landmark initial public offering (IPO) on the New York Stock Exchange.

The IPO marks a pivotal fork in the company’s journey since first launching operations in Nigeria in 2012 and expanding over time to 14 African countries with businesses across several verticals including food delivery, real estate, logistics, hotel and flight bookings.

The IPO priced the stock at $14.50. On Tuesday it closed at $43.04. Jumia started operations in Nigeria in 2012 but now has big markets in Cote d’Ivoire, Egypt, Kenya, Morocco, and South Africa. The firm is registered in Germany. South Africa’s MTN remains its largest shareholder.

In my view the most exciting thing about the listing is that it could result in the allocation of significant amounts of capital that is needed to unlock the Continent’s online retail market and link it to the wider world market. According to the FT: 

…. mobile broadband penetration in Africa was 32 per cent, or 399m subscribers, in 2017. This was expected to rise to 73 per cent by 2022, to more than 900m subscribers.

The company said that less than 1 per cent of retail sales in the countries it operated in were conducted online, against 24 per cent in China, a sign of how undeveloped the African online market was.

I also foresee African regulators moving to force Jumia to have more of its operations domiciled on the Continent — both to create jobs and for tax purposes. The company CEO recently erroneously claimed that African countries do not have enough developers to justify the fact that its development office is in Portugal (and headquarters in Germany).

More on this here.

China & Civic Architecture in Africa

China just finished a 150 million Yuan four-year project to build Burundi a new presidential palace in Bunjumbura. This is but one of many installments of China’s ongoing influences on civic architecture on the Continent. The Burundian presidential palace is grand, and sitting on an elevation appears to have been designed to project the occupant’s power. While likely not the best use of that much money in Burundi, it is an important investment in the physical manifestation of Burundian stateness.

Other major civic buildings on the continent funded and (to be) built by China include the African Union headquarters in Addis Ababa, Ethiopia, the ECOWAS headquarters in Abuja, Nigeria, and Senegal’s Museum of Black Civilizations in Dakar.

dakarmuseum.jpg

The Museum of Black Civilizations in Dakar, Senegal

Concerns over costs (and espionage) aside, one of the under-appreciated effects of Sino-Africa relations in China’s continuing influence on African architecture. From train stations, to hotels, to high-rise apartment blocks, to libraries, China’s influence is making an indelible mark on Africa’s landscape. At the moment much of this appears to be cut-and-paste jobs with little, if any, African influence. But it is ineluctable that over time many of these foreign designs will be infused with local sensibilities and tastes in the continuing process of architectural evolution on the Continent (no more fake marble and chandeliers please!).

It is fair to say that the state of civic architecture in many African states is wanting. Many civic structures exist as physical embodiments of the malaise afflicting the African state.  The last golden age of public buildings died with the independence generation. The era’s designs focused on function, but also the implicit desire to project state power — Dar es Salaam’s austere public buildings with their long hallways and exposure to the elements (for ventilation) quickly come to mind. The economic crises of the long decade (1980-1995) virtually stalled much of the region’s architectural evolution as far as civic buildings were concerned.

The current iteration of Sino-African relations is changing this. More capitals (sub-national, national and regional) are seeing the construction of civic buildings befitting their stature. The influence of these developments will likely travel beyond their aesthetic impacts on Africa’s architectural landscape. Civic buildings are also monuments to the idea of the state.

 

Is China Doomed to Fail in Africa?

This is from Wilson VornDick, a commander in the U.S. Navy Reserve, writing in the National Interest: 

It is unclear whether China could handle the financial repercussions of a larger, more systemic default or debt-forgiveness program across the African continent. Seeking relief, debtors to China would likely overwhelm existing mechanisms, like international arbitration, or China-backed forums such as the Export-Import Bank of China , China Development Bank , and Asian Infrastructure Investment Bank . More importantly, debt restructuring, recoupment, and, in the more extreme case, seizure may not be viable, reasonable, or sustainable for Chinese interests or presence continent-wide. Just such a dire economic scenario might push China to use its nascent military force to protect or even seize its interests. Looking back at the previous period of Great Power Competition more than a century ago, leveraging military might to force repayment was commonplace. The U.S. military made multiple incursions into Caribbean and South American nations as did the Western powers in Africa and Asia.

It is reasonable to assume that China would have little or no experience in any dire economic contagion across Africa. The one primary example, the take-over of Hambantota Port, was an isolated incident during calmer times, before the financial uncertainty stoked by a slowing global economy or the current U.S.-China trade war. Moreover, the port takeover has now become a watershed moment in Chinese behavior that has attracted significant international scrutiny and ire.

More broadly, VornDick articulates the potential merits (from a U.S. standpoint) of a “Let China Fail in Africa” strategy as part of Washington’s Great Power global competition with Beijing. The whole argument is worth a read.

A glaring omission in VornDick’s analysis, however, is the interests and roles of Africans in this whole game (note that this is a gap in the “China-in-Africa” genre more generally).

chinafricaA key weakness that I see in the “Let China Fail in Africa” strategy is that it vastly underestimates the extent to which Africans will be willing to work hand in hand with China to make the Sino-African relationship work.

China’s forays in Africa is creating complex tapestries of personal and institutional relationships that will become ever harder to undo. For example, in both electoral democracies and autocracies in the region, citizens have come to expect political elites to provide public goods — many of them financed and built by China. Demands for more of the same will likely only get stronger. The desire to secure funding for more public goods will likely push African elites even closer to Beijing. Furthermore, at a time when the U.S. is working hard to signal that Africans are not welcome on its shores, tens of thousands of African students are earning degrees in Chinese universities. Many of these students will probably go back to their respective countries and maintain ties with Chinese business and academic contacts. These kinds of investments in soft power will matter in the long run.

Global diplomacy is not just about crass material interests. It is also about values and shared commitments to respectful mutual cooperation. If African elites become convinced that they are better off bandwagoning with China, they will do so.

And most importantly, having made that choice, they will make specific investments (whether deliberately or not) to make their nations ever more closely allied with China. They will adopt specific technologies. Establish specific market relationships. Acquire specific weapons systems. And yes, more of their students will learn Chinese and go on to earn degrees in China. The closer the military, economic and “soft” ties, the more African elites will be willing to make costly investments in order to ensure that their respective states’ relationships with China work.

A good lesson in this regard is francafrique. The relationship between France and its former colonies in Africa is not winning any awards soon. But for almost six decades African elites have remained committed to the relationship and worked to give the French military free rein in the region and French firms access to vast natural resources. The French state, in turn, has worked to prop up the same elites despite massive economic and political failings.

The point is: China’s failure in Africa (if it comes to pass) is not what will determine the future of Sino-African relations. What happens before any such failure will likely matter more.

Here’s why African states value their economic and political ties with China

This is from an excellent essay by  in Foreign Policy:

…. when former U.S. Secretary of State Rex Tillerson raised a cautionary alarm for Africans to be wary of Chinese predatory investments just a few months ago, his lecturing tone did not go over well. Many African leaders reacted negatively to the underlying assumption that they were not qualified to figure out profitable from predatory investments on their own.

Sierra Leonean President Julius Maada Bio rebuked the warning as misguided, saying, “We are not fools in Africa. … At difficult times, when we needed help most, China was there for us.”

The expansion of Confucius Institutes across Africa is another part of the push worth engaging with. With more than 50 Confucius Institutes teaching Chinese language, as well as the Communist Party’s version of Chinese history and culture, more and more Africans have the chance to study Chinese and travel to China on cultural scholarships. In 2015, approximately 50,000 African students attended Chinese universities, compared with 40,000 in the United States and the United Kingdom. Elementary and middle schools in several African countries are now offering Mandarin as a foreign language.

I highly recommend that you read the whole thing.

H/T Judd Devermont

Are Metros Overrated?

This is from a story in The Guardian:

The ITDP bemoans Africa’s obsession with metros. Lagos in Nigeria – the largest city in the world without a functioning mass transit system – has been trying to build a metro since the 1980s. In the latest of many incarnations, the project was supposed to begin operations in 2012 at a cost of $2.4bn (£1.9bn). Six years after the supposed start date, construction is “nowhere near complete”, says Kost.

Abidjan, the economic capital of Ivory Coast, began construction of a metro last year. The French-financed and -built line is projected to carry 500,000 passengers a day at a cost of $1.7bn. Dar es Salaam’s bus system, by contrast, has capacity for 400,000 people and cost less than a 10th of that – about $150m.

Addis Ababa in Ethiopia opened a Chinese-built and -operated light rail line last year at a cost of $475m. Shenzhen Metro Group has a deal to run it for the first five years.screen shot 2019-01-09 at 4.03.54 pm“With a metro, an international firm will often just parachute in its own system,” says Kost. “Bus rapid transit allows existing stakeholders to get involved. That’s what we did in Dar es Salaam and what we’re planning in Nairobi, where the bus bodies will be built in the city and local operators will look after tickets, fare collection and IT. It’s good for the development of the local economy.”

Regular readers know that I have a bias for Kost’s argument. Read the whole thing here.

H/T Dina Pomeranz.

How can African governments increase their bargaining power vis-a-vis China?

Folashade Soule has answers.

First, a reminder that African governments are not uniformly bad at negotiating with China:

….when you look closely at what happens on the ground, some African countries are much better at negotiating with the Chinese than others. Railway projects in East Africa appear to be a good example. In Kenya, the Standard Gauge Railway is the largest infrastructure project since independence from Britain in 1963. China Eximbank provided most of the finance for the first phase – 472 kilometres of track between Nairobi and Mombasa – at a cost of US$3.2 billion.

In neighbouring Ethiopia, an electric train line from Addis Ababa to Djibouti, which is also Chinese-financed, opened two years ago. The cost for this more expensive type of railway was US$3.4 billion – for 756 kilometres. Kenya claims that its railway cost more for reasons like the terrain and the need to carry higher volumes of cargo. At the same time, however, many believe other issues to have been at play – including failures around the negotiation process.

Second, there are Soule’s suggested remedies:

Involve everyone: When all relevant government departments are involved in a negotiation, it does take longer. The process is more coherent, however, and the resulting project is less likely to breach national regulations.

Empower negotiators: The Chinese often adopt a take-it-or-leave-it approach. In many cases, Africans are not confrontational enough in return. They don’t appreciate that China has a surplus of domestically produced materials they are seeking to offload, for example. Wiser negotiators will play China off against other countries seeking to finance infrastructure projects on the continent, such as South Korea or the United Arab Emirates.

Keep the public onside: China tends to be popular in Africa – more so than the US in around 60% of countries on the continent. Yet the public also see negatives: many think Chinese products are poor quality, while there is a growing perception that dealing with China tends to favour Chinese labourers.

Increase knowledge: African governments are still relatively new to dealing with China; they should take every opportunity to share lessons with one another. There is a role for African universities here. They should set up more centres of Asian studies to close the gap in information and knowledge.

I fully agree.

While it is true that China has geopolitical ambitions in Africa, a lot of Chinese infrastructure plays in Africa are commercial in nature. It is in China’s interest that these projects succeed. That means that African governments could get better deals (in terms of value for money) by doing their homework (on Chinese politics and commercial and institutional architectures) before chasing the money. Similarly, public opinion presents a potential bargaining chip — (the threats of ) transparency and robust public participation should force Beijing’s hand in settling for better deals (from the perspective of African governments). 

All this, of course, is predicated on the assumption that African elites get loans from China to finance infrastructure projects; as opposed to dreaming up projects in order to get loans that then find their way into private bank accounts. 

Read the whole thing here.

H/T Zainab Usman.

The Economics of Weddings in Nigeria

This piece highlights some interesting facts about the wedding industry in Nigeria.

How much do weddings cost?

When an upper-class Nigerian couple throws a wedding, at least 1,000 guests are invited. This equates to about ₦20 – ₦100 million [$55k-$275k], indicating that our celebration culture is nothing short of extravagant.

For perspective:

In India, with 3-5 days set aside to mark the union of two people, a single wedding can earn the economy about as much as $300,000.

Here’s more:

There is evidence that Nigerians’ desire to “flex” has provided a boost to the economy. For example, during the country’s last recession, the entertainment industry continued to expand even as other sectors shrunk. This similar pattern is observed with big-budget weddings. The cost of living has risen, but it hasn’t deterred the big wedding spenders.

And this has had a rippling effect on the rest of the economy.

Today, weddings are major employers of catering services, makeup artists, photographers and so on, directly supporting key growth drivers for any economy- small businesses. For example, a mobile toilets startup estimates that marriage celebrations account for 40% of its revenue. Trickle down economists might have a point. Our booming wedding culture is now supporting so many businesses today that would have struggled to survive in the past.

… Even though Nigerians are still famous for being net importers of many products, the wedding industry appears to be directing more spending within the country’s borders. Designers like Deola Sagoe and Mai Atafo have become favourites among brides for their bridal train outfits, instead of foreign designers like Vera Wang.

Lately I have been thinking a lot about socially-embedded economic sectors on the Continent, and their potential for mass job creation — think housing, agriculture, textiles, logistics, carpentry, funerals, weddings. These sectors provide low hanging fruits for policymakers for value addition and productivity gains. And their social embeddedness ensures that the surpluses are shared across the entire SES spectrum.

Unfortunately, most African governments spend all their energies on attracting FDI that ends up in enclave economies that create very few jobs. And to make matters worse, these sectors also get a ton of subsidies:

For example, multinational companies [in Nigeria] are entitled to tax incentives worth an estimated $2.9 billion a yearthree times more than our entire health budget. By comparison, small and medium-sized businesses and workers in the informal sector face multiple taxes. Regressive tax policies like this work to keep wealth concentrated amongst a few.

FDI is great for capital intensive sectors. But governments should also be thinking creatively about how to promote local (micro) SMEs that touch a wider base of households.

Perhaps its time for the World Bank to consider issuing “An Ease of Doing Business for Local Firms” index.