Monday, December 8, 2014

Africa must make inclusive growth happen

Blind exuberance and naïve optimism has trumped honest commentary on Africa’s growth and boom story. Do not get me wrong. Africa is on the ascent, economically. The ranks of the urban consumer middle class is growing. There is money to be made in Africa.

For a majority of Africans, the Africa rising narrative is hollow. Africa’s growth is intangible for over half a billion men and women trapped in moribund rural economies. For nearly 70 percent of Africa’s youth who lack skills Africa’s growth is intangible. For the hundreds of millions of women who eke out a living in unproductive agricultural fields and whose small-scale business are starved of credit, Africa rising is empty words.

Zedekiah dropped out of a crowded rural public school at the tender age of 13. His teachers hardly showed up and Zedekiah had never held a textbook in his hands. When he dropped out at class 6, Zedekiah could not read at the level of a middle class urban child in class 3. Semi-illiterate and without skills, he is now 17, married and employed as motorcycle taxi (boda-boda) rider. There are millions of African children like Zedekiah. How much of the Africa rising narrative would teenagers like Zedekiah expropriate?

In many parts of rural Africa, over 60 percent of teenage girls are out of school because their families cannot afford sanitary towels, which cost only $2.50. These girls will join the ranks of millions of Africa’s young and illiterate mothers, vulnerable to disempowering poverty and lack of opportunity.

What does the Africa rising story mean to the soaring number of young Africans who make perilous trips across the Sahara Desert and the Mediterranean Sea, in an attempt to enter Europe illegally? According to the International Office on Migration, over 43,000 young Africans have lost their lives in a desperate bid to cross into Europe since 2000.

In Africa, rising incomes have disproportionally benefited the rich. For a majority of African families, growth in household disposable income has not matched gains in per capita GDP. Thus, to enable inclusive growth and prosperity, African countries must implement responsive policies, deep and sustained public investment in education and skills formation, appropriate industrialization, agriculture and rural infrastructure, affordable urban housing, water and sanitation, and labor market reforms.

Inclusive growth bolsters labor productivity, enhances health and education outcomes. Inclusive growth is the kind that breaks intergenrational poverty traps, expands opportunities in agriculture and manufacturing. Inclusive growth must build assets, create enduring wealth and deepen resilience at the household level.  In their book, The Spirit Level: Why Equality is Better for Everyone, Richard Wilkinson and Kate Pickett show that greater social and economic inclusion is strongly associated with longer and stronger periods of sustained economic growth.

Understanding and tackling the multidimensional nature of inequality and its impacts on different groups in society is critical for inclusive growth and shared prosperity. In his Apostolic Exhortation released in November 2013, Pope Francis wrote; “Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world”.

Nobel Laureate Paul Krugman believes that much of macroeconomics of the past 30 years was spectacularly useless at best and positively harmful at worst. The world needs new economic thinking to drive policies and investments for inclusive growth and participation, not trickle down, in the economy through accountable and transparent governance. Transparency and good governance matters. A recent report “The Trillion Dollar Scandal” released by ONE Campaign reveals that every year an additional 10 million children in sub-Saharan could be educated if corruption was eradicated and 500,000 more primary school teachers could be hired.

Inclusive economic growth is entwined with the political economy. In their book, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James Robinson argue that extractive political and economic institutions lead to economic stagnation and poverty. This is especially true in societies polarized along ethnic or religious lines. Political bias is detrimental to inclusivity; hence we must pay attention to distributional effects of policies on different social groups.

Most of all, Africa must nurture a new generation of economic thinkers to re-imagine the prevailing economic model, which has produced odious growth at the top but failed spectacularly to deliver inclusive growth and shared prosperity.

Monday, December 1, 2014

Falling global oil prices could slow down investment in Kenya’s oil

Global oil prices are spinning out of control. Prices came under intense downward pressure as global output of crude oil outstripped demand, especially this year. The global benchmark, Brent crude oil fell below $70 per barrel, it’s lowest level since 2010.

What caused oil prices to rise to such unprecedented high levels?
You have to go back about nine years ago, to the mid 2000s when oil prices rose steeply owing to the unprecedented global demand caused by China’s meteoric rise. China with a GDP of $17.6 trillion is now the world’s largest economy, putting the United States in second place for the first time in 142 years.

The surge in China’s economic output and energy demand led to a large price spike, with Brent crude price holding steady at over $100 per barrel over the last four years. With what looked like a sustained surge in global crude prices, energy companies were persuaded going after tight oil would be immensely profitable.

Why are crude oil prices plummeting today?
The slowing down in global demand has triggered the inexorable decline in world crude market prices. This is due the slowing Asian economies and chronically slow and deteriorating European Union economies.

Asian economies are slowing down as fallout from “re-balancing” in China. China’s re-balancing will require lowering investment levels, increasing household consumption, which must grow faster than GDP, and reducing the role of the state sector. Several new reports indicate that the European economy is stagnating and is at risk of a deflationary spiral. The European Central Bank has downgraded growth in the euro zone to just 1 percent in 2014. The core of Europe, Germany and France, is in recession.

Another demand-supply influencing factor is the US domestic crude oil production. Domestic crude oil production levels have increased since prices spiked in 2008, exceeding net imports in 2011.
And what has been the global response, if any?

Organization of Petroleum Exporting Countries (OPEC) – a cartel of oil producers that includes Saudi Arabia, Iran, Iraq, and Venezuela – met in Vienna last week with the expectation that it would cut petroleum production to forestall the plunge in oil prices. It did not; a sign that OPEC influence in the global oil market is diminishing or we have entered an era or crude price wars.

Is OPEC instigating a price war with other oil producers, notably the United States, Russia and Brazil? Will OPEC allow global oil prices to continue falling in the hope that many of the newest exploration and drilling operations will prove unprofitable and shut down?

US companies are using horizontal drilling hydraulic fracturing to extract oil from shale formation, techniques that are more expensive than pumping oil from conventional reservoirs. Is that why Abdalla El-Badri, OPEC secretary general, says the best cause of action is to do nothing; just wait and see how the market behaves, hoping that lower prices will discourage domestic production in places like the United States?

But more importantly, how does the plunge in crude oil price affect us here in Kenya?
 Falling petroleum prices will benefit Kenyan consumers and the overall economy. The cost electricity and transportation will drop markedly, causing higher consumption of oil products. Moreover, manufactures will reward consumers with lower prices, lowering inflation and spurring spending. However, in the short term, a glut in crude oil will slow down investments in renewable, clean energy such as wind and geothermal. Increased energy consumption is bad for our climate. It means higher greenhouse gas emissions.

Substantial and pro-longed decline in crude oil prices pauses huge risks for Tullow Oil. Plummeting oil prices could reduce its operating cash flow, reduce the value of its assets and cause development plans to stall. Falling oil prices could compound other risks Tullow already faces, such as long spells of unsuccessful exploration wells, political uncertainty and shifting fiscal and regulatory terrain in all three of the African countries it operates in.

What if OPEC is determined to decimate new investments in places like the US, Canada and Africa by allowing crude prices to fall below $75 per barrel? With crude oil prices in near free fall, can an exploration-focused company like Tullow survive? Will shareholders run for the hills?

But analysts estimate that South Lokichar Basin contains valuable light oil assets that would break-even below $50 per barrel. Keep your eye on crude oil futures.  

Monday, November 24, 2014

Why investing in human capital is imperative

Of the many issues that bedevil Kenya and the region in the 21st century, developing human capital is one of the most urgent. We must therefore prioritize human capital formation.

David Ndii believes we cannot produce skilled workers. In Dr. Ndii’s view, “in countries oversupplied with skilled workers, banks don’t poach tellers from each other. One hundred thousand primary-schooled athletic AK-47 marksmen we can supply for sure.”

The prevalence of stunting is nearly 40 percent. A recent study reported by Save the Children in the report, Food for Thought: Tackling child malnutrition to unlock potential and boost prosperity, shows that compared with normal children, stunted children: score 7 percent lower on math tests; are 19 percent less likely to be able to read a simple sentence at age 8, and 12 percent less likely able to write a simple sentence; and, are 13 percent less likely to be in the appropriate grade for their age at school. The implication is that about 40 percent of kids in every cohort in our school systems is pre-ordained to achieve way below their potential.

Dr. Ndii is right on the money when he says we cannot supply skilled workers because we have not invested in quality teachers. In 2009, African Population and Health Research Center conducted a classroom observation study focusing on math in 72 schools in six districts in Kenya. The students’ mean score in standardized primary 6 math was 47 percent. The mean score for teachers was 60.5 percent, with the lowest teacher scoring 17 percent and highest 94 percent.

We cannot match the prodigious talent pools of the Philippines because in the 21st century high school education is not the birthright of every Kenyan child but a privilege of a few. We have an unconscionable undersupply of high schools. Moreover, the scarcity of secondary and tertiary education resources is a major driver of the corruptible exam-centric education system. We are more concerned about the ability of our children to tick the correct bubble in the multiple choices questions than their ability to think, imagine, innovate and create.

We cannot produce a critical mass of high quality workers because less than 7percent of the children who enter primary school make it to tertiary level. The quality of teaching in our universities is deplorable. According to a study commissioned by the Inter-University Council of East Africa and the East African Business Council, 51 percent of young men and women graduating from our universities are not employable.

We cannot produce high quality graduates because our universities are not accountable for value, relevance and quality. Without resorting to externally imposed accountability systems, universities should be obligated to develop specific and clear goals for student achievement. Universities should collect verifiable data on how students are meeting their learning goals, across all degree programs. The results of such self-assessment should be made available to prospective students and their parents.

If we go on business as usual, pay lip service to education and training, Kenya’s moment will forever tarry. We will always be on the cusp of greatness. Kenya will rise or fall by the quality of its human capital. No length of rail or road or size of harbor or airport or megawatts of power can be a substitute for a dearth of skilled labor, especially in a globalized knowledge economy. 

Kenya must produce highly skilled and engaged citizens in order to compete in today’s globalized knowledge economy. The logic of our current system of education was conceived in the old era of the industrial economy. Moreover, the purpose of our current system of education was designed in the colonial era.

We are not live in the industrial economy and we are not a colony. Hence, there is no room for an unthinking, unquestioning underclass, which must only do as it is told. Educating a work force for a postcolonial, new knowledge economy demands that we prepare our children for an unknown future, to learn how to learn.
When information is a click away on the cellphone, tablet and computer what is the relevance of a content and fact laden curriculum? What is the role of the teacher? What is the value of school?

Kenya’s education system must move up the value chain. The education system, at all levels, must support critical thinking, analytical reasoning, collaboration, problem solving, play, innovation and discovery.

Monday, November 17, 2014

Reform antiquated exam-centric education system

“Exams are a necessary evil”. These words were proclaimed by my high school headmaster annually, to calm terrified and nervous candidates. Back then, these words were incredibly sagacious. Today they sound hollow; a shameful acceptance of a failed education system.

A high-stakes exam-centric education has turned schools into grade factories. Our school buildings, in my view are mausoleums, housing the remains of education. We have murdered the soul of education and defiled the creative proclivity of our children.

The word education is derived from the Greek word educatio, which means bringing up, or raise. Education is about knowledge, skills, values, beliefs, and habits through story telling, debate, learning, training and or research.  

The so-called education is delivered through passive rote learning and regurgitation of facts. It does not matter whether the student can argue a position or express their ignorance or skepticism through precise questions.
Rote learning and didactic teaching is a linear product-oriented approach. The output is measured by achievement in standardized test scores. This grade oriented system is characterized by the absence of independent thinking and an abundance of subservience and a follow the leader mindset.

 Sadly, what happens in our schools is not education. Our schools are obsessed with examination grades. Parents demand high grades. Teachers crave high subject mean grades and headteachers want prestige to drive high enrollment and revenue. Parents and teachers want high grades from students by hook or by crook.

Evidence and examples abound, which demonstrate how the product-oriented education was used by the colonial government to institutionalize rote learning and unquestioning acceptance of facts, discouraging, critical thinking and perpetrating cultural and intellectual subjugation. Half a century after colonialism, the product-oriented, exam-centric education system is still alive. Clearly, the colonialist is no longer here. Whose interest is served by unthinking citizens?

How we are educated offers unsettling insights into the archetypal Kenyan, especially our unquestioning allegiance to ethnic head honchos, impunity and disdain for analytical reasoning and robust public debate. How we are educated explains our winner take-it-all attitude and the belief that our competitors are enemies to be humiliated. It explains the primordial and contemptible zero-sum ethnic calculus of our politics.  

The didactic, fact-based and exam-centric approach to education has its origins in the era of scarcity of facts and information. Books and other learning resources were rare, the Internet was not even imaginable.Today we are inundated with information and facts. Facts and information are a click away, on our mobile phones, tablets and computers. You do not need school or college to memorize facts or get information.

We must re-appropriate education to optimize curiosity, creativity and innovation. Our schools must foster playful exploration and emancipate education from rote learning and the tyranny of a didactic, fact-based and exam-centric approach. Education must be a recursive process of learning, sense-making, collaboration, application, discovery and re-learning.

Primary education must be the first rung on the ladder, where we learn how learn, to learn how to think, to learn how to ask questions, to learn how to play, how collaborate and to learn how to be moral, ethical citizens. Moreover, primary education must not be about how to take a meaningless test, which do not challenge their wonderful creative and inventive minds. It is time to abolish KCPE.
Transition to high school must be a birthright of every Kenyan child. We must abandon the colonial logic of artificial scarcity of high school education resources. Moreover, the colonialists wanted to create a small cadre of pliable and subservient educated elite, for obvious reasons.

A radical change in Kenya’s education is imperative, if we are to build a stable democracy and prepare skilled and employable citizens to drive the political, socio-economic and technological transformation imagined in Vision 2030.

I offer some ideas to motivate debate: i) replace current fact-laden curriculum with a problem-based approach to learning to encourage critical thinking, analytical reasoning, collaboration, innovation and discovery; ii) eliminate standardized national testing for primary school; iii) assess learning through multiple measures, including school-based formative assessments and student portfolios; iv) promote knowledge application and reflective practice at all levels through service learning because “tell me and I will forget, show me and I will remember and involve me and I will understand”.  

Half a century later, do we have the courage to reform our education system, emancipate our children and secure the future for posterity?


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