Monday, October 20, 2014

Do we have the audacity to bet on our children?

A woman poured very precious ointment on Jesus’ head. In indignation, his apostles asked, “To what purpose is this waste?’” In their view the ointment could have been sold for much and the money given to the poor.

But Jesus defended the woman and praised the good work that she had wrought upon him. Matthew 26:11 record these eternal words, “ For ye have the poor always with you; but me ye have not always”.

Many people – academics, clerics, journalists and politicians – often read Jesus’ words out of context and use the scripture to justify or tolerate depressing depravation in society. A majority of those who invoke this verse believe that poverty cannot be eradicated.

Poverty is neither inevitable nor pre-ordained. There is, in my view, a constellation of structural, and hence modifiable conditions, which cause poverty to thrive. That every year, according to WHO, eight million people die because they are too poor to stay alive is unconscionable. A majority of these people die of hunger, malnutrition, diseases such malaria, diarrhea, respiratory infections and measles. All of these diseases can be treated or prevented.

Recent estimates by the World Bank put the population of global poor at 1.44 billion people, based on the $1.25 daily expenditure. However, Nobel Laureate Amartya Sen, based on a multidimensional poverty index (MPI), estimates that there are about 1.7 billion poor people. The MPI takes into account living standards ranging from quality of dwelling house, sanitation, child mortality and years in schooling. Based on the MPI, our poverty rate surpasses 50 percent.

But poverty is not only multidimensional. Poverty is produced by a confluence of interacting and mutually reinforcing conditions. The interplay among the legion of factors that cause poverty invariably creates a “poverty trap”. Columbia University’s Jeffery Sachs defined a poverty trap as the overwhelming interconnected burden of disease, illiteracy, lack of capital, hunger, malnutrition, low agricultural productivity, etc. Poverty is a wicked condition, not amenable to straightforward, technocratic or expert or silver bullet solutions.

Kenya’s new status as a middle-income economy is undermined by what many analysts as well as ordinary folk perceive as pockets of extreme wealth in vast and deep Ocean of poverty. The enduring puzzle is why the tide of economic growth has failed to lift millions of Kenyans out of poverty. What happened to the notion of “trickle down economics”? Have markets failed to distribute or allocate prosperity equitably?

Think about the more than one million children of school going age who are out of school because their parents cannot afford to clothe or feed them. Think about the millions of children who go to school but do not have a desk or a book or a teacher or a decent classroom or toilet or clean water to drink. Think about the hundreds of thousands of kids who will sit KCPE this year and yet cannot read at the level of a child in class three who attends a private school. Think about 40 percent of our children who enter school ready to fail because their cognitive capacity has been damaged by years of hunger and malnutrition.

The plight of Kenya’s less privileged children, and there are tens millions of them, reminds us that the greatest driver and purveyor of poverty is not wealth or income but the unconscionable gap of opportunity. A lack of opportunity creates differential life outcomes and often produces insurmountable divergence in life achievement, which is intergenerational. The most effective way to break the poverty trap is to deploy fiscal and social policy tools to ensure equitable access for every Kenyan child. For many years we imagined that free primary education alone was the best way to deliver equal educational opportunity for all Kenyan children. We were wrong. We forget that equally important was the health and socio-economic wellbeing of the children in the home environment.

We can learn from Brazil’s conditional cash transfer program, which has reduced child mortality, improved nutritional outcomes for children and bolstered school attendance among poor children.

We need to turn the plight of millions of children who lack opportunity today into a business proposition.  A rough calculation shows that if 75 percent of the 906,000 children sitting KCPE in 2014 graduated from tertiary education with skills, they would add about $10 billion to our economy annually. Do we have the audacity to bet on our children?

Tuesday, October 14, 2014

Moribund rural economies could undermine Africa rising momentum

In 2000 The Economist magazine painted the portrait of a continent riddled with corruption, ravaged by conflict, poverty, debilitated by hunger and disease. Africa was ‘The Hopeless Continent’. But in 2011, with a cover titled ‘Africa rising’ and an illustration of a boy flying a rainbow-colored kite the shape of the continent, The Economist magazine released a revised edition of Africa.

In the revised edition The Economist magazine wrote not about the abundance of brutality or disease or poverty in Sierra Leone. The revised edition was about the pulsating Onitsha market in Nigeria, with shops stacked high with goods and streets jammed with buyers and sellers. It was about Africa having a real chance to follow in the footsteps of the Asian tigers.

The Economist’s Africa rising saga was preceded by Lions on the move: The progress and potential of African economies, a 2010 McKinsey Global Institute (MGI) report on Africa. The report showed that the year 2000 was an inflection point, heralding Africa’s growth acceleration with 27 of its 30 largest economies expanding more rapidly after 2000. MGI projected that services and products industries, agriculture, extractive resources and infrastructure could generate $2.6 trillion in revenue by 2020.  

In 2012 TIME, with an ‘Africa rising’ title of its own, described Africa as the “world’s next economic powerhouse”.  But it cautioned that hundreds of millions were at risk of being left behind. Similarly, in its Africa rising story, the Economist warned that optimism about Africa must be taken in small doses because things remained exceedingly bleak across the continent. 

That African economies are on the upswing is undeniable. The cities are throbbing. The energy and the hustle and bustle in the streets of African cities is tangible. Perpetual traffic gridlock, chronic water shortages, and eruption of informal housing in a majority of African cities, underscores the fact that growth has outpaced the capacity for planning and management. But there is some hope. There is infrastructure frenzy across many African cities – elevated highways, ring roads and by pass corridors are under construction – especially to deal with traffic congestion.

But something else is happening. The rural economy is pretty stuck. The intensity of rural poverty has not eased. Rural economies are predominantly sustained by remittances from the cities. Rural infrastructure is in a veritable state of decline. Agriculture is comatose. Land values are lowest in rural Africa. And for the most part, most rural landowners do not have land title deeds or proof of property ownership. So land is essentially dead capital. The returns on labor and land are too low. Women, who often lack the power to make critical decisions about land operations or choice of crop or use of technology, manage agriculture.

Moreover, the burden of disease is highest in most of rural Africa. Infant and maternal mortality are highest in rural Africa. The prevalence of stunting and other nutrition related problems are highest in rural areas. It is not surprising that rural districts have the worst education outcomes. For example, only 16 percent of Kenya’s rural population has post-secondary education. Enrollment, retention and completion rates in rural schools are deplorable. Numeracy and literacy scores among children in rural schools are consistently lower than for children in urban schools. Teacher absenteeism is worse in rural schools compared to urban schools.

Africa’s growth is really a tale of two economies. The first economy is the vibrant, pulsating urban economy. What happens in this economy is what feeds the Africa rising hysteria. Urban areas are home to the emerging middle class, which has got the global services and products aficionado all excited about Africa’s emerging consumer market.

The second economy is rural. It is largely characterized by socio-economic stagnation and decline. Over 50 percent of Kenya’s rural population lives below the poverty line, compared to 33.5 percent in urban areas. Only 3 –10 percent of Kenya’s rural population works for pay. Describing his community, a young pastoralist from northern Kenya wrote: “The youth in my community are idle and mostly indulge in reckless consumption of alcohol. Teen pregnancies are rampant and young men marry too early.

Inclusive growth and shared prosperity will depend on adoption of pro-poor policies and public investment aimed at agriculture and rural infrastructure. Things will remain exceedingly bleak as long as over 75 percent of Africa’s population is not implicated in the Africa rising saga.  

Tuesday, October 7, 2014

Kenya’s economic growth devoid of prosperity

After a process known as rebasing, Kenya’s economy is now $55.2 billion strong. With a per capita GDP of about $1,250, we are a middle-income economy. And we have entered the league of Africa’s top ten economies.
Part of the reason our GDP shot up by 25 percent is because we were using outdated data and significant components of our economy were not measured. For example mobile telephony services, both utilization of voice and mobile money were hitherto not measured. The informal business sector, which employs over 60 percent of Kenyans, was never factored in GDP calculations. Moreover, the vibrant real estate sector was largely invisible in our national accounts.
In his book, “Poor Numbers: How we are misled by African development statistics and what to do about it”, Morten Jerven shows that the statistical capacities of a majority of African countries is in shambles and numbers often misstate the actual state of affairs. For a majority of African countries, data is at best incomplete or unreliable. Reliable national data and statistics are critical to the basic operations of government. Hence the paucity of accurate statistics has serious implications on policy formulation, national planning and welfare of citizens.
The collection of reliable statistics is inherently complex and is inextricably bound to the political economy. The quality of data and how it is used in national accounting and decision-making reflects political expediencies. In a sense data, especially in Africa, is political. For example, national population and demographic census is always a hot topic. We all understand very well the emotions around the so-called tyranny of numbers.  But the larger and more urgent question is about the production of data or statistics and the extent to which African governments rely on evidence for policy and decision-making.
Our economy is bigger than we once imagined. Our per capita GDP is actually $400 bigger. And yes, agriculture, the informal sector, real estate and mobile money are critical drivers of our economy. More importantly, as the government would like us to believe, we are using better data.
But how does the fact that our economy is vibrant and growing square with the fact that less than one percent of the young men and women who graduate from our schools and colleges cannot find gainful employment? How does a per capita GDP of $1250 square with the fact that more than 4 out 10 Kenyans live on less than $1.25 a day? What does $55 billion economy mean when over 1 million children of school going age are out of school? How will the millions of children whose cognitive capacities have been undermined by severe malnutrition share in the economic growth?
What is it about a $55 billion economy that would excite 25 percent of our fellow citizens who don't know where their next meal will come from? What do we say to millions of young mothers who won’t start their own business or take up paid employment because they can’t afford to hire a nanny to mind their little children while they work? What side of the real estate boom story do we tell millions of hard working Kenyans who will never own a home or find a decent, affordable house to rent? Which part of the growth story do we tell the Jua Kali artisan who dares to dream big but won’t get credit to expand his business and train more apprentices?
A fundamental characteristic of our much-celebrated growth is the unconscionable inequality that it has produced. This is partly because the structure of growth has tended to reward capital and the very high end of skilled labor. Moreover, growth in the last decade has been characterized by prodigious unemployment among the youth, who constitute more than 60% of our population.
Headline GDP alone just won’t do. We need equitable growth and shared prosperity. How do we ensure that every Kenyan receives a fair shake of the $55 billion economy?
The next decade must be about shared prosperity. We must embark on a path of structural transformation. Equitable growth and shared prosperity can be achieved through enlightened redistributive social policies, which enable millions of young people and rural poor farmers to participate in the economy, contribute to growth and share in the prosperity. 


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