I’m reading an article on African firms and why they don’t seem to grow.
There is an urgent need for job creation in Africa yet something seems to be stunting firm growth. This column shows that African firms are about 20% smaller than their counterparts in other locations. It suggests small firms put the brake on growth as the burden of dealing with government and labour costs may increase with size, or perhaps as they start facing trust issues between managers and workers.
Wow. This pretty much sums it up. African business can’t grow because of onerous regulation, corruption and a general problem of too many people wanting too much of the pie.
I wondered for a while why ladies selling bags of rice, for example, might choose to sell the same rice right next to one another for the exact same price to the exact same market. All of them would make much more money and market prices would be much lower and more competitive if a few of them would band together and form multi-lady shops. I thought it might be because the ladies don’t trust one another to enter such a relationship, but I’m thinking that raising the profile of an enterprise might invite all kinds of new and expensive problems. It still might be true that the ladies don’t trust one another, however.
The overall price level in Africa could also be a factor in determining the size of firms (Gelb et al. 2013). Relative to low-income comparators like Bangladesh, Vietnam and also India, African countries are considerably more costly. In absolute terms, and excluding South Africa as a middle-income country, the average purchasing power parity for a sample of African countries is about 20% higher than the average for the four poorest comparators (Bangladesh, Indonesia, Philippines and Vietnam). Africa’s higher costs may result in a lower level of competitiveness and consequently, in a distribution of firms that is different (smaller) than distributions in other countries. African firms may also face a steeper labour cost curve; as firms become larger and more productive, their labour costs increase more in other regions of the world.
Africa is just about one of the most expensive places to do just about anything, simply because you have to do and provide so much on your own. Our research activities come at incredible expense despite the fact that labor is far, far cheaper. If you need power, you have to figure a way to deliver it yourself. If you need skills, you have to pay to train up people to perform the duties you need. If you need supplies, you have to order them from overseas since very little of what you need is manufactured on the continent.
Next, I’m looking at the graphic below and seeing that Africa only spends about .8% of all worldwide R&D dollars, despite housing a sixth of the world’s population and even including South and North Africa.
A new study which just appeared in Malaria Journal, however, calls this optimism into question.
This review presents two central arguments: (i) that empirical studies measuring change are biased towards low transmission settings and not necessarily representative of high-endemic Africa where declines will be hardest-won; and (ii) that current modelled estimates of broad scale intervention impact are inadequate and now need to be augmented by detailed measurements of change across the diversity of African transmission settings.
So, our ability to accurately determine whether transmission intensity has declined is hampered by the fact that most studies of the disease occur in areas of low transmission. This would make sense. It is much easier for us to evaluate the malaria situation in Kenyan context than in the Democratic Republic of Congo due to availability of surveillance infrastructure, official mechanisms which allow research projects to move forward, and security issues.
The obvious problem with this, is the relationship of governance, economy an instability to malaria itself. People in the poorest countries are at the highest risk for malaria and people in the poorest parts of the poorest countries are at the highest risk of all. The trouble is, despite being the populations we are most concerned about, they are the hardest to reach, and the hardest to help.
Worse yet, the estimates of malaria prevalence found in a number of studies were considerably lower than estimates for the entire African continent.
The combined study area represented by measurements of change was 3.6 million km2 (Figure 1), approximately 16% of the area of Africa at any risk of malaria . The level of endemicity within these studied areas (mean PfPR2-10 = 16%) was systematically lower than across the continent as a whole (mean PfPR2-10 = 31%) (Figure 2). While 40% of endemic Africa experienced ‘high-endemic’ transmission in 2010 (PfPR2-10 in excess of 40%) , only 9% of the studied areas were from these high transmission settings.
This is a huge issue and one that shouldn’t be limited to malaria. While it is helpful to hear good news of malaria declines in formerly afflicted areas, we need to be careful about overstating the impact of interventions. Funding for malaria projects such as the distribution of insecticide treated bed nets was incredibly high throughout the 00′s but it is unlikely that trend will continue. Offering an positive picture can show that our efforts are valuable, but might also lead policy makers and donors to suggest that money be put toward other goals. If Sri Lanka is any indication, where malaria was nearly eliminated at one time but experienced a rapid and devastating resurgence, even a brief relaxation of malaria control efforts could erase current gains completely.
It’s an old paper, but I just came across The Colonial Origins of Comparative Development: An Empirical Investigation
by Daron Acemoglu, Simon Johnson and James A. Robinson, originally published in the The American Economic Review back in 2001.
They take rough data of settler deaths back in the seventeenth and eighteenth centuries and plot them against the GDP of several countries from 1995. I’ve included the plot on the right. What they found was that a higher number of European settler deaths was associated with a long term decline in economic output.
Settling in the seventeenth and eighteenth centuries was a dangerous business, particularly in Sub-Saharan Africa and less so in what is now the United States, New Zealand and Australia. Malaria and yellow fever were responsible for killing up to 100% of groups brave enough to attempt the journey.
Acemoglu, et al.’s argument is as follows:
1. There were different types of colonization policies which created different sets of institutions. At one extreme, European powers set up “extractive states,” exemplified by the Belgian colonization of the Congo. These institutions did not introduce much protection for private property, nor did they provide checks and balances against government expropriation. In fact, the main purpose of the extractive state was to transfer as much of the resources of the colony to the colonizer. At the other extreme, many Europeans migrated and settled in a number of colonies, creating what the historian Alfred Crosby (1986) calls “Neo-Europes.” The settlers tried to replicated European institutions, with strong emphasis on private property and checks against government power. Primary examples of this include Australia, New Zealand, Canada, and the United States.
2. The colonization strategy was influenced by the feasibility of settlements. In places where the disease environment was not favorable to European settlement, the cards were stacked against the creation of Neo-Europes, and the formation of the extractive state was more likely.
3. The colonial state and institutions persisted even after independence.
They argue that the disease environment determined the nature of settlements, which determine the nature of institutions which, in term, determined the economic trajectory of a country.
Interestingly, they control for all of the things that one might control for, such as distance from the equator and the percentage of inhabitants that were European, being landlocked and the ruling power, ruling out the effect of some obvious potential influences. Property rights, a solid judiciary and limits on political power in the colonies and upon independence, they argue, had a greater effect on long term GDP, and the development of those institutions was enabled or inhibited by early settler mortality.
It’s a fairly compelling argument, though not without its critics.
A few gems from the paper interested me. One, the return on investment in the British colonies during the nineteenth century was a whopping 25%, far more than one could have expected domestically. In the late 19th and early 20th centuries, this dropped so that returns on colonial and domestic investments were the same.
I found (finally!) a reference to indicate the willful choosing of high altitude and thus less malarious areas for colonial settlements. Note that in Europe and the US, the location of cities is often along river ways and sea sides, where in Africa large cities tend to be placed inland (with some exceptions). There has been no industrial revolution in Africa and little regional trade (a condition which persists to this day) so that cities along water based shipping routes are not necessary. Extraction in Africa was largely done by rail, further alleviating the need to be close to rivers.
Kenya, lacking mineral or oil resources, is an agricultural economy. Specifically, they are really good at growing tea, and, to a lesser extent, coffee. This helps explain why Kenya’s developmental trajectory has been far more successful than that of other economies. Tea production is labor intensive and often depends on small and mid-sized farms which employ lots of people. Instead of money flowing in the pockets of the corrupt, who often squirrel it away in overseas accounts, money goes directly in the pockets of growers.
Kenya is the UK’s biggest tea supplier, but Egypt buys more tea by volume from Kenya than any other country. A piece in Think Africa Press today wrote on the dual problem of falling demand for tea from Egypt due to prolonged unrest, and that of falling commodity prices worldwide.
The cause of the farmers’ problems lies far to the north of the cool, tea-covered slopes of the Aberdares, in the heat of Cairo and the continuing fallout from the Arab Spring. In 2010, the last year before the uprising in Egypt, Kenya supplied the tea-obsessed UK with around half of its tea, but Egypt was the the single largest destination for Kenyan tea exports, buying nearly a fifth of what the factories around Nyeri produce. With the overthrow of President Mohammed Morsi in July 2013 and the ongoing campaign against the Muslim Brotherhood causing continued political instability, demand has plummeted and prices have gone with them.
“It’s a supply and demand issue,” says Chai Kiarie, Field Services Manager at Gitugi Tea Factory. “We produced more tea this year, but we still made nearly $2 million less than we did last year. With these problems abroad, the demand just isn’t there.”
This isn’t an isolated problem. Coffee prices, once riding high on a boom in commodity prices have been steadily falling since the financial collapse. The commodity boom was a winning sitaution for African economies and helped drive much of the rapid growth seen throughout the 00′s. Regulation has started curbing speculative practices that drove the increases, removing a source of destructive volatility which drove up food prices in developing countries, but has also decreased badly needed foreign exchange revenues.
I visited a few farms the last time I was in Kenya. Farmers aren’t waiting around for subsidies to help pull them out of a potential mess. All of the farmers I spoke with are looking for new ways to diversify their operations and meet potentially lucrative world wide demand for competitive products. All of them wanted to think of ways to increase productivity while decreasing the cost of inputs. The pressures from falling tea demand could help push them to find ways to innovate and increase both revenues and stability.
Not that the Economist has ever made a habit of ignoring tropical diseases. Far from it, the Economist as a British magazine is quite good at reporting on the Isles former colonies.
Here they’ve written on the issues of mass drug administrations as a tool in malaria eradication. Specifically, they focus on a Chinese group seeking to ramp up efforts to create a successful regimen of artemisinin and piperaquine to eliminate the disease by prophylacticly preventing infection, and interrupting the cycle of transmission long enough to eliminate the parasite entirely.
Dr Li’s approach is to attack not the mosquito, but the disease-causing parasite itself. This parasite’s life cycle alternates between its insect host (the mosquito) and its vertebrate one (human beings). Crucially, as far as is known, humans are its only vertebrate host. Deny it them and it will, perforce, wither away—an approach that worked for the smallpox virus, which had a similarly picky appetite. In the case of smallpox, a vaccine was used to make humans hostile territory for the pathogen. Since there is no vaccine against malaria, Dr Li is instead using drugs.
To date, the group has been running trials in the Comoros islands off the coast of Mozambique and had some success, but haven’t come close to full elimination. Elimination on islands surrounded by salt water (mosquitoes which transmit malaria breed in fresh water) should be a fairly easy proposition, but the issue of human mobility from the African continent guarantees reintroduction.
I’m personally involved in an island malaria elimination project in Kenya, but am under no illusions that results from an island are in the least bit generalization to the continent. Falciparum malaria is far too efficient and the lack of a winter renders transmission far too consistent to allow easy elimination. Add the issue of the intense mobility of Africans and one can’t help but be discouraged.
Dr. Li from the Guangzhou group seems to be optimistically under the mistaken impression that all it will take to eradicate malaria is the right combination of magic pills, but he’s gravely mistaken. The only thing that will consistently control malaria on the continent will be a full on, sustained assault using every tool known, along with intense economic development. The continent has only seen gains in malaria control during the 00′s, when incredible amounts of money and effort was thrown at the disease and, not coincidentally, when African economies finally started to take off. Eradicating malaria won’t be about a few pills.
More troubling to me are the ethical issues. Mass drug administrations require the participation. If even a small group of people refuse the medication, the entire effort might be for naught. Obtaining full, informed consent, however, is near impossible in these areas. While most people are willing to participate once the benefits are explained to them, the risks are often glossed over. Moreover, as communities will often follow the behavior of their neighbors or community leaders, it is difficult to judge whether people participate of their own volition or whether they are merely bowing to community pressure. Educational barriers might also compromise the ability to obtain truly informed consent.
Further, I don’t doubt the intent of the Guangzhou group, but I do wonder if Chinese institutions truly have the same level of ethical review and monitoring that United States’ institutions have (which isn’t even perfect and sometimes ill suited to developing countries). I’m sure that China would love to claim a success like malaria elimination, but I worry that a zeal for victory might lead to a violation of basic ethics and even a masking of failures, complicating the issue in the long term. I hope that I’m wrong.
Africa is an awful place to be gay, but, just as everywhere else, gay folks exist and do the best they can under adverse circumstances.
Happily, President Museveni of Uganda has stated that he refuses to sign a “anti-homosexuality Bill” sent to him from the Ugandan Parliament. It’s possible that he would have supported had he sensed that signing the bill would have benefitted him domestically, as Nigerian President Goodluck Johnathan (who’s luck seems to be running out) did just this week.
Wasting no time at all, Nigerian authorities have arrested and tortured dozens of people suspected of being gay. The methods are frightening:
Human rights advocates in Nigeria are reporting that dozens of gay men have been arrested under a new law that makes homosexual clubs or associations illegal. That law also criminalizes same-sex marriage. Gay men who have been arrested have reportedly been tortured into giving up the names of others. Michelle Faul with the Associated Press has been writing about this and she joins us now from Lagos.
And Michelle, why don’t you give us more details, what you’ve learned about these arrests and the reports of torture from human rights groups there.
MICHELLE FAUL: As we’re speaking, Melissa, we’re getting more reports in of more people being arrested in about six of Nigeria’s 36 states. I’ve spoken with human rights activists here who say this has not just happened since the bill was signed into law, but since there’s been noise about the bill. So the very idea of the bill has led to this persecution of people because of their sexual differences.
BLOCK: And in particular the reports of torture, what have you heard about that?
FAUL: That particular report comes from Bauchi State in the north of Nigeria, where it’s almost a case of entrapment. A law enforcer pretending to be a gay man went to a meeting where an AIDS counselor was speaking to men, who have sex with men, about how they could do this safely. He pretended to be gay, got the names of a couple of people, arrested subsequently one person, used their cell phone – this is illegal in itself for him to go through this person cell phone, contact another gay person and another gay person. Called them for a meeting, arrest them, take them to the police station and beat them up repeatedly and brutally until they gave up 168 names of people who were supposed to be gay.
But back to Uganda. Museveni has a thin road to walk. If he comes out on the side of Uganda’s very active gay rights movement, he risks losing crucial domestic support. If he would have signed the bill, he risks losing international support at a fragile point in Uganda’s development.
He plays it carefully, but offers a few bizarre ideas:
The President said a homosexual is somebody who is abnormal because the normal person was created to be attracted to the opposite sex in order to procreate and perpetuate the human race. He said, nature goes wrong in a minority of cases.
While in the Bill passed by Parliament there is no provision for killing homosexuals; the President said, “The question at the core of the debate of homosexuality is; what do we do with an abnormal person? Do we kill him/her? Do we imprison him/her? Or we do contain him/her?”
While the President said homosexuality is an abnormal condition that can be cured, he disagreed with the position of Western countries that homosexuality is an “alternative sexual orientation”. “You cannot call an abnormality an alternative orientation. It could be that the Western societies, on account of random breeding, have generated many abnormal people,” he said, adding that his acid test for rejecting Western position is that nature is purposeful.
The President said apart from the people who are abnormal, it seems there is a group of those that become homosexual for “mercenary reasons”—they get recruited on account of financial inducements. He said this is a group that can be rescued and that many of the youth fall in this category.
I’m not following his logic here. I seriously doubt Museveni does either. Though he says that homosexuality is a natural condition, he also tries to claim that young men become gay to make money. The former presents him with a problem. If homosexuality is to be considered an unfortunate genetic outcome, the state has no right to inflict punishment on the individual any more than on a person born with any other type of genetic defect.
The latter, I’ve heard before. NGOs allegedly come to Africa and recruit young men through promises of money and passports. There is no reason to discount the problem of prositution enabled by economic inequality. We’ve seen it elsewhere (a movie was even made about an Irish author’s disgusting sexual adventures in Nepal). Of course, the Ugandan and Nigerian Parliaments seem to be doing little to curb the much larger problem of female prostitution in Uganda and it’s difficult for me to understand how it’s at all relevant to the lives of people peacefully living their lives who happen to be gay.
And this is of course where the problem lies. Homosexuality makes for an easy target for Christian conservatives in Africa (often egged on by western missionaries and evangelicals). However, there is little outrage over extramarital affairs, child rape, and the buying and selling of women, an obviously greater social problem. But policy makers worldwide often like to pick on those who are unable to defend themselves.
How do the governments of Nigeria and Uganda have time for all this? In countries where half the population lives on a dollar a day, the problem of delivering food and health care would seem to be more pressing issues. Many people I know like to blame the West for all of Africa’s ills. Clearly, as these examples show, policy makers in Nigeria and Uganda aren’t in the least bit interested in the welfare of their people, preferring to weed out minor issues of “gays” than deal with important matters such as food, health and stability.
This map (from “Mapping of poverty and likely zoonoses hotspots”) is pretty eye-opening. Looking at this, I’m thinking that the next big disease event will most certainly come out of India.
Note that the most virulent of infectious diseases in humans are often associated with animals. India’s high density, close contact with animals and poor regulatory environment make for a frightening mix.