Development Economics

Realpolitik, Capitalism, Wikileaks, and Nigeria

Jesus:

Cables from Nigeria show how Ann Pickard, then Shell's vice-president for sub-Saharan Africa, sought to share intelligence with the US government on militant activity and business competition in the contested Niger Delta – and how, with some prescience, she seemed reluctant to open up because of a suspicion the US government was "leaky". But that did not prevent Pickard disclosing the company's reach into the Nigerian government when she met US ambassador Robin Renee Sanders, as recorded in a confidential memo from the US embassy in Abuja on 20 October 2009. At the meeting, Pickard related how the company had obtained a letter showing that the Nigerian government had invited bids for oil concessions from China. She said the minister of state for petroleum resources, Odein Ajumogobia, had denied the letter had been sent but Shell knew similar correspondence had taken place with China andRussia. The ambassador reported: "She said the GON [government of Nigeria] had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries." Nigeria is Africa's leading oil producer and the eighth biggest exporter in the world, accounting for 8% of US oil imports. Although a recent UN report largely exonerated the company, critics accuse Shell, the biggest operator in the delta, and other companies, of causing widespread pollution and environmental damage in the region. Militant groups engaged in hostage-taking and sabotage have proliferated. (more…)

Development Economics

Poverty in Africa is Falling…Fast

According to a recent study by two economics professors, both poverty and level of inequality have fallen considerably since 1995:

The picture of Africa as a place of collapse, hunger, disease and death is slowly fading. Both official statistics and the popular press acknowledge a nascent “African Renaissance”, as the continent is enjoying its longest and strongest growth spurt since independence. Nevertheless, it is still widely believed that this growth is primarily driven by oil and natural resource prices, and that it is confined to well-connected elites in geographically advantaged countries. The popular image is that the poor majority in all African nations and many African nations as a whole are stuck in “poverty traps” created by unfortunate geography and calamitous history. For example, the prospects of meeting first Millennium Development Goal of “halving, between 1990 and 2015, the proportion of people earning an income less than $1 a day” seem to appear bleak for Africa; the UN writes in its latest Millennium Development Report that “little progress was made in reducing extreme poverty in sub-Saharan Africa” (UNDP 2008). We disagree. The sustained African growth of the last 15 years has engendered a steady decline in poverty that puts Africa on track to meet the Goals by 2017. If peace is established in the Democratic Republic of Congo, and it returns to the African trend (which is what happened to other African nations that were formerly at war), Africa will halve its $1/day income poverty rate by 2013, two years ahead of the 2015 target. (more…)

Development Economics

The State of the Agriculture Sector in Ghana

Ghana is located on the West Coast of Africa, referred to as the Gold Coast due to its abundance of the precious metal.  It is the second-largest producer of cocoa, with about 15% of the world market.  Cocoa is dominated by Ghana’s next-door neighbor, Cote D’Ivoire, which has spent the last decade in disarray after a civil war and the ensuing post-war violence.  Despite the fact that agriculture accounts for about 40% of GDP and more than half the workforce, Cocoa is the only commercial crop of economic significance.  While other industrial crops, including cotton, rubber, and tobacco are grown, they are small potatoes compared to cocoa and other exports.  (The major exports are timber, gold, diamond, bauxite, and manganese.  It is difficult for African economies to be competitive in global agriculture markets due to agriculture subsidies in the U.S. and Europe, efficient farming practices in Brazil and Argentina, and the scale of rice production in Thailand and Vietnam.  For a more complete explanation, see here.) The main food crops grown in Ghana are maize, yams, cassava, and, to a lesser extent, sorghum, and millet.  More recently, rice Cocoa is the only with a specific framework for facilitating trade.  All cocoa grown for export must be sold to the Ghana Cocoa Board (COCOBOD), which aggregates the crop for sale in the international market.  International demand and the presence of a single buyer to coordinate trade means the market for cocoa is guaranteed.   COCOBOD has experimented over the last thirty years with various market liberalization tactics in order to make the industry more competitive, including privatizing more companies and investing in the development of the market.  Technoserve currently runs the Cocoa Abrapopa project in Ghana, which has raised farmer incomes by a remarkable 270%. (more…)

Development Economics

The Structure of an Agriculture Industry

I have been in Ghana now for one week, and think that it is time to give an update on what I am doing here.   I will be working on the ADVANCE project, which has the lofty goal of establishing an effective value chain in the agriculture industry.  It is a four-year, USD $30 million project with about 100 staff, including a mix of agronomists, business development people, rural finance specialists, and a handful of outside consultants providing support.  To describe the project requires providing an overview three dynamics:

  1. The structure of an agriculture industry
  2. The state of the current agriculture sector in Ghana
  3. The specific challenges in the West African context.
I will address each of these topics in three posts, beginning with an overview of how the agriculture sector works. The term “value chain” refers to the pathway that crops take in their journey from the ground to your plate, or your wardrobe, or the tires of your car.  The farmer plants the crops and tends to them sporadically throughout the growing season.  With sugar in the Philippines, the growing season is nine months.  During the first two months, the farmer spreads fertilizer, sprays the crop with pesticides and fungicide, and weeds the plot.  He then lets it sit for six months before harvest time, which lasts one month.   The amount of inputs (fertilizer, pesticides, etc.) and mechanization used by the producers depends on the location.  Most farmers in sub-Saharan Africa (SSA) are smallholders, managing less than two hectares, on average.  In contrast, the average farm size in the U.S., which is dominated by corporate giants like Archer Daniels Midland and Cargill, is 431 hectares.  These economies of scale give American agribusiness a big advantage on the global market. (more…)