Development Economics

Why China’s Model of Development in Africa is Working

The answer to the title of this post is that China is using the same model of development to develop other countries that it used to develop itself.  And China is a shining example of why its own model works.  China has lifted hundreds of millions of its own people out of poverty and grown to be the second-largest economy in the world.  Its growth in GDP is only matched by its increasing global influence around the world - an alternative superpower to deal with. Every day, on my drive on the highway from Accra to the Eastern region, I see the bridges and roads being built.  Caterpillar trucks and big crews of Ghanaian construction workers being supervised by a Chinese foreman in a floppy hat.  I have heard and read about China in Africa, and its strategic interest in the continent from a natural resource perspective.  I knew they were involved in infrastructure projects, but I didn't think it would be every single project. Today I read an article in NextBillion titled "Why Africa is Open for Business." The article closes with this paragraph:

Probably the greatest challenge resides in the U.S. and the Western world. That challenge is to change the perception of Africa and encourage young entrepreneurs and investors to look at Africa as a place to do business. Business is probably a better way out of poverty than philanthropy. And I can't wait for Business Schools to lead the way by developing curriculums on business in Africa.
I agree, but there are two things I want to unpack about this statement.   (more…)

Development Economics

The Next Non-Story About Big Aid

This isn't surprising:

A $21.7 billion health fund championed by the rich and famous has come under harsh scrutiny amid revelations it's bleeding money to corruption. But fund officials and outside experts in the field have a stark message for global development: other aid agencies are in much worse shape. Investigations led by Robert Appleton, a veteran former U.S. federal prosecutor whom Parsons hired last fall to root out corruption, are showing that up to two-thirds of some grants provided by the Global Fund to Fight AIDS, Tuberculosis and Malaria are lost to graft, with much of the money accounted for by forged documents or improper bookkeeping. The fund rocketed to prominence with the backing of celebrity campaigners like Bono, who see it as an alternative to the bureaucracy of the United Nations.
This is kind of a non-starter for me.  Everyone knows that aid is riddled with inefficiency and corruption.  Here is what Transparency International has to say:
"There's the need in the developing aid agencies to be accountable," said Robin Hodess, Transparency International's director of policy and research. "Sometimes there hasn't been enough attention to preventing corruption."
But here is the most interesting part of the article.  The Bill and Melinda Gates Foundation - another big donor - has actually funded research projects to show just how badly these organizations lack accountability: (more…)

Development Economics

Impact Investing: Venture Capital for Do-Gooders Takes Off

The other day a friend put me in touch with a friend of his who had just moved to Accra.  She works the Acumen Fund, a social venture capital fund that invests in promising  entrepreneurs in developing countries.  The use of the adjective "social" is a bit misleading, in the sense that the companies are purely for-profit and do not need to have an explicit social motive guiding the business strategy.  What distinguishes them is the market they serve, termed the base of the pyramid, or BoP for short.  The name is derived from C.K. Prahalad's books "Fortune at the Bottom of the Pyramid." These businesses typically serve the poor in some way.  Acumen has invested in agribusinesses and businesses in healthcare, water, and energy.   The broader term for the modus operandi of Acumen Fund and other investment funds is "impact investing." The unfailingly reliable Wikipedia describes impact investing as "an investment strategy whereby an investor proactively seeks to place capital in businesses that can generate financial returns as well as an intentional social and/or environmental goal." It is a relatively new concept, and it has taken off in recent years. So we met up at one of the many Lebanese restaurants in town for a drink and talked about all things development.  There aren't too many impact investors operating in Ghana, or West Africa in general.  A few local private equity firms and some U.S.-based venture capital funds are the only ones I have come across.  But it is the next big thing in development, which, in general, tends to driven by fads and has an often-changing flavor of the month.  For a few years, microfinance was the darling of the donor communities, as Dr. Muhammad Yunus took that Nobel Peace Prize and ran with it.  But now, microfinance is experiencing its own serious growth pains in its biggest and most dynamic market, India, and has been criticized for being, at best, ineffective, and, at worst, actively counterproductive in alleviating poverty.   (more…)

Agriculture

Invisible Barriers: Land Tenure for Women in Ghana

I attended a gender sensitivity training put on by a partner of ADVANCE. The training was given to two offices with whom I'm trying to work, so I thought it would be a good opportunity to meet and get to know everyone at the training. I had a lot of pre-conceived notions about what a gender sensitivity training would entail, and thought it might be good fodder for some jokes. As it turns out, how the program impacts men and women differently is actually pretty interesting. There are a lot of nuanced cultural traditions that skew the equitable distribution of benefits. We were divided into three groups and each asked to represent a different actor in the value chain - traders, processors, and farmers. We did a role play exercise where I pretended to be the owner of a rice mill and I discussed how I employ men and women in my business. Each group did something similar, and the next two days were spent drilling down on the reasons that things are the way they are. Towards the end of the training, everyone voted on the most relevant roadblocks that relegate one gender (typically women) to a disadvantaged position. One of those problems was the system of title exchange, which effectively excludes women from owning land and, as a consequence, developing farms. (more…)

Agriculture

Small-Scale Pineapple Processors Discover Ruthless Capitalism

I have spent the last week in the region around Accra meeting with small-scale pineapple processors.  ADVANCE has six offices, each with about six field business facilitators (FBF).  I have been working with Collins, the pineapple FBF out of the office in Tema, the main port town a half hour outside of Accra, the capital city.  He put together an association of pineapple juice manufacturers who are all buying fresh pineapple directly from farmers in the area, processing them in small factories with a single assembly line and a few employees.  There is a actually a huge market for fresh fruit juice in the country.  Ghanaians have become more health-conscious in the last few years and are increasingly opting for 100% fruit juice instead of synthetic products.

These pineapple processors have a strong market demand.  They have customers who bring their own bottles and private label their juices with these processors.  In addition, the processors have their own labels and sell to hotels, restaurants, and markets as far as six hours away.  They get their pineapples from multiple different sources.  Some have their own farms and all have relationships with local producers.  They even buy product from the big exporters to the European Union, who have specific quality standards that, if not met, result in the pineapples being rejected.  The processors buy up this excess at a low cost and turn it into juice.  The problem with this arrangement is that the major exporters are also juicemakers themselves, so these processors are effectively buying their raw materials from their largest competitor, which makes for a tenuous relationship, at best.  For now though, the businesses are doing well.  There is one major constraint, however: bottles. There are no glass manufacturing plants in Ghana, so these processors buy used bottles from companies that collect discarded bottles of Vitamilk and other drinks.  They typically hire two women to wash the glass bottles, strip them of their labels, and pack them into crates.  But bottles are expensive here.  A crate of 24 bottles costs 2.60 cedis.  Once the crates have been filled with juiced, labeled, and corked, they are sold for 7 cedis, which gives you an idea of the thin margins here.  There is, however, a solution to this problem.  Burkina Faso, Ghana's Canada, also consumes a lot of Vitamilk, but their juice processing industry is much less developed compared with Ghana.  There is an enterprising businessman at the Ghana-Burkina border who buys up all of the used bottles from Burkina and imports them into Ghana.  It is cheaper to buy them at the border (1.50 to 2 cedis per crate), but the minimum order size is 600 crates.  And here is where it gets dark. (more…)

Travel and Culture

The Anthropology of Food: Adobo in the Philippines

The Philippines has a rich and complex history that is colored by practically as many different cultures as there are islands.  A guy I used to work with used to love telling me about his favorite professor in college, who gave a final exam with only one task: de-colonize colonialism.  In other words, deconstruct the culture, the traditions, the idiosyncracies that make the country what it is.  Remove all of the external influences that have resulted from the different occupations - the Malaysians, the Spanish, the Americans, and the Japanese.  What do you get?  I don't know, but it would look nothing like what the Philippines is today, which is a rich tapestry of traditions that have been shaped by its history. Food is an interesting way to look at a culture.  Maybe the most famous dish in the Philippines is simply called Adobo.  One of the first posts I ever wrote on this blog - titled "Cooking Styles of the Philippines" - talked about adobo.  It is like the Aristocrats - a blank slate of a dish tied together by a name and a few basic ingredients more than anything else.  And just as there are thousands of recipes for making chili in Texas, there are as many adobe recipes as there are people who know how to make it.   It is basically a sauce.  The choice of meat, the method of cooking, and anything else is up to you.  So when I saw an article about Filipino adobo in the New York Times magazine, it picqued my interest, only partly because most international news stories about the Philippines highlight the bad, not the good.  Here's a description from the article:

It is the national dish, many Filipinos say: protein braised in vinegar until pungent and rich, sweet and sour and salty at once, sometimes crisped at the edges in high heat, always served with the remaining sauce. Its excellence derives from the balance of its flavors, in the alchemy of the process. Cooking softens the acidity of the vinegar, which then combines with the flavor of the meat to enhance it.
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Development Economics

Next Billion Post: Energy to the BOP Made “Simple”

For my second post at Next Billion, I wrote about a company called Simpa Networks.  Simpa was founded by Jacob Winiecki and Mike MacHarg, two people I have known since I started out in the development game.  Here is a tangential story about the smallness of the world. I used to work for a consulting firm in Boston.  I wanted to work in development but wasn’t sure how to get in the door.  I knew I was interested in solar energy and read about a lot of exciting things revolving around energy solutions in the developing world.  I went on NextBillion, a blog about market-driven solutions to poverty alleviation, and looked up posts on solar energy.   I came across a post on a Brazilian NGO called Ideaas, an organization that focuses on clean energy for the poor.  Mike MacHarg had posted a comment about integrating micropayments into the Ideaas business model.  He had a Duke email address, so I reached out to him to talk about what he was doing.  He happened to be passing through Boston on the way to a wedding in Vermont, so we met up for coffee.  He introduced me to Jacob Winiecki, who he’d been working with at Arc Finance, another NGO focusing on rural energy delivery.   We talked on the phone, I told him I was applying to Kiva.  Arc Finance, as it turned out, was trying to work with Kiva to get an energy loan portfolio going on the website.  They were piloting a solar lantern program with an MFI in the Philippines and wanted to get the loans up on Kiva’s site. A month later I was accepted to the Kiva Fellows program and given my assignment in the Philippines.  As it turned out, I was placed with NWTF, the very same MFI that Arc Finance was doing a pilot with.  So, when I got down to Bacolod, I worked together with Kiva, Arc Finance, and NWTF to get the loans up on the website.  We were the first MFI in Kiva history to post clean energy loans. Now, things have come full circle.  Jacob and Mike started Simpa, and I am writing a profile on the company for the website that started the cycle a year and a half ago.  You can read my full piece here.  Below is the transcript of an interview I had with Jacob Winiecki to write the piece. (more…)

Development Economics

Are Conditional Cash Transfers Really the Answer?

[caption id="" align="alignright" width="300" caption="Genius"][/caption] A while back I wrote about conditional cash transfers, which are the next biggest thing in development, in a post called "Where's My Money, Fool," titled so as an homage to the curler-wearing drug dealer Big Worm in the movie "Friday." The most successful example of a good CCT program is Bolsa Familia, a government program in Brazil which has helped to increase incomes for poor families by 7 times as much as incomes for the rich (albeit, off a lower baseline).  Brazil has seen its poverty level drop faster than Snooki inside a plastic Zorb-like ball in the Jersey Shore on New Years Eve.  Specifically, the number of people living in poverty has dropped from 22% to 7% over the last decade. The theory behind conditional cash transfers is simple.  The government pays poor families for meeting certain requirements.  Attendance in school and maintaining standards of healthcare are rewarded with monthly payments.  As long as the family achieves the targets of the program, they are eligible for a payout.  The outcome is two-fold.  First, the family gets immediate relief in the form of cash payments from the government, which can be put toward food and education.  Second, the underlying conditions that cause the unbreakable cycle of poverty to unbroken - lack of education due to the demands of meeting financial needs for the household - are addressed, as financial incentives eliminate the need to pull kids from school to help their parents earn income for the family.  An explanation from the New York Times:

The program fights poverty in two ways.  One is straightforward:  it gives money to the poor.  This works.  And no, the money tends not to be stolen or diverted to the better-off.   Brazil and Mexico have been very successful at including only the poor.  In both countries it has reduced poverty, especially extreme poverty, and has begun to close the inequality gap. The idea’s other purpose — to give children more education and better health — is longer term and harder to measure.  But measured it is — Oportunidades is probably the most-studied social program on the planet.  The program has an evaluation unit and publishes all data. There have also been hundreds of studies by independent academics. The research indicates that conditional cash transfer programs in Mexico and Brazil do keep people healthier, and keep kids in school.
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