Development Economics

Cote D’Ivoire and the “Big Man” in African Politics

The big news in West Africa (and the rest of the world) is the election crisis in Cote D'Ivoire, the next-door neighbor of Ghana. I have talked to a lot of people about what's happening and have tried to learn as much as I can about the issue. Basically, Cote D'Ivoire recently held a presidential election. The incumbent, Laurent Gbagbo, is a former history professor who took became president in 2000 in a contested election. Despite losing the most recent election to Alassaine Ouattara, a technocrat and economist from the predominantly Muslim north, Gbagbo is refusing to step down. Both men have been sworn in as president, though Ouattara is holding court in a hotel surrounded by 700 UN peacekeepers. Meanwhile, the entire world has condemned Gbagbo and called for him to step down. Gbagbo, the consummate "big man," has no intention of leaving anytime soon. Most recently, the new Ivorian UN ambassador (appointed by Ouattara) told the international community that Cote D'Ivoire is on the brink of genocide. 173 people have already been killed, and, unfortunately, that is probably just the beginning. My first reaction was that what is happening in Cote D'Ivoire is, for lack of a better word, cliche, given the historical precedent of tainted democratic elections in Sub-Saharan Africa.  The more I read, the it became clear that I am not alone.  There are exceptions to this rule, of course.  Ghana is a great example of a stable democracy.  So much so, in fact, that President Obama chose Ghana as the site of his first speech to Africa.  But why don't these proverbial big men just step aside?  The whole world is against you, you are broke and hanging on by a very thin thread, and refusing to capitulate to the will of your own people will likely result in the deaths of thousands of your people and will set the development your country back decades.   So why not step aside? (more…)

Agriculture

Crisis in Cote D’Ivoire: How Political Instability Alters Trade Patterns

The big news in this part of the world (West Africa) is the recent democratic election in Cote D'Ivoire, which saw the anointing of not one but two presidents.  The incumbent president, who has led the country for 10 years and is constitutionally barred from seeking a third term in office, is refusing to step down after a decisive 54-46 loss to Alassane Ouattara, an economist and technocrat who also happens to be both a Muslim and a leader of the rebel groups in the north.  The international community has unanimously rallied behind Ouattara and called for Gbagbo to step aside.  The World Bank has suspended aid to the country, and Ouattara has called for the Central Bank to stop releasing money as a way to "starve the beast," and turn hungry soldiers against the incumbent president. Unfortunately, with 173 people killed so far in the post-election violence, analysts are predicting the country is going to slide into another civil war. (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…)

Development Economics

A New Chapter: Working with Technoserve in Ghana

In less than two weeks, I'll be moving to Ghana to work as a consultant with an organization called Technoserve.  It is my first time to visit West Africa and am excited to learn about the region.  Technoserve works to strengthen the economies of the countries it serves by making the industries more efficient and profitable.  Founded in the 1970's, Technoserve began in Sub-Saharan Africa and has since expanded to Latin America and India.  Most projects involve agriculture, since the majority of the world's poor are subsistence farmers, though some focus on tourism, energy, and other sectors.  The CEO, Bruce McNamer, explains Technoserve's approach to economic development in a recent article from the McKinsey Quarterly:

There are significant possibilities in Africa to unlock value in different industry sectors, and these possibilities will grow over time. Success, however, will require the government and business to adopt a strategy based on an analytical and market-oriented approach, customized for the sector and focused on helping enterprises and people make money. While ultimately reliant on commercial incentives and viability, this strategy will probably require up-front, subsidized investments to seed the market, as well the coordination of stakeholders and interventions across the value chain. (more…)