[afro-nets] Doing the Sums on Africa

[Steven Fouch <steve.fouch@cmf.org.uk>]

Doing the Sums on Africa
------------------------


An article of interest from this week's Economist.

Steven Fouch
mailto:steve.fouch@cmf.org.uk


--
DOING THE SUMS ON AFRICA
May 20th 2004

Small amounts spent on promoting Africa's economy can save bil-
lions and make the West more secure

Africa's importance for global security has risen dramatically
in recent years. Africa has served as a staging-post for terror-
ist attacks both within the continent and in the Middle East.
West Africa's development prospects have brightened with the
discoveries of offshore oil and gas reserves that could supply
perhaps 25% of America's hydrocarbon imports within a decade,
yet the orderly and transparent development of these reserves is
threatened by violence and instability. Al-Qaeda has reportedly
tapped into the illicit diamond trade in West Africa and has
promoted insurgencies across the Sahel (the border region be-
tween desert and savannah). Governments in countries such as
Ethiopia, Kenya, Tanzania and Uganda are co-operating closely
with America to fight these threats. But poverty, hunger and
disease leave the region vulnerable to security and humanitarian
disasters.

In every aspect of Africa's complex plight an ounce of preven-
tion will be worth a ton of treatment. In recent years America
gave a negligible $4m a year to Ethiopia to boost agricultural
productivity, but then responded with around $500m in emergency
food aid in 2003 when the crops failed. In the 1990s America
gave less than $50m a year for Africa to prevent AIDS, so now
will spend $3 billion per year to treat the disease after it has
spread to more than 50m Africans -- 20m dead and 30m currently
infected (see article [1]).

America's security outlays in Africa have shot up by $100m in
the new East Africa Counterterrorism Initiative, and could soon
dwarf economic development assistance. America recently commit-
ted almost 2,000 troops in the Combined Joint Task Force Horn of
Africa, based in Djibouti, and is providing security and intel-
ligence training in the Sahel. But direct military efforts will
not achieve long-term security when Africa's underlying crises
of hunger, disease, poverty and bulging youth populations remain
unaddressed. Indeed, under today's conditions, a growing Ameri-
can troop presence in Africa could easily provoke a backlash.

American strategic planners generally recognise the value of
economic development assistance in the aftermath of wars, as in
the case of $20 billion that America will spend in Iraq and the
$2.3 billion committed to Afghanistan. Yet when it comes to de-
velopment assistance to prevent conflict there is almost no
money to be found. America's foreign policy is strikingly out of
kilter, allocating $450 billion per year for the military and a
meagre $15 billion (at most) for development assistance.

Strip out sums for emergencies such as food aid and anti-
retroviral medicines, military assistance, debt service, as well
as sums paid to American consultants rather than to African
countries, and total American development assistance for Africa
will be less than $1 billion this year for more than 700m Afri-
cans. What about America's new Millennium Challenge Account,
budgeted this year at $1 billion, but to be scaled up to $5 bil-
lion per year by 2006? This sum is distributed throughout the
developing world, and in any case will be much too small to ad-
dress Africa's financing needs for roads, power, clean water,
sanitation, children's health, schools, fertilisers and irriga-
tion, and other specific investments that could unlock the con-
tinent's economic growth.

A much smarter plan for Africa would save a fortune in the fu-
ture by ending Africa's trap of poverty, disease, hunger and
violence and bolstering Africa against the virus of terror.
America and its allies need to appreciate that there are several
well-governed African countries in which investments on a mean-
ingful scale would fuel regional economic development rather
than corruption and misrule. Specific and well-targeted invest-
ments over the coming decade would provide the foundation for
self-sustained growth. And donor countries need to realise that
they are sitting on under-utilised systems that could deliver
that aid effectively.

FIND YOUR PARTNERS
The first step is to identify plausible African partners. In Af-
ghanistan and Iraq America has not withheld development assis-
tance pending "good governance". It has ploughed ahead with de-
velopment spending even in the midst of extreme violence and
even though the respective American-backed governments in Bagh-
dad and Kabul barely have a writ of authority that runs beyond
(or even within) their respective capitals. In Africa, the op-
tions are vastly better. At an over-arching level, the new Afri-
can Union, with its development flagship, the New Partnership
for African Development (NEPAD), has launched an enormously
valuable process of "peer review". So far, 16 African govern-
ments have signed up.

Strong national leadership backed by regional peer review offers
a powerful combination to improve the performance of govern-
ments. In west Africa, at least two strategically positioned
countries stand out for their exceptionally good governance:
Ghana and Senegal. Both are multi-party democracies. Both are
led by impressive and popular elected leaders, Presidents John
Agyekum Kufuor and Abdoulaye Wade. Both countries have an edu-
cated cadre that can lead a bold strategy. Both have acceded to
peer review. Yet both are mired in poverty because of the lack
of key infrastructure and because of unabated disease, espe-
cially malaria.

Other impressively governed yet impoverished countries in the
region include Mali and Benin. Nigeria too could turn the corner
on governance. President Olusegun Obasanjo inherited a corrupt
governance mess when he came to power in 1999, but he has worked
hard and against the odds to improve the situation. His new and
widely admired finance minister, Ngozi Okonjo-Iweala, has re-
cently tabled an impressive poverty-reduction strategy backed by
much more rigorous systems of public administration and account-
ability.

In east Africa, there are also several outstanding partners. Ef-
fective leaders in Ethiopia and Uganda have taken two seemingly
hopeless countries and set them on a path of development despite
desperate initial conditions. Meles Zenawi, the prime minister
of Ethiopia, has the most insightful, indeed ingenious, ideas
about rural development of any leader in that country's modern
history. President Yoweri Museveni of Uganda has fashioned the
fastest-growing economy in east Africa, and the only country in
all of Africa to have turned the corner on AIDS. All of this is
despite Uganda being landlocked and victimised by an insurgency
in the north backed by Sudan's Islamist forces. Both Messrs Me-
les and Museveni have been staunch and unstinting supporters of
America's anti-terrorism efforts, and both have also acceded to
African peer review.

To the east and south, Kenya and Tanzania have democratic and
development-minded governments, but are under extreme stress
from pervasive poverty and disease. Well-governed poor countries
farther south include Botswana and Mozambique, among others. The
situation in Kenya is especially poignant. A bold democratic op-
position united to unseat the deeply entrenched and corrupt rul-
ing party in the 2002 elections. But just as this government
came to power, Kenya was hit by an American State Department
travel advisory warning of potential terrorist threats. Tourism
fell off and the government was immediately on the ropes.

On anybody's list--the World Bank, Freedom House, Transparency
International--a growing and significant number of African coun-
tries has the quality of leadership and governance to achieve
economic development and to fight terrorism. But these countries
lack the means. Consider the dire infrastructure situation in
six of these well-governed countries (see table). They lack the
roads, electricity, health care and teachers needed to break out
of poverty. Without this basic infrastructure, these countries
cannot reliably feed themselves, much less attract investors for
long-term growth.

Even Uganda, with its impressive record of economic growth in
the 1990s, has experienced an upturn of poverty. Without a
multi-lane highway from Kampala, the capital, to the port of
Mombasa in Kenya, and without a network of roads connecting vil-
lages to such a highway, the economy is trapped in a strait-
jacket.

NEEDS TO KNOW
The first step to help these countries is a detailed "needs as-
sessment" of the kind that the UN and World Bank carried out
last summer for Iraq at America's request. The assessment in
Iraq was a joint product of the World Bank, the International
Monetary Fund and about a dozen specialised UN agencies. These
agencies identified Iraq's infrastructure-investment needs on a
sector-by-sector basis. The results showed that Iraq would need
around $36 billion over four years for roads, power, water and
other priorities. Another $20 billion was needed for targeted
spending in "softer" areas like human rights and culture. The
total assessment therefore came to $56 billion over four years.
America has so far pledged around $20 billion of that. In the
case of Afghanistan, a similar exercise in April identified
$27.5 billion in investment needs over the next seven years, and
the plan was backed by pledges of $8.2 billion during the coming
three years.

This kind of needs assessment has never been done for Africa. In
recent years, African countries have been told by the rich world
simply to "live within their means", however meagre those means
might be. The IMF and World Bank have had to deliver this pain-
ful donor message. "Belt tightening" for people who cannot af-
ford belts became the order of the day. The professional staffs
of the Bretton Woods institutions know full well that their pro-
grammes lack adequate donor financing. But since these agencies
are run by the same donor governments that are withholding ade-
quate aid, deep frustrations are rarely expressed in public.

As special adviser to the UN secretary general, Kofi Annan, I
asked my colleagues in the Millennium Project to undertake a
needs assessment in order to assay what a more detailed study
might show. Our much smaller team undertook a process very simi-
lar to the multi-agency study for Iraq, looking sector by sector
at the gaps in infrastructure, social-service provision and hu-
man resources, and the costs of filling them in relatively well-
governed countries. With only a small portion of what America is
now spending on military and reconstruction outlays in Afghani-
stan and Iraq, it would be possible to enable hundreds of mil-
lions of people to break out of poverty. The average annual fi-
nancing needs for the period 2005 to 2015 are roughly as fol-
lows.

Basic infrastructure--roads, investments in soil health, water
harvesting for crops, drinking water and sanitation, modern
cooking fuels, electricity--would cost around $45 per person per
year between now and 2015 (using an average of the per-capita
costs identified for Ghana, Tanzania and Uganda). Basic health
care--for control of malaria, AIDS, TB, childhood diseases, safe
childbirth, nutrition and family planning--would be another $30.
Upgrading primary and secondary education would add another $15
per person per year. Other high-priority items would add roughly
another $10, bringing the total needed investments to around
$100 per person per year.

Some of these needs are, of course, covered by domestic budgets,
while a small part comes from the out-of-pocket spending of the
extremely poor. In total, domestic outlays might cover as much
as $40 per person per year, if these poor countries push hard
(but not punitively hard) on mobilising local resources. The re-
maining $60 gap would require international help. These coun-
tries already receive around $10 per person per year in aid that
is directed at these priorities (additional aid is directed at
other purposes). The unmet need is therefore around $50 per per-
son per year. Applying these results to six countries--Ethiopia,
Ghana, Kenya, Senegal, Tanzania and Uganda--with a combined
population of 180m, this amounts to only $9 billion per year in
addition to current aid flows, far less than what was targeted
for Iraq alone with its 24m people.

BEACONS OF STABILITY
Could this money be well absorbed? The answer is a decisive
"yes". In the six countries, the governments are stable.
Bridges, pipelines and power pylons are not being blown up each
day. All six countries have already prepared detailed, often in-
genious, plans for scaling up their investments in the key in-
frastructure sectors. Ghana has its Ghana Poverty Reduction
Strategy (GPRS), Ethiopia its Sustainable Development and Pov-
erty Reduction Programme, and so forth. Indeed, these plans re-
veal a powerful and poignant truth.

Ever since the UN Millennium Assembly in September 2000, the
low-income countries were told to "scale up" their ambitions in
order to meet the poverty-reduction targets summarised in the
Millennium Development Goals. They were told to make plans for
Education for All (EFA), to Roll Back Malaria (RBM), to treat
AIDS patients on the scale of 3-by-5 (3m patients in poor coun-
tries on anti-retroviral treatment by the end of 2005, covering
half of all those who would need such treatment), and so forth.
The well-governed countries took these initiatives seriously,
making detailed plans and submitting them to the donors. But the
donors got sidetracked by the September 11th attacks. Africa's
plans are on the table, but the financing is not.

Ghana's GPRS, to name just one example, brilliantly identified
the sources of rural poverty. It systematically laid out the
case for a five-year investment programme, identifying regional
needs and timetables for filling them. It produced, in short, a
first-rate analytical effort. But the donors said that it was
"unrealistic"--not in terms of Ghana's needs, potential, goals,
or plans, but in terms of what the donors were prepared to fund.
The GPRS went through four drafts as it was beaten down to "re-
alism" by the donors. In consequence, the plan addresses only a
fraction of the country's real needs.

With strategic and well-governed countries identified, with
plans of action in place, and with relatively modest financing
needs, the last remaining step is to set in motion a process in
which the elements are combined. Such a process is surprisingly
close at hand, if America can rouse itself even briefly from its
election-year and Middle East preoccupations. The key lies in a
multilateral approach to helping Africa, and America is the big-
gest missing element for greater multilateral assistance.

The International Development Association (IDA) of the World
Bank is the right focal point for revamping and expanding the
aid flows. IDA provides the most successful form of development
assistance in the world today, and it can be made even better.
It does five important things. First, it provides the world's
single largest flow of low-cost development assistance to poor
countries, though not enough of it and not at low enough cost.
IDA currently makes commitments of around $8 billion per year,
of which 80% is low-interest long-term loans and the remainder
outright grants. Second, it directs its outlays towards the pri-
orities identified by the recipient countries.

Third, IDA harmonises donor resources. Typically, the 22 rich-
country donors torment recipient governments by insisting on
separate aid projects that allow each donor to "show the flag".
In the case of IDA, however, the donor governments agree,
wisely, to pool their resources into a single basket that can
back the specific strategy of the recipient country. Fourth, IDA
commits its resources over a three-year time horizon rather than
a one-year donor budget cycle typical of bilateral aid. Fifth,
it aims to base its allocations on good performance, using indi-
cators for governance and economic management.

BIGGER IS BETTER
Still, IDA needs to be strengthened in four ways for it to play
a breakthrough role in Africa. Most important by far, instead of
$8 billion, IDA's annual programmes should be up to $25 billion,
with around half of that going to Africa. Second, IDA needs to
make grants rather than loans to the poorest recipients, which
would include almost all of the countries in sub-Saharan Africa.
The American government called for grants rather than loans to
finance Iraq's recovery so as not to encumber future Iraqi gen-
erations, and the same principle applies even more emphatically
for impoverished Africa. Third, IDA should work with the aid re-
cipients on strategies that have a time horizon long enough to
carry them from today to 2015 when they are supposed to meet the
Millennium Development Goals. Fourth, IDA can and should focus
even more on measurable, monitorable and proven interventions--
roads, soil nutrients, anti-malaria bednets, to name a few--
which in combination enable a country to break free of poverty.

In fact, the timing for introducing properly ambitious pro-
grammes could not be better. The next three-year round of IDA
financing (IDA-14, covering fiscal years 2006-08) is currently
under negotiation among donors. The African Union's peer-review
mechanism is getting under way. Next year, Britain hosts the G8
Summit, and Tony Blair's government has made clear that a dou-
bling of development assistance will be at the core of the
agenda. Mr Blair's Africa Commission is due to report in spring
2005. And in September 2005, the world's leaders will gather at
the UN to review progress in the five years since the Millennium
Assembly. Will they still be enmeshed in bitter controversy over
a highly contested war? Or will they say with confidence that
well-governed developing countries will finally find a partner-
ship with their rich counterparts to help the world escape from
violence, terror, disease and extreme poverty?

Jeffrey Sachs is the director of the Earth Institute at Columbia
University in New York and special adviser to UN secretary gen-
eral, Kofi Annan, on the Millennium Development Goals

[1] http://www.economist.com/displayStory.cfm?story_ID=2693350

See this article with graphics and related items at:
http://www.economist.com/world/africa/displayStory.cfm?story_id=2685783