Category: Poverty

One of the sad realities of money given to help those in need is that it often provides an easy avenue for the unscrupulous to make a profit at the expense of those whom the money was designed to help. In the case of free education for primary school children in Kenya, funded by the government and foreign donors, the Daily Nation has uncovered a scam which milks money from funds allocated for the purchase of textbooks.

Most textbooks are sufficiently durable to last for at least three or four years, and yet many schools have been ordering new text books for students every year. This is news to the publishers, who have stacks of books waiting to be ordered, and it is news to the many students who have to do without textbooks. Somewhere between the orders that appear in the school accounts and the publishers who do not receive the orders, there is some racketeering going on.

The scam appears to involve collusion between school principals and retailers who bill the schools for larger quantities of books than are delivered, then pocket the proceeds. If a school is threatened with an audit, the school’s stores are mysteriously broken into or a fire mysteriously breaks out in order to cover up the discrepancies. Thus greedy school principals steal from impoverished children.

Like much of sub-Saharan Africa, Kenya relies on smallholder farmers to produce the majority of its food. Farming is a difficult low-margin business in Kenya because poor infrastructure makes transport difficult and expensive, and most of the end-consumers have very limited capacity to pay. As a result, farmers tend to run their operations as economically as possible, leaving them with inadequate savings when natural disasters or other factors damage their crops.

The staple food for most Kenyans is maize meal, but a strange disease which turns maize brown and causes it to wither has been spreading from farm to farm. The disease, known as Maize Lethal Necrosis, is spread from plant to plant by the wind and has so far affected thousands of farms. The farmers have been instructed by the Ministry of Agriculture to destroy their crops to prevent the disease spreading further.

An obvious measure to limit the damage would be for the farmers to plant a different type of crop which is not affected by the disease, but that would require a significant cultural change for Kenyan consumers. Kenyans have stubbornly clung to their preferred diet of maize meal in the face of rising prices and shortages in recent years. Thus the maize crop disease follows last year’s drought as the latest threat to food security for the poor.

“Africa must stop begging for food. That is an affront to both its dignity and its potential. If some African countries can acquire and deploy jet fighters, tanks, artillery and other advanced means of destruction, why should they not be able to master agricultural know-how? Why should Africans be unable to afford the technology, tractors, irrigation, seed varieties and training needed to be food secure?” So says Tegegnework Gettu, the director of the UNDP’s Regional Bureau for Africa, in the Africa Human Development Report 2012.

Decades of poor governance have led to chronic food insecurity. State revenues have been monopolised by self-serving elites. Rural infrastructure has deteriorated and food systems have stagnated. The international community has been similarly culpable, with agricultural subsidies to developed-country farmers making smallholder African farmers unable to compete. Structural adjustment programs have taken resources away from food production. Aid has been tied to counterproductive conditions.

Fundamental change is essential for Africa. The economic growth seen in the last decade has not increased food security. Africa has access to the knowledge and technology for ending hunger and food insecurity. All that is lacking is the political will required to create greater productivity of smallholder farms, more effective nutrition policies, greater household resilience to cope with shocks, and wider participation and empowerment.

One common approach to helping the poor is to provide them with micro-loans. These are said to be good because they provide the poor with the capital required to allow them to exercise their latent entrepreneurial instincts, thereby working their way out of poverty. One of the curious features of micro-loans is that the organisations which provide them almost always say that they get very high rates of repayment, higher than normal banks.

This story appeals to the paternalistic instincts of donors, because it demonstrates that the poor are conscientious, hard-working and therefore deserving. But it does seem to be extremely counter-intuitive. Surely people who are desperately scrounging for resources every day are far less likely to consider repaying a small loan to be a higher priority than do people who are more financially stable. It beggars belief that a micro-loan organisation could claim a repayment rate such as 98%.

Unless… the micro-loan organisation exercises a lot more diligence in collecting repayments than does a normal bank, ensuring that borrowers repay their principal plus interest (usually at rates well in excess of 20%) before the borrowers spend any money on food or shelter or medical treatment or other necessities. There may be a more innocent explanation for the high repayment rates, but exploitation suggests itself as a likely candidate.

Last week US president Barack Obama announced a plan to boost food security and farm productivity in Africa. There is no doubt that many African countries have rapidly increasing populations, and food security is an issue which urgently needs to be addressed. The bigger question is whether the US will be able to persuade Africans to accept its proposed solutions, given the significant changes that would be required in agricultural practices.

Africa possesses sufficient land to feed a significantly larger population than it currently has, if high-productivity farming techniques were used. The Green Revolution which took place in the middle of last century resulted in significant increases in agricultural production in most parts of the world. It involved the cultivation of high-yielding crops, the use of irrigation, synthetic fertilizers and pesticides, and the modernisation of land management techniques, but the revolution largely failed to occur in Africa.

The new plan involves 45 large companies, including Diageo, Unilever and Vodafone, joining with governments and aid agencies to form the New Alliance for Food and Nutrition Security. The New Alliance will invest more than $3 billion in developing African agriculture. The large companies will provide skills, resources and financial expertise to help give poor farmers the chance to pull themselves out of poverty.

Major-General Kahinda Otafiire, the Minister of Justice and Constitutional Affairs in Uganda, is reported to have come up with a bold way to end poverty: “I will arrest those who are poor and do not want to work.” Undoubtedly idleness does eventually lead to poverty; as Proverbs 10:4 says, “Lazy hands make for poverty, but diligent hands bring wealth.” However, is poverty in Uganda attributable primarily to idleness, or to something else?

Poverty, at least of the financial type, arises when a person’s outgoings exceed his or her income. If a person lives in an environment where there are no opportunities to make an income exceeding the cost of living, then the person will be trapped in poverty regardless of how hard he or she works. For many of the world’s poor, the cost of living is high because of exploitation by officials, and goods are often expensive because the poor do not have access to supermarkets and other low-cost distribution networks.

Undoubtedly some poor families suffer because the man of the household spends his time in bars rather than working. But will arresting such people help to cure the general problem of poverty? Ugandan prisons are already overcrowded. Imprisoning people increases the burden on society without creating any advantages. The real (but very difficult) way to reduce poverty is to change the ecosystem in which people live, so that there are plenty of opportunities for them to earn income exceeding their outgoings.

The prevailing view in the development business is that microenterprise loans are Good because they help people get out of poverty, and so they are supported by aid organisations. It is not generally considered polite to question the effectiveness of aid because it might discourage donations. The story of microcredit sounds enticing to capitalists, because it is about people working their own way out of poverty, rather than seeking handouts.

However, the story sounds fishy to me. If someone you knew was having financial difficulties, would you recommend that he max out his credit cards to help him get richer? There are certainly some people who have borrowed money at credit card-type interest rates and have subsequently gone on to great financial success. However most people get poorer through borrowing money at high interest rates, not richer.

Businesses often use debt financing, but they usually confine this to situations where it is rational to do so. If a business opportunity reliably promises a rate of return which exceeds the cost of borrowing, then it makes sense to borrow. In the slums of the world, such business opportunities are few and far between; if significant high-return business opportunities existed, wealthy outsiders would already have moved in and taken them. Intuitively I find it difficult to see how microenterprise loans can make a serious contribution to poverty eradication.

One of the problems that often arises when people become refugees as a result of famine or insecurity and end up in refugee camps is that they do not want to return home when the immediate crisis is ended. They find the security of the camps and the certainty of food provided by aid agencies preferable to the risks and dangers of their former lives. Short-term refugee camps can turn into long-term people problems.

The United Nations faces such a problem with the Dadaab camp in Kenya, which is currently home to almost 450,000 refugees, and is suffering from overcrowding and insecurity, with women in particular being vulnerable to gender-based violence. One third of Somalia’s population is still facing food insecurity, so the number of refugees in Dadaab is increasing, with no signs of the people returning to Somalia.

Dadaab is only one of many camps and services provided for refugees, all at considerable cost, and the UN’s Office for the Coordination of Humanitarian Affairs is currently trying to find $1 billion to respond to refugee crises in Somalia and Sudan. The OCHA is providing refugees with seeds, fertiliser, solar lighting and fuel efficient stoves.

When commentators expound on the causes of poverty and the challenges for developing countries, critical infrastructure weaknesses are often overlooked. In the case of East Africa, development of the whole region is being held back by weak transport infrastructure and capacity limits at Kenya’s key port, Mombasa. For a nation’s prosperity, it is necessary that citizens be able to trade with others inside and outside the country without having to pay excessive transport costs.

Unfortunately for the citizens of East Africa, the port of Mombasa is seriously congested, and cross-country transport infrastructure is slow and expensive. A shipping container of goods from Singapore would take 19 days to sail to Mombasa, then 20 more days – because of delays in the port and on the road – to reach Nairobi by road. It is cheaper to ship a container of goods all the way from Tokyo to Mombasa than it is to transport that same container by road from Mombasa to Kampala.

As is often the case with systemic problems, it will be necessary to fix a number of problems at the same time in order to create the desired improvement. Kenya needs to upgrade the port of Mombasa, and at the same time it needs significant improvements to road and rail transport infrastructure. Improvements are currently underway in both these areas.

While most people who live in poor countries eke out a meagre living, a very small number of people manage to do quite well for themselves financially by working out a way to profit from the situation. One such winner is David Oyedepo, the founding pastor of Living Faith Church Worldwide, also known as Winners’ Chapel. Each Sunday he hosts three services at the Faith Tabernacle in Lagos, Nigeria, which is the world’s largest church building capable of seating 50,000 people, with an outside overflow capacity of 250,000.

The Winners’ Chapel network of churches has branches in all states of Nigeria, in 32 countries in Africa, and in the UK, US and Dubai. Presumably largely as a result of tithes and offerings, Oyedpo has become, according to Forbes magazine, Nigeria’s wealthiest pastor with an estimated net worth of $150 million. He owns four private jets, luxury houses in London and the US, a publishing company, a university and an elite high school.

Now, to take things a step further, Oyedpo also owns an airline. Dominion Air will offer executive jet services at prices up to $10,000 per hour. The contrast between the very high cost of private charter jet travel and the very low income of many congregants at the Winners’ Chapel churches is giving critics plenty to say about Oyedpo’s “prosperity gospel” teachings.