• TABLE OF CONTENTS
HIDE
 Front Cover
 Introduction
 The nature and extent of poverty...
 Women and poverty in Africa
 Impact of slow growth on pover...
 External terms of trade vs. internal...
 Export crop pessimism, smallholder...
 Role of the state: its nature and...
 Structural adjustment and uprooting...
 Strategies for enhancing employment...
 Social services
 Intervention in special cases
 Aid related issues
 The role of the African development...
 Conclusion
 Table of Contents
 Bibliography






Group Title: International working paper - Food and Resource Economics Department, University of Florida - IW91-6
Title: An integrated approach of strategies for poverty alleviation
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
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Permanent Link: http://ufdc.ufl.edu/UF00054799/00001
 Material Information
Title: An integrated approach of strategies for poverty alleviation a paramount priority for Africa
Series Title: International working paper series
Physical Description: 32 p. : ; 28 cm.
Language: English
Creator: Lele, Uma J
Adu-Nyako, Kofi, 1952-
Publisher: Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Publication Date: 1991
 Subjects
Subject: Economic assistance, Domestic -- Africa, Sub-Saharan   ( lcsh )
Economic policy -- Africa, Sub-Saharan   ( lcsh )
Economic conditions -- Africa, Sub-Saharan -- 1960-   ( lcsh )
Social conditions -- Africa, Sub-Saharan -- 1960-   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references (p. 31-32)
Statement of Responsibility: by Uma Lele and Kofi Adu-Nyako.
General Note: Cover title.
General Note: "This document was commissioned by ADB"--Leaf i.
General Note: "October 1991."
Funding: Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
 Record Information
Bibliographic ID: UF00054799
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 001669803
oclc - 24673852
notis - AHY1641

Table of Contents
    Front Cover
        Page i
        Page ii
    Introduction
        Page 1
        Page 2
    The nature and extent of poverty in Africa
        Page 3
        Page 4
        Page 5
    Women and poverty in Africa
        Page 6
        Page 7
    Impact of slow growth on poverty
        Page 8
    External terms of trade vs. internal policies
        Page 9
        Page 9a
        Page 10
    Export crop pessimism, smallholder development and overall economic diversification and modernization: some empirical examples
        Page 11
        Page 12
        Page 13
    Role of the state: its nature and evolution in Africa
        Page 14
        Page 15
    Structural adjustment and uprooting of poverty
        Page 16
        Page 16a
        Page 17
        Page 18
    Strategies for enhancing employment opportunities
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
    Social services
        Page 24
    Intervention in special cases
        Page 25
        Page 26
    Aid related issues
        Page 27
    The role of the African development bank
        Page 28
    Conclusion
        Page 29
    Table of Contents
        Page 30
    Bibliography
        Page 31
        Page 32
Full Text





IW91-6






AN INTEGRATED APPROACH OF
STRATEGIES FOR POVERTY ALLEVIATION:
A PARAMOUNT PRIORITY FOR ARICA

by

Uma Lele and Kofi Adu-Nyako

IW91-6 October 1991


INTERNATIONAL WORKING PAPER SERIES


FOOD AND RESOURCE ECONOMICS DEPARTMENT
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611


























This document was commissioned by ADB to a group of
consultants. The content and views expressed
in this report do not necessarily reflect
the official opinion of the
ADB Group or staff.








Introduion


1.01 Growing poverty in Africa has once again begun to sound alarming bells. It is a
problem which must receive urgent attention. However, solutions must be seen from an
historical perspective if mistakes are not be repeated, and if constructive lessons are to be learnt
and applied in an operational context. A question may be asked why so much concern about
poverty in Africa today? In 1973, Mr. McNamara's famous Nairobi speech at the World Bank's
annual meeting of the board of governors was followed by a widespread interest in the
international donors' community to make a direct "Assault on poverty" (World Bank, 1973). The
donors' concern rose at the time of a major drought which had led to rising world food prices and
a sharp rise in the food import bill of African governments. The oil import bill had also
burgeoned following the first oil price shock. Then African governments resolved to achieve
food self sufficiency by giving a high priority to food production. Donors vowed to provide for
basic needs of Africans. External aid rose sharply. Nearly a quarter to a half of the rise in
external aid was directed to integrated agricultural and rural development projects. Amounts
committed to agricultural and rural development increased by up to 7 times in less than ten years
in several countries. To mitigate poverty, project interventions shifted away from export to food
crops. Investment focus also shifted from areas of well demonstrated agricultural potential where
rural incomes were already better, to poor relatively marginal areas that had low and variable
rainfall. Assistance to agriculture was combined with investment in health, education etc. In this
way governments intended to achieve political integration and regional equity. Donors hoped to
reach the poorest of the poor.

1.02 It is now generally believed that most integrated projects failed. They were too
complex and tried to do too much too quickly. Public services expanded, but their quality left
much to be desired. Projects were also based on very little knowledge of the precise constraints
the poor households faced. For example, they pushed production of maize where only millet and
sorghum could grow for climatic reasons. Governments and donors also overlooked
macroeconomic management in their tunnel-visioned focus on projects. As macroeconomic
problems mounted by the end of the 1970's, donors were quick to abandon integrated rural
development and eager to dissolve the projects entities (Lele). After a decade of structural and
sectoral adjustment, much of the planning and implementing apparatus created for agricultural
and rural development in Africa, albeit on ad hoc basis, has been dismantled. As criticism that
adjustment programs are adversely affecting the poor mounted, new interventions have begun to
be designed to compensate for the adverse impact of structural adjustment. All too often these
interventions do not draw on the past experience. They overlook the fact that the problems of
poverty in Africa are deep rooted, long-standing and often not necessarily related to structural
adjustment.








-2-


1.03 The poor eam their living by mostly selling their labor. Therefore, uprooting poverty
requires rapid and broadly based growth to create productive employment so as to outpace high
growth rates of population. Given the extensive initial underemployment in Africa it will take a
long time to soak up the unemployed labor force before real wages can increase. The pace and
pattern of development are crucial to the amount of productive employment and income
generation. No matter how rapid, the normal process of development will not however, be able to
benefit some sections of the population that are too poor to participate in the normal growth
process. For these sections direct programs of poverty alleviation are essential. However,
experience in Asia indicates that to be effective such programs tend to be highly resource
intensive, mainly of indigenous leadership, administrative and management skills. They also
require a strong political commitment to uproot poverty. Africa, which now receives nearly $4
billion worth of technical assistance, will need to examine how it will reduce that dependence and
increase the mobilization of its own people to solve the complex problems of poverty. Finally,
there is an urgent need for an active population policy that will bring down the population growth
rates and increase per capital benefits of growth. This requires massive investment in the
education of women as a way of uplifting the entire families. This paper therefore deals with the
problem of poverty uprooting at three levels:

1. Those which can be addressed by an effective long term strategy of rapid and
broad based economic growth.

2. Those which require active population and human resource development policy .

3. Those which need special programs to uproot poverty.


1.04 As the premier regional development agency, the African Development Bank has a
critical role to play both at the levels of helping African governments to establish effective long
term economic development strategies and human resource policies, as well as in getting
underway direct action programs to redress problems of the very poor. The implications of our
diagnosis for future long term policy analysis and policy reform, monitoring, evaluation and
programs of action for poverty uprooting are spelled out at the end of the paper.





-3-


The Nature and Extme of Poverty in Africa

2.01 Sub-Saharan Africa is one of the most deprived regions in the world. Based on a
poverty line defined as per capital incomes below $370, the World Bank's 1990 World
Development Report (WDR, 1990) estimated that in 1985 over 1.15 billion people in developing
countries were living in poverty. Sub-Saharan Africa accounted for 16% or 180 million people,
South Asia 47%, East Asia 25%, Latin America and the Caribbean 6%, the Middle East and
North Africa round up the rest. However, if present trends of low growth in incomes and rapid
population growth exceeding well over 3% continue, the WDR projects that by the year 2000 the
number of the poor in Africa will increase to 265 million people accounting for 30% of the
developing world poor. This contrasts sharply with a projected decline in the number of poor in
South Asia to over 365 million by the year 2000. The growing incidence of AIDS and its likely
impact on future population growth rates in Africa and elsewhere in the world are however a
major enigma. Its impact on incidence of poverty and implications for policy will need
systematic analysis. However, it is a subject which is beyond the scope of this paper.

2.02 The paucity of intertemporal data on income distribution in Sub-Saharan Africa makes
it difficult to estimate trends in the incidence of poverty for individual countries. Available
evidence, however, suggests that Tanzania's real rural living standards declined at an annual rate
of 2.5% from 1969 to 1983, urban real wages fell by a drastic 65% over the same period. Real
private per capital consumption has fallen by 43% since 1973 (World Bank, 1990). The likely
effect of structural adjustment on incomes in Tanzania and elsewhere is explored later. Trends in
the incidence of poverty in Nigeria with a quarter of African population have fluctuated rather
than declining. In the 1970's, with the oil price increases, per capital consumption and incomes
increased, but with the oil price decline in the 1980's, consumption fell by 7% annually. Nigeria
did not make use of its substantial oil revenues to achieve a sustained rate of broad based
economic growth as did Indonesia (Gelb). The evidence on caloric intake showed no
improvement between 1952 and 1985 (World Bank, 1990). Even in Kenya, which has had a
relatively better record of economic growth, the FAO estimated per capital food availability of
2013 calories and 54.6 grams of protein per day for 1979-81. Using a similar methodology, the
World Bank estimates for 1987-88 of 1800 calories and 52 grams of protein indicate that per
capital food availabilities may have declined by 10% over the decade.








-4-


2.03 Despite rapidly rising food imports, a declining per capital food availability in Kenya
and elsewhere is due in part to the high rate of population growth. In addition, African countries
have experienced little, if any, growth in agricultural productivity. Much of the growth in food
and other agricultural production has come from area expansion to marginal lands, or lands
previously under forests and grasslands. Population pressure has also reduced the fallow period,
causing declining soil fertility.

2.04 Malnutrition is a serious problem in Africa. Two broad regional patterns of
malnutrition have been noted: in West Africa malnutrition in Burkina Faso, Ghana, Togo and
Benin rose sharply in the first half of the 1980's then declined until 1986, and is on the
ascendancy since. In Ethiopia, Niger, Rwanda, and Madagascar malnutrition has shown a more
persistent rising trend (World Bank 1990a). Surveys indicate that in Malawi over 35-50% of
children under five years are classified as malnourished. Some of the recent information from
food security studies in Malawi suggest that nearly 70% of the households in the Southern region
of Malawi run out of food months before the next harvest season. These data mean that apart
from a renewed emphasis on food production by the poor, the process of liberalization of food
markets must also be considered from the viewpoint of ensuring stability of prices and supplies.
The poor spend nearly 80% of their income on food, most of which they purchase in the market.
Increased food prices therefore have major adverse effect on their welfare. Until now, far too
much reliance has been placed on the use of high producer prices as a means to increase
production without considering its adverse effect on consumption. Much greater reliance will
need to be placed in the future on improvement in technology as a means of increasing production.

2.05 Given the state of nutrition, it is not surprising that life expectancy in Sub-Saharan
Africa is only 54 years compared to the average of 62 years for all developing countries. In other
social indicators as well, Sub-Saharan Africa is behind most other regions in the developing
world. The under five mortality rate is 196 per 1000 for Sub-Saharan Africa, compared to 172 for
South Asia and 56 for East Asia. In Asia, only India with under five mortality rate of 200, has a
high rate comparable to Africa's. While China and other countries in East Asia and Latin
America have achieved primary school enrollments in excess of 90% of the age group, the
enrollment rate in Sub-Saharan Africa is a low 56%. Even in South Asia, which lags behind the
rest of Asia, the rate is 74% and for India it is 81%.





-5-


2.06 Notwithstanding the recent decline in urban living standards experienced in most
African countries, poverty in Africa is predominantly a rural phenomenon. In 1980, 86% of the
rural population in C6te d'Ivoire, 80% in Ghana and 96% in Kenya were categorized as poor
(WDR, 1990). Although up to 60% to 80% of the income of the poor is derived from wage
employment outside one's own farm, sectorially, poverty is reported to be concentrated in
agriculture, followed by the informal sector. Within agriculture, higher incidence of poverty is
recorded for food crop producers than those who produce both food and export crops. Nomadic
cattle herding populations that tend to have the least political representation also tend, on average,
to be poorer economically than settled populations cultivating crops, although there is much
skewness of income and wealth among cattle herders. There is also growing evidence of
increased absentee ownership of cattle by urban elite with the traditional herders mainly
becoming wage earning managers. Similarly, there is growing evidence of social differentiation
among producers. A small body of commercially oriented crop producers and livestock owners
are contributing to the marketed surplus. A large body of the peasantry is experiencing a gradual
but certain process of immizerization. The access to land is constrained by a complex set of
customary laws that restricts the ownership of land, based on cultural, ethnic or gender issues as
well as by political factors. The land, population growth and the environmental dynamics raise
sociopolitically sensitive issues which need to be addressed in policy.

2.07 Cattle herding, and food and export cropping patterns are of course determined by
rainfall. Therefore a North-South pattern is noted in the incidence of poverty. Using the physical
quality of life index (PQLI), UNICEF, (1984) estimated that the incidence of absolute poverty in
Ghana is highest in the Northern and Upper Regions. A similar pattern is identified in Cameroon,
Senegal, Nigeria and the Cote d'Ivoire. Improvements of pastoral households have received little
attention from donors after the initial spate of failure of livestock ranching projects in the 1970's.
For instance, less than 5% of lending by the World Bank in the 1970's went to livestock
development. Low incomes and adverse climatic conditions mean that susceptibility to droughts
and other risks arising from frequent famines, including from the depletion of cattle herd, is
greater in the Sahelian than in the Sudano Sahelian or the Sudanian zones. In Kenya, also
connected with rainfall, lower average incomes have been documented in the relatively more arid
Western and Nyanza provinces, which account for 60% of those suffering from food poverty
(World Bank, 1990 KFNP). The regional concentration of poverty means that:

1) long run policies should be pursued which would promote growth and migration
into the areas of relatively high physical productive potential, and











2) in the short and medium run, the public sector must play an active role in
stabilizing food supplies and prices in areas where susceptibility of populations to
climatically induced shortages is acute and frequent.

2.08 Incidence of poverty is lower in urban areas where rapid growth of government and
industrialization policies expanded employment in the formal sector at unsustainably high wage
and employment rates, although recent reductions in public expenditures and wage employment
have also swollen the ranks of the poor, mostly by increasing the size of the informal sector. As a
result of articificially pegged wages and employment, the rate of urbanization has been far more
rapid in Africa than in other regions of the world. In 1965, the urban population was reported to
be 14% of the total; by 1985, the reported urban share had constituted 28 % of the total (World
Bank, 1990a), with urban population growing at an annual average rate of 5.8% between 1965 and
1980, and the rate accelerating to 6.2% in the 1980's. In contrast, in South Asia the rate of
urbanization stagnated at 4% and in the Caribbean and Latin American region the rate of growth
in the urban population declined.

2.09 It needs no stressing the high rural-urban migration in Africa is a reflection of the low
levels of opportunities for employment as well as low levels of social services in the rural areas.
Migration to urban areas undoubtedly reflects possibilities for improved family income and
welfare. However the predominantly male migration has also had far reaching social effects,
including breakdown of families, and poor health of rural women and children, in turn leading to
a desire for large number of births. Data suggest that the incidence of AIDS is several times
higher in urban than in rural areas. There is a growing danger that the already limited budgets
allocated to health services in rural Africa will be preempted by the needs to deal with AIDS,
while the chronic problems of malaria, cholera, etc. that are prevalent in rural areas will remain
unattended. It is an issue which needs attention for designing effective future policies.

Women and poverty in Africa

3.01 Women headed households tend to be disproportionately represented in the poverty
group. There is evidence that women headed households are on the increase especially in
Southern and Eastern Africa (Buvinic and Lycette). Such households tend to be smaller and their
composition is dominated by dependent children, frequently bom out of wedlock and therefore
without the benefit of a stable family. Women often do not have right to cultivate land, and earn
their living primarily by selling their labor. Even women with access to land are mainly





-7-


producers of food crops. They work long hours at low remunerative wages. Their lack of
collateral limits their ability to obtain institutional credit and other modem inputs, and to adopt
new innovations. Extension agents often have little contact with female farmers. Data on
education show a disparity between educational attainment of females compared to males. In
1980, the literacy rate of women was only 60% of that of men. Enrollment at all levels of
education was lower for women than men. The good news is that progress in female enrollment
in primary schools has been more rapid than that of men, and improved from a low of 30 % of the
total to 57 % in 1987 (WDR, 1990a). However, at the secondary and tertiary levels, females still
lag behind men.

3.02 The link between women's educational level, and the quality and productivity of the
labor force through effects on the quality of child care and reduction in the fertility rates, is well
established and has clear implications for a population and human resource policy. The social
return to primary education is known to be higher than for higher education. Empirical evidence
from Kenya, Brazil, Korea and Nepal indicates that in the presence of complementary inputs
farmers with four years of education on the average improved productivity by 13.2% and even
when complementary inputs were not available, significant productivity improvement was
achieved (World Bank, 1980). We have already pointed out that the high and accelerated rates of
growth of population have caused a sharp reduction in per capital incomes and the growing
incidence of poverty. Some initial acceleration in the rates of growth of population occurred as a
result of success of public health campaigns, e.g. the eradication of malaria and cholera, leading
to decline in the infant and child mortality, and death rates in general. 'However, the long delay in
the drop in fertility rates is related to the poor, or no access of women and children to basic
amenities of life. The link between good health and the capacity of a child to learn has been
documented in a number of studies. Low cognitive performance has been associated with protein
energy malnutrition in Kenya, China and India. Micronutrient supplementation in primary school
children in Thailand and Indonesia has been shown to improve test scores. Other benefits of
education, better health and fertility reduction have been shown to exist for women.

3.03 Poor health, inadequate education, unclean water, shortage of food and malnutrition
increase the incidence of infant and child mortality, in turn increasing the desire for larger
families as a cushion against social insecurity and old age. Low productivity of labor in
agriculture and rural activities in situations of extreme reliance on handhoe cultivation also
increases the demand for children as a means of increasing the supply of labor in farming,
fetching water and fuel wood, in minding cattle and transporting the small surplus to the market.
Whereas only about half of the value added in smallholder agriculture in Asia is by labor,










in most African countries the proportion is close to 80%, reflecting the low level of capitalization
of agriculture. Quantity of children therefore becomes a substitute for their quality, leading to a
spiralling vicious circle of poverty. The cost to the poor households of raising children tends to
be low in relation to the benefits they derive from large families, in contrast to the situation in
more advanced countries where the cost of schooling, health care and other activities of children
often outweighs their benefit. The economic benefit of large families is not to deny the high
cultural value placed on large families by African societies. Cultural preferences are however,
themselves invariably related to the level of education of women and the other constraints faced
by them.

Impact of Slow Growth on Poverty

4.01 Since a major part of the reason for the growing incidence of poverty in Africa is the
slow growth of GDP the causes of slow growth must briefly be reviewed from the viewpoint of
future policy. Whereas the African continent generally outperformed Asia in the 1960's and
indeed was held as the model for Asia when the Asian continent faced a share of its difficulties,
the reverse was true in the 1970's and 1980's. African GDP which had grown at an annual
average rate of 5.9% between 1965-73, decelerated to 2.7% over the period 1973-80, and to only a
0.3% during 1980 to 1986. GDP declined by 1.1% in 1987, grew by 2.5% in 1988, and the
preliminary estimate for growth for 1989 is 3.5% (WDR, 1990).

4.02 GDP performance is closely related to the growth of exports in small African
economies in which trade plays an important part. Whereas minerals including oil have
dominated exports of some countries, agricultural exports have been important in virtually all
countries and they have been the real barometer of the health of the economy. Unlike mineral
exports which can be realized by small enclave sectors, agricultural exports have traditionally
come from a large number of small farmers. Production and processing of agricultural crops is a
highly labor intensive phenomenon. Increasing the productivity of export crops is thus not only
an important way of increasing exports but of creating employment, increasing incomes and
reducing poverty.

4.03 It is now broadly agreed that Africa discriminated strongly against agriculture by
implicit and explicit taxes on exports through an overvalued exchange rate which rendered export
crop prices lower than they would otherwise have been. Export taxes became an important source
of government revenue. Taxation on agricultural output caused resources to be shifted away from





.9-


exportables to non-tradeables including food crops (Lele). Figure (1) shows that the trade
weighted exchange rate which measures the extent of overvaluation indicated a strong
appreciation of the exchange rate for Sub-Saharan African countries throughout the 1970's and
early 1980's. At the same time, the index declined for the Asian and Westem hemisphere
developing countries. This situation reduced the competitiveness of African exports vis a vis
other developing countries.

4.04 The emphasis on the neglect of export agriculture in the previous paragraphs should
not be interpreted as suggesting that export agriculture should have been promoted at the cost of
food crops. There has been a tendency to dichotomize the concern about export promotion and
food production. Evidence suggests overwhelmingly that the two are highly complementary.
Farmers concerned with food security of households frequently devote some resources to export
crop production as a diversification strategy of increasing incomes and spreading risks of crop
failure. An increase in the productivity of either food or export crops releases additional
resources in the form of land and labor for the production of the other. Thus frequently low levels
of land and labor productivity of major food crops prevent farmers from deploying resources for
tht production of high value export crops and vice versa. Many of the requirements for the
development of food crop production, e.g. access to a transportation network, credit, inputs,
markets and technology are similar to those of export crops. The discrimination against the
export crop sector thus reflected a more general neglect of smallholder agricultural production
and productivity.

Extemal Temn of Trade vs nltmanl Policis:

4.05 Arguments raged in the early 1980's after the issuance of the Berg report by the World
Bank about the relative roles of adverse external terms of trade and poor internal policies in
explaining export growth of agriculture. The question of terms of trade behavior is of course
complex, because the answers depend on the period under review, the choice of base andc end
years and the commodity composition of exports. Answers for individual countries must be
different from those for the continent as a whole. Nevertheless, the World Bank's 1990 WDR has
shown that, if a long period, beginning in the 1920's is considered, real primary commodity prices
have not declined. In the more recent period, movements in Africa's overall terms of trade have
been influenced by the dominance of oil. In the 1970's the oil exporters, many of whcrn are
middle income countries, experienced favorable terms of trade, but in the 1980's they experienced
a rapid deterioration. In the case of the oil importing and agricultural exporting counties, many
of whom are low income "IDA" countries, the reverse was true. With the exception of 1975 and
1977 their terms of trade declined in the 1970's but remained flat in the 1980's.

























Figure (1)


InOB 1971-72 100

125



100



75


soIk,


70 75 80 85 r7


Source: The World Bank





-10-


4.06 Some important broadly agreed lessons need to be considered with regard to the old
terms of trade debate from the viewpoint of implications for resuming growth and uprooting
poverty. First, the same international price environment was interpretated differently by Africa
and its competitors mostly in the developing world. Sub-Saharan Africa's share of major non-oil
commodities in world exports fell by 2.4% annually in the 1970's but increased slightly in the
1980's. By contrast, Africa's competitors in Asia and Latin America gained shares in agricultural
exports rapidly. Second, while primary commodity exporters experienced greater volatility in
export earnings and government revenues than their manufacturing counterparts, they expanded
government expenditures rapidly as if the commodity booms were permanent rather than
transitory. Thus government expenditures as a percent of GDP increased from nearly a fifth in
the early 1970's to well over a quarter by 1986 (IMF). Over the same period, the government
incurred public sector deficits of 4% to 6% of GDP. Admittedly at an early stage of development
in which governments must provide a variety of public goods which countries lack, e.g. roads,
electricity, water, schools, etc., and which result in the development of markets and make private
actors productive, requirements of government revenues can be considerable. Even with the rapid
rise in government expenditures, however, the primary problem in Africa has not been so much
the overall level of government expenditures as their allocation and quality.

4.07 Wages and salaries have constituted a rising and high share of total government
expenditures in Africa relative to Asia. Not surprisingly, there were limited budgetary resources
left to provide the necessary complementary operating and maintenance expenses to make public
employees productive. As a result despite a rapid rise in special expenditures, effective social
indicators have not improved commensurately. Moreover, bloated and inefficient marketing
boards, the neglect of rural infrastructure including farm to market roads, and little or no attention
to agricultural technology and its extension have affected the growth of the export sector
adversely.

4.08 Government subsidized services have mainly benefitted the relatively better off urban
populations leaving few resources for the provision of primary education. In Sub-Saharan Africa
subsidy on education is estimated to increase sharply from a low of $48 per primary pupil to $233
per secondary student and $2710 at the tertiary level (World Bank, 1990a). Similarly,
expenditures on hospitals in the capital cities have expanded rapidly while rural clinics have
experienced shortages of medicines. In Ghana the bulk of the Ministry of Health budget has been
directed at curative care that serves the urban one-third of the population. Even Tanzania which





-11-


has had a strong commitment to broadbased development allocated only 5.9 per cent of the
1988-89 health budget for preventive health services (World Bank, 1990a). Such urban bias
existed before the process of structural adjustment began and has reflected the political influence
of vocal urban populations.

4.09 Growth in government expenditures was predicated on the expectations of the
favorable terms of trade and continued levels of foreign aid. As both these faltered in the later
1970's, governments increasingly resorted to external borrowing to sustain expenditures. The
growth in real interest rates in the latter part of the 1970's and the 1980's have contributed to the
growing service obligation. The debt burden has increased dramatically since the mid 1970's. In
1975 debt disbursed and outstanding was $20 billion and by 1987 this had risen to $128.8 billion.
Debt service payment as a percentage of total exports increased from 7 percent in 1975 to over 25
percent in the mid 1980's. In 1986 debt service obligations amounted to 45 percent of
Sub-Saharan Africa's export earnings (World Bank, 1989). Without some debt rescheduling it is
difficult to know where the resources for poverty alleviation will come from. However, debt
rescheduling alone is not sufficient. A necessary condition is for the governments to get their
house in order by

1) maintaining a level of expenditures on a long term basis consistent with the level
of domestic resources and external aid that can be realistically expected;

2) controlling the level of government budget deficits

3) improving its balance between a) salaries and wages vs. maintenance and
operations, b) urban and rural sectors and c) social and industrial sector
investments.

Export Crop Pessimism. Smallholder Development and Overall Economic Diversification and
Modernization: Some Empirical Examples

5.01 Countries that attempted to diversify out of agricultural exports by industrialization
through acute import substitution policies were paradoxically the least successful in reducing the
importance of agriculture, in contrast to countries who encouraged agricultural production and
exports (Lele and Agarwal). Thus Tanzania pursued a policy of development of heavy industry
and agroprocessing. In spite of the strong emphasis on industrialization the share of agriculture in
GDP increased from 41% in 1967-73 to 58% in 1985. Ghana, Nigeria, Zambia,








-12-


and Senegal among others, typified countries which launched import substitution industrialization
strategies in the 1970's. Besides losing revenue from the foregone production in the export
sector, import substituting industrialization policies limited labor absorption and did not enhance
the income earning potential for the poor.

5.02 The contrasting case of Chile and Zambia are worth noting. Both countries were
confronted with high volatility in the export price of their dominant export, copper. However
through the pursuit of its comparative advantage in producing copper, including avoidance of
Dutch disease, by maintaining a competitive exchange rate, and control of public expenditures,
Chile has been able to diversify its export base including achieving a rapid growth in agricultural
based exports. Zambia on the other hand allowed the copper sector to generate a chronic case of
the Dutch disease, encouraged the strong labor unions to build a large base of high wages and
food subsidies leading to growth of public expenditures, overvaluation of the currency and a
stagnation in agriculture. In Zambia the share of agriculture in GDP remained constant at 14%,
manufacturing share grew from 6% in 1965 to 25% in 1988, and the share of services grew from
32% to 43% over the same period. The share of the mining sector in GDP fell. By some criteria
economic transformation has occurred in Zambia i.e. from an agrarian to an industrialized
economy, however, over the past two decades, per capital incomes have been declining.

5.03 The lesson is that even though primary commodity production for export may seem
less promising, the route to industrialization lies in pursuing comparative advantage. At early
stages of development this means in most cases in agriculture. There is strong congruence
between playing to one's comparative advantage -- promoting export led policies, broadbased
agricultural growth of food and export crops and reduction of poverty.

5.04 That simply pursuing an agricultural export led growth without encouraging
broadbased smallholder production is not sufficient to reduce poverty is shown by the contrasting
strategies pursued by Kenya and Malawi (Lele and Agrawal). Both followed export led
development strategies and have experienced impressive growths for their agricultural export
volumes. However, because Kenya's growth path involved a smallholder strategy that allowed
their access to land, the rights to grow tea and coffee and to earn international prices for their
crops, the gains from growth were broadly distributed and moreover, dependence on tea and
coffee was reduced through diversification by small farmers into high value horticultural crops.
Kenya's approach led to a rapid overall growth in GDP. The share of agriculture in GDP has
fallen as the country developed. Accompanying the growth in GDP was also a rapid growth in
employment in both agriculture the non-agricultural sector. Despite the high rate of population






-13-


growth, real rural wages did not fall in Kenya to a degree predicted earlier, as they have in
Malawi. Broadbased participation by smallholders coupled with substantial expansion of
investment in the social sectors, especially in primary and secondary education had a salutary
effect on keeping children in school and increasing the reservation price of labor by increasing its
opportunity costs. A broadbased smallholder strategy has also had major multiplier effects
throughout the economy by increasing saving and investment rates. Kenya (like India) has one of
the highest rates of savings nearly 20% of GDP, a great deal of which is undertaken by rural
households. Such savings are invested in a variety of enterprises leading to growth of small
towns. An expanding non-farm sector and growth of small towns in turn reinforce agricultural
growth. Empirical evidence on Kenya (World Bank, 1982) indicates that rural to urban migration
is dominated by households with education who invest their non-farm income into smallholder
agriculture by financing increased use of labor and purchased inputs in support of adoption of
modem innovations. Kenya's overall success in poverty reduction does not mean that the absolute
number of the poor living in poverty has not increased. But their proportion in the total
population is not as high as it would have been, if not for Kenya's policies of broad-based
agricultural growth based on a combination of price and non-price incentives and investment in
the social sectors.

5.05 In the case of Malawi, growth in export performance was due mainly to output from
estate production. Originally, estates were confined to very large producers although in recent
years there has been a rapid growth in small estates and tenancy farming. Issuance of licenses to
grow the high value tobacco, tea and coffee were restricted to estates. Estates can sell their
tobacco in auctions at close to world market prices, whereas the certain kinds of low value
tobacco that the smallholders are allowed to grow are restricted to being sold to the state
marketing board ADMARC at near half to a third of the auction price.

5.06 Restrictions on growing of high value crops and low prices paid to small farmers in
Malawi has curtailed incomes and demand of the smallholder population, aborting any growth
linkages from agriculture to the rest of the economy. Low public investment in education has
also contributed to the low reservation price of labor by increasing the supply of child labor. The
low per capital incomes have also resulted in low and declining savings by rural households in
Malawi.







-14-


5.07 The lessons from Kenya and Malawi are clear. The example of Kenya (and indeed that
of successful smallholder development experience elsewhere in the world e.g. Taiwan, Japan,
Indonesia and India) shows the fundamental role of the government in the provision of basic
public goods i.e. agricultural research and extension, rural feeder roads, schools, water points for
people and cattle and indeed even support prices for agricultural commodities when an assured
market is essential for the adoption of modem technology.

Role of the State: Its Nature wnd Evolution in Africa

6.01 Widespread concern about the growth of the government has led to a concommitant
tendency to assume that the private and the non-governmental sectors will undertake many of the
functions which government must perform. Therefore, the role of the state and its evolution in
the post independence Africa is apt to consider at this stage.

6.02 In the post colonial Africa, governments introduced many unnecessary monopolies and
inflexibilities which have resulted in widespread rent seeking by public officials. For example,
while grain trade was supposed to be a dejure monopoly in most of eastern and southern African
countries, de fact private markets already operated and a fixed producer and consumer price
across seasons and regions for maize operated more in breach than in effect. Public monopoly of
grain marketing however, greatly increased the budgetary costs as well as the risk of operation by
the private trade. Public policy is thus arresting the growth of private enterprise.

In addition to displaying monopolistic tendencies, governments have also become
more centrist whereas rural development requires highly location specific solutions, which
decentralized governments can perform better. However administrative capacity and fiscal
authority of local, district and regional governments have been greatly eroded, to undertake many
vital functions. This explains why 9,300 kilometers of rural roads constructed with World Bank
assistance of 300 million naira in Nigeria have had a tendency to revert to tracks in less than three
years of their construction (Gavira, et al.). Even when governments decentralized administration
as in Tanzania, they have in effect redistributed the centrally collected revenues as a means of
exercising political control over competing regional interests. Growth of foreign aid as a primary
source of public expenditures has increased the power of the central governments with whom
donors deal exclusively. The role of the legislative and elected officials and grassroot leadership
too has been minimal. There is abundant evidence to indicate that emergence of viable
co-operatives with genuine grassroot leadership has been perceived by governments in power as a





-15-


threat and often discouraged systematically (Hanak and Loft). Furthermore, whereas de ure
power has often been vested with the bureaucracies for policy formulation and implementation, in
reality the state has often resided elsewhere. Its precise location has varied from country to
country. Thus in Tanzania the Party became all powerful, in Nigeria the military, and in Malawi
and Cameroon power has centered in the presidency. In virtually all countries the offices of
President have become powerful with a decline in the power of the ministries of finance,
agriculture, and education. Donors have tried to correct this bias in the course of structural
adjustment by increasing the power of the finance ministries. However, by and large they have
dealt with the problem, not by helping to improve functioning the normal governments, but rather
by creating adhoc structures and arrangements that have contributed to further weakening of the
state, by robbing the normal ministries of the vital personnel and planning and implementing
capacity. Moreover, much of real planning and implementation of donor programs is still done by
external technical assistance, while a large number of highly trained and qualified Africans
remain underutilized inside and outside their countries. It is a result of the need to approve
adjustment and other loans in rapid succession to provide Africa the vital foreign exchange it
often needs quickly. However, it explains the massive use of technical assistance referred to
earlier which still leaves the problem of strengthening African governments unattended. It is no
wonder then that while dismantling many of the structures created in the 1970's through
adjustment programs in the 1980's, there still remains a major institutional void in Africa. Even
the private and voluntary sectors on which much hope had been pinned have turned out to be
much weaker to make an impact on the poverty problem on a global scale.

6.03 Which interest groups wield power and exercise influence on governments therefore
require careful exploration on a country by country basis to determine the likely political support
for putting in place effective development policies and to uproot poverty. One of the reasons why
smallholder agricultural led strategy has had a stronger hold in Kenya is that its independence
struggle was grounded in the rural sector revolving as it did around the issues of rights to land and
to grow and sell export crops, rights which were previously denied to African farmers (Bates).
Thus more of the political preconditions for an effective smallholder led strategy have been
present to uproot poverty via growth in Kenya. This is in contrast to other countries where the
political power has either been urban based as in Zambia, or occasionally narrowly based in the
hands of those with large vested interests in land. This explains in part why the local and district
governmental administrations and the legislature have been relatively stronger and the
bureaucracy relatively more intact in Kenya than in several other African countries. This is not







-16-


to suggest that rent seeking is not rampant, nor that there is freedom of expression or an effective
multi-party system in Kenya. Nor that there is an effective lobby of the poorest segment of the
population who are bypassed in the normal development process.

Strctural Aijus at and U proorin of Poverty

7.01 We have already stressed why the adverse external environment and poor internal
policies made structural adjustment necessary to resume growth at a rate sufficient for uprooting
poverty. Well over 30 countries have bought this argument and pursued reform. Structural
adjustment has required demand management, i.e. curtailment of the role of the government by
reducing public expenditures and public employment involving reduction in both public
consumption as well as investment. On the supply side, measures are designed to expand the
supply of tradeables relative to non-tradeables by changing relative prices, in particular reforms in
exchange rate, trade and pricing policies etc. Price reforms are complemented by non-price
reforms including reduction of controls on the operation of the private sector, and active
divestiture of some public sector activities.

7.02 What can we say about the impact of adjustment on the resumption of growth in
countries that have adopted measures? This is too early to determine. First, compliance with the
terms of agreement is difficult to establish, given the large number of conditions and lack of
systematic empirical information. For example, there were 70 conditions in the first structural
adjustment loan in Kenya. While efforts have been made to simplify loan conditions and to focus
them on individual sectors, the adjustment programs tend still to be too complex all encompassing
and unrealistic in terms of what can be achieved in a short period. Second, aid flows from
bilateral and multilateral donors have shifted in favor of reforming countries making it difficult to
separate out the effects of returns to reforms, from those to additional resources which enable
greater imports. Third, unforeseen external events, e.g. changes in the prices of primary
commodities, droughts, and refugee problems caused by wars and famines, have made it difficult
to stick with original intentions or to separate out the effects of adjustment. Finally, several
preliminary reviews of reforms suggest that most governments have not had the necessary
political strength to implement reforms which affect the status quo.

7.03 Studies undertaken in the World Bank conclude that reforming countries have
performed better than non-reforming countries. The economic indicators prepared by the World
Bank and presented in table (1) seem to confirm the conclusion e.g. growth in agricultural













Table (1)


Sumary of economic performance indicators
(average annual percentage change unless indicated otherwise)
Countr -,


Indicator


Growth of GDP
(Constant 1980 prices)

Agricultural production


Growth of export volume


Growth of import volume
excluding oil exporters

Growth of real domestic
Investment

Gross domestic savings
(percentage of GDP)

Growth of per capital
Consumption (real)


All countries
With strong With weak or
reform no reform
programs programs


-3.1 (-0.9)
0.2 (-2.5)

-2.7 (-3.0)


-1.3 (-11.0)
4.2 (-2.0)

1.7 (-7.7)
4.8 (6.8)


-3.7
-7.0


-8.1
-0.9

9.9
10.7


1980-84 -2.3
1985-87 -0.4


-1.1
-0.5


Affected by
With strong
reform
programs


-0.7 (-4.7)
4.9 (3.5)

6.1 (7.4)


Period


1980-84
1985-87

1980-84
1985-87

1980-84
1985-87

1985-87


1980-84
1985-87

1982-84
1986-87


. .. a-bucks
With weak or
no reform
programs


-5.7 (-2.1)
-3.3 (-6.0)

-4.0 (-2.2)


-7.0
-4.8

0.9
5.6

-1.5
-0.9


Source: The World Bank

Note: Country coverage varies by indicator depending on available data over the entire period covered.
Averages are unweighted except as noted. Growth rates are computed using least squares. Periods are
inclusive. Figures in parentheses are weighted averages of country growth rates based on total values
summed across countries.


-3.5
1.9

7.8
10.7

-2.4
0.7





-17-


production doubled for adjusting countries, export volumes improved more and the decline in real
domestic investments was arrested and even showed signs of growing. GDP growth was also
slightly better for countries that adopted reform programs. However, it is too early to confirm if
adjustment has resulted in rapid growth as claimed, especially the extent to which growth has
resulted from genuine improvement in the efficiency of resource allocation as distinct from
additional resources available for investment through external aid. Second, the growth in many
cases has simply meant resuming earlier peaks in production. Weather has also played a part.
Finally, World Bank studies only provide a macroeconomic view of the reforming countries. The
distributional impact of adjustment policies is yet to be assessed. Since only a few studies have
been done on the distributional impact, one can only speculate on how the instruments typically
employed in structural adjustment programs affect the welfare of the poor directly through growth
and through affecting prices and access of goods and services they might consume.

7.04 The impact of a devaluation will have a differential effect on different households
depending on the kinds of output they produce, i.e. whether tradeables or non-tradeables, the
household income and consumption patterns, the extent to which they use imported items and
whether they are located in rural or urban areas. A devaluation causes the internal terms of trade
to favor export agriculture. A similar effect occurs when trade is liberalized and export taxes are
removed. Thus, provided smallholders are the major producers of export crops, adjustment
should be expected to have a particularly positive effect on rural poverty both by directly
increasing the incomes of rural producers who are often not the poorest as we pointed in the
introduction, and through them by creating a strong demand for wage labor in the rural and semi
urban areas. However, increased cost of imported inputs and transportation, both of which tend
to be highly import intensive in Africa erode some of these benefits.

7.05 The price effects on food crop producers are less clear. The coat of food imports
increases due to devaluation. Liberalization of grain markets, removal of food subsidies and
restriction on governments as to the level of stocks they hold in reserve, or where and how much
grain they purchase and undertake retail distribution of grain in rural areas are all actions intended
to reduce budget deficit and/or contain growth in money supply caused by the costly operations,
and to increase markets and prices of food as a way to improve producer incentives. The
budgetary and deflationary impact of reduced operations of marketing boards are clear enough.
The effects on getting underway a sustained increase in food and agriculture or on consumption of
the poor are by no means empirically established as yet. There is not a country











in the world which has successfully developed its agriculture without some role for the
government in assuring markets for basic commodities. The main question is how to perform this
function cost effectively. This is an issue which could use further analysis by examining
experience of countries elsewhere that have been particularly successful. For instance,
Indonesia's Bulong stabilizes rice prices at a much lower level of stocks and fiscal costs than
India's giant Food Corporation. Marketing boards relinquishing control of imports to the private
sector has not always resulted in competition, instead transferring functions to a handful of
politically powerful traders that have been able to gain import licenses and acquire control of
retail distribution with adverse effects on consumer prices and poor households. While producers
may be receiving higher prices they have lost the benefit of an assured market. Moreover, the
evidence of weak supply response to price signals in African countries is due in par to rigidities
in the marketing structure, lack of or poor state of rural infrastructure and lack of institutions to
support both production and marketing. The effect of liberalization of markets on consumption of
the poor, especially in remote rural areas i.e. nomadic households and food producing households
in semi-arid areas, as well as those in the urban sector who have lost formal employment and
swollen the ranks of the informal sector require much more attention. This issue is taken up in
the recommendations.


7.06 An issue which also has the most direct bearing on the poor and which has received
much attention is the effect of contractionary demand measures which might have necessitated
across the board cuts in government expenditures. Hard empirical evidence on this issue is sti:
very limited. A recent World Bank study indicates that contrary to the general perception, total
real government expenditures increased in the 1980's, suffering only a temporary decline in 1984
(Ferroni and Kanbur, 1990). Although sectoral allocation of government expenditures to health.
education and agriculture maintained their historical levels, the intrasectorial allocationr of
expenditures did not reflect an antipoverty focus. We have stressed in this paper that the **'-hra
bias in public expenditures has been strong in Africa even in the 1970's. Thus, it is not surprising
that this bias may have continued, and it is misleading to attribute the continuation to the process
of reform. This is not to suggest that the poverty problem does not need addressing urgently but
rather to emphasize the need to address the more basic root causes of the problem, highlighted in
this paper, including the lack of representation of the poor in the political and bureaucratic
processes and systems of many countries.





-19-


7.07 It is clear that allocative efficiency with respect to poverty alleviation will be achieved
if public sector spending is reallocated to reinforce services to:

(1) areas where employment opportunities of the poor are the greatest, e.g. in small
holder agriculture and livestock, the services that support that agriculture
including in particular investment in technology, feeder and other roads, small
scale processing and private and cooperative marketing of agricultural
commodities, etc.


(2) Social sectors that impact on the lower income rural households.

(3) Targeted groups identified as especially vulnerable.

Strategiesfr Enhancing Employmnt Oplowtunities


Land:

8.01 We have argued in this paper that access to land interpreted in the broadest sense has
determined the opportunity cost of labor. The African Developement Bank as a premier regional
institution has an unusual advantage over its OECD counterparts in helping countries to address
the land issue by developing land records, carrying out analysis and generating an informed
debate among thoughtful Africans as to the way land policies should be addressed in the future to
generate broadbased income and employment generation. This type of work is often less
appealing than large scale, short term financing of employment programs to alleviate the
perceived impact of structural adjustment. Therefore it does not receive the attention it needs. but
it is urgently needed. Among the issues it could address are the effects of rapid population
growth on land availability and land degradation including implications for protecting land rights
and for investment, e.g. small scale irrigation, soil conservation, etc. to improve land quality.
Another major issue is the way large farms or estate production may be causing land alienation by
the well-to-do, former party functionaries and retired civil servants for large scale farming.
Elitism in agriculture does afford agriculture a larger voice in the policy making process than it
would otherwise. However the policies that result are not necessarily conducive for broadbased
development. An example is when the rural elite or absentee farmers seek to maintain subsidies
on tractors, as in Northern Nigeria, enabling them to intensify the use of tractors.







-20-


It causes:


(1) lower demand for labor in production

(2) skews incomes in favor of the few who are able to command the use of tractors
services through the ministries of agriculture


(3) preempts the few recurrent resources governments can devote to agriculture when
the same resources could be used more productively, for instance, to increase the
stability of funding for Africain researchers in the national agricultural research
systems to improve the state of technology for small farmers.

8.02 Evidence abounds that shortage of operating recurrent budget rather than the shortage
of donor support has been a major constraint to the functioning of the national research systems.
The budgetary restraints imposed by structural adjustments has worsened the plight of these
national systems, because there is weak constituency in African governments for the support of
African science and technology for the small scale farmer, than there is for protecting subsidized
use of inputs that benefit large farmers.


8.03 An argument against subsidies for tractors is not intended to suggest that all forms of
mechanization should be rejected in a situation where surplus land exists and labor shortages
constrain agricultural intensification. Large tractors however, tend to allow extensive land use in
the midst of growing population pressure. In contrast, broadbased "capitalization" of agriculture
in the form of simple tools and implements, and improved biological and chemical inputs increase
labor use and productivity in agriculture. Asian countries are the powerhouse of such
intermediate technology. A combination of tied foreign aid, and an attraction of "advanced
technology" among African policy makers has however, resulted in much underutilization of the
vast potential for the use of intermediate technology in Africa. The African Development Bank
can take a major initiative in facilitating such a transfer of technology from Asia to Africa.






-21-


Prhdasd WPMut:

8.04 Access to purchased inputs is another area where a poverty sensitive policy is urgently
needed. Fertilizer and improved seeds are the easiest and most scale neutral inputs to raise
agricultural productivity. Privatization of fertilizer distribution and generally ensuring
institutional pluralism in the sale of inputs is a salutary development. It will increase services in
the areas where demand is already well established e.g. in the high potential areas. However the
access of the poor to these inputs is limited by the high costs of inputs as well as the high risks in
returns under conditions of low and variable rainfall. Technologies for the arid and semi-arid
areas where many poor reside are less well established in terms of their profitability or certainty.
Trade is not necessarily competitive in such often remote areas, especially where the effective
demand for inputs is limited. Whereas there is the need to remove most subsidies on factors of
production and to liberalize input and credit markets, governments will have to play an active role
in targeting concessionary sales to targeted poor groups. This could perhaps be done by the public
sector providing subsidized transport of bulk inputs to remote areas and leaving their retail sale
and distribution to private and cooperative sectors. Such "subsidization" of distribution which
allows the poor to increase their food production will be more cost effective in budgetary terms
and will minimize the need for the public sector to undertake retail distribution of food to
vulnerable groups in those areas where market dependence in domestic food consumption is high
and the sources of supply of food are few and uncertain. Input distribution may however, not be a
complete substitute for concessionary distribution of food.


Credit:

8.05 There are positive examples in Africa of the extent to which ready availability of cash
e.g., through remittances from the urban sector, has assisted the hiring of more labor in the
intensification of agriculture, and the extent to which lack of cash has been a constraint to
increasing use of labor and other inputs. Institutional credit has played an important role in
alleviating a cash flow constraint in modernizing agriculture in most parts of the world. And yet
when the need for intensification of agriculture is the most urgent in Africa there is a widespread
and understandable disenchantment with the use of institutional credit. The reasons include the
tendency of the governments to subsidize interest rates and the indiscriminate growth of
inadequately supervised credit, inadequate repayment rates by large producers who are usually the
beneficiaries of the subsidized credit and the consequent erosion of the financial capital of credit
institutions. At the same time countries with a broad-based pattern of dynamic agriculture







- 22 -


such as India and Kenya have tended to have high rural saving rates by low income households.
Evidence from Malawi also shows that the poor households can have a high rate of credit
repayment, if credit is well administered and highly supervised.

8.06 The challenge is to develop organizational means to mobilize those rural savings, and
to deploy them directly for the benefit of the rural poor rather than being siphoned off through the
banking system for the benefit of the large farmers and the urban elite as is currently the case.
Experiments with "susus" and tontiness" in West Africa with their creativity and flexibility have
shown the potential that exists in the informal sector for generating savings. The Grameen Bank
in Bangladesh is however perhaps the only example where banking has been developed solely for
the benefit of the poor on a large scale. This has required dynamic indigenous leadership by a
dedicated individual, as well as the use of subsidies which are carefully administered to make the
process of developing a financial market for the poor viable in the long run. There are already
some attempts in Africa to learn from the Grameen Bank experience. The African Development
Bank needs to help nurture traditional local saving institutions as well as local leaders committed
to deploying these institutions for the benefit of the poor, while expanding the knowledge of the
ingredients of success of experiments such as those in Bangladesh, Malawi and elsewhere. It is
generally recognized by experts in the financial sectors of Africa that the usual market oriented
price factors such as the liberalization of interest rates etc. while essential to improve financial
discipline and in the long run to augment resource mobilization are relatively dull instruments to
mobilize and deploy savings productively due to the early stages of development of the African
financial markets. A variety of nonprice interventions would thus be essential to ensure that
credit is available to poor agricultural and trading households in the rural sector.

Marketing facilities that serve the rural poor

8.07 Evidence of monopsonist situations in rural areas may serve to preclude certain
sections of the rural population from responding to higher price incentives for tradeables.
Improving rural market organizations including encouraging grassroot cooperatives could serve to
break the monopsonist log jam. Competitive markets however only ensure that food supplies go
to the areas where households command incomes. Private traders may not hold enough stocks of
food and fertilizers across years to meet shortages of poor households. For this reason, the role
of the government in retail public distribution of food at affordable prices to specifically all
designated target groups needs urgent reconsideration.





-23 -


Infrasutmcue:

8.08 Rural infrastructure development needs to be accorded top priority. Rehabilitation and
maintenance of rural roads is essential for transporting the expected surplus to markets; incidents
of agricultural produce rotting in remote parts of a country for lack of roads or impassable roads
are common place in Africa. Knowledge by the small farmer that agricultural output will be able
to reach markets is an incentive to boost production. It should be noted that transportation costs
constitute a large proportion of marketing margins in Africa. Thus, providing new roads to serve
remote producing regions could elicit a greater supply response, cause to integrate rural and urban
markets and reduce the price spread between producers and consumers. If the small rural farmer
can command a large portion of the retail value of his or her produce, his or her income would be
enhanced. Since lack of capacity of local governments to plan, implement and especially
maintain feeder roads has been a major problem, ADB can plan a major role in addressing the
issues of strengthening the capacity of local, district and regional governments.

8.09 Maintaining water and irrigation systems should also be top priority as irrigation
allows double and triple cropping and is highly employment intensive. Small and medium scale
irrigation rather than the high cost large dams may be the way to raise the yield of agricultural
production in many parts of Africa especially in the arid regions where moisture is the primary
limiting factor in production. Irrigation will also afford intensification of production and reduce
the pressure on extensive use of land for increasing production. The Bura irrigation scheme in
Kenya is an example of the wasted donor and country resources in an otherwise well managed
agricultural sector. The small scale surface and tubewell irrigation introduced by the World Bank
in Northern Nigeria, based on the use of intermediate technology, is an example of a successful
case of technology transfer in an agricultural sector which is less well managed than Kenya's. In
both cases the type of technical assistance the two countries received determined the quality of
technology transferred. (See Lele and Subramaniam)

Research and extension

8.10 Both the integrated rural development projects of the 1970s and the structural
adjustment programs of the 1980's have overlooked the fundamental importance of science and
technology in the generation of appropriate technology to suit the constraints faced by small
farmers. Agricultural research and extension should be given top priority to increase the
productivity and incomes of the rural poor. In Africa, on-the-shelf bio-technology suited to the







-24-


resources of small farmers and appropriate for the diverse ecological situations is still limited.
The high turnover of African scientists caused by a poor research environment, low and
unpredictable budgets and a lack of clearly defined research priorities, combined with an absence
of a scientific environment in which output of research is assessed, have been associated with
heavy and rapidly turning expatriate technical assistance and an emphasis on buildings and
equipment rather than on the management of the research systems. Far too many of the precious
resources have been devoted by donors and governments on extension in a situation when budgets
of ministries of agriculture have been contracting under heavy pressure of structural adjustment.
More objective evaluation of extension programs such as that being initiated by the World Bank
on T&V extension should be undertaken to determine the relative resources that should be
allocated to extension vis a vis other expenditures, e.g. rural roads, input supply and market
development.

Social Services

Education:

9.01 Shortage of trained personnel make implementation of poverty programs difficult
given their need of highly skilled and trained personnel. Educational priorities in the face of cuts
in government spending should be to achieve a balance between universal primary education and
secondary and higher education. People who benefit from higher education must be made to
contribute a larger share of the cost, perhaps through a loan scheme or service to the country at
lower than normal pay. The savings arising from this source could be used to expand and
enhance the quality of primary and secondary education. Vocational education would need to be
targeted to vulnerable groups such as displaced workers in the urban sector and women, to
enhance their employability and earnings in the informal sector.

Health:

9.02 In prioritizing expenditures in the health sector emphasis should be placed on
providing primary and preventive health care as opposed to hospital based care. Immunization
programs for children are more cost effective in the long run than curative care. The importance
of preventive programs that achieve an exhaustive coverage is critical in light of the devastation
that has accompanied epidemics such as outbreaks of meningitis, and guinea worms. Endemic
diseases like river blindness and sleeping sickness have prevented large areas of the hinterland
from being cultivated. The eradication of the tsetse fly in large parts of Africa has enabled
livestock production to be income earning in those areas. Similarly, the resettlement of "oncho"
infested areas in parts of West Africa has been the result of checking the simulium fly that
transmits the parasite.





-25-


9.03 Public health services will need to be targeted to reach the very needy. Delivery of
subsidized health services through public health centers have been found to be effective in their
coverage. However, with the poor state of these facilities in many countries and also lack of
facilities in remote areas, this avenue of health service delivery is of limited effective use.
Alternative means of delivering health services to the rural areas would involve increasing
emphasis in using community health workers who reside in the rural communities. Training for
community health workers may be needed in most countries in order for them to be effective and
for the rural clients to have confidence in them to use their services.

IerYvntios in Special Caes:

10.01 While the strategies discussed above are expected to induce growth in the economy
and impact positively on the poor, there still are situations where any benefits of these programs
would by-pass the very poor. This may be due to their lack of capital, illiteracy, or geographical
isolation. Also, in time of emergencies such as droughts, wars, political upheavals and mass
migrations the poor suffer disproportionately to other sections of the population. Their economic
situation deteriorates and their ability to adequately meet their nutritional requirements is
curtailed. Such situations while temporary have become all too common in Africa. They require
extraordinary responses from governments to prevent catastrophic consequences. For such
disadvantaged people there is the need to effect transfers either in kind or monetary aid in the
alleviation of their poverty.

Chronic Food Poverty:

10.02 In the case of chronic food poverty, direct food transfers are needed to alleviate the
problem. To be effective, subsidized food aid should be targeted to the intended recipients
instead of imposing a general subsidy. The subsidy should be placed on food that is easily
identified as that which is consumed by the poor. A thorough knowledge of the consumption
patterns of the poor is needed to design an effective food targeting program. Often foods
presumed to be consumed by the rich in reality are consumed by the poor. In Senegal, for
instance, rice believed to be the rich man's food has been shown to be important in the
consumption of the poor due to the relative ease of cocking or buying cooked rice compared to
sorghum (Delgado and Reardon). Recommendations to raise the price of rice have been shown to
have an adverse effect on the incomes of the poor. The case of Egypt is a good example







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of food subsidy being effectively targeted to the poor by restricting the subsidy to coarse wheat
flour which is consumed only by the poor. If the problem is one of inadequate incomes then cash
transfers to raise the purchasing power of the poor may be needed. The problem of misdirecting
cash transfers to consumption of less desirable items should be of concern and appropriate
strategies should be taken to ensure proper use of transfers. Food stamps may be one means to
remedy this situation.

Food Policies in Famines:

10.03 Large infusion of food may be needed at short notice. A well developed food trade
and distribution system is essential to effectively respond to this situation and swift and decisive
action by the government either to release food stocks e.g. as was done in Zimbabwe or bring in
imports as in Kenya in 1984 may save an otherwise bad situation. Direct feeding and food
transfers coupled with cash transfers to restore purchasing power may be the way to go in crisis
situations where food is available in other parts of the country. The case of drought and famine in
Bostwana in the 1980's and how it was managed serves as a good model of an effective and
integrated approach to dealing with famine crises. The government combined large purchases of
maize from South Africa and public work programs that enhanced rural incomes to attack
famine. Effective distribution through private channels stabilized prices.

Public Employment Programs and Poverty Reduction:

10.04 Public employment programs have been used extensively in India to provide
employment in rural areas that lack any employment opportunities for landless laborers and
people who are normally excluded from regular employment. They are also an important way of
generating productive assets. Such schemes may be instrumental in providing seasonal
employment during the lean seasons in agricultural production. A major consideration in their
design should be their labor intensiveness. However, care must be taken to avoid causing labor
shortages during the peak demand for labor. Careful design of these programs would preclude the
non-poor from participation; for example, wages must be low enough to make it unattractive to
people with access to better paying jobs. For the very poor, their low health and poor nutritional
status may pose an impediment for their participation and food supplementation program attached
to the public works program may elicit the required response. Participation in public work
programs by non traditional labor groups like women has implications for their earnings as well
as the substitution they make in their time allocation for home work and outside work. Lack of
proximity of such programs may be a major detriment for the participation by women. Also,





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providing child care facilities will enhance women participation. It is important that the public
good output emanating from these programs be beneficial to the local people --e.g. public roads
that improve access to local markets or public health facilities. Thus, a locally needed project,
apart from providing employment to the poor will have second round benefits to the society at
large. Public employment programs should not overly increase public expenditures of the
government and cost effectiveness should be a paramount concern in their design and
implementation.

Aid Related Issues:

11.01 Aid levels to Africa have been high in per capital terms ranging from $35 to $50 in
nominal terms for over a decade compared to $2 for China and India. In real terms however, aid
levels have been stagnating. Moreover, the effective level of aid to Africa is far lower than
nominal numbers suggest. A high proportion of aid is tied to goods and personnel from donor
countries -- both the technology and technical assistance associated with it is frequently more
costly than it needs to be -- more an employment program for the donor countries' industries and
personnel, and its content is often inappropriate to Africa's factor proportions, availability of
trained personnel, physical infrastructure and institutions. There is relatively little emphasis on
training of personnel and developing indigenous institutions rather than on "getting the job
done". A large amount of aid is thus misallocated in a variety of different ways and yields very
little return. Results of a major study (Lele and Nabi) recently completed also, indicate that large'
quantities of aid have often had effects similar to those of commodity booms -- they have
contributed to the Dutch Disease phenomenon -- helping to increase the size of the government
and reducing the supply of tradeable goods. Aid has also been highly unstable in much the same
way as commodity booms and instead of helping to stabilize the foreign exchange earnings of
countries at an early stage of development, being driven by geopolitical considerations, aid levels
and its programming have been difficult to predict. Indeed the study argues that recipients need
to treat aid in much the same way as they should treat commodity booms -- they should save and
invest the earnings productively to accelerate growth.

11.02 Small amounts of well conceived aid has however had a tremendously positive role in
increasing the capacity of recipient countries to plan and implement well conceived policies and
development programs, the Green revolution in Asia being a classic example of the role played by
external aid in accelerating the rate of growth of food production, virtually eliminating famines
and greatly increasing physical and economic access of the population to food while also assisuf;g
in the industrialization process.







-28-


11.03 Donor agencies including the African Development Bank will serve African countries
well if aid were given to support elements of broadly based long term development policies.
Supporting long term programs of infrastructure development, agricultural input delivery systems,
primary and preventive health care, and schools may serve the cause of poverty reduction better
than exclusive emphasis on short term reform programs.

The Role of the African Development Bank:

12.01 The ADB should assume a leading role in galvanizing member countries to address the
problems of economic growth in general and issues of poverty in particular. It should be
instrumental in focussing ideas on the solutions to aid and development related problems at the
regional and country specific levels. It should strengthen capacity to analyze long term
development strategy issues as well as short term macroeconomic developments, to be
incorporated in the design of recommendations for country programming. The bank staff should
be sensitized to poverty issues in order to incorporate poverty concerns into the design of each
country project or adjustment loan. To attain that level of sensitivity, the bank staff will require a
strong information base to trace the link from the individual to the household and on to the macro
level a thorough knowledge of the characteristics of the household as consumers, producers as
well as suppliers of services to the economy, and to establish how macroeconomic and sectoral
policies and programs affect them.

12.02 Lessons from the dismal performance of rural development projects in the 1970s is
that to design appropriate, location specific interventions to complement reforms being
undertaken at the macroeconomic and sectoral levels, requires substantial input from African
professionals (social and physical scientists), voluntary agencies and African rural poor people
themselves with a strong backing of their governments. Even the experience of the United States
suggests that antipoverty programs do not always benefit the intended beneficiaries. Therefore a
substantial emphasis should be placed on simple, quick and small household surveys geared
directly to design interventions of these programs, to ensure that the design can be adjusted to
address the problems that are encountered in the course of implentation, and there should be
substantial flexibility in the implementation of these programs.






-29-


13.01 Conclusions

(1) Poverty is mainly a rural phemenon in Sub-Saharan Africa

(2) To attack the high incidence of poverty requires:

(a) Rapid and broadbased overall economic growth through an effective
development policy.

(b) A population and human resource policy which increases per capital growth.

(c) Special programs of action for those who are bypassed in the normal process
of growth.

(3) Broadbased agricultural growth strategies that employ intensively the rural poor
are the best way to alleviate poverty. This implies assured access of the poor to
productive factors of production such as land, credit and fertilizers. Also, an
enabling environment through the provision of complementary services such as
rural roads, irrigation infrastructure, markets, research and extension services are
needed to accelerate growth.

(4) Past policies of African governments were inimical to agricultural growth.

(5) Public expenditures need also to be geared to providing basic social goods such as
health care facilities, mass health intervention programs and emphasis on primary
school education that ensure high quality of services while also allowing broad
coverage of the people.

(6) Transfers need to be effected to reach the very poor. Targeted interventions may
be the best approach although this may be more difficult to implement than
general subsidies, and tends to be highly intensive of detailed information and
experienced personnel.

(7) An effective overall strategy to uproot poverty requires a thorough knowledge of
the interrelatedness of the various facets of macroeconomic policy, population
policy, markets, and the microlevel constraints and potentials.

(8) African Development Bank can help in a variety of ways outlined in this paper to
uproot poverty.







-30-


Introduction 1
The Nature and Extent of Poverty in Africa 3
Women and Poverty in Africa 6
Impact of Slow Growth on Poverty 8
External Terms of Trade vs. Internal Policies 9
Export Crop Pessimism, Smallholder Development
and Overall Economic Diversification and
Modernization: Some Empirical Examples 11
Role of the State: Its Nature and Evolution in Africa 14
Structural Adjustment and Uprooting of Poverty 16
Strategies for Enhancing Employment Opportunities 20
Land 20
Purchased Inputs 22
Credit 22
Marketing Facilities that serve the rural poor 23
Infrastructure 24
Research and Extension 25
Social Services 25
Education 25
Health 25
Interventions in Special Cases 26
Chronic Food Poverty 26
Food Policies in Famines 27
Public Employment Programs and poverty reduction 27
Aid Related Issues 28
The Role of the African Development Bank 29
Conclusions 30






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