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Rwanda revisits the idea of manufacturing-driven growth

A gleaming building with the words "Convention Centre" written on it, and a sort of beehive-like structure on top lit up in blue and yellow
The Kigali Convention Centre, via GovernmentZA on Flickr

The Africa at LSE blog has an interesting piece by Georges Quist about the role of manufacturing in Rwanda’s development plan.  As he notes,

This development strategy has attempted to leapfrog Rwanda from the primary sector of unprocessed agricultural production (mainly tea and coffee) to modern services – prioritising finance, insurance and real estate (FIRE) and meetings, incentives and conferences (MICE) over manufacturing. The country’s rather agnostic stance toward industrial production is salient in its twenty-year development strategy, laid out in 2000, which highlights service provision (particularly in tourism and finance) as Rwanda’s main engine for growth.

The Kigali Convention Centre, pictured above, is the cornerstone of the meetings & conferences strategy.   (I must say I can’t quite get on board with the acronyms, though — fire and mice sound like your realtor has some uncomfortable truths to tell you.)

I understand the government’s reluctance to focus on manufacturing, as its domestic market is small and its geopolitical neighborhood makes exports risky.  The country has poor relations, involving semi-regular border closures, with three of its four neighbors (DRC, Burundi, and Uganda).  Relations with Tanzania seem all right, but a rail link between Kigali and the port in Dar es Salaam won’t be operational for at least three more years, meaning that all cargo currently goes overland along poorly maintained roads.  And in general, the EAC countries aren’t doing nearly as much to facilitate regional trade integration as they ought to be.

Despite all of this, Rwanda is apparently now taking its chances with greater investment in domestic manufacturing.  As Quist writes,

Rwanda’s Domestic Market Recapturing Strategy recognises this growth model’s shortcomings, as revenue from services have not been enough to cover the country’s import purchases. To improve its finances and challenge its naysayers, the government now places more emphasis on the promotion of firms in light manufacturing (textiles and garments) and agro-processing, a diversifying of the economy the recapitalised Rwanda Development Bank is tasked with supporting.

It will be very interesting to see how this proceeds!  For more background on the subject, check out Pritish Behuria’s recent paper on Rwanda’s industrial policy as well.

Africa Update for July 2019

Here’s the latest edition of my Africa Update newsletter.  We’ve got the CAR’s only pediatric hospital, Zambian superheroes on Netflix, new books on medieval African history, the feminists of Cameroon, and more.

West Africa: Lagos alone accounts for 70% of Nigeria’s tax base.  Check out this reading list on Nigerian political history.  Here are 10 essential Nigerian recipes.  This was a great read about feminist organizing in response to the Anglophone crisis in Cameroon.  In response to increasing attacks by armed Islamist groups in Burkina Faso, the government has adopted a troubling policy of extrajudicially executing suspected sympathizers.

A map of protests in Africa, showing increased activity from 2007 to 2017
Protests in Africa, via ISS Africa

Central Africa: In the DRC, president Tshisekedi’s power continues to be constrained, with a majority of Cabinet seats going to ex-president Kabila’s coalition, and Kabila still living in the presidential villa. In Burundi, the ruling party has begun charging people a new “election tax” as often as they’d like to do so.

East Africa: This was a good profile of Hemedti, the former Janjaweed commandernow leading Sudan.  In South Sudan, decades of conflict has pushed most people away from growing their own food and towards purchasing it at markets.  I wrote about what traffic tickets can tell us about statebuilding in Kenya.  This was an interesting history of economic protectionism in Kenya.  A new Human Rights Watch report documents the disturbing record of extrajudicial killings by the Kenyan police.

lamu
A dhow off the coast of Kenya, by Khadija Farah

Southern Africa: So many Zimbabweans are trying to leave the country that the wait time for a passport is more than a year.  Netflix is launching its first original African animated series, about teenaged female superheroes living in Lusaka.  Congratulations to Botswana’s Gogontlejang Phaladi, who joined the ranks of great explorers by discovering a new body of water in Switzerland and naming it Letamo.

Public health: This is a remarkable story about the Central African Republic’s only pediatric hospital.  One of the coordinators of Liberia’s Ebola response team offers unconventional suggestions about incentivizing people to cooperate with Ebola vaccinators in the DRC.  The DRC is also one of the world’s largest quinine exporters, producing 30% of the world’s supply of the anti-malarial drug.  In South Africa, the urban environment in Johannesburg makes it difficult for women to get enough exercise.

aida muleneh
“Denkinesh: Part Two,” by Ethiopian photographer Aïda Muluneh

Research corner: Read about the challenging experience of being a female researcher in eastern DRC.  Check out TMC’s summer reading list on African politics, and this wonderful review of books on medieval African history.  Here’s what needed to improve the quality of research output at African universities.  Researchers in many African countries can get free online access to Taylor & Francis journals through their STAR program.  African students interested in a science PhD should apply to the RSIF PASET PhD scholarship program by July 22.

The arts: This is a great thread on affordable, contemporary architectural design across Africa.  Did you know that Bollywood films are huge in Somalia?  If you’re in Accra this summer, don’t miss the Accra Animation Film festival from July 27 – August 2.  African writers should apply to the Miles Morland writing fellowship by September 30.

A history of homebrewed alcohol in Nairobi

A large plot of houses made of tin, with rubbish on the ground in front of them
Houses in Mathare, via Wikipedia

I’ve written previously about the challenges of accessing justice, clean water, and other basic services in Nairobi’s Mathare neighborhood.  Now another insightful article about the area has come out, with Antony Adoyo, Jackob Omondi, Juliet Wanjira, and Naomi van Stapele’s account at Elephant of the critical role that homebrewed alcohol (or chang’aa) plays in the local economy.

The roots of the chang’aa economy go back to the colonial era.

 As early as the 1930s, women who settled in abandoned parts of the quarry that later came to be known as Mathare earned money through sex work and selling home-brewed alcohol such as busaa and chang’aa. The colonial capital Nairobi only allowed a limited number of ‘native’ bachelors living in designated housing facilities. This area was also wedged in by the Royal Airforce Eastleigh Base (currently known as Moi Air Base), an askari barrack, and a transit camp for the Kings African Rifles.

These women were among the many young people who were forced to leave their increasingly overcrowded homesteads in the ‘Native Reserves’ in the pre-WWII colonial period in search of work for cash to pay for hut tax, among other things. Even if women comprised the majority of residents in Mathare from the onset, men also increasingly came to live here. During the late 1930s, many of the rural-urban migrants also came from other illegalized squatter communities in the Rift Valley, where former farm workers had been displaced from European farms as a result of the gradual mechanization of farm work.

After independence in 1963, chang’aa distilling continued on a smaller scale.  Then the rapid urbanization of the 1990s caused it to expand:

It was not until the late 1980s and early 1990s that parts of Mathare gradually became the epicenter of the largescale production and distribution in Nairobi of chang’aa. According to several bar owners we spoke with, the influx of rural-urban migrants during this period boosted the selling of chang’aa to unprecedented levels. Demographic records and academic estimates vary greatly but it is safe to say that the population in Mathare rose from a few thousand during the colonial era to many tens of thousands between the 1960s and 1980s.

Today, the chang’aa distillers are regularly shaken down by the police for bribes, and risk having their equipment destroyed if they don’t pay up.  (Manufacturing chang’aa is legal, although basic sanitary standards must be met.  The penalty for not meeting them is supposed to be a fine rather than destruction of equipment.)

Shosho Kingi has distilled and sold alcohol for more than four decades and has raised her children, grandchildren and great-grandchildren while doing so. The police had poured her kangara, the distilling mixture, which had been almost ready for cooking. Subsequently, she had lost 4500 shillings [US$45], her monthly earnings, and was left seriously in debt. Thousands of small business owners and their employees and tens of thousands of their dependents suffered the same fate. On Monday, all the jiko’s (‘kitchens’) near the river remained closed; no one could work while the police patrolled in search of alcohol and production tools to destroy.

There are very few other livelihood options in Mathare, which makes the regulation of chang’aa a serious economic issue for the area.

Jean Drèze on the politics of evidence-based policymaking in India

I’m a bit behind on this Ideas for India article, but Jean Drèze has a refreshingly clear and compelling take on the difficulties of translating evidence into policy.  He highlights four political, ethical, and logistical challenges that academics may face in providing policy advice.

First, feasible policies must balance the competing interests of a range of different societal groups, which requires value judgements as well as some apolitical weighting of evidence.

No value judgements are required to conduct an RCT aimed at examining whether adding eggs in school meals helps to enhance pupil attendance or child nutrition. But advocating the inclusion of eggs in school meals is a very different ballgame. It means dealing with the arguments of upper-caste vegetarian lobbies (eggs are considered non-vegetarian in India) and animal-rights activists, aside from those of the Finance Ministry, the Education Department, and teachers’ unions. Commercial interests, too, are likely to come into play as the poultry business eyes big contracts. The debate can easily get very charged. Any ‘advice’ offered in this charged atmosphere may have serious repercussions, good or bad.

Second, the advice one provides to a technocrat who wants to maximize program efficiency and an advocacy group who wants to minimize social harm from a program might be very different.

 It is easy to imagine an economist giving the following sort of advice to the government: Our RCT shows that people essentially treat food transfers as an implicit cash transfer. Considering the high transaction costs of food subsidies, a transition to cash transfers seems advisable…

It is possible, however, that based on the same research a person who addresses herself to poor people would give the following – very different – advice: The government is planning to replace food transfers with cash transfers. You should resist this at all cost. Our work shows that the banking infrastructure is not ready. If you get cash instead of food, you will have to travel long distances and queue for hours to collect your meagre benefits.

Third, it’s not obvious that academics are sufficiently familiar with the deeply particular local political contexts in which every development program must be implemented to give useful advice on them.

Just to pursue the first angle, a development scheme can stand or fall on minor details such as whether the monthly cheques are signed by the district magistrate or village head, whether a government-sponsored latrine has one pit or two pits, or whether biometric authentication is necessary to apply for benefits…

Economists certainly have much to contribute, but in many cases they have no special competence on the relevant details. This has often struck me in the context of discussions of India’s MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), a complex programme that makes exacting demands on the administrative machinery. In my experience, it is possible to have enlightening discussions on the operational details with local administrators, village-level functionaries, and even MNREGA workers… In academic seminars on this subject, by contrast, the ignorance of operational matters is epic.

Finally, there is the very real possibility that advocacy on behalf of a specific policy could backfire.  But it is unclear how well academics can game out the policymaking process and anticipate precisely how their advice will be used.

 If you advise A, you may get a.A (a fraction of A), or A’ (a variant of A), or B (or an alternative to A), or even -A (the opposite of A). In the first case, should one actually advise (1/a).A, in the hope of getting A? That is, indeed, a common tactic among activists – ask for the loaf, settle for a slice. To put this in a different way (familiar to economists), policy advice can be seen as a kind of ‘game’, where the outcome depends on the strategies of all players, and the players must take each other’s strategies into account. Or perhaps it would be unprincipled to look at it that way, and economists should just give the advice they think is right, irrespective of the consequences? It is hard to tell.

The whole article is well worth a read.

 

Working paper on generalizability in the social sciences

Here’s the latest draft of my working paper on generalizability in the social sciences.  Abstract:

Generalizability is widely agreed to be a desirable characteristic of social science research.  Many discussions of the topic present it as a tradeoff between a study’s internal validity, and its generalizability, which is best achieved by increasing its sample size.  At present, individual researchers usually bear all the costs of expanding the sample size, which means that generalizable single studies are undersupplied.  I argue that disciplines should subsidize and coordinate generalizable research by building infrastructure for systemic reviews and coordinated multi-site studies.  Both of these techniques expand sample sizes by aggregating data across studies, which lowers the cost to individual researchers.  The biomedical sciences provide a model of infrastructure for generalization within a mature research ecosystem.  The social sciences have been slower to build such infrastructure, although it has been expanding more rapidly in the last decade.   The substantive implication of this argument is that researchers should focus on their preferred type of internally valid research, and disciplines as a whole should take responsibility for assessing the generalizability of research findings.

Any comments on this are welcome!  I’m also looking for a good publication venue for this, either as an article or as commentary, so please let me know if you’ve got thoughts on that.

Are M-Pesa’s poverty reduction powers overstated?

A Kenyan woman stands in front of a green kiosk with the word MPesa prominently painted on it

Photo via Fiona Graham / World Remit

There’s been a bit of a stir on Kenyan Twitter lately about a new (and ungated) Review of African Political Economy article by Milford Bateman, Maren Duvendack, and Nicholas Loubere.  In it, they take on Tavneet Suri and William Jack’s claim in Science that the M-Pesa mobile money platform has led to reductions in poverty in Kenya by making it easier for people to access remittances from family and friends, and consequently giving them more money to start small businesses.

Writing at Developing Economics, Bateman et al. argue that Suri & Jack’s argument falls short in several ways.  First, informal microenterprises are rarely profitable.  In addition, there’s a question of general equilibrium effects:

Some of the purported gains made by M-Pesa clients inevitably come at the expense of existing microenterpriseswhich will contract, lose income, and possibly close. Moreover, the influx of new microenterprises has undoubtedly had negative knock-on effects for entire local economies, driving down already tiny profit margins and exacerbating hypercompetitive markets dominated by the poor acting as producers.

Second, M-Pesa facilitates not just remittances, but also borrowing.  More than 25% of Kenyans have taken out a loan through one of the many mobile money borrowing facilities available, and about half of those borrowers have struggled to make payments on time, according to a CGAP report.  There’s an implicit argument here that trapping poor people in debt is unethical, although it’s not obvious to me that cutting poor people off from credit is ethical either.

Third, Bateman et al. also question Suri & Jack’s methods, suggesting that the observed increased in wealth in areas with more M-Pesa agents is driven by clustering of agents in wealthier areas, rather than changes facilitated by access to M-Pesa.  I’m not as convinced by this.  Suri & Jack used panel data from 2008 – 2014 to measure the impact of M-Pesa expansion up until 2010.  They picked this cutoff date for M-Pesa because the distribution of agents up till that point (but not afterwards) wasn’t strongly correlated with local income levels.

My take on all of this is that I don’t think Suri & Jack have fundamentally misunderstood the economic effects of M-Pesa expansion.  However, I think the point about general equilibrium effects is an important one, and one that’s generally underdiscussed in the literature on microfinance and microenterprises.