Using markets and donor support to mitigate the economic effects of coronavirus in African countries

ETA: a shortened version of this post has been published at African Arguments.

One truism about the coronavirus pandemic is that it is amplifying pre-existing vulnerabilities and inequalities.  This comes through particularly clearly in discussions about how African countries should respond to the pandemic. Rich countries have a range of options for containing the virus and mitigating its economic impacts but these solutions often require money or public health capacity which African countries lacked even before the pandemic.

This doesn’t mean that there is nothing to be done, however.  There’s been an outpouring of research on approaches to pandemic control and economic relief which are tailored to African contexts.  In particular, it may be possible to mitigate the economic impacts of the crisis through a mixture of targeted investments in public markets and public transport, and donor-funded cash transfer programs.  

How are rich countries responding to the pandemic?

To generalize a bit, rich countries have considered four different responses to the pandemic.  Most of them are clustering around approaches 3 or 4 at this point, which contain the virus and minimize economic disruption, but require lots of spending and strong public health capacity.

  1. Uncontrolled spread: Letting the pandemic spread mostly unchecked in order to rapidly build immunity in the population. This leads to many avoidable deaths, completely overwhelms the healthcare system, and causes a major economic crash, so that’s clearly a bad idea.  The UK briefly considered this before changing their tune.
  2. Lockdown without income replacement: putting the country on lockdown in order to avoid the spread of the virus, without compensating people for lost income.  This leads to higher rates of infection because many people must violate lockdown to continue working and feeding their families, and leads to an economic contraction as many others lose their jobs.  The US is only replacing a fraction of people’s lost incomes with a one-time $1200 check, so it’s a good example of this approach.
  3. Lockdown with income replacement: self-explanatory.  There are a variety of ways to replace lost incomes, from paying companies to keep their workers on board (like Denmark) to offering direct cash transfers to people who’ve lost their jobs (like Canada).  This approach slows the spread of the virus while preserving people’s ability to access the goods and services they need to stay healthy.  However, it’s also extremely expensive.
  4. Testing and containment: Testing enormous numbers of people in order to contain infections before they spread, and letting people who are not infected continue to work and travel as usual.  This is the Taiwan-Singapore approach, and it’s been successful at constraining the spread of the virus while minimizing economic disruption.  However, it relies on the existence of strong public health systems and access to hundreds of thousands of coronavirus tests.

What are the options for African countries?

Which of these approaches might be useful for African countries? Approach 1, uncontrolled spread, is inherently a bad idea, and many governments are already taking steps to avoid this.  South Africa and Uganda are on national lockdown already, Kenya is encouraging cashless transactions, Ghana is shutting down markets to fumigate them, and so forth.  We can also rule out approach 4, testing and containment, as most countries don’t have the extensive public health infrastructure needed to do this.

This leaves us with approaches 2 and 3, lockdowns without or with income replacement.  Right now, many African countries are defaulting to approach 2, as they’re cutting back on economic activity without replacing lost incomes.  This is clearly not sustainable. Many people are subsistence farmers who depend on markets to access inputs like seeds and fertilizer, or live in poor urban neighborhoods without regular access to water and food even at the best of times. Some governments are already using violence to try to enforce these unpopular lockdowns.  We can’t lose sight of the fact that hunger and violence are also threats to public health.

The best remaining option is approach 3, lockdown with income replacement.  Most African governments can’t afford to massively scale up their welfare systems in a short time.  But with a combination of donor support and targeted interventions to keep markets open while protecting vulnerable people, it may be possible to keep people from going hungry while also lowering coronavirus risk.

Protecting people’s incomes

Let’s start with options to keep people’s incomes stable, as it’s going to be impossible to promote any sort of social distancing if people can’t feed themselves while doing so.  The two options here are promoting a baseline level of regular economic activity, and giving people direct transfers of cash or food.

One option for promoting regular economic activity in a safe way is reconfiguring the physical spaces of retail markets so that people can continue to buy and sell with greater social distance.  This includes expanding the footprint of markets to allow for proper social distancing, installing handwashing facilities, and training retailers in safe product handling practices.  It may also be possible to do staggered lockdowns in various neighborhoods in order to keep markets open while controlling the total number of people entering at any given time.  Public transport remains a point of vulnerability, as many people have no alternative for getting around besides crowded mini-buses or motorcycle taxis, but it may be possible to distribute masks and hand sanitizer at bus stops or via transport unions to lower the risk of transmission.

Even if a baseline amount of economic activity can be safely maintained, many African citizens are still going to lose their livelihoods as demand for things like tourism and agricultural exports drops.  There’s a clear need for direct income replacement from the government. Since most people work in the informal sector, a Denmark-style approach to paying employers to keep their employees on isn’t feasible.  Instead, the best solution is to provide cash transfers directly to individuals.  (If agricultural markets begin breaking down, in-kind transfers of food may also be useful, but these are more difficult to organize than cash transfers, so they shouldn’t be the first step.)

The good news is that almost all African countries have existing social protection programs which offer cash transfers to poor citizens.  These programs do tend to have very limited reach, supporting only small percentages of the poor, but at least the infrastructure exists.  There are also cash transfers run through humanitarian aid organizations and through NGOs like GiveDirectly.  As of March 27, only a few African governments had announced plans to scale up their social protection programs.  However, most countries are early enough in the progression of their pandemics to be able to do this before infections peak.

African governments and aid donors should be immediately focused on scaling up the infrastructure for universal cash transfers.  Many African governments can’t unilaterally afford a huge increase in welfare expenses, and will face falling tax revenues during the period of the pandemic, so this is the ideal time for the major donors to step in and support them — ideally with grants rather than loans.  Time is really of the essence here.  Food prices have already begun rising, and will only continue to do so as imports get delayed or shut down, and domestic food supply is threatened by market failures.  Targeting cash transfers to the poorest also takes time, and in this case many people who were not previously extremely poor are about to lose their incomes, so targeting doesn’t really make sense from an ethical perspective either.

Protecting people’s health

But what about public health in all of this?  If markets and transport remain open, even with social distancing measures in place, there’s clearly still a risk of coronavirus transmission.  Many African countries have only a few dozen ICU beds for millions of citizens, and it’s going to be difficult to scale that up rapidly, given that every single country around the world is trying to procure additional medical equipment on short notice via already-stretched supply chains.  The Africa Centres for Disease Control and Prevention appear to be doing as much as they can to help countries acquire coronavirus tests and protective equipment for healthcare workers, but they can’t compensate for years of low investment in health systems overnight.

A research group at the London School of Hygiene and Tropical Medicine has proposed that public health resources in low income countries should be focused on protecting the most vulnerable populations, rather than trying to stop the spread of the disease generally.  This involves identifying people who are immunosuppressed or over 60 years old, and providing them with a package of services (like a safe place to stay and regular food deliveries) so that they can remain isolated from others during the course of the pandemic.  Younger people can continue to show up to work and keep markets open while they are healthy, and if they become ill, there will be more hospital beds available to them.

This strategy obviously has some limitations.  Coronavirus is posed to spread most rapidly in dense urban neighborhoods, where few people can afford an entire room to themselves and there’s no reasonable prospect of building new shelters.  The prospect of leaving home to go into a state-run quarantine facility is clearly undesirable unless the facility is well-run, which many will not be.  In addition, people with conditions like HIV or TB already face stigma, and may not want to self-identify in order to go into coronavirus quarantine. However, this doesn’t mean that quarantine interventions are doomed to fail.  Research on the 2014 – 2016 Ebola epidemic in West Africa suggests that building community trust is an essential part of developing effective, locally contextualized interventions.  Similar trust-building practices may be necessary to develop successful public health strategies in the age of coronavirus.

 

Interesting academic articles for February 2020

Here’s what I’m looking forward to reading this month!

Kobina Aidoo and Ryan Briggs.  2019.  “Underpowered: Rolling blackouts in Africa disproportionately hurt the poor.”  African Studies Review.

Electricity demand exceeds supply in many parts of Africa, and this often results in rolling blackouts. This article argues that blackouts tend to concentrate on poorer places within countries, due to both economic and political factors. This argument is tested with an analysis of electricity availability across thirty-two neighborhoods in Accra and survey data from thirty-six African countries. Across these analyses, poorer people with a grid connection experience lower electricity supply than richer people. This article concludes by discussing implications for research on electricity availability, policymakers working on energy, and the distributive politics literature.

J. Andrew Harris, Catherine Kamindo, and Peter Van der Windt.  2020.  “Electoral Administration in Fledgling Democracies: Experimental Evidence from Kenya.”  Journal of Politics.

We examine the effects of national voter registration policies on voting patterns with a large-scale experimental study. Together with Kenya’s electoral commission, we designed an experiment in which 1,674 communities were randomized to a status quo or treatment group, receiving civic education on voter registration, SMS reminders about registration opportunities, and/or local registration visits by election commission staff. We find little evidence that civic education improves registration. Local registration visits improve voter registration, a relationship that increases in poorer communities. Moreover, local registration increased electoral competition and vote preference diversity in down-ballot contests in the 2017 Kenyan elections. Our results suggest that status quo voter registration policies constrain political participation and competition, and that inexpensive policy changes may attenuate the effects of such constraints.

Jeremie Gross, Catherine Guirkinger, and Jean-Philippe Platteau.  2020.  “Buy As You Need: Nutrition and Food Storage Imperfections.” Journal of Development Economics.

In this paper, we investigate whether and how a more steady supply of foodgrain in local markets impacts the nutritional status (measured with body-mass-indexes) of both children and adults, in a context characterized by large seasonal fluctuations in the price and availability of foodgrain. Taking advantage of the random scaling-up of a program of Food Security Granaries in Burkina Faso, we reach three conclusions. First, especially in remote areas where local markets are thin, the program considerably dampens nutritional stress. The effect is strongest among children, and young children in particular, for whom deficient nutrition has devastating long-term consequences. Second we argue that it is a change in the timing of food purchases, translated into a change in the timing of consumption, that drives the nutritional improvement. A simple two-period model shows that, once we account for various forms of storage costs, an increase in nutrition does not necessarily require larger quantity of food purchases or even consumption. Our last and unexpected conclusion is that the losses associated with foodgrain storage do not stem from physical losses in household granaries but rather from inefficient seasonal bodymass fluctuations. One plausible mechanism behind this particular storage imperfection rests on the households’ urge to consume readily available foodgrain.

Moses Khisa.  2020.  “Politicisation and Professionalisation: The Progress and Perils of Civil-Military Transformation in Museveni’s Uganda.”  Civil Wars.  

Problems of civil-military relations have been at the centre of recurring political crises in contemporary Africa. Routine military intrusion in politics characterised the first four decades of independent Africa. Citizens suffered at the hands of the armed forces, infamous for widespread human rights violations. One key response to this dual civil-military problem was to pursue a strategy of politicising the armed forces in order to make them a) subordinate to civilian authority and b) organically close to the public and protective than predatory. This also entailed the militarisation of politics ostensibly to bring the political class into closer conversation and collaboration with the military. To what extent did this strategy contribute to transforming civil-military relations? Taking the Ugandan case, this article argues that transformation was attained in making the military more respectful of citizens’ rights while simultaneously creating a fusion with the ruling class thereby subverting the very goal of professionalism.

Josephine Ahikire and Amon A. Mwiine.  2020.  “Gender equitable change and the place of informal networks in Uganda’s legislative policy reforms.”  Effective States in International Development working paper #134.

Uganda has had an uneven history and experience around gender equity policy reforms, particularly, from the late 1980s and early 1990s to-date. These range from the countrywide constitutional review processes of the early 1990s, legislative activism and reforms around domestic relations, land/property rights, and women’s access to public position, to mention but a few. While some of these gender reforms (commonly promoted through women’s collective mobilisation) were successful, other legislative initiatives faced intense resistance. This paper compares three policy cases – the 1997 Universal Primary Education policy, the 1998 legislative reform around spousal co-ownership of land and the 2010 Domestic Violence Act. Drawing on feminist institutionalism, the paper explores how gender norms operate within institutions (both formal and informal) and how institutional processes construct, reproduce or challenge gender power dynamics in policy reforms. The paper examines the place of informal networks and raises critical questions regarding ways in which women emerge as critical actors in securing and consolidating gender change, the strategies they draw upon to negotiate resistance, and whether the nature of policy reform influences the kind of resistance and (in effect) counterstrategies used to negotiate resistance to gender change. We also assess the implications these legislative processes have for activism around gender equity reforms. Findings indicate creative ways through which women draw on informal networks and networking practices to influence gender equitable change, often revealing the micro, subtly gendered dynamics that animate success or failure of a particular policy reform. We argue that the nature of policy reform, e.g. gender status policies or doctrinal policies, determines the nature and process of policy adoption.

Eric Mvukiyehe and Peter van der Windt.  2020.  “Assessing the Longer Term Impact of Community-Driven Development Programs: Evidence from a Field Experiment in the Democratic Republic of Congo.”  World Bank Policy Research working paper #9140.

Community-driven development programs are a popular model for service delivery and socioeconomic development, especially in countries reeling from civil strife. Despite their popularity, the evidence on their impact is mixed at best. Most studies thus far are based on data collected during, or shortly after, program implementation. Community-driven development’s theory of change, however, allows for a longer time frame for program exposure to produce impact. This study examines the longer term impact of a randomized community-driven development program implemented in 1,250 villages in Eastern Democratic Republic of Congo between 2007 and 2012. The study team returned to these villages in 2015, eight years after the onset of the program. The study finds evidence of the physical endurance of infrastructure built by the program. However, it finds no evidence that the program had an impact on other dimensions of service provision, health, education, economic welfare, women’s empowerment, governance, and social cohesion. These findings suggest that, although community-driven development programs may effectively deliver public infrastructure, longer term impacts on economic development and social transformation appear to be limited.

Cyril Brandt and Tom De Herdt.  2020.  “Reshaping the Reach of the State: The Politics of a Teacher Payment Reform in the DR Congo.”  Journal of Modern African Studies.

We analyse the politics of the reform of teacher payment modalities in the Democratic Republic of Congo (DRC) in light of the uneven territorial reach of the DRC state. The reform focused on extending this reach by paying all teachers via a bank account, replacing longstanding shared governance arrangements between state and faith-based organizations with a public-private partnership. By using qualitative and quantitative data, we map the political practices accompanying the implementation of the reform. While the reform itself was officially deemed a success, its intended effects were almost completely offset in rural areas. Moreover, governance of teacher payments was not rationalized but instead became even more complex and spatially differentiated. In sum, the reform has rendered governance processes more opaque and it deepened the existing unevenness in the geography of statehood.

Michel Thill and Abel Cimanuka.  2019.  “Governing local security in the eastern Congo: decentralization, police reform and interventions in the chieftaincy of Buhavu.”  Rift Valley Institute.  

In the Democratic Republic of the Congo (DRC or Congo), security governance is competitive, fragmented and marked by violence. Multiple actors—state and non-state—vie for influence and many areas of the country lack effective structures to ensure that their residents live in safety and security. In this context, the threat and use of violence has become central to the state’s efforts to maintain social control and public order. This tendency has come to shape the troubled relationship between Congolese citizens and the army and police, reflected in numerous fraught day-to-day interactions. Two ongoing processes— administrative decentralization and police reform—have been designed to turn a page on past practices, bring government and security closer to the population and, consequently, improve this relationship. While they have had some successes, they also risk the re-creation of existing governance dynamics within newly empowered local administrative and security-related entities.

Mary Hallward-Driemeier, Anna Kochanova, and Bob Rijkers.  2020.  “Does Democratization Promote Competition? Indonesian Manufacturing Pre and Post Suharto.”  World Bank Policy Research Group working paper #9112.  

Does democratization promote economic competition? This paper documents that the disruption of political connections associated with Suharto’s fall had a modest pro-competitive effect on Indonesian manufacturing industries in which his family had extensive business interests. Firms with connections to Suharto lost substantial market share following his resignation. Industries in which Suharto family firms had larger market share during his tenure exhibited weak improvements in broader measures of competition in the post-Suharto era relative to industries in which Suharto firms had not been important players.

Anne Buffardi, Samuel Sharp, Sierd Hadley and Rachel A. Archer.  2020.  “Measuring evidence-informed decision-making processes in low- and middle-income countries.”  Overseas Development Institute.

The evidence base on the practice of evidence-informed decision-making (EIDM) in international development is limited. Previous work has identified multiple roles that evidence could play; principles and desirable decision-making practices; and individual, interpersonal, organisational and contextual factors thought to influence the interpretation of evidence and decisions. Despite a proliferation of frameworks and guidance, there is a relative dearth of research on the extent to which and how they are applied in practice, at what cost and with what effects. EIDM faces measurement challenges, including investigation into largely undocumented and sometimes unobservable processes, multi-finality and equifinality (multiple pathways to multiple outcomes), often along extended time horizons, in addition to difficulties establishing counterfactuals. In the health sector, current indicators tend to cluster around two ends of a long change pathway: tracking upstream activities and immediate outputs, and downstream changes in health coverage and outcomes. Building on existing systems, future efforts could be directed at the ‘missing middle’ in measurement, filling notable gaps in defining what constitute quality EIDM processes, minimising biases in measuring these processes and investigating how evidence-informed recommendations make their way through the policy process.

Matteo Alpino and Eivind Moe Hammersmark.  2020.  “The Role of Historical Christian Missions in the Location of World Bank Aid in Africa.”  World Bank Policy Research Group working paper #9146.

This article documents a positive and sizable correlation between the location of historical Christian missions and the allocation of present-day World Bank aid at the grid-cell level in Africa. The correlation is robust to an extensive set of geographical and historical control variables that predict settlement of missions. The study finds no correlation with aid effectiveness, as measured by project ratings and survey-based development indicators. Mission areas display a different political aid cycle than other areas, whereby new projects are less likely to arrive in years with new presidents. Hence, political connections between mission areas and central governments could be one likely explanation for the correlation between missions and aid.

Abhishek Nagaraj and Scott Stern.  2020.  “The Economics of Maps.”  Journal of Economic Perspectives.  

For centuries, maps have codified the extent of human geographic knowledge and shaped discovery and economic decision-making. Economists across many fields, including urban economics, public finance, political economy, and economic geography, have long employed maps, yet have largely abstracted away from exploring the economic determinants and consequences of maps as a subject of independent study. In this essay, we first review and unify recent literature in a variety of different fields that highlights the economic and social consequences of maps, along with an overview of the modern geospatial industry. We then outline our economic framework in which a given map is the result of economic choices around map data and designs, resulting in variations in private and social returns to mapmaking. We highlight five important economic and institutional factors shaping mapmakers’ data and design choices. Our essay ends by proposing that economists pay more attention to the endogeneity of mapmaking and the resulting consequences for economic and social welfare.

Africa Update for February 2020

Here’s the latest edition of Africa Update!  We’ve got 1.4 million resumes to review in Nigeria, the (possible) end of tsetse flies, Kenya’s first online archive of LGBT+ life, anti-colonial acronyms, and more.

West Africa: Ghana is trying to raise US$3 billion in investment with a new bond targeted at the diaspora.  Unfortunately that money might go to vanity projects like replacing all of the country’s still-functional electronic voting machines. Burkina Faso is taking a big gamble in arming local vigilantes to fight Islamic rebel groups. Unemployment is a serious problem in Nigeria, where 1.4 million people recently applied for 5000 civil defense jobs.

Central Africa:  Rwanda is still trying to make English the official language used in schools, despite rich evidence that students learn best in the language they speak at home.  Rwanda is also locking up and abusing children living on the streets in the name of “rehabilitation.”  Burundi’s Pierre Nkurunziza isn’t running for president again in the next elections, but he is getting a golden parachute with a lifetime salary and a luxury villa after stepping down.

orthodox christmas
Loved this beautiful photo of an Ethiopian Christmas celebration, via Girma Berta

East Africa: Sudan is opening up its gold market and doubling civil servant salaries while slashing fuel subsidies in an attempt to jump-start its moribund economy.  Check out this a great cartoon about the upsides and downsides of urbanization in Ethiopia.  In Kenya, gambling is increasingly seen as a chance to learn a livelihood outside of state-funded patronage networks.  Kenya’s foreign policy towards Somalia has grown increasingly bellicose over recent years.  This was a heartbreaking piece about the civilians killed by US airstrikes in Somalia.

Southern Africa: A new law means that South Africa can block refugees from seeking asylum if they engage in political activism in their home countries.  Meet the activists fighting for the rights of domestic workers in South Africa.  In Lesotho, the prime minister has resigned after evidence came out that his current wife may have had his ex-wife murdered so that she could be the official First Lady.  The billionaire Zimbabwean owner of Econet is paying the country’s striking doctors to return to work out of his own pocket.  Zimbabwe has run out of money to deport undocumented immigrants, leaving many of them languishing in jail for months.  In a landmark ruling, the high court in Malawi has ordered the country to re-run its recent election.

taxes
Tax revenues are quite low in many African countries compared to the OECD average of 34% of GDP (via The Economist)

Politics & economics: Check out this interactive map of upcoming elections across Africa.  Here’s a good summary of the political history of African states before colonization.  What are some reasons to be optimistic about economic growth and life expectancy in Africa?  This is some useful background on West African countries’ plan to replace the CFA currency with the eco.  As transport routes with China are shut due to coronavirus fears, many Ugandan traders are also facing shortages of imported goods.

Environment & resources: Climate change is almost uniformly a bad thing, but one possible exception is that rising temperatures might kill off the tsetse fly and end the spread of sleeping sickness across Africa.  In Uganda, people in gold mining communities are being poisoned by the mercury used to refine the gold.  The DRC’s long-delayed Inga III mega-dam project has just been pushed further down the road with disputes among the major contractors about the dam’s design.

research
Research interlude: here’s some interesting data from Joy Owango

Health:  A new study in Liberia finds that motorcycles are still more efficient than drones for transporting medical supplies.  In Zambia, rates of stroke are rising as the population ages, but there are only five neurologists being trained to deal with this.  Meet the researchers who are coordinating the African fight against coronavirus at the Institut Pasteur in Senegal. This Nigeria researcher is working to develop anti-cancer drugs from indigenous African plants.

Gender: Meet 14 inspiring women in science from across Africa.  What can African governments do to reduce the burden of unpaid care work for women and girls?  Women who run for political office in Uganda can increasingly expect to face online harassment from men.  In Tanzania, women often don’t ask to use contraception because they feel that their husbands won’t approve.  Climate change might increase the risk of premature births in countries like the Gambia, where many women are subsistence farmers who work outside all day and can’t avoid increased temperatures.

colonization
BRB, ROFL, SMH (via Suhayl)

Globalization:  The Oxford English Dictionary is adding dozens of words from Nigerian English in recognition of the language’s global use.  Here’s how American consulting firms helped Angola’s Isabel dos Santos try to legitimize the money her family had corruptly acquired.  Meet the Soviet-era architects who shaped the visual landscapes of Accra and Lagos.  Read about the 10 critical issues which will shape China-Africa relations in 2020.  Here’s why the Gambian Minister of Justice sued Myanmar at the ICC to force the country to stop persecuting the Rohingya.

Culture: Check out KumbuKumbu, the first online archive of LGBT+ life in Kenya.  What are the top 10 things to know about getting young Kenyans engaged in politics?  This was a lovely essay about polychronic time-keeping and food in South Africa.  Meet the first professor with a PhD in African indigenous astronomy.  I can’t wait to watch the Netflix adaptation of Nnedi Okorafor’s Binti trilogy!

Access to consumer goods in rural Ethiopia

ethiopia
From the original post: “The figures display the lowess graphs of shares of items available in the village relative to the associated market town. Heavier, bulkier items, such as processed food, drink, and hardware, see a sharper fall in availability by travel time.”

Everyone intuitively understands that it’s hard to get access to the latest or fanciest consumer products in remote rural areas.  Over at VoxDev, Jan Willem Gunning, Pramila Krishnan, Andualem T Mengistu, and Peng Zhang share some recent research where they’ve quantified this in Ethiopia.  As they note,

We find that remoteness sharply reduces the variety of consumer goods available. For an average village, a fall of an hour in travel time is associated with an increase of about nine items or 18 brands of these items.

Ethiopia is a particularly apt location for this study.

The country is landlocked and internal trade costs are strongly affected by its particular physical geography. It has a mean elevation of over 1000 metres and the bulk of the population lives on the high plateau, a terrain wrinkled with steep hills and mountains.

As a result, Ethiopia has one of the lowest road densities in the world, despite substantial investment in new roads over the last decade. In addition, the low urbanisation rates (at 17% compared to a sub-Saharan average of 33%) imply that households face markets distant from them. This particularly affects their access to manufactured goods.

The Kenya-Uganda dairy war continues

USAID Measuring Impact Conservation Enterprise Retrospective
Ugandan farmer Simeo Ntawuruhunga stands next to one of his dairy cows (via USAID)

For two countries nominally in the same free trade area, Kenya and Uganda spend a lot of time squabbling about agricultural exports.  The latest front is milk exports, where Kenya has been blocking Ugandan imports over claims that Uganda actually lacks the capacity to produce enough milk to export, and has been relabeling foreign milk powders instead.

David Ndii has an insightful take on this issue at The Elephant.  He notes that the real issue in Kenya is politics, not economics.  The country’s largest milk producer, Brookside Dairy, is owned by the family of the president, and has raised consumer milk prices by nearly 100% over the last decade. This has attracted the attention of Ugandan exporters.  As he writes,

More fundamentally, why the Kenyan market is attracting Ugandan milk has little to do with Uganda’s demand-supply balance, and everything to do with Kenya’s consumer price. As observed earlier, the retail price of processed milk has doubled from Sh65 to Sh120. In Uganda, a litre of processed milk retails at between USh2,800 and USh3,000 which translates to an average of Sh80, i.e. Sh40 per half-litre packet, compared to Sh60 in Kenya. Ugandan producers are not obliged to satisfy their domestic market when a more profitable market is available across the border. If consumer prices had increased at the rate of inflation faced by Kenyan manufacturers, as measured by the producer price index (2.5 per cent per year), the retail price in Kenya today would be in the Sh70-75 range, which is well below the Uganda retail price.

How much do African countries collect in taxes?

Not very much compared to global standards, according to this Economist article.  As they note,

Government revenues average about 17% of GDP in sub-Saharan Africa, according to the IMF. Nigeria has more than 300 times as many people as Luxembourg, but collects less tax. If Ethiopia shared out its tax revenues equally, each citizen would get around $80 a year. The government of the Democratic Republic of Congo is so penurious that its annual health spending per person could not buy a copy of this newspaper.

Globally, wealthy countries have tax revenues equivalent to about 34% of GDP, and Latin America averages 22%, according to the OECD.

taxes

One of the paradoxes of taxation in many African states is that low tax revenues co-exist with relatively high tax rates, because the overall tax base is very narrow.  Most economic activity goes untaxed, and taxes are concentrated on a small number of firms in the formal sector.  And the largest firms, or those which are politically connected, can often negotiate further tax breaks, further narrowing the tax base.

(H/t to Ken Opalo for this article.)