Tag Archives: development

Harnessing Markets to Reduce Extreme Poverty

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When “3 billion people on the planet making less than $3 a day, [are] effectively cut out of society, we are missing the opportunity of all those people to be our musicians, our Einsteins, and our professors- it is really all of us that lose.”

In an event on harnessing the power of markets to tackle global poverty, American Enterprise Institute President Arthur Brooks and Acumen founder and CEO Jacqueline Novogratz highlighted the role markets can play in enabling the poor to participate fully in society.

By treating the poor “as assets to society,” rather than liabilities, “we’re going to enliven their capital and that will also give them earned success and dignity,” said Brooks. Novogratz’s philosophy is to do just that – by investing in the poor through so-called “patient capital.”

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Shaping the Post-2015 Development Agenda

In 2000, the United Nations laid out an ambitious global development agenda known as the Millennium Development Goals (MDGs), which sought to resolve some of the most pressing international challenges of our time: eradicating extreme poverty and hunger, achieving universal primary education, promoting gender equality, improving maternal health, reducing child morality and promoting environmental sustainability.

While the world has made progress on many of these objectives over the past 15 years, the deadline for developing the new set of global development goals is quickly approaching. The current goals will expire on December 31, 2015 and a new set of principles will replace them. The question of what these principles will look like is explored in detail in the latest Economic Reform Feature Service article Shaping the New Development Agenda.

Author James Michel argues that the post-2015 agenda will need to address an increasing number of complex issues and reconcile the goals of a diverse group of actors in the development landscape. While the concrete set of goals have yet to be outlined, what is becoming clear is that there has been a shift in thinking related to international development. Michel’s article explores the emerging consensus that the post-2015 goals will be based on advancing “human security, well-being, and dignity” and will incorporate the Busan principles of “developing country ownership, a focus on results, inclusive partnerships, and mutual accountability and transparency.”

Furthermore, the traditional relationship between donor countries and recipient states, characterized by North-South dependency, will be transformed to an active partnership with an emphasis on local ownership and South-South exchange of knowledge, expertise, and trade. The agenda will pay greater attention to “exclusion and inequality, urbanization, demographic challenges and the positive contribution of migrants” among others. The paramount challenge will be to incorporate these diverse concerns in a coherent policy agenda focused on sustained, inclusive growth.

To read more on the topic of the post-2015 development agenda, read the article here.

Teodora Mihaylova is a Research Coordinator at CIPE.

For Alternatives to the Authoritarian Model, Look to South Africa

Despite its lingering problems, South Africa's transition from apartheid to democracy provides many valuable lessons.

Despite its lingering problems, South Africa’s transition from apartheid to democracy provides many valuable lessons.

This week’s U.S.-Africa Leaders Summit focuses on the topic of “Investing in the Next Generation.” The summit aims to explore issues of economic inclusiveness, democratic development and “creating an enabling environment for the next generation.”

This discussion is especially pertinent in the aftermath of the global financial crisis of 2008, when many in developing countries have begun to lose faith in the wisdom of democratic governance and market-based economic reforms. The rise of Chinese and Russian authoritarianism coupled with robust economic growth in those countries provides a seemingly plausible alternative for lifting millions out of poverty while still allowing autocrats to retain a tight grasp on power.

The Centre for Development and Enterprise (CDE), a South African think tank and CIPE partner, examined the post-apartheid experience of South Africa’s transition to market economy and a vibrant democracy in a recently released report entitled “South Africa and the Pursuit of Inclusive Growth.”

As part of a larger initiative known as the “Democracy Consensus”,  CDE’s research shows that democracy is a viable path not only for fostering inclusive economic growth in the short- to medium-term, but also laying the foundations for sound institutions that lead to long-term stability and prosperity.

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The Role of Business in Advancing Political and Economic Freedom in Africa

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This week nearly 50 heads of state will attend President Obama’s U.S.-Africa Leaders Summit in Washington, DC to discuss trade and investment, security, democratic development, and how to achieve a better quality of life for all Africans. The summit will bring together government representatives, business people from the U.S. and Africa, and leaders of civil society groups.

In many ways this summit will be the beginning of a hopefully much larger conversation on how the United States and 54 African countries can increase economic ties, strengthen democratic development, and create new economic opportunities and freedoms for Africans.

To help start this conversation, CIPE and Freedom House brought together several U.S. and African thought leaders to offer their insights on how to advance political and economic freedom in Africa at an event August 1. The purpose of the event was to reinforce the case that good governance and democratic values are closely linked to sustained economic growth, and to offer some actionable ideas on how to strengthen the U.S.-Africa partnership.

The panelists included: Kim Davis, Managing Director and Co-Chairman at Charlesbank, Hon. Donald Gips, Co-Chairman of the U.S. Chamber of Commerce Africa Business Initiative, Betty Maina, Chief Executive of the Kenya Association of Manufacturers (KAM), and Aniket Shah, Global Investment Strategist from Investec.

As Hon. Gips mentioned, many American firms are not even at the “starting line” with regards to expanding their business into Africa. There is no doubt that there are plenty of opportunities and that different countries on the continent are experiencing economic growth and a growing middle class of consumers that offer both African and international companies new opportunities to expand their markets. But for many reasons, few U.S. firms outside of the extractive industries are investing in Africa.

At the same time, Freedom House’s Freedom in the World Index shows that many African countries are not advancing political and economic freedoms, and in some parts of Africa are reversing previous gains. As Betty Maina from KAM pointed out, after the fall of the Berlin Wall there was a great promise “for a better life and democratic opportunity,” but Africans have not built the underlying institutions necessary for democracy to succeed – instead focusing almost solely on conducting elections.

“There is currently a despair about democracy and the fundamental ingredient to change this is the building of proper institutions,” Maina said.  As former Ambassador to South Africa, Hon. Gips, put it: “the hard part is what comes after the elections.”

So what can the business community do about the current state of affairs? Kim Davis emphasized that business has a deep interest in the rule of law. African countries need judiciary systems that work and business climates where contracts can be enforced. Keeping the system accountable requires freedom of the press, and African businesses need to push for greater press freedoms.

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Moving Beyond the Bi-Polar View of Doing Business in Africa

New buildings in Gabarone, the capital of Botswana -- one of the most developed and fastest-growing economies in sub-Saharan Africa.

Gabarone is the capital of Botswana — one of the most developed and fastest-growing economies in sub-Saharan Africa.

By Naledi Modisaatsone

Economic improvements and a wealth of opportunities for business in Africa have led to an increased focus on the continent. Over the past three years Ernst & Young’s Africa attractiveness reports have highlighted the continent’s steady rise. Their research provides some quantitative substance to the growing perception that African markets offer an exciting growth and investment opportunity.

Africa’s growth prospects differ not only country by country but also sector by sector. For example, agriculture is Africa’s largest economic sector, representing 15 percent of the continent’s total GDP, or more than $100 billion annually. It is highly concentrated, with Egypt and Nigeria alone accounting for one-third of total agricultural output and the top ten countries generating 75 percent.

Africa’s banking sector has also grown rapidly in the last decade. Sub-Saharan Africa has become a substantial player in emerging-market banking, with total 2008 assets of $669 billion, while North Africa’s asset base has grown substantially, to $497 billion. Africa’s banking assets thus compare favorably with those in other emerging markets, such as Russia (with $995 billion).

However, the Ernst & Young reports also highlight a lingering perception gap between companies already doing business on the continent and those with no business presence there. The respondents with an established business presence in Africa are more positive about the continent’s prospects and rank Africa as the most attractive regional investment destination in the world today. They view it as an exciting, dynamic, high-growth market. In stark contrast, respondents that have not yet invested are negative and rank Africa as the least attractive regional investment destination in the world.

The African business community should spend some time on this issue at the US-Africa Business Forum. It is their responsibility to debunk the myths that some external investors have about operating a successful business in Africa. These business leaders are successfully embracing Africa’s uncertainty, complexity and volatility, understanding that these are common challenges across most emerging markets.

They are actively balancing the three tensions that all companies face in doing business in emerging markets: long-term versus short-term focus, profit-taking versus sustainable growth, and managing the whole versus optimizing the parts. Most importantly, their companies are establishing strong competitive positions in key markets and are poised to benefit from the continued growth anticipated over the next decade.

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Broadband Internet Access and Development in Latin America and the Caribbean

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By Gustavo Guerrero

While broadband internet has become an essential business tool, it has been slow to arrive in the areas that need the benefits of development the most – namely rural regions of developing countries. Though there has been some growth over the years, there is still a long way to go. Recognizing this, the Inter-American Development Bank (IDB) released a report showing the effect of broadband internet on the economies of Latin American and Caribbean countries, outlining how countries can improve their telecommunications infrastructure.

Nationwide high-speed internet access is something that many in the developed world take for granted. However, in the developing world there is a different story. In Nigeria, low broadband penetration has been cited as hindering the development of e-commerce in Africa’s largest economy. Similar examples are present all across the developing world.  The potential for growth is there, waiting, but it cannot be realized until broadband penetration and speed are improved.

Having a web presence is now almost a prerequisite for becoming a successful business.  The specific type of web presence can range from simply listing basic business contact information and operating hours, to having an online sales portal. Being online offers many benefits with very few, if any drawbacks. While most businesses in the developed world have adapted to this new environment, businesses in many parts of the world lack basic internet access that would allow them to grow and thrive.

The report, Socioeconomic Impact of Broadband in Latin American and Caribbean Countries, consists of two major components which aim to promote broadband internet connection in the region.  The first is an econometric model for LAC countries which helps determine how increases to broadband penetration could affect their GDP.  The second is a set of recommendations designed to help governments best improve their infrastructure.

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Time to Re-Think Development in Africa?

Naledi Modisaatsone is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Urban Institute.

Africa is in the news. The U.S.-Africa Leaders’ Summit is being held in August, the first of its kind. President Obama will be welcoming leaders from across the African continent to the nation’s capital in less than two months. The summit holds many promises; it could mark a turning point in U.S-Africa relations.

While there are many issues that can be discussed, not all of them should be on the agenda for this summit. To achieve the maximum benefits, it is very critical for African leaders to prioritize just what to put on agenda, and what to leave out. It is tempting to want to bring all the issues, but highly focused interactions are more successful. Topics for discussion should reflect the most critical issues regarding African economies and address challenges to sustainable growth and development.

One important issue is private sector development. Development finance and private sector entrepreneurship are powerful, but under-utilized, assets for development in Africa. While most countries have set goals for inclusive growth, they will not be achieved without better harnessing private sector resources that are ultimately the drivers of development.

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