COVID-19 impacts on foreign direct investments in sub-Saharan Africa
In June of this year, the United Nations Conference on Trade and Development (UNCTAD) released its 2021 World Investment Report, in which it focuses on investing in a sustainable recovery from the pandemic. The report itself looks at how the COVID-19 pandemic impacted foreign direct investment globally and investment priorities for the recovery phase. The complex health and economic challenges created by the pandemic throughout the African continent have significant impacts on the foreign direct investment (FDI) both to and from the region. In fact, Africa’s share of total global FDI inflows for developing economies fell from 6.3 percent to 5.9 percent between 2019 and 2020 (Figure 1). Although FDI inflows were already on a decline, COVID-19 continued to have a negative impact on investment globally and regionally.
Figure 1. Foreign direct investment inflows, 2007-2009 and 2018-2020
Source: United Nations Conference on Trade and Development, World Investment Report. 2021.
Overall, FDI inflows to sub-Saharan Africa decreased by 12 percent between 2019 and 2020, but a few countries did see investments grow. In fact, Central Africa registered a consistent increase in FDI with inflows increasing to $9.2 billion from $8.9 billion. East Africa and southern Africa, on the other hand, saw 16 percent drops in inflows each since 2019. Notably, even within regions the impacts of the pandemic varied. For example, in West Africa, Ghana saw a 52 percent decline in FDI inflows in the year 2020—a drop from $3.9 billion to $1.9 billion; meanwhile, inflows to Nigeria slightly increased from $2.3 billion in 2019 to $2.4 billion in 2020.
FDI outflows were also impacted by the COVID-19 pandemic, but, again, varied across and within regions (Figure 2): According to the report, FDI outflows from Africa fell by two-thirds from $4.9 billion in 2019 to $1.6 billion in 2020. Notably, the highest outflows came from Togo, which, according to the report, were mostly to other African countries. For example, Togolese company Afrik Assurances opened financial services operations in Benin and Côte d’Ivoire during the pandemic. While Ghana saw a decrease in outflows, it still made up a significant percentage of total outflows from the continent. Another notable trend was the significant drop in outflow investment for southern Africa, which, according to the authors, is due to South African multinational enterprises repatriating capital from foreign countries.
Figure 2. Foreign direct investment outflows, 2007-2009 and 2018-2020
Source: United Nations Conference on Trade and Development, World Investment Report. 2021.
The report authors, overall, remain optimistic despite these drops. In fact, UNCTAD suggests that Africa will see a rise in both FDI inflows and outflows in the year 2021 with potential to reach pre-COVID levels in 2022. Notably, the report also suggests that the African Continental Free Trade Area and the Sustainable Investment Protocol (phase II of the AfCFTA) could boost FDI flows in the long term as well. In the long run, for a successful recovery, the authors stress increasing vaccine availability and call for international financial support, among other country-focused policies.
Which will be the top 30 consumer markets of this decade? 5 Asian markets below the radar
Despite COVID-19, the global consumer class—those who are middle class or rich—is rising fast. In an earlier post, we showed that we are experiencing a truly secular shift in the size of this global consumer class. COVID-19 is a transitory setback of one or two years in this long-term shift. Since 2000, the global consumer class grew by more than 4 percent each year, reaching a new milestone of 4 billion people—for the first time—in 2020 or 2021. At the beginning of this century, the middle class was mostly a Western phenomenon. Consumer companies were selling their goods in OECD countries, especially the USA and Europe. Today, the consumer class is global and increasingly Asian. Spending by the Asian middle class exceeds that in Europe and North America combined.
We define the global consumer class as anyone living in a household spending at least $11 per day per person, of which the global middle class ($11-$110 per day) represents the lion’s share with 3.75 billion people. It is very important to define the global consumer class correctly and allow for comparability across countries and over time. Incorrect definitions could cost companies billions, as Nestle experienced painfully in Africa. The company based its decision to expand on announcements of a rapid rise of Africa’s middle class. While Africa’s middle class has indeed been rising rapidly, the threshold of $3 per day in consumer spending was too low to gain traction with products that are enjoyed by American or European consumers. Cornel Krummenacher, then chief executive for Nestle’s equatorial Africa region, noted that “we thought this would be the next Asia, but we have realized the middle class here in the region is extremely small.” Even today, Africa’s consumer class is only 283 million people strong according to projections by World Data Lab, growing at 4.1 percent per year. However, there is an untapped potential in Africa below the middle-class threshold. If companies want to benefit from Africa’s growth in this decade, a focus closer to the bottom of the pyramid would yield more success.
Under current projections, Asia will represent half of the world’s consumer spending by 2032.
By contrast, Asia’s consumer class is advancing strongly. Since 2016, half of the global consumer class has been Asian. Today, out of the 4 billion global middle-class consumers, 2.2 billion live in Asia. However, while Asia has more than half of the world’s consumers, they only represent approximately 41 percent of consumer spending ($26 trillion out of $63 trillion in 2011 purchasing power parity, see Table 1). Under current projections, Asia will represent half of the world’s consumer spending by 2032.
Table 1. Asia’s consumer class power
Asia
Rest of the world
TOTAL
Asia’s share
Consumer class (billion)
2.2
1.8
4.0
55%
Spending of the consumer class (trillion $)
26
37
63
41%
Source: World Data Lab’s MarketPro; 2021 projections.
Today, there are 13 Asian economies in the top 30. The composition of these top 30 countries will not change until 2030. However, there are big shifts within the top 30: Only 7 countries are expected to keep their position; 14 countries will lose position while 9 countries gain positions (see Figure 1). To assess which countries will move up in the consumer class tally, we used our unique modeling capacity to project the change of the consumer class between 2020 and 2030.
Figure 1. The top 30 consumer markets of this decadeDaily spending of more than $11 (2011 PPP)
Source: World Data Lab’s MarketPro.
Everyone is familiar with consumer class growth in China and India. In Europe and North America, the numbers in the consumer class will stagnate and growth will come about only because households will become richer.
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But there are other countries, too, growing under the radar, which are forecast to have very large increases, in the tens of millions, in the numbers in the consumer class in 2030.
Here is an overview of the five top movers:
Bangladesh (+17 positions), from place 28 to 11; future consumer class: 85 million (+50 million)Global share of consumer class: 0.8 percent (2020), 1.6 percent (2030). Bangladesh’s consumer class is projected to more than double by 2030: Today, 35 million people in Bangladesh spend more than $11 a day. By 2030, it will be 85 million!
Pakistan (+8 positions), from place 15 to 7; future consumer class: 121 million (+56 million)Global share of consumer class: 6 percent (2020), 2.3 percent (2030). Pakistan will add 56 million new consumers by 2030, for a total of 121 million. This means that in 2030, for the first time, every other Pakistani will be able to spend more than $11 per day.
Vietnam (+7 positions), from place 26 to 19; future consumer class: 56 million (+21 million)Global share of consumer class: 9 percent (2020), 1.1 percent (2030). Vietnam’s consumer class will grow from 35 million to 56 million within this decade, which is a success story particularly of the middle-aged generation: Consumers between 45 and 65 years of age will contribute nearly 25 percent of Vietnam’s spending, as opposed to 20 percent today.
Philippines (+6 positions), from place 20 to 14; future consumer class: 79 million (+38 million)Global share of consumer class: 1 percent (2020), 1.5 percent (2030). The Filipino consumer class is projected to grow steadily, from 41 million today to 79 million in 2030. By then, more than two-thirds of the Filipino population will spend more than $11 per day.
Indonesia (+2 positions), from place 6 to 4; future consumer class: 199 million (+76 million)Global share of consumer class: 2 percent (2020), 3.8 percent (2030). While Indonesia is only moving up two places, it is experiencing a large gain of consumer class growth. Starting from an already large base of 123 million, Indonesia will have almost 200 million consumers in 2030, making it the fourth-largest consumer market in the world.
The big message of this analysis is that the consumer class is spreading across the world, and that many emerging markets will have large consumer markets where supply-chain-scale economies, digital platforms, and local preferences will need to be better understood and developed.
The role of fiscal decentralization in promoting effective domestic resource mobilization in Africa
The lingering economic impact of the COVID-19 pandemic is disrupting sub-Saharan Africa’s traditional financial inflows, revealing the heightened need to strengthen domestic resource mobilization and improve tax administration in the region. This unprecedented shock to the world economy has revealed the volatility of financial inflows that African nations are dependent on: Indeed, foreign direct investment (FDI)—an increasingly important source of development financing traditionally rooted in oil, gas, and infrastructure projects—has declined approximately 12 percent and 25 percent in sub-Saharan and North Africa, respectively, between 2019 and 2020. Remittance inflows, which millions of African households rely on to support their families, declined by 12.5 percent throughout sub-Saharan Africa over the same period. In addition, discontent with globalization, inconsistent political environments, and competing humanitarian issues are transforming official development assistance (ODA) into an increasingly uncertain source of development financing.
The fragility of Africa’s external financial inflows to shocks in the global economy suggests African nations should focus on securing more consistent domestic revenue streams. Indeed, ensuring more effective domestic resource mobilization and tax administration systems—sources of revenue that governments have direct control over—via fiscal decentralization reforms can offer an avenue to simultaneously bolster government coffers, improve the impact of government spending, capture uncollected tax revenue spillage, and augment taxation’s prominent role as a source of development financing.
Achieving better governance is easier said than done: Indeed, the experience from relatively well-executed fiscal decentralization in Brazil and Indonesia provides evidence that fiscal decentralization has the potential to improve the collection and spending of domestic tax and nontax sources of government revenue and, in addition, improve government accountability.
How can fiscal decentralization boost domestic resource mobilization?
For fiscal decentralization to be effective, countries must meet several key institutional preconditions. Meeting these institutional preconditions ensures regional/state and local/municipal governments have the capacity to institute effective decentralized expenditure allocation and revenue collection. Otherwise, fiscal decentralization has the potential to worsen public service delivery. Such preconditions include:
Stable political environments.
Effective autonomous subnational governments.
Institutional capacity at regional/state and local levels of government.
Government accountability.
Effective democratic election infrastructure at all levels of government.
Capacity to raise adequate levels of revenue locally.
Importantly, the potential for fiscal decentralization to benefit domestic resource mobilization stems from improvements in public service delivery, particularly in terms of allocative efficiency, preference matching, and stronger government accountability.
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Local governments benefit from an informational advantage, whereby their proximity allows them to better understand the needs and preference of their local constituents. Relative to the central government, this informational advantage enables local governments to more effectively allocate public resources and serve needs of the people.
Local governments’ geographic proximity to their constituents—the direct beneficiaries of public services—also pressures local authorities to efficiently allocate fiscal resources. This productive efficiency of local public service delivery promotes government accountability through the direct election of local officials by the local populace, which also empowers voters with control over their public authorities and institutions. The subsequent performance of neighboring localities also provides local voters with a model to compare the competencies and effectiveness of their local politicians, as well as encourages competition among local governments to produce effective public services.
Drawbacks of fiscal decentralization
While fiscal decentralization provides an alternative fiscal structure to improve the collection and spending of government revenue, drawbacks exist. Hierarchical fragmentation of government services can impose the loss of economies of scale and, therefore, cause decreased efficiency and higher costs in the production, implementation, and distribution of public goods and services. Fiscal decentralization, which reduces federal government revenue, may also weaken the central government and hinder its full capability to redistribute national resources from regions/states with surpluses to localities in need of funding. Furthermore, without the infrastructure to support legitimate democratic local elections, fiscal decentralization will not improve government accountability and may introduce incentives for rent-seeking political behavior and the misallocation of local resources to nonproductive expenditures. In what follows, we compare the experiences of Brazil, Indonesia, and Nigeria—three economic powerhouses in their respective regions.
Evidence from Indonesia
Following economic and financial crises, Indonesia transitioned to a decentralized governmental system in 1999. Regional governments became empowered to manage governmental and public services, with notable exceptions in the regulation of religion, defense, national security, and monetary policy. Indonesia’s fiscal structure enables provinces and municipalities to collect local taxes and set local tax rates according to their budgetary needs, while maintaining a fiscal network between the subnational and federal government to ensure an equitable budgetary balance across provinces. These transfer payments alleviate horizontal, cross-state fiscal imbalances and promote equitable distribution of state revenue.
Since the implementation of fiscal decentralization in Indonesia, social welfare, public service delivery, and a myriad of development indicators have improved significantly.
Evidence from Brazil
Brazil’s model of fiscal decentralization offers an insight into the importance of intergovernmental tax transfers to prevent revenue imbalances among states. The redistributive structure of the Brazilian federal fiscal system allows poorer states to access a greater share of revenue from federal transfers than wealthier states, which enjoy a more substantive tax base. In turn, these wealthier states also benefit from greater budgetary autonomy. As a result of the integration of intergovernmental transfers mediated by the federal government, Brazil’s equitable revenue transfer system allows it to maintain low levels of vertical imbalances—the differences between budgetary mandates and revenue assignments throughout all levels of government—relative to the international average and select wealthy countries such as United Kingdom, Spain, and Australia.
Evidence from Nigeria
Nigeria’s model of fiscal decentralization has persisted since 1946, but its decentralized system of revenue allocation and collection has not manifested in notable improvements to the country’s nominal tax revenue or tax-to-GDP ratio over the years. While some of Nigeria’s revenue collection inefficiencies may be tied to its relatively high rate of tax evasion and avoidance, the bureaucratic, administrative, and institutional requirements at the local level of government may be limiting the proper implementation and delivery of decentralized public services. Studies, however, have uncovered positive relationships between fiscal decentralization and social and health outcomes in Nigeria, such as higher literacy rates and lower infant mortality rates.
Can effective fiscal decentralization improve domestic resource mobilization?
The successful implementation and outcomes of fiscal decentralization in Brazil and Indonesia offer insight into decentralization’s ability to improve public service delivery, increase government accountability, and promote social, economic, and human development goals. Yet, the institutional preconditions throughout all levels of government that are necessary for successful implementation of fiscal decentralization suggest the reform is not always fully successful, as seen in Nigeria. Nonetheless, the potential for fiscal decentralization to improve public service delivery, efficiency, and accountability remains an attractive alternative governmental system, as Kenya became the most recent African nation to successfully institute a decentralized fiscal system following the approval of its new constitution in 2010.
Lessons for Africa
Shoring up and capturing the full potential of domestic taxation is one of the most important sources of development financing and therefore needs to be a policy priority for African governments. The ability of domestic resource mobilization to provide a hedge against fluctuations in the global economy and volatile commodity prices is especially important for resource-rich countries whose fiscal systems are heavily commodity dependent.
Because 46 African countries and 89 percent of sub-Saharan Africa are commodity-dependent economies (as categorized by the U.N.), African fiscal systems maintain significant exposure to international commodity markets and the global economy. The COVID-19 pandemic exposed this vulnerability, as large commodity-dependent economies with a hefty fiscal reliance on commodity exports, such as Angola, Nigeria, and the Democratic Republic of the Congo, experienced precipitous declines in government revenues in 2020. As a result, these countries were forced to respond with spending cuts, debt issuance, and support from international financial institutions, alongside heightened budgetary requirements, to tackle the pandemic and its economic fallout.
Considering the deleterious impact of the pandemic on African finances, restructuring fiscal dependence away from financial inflows and toward domestic tax resources will provide a route to greater fiscal self-reliance and economic stability. In turn, bolstering internal revenue streams and downstream fiscal stability will make African economies more attractive to international investors—who simultaneously see the continent’s enormous growth potential but remain apprehensive about its economic and political risks.
Africa in the news: South African economy, energy production, and Nigerian foreign relations updates
New definition measures South Africa’s GDP 11% higher than previously thought
This week, authorities in South Africa announced that the country’s economy is 11 percent larger than previous estimates after Statistics South Africa altered its method for calculating gross domestic product. The national statistical service’s new definition utilizes a refined, more modern classification of activities, new sources of information, and a new reference year (2015 instead of 2010). The new definition also changed estimates for other key variables, including household consumption relative to GDP and GDP per capita, which became 16 percent and 9 percent higher, respectively. This higher GDP also means that Africa’s (still) second-largest economy has a lower debt burden than previously thought. According to Annabel Bishop, chief economist at Investec Bank Ltd, the new definition suggests that South Africa’s debt-to-GDP ratio will remain below 80 percent through 2023-2024, whereas earlier estimates had it at 87.3 percent by that time. For more on South Africa’s debt burden and how the country’s economy has fared during the pandemic, read “From stimulus to debt: The case of South Africa.”
Meanwhile, South Africa’s unemployment rate has become the highest in the world, according to Bloomberg, which regularly monitors the indicator in 82 countries. The unemployment rate increased to 34.4 percent in the second quarter of 2021, up from 32.6 percent in the first quarter. South Africa is not the only country in the region with such high unemployment rates: The country’s jobless mark barely eclipses fellow sub-Saharan African countries Namibia (33.4 percent) and Nigeria (33.3 percent), which rank second and third in Bloomberg’s database. An expanded measure of unemployment, which includes those available for but not seeking work, reached 44.4 percent in South Africa, an increase of 1.2 percentage points from the first quarter. For recommendations for policies to create jobs for youth in South Africa, see “Solving South Africa’s unemployment: Could tourism, horticulture, agro-processing, or logistics hold the key?“
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New energy projects announced, including transforming landfills in Rwanda, expanding solar and wind capacity, and building and upgrading nuclear power plants
This week, the Rwandan capital of Kigali announced a new environmentally friendly project that aims to use the Nduba landfill to generate energy for the national grid. In 2020, the area was designated an environmental and health hazard, and this new project will transform the landfill so that it will capture gases (such as methane) that it produces and convert those gases into power instead of releasing them into the air. The solid waste can also be turned into other materials like plastic and repurposed into items like bricks, electric poles, and chairs. According to The New Times, the capture and use of landfill gas, the transformation of waste to energy, and aerobic composting can all make major contributions to the reduction of gas emissions that cause global warming. Overall, the government plans on investing $28 million in projects that can utilize gas landfills for power generation and which are also expected to create new green jobs.
The government argued that such action is essential as Rwanda’s cities undergo rapid urbanization—the population of Kigali alone has skyrocketed from just over 600,000 people in 2002 to 1.6 million in 2021.
At the launch, Environment Minister Jeanne d’Arc Mujawamariya explained the reasoning and outlined hoped-for next steps in the effort: “The waste should not be wasted. We should turn waste into revenues. Once investors generate revenues from recycling waste, we will work with them to reach the level of providing incentives to households.” The project is part of an agreement between Rwanda’s Ministry of Environment and the government of Luxembourg and is also a part of efforts to strengthen diplomatic ties and aid in the transfer of technology between the two nations.
Other renewable energy sources like solar continue to grow throughout the continent. Investment companies Gridworks and New GX have announced investments of $40 million into the company Sustainable Power Solution Investments (SPS), which will be used to build additional solar plants that can collectively generate 100 MW of power across sub-Saharan African countries, especially Ghana and Nigeria. The investment in SPS is Gridworks’ second since 2019, when it committed $31 million to facilitate the installation of 45 MW of solar energy across the region.
In related news, South Africa moved forward with plans to expand its solar and wind capacity by 2.6 GW and, this month, received 102 bids from companies for such projects. The Department of Mineral Resources and Energy, which will fund the projects, said that it would announce the successful bidders in October and November of this year, and the winners must complete the projects by April 2024.
Also as part of efforts to reduce the country’s dependance on carbon-intensive energy sources, South African energy regulators are looking to increase the country’s nuclear energy capacity. Last week, Mineral Resources and Energy Minister Gwede Mantashe announced plans to build a new 2,500 MW nuclear power plant by 2024. The announcement was met with some early opposition, though, with the civil society group Organization Undoing Tax Abuse (OUTA) arguing that the project is “not affordable, not appropriate and should not be approved.”
South Africa currently has the continent’s only nuclear plant, the Koeberg Nuclear Power Plant near Cape Town, which generates 5 percent of the country’s electricity. Notably, a new $1.2 billion program was recently launched to extend the operating life of that plant, which will involve replacing six steam generators and forced air cooler units, as well as perform needed maintenance on the turbine system. The modifications are expected to extend the operational life of the plant, which has been connected to the national grid since 1984, by 20 years.
Nigeria deepens relationships with Russia, South Korea
This week, Nigeria and Russia signed a military cooperation agreement that details the framework for the supplying of equipment from and training of troops by Russia to the West African country. According to the Nigerian ambassador to Russia, President Muhammadu Buhari feels Russia can aid Nigeria in defeating Boko Haram, which continues to contribute to insecurity in northern Nigeria.
This deal is another step in the strengthening of ties between the two countries: For example, in October 2019, Russia hosted its first summit with Africa that included 43 heads of state or government, with the purpose of reviving the economic, political, and military influence of Russia in Africa. At the summit, Russia made the first of many security and economic deals, including a contract to supply attack helicopters to Nigeria. For more on the Africa-Russia relationship see the 2019 op-ed, “Vladimir Putin is resetting Russia’s Africa agenda to counter the US and China.”
In related news, Nigeria and South Korea have been working to expand their political, economic, and defense relationships, as recently demonstrated by the visit of Korea’s First Vice Minister of Foreign Affairs Choi Jong Kun to Nigeria early this week. In fact, during his visit, Kun stated that, COVID situation pending, within the next five years, he wants to see a direct flight between the capitals of both countries, as well as increased cultural collaboration, technology, education, and trading. The two countries are looking to cooperate on security issues as well, as Kun and the Nigerian Minister of Transportation Rotimi Amaechi met to discuss maritime security during the visit.
This trip was another step in Korea’s pursuit of a long-term, mutually beneficial relationship with Africa in recent years: For example, Korea has sent $200 million in masks and medical equipment to the continent to aid its fight against COVID-19. In March of this year, the South Korean Ambassador to Nigeria stated that the embassy of South Korea was interested in a joint program for children as well as other cultural programs to aid Koreans in understanding Nigerians culturally. The Korea International Cooperation Agency (KOICA) has also been rapidly increasing its aid to the region since 2016.
Figure of the week: A case study comparison of industries without smokestacks in South Africa and Uganda
Unlike developing countries in Asia, African countries are not relying on export-led manufacturing to drive structural transformation but instead pivoting to service-oriented sectors. While many services are less productive and absorb less low-skilled labor than manufacturing, certain subsectors, according to recent Brookings Africa Growth Initiative research, can be the catalyst for economic growth and job creation in the changing global marketplace. Termed “industries without smokestacks” (IWOSS), these sectors share characteristics with manufacturing, including being tradable, having high value added per worker relative to average economy-wide productivity, exhibiting capacity for technological change and productivity growth, showing some evidence of scale or agglomeration economies, and being amenable to absorbing large numbers of low-skilled workers. These sectors include, among others, agro-processing and horticulture, tourism, information and communication technologies (ICT), transit trade, and financial and business services.
To examine the potential and constraints of IWOSS to spur inclusive growth, economic transformation, and job creation for workers with different skill levels, AGI and its partner think tanks have been conducting a number of case studies, including in South Africa and Uganda.
Major trends in South Africa
South Africa’s youth are particularly afflicted by a lack of jobs: The country has a youth unemployment rate of 56 percent, far higher than comparable countries in sub-Saharan Africa.
According to the Development Policy Research Unit’s South Africa case study, IWOSS accounted for 66.7 percent (8.8 million) formal private sector jobs in South Africa in 2018. Like many of the other country case studies in the project, South Africa’s economy has been shifting toward IWOSS, but, unlike in the other case studies, that shift has not been taking place in IWOSS subsectors particularly poised to absorb low-skilled labor. Indeed, the authors find that finance and community, social, and personal (CSP) services—sectors that require labor that is slightly more skilled—have seen the most growth. More specifically, the finance sector comprised 13.4 percent of the country’s GDP in 1980, increasing to 22.4 percent by 2018. In contrast, the contribution of non-IWOSS sectors fell: For example, mining’s contribution to GDP dropped from 19.5 percent to 8.1 percent between 1980 to 2018 (Figure 1). Thus, DPRU’s findings are nuanced, as the team finds that the IWOSS overall has the potential to absorb labor, but tourism and horticulture specifically are more likely to absorb low-skilled labor and are poised to experience tremendous growth if certain constraints are addressed. (See the full case study for more details.)
Figure 1. Contribution to GDP by industry, South Africa, 1980 and 2018 (percent)
Source: Allen, C., Asmal, Z., Bhorat, H., Hill, R., Monnakgotla, J., Oosthuizen, M., and Rooney, C. Employment creation potential labor skills requirements, and skills gaps for young people: A South Africa case study. (Washington, DC: Brookings Institution, 2021).
Major trends in Uganda
In Uganda, the growth rate of the population remains higher than job growth, creating unemployment or underemployment, including for the 600,000 youth entering the labor market each year. Underemployment is particularly a problem since much of the youth engage in unofficial services like food vending and are not able to secure higher-value jobs in formal sectors.
The Economic Policy Research Centre (EPRC) in Uganda found similar broad trends as DPRU in South Africa, but also noted that different subsectors in the East African country are contributing to its growth. In other words, like in South Africa, the prominence of IWOSS has grown in recent years, especially compared to manufacturing, but the fastest-growing subsectors have been agro-processing and tourism (Figure 2). Tourism in particular has been a major contributor to Uganda’s economic growth, comprising 7.7 percent of the country’s GDP as of 2019.
Figure 2. Uganda’s tourism performance: 2000-2017
Source: Guloba, M., Kakuru, M., Ssewanyana, S., and Rauschendorfer, J. Employment creation potential labor skills requirements, and skills gaps for young people: A Uganda case study. (Washington, DC: Brookings Institution, 2021).
Recommendations for unleashing the potential of IWOSS in South Africa and Uganda
Notably, such growth in either country is not yet robust enough to produce the volume and types of jobs demanded there: For example, as noted above, most IWOSS growth in South Africa has been in financial and community services, which require more high-skilled workers and leave low-skilled workers unemployed. Some of the recommendations from the authors include: increased investment in infrastructure, especially in engineering and town-planning fields, and greater support for postsecondary education and mentorship programs from employers to develop the necessary sector-specific skills.
Like in South Africa, in Uganda, horticulture, agro-processing, and tourism have the potential to create much-needed jobs, and the case study authors find that irregular and erratic business policies hinder the growth of those sectors. EPRC also finds the need for improved curricula aimed at developing digital and problem-solving skills, as well as more investments in road network infrastructure in order to improve transport and communications. To better support horticulture and agro-processing, the authors recommend that the government create policies that would encourage the uptake and adoption of technologies that shorten the wait for clearance at customs and licensing applications.
For more on the South Africa case study, please see the full report, COVID update, and summary blog. For Uganda, please see the full report, COVID update, and summary blog.
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How has education technology impacted student learning in India during COVID-19?
India has been one of the hardest-hit countries by COVID-19. Beyond the staggering impact on human life, COVID-19 has greatly disrupted access to education in India, with 247 million primary and secondary school students out of school. While school systems in India and across the world have made efforts to reach students at home through various means, recent estimates of the impact on learning and socio-emotional well-being suggest that the poorest children will be hurt the most by the pandemic-related school closures.
Indeed, school closures have compelled education systems to quickly devise and apply different modes of remote learning such as radio, TV, and various other types of online tools. But access to this education technology (ed tech) differs across and within countries—with students in high-income countries and communities much more likely to have access to online, virtual schooling than their peers in low- and middle-income countries and communities. Thus, an important question is to what extent will student learning and progression in school, especially among primary-school-aged children in low- and middle-income settings, be affected by the global school closures? Further, how will the COVID-19 school closures cause inequality in learning among girls and boys, among poor and affluent children, and across communities and countries of varying income levels?
To answer these questions, we conducted a household survey in February of this year in a southern city of India—Chennai in the state of Tamil Nadu—with financial support from the Asian Development Bank and in collaboration with J-PAL-India. Chennai is the largest urban center in Tamil Nadu and is India’s sixth most populous city. Due to Chennai’s dense population, families typically have several nearby private and government school options, which provide a ripe setting to explore how the use of ed tech differed between different types of schools—both prior to and during the COVID-19 pandemic. Additionally, India offers a fertile environment for this study’s data collection as a leader in large-scale education reform and ed-tech application among developing countries. The diversity in its large population offers useful lessons applicable to many different contexts.
Alarmingly, 1 in 5 children in our sample were enrolled in schools that do not offer any remote instruction during the school closures, and even among the children whose schools had begun remote instruction, only slightly more than half attended all the classes.
Our goal was to get a better picture of primary school-aged children’s daily educational experiences during the COVID-19 school closures, and especially how students and teachers are using ed tech. We were particularly interested in understanding how these learning experiences may differ among children from low- and high-income households and between children attending private and government (publicly funded) schools.
Our survey findings
Alarmingly, 1 in 5 children in our sample were enrolled in schools that do not offer any remote instruction during the school closures, and even among the children whose schools had begun remote instruction, only slightly more than half attended all the classes.
Our findings further indicate that during the pandemic-related school closures, students in private schools and those from households with high socioeconomic status (SES) have more access to digital devices and are more engaged in regular educational activities than their peers in government schools and from low-SES households. As Figures 1 and 2 show, children enrolled in private schools and from high-SES households had higher rates of access to digital devices—such as smartphones, internet, and computers/laptops—than their peers in government schools and from low-SES households. These preliminary results shed light into a likely growing inequality of educational opportunity and suggest the need for policymakers to support access to regular learning opportunities at home for children from low-SES households in government and private schools. Other emerging evidence from the COVID-19 school closures suggests that ensuring students have access to even low-tech interventions, such as SMS text messages and phone calls, can help mitigate the potential learning losses.
Figures 1. Share of students with access to educational resources, by household income
Source: February 2021 Brookings phone survey.
Figure 2. Share of students with access to educational resources, by school type
Source: February 2021 Brookings phone survey.
Prior research has shown that the impact of school closures in low-income countries may differ by gender, as girls are often expected to help out with household chores and/or assist parents in caring for younger siblings. However, our study shows an encouraging pattern, where girls are more likely than boys to have access to digital devices for learning and to engage in more regular educational activities (see Figures 3 and 4). Nevertheless, this finding suggests the need for further analysis into why boys may be losing out on educational opportunities, and what strategies may be most effective to increase learning among both girls and boys in India and other low-income countries.
Figures 3. Share of students with access to educational resources, by gender
Source: February 2021 Brookings phone survey.
Figure 4. Frequency of engagement in educational activities, by gender
Source: February 2021 Brookings phone survey.
Altogether, these preliminary results shed light onto a likely growing inequality of educational opportunity in India and around the world, suggesting the need for policymakers to broaden access to continuous and equitable learning opportunities across the student population.
Looking ahead, it will be crucial for governments to enact strategies to help students recover from the learning losses suffered during the school closures and to return to school. Such a strategy may include:
Working closely with the health authorities, plan to reopen schools safely as soon as possible.
Assess each child’s foundational literacy and numeracy skills as soon as possible to help teachers and parents develop personalized interventions to ensure that each child can get back on track to develop these critical skills.
Expand access to digital devices and connectivity among educators and students, along with guidance and support to teachers on ed-tech resources that are best aligned to each student’s learning level. While ed tech is not alone going to ensure children learn, it can be a tool for educators, students, and parents to facilitate learning continuity during school closures and allow for more student-centered, engaging instruction in and outside the classroom.
Provide socio-emotional support to educators and students, recognizing that the pandemic has not only caused learning loss but also emotional trauma in too many households.
You can access the full report here.
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Africa in the news: Zambian election, impacts of the Taliban’s Afghanistan takeover, and health updates
Zambian opposition leader Hichilema wins presidential election
On Monday, Zambia’s electoral commission declared opposition leader Hakainde Hichilema the winner of the southern African nation’s recent presidential election. Hichilema garnered 2.8 million votes, or 50.1 percent of the total, narrowly eclipsing the 50 percent mark needed to win without recourse to a second round. Addressing the nation on Monday, the current president, Edgar Lungu, announced that he would “comply with the constitutional provisions for a peaceful transfer of power.” On July 14, Lungu had criticized the elections as “not free or fair,” but he ultimately earned only 1.8 million votes, a sum that the Financial Times suggests was insufficient to support a legal challenge to the result.
Since the election was called, the value of the kwacha has risen nearly 11 percent against the U.S. dollar. The prices of Zambia’s defaulted U.S. dollar-denominated bonds have also risen. Now, Hichilema will try to navigate Zambia out of its current debt crisis, which has it paying 30 to 40 percent of its revenue on interest payments after becoming the first African country during the pandemic to default on its obligations.
The Taliban’s takeover in Afghanistan will likely have implications for Africa
According to Deutsche Welle (DW), the Taliban’s recent takeover of Afghanistan has heightened worries that extremist groups in Africa will be emboldened by that victory. In fact, in a recent radio interview, Kwesi Aning, director of the faculty of academic affairs and research at the Kofi Annan International Peacekeeping Training Centre in Ghana, warned that the events in Afghanistan “can potentially put all of us in Africa and the Sahel at risk.” DW notes that many Islamic militant groups in the region have an affiliation to al-Qaeda, which was formerly based in Afghanistan.
Recent years have seen surges in extremist activities across the continent despite national government efforts to stamp out such activities and the presence of thousands of U.N. troops in extremist hot spots. In fact, Nigerian President Muhammadu Buhari suggested this week that the war on terror is not over but is moving to Africa. Nigeria itself has been fighting Boko Haram since 2009 and that conflict has spread to areas in Cameroon, Chad, and Niger. Just earlier this month, in northern Burkina Faso, suspected extremists ambushed a government convoy, killing 30 civilians and 17 soldiers. Other extremist groups in Africa include al-Shabaab in Somalia, Jama’a Nusrat ul-Islam wa al-Muslimin (JNIM) in the Sahel, and the Islamic State West Africa Province (ISWAP).
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The Taliban’s resumption of power in Afghanistan comes after the U.S. withdrawal from the region after 20 years of military presence and has raised questions over other foreign military pullouts in many African hot spots. For example, in July of this year, France announced that it will reduce its military presence in the Sahel, withdrawing over 2,000 troops from the region. Some experts, including Ryan Cummings, a senior associate at the Center for Strategic and International Studies, warn that France should now reconsider its decision to avoid a potential repeat of the Afghanistan scenario.
In related news, Uganda has agreed to take 2,000 Afghan refugees at the request of the United States. Uganda’s camp Bibi Bidi is the world’s largest refugee camp, and Uganda alone currently hosts about 1.4 million refugees escaping conflict. Afghan refugees will be housed temporarily in Uganda until relocated by the U.S., but, at this time, there is not a set date for when the refugees will be moved.
Vaccine inequity; confirmed case of Marburg virus in Guinea; Ebola in Côte d’Ivoire; cholera in Nigeria
On Wednesday, health officials in the U.S. announced plans to begin rolling out COVID-19 booster shots in October to all U.S. citizens. In response, Africa director for the World Health Organization (WHO), Matshidiso Moeti, criticized the decision, stating that such actions “make a mockery of vaccine equity” since wealthy countries have, on average, distributed more than 103 vaccine doses per 100 people, while in Africa only six doses have been distributed per 100 people. In other words, less than 2 percent of Africa’s population is fully vaccinated.
Indeed, vaccine access in the region remains difficult as well as controversial. While the region has demonstrated that it has the capability to mass produce the Johnson & Johnson (J&J) vaccines through manufacturers like Aspen in South Africa, many of those doses have been exported to Europe. In fact, as The New York Times reported this week, South Africa waived the right to ban vaccine exports from the country, sparking outrage from health activists like Fatima Hassan of the Health Justice Initiative, who called the decision to export the vaccines “scandalous, immoral, and unconstitutional.” While wealthy countries have promised to donate shots through the COVAX program, most of them will not be delivered until next year.
Meanwhile, as Guinea deals with its third COVID-19 wave, on July 25, doctors confirmed West Africa’s first-ever case of Marburg virus, two months after the country declared a new outbreak of the Ebola virus. Guinean health officials continue to monitor 172 people who were in contact with Marburg patient zero, who died on August 2. The Marburg virus, which is in the same family as Ebola, causes symptoms similar to Ebola and is transmitted between humans through bodily fluids. The government of Guinea, its neighbors, and the WHO are using the control system developed within the country to deal with Ebola in an attempt to stop the spread. In related news, neighboring Côte d’Ivoire declared its first case of Ebola in 27 years this week. The patient had traveled from Guinea last week and is currently being treated in intensive care.
Also in West Africa, Nigeria is currently responding to a cholera outbreak with more than 30,000 cases and 800 reported deaths this year. The disease is waterborne and is spread by poor access to clean water, open defecation, poor sanitation, and other hygiene issues, according to the Nigeria Centre for Disease Control (NCDC). The NCDC instructs Nigerians to only drink or use water that is boiled and stored safely to prevent infections.
Figure of the week: Potential for youth and female employment in industries without smokestacks
Africa’s youth population continues to grow rapidly: In fact, the World Bank predicts that people under the age of 25 are set to comprise 50 percent of the population of sub-Saharan Africa by 2050. Such growth has created now-urgent demand for employment that must be met for Africa to reduce poverty. To examine new strategies for job creation for the region’s youth, the Brookings Africa Growth Initiative (AGI) and its partner think tanks on the continent have been conducting research on how to support promising industries to grow and absorb low-skilled labor.
While export-led manufacturing has historically led to job creation, factors like technological progress and the evolving global marketplace have meant that Africa has not been able to capitalize on the gains from manufacturing that other developing regions have. In response, AGI researchers have identified other sectors, termed “industries without smokestacks” (IWOSS), that share characteristics with traditional manufacturing and thus might play a similar role in driving economic growth and job creation. In short, IWOSS are sectors that are tradable, have high value added per worker relative to average economywide productivity, exhibit capacity for technological change and productivity growth, and show some evidence of scale or agglomeration economies. IWOSS include high-value agribusiness, horticulture, tourism, business services, ICT (information and communication technologies)-enabled services, transport, and logistics—all sectors that are growing at a faster pace and have higher labor productivity than non-IWOSS sectors like agriculture. Notably, different sectors of IWOSS can cater to Africa’s youth, whose education and skills vary widely, with tourism and horticulture largely relying on low-skilled labor while sectors like logistics and ICT require more training.
The case studies for Ghana, Kenya, Senegal, South Africa, and Uganda were published earlier this year, and the recent paper “Addressing youth unemployment in Africa through industries without smokestacks” synthesizes the major findings and trends from those case studies.
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Overall, the case studies predict that IWOSS will account for 60 percent or more of new jobs in Ghana, Rwanda, Senegal, and South Africa; however, the share is lower for countries like Kenya and Uganda, which are projected to rely heavily on traditional, “smokestacks” industries to 2035 (Figure 1).
Figure 1. Projected share of new jobs created by 2035 by sectoral grouping
Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
More opportunities for women
Notably, IWOSS industries also offer more employment opportunities for women: In fact, the case studies reveal that most IWOSS subsectors employ a greater share of women than other sectors of the economy. Within IWOSS, tourism employs the greatest share of women (56.7 percent), while horticulture and export crops follow second at 53.2 percent (Figure 2). Female employees in ICT comprise only 31.7 percent of the sector; according to the authors, this finding indicates a greater need for training in digital skills for young girls and women.
Figure 2. Share of female employment by IWOSS sector
Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
Policy recommendations
While the job creation potential of IWOSS relies on the fact that most roles do not require higher-level skills, a persistent lack of skills at all levels still holds their promise back. More specifically, the authors find that, for IWOSS firms to grow and create jobs, potential workers must demonstrate soft, digital, and intrapersonal skills, which can be taught through postsecondary education but require input from employers and businesses, as each sector has different demands for the skills required. Countries in the case studies have at least a moderate deficit in all six subcategories of skills: basic, problem-solving, resource management, social, systems, and technical. Notably, Ghana, Kenya, Senegal, South Africa, and Uganda have a substantial deficit in all six skills for agro-processing and tourism, and in horticulture have only a moderate gap in social skills but a severe gap in the rest of the skill subcategories (Figure 3).
Figure 3. Skill gap by skill category and sector
Note: See the full paper for an extensive definition of each skill category.Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
At the same time, the authors point out that gaps in necessary skills are not the only constraint IWOSS face, as poor infrastructure—like unreliable power supply and lack of or poorly maintained roads—pose major challenges for IWOSS development. Lack of competition as well as regulatory coordination issues that do not allow for customs and standards to be implemented also pose challenges. Since IWOSS face constraints similar to those of traditional manufacturing, the authors argue that policymakers are not required to choose between promoting IWOSS and manufacturing, thus enabling them to focus on forming multifaceted policies. Key takeaways of the report include the necessity of prioritizing investment in infrastructure (particularly gaps in the reliable supply of electricity), addressing the skills deficit through a demand-led approach between postsecondary education and businesses, and encouraging a competitive business environment. The individual case studies also provide country-specific recommendations for supporting the growth of IWOSS.
Is the BBI ruling a sign of judicial independence in Kenya?
On May 23, 2021, a special five-judge bench sitting at the High Court of Kenya at Nairobi declared unanimously that the Constitution of Kenya (Amendment) Bill, 2020 was unconstitutional. The High Court’s judgment, argued journalist and commentator Ferdinand Omondi, “is arguably the most significant ruling by Kenyan courts since President Uhuru Kenyatta’s election win was nullified in 2017.”
Notably, the government has appealed the ruling of the High Court and the case is now before a seven-judge bench of the Court of Appeal, with presiding. The Court of Appeal is expected to deliver its verdict on August 20, 2021.
Importantly, the judicial decision and subsequent reactions from the Kenyan political class, civil society, and institutional actors appeared to shed light on the changing political environment within the country as well as the continuing strengthening of democratic institutions, especially at the national level.
The ‘handshake’ and the Building Bridges Initiative
The Constitution Amendment Bill 2020 was an outcome of the Building Bridges Initiative (BBI)—an effort by Kenyatta and political rival Raila Odinga, the leading contenders for the presidency in 2017 and their supporters. The BBI was expected to generally improve governance and prevent future post-election violence like that of the aftermath of the 2017 elections.
Indeed, in March 2018, Kenyatta and Odinga publicly declared that they had decided to put aside their political differences and come together through a “handshake.” As magnanimous and patriotic as this political gesture may have appeared to many observers, especially since it “brought calm and a sense of relief” to Kenyans following the extremely contentious 2017 presidential election, another interpretation is that this was essentially an effort to ensure the continued political relevance of Kenyatta and Odinga. In fact, many cynics view the truce with suspicion, arguing that this rapprochement could place Kenyatta, who is constitutionally barred from standing for a third term as president in 2022, in a position to assume the role of managing the country behind the scenes with a puppet president in post-2022 Kenya.
Importantly, while the handshake may have it did not resolve the feelings of alienation and marginalization that continue to consume some ethnolinguistic groups that are suspicious of the central government and believe that it is either unwilling or unable to deal effectively and fully with issues of extreme poverty and underdevelopment, inequality, inequities in the distribution of income and wealth (particularly land), ethnic animosity, and other problems that have relegated them to the political and economic margins.
The constitutional amendment bill
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The Kenyatta-Odinga handshake led directly to the production of the Building Bridges Initiative (BBI), whose main objective was to thoroughly investigate nine issue areas that were deemed by Kenyatta and Odinga to be critical to the creation of “a united nation for all Kenyans living today, and all future generations.” Among the BBI report’s wide-ranging series of recommendations are institutional reforms for significantly restructuring the country’s institutions, particularly its constitution, and reintroducing a hybrid system of government that will include power-sharing between a president and a prime minister, with members of the Kenyan Parliament effectively allowed to serve as part of the Cabinet.
If implemented, the proposed BBI reforms will likely undermine the country’s institutions of governance. They will also threaten judicial independence, eliminate opportunities for the formation of an effective opposition to government, severely erode Kenyan democracy, pervade any efforts to adhere to the rule of law, and make it extremely difficult to build the types of national ruling coalitions that can advance the interests of all Kenyans, instead of those of specific ethnolinguistic factions. In response, five political activists have challenged the process before the High Court.
The High Court rules on who can initiate amendments to the constitution
In May of 2021, the five-judge bench struck down the proposed amendment, declaring that “the President does not have authority under the Constitution [of 2010] to initiate changes to the Constitution, and that a constitutional amendment can only be initiated by Parliament through a Parliamentary initiative under article 256 or through Popular Initiative under Article 257 of the Constitution.” In other words, an amendment must emerge from the ordinary citizen and not the president, as required by the basic structure doctrine.
In this way, the court declared that the BBI steering committee was “an unconstitutional and unlawful entity,” hence not recognized by law, and with no legal capacity to initiate any action to change the constitution. In other words, the entire BBI process, which ultimately culminated in the Constitution of Kenya (Amendment) Bill 2020, was unconstitutional. Importantly, the court went further: In order to prevent “the mischief of disguising unpopular amendments among the popular amendments of the constitution,” the court held that each referendum designed to effect amendments to different articles of the constitution must have multiple questions, each dealing with each proposed amendment to the constitution.
The High Court then issued a permanent injunction that effectively restrained the Independent Electoral and Boundaries Commission (IEBC) from verifying that the initiative is supported by the requisite number of voters and submitting the draft bill to each county assembly for consideration. Finally, the court held that President Kenyatta could be sued in his personal capacity “in respect of anything done or not done contrary to the Constitution.”
Is Kenya an example of increasingly strong democratic institutions and judicial independence?
Kenya has been here before when it comes to contentious political issues being brought before a high court. Indeed, in September 2017, the country’s Supreme Court, under a challenge from Odinga, then-leader of the opposition, annulled the 2017 election and called for a new election to be held within 60 days. This Supreme Court ruling was “an unprecedented move,” particularly in a region in which judicial independence is a rarity and the executive branch of government usually dominates and controls the judiciary. Indeed, this ruling was considered historic and an important development in Kenya’s efforts to entrench democracy and the rule of law.
However, Odinga boycotted the rerun election in October 2017, “claiming that he and his party lacked confidence in the credibility of the process,” which led to Kenyatta capturing 98 percent of the vote. Although Odinga rejected the results, he did not challenge them before the courts. Nevertheless, a number of private citizens did challenge those results in several petitions to the Supreme Court, but the Supreme Court held that the rerun election had fulfilled or met all the constitutional requirements and hence was valid.
Despite this exemplary performance, Kenya’s judiciary continues to face some major challenges, which include the need to significantly “expand its own infrastructure and build professional capacities” as well as make certain that the integrity of judges “must never be in doubt.” In addition, political interference and lack of financial security remain serious threats to the independence of the judiciary.
Amending Kenya’s constitution
The constitutional review process is extremely complex and is often plagued by the factional appeals of special interests, which are contrary to the common will of the people. This complexity and the occasional intervention by factional interests partly explain why it took Kenya more than 20 years to finally produce a new constitution in 2010. The process through which the constitution can be legally amended is spelled out in Article 255. Initiatives to amend the constitution can originate in the Kenyan Parliament through a bill. The role to be played by the president, the public, and the IEBC are spelled out in Article 256. An amendment to the constitution can also be proposed by a popular initiative, which must be signed by at least 1 million registered voters. Such a popular initiative can be in the form of a general suggestion or a formulated draft bill as elaborated in Article 257. While the constitution does not grant the president the power to initiate changes to it, the president still has an important role to play—he or she can provide the leadership to make certain that amendments are designed to maximize the interests of the people writ large and not those of some faction, regardless of how it is defined.
Lessons from the High Court ruling and other signs of the strengthened rule of law in Kenya
There are several lessons that Kenyans and other Africans can learn from the High Court’s 321-page and well-reasoned and articulated judgment made in May 2021. First, the process, as frustrating as it may appear to Kenyatta, Odinga, and other supporters of the BBI, has reaffirmed the important role that courts can and must play in the peaceful resolution of political and constitutional issues in Kenya. Second, the ruling shows that Kenya’s constitution is working perfectly well—the petitioners, who strongly believed that the BBI process was unconstitutional and hence, unlawful—chose, and were able, to take their grievances to the High Court, instead of resorting to extra-constitutional approaches, such as violent mobilization. Indeed, the decision by both proponents and opponents of the BBI process to adhere to the law augurs well for constitutionalism and the rule of law in Kenya.
The way forward for Kenya
Despite the claim by Kenyatta and Odinga that the BBI is designed to finally bring to an end ethnic-induced post-election violence, this process, if successful, will only undermine Kenya’s constitutional order and threaten its democratic institutions. While the additional 70 parliamentary constituencies might satisfy and placate the groups that benefit from these new constituencies, those that consider themselves marginalized by the new constitutional changes will make demands for additional constitutional changes to accommodate them. Such opportunism is unlikely to end until all groups in Kenya, whether identified by religion or ethnicity, have been assigned their own political constituencies, effectively rendering the Kenyan state virtually ungovernable.
Kenya’s 2010 constitution essentially introduced a pseudo-federalist system consisting of national and county governments, with the goal of bringing government closer to the people, improving participation and inclusiveness, and abolishing what had been a dysfunctional and untenable governing process inherited from the colonial state. However, in contrast to a federalist system, sovereignty is not constitutionally divided between the national government and the counties and, in addition, national legislation can override or prevail over county legislation in some cases. Granting the national government significant constitutional powers to interfere with governance in the country’s subnational units does not augur well for true devolution of power.
Importantly, the country’s existing constitution already spells out and emphasizes the separation of powers, and these recent court rulings prove that the system is working. The BBI must either be abandoned or be subjected to more restructuring, possibly through a more inclusive and participatory process, because in its present form, it does not augur well for the type of institutional reforms that can significantly improve political and economic outcomes in Kenya. In other words, the BBI, if implemented in its present form, is not likely to resolve the problem of post-election violence nor significantly improve the peaceful coexistence of the country’s subcultures.
Proponents of the BBI argue that if it is successful, it can provide significant benefits to Kenyans. First, they argue that it can lead to a reduction in post-election conflicts and their destabilizing impacts. Both Kenyatta and Odinga have noted the “destabilizing impact [that] post-election conflicts have had on the country’s growth over the last 30 years” and have argued that the BBI “is aimed at finding a homegrown solution to the divisive nature of Kenyan politics.” Even opponents of the BBI must agree that dealing with the country’s “divisive politics and the resultant ethnic tensions” is a public policy imperative. The two politicians also argued that the BBI will help unify the country, and address several challenges that the country currently faces, including “youth unemployment, corruption and negative ethnicity.” With this in mind, it is important to note that the High Court faulted the process and not the contents of the BBI itself. Thus, if there must be changes to the constitution, they must be undertaken through a legal process, as prescribed in the constitution.
With respect to the reforms proposed by the BBI, it is important to note that parchment prohibitions alone are not enough to secure and protect the fundamental rights of Kenyans. Like their counterparts in other African countries, Kenyans are frustrated with their political elites who have been negligent in safeguarding the rights of the masses and providing them with the wherewithal to create the wealth that they need to confront poverty and improve their living standards. While institutional reforms are critical for peace and security—as well as economic and social advancement of all Kenyans—in order for these institutions to perform their functions and advance the general welfare, Kenya must have “a virtuous public and virtuous leaders” or else the country will remain trapped in a state of political dysfunction and deteriorating economic conditions.
Mainstreaming the outcomes mindset of results-based financing
Today there are over 200 registered impact bond transactions globally and 19 transactions in low- and middle-income countries. Over the last decade, impact bonds have gained momentum through repeatedly demonstrating their effectiveness. The very first development impact bond (DIB) on girls’ education generated a more than 60 percent improvement in literacy outcomes in just three years in the Indian NGO Educate Girls’ program, demonstrating the power of simple performance incentives done right. This has grown interest and a community of believers.
These exciting results have unfortunately not led to the anticipated widespread adoption of impact bonds by governments. Since the inception of impact bonds, low- and middle-income country governments have participated as outcome payers in only seven projects globally. Governments have engaged at small scale—motivated by the reputational value of paying for results, the promise of matching donor funds, or the rare politicians’ and bureaucrats’ intrinsic motivation. Impact bonds are narrow innovation instruments, but government adoption is a challenge that also holds true for other simpler results-based financing (RBF) instruments that can be easily integrated in large-scale government delivery.
While impact bonds and RBF may sound complicated or exotic, they are about deploying simple, sensible, and performance-critical delivery management practices.
While impact bonds and RBF may sound complicated or exotic, they are about deploying simple, sensible, and performance-critical delivery management practices: Clarify, articulate, and incentivize target outcomes; provide necessary autonomy to front-line staff; measure progress; reward good performance; and repeat these steps. These practices are routine in high-performing organizations but are often lacking in many developing country governments that manage trillions of dollars of taxpayers’ money.
While we should absolutely debate the mechanics of RBF (financial incentives are not always great, an overemphasis on measurement can sometimes be counterproductive, and so on), we must insist on dramatically accelerating the use of the type of citizen-centered program delivery that the RBF community is pursuing. According to a 2016 Harvard study, only three out of 102 developing countries surveyed are on track to building strong delivery capacity for basic services by the end of the 21st century. The urgent need for progress on critical local issues like inequality and global issues like climate, migration, and global security require us to change course.
Strengthening delivery governance as a precondition
Delivery failures are pervasive and have multiple root causes. However, the few success stories in sustaining excellence in government-led delivery all point to one important precondition: delivery accountability. Citizens must have the information, collective action mechanisms, and power to hold governments accountable to delivery targets—something that the World Bank also argued for in its 2004 World Development Report on service delivery
Rwanda offers a good example. The government has faced strong institutional incentives to deliver for the last 20 years. President Kagame’s government understood that delivering high-quality services to all was critical to its own legitimacy and longevity. That led to significant investments in delivery governance, including transparent yearly reporting of delivery achievements and public evaluations and sanctions of ministers who fail to deliver. In turn, that led to efforts to improve delivery performance through the adoption and scale-up of highly successful RBF programs and the establishment of the famous ”Imihigo” performance contracts, which assign delivery targets and corresponding performance payments to each civil servant. This helps explain Rwanda’s performance in universal health care, which the World Health Organization called “the beacon of universal health coverage” in 2019.
To shift from being a donor-pushed initiative to becoming a government-led practice, the RBF movement needs to deploy and support strategies that scale such delivery governance mechanisms that pressure governments to improve their performance.
Promising strategies for citizens, governments, and donors to prioritize
Today the fields of governance and service delivery work in silos. Governance work has mostly focused on “higher-level” issues like reducing corruption, the free press, and improving procurement transparency rather than governing service delivery, where much of the public spending challenge lies. As a result, most countries do not have independent institutions with the mandate, the resources, and the reach to measure the quality of public programs and hold governments accountable. Often, even ministries of finance do not collect any data to evaluate the quality of services delivered by line ministries, let alone their relevance and impact on citizens. Accelerating delivery excellence in the public sector will require working with existing governance funders and champions to develop stronger governance systems around service delivery.
Strong delivery governance systems will incentivize governments to search for greater impact, lead them to leverage readily available tools like impact bonds and RBF, and ultimately direct taxpayers’ contributions and donor grants to well-functioning delivery systems that actually produce results.
Actors trying to improve governance can create the right macroinstitutional delivery incentives, while the RBF field can equip governments with the practical tools around financing, measurement, and performance management to deliver superior performance.
Strengthening delivery governance will require at least the following investments:
Increase transparency around delivery targets and delivery performance in key areas of service delivery like education, health, social protection, and the environment. We need governments to establish quality and impact targets and provide regular progress reports for all major policy areas. This would require establishing quality measurement frameworks and investing in measurement teams, data infrastructure, and open data practices that inform citizens of the return on taxpayer money. Affordable and scalable technologies are available to help. Without this building block, citizens will not have the information required to hold governments accountable.
Strengthen independent institutions that perform quality audits by expanding the mandate and impact monitoring capabilities of national oversight bodies that audit and control governments to independently verify and audit government quality reports, and direct operational improvements where needed. Every ministry could be given a quality rating, for example, which could impact future budget allocations. It would be critical to engage citizens in this process through inclusive social accountability mechanisms to bring the citizens’ voice to life.
Drive intragovernmental incentives. A third pillar includes the introduction of performance incentives within governments’ various delivery agencies through performance-based grants. For instance, this would apply where ministries of finance make fiscal transfers to other ministries or local government at least partly conditional on delivery performance that is established by quality reports. These intra-governmental performance management measures are critical to reaching the front line of service delivery, and thereby citizens.
Each country will need a contextualized roadmap to achieve strong delivery governance. Donors, citizens, and government champions stand to gain from prioritizing and investing in these systems. They will incentivize governments to search for greater impact, lead them to leverage readily available tools like impact bonds and RBF, and ultimately direct taxpayers’ contributions and donor grants to well-functioning delivery systems that actually produce results.
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