Overcoming Persistent Poverty and Hunger in Africa: How Business Can and Does Help Chris Barrett Charles H. Dyson School of Applied Economics and Management March 11, 2015 Cornell Club of Sarasota

Rapid, large-scale poverty reduction is possible … as demonstrated by a generation of rapidly falling global poverty rates, especially in East Asia. Source: World Bank, PovCalNet Uneven, rapid progress But until the past decade, little real progress in sub-Saharan Africa.

The big challenge is the persistence of concentrated ultra-poverty … in Africa, where it almost doubled in a generation. In 1981 Africa was home to 12% of the world’s ultra-poor … now >75%. The ultra-poor are African Source: World Bank, PovCalNet

The persistence of African ultra-poverty Longitudinal data reinforce the story - In the US, the median poverty spell length (pre- Great Recession) was only 4.5 months. Most US poverty is transitory. - In rural Africa, we don’t know the median spell length because we don’t have data where half have exited poverty! Most rural African poverty is chronic.

Reasons: Humanitarian/ethical - Golden rule Economic - Future markets/suppliers Security/geo-political - Prospective source of insecurity Environmental - Conservation of forests, wildlife Health - Controlling pandemics Why care about ultra-poverty?

How do people escape chronic ultra-poverty? - Market access - Finance: savings, insurance, credit - Education - Early childhood health and nutrition … empower the poor to invest in human capital and grow richer Escaping ultra-poverty

Net aid given by governments: only ~7.5 ¢/day pc (overstated due to “tying”) Private gifts (foundations, companies and NGOs): only ~ 6 ¢/day pc The BIGGEST benefits come from new technologies, remittances, private investment, better institutions … mostly from private enterprise and individuals It requires more than aid

Index-based livestock insurance to protect vs. drought -Individuals buy policies to protect their herds -Private underwriters, global reinsurers -Commercially piloted in Kenya in Now spread to Ethiopia, going nationwide in Kenya -Major, positive effects in both countries: 10x the marginal benefit/cost of cash transfer programs Example 1: IBLI

Cell phones and the internet rapidly improving lives: -Improved early warning systems, delivery of emergency aid -Small farmers/traders can find best prices: ECX -Agricultural extension/health message delivery -Call centers and back office data entry Example 2: ICT

Vibrant commercial distribution of farm inputs and outputs is transforming parts of rural Africa: -Contract farming and retail revolution -Rapid spread of fertilizer, agrochemicals and improved seed -Post-harvest loss rates falling Example 3: Agro-inputs

“Most of the people in the world are poor, so if we knew the economics of being poor we would know much of the economics that really matters. Most of the world’s poor people earn their living from agriculture, so if we knew the economics of agriculture we would know much of the economics of being poor.” - Theodore W. Schultz Opening sentences of 1979 Nobel Prize in Economics lecture Dyson School/CALS has great capacity to help

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