Can the Millennium Development Goals Contribute to Poverty Reduction in Sub-Saharan Africa?

Table of contents

Abstract

List of abbreviations

Table of figures

Introduction

1 - The Millennium Development Goals
1.1 - Relevance of the MDGs
1.2 - Focus on MDG No. 1: Eradication of worldwide poverty and hunger

2 - Poverty in Sub - Saharan Africa
2.1 - Overall assessment of the poverty situation in Sub - Saharan Africa
2.2 - Characteristics of poverty in the Sub-Saharan region

3 - The United Nations strategic approach to reduce poverty: The use of employed indicators and their limitations
3.1 - Target No. 1: “Halve the proportion of people whose income is below US$1.25 PPP a day”
3.2 - Target No. 2: “Achieve full employment and decent work for all”
3.3 - Critical consideration of the indicators employed

4 - Development strategies derived from the employed ratios
4.1 - Strategies targeting poverty alleviation
4.1.1 - Investments in social safety nets
4.1.2 - Direct cash transfers
4.1.3 - Zero-interest development grants
4.2 - Strategies targeting employment creation
4.2.1 - Investing in agriculture
4.2.2 - Investing in infrastructure
4.2.3 - Investing in human capital

5 - Success evaluation of the poverty - reduction strategies
5.1 - Evaluation of strategies targeting poverty alleviation
5.1.1 - Investing in social safety nets
5.1.2 - Direct cash transfers
5.1.3 - Zero-interest development funding
5.2 - Evaluation of strategies sustaining employment creation
5.2.1 Investing in agricultural productivity
5.2.2 Investing in infrastructure
5.2.3 Investing in human capital
5.3 - Critical consideration of the evaluated strategies

6 - Investment needs and sources of funding to reach MDG No.1
6.1 - Investment needs
6.1.1 - Top-Down-Approach
6.1.2 - Bottom-up-Approach
6.2 - Sources of funding

7 - Alternative strategies of poverty alleviation and development financing
7.1 - Investing in Information and Communication Technologies
7.2 - Global taxes
7.3 - International Finance Facility for Immunization (IFFIm)

8 - Outlook for 2015 and the future development agendas
8.1 - The Post - Agenda
8.2 - The MDGs as benchmark for future development efforts
8.3 - Limitations of global goal - setting

Conclusion

Appendix

Bibliography

Abstract

"The world has made great progress in the last quarter-century in reducing extreme poverty - it was cut by a stunning two-thirds - and now we have the opportunity to end poverty in less than a generation,” the World Bank Group President Jim Yong Kim stated in a 2014 press release.¹

On the basis of this prediction this paper will assess whether the United Nations´ development agenda - the Millennium Development Goals - could provide a pathway in achieving this keen target and herald an era of bold ambition to solve one of the world´s most urging problems.

The MDGs comprise eight global objectives, one of them “The eradication of worldwide poverty”, which is being measured by a set of economic indicators in order to derive respective strategies for halving destitution between 1990 and 2015.

In the course of this work the success and shortfall of the implemented strategies will be analyzed for Sub - Saharan Africa, the region where the greatest share of the world´s poor reside. Furthermore, the chances and deficits that global development agenda such as the MDGs exhibit will be taken into deeper consideration highlighting the needs of the development assistance of the years to come.

Ultimately, the future efforts of international institutions, governments and nongovernmental organizations with reference to poverty alleviation will be outlined and evaluated as far as Mr. Kim´s statement of ending poverty within a generation can be realized.

List of abbreviations

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Table of figures

Introduction

Fig. 1: Seven - step - methodology

Chapter 2

Fig. 2: Own representation of “Population living below the poverty line, by developing region” based on data compilation of (World Bank Group, Worldbank - Development Data and Statistics 2012)

Fig. 3: Own representation of “Comparative indicators across developing regions around 2010” based on data compilation of (World Bank

Group, Worldbank - Development Data and Statistics 2012)

Chapter 4

Fig. 4: Own representation of “Agricultural technology and productivity, by developing region” based on data compilation of (United

Nations Department of Public Information 2004)

Fig. 5: Own representation of “Employment distribution in Uganda”

based on data compilation of (unstat 2013)

Fig. 6: Own representation of “Relative transport costs in a typical Sub - Saharan country compared to typical Asian countries” based on

data compilation of (United Nations 2014)

Fig. 7: Overview of employed strategies derived from the economic

indicators (Own representation)

Chapter 5

Fig. 8: Own representation of the strategy evaluation “Investing in social safety nets” based on data compilation of (UN Department of Economic and Social Affairs 2014)

Fig. 9: Own representation of “National saving rate of Sub - Saharan Africa and other developing regions” based on data compilation of (International Monetary Fund, World Economic and Financial Surveys 2014)

Fig.10: Own representation of the strategy evaluation “Direct cash transfers” based on data compilation of (Statistical Economic Research Centre (SESRTCIC) 2007)

Fig.11: Own representation of “Worldwide Governance indicators “Control of corruption” based on data compilation of (Kaufmann, Kraay, Mastruzzi 2010)

Fig. 12: Own representation of the strategy evaluation “Zero - interest development funding” based on data compilation of (United Nations 2014)

Fig. 13: Own representation of “Worldwide Governance indicators “Voice and Accountability”, “Government Effectiveness” and “Rule of Law” based on data compilation of (Kaufmann, Kraay, Mastruzzi 2010)”

Fig. 14: Own representation of the strategy evaluation “Investing in agricultural productivity” based on data compilation of (UN Department of Economic and Social Affairs 2014)

Fig. 15: Own representation of “Food price index between 2011 and 2013 in Sub - Saharan Africa” based on data compilation of (World Bank Group, Worldbank - Development Data and Statistics 2012)

Fig. 16: Own representation of “Agricultural risk by region” based on data of (World Bank Group, Worldbank - Development Data and Statistics 2012)

Fig. 17: Own representation of the strategy evaluation “Investing in infrastructure” based on data compilation of (UN Department of Economic and Social Affairs 2014)

Fig. 18: Own representation of “Levels of Infrastructure Development in Sub - Saharan Africa between 2000 and 2010” based on data compilation of (World Bank Group, Worldbank - Development Data and Statistics 2012)

Fig. 19: Own representation of the strategy evaluation “Investing in infrastructure” based on data compilation of (UN Department of Economic and Social Affairs 2014)

Fig. 20: Own representation of “Gross enrollment ratio in selected Sub - Saharan countries in 2007” based on data compilation of (Statistical Economic Research Centre (SESRTCIC) 2007)

Fig. 21: Own representation of “Risk factors and human vulnerability index, by region” based on data compilation of (World Bank Group, Africa´s Pulse 2013)

Chapter 6

Fig. 22: Own representation of “Cost of achieving poverty MDG top- down by region (annual amounts in billion USD)” based on data compilation of (Stijns, Garroway 2012) 55

Fig. 23: Own representation of “Cost of achieving poverty MDG bottom- up by region (annual amounts in billion USD)” based on data compilation of (Stijns, Garroway 2012) 56

Fig. 24: Own representation of “Tax revenue in Sub - Saharan Africa and developed between 1990 and 2013” based on data compilation of (International Monetary Fund, World Economic and Financial Surveys 2014)

Chapter

Fig. 25: Own representation of “Africa´s progress towards meeting MDG No.1” based on data compilation of (unstat 2013)

Appendix

App. 1: Plan Do Check Act - method (PDCA)

App. 2: Overview of indicators employed including respective interpretation and formula (Own representation)

App. 3: The classic poverty trap (Own representation)

App. 4: Overview of PDCA - method applied on MDG No. 1 strategies

App. 5: Own representation of “Regional price of maize in 2012 in Tanzania, Uganda, Ethiopia and Kenya” based on data compilation of (World Bank Group, Africa´s Pulse 2013)

App. 6: Own representation of “Foreign Direct Investment Flows to Sub - Saharan Africa between 2008 and 2012” based on data compilation of (World Bank 2014)

App. 7: Storyline overview of implemented strategies and their achievement evaluation (Own representation)

App. 8: Top-down and bottom-up approach

Introduction

This thesis analyses whether the United Nations have been successful at eradicating poverty in Sub - Saharan Africa by implementing strategies based on the results of economic indicators. As the UN will ultimately evaluate the success of the Millennium Development Goals in 2015 and estimate whether the proportion of people living in extreme destitution could have been halved since 1990, the topic is of great political relevance for this year and the future of the African continent. The outcome of the efforts made will shape and determine the future of development assistance and agendas to come. Thus, this paper will put emphasis on the achievement of the strategies employed by the UN and - if the targets set in 2014 have not been reached - the reasons for failure.

The methodology of this paper is based on the four - step project management method “Plan - Do - Check - Act” (PDCA)² that focuses on establishing a process enabling to incorporate feedback after it has been designed and put into practice. (See appendix 1) The results of the first pilot project - in this case the MDG - allow readjustments that are being worked into the initial process and hence perfect it.³

Therefore a seven - step - methodology based on the PDCA - method and illustrated in figure 1 was employed in order to answer the question “Can the Millennium Development Goals contribute to poverty reduction in Sub-Saharan Africa?”

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Fig. 1: Seven - step - methodology (Own representation)

At the end of this work, the conclusions that have to be drawn from the results of the MDG and recommendations for future action will be suggested to successfully improve development agendas to come and reduce poverty in the long run.

1 - The Millennium Development Goals

In September 2000 the members of the United Nations set out a vision of a global partnership for development during the Millennium Summit, directed at the achievement of specific targets. Specifically, 189 countries signed up to the Millennium Development Goals agreeing on eight objectives to fight destitution and human deprivation.⁴ It is on the basis of these commitments to action that performance can be measured in reaching those ambitious objectives.

1.1 - Relevance of the MDGs

In the Millennium Declaration of 2000 the world leaders decided in the first goal to halve the people living on less than 1US$ a day and to promote full employment by 2015 in the self - declared “International Decade of the Eradication of Poverty”.⁵ Therefore, the MDGs represent the first worldwide attempt to combat the multiple dimensions of poverty providing both national and international governments and policy makers with specific and time - bound targets: they are to be achieved by 2015 and their progress is to be measured by specific indicators that the UN has worked out.

The goals were selected in this way, in that they are ends in themselves, serving as inputs for further economic growth. In that way, MDG No. 2 “Achieve universal primary education” and MDG No. 5 “Improve maternal health” result in the target of MDG No. 1 “Eradicate extreme poverty and hunger” - as a worker possessing good health and good education is more productive and therefore positively impacts a nation´s economy.⁶

1.2 - Focus on MDG No. 1: Eradication of worldwide poverty and hunger

The first MDG - “Eradicate extreme poverty and hunger” - is considered to be the main goal of the eight chosen objectives as it aims at promoting international and sustainable growth within the UN main objective of fostering social and economic development. It is on the basis of this declared goal to reduce destitution that the United Nations expects all other seven goals - achieve universal primary education (MDG No. 2), promote gender equality and empower women (MDG No. 3), reduce child mortality (MDG No. 4), improve maternal health (MDG No. 5), combat HIV/Aids, Malaria and other diseases (MDG No. 6), ensure environmental sustainability (MDG No. 7) and develop a global partnership for development (MDG No. 8) - to be achieved more easily, as poverty reduction has a positive impact on all of them. Among others, those above - mentioned positive effects will be outlined in the course of this paper.

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2 - Poverty in Sub - Saharan Africa

The following section puts emphasis on the poverty situation in Africa between 1990 and 2015 highlighting the special needs of the Sub- Saharan region which demonstrates the strongest patterns of destitution worldwide.

2.1 - Overall assessment of the poverty situation in Sub - Saharan Africa

Among all the countries worldwide, the region of Sub - Saharan Africa represents the greatest share of countries classified as “Low income countries”⁷ - a total of 34 out of the 54 in this region.⁸

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Fig. 2: Own representation of “Population living below the poverty line, by developing region” based on data compilation of (World Bank Group, Worldbank - Development Data and Statistics 2012)

The first part of the figure shows the number of people living below US$1.08 a day - which is considered being the poverty line - split by developing region, whereas the second part refers to the number of people living off US$2.15 a day. When analyzing the given data, the distinction between Sub - Saharan Africa and other developing countries such as the Middle East / North Africa becomes evident: while in 2010 around 2% of the total population of the Middle East / North Africa lived below the poverty line of US$1.08 a day, in Sub - Saharan Africa the percentage amounted to a 46% share of the total population, being the highest poverty rate in the world. Statistics reveal that SSA is the only region in the world where the proportion of poor has been rising in the last twenty years.⁹

With reference to a poverty line of US$2.15 shown in the second part of the figure, it can be observed that a drastic share of 77% was considered poor in Sub - Saharan Africa in 2010. These figures explain why the UN put special focus on analyzing the progress being made to alleviate destitution in this region of the world.

2.2 - Characteristics of poverty in the Sub-Saharan region

The first characteristic of poverty in SSA can be observed in figure 1, reflecting the share of people living in rural areas - a total amount of 67% in Sub-Saharan Africa - as destitution is prevailingly high in such areas. In rural regions poverty rates are considerably higher than in urban areas which can be related back to the low productivity of smallholder farmers, the lack of public services and poorly developed infrastructure. This leads to the fact that most of the population operates in the informal economy such as food processing “heavily depending on primary commodity exports that are subject to price volatility and long-term declines in prices”.¹⁰ As a consequence, the governments are unable to provide sufficient social safety nets and secured employment opportunities.¹¹

The second poverty characteristic of this region is the low human capital¹² of its population, as life expectancy amounts to 50 years or less compared to 80 years in developed regions and the child mortality rate stands at 10%.¹³ This has a significant impact on development strategies that will be analyzed in chapter 5 - investing in human capital with the objective of reducing misery.

The following figure displays five indicators comparing the characteristics of poverty in the Sub - Saharan region with those of other developing countries.

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Fig. 3: Own representation of “Comparative indicators across developing regions around 2010” based on data compilation of (World Bank Group, Worldbank - Development Data and Statistics 2012)

It shows that Sub-Saharan Africa not only has the lowest life expectancy at birth, literacy rate among adults, cereal yield and average schooling among its population, but it also holds the highest rate of under-five mortality rate - all of those factors resulting in a deepening poverty situation within a country. These indicators underline Sub-Saharan Africa´s challenges that induced the UN to work out a set of new indicators measuring destitution and deriving the according measures out of them.

3 - The United Nations strategic approach to reduce poverty: The use of employed indicators and their limitations

In order to make the MDGs achievable, the UN has elaborated a set of quantifiable and time - bound indicators which have been analyzed between 1990 and 2015. Three objectives for each target have been elaborated in order to make country performances transparent and to indicate where further improvements are necessary. The MDG No. 1: “Eradicate poverty and hunger” has been split into two targets referring to the fight against destitution; first, “Halve the proportion of people whose income is below US$1.25 PPP a day” and second, “Achieve full employment for all”. The ratios that have been employed to measure those two targets will be analyzed more closely in the following sections.

3.1 - Target No. 1: “Halve the proportion of people whose income is below US$1.25 PPP a day”

This target makes reference to the percentage of households of a population living below the international poverty line with an average consumption per capita being less than US$1.25 a day adjusted for purchasing power parity (PPP).¹⁴ Following this concept, a person is considered poor if they live on or spends less than US$1.25 a day - for this has been calculated as the minimum level by national consumer indices to meet one´s basic needs in a specific country. In order to estimate the progress of achieving this target, three indicators have been employed.¹⁵

Proportion of population below US$1.25 (PPP) per day

This ratio ranges from the values 0 - no population suffering from misery - to 100 - the whole population is situated below the poverty line. The ratio enables a comparison between different countries by using PPP rates for consumption and it is considered to have been achieved when the proportion of people living below the poverty line in 1990 has been halved by 2015.

This ratio enables governments and international organizations to highlight the countries in need of further financial transfers and development policies.¹⁶ Nevertheless, it has to be taken into consideration that it does not measure the depth of destitution within a country, i.e. how far an individual is situated from the poverty line.

Poverty gap ratio

This indicator allows the measurement of the “the mean shortfall of the total population from the poverty line (counting the non-poor as having zero shortfall), expressed as a percentage of the poverty line.”¹⁷ The figure reflects the depth of destitution of a country´s population, a large number reflecting a high prevailing discrepancy and deep misery within a country. It enables donors and development organizations to quantify the financial amount necessary to lift the poor population within a country above the poverty line - under the assumption of perfectly targeted cash transfers.¹⁸

Nonetheless, this ratio does not take into account that poverty lines within urban and rural areas may differ as the access to goods and services in areas may vary and therefore might distort the evaluations.

Share of poorest quintile in national consumption

This percentage reflects the bottom 20% of a population in terms of consumption or income level comparing it to other quintile´s consumption levels. In this manner, a country´s “relative inequality” can be quantified.¹⁹ The values of this ratio range from 0 to 20 - a higher value indicating low inequality within a quintile and vice versa. Perfect equality of consumption or income would be reached if each quintile showed a value of 20.

The UN employed this indicator as inequality is referring to a wider range of population than poverty, “not revealing the distribution of income within the poorest quintile. Therefore, further disaggregation by deciles or percentiles is needed to assess inequality among the poorest quintile.”²⁰ This indicator is being limited by the fact that the analysis of consumption level and income level will lead to different results depending on the type of survey and given the fact that definitions for the concepts “consumption” and “income level” diverge. Also the extrapolation of the results for households may lead to misinterpretation as the individuals forming a household may display different consumption needs and income levels.

3.2 - Target No. 2: “Achieve full employment and decent work for all”

The second target that aims at alleviating destitution focuses on the macro-economic concept “employment”, as it grants an individual the opportunity to earn his living and lift him out of an impoverished situation. In order to reach this target, three indicators have again been elaborated to measure its performance.

[...]

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¹ (World Bank Group, WB-IMF Report 2014)

² Further information on this „The New Economics“ by Dr. Deming

³ (Washington Education Association 2011)

⁴ (Atkinson, 2006, pp. 34)

⁵ (United Nations Department of Public Information 2004)

⁶ (Sachs, 2005, pp.12 - 13)

⁷ Countries with US$1.046 of Gross National Income per capita or less are being considered low income countries (World Bank Group, Worldbank - Development Data and Statistics 2012)

⁸ (UN Department of Economic and Social Affairs 2014)

⁹ cf. ((SESRTCIC) 2007)

¹⁰ (Sachs, 2005, pp. 34)

¹¹ cf. (World Bank 2014)

¹² Human capital is being defined as “Education, health and the nutrition of individuals; labor is linked to investments in human capital, health status determines people’s capacity to work, and skills and education determine the returns from their labor.” (Stein; Horn, 2012, pp. 57)

¹³ cf. (World Bank 2014)

¹⁴ “The theory aims to determine the adjustments needed to be made in the exchange rates of two currencies to make them at par with the purchasing power of each other. In other words, the expenditure on a similar commodity must be same in both currencies when accounted for exchange rate. The purchasing power of each currency is determined in the process”. (The Economic Times 2013)

¹⁵ cf. (MDG Handbook 2012)

¹⁶ cf. (MDG Handbook 2012)

¹⁷ cf. (Stijns, Garroway, 2012, pp. 39)

¹⁸ cf. (MDG Handbook 2012)

¹⁹ cf. (MDG Handbook 2012)

²⁰ (World Bank Group, Worldbank - Development Data and Statistics 2012)