On the road no more

To my great disappointment, the Land Rover that I have driven for the best part of the last nine years has been written off. Here's a picture of its preferred environment, rather than the crowded Kampala streets where it met its end, courtesy of a speeding and (even by Kampala standards) unusually erratic vehicle on Ggaba Road, opposite the American Embassy, about 1 month ago. Fortunately, no-one was seriously injured in the crash.

To compare my feelings to bereavement would be a tasteless overstatement, but I certainly feel a sense of loss and sorrow at its untimely end.

JG Ballard

One of the UK’s greatest (and most underrated) writers, JG Ballard, died last week. He is probably most famous for his novel Empire of the Sun,which tells the story of an English boy growing up in China during the WW2 Japanese occupation.

The historical and autobiographical nature of Empire of the Sun (subsequently made into an excellent film by Steven Spielberg) is untypical of most of Ballard’s work, which is more concerned with an immediate future. His bleak vision of the corrosive impact of technology and the modern environment on human society is described as "dystopian" by his biographers.

Like many of his admirers, I discovered Ballard's work through Empire of the Sun, and have only recently read four of his other works: Crash (which became notorious following the release of the David Cronenberg film of the same name), High Rise. Concrete Island and his last novel, Kingdom Come, all of which expertly depict the fragility of civilisation in the modern world.

Ballard's books aroused strong passions - the US publishers of the Atrocity Exhibition (which I have not yet read) withdrew it from publication due to the furore over its controversial content: yet the author himself preferred a quiet family life in Shepperton, seldom courting publicity or self-promotion.

Loan Shark

Borrowing dulls the edge of husbandry, and the loan oft loses both itself and its friend. So spake the wise Polonius to his son, Laertes, in a pre-capitalist era. But now, Shakespeare’s sage advice seems hopelessly outdated. Debt is now so deeply entrenched in our society that it is almost impossible to imagine a world without it.

I am currently attending the Global Philanthropy Forum in Washington, a gathering of remarkable people drawn together from around the world with one main objective: to find ways of improving the human condition. Much discussion has centred around the success of the microfinance movement in developing countries: the positive impact of providing poor people with small (and hitherto unavailable) amounts of credit which enable them to improve their lives. Microfinance advocates use heart-warming anecdotes to illustrate its success in lifting individuals out of poverty. It makes a great story.

In this morning’s newspaper, my eye was taken by a headline concerning a Presidential probe into US credit card interest rates. President Obama is making good his campaign promise to investigate the high cost of consumer debt at a time when, we are told, it is ever more important to raise consumer spending and unfreeze the market for credit. Apparently, many credit providers have recently hiked the cost of debt, in some cases to 30% per annum. Make no mistake, with inter-bank lending and depositor saving rates close to zero, this looks like exceptionally good business for financial institutions, laced with more than a dash of market failure. Bring on the regulator!

And yet interest rates at or above 30% are the norm in the world of microfinance, the latest “donor darling”, which seems to suggest that this cost of money – so unacceptable to policy-makers in the USA – is somehow entirely acceptable across the developing world. The fact is, that unless inflation is high, it is almost impossible to use expensive finance like this for anything other than short term trade finance or urgent consumption requirements, like health care or school fees. While this is unquestionably useful, in that it does provide access to short term money, it is harder to identify any systemic impact on poverty – if anything, interest rates like this will impoverish rather than enrich borrowers.

In defence, Microfinanciers say that these interest rates are fine: people are willing to pay even higher rates. They quote a willingness to pay rates of 50%+, but they seem to have missed the simple point that poor people in desperate need of cash have always borrowed unwisely: loan sharks and tallymen have always found a ready market in poverty.

Certainly, in East Africa, my own experience suggests that microfinance seldom, if ever, leads to increased employment. The small size of loans, allied to extremely high interest rates, usually means that microfinance is restricted to sole traders. With the best will in the world, a thriving economy cannot be built on sole traders alone. If we are going to have a real and long term impact on poverty, we need businesses that can generate employment for others, which means more small and medium-sized enterprises. In an environment like East Africa, where, as a result of rapid population growth more than 2 million people will be entering the labour market every year for the forseeable future, the need to create jobs is essential.

Standing on Your Own Two Feet

Development aid to Africa is once again beleaguered by assailants. It's nothing new: Graham Hancock started it about 20 years ago with the still-popular Lords of Poverty. But the number of recent attacks is rising rapidly. It has become fashionable to bad-mouth the alphabet soup of the development world. There are a host of recently-published accounts, including Dambisa Moyo's Dead Aid and William Easterly's White Man's Burden, which make broadly the same point: development aid has failed.

Of course, the aid industry retains its apologists, most of whom owe their livelihoods to it. They say things like “almost any result can be obtained when aid is lumped together”, or “We’ve learned from the successes and failures of the past: our new programmes have clearly defined outcomes…..” Well, maybe, but as Mark Twain observed: history doesn't repeat itself, but it does rhyme, so please excuse my skepticism.

The simple fact is that if you speak to anyone who has been involved in development assistance in Africa for any significant length of time they will reluctantly admit that it has been neither effective nor efficient. Several hundreds of billions of Dollars have been spent without achieving several hundreds of billions' worth of value. True, there are beacons of success, but they are few and far between and generally owe their success to the actions and determination of remarkable individuals

My principal objection to the aid business relates to the dependency culture it creates. This culture manifests itself in all sorts of ways, but something much ignored by aid advocates is its impact on the labour market. In my experience, with the possible exception of the banking and legal sectors, aid organizations in Africa tend to be the highest payers, offering the best terms and conditions of employment. My argument is that this discourages the brightest and most dynamic individuals from going into private enterprise and therefore deprives the private sector of the kind of talent it needs in order to grow. And, if we are being honest, it is hard to deny that the private sector is the engine of economic development and wealth creation. It's hardly a new idea: Schumpeter, in his Theory of Economic Development, published just under 100 years ago, postulated the thesis that development is propelled, not by Government intervention, but by the actions of entrepreneurs. If writing today, it is hard to imagine that Schumpeter would have been a supporter of international aid. It is far more likely that he would have subscribed to Dambisa Moyo's conclusion that the growth of the private sector (albeit with effective regulation) and free enterprise represents the best prospect for sustainable development.

In saying this, I recognise that to dismantle international development aid overnight (as Ms Moyo seems to suggest) would have disastrous short term consequences in health, education and many other social goods, but there has to be a policy of withdrawal and transition if we are going to find a way of breaking the current dependency culture.

And now to explain the picture. It's a snap of my daughter Roxanne taken about four weeks ago, just before she took her first few faltering steps. Just as for my two older sons, I have witnessed the immense effort, the colossal motivation and the tireless determination that children have to stand on their own two feet: unsupported by their parents. And it is universally true – it doesn’t matter what culture, what race, what socio-economic background. Human beings everywhere want to stand on their own two feet.

In the words of Abraham Lincoln, "You cannot permanently do more for people than they are capable of doing for themselves". It's time for Western Governments to admit failure, abandon aid in its present form and support private sector development by (among other things) the removal of unfair trade barriers and investment in improved infrastructure. Africa is perfectly able to stand on its own two feet. Let it do so.

The Africa Seed Investment Fund

It has been a while since my previous post. Apart from a considerable amount of travel, my energies have been fully focused on preparing for the launch of the Africa Seed Investment Fund, a $12 million investment facility to be managed by African Agricultural Capital. The facility is the brainchild of the Alliance for a Green Revolution in Africa and will offer medium to long term capital to seed businesses in eight countries in East & Southern Africa.

The African seed industry has (alongside most other agricultural sectors) been starved of investment capital. As a result, there is a significant deficit in high quality certified seed available to farmers across the region. This deficit, along with the questionable quality of this most essential of all farming inputs, is a substantial contributor to the poor agricultural productivity and efficiency endemic to the region. The Africa Seed Investment Fund offers the opportunity to seed businesses to access the capital they require in order to increase seed production volumes, seed quality and take advantage of the opportunity to commercialise new improved seed varieties - the fruits of research and development work carried out by both national and international plant breeding programmes.

The launch was held on April 2nd in Kampala. Now the hard work of identifying, researching, evaluating and negotiating investment agreements will start.