Sunday, June 10, 2007

Kenya, Amplifyng the Trade Vs Aid Discussion

As the TED 2007 conference becomes a new chapter in Africa's history books, one issue will continue to be brought up in the media. That is the issue of trade versus aid. To me no story displays the chasm that has occurred between the two supporting camps like the two examples that I am about to highlight for you. I don't know if it's a coincidence or what...but two of the most recognizable text-book cases for each theory come from rural Kenya.

So first let us look at the evidence for supporting trade as a means of poverty reduction. For that we shall go to the small town of Ndaragwa in Central Kenya.

Here's the story as Technoserve recalls it:

"...Before 2001, business activity in the town of Ndaragwa had virtually ceased. The 10 small stands and one hardware store that lined the street of this small town in Central Kenya were generating barely enough income to survive. Local residents depended on small, one- to three-acre dairy farms to earn a living. Isolated by dilapidated roads in this dry, mountainous region, the farmers had no option but to sell their milk to traveling middlemen who notoriously underpaid them. Frustrated by their situation, a group of over 2,000 farmers founded the Nyala Dairy Multipurpose Cooperative Society.

The Nyala farmers' dream was to construct their own cooling plant so they could sell their milk directly to Kenya's large dairy processors and avoid middlemen. They turned to TechnoServe for help. In order to raise funds for the plant's construction and new equipment, TechnoServe helped the Cooperative to create a farmer-owned business. Nyala's 2,700 members became dairy shareholders by contributing $28 each -- not an easy task in a country where over 58% of the population earn less than a dollar a day. But with this structure in place, financing was secured and in 2002, the plant was completed. On the first day of operation, 3,000 litres of milk were collected.

With TechnoServe's guidance, Nyala Dairy's collection has since quadrupled to 12,000 liters per day supplied by 2,100 small-scale farmers. The largest milk processor in Kenya, Brookeside Dairy Ltd., is now purchasing Nyala's milk, and because Nyala Dairy is a reliable, high-quality supplier, it can pass along higher prices to its smallholder farmers. Recently, Nyala paid $86,258 to rural producers -- the highest monthly payment since its founding. The Dairy also provides a store that offers affordable cattle feed, veterinary drugs, and credit for its members.

In three short years, the Dairy has already increased incomes for thousands of poor farmers, but what it has done for the town of Ndaragwa is truly extraordinary. Nyala Dairy has created a standard of living that none of the farmers ever dreamed possible..."

Now in comparison with Ndaragwa is another rural community in Kenya called Sauri. Sauri is perhaps the most unique village in Africa.

I'll let Sam Rich and The Wilson Quarterly do the honors and explain why Sauri just might be Africa's dream village:

"...Sauri must be the luckiest village in Africa. The maize is taller, the water cleaner, and the schoolchildren better fed than almost anywhere else south of the ­Sahara.

Just two years ago, Sauri was an ordinary Kenyan village where poverty, hunger, and illness were facts of everyday life. Now it is an experiment, a prototype “Millennium Village.” The idea is simple: Every year for five years, invest roughly $100 for each of the village’s 5,000 inhabitants, and see what ­happens.

The Millennium Villages Project is the brainchild of economist Jeffrey Sachs, the principal architect of the transition from ­state-­owned to market economies in Poland and Russia. His critics and supporters disagree about the success of those efforts, often referred to as “shock therapy,” but his role in radical economic reform in the two countries vaulted him to fame. Now he has a new mission: to end poverty in ­Africa...

It’s not this diagnosis of Africa’s problems that makes Sachs’s theories contentious, but his proposed solution, which might be called shock ­aid—­huge, sudden injections of money into poor areas. Over five years, $2.75 million is being invested in the single village of Sauri, and an equal amount will be sunk into each of another 11 Millennium Village sites that are being established in 10 African ­countries...

Sachs has persuaded Western governments, local governments, businesses, and private donors such as Hollywood stars and international financiers to foot the bill. Under the auspices of the Earth Institute, the project he heads at Columbia University, he has gathered specialists in fields from HIV/AIDS re­search to soil science to work out master plans for these dozen ­villages...

But economists aren’t Sachs’s only critics; others within the micro school he wants to win over are asking questions, too. They want to make sure communities such as Sauri are not simply passive recipients of handouts from donors and lectures from experts, but are actively involved in making decisions about their own development...

Sauri faces the same economic challenges it always has. Most farmers are still growing subsistence crops and depleting their soils. They could instead be growing crops for market or investing in livestock. ­Low-­cost improvements in farming techniques, such as the use of manure and other organic methods that are more sustainable in the long run, are only beginning to be promoted. Growth will be slow because taxation, bad roads, and a lack of electricity need to be addressed at a national ­level..."

Now of course, these aren't the only two forms of aid and trade initiatives going on in Sub-Saharan Africa, however they seemed to illustrate why supporters of both trade and aid in Africa are so hopeful about their respective tool kits. But what do you think, is there enough evidence for you to conclude one strategy works better than the other at reducing the poverty gap in some of Sub Saharan Africa's rural communities?

Thanks Osize for your contribution to this discussion!

photo courtesy of Alison M. Jones Photo Gallery



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