ethical impact investingOne of the benefits of living in a developed nation with a strong economy is investing and making money off the success of the market. Traditional investing holds profits above all else, and generally shun factors such as environmental impact and workplace equality. Ethical impact investing tries to marry consciousness investing with profit to help both investors and companies active in creating a better world reach greater success.

According to the Global Impact Investing Network (GIIN), impact investing consists of “investments made with the intention to generate positive, measurable social and environmental impact alongside a finical return.” Examples of ways that companies can qualify for impacting investing include: reducing their carbon footprint, installing green energy and creating a more diversified board of directors and executive suit. In terms of viability, the GIIN reports that impact investing portfolios “overwhelmingly meet or exceed investors expectations for both social and environmental impact and financial return.”  Ethical impact investing portfolios do not sacrifice profits for impact or the other way around, they are the best of both worlds.

Who Does Impact Investing?

Many firms including the biggest in the world operate some form of impact investing. Blackrock calls their form of impact investing, “sustainable investing” and focuses on “investing in progress and pioneering.” Blackrock runs funds which are made up of multiple companies which meet a certain criterion. For example, Blackrock’s “02 SDG [sustainable development goals] fund” is made up of companies which help to “advance the U.N.’s sustainable development goals.”

Companies in this fund include: Tesla INC, Procter and Gamble Vesta Wind Systems and New Oriental Education and Technology. Blackrock’s funds are incredibly diverse with the highest percentage weight in the 02 SDG Fund making up only 4.72 percent of the weight. Having a diverse fund helps the fund stay stable in case any of the companies or markets crash.  And the proof is in the numbers — with the Blackrock fund outperforming the market. According to Investopedia, the average return of the U.S. market on average is 8 percent while the average return of Blackrock’s 02 SDG Fund is 9.3 percent.

Goldman Sachs also works towards ethical impact investing, but through a geographical lens which seeks to relive certain communities of specific ills. For instance, Goldman Sachs reports that it “invested over $300 million in the City of New Orleans [with an] integrated, place-based approach [which] has provided more than 1,450 units of…housing [and] over 1,300 new jobs.”

Goldman Sachs post-2008 has helped to create housing and jobs for an area ravaged by natural disaster. One of the projects that Goldman Sachs operated in New Orleans was the Harmony Oaks Apartments which Goldman Sachs poured “$61.2 million in financing to support the rebuilding effort [post Katrina].” Rather than having citizens invest in a fund, Goldman has corporations and projects apply for a grant which they can then be approved or denied for.

The Bottom Line

In terms of accessibility to the average investor, Goldman Sachs falls behind Blackrock’s fund management. Blackrock also includes companies from around the globe in their sustainable investing funds, while Goldman Sachs only offers impact investing related grants in the U.S. Blackrock also runs two other sustainable investment funds with one centered on low-cost sustainability, “01 ESGU” fund and one focused on reducing carbon footprint, “03 CRBN” fund. For investors who want to see a direct correlation with their profits and their impact, investing in Blackrock sustainability funds offers an effective, profitable alternative to traditional investing strategies.

Spencer Julian
Photo: Flickr

Impacting Investing
Investing in the right organizations has the potential to change the world. Impact investing is a type of investment that focuses on social or environmental benefits as well as financial or capital returns. Impact investing can be done through for-profit or nonprofit organizations that are looking to improve the world. It can be done in emerging or developed markets anywhere in the world as part of a growing market that provides capital to address global issues in sectors like “sustainable agriculture, renewable energy, conservation, microfinance and affordable and accessible basic services including housing, healthcare and education,” as the Global Impact Investing Network (GIIN) says. The market is estimated to be at around $502 billion as of April 2019.

According to GIIN, there are four primary characteristics of impact investing:

  1. Intentionality – The intention is one of the main things that differentiates impact investing from regular investing. The intention behind impact investing must be the desire to create measurable social or environmental benefits.
  2. Use evidence and impact data in investment design – Investments must have evidence or data that indicates the investment will have social or environmental benefits.
  3. Manage impact performance – Investments must be managed toward the specific intention of the investment. This would mean having feedback loops and means of communicating performance information to ensure that the investment is working toward the intention of the investment.
  4. Contribute to the growth of the industry – Impact investors must use shared industry terms to communicate their goals, strategy and growth. They also share information so that others may learn from their experience and adjust their investments accordingly.

Examples of Impact Investments

  • The Omidyar Network – Pierre Omidyar, the founder of eBay, and his wife Pam obtained large quantities of wealth after the company went public and wanted to do some good with it. He set up a limited liability company (LLC) to make investments in early-stage innovations that are able to generate profits. He also set up a 501(c)3, a tax-exempt nonprofit, to provide grants for public goods and assistance to disadvantaged communities as well as subsidize the production of beneficial goods. The use of both of these allows the Omidyar Network to use for-profit capital and nonprofit grants to benefit society.
  • Actiam Impact Investing – Actiam Impact Investing invested in Pro Mujer Bolivia, an organization that provides training and financial services to women in Bolivia. Janeth Villegas is one of many women who benefited from the program. Pro Mujer taught Villegas a number of skills including accounting and business management which empowered her to start her own chocolate company that she is now teaching her kids to run.
  • Salkhit Wind Farm – Impact investors invested capital in Salkhit Windfarm, the first renewable energy generator connected to the central grid in Ulaanbaatar, Mongolia. The installation of this wind farm has reduced coal burning by 122,000 tons annually and has created over 3,000 local jobs.
  • General ElectricGeneral Electric (GE) provides impact capital through its Ecomagination Accelerator to finance energy conservation efforts. Ecomagination investments totaled $1.4 billion in 2014. “We want to inspire more companies to work together and tackle the world’s greatest resource problems,” Ecomagination’s global executive director Deb Frodl said. With this goal in mind, the company also aims to decrease reliance on fossil fuels in order to reduce greenhouse gas emissions.
  • d.light – This for-profit company invests in and manufactures solar energy and distributes its products through the developing world. d.light’s mission is “To create a brighter future by making clean energy products universally available and affordable.” The focus here is on providing clean energy to the developing world which helps reduce dependence on fossil fuels and provides electricity to people who might not otherwise have it.

– Sarah Faure
Photo: Wikimedia Commons

Nicaragua’s Poverty Rate

Although Nicaragua remains one of the poorest countries in Central America,  the poverty rate has been cut in half in the last 10 years. Between 2005 and 2016, Nicaragua’s poverty rate fell from 48 percent to 25 percent. One reason for this dramatic reduction is industrialization. Over time, tourism and mining have become important to Nicaragua’s economic growth and stability.

According to the United Nations Industrial Development Organization, the key to reducing poverty is “to mobilize private and public investments […] around a long-term inclusive and sustainable industrialization plan for export-oriented and job-creating industrial capacity.” The following are three areas that both keep the U.N.’s policy recommendation in mind and hold promise in reducing Nicaragua’s poverty rate.

The Impact of Tourism

Tourism is the second largest industry in Nicaragua and has grown significantly since the Nicaraguan Revolution in the 1980s. For the first time in Nicaraguan history, there were more than one million visits to the country in 2010. This is an 8 percent increase from 2009. The tourism industry is currently thriving and provides revenue to small businesses. Additionally, it provides income to poor Nicaraguans in rural areas.

Tropical islands and volcanoes, such as the Mombacho volcano and the Corn Islands, are two popular destinations that attract tourists from the U.S., Europe and Central and South America. In 2010, gross income from foreign tourism was approximately $360 million. This is a $15 million increase in gross income from the previous year.

Mining Sparks Economic Growth

Alongside tourism, there has also been an increase in gold mining production. Between 2006 and 2016, production has gone from more than 109,000 ounces to 267,000. The results are even greater for silver mining, which increased from 94,000 ounces in 2005 to almost 682,000 in 2016. Mining is steadily growing to become one of Nicaragua’s driving economic forces.

Gold, beef and coffee are the country’s top three exports. Gold production has doubled and is emerging as an important source of income to the Nicaraguan government and their citizens. For each dollar earned from mining, $.66 cents go to taxes, remuneration and acquisition of goods and services. This revenue can aid in investing in better farming equipment for poor farmers and creating jobs through emerging industries like mining.

Agricultural Advances Combat Nicaragua’s Poverty Rate

Nicaragua still remains an agriculture-dependent economy. About 50 percent of its exports come from textiles and the agriculture industry. Bananas, cotton, sugarcane, rice and tobacco are some of Nicaragua’s other exports. However, Nicaragua’s poverty rate remains high, especially in rural areas where extreme poverty is heavily concentrated.

Many in the agriculture industry are migrants who harvest crops for half the year and search for other work during the other half. By investing in farm equipment and technology, farmers of smaller plots have a chance to increase their income beyond than $2 a day.

An example of increasing crop quality and yields is shown through conservation tillage, which is transgenic insect control. This system decreases erosion, increases organic matter in soil and conserves soil moisture. Additionally, marker-assisted breeding and biotechnology traits are new developments that have been shown to increase yields and improve traits, such as grain moisture in corn.

Other traits include providing resistance to corn rootworm and borers. Lastly, diversification is another way to help those in the agriculture industry. If crop prices are unfavorable, another crop’s production would offset the negative effect of those prices.

There are several ways to reduce Nicaragua’s poverty rate. A combination of improvements in quality and quantity alongside the diversification of crops can help increase income to those in poverty.

– Lucas Schmidt
Photo: Flickr

Credit Access in Bulgaria
Bulgaria is an Eastern European country with a population of approximately 7 million people. In 2016, the country’s poverty rate stood at 23.4 percent, which means that around 1.6 million Bulgarians lived below the national poverty line. In addition, Bulgaria has the lowest GDP per capita in the European Union and the highest levels of income inequality among E.U. countries. Increasing credit access in Bulgaria could be one way to recharge the economy and help reduce poverty.

Background

Poverty in the country has been steadily rising. Since 2000, the poverty rate has increased by 9.4 percent. Contradictorily, the unemployment rate has never been lower and wages have never been higher than they are now. To explain this contradiction, it is important to know that Bulgaria has experienced a rapid population decline. Between 1988 and 2018, the population of Bulgaria declined by nearly 2 million people. By 2050, economists predict that the Bulgarian population will fall to 5.5 million if the country does nothing to reverse the trend. This has precarious implications for the nation’s economy, and increasing access to credit is a viable solution to stymie population loss.

Particularly concerning is the fact that young and educated Bulgarians constitute the bulk of those leaving the country. In most cases, they leave to find employment elsewhere in the E.U. Some dubbed this phenomenon a “brain drain,” and studies confirm that it hinders economic growth and development. Experts at the Institute for Market Economics in Bulgaria argue that political stability and economic growth are the surest ways to dissuade young people from leaving the country; in other words, the overall outlook for the country must be bright.

Credit Access in Bulgaria

One possible way to address Bulgaria’s population problem is to increase access to credit. With increased credit access, impoverished Bulgarians can secure the funding they need to start a business, purchase a home or own a car. Expanding credit for small businesses could be due to economic growth. Furthermore, a 2006 study found that increased credit access in Bulgaria had a strong correlation with total factor productivity. Credit access has also led to growth in both the manufacturing and service sectors. A Georgia State University study found that access has led to a 0.34 percent annual increase in value for both sectors. These sectors account for 83 percent of Bulgaria’s GDP.

By further developing access to credit, Bulgaria has a brighter economic outlook. Despite its population decline, the GDP has increased by $52 billion since 2000. In order to reverse the brain drain and address national poverty, financial institutions and the Bulgarian government should continue to invest in credit access. Credit access will allow young entrepreneurs to remain in the country, helping the economy grow and encouraging Bulgarians. Economic growth, according to the Institute for Market Economics, remains Bulgaria’s best chance at recovering its lost population.

– Kyle Linder
Photo: Flickr


Nearly 63 percent of people living in Africa lack internet access. In contrast, 11 percent of North Americans, 13 percent of Europeans and 48 percent of Asians lack internet access. In response to this issue, Africa50, an infrastructure investment organization, has launched an innovation challenge asking for modern innovators to submit their original ideas on how to provide internet to under-served areas in Africa.

The Africa50 Innovation Challenge began May 14, after it was announced at the Transform Africa Summit held in Kigali, Rwanda the same month.

The submitted solutions will be piloted in Rwanda, which Africa50 CEO Alain Ebobissé said was the ideal place to implement and test the solutions.

Rwanda: A Country Evolving in ICT

Ebobissé described the country as having a thriving Information, Communications and Technology (ICT) sector. Cooperation between the challenge and the co-development of the Kigali Innovation City, a project Africa50 invested $400 million in 2018, is evidence of this ICT boom.

Rwanda has increased its internet access to 29 percent, as of 2019. The increase is a marked improvement compared to the less than 1 percent who had access in 2000. This development can, in part, be accredited to the National Information Communication Infrastructure (NICI) policy the country adopted in 2000.

The policy defines four separate stages of increasing internet and communication in Rwanda. The country has already prepared the ICT groundwork and is currently in the fourth and final stage; enhancing the infrastructure and improving the service delivery.

The goal of the final stage is to increase technological skills, develop the community and private sector and enhance the government’s use of the internet and cyber-security. The policy is planned to end in 2020.

The ideas will be implemented more broadly across the continent once the pilot phase in Rwanda is complete.

Winning Criteria and Perks

The judges will be looking for six main criteria in the proposals submitted to the Africa50 Innovation Challenge:

  • Innovation and originality
  • Ability to be implemented on a large scale
  • Affordability for both implementors and consumers
  • Sustainability for the environment
  • Readiness to be piloted in Rwanda
  • Adaptability of the solution for a variety of circumstances

The finalists will be announced mid-October and they will present their solutions at AfricaCom the following month.  Those selected will be announced at the 2020 Transform Africa Summit, but the organization does not specify how many winners will be chosen.

The winners will be awarded a cash prize or project development funding, connections to investors and exposure as an innovator.

If these solutions are implemented, economic growth and job creation are a few of the newfound benefits that may come to these countries. Companies can grow and have an improved role in the competitive market if they have access to the internet.  As a result, these solutions allow them to reach more consumers, labor pools and raw materials, according to a 2012 report by the International Telecommunication Union.

ICT Progress in Other African Countries

There will certainly be interesting proposals from this year’s Africa50 Innovation Challenge entries,  but there are already solutions that have worked in other African countries.

For example, Kenya has had a considerable jump in their internet speed and bandwidth — which increased 43 percent from 2016 to 2017. This increase can be attributed to the National Broadband Strategy for Kenya. Additionally, Nigeria has increased its number of internet users from 72 million in 2017, to 92 million in 2018.

Nigeria’s fiber network, 21st Century, is partnering with Google Station and anticipates the installation of 200 Wi-Fi hotspots by the end of 2019, according to Fortune.

Africa50 aims to spread high-speed internet and improve opportunities for those living in under-served communities, whatever the solution.

– Makenna Hall
Photo: Flickr

Industrialization in Bolivia

Although Bolivia’s poverty rate declined significantly from 63 percent in 2004 to 36 percent in 2017, the industrial production growth rate has been slow at about 2 percent. One major challenge to continually reducing the poverty rate is industrialization in Bolivia. The country’s state-oriented policies discourage investment, especially in the underutilized mining sector. Further economic developments that include incentives to spur investment, as well as policies to improve income equality, are needed to continually reduce the high poverty rate.

Improving the Business Environment

Bolivia’s state-oriented policies is a barrier to development. According to Joe Lowry, head of Global Lithium and a former employee of FMC, FMC wished to develop Uyuni in the late 1980s and early 1990s, but “governmental chaos and poor infrastructure were too much to deal with.” President Morales is preventing external corporations from exploiting natural resources, such as lithium. FMC Corp, a major lithium producer, and South Korean steelmaker POSCO tried to make deals with Morales’ government, yet no agreement was made due to strict government control.

To induce foreign companies to form operations in Bolivia, reducing government control on the private sector is an essential requirement. This laissez-faire style of welcoming outside companies to build relationships with Bolivians would not only create jobs but also improve the poor roadways leading to its neighboring countries. A lack of infrastructure also creates difficulty for external corporations who wish to start operations within the country. Inefficient roadways slow transportation vehicles and create major obstructions to traveling throughout Bolivia.

About 12 percent of roadways are paved. The Inter-American Development Bank approved a $178 million loan to Bolivia in an effort to improve or add roads, traffic flow and increase security. The loan also increases job opportunities for women in non-traditional sectors through training in truck-weighing procedures, toll-collection and heavy machinery operation. The regions with paved roads earn the majority of the gross domestic product. In these areas, the travel time and cost of operating vehicles is less than areas with crude and poorly maintained roads. Additional infrastructure development is needed to create jobs and increase the probability of future investment prospects.

Key Sectors for Bolivia’s Growth

Lithium mining is one key sector to increase industrialization in Bolivia. With demand for lithium expected to double by 2025, President Evo Morales is set to invest $250 million into lithium operations after signing an agreement with ACI Group. Morales vowed to “industrialize with dignity and sovereignty.” Bolivia has nine million tons of untapped lithium, the second-largest amount in the world. Construction begins in 2021 and already companies are showing interest.

While Morales envisions Bolivia as a major lithium producer, Bolivia’s economy and finance minister, Luis Arce, perceives a future in the tourism industry. Arce agreed with Morales on its need for industrialization, especially in mining, natural gas and tourism sectors. Lake Titicaca, Salar de Uyuni and La Paz are three popular destination sites that receive tourists from across the world. Arce also plans to target income inequality by redistributing wealth. This would give compensation to families whose children complete a school year and a program guaranteeing a minimum retirement payment. Arce also stated salary increases outpacing inflation would help Bolivians, especially those in extreme poverty.

Present Infrastructure Status

Industrialization in Bolivia, especially in road construction, is already underway. Reducing state-oriented policies could offer an incentive to investors interested in lithium. It is an important component in batteries that power electric vehicles and an important resource for the future of vehicles. With a decrease in strict government control, Bolivia could rise out from its slow development, create jobs and reduce its high poverty rate.

– Lucas Schmidt
Photo: Flickr

 

transportation impacts poverty
Transportation impacts global poverty in ways that are both obvious and subtle. If the job market is centered in an urban area and potential workers live in a distant, rural area, their immediate survival depends on access to transportation. On a larger scale, the ability for a developing country to transcend poverty and become productive and prosperous depends a great deal on the transportation systems that are implemented with the help of foreign aid. This article analyzes five ways transportation impacts global poverty.

Five Ways Transportation Impacts Global Poverty

  1. Rural isolation arguably deserves its own list of ways transportation impacts global poverty because it has so many consequences that perpetuate continued destitution. For example, farmers in isolated rural environments often fail to reach their economic potential because they cannot easily access marketplaces that offer seeds, fertilizers and other tools for agricultural success.
  2. Other casualties of rural isolation are the elderly or otherwise infirm. Healthcare services are usually in centralized urban locations. Even if the poor and sick or even the old, pregnant or injured can afford the costs associated with health services, they are often unable to get to where the providers are if they live in rural communities. World Bank has helped to address this in developing regions of India, Georgia and Vietnam by subsidizing travel costs and making health professionals available in more remote areas.
  3. Investing in basic infrastructure is often one of the most significant ways in which transportation impacts global poverty. The building of roads, trails and bridges creates greater accessibility even for those who can only travel on foot. Jobs are created to facilitate these developments, and there are often new modes of public transportation implemented to make use of newly created roads or railroad tracks. This helps to minimize the travel time between rural and urban regions. Bill Gates asserts that while domestic resources can and should be utilized for infrastructure investment, global aid is a critical component as well. An investment in a developing country ultimately benefits the entire world, including the wealthiest nations.
  4. It stands to reason that the more easily a population can access educational facilities, the more educated that population is likely to be. People living more than an hour’s walk from the main road in Papua New Guinea were shown to be experiencing twice as much poverty as those living closer to the road. Building new roads and providing greater access to transportation resulted in an increase in education enrollment and literacy as well as an overall decrease in poverty.
  5. A theory known as “spatial mismatch” describes a phenomenon in which those who can easily pay for transportation, whether by automobile or public means, move away from congested urban regions. This creates a problem for the poor because the market often follows the wealthy as do the jobs. In developing countries, this is especially problematic since it feeds a cycle of poverty in which cheap housing options are only available in areas where there are few amenities, poor transportation options and limited jobs.

Writer Wilfred Owen asserts, “Continuing global prosperity is contingent on the very large volume of trade with developing countries and on the foreign investment opportunities they provide.” This will not be feasible without a short-term investment in the infrastructure and transportation systems of those developing countries. While the governments of the developing nations play a vital role in upgrading transportation options in their countries, foreign aid must also play a part. As this article shows, transportation impacts global poverty; therefore, it is not a simple matter of charity but rather a wise investment in our global future.

Raquel Ramos
Photo: Flickr

investing in Zimbabwe
Zimbabwe, a landlocked country located in Southern Africa, is becoming an interesting area for foreign investments. China is planning on investing more than $3 billion in the country this year. Some of the projects include investments in the hospitality, steel, mining and manufacturing sectors. China has been a major investor in Zimbabwe, accounting for more than 70 percent out of total Foreign Direct Investment (FDI).

Current Economic Climate

Acting Chinese Ambassador Zhao Baogang, stated that China has strong confidence in Zimbabwe. After the efforts made by the Government of Zimbabwe, China believes that more investments will be attracting, the economy will go back to normal and the country will become prosperous and strong. Baogang is referring to the past government corruption under dictator Robert Mugabe and the hyperinflation that caused many inhabitants to struggle to afford food.

With a per capita GDP of $1,000, many Zimbabweans struggle, finding it hard to afford even the essentials. One such indirect solution has been provided by external companies and nations investing in Zimbabwe, creating jobs and bringing the country out from poor economic conditions. Zimbabwean politician Patrick Chinamasa stated that he believes working with China is necessary and wise because they have been able to take almost 300 million people out of poverty. Chinamasa is the Finance Minister and trusts China to help the poverty-stricken nation grow financially. He believes that more jobs and less government corruption will help renew business interests in Zimbabwe.

China’s Past Investing Success

China has had previous success with investing in Africa. This year is not the first time China has partnered with an African country in a business venture. Shoemaker Huajian Group had a huge financial success in Ethiopia thanks to Chinese investment. The shoemaker is set to expand to Zimbabwe, opening a $2 billion shoe factory in the country. It will be Huajian Group’s second-largest shoe factory, second to their largest facility built in Addis Ababa, Ethiopia. If the deal is followed through, over 15,000 jobs will be created.

Future of Investing in Zimbabwe

According to Baogang, 2019 is an important year, as many international companies have discussed or already began their projects in Zimbabwe. Jinan Sinotruck Co. is a Chinese light truck maker that is collaborating with Quest Motors, a struggling vehicle manufacturer based in Mutare, to help them succeed again. More outside investors are seeing future financial prospects in steel, a basic component in building automobiles.

Investing in Zimbabwe is one opportunity external investors view as crucial for lithium mining. The Bikita and Kamatavi mines are seen as viable investments as the world turns to electric cars, which, such as the Tesla Model S and Chevy Volt, utilizes power from lithium-ion batteries. Pacemakers and other battery-utilized medical equipment make use of lithium batteries as well. With the future automobile industry appearing battery-powered, more companies are becoming interested in lithium mining. Zimbabwe’s ambassador to China Paul Chikawa has echoed Baogang’s optimistic statements, stating that Chinese investors are interested in projects involving tourism, manufacturing and mining.

Other International Investors

The outside involvement in the country’s lithium mining is good news for Zimbabwe. Various companies, such as Prospect Resources, founded in Australia and listed on the Australian Securities Exchange, invested more than $165 million in Zimbabwe’s lithium mining industry through the Arcadia Lithium Project. The company stated that $3 billion in export revenue is feasible. Baogang mentioned that two other companies are interested in lithium mining in the Kamativi mine in Matabeleland North province and that some progress has already been achieved.

According to diplomats from Australia and China, several more investors are interested in investing in Zimbabwe. They are keen on expanding to a nation with many prospects in the mining, hospitality, steel, agriculture, rail and timber industries. With many investors interested in Zimbabwe, the nation is set to create new jobs and grow financially, providing its citizens with better living conditions along the way.

– Lucas Schmidt

Photo: Flickr

Ethiopian PM Turns to Privatization to Further Economic Growth

In a move atypical of his political alignment with the Ethiopian People’s Revolutionary Democratic Front (EPRDF), Prime Minister Abiy Ahmed announced in June 2018 that the government will begin procedures to implement privatization in Ethiopia of various state-owned enterprises (SOEs) in telecommunications, energy and transportation.

Already one of the fastest growing economies in the world, Ethiopia hopes to continue this trend by selling shares in some of the country’s most profitable and promising industries. In this announcement, Ahmed proposed that privatization of these booming enterprises will aim to increase foreign direct investment (FDI), lessen the unemployment rate and reduce poverty.

Ethiopia’s Recent Improvements

The second largest country in Africa and home to more than 100 million people, Ethiopia has been experiencing tremendous economic growth in recent years. Unemployment has dropped from more than 26 percent in 1999 to less than 17 percent in 2015. The poverty rate has decreased from nearly 46 percent in 1995 to less than 30 percent in 2010.

While Ahmed has only been in office since April of 2018, his vows to reform Ethiopia economically and socially have surprised many. Since their coming to power in 1991, the EPRDF’s has had a history of complete state-ownership of the majority of the industry. The state, however, will remain in control of the majority of shares in the industries being opened up to foreign investment.

His promises of calming social tension and revamping the economy have been met with some skepticism, but Ahmed fervently retains that his intentions are to restore Ethiopia to a place of social stability, economic prosperity and peace. Ahmed has even gone as far as to reach out to Ethiopia’s long-term enemy, Eritrea, to find common ground.

The Prime Minister’s Plans

Although the government has yet to release detailed plans as to how they intend to implement privatization in Ethiopia, they have been working with consulting agencies abroad such as PwC and McKinsey to determine a practical and sustainable way to carry out an economic overhaul of such magnitude.

Among the SOEs the government plans to privatize, the introduction of Ethiopian Airlines to the private sector, in particular, represents a key component in Ahmed’s economic plan; Ethiopia will experience a shift from an agrarian society to a modern, competitive, industrial society. As the country’s national flag carrier and a symbol of state pride, Ethiopian Airlines has garnered an intake of hard currency (currency unlikely to be affected by inflation) three times that of coffee, a long-standing staple of Ethiopia’s economy.

Increasing Foreign Investment

The privatization of Ethiopian Airlines also indicates Ahmed’s desire to transform Ethiopia into a major air travel hub, similar to Emirates’ position in the United Arab Emirates. This will serve as a way to bring in foreign investors and to present Ethiopia as a modern contender in the world economy. By selling shares of Ethiopian Airlines and other rapidly-growing SOEs such as Ethio Telecom, Ethiopian Electric Power and Railway Corporation, Ahmed hopes to draw foreign investment since Ethiopia has experienced an alarming shortage of foreign exchange in recent years.

While privatization in Ethiopia is sure to be a slow transition, and the government will most likely remain majority shareholders in the enterprises they are selling, the country appears to be heading in a positive direction. Between 2004 and 2014, Ethiopia averaged annual economic growth of 10.9 percent and is projected to grow another 8.7 percent in the next two years.

With a goal of reaching lower-middle income national status by 2025 and a government promising major social and economic reform, Ethiopia has established itself as a nation in the midst of a true revival. Hopefully, Ahmed’s plan of privatization in Ethiopia will prove to be a positive step for the country’s future economic growth.

Rob Lee

Photo: Flickr

The 7 Virtues and Afghanistan's Opium EpidemicIn the war-torn country of Afganistan, groups such as the Taliban enlist the help of opium farmers to finance their terrorist operations. Since opium crops are the most effective way to make a profit, farmers living in poverty have little to no reasons to resist contributing to the drug trade.

However, farmers in Afganistan can defeat terrorism with this unexpected strategy- selling oranges and roses. A perfume company called The 7 Virtues pays a generous amount for these ingredients which are used in the perfumes so that families can have a sustainable livelihood. Their philanthropy benefits the people of Afghanistan, the United States, and the world in general.

Opium Production in Afganistan

There is a huge demand for opium in Afghanistan, but the consequences of this illegal drug extend far beyond the country’s borders. Afghanistan farmers produce between 70 and 80 percent of the world’s supply of opium, and the drug industry spurring on their production is responsible for opium-related deaths throughout the world. In addition to funding terrorist operations, growing opium encourages other illegal behaviors and contributes to Afghanistan’s violent atmosphere.

It is no coincidence that some of the poorest farmers in the world are producing opium in Afghanistan. To survive, families must resort to a form of employment they might abstain from under less desperate circumstances. However, selling legal crops is not very profitable. Experts concerned about the economic development of Afghanistan have warned against stifling the opium trade because they don’t want more than three million farming families to lose their main source of income. Renting land is expensive for shareholders, so they need to sell crops in high demand. Compared to legal crops, opium brings in the most revenue.

The 7 Virtues

Barb Stegemann, the founder of The 7 Virtues, is determined to address violence and economic instability in Afghanistan with economic power. Many businesses in the fashion industry exploit cheap labor without giving the workers sustainable wages, so the company hopes to set a good example for others to follow. It lifts more than 1,000 families in Afganistan out of poverty by paying twice as much for essential oils to the farmers as they would get by selling opium. By selling legal crops for a generous price, this simultaneously limits financial support for terrorist groups. The company does business with other countries affected by violence and conflict such as Haiti, Rwanda and countries in the Middle East.

Legal crop production benefits more people than just farmers in the country. Reduced activity from terrorist groups is good for U.S. national security and saves people from opium addiction all over the world. Stegemann’s motto is: “Good for the world. Good for your skin.” Not only that perfumes made by The 7 Virtues are phthalate and paraben free, but they are also not tested on animals. Due to their rising popularity, the perfumes will be sold in Sephora outlets. Partnering with a mainstream beauty store helps maximize their visibility among consumers and makes the perfume easily accessible for supporters of Stegemann’s company.

Other Methods for Opium Reduction

The elected government in Afghanistan has introduced several other methods for interrupting the opium trade. They’re currently testing the effectiveness of aircraft that spray herbicides over poppy fields. This practice is announced prior to the harvest season that gives opium farmers a chance to make the decision of planting legal crops. The government is also confiscating the property of landlords who encourage shareholders to grow opium poppy plants. Future plans include research on types of crops grown in provinces controlled by terrorist groups. This will provide information about where they collect revenue and allow the government to focus their opium eradication efforts.

Barb Stegemann began a legacy to demonstrate the power of investment for alleviating poverty. Instead of fighting terrorism with more violence, she proves that Afghanistan’s problems can be solved with a bottle of fragrance.

Sabrina Dubbert
Photo: Flickr