One Product Poverty in Developing Countries

There is an inextricable link between the commodity dependence of developing countries and their susceptibility to poverty. The tie to poverty in nations that heavily rely on one or two products to boost their export revenue may be closer than current research demonstrates. This phenomenon, which will hereafter be referred to as “one product poverty,” needs additional study.

The extreme reliance on select commodities is especially harmful at the household level. This is in large part due to price volatility. Price volatility refers to fluctuations in worth resulting from unanticipated supply and demand that is reflected in a commodity’s price. In recent years, commodity price volatility has increased as a partial consequence of the 2008 global financial crisis.

Some of the effects of price volatility must be taken as a given. In a free market, supply and demand are the driving mechanisms that affect commodity prices. However, price volatility is especially harmful to one product countries. It creates barriers in economic markets and discourages entrepreneurship by heightening the risk of investment. Commodity dependency and price volatility, then, are a recipe for one product poverty.

The United Nations Conference on Trade and Development’s 2014 State of Commodity Dependence report shows that high commodity dependence is concentrated in impoverished regions of the world. Sub-Saharan Africa and Western Asia, for instance, have the highest percentage of commodity exports in relation to gross domestic product (GDP). Some of the poorest countries in the world, such as Mozambique, have some of the highest percentages of commodity exports as a percentage of GDP.

The instinctual solution to one product poverty is variance in commodities. In other words, developing countries should strive to increase their revenue-making operations from one commodity to two and then three. These countries should stay away from over-specialization.

By doing so, developing countries can lessen the vulnerability of their commodities to fluctuating markets, which would benefit their economies and encourage individual initiative and entrepreneurship. Households can then take a final step out of poverty as self-sustaining business owners.

The role of developed countries in this equation is to encourage sustainable development. Policies that promote the broader production of commodities, stabilize prices and increase exports must be considered as solutions for one product poverty.

– Rebeca Ilisoi

Photo: Flickr

Mining in Malawi: Understanding the Conflict

The relationship between the mining industry and the country of Malawi is burdened with complexity. Mining in Malawi promises substantial economic growth, yet it simultaneously has the potential to violate human rights and destroy the natural ecosystem.

Malawi profits through the mining industry, as the country is rich in economic deposits of uranium. Both Malawian granite and sandstone host uranium reserves, such as the Karoo sandstone in Karonga, Malawi.

The district of Karonga lies on the northwest side of Lake Malawi. Lake Malawi is one of the only freshwater lakes on the entire continent of Africa and is a key source of livelihood for over 1.5 million Malawians.

While clearly rich in resources, the country itself is impoverished. Due to this, the government has signed many agreements with extraction companies, hoping to increase exports.

Some national organizations are concerned about the mining industry’s effect on the precious and fragile ecosystem of Lake Malawi, yet the government has prioritized economic interests.

In 2007, a subsidiary of Paladin Energy took interest in Karonga due to a uranium deposit in the district. Due to the immense economic potential of the mine, called Kayelekera, the government agreed to let Paladin extract uranium in 2009. The government was issued 15 percent equity in the subsidiary.

As expected, the mine stimulated a crucial boost to the country’s foreign currency account. Over the following 10 years, the uranium industry overall is expected to raise Malawi’s GDP by 10 percent, account for 30 percent of exports and increase exports by 25 percent.

Due to company promises, many people in Malawi flocked to Karonga, hoping the uranium industry would generate employment, build clinics and increase general infrastructure in the new mining community.

Others, however, were not adequately informed that uranium mining was going to take place around their homes. None were aware that the Kayelekera mine would disrupt their entire way of life.

Reporters from Human Rights Watch conducted research for a year in Karonga, interviewing nearly 80 villagers who had been affected by uranium mining. They found that the general lack of government oversight and corporate responsibility harmed Malawians.

The construction of the Kayelekera mine caused villagers to be evicted from their homes. Many were only notified of the relocation at the last minute. Without any time to find other places to stay, these Malawians found themselves temporarily homeless.

While Paladin did offer compensation for the forced removal, the sum was insufficient to completely cover the cost of buying new land and building a new home. The company offered about MWK 50,000 to each family, which currently equates to about $70.

The uranium mining in Malawi damaged maize crops, dried rice fields and destroyed irrigation channels. As most of the villagers around Karonga live off of subsistence farming, threatened agriculture endangers survival.

Secrecy around the operations of the mine led to Malawian suspicion. When the people in Karonga asked the corporation to test the water for contamination, Paladin claimed to have a monitoring system in place. The company then refused to release any results. This lack of transparency has left many villagers concerned for their health.

As the laws surrounding mining in Malawi have not been updated since the Environmental Management Act of 1996, amendments are well overdue. In order to protect the interests of its citizens, the government of Malawi needs to strengthen regulations over extractive corporations, educate its people about the risks of mining, enforce institutional transparency and take measures to mitigate any damage.

The Kayelekera mine was closed in 2014 for repairs, yet the uranium industry in Malawi is just beginning. Moving forward, the Malawian government needs to enforce corporate responsibility on all companies who wish to extract natural resources from their country.

This conflict over mining in Malawi ignites fundamental questions over the delicate balance between economic development and social responsibility. With a more comprehensive legal framework, the government of Malawi may not have to choose one or the other. After further reform, the government can protect its people while simultaneously fostering social, institutional and economic development.

– Larkin Smith

Photo: Flickr

Investing in Uganda

Uganda’s most obvious investment appeal is its location – bordered by Sudan in the north, Kenya in the east, the United Republic of Tanzania to the south, and the Democratic Public of Congo to the west – that offers the nation a powerful base for central trade partnerships as the country acts as a regional hub for investment.

Uganda is a nation that depends on agriculture for economic stimulation thanks to the country’s favorable climate and fertile soils. Investing in Ugandan farming expansion and sustainability efforts will help support the 80 percent of the population working in agriculture, feed the nation and will support economic growth.

According to the State House of Uganda, the country is among the leading producers of coffee and bananas, with exports of tea, cotton, tobacco, fruit, vegetables, and silk contributing to Uganda’s 2014 record GDP of $26.3 billion.

Agricultural opportunities for investors include commercial farming, value addition, fertilizer and pesticide manufacturing, machinery supply, packing materials, and cold storage facilities.

The Agriit Institute of Uganda, an agricultural development advocacy organization, states that growth in agriculture is up to 11 times more effective in reducing poverty within sub-Saharan Africa than development in any other divisions.

The international Food Policy Research Institute (IFPRI) finds that agricultural growth can reduce urban poverty levels as food prices go down. These prices are often lowered when crop sustainability measures are taken through investments in developmental farming technologies.

Uganda offers investment prospects due to the growth in natural resource discovery. According to the Petroleum Exploration and Production Department of Uganda, there have been 21 discoveries of oil and/or gas throughout the nation.

A total of 87 oil wells have been drilled from 21 fields in Uganda. There are currently 3.5 billion barrels of unprocessed oil, with 1.2 billion recoverable barrels in existence. The U.S. Department of State reports that only 40 percent of the oil-rich areas in the region have been explored, which leaves great investment opportunity.

The potential growth and discovery of these natural resources welcome investors into untapped markets licensing for petroleum production, crude oil pipeline construction and maintenance, environmental services, waste disposal and drilling services.

According to the U.S. Department of State, Uganda’s foreign direct investment doubled from 900 million to $1.7 billion from 2011 to 2012 due to investor interest in the oil sector. The Uganda Poverty Status Report of 2014 shows a direct link to these investments and poverty alleviation, stating that the national poverty rate dropped from 24.5 percent in the 2009-2010 fiscal year to 19.7 percent during 2012-2013.

– Kelsey Lay

Sources: Agritt Institute, International Food Policy Research Institute, The State House of Uganda, Uganda Ministry of Finance, U.S. Department of State
Photo: Google Images, Flickr

Hunger in South Africa

South Africa is one of the few countries able to provide its entire population with food. Each individual is able to receive approximately 600 grams of starch, 300 grams of fruit and vegetables, and 150 grams of meat or fish, according to the Food and Agriculture Organization of the United Nations.

Though this may be the case, 11 million South Africans are unsure where their next meal will come from, a concept known as “food insecure.” A quarter of the South African population is currently struggling from malnourishment and hunger. The rural areas are where hunger hits the hardest, and the majority of South Africa’s poor are living in the rural parts of the country.

The reasoning for this is because natural resources are being wasted and are not being put to appropriate use. The cost of food is rising, and many South Africans are finding it increasingly difficult to afford or access nutrient dense foods at an affordable price.

Dr. Gerhard Backebery, Executive Manager of the South African Water Research Commission states, “Although not conclusive, it seems that most poor people are buying and not growing the food that they are eating. At the same time it is of major concern that available natural resources (such as water, soil and plants) are under-utilized.”

People are not merely dying of hunger in South Africa, but more specifically, they are dying from the side effects of lacking proper nutrients.  What people are able to eat is directly stemmed from what they are able to afford. Children, in particular, are suffering from undernourishment and malnourishment; a study in the Eastern Cape shows that some children are only ingesting meat one time per month, therefore they are severely lacking in minerals such as zinc and iron.

One in five children are reportedly stunted from lack of necessary nutrients and minerals.  Their nutrient deficiencies can have a lasting effect on their growth process, causing significant impairment to their physical health and mental development.

For example, iron deficiencies can cause poor attention spans and fatigue, making brain activity slower and learning more difficult.

Food fortification is one of the main methods to help reduce malnutrition and deprivation of nutrients.

Wheat flour, sugar, and maize flour now include essential vitamins and minerals. The addition of fortification in food has led to a reduction in birth defects. Children who are not breastfed, or who have been improperly breastfed, present elevated levels of malnourishment, growth defects, diarrhea, and are at greater risk of HIV and AIDS.

Other factors such as access to clean water, sanitization and health care can have a large impact on resolving hunger in South Africa. They influence health and can lead to maintaining essential nutrients that may otherwise be lost due to diarrhea and dehydration.

– Rebecca Felcon

Sources: UNICEF, Food Bank, Mail and Guardian
Photo: Telegraph

Ethiopia Begins Building New Wind Farm

Ethiopia is the second most populous country in all of Africa. As a result of the nation’s large population and limited resources, Ethiopians are often faced with frequent electrical blackouts. This problem may soon be addressed by Ethiopia’s plans to build Africa’s biggest wind farm.

Ethiopia plans to boost its electrical generating capacity from 2,000 megawatts to 10,000 megawatts within the next five years. Prime Minister of Ethiopia Hailemariam Desalegn has stated, “Various studies have proved that there is potential to harness abundant wind energy resources in every region of Ethiopia.” Much of this increase will stem from the Grand Renaissance Dam that is being constructed on the Nile River.

Ethiopia has made efforts to incorporate wind power in the past with the creation of the Ashegoda Wind Farm. The groundbreaking for the Ashegoda Farm was completed in 2009; however, logistical issues stalled the project. This month, Ethiopia has begun building the farm 780 kilometers north of the capital of Addis Ababa. Because Ethiopia’s energy resources are mostly derived from hydropower, droughts and dry seasons can have a significant impact on the availability of electricity in Ethiopia. Mihret Debebe, CEO of the Ethiopian Electric Power Corporation, states that the new wind power “compliments hydropower, which is seasonal. When you have a dry water season we have higher wind speed.”

Ethiopia has also recently received an investment from a US-Icelandic firm in order to tap the nation’s geothermal power resources.  Ethiopia’s plans for the wind farm will diversify electricity generation from hydropower plants and help Ethiopia become a major exporter of energy in Africa.

– Lienna Feleke-Eshete

Sources: Addis Voice, Al Jazeera
Photo: Inhabitat