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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

Poverty in Montenegro

Poverty in Montenegro
Montenegro is a small mountainous country located in Southeast Europe off the coast of the Adriatic Sea. The country has a relatively small and open economy, which is reliant on energy-intensive industries. On average, Montenegro is one of the least efficient consumers of energy and water in the entire European continent.

Further, urban sprawl and deforestation put a strain on the infrastructure and local service provisions within Montenegro. This also increases exposure to environmental hazards and erodes natural resources. Overall, these issues pose a threat as it makes Montenegrins vulnerable to resource depletion.

Poverty in Montenegro averages at around 8.6 percent with 33 percent in economically vulnerable situations. However, those in the northern region average at around 10.3 percent poverty rates. Unemployment rates in the north, are around two times greater than the national average and citizens there have limited access to public services. This reflects an internal problem within the country, namely regional development disparity.

Gender and age discrimination are two additional issues in Montenegrin society. Although the high-education balance between men and women is equal in Montenegro, women in the workforce are prone to huge gaps in income. They also lack proper political and economic representation, making them especially vulnerable to problems such as domestic violence and general impoverishment should they choose to divorce or remain unmarried.

Another demographic that is overwhelmingly at a disadvantage are the roughly 50,000 internally displaced persons (IDPs) and refugees. These people make up roughly seven percent of the Montenegrin population and are among the poorest in Montenegro. Their poverty rate is roughly six times higher than the average national poverty rate.

Thus, combating social discrepancies and poverty in Montenegro is the pinnacle for evening the proverbial fiscal playing field. This will require reformation of health, employment and social services on both the local and global level.

– Kayla Provencher

Photo: Flickr

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Mining in Malawi: Understanding the Conflict

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

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Tuungane Project Invigorates Population

Tuungane Project
The Greater Mahale Ecosystem in Tanzania is home to rich biodiversity, but an impoverished human population. Pathfinder International, a global nonprofit organization focused on reproductive health, HIV prevention, and maternal health, has launched the Tuungane Project to address reproductive health and natural resource management.

Because Pathfinder sees a direct connection between the health of the environment and the health of the people, they partner with organizations that focus on threats to biodiversity, while they target what they call “improving health of the communities by increasing sustainable livelihoods and increasing access to contraceptives, adolescent and youth sexual and reproductive health, maternal, neonatal, and child health, and primary healthcare services.”

The Tuungane Project’s projects include land and fisheries management, health system strengthening, and reproductive health services. As a result of their efforts, seven new medical personnel have been posted, 66 community health workers have been trained, and 1,106 new latrines have been built by community members. Prior to these improvements, populations of between 3,000 to 5,000 people sometimes had access to only a single health professional.

Key players in sanitation efforts are the beach management units, which have eliminated cases of cholera, a bacterial disease usually spread in water, for the past two years.

The lives and livelihoods of the population depend on the rich natural resources of the Greater Mahale Ecosystem. The Nature Conservancy, a charitable environmental organization, partners with Pathfinder to create a healthy future for this area. By teaching best practices regarding how to best extract resources from their environment, the organization helps villages meet community needs and attain food security. One of the Nature Conservancy’s major efforts aims to enhance fisheries management on Lake Tanganyika, which holds 17 percent of the world’s fresh water.

By uniting conservation efforts with community development, local governance is strengthened, family health is possible and the population can achieve a sustainable livelihood.

– Emily Ednoff

Sources: Pathfinder International, The Nature Conservancy
Photo: Flickr

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Investing in Uganda

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.Investing_in_Uganda

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

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Corruption Kills Millions, Steals Trillions

In a report released by ONE, an anti-poverty organization, it is estimated that corruption causes 3.6 million unnecessary deaths and costs poor countries $1 trillion each year.

Using three different methodologies to calculate the cost of corruption, all three measures indicated that the loss was either $1 trillion or $2 trillion.

In what is called a “trillion dollar scandal,” corrupt business practices, “anonymous shell companies, money laundering and illegal tax evasion” all serve to severely reduce the effectiveness of poverty relief efforts.

While extreme poverty has been reduced to half its original level over the past 20 years and has the potential to be completely eradicated by 2030, corruption is putting much of that progress at risk.

While corruption is damaging in almost all countries, it is especially dangerous in poorer and developing countries and mostly affects children. It is estimated that millions of deaths could be avoided if corruption was combated and recovered funds were reinvested in essential fields.

Furthermore, the money that is siphoned out of poor countries is not from international development aid, which has helped make a considerable improvement, but rather directly from businesses in these countries. The money is generated by domestic businesses and illegally extracted out of the country. The largest source of financial drain is the illegal manipulation of cross-border trade.

The organization found that even recovering a small amount of the money lost to corruption could dramatically affect development. In Sub-Saharan Africa, a small amount of recovered funds could provide an education to an additional 10 million children each year; pay for an additional 500,000 primary school teachers; provide antiretroviral drugs for more 11 million people with HIV/AIDS and buy nearly 165 million vaccines.

The report stresses action that serves to end the secrecy that allows corruption to thrive. If specific policies were implemented that increased transparency and combated corruption in the four areas of “natural resource deals, the use of phantom firms, tax evasion and money laundering,” developing countries could considerably stem the financial drain.

Natural resources in particular can provide a vital source of funds that could greatly increase economic growth in many developing countries. Corruption concerning natural resources is particularly bad, with approximately 20 countries in Sub-Saharan Africa rich in natural resources but receiving few benefits from these reserves.

Specifically, One calls for mandatory reporting laws for the natural resource sectors and publish open data so citizens are able to track where travels from and to, ensuring that the funds are not lost to corruption.

Published in anticipation of the G20 meeting in Brisbane, Australia in November, the organization stresses the importance for the G20 nations to address the issue. Now that the cost of corruption has been defined in real terms, the fight against corruption can become more directed and effective.

— William Ying

Sources: ONE 1, ONE 2, ONE 3, BBC, The Guardian, ABC News, Yahoo News
Photo: Blogspot

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Hunger in South Africa

Hunger in South Africa Starvation
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. However, hunger in South Africa continues to be a prevalent issue.

 

Causes of Hunger in South Africa

 

Thus, 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.”

 

Devastating Health Outcomes of Hunger in South Africa

 

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

African Natural Resources Make the World Go Round

africa_natural_resources.jpg
Countless everyday appliances and gadgets would not exist if it were not for the minerals that come from Africa. From cars to cell phones, laptops, airplanes and batteries, much of what makes the world go round depends on resource-rich African nations that are being fueled by a global commodities boom.

Although much can be said of whether the rising demand for these minerals is actually benefiting those at the bottom of the pyramid, it is certain that emergent African economies are growing thanks to these raw materials. If well-managed, Africa’s mineral resources can lift the continent out of poverty and catapult it toward growth and prosperity for all.

Here are some of the everyday objects that are created with African natural resources.

1.       Cars

The catalytic converters in cars that are made to reduce pollution are made with platinum and rhodium. South Africa alone produces 72% of the world’s platinum and 83% of the world’s rhodium.

2.       Electronics

Devices such as cell phones, laptops, and other electronic gadgets are made from tantalum. Africa provides 71% of the world’s tantalum, with Mozambique leading the region as the source of 24% of the global production of the mineral, followed by Rwanda with 20% of the production.

3.       Jewelry

In 2011, more than 57% of the world’s diamonds, nearly 75% of the world’s platinum and 20% of the world’s gold was found in Africa. Botswana is the world’s second largest producer of gem diamonds, and in 2011, the diamond industry accounted for half of the government revenue.

4.       Batteries

The cobalt used in the electrodes of rechargeable batteries is growing rapidly in demand due to the use of portable electronic devices. In 2011, Africa accounted for 58% of the global production of cobalt, while the Democratic Republic of Congo alone represented 48% of this supply. Mineral mining, however, has been implicated in funding conflict in the country.

5.       Airplanes

Many aircraft parts are made with aluminum alloys, which can account for up to 80% of the jet’s weight. Jet engines also use superalloys that contain cobalt and chromium. South Africa represents 47% of the global production of chromite – used to produce chromium -, while Guinea represents 8% of the world’s production of bauxite, used to make aluminum. Guinea has almost half of the world’s bauxite reserves and is predicted to become a world-leading producer of iron ore in the next decade.

6.       Electricity

Besides coal and gas, Africa produces 16% of the world’s uranium, which is the source of the nuclear fuel that provides 14% of the world’s electricity.

7.       Oil

Last year, Africa produced 10% of all the world’s oil – nearly 9.4 million barrels per day. Leading this production is Nigeria, with 37 billion barrels of proven reserves of oil – enough to keep supplying oil at 2011 levels for the next 40 years.

– Nayomi Chibana
Feature Writer
Sources: African Minerals Development Centre, CNN
Photo: CSMonitor

Poverty in Namibia

Poverty in Namibia

Located on the southernmost part of Africa’s western coast, Namibia is not recognized by most Americans.  Namibia invests heavily in its people’s education and health, possesses a free press, competitive business markets and one of the lowest rates of corruption in Africa.

However, it is marked by an extremely large economic divide among its citizenry.  Although it is technically a middle-income country, there is much poverty in Namibia as a result of income inequalities.  The UNDP rates the income disparity in Namibia as the highest in the world, at 70.7 on a scale of 0 to 100. The top 5 percent of Namibians control 70 percent of the country’s GDP, while the poorest half of the population controls only 3 percent of GDP.  Poverty is most prevalent in rural areas of the country and among women, as is often the case.  Women head around 40 percent of households in Namibia, and these households are the poorest in the country.  Half of the country’s population lives below the poverty line.

The government’s poor land redistribution contributes significantly to Namibian poverty.  During the era in which Namibia was ruled by the apartheid regime in South Africa, large white-owned commercial farms dominated agriculture with cattle production.  The Namibian government has now divided these farms up and given the portions to natives in Namibia, still committing them to cattle production.  Essentially, the government has reproduced the apartheid era farms, but in a weakened form, as they are smaller and no longer subsidized by the South African government.  Experts suggest that a shift towards tropical agriculture and crop cultivation rather than cattle production is the solution to these land distribution issues.

Namibia also faces a severe HIV/AIDS epidemic, in which 19.7 percent of the country is afflicted.  As a result, life expectancy in the country has declined from 61 to 49 years.  Promoting economic growth in the country is difficult due to an under-educated and low-skilled workforce.  The economy is subsisted largely on the export of primary resources for little profit.

USAID uses its “ABCDE’s of development” to combat poverty in Namibia:  AIDS and TB prevention, care, and treatment, basic education, community-based natural resource management, democracy and governance, employment creation/enterprise development.  Through PEPFAR, the US has given $42.8 million in funds for disease management and prevention.  USAID has also provided training to 4,000 teachers in Namibia in the hope of developing human capital to form a more skilled workforce.  USAID also promotes community-based democratic programs to help strengthen the country’s democracy and governance.

Namibia, rich in natural resources such as diamonds, uranium, lead, gold, copper, zinc, bountiful fisheries, natural gas, and some of the most spectacular and varied scenery and wildlife in the world, could greatly benefit the world’s economy. It also benefits from an extremely developed infrastructure and a politically stable government.  If the country can overcome its disease issues, poor land redistribution and income inequalities, it will be an asset to the global economy.

–  Martin Drake

Source: World Bank, USAID, IRIN News
Photo: Steps For Children

EITI Improves Transparency and Payment

EITI Improves Transparency and Payment
The G8 Summit in Northern Ireland on June 17 focused heavily on transparency and trade and brought the EITI — the Extractive Industries Transparency Initiative — into the spotlight. Immediately after the G8 Summit, it was announced that Italy and Germany would be implementing and piloting EITI, respectively, a step forward towards increased transparency for extractive industries worldwide.

Transparency for extractive industries is particularly necessary for developing countries that suffer from what is known as the resource curse– the trend for countries with high amounts of natural resources to be low in development. The resource curse is often perpetuated by irresponsible extraction processes that disrupt life in the host country and negatively impact its economy.

EITI, an initiative first introduced in 2002 by UK Prime Minister Tony Blair, focuses on transparency in the extraction industries — mining and logging being the largest ones worldwide — so as to address at least one element in the “resource curse”: the countries from which the extraction companies originate. While the initial implementation of EITI standards between 2002 and 2005 was aimed at voluntarily committing companies, by 2005 EITI standards took the form of “a disclosure standard implemented by countries.”

Stakeholders in EITI include over 70 of the world’s largest oil, gas, and mining companies, including Britain’s BP, America’s Chevron, Britain and Australia’s Rio Tinto, and Brazil’s Vale. The transparency standards include improved payment and revenue reporting on the parts of both company and host country. It aims to answer the questions, “How much are governments receiving?” and “Where does this money go?”

The G8’s commitment to and support for the EITI shows a continued dedication to improving transparency worldwide and addressing the resource curse. While EITI still faces obstacles such as ensuring members procure timely reports and that these reports are not so delayed as to prove entirely unhelpful. At present, 23 countries are considered EITI Compliant, and 16 have status as EITI Candidates including the recent additions of the Philippines and Honduras.

– Naomi Doraisamy
Source: Christian Science Monitor, EITI, Thomas Reuters Foundation
Photo: Christian Science Monitor