ZrI | l i g~Lo~ D E V E L O P M E N T I N P R A C T I C E Taking Action to Reduce Poverty in Sub-Saharan Africa IERD 22922R3 GREG SE - N JIA IN 25*X SA!N , =W--{b Postneonatal mortality Neonatal mortality 0 1980 1985 1990 population has access to safe water; in rural areas 42 percent of the population has access to safe water, compared with 70 percent in urban areas. The urban- rural difference in Zambia is an extreme example-investment in infrastruc- ture has given 88 percent of the urban population, but less than 20 percent of the rural population, access to safe water. FOOD SECURITY. Most of the people in Africa who chronically face food insecu- rity are impoverished. They lack access to food because they lack income, 50 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA assets, or entitlements with which to produce, buy, or exchange sufficient food. (See Sen 1981, which discusses the importance of entitlements in the context of starvation and famines.) Because this lack of income and assets also defines poverty, chronic food insecurity and severe poverty are virtually the same, and so is the analytical framework for analyzing both. Food insecurity, however, also arises for other reasons (see World Bank 1986, 1988b; Binswanger and Landell-Mills 1995). Transitory food insecurity is caused by such factors as seasonal changes in the availability and price of food at the household, regional, or national level. Civil conflict, droughts, and famine create a special type of transitory food insecurity that affects the poor and vulnerable most severely. Transitory food insecurity may lead to chronic poverty and destitution to the extent that temporary factors destroy assets such as land, food storage, or livestock. This situation has been seen in a number of African countries, notably Burundi, Liberia, Rwanda, Somalia, and Sudan. NuTRITIoN. Although malnutrition is declining in every other part of the world, nutritional status has remained stagnant or has deteriorated in much of Sub- Saharan Africa in the past decade. The effects on children can be serious. In Burundi, Ethiopia, Madagascar, Malawi, and Rwanda nearly one-half of all chil- dren are stunted in height for their age; in Ghana, Mali, Niger, and Nigeria one child in ten is wasted (low weight for height). With a few exceptions, such as Botswana, Cameroon, and Zimbabwe, at least one-fifth of African children are underweight. Micronutrient malnutrition, which is "devastating for preschool children and pregnant women" (World Bank 1994e), is widespread. Economic decline and poverty are the root causes of malnutrition. Figure 1.8 illustrates the effect of income levels on anthropometric measurements. FIGURE 1.8 ANTHROPOMETRIC INDICATORS BY HOUSEHOLD INCOME GROUP, ZAMBIA, 1991 Percent 80 Share of expenditure on food 70 60 50 40 30 Underweight 20 10 _ - 0 Less than ,o000 10,001-25,000 50,001-75,000 100,001 and over Income group (kwache) Source: World Bank 1993j. A PROFILE OF POVERTY IN SUB-SAHARAN AFRICA 51 BOX 1.8 THE CYCLE OF POVERTY AND societies. Malnutrition can increase MALNUTRITION the risk of premature death. Depend- ing on the underlying levels of mor- The nexus among poverty, hunger, tality in the population, the odds of and malnutrition is obvious: people dying increase exponentially (at a are usually hungry and malnourished compound rate of about 7 percent) because they are poor. Thus, nutri- for each percent of deterioration in tional status is a singularly sensitive the weight-for-age figure. This recent indicator of both current and past dep- finding (Pelletier 1991) is particularly rivation. At the global level, regres- significant for Africa, where moder- sion analysis indicates a strong rela- ate malnutrition is the primary nutri- tionship between the prevalence of tion problem. Malnutrition increases underweight children and gross na- the incidence and severity of sick- tional product (GNP) per capita (ACC/ ness by 50 percent and reduces SCN 1993). Increasing GNP per capita learning ability by 10 percent and from about $300 to $600 is associ- adult productivity by up to 20 per- ated with a decrease in the preva- cent. The prospective costs of micro- lence of malnutrition from about 34 to nutrient deficiencies, which can cause 17 percent. Some countries, however, disease, disability, and death, are in such as Egypt and Zimbabwe, have some respects even higher. low levels of malnutrition for their in- The poor are disproportionately come level, probably because of sig- affected by malnutrition. Their nutri- nificant social sector programs. tional status is more likely to have Poverty and malnutrition are linked intergenerational consequences, and in a vicious cycle: not only does pov- it may limit their ability to benefit from erty cause malnutrition, but malnutri- other social services, such as educa- tion, particularly in young children, tion. Breaking the poverty-malnutri- contributes to low future productivity, tion nexus is a prerequisite for im- seriously constraining the develop- proving the human capital of the poor. ment of both individuals and Although the lowest-income groups spend a greater share of their income on food than do higher-income groups, they are substantially less well nourished. The relationships in the figure are at the heart of the problem of poverty and human capital development in Sub-Saharan Afiica. Other factors contributing to malnutrition include poor understanding and awareness of nutrition, at both household and national levels; absence of a distinct institutional base for nutritional interventions; poor coordination among ministries responsible for nutrition-related actions; and limited political will. But action can and must be taken (see Reutlinger and Selowski 1976; Berg 1981). Box 1.8 presents a review of the problem. Poor households need help with access to food and health services to improve their nutritional status. In addition to agricultural and health poli- cies that promote the welfare of the poor, community-based nutrition projects, 52 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA or significant nutrition components in social sector projects, can make a difference. Many countries in Latin America (for example, Chile) and Asia (for example, India-in Tamil Nadu State-and Thailand) have invested substantially in explicit programs for nutrition and early childhood develop- ment. The Africa Region's nutrition portfolio is new and still quite small, although growing. IDA-supported nutrition projects in Madagascar and Senegal are good examples of community-based nutrition interventions implemented with NGO support. In addition to replicating such successful efforts, action must be taken to improve household access to food and health care in early childhood development programs, social funds, human resource develop- ment projects, community health, primary education, and agricultural ex- tension. Recognizing the need and identifying how to make a difference are the first steps in breaking the poverty-malnutrition connection. Notes 1. See appendix F for recent estimates. The estimate is based on purchasing power parity-adjusted dollars in 1985 prices. The 1990 average GNP per capita at 1992 prices for Africa, using official exchange rates, was calculated as $530 (World Devel- opment Indicators, World Bank 1994m). 2. See also Easterly and Levine (1995), who, on the basis of econometric analy- sis, suggest that Africa's poor growth in the past can be explained by low schooling, political instability, little financial depth, high black-market premiums for foreign exchange, high government deficits, inadequate infrastructure, and ethnic conflict. C H A P T E R T W O The Role of African Governments and Civil Society African governments must be at the center of efforts to reduce poverty in their countries, yet their policies and strategies do not at present demonstrate sufficient political commitment to taking the necessary actions.' This chapter explores the evolving role of African govemrnents in the fight against poverty and examines statements by African government leaders and parliaments, letters of development policy prepared for the World Bank, and poverty assessments and other background papers. It reviews the roles of other development partners within the country-NGOS, community-based institu- tions, and the private sector. It incorporates the views of a number of Africans who were consulted during the preparation of this report and makes use of available public documents and of discussions held within the Bank. Never- theless, this chapter is by no means a comprehensive statement on the role of governments and civil society in poverty reduction. The Evolving Role of Government The role of government is in a state of flux in Sub-Saharan Africa. More and more governments are being elected in a democratic fashion, thus gaining credibility within and outside their borders.2 This process of democratization demands that the role of government change. As governments move out of public enterprises and other productive areas into a more policy-oriented area, their role is being redefined. They are beginning to concentrate on providing public goods and services, intervening in the economy only when market failure occurs. A principal role of governments is to set the development agenda. As real democratization evolves, that agenda must increasingly be based on the de- mands of the electorate, rather than those of the donor community, with its 53 54 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA particular perspective on broad economic development. This shift will bring new challenges for governments and donors and justifies a broadly based, participatory process of policy formulation. Each government is responsible for ensuring that the agenda fits its country's poverty reduction objectives and can be effectively implemented. Government Commitment to Poverty Reduction Leaders in Ghana, Kenya, Malawi, and South Africa, among other countries, have declared their commitment to poverty reduction. For example, the president of Kenya has advocated a program for dealing with the effects of structural adjustment on the poor. Although the program addresses many issues contribut- ing to poverty, the strategy outlined does not yet have the financial backing for implementation. Nevertheless, the current government in Kenya has officially recognized poverty as a serious issue, which many previous governnents have not. Although leaders of African nations often express general aspirations for poverty reduction, few governments have developed comprehensive and specific poverty reduction policies. Those government policies that do assist in reducing poverty are invariably referred to in the poverty assessments prepared by the Bank. The following is a summary of poverty-reducing policies already in place in various countries at the time their poverty assessments were completed. Malawi's new government made a strong commitment to reduce poverty and is in the process of designing its strategy. A collaborative workshop was held, with participants from government, the private sector, academia, do- nors, and NGOS, to formulate an action plan for poverty reduction and define priorities. A positive feature of the plan is that actions were assigned to various participants for implementation and accepted by them. In November 1995 the government of Malawi and the World Bank prepared a report on human resources and poverty in which many aspects of the strategy outlined in box 2.1 were confirmed. The government of Senegal has decided to design an action program for the "fight against poverty." A ministerial consultative committee will meet as needed to discuss the needed actions. Having a committee of high-level people in charge of the issue gives poverty high visibility and increases the government's accountability for poverty reduction. The government of Zimbabwe presented a comprehensive policy paper on its Poverty Alleviation Action Plan at the consultative group meeting held December 1993 in Paris. This policy document clarified the government's new focus, build- ing on its experiences in implementing the Social Dimensions of Adjustment program. The intention is to broaden and enhance the overall scope, coverage, and impact of targeted social programs, with special emphasis on programs to create employment and foster self-reliance (box 2.2). Recently a poverty forum was established in Zimbabwe to strengthen the work on reducing poverty, with par- ticular emphasis on increasing the effectiveness of initiatives for poverty monitor- ing and reduction and on providing an opportunity for cross-sectoral debate. THE ROLE OF AFRICAN GOVERNMENTS AND CIVIL SOCIETY 55 BOX 2.1 MALAWI'S POVERTY REDUCTION and literacy programs, is another pri- STRATEGY ority sector for improvement. A large share of these educational improve- The government of Malawi is develop- ments will be funded through the ing human capital and broadening in- Malawi Social Action Fund. come and employment opportunities to The District Focus for Rural Devel- improve the living conditions of its poor opment, a major decentralization and majority. It is promoting privatization of administrative strategy being consid- commercial parastatals (large govern- ered for implementation, would re- ment enterprises with a commercial quire all central ministries and depart- function) and removing restrictions on ments to transfer to the local level production and marketing of goods and their powers for identifying, planning, services. and implementing district-specific The government will allocate 15 projects. Projects and programs at percent of the total investment bud- the national level or affecting more get for health to increase access by than one district would be handled by the poor to basic health care. Educa- the central ministry or department tion, particularly primary education (Kakhobwe 1995). BOX2.2 MOBILIZINGSUPPORTFOR geted social programs; informal sec- POVERTY REDUCTION: THE CASE OF tor development; institutional and hu- ZIMBABWE man capacity building; targeted social safety net programs; and improved Zimbabwe's Poverty Alleviation Ac- social policy development and moni- tion Plan (Zimbabwe 1 994a) summa- toring. The employment-related activi- rizes the country's strategy for reduc- ties will include labor-based public ing poverty through targeted social works programs, entrepreneurial reforms and reorganization. It pre- development programs, support for sents the operational strategies that youth and women's self-help projects, integrate a more streamlined process and promotion of greater participation of social assistance and will encour- in productive activities. age more participation by beneficia- The program development task ries. A companion framework docu- force, which had designed the 1993 ment (Zimbabwe 1 994b) outlines the Poverty Alleviation Action Plan policy details of the action plan. The three- document, drew up the 1995 plan year time frame for program initiatives under the leadership of the Ministry is the minimum required to establish of Public Service, Labour, and Social and institutionalize the program. Welfare, with substantive technical The central component of the imple- support and inputs from other Zim- mentation strategy is a social and po- babwean ministries and U.N. agen- litical mobilization process for introduc- cies. The concept and formulation of ing the Poverty Alleviation Action Plan the implementation strategies also to civil society. Other components of benefited from contributions by other the plan include community-based pro- development partners, including the grams for poverty alleviation-for ex- public sector, the private sector, NGOS, ample, institutional developmentof tar- and the donor community. 56 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA Governments now need to define their priorities for poverty reduction more precisely, with or without the help of donors. The Blantyre Statement on Pov- erty Alleviation in Sub-Saharan Africa (appendix D) states this clearly: In too many cases, host countries are not in the driver's seat. Once the institutional framework and national policy priorities are agreed on by government and donors, all parties should abide by the "rules of the game" and the chosen policy priorities. For governments, the litmus test lies in their beginning to say . . . no to the lure of "free" project inputs or more technical assistance.... For donors, the litmus test is to learn to sit in the back seat and adjust their programs and projects to the agreed-on policy framework. During preparation of this report a request was sent to all country officers in the World Bank asking for their comments on whether the country for which they were responsible had made any significant policy statements on poverty reduction. An exact reading is difficult, but of the responses received, Comoros, Ghana, Kenya, Lesotho, Malawi, Mozambique, Niger, Nigeria, South Africa, Uganda, Zambia, and Zimbabwe were reported to have made public policy statements about the importance of poverty reduction, although action may not necessarily have followed. Benin, Burkina Faso, Central African Re- public, Congo, C6te d'Ivoire, Equatorial Guinea, Madagascar, Mali, Tanzania, and Togo were reported not to have made official statements, but in most, progress is clearly being made on the basis of recent administrative actions to establish poverty reduction programs. The previous government of the Gambia had made a statement, but whether the current government will follow up is not known. Senegal is exploring specific moves in collaboration with the Bank.3 Social Sectors The Bank's poverty assessments usually find that governments have an unsat- isfactory record of public expenditures on the social sectors, such as primary health care and education. Some governments that are allocating significant amounts of their budgets toward these sectors are not necessarily distributing the expenditure in a desirable fashion. For example, the poverty assessment for Benin indicates that nearly one-third of its recurrent budget was allocated to the health and education sectors, but the money goes primarily toward salaries and higher education (World Bank 1994b). Similar problems were noted in Ghana (World Bank 1992b) where the urban bias was particularly severe, but substantial changes are taking place. Distribution of public expen- ditures was also a problem in Cape Verde, reflected in a bias toward basing more teachers in urban areas (World Bank 1994h). The Ghana Extended Poverty Assessment found that investment in capital projects for education was falling far below initial targets and was especially biased against poorer regions. The incidence of public sector social spending in Ghana, compared with some other countries, shows that Ghana compares THE ROLE OF AFRICAN GOVERNMENTS AND CIVIL SOCIETY 57 TABLE 2.1 INCIDENCE OF PUBLIC SECTOR SOCIAL SPENDING, GHANA AND SELECTED COUNTRIES (percentage share of expenditure, for poorest and richest quintiles) Health Education Country Poorest Richest Poorest Richest and year quintile quintile quintile quintile Ghana, 1992 16.2 21.2 11.2 33.6 Brazil, 1985 14.3 19.1 16.7 41.7 Colombia, 1992 19.8 21.3 28.0 12.2 Indonesia, 1989 15.4 29.3 11.5 28.7 Kenya, 1993 16.7 20.7 14.0 24.0 Malaysia, 1989 26.0 13.0 29.0 11.0 Uruguay, 1989 32.9 14.6 37.0 10.6 Vietnam, 1992 11.1 44.6 12.0 29.0 Source: World Bank 1995f. well in education (see table 2.1) but not in health. Other issues raised in the poverty assessments were lack of supplies and equipment in health centers, as was the case in Rwanda even before the recent conflict. In contrast, many governments have increased their budgetary allocations to primary health care, education, and water supply or have focused on im- proving their service delivery. Cape Verde, Ghana, Guinea-Bissau, Mauritania, and Uganda are examples of countries that have either increased the share of social sector spending for primary services or have improved service delivery and coverage as part of their policies and strategies. Some governments have prepared policy papers on poverty reduction, which shows an effort to address these issues. Ethiopia, for example, designed both rural and urban strategies for poverty reduction as part of its 1993-94 safety net program. In rural areas the government provided interest-free loans for farm inputs such as oxen, hand tools, and seeds for the poorest farm households. For the urban poor, the government financed labor-intensive pub- lic works and certain programs of targeted subsidies. Labor Markets Restrictions on labor markets can hurt the poor. Governments often inadvert- ently perpetuate these distortions, as illustrated in many poverty assessments. A microenterprise tax in Benin is based on average income and is therefore biased against small enterprises and their employees. Cape Verde restricts imports by the informal sector, in which many of the poor are traditional employees. Rwanda, before its recent civil conflict, restricted the movement of people from rural to urban areas, causing the rural population to increase its demands on the already degraded land. Mauritania's investment code favors 58 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA large capital-intensive enterprises, reducing opportunities for labor-intensive microenterprise development. Rural Development Considerable changes designed to reduce the role of governments in agricul- tural development have already taken place and are going on. State involve- ment in some countries, however, continues to constrain growth of the rural sector. In addition, policy is often specifically biased against smallholders who are, more often than not, the poor. In Rwanda state intervention in the formal coffee sector biased government support toward this cash crop and therefore tended to ignore diversified smallholders in providing services. For many years the same was true in Malawi, where the government, in an effort to maintain high world prices, licensed burley tobacco farming by large estate holders only. Recently, that policy was changed, with a direct positive effect on smallholders' incomes. Licensing of smallholders to grow burley tobacco is being expanded. In contrast, land tenure policies in Malawi limit farmers' use of land as collateral for long-term investment and so constrain agricultural develop- ment. The fundamental issue here is promotion of an efficient market for land either through traditional community systems or through more formal land- titling arrangements, when traditional systems have broken down. In South Africa the landless-like the poor and economically disenfran- chised among smallholders in an increasing number of African countries-are demanding action on land redistribution. These demands will need to be addressed in a comparatively short time or, as the experience of numerous other countries demonstrates, land reform will become an increasingly politi- cized issue, with the potential to destabilize the economy and hinder growth. Indeed, in Zimbabwe the government's failure to implement effective land reform has increasingly politicized the issue. This failure not only re- moved many attractive solutions to the land distribution problem from the political agenda but also contributed to continuing uncertainty about issues that are fundamental to investor confidence, such as property rights. These are but some of the government policies that have had a detrimental effect on rural development. Another negative impact occurs when provision of infrastructure is skewed toward urban areas, leaving rural areas inadequately served. This issue will be taken up in the next chapter in connection with the urban-rural balance of Bank lending programs. Letters of Development Policy Another avenue for identifying policies related to poverty reduction is through letters of development policy (LDPs), which are submitted to the Bank in support of government requests for financing structural adjustment credits. LDPS are generally focused on long-term growth policies, with little or no THE ROLE OF AFRICAN GOVERNMENTS AND CIVIL SOCIETY 59 emphasis on measures that increase the participation of the poor in growth. Few of the policies in the LDPs are outside the narrow requirements of the structural adjustment program supported by the credit. The assumption im- plicit in the LDPS is that the growth resulting from improved macroeconomic policy supported by the credits will lead to increased employment of the poor and hence contribute to poverty reduction. Labor-intensive growth, however, is rarely an explicit objective of the LDP. Indeed, it is not at all clear that macroeconomic or even sectoral policies have been designed to achieve labor- intensive growth. Although such policies as exchange rate adjustment make imported capital goods more expensive, the govemments of many countries still provide incentives to use capital rather than labor (see, for example, World Bank 1994g). Most LDPs emphasize the importance of liberalizing trade, increasing tax revenue, reforming the civil service, creating an enabling environment for private sector development, liberalizing the agricultural sector, reforming public enterprises, and deregulating prices. Most address poverty reduction in the context of the need to develop human resources, primarily by increas- ing or protecting the share of public expenditures that goes for education and health care, with an emphasis on the primary sectors. Allocations are rarely specified for the primary services; rather, the requirement usually addresses broad sectoral allocations. Many LDPS outline measures to mitigate the effect of structural adjustment on the poor through labor-intensive civil works (see box 3.8). These measures include temporary subsidies on prices of essential consumer goods and some- times direct transfers of income to the poor. A good example of an LDP with a strong focus on poverty reduction is that prepared for the Zambia Economic and Social Adjustment Credit. Apart from emphasizing the importance of long-ran growth and social sector development to poverty reduction, the Zam- bia LDP also acknowledges that economic adjustment measures may cause short-term economic hardship for the vulnerable and poor. Although cost- effective targeted programs should be supported, a much stronger strategy would make poverty reduction a pervasive theme of the LDP. The Bank should require this emphasis in all future LDPs. Reducing Poverty through Improved Institutions Strengthening African govemment institutions for planning and implementa- tion is a central requirement of long-term development and a number of donor programs. The African Capacity Building Foundation is addressing this issue. An increased focus on strengthening govemmental capacity also requires long-term change in the way development agencies do business and coordi- nate and plan activities with each other and with African govemments. The strengthening of govemmental capacity to plan and implement pov- erty reduction actions requires particular attention to capacity in a number of specific areas: 60 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA * The ability of service delivery institutions to reach poorer regions and communities and specific social groups within those communities (diffeerenti- ated by gender, income, age, ethnicity, or other factors) and to do so in a manner that responds to the needs and priorities of the poor. Effective man- agement of services such as health care, education, water and sanitation, and agricultural extension has to be decentralized to allow for decisionmaking that reflects local priorities. * The ability of African countries to implement effective systems for moni- toring poverty and to use household-level data disaggregated according to r egion, gender, household structure, and other characteristics in policy analy- sis. In most African countries this capability is still limited despite recent initiatives, such as the Social Dimensions of Adjustment program and the Statistical Capacity-Building Initiative in Sub-Saharan Africa. Participatory analysis, which incorporates the perspectives of the poor themselves, can provide significant feedback on how the poor view changes in their liveli- hoods and on the services and programs intended to assist them. * The ability to plan and implement targeted programs that address particu- lar constraints faced by specific groups among the poor. In Africa care of the poor has generally been carried out by kinship or community institutions. Yet most governments face the need to mitigate the effects of various kinds of "shocks." The ability to implement emergency programs needs to be main- tained and developed, even in times of relative security. The civil service is hampered by lack of sound leadership. Although institutions need to be strengthened, much of the civil service in Africa is made up of talented and educated people whose potential has yet to be tapped. Existing personnel are currently underused. Incentives do not exist that would encourage civil servants to perform in the best interests of the general public and, in particular, of the poor. Good public policies for poverty reduction will never be implemented until those who must carry out these policies have the motivation and incentive to do so. The perception that the civil service is constrained by lack of government commitment came out clearly in the workshop on poverty reduction held with twenty African government officials, academics, and representatives of NGOS in Norway in early 1995 (box 2.3). The Role of Civil Society Civil society, in general, has an important role to play in establishing and reviewing priorities and actions for poverty reduction programs. Nongovernmental Organizations NGOs are acting more and more as internediaries between governments and the poor as the role of the state changes. Governments are increasingly aware of the THE ROLE OF AFRICAN GOVERNMENTS AND CIVIL SOCIETY 61 BOX 2.3 AFRICAN PERSPECTIVES ON Saharan Africa (World Bank forth- POVERTY REDUCTION coming). The Oslo group reached a strong The Oslo meeting on poverty as seen consensus on the following issues: from an African perspective was held a Poverty reduction cannot be in early 1995. Twenty distinguished achieved until African leaders make Africans were among the participants an unequivocal political commitment in this conference, which was cospon- to that objective; this is not only good sored by the Norwegian Royal Minis- economics but also good politics. try of Foreign Affairs, the Norwegian InstituteforApplied Social Science, and * Africa's crisis of confidence about the World Bank. The discussions taking action is both unnecessary and stressed the need to create a macro- self-defeating. The capability to reduce economic policy framework for pov- poverty largely exists in most countries, erty reduction efforts, improve social provided the government establishes services for human resource develop- a clear mandate to do so through a ment, foster coordination among de- broadly based, sociopolitical coalition. velopment partners, expand the role * International assistance should of communities and the poor in be made available primarily to gov- designing and implementing poverty- ernments that make convincing long- reducing programs, and monitor and term political and strategic commit- analyze poverty. These recommended ments to poverty reduction. Assis- actions, although not new, are never- tance to countries that establish cred- theless critical. Their implementation ible poverty reduction strategies is crucial to poverty reduction in Sub- should be increased. important role of NGOS in poverty reduction and are beginning to trust NGOs to undertake collaborative activities. NGOS are also working with the Bank and other donors to promote the well-being of the poor. Indeed, a recent position paper prepared by OXFAM International, which supported the eleventh replen- ishment of IDA, reinforced many themes in this report, such as the focus of lending on poverty reduction and the critical role of CASs (OXFAM 1995). NGOs are a significant potential force for promoting poverty reduction in Africa. They have, for example, pioneered participatory methods in project design and implementation and are strong advocates of strategies that view the poor as economic and social actors rather than passive recipients of wel- fare. NGOs have also been involved in most relief programs dealing with the effects of sudden shocks, such as drought and civil conflicts. The importance of broader institutional development within civil society is also clear. Mature and effective nongovemmental institutions-in such fields as national and local news media, religious organizations, trade unions, policy research, and advocacy groups-can strengthen mechanisms of ac- countability for public policy and ensure that diverse groups in society have a voice in formulating poverty reduction measures.4 62 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA Community Structures and Organizations Strong institutions for and of the poor allow poor rural and urban communities to help themselves and to implement actions that address the issues and constraints they see as priorities. Improved organization for the poor can contribute to: * Increasing production through organizing labor and material resources more effectively * Improving the sustainability of natural resource management through par- ticipatory planning * Supporting social infrastructure at the community level through mobiliza- tion of resources and labor * Assisting local institutions to make them more responsive to the needs of the poor * Providing a framework of cooperative action to assist vulnerable house- holds and individuals. Support for strong community organizations has proved effective. Tradi- tional leadership structures and community support groups have often filled the gaps left by ineffective or nonexistent govemment services. Because com- munity groups have served this purpose effectively in the past, their efforts should be the basis for future programs. Official action to assist the poor has often ignored or circumvented these groups, with disappointing results. A growing number of such groups have been key partners in projects and pro- grams that directly benefit the poor. Involving the Private Sector National economic policy and strategy is based on the premise that the private sector includes the majority of the poor, such as small farmers. Many of these small farmers need credit for their productive activities. The need for small- scale credit is particularly crucial for women, who typically operate and manage many farming activities and other small enterprises. The delivery of small-scale credit is generally accepted as vitally important in stimulating the private sector and contributing to growth and poverty reduction. During the past twenty years, practitioners in business finance, banking, and poverty alleviation have pioneered ways to engage the poor in the private sector in the effort to reduce poverty. Indonesia has created a highly profitable bank, Bank Rakyat Indonesia, with 10 million rural savers and 2 million rural business borrowers. In Bangladesh borrowing groups are used to cut transac- tion costs among 1 million poor, self-employed female members of the Grameen Bank. These experiences illustrate a number of principles that are relevant for poverty reduction: THE ROLE OF AFRICAN GOVERNMENTS AND CIVIL SOCIETY 63 * Private banks gravitate to large transactions with affluent borrowers. They probably should not be expected to deliver small-scale financial services to low-income clients. * Banking institutions with a long-term vision of the common good can be capitalized on to assist the poor in initiating small-scale programs for entry- level economic development. By lowering information costs through special- ization and assisting the poor in initiating economic development and innova- tion in delivery systems, banks can operate profitably in markets with small transaction sizes and less affluent clients. * Poor entrepreneurs possess the same survival skills as affluent ones. They save money, carefully apply their entrepreneurial energy, and repay debts to maintain access to future loans. * Large-scale solutions are required to expandpoor people's participation in their country's economy. Investment in self-sustaining institutions that finance the poor is a comparatively cost-effective use of scarce subsidies. * An investment orientation is preferable to charity. Independently respon- sible borrowers and institutional managers perform better when risk is in- volved. Talent and energy are valuable resources. Individuals possessing them can be attracted to both entrepreneurship and to public-purpose banking, but only if given enough time and support to succeed. Notes 1. Much of this chapter is based on the senior policy workshop on poverty reduction in Sub-Saharan Africa, which met in January 1995. The workshop was arranged jointly by the Norwegian Royal Ministry of Foreign Affairs, the Norwegian Institute for Applied Social Science, and the World Bank. It was held to explore and understand the African perspective on poverty reduction. World Bank (forthcoming) contains a summary of the meeting. 2. More than thirty elections have taken place in Africa in the past five years (World Bank 1995c). 3. Since August 31, 1995, the number of countries that have made public state- ments about the importance of poverty reduction has doubled. 4. See Dreze and Sen (1989) for a discussion of the importance of newspapers and the dissemination of inforrnation in providing early warning systems and stimu- lating public debate on hunger and poverty, which can have a major effect on their reduction. C H A P T E R T H R E E The World Bank's Response to the Challenge of Poverty T his chapter assesses the Bank's operational work and its likely effect on poverty reduction. Three principal programmatic elements serve as the basis for examining the Bank's strategy for poverty reduction in Sub- Saharan Africa: poverty assessments, country assistance strategies (CAss), and recent and proposed lending programs. The Strategy for Poverty Reduction The assessment of the Bank's operational response is based on the three parts of the Bank's poverty reduction strategy outlined in World Development Re- port 1990 (World Bank 1990). I Poverty reduction cannot be achieved and sustained without growth and increased employment opportunities for the poor. m Growth, although necessary, is not sufficient unless critical social ser- vices such as basic health care and primary education, water supplies, and sanitation are made available to the poor. * Narrowly targeted interventions may be necessary to provide additional assistance to very poor and vulnerable groups when growth or broad social service programs are insufficient. The Bank's strategy for poverty reduction can be divided into three opera- tional phases (see figure 3.1). The research and assessment phase is centered on the poverty assessment and brings together household surveys, poverty profiles, participatory poverty assessments (PPAS), beneficiary assessments, public expenditure reviews, country economic memoranda, and sector re- views. The discussion and strategy formulation phase focuses on the country 64 THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 65 FIGURE 3.1 BUILDING A POVERTY-FOCUSED LENDING PROGRAM: THE PROCESS IN THE WORLD BANK I Discussion and l | formulation of policies Implementation Research and assessment 0 and strategies and evaluation Public expenditure | Country l reviews dialogue Household memorandum paperoupt(enmc surveys I I=\ Poverty reviews profile Participatory poverty Pov t assessment assmn rga Beneficiary assessment Lessons learned l ~~~~~~~~~~~~~~(Operations l l ~~~~~~Evaluation Department) l l dialogue and on the development of the CAS, the main document outlining the Bank's operational strategy in a country. The implementation phase includes lending and nonlending outputs and evaluations of performance. The starting point for the poverty assessment is a country assessment of poverty, using a poverty profile that provides a statistical overview of the extent of poverty. To understand the needs of the poor, PPAs and beneficiary assessments are conducted. Systematic client consultation is carried out in all phases, with all types of clients, Social sector reviews, public expenditure reviews, and country economic memoranda also contribute inforrnation and supplement the poverty assess- ment. These reviews, along with the poverty profile, attempt to answer the questions: Who are the poor? Why are they poor? How poor are they? Where are they located? The poverty assessment identifies policies and strategies for reducing poverty and proposes an action plan. The CAS is prepared on the basis of the earlier broad statement of the business plan for each country. (At times, however, a recently prepared CAS may drive the business plan.) The CAS summarizes the Bank's analysis of the country's economy and its most important policy issues, defines the Bank's assistance strategy, and focuses on a strategy for reducing poverty, which is derived from 66 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA the poverty assessment and other related economic and sector work. The CAS also contains a proposed lending program for the country. The projects outlined in the lending program should reflect the priorities of the CAS and the country's commitment to and prospects for economic and social development. The final phase in the program of action is implementation of the Bank's lending program, in the form of lending operations, and preparation of the Bank's numerous nonlending outputs, such as economic and sector work. Assessments by the Bank's Operations Evaluation Department (OED) provide feedback in the form of conclusions on best practices. Throughout the three phases the Bank-country dialogue takes place bilat- erally and within the context of consultative groups and other forums. Many sector reviews uncover policies that inhibit the productivity of the poor, con- strain the generation of income-earning opportunities for the poor, or hamper the access of the poor to social services. The poverty assessment and eco- nomic and sector work help identify the needs of the poor, and their recom- mendations can serve as the basis for an assistance strategy and an investment program. Ideally, policies that inhibit growth or do not benefit the poor are adjusted through conditionalities in structural adjustment credits (SACS), sec- tor adjustment loans (SECALS), and projects. The next section reviews the themes found throughout the three phases of the Bank's programmatic approach. It focuses on the poverty assessments completed so far in Sub-Saharan Africa, the main thrust of poverty reduction strategies in the CASS, and the poverty reduction features of the lending portfo- lios for fiscal 1992-94 (projects approved during those three years) and fiscal 1995-97 (projects approved or proposed for funding in those years). Poverty Assessments Country poverty assessments should contain the basic analytical foundation for efforts by governments and the Bank to reduce poverty (see box 3.1; see also Operational Directive 4.15 and World Bank 1992d). They provide a vehicle for dialogue with governments and donors on poverty issues. They draw, to varying degrees, on a wide range of data and other analytical work, including available economic and sector work, formal and informal house- hold data collection, and beneficiary assessments. Poverty assessments are intended to serve as the primary input on poverty reduction for the CAS and the lending program. As of March 1996 the Bank's Africa Region had completed twenty-three poverty assessments (see note 4 in the Summary). The Bank's annual reports on poverty reduction, which review the content of poverty assessments, reveal considerable variation, especially among early poverty assessments, in the way the reports are prepared, their areas of emphasis, and their action plans. Figure 3.2 summarizes the main themes examined in completed pov- erty assessments and in the action plans in assessments completed as of March 1996. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 67 BOX 3.1 ROLE OF POVERTY ment. The objectives of the poverty ASSESSMENTS assessment are to identify the economywide policy, public expendi- Since the late 1 980s country-specific ture, and institutional issues that con- policy analysis on poverty in the World strain effective poverty reduction and Bank has sharply increased. One cor- to recommend an agenda for reform. nerstone for improved understanding The assessment analyzes the suc- of poverty at the country level is the cess of government's short- and long- poverty profile, which provides the term economic management in gen- basic material for the poverty assess- erating the kind of growth that will ment completed for every country in create demand for labor, in develop- which the Bank has an active lending ing human capital, and in improving program. The Bank's Operational Di- safety nets. The poverty assessment rective 4.15 and the Poverty Reduc- provides the basis for collaboration tion Handbook (World Bank 1992d) between the government and the provide additional information on the World Bank on the best way to re- desirable content of a poverty assess- duce poverty. Principal Themes in Poverty Assessments The wide range of subjects examined in poverty assessments in part reflects their comparative newness as operational tools and the experimentation that has taken place in their brief history. It also reflects the circumstances of individual countries. Despite the variations, some obvious themes stand out: * Importance of talking with stakeholders. Participation surveys and client consultations add a dimension to the poverty assessment that is typically not available from the usual quantitative analysis. The poverty assessment for Benin found that the primary school enrollment rate for females was half that of males. Only through field interviews with families was it possible to dis- cover that families often viewed investment in education for females as a net loss to the household; they believed the benefits of a girl's education would accrue to her husband's household. This aspect of assessments is so important that it has become a separate methodology, the PPA (see below). * Importance of macroeconomic policy. Most poverty assessments stressed the benefits of macroeconomic and sectoral policies for the poor; only about half provided specific recommendations on how to make these policies pro- poor. Recommendations tend to concentrate on the need to give small produc- ers-typically, but not exclusively, farmers-access to commercial services such as credit and marketing. * Emphasis on growth. The poverty assessments emphasize two important areas-agriculture and other income-generating activities. Many poverty as- sessments view agriculture as the most promising area for increasing income and promoting growth. Because it uses considerable amounts of labor, agri- CY) Go FIGURE 3.2 PRINCIPAL THEMES OF ACTION PLANS IN POVERTY ASSESSMENTS Benin * * * _ _ Cameroon * * * * * * * * * * N Cape Verde * * * * * * * * N Comoros * * * * * * U Ethiopia' Gambia, The * * * * * * N Ghana * * * * * N Guinea-Bissau * * * * * Kenya * * * * * * * * N Lesotho * * * * * * * * * N Malawi * * * * N Mali * * * * * U Mauritania * * * * N Mozambique * * * Namibia * * * Rwanda * * * * * U Senegal * * * * N Seychelles * * * U Sierra Leone * * * * * * G lJganda * * * * Zambia * * * * * * * * N Note: Includes all poverty assessments prepared for final publication by March 1996 (indicated by blue squares), except for Mauritius and Zimbabwe. Poverty assessments for those two countries were prepared as part of a country economic memorandum; they do not contain detailed action plans on poverty reduction. a. The poverty assessment for Ethiopia specifically excluded education because of budget constraints on the Bank mission. Soarce: Workl Bank data. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 69 culture also has a high potential for increasing employment opportunities and so reducing poverty. The poverty assessment for Malawi addresses specific constraints on rais- ing the production abilities of the poor. These constraints arose from a prohi- bition (subsequently lifted) on cultivation by smallholders of burley tobacco, a high-yielding crop with high returns to land and labor. The poverty assessment for Sierra Leone recommends special budgetary and donor-financed programs for rehabilitation and maintenance of rural in- frastructure, including roads and water supply and sewerage systems. Enhanc- ing rural infrastructure would create an enabling environment for increasing, both directly and indirectly, income-generating opportunities for the poor. * Pro-poor allocation of public expenditures. Most poverty assessments contained analyses of public sector expenditures. In general, these analyses concentrated on the need to examine the effects of expenditure and tax policy on the poor. Among the findings were that many subsidies intended for the poor go instead to the middle and upper classes, that spending on primary education yields the greatest positive redistribution to the poor, and that spending on hospitals is less effective for benefiting the poor than is spending on clinics and primary health centers. A regularly occurring theme is the need to increase budget allocations for primary social services and to ensure effective targeting of these services. * Emphasis on the quality of primary education. Most poverty assessments stressed the need for improved quality in education in general and in primary education for girls in particular. Several explicitly recommended transferring public resources from tertiary education to vocational or technical education. * Emphasis on the quality of primary health care. Suggested actions in health care often focus on the quality of care, costs and availability of basic medicines, and cost recovery. The poverty assessment for Sierra Leone ad- dresses all these issues as critical points of a health strategy within the poverty reduction framework. Cost recovery is a recurrent theme in many sector plans as a way to finance primary health care, including services designed to assist the poor (see Shaw and Griffin 1995). * Need for information on poverty. The quality of the poverty analysis in the poverty assessment, and hence in the CAS, is directly related to the quality and coverage of country-specific data. Poverty assessments often lament the lack of reliable data on which to base analysis and recommendations. More effort is needed to identify gaps in poverty monitoring and develop proposals for strengthening data collection and analysis. * Gender issues. About half of the poverty assessments examine gender issues in some detail. Recommendations have included greater recognition of the problems of seasonal labor shortage experienced by most agricultural 70 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA households, but especially those headed by females, and greater emphasis on female education, especially at the primary school level. * Building consensus on a poverty reduction strategy. A growing number of poverty assessments recognize the importance of country poverty assessments as a tool for stimulating ownership by governments of the objective of poverty reduction and for developing consensus between countries and donors on the nature and importance of a poverty reduction strategy. Many recently com- pleted poverty assessments were the outcome of considerable consultation and partnership between governments and the Bank. This process has increased ownership by governments of policies and strategies for poverty reduction. Evaluating Poverty Assessments One shortcoming of the poverty assessments is the lack of reliable data on poverty because of the paucity of information on household expenditure and consumption. Even when household survey data do exist, not much analysis has been carried out. A study by the Institute of Development Studies (1994) for the Working Group on Poverty and Social Policy of the Special Program of Assistance for Sub-Saharan Africa found a considerable range in the quality of poverty assessment, from "missed opportunities (such as Ghana 2000) to substantial achievements (the Zambia poverty assessment)."' The study rec- ommended four ways to improve the quality of poverty assessments: (a) explore qualitatively the constraints on agricultural production, (b) make PPAS an integral part of poverty assessments, (c) compare poverty situations over time against well-established benchmarks, and (d) use a phased consultative process to build a consensus around the poverty assessment. The working group's conclusions are summarized in box 3.2. Strengthening the Role of Poverty Assessments The country poverty assessment is the foundation for the Bank's understand- ing of the nature and extent of poverty in a country. The poverty assessment can play a crucial role in shaping the Bank's country strategy-as contained in the CAS-and lending program. In addition, it is one of the few vehicles available to the Bank for facilitating a dialogue and creating a consensus among donors and government on a poverty strategy. To date, however, the quality and coverage of poverty assessments, and hence their ability to pro- vide guidance for a poverty reduction strategy, have been uneven. A few suggestions for strengthening poverty assessments follow: * Because the nature of poverty can differ significantly across countries, with important implications for interventions intended to reduce poverty, at the heart of each poverty assessment should be an analysis of the types of poor households and the causes of poverty. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 71 BOX 3.2 POVERTYASSESSMENTSAND should be integrated into the overall PUBLIC EXPENDITURE REVIEWS analysis, including the discussion of the macroeconomic environment. In September 1994 the Working . nassessingpoliciesandthelike- Group on Poverty and Social Policy lihood of their successful implemen- of the Special Program of Assistance tation, poverty assessments should for Sub-Saharan Africa issued the fol- carefully consider the stakeholders lowing recommendations on ways to and the power and incentives they improve the poverty reduction focus have either to support or to frustrate of poverty assessments and public the proposed measures. Involving expenditure reviews (see Institute of stakeholders helps ensure that pro- Development Studies 1994): posals respond to the needs of those * Future poverty assessments (and intended to benefit and improves follow-up to them) should enable gov- ownership and commitment. ernments to develop a poverty reduc- * Public expenditure reviews tion strategy endorsed by donors and should attend more to poverty issues, based on sound analysis of key policy including the net incidence of taxa- issues. The objective should be man- tion and expenditure decisions, mak- agement of poverty assessments by ing use of social accounting matrices governments. where they exist. * The consumption- or income- The Africa Region has reviewed based approach to measuring poverty the implications of these recommen- needs to be broadened to take more dations for the donor community, account of security of livelihoods. In covering not only the conduct of new addition to raising average incomes, poverty assessments and public ex- poverty assessments should focus on penditure reviews but also the fol- reducing vulnerability and improving low-up to those already completed livelihood security. Gender analysis or in preparation. * The poverty assessment's analysis of the causes of poverty should carefully examine distortions that influence the factor and product mix in the economy, with particular emphasis on labor intensity. Because policy distortions usually discriminate against labor, the poverty assessment should explain how these distortions work and how the reform process will remedy the situation and lead to increased employment. * The process of preparing a poverty assessment must be open. Ideally, the govemment and outside experts with a knowledge of the country should be closely involved in the process of identifying the main issues and the types of analysis required for the poverty assessment. * Task managers need to be well acquainted with the process for and results of other poverty assessments prepared by the Bank's Africa Region. The system of identifying "best practices" (or good practices) is useful and, if 72 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA expanded, could provide task managers with greater support for preparing these reports. * The need for reliable and comprehensive data is greater than ever. When formulating a program of economic and sector work, each country team should ensure that data on poverty are being collected on a regular basis, along with other economic and social information. This requirement was part of the Bank's focus on improved macroeconomic policy and needs to be part of the renewed emphasis on poverty. The Future of Poverty Assessments The financial resources used to prepare poverty assessments have varied con- siderably and are difficult to estimate. Poverty assessments have regularly cost between $300,000 and $400,000, but some have been considerably more expensive. In many cases, donors have provided valuable assistance in financ- ing assessments through trust funds.2 Although poverty needs to be monitored on a regular basis, the cost of previous poverty assessments is not sustainable. In the future, a standard poverty profile, poverty indicators, and a summary of actions for reducing poverty should be prepared regularly for each country in collaboration with governments, donors, NGOS, and other interested parties, with strong government ownership. Each CAS should be required to include the most recent profile of poverty and priority poverty indicators. Participatory Poverty Assessments Structuring the consultative process-whether for preparing a poverty assess- ment, a CAS, economic and sector work, or a project-so as to involve the stakeholder or beneficiary is essential to the design of a sustainable poverty reduction program. This participatory methodology, usually PPAs, has been successfully applied to poverty assessments (see, for example, Norton and Stephens 1995). There are a number of reasons for involving and consulting with a range of stakeholders, including the poor: to understand better the social, economic, and political dynamics that perpetuate poverty in a given country; to ensure that strategies identified for poverty reduction reflect the real concerns voiced by the poor; to promote ownership of the proposed solutions by a variety of stakeholders; and to build in-country institutional capacity for ongoing analysis of poverty and formulation of policies to reduce it. Participation in poverty assessments has been pursued through two main channels: increased involvement of institutional and governmental stakehold- ers to ensure a coalition of support in government and civil society for strate- gies adopted, and participatory research exercises carried out with poor people in rural and urban areas to elicit their experience and understanding of poverty and the processes that produce and sustain it. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 73 At the time this report was completed, eighteen PPAs had been carried out or were in progress in Sub-Saharan Africa. They have varied considerably in methodology and scope but have produced results in a number of important areas. They have enriched the poverty profile by illustrating local understand- ing of poverty and vulnerability; improved the understanding of the impact of public expenditures by eliciting perceptions of the poor on accessibility and relevance of services and infrastructure; improved the analysis of hindrances experienced by the poor in realizing market-based opportunities; and sup- ported policy analysis of emergency and "safety net" provisions by examining local experience with formal and informal safety net systems and operations and the coping strategies used by the poor. An important area in which PPAS have contributed to poverty assessments and especially to the formulation of action plans has been in outlining what the poor see as priorities in the provision of public services for poverty reduc- tion.3 Typically, these perspectives include elements specific to particular environmental and social localities or pertaining to certain priorities that run through all the material gathered. Where consistent messages have emerged, they have proved extremely valuable for task managers seeking to develop practical programs of action that reflect the priorities expressed in poor com- munities. In Zambia discussions with the govemment on the sectoral empha- sis of the lending program were influenced by ranking exercises conducted as part of the PPA. The topics emphasized by poor people in these surveys in- cluded agriculture and health, rural infrastructure, environmental issues, and the need for improved delivery of educational services. A survey of the findings of eleven PPAS carried out in the Bank's Africa Region suggested some general conclusions on the priorities of the African poor for public action on poverty reduction: * A sense of profound isolation-from services, markets, local governmen- tal institutions, and information-characterizes rural poverty in many parts of Sub-Saharan Africa. In a practical sense, this isolation implies the need for rural roads and bridges, especially in areas where heavy and prolonged rainy seasons mean effective loss of contact with markets and even basic services for large parts of the year. This finding is strong in PPAs carried out in Benin, Cameroon, Ghana, Nigeria, and Zambia. In many countries the poor also feel isolated from the institutions of the state, which are seen as unresponsive and distant; this alienation is particularly evident in the PPAS carried out for Cameroon, Madagascar, and Nigeria. * In arid and semiarid rural areas, water supply for both domestic and produc- tive use is the most pressing priority. Characteristically, the perception of water as a priority need typically comes up in focus group exercises with women, who, along with children, bear the main burden, in labor and time, of fetching domes- tic water. When men regard water as a high priority, it is usually because of the need for a reliable source of water for agricultural production in the dry season. 74 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA In northem Ghana, for example, provision of a dam allows cattle to be kept near the community-increasing agricultural production through an improved sup- ply of manure-and makes possible dry-season vegetable gardening, which has become a critical supplement to local incomes. * Not surprisingly, in areas that have recently experienced massive welfare crises because of drought and civil conflict, physical and economic security are the main concerns. In northern Uganda physical safety in farming was the overriding concern. In much of Zambia local communities viewed as vital the maintenance of institutional arrangements for the drought response system, which had functioned well during the 1992 crisis. * Effective functioning of and access to curative health care is the most consistent priority in rural and urban areas and for almost all of the PPAS (nine out of eleven in our sample). Of particular concern to the poor are drug supplies, cost of treatment, and courtesy and openness on the part of health facility staff. * In urban areas, access to employment, opportunities to learn marketable skills, and credits for small enterprises emerge as consistent themes. The urban poor in, for example, Ghana, Madagascar, and Zambia generally em- phasize education as a priority need more than the rural poor do, but surveys from many rural areas also cite the quality and cost of education as a signifi- cant concern. This is especially so in Niger. Country Assistance Strategies CASS summarize the Bank's assessment of economic and policy issues and set out the Bank's proposals for assistance to a country. The most recent CAS for each country in the Bank's Africa Region was reviewed for this report, with an eye to the emphasis given to poverty reduction and specific proposals for reducing poverty. Conducting such reviews is difficult because the findings from the review tend to be qualitative rather than quantitative. The inevitable element of judgment has been compensated for by basing judgments about CASS on the weight given to poverty reduction and specific actions outlined in the CAS, not on the nature of the actions. It should be noted that the CAS iS evolving as an operational instrument and is showing substantial improve- ments in quality and in attention to poverty reduction. Most CASS, following Bank guidelines (see box 3.3), cover five basic subject areas in describing planned actions for promoting growth and reducing poverty: labor-intensive growth, private sector development, improved public sector management, human resource development, and conservation of the environ- ment. Although poverty reduction was nominally the dominant theme in these five areas, in the past most CASs did not emphasize poverty reduction itself or specific actions that would benefit the poor. The typical CAS for one country was similar in structure to strategies for other countries, with little in the way of THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 75 BOX3.3 COUNTRYASSISTANCE According to a study prepared for STRATEGIES the consultations on the eleventh re- plenishment of the fund for the In- The World Bank's guidelines state that ternational Development Association the country assistance strategy (CAS) (IDA-1 1), "The preparation and review should"describetheBankGroup'sstrat- of CAS documents provide a regular egy based on an assessment of prori- opportunity to take stock of and re- ties in the country and indicate the level think the country assistance strat- and composition of assistance to be egy [and] consult with country coun- provided based on the strategy and the terparts, international agencies, re- country's portfolio performance." Al- gional development banks, the IMF though certain general themes, such [International Monetary Fund], and as macroeconomic stability, need to be U.N. agencies. The CAS process al- addressed in all strategy statements, lows management review and the CAS should provide a country- needed corrections to be incorpo- specific strategy for achieving both the rated in the strategy and operations" general objective of poverty reduction (OXFAM 1995). The same document and sectoral objectives, such as hu- also refers to a consultative process man resource development (with atten- involving a variety of stakeholders tion to gender issues), environmentally used in preparing CASS and ensuring sustainable development, and private participation and country responsive- sector development. ness. a unique country perspective on poverty. CASS lacked clear objectives and a strategic vision for reducing poverty. Links among the strategies for different sectors, the lending program, and poverty reduction have been vague. More- over, there has been no substantive discussion of the distribution of growth to the poor. Instead, CASS used poverty reduction objectives to justify a wide range of activities, especially those promoting long-term growth. They failed to set priorities on the basis of poverty reduction, even though this is the overarching objective of the Bank. As a result, the typical CAS included few concrete poverty reduction measures, even though the formal requirements are met. To cite these shortcomings is not to deny the importance of growth as the primary means of reducing poverty. In the latest CAS for Senegal, approved in fiscal 1995-an excellent example of an improved model-the strategy is based on growth, with attention to human resource development and target- ing. The Senegal CAS provides a comprehensive statement of a poverty reduc- tion strategy and a specific program of action, classified into investment and analysis for each of the three strategic objectives mentioned in box 3.4. A significant weakness of the Senegal CAS, however, is that it does not refer to the government's declarations on poverty reduction (see chapter 2). A review of fiscal 1996 CASS reveals substantial improvements in the extent to which poverty reduction is incorporated into the overall assistance strategy. Preparation of recent CASS is also much more participatory because of the close 76 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA BOX3.4 SENEGAL'S COUNTRY ASSIS- investment program as a whole. The TANCE STRATEGY core program does focus on some critical aspects of poverty reduction, Senegal's CAs emphasizes the con- such as health, natural resource man- nections among growth, human re- agement, and education and nutri- source development, and poverty re- tion programs for women. The base- duction as a consistent theme (World case and high-case scenarios focus Bank 1995k). However, the CAS iden- on growth-promoting policies and in- tifies poverty reduction as only one of vestments, but the impact on pov- many critical issues or areas of spe- erty reduction is not clear. cial focus for action instead of making * Targeting. The country will have poverty reduction a pervading theme. trouble financing targeted programs The main features of the CAs are: unless much more rapid growth is * Povertyprofile. One box, plus de- achieved. The cAs identifies two ar- scription of the perilous food security eas requiring special attention: trans- situation. lating population policy into action * Impact of past policies. Analysis through health care programs, public of the effects of the CFA (Compagnie information campaigns, and improved Financiere Africaine) devaluation; adult literacy, and reaching the desti- boxes on the effects of the devalua- tute in urban and rural areas. tion on production incentives and the * Government commitment. The supply response. Also discussed are Bank has held many consultations the painful lessons learned from with the government on economic Senegal's easy access to external aid policy, particularly because of the despite inadequate implementation of devaluation of the CFA franc. By dis- improved policy. seminating information within Senegal * Pro-poor development programs on its proposed economic policy, the and social services. The material on government has built strong internal the Bank's lending program is not dis- support for the macroeconomic re- cussed in the context of the country's form program. involvement of governments and of representatives from civil society. All re- cent CASS draw on the findings of a completed poverty assessment or refer to one that is forthcoming.4 The CAS for Mozambique, for example, outlines a strategy that will focus on increasing the rate of growth, fostering a poverty-reducing pattern of growth, developing human resources, improving safety nets, and strengthening partnerships. It highlights the effect on poverty of each of these elements. The fiscal 1996 CAS for Kenya draws heavily on the findings and recommendations of the Kenya Poverty Assessment in fiscal 1995, which was undertaken by IDA in close consultation with the government and with the support of several donors. The Bank's assistance strategy in Kenya will include measures to promote an efficient private sector while continuing to ensure provision of adequate and sustainable infrastructure and supporting services, especially in rural areas; to improve public sector efficiency according to the THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 77 recommendation of the poverty assessment through a proposed structural ad- justment credit; and to promote human capital development, focusing on reori- enting social expenditures and restructuring sectoral institutions to this end. The strategy will include measures to improve environmental management through such projects as Arid Lands Resource Management. In addition to strengthening and supporting local community-driven initiatives to manage fragile environ- ments better in the arid lands, this project seeks to reduce chronic poverty and food insecurity in these regions. Focusing Country Assistance Strategies on Poverty The review of CASS produced by the Bank's Africa Region shows that the core strategy for poverty reduction consists of growth and investment in primary education and primary health services. Without denying the importance of these factors, the question remains: is this approach sufficient? The task force concluded that inadequate attention is being given to poverty in the CASs and suggested that a significant change in mind-set was required to ensure that poverty reduction becomes the dominant theme. Chapter 4 discusses some proposals for doing this; the theme of the proposals is that a much greater sense of urgency is needed regarding poverty reduction. Clearly, the growth potential foreseen under even highly optimistic sce- narios for most Sub-Saharan African countries is not enough to reduce poverty significantly in the next twenty years. Given historical rates of growth, few countries will double their per capita incomes within that time. Income levels of one-third and two-thirds of estimated mean income are often used as lower and upper poverty lines. Moving an average individual from the lower poverty line to the upper poverty line on the basis of a country's average growth rate will clearly take considerable time. If, for example, per capita growth is 2 percent a year, doubling per capita income would take thirty-five years (see figure 3.3), but average life expectancy is about fifty years. Most CASs do not give the faintest hint about how long it might take to achieve poverty reduction, given a particular country's circumstances. The latest Ghana economic memorandum does include such a calculation; it shows that even with the good results achieved by Ghana, it would take twenty years to move the average poor person out of poverty and fifty-three years for an extremely poor person (World Bank 1995e). There is a logical relationship between the population growth rate, the pattem of growth as expressed by growth elasticity, and the growth of national income required to keep the number of poor constant. This relationship was explained in chapter 1, which suggested that for a population growth rate of 3.0 percent a year and a growth elasticity of -1.5 (typical for many African countries), a national income growth rate of 5 percent a year is required to ensure that the number of poor does not increase. None of the CASs reviewed discuss the growth rates that are required to have an effect on poverty reduc- tion. Rather, most CASs claim, without any evidence, that a strategy of growth and improved social services will lead to poverty reduction. 78 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA FIGURE 3.3 TIME REQUIRED TO DOUBLE PER CAPITA INCOME AT VARIOUS GROWTH RATES Annual growth rate (percent) to _ 9 8 6 Lesotho (5.6) Mozambique (4.7) 5 Mauritius (4.5) 4otsana (4.3) 4 3 Uganda (2.8) 2 Nigeria 2.0 Chad 17 XGhana 1.3 0 1 0 20 30 40 50 60 70 Number of years to double GDP per capita Note: Numbens in parentheses for countries are annual growth rates of GDP per capita, 1988-94 Given that current patterns of economic and population growth will re- duce poverty only slowly, an assistance strategy needs to include actions to increase income growth among the poor much more rapidly or reduce the population growth rate and improve the pattern of growth. The main strategy for achieving these goals is to provide the poor with greater access to the assets and services necessary for income generation: better health, education, and infrastructure for the poor in remote areas; land rights; and improved credit facilities for small traders and farmers. All these factors would support improved prospects for employment and income generation and, ultimately, higher aggregate growth. Strategies to improve the pattern of growth (that is, to increase growth elasticity) include rural development as a very important element in most African countries. The Portfolio and the Lending Program The task force reviewed approved and proposed Bank projects or operations for fiscal 1992-97 to determine whether the lending program reflected state- ments that poverty reduction is the Bank's overarching objective. The review also analyzed the lending program for links between the action plans in the poverty assessments and the CASS. Projects were classified according to objec- tive: enabling growth, providing broadly based services, and providing nar- rowly targeted services for the poor (see box 3.5 for definitions). This classi- fication of the lending program is consistent with the framework for address- ing poverty reduction outlined in World Development Report 1990 (World Bank 1990), which should have influenced projects approved since fiscal THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 79 BOX 3.5 CRITERIA FOR CLASSIFYING the poor. Projects designed to pro- BANK PROJECTS vide social services or other benefits for a target group of the poor or vul- * Enablinggrowth. Includesprojects nerable. The proportion of the poor orientedtowardprovidingapolicyand among the beneficiaries of the physical environment that will promote project is significantly larger than the improved growth of the economy and proportion of the poor in the total that will eventually lead to increased population. The project's objectives employment opportunities for all sec- and cost structure must reflect the tions of the community, including the emphasis on reaching a target group. poor. Unless at least 25 percent of the loan * Broadly based services. Projects or credit amount is directed toward that provide services or similar ben- the target group, the project is not efits to the general community, in- classified in this group. In addition, cluding the poor, but do not focus on the existence of a narrowly targeted a specific poverty group. pilot scheme does not warrant clas- sification of the project as narrowly * Narrowly targeted services for targeted. 1992. The definitions combine project objectives with characteristics of the projects. Projects providing support for broadly based and narrowly targeted services do contribute to growth, but they are classified separately because of their different emphases and design characteristics.5 The classification is based on project design and objectives; it is not an evaluation of the impact.6 One concern is that for a significant number of the projects planned for fiscal 1997, an initial executive project summary (IEPs) had still not been prepared when the initial review was conducted in June 1995. Discussions with potential task managers do not increase confidence that in the absence of a formal IEPs, a clear vision exists of the objectives of the proposed project. Since ensuring a poverty reduction focus in projects is well known to take more time and effort than preparing a standard project provid- ing broad benefits, this lack of preparedness is not comforting. Moreover, the Wapenhans report (World Bank 1992a) emphasized the importance of project quality "at entry." The main finding of this review of 406 projects is that, measured in credit and loan amounts, the Bank's Africa Region operations are focused to a large extent on establishing an enabling environment for long-term growth (see figure 2 in the Summary and table 3.1). Enabling Growth Table 3.2 summarizes past and future lending in the group of projects de- signed to provide an enabling environment for long-term growth. These projects promote growth in a variety of ways, most significantly by establishing the conditions for private sector development. 80 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA TABLE 3.1 ADJUSTMENT AND INVESTMENT PROJECTS BY SUBREGION, FISCAL 1992-94 (millions of dollars; number of projects in parentheses) Enabling Providing broadly Providing narrowly Subregion growth based services targeted services Fiscal 1992-94 Central and Indian Ocean 447.8 (15) 227.7 (14) 161.0 (9) Central Western Africa 932.5 (21) 700.2 (16) 515.1 (18) Eastern Africa 1,552.1 (20) 691.4 (12) 251.1 (6) Southern Africa 1,666.7 (24) 541.5 (12) 356.2 (8) Western Africa 306.9 (16) 168.5 (5) 266.2 (15) Total 4,906.0 (96) 2,329.3 (59) 1,549.6 (56) Fiscal 1995-97 Central and Indian Ocean 846.2 (25) 244.2 (12) 188.2 (9) Central Western Africa 1,661.1 (28) 310.0 (9) 379.9 (12) Eastern Africa 457.8 (14) 514.5 (10) 239.5 (5) Southern Africa 1,118.2 (15) 517.9 (9) 239.5 (7) Western Africa 466.2 (21) 145.5 (8) 403.2 (11) Total 4,549.5 (103) 1,732.1 (48) 1,450.3 (44) Source: World Barik data. TABLE 3.2 PROJECTS FOR ENABLING GROWTH, FISCAL 1992-97 Amount Projects Millions As share of As share of Group of dollars total (percent) Number total (percent) Fiscal 1992-94 Structural adjustment 2,848.1 58 29 30 Infrastructure 1,094.7 22 19 20 Capacity building 736.8 15 41 43 Other 226.4 5 7 7 Total 4,906.0 100 96 100 Fiscal 1995-97 Structural adjustment 2,222.0 49 32 31 Infrastructure 1,362.3 30 29 28 Capacity building 878.2 19 38 37 Other 87.0 2 4 4 Total 4,549.5 100 103 100 Source: World Bank data. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 81 EMPLOYMENT AND GROWTH. A principal goal for poverty reduction is to pro- mote labor-intensive growth and make use of the poor's biggest asset, their labor. The strategies available for achieving labor-intensive growth include devaluation, which makes it more attractive to hire local labor than to import machinery for the same work, and structural adjustment credits, which are designed to stabilize the economy and promote an improved policy frame- work. Projects that support labor-intensive growth directly by employing labor-based technologies, such as feeder roads projects, do contribute indirectly to long-term growth, but because their primary aim is to target a certain popula- tion, they are classified as narrowly targeted rather than as enabling growth. The question for projects that provide an enabling environment for long- term growth is whether they facilitate a pattem of growth that is labor- intensive or pro-poor. A review covering activities during the fiscal 1992-94 period suggests that, at best, 30 percent of the Bank-assisted investment and adjustment projects committed to enabling long-term growth had pro-poor components. These components were generally directed at activities in pro- ductive sectors in which the poor are heavily represented, such as agriculture, or at the reallocation of public expenditures to poorer groups. Generally, growth supported by these projects will benefit the poor in the long term, although in some instances, as in the reallocation of public expenditures, the poor could benefit relatively quickly. STRUCTURAL ADJUSTMENT. During fiscal 1992-94 structural adjustment opera- tions constituted 58 percent of lending for enabling growth and 32 percent of all lending. During fiscal 1995-97 they will probably account for about 49 percent of lending for enabling growth and 29 percent of all lending. The number of struc- tural adjustment credits and sectoral adjustment loans that address poverty-re- lated issues is increasing. Typically, these operations seek to correct policies that inhibit the productivity of the poor and to focus on improvements in allocating public expenditure, particularly for health and education. The fiscal 1994 Zam- bia Economic and Social Adjustment Credit is a good example (box 3.6). BOX 3.6 ECONOMIC AND SOCIAL Decentralization of responsibility for ADJUSTMENTINZAMBIA service delivery will take place in health, education, and water and The Economic and Social Adjust- sanitation. The Program to Prevent ment Credit for Zambia, approved in Malnutrition, developed in response fiscal 1994, concentrates not only to the drought of 1992-93, will con- on the economic reforms needed to tinue under the management of continue adjustment in the country NGOS to improve service delivery. An but also on restructuring the social appropriate share of the budget for services sector. The main issue in this social sectors will be maintained as sector is devolution of decisionmaking a national priority, and allocations authority to people who are in a bet- will support services mainly at the ter position to assess clients' needs. primary level. 82 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA The policy objectives for structural adjustment credits tend to be evenly split among three policy objectives: devaluation, tax reform, and removal of tariffs on imports. Pro-poor programs among them are generally those de- signed to change the terms of trade for agriculture. Financial sector operations seldom have any pro-poor characteristics. Of the four financial sector adjust- ment credits for 1992-94, only one, Ghana (fiscal 1992), finances so much as a review of informal markets that may be beneficial to the poor in the long term. This project will also establish a framework for nonbank financial insti- tutions, but the implications for the poor are not clear. Since the devaluation of the CFA franc in early 1994, a number of economic recovery credits have been approved for West African countries. In the credit for Senegal (fiscal 1994) producer support prices were raised as a condition of negotiations, to mitigate the effects of devaluation on farmers. This credit also supports temporary price subsidies for consumers of rice, wheat, and essential drugs and supplements for educational expenditures to increase school enroll- ments and accelerate classroom construction. Many other countries in the CFA zone, including Cameroon, Congo, and Gabon, have introduced special mea- sures to protect the poor from the impact of the devaluation on the prices of essential consumer goods, but some, such as the Central African Republic, made no such provisions for protecting the poor. A more detailed analysis of the adjustment operations supporting long- term growth was undertaken to assess the extent to which these projects are expected to reduce poverty. Components in adjustment operations were clas- sified as pro-poor, neutral, and not pro-poor. The results were mixed, but components with positive or neutral effects on the poor were prominent. During fiscal 1992-94, approximately twenty-one of twenty-nine structural adjustment programs (72 percent) in the enabling growth category had com- ponents that were pro-poor. Examples included components to improve the composition and quality of public expenditures, revise labor codes, foster development of the informal financial sector, establish social funds, reform agricultural price policy, and establish targeted programs. About twenty-five of the structural adjustment programs (86 percent) for fiscal 1992-94 had components with a neutral effect on the distribution of incremental growth; these supported a reduced role of the state in the economy, reform of the tax system, privatization of state enterprises, civil service reform, improvement of the trade regime, and increased revenue collection. Sixteen operations (55 percent) had components that were neither pro-poor nor neutral. Examples are components meant to improve cost recovery in health and education without taking account of ability to pay, to improve the efficiency of the financial sector, and to bring bank interest rates into line with market rates. INVESTMENT IN INFRASTRUCTURE. During fiscal 1992-94 about 22 percent of projects in the enabling growth category were for infrastructure rehabilitation, maintenance, and construction; they accounted for 12 percent of all lending. THE BANK'S RESPONSE TCI THE CHALLENGE OF POVERTY 83 During fiscal 1995-97 about 30 percent of projects in that category will be for infrastructure, accounting for about 18 percent of all lending. The total amount invested in infrastructure is actually higher than these numbers indicate be- cause infrastructure is also included under broadly based and narrowly tar- geted services. Infrastructure projects judged as supporting long-term growth include power, telecommunications, and highway and port rehabilitation. Infrastructure projects classified as enabling growth are generally of types that have little direct ef-fect on the poor in the short term; an example is support for renovation and construction of power plants. Such projects pro- vide some employment in urban areas during their construction phases, but they do not necessarily make a sustainable contribution to the growth of employment in rural areas. To pursue the example of the power plants, much of the additional power generated will go into the national grid; whether rural electrification benefits is seldom clear. Only Ghana (fiscal 1993) has a spe- cific rural electrification project. Most infrastructure projects include technical assistance components or an institutional development component that improves the government's abil- ity to implement future infrastructure projects. Angola's Infrastructure Reha- bilitation Engineering project (fiscal 1992) includes some funds for designing and preparing tender documents for priority public investments. In the long term such projects may have a direct impact on the welfare of the poor through improved service delively, but the benefits will probably not be felt by the current generation of unskilled laborers and poor people. The employment linkages for the poor are not clear. It is not surprising that governments have a dominant role in infrastructure development in Sub-Saharan Africa; most governments believe they can deal with the technical issues-although that belief is not always borne out by the facts. Another cause for concern is that government involvement has created a substantial urban bias in infrastructure development, with few benefits reach- ing the rural poor. The task force reviewed Bank-assisted infrastructure projects designed to support growth to assess their likely effect on the poor. Only three of the nineteen infrastructure projects in the enabling growth group-projects for rural electrification, road rehabilitation, and a community development fund- were judged as having components that would directly benefit the poor. Projects in such areas as power, telecommunications, petroleum, and gas exploration may have a positive indirect effect on the poor, but they are not likely to deliver many direct benefits. Moreover, setting aside whether the poor will benefit in the long run, it may be questioned whether IDA should finance such projects, which have a high private rate of return and should therefore be attractive to private sector financing.7 CAPAcrrY BUILDING. During fiscal 1992-94, capacity-building projects accounted for 15 percent of the enabling growth group and 8 percent of lending for all 84 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA projects. For fiscal 1995-97 capacity-building projects in these years will ac- count for 19 percent of the enabling growth group and 11 percent of the lending for all projects. Objectives of capacity-building projects range from restructur- ing financial systems and agricultural markets to private sector development. Most Bank projects have a capacity-building component. Projects that build capacity in the health and education ministries are in the broadly based services category. Most capacity-building projects in the enabling growth category focus on private sector development; examples include Burundi Private Sector Development (fiscal 1992), Kenya Parastatal Reform (fiscal 1993), and Rwanda Private Sector Development (fiscal 1994). To have a direct impact on the poor, the projects need to focus on microenterprise or small enterprise development, yet only one of the forty-one projects reviewed has a microenterprise component. This observation does not mean that the Bank is not working in these areas, only that the capacity-building projects approved during fiscal 1992-94 do not appear to be designed to achieve any direct benefit for the poor. Other capacity-building projects include economic management assistance to strengthen ministries of finance and planning. Again, this institution strengthening will eventually benefit the poor through better management of national resources, but the benefits are long term and indirect. Of the forty-one capacity-building projects approved during fiscal 1992-94 only four were judged as having pro-poor components, such as technical assistance for formulating and carrying out a social action plan, support for small enterprises, and support for improved basic infrastructure. Much needs to be done to develop or strengthen African institutions so that they can plan and guide policy changes and implement targeted projects effectively. Since 1991 the Bank has supported the African Capacity Building Initiative, which has as its purpose to build "a critical mass of professional African policy analysts and economic managers who will be able to better manage the development process and to ensure the more effective utilization of already trained African analysts and managers" (World Bank 1991a). This initiative and other capacity-building efforts supported by the Bank (see Dia 1996, describing an initiative to develop operationally relevant models of institutional development) are expected to yield results only in the long term. DISTRIBUTION OF GROWTH. To reduce poverty, the Bank needs to ensure that the distribution of incremental growth is directed more toward the poor, by targeting projects to a geographic region, social group, or gender. Achieve- ment of a pro-poor distribution of growth will depend heavily on the overall pattem of growth and on the allocation of social expenditures. More infrastructure projects need to be carried out in areas that lack education and health facilities and domestic water supply, power, and com- munications infrastructure so that the poor can improve their human capital and facilitate their participation in development. Rural areas would contribute more to a country's growth if rural infra- structure were improved so that farmers could participate more efficiently in THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 85 TABLE 3.3 PROJECTS PROVIDING BROADLY BASED SERVICES, FISCAL 1992-97 Amount Projects Millions As share of As share of Sector of dollars total (percent) Number total (percent) Fiscal 1992-94 Infrastructure 1,204.9 52 21 36 Agriculture 346.9 15 18 31 Education 243.9 10 9 15 Health 197.2 9 6 12 Other 336.4 14 5 7 Total 2,329.3 100 59 100 Fiscal 1995-97 Infrastructure 686.5 40 15 31 Agriculture 573.1 33 19 40 Education 61.5 4 2 4 Health 393.5 23 10 21 Other 17.5 1 2 4 Total 1,732.1 101 48 100 Note: Numbers may not sum to totals because of rounding. Source: World Bank data. markets for services arid commodities. Improved rural infrastructure would bring substantial dividends by increasing the eaming ability of the poor and so contributing to poverty reduction. Broadly Based Services Broadly based services projects in most cases not only serve the general population but also contribute to growth. For example, national education and health projects contribute to human capital development, which should raise productivity and foster growth. These projects are not targeted spe- cifically at the poor, but the poor are not excluded from the benefits. Table 3.3 summarizes the types of projects in the broadly based services group. The broadly based services category also includes projects designed to ease access to markets, improve urban water supply, and support capacity building for health ministries to increase their ability to provide services to everyone. An example of this type of project is Nigeria Multi-State Roads II (fiscal 1993). The objectives of broadly based services projects for fiscal 1992-94 were increased income and ernployment opportunities for the poor, improved deliv- ery of social services to ihe poor, and increased availability of productive assets to the poor (figure 3.4). Mechanisms for monitoring and evaluating the project's impact on the poor were included in 14 percent of the projects; these often include indicators designied specifically for the project and its potential effect. 86 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA FIGURE 3.4 SERVICES PROVIDED BY BROADLY BASED AND NARROWLY TARGETED WORLD BANK PROJECTS, FISCAL 1992-94 Income and employment m Social aervices Broadly based projects _ Em Narrowly targeted projects Productive assets Monitoring and evaluation 0 1 0 20 30 40 50 60 70 80 Percent Source: World Bank data. TABLE 3.4 INVESTMENT PROJECTS PROVIDING NARROWLY TARGETED SERVICES, FISCAL 1992-97 Amount Projects Millions As share of As share of Sector of dollars total (percent) Number total (percent) Fiscal 1992-94 Infrastructure 499.4 32 16 29 Agriculture 552.1 36 19 34 Education 308.5 20 10 18 Health 130.0 8 7 13 Social funds and social action projects' 59.6 4 4 7 Total 1,549.6 100 56 101 Fiscal 1995-97 Infrastructure 320.0 22 7 16 Agriculture 233.2 16 9 20 Education 243.0 17 10 23 Health 337.6 23 11 25 Social funds and social action projectsa 316.5 22 7 16 Total 1,450.3 100 44 100 Note: Numbers may not sum to totals because of rounding. a. Social funds are primarily in agriculture, education, and health. Sozurce: World Bank data. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 87 Many projects have a monitoring mechanism not specifically designed to assess the projects' impact on the poor; some projects, however, finance broader, nationwide poverty monitoring. Many of the latter were started under the Social Dimensions of Adjustment (SDA) program. Of a total of fifty-nine projects providing broadly based services during the fiscal 1992-94 period, fifty-six contained components for at least one of the purposes listed above. Narrowly Targeted Services Projects providing narrowly targeted services include specific measures aimed at a specific group in areas such as primary education and basic health ser- vices, food security, and social funds (see table 3.4). This classification in- cludes projects outside the realm normally associated with the narrowly tar- geted category. For example, many countries have urban rehabilitation projects that target particularly poor areas of a city to improve sanitary conditions and water supply. Narrowly targeted projects tend to be small in terms of cost: 63 percent of the projects in this category in fiscal 1992-94 were for amounts of $25 million or less. Types of Targeting Targeting is achieved through a variety of methods: by location, by vocation, and by required participation. Of these, location is the most common. Projects are typically implemented in areas in which a high percentage of the popula- tion is under the poverty line. A primary education or health project is classi- fied as narrowly targeted if it focuses on certain areas where the poor live rather than blanketing thte country with services that benefit both the poor and the nonpoor. An example of targeting by vocation is Nigeria Agricultural Technology Support (fiscal 1992), which targets smallholders through an agriculture extension project. Many narrowly targeted projects use participatory methods to identify and target beneficiaries-such as women in an income-generating project. More than a third of these projects employ NGOs to implement some or all of the components. Burkina Faso Food Security and Nutrition (fiscal 1993) involves beneficiaries in the design of projects, with the help of NGOS, and targets lactating mothers and mothers with toddlers through its education and infor- mation campaigns. The main objectives of narrowly targeted projects in fiscal 1992-94 were income and employment, social services, productive assets, and monitoring and evaluation of projeel impact (see figure 3.4). The criteria for these projects are the same as for broadly based projects. Of fifty-six projects in the narrowly targeted category for fiscal 1992-94, 73 percent were judged to provide social services for the poor. A question that often arises is whether social services can be sustainable if they are not broadly based. Sustainability of narrowly based services is achieved 88 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA through a variety of measures similar to those for broadly based services. For example, education projects in both categories depend on government expen- ditures for their recurrent costs. Community participation helps achieve local ownership of a project and so ensure continuation of the activities after project funds are exhausted. Another way of achieving sustainability is through ca- pacity building at all levels. Mauritania Population and Human Resources (fiscal 1992) will train communities "to increase the efficiency of their al- ready active involvement in the social sectors." Madagascar Food Security and Nutrition (fiscal 1993) will help develop the ability of NGOs and the private sector to deliver social services and will strengthen the institutional ability of local communities and grassroots groups to carry out development projects. Projects designed to provide broadly based services, as well as many narrowly targeted projects, can contribute substantially to long-term growth BOX 3.7 SOCIAL FUNDS filling the institutional gaps that exist in the public sectors of many developing Social funds are quasi-financial inter- countries. They do, however, have limi- mediaries that finance projects in mul- tations. Their ability to reach the poor- tiple sectors and government agencies. est communities is one reason for con- They are a valuable institutional re- cern because the use of these funds source for providing funding more flex- depends on initiatives that may not ibly and transparently than regular gov- involve the poor. There are also ernment and line ministries usually do. tradeoffs between rapid implementa- Social funds are demand-driven insti- tion of social fund projects and the need tutional arrangements that fund (on the to build institutional and technical abil- basis of a set of guidelines) requests ity. Where local ability is limited, addi- fromcommunityorganizationsforimple- tional resources for capacity building menting small-scale projects. The ac- and institution strengthening may be tivitiestheysupportincludecreatingem- needed. In Guinea and Sao Tom6 ployment, providing basic services, shortcomings in local capability re- strengthening institutions, and target- quired the social funds to pay for tech- ing and monitoring. In contrast to social nical assistance to local organizations, funds, social action programs, which public agencies, and community are also meant to reduce poverty and groups to ensure that they were able reintegrate poor and vulnerable groups to undertake projects. Finally, because into the economy, are designed simi- social funds have limited resources, larly to regular investment projects. they must be part of a larger, coordi- Social funds are low-cost, flexible nated effort to meet social and eco- mechanisms for addressing critical nomic needs, and they should not re- economic and social needs, distribut- place critical policy and public sector ing resources to underserved commu- reform programs (Marc, Graham, and nities, enhancing community participa- Schacter 1993; World Bank 19950). tion, improving donor coordination, and THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 89 BOX3.8 ANEXAMPLEOFANAGETIP person-years of employment was created in urban areas. The project One of the first of many social fund contributed to the renovation of programs in the Bank's portfolio was 221,820 square meters and the con- Senegal's Public Works and Employ- struction of 101,300 square meters ment project. The objectives of the of simple buildings, including schools project were to create new employ- and dispensaries, the rehabilitation ment in urban areas, improve the skill of 133 kilometers of urban roads and levels of employees in the construc- paving of 523,500 square meters of tion and urban services industries, roads, the rehabilitation of 65,000 demonstrate the feasibility of labor- square meters of sidewalks, the intensive techniques, andJ implement demolition of 15,000 square meters economically viable and socially ben- of derelict buildings, the cleaning of eficial projects. The project was man- 37,200 linear meters of drainage ca- aged by Agence d'Execution des nals and the clearing of 122,000 Travaux d'int6r6t Public contre le square meters of bush, the trans- Sous-Emploi (AGETIP), a nongovern- port of 7,700 cubic meters of sand, mental, nonprofit, contract manage- and the construction of 18,000 cu- ment agency with delegated respon- bic meters of embankments. sibilities for providing infrastructure The project had a strong impact on services on behalf of the government the growth of the building and con- and for managing the procurement struction industry and on human re- process and supervision of works on source development. AGETIP'S success behalf of the World Bank. The Public led the government to introduce an Works and Employment Project be- executing agency into some of its other gan in March 1990, initially in pri- activities. The project is being repli- mary cities. After the first year imple- cated in a growing number of coun- mentation gradually expanded to tries, including Burkina Faso, Chad, secondary cities. the Gambia, Mali, Mauritania, and The project's results have been Niger, and has spread to southern and highly satisfactory: 416 subprojects eastern Africa and even beyond Af- were completed, and a total of 8,713 rica (World Bank 1995j, 1995m). by improving the access of the poor to services that help increase their produc- tivity. For example, a national education project develops human capital; a social fund rehabilitates infrastructure, builds social services, and provides a base for income-generating activities. (See box 3.7 on social funds and box 3.8 on a model for a social fund.) Because such projects contribute directly to short- and long-termn economic growth, support for them must continue and be strengthened. Comparison between Narrowly Targeted Projects and the Bank's Program of Targeted Interventions Questions have been raised about the relationship between the project classifi- cations used in this report and the Program of (Poverty) Targeted Interventions 90 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA (P'n) cited in the Bank's annual reports on poverty. The task force classified 35 percent of fiscal 1994 operations as providing direct (narrowly targeted) ser- vices to the poor. For the same year 43 percent of projects were classified by the Bank as part of the vPI. Projects are eligible for PrI status if they include a specific mechanism for targeting the poor, if the proportion of project beneficia- ries who are poor is significantly larger than the share of poor people in the total population, or both. Project components meeting either criterion must account for at least 25 percent of the loan amount. Whereas the task force clearly distinguished between narrowly targeted and broadly based services, projects in the trT may include projects that provide broadly based services as long as the poor are perceived to benefit disproportionately from project activities. Never- theless, the PrT projects closely match the narrowly targeted projects. Sectoral Issues in the Portfolio and the Lending Program The discussion of participatory poverty assessments, above, noted that the poor see rural roads, water supplies, and basic health services as important public services that meet their most important needs. This section reviews the Bank's involvement in the provision of these services, which are all crucial for rural development. Rural Roads Figure 3.5 shows a substantial decline in proposed lending for rural roads during fiscal 1995-97 compared with fiscal 1992-94, particularly when inter- urban roads are taken into account. Rural road projects, or projects with rural FIGURE 3.5 RURAL ROADS COMPONENTS IN WORLD BANK LENDING, FISCAL 1992-97 Fiscal 1992-94 Fiscal 1995-97 Millions of dollars Millions of dollars 600 - 600 _ 519.4 500 _ 500 - 400 - 372.2 400 - 300 . 300 - 248.8 200 - 142.2 200 - 100 _ . 1 100 i.981 77.1 Interurban Urban Rural Interurban Urban Rural roads roads roads roads roads roads Source: World Bank data. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 91 road components, account for about 18 percent of total transport lending during fiscal 1992-94. If interurban roads are included in the definition of "rural," then rural roads account for about 82 percent of the total lending for roads. This situation is much better than during the fiscal 1964-89 period, when only 15 percent of Bank-financed projects (or 33 percent of IDA loans) was devoted to rural roads (see Riverson, Gaviria, and Thriscutt 1991). Sur- prisingly, lending for ru-ral roads was cut in half between fiscal 1992-94 and fiscal 1995-97, and lending for interurban roads was reduced by 81 percent. As a result, even if interurban roads are defined as rural, the relative share of lending for rural roads will decline to about 41 percent of lending for all roads during fiscal 1995-97. This may not be a lasting trend, but it is troubling; if the concerns of the poor are to be met, a relatively large share of the Bank's resources should be allocated to rural roads. The Bank is devoting considerable effort to assisting governments in decentralizing responsibility for rural roads, and increased lending for rural roads is also under consideration in many countries. The objective should be to find more ways to lend to local governments that have a keen interest in improving rural roads; this strategy would ensure ownership at the level where it really belongs. Central governments appear to be more concerned with improving main roads, including some higher classes of feeder roads that are in bad condition because of the scarce resources available. In Ethiopia re- gional governments are interested in receiving support for rural road improve- ment, but the central go-vernment would rather use multilateral credit and loan funds for major roads and local resources and grants for regional (rural) road improvements. The sector lending approach is a way of including rural roads in overall road network improvement programs. In Eritrea a feeder roads component in the Community Development Fund project builds on existing community and local government participation in rural infrastructure im- provements. This approach is important because lack of responsibility for paying for and ensuring the follow-up maintenance of improved roads has been a significant stumbling block for rural roads projects in the past. The Roads Maintenance Initiative, part of the Sub-Saharan Africa Transport Policy Program launched in 1987 by the U.N. Economic Commission for Africa and the World Bank, was a response to these problems. Water Supply The Bank's lending program in the water sector is biased toward urban sys- tems, even taking into account the fact that per capita water supply costs are lower in rural areas and hence the coverage for a given investment is greater in rural areas. During fiscal 1992-94 only about 20 percent of Bank credits and loans for provision of dLomestic water supplies was for rural areas (figure 3.6). For the fiscal 1995-97 period Bank support for rural domestic water supplies 92 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA FIGURE 3.6 RURAL WATER SUPPLY COMPONENTS IN WORLD BANK LENDING, FISCAL 1992-97 Fiscal 1992-94 Fiscal 1995-97 Millions of dollars Millions of dollars 600 - 600 - 500 500 _ 400 400 - 300 300 - 245.3 200 167.6 200 111.2 100 42.2 100 _ 0 _ . 0.0 ,-- ,I_ 5.0 Urban Small- Rural Urban Small- Rural water town water water town water supply water supply supply water supply supply supply Source: World Bank data. will probably increase by 164 percent because of the substantial increase in rural water supply components in projects. Although improvements in the lending program are taking place, there is still a substantial urban bias in lending for domestic water supply improvement. As noted earlier in this chapter, the urban bias in lending for roads and domestic water supplies sharply contrasts with the needs expressed by the poor in participatory surveys. The survey results highlighted the desire of poor people for better roads to reduce their isolation and improve water supplies. In Nigeria, for example, girls' enrollment in school was strongly associated with the proximity of water supplies. Why does the Bank's lending program not respond to such obvious priori- ties? In general, the reasons include the support already being given by bilat- eral donors and UNICEF for these rural activities through NGOs and community organizations; the complexity of working at the rural, regional, and commu- nity levels; and the difficulty of sustaining maintenance of rural roads and community water supplies, which is associated with problems in designing and implementing cost recovery mechanisms. Unfortunately, bilateral donors are not very active in providing rural do- mestic water supplies. As for the issue of complexity, that should be a chal- lenge, not a deterrent. Implementation problems are genuine concems; many rural domestic water supply programs financed by various donors have indeed failed.8 But there are strong reasons for the Bank to try to find ways around these constraints. A World Bank policy paper on water resource management (World Bank 1993h) outlines a new approach to water management that is consistent with the Dublin Statement of the International Conference on Water and the Envi- THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 93 BOX3.9 NEWAPPROACHESTOWATER the capital costs (50 percent for DELIVERY IN RURAL COMMU141TIES AND household latrines and 5 to 10 per- SMALL TOWNS: GHANA cent for water supply) and all the op- erational and maintenance costs. The Ghana Community Water Sup- Local partner organizations (NGOS or ply and Sanitation project, which be- consulting firms) work with communi- came effective in December 1994 with ties to facilitate collective decision- a $22 million credit from IDA, is imple- making and shorten the "institutional menting a new approach to water distance" between users and other management in rural communities and project stakeholders. Various sub- small towns in four regions of the groups in the community are included country. Districts and communities are in the project process as appropriate. chosen for participation in the project An adaptive project strategy uses an- on the basis of demand, current wa- nual and quarterly review meetings ter supply status, poverty level, and to discuss implementation and make other criteria. Villages choose service adjustments as needed. In this way, levels according to what they are will- lessons from earlier project phases ing to pay. Under the rules concern- can be fed back quickly into subse- ing cost recovery, users pay part of quent stages of the project. BOX 3.10 A RURAL WATER SUPPLY AND cation for village communities (14 per- SANITATION PROJECT: BENIN cent); and capacity building (16 per- cent). To a large extent, rural com- The Rural Water Supply and Sanita- munities would undertake their own tion project, approved in fiscal 1994, projects, with the help of NGOS. will be the first free-standing water The design of the community- supply project supported by IDA in based approach in this project builds Benin. Project costs total $15 million, on experience gained in preparing of which IDA will contribu.te $9.8 mil- and carrying out rural water supply lion. An important rationale for the projects in West Africa, particularly project was that the Bank had so far C6te d'lvoire and Ghana. The expe- mainly focused its efforts in the water rience of other donors with water sup- supply sector in urban areas. By tar- ply projects provided valuable les- geting rural communities, particularly sons. One was that participation of small communities, the project is ex- communities in maintenance im- pected to benefit the poorest strata of proves supplies but does not neces- the population through better-quality sarily improve the use of water facili- water, less waterborne dJisease, and ties. Another is that the health ben- savings in the time spent by women efits from improved water supplies and children in fetching water. may not be easily perceived by vil- The project has four components: lagers and so the expectation that water supply for rural communities in recognition of these gains will rein- two regions (59 percent of project force the sustainability of water sup- costs); provision of village pumps (11 ply services is not always borne out percent); sanitation and Ihygiene edu- (World Bank 1994k). 94 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA ronment (wMo 1992). Key elements of the policy paper include "adoption of a comprehensive policy framework and the treatment of water as an economic good, combined with decentralized management and delivery structures, greater reliance on pricing, and fuller participation by stakeholders." This approach emphasizes a demand-based strategy in which users make choices concerning types and levels of service based on what they want and are willing to pay. It stresses the importance of getting the institutional arrangements right by ex- ploring how community water associations, NGOS, and government depart- ments can work together more successfully. Project rules and procedures should provide the correct incentives to sector stakeholders so that projects meet the needs of intended beneficiaries. Capacity building may be needed at various institutional levels, and strong commitment of government at all lev- els to the new approach is crucial. Despite good intentions, the Bank has made little progress in promoting improved rural domestic water supply, nor is it clear that governments and donors have done any better. The Bank is starting to focus more on rural issues (box 3.9); the Benin Rural Water Supply and Sanitation project is the best example (box 3.10). In the future the Bank will need to concentrate more on sustainable institutional arrangements for rural water supply delivery and on efficient and equitable cost recovery (Briscoe and Gain 1995). Education and Health As Priorities and Strategies for Education (World Bank 19951) emphasized, "education is a major instrument for promoting economic growth and reduc- ing poverty." The Bank has significantly increased and will continue to in- crease social sector lending to Sub-Saharan Africa. Under the fiscal 1996-98 business plan for the Africa Region, the Bank's lending for education in Sub- Saharan Africa is expected to increase from $0.9 billion during fiscal 1993-95 to $1.3 billion during fiscal 1996-98. For health the increase is from $0.6 billion during fiscal 1993-95 to $1.3 billion during fiscal 1996-98. This increase would bring direct lending for human resource development and poverty reduction in Sub-Saharan Africa to approximately 38 percent of all lending projected for fiscal 1996-98. A review of Bank-financed investment projects in education reveals strong attention to primary education. Figure 3.7 shows that lending for primary educa- tion projects during fiscal 1992-94 and fiscal 1995-97 exceeds or will exceed lending for other types of education projects, including higher education and technical and vocational education. The differences in lending for different types of education projects are magnified in fiscal 1995-97, when lending for primary education is projected to be more than two and one-half times greater than lending for other types of education projects. In addition to its intensified emphasis on education, the Bank's Africa Region is moving toward an increased allocation of resources to sectoral lending for social services and a reduction in the proportion of resources THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 95 allocated to traditional project lending. Programs of sectoral activities, as in education, benefit from a sectoral lending approach. The basis for sectoral lending is a sectoral development program that has been discussed and agreed on by the government and all potential donors. All partners in the sectoral development program will coordinate their support on the basis of commit- ments and performance. Sectoral lending is growing rapidly in importance and has the great advantage of focusing attention on sector policy issues, increasing coordination among donors, channeling resources to the most important needs, and focusing on the development of institutions to implement the program. The achievement of better health in Africa will require a wide range of interrelated actions (see World Bank 1994c) with short-, medium-, and long- term horizons. Well-chosen actions will be needed to address such areas as policy formulation and data collection, health care delivery, national drug policies, health infrastrtucture and equipment, institutional reform and man- agement, health care financing, and donor collaboration. A review of fiscal 1992-95 projects in the sector reveals that many Bank health projects support varying combinations of actions to address these types of concerns. Typically, the projects include components that support a basic package of health services designed to improve malaria control, family plan- ning, nutrition, or AIDS control (see figure 3.8) and institutional development components that promote the proposed basic package of services. A few projects do not provide support for a basic package of services. For example, Kenya Health Rehabilitation project (fiscal 1992) is financing development of Kenyatta National Hospital and Nairobi Health Services, strengthening of health planning and analysis, and development of a national household welfare-monitoring system. FIGURE 3.7 EDUCATION SE CTOR INVESTMENT PROJECTS, FISCAL 1992-97 Millions of dollars 600 500 400 348.8 300 267.7 266.5 200 98.6 100 0 Secondary an,d tertiary edtucation Primary education Fiscal 1 992-94 Fiscal 1 995-97 Source: World Bank data. 96 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA A preliminary review of the projected fiscal 1996-97 health sector pro- gram confirms the focus on delivery of basic services. The proposed Ethiopia Health II project (fiscal 1997) seeks to extend the coverage of a basic package of health care services designed to deal with the principal sources of disease in Ethiopia; its institutional components are meant to promote this approach. The CMte d'Ivoire Health, Nutrition, and Population Program Support Credit (fiscal 1996) supports service delivery components that include a minimum package of health services and an accelerated program of reproductive health services. The institution-strengthening components, which focus on health finance and management and information systems, will contribute to im- proved service delivery. Agriculture If labor-intensive growth is to be achieved in Sub-Saharan Africa, much of it will need to occur in agriculture or in complementary activities. Hence, in the foreseeable future agriculture and rural development should remain among the top priorities for any country's investment program and for the Bank's strategy and lending portfolio. Currently agriculture accounts for a small proportion of the Bank's total portfolio. During the fiscal 1992-97 period 19 percent of total projects (13 percent of the value of lending) in the Bank's Africa Region was in agricul- ture. Table 3.5 shows that the largest share of agriculture projects in the region (46 percent) went for broadly based services, but only about one- fourth of all projects for the African Region were in this category. About FIGURE 3.8 HEALTH SECTOR PROJECTS, FISCAL 1995-97: BASIC PACKAGE APPROACH Number of projects 20 15 10 5 0 Basic services No basic package package Source: World Bank data. THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 97 one-third of agriculture lending is classified as narrowly targeted to the poor, in contrast to one-fifth of the Africa Region's lending for all projects. Finally, only about 19 percent of agriculture lending in the region focuses on enabling growth-significantly less than the average for all projects in the Africa Region. This composition of the Africa Region's lending pro- gram is largely a result of the effort to improve technology and extension in the agriculture sector. The projects are included in those providing broadly based services. The heavy emphasis on research and extension in the lending program is well placed. The need to improve productivity in agriculture is unquestioned, in light of the stagnant yields in Sub-Saharan Africa compared with other regions. Significant concerns about soil fertility also need to be addressed. Sanchez and Izac (1995) note that: Soil fertility depletion in small holder farms of Sub-Saharan Africa is probably the fundamental biophysical limiting factor responsible for the declining per capita food production of the continent. The magni- tude of nutrient mining is huge: an estimated average net loss of about 700 kilograms of N, 100 kilograms P, and 450 kilograms of K per hectare during the past 30 years in about 100 million hectares of cultivated land. These figures reflect the balance of nutrient inputs, including fertilizers, minus nutrient outputs, primarily crop harvest removals. In contrast, commercial farms in North America and Europe have averaged net positive nutrient balances on the order of 2,000 kilograms of N, 700 kilograms of P, and 1,000 kilograms of K per hectare during the past 30 years in more than four times the cultivated land, often resulting in groundwater and stream pollution. Nutrient mining in Africa, therefore, contrasts sharply with nutrient capital buildups in temperate regions. Questions about the adequacy of research and extension should be re- solved at the country level. As far as the impact of agricultural projects on TABLE 3.5 DISTRIBUTION OF AGRICULTURE PROJECTS BY LENDING CATEGORY, FISCAL 1992-97 Enabling growth Broadly based Nan-owly targeted Subregion (percent) (percent) (percent) Central and Indian Ocean 0 79 21 Central-Western Africa 23 35 42 Eastern Africa 31 62 8 Southern Africa 11 33 56 Western Africa 44 31 25 Average 19 46 35 Source: World Bank data. 98 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA growth is concerned, analysis of the components of agricultural projects shows that while almost 50 percent of projects are characterized as providing broadly based services, about 50 percent of the components of the projects are de- signed to enable or generate growth. Summary and Implications This chapter has examined three critical elements of the Bank's operational cycle inman effort to assess how these activities are related and how they affect the Bank's poverty reduction efforts. On balance, the Bank's lending is not always consistent with the needs for poverty reduction as set out in the avail- able poverty assessments. In some countries the poverty assessment has led to significant changes in the country strategy and the nature of the lending program, but in others neither the strategy nor the lending program offers guidance on means for reducing poverty. This result suggests the need to improve the method of preparing the CAS and the lending program so that poverty reduction becomes more central. Linkages between Poverty Assessments, the CAS, and the Lending Program The recommendations in the poverty assessments have been important in the dialogue between the Bank and governments and have influenced the lending program to some extent. The poverty assessment for Malawi, one of the first in the Bank's Africa Region (March 1990), had a significant impact on Bank dialogue and policy conditionality in subsequent structural adjustment opera- tions, and the Agriculture Sector Adjustment Program has been beneficial for smallholders. The poverty assessment for Ethiopia led to considerable discus- sion on targeted programs; as a result, the govemment asked for Bank assis- tance to support a social fund for the entire country and designed its own targeted program. The Zambia poverty assessment provided a framework for the Bank's assistance strategy and lending program for many years to come. In Kenya the poverty assessment stimulated the Early Childhood Develop- ment project, and consideration is being given to a social fund project; discus- sions regarding sectoral credits in education and health are likely to focus on primary services and allocation of public expenditure. As noted earlier, water supply projects are still predominantly urban, and Bank investment in roads occurs predominantly in main highways with some funding for rural roads, if other donors cannot be persuaded to finance them. Even where the Bank has completed a poverty assessment, the strategy typically does not reflect the findings of the assessment. Whereas the typical poverty assessment describes the need for increased social services and income-generating activities, often emphasizing rural areas, the typical CAS emphasizes the importance of macroeconomic stability and factors contribut- ing to long-term growth without any explicit assessment of the effect on THE BANK'S RESPONSE TO THE CHALLENGE OF POVERTY 99 poverty reduction. Notably, the CASs do not exclude consideration of social services in general but do tend to minimize consideration of the impact these services have on the poor. This tendency is reflected in the number of urban programs supported by the Bank. In Sierra Leone plans for an urban works program include water supply and sanitation for Freetown but no plans for a rural water supply and sanitation project or for other rural social services projects identified as important in the CAS. The bottom line is that although poverty assessments have done a reasonably good job of identifying the policy and strategy options that will assist the poor to become more active participants in the growth process, these options typically are not being reflected in the Bank's assistance strategies or operations. The Bank's Effectiveness in Pursuing Poverty Reduction To implement its strategy for assisting Sub-Saharan African countries to reduce poverty, the Bank has been working from a well-established and well-known strategy of stimulating broadly based, labor-intensive growth, improving social services for the poor, and, when necessary, targeting assistance to the poor. Assistance programs for each country usually include all three components. How effective have these programs and the Bank's lending been in reducing poverty? Several questions need to be answered for each country strategy: I What is the effect of growth on poverty? How much time will it take to increase incomes significantly? What is the distribution of growth, and to what extent will the poor benefit? I Is the balance between public and private investment appropriate? I Are stakeholders sufficiently involved in formulating strategies for de- velopment? I Are changes in welfare being monitored? THE EFFECT OF GROWTHI ON THE POOR. Unless economic growth is at least 5 percent a year, the number of poor in a typical Sub-Saharan Africa country will not decrease. Indeed, a growth rate of at least 7 percent a year is required to reduce substantially the number of poor. But even at that rate, average per capita income will take at least thirty-five years to double. Moreover, liffle is known about the distribution of growth. Recent research (Sahn, Dorosh, and Younger 1994) suggests that although the poor do not suffer as a result of structural adjustment programs, there is little strong evidence about direct benefits for the poor. Usually the benefits are ascribed to improved rural incomes, but social indicators are still low, and in some countries they are declin- ing. As the results of household surveys at two different points in time become available, it should be possible to investigate the effects of policy changes and other changes on the poor. Chapter 1 provided some evidence from Nigeria indicating that minimal benefits accrued to the poor in the poorest regions 100 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA during a period of rapid aggregate growth. In contrast, in Ghana (outside Accra) poverty has declined, despite the imperfect adjustment performance and lag- ging private investment. Even though the results have been uneven, there is no choice but to promote growth and, in particular, a pattern of growth that will most benefit the poor. PUBLIC AND PRIVATE INVESTMENT. IDA finances structural adjustment credits and sectoral adjustment loans. But IDA also finances power, telecommunica- tions, and highway projects. Although these public infrastructure projects gen- erate benefits that accrue to the private sector, the benefits are seldom ad- equately recouped through user charges or taxes. If the benefits could be ad- equately taxed, returns would be high, and the monies could be applied to maintenance and reinvestment in new infrastructure. In fact, however, public institutions in Sub-Saharan Africa are seldom efficient, and large private sec- tor beneficiaries usually pay little tax. Therefore, maintenance and reinvest- ment for project sustainability become considerable burdens for the state. Thus, benefits from some IDA infrastructure investments are often largely captured by private sector enterprises and rarely extend to the poor. Should IDA finance such investments, or should funds from the private sector be mobilized for investments that provide mainly private benefits? The latter course would ensure efficient implementation and adequate cost recovery, and IDA funds could be directed more toward improving social services and supporting targeted poverty-reducing projects. PARTICIPATION OF STAKEHOLDERS. Throughout the Bank's work, systematic con- sultation of clients is being recognized as an important element for ensuring improved project effectiveness and sustainability. Evidence shows that the qual- ity of project design, implementation, operation, and maintenance is markedly improved when beneficiaries are consulted from the start. In addition, partici- pation and broad ownership of a program increase the likelihood of strong support for investments. The rapid increase in systematic participation with stakeholders is heartening. POVERTY MONITORING. World Bank projects are, of course, supervised, but few contain provisions for monitoring or evaluating the projects' effects on the poor. For fiscal 1988-93 one-third of the staff appraisal reports for Bank- assisted projects that were judged as targeted toward poverty or contained com- ponents focused on poverty reduction failed to mention any use of indicators other than for routine project management (Carvalho and White 1994). De- veloping indicators is an important step toward enabling the Bank to judge what types of projects are effective. The Bank's Board of Directors has regularly emphasized the importance of measuring the effect of projects on the poor. Monitoring goes beyond the project level to national statistical agencies. Reliable data are critical if realities on the ground are to be understood. The Bank put much effort into the Social Dimensions of Adjustment (SDA) pro- gram, which worked with governments to establish poverty-monitoring sys- THE BANK'S RESPONSE TO' THE CHALLENGE OF POVERTY 101 tems. Although the SDA program itself has ended, this effort continues through projects and technical assistance directed toward strengthening statistical agen- cies in Sub-Saharan Africa. QUESTIONS FOR AN ACTICON PLAN. What are the Bank's options for improving its ability to fornulate and implement an effective poverty reduction program in the field? How can the Bank better and more systematically incorporate the recommendations of the poverty assessments, and other analytical work on poverty, into the CAS? How can CASs be prepared so that poverty reduction emerges more clearly and strongly as a central theme, making the lending program more focused oln poverty reduction? How can the Bank's operations become more effective in reducing poverty? Finally, how can the Bank in- crease the participation of clients in its work? The next chapter offers some answers to these questions. Notes 1. Ghana 2000 was an assessment by the World Bank of the impact of the macroeconomic changes of the early 1980s on poverty reduction. It was, in effect, the first poverty assessment for Ghana. At the time this book went to press, a review of poverty assessments by the Institute of Social Studies Advisory Services in The Hague was being completed. In August 1996 the World Bank's Operations Evaluation Department completed a review of poverty assessments throughout the Bank. (World Bank 1996e). 2. These include the many general trust funds financed by bilateral donors, as well as specific trust funds for poverty monitoring and analysis (Norway and Bel- gium) and the Netherlands trust fund for poverty assessments. 3. See, for example, Isaham, Narayan, and Pritchett (1995), which provides statistically significant support for the proposition that increasing beneficiary partici- pation directly caused better project outcomes in 121 rural water projects in forty-nine countries in Africa, Asia, and Latin America. 4. At the time this report was being prepared, CASs for fiscal 1996 were available only for Eritrea, Cameroon, Chad, Kenya, and Mozambique. 5. Documents used for the classification of projects included memoranda of the president, for projects already approved, or, for proposed projects, the most recent initial executive project summary (tEps) or final executive project summary (FEPS). For fiscal 1996-97 the judgments on classification were based on the available de- scription of the projects in the IEPS and, whenever possible, on discussions with individual task managers. 6. Examining the impact of projects is the role of the OED, which recently completed an analysis of the social impact of adjustment operations. See World Bank (1995p); Carvalho and White (1996). 7. The Bank has recently decided to increase private participation in telecommu- nication projects; see Operational Policy 4.50, May 1995. The application of this policy should be considered for other infrastructure projects. S. The Ethiopia Poverty Assessment (World Bank 1993b) mentions a failed rural domestic water supply program financed by the Canadian International Development Agency (cIDA). C H A P T E R F O U R The World Bank and Its Partners As has been seen, Africa's poor have little capital or land. They suffer from bad health and inadequate education, and they often live in unfa- vorable locations. As a consequence, they are usually unable to take full advantage of growth in the economy. The poor have few assets on which to build their future. Even at a sustained GDP growth rate of 6.5 percent a year (the rate required, for most countries, to achieve a reduction in poverty), it will take generations before poverty indicators significantly improve or the num- ber of poor is substantially decreased. If pro-poor growth programs are to succeed, they must include actions that increase the assets of the poor by extending credit and developing social and physical infrastructure. The experience in East Asia, different as it is from that of Sub-Saharan Africa, nevertheless offers some useful lessons. It took many years-nearly thirty in some cases-to create a healthy, trained work force and other precon- ditions for high levels of long-term sustainable growth. It is unrealistic to expect that either the preconditions for growth or the effect of growth on poverty reduction will come about quickly. Indonesia, Malaysia, Singapore, and Thailand had achieved universal pri- mary education enrollment by 1965 and thus had a base of educated people on which to build their growth. Indonesia already had a gross primary school enrollment rate of 67 percent in 1960-the same as the average rate in Sub- Saharan Africa today. Without investments in education and other services that develop human capital, economic growth and poverty reduction will not be achieved or sustained. Difficult, but essential, public expenditure choices must be made now. The objective for any Bank assistance program should be pro-poor growth. Tradeoffs will have to be made to put poverty reduction first. Increases in public expenditures for primary education and primary health programs may 102 THE WORLD BANK AND ITS PARTNERS 103 reduce the resources available for improving hospitals and tertiary education. Rural roads may take precedence over trunk roads or mining. Such allocative decisions may be needed to shift the distribution of services toward the poor. Helping farmers in a backward agricultural region through rural road develop- ment, provision of domestic rural water supplies, or small-scale rural credit programs may not contrilbute as much to aggregate growth as investment in a region with higher potential, but such actions may be the only ones available for reducing poverty efficiently and sustainably.1 Lessons for the Bank The essential lesson for the Bank is that a larger proportion of incremental growth must reach the poor. More programs that stimulate rural develop- ment are urgently needed because of the large proportion of the poor in the rural economy. Such programs should explore new ways of fostering large gains in agricultural and pastoral productivity through better means of pro- viding credit, improved technologies, extension of production technologies, better rural infrastructure, and more information about product and input markets, including broadly based employment opportunities. All these fac- tors are important, but perhaps the most important is technological progress in agriculture, which must receive continued support to achieve sustainable development. Donor assistance by itself will never be able to generate long-term sustain- able growth in any country. Ultimately, private capital must provide the main financing for sustainable growth. Consequently, a principal function of do- nors, in partnership with govemments, is to identify the investments and policy reforms that will create an attractive investment environment for the private sector and foster a pattem of growth that will achieve the greatest reduction of poverty-that is, will ensure the maximum increase in employ- ment and income generation among the poor, consistent with equitable and efficient factor markets. In addition to these general lessons, the Bank has leamed some specific lessons that will help improve its contribution to reducing poverty in Sub- Saharan Africa: I The Bank has a tendency to understate how long achieving substantial poverty reduction in Africa will take. Expectations must be far more realistic; if poverty reduction is the Bank's overarching objective, its success should not be judged in the short term. * Poverty reduction must be the principal and explicit theme of country assistance strategies. The CAS must provide a clear statement of the details of the poverty reduction strategy, priority actions that should be taken, and the likely impact of the strategy on poverty reduction. The CAS also needs to consider the distribution of incremental growth and describe specifically the likely contribution of broadly or narrowly targeted programs to poverty reduc- 104 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA tion rather than including them in a standard way as part of social sector development. Just because a project has "education" or "health" in its title, it should not get an automatic "free ride" into the lending program on the assumption that it satisfies poverty reduction objectives. * The composition of lending programs should be geared to the differences among Sub-Saharan African countries and the changes in their external and internal environments. Both broadly and narrowly targeted projects that seek to increase immunization, primary education enrollment rates, or the adult literacy rate in a backward region have been relatively small compared with funds supporting macroeconomic policy reform. The actual volume of lend- ing required to support policy change should be reviewed to see whether some resources allocated to those projects should be transferred to social and physi- cal infrastructure development.2 The allocation of IDA investments should be carefully reviewed to determine which projects could be financed more effi- ciently and more appropriately by the private sector and which are uniquely public investments that warrant Bank and IDA assistance. * In many sectors that are central to reducing poverty, such as agriculture, the Bank's portfolio performance is weak. An OED review found that in five of eight agriculture projects approved for Sub-Saharan Africa in fiscal 1993 the analysis of poverty in staff appraisal reports was bad or marginal. Weak project performance in rural areas is clearly a setback for the rural poor. Project analysis of poverty issues must obviously be improved because pov- erty problems must be linked to appropriate actions. * Poor understanding of the causes of poverty and how they might be rem- edied remains a fundamental stumbling block to the adequate design and monitoring of a poverty reduction strategy for Sub-Saharan Africa. The rem- edies lie in increased research into the causes of poverty by African research institutions, the formulation of policies and actions for poverty reduction, and the timely monitoring of poverty through household surveys. Partnerships for Action Progress on poverty reduction will only be made by hamessing the vision, resources, and energy of all partners-governments, donors, and the Bank. Actions by Governments Governments should demonstrate their commitment to poverty reduction through public statements and actions and through ownership of the policies and strategies for reducing poverty. This commitment could take many forms. depending on country circumstances, but the following actions are among the most important: * Foster efficient macroeconomic and sectoral policies for sustained growth and poverty reduction. THE WORLD BANK AND ITE PARTNERS 105 * Establish a forum for poverty reduction at which stakeholders discuss, evaluate, and coordinate efforts to reduce poverty. In particular, establish opportunities for listening to the poor. Such a forum should lead the dia- logue with government departments and donors in designing and imple- menting a strategy for reducing poverty. * Carry out regular reviews of public expenditures as the basis for a pro- poor public investment program that can be supported by donors. * Shift actual expenditares on social services from urban to rural areas. * Decentralize governrent decisionmaking, especially on public expendi- tures; promote community participation in the design, implementation, and monitoring of programs that are essential for successfully reducing poverty. * Monitor poverty (through, for example, the collection of household data) to assess the difficulties faced by both men and women and to evaluate the progress being made (see box 4.1). Actions by Other Donors The Special Program of Assistance for Sub-Saharan Africa and the Global Coalition for Africa should lead in developing an international consensus on the strategies, actions, and financing necessary for a more active and intensive poverty reduction program. The following actions are essential: * Governments and donors should build a consensus on a strong vision for and commitment to poverty reduction. * Levels of assistance, except for clearly humanitarian aid, should be re- lated to the government's commitment to poverty reduction. * Consultative groups should make poverty reduction the central theme for assistance programs. * Donors must demonstrate greater flexibility and openness with each other in coordinating assistance programs better for a concerted attack on poverty. Such country-level coordination is best done by major donors, who should meet on a regular basis to review sectoral programs. The framework for in- country, sector-investment lending already provides the model for such inter- action among donors. * Donors should reduce the bias in assistance programs toward urban and high-potential agricultural areas and seek a balance of programs that is more pro-poor. Actions by the World Bank The task force report focuses on measures that the Bank, in partnership with governments and donors, can take to strengthen its effectiveness in poverty 106 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA BOX4.1 IMPROVINGPOVERTY responsible for managing the funds MONITORING: ANGOLA and channeling them to government institutions and other local agencies. Statistical offices are the usual agen- After reviewing the financing requests cies for monitoring poverty in Bank for technical and methodological projects, even though their success soundness, the GMcvP releases funds has been limited by funding uncer- for work in four main areas: quantita- tainties and by the offices' large size, tive and qualitative surveys, benefi- weak analytical ability, and lack of ciary and participatory impact stud- autonomy. Analytical units, because ies, data processing, and data dis- they are smaller and more autono- semination. The GMCVP'S principal mous structures within or parallel to activities are to gather information on government, can serve as an alter- the welfare of the population, sup- native to statistical offices for moni- port local institutions in carrying out toring poverty. These analytical units household and community surveys, can also link the activities of the gov- as well as specific poverty-related ernment and other actors or partners studies, and administer funds for a involved in achieving poverty reduc- study program. Forthcoming activi- tion and improving living standards in ties will include a series of national a country. and provincial seminars, which will The Gabinete de Monitorizacao das provide forums for presenting the re- Condicaoes de Vida da Populacfo sults of the poverty profile and dis- (GMCVP) in Angola is one example. cussing poverty alleviation programs Under the leadership of the director with local authorities and partners in of the Institute of Statistics in the Min- the social sectors; the integration of istry of Planning, the GMCVP serves recommendations from these semi- as an observatory for monitoring pov- nars into the Bank poverty assess- erty but operates on its own funds ment, using participatory processes; provided, in part, by Bank projects and a full-year household consump- and other donors. It is composed of a tion and budget survey to be carried small group of consultants who are out by mid-1996. reduction. The Bank needs to implement four changes to increase its opera- tional emphasis on poverty reduction: * Focus clearly and unequivocally on growth and poverty reduction. Bank staff, including managers, need to orient themselves more toward the poor as the ultimate clients and to become more familiar with their needs. This will require a significant change in the mind-set of some staff about what consti- tutes the Bank's output or product. The Bank's role as a source of advice on development strategies is as important as its projects. * Make poverty, gender, and environmental issues the heart of macroeco- nomic and sectoral strategies-not "add-ons." * Arrange to monitor poverty systematically in all countries that receive Bank lending. THE WORLD BANK AND ITS PARTNERS 107 * Hold management and staff accountable for ensuring participation of all stakeholders in the formulation of assistance strategies and for achieving the Bank's stated objective of poverty reduction. An important conclusion of the task force is that the internal causes of slow progress on poverty reduction derive from two parts of the Bank's opera- tional cycle: country assistance strategies and lending. Past country assistance strategies (CASs) have generally lacked a strategic vision on how to reduce poverty and a clear means of monitoring progress. Many CASS imply that macroeconomic adjustment or reform is an end in itself, and most fail to solidly link the reform agenda with poverty reduction, even though policy change has enormous potential for helping the poor. This opera- tional shortcoming is often rooted in lack of information on poverty, inadequate analysis, and lack of interest in poverty reduction. Another factor may be a willingness by the Bank's management to compromise on poverty reduction for the sake of good country relations and to be satisfied with lending operations that address aggregate growth but pay little attention to distribution. Some CASs have a clear strategic vision on how to reduce poverty but have not effectively implemented a lending program that significantly furthers this vision. In practice, Bank structure and staffing, not the priority of poverty reduction, often drive the lending program. As a result, operational decisions are based more on sectoral interests than on poverty reduction, which is a multisectoral issue that requires an integrated strategy.3 Country business plans must explain how the Bank's work program for a country will implement the poverty reduction strategy contained within the CAS. Specific actions that are to be part of each business plan include: * Preparation of a prospectus showing how sectoral investment programs will be implemented in the four key poverty reduction sectors-education, health, agriculture, and rural infrastructure-and explaining how they are designed to reduce poverty. * Establishment of clear targets for poverty reduction and social develop- ment that the Bank and governments have agreed on and that can be moni- tored. Specific targets are being established in consultation with governments for all countries in Sub-Saharan Africa. * Examination of the criteria for lending to avoid financing investments that the private sector could undertake. Promotion of a larger role for the private sector, while maintaining the Bank's catalytic role, would allow the Bank to reallocate some funds currently going toward projects involving mining, power, telecommunications, and other infrastructure, or hospitals and similar institu- tional structures, and use them to support expanded primary services for the poor. The Bank should establish strong linkages between the poverty as- sessment, the country assistance strategy, and the lending program. The 108 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA BOX 4.2 SIMULATION OF POVERTY graphic regions from the strong eco- TRENDS IN NIGERIA nomic growth in Nigeria during the 1985-92 period discussed in chap- To analyze the effects of different ter 1. For details on the model and growth scenarios on the number of simulation method see Bigman poor in Nigeria in the next decade, a (1995a). A more complete summary simulation model was used to project can be found in appendix E. the changes in poverty on the basis The model takes account of differ- of growth rates of population and con- ences in growth rates between sumption. The model reflects the agroclimatic regions, urban and rural highly unequal distribution of benefits populations, agricultural and nonagri- across economic sectors and geo- cultural sectors, and poor and nonpoor. MEASURES OF POVERTY AND INCOME INEQUALITY Item 1996 2000 2005 Total population (millions) 111.0 128.4 148.6 Scenario 1(2 percent growth a year) Rural share of the poor (percent) 62.8 58.0 46.8 Gini index (percent) 58.0 47.4 57.0 Size of poor population (millions) 46.8 49.3 72.9 Scenario II (5 percent growth a year) Rural share of the poor (percent) 62.5 57.9 53.2 Gini index (percent) 45.8 47.4 49.6 Size of poor population (rmillions) 43.8 49.4 56.6 poverty assessment, and other analytical work, should feed into the CAS, which should drive the lending program. The relationship between the poverty assessment, the CAS, and the lending program for a country must be charted in the CAS. The analytical building blocks shown in figure 3.1, together with a substantive dialogue between the Bank, cli- ents, and other partners, will provide the framework within which the CAS is prepared. The lending program will reflect the action plan con- tained in the poverty assessment. The CAS will pursue the theme of poverty reduction in all of its four sections, not as a separate reference in one or two paragraphs: * "Recent economic and social performance" will review and discuss the poverty status of the country and the effects of past policies on poverty reduc- tion. * "The external environment" will clarify how the poor are directly or indirectly involved in the production and consumption of tradable goods and how they are affected by the external environment. THE WORLD BANK AND ITSi PARTNERS 109 The table summarizes results for two although total income for the rural and growth scenarios. urban sectors grows 5 percent a year, The main reason for the relatively poverty in the rural areas is likely to small decline in poverty, despite the decline from 38 percent in 1995 to 27 rise in average consumption per capita, percent in 2005, while poverty in the is worsening of income inequality; un- urban areas is likely to rise. The main der the existing patterns of growth, the reason for these sharp differences is benefits from growth will accrue to the the continued wave of rural-urban mi- nonpoor more than to the poor. The gration. As a result, the net increase in figure shows the chaniges in the the rural population is 1.45 percent, headcount measure of poverty in ur- whereas the net increase in the urban ban and rural populations; and in the population is over 4.5 percent (Bigman general population. In this scenario, 1995a). HEADCOUNT INDEX OF POVERTY sor 50_ 1995~~~~~~~~ 2000 200 Note: A growth rate of GDP of 5 percent a year is assumed. * "Country's development objectives and policies" will describe and ana- lyze the government's commitment to poverty reduction, its budget alloca- tions, and the implications for the poor. * "The Bank Group's assistance strategy" will analyze the balance between policies and investments and the short-term and long-term effects of policies on the poor. For example, "links between poverty and the environment" will address the mutually reinforcing relationship of poverty and environmental degradation. CASs and Bank operational work contain almost no quantitative as- sessment of the effects of policies and projects on poverty reduction, in spite of voluminous statements about the expectation of poverty reduc- tion from this or that policy. Methods can be developed for assessing the effect of various development options on the number of poor. One pos- sible model is described briefly in appendix E. Box 4.2 summarizes the methods and some results for Nigeria. The following actions are essential to fulfill the Bank's responsibili- ties to its shareholders:: 110 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA * Emphasize, through constructive dialogue with borrowers, the need for a strategy to reduce poverty as a minimum requirement for receiving Bank assistance. * Assist borrowers in developing the internal capacity to analyze poverty issues. * Link assistance to governments to the strength of their commitment to reduce poverty, as reflected in their public policies, strategies, and actions. Next Steps for the Bank The following actions will be taken within the Bank's Africa Region: * Establish poverty reduction as the common objective and organizing prin- ciple through the leadership of managers and the actions of staff. This objective will be reflected in the Bank's dialogue with borrowers and other partners, such as bilateral donors and NGOs, on macroeconomic and sectoral policy, public expenditures, and lending. * Indicate in the business plan for each country program how and to what extent each proposed project in the lending program will help reduce poverty. * Arrange training programs on the internal processes and on analysis of poverty issues in order to emphasize poverty reduction and highlight actions that can better integrate poverty reduction into the World Bank's macroeco- nomic and sector strategies, investments, and cooperation with NGOS and communities. * Focus the Bank's operations more on rural development in the poorest regions, on rural domestic water supplies and rural roads, and on primary services for education and health. * Find imaginative ways of working with communities through sectoral operations and investments, such as social funds. It is recognized that Bank investments in larger infrastructure projects and adjustment lending will often be necessary to promote aggregate growth, but these projects must clearly contribute to reducing poverty. * Work through the country teams to establish with governments and other stakeholders in all Sub-Saharan African countries a strengthened process for formulating the CAS so as to treat poverty reduction systematically. Possible candidates for initial review of progress based on the severity of poverty and the background work already completed or ongoing are Cameroon, Ethiopia, Ghana, Malawi, Mali, Nigeria, Tanzania, and Uganda. Some of these coun- tries are also the focus of a collaborative UNICEF-World Bank program of action on basic health and education. * Disseminate information on best practices in operations that have led to poverty reduction. THE WORLD BANK AND ITS PARTNERS 111 * Orient incentives for staff to ensure that success in reducing poverty becomes a criterion for rewards and advancements. * Foster effective national systems for monitoring poverty. * Continue to support collaborative research with Africans on all aspects of poverty and on the analytical challenges posed in Sub-Saharan Africa. Partnerships, Forums, and Networks The Bank will strengthen partnerships with governments through regular dia- logue to achieve a shared commitment to poverty reduction and to agree on a strategic vision for the best way to reduce poverty. It will also establish discussion groups of supporters on the broad strategy laid out in the task force report, drawing in Africans from all walks of life, as well as NGOs. As a partner, the Bank will work with governments and with other donors to foster actions that have poverty reduction as their principal objective-sound strat- egies and investments, and macroeconomic and sectoral policies. In addition, the Bank will continue to focus on poverty reduction within the donor com- munity, in such forums as consultative groups, the Special Program of Assis- tance for Sub-Saharan Africa, and the Global Coalition for Africa. Steps have already been completed to establish the African Poverty Re- duction Network, which includes African government officials, academics, and representatives, from the private sector and from NGOS. The network will advocate ways of reducing poverty more rapidly in Sub-Saharan Africa, ad- vise on options that should be explored, and prepare action plans as appropri- ate. Its first business will be to evaluate the operational implications of the Bank's task force report. Members of the network will also provide in-country support to donors and will consult with governments on implementing poli- cies and strategies for reducing poverty. Notes 1. There is empirical evidence that geographic targeting can reduce overall pov- erty levels. See, for example, Ravallion (1993); Baker and Grosh (1994). 2. The issue of getting a better return from adjustment lending is part of the region's Change Agenda and is being examined separately. 3. A recent restructuring of the World Bank's Africa Region is designed to address this problem, as well as other issues. A P P E N D I X A Selected World Bank Reports on Poverty, 1982-96 T his appendix briefly summarizes selected World Bank reports on poverty and food security and on other broad subjects such as education, health, infrastructure, and the environment that have a bearing on poverty. The lists, which bear witness to the continuing concern about poverty in the Bank, are by no means exhaustive; many other Bank initiatives have addressed broader de- velopment issues-drought, population, and natural disasters, for example- that have important implications for poverty and its reduction. A brief sample of these broader reports, not annotated here, includes Accelerated Development in Sub-Saharan Africa: An AgendaforAction (1981); Siub-Saharan Africa: Progress Report on Development Prospects and Programs (1983); "The 1983 Drought in Sub-Saharan Africa: Short-Term Impact, Desertification, and Other Long-Term Issues," (a report to the Bank's executive directors, May 29, 1984); "Financing with Growth: Issues Paper on Poverty in Sub-Saharan Africa" (1988); and "African Population Program: Status Report" (1993). Titles in italics have been formally published by the World Bank. Poverty and Food Security A 1982 report of the poverty task force that reviewed the Bank's work on poverty reduction during the 1970s concluded that economic growth and poverty alleviation were complementary. The report introduced the concept of a poverty income threshold to measure the proportion of beneficiaries in a poverty group and the proportion of project costs benefiting the poor. "Focus on Poverty: A Report by a Task Force of the World Bank" (1983) recommended strengthening the Bank's approach to poverty needs and making poverty issues an important part of the Bank's policy dialogue with borrowers. Poverty and Hunger: Issues and Options for Food Security in Developing Countries (World Bank 1986) discussed the importance of poverty alleviation as 112 APPENDIX A 113 a means of addressing food security problems. It concluded that food insecurity among millions of poor people was caused primarily by a lack of purchasing power and recommended measures for enhancing both chronic and transitory food security. Protecting the Poor during Periods of Adjustment (World Bank 1987) discussed the social costs of adjustment and proposed measures for protecting the poor by redirecting social expenditures and through direct compensation. "Report of the Task Force on Food Security in Africa" (World Bank 1988b) recommended a vigorous approach to growth and adjustment to lay the foundation for long-term food security in Africa, country-specific actions to address hunger, and an action program sponsored by a partnership of donors. "Report of the Task Force on Poverty Alleviation" (World Bank 1988c) recommended adoption of a core poverty program that would focus on strate- gies and operations with the primary objective of alleviating poverty, espe- cially extreme poverty. The task force advocated preparation of poverty pro- files for borrowers and strengthening of sectoral approaches to reach the poor. Status Report on the Bank's Support for Poverty Alleviation (World Bank 1988d) stressed that adjustment lending should address poverty issues and that poverty reduction objectives should be reflected in assistance strate- gies and included in econornic and sector work and lending operations. The task force recommended that cost-effective service delivery to the poor also be supported. The Challenge of Hunger in Africa: A Call to Action (World Bank 1989a) outlined a strategy and an action plan prepared by the Task Force on Food Security in Africa with the aim of achieving food security. Ending hunger, the task force concluded, will require both economic growth and a number of complementary actions: designing policies and action programs to promote food security; promoting projects and policies that target persons facing food insecurity; identifying persons at high risk of food insecurity; and strengthening the institutional capacity of African governments to manage programs while increasing the effectiveness of food aid through better coordi- nation among donors, NGOS, and African governments. World Development Report 1990: Poverty (World Bank 1990) laid out a two-pronged strategy for sustainable poverty reduction: promote broadly based economic growth that will generate income-earning opportunities for the poor, and improve access of the poor to education, health care, and other social services so that the poor can take advantage of increased economic opportuni- ties. In addition, the strategy called for targeted transfers and safety nets for those who are not able to benefit from increased opportunities-the aged, the ill, and the disabled-and those buffeted by economic shocks and setbacks. Assistance Strategies to Reduce Poverty (World Bank 1991b) showed how the analytical framework oiF World Development Report 1990 could be inte- 114 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA grated into Bank operations by assessing each country's policies, public expen- ditures, and institutions. The report also described how Bank country assistance strategies can be designed to support country efforts to reduce poverty. Food Aid in Africa: An Agenda for the 1990s (World Bank 1991c) ana- lyzed flows, channels, and uses of food aid in emergency and other situations and discussed programming issues. It noted that food aid is a development resource that should be used to combat poverty and hunger, and it identified actions to be taken by recipient countries, donor countries and agencies, NGOS, the World Bank, and the World Food Programme. "Food Security and Disasters in Africa: A Framework for Action" (World Bank 1991d) discussed the effects of drought and disasters on food security and on Sub-Saharan Africa's development prospects. It identified a long-term strategy for the Bank aimed at minimizing the negative develop- ment impact of natural and man-made disasters. Poverty Reduction Handbook (World Bank 1992d) provided a frame- work for analyzing and preparing poverty assessments and for measuring and monitoring progress in poverty reduction. Chapter 9 of the Handbook pre- sented the institutional history of poverty monitoring by the Bank. Implementing the World Bank's Strategy to Reduce Poverty: Progress and Challenges (World Bank 1993d) summarized poverty trends and coun- tries' efforts to reduce poverty. It also assessed the Bank's efforts in sectoral lending for such purposes as investment in rural infrastructure, human re- source development, and programs of targeted interventions. "Review of the World Bank's Effort to Assist African Governments in Reducing Poverty" (World Bank 1993e) highlighted new trends in poverty reduction efforts and identified ways of strengthening Bank assistance to gov- ernments for reducing poverty. It found that increasing the poverty focus of structural adjustment and sectoral lending was the most effective means of reducing poverty. "The Social Dimensions of Adjustment Program: A General Assess- ment" (World Bank 1993f) examined the Social Dimensions of Adjustment (SDA) program, a strategic response to concem about the effects of adjustment on the poor. The program developed a framework within which to design operational interventions on poverty as part of structural adjustment lending. It recommended four actions: improving macroeconomic and sectoral poli- cies by carrying out studies of the socioeconomic implications of adjustment, establishing social action programs in conjunction with adjustment programs, developing analytical and methodological tools for data collection and analy- sis, and strengthening national institutional capacity for poverty monitoring and analysis. APPENDIX A 115 Poverty Reduction and the World Bank: Progress in Fiscal 1993 (World Bank 1994i) was the first of the annual reviews of progress made in the Bank's efforts to reduce poverty. Selected Reports Related to Poverty Reduction Education in Sub-Saharan Africa: Policies for Adjustment, Revitalization, and Expansion (World Banik 1988a) argued that although progress in educa- tion after independence succeeded in improving countries' human capital, those gains were being threatened by stagnant enrollments and erosion of quality as a result of population growth and cutbacks in public spending. At the primary level, scope for adjustment, through lower unit costs or increased cost sharing, was found to be limited. At the secondary level, better use of resources and adoption of more cost-effective ways of providing services offered hope for containing unit costs. At the higher level, rapid expansion and poor planning had led to low quality and dubious relevance. The book recommended as policy objectives improvement in quality, increased effi- ciency, and cost recovery. World Development Report 1991: The Challenge of Development (World Bank 1991e) raised awareness about the one-fifth of the world population that remains in poverty and out]Lined what developing countries and the intema- tional community could do to spur development and alleviate poverty. World Development Report 1992: Development and the Environment (World Bank 1992e) explored the two-way relationship between development and the environment, identified policies that could build on the positive links and break the negative links, and advocated policies and institutions designed to rectify environmental problems. The report emphasizes that poverty reduc- tion-a moral imperative-and environmental conservation are mutually rein- forcing objectives. WorldDevelopmentReport 1993: Investing in Health (World Bank 1993i) proposed a three-pronged approach for govermnent efforts to improve health: foster an environment that enables households to improve health; increase efficiency in govemment spending on health; and promote diversity and com- petition in the provision of health services and insurance. A clear message from the report was that providing cost-effective health services to the poor is an effective approach to reducing poverty. Better Health in Africa: Experience and Lessons Learned (World Bank 1994c) argued that health in Africa can be improved, despite the financial constraints, through efficient allocation of resources, higher priority for primary health, better management, mobilization of private resources, and restructuring 116 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA of health care delivery systems. It urged that African governments take the following actions: (a) adopt public health policies, support public services, such as safe drinking water and sanitation, and strengthen the enabling environment for households; (b) implement cost-effective approaches to basic health ser- vices, particularly for vulnerable groups; (c) accelerate institutional reforms and build management capacity to improve the performance of health care systems, strengthen research support, and build effective partnerships with private and volunteer providers; (d) increase government commitment to health expendi- tures and reallocate public expenditures to increase efficiency and stimulate private sector financing; and (e) develop national strategies for managing exter- nal assistance rather than simply comply with donor conditionalities. "Paradigm Postponed: Gender and Economic Adjustment in Sub- Saharan Africa" (Blackden and Morris-Hughes 1993) addressed the gender dimensions of structural adjustment. It argued that since economic agents face gender-specific constraints, policies that are gender neutral are likely to worsen the situation of women and men and so contribute to greater economic ineffi- ciencies. The main recommendation of the study was that gender analysis be integrated into the design of policies and programs intended to promote eco- nomic growth. World DevelopmentReport 1994: Infrastructure forDevelopment (World Bank 1994m) examined new ways of meeting public needs for services from infrastructure that would be more efficient, more user-responsive, more envi- ronmentally friendly, and more resourceful in using both the public and pri- vate sectors. The report explained how infrastructure can deliver major ben- efits in economic growth, poverty alleviation, and environmental sustainability and explored the causes of past poor performance and the potential for im- proved future performance. "A Continent in Transition: Sub-Saharan Africa in the Mid-1990s" (World Bank 1995c) used the outline given in the World Bank's 1989 report Sub-Saharan Africa: From Crisis to Sustainable Growth to assess what has happened to Sub-Saharan Africa in the past five years and identify steps for the future. The report noted the progress made in a large number of countries in macroeconomic policy, such as the decontrol of exchange rates and of producer prices and political liberalization, but also cited the need for greater progress in fiscal management and human capital development. Given that sustainable poverty reduction is the Bank's overarching objective, the report concluded that equitable and environmentally sustainable growth, accompa- nied by investment in human development and infrastructure, should form the broad elements of a development agenda. WorldDevelopmentReport 1995: Workers in an Integrating World (World Bank 1995s) observed that the present revolutionary changes in the global APPENDIX A 117 economy bring with them both risk and challenge. The report stated that the problems of low incomes, poor working conditions, and insecurity affecting many of the world's workers can be effectively tackled in ways that reduce poverty and regional inequality. To do so will require that governments pur- sue sound domestic policies, such as market-based growth paths that generate rapid growth in demand for labor, take advantage of new international oppor- tunities by opening up trade and attracting capital, and construct a framework for labor policy that complements informal and rural labor markets and avoids biases that favor relatively well-off workers. A P P E N D I X B Lending for Human Resources, Fiscal 1995-97 Amount of credit or Colnltry Project name and fiscal year loan (millions of dollars) Education Southern Africa Department Malawi Primary Education (1996) 22.5 Central and Indian Ocean Departmenzt Burundi Education V (1997) 10.0 Cameroon Education Sector (1997) 50.0 Comoros Education III (1997) 8.3 Mauritius Higher and Technical Education (1995) 16.0 Central-Western Africa Department Burkina Faso Post-Primary Education (1997) 28.0 Ghana Educational/Vocational Training (1995) 9.6 Basic Education (1996) 50.0 Togo Education (1995) 36.7 Western Afi-ica Department Cape Verde Basic Education (1995) 11.5 Guinea Equity and School Improvement (1995) 42.5 Higher Education Management (1996) 6.6 Mali Vocational Education Training (1996) 13.4 Mauritania Gern,ral Education Project (1995) 35.0 Senegal Higher Education 1 (1996) 25.0 Health Southern Africa Department Mozambique Health Sector Recovery (1996) 98.7 Zambia Health Sector (1995) 56.0 Zimbabwe Family Health III (1997) 50.0 Eastern Africa Department Eritrea Health Project (1997) 12.5 118 APPENDIX B 119 Amount of credit or Country Project name andfiscal year loan (millions of dollars) Kenya Sexu ally Transmitted Diseases (1995) 40.0 Tanzania Human Resources 1 (1997) 20.0 Health Sector Reform (1997) 40.0 Uganda District Health (1995) 45.0 Nutrition Child Development (1997) 40.0 Central and Indian Ocean Department Burundi Health/Population 11 (1995) 21.3 Cameroon Health/Fertility/Nutrition (1995) 43.0 Health and Nutrition (1997) 15.0 Chad Population and AIDS Control (1995) 20.4 Central-Western Africa Department Benin Population and Health (1995) 27.8 C6te d'Ivoire Population Health and Nutrition (1996) 30.0 Ghana Health Sector Support (1997) 50.0 Niger Health/Nutrition (1996) 50.0 Western Africa Department Senegal Community Nutrition (1995) 18.2 Sierra Leone Health Sector (1996) 20.0 Social Sectors Southern Africa Department Angola Social Action (1996) 24.0 Malawi Social Action Fund (1996) 60.0 Zambia Social Recovery 11 (1995) 30.0 Eastern Africa Department Eritrea Development Fund (1996) 17.5 Ethiopia Ethiopia Social Rehabilitation and Development Fund (1996) 120.0 Central and Indian Ocean Department Madagascar Social Fund 2 (1996) 40.0 Central-Western Africa Department Nigeria Social Fund (1997) 25.0 Western Africa Department Cape Verde Social Sector Development (1997) 13.2 Source: World Bank data. A P P E N D I X C Policies and Assistance Programs of Bilateral Donors This appendix surveys donor policies and assistance programs in Sub-Saharan Africa. Although information on lending by donors is not gener- ally available in the same detail as for the World Bank, the statements and documents obtained from donors, together with aggregate data from the Organisation for Economic Co-operation and Development (OECD), provide a reasonably complete picture of assistance programs.) The discussion is based on information about assistance provided by the African Development Bank (AfDB); the Danish Intemational Development Agency (DANIDA); the European Union (Eu); the Canadian hiternational Development Agency (CIDA); the Ger- man Bundesministerium fir wirtschaftliche Zusammenarbeit und Entwicklung (BMZ), Kreditanstalt fur Wiederaufbau (KFw), and Gesellschaft fur technische Zusammenarbeit (GTz); the Italian Ministry of Foreign Affairs; the Netherlands Ministry of Foreign Affairs; the Swedish International Development Authority (SIDA); the U.K. Overseas Development Administration (ODA); and the U.S. Agency for International Development (UsAID). Together, these donors account for 47 percent of disbursements of development assistance to Africa. The EU's contribution to official development assistance reached $4.8 billion in 1994-an increase of 14 percent in real terms from the previous year. Appendix figure C. 1 shows net official development assistance by indi- vidual members of the OECD's Development Assistance Committee (DAC) in millions of dollars and as a share of gross national product (GNP). Germany was the fourth-largest donor, after the United States, Japan, and France. Its assistance program emphasizes rural development, environmental protection (increasingly, in forestry), and poverty alleviation through participation of the poor. The priority objectives of U.K. assistance are economic reform, en- hancement of productive capacity, direct poverty reduction, human resource development, good government, women in development, and environmental 120 APPENDIX C 121 protection; its programs are evaluated against those objectives. Denmark now spends 1.0 percent of its (,DP on development assistance. By 2002, under current plans, Denmark will be spending 1.75 percent of its GDP on external assistance: 1 percent for developing countries, 0.5 percent for environment and emergency purposes (in accordance with a parliamentary decision), and 0.25 percent for Central and Eastern Europe. A large proportion of Swedish bilateral aid goes for emergency assistance. The Netherlands' aid budget goes partly for expenditures on asylum seekers and U.N. peacekeeping operations. APPENDIX FIGURE C.1 NET OFFICIAL DEVELOPMENT ASSISTANCE BY DAC COUNTRIES, 1994 Amount As share of GNP Japan __________________ _ Denmark _________________ United S Norway Fnnce Sweden Germany Netherlands France Unted Kingdom Italy Finland Neterlands Canada Canada Belgium Sweden Germany Denmart Australia Spain Luxembourg Norway Switzedand Australia Italy Begium United Kingdom Switerdand Ausira Austria Porlugal Finland Japan Fotugat New Zealand New Zealand Spain Ireland Ireland Luxemboug * United States 0 2 4 6 B 10 12 0.0 0.2 0.4 0.6 0.8 t,0 1.2 Millions. o-dlollars Percfntagp.f .GNP Source: OECD 1995. 122 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA Assistance to Sub-Saharan Africa In all, five multilateral and twenty-three bilateral donors, as well as numerous NGOS, provide program and project assistance to Sub-Saharan Africa. (The World Bank Group and the United Nations agencies are each counted as one donor.) The total amount of annual donor commitments for assistance to Sub- Saharan Africa is not available, but data on disbursements from DAC's annual report for 1995 indicate that slightly more than $18 billion was disbursed in 1994 by DAC countries, multilateral organizations, and Arab countries (oECD 1995). Net disbursements to Sub-Saharan Africa by DAC countries were nearly $10.5 billion, or 58 percent of the total disbursements of official development assistance from those three types of source. Donor Policies on Poverty Reduction The extent to which assistance is focused on the poor is not well known. Many donors take the view that assistance for economic growth in Africa will ben- efit the poor through the spillover effect of broadly based growth. Other donors and NGOs acknowledge the importance of growth but are skeptical about the extent to which aggregate growth benefits the poor and therefore prefer to provide more targeted assistance. Most donors agree that poverty reduction is achievable only through eco- nomic growth and human resource development, with the support of a favor- able external environment. Donor policies generally emphasize the need for: * Sustainable economic growth geared toward increasing demand for the poor's labor and increasing the access of the poor to productive resources * Provision of basic social services such as primary education and health care for the poor, to improve the quality of their lives and increase their productivity * Access to basic infrastructure * Participation of the poor in the development process * Provision of safety nets for the old, sick, and handicapped who are unable to take advantage of income-earning opportunities. Most donors stress that developing countries have the primary responsi- bility for fighting poverty. Although bilateral donors accept that their assis- tance is crucial, they emphasize that their contribution will have a greater impact if it is integrated into the recipients' policies. A shift in the balance of responsibility between the public and private sectors (the latter including NGOs) and the increased importance of market reforms also play prominent roles in donor policies. APPENDIX C 123 Although donors' poverty reduction strategies overlap with those of the World Bank in many respects, there are subtle differences in implementation and areas of emphasis. Most donors are bolder than the World Bank in raising issues of democracy, law, human rights, and governance. Economic Growth Sustainable economic growth, with an emphasis on improving the living standards of the poor, is at the center of all donor policies intended to reduce poverty. (This characteristic of donor programs is not restricted to Sub- Saharan Africa.). The AfDB3 is committed to reducing poverty through eco- nomic growth based on sound macroeconomic policies. It is cofinancing Zimbabwe's structural adjustment program, which has social issues fully integrated into the design. In the EU'S view the fight against poverty should focus on sustainable growth by reducing inequalities, preserving social ties, and strengthening the productive capabilities of the poor through employment creation and im- proved access to productive assets. CIDA's policy on poverty reduction (June 1995) cites the need for a better understanding of the country-specific and local characteristics of poverty; a coordinated use of project, program, institutional-support, and policy interven- tions to achieve maximum impact; and a clear view of CIDA's role and capabili- ties. CIDA starts from the concept that the income of the poor stems from the value of the services and assets owned by them or that they sell on the market. This approach is supported by asset-oriented strategies that focus on increasing the quantity of the poor's assets, through education, health, credit, and land reform, and by productivity-oriented strategies designed to increase the poor's eaming capacity by raising their productivity through investment in human capital (for example, health, nutrition, education, and training programs) and through provision of complementary resources linked to labor productivity such as access to credit, water, infrastructure, technology, fertilizer, and so on. Policy interventions are designed to increase economic growth, reduce income disparities, provide social services and improve income-earning opportunities for the poor. CIDA's approach places equal emphasis on economic growth and investment in human capital. DANIDA'S poverty alleviation strategy emphasizes sustainable and socially balanced economic growth, social sector development, governance, and par- ticipation in the development process. Germany's approach to growth is focused on two themes: "growth through the poor," which consists of directly mobilizing the productive potential of the poor and promoting their contribution through labor-intensive employment, and "growth for the poor," whereby the benefits from increased economic 124 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA productivity are invested in targeted interventions intended to create employ- ment and provide social services-that is,'health and education-for the poor. The Netherlands promotes growth through policies designed to improve distribution and raise the disposable income of the poor. In addition, it encour- ages local initiatives of groups that give priority to women, the vulnerable, and ethnic minorities. Sweden strongly supports economic adjustment programs in developing countries and therefore promotes growth primarily through economic re- forms and import support. The Swedish parliament has identified five goals for development assistance to improve the living standards of the poor: economic growth, economic and social equality, economic and political in- dependence, democracy, and conservation of the environment. More rapid and more widely shared economic growth underpins the United Kingdom's approach to poverty reduction. ODA supports economic growth through macroeconomic policy reforms, human development, improvement of the economic environment for the private sector, institutional development, better infrastructure provision, and enhancement of the productive capacity of target beneficiaries-for example, through support for microenterprises. Promoting economic growth and political democracy are the corner- stones of USAID'S poverty reduction strategy, which focuses on macroeco- nomic stability, agricultural growth, and basic education. USAID promotes programs to provide an enabling environment for growth of the private sector and support for reforms that make markets more open and competi- tive; the development of financial systems and markets to enhance employment generation and income-earning opportunities; and infrastruc- ture development, particularly rural roads, with an emphasis on capacity for undertaking rehabilitation, financial sustainability, and private construc- tion. USAID considers basic education part of its growth strategy and invests heavily in this sector. Reducing Poverty through Investing in People and Providing Social Services Most donors stress the importance of investing in human capital and providing for basic social services. Donors implement their policies through significant investments in the social sectors. Germany's assistance for the development of human resources includes support for education, health care, food security, and family planning to avoid explosive population growth. In the past Italy allocated a large part of its development assistance to adjustment programs, but an increasing proportion is expected to go to broadly and narrowly tar- geted services. The AfDB considers social development funds one of the most APPENDIX C 125 appropriate instruments for empowering poor and vulnerable groups through such measures as skill development, provision of credit, and encouragement of small enterprises. The Netherlands' "development of the people, for the people, and by the people" approach emphasizes investing in people, particularly in the poorest groups, to increase their productive capacity; providing for basic social needs; and promoting participatior of the poor in the decisionmaking process. More assistance will be given to basic health and education throughout the 1990s. For SIDA improvement of the living standards of the poor is the primary objective of its developmenat assistance, in harmony with the goal of "eco- nomic and social equality" adopted by the parliament. The health sector appears to be a particularly important area for Swedish aid. The United Kingdom cites human development as a key objective. The category comprises policy reform, better management, and investment in health, education, and family planning, with a focus on the priority needs of the poor. Investing in people is a pillar of USAID'S development strategy. The main tenets of its human resources strategy are child survival through immuniza- tions, control of diarrheal diseases, support for the acute respiratory infections program, strengthening of health delivery systems, and improvement of ser- vices; HIV/AIDS program support, with an emphasis on community-based edu- cation designed to change attitudes and behavior; and population programs that focus on (a) the use of computer modeling to demonstrate the effects of unrestricted population growth, (b) support for voluntary family planning programs and for education, information, and communication, and (c) the development of channels for distributing contraceptives. Participation of the Poor in Development The AfDB's operational procedures require that proposed projects be screened for their likely contribution to the reduction of absolute poverty. Staff must determine whether the proposed project or program adequately addresses the following issues: identification of would-be beneficiaries; targeting strate- gies; the extent to which the poor were involved in the conceptualization of the project; labor-intensive techniques, safety nets, use of poverty indicators to mea- sure the likely impact of the proposed project; and other donor and NGO efforts. In addition to economic growth, equal distribution of income, and targeted assistance, the EU considers the social and economic integration of the poor in the development process as key to reducing poverty. This, in the EU'S view, calls for an integrated approach to the development process that includes using stractural and sectoral adjustment programs to address the needs of the poor and adopting participatory approaches to project design and implementation. 126 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA For CIDA one of the best ways to lift people out of poverty is to empower them by supporting the optimum use of their own potential. CIDA promotes this agenda through support for small-scale producers in rural areas. Denmark applies participatory approaches in project planning and imple- mentation. Popular participation is essential to development effectiveness and sustainability of development efforts and to the achievement of sustainable poverty reduction through self-empowerment. Participation and self-help are the two guiding principles of the German approach to poverty reduction. Participation means that the poor partake in and benefit from development; self-help entails promoting the productive capabilities of the poor and enabling them to better satisfy their needs through their own economic activity. The policies for promoting participation and self-help include building democracy (democratic govemments, respect for the rule of law, and a market-friendly economic system) and promotion of the informal sector. The active participants in this strategy are the poor, grassroots organizations such as NGOS, governments, and the donor community. Promoting the participation of the poor in the decisionmaking process is a central element of the Netherlands' poverty reduction strategy. To better reach the poor and bring them into the development process, the Netherlands is increasingly working in partnership with NGOs. The United Kingdom's poverty reduction strategy is similar to the Bank's: it is based on economic growth that promotes the use of labor, the poor's most abundant asset; provision of social services; and targeted interventions for vulnerable groups. ODA also emphasizes: * The use of participatory approaches in identifying the poor and under- standing their needs. Participation is promoted in project design and imple- mentation and in studies, such as poverty assessments, social assessment, and stakeholder analysis. * The use of NGOS to design and implement poverty-focused projects. About 15 percent of ODA's bilateral aid expenditures in fiscal 1992-93 was channeled through NGOs. Poverty projects supported by ODA include microenterprise development; natural resource strategies, with a strong emphasis on identifying the needs of resource-poor small farmers, herders, and fishers; education and health strat- egies that stress basic education, including adult literacy, nonformal educa- tion, and primary health care; and humanitarian aid management. USAID'S concern for participation is evident in its support of democratiza- tion. Through the democratization process, USAID supports reforms that it sees as making governments more effective, efficient, and equitable, which in turn encourages participation of all citizens in the political arena and in the economic growth of the country. APPENDIX C 127 Other Concerns Promoting the empowerment of women is seen as fundamental by all donors, who also agree that a major strategy for achieving women's empowerment is through girls' education. The Netherlands explicitly states that its develop- ment policy will aim to help women achieve autonomy as a precondition for change. In Africa the Netherlands will support women's initiatives and pro- vide aid to govemments thiat extend their policy to the field of women and development. In many cases governrents must demonstrate their commitment to de- mocracy, citizens' economic and political independence, and human rights to receive bilateral aid. The issues of good governance and excessive military spending are addressed in policy dialogue by Germany, the Netherlands, the United Kingdom, and the UJnited States. The EU and Germany"' BMZ have identified trade regulations and other economic relations as major constraints faced by developing countries in their struggle to achieve economic growth and poverty reduction. DANIDA empha- sizes gender, environment, promotion of human rights, and democratization in its political dialogue with developing countries. These issues are addressed in specific projects and are part of mainstream development activities. All donors involve NGC)S in project design and implementation and in the provision of safety nets because they see NGOs as essential to their effective- ness on the ground. USAID emphasizes working with NGOS to promote sustain- able use of Africa's resource base. Environmental issues are a priority for the United States and for Canada. The Netherlands and the EU are concerned that development relate to indigenous cultures. The Netherlands' policy outlines the need to take culture into account when identifying, evaluating, and imple- menting projects. Note 1. In some cases detailed information was received but could not be used because of the lack of comparable data from other donors. 'A P P E N D I X D The Blantyre Statement on Poverty Alleviation in Sub-Saharan Africa During July 11-20, 1994, more than sixty African policymakers, planners, academics, and managers of social funds and NGOs from eleven African countries, along with representatives of several donor agencies, gath- ered at a regional seminar in Blantyre, Malawi, to discuss the continuing and worsening conditions of poverty in Sub-Saharan Africa.' Participants exam- ined how to improve the policy environment for poverty alleviation and over- come the implementation and institutional constraints surrounding efforts to alleviate poverty. Participants agreed that the general causes of poverty in Africa are now well understood. Although individual country situations may vary, poverty is recognized to be a multidimensional condition affected by a wide range of factors. These include the poor's lack of access to productive income-earning opportunities and basic needs services (health, education, and clean water), their lack of influence and their low levels of participation in political pro- cesses, and the direct and indirect consequences of external financial and economic factors beyond the control of African governments. Poverty has been exacerbated in many instances by the failure of both government and market mechanisms to allocate resources efficiently or equitably so that the poor actually benefit. In some cases, certain forms of donor assistance have actually hindered rather than helped poverty alleviation. Since the early 1980s many of the poor have also been adversely affected by the burdens imposed by necessary economic reforms, not to mention the terrible toll exacted by con- tinuing ethnic and civil strife and by drought and other natural disasters. During the seminar discussions, four general observations reappeared time and again to shape the underlying premises for the seminar conclusions and recommendations given below. 128 APPENDIX D 129 * In most of Sub-Saharan Africa, the poor do not participate in public policy decisions that affect their lives or in choosing the kinds of services directed toward them. Policymaking for poverty alleviation is still top-down. Most resources and decisionmaking are still heavily concentrated in central minis- tries, not at the local government or community level where the poor come in direct contact with available services. * Despite rhetoric to the contrary, many African governments have still not made poverty alleviation a central focus of public policy, as evidenced by the low levels of budgetary allocations and other resources directed at helping the poor. This situation has arisen in part because of the political difficulty of reallocating resources away from the better-off toward the poor. The often- cited "political will" is stil:l lacking. * Even where African governments have defined the broad policy direc- tions for poverty alleviation in their respective countries, problems and lack of progress have persisted. This situation has arisen because of imprecise policy definition and inadequate or unrealistic attention to implementation and follow-up for policies already stated in national plans and sectional strategies. Conflicting or diffused donor support in the identified policy areas has com- pounded the problem. J Poverty alleviation cannot be successfully addressed by African govern- ments alone. Experience has demonstrated that it must combine the comple- mentary efforts of government, domestic private and nongovernmental actors, the international donor community, international private investment, and, most important, the poor themselves. Each has comparative advantages it can bring to the task. Governments will continue, however, to have the central role of establishing the policy framework and taking the lead in poverty reduction efforts. With these overall observations in mind, the participants identified the following key areas that require more concerted attention by African govern- ments and their development partners. The poor are not passive actors in the development process. The poor constitute over 50 percent of the population in many Sub-Saharan African countries and can be found among a wide range of socioeconomic groups in both urban and rural areas. Efforts by government and various devel- opment agencies to help the poor have often treated the poor as if they are passive agents in their own development. In fact, the poor employ a wide range of survival strategies (proactive efforts to obtain sufficient household income 130 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA and basic needs) and coping mechanisms (reactive responses to unexpected situations of household crisis) to maintain or, hopefully, improve their condi- tion. In particular, the survival strategies and coping mechanisms of poor women-not to mention their economic potential-are even more critical to understand because the numbers and degree of poverty among women are correspondingly greater than among men. The challenge for African governments is, thus, how to build on, not undermine. the existing economic activities in which the poor are engaged. In some instances, this may require governments to take a more activist stance, especially in cases of families forced to adopt various coping mechanisms in times of drought, sickness, or temporary loss of employment. In other in- stances, governments may sometimes actually be required to do less-as in cases where govemment rules and procedures impede the poor's survival strategies, notably in the informal sector-so that the poor can more actively participate in the newly emerging economic opportunities brought about by the reform process. Given this perspective, the following is recommended: * Governments should more actively explore how best to build on the posi- tive survival strategies of the poor by encouraging beneficiary participation in planning and implementation. * Governments should examine the elements of public regulations that have the most direct impact on the poor with a view to minimizing such rules and regulations that hamper the poor in their daily economic and income-earning activities. * Governments and other service providers should explore with local com- munities what viable alternatives exist for identifying those poor facing unex- pected crises and the corresponding best ways to support the coping mecha- nisms that poor households or local communities have already established. The macroeconomic policy environment remains a critical element in poverty alleviation. African governments have recognized the importance of carrying out eco- nomic reforms and correcting past structural impediments to achieve sound economic growth, which still represents a fundamental precondition for poverty alleviation. Yet such reforms are only a necessary, not a sufficient, condition for poverty alleviation. Too much attention has been directed by governments and donors toward the short-to-medium-term macroeconomic aggregate outcomes of structural policy shifts. Not enough attention has been given to the implementation difficulties in making policy changes or to the distributional and equity consequences of both pre- and postreform policies. APPENDIX D 131 As a consequence, the expected winners and losers during economic reform have not always coincided with the resulting reality. Structural adjustment continues to be seen by many African countries as an externally imposed requirement for maintaining access to official develop- ment assistance. Great scope still exists for governments and donors to work together to internalize the adjustment process so that it reflects more closely local and national perceptions and requirements, thereby placing the onus of implementation more squarely on the shoulders of the government and soci- ety as a whole. Where disagreements arise between donors and governments over the speed and pace of reform, it should be kept in mind that the short-run economic costs of decelerating some adjustment measures may be outweighed by the larger payoffs over the long term from deeper and more thorough change when adjustment is internally derived and owned. To ensure more integration of poverty concerns into the macroeconomic policy environment, governments and donors must place much greater em- phasis on monitoring the downstream outcomes of policy change. This ap- plies to two kinds of policies. (1) Macroeconomic policies must be examined for any antipoor biases or spin-offs so that shifts can be made in the emphasis or sequencing of policy measures (without sacrificing growth-with-equity objectives) or so that other compensating policy measures or programs, such as social funds or various income transfers, can be put in place. (2) Macroeco- nomic or sectoral policies that are specifically intended to be pro-poor should be monitored to ensure that they, in fact, are efficient and effective in helping the poor. On close examination, many seemingly pro-poor policies have little impact on the poor and represent a drain on scarce resources. Alternatively, pro-poor policy objectives may be overly optimistic or unrealizable within the existing resource envelope and should therefore be brought into line with what is feasible with available resources. To achieve this measure of policy internalization and integration, it is recommended that: * Governments and the World Bank begin discussions on how best to inter- nalize ownership of the adjustment process, preferably before, not during, negotiations for the next adjustment credit * Governments and their development partners agree on practical poverty benchmarks and social objectives for macroeconomic policies so that intended outcomes can be tracked and necessary corrections made, when applicable; expand the scope of macroeconomic policy analysis to determine any antipoor consequences so that remedial actions can be taken; and calculate the expected costs (financial and manpower) of undertaking the kinds of policy monitoring here proposed, to formulate viable and sustainable operational capabilities. 132 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA The formulation of pro-poor policies must be matched by equal attention to corresponding resource and institutional commitments. Too much attention has been focused by governments and donors on the broad policy framework for poverty alleviation. Although certainly critical, getting the policies "right" is only the first step. Without corresponding commitments in terms of increased resources and implementation capacity, many, if not most, elements of a poverty alleviation strategy will be stillborn. Governments need to mobilize new financial resources for poverty allevia- tion from domestic and international sources. These include the resource benefits accruing from an expanded domestic tax base and greater effi- ciency in tax collection, greater domestic savings, progress in debt relief or rescheduling, and more foreign private investment. Equally important, wide scope exists for increasing the resource base through switching public expenditures both between and within sectors to the benefit of the poor. The record shows that the poor receive only a small proportion of available resources on a per capita basis, when measured in terns of access to basic social services, credit, extension services, or any other yardstick. Far too many African governments have, for example, still not made the tough political decisions to reallocate expenditures away from un- profitable state enterprises or defense spending toward more productive ex- penditures that benefit the poor through local structures. Similarly, they have not made significant shifts away from tertiary education and health services in favor of primary and functional education and basic health. Likewise, atten- tion must be given to increasing the nonwage size of recurrent expenditures and to the amount actually spent outside the center at the district or local level. Expenditure switching is important not only for strengthening social sec- tor institutions but also for other areas at the "meso-level" of the economy, such as economic infrastructure and other institutions that benefit both poor and nonpoor. Improving the functioning and efficiency of market mecha- nisms, particularly factor and product markets, is also critical for increasing the income-earning potential of the poor. In all these areas, it is important to understand that pro-poor expenditure switching is only part of the picture. Care must be taken to ensure that pro- poor expenditures in subsectors and meso-level services are judged against the same kinds of efficiency and effectiveness criteria for meeting social objectives as are used to measure other public or private sector activities. Even if more resources are made available through resource mobilization and expenditure switching, they must be accompanied by more careful atten- tion to capacity-building issues related to poverty reduction. Capacity build- ing is more than just training and equipment. It encompasses a spectrum of activities related to human resource development and organizational effec- APPENDIX D 133 tiveness-staff utilization, incentives and development, adequate remunera- tion, and the material and administrative inputs to improve staff performance. To facilitate greater attention to resource and institutional commitments, the following are recommended: * Governments should give much greater attention to ways of mobilizing new domestic resources for poverty alleviation. * The international community should actively reexamine ways of lowering the tremendous debt burdens facing Sub-Saharan African countries, based on commitments by African governments to ensure that any saving accrued be used for support for the productive sectors of the economy and for poverty alleviation. * Government and donors should explore more innovative ways of actually building capacity for poverty alleviation. * Governments should accord high priority to the potential for generating more resources for poverty alleviation through expenditure switching be- tween and within sectors. * Priority policy attention should be given to raising the standards of plan- ning and public expenditure management so that they are more transparent and accountable and to ensure that (a) programs can be measured against performance indicators or goals, (b) the sanctity and discipline of the budget can be safeguarded, (c) greaLter rationalization between the capital and recur- rent budgets takes place, and (d) more delegation of budgetary control can occur closer to the local level. Host country and donor collaboration is still often inefficient and wasteful of scarce resources. Africa is littered with the remains of hundreds of development projects that were neither consistent with individual countries' national development plans nor sustainable when measured against continuing commitment by the target population once the project stopped. The benefits to be derived from closer collaboration among all development actors are obvious-maximized use of resources, greater hannonization between national policies, on the one hand, and program and project objectives, on the other, and correspondingly more efficient and effective project implementation. How can the present situation be improved? In the first instance, African governments are responsible for establishing the institutional framework for better host country-donor coordination. In too many cases, host countries are not in the driver's seat. Once the institutional framework and national policy priorities are agreed on by government and donors, all parties should abide by 134 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA the "rules of the game" and the chosen policy priorities. For governments, the litmus test lies in their beginning to say no to unwanted donor project propos- als that fall outside the agreed parameters of donor support, saying no to the lure of "free"' project inputs or more technical assistance, and recognizing that such projects actually have high domestic costs or may run counter to long- term national objectives. For donors, the litmus test is to learn to sit in the back seat and adjust their programs and projects to the agreed-on policy frame- work. The proliferation of local and international NGOS in recent years has cre- ated new problems of coordination and collaboration for governments. Gov- ernments recognize this situation and would like both local and foreign NGOS to undertake their project activities within the scope of national priorities and be accountable for the effective use of project funds. Local NGOs believe that government officials do not fully understand how NGOs operate and do not recognize or appreciate their role in development. As a result, NGOs' contribu- tion and potential for policy formulation and implementation are often under- rated. Local NGOs also find themselves overwhelmingly dependent on foreign funding but with few viable alternatives. To improve the framework for coordination and collaboration among the various stakeholders in national development, the following are recommended: N Governments should establish or accelerate the means by which they can more actively take the reins in overseeing the coordination process among development partners. i Collaboration should be seen as being most effective when it encompasses all phases of program and project activities-from identification through evalu- ation-and when it permeates national, regional, and local levels of stake- holder interaction. * Donors should recognize their responsibility to adapt their assistance to the agreed-on national development framework and public investment pro- gram once it is established. * Governments should provide guidelines on the mode of operation for both local and international NGOS, based on joint discussion, confidence building, and recognition of the role and comparative advantage of each side. * NGOS should increase attention to ways of mobilizing local resources to reduce dependence on foreign funding. Poverty monitoring is beset by conflicting demands on available resources and manpower and by confusion about appropriate techniques. The reduction of poverty must begin with a clear understanding by policymakers and various stakeholders (including the public at large) of the extent and APPENDIX D 135 characteristics of the poor and where they are located. For policy, program, and project purposes, this is the sine qua non of all action-to establish the benchmark against which progress can be measured. Furthermore, poverty monitoring must be an ongoing process-to capture how the poor and various socioeconomic groups are faring during times of rapid economic change, to find out which groups are moving out of poverty and which groups may be moving into poverty, and to determine the effectiveness of various policies and program responses. Poverty monitoring, however, takes place in the context of a country's overall information and statistical system, usually managed by national statis- tical offices and line ministries. The information used in poverty monitoring includes such common data sources as national accounts information, con- sumer price indexes, agricultural and other sectoral performance indicators, health, education, and nutrition data, and various kinds of household surveys. These requirements for various kinds of data give rise to conflicting demands and overloads on existing manpower and financial resources. As a first step, poverty rmonitoring must, therefore, be seen as an integral part of a country's overall information needs, and careful attention must be given to how much and what kinds of poverty-related data can be collected. An elaborate poverty-monitoring system, however potentially useful, is use- less if the data are not collected, analyzed, and made available to policymakers and planners on a timely basis. It is obviously better to have a smaller, more efficient poverty-monitoring system that gives policymakers and other stake- holders information on which to act. Recognition is also growing that the nature of poverty requires poverty monitoring to combine both quantitative and qualitative data. A number of emerging methodologies (sentinel site surveillance, beneficiary assessment, rapid rural appraisal, and so on) are now being used in African countries and have already shed new light on the problems and perceptions of the poor. Qualitative data is not a substitute for quantitative data; they complement each other and can compensate for each other's methodological shortcom- ings. For improved poverty monitoring, the following are recommended: * Governments that have not already done so should undertake a poverty audit or assessment that establishes the benchmark against which progress can be measured. * Governments should explore ways to institutionalize a poverty-monitor- ing system that is consistent with the overall statistical requirements and capabilities of the country. * Donors should recognize their responsibility to keep their support for statistical services in general and poverty monitoring in particular within the 136 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA framework of the host country's statistical capacity and avoid the ad hoc or arbitrary surveys often proposed by donors. * Poverty programs and projects and basic service delivery systems should include baseline surveys and simple monitoring schemes that capture the impacts of these interventions on various groups of the poor. * Impact assessments should be made a condition for continuation of fund- ing for poverty-oriented projects. The multidimensional nature of poverty means that it cannot be over- come by technical approaches alone. Poverty alleviation efforts can never be successful if they are seen in purely technocratic terms. Poverty does not evolve in a social vacuum. Attention to cultural considerations, changing social relationships, and access to political expression and participation are all key ingredients in any successful poverty alleviation effort. Despite emerging pattems of democratization in many Af- rican countries, the majority of poor have little or no voice in the public policy decisions that affect their lives. Poor women tend to have even less of a voice. The term empowerment is often used to describe a complex process that seeks to give a voice to the poor. Empowerment encompasses increasing the economic and political assets of the poor so that their views and concems are taken seriously by the stakeholders with whom they interact and, more impor- tant, so that the poor themselves can take the initiative in overcoming their own problems as they perceive them. African govemments, particularly the democratic ones, will face increasing pressure to meet the needs of various constituency groups, including the poor, from limited available resources. This is the democratic dilemma facing any country, developing or developed. For equity considerations to be given their due place, govemments must recognize the fundamental importance of active debate and dissent, a free press, access to information by all groups, and rights of groups to formal organization. These are key to encouraging the environment necessary for govemment transparency and accountability. The process can be further en- hanced when govemment decisionmaking is brought closer to the people- through decentralization, gender-sensitive consultations, and other approaches that spread authority and resources away from the center. As for the poor, they can best be served through active support which encourages local communities to articulate their concems and to establish self-help organizations that link them more closely with local government, service providers (govenmmental and NGO), and available financial resources. Such an approach should not be seen as a threat to govemrnment; on the con- trary, it can make government more responsive and thus more popular. APPENDIX D 137 To encourage nontechnical considerations of poverty alleviation efforts, the following are recommended: * Public education and debate on the causes of poverty should be encour- aged, including those policies and practices that lead to women and ethnic or religious minorities being disproportionately represented among the poor. * Much greater attention should be given to ways of shifting government decisionmaking to the local level where the poor can actively participate and be encouraged to form civic and self-help organizations. * Governments should recognize the important positive role that open dis- cussion and debate can have in achieving development objectives by expand- ing access of community groups to local decisionmakers and ensuring access to public information sources-for example, statistical reports, broad policy documents, and reports or mrinutes of government meetings. The Blantyre seminar participants ended their discussion and debate by emphasizing that their observations and recommendations are not meant to be exhaustive on a topic as complex as poverty alleviation throughout the conti- nent. Rather, they are meant to generate debate at the national level on the kinds of common problems that came to light through cross-country compari- sons when discussed at the regional level. Regional discussion must be trans- lated into national action. Note 1. The participants were from Ethiopia, Ghana, Malawi, Mozambique, Namibia, Nigeria, Sierra Leone, Tanzania, Uganda, Zambia, Zimbabwe, Gesellschaft fur technische Zusammenarbeit (GrTz, German Agency for Technical Cooperation), the United Nations Children's Fund (UmIcEF), the United Nations Development Programme (UNDP), and the World Bank. The statement has been slightly edited for publication. A P P E N D I X E Assessing the Impact of the Pattern of Growth on the Poor T his appendix examines changes in poverty and income inequality in Nigeria for 1996-2005 using a simulation model (discussed in more detail in Bigman 1995a). The model relies on primary data from the 1992 household survey to evaluate these changes on the basis of population and consumption growth rate projections. Its general principles are as follows: * The country's overall growth process is divided into two principal compo- nents: the growth of the population and the growth of the economy. * The projections for population growth are made for different subgroups of the population in rural and urban areas, taking into account the differences in average household size between households in rural and urban areas and between poor and nonpoor households. The model also takes into account rural-urban migration. * The projections for economic growth are made for the different sectors of the economy and for the three agroclimatic regions. * The consumption of each household grows from year to year according to the sector to which the head of household is affiliated and the region of the household. The size of the household also expands according to the rate of growth of the population subgroup to which the household belongs. The model has been used to analyze the impact of three growth scenarios, as summarized in appendix table E. 1. The large differences between the growth rates of different sectors and regions proved to have a significant effect on changes in poverty. During 1985-92, when average per capita expenditures in Nigeria rose by 33 percent; the increases in the northem, middle, and southem regions were 17, 40, and 41 percent, respectively. In the simulation analysis it is assumed that in the absence of government measures to avert the bias, expenditures per capita in 138 APPENDIX E 139 APPENDIX TABLE E.1 GROWTH AtND PATTERN OF GROWTH UNDER THE THREE SCENARIOS, NIGERIA Pattern of growth Annual grow.th rate, across sectors (percent) Scenario 1996-2005 (percent) Urban Rural 1 5.0 5.0 5.0 2 5.0 7.0a 3.5 3 5.0 3.5a 7.0 a. The actual growth rate may deviate froin this rate in some years because of the change in the relative share of the two sectors. the north will continue to rise at half the rate of the other two regions. We consider, however, in scenario 1 the effects of a distributionally neutral growth in which this bias is averted and all regions grow at the same rate. The projections of the annual growth rate of population used in the simu- lation analysis are 4.6 percent in urban areas, 1.4 percent in rural areas, and 2.9 percent for the entire country. The growth rates are slightly higher among low-income households, which tend to have more children per household. The three scenarios show the effect of an annual growth rate of 5 percent on poverty under different pattems of growth (appendix figure E.1). In sce- nario 1 both urban and rural incomes-and the entire economy-grow at an annual rate of 5 percent. The headcount measure remains essentially un- changed at 40 percent (appendix table E.2). Although per capita consumption rises at an annual rate of 1.7 percent, poverty decreases only slightly because of the rise in income inequa:lity. Thus, under the patterns of growth examined in scenario 1, more of the benefits from growth accrue to the nonpoor. In scenario 2 urban incomes grow at twice the rate of growth as rural incomes. The headcount measure of poverty declines only slightly, from 40 percent in 1995 to 38 percent in 2005. This is because the urban bias of growth can compensate only partly for the rapid rise in urban population stemming from continued rural-urban migration. As a result, per capita consumption in the urban sector rises at an annual rate of 2 percent-the same as in rural areas. Scenario 2 shows that with continued rural-urban migration, poverty is in- creasingly an urban phenomenon. The higher growth rate in urban areas compensates only partly for the rise in urban population. The incidence of poverty in urban areas declines from 42 percent in 1995 to 36 percent in 2005 despite the rise in the share of urban poor in the total poor population, from 37 percent in 1995 to 47 percent in 2005. 140 TAKING ACTION TO REDUCE POVERTY IN SUB-SAHARAN AFRICA APPENDIX FIGURE E.1 POVERTY UNDER THE THREE SCENARIOS, NIGERIA Headcount index (percent) 50 49 44 40 __ 36 _ I I II I I I I I I 32 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Scenario 1 - - Scenario 2 - - - Scenario 3 Size of poor population (millions) 75 70 65 60 55 50 _- - -__ 40 35 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Scenario 1 - _ Scenario 2 - - - Scenario 3 APPENDIX E 141 APPENDIX TABLE E.2 POVERTY AND GROWTH, NIGERIA, 1985-2000 Indicators of poverty and inequality Aggregate Size of rate of growth Per capita Headcount Depth of Severity of poor Year or (percent expenditure index poverty poverty Gini population scenario per year) (1985 naira) (percent) (percent) (percent) coefficient (millions) Actual 1985 10.7 593 43 16 8 0.39 36 1992 -0.4 792 34 14 8 0.45 35 1995 -3.6 720 40 17 10 0.46 44 Simulations, 1996-2005 Scenario 1 5.0 876 40 17 10 0.51 60 Scenario 2 5.0 879 38 17 10 0.50 57 Scenario 3 5.0 873 44 21 13 0.55 66 In scenario 3 rural incomes grow at twice the rate of the urban incomes. As a result of the large differences between the rates of population growth in the two sectors because of rural-urban migration, average per capita consumption in rural areas grows at 5 percent per year, while in urban areas average per capita consumption declines 0.24 percent a year. If migration is not reduced; the headcount measure of poverty will rise from 40 percent in 1995 to 44 percent in 2005 because the incidence of poverty in urban areas increases from 42 percent in 1995 to 64 percent in 2005. Meanwhile, the incidence of poverty in rural areas falls from 38 percent in 1995 to 21 percent in 2005, and the share of rural poor in the total poor population declines from 63 percent in 1995 to 53 percent in 2005. This scenario points up the need to take into account future trends-primarily rural-urban migration-in the design of the pattern of growth rather than rely on the accepted truths of the past.' The focus of future growth policies must be increasingly on promoting more rapid growth in urban areas-where nearly half of the country's poor will live by the year 2005-and taking more active measures to slow the pace of migration. Note 1. The scenario exaggerates the negative effect of the biased growth by assuming that the trend of rural-urban mipration will not respond to the rising gap in favor of the rural population. A P P E N D I X F THE POOR POPULATION IN DEVELOPING AND TRANSITION ECONOMIES, 1987-93 Percentage of Number of poor Headcount index Povertn gap population covered (nillions) (percent) (percent) Regioni by at /east one survey 1987 1990 1993 1987 1990 1993 1987 1990 1993 East Asia and the Pacific 8Y.0 464.0 468.2 445.8 2S.2 28.5 26.0 8.3 8.0 7.8 ExcludingChina 61.5 109.2 89.3 73.5 23.2 17.6 13.7 3.8 3.1 3.1 Eastem Europe and Central Asia (EcA) 85.9 2.2 n.a. 14.5 0.6 n.a. 3.5 0.2 n.a. 1.1 LatinAmericaandtheCaribbean 83.9 91.2 101.0 109.6 22.0 23.0 23.5 8.2 9.0 9.1 MiddleEastandNorthAfrica 46.7 10.3 10.4 tO.7 4.7 4.3 4.1 0.9 0.7 0.6 SouthAsia 98.4 479.9 480.4 514.7 45.4 43.0 43.1 14.1 12.3 12.6 Sub-SaharanAfrica 65.9 179.6 201.2 218.6 38.5 39.3 39.1 14.4 t4.5 t5.3 Total 85.0 1,227.1 n.a. 1,313.9 30.1 n.a. 29.4 9.5 n.a. 9.2 Total (excludingEcA) 85.0 1,224.9 1,261.2 1,299.3 33.3 32.9 31.8 10.8 10.3 tO.5 Note: Unlike pastestinsaes, including thosemi World Bank 1990 and 1 993d, thesenumbers are basedsolely on survey datatatherthan on extrapolainons, and new purchasing power pairity estimates are used. 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