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UMass-Amherst PERI’s Leonce Ndikumana says resource-rich economies like Nigeria need to reform tax codes to make real impacts on poverty

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JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore. According to the UN, 40 percent of the 783 million people living in sub-Saharan Africa are without access to an improved source of drinking water. To address this staggering figure in 2000 leaders from 189 nations signed on to the Millennium Development Goals, which was a set of eight poverty-busting goals designed to significantly reduce global poverty and disease by 2015. Well, now we’re in 2015, and we want to see if the foreign aid community came close to meeting those targets. Joining us from Amherst, Massachusetts is Leonce Ndikumana. Leonce is a professor of economics at the University of Massachusetts Amherst, and he’s the co-author of a new report called Impact of Foreign Aid Allocation on access to social services in Sub-Saharan Africa: The Case of Water and Sanitation. Thank you for joining us, Leonce. LEONCE NDIKUMANA: Thank you very much for the opportunity. DESVARIEUX: So Leonce, did the leaders who signed on to the Millennium Development Goals come close to meeting their goal for targeting water and sanitation needs in sub-Saharan Africa? NDIKUMANA: Thank you very much for the very important question. The answer is clearly no. To be more specific, we have to recognize that African countries have made substantial progress in reaching some of the Millennium Development Goals. In some countries poverty has declined, especially in areas like education. We have seen more kids going to school and staying in school. But there are some, some of the goals which have been quite orphaned and less attention has been paid to those. Two of those are access to water and access to sanitation. And unfortunately what we should realize is if in fact countries and the global community are interested in fighting poverty, access to water and sanitation are very, very important tools for fighting poverty, for improving gender, gender empowerment, gender equity. Because lack of access to water, lack of access to sanitation, many times lead to poor health conditions and also worsens the burden on women in terms of what they have to do to sustain the well being of the households. So what we have seen is that while countries have made important progress in the margins, in the areas of water and sanitation the progress has been very, very limited. DESVARIEUX: Okay Leonce, let’s dig into your report a little bit more. You suggest that increased aid targeted to the supply of water and sanitation is associated with increased access to these services, although the relationship is nonlinear. That’s what you call it. What do you mean when you say nonlinear? And if it wasn’t linear, what can we attribute the rise in access to services to? NDIKUMANA: This is again a very important question. What the results, we find, is that an increase in aid located to the water and sanitation sector leads to an increase or is associated with that an increase in access to those services. What there are, because of the nature of the data we use, there are two dimensions to that relationship. One is within country dimensions where we would look at the data, would track the impact of an increase in aid to a particular country targeted to water and sanitation, and how does, how these affect access to water and sanitation. So the result would suggest that in any given country an increase in access to, in aid to the sector, would increase access to water and sanitation. But there are another dimension, which is a cross-country dimension, which would compare a country with high aid to water and sanitation and a culture with low aid to water and sanitation. And the results would suggest that a country with high aid to water and sanitation would have higher access to water and sanitation than the country with lower aid to the sector. But the nonlinearity would suggest that there are countries with high aid to water and sanitation that still have low access to water and sanitation. And this could be explained by many factors. One would be inefficiency in implementation of the aid in sanitation, and the water and sanitation projects. The second reason could be fungibility of aid, where maybe aid which is provided to a government earmarked for those sectors ends up being used for other reasons. And another possibility is simply corruption. It could be that some of the aid which is targeted to those sectors ends up being squandered and embezzled, and converted into private use, private wealth, akin to the problem we always have documented where aid and external borrowing may in fact many times finance private asset accumulation through capital flight. DESVARIEUX: All right, Leonce, so you mentioned that some countries are dealing with that. Just quickly, give me an example of a country that is going through that exact scenario that you laid out. NDIKUMANA: One example would be Nigeria, which is a country that, which is now the largest economy on the continent with about $570 billion, compared to the next biggest economy which is South Africa, $350 billion. But if you look at the, the access to social services in Nigeria it [trades] other countries. So for example, access to improved sanitation in Nigeria, you find that for the rural sector only 26 percent of the population have access to water and sanitation. This is very, very low compared to South Africa, which is about 60 percent. So basically this shows that the country based on its potential, this is a country which is endowed with a large number of natural resources, including oil. But also a large economy, which means that basically the, the country is punching below its weight in terms of provision of social services to its population. It could be, again, another sign that government resources are not effectively used and not efficiently used. And one of the reasons would be technical inefficiencies where money is not, it does not reach the project that it were earmarked. It could also be corruption, and we know that this country is also, ranks very high in terms of countries that had the most, that are more corrupt than others. DESVARIEUX: So let’s talk about specific policy. What should a sub-Saharan country like Nigeria, largest economy in Africa, do, aside from advocating for more aid to be channeled to the water and sanitation sector. I mean, they clearly have the funds. You’ve mentioned corruption being a roadblock. But what sort of policies should people be advocating for, then? NDIKUMANA: I think, yes. One of the, one of the focuses should be to increase allocation to water and sanitation, both from aid but also from domestic resources. This country should be mobilizing more domestic resources, more taxes. If you look at tax to GDP in Nigeria, it’s less than the tax to GDP ratio in Rwanda. Why would that be? Rwanda is a much, is a much less developed country, it’s a low-income country, much smaller capacity. But that shows that efficiency in tax mobilization is, is better in Rwanda than in Nigeria and there is no reason for that. Nigeria has a very well-educated population. Technical capacity in the government is sufficient. So it’s only political will and corruption that’s really holding the country back. The way you resolve that is to increase transparency in the way government resources are managed. I think we have to, we have to go our, to get away from the tradition where government business is closed off from the reach of the population and civil society. Civil society and operations should be, should have an opportunity to participate in the budgeting, procurement, and monitoring processes of government budget and government projects. Secondly, you need to move towards more decentralized management of government projects so that local communities know about the projects which are going to be implemented in their communities. Local communities have a way of monitoring how much money is being allocated to water and sanitation, what projects are being implemented, and who is implementing those projects. Procurement has to be transparent. What you find is that in many cases when procurement is not transparent then you end up with inflated costs and money leaking out of the government sources. DESVARIEUX: And you end up with more people without water and sanitation. NDIKUMANA: Exactly. DESVARIEUX: All right. Leonce, thank you so much for joining us. NDIKUMANA: Thank you very much. DESVARIEUX: And thank you for joining us on the Real News Network.


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Leonce Ndikumana is Professor of economics and Director of the African Development Policy Program at the Political Economy Research Institute ( at the University of Massachusetts at Amherst. He is a member of the United Nations Committee on Development Policy, Commissioner on the Independent Commission for the Reform of International Corporate Taxation, a visiting Professor at the University of Cape Town, and an Honorary Professor of economics at the University of Stellenbosch, South Africa. He has served as Director of Operational Policies and Director of Research at the African Development Bank, and Chief of Macroeconomic Analysis at the United Nations Economic Commission for Africa (UNECA).