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Monday, 5 January 2009

Quick links (Cash transfer, cell phones, societies, books)

I hope to provide more "quick links" of broader topics of interests for the 2009 Zambian Economist reader :

5 comments:

  1. Great list, the Book Bus is an excellent example of hands on ecotourism.

    One issue we talk about a great deal is affordable housing, especially in rural areas. Kleiworks.org has had success all over the world (except africa!) in the last decade demonstrating updated versions of traditional building methods and materials. Funding Zambian involvement with this organization would be a good idea for collective diaspora action, made easier with government facilitation of course: Kleiworks promotional video

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  2. I was thinking about the figures from the Project Syndicate site article on direct cash distribution aid. "Affordability does not appear to be a big hurdle. Assume, for example, that an annual universal grant of $50 is given to all children below 10 years of age in Mozambique, Malawi, and Zambia − covering roughly 10 million children. These are three low-income countries with HIV prevalence rates of roughly 15%. Further assuming a relatively generous 20% administration overhead, the total cost of the scheme would be approximately $600 million – equivalent to a fifth of the reported aid flow to these countries in 2004 and to 3.5-4% of their combined GDP. It would certainly be costly, but not out of reach if African aid is doubled." I think they are right that the total amount of money required is not out of reach, and yet I am uncertain about the political will of donor countries to continue providing an inflation and population growth adjusted US$600M every year in perpetuity.

    I did some calculation on the endowment potential for consistent funding of direct cash distribution, and it seems that the total amounts would not be too outrageous to contemplate. Dollar inflation is relatively low, so let's assume 1.5% per year to be conservative. Population growth in the region is high, likely to slow as female math education rates and overall household incomes improve over time, again we will take a high estimate of 3.5% (this also assumes that receipt of benefits are never subjected to means testing for eligibility). At 3% annual return, an initial investment of US$20B is required to generate the benefit, US$10B to cover inflation, and US$23.3B to cover population growth (total US$53.3B). At 4% annual return, an initial investment of US$15B to generate the benefit, US$5.625B to cover inflation, and US$13.125B for population growth (total US$33.75B). At 5% annual return, an initial investment of US$12B to generate the benefit, US$3.6B to cover inflation, and US$8.4B to handle population growth (total US$24B).

    So what this means is that if Mozambique, Malawi and Zambia can get a collective grant of US$24B to be held in an endowment trust and loaned out for development purposes at a rate sufficient to return 5% per annum over administration and reinsurance expenses, then every child born in the three countries can receive an inflation adjusted annual payment of US$50 in perpetuity. Oh and an additional 24B are deployed on productive activities. For example the average interest rate on the short term debt of Equinox for example, is around 7.35%, so offer them something around 6.5-7.25% and they ought to jump at it. Even if only 10% of the money is put into development in the region instead of more mainstream investments, that would nearly equal the entire capitalization of all companies on the Lusaka Exchange.

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  3. Kleiworks are doing a great job..

    Yes, I think this can work....

    I will bring it to the attention of the commerce and investment thematic group....

    The bus idea should be explored by the Identity and Culture group...it is the group responsible with liasing with the Tourism Ministry...

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  4. Yakima,

    "So what this means is that if Mozambique, Malawi and Zambia can get a collective grant of US$24B to be held in an endowment trust and loaned out for development purposes at a rate sufficient to return 5% per annum over administration and reinsurance expenses, then every child born in the three countries can receive an inflation adjusted annual payment of US$50 in perpetuity.."

    Its sort of similar to the Alaskan model we previous discussed. The only difference is that the initial money comes as a grant. I am not surprised that this model to get round resource endowment corruption related issues...is equally applicable to aid or grants...

    http://zambian-economist.blogspot.com/2009/01/quick-links-cash-transfer-mobile-phones.html

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  5. Something to think about in the future:

    http://www.washingtonpost.com/wp-dyn/content/article/2010/06/08/AR2010060805224.html?hpid=sec-world&sid=ST2010060900313

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