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January 20, 2019

Growth depends on human capital

Workers busy at the construction site for the Kyangwithya East ward Administrator offices in the disputed land in Kwa-Ukungu village on last Thurssday.
Photo by Musembi Nzengu
Workers busy at the construction site for the Kyangwithya East ward Administrator offices in the disputed land in Kwa-Ukungu village on last Thurssday. Photo by Musembi Nzengu

Across the world, it is easier for governments to make the economic case for large investments in physical capital — highways, railways, ports, power grids, airports and broadband. Investment in infrastructure makes a country makes sense and attracts foreign investment.

Reliable electricity, high-speed internet, efficient ports and airports as well as good roads and fast trains increase efficiency and lower the cost of doing business. The expectation is that foreign capital and investors would follow. Inevitably, jobs would be created, incomes would rise, the Exchequer would be awash with tax revenue and more resources would be available to spend on health, education, agriculture or even housing for the poor.

Somehow the ultimate goal of ministries of finance, planning or economy is to enhance the business fitness of their countries. Some measures often taken to lure investors include waivers on import duty for raw materials and machinery, as well as rebates on energy costs. Some governments even grant land to investors. Other measures include regulatory action to expedite contract enforcement, property registration, protection of minority investors and construction permits.

It is abundantly clear that governments bend over backwards to attract investors. But governments often do far less to invest and build human capital, which comprises, health and safety, nutrition, education, skills, values, and participation of girls and women.

Half of the world’s 6.6 million under-five deaths occur in Africa. About 40 per cent of children under five in Eastern and Southern Africa are stunted. Pneumonia, malaria and diarrhoea account for 40 per cent of all under-five deaths.

An estimated 3.2 million children were living with HIV at the end of 2013, and over 15 million children in sub-Saharan Africa were estimated to have lost one or both parents to Aids.

Only five of 53 African countries have achieved universal primary education. According to Unesco, more than 30 million of the world’s out-of-school children are in Africa.

Even when they have attended school and progress through the grades, many children do not acquire basic knowledge and skills. For example, a study by Twaweza in 2014 revealed that 75 per cent of children in Standard 3 in Kenya, Tanzania and Uganda could not read sentence such as: “The name of the dog is Puppy.”

Like physical capital, human capital must be built, through painstaking investments in health, nutrition, education, training and jobs. Building human capital costs money and demands public incentives through smart investments in social protection. For example, governments should consider programmes that make conditional payments to parents for key child health and education outcomes.

Alongside the energy expended in promoting the SDGs, the United Nations and the World Bank should design incentive measures to encourage governments, especially in the developing world, to invest in human capital.

Just like the ease of doing business ranking, we should develop an index to measure human capital growth.

Africa’s infrastructure funding gap is estimated at $130 to $170 billion (Sh1.29-1.69 trillion) a year. What is the cost of funding Africa’s human capital gap?

Alex O Awiti is the director of the East Africa Institute at Aga Khan University

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