AIDS – the wrong answer
And the big winner of the downturn is…
USA Today this morning:
The recession has battered the U.S. economy, but the lobbying industry is humming along in the nation’s capital, even for companies that have shed thousands of jobs in the past year.The 20 trade associations and companies that spent the most on lobbying increased their spending by more than 20% in 2009 to $507.7 million, up from $418.2 million a year earlier, according to a USA TODAY analysis of reports compiled by the non-partisan Center for Responsive Politics.
The top 10 spenders: US Chamber of Commerce ($144.5m spend in 2009), ExxonMobil ($27.4m), Pharmaceutical Research and Manufacturers of America ($26.4m), General Electric ($25.5m, Pfizer ($24.6m), American Assocition of Retired People ($21.0m), Chevron ($20.8m), Blue Cross / Blue Shield ($20.0m), and the National Association of Realtors ($19.5m). Followed by: Conoco Phillips; Verizon; FedEx; Boeing; American Hospital Association; National Cable and Telecommunications Association; Northrop Grumman; Lockheed Martin; Business Roundtable; Altria Group.
A snapshot of Freetown
Had a surprisingly interesting tour of Freetown’s port yesterday. It’s the world’s third largest natural harbour.
Seventy years ago, the ship carrying my grandfather to the Far East during the war anchored briefly off Freetown. He remembered the oppressive heat and humidity, and the hawkers who rowed out to the ship in dugout canoes to sell their wares to British soldiers (plus ça change). The soldiers would lower buckets down to the canoes and haul up fresh fruit and snacks. For entertainment, some would drop coins into the sea, which intrepid young boys would dive down to retrieve from the seabed.
The port is a pretty modern affair these days. A couple of hours there gives you some insight into the workings of the country. A huge Norwegian vessel was unloading limestone to make cement (the post-war rebuilding of Freetown continues); another ship was being emptied of flour; dockers employed by the day were asleep in the shade of Maersk containers. Rice, bizarrely in such a hot and wet country, is the main import commodity, followed by wheat and iron rods for construction. Iron ore (processed elsewhere – Sierra Leone lacks the industrial capacity to process anything), timber, bauxite and rutile are the main exports (diamonds and gold are exported by other means). The World Food Programme has its own depot there, half-full of sacks of corn and flour.
We were shown round by a security guard, Alex, who has worked at the port for twenty years, including during the war when RUF rebels took it over and looted all the containers. His main duties include checking departing ships for drugs and stowaways. He says about half of the ships bound for Europe contain four or five stowaways. They row in in the dead of night, climb into the rudder hole, and sit tight – for weeks.
Sitting forlornly at the far end of the dock is a medium-sized Chinese fishing vessel. On it are a couple of Chinese men and a Sierra Leonean soldier. The boat was caught and impounded last autumn for fishing in Sierra Leone’s waters without a license (a common problem in West Africa). Seven Chinese fishermen have languished in a Freetown prison ever since – those who remain on board take them food every day but are not allowed to leave the country. To obtain his and the boat’s liberty, each prisoner must pay a $25,000 fine, but the shipping agent has failed to cough up. The vessel, guarded round the clock, is quietly rusting.
The wretched of the earth
I’ve been in Freetown for a couple of weeks now and am starting to get my head around the place. Sierra Leone has only recently climbed off the foot of the UN Human Development Index, but signs of poverty, which people in the West – where its most abject form is mostly confined to society’s margins – can go long periods without glimpsing, are everywhere.
Among the most arresting are the crowds gazing at DVDs playing in shops; the emptiness of markets after festivals; the accused dressing up for court in clean T-shirt and flip flops; young African girls on the beach with old white men; the hordes of disabled people – not just amputees from the war but also victims of polio, leprosy and unhealed fractures; beggars of all ages on every street corner; the ubiquity of slums, which as well as having whole districts to themselves also fill in the gaps in more affluent areas; billboards telling people to beware of counterfeit medicines; people collecting used plastic water bottles; the popularity of lottery outlets; car engines being switched off going downhill; children outside a bar at night using the electric light from inside to see their homework; stalls selling individual cigarrettes, pills and teabags; incessant and insistent requests for money or help with getting to the UK, even by people who work; the huge number of working children; and, of course, the proliferation of NGOs.
And finally an audible indicator of poverty, in the shape of a complaint made to me last weekend by an old man in a slum: “We should be shitting four or five times a week,” he said, “but people here only shit twice a week.”
Recession hits the world’s poorest
Of course, traditional banks like Ecobank look down on microfinance as a small-fry, over-risky industry. In Freetown I met SB, who heads a not-for-profit microfinance institution (MFI).
Set up in 2002 by a large American NGO but now self-sustaining, it has 20,000 members in four Sierra Leonean cities. It lends sums of between $120 and $2000 – in a country where most people live on a dollar a day, this means the loans are too large for the poorest people to access (SB says small loans are too costly to administrate).
Loans are for “income-generating activities” only. That is, not for weddings, funerals, medical bills or luxuries, for example, although SB is receptive to my argument that the first three of these can indirectly lead to improved income-generating capacity by relieving stress and strenghtening health (he also admits that some loans probably end up being spent on consumption rather than investment).
Most of the loans are repaid over 6-10 months, with repayments made weekly. They do not come cheap. The monthly interest rate is 3% – with inflation at around 11% this works out at an annual rate of 25%. And to this must be added the cost of travelling to the MFI’s office to make repayments (my medicine seller friend Musa said he gave up his membership because having to pay every week was too tough – his business is collapsing, and he asked me to fund him last week instead). Clients put up with these rates because they are poor, and cannot access cheaper loans because they lack collateral and credit ratings – SB’s MFI relies on word of mouth references, visits to inspect businesses, and guarantors.
Eighty per cent of clients are self-employed businesspeople, who borrow to buy palm oil for cooking businesses, refrigerators for storage, baskets and trays for hawking, and stock. The other twenty per cent are salaried but moonlighting. Eighty per cent of clients are women because, as SB says, men want to shoot for the big pot so they look down on small loans. Women are also much better payers.
The recession has hit the MFI’s clients hard. Remittances and investment from abroad have slumped, and the increased costs of food and fuel have hit customers. Many small enterprises, says SB, have gone to the wall. The normal default rate on loans is 3-4%, but in 2009 11% of money loaned was not repaid. As SB put it, “You might want to pay back a loan but if you have the choice of maintaining your credit rating or feeding your family, you don’t worry about not being able to borrow again in the future.”
If clients do default, the MFIs have limited options for chasing their losses. SB threatens to take bad debtors to the police but never carries it through because he knows it won’t help him recover the money. He worries that “clients talk to each other,” and come to see not-for-profit MFIs as a soft touch. Readers of Hernando de Soto will not be surprised to hear, moreover, that in many cases SB can’t even find his errant clients – some don’t have identity cards, and changes of address are frequent and go undetected by officialdom.
SB’s profits (which are all reinvested) have halved in the past year. Other MFIs have seen similar or worse slumps – in Morocco, once the poster child of African microfinance, the government has had to step in to help as several MFIs went bankrupt after defaults soared to 30%.
Because of the recession, many MFI clients have resorted to “multiple borrowing.” They join several institutions at once, borrow money from all of them, and often fail to repay. The problem is so serious that SB’s MFI has stopped taking new members until it figures out a way to stop the multiple borrowers. Such is people’s desperation, he says, that “if we opened up our membership now, we’d have 200 applicants queuing outside our office every day.”