How to get rich? Becoming less poor would already please many

Introducing Grain Xplore—maize milling and the fortification of maize flour. The logic and exemplification of evidence-based “inclusion investing” in sub-Saharan Africa. A “not for loss” business adventure in northern Tanzania that targets the issues of food security, nutritional health, employment, and education. And places special focus on child food poverty and stunting. Sober analysis. Less rhetoric. More action.

Update: January 26 2025. Original published in three parts between August and October 2024.

Ferdinand A Kovacic

www.kovalentics.at

VIENNA

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PART 1—Roads to riches, reconsidered

SOMEWHERE OVER THE RAINBOW. When the British weekly The Economist recently took a look at how countries are trying to achieve prosperity in the 21st century, it identified, amongst the variety of schemes pursued, three main “roads to riches”: first, become a high-tech manufacturer; second, if endowed with natural resources essential to the green transition, attract related industries to your country and get them to scale up local supply chains; or third, leverage your fossil-fuel riches to transform the country into an entrep?t—a place where the world does business. 1

????These socio-economic development schemes figure at the “grand-scale” end of the development policy spectrum. They spend billions to attract semiconductor manufacturers, provide huge tax-free industrial parks or roll out the Swiss-style red carpet, with fewer questions asked than ever, to the world’s business communities. Grand-scale investments usually go along with the bravado expectation that multiplier effects, complementary investments and other economic synergies will generate widespread and rapid “crowding-in” and “trickle-down” growth into other sectors of the economy and down the societal strata. They contrast, in varying shades of grey, with what I call “backbone” investments: the very physical and institutional foundations of any modern society such as roads, power supplies and grids, mobile and internet connections; hospitals; or secure property rights, regulatory certainty and low-barrier public administrations.?

From a policy perspective, these macro-level decisions constitute major development crossroads of sorts. The decision between “grand-scale” and “backbone” refers to the specific point—or node—within a system at which an intervention is applied and upon which resources are spent. Let us call this particular one the xD NODE, where x stands for crossroad and D for development. Welcome to xD1 , our first of three development crossroads.

?FIRST I LOOK AT THE PURSE. “Grand-scale” roads to riches, as The Economist points out, are fraught with major risks, given the sheer magnitude of investments required and the equally grand-scale aspirations that usually come with them. And speaking of scale, we often overlook how different the starting positions of countries are in terms of the resources available to them. Such as those in sub-Saharan Africa (SSA).

?????Tanzania, the site of my personal project engagement, Grain Xplore, shows selective, credible progress and significant economic potential. Yet, this country—1.5 times the size of Germany—is (barely) a lower middle-income country: its GDI per capita of just over $2,000 is one of the lowest in the world. Its current population of 65 million will double in 23 years, exacerbating problems of poverty, poor income distribution, inadequate education, weak infrastructure, energy shortages. And undernutrition. More on this later. Without wishing to exaggerate, socio-economic development in this country is a matter of (dignified) life and (premature) death for a material part of its population. For Tanzania, and all other countries in SSA, two key issues for their socio-economic growth stand out. No. 1 is enabling livelihood security in the most basic sense, making growth “inclusive” by creating income opportunities and better jobs for all Tanzanians. No. 2 relates to the limited resources available to develop any interventions: this populous country of 65 million people has a GDP the size of the Greater Vienna area. And the capital of Austria is a city of two million people only. 2 We will address no. 2 first.

?4M—MAKING THE MOST WITH MODEST MEANS. Let us narrow down our exposé to The Economist’s first road to riches, on manufacturing. A special issue of the Journal of Industry, Competition and Trade on the rebirth of global industrial policy (Aiginger and Rodrik, 2020) 3 contains two papers of particular interest when zooming in on the geographies of sub-Saharan Africa. The first article (Yülek et al, 2020) 4 introduces the concept of “state capacity” and defines it as the “ability of the state to steer business, entrepreneurship, and investment in socially desirable directions.” This refers to the capabilities and resources available for state investments and, by implication, the affordability of a loss in the event of the investments’ (partial) failure. In sub-Saharan Africa, no surprise, this type of capacity is particularly scarce (not only on the state but also on the private level). The second contribution in the journal (Gelb et al, 2020) 5 examines the potential of sub-Saharan Africa not as a high-tech manufacturer, but as a manufacturing platform based on low-cost labour. It makes the sobering point that, with selective exceptions, labour costs tend to be (too) high in a context of low productivity, suggesting that countries pursue alternative, multi-dimensional and balanced strategies rather than one based on low wages. (In fact, a broad-based Asian-style low-wage manufacturing transformation in SSA seems increasingly unlikely at present. It is probably not unfair to argue that poor infrastructure, widespread electricity shortages or lack of access to finance, together with small and fragmented markets often dominated by local business-political networks, play as big a role as low labour productivity).

????Indeed, individual sub-Saharan countries face highly heterogeneous framework conditions, resulting in different types and levels of resources available for socio-economic development . Consider, for example, their vastly different natural endowments in terms of climate, natural resources (such as oil, coal, minerals), water, fertile soils, navigability of their rivers and access to the sea, or touristic landscapes. Geography counts. Then there are their peoples, their cultural and other legacies. These also constitute a kind of “capacity”, available in varying degrees of quality and intensity. And now let us combine the notion of state capacity in sub-Saharan Africa with this resource-related capacity determined by local framework conditions. And introduce our second development crossroad, xD2, namely xD CAPACITY.

????A comment is in order here. Sub-Saharan Africa is, in many parts, a region of enormous riches waiting to be unlocked. However, some types of natural endowments, especially resources in the ground, can prove to be a double-edged sword. A “two-track growth pattern“ is evident in SSA, with resource-intensive countries, especially those endowed with oil and other valuable minerals (Nigeria, Angola, South Africa), experiencing significantly lower growth rates than non-resource-intensive countries (Rwanda, Tanzania). It is very possible that we are witnessing an instance of the “resource curse” at work, where a concentrated circle of local elites or institutions are able to monopolise, misuse and squander a country’s or region’s riches. Which, ironically, is reassuring news for the have-nots—if they are decently governed, that is. 6 Either way, we need to recognise the fact that for countries in SSA, managing with limited (state) capacity means taking worthwhile risks without betting the farm. In other words, skilfully navigating these roads to riches by making the most with modest means.

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PART 2—A high carb cookbook for inclusion?

EENY, MEENY, MINY, MOE. The path to get rich in these countries is rather a path to becoming less poor, and doing so fast. It starts, conditio sine qua non, with (1) social stability, the absence of war or violent social conflict, which should be also of interest to the gated local wealthy elites (not counting war lords and other human termites, of course). For the overwhelming majority of people, growth means (2) getting out of poverty, and staying out. This requires (3) first meeting basic needs: food security and nutritional health, physical basics such as housing or health services. So, growth must be what is called (4) “inclusive”, if it is to reach the poor in society. And, in the face of local populations exploding, growth must be (5) fast. 7

????“Inclusiveness” raises the question of who should be counted out, and, by implication, who should be elected to become the first-in-line beneficiary of socio-economic development schemes. All the three main “roads to riches” listed in The Economist article are “elitist investments”: designed by, primarily targeted at, and benefiting local and international technology, capital, and resource elites (mostly urban, often coastal, rarely rural). These are the first to feel the benefits of state investments in their personal pockets, while those closer to the bottom of the income pyramid must wait for growth to trickle down and crowd them in.

?????We have arrived at our third and final development crossroad xD3, which we will call xD INCLUSION. It refers to the extent to which policymakers and other actors in, and for, poor countries are genuinely concerned about fast track and “inclusive” growth of the poor (genuine concern may be based on an ethical stance; or it may well be driven by sober, calculated interests—social stability, migration, population growth, or long-term trade and market opportunities). And to the extent to which they actually do spend real money that benefits the many directly: in particular through durable investments in kind, such as by paving a road, drilling a well; or through providing immediate income earning opportunities.

?THE NEXUS EFFECT OF true INCLUSION INVESTING. By now we are ready to take a walk down the decision paths of socio-economic progress in poor countries, merging our three development crossroads (xD1 to xD3) into a more comprehensive kind of nexus formula for investments that have “true” inclusion impact in mind:

??????????????? true Inclusion Investing tII = f(xD NODE; xD CAPACITY; xD INCLUSION)

????Nexus, from the Latin word “nectere”, means “to bind, join, tie”. The likelihood of a “nexus effect”—positive, reinforcing, and viable outcomes—from investments with an inclusion purpose rests on the combined and balanced inputs to the above “formula”. The triple IFs of “true Inclusion Investing”, so to speak: (1) IF you distrust a full ‘n fast crowding-in and trickle-down; (2) IF you have to brace for low (state, or private) capacity and a low affordable loss in case of failure; and (3) IF you are genuinely concerned about inclusiveness; then (1) focus more on the “backbone” nodes; (2) adopt a targeted “modest means” approach; and (3) implement “inclusion” solutions and investments.

??? ?Whatever the appropriate investment mix for an individual country (whether at the national, sub-national or even micro-regional level), however, material and broad-based progress will fundamentally require agricultural productivity and food security; affordable and reliable energy supplies; sound investment in basic infrastructures such as water or roads; secure property rights; tolerable public governance; sensible (at least intra-regional) trade policies; and a broad-based education system that ensures the capability of its firms through the skills of its workers and managers. And in the search for helpful analysis of concrete actions, not only at the state but also at the micro level, that meet the criteria of our “true Inclusion Investing” approach and deliver the greatest return for a given amount of money, we turn next to the Copenhagen Consensus Center.

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CONSENTING TO CONSENSUS. Every major investment decision deserves one: a decent decision framework that prioritises viable options in a strategic cost-benefit analysis. When decisions need to be made under uncertainty, “roughly right [rather] than precisely wrong”, as John Maynard Keynes so aptly stated, will suffice. And, if and where available, decisions should take account of the best research available, using facts, figures, and evidence.

?????The Copenhagen Consensus Center (CCC) 8, led by Bjorn Lomborg, is a think tank that researches solutions and advises policymakers and philanthropists on where to spend their money most effectively to help the poor. 9 Their work relevant to us can be found in Lomborg’s book Best Things First (2023) 10 and the CCC report Best Buys for Africa: Solutions for the World’s Poorest (2021) 11. These publications provide a compelling summary and concrete recommendations for the most cost-effective solutions to help the world’s poorest. The book outlines twelve solutions, ranging from securing land tenure to increasing and making food more abundant and affordable through agricultural R&D. The report examines twenty-six possible interventions that use current technologies; and nineteen R&D investments that reach into the future.

???? Of all the possibilities presented in the two CCC publications, we now zoom in on the issue of UNDERNUTRITION in sub-Saharan Africa (see in particular Hoddinott J., 2021) 12. Undernutrition (obesity, the second form of malnutrition, which is yet to become a major issue) is characterised by an overall inadequate intake of macronutrients (protein, carbohydrates, and fat) and/or a particular lack of micronutrients such as vitamins, iodine, iron, and zinc. In its chronic form, it manifests itself in stunted growth: children who are too short for their age or gender; in its acute form, in children who are too thin given their height. Either way, the consequences are severe: stillbirths, premature births, low birth weight, increased susceptibility to disease, death from infection, and impaired cognitive development. And it creates a vicious cycle of underdevelopment in which poor nutrition, through impaired cognitive skills, leads to poor schooling outcomes and lower economic productivity in adulthood.

???? When dealing with systems of linear equations, you need both a necessary and a sufficient condition to solve such a system. Applying this analogy to our discussion, necessity can be expressed as excellence in directional analysis: doing the right things. Here, the Copenhagen Consensus Center delivers best-in-class analysis. Sufficiency, the second condition, additionally requires the practical design of a solution—a skilful translation of the analysis in view of prevailing local framework conditions—as well as the successful delivery on the ground: doing things right. An exemplification of design and delivery in the field of undernutrition is—Grain Xplore. This is a private sector engagement in which I am deeply involved, and that I will introduce next.

PART 3—Grain Xplore. Inclusion investing, exemplified

HEMINGWAY’S MILLS. Our new company, Grain Xplore *] is a small-scale private sector undertaking located on the hills of Mount Kilimanjaro in northern Tanzania. It is a pilot project, in full recognition of the many learning curves that lie ahead: hence the (e)xplore in the company’s name. I have affectionately dubbed our initiative “The Mills of Kilimanjaro”, in a nod to Ernest Hemingway’s famous short story. At its heart is a maize milling facility that additionally fortifies maize flour by adding essential vitamins and minerals. A prime target group is children in schools and educational institutions.

???? Our company’s investment is a level-headed synthesis of true Inclusion Investing considerations. As simple as that. And as vital as that. It builds agricultural capability that is in dire short supply across the entire country with regards to fortification. It shuns the operating logic of the “aid industrial complex”, rather applying a fair-minded market-oriented, commercial approach instead. 13 Importantly, its design places local framework conditions at the very centre of its value proposition logic. And it delivers on the ground. Less rhetoric, more action. Let us look at some of the framework conditions first.

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HORSES FOR COURSES: MAIZE FOR ME. While, as already stated, economic progress is clearly visible in parts of the country, it also varies enormously at the sub-national or micro-regional level, by sector, and, in particular, across its social strata. Consider this: 3.1 million children in Tanzania under the age of 5 (or 1 in 3) are stunted. 13.5 million people (or 1 in 5) regularly go hungry. For the majority of Tanzanians, a meal means primarily ugali, a dish made from processed maize flour. Demand for this vital starchy grain will soar as Tanzania’s population grows to a projected 130 million by 2050. Hence our project’s focus on maize. And its fortification. Because maize lacks the micronutrients so essential for nutritional health (for a graphic overview of the prevalence of stunting in children in Eastern Africa, see Kovacic F.A., 2024) 14.

???? The country’s agricultural productivity remains extremely low, due not only to the low-productivity of its individual value chain players—plots are tiny, yields are poor, farming skills low, irrigation scarce, fertilisers not affordable—, but also due to poor or broken supply chain linkages such as a lack of (cold) storage, for instance. The idea of imitating Western-style industrial agriculture may sound appealing, but most regions of this vast country face significant obstacles: a lack of paved transport networks, severe energy shortages and frequent electricity grid failures, or insufficient private and public investment levels. As a consequence of populations bursting, Tanzania, as Africa as a whole, is experiencing not only rapid urbanisation but also what is known as “small-town proliferation”: the rapid growth and spread of villages and small towns all over the country. Now add to that some 3.7 million “smallholdings”, small family farms scattered across this large country that use 80% of its arable land and employ about a third of its population. Then it becomes obvious that local production, local processing, and local consumption are a crucial alternative and supplementary path to achieve food security and employment.

?????Milling is a critical part of an effective overall food chain. And milling capacity in Tanzania is inadequate, not only as regards to productivity levels, but in particular in terms of fortification capabilities: only 2% of the more than 30,000 small and medium-sized private millers fortify maize flour (Bymolt & d'Anjou, 2017) 15. Furthermore, the majority (even in the advanced Kilimanjaro region it is well over 90%) do not provide the flour in bags. This hinders effective distribution of the finished fortified maize flour. Taken together, this represents a massive nutritional shortfall in the country, excluding more than 50 million people from fortified food supplies.

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TICK. TRICK. AND TRACK. When it comes to food chain integrity in general, and milling and fortification in particular, this is now where Grain Xplore comes in. The business and operational model are carefully designed with a whole-system approach in mind. The facility’s deliberately “compact” design makes use of readily available and proven modern technology: a right-sized approach that turns smallness to an advantage. The facility is both affordable and cost-effective; it hits the sweet spot between investment required and performance delivered, making the most with modest means. Its modular and standardised blueprint allows for future rapid capacity expansion and cross-regional replication. A systematic “Verbund concept”—an approach pioneered by the German chemical company BASF—emphasises the tight business integration of production, (digital) technologies and supply chains linkages. Technology investments are matched by equal investments in “human capital”, building and enhancing people skills through vocational, business, and leadership training. Together, this will enable the productivity gains of the firm needed to ensure its long-term financial viability.

?????Grain Xplore ticks all the Copenhagen Consensus Center’s boxes in terms of selecting, designing, and delivering a solution to the problem of undernutrition. And many boxes more, as it fully embodies solutions under the above criteria of the triple IFs of “true Inclusion Investing” (come and check them out for yourself). The company helps address a critical gap in the local food supply chain, thereby also reducing food waste. Its 360-degree localisation enables self-reliance through locally grown, locally processed, and locally consumed maize: national security through food security. And our company deliberately engages in an integrated value chain approach, for example by sourcing from women’s self-help groups (also on the CCC recommendation list). The initiative creates direct and indirect employment, with jobs especially for youth and women, generating local incomes for local people. In addition to its internal educational measures, Grain Xplore will invest into the external transfer of administrative, business and leadership skills, and in targeted community engagements such as nutritional and agricultural education. Our initiative works with local authorities to determine how to best support the government’s nationwide nutritional health efforts, through assuring the supply of fortified maize flour to educational institutions: one of the key ways to fight child food poverty and stunting.16

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KEEP EXPLORING. BE FRUITFUL AND MULTIPLY. Grain Xplore is about smart action, not rhetoric. It is our concrete response “off the beaten debate paths of development”, a down-to-earth micro-project with a focus on action, experimentation, learning and delivery. It is a private sector initiative; it applies the lessons from the public sector debates as outlined above but draws its own economic and ethical conclusions. We risk our own money—not a single tax or aid dollar has been spent—, so we need to work with a “modest means” approach when financing capital expenditures and funding the ramp-up to full operation. We ensure long-term economic viability by keeping a close eye on the financial bottom line and operational productivity, while simultaneously adopting a “not for loss” attitude: a reduced expectation of profit margins returned. 17 In parallel, we do organise a platform for clever philanthropic engagement in the form of fiduciary micro-projects (just pick up the phone, or send an e-mail); and we are committed to creating an entrepreneurial ecosystem of like-minded people to further develop and replicate our modular solution, many times over.

?????Keep exploring as the company’s name suggests. And—but only as far as the mills are concerned—be fruitful and multiply. 18 So that we can use the plural soon: The Mills of Kilimanjaro. Turning Hemingway’s story into a happy ending at last.

Grain Xplore: Where the maize truck hits the road, not just the dust. Sober analysis. Less rhetoric. More action.

*] Grain Xplore is a joint initiative of myself and the esteemed local Mbatia family.

Copyrights. [article] BY-NC-ND Ferdinand A Kovacic | [tag lines] 4M—Making the most with modest means; true Inclusion Investing tII; The Mills of Kilimanjaro: BY-NC-ND Kovalentics? | Grain Xplore: company founders | APBS certified

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References

?1 How to get rich in the 21st century. (2024, January 6). The Economist.

?2 For a visual comparison of country World Bank data, see Kovacic, F. A. (2024). World Bank Group: PPP-based GDP and SSA; see image slider at: www.kovalentics.at/emerging.

?3 Aiginger, K., & Rodrik, D. (2020). Rebirth of Industrial Policy and an Agenda for the Twenty-First Century. Journal of Industry, Competition and Trade, Volume 20, 189–207.

?4 Yülek, M. A., Lee, K. H., Kim, J., & Park, D. (2020). State Capacity and the Role of Industrial Policy in Automobile Industry: A Comparative Analysis of Turkey and South Korea. Journal of Industry, Competition and Trade, Volume 20, 307–331.

?5 Gelb, A., Ramachandran, V., Meyer, C., Wadhwa, D., & Navis, K. (2020). Can Sub-Saharan Africa Be a Manufacturing Destination? Labor Costs, Price Levels, and the Role of Industrial Policy. Journal of Industry, Competition and Trade, Volume 20, 335–357.

?6 See Growth in Sub-Saharan Africa is Diverging. (2024, October). IMF. and McDermott, J. (2024, November 23) and A tale of two Africas. The Economist and Growth in Sub-Saharan Africa is Diverging. (2024, October). IMF.

?7 See, for instance, The Clock is Ticking on Sub-Saharan Africa’s Urgent Job Creation Challenge. (2024, November). IMF.

?8 Copenhagen Consensus Center: www.copenhagenconsensus.com.

?9 Do-gooders and do-besters. The Economist, November 14th 2019. Download at: www.copenhagenconsensus.com/best-buys-africa.

?10 Lomborg, B. (2023). Best things first: The 12 most efficient solutions for the world’s poorest and our global SDG promises (First edition). Copenhagen Consensus Center.

?11 Copenhagen Consensus Center (2021). Identifying Best Buys for Africa. Comparing Costs and Benefits. Download at: www.copenhagenconsensus.com/best-buys-africa.

?12 Hoddinott, J. (2021). Reduce malnutrition in Sub-Saharan Africa. In: Identifying Best Buys for Africa, 59–63.

?13 For a macro-level discussion on the economic gap between Africa overall and the rest of the world and Africa’s need for a capitalist revolution see: Special report: Africa’s economies. The Africa gap. (2025, January 11). The Economist.

?14 Kovacic, F. A. (2024). Stunting; see image slider at: www.kovalentics.at/emerging.

?15 Bymolt, R., & d’Anjou, J. (2017). Lessons on small and medium-scale maize flour fortification in Tanzania.

?16 As to the Government of Tanzania’s efforts to address the country’s nutrition challenges, see for instance the National Multisectoral Nutrition Action Plan (NMNAP II) 2022-2026. (2022). Prime Minister Office Tanzania.

?17 Credit for this beautiful expression goes to Morgan Entrekin of Grove Atlantic, an independent publisher. See: Small, but mighty. (2023, December 2). The Economist.

?18 Indirectly, efforts like ours help accelerate the much-needed fertility decline and reduce birth rates. See Tanzania Economic Update: Overcoming Demographic Challenges While Embracing Opportunities. (2024, March). World Bank.?