Investing in people

(Dossier coordinated by Augustine Oyowe)

Previous editions of The Courier have dealt, separately and at length, with various aspects of human resource development, especially in the context of recent dossiers on population and social development, education and training, public health, women, and poverty. Our current dossier looks at the issue from the investment perspective.

To say that investing in people makes economic sense is to state the obvious. But to what extent are the implications of this statement fully understood in the developing countries, especially in sub-Saharan Africa in these days of constantly shifting development theories?

Labour or 'human capital' has long been recognised as a key factor of economic growth. As opposed to sustainable human development, which places human beings at the centre of economic activities (the recipient of the fruits of economic progess), 'human capital' places them at the beginning of the process. The difference of approach is thus evident even though the objective is the same.

Investing in people is a concept which simultaneously combines 'human welfare' with the 'human capital' approach at the beginning of the economic development process. It encompasses nutrition, health and education, and should, under the right investment climate or conditions, enable any investor, whether State or individual, to reap an adequate return .

After three decades of considerable efforts at investment in health and education by sub-Saharan African countries, the returns in terms of standards of living, economic grovvth and rate of development have been extremely disappointing. The conclusion which can be drawn is that the conditions necessary for adequate returns on these investments have been absent.

Colonial legacy

Sub-Saharan Africa inherited from the colonial regimes, infrastructures in health delivery and education that were not only alien to its culture and traditions, but also totally inadequate for nation building. It is a well known fact that in 1960, there were no more than 1200 university graduates in Capital redefined

It is important when thinking of investnent in human resources to understand the real concept of capital. Below is an extract of a definition given by Stefan de Vylder (taken from his UNDP discussion paper: 'Sustainable Human Development and Macroeconomics strategic links and implications' .

A child in the North is born wealthy. His or her share of the capital accumulated by earlier generations is worth a fortune. The higher wages and salaries in the North, compared with those in the South, largely reflect differences in endowment of the country, rather than of the individual. The fact that, for example, a nurse in Germany earns 30 times more than one in Bangladesh or Zambia has little to do with individual differences in training or skills; the higher salaries in the North simply reflect the higher dividend on the capital bestowed from the past. Part of this wealth or heritage is easily visible: factories, roads, schools hospitals, universities, telecommunications, and other infrastructure.

However, there are other, less tangible, forms of capital that constitute a crucial complement to physical and infrastructural capital; parliamentary democracy, a free press, respect for human rights' norms for social interaction, systems of rapid dissemination of new ideas, trade unions and a myriad of other large or small social organisations, a judiciary system which, by and large, defends law and justice, and other institutions. This latter form of capital may be called institutional or social capital. It is also highly unevenly distributed in the world, with large differences both between the North and the South and within individual countries of the North as well as in the South the region as a whole. Indeed, some countries had no graduates at all and in others, they could be counted on the fingers of one hand. In what was effectively a race against time, African leaders understandably responded by investing massively in human resource development. This was made possible partly by small, but steady rates of economic growth and partly by sustained foreign assistance. Between 1960 and 1980, sub-Saharan African governments consistently allocated high proportions of their annual budgets to health and education. Households and individuals made similar efforts (accounting for nearly 75% of all spending on health). They made sacrifices and gave a high premium to the education of their children.

The results were tangible and very significant. By the late 1980s, sub-Saharan Africa was producing over 70 000 graduates a year. Major cities had hospitals and health centres and the rural areas, clinics and dispensaries. Amid a general improvement in nutrition and health-care delivery, the incidence of infectious disease, and maternal and infant mortality were considerably reduced.

Despite these achievements, the approach to manpower building by the post-independent African leaders was, to say the least, haphazard. As a result, a number of problems, such as the appropriateness of school curricula, under staffing and the long-term budget implications of recurrent expenditures, were overlooked (although reform efforts have since been attempted in some countries with varying degrees of success).

The consequences were felt in the 1980s when Africa's economic crisis was only just beginning. Health and school infrastructures deteriorated for lack of maintenance. There were shortages of qualified teachers and teaching materials leading to falls in educational standards as well as in primary school enrolments. And health systems failed for lack of personnel and drugs.

The situation has worsened as the continent's economic crisis has deepened-a crisis characterised by huge budget deficits, high inflation rates, sluggish growth rates and a heavy debt burden. Structural adjustment programmes (SAPs), introduced in response to this, have only served to undermine further the gains made in human resource development. SAPs have been aimed mainly at macroeconomic stabilisation, deregulation and privatisation of state enterprises, and the social sectors have lost out in the process. Subsidies on basic commodities, especially food, have been removed, civil servants and employees of state enterprises have been made redundant and cost-recovery has become the standard practice in medical services. These measures have all combined to produce a level of poverty never before seen in the region, a situation which has adversely affected nutritional standards, provoked malnutrition in many countries and reduced resistance generally to infectious diseases. Because of the rise in unemployment, large sections of the educated population have been rendered unproductive, a waste of several years investment by both the state and the individuals in question.

Appropriateness of skills

Although sub-Saharan Africa produced a large number of graduates before the economic crisis began, few had the kinds of skills needed for industry and agriculture. The evidence of this lies in the unsuccessful attempts by some governments in the late 1970s to indigenise executive positions, most of which required high levels of technological knowledge or experience. The 1980s saw a dramatic increase in the number of foreign technical assistants working on the continent and, paradoxically, in the number of qualified African professionals leaving, mainly for Western Europe, the United States and Canada.

International technical assistance to, or cooperation with, subSaharan Africa has intensified. Organisations such as the World Bank, IMF, UNDP, UNCTAD, UNESCO, European Union and Commonwealth are all involved in one form or another. The effectiveness of this assistance varies, however. This dossier features articles on the work of three of these bodies (the Commonwealth, UNDP and VNESCO). The Commonwealth Fund for Technical Cooperation was set up more than 25 years ago to mobilise Commonwealth skills to meet the needs of member states as required. The UNDP's TOKTEN programme is designed to reduce the negative impact of the brain drain by getting highly qualified developing country expatriates to contribute their skills to the development of their home countries without necessarily having to return permanently. Finally, UNESCO's university twinning programme is designed as a mechanism for the rapid transfer of technology and sharing of knowledge.

While international assistance or cooperation is indispensable, it is surely no substitute for Africa's own efforts at human resource development. Three years ago, Edward Jaycox, then World Bank Vice-President for the Africa Region, announced what appeared to be a change of policy at the annual conference of the African-American Institute in Washington DC. He said that the Bank would no longer pay for foreign technical assistants to help resolve African economic problems but would instead help African governments build their own capacity. Although the Bank has traditionally had enormous influence on development thinking and policy worldwide, the apparent policy change does not appear to have influenced other donors. Nor, indeed, is there any evidence that the Bank itself is implementing it vigorously. The number of foreign experts being sent to Africa continues to grow. There were over 100 000 in 1988.

Rationality of investing in people

In addition to the negative social impact, ten years of structural adjustment have not produced the sought-after stabilisation or the economic growth that was initally anticipated. Even the World Bank and IMF, who spearheaded the structural adjustment idea, have admitted that it has flaws and the need for a new approach to sub-Saharan Africa's economic problems could hardly be more urgent. In the Dossier, Giovanni Andreas Cornia argues for a new focus for structural adjustment, based on restoring adequate levels of public spending on health, education, social welfare and water supplies, so as to enable sub-Saharan Africa to restore and develop its human resources.

Evidence of the impact of a healthy and educated population on economic growth and development abound. Studies on the economies of the East Asian 'tigers' have all concluded that big investments in education in the late 1950s and 1960s were largely responsible for the rapid growth they have experienced in recent years. Malaysia, although a latecomer, appears to be following in the footsteps of its neighbours. After nearly two decades of investment in human resource development, and the introduction of a foreign investment policy which requires some technology transfer, the Government now predicts Malaysia will achieve 'fully developed' status by 2016-twenty years from now.

A relatively well-educated workforce and a certain amount of physical capital or natural resources are all a country needs to succeed economically. Sub-Saharan Africa has sufficient natural resources as is often pointed out. The other side of the equation-a relatively well-educated workforce-is missing.

Sub-Saharan Africa lags behind other regions in human resource development for a complex variety of reasons. The natural and political environment are not conducive to the delivery of social services: low population density and weak transport infrastructures make such delivery expensive and the achievement of economies of scale impossible. The region's climate favours a variety of diseases (such as malaria and sleeping sickness) and many areas have little or no access to natural water sources. Political instability and weak institutions also continue to cast a long shadow. Although these constraints are long-term, appropriate policy measures could reduce their negative impact significantly.

Giovanni Cornia analyses the distributive effects of appropriate health care, nutrition and education on economic growth. He suggests ways of making rational use of available resources for maximum returns and of mobilising funds through taxation, foreign aid and other sources.

In an age of increasing globalisation, where technology is more easily transferable across borders, a healthy and educated population is essential, not only for the absorption and use of new technology but also for meaningful participation in international trade.

It is insufficient, however, to have an educated workforce. Sub Saharan Africa must acquire the institutional and managerial capacity to make the right decisions, both in the public and private sectors. This is essential in the quest to eliminate poverty, achieve sustained and sustainable economic growth and ensure a realistic integration of the region into the global economy.