Xiaochen Su

The Price of Poverty in Rural Africa

Many first-time visitors to rural Africa share a pretty vital misconception. They assume that everyday products sold in Africa will be much cheaper than the same product purchased back at home. Since, in their minds, Africans (yes, all 1.25bn of them) have the lowest per capita income in the world, on average, prices will be correspondingly low. After all, with the lowest labor costs and the lowest spending power in the world, it makes sense for businesses to set their prices accordingly, so as to attract consumers who have low purchasing powers.

In some cases, such assumptions are spot on. Local food is a good example. A daily lunch and dinner of a cheap carb like rice, maize meal, fried potato wedges, or boiled plantains, paired with fried fish, grilled chicken, or beef in tomato sauce would not cost more than the equivalent of a couple of American dollars. Because all of the ingredients are locally produced, harvested, and processed, the pricing of a meal such as this may cost little beyond labor costs.

However, the story is a completely different one if something is not locally produced. In many towns, supermarkets that cater to needs of foreign tourists and expats are emerging, and they specifically stock imported items — flavors for homesick foreigners. However, these foreign products are offered at a heavy markup. For instance, a small box of cereal or a jar of peanut butter can be priced at more than 7 USD, while high-quality cheese can easily be more than 10 USD for a small block. With most foreign residents working in low-paid NGO jobs, expenses can quickly add up — but foreign workers are at least able to afford these imported goods. For most locals making 1-2 USD per day, the stock on these shops’ shelves are simply luxuries that they can never afford.

For many, the gap between the local produce and the imported goods is another perplexing aspect of life abroad. With the labor costs the same and transport costs via oceangoing container ships marginal, it is hard to imagine how imported products can cost more than three times their prices back home and more than ten times of their locally produced substitute. Yet, a couple of factors, both tied back to the paucity of public services in rural Africa, can explain the phenomenon.

The first is sheer cost of local ground transport. The distance between population centers are massive in some rural areas. In rural Tanzania, it takes some 20 minutes of riding bicycles on rough dirt roads to get to the next village. For more remote villages, the nearest market town can be as far as two hours away by car.

Given the small size of remote rural villages and the sheer distance between them, transport options for products are few and far in between. Cross-country delivery trucks generally stop only at sizeable market towns, where shoppers must go to get any imported products. Trucks generally do not run to remote villages simply for the reason that the routes are unprofitable for their owners. Aside from paying exorbitant prices for imported goods, hauliers must also spend additional money and hours transporting these goods back and forth.

Nor is transport cheap, due to high cost of maintaining the trucks. Roads in the rural reaches of countries such as Tanzania are suboptimal, to say the least. With the exception of a few paved cross-country highways, roads in rural areas are made of dirt and soil, and are barely maintained. In rainy seasons, these dirt roads are prone to becoming waterlogged and swampy — stories of trucks slipping in the mud and falling off roads entirely are common. Driving such roads day in and day out, it is unsurprising that trucks in rural East Africa face abnormal amounts of wear and tear, requiring much more frequent repairs to keep them operational.

The high cost of local transport costs is exacerbated by presence of massive border tariffs that greatly increase running costs for businesses looking to import goods. For many African governments, import tariffs act as a major source of revenue, as other sources of taxation are impractical to implement. The lack of nationwide public records for formal employment and property ownership mean that it is impossible to systematically collect either income or property taxes beyond a tiny minority of the overall population. Even if such records do exist, the lack of retail banking in remote villages means there is no easy way for citizens to pay their taxes.

For the transport sector, this means that already-high maintenance costs are amplified by higher costs for parts and vehicles, which all too often need to be imported. To cut down on costs, often the cheapest, most worn secondhand parts and vehicles are bought, amplifying the need for extensive (and expensive) repairs in the longer term. Such costs are passed on to the helpless consumer in the form of increased prices for nearly all products sold across the country — virtually everything is transported by road as rail and airborne transport is nearly nonexistent.

Piling cost upon cost, import tariffs make consumer goods themselves more expensive. International packages are often charged a massive customs tax upon receiving, often amounting to more than the total value of items inside. It is not unheard of for containers coming off oceangoing ships to be charged few hundred percent of the product value. This collocation of factors means that the price of imported goods can rise very quickly indeed.

Thus, prices of imported goods are do not correlate with local incomes and purchasing powers; rather, prices are a function of the presence and state of transport infrastructure as well as tax collection. The continuing lack of investments into roads, public records systems, and mechanisms for fairly collecting government revenues will ensure that the “poverty” of public services continue to make life expensive for those who need to buy imported goods, be they foreign workers looking to stock up on Nutella, or locals who need to buy medicine.

 

Xiaochen Su is an Africa analyst.

 

Source: https://raddingtonreport.com/price-poverty-rural-africa/