August 5, 2022
Limestone Analytics contributed to the efforts of the Malawi Priorities project, which compared alternative social investments to determine which offer the greatest social and economic benefits per $1 spent. The analysis finds that investments focused on children tend to offer the largest benefits to society per dollar spent. Supporting community dialogues on child marriage results in $114 in benefits for every $1 spent. Investing in technology assisted learning in schools results in $106 worth of benefits to the community. Other promising investments involve maternal and neonatal health and nutrition, land and market reforms, and providing energy sector technical support.
Malawi remains one of the world’s poorest countries. A landlocked country in Sub-Saharan Africa whose economic opportunities depend heavily on its neighbors. A country whose population is largely rural and dependent on agriculture, while facing water shortages and environmental challenges. A large youth population whose rapid growth outstrips growth in school capacity and formal employment opportunities.
Malawi faces many challenges. Because of this, there are countless opportunities for governments, NGOs, and social sector organizations to undertake investments that may have lasting effects on Malawi and its people. There are many opportunities, but few resources. Which raises the question: which opportunities result in the greatest social benefit and offer the greatest value for money? Which opportunities should be prioritized over others?
These are the questions asked by the Malawi Priorities project led by the Copenhagen Consensus Center and the National Planning Commission of Malawi, with support of the African Institute for Development Policy and the JBJ Foundation. The Malawi Priorities project worked to identify the most promising social investment opportunities across the country, from those focused on infrastructure and energy to agriculture and environment to public health and education to social inclusion and employment. It then applied rigorous, evidence-based cost-benefit analysis (CBA) of these opportunities for a head-to-head comparison of the society-wide benefits and costs of the alternative opportunities.
Our research team at Limestone Analytics was engaged by the project to lead the assessment of nine separate research questions on behalf of the group. We worked with Malawi based experts to identify the most promising solutions, and then conducted detailed CBAs for each opportunity. The questions how Malawi can improve outcomes on a range of dimensions, from the primary school education quality, secondary school retention, gender empowerment and inclusion, industrialization, youth employment, public utility reliability, and national resource management. Our team also provided macroeconomic projections for the project and the National Planning Commission the project to map out alternative COVID-19 recovery paths over the next five years.
In total, Malawi Priorities compared 56 alternative opportunities that were deemed as the most-promising options for addressing a wide array of social sector challenges. For each opportunity, the aggregate net present value of social, economic, and environmental benefits were estimated and compared against the costs of implementing or extending the program to determine the ratio of benefits to costs.
Of the 56 opportunities, only 4 had estimated benefit-to-cost ratios less than 1, meaning that the overall value to society of implementing these 4 programs were less than the costs of doing so. The other 52 projects all offer positive expected returns. While these projects may all be considered “good ideas” offering more benefits to Malawi than they cost, the benefit-to-cost ratio differs widely across the opportunities, suggesting that some options are better investments for society than others.
11 opportunities offered a benefit-to-cost ratio greater than 10, which we refer to as highly cost effective. And, among these, the ratio ranged from 14 to 113. Meaning that for every $1 spent on the program, that dollar resulted in an aggregate benefit to Malawi of between $14 and $113 dollars. These are highly cost effective programs.
Top 11 opportunities for investment in Malawi (with link to reports written or coauthored by members of the Limestone team):
These are not the only worthwhile investments, however. Several of the other interventions focused on primary and secondary education were also shown to offer high benefit-to-cost ratios, including sexual health and girls’ empowerment programs (B/C ratio of 10), primary school feeding programs (B/C ratio of 10), and others. In contrast, reducing the pupil to teacher ratios in classrooms through construction and hiring was nearly as cost effective as other investments (B/C ratio between 1.3 and 3.4). We will explore some of these specific opportunities and the innovative methods used in their evaluation in upcoming blog posts.
Other areas of investment were shown to be less cost effective than those in the high priority sectors. Interventions focused on industrialization and youth employment (B/C ratio of 1.1 to 1.3), HIV and AIDS programs (B/C ratio of 1.7 to 2.3), urban water resources (B/C ratio of 1.5 to 3.2), national resource management (B/C ratio of 1.9 to 3.6) and early childhood development (B/C ratio of 2.1 to 4.5) had lower estimated social benefits per $1 spent compared to many of the other areas for investment.
This does not mean that investments in these other areas are not worthwhile, or justifiable along other dimensions of equality or human rights. But, it does mean that we should think carefully before choosing to focus limited resources on such efforts rather than alternative opportunities in education, health and nutrition, child marriage, and utility and market reforms for which the benefit-to-cost ratios tend be be significantly higher. The analyses are intended to inform discussions and decision making around social sector investments in Malawi, not to paint a complete picture of all of the factors that must be accounted for in each decision.
maDespite its limitations, a comprehensive cost-effectiveness comparison of 56 opportunities proposed by experts offers tremendous value for planners and social sector organizations. It can help guide decisions to ensure that limited resources are being directed to activities where they can have the biggest impact on the people the money is intended to help.
Limestone Analytics has conducted cost benefit analyses and cost effectiveness comparisons for many projects around the world. It can help your organization define the impact of its own projects, compare alternative social sector investment opportunities, or conduct a countrywide assessment of opportunities as in the Malawi Priorities project.
During a recent project with the @gatesfoundation, Limestone examined the importance of Government-to-Person Payment Programs to increase financial inclusion, particularly for women.
Read more in @CGAP's blog written by some of our colleagues: https://www.cgap.org/blog/financial-inclusion-friendly-g2p-recommendations-stakeholders