Monthly Archives: December 2016

For Africa in 2017, watch the politics

By Rafiq Raji, PhD

Just a few weeks before the new year, events are already shaping up towards what may be a politically tense 2017. Never mind that an already impatient American president-elect Donald Trump would be quick to make his presence felt everywhere, after his inauguration on 20 January. With presidential elections due in at least five African countries – Angola, Kenya, Liberia, Rwanda, Sierra Leone, and hopefully the Democratic Republic of Congo – during the year, 2017 promises to be interesting on the African continent certainly.

Jubilee beware
As if similarly impatient, the Kenyan parliament had a violent session in the penultimate week to the end of 2016, as lawmakers from the ruling Jubilee Party passed amendments to the electoral law that didn’t quite sit well with their counterparts from the opposition Coalition for Reforms and Democracy (CORD). Why are they fighting again? For elections on 8 August, Jubilee wants a manual back-up to the electronic electoral system it earlier agreed to via negotiations with CORD, after protracted protests by the latter. The ruling party now fears its supporters, in areas – about 1,300 polling stations – that may not be covered by the 3G mobile phone network needed for the system to run effectively by election time, could be disenfranchised. CORD, which wants the registration, identification, and verification of voters and transmission of results to be fully electronic, disagrees. By amending the electoral law to accommodate a manual back-up, and successfully passing them in the absence of CORD lawmakers who boycotted the vote, Jubilee has reneged on the deal. CORD is not amused. Its leader, Raila Odinga has called for non-violent mass action in early January. Considering how hopeful one had become, as Mr Odinga and Kenyan president, Uhuru Kenyatta, came together, as statesmen should, to resolve their differences over commissioners of the Independent Electoral and Boundaries Commission (IEBC) not too long ago, this is a concerning turn of events. The clergy, which brokered the earlier deal, is urging President Kenyatta not to sign the amendments into law. I wonder about that though: it is very unlikely the lawmakers would make such a brazen move without the blessing of Mr Kenyatta. In any case, details emerged over the weekend that suggest he likely sanctioned the move.

Extra time for a crisis
Violence also erupted in the Democratic Republic of Congo this past week, as Joseph Kabila, the country’s president remains in office despite his term expiring on 19 December. A score died, after authorities opened fire on anti-Kabila protesters. His continued stay in office comes with the imprimatur of the country’s constitutional court though, which ruled in May that President Kabila could stay on if elections were not held in November; a likely possibility due to budgetary constraints, the government then argued. In October, the same court approved a request by the electoral commission to postpone the elections to April 2018. The opposition would have none of it, hence the protests on 20 December and consequent violence. There is hope now though, as opposition members have agreed a transition deal in principle with Mr Kabila. He will stay one more year, during which polls are to be held to elect his successor. Despite supposed complications, expectations are high that a final deal would be struck before the end of the year. Regardless, one is typically wary when dictators get extra time. That is, even as Mr Kabila is expected to appoint a prime minister from the ranks of the opposition, if all goes according to plan. Also bear in mind, the Gambian impasse remains, as Yahya Jammeh, the country’s president, refuses to accept the results of recent elections. (See earlier columns for views.) Widely known for his belligerence, President Jammeh may want to test the will of the international community. Thankfully, the Economic Community of West African States (ECOWAS) has firmed up its threat: Senegal would lead a military operation to forcefully oust Mr Jammeh should he choose to push the limits. Thus, January could prove to be particularly tense in the African political space indeed.

Weary heads
In South Africa, the race to replace Jacob Zuma, South Africa’s president, has begun in earnest. The focus in 2017 would be the December (or earlier) leadership contest in the ruling African National Congress (ANC), an almost sure step towards clinching the country’s presidency. The top contenders, Cyril Ramaphosa, South Africa’s deputy president, and Nkosazana Dlamini-Zuma, the outgoing African Union (AU) Commission chair, are already targeting their speeches at party faithfuls. Considering how divided the ANC has become under the rather underwhelming and controversial stewardship of President Zuma, the winner would have a huge task on his hands. And in Nigeria, one would be greatly surprised if the Muhammadu Buhari government is allowed any breathing space in the coming year. Already, key contenders for the presidency in elections due in 2019 have started making comments targeted at regions disgruntled with the incumbent. President Buhari is unpopular in the south for being unabashedly sectional and exclusionary. For instance, one of the potential candidates, Atiku Abubakar, a former vice-president, has been harping on the need to negotiate the federal structure of Nigeria. It is probably all just strategy: one is sceptical that Mr Abubakar would be any more inclusive than Mr Buhari. More interesting is talk of a mega party soon to be launched by disgruntled elements in the ruling All Progressives Congress (APC) party and Peoples Democratic Party (PDP), the factionalized but still leading opposition party. The alleged leaders within the ruling party are still operating in the shadows though, playing both sides, as taking on Mr Buhari too early may be ‘dangerous for their political health.’ Mr Buhari’s potential headaches may be born closer to home. There are one or two members of his inner circle who do not want him to run in 2019. They may choose to covertly sabotage his government to ensure he sees the wisdom of their counsel. Not without support of his own, never mind an almost fanatical followership within the security services, which he has made sure to fill with people loyal to him first, Mr Buhari may bring the full force of state power to bear on his opponents regardless. And therein lies the risk.

Statesmen needed
Incidentally, much of these concerns could well be assuaged if the principal actors choose to show leadership. Mr Jammeh could simply leave office when his term expires on 18 January. So far, he has not shown any indication he intends to do so. Mr Kenyatta could do more to rein in his party’s hawks. The most recent skirmish likely had his acquiescence nonetheless. And Mr Kabila could simply hand over to a caretaker government, like the opposition wants. This is wishful thinking, however. The likely scenario is that Mr Kenyatta and his Jubilee party would do everything in their power to win upcoming elections, Mr Jammeh would test the wills of ECOWAS and AU by refusing to leave office in January, and Mr Kabila may engineer a crisis to justify his continued stay. Still, it is too early to tell how any of these events would play out. But it would be wise for stakeholders on the continent to brace up for what could be a volatile political environment. It could also be that all these are much ado about nothing. And that would be just as well.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. https://www.businessdayonline.com/africa-2017-watch-politics/

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Negotiating Jammeh out

By Rafiq Raji, PhD

Yahya Jammeh, hopefully Gambia’s outgoing president, surprisingly conceded defeat after losing elections held on 1 December. Shortly thereafter, the oft-erratic leader changed his mind. The president-elect, Adama Barrow, has threatened to declare himself president should his inauguration not take place as planned on 18 January. There have been varied accounts about the events that led to President Jammeh conceding defeat the way he did. Prominent amongst them is that the Gambian Army virtually threatened him if he did otherwise. It is believed his decision to hold on came after getting the Army onside. These involved mass promotions for soldiers of Jola ethnicity, his tribe, and procurement of foreign mercenaries to guard him and so on. Calls for his prosecution got him spooked certainly. But surely, this could not have come as a surprise to him. The explanation that makes sense to me is that he sought to buy time, whilst he engaged in ‘consultations’. It is widely known Mr Jammeh relies a great deal on fortune-tellers. But I think a part of him also saw the loss as an opportunity: every dictator after a while wonders how it will all end. It is probable Mr Jammeh reckoned his magnanimity would earn him the forgiveness of Gambians. Alas, wisdom was in short supply among leading opposition figures.

Only credible threat of force will do
Were Mr Jammeh to succeed in holding on to power, the damage to democratic progress on the African continent would be tremendous. Stopping him would require a credible threat of military intervention, however. But judging from the communique issued by the Economic Community of West African States’ (ECOWAS) heads of state at its most recent summit this past weekend (17 December), military action against Mr Jammeh, should he refuse to handover power in January, was not discussed in concrete terms. Promising to take all ‘necessary actions’ to ensure Mr Barrow’s inauguration without a clear red line was not entirely reassuring. Without a credible threat of force, Mr Jammeh may get away with his latest mischief I’m afraid. Furthermore, the mediator assigned to ensure he doesn’t, Nigeria’s President Muhammadu Buhari, has troubles of his own. Busy with at least two major armed insurgencies, Mr Buhari would be loath to send his troops abroad. But without a doubt, his leadership would be crucial to resolving the impasse.

Power-sharing should not be an option
Mr Jammeh has indicated he would not be averse to a power-sharing arrangement with Mr Barrow. Trouble is, allowing Mr Jammeh to stay beyond 18 January would only buy him time. There are precedents. The 2007 Kenyan presidential elections were similarly contentious. Raila Odinga, the leading opposition candidate, refused to accept the official results, which declared Mwai Kibaki, then Kenya’s president, as winner with about 46 percent of the vote. Violence broke out consequently. Eventually, both parties agreed a power-sharing deal, under the skilled facilitation of Kofi Annan, the former United Nations top scribe. It is noteworthy that although Mr Odinga successfully served his term as prime minister under the deal, the presidency has since eluded him. Similar troubles were associated with the 2008 Zimbabwean presidential elections. In the first round, Robert Mugabe, the incumbent, came second with 43 percent of the vote. Morgan Tsvangirai, the leading opposition candidate, came first, with 48 percent of the vote. Even so, Mr Tsvangirai thought his tally was undercounted, claiming he secured at least half of the vote and thus didn’t see a need for a runoff. But because officially, both leading candidates did not secure the minimum half, a second round of voting was called. Although eventually agreeing to participate, Mr Tsvangirai would soon pull out just before the polls, citing safety concerns for his supporters, after several of them went missing, were killed or injured from wanton attacks by Mr Mugabe’s supporters. In the violent aftermath of Mr Mugabe being officially declared winner of the runoff polls, tremendous international pressure was brought to bear on the ‘victor’ to agree a power-sharing arrangement with Mr Tsvangirai. Again, just like in the Kenyan example, Mr Tsvangirai became prime minister and his aspirations for the presidency have since remained just that: Mr Mugabe is set to run for yet another term in office come 2018. Note how in both the Kenyan and Zimbabwean cases, the incumbent cheated and prevailed.

Persuade the military
Mr Jammeh is in a relatively stronger position than either Mr Kibaki or Mr Mugabe were when they sought to subvert the will of their peoples. First, there has not been a violent aftermath. Second, Mr Barrow does not have real power: his safety and electoral mandate are almost entirely subject to Mr Jammeh’s discretion. But there is one major difference: Mr Kibaki and Mr Mugabe were ‘officially’ declared winners of their controversial elections. In Mr Jammeh’s case, not only was he officially declared to have lost, he conceded defeat publicly. If he had any sense of shame, he would have left it at that. But Mr Jammeh is no statesman. Thus, short of a foreign military intervention, by ECOWAS, say, Mr Jammeh could successfully dig in his heels. A much more effective tact might be to persuade the Gambian military to nudge him out. Incidentally, they likely also fear for their fate when he is gone, hence why they back him. For now. Even so, they may yet save everyone the trouble.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/negotiating-jammeh-out/

Make a fuss. It’s your economy too

By Rafiq Raji, PhD

This week, I share edited views I presented on the state of the Nigerian economy and outlook for 2017, at the Bonds, Loans and Sukuk Nigeria Briefing Day held in Lagos on 21 November 2016. You can download my presentation via this link: http://www.gfcmediagroup.com/africa/bonds-loans-nigeria

Macroeconomic vs geopolitical woes: What is hurting the economy the most?
In the Nigerian case, they are interconnected. Attacks by Boko Haram, a terrorist group, in the northeast hitherto weighed significantly on agricultural output, as logistics and other parts of the agriculture value chain were significantly disrupted. In any case, farmers couldn’t plant for fear of being killed. Some of those fears have abated, in light of successes recorded by the Nigerian military. But a significant number of able men in the region are still not farming, because they are displaced, fighting with Boko Haram or in hiding to avoid arrest by the military on suspicion of being Boko Haram sympathizers. Attacks by Fulani cattle herdsmen on farming communities also affected agricultural production. As some of these troubles remain, insecurity in these areas remains concerning.

In the Niger Delta, attacks by militants on oil and gas infrastructure have disrupted crude oil production and gas supply to power stations. And even though these attacks are motivated in part by a desire for more control over resources, there is a corruption dimension as well; as erstwhile treasury looters feel squeezed by the administration of Muhammadu Buhari, Nigeria’s president. There is also likely a political motivation. A supposedly competent President Buhari, in the security sphere at least, would be hard-pressed to explain why he failed to curtail militancy in the Niger Delta come 2019, when elections are due. The casualties? Economic growth, inflation, and the fiscus. To a great extent, these negative geopolitical events contributed to the recession, double-digit inflation, and budget deficit.

Still, poor economic management made these troubles worse. The actions of the monetary authorities in light of dwindling foreign reserves were quite frankly irresponsible. To have kept the exchange rate artificially strong for so long, meant that even the little that had been saved was pilfered away to speculators and the like. And fiscal policy? You are all privy to how problematic the 2016 budget process was. Bizarrely, it seems history is about to repeat itself: the 2017 budget process is eerily following the same timeline.

More fundamentally, the main issue with the Nigerian economy is one of confidence. Authorities need to be clear on policy direction and be consistent. The government’s fundraising efforts have faced some pushback from multilateral institutions in part because of a lack of these. Though, it is surprising the authorities have not considered potentially much more effective ways of stimulating the economy. A 2-3 year tax holiday for households and businesses, whose expenditure constitutes at least 90 percent of economic activity, is one example.

Short-term suffering vs long-term gains: What does the end of the commodities super-cycle reveal about Nigerias economic fundamentals?
It is not the economy that is not diversified. It is government finances – 70 percent of which are crude oil-based – that are not. Unlike the popular commentary, Nigeria is not a mono-economy. 90 percent of the economy is non-oil related, based on 2015 data. At 23 percent of GDP, agriculture has a greater share of output than oil’s 10 percent. Then there is the dominant and varied services sector (53 percent of GDP), with telecoms, banking and other financial services accounting for not only significant tax revenue but are also major sources of employment. Only recently, Nigerian authorities raised an alarm about a potential famine next year, as farmers now find they could get more value for their produce abroad. One wouldn’t want to belabour the point about how unwise it was on their part for raising that alarm in the first place; after all authorities could better monitor the borders or quietly buy up grains needed for the strategic reserve. Even so, it highlights the likely underestimation of the agriculture sector and its potential as a source of foreign exchange; if in addition to producing for domestic consumption, farmers are able to export as well. Other sectors are probably underestimated as well.

What is pushing the currency down and how much further is it going to fall?
The main source of foreign exchange inflows to the Nigerian economy is not crude oil. Autonomous sources or so-called invisibles (ordinary domiciliary accounts, over-the-counter purchases, and so on) account for 60-70 percent of FX inflows. Crude oil? 20-30 percent. To encourage these suppliers, it is important for the Central Bank of Nigeria (CBN) to indeed let the naira float. It does not make sense for a central bank to keep supporting a currency when the extent of its firepower is in the full glare of the public. Then there is still pent-up demand. And just recently, the unthinkable happened. The country’s spy agency went after bureau-de-change (BDC) operators, ordering them to sell their foreign exchange stock at a certain price. Such actions discourage market participants.

There are other ways the government could increase FX supply. It is likely a significant sum of the money stolen during past administrations, foreign exchange especially, may still be domiciled within the country: It is not likely there was just one case of an ex-government official hiding dollars in a specially-built soakaway at his house. There are probably numerous others who have similar repositories of cash in safes and elsewhere. A way to formalise that money might be to issue a domestic dollar bond, like Ghana did. The Buhari administration may need to look the other way in the event. It is better to have stolen funds put to use in the domestic economy, than have them rot in some hideaway. So would the naira depreciate some more? It probably would. Unless the CBN allows the naira to trade freely long enough to re-gain the confidence of market participants, who have been disappointed by what has been a CBN-manipulated market thus far.

Is there more volatility ahead or will 2017 see a return to stability?
The recession would probably be over in Q1-2017. After likely negative growth of 1.5 percent for 2016, the Nigerian economy would probably record positive growth in the first quarter of 2017; 2.9 percent year-on-year is my reckoning. Inflation would also likely be in the single-digits by end Q2-2017, about 9 percent in June, say. Crude oil prices would also likely recover. Authorities’ economic stimulation efforts – to be proposed in a National Economic Recovery and Growth Plan (NERGP) – add to one’s optimism. In any case, base effects alone may buoy growth towards good numbers. But would that change the feeling of a go-slow economy among Nigerians? To the extent that likely positive growth figures in Q1-2017 changes the currently depressing commentary of government officials, the mood may turn around.

Hopefully, the Buhari administration would also adopt a pragmatic approach to current regional agitations. In the event, stability is likely. The Niger Delta issue has to be resolved by peaceful means certainly. And quickly. The Boko Haram issue should also be resolved once and for all. And to fend off other brewing regional agitations, authorities have to adopt a more inclusive style. It does not at the moment. And the CBN needs to make data-dependent decisions, consistently. Yes, it is under political pressure to cut rates. Still, a reduction should not be contemplated at this time. Thankfully, the CBN governor, Godwin Emefiele, has signalled as much. And the fiscal authorities need to get their acts together: pass the budget on time, borrow prudently, and explore untapped revenue sources. Ironically, it is the external environment that might make for a turbulent 2017. A Trump-led America, Brexit uncertainties, US Fed policy tightening and so on. But on balance, there is good reason to be cautiously optimistic.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/make-a-fuss-its-your-economy-too/

Ghana polls could go either way

By Rafiq Raji, PhD

After the astonishingly heartening dramatic turn of events in The Gambia last week – longstanding incumbent president, Yahya Jammeh, lost his fifth re-election bid and shockingly conceded defeat, the presidential election in Ghana this week (7 December) has hearts racing. Not that there is much doubt the polls would be credible – probably outside of South Africa, Ghana has an unparalleled record of running successful elections that have been deemed largely free and fair. Worry is the election results may be too close, and thus move into second round: the winner must secure more than half of votes cast. For the two leading presidential contenders, John Mahama of the ruling National Democratic Congress (NDC) and Nana Akufo-Addo of the New Patriotic Party (NPP), the main opposition party, that is. The last time they sparred in 2012, President Mahama won 50.6 percent of the vote, about 3 points above Mr Akufo-Addo’s 47.8 percent.

Opposition has ample ammunition
Mr Akufo-Addo’s challenge to the incumbent is stronger now. But Mr Mahama, who has had the mixed fortunes of steering Ghana through a most difficult time, has deeper pockets this time. He rose to the office in July 2012, after the death of John Atta Mills, the first president of the country to die in office, and successfully contested for his first term five months later, amid recurring power shortages (‘dumsor’), which he almost entirely pledged his presidency on resolving. True, his administration has put in a lot of efforts towards resolving the problem. Power barges were procured to bridge the supply gap temporarily as more permanent solutions were being sought. A gas-fired power plant was also built. With income from newly discovered crude oil slow in coming (some was even spent before being earned) amid ramped-up spending, public debt rose to almost 70 percent of GDP in 2014 from about 50 percent in 2012, the year Mr Mahama took office. Inevitably, his administration had to seek IMF aid to manage what could have been a much worse economic crisis. A 13 percent increase in public sector salaries in early 2015 was clearly ill-advised. Mr Mahama also increased the minimum wage by about 17 percent in that year. Now another 13 percent wage increase for the country’s civil servants early next year has been promised. And the minimum wage is almost certainly going to rise by 10 percent in January. Little wonder, the public wage bill for this year to June has already gulped almost 60 percent of the budget for the entire year. There have also been allegations of corruption. A controversial gas turbine contract is one example. An SUV gift to Mr Mahama by a government contractor was also a source of some controversy.

To one’s mind, Mr Mahama and his team have done as much as any administration could to steer the country out of the doldrums, self-inflicted in any case. But voters hardly care how hard a government is working if the outcomes are below expectations. And Mr Mahama has had to take some very unpopular decisions. Power tariffs and fuel prices have risen quite a bit since four years ago for instance, more than double in some cases. And until recently, inflation showed little signs of slowing. There is hope now that the current downward trend in the pace of price changes would be sustained. It has to be the case. Otherwise the recent cut in interest rates by the central bank rings slightly like a favour to the new governor’s benefactor. Even so, it is most unprecedented for a central bank to cut interest rates just two weeks or so to potentially contentious elections; in Ghana at least. Optimism about the economy by administration officials is not farfetched regardless. Inflation would likely slow into the single-digits next year. Interest rates would also likely come down as the central bank continues the easing policy it just started. And yes, the economy would likely roar in 2017 as oil and gas production gathers steam, albeit probably in the 7 percent range, less than Mr Mahama’s assertion of above 8 percent during the presidential debate, but definitely better than expectations of about 4 percent for this year.

Equal chances
Clearly, the opposition goes to the polls with a lot to criticise Mr Mahama about. Not that if it were in government it would do any better. Accusations of corruption applies to members of the opposition as much as those of the ruling party. I last visited Accra, the Ghanaian capital city, around mid-2015. I recall a most interesting conversation, with those very lively storytellers: cab drivers know all of a city’s secrets. While trying to avoid some gully-type potholes – I chose an opportune time it turned out, the cab driver went on a diatribe about how distant from reality members of the political class were. He harped on the wanton display of wealth by government officials who before getting to office barely got by. Coming from Nigeria, I found this a little bit amusing. If the only thing our politicians did was to live comfortably on our dime but do their jobs nevertheless, that would be a most gratifying turn of events. Ghanaians still have it good. And yes, dumsor was a recurring issue in the conversation. And the all too familiar argument about the rich not being overly concerned since they have standby generators and so on.

True, Mr Akufo-Addo is promising everything and all things. While on a rally in September for instance, he promised each of Ghana’s 275 constituencies the local equivalent of US$1 million annually if he won power, about US$1.1 billion over four years. Every village would also get a dam, every district, 110 in all, a factory and everyone eligible a free secondary school education, he added. Hollow promises. Nonetheless, his grassroots approach – he even skipped the presidential debate, uneventful in any case – and populist promises likely resonates with not a few voters seeking some reprieve from what is still a challenging economic environment. To his credit, Mr Mahama has not responded as much in kind, by and large. Regardless, his chances of winning are about the same as those of his main challenger. One private opinion poll actually puts Mr Akufo-Addo in the lead to win the election. Another suggests Mr Mahama might win, but by the slimmest of margins. Truth is, no one knows for sure. And that is how it should be.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/ghana-polls-could-go-either-way/