Category Archives: Trade

Can Africa win Trump over?

By Rafiq Raji, PhD

In mid-May, at the Africa Finance Corporation’s 10th year anniversary infrastructure summit (“AFC Live 2017”) held in Abuja, I asked Jay Ireland, the president and chief executive of GE Africa – the subsidiary of the American industrial giant on the continent – about his thoughts on whether Donald Trump, the American president, would be good or bad for Africa. Specifically, I wanted to know if President Trump would be worth the trouble of winning over. As Mr Trump does not know much about Africa, if the little mention the continent got during his election campaign is anything to go by, engaging with him early on might spring pleasant surprises, some pundits argue. Despite such assurances, I remained a little sceptical. So the opportunity to ask Mr Ireland, who incidentally is also the chair of former President Barack Obama’s Advisory Council on Doing Business in Africa and co-chair of the US Africa Business Centre, which leads the American business community’s engagement activities on the continent, was huge. In a sign of the times and the peculiar style of the current American president, Mr Ireland demurred, humorously wondering if his answer might not become the “subject of a tweet.” More importantly, he said a strong case was being made to the Trump administration to continue ongoing initiatives. I was particulary interested in the “Power Africa” programme initiated during the Obama administration; especially since even during Mr Obama’s tenure, it was floundering, talk less that of Mr Trump. The African Growth and Opportunity Act (AGOA), is not as vulnerable to a Trump rethink, albeit the administration could still exercise certain prerogatives over the choice of beneficiary countries and so on. My interpretation of Mr Ireland’s comments are as follows: Should Africa indeed not be a priority for Mr Trump, ongoing African initiatives may simply continue under the aegis of able and experienced technocrats at the American State department. And in the event Mr Trump suddenly develops a keen interest on African issues, proactive engagement with the administration like his and the business people he represents may be hugely differential. It has also been argued that African heads of state should do likewise.

Focus on first-order issues
In light of the recent exit from the Paris climate accord by Mr Trump, however, some are now beginning to think whether there is a need to even try. I would not be too quick to give up. True, with African countries already beginning to see the negative effects of climate change via droughts and so on, the recent American action is a setback. And of course, African countries initially had their own reservations about the accord. Not a few wondered why they should have to be environment-friendly at the expense of their development; especially as currently developed countries were not similarly cautious. But with research showing a nexus between climate change and increasing incidents of conflict in a number of African countries, there is a growing consensus about the need to be more caring of the Earth we live in. Still, to do this, African countries would require financial and technological support. To this end, the Paris agreement makes substantial provisions. With the American exit, however, also goes its financial commitments. It is also evidence that a Trump presidency would (at least for now) have second-order negative effects for Africa when the issues relate to broader international and multilateral arrangements that Mr Trump is averse to. So it is on the more specific African initiatives that African leaders should hope to influence him on.

Show respect
At the recent G7 summit in Italy, it was all too clear Mr Trump was not enjoying himself. He was particularly irritated by Emmanuel Macron’s (the French president) “macho-diplomacy”: Mr Macron’s overly firm and lingering handshake with Mr Trump at their very first meeting since the former’s inauguration was well-reported. As if determined to rattle the American president or put him to size, Mr Macron also made sure to refer to the incident afterwards as deliberate. That and another, where Mr Macron seem to be moving towards Mr Trump to shake hands, as the G7 leaders and invited guests did their traditional group-walk in front of the press, but at almost the last minute swerved to shake that of Angela Merkel, the German chancellor, must have been a little unnerving for a man known for his fragile ego. Thus, it is very likely that unpleasant experience was at least a secondary motivation for his action on the Paris accord. In his speech announcing the decision, Mr Trump was almost certainly taking aim at Mr Macron when he said: “I was elected to represent the citizens of Pittsburgh, not Paris.” (The Washington Post did a very insightful article on the dynamics leading to Mr Trump’s decision.) At the G7 summit it turns out, one of few instances where Mr Trump seemed to be enjoying himself was when he ran into some of the African delegates: Yemi Osinbajo (Nigeria), Alpha Conde (Guinea), Uhuru Kenyatta (Kenya), Hailemariam Desalegn (Ethiopia) and Akinwumi Adesina (African Development Bank). With deft handling, Mr Trump could become an ally.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/can-africa-win-trump/

Doing Business: Can Nigeria replicate the Singapore model like Mauritius did?

By Rafiq Raji, PhD

It is undeniable that there is a correlation between a country’s business environment, foreign direct investment inflows and international trade performance. Countries that make setting up businesses easy, allow clearance of goods at ports with little hassle, grant entry and exit visas to investors and visitors alike in quick time, enable the registration of property with little trouble, provide reliable electricity, and make documentation like construction permits easy to acquire, attract more foreign direct investment (FDI). [1] The easier it is to do these things, the more likely cross-border and broader international trade would flourish.[2] These benefits are what motivate countries to try to improve their business environments, more so now that capital is increasingly choosy and circumspect.

Country GDP per capita(US$) (2016) (PPP) Overall DB rank (over 190) Trading across borders (over 190)
Singapore 87,855 2 41
Mauritius 20,422 49 4
Rwanda 1,977 56 6
Botswana 17,042 71 3
South Africa 13,225 74 25
Kenya 3,361 92 9
Seychelles 27,602 93 5
Zambia 3,880 98 31
Lesotho 3,601 100 2
Namibia 11,290 108 17
Ghana 4,412 108 29
Nigeria 5,942 169 181

Source: IMF, Doing Business 2017: Equal Opportunity for All (World Bank, Oct 2016) [3]

Singapore as role model
Singapore is the quintessential example. In the World Bank Ease of Doing Business (DB) 2017 rankings, Singapore is second out of 190 countries ranked globally, having topped the rankings at least nine times since they began in 2004.[4] With a GDP per capita on purchasing power parity (PPP) basis of US$87,855 (2016), it is one of the wealthiest countries in the world. More than three decades earlier, its GDP per capita of about US$8,852, was just one-tenth of its current level. Between 1980-2016, the Singaporean economy grew twenty-five times over from US$12 billion to US$297 billion. Its remarkable success is testimony to the heights any country can reach on the back of sustained reforms and reinvention. In Singapore, contracts matter and are readily enforced, the resolution of insolvencies are not tedious, there is little or no red tape in conducting tax affairs and cross-border trade thrives consequently. In spite of the second place ranking referred to above, Singapore is still widely acclaimed as the easiest place in the World to do business in.[5]

One aspect of doing business in foreign countries that investors dread, is that of dispute resolution. Court processes can be unnecessarily long and slow in most jurisdictions. Singapore overcame this constraint by automating the process, with almost all litigation activities (e.g., submission of claims, payment of court fees, serving of initial summons, etc.), outside of those requiring the physical presence of the litigants or their lawyers, doable online.

Even as some aspects of the Singaporean model are clearly replicable, attempts at copying it often falter when some of the necessary conditions that enabled the Southeast Asian nation to succeed, are missing. “Remaking is essential”: A country must be willing to reinvent itself when the variables change. [6] So just because a model proves successful over a certain period, does not mean it would be a good fit when the times change, as they always do. “Collective response” and “social consensus” also matter a great deal. [7] A determined leadership in the absence of an equally enthused followership may still flounder. Singapore has the unique distinction of having both. Still, there are probably just two essential ingredients for success. First, there must be the political will for reforms.[8] Second, and probably most important of all, the political leadership must be in a secure position and endure long enough for what are sometimes painful reforms, to translate into concrete progress.[9] The two identified prerequisites go together. Otherwise, longstanding African regimes could easily have been similarly transforming. Unsurprisingly, with political will lacking, most are not. There are a few exceptions, however. That is, cases where there have been both the political will for reforms and stable government to see them through. Successes recorded by Mauritius, Botswana and Rwanda, as the DB rankings show, offer a ray of hope for the continent. In line with the Singaporean evolution, their experience also adds to evidence about the identified necessary ingredients for success. In other words, they offer a template on how to assess the likelihood of success of many other countries, African ones especially, who now seek to be similarly attractive to foreign investors.

The case of Mauritius
The one African country that has consistently topped the rankings on the continent, and sometimes dubbed the “Singapore of Africa” – Rwanda also shares the epithet these days – is Mauritius (ranked 49 in the latest DB rankings).[10] [11] [12] Although the Mauritian economy (GDP of US$12 billion) is relatively small when compared with continental giants like South Africa (US$294 billion) and Nigeria (US$406 billion), it is one of the wealthiest. Its remarkable evolution especially suggests the Singapore model can be successfully replicated by African countries. Like Singapore, Mauritius ranks high for good governance and its politics is quite stable.[13] Mauritius’ strong institutions have also been widely acknowledged to be a key success factor.[14] Its cosmopolitanism, similar to that also evidenced in city and coastal states like Singapore, together with similarly close ties to China and India, were also crucial to the development of its manufacturing sector.[15] There is also a consensus in the literature about the huge role its trade policies played in its rapid development.[16] Preferential trade access agreements with key export markets and investment incentives via export processing zones (EPZs), enabled it to develop an apparel and textile manufacturing base, for instance. There is also now a vibrant light manufacturing sector. In addition, tax incentives have enabled Mauritius to become a preferred destination for offshore financial services, and was hitherto a major channel for Indian capital flows, a feat it competes with Singapore to achieve. Unsurprisingly, Singapore and Mauritius already explore palpable synergies between them, signing an air corridor agreement in October 2015, for instance.[17]

Mauritius especially highlights its DB ranking when pitching to foreign investors, and is acknowledged to be for Africa what Singapore is to Southeast Asia. However, unlike Singapore, it has not been similarly successful in getting foreign businesses that register within its jurisdiction, to actually situate the bulk of their operations within the country. That is why it is widely considered to be mostly a tax haven, a characterisation Mauritian authorities dislike and would like to disabuse. Unsurprisingly, its goods exports trend is not impressive, unlike the Singaporean example. It is noteworthy though that a bulk of its goods exports emanate from its EPZs. Lately, Mauritius has been forced to address these deficiencies, as developed economies crack down on tax havens and avoidance schemes and hitherto lucrative tax arrangements are renegotiated. Mauritius, which does not charge a capital gains tax, used to be the preferred destination for channelling capital to India, where capital gains tax can be as high as 40 percent and accounted for a quarter of its foreign capital inflows.[18] This may change from April 2017, when India started charging taxes on investments from Mauritius, after the more than 3-decade tax treaty between the two countries was amended in May 2016.[19] Consequently, Mauritius has ramped up its African focus, with more than half of foreign companies registered by it in the past few years, aiming to do business on the continent.

Corruption and poor governance may weigh on Nigerian reforms
Other African countries have been trying to improve their business environments.[20] Even so, most African countries remain in the lower rungs of the DB rankings, with South Africa and Kenya respectively at 74 and 92 out of 190 in the most recent one. Still, more than a quarter of ease of doing business reforms in 2015-16 were by Sub-Saharan African (SSA) countries, with Kenya one of the top 10 improvers globally. [21] Others seek to join the list of top improvers. Most recently, Nigeria (DB rank: 169) has made a splash about its DB reforms, announcing a 60-day action plan in late February 2017.[22] Nigeria’s abysmally poor non-oil goods exports is another motivation for the authorities’ forced reformist stance, after low crude oil prices over the past two years starved the government of revenue. Crude oil exports constituted more than 90 percent of total goods exports between 2009-15. That is, even as total goods exports were less than 20 percent of GDP on average. Unfortunately, attempts at using EPZs to spur export of manufactures have been slow-moving, with the most promising one (Lekki Free Trade Zone) still largely at development stage.

Fundamentally, the recently proposed DB reforms are aimed at increasing international trade and FDI. This is what motivates the three broad areas that Nigerian authorities have identified for reform: entry and exit of goods, entry and exit of people and government transparency and procurement. Agencies at the ports are to be reduced to six, from almost a dozen. Visitors to the country would be able to get visas on arrival, and those that apply at the country’s embassies, would hopefully get theirs within 2 days.

Incidentally, attempts were made in the past to sanitize the maritime ports.[23] That the bottlenecks remain point to the intense pushback reformers tend to face. Corruption is a principal motivation and is why Nigerian ports are some of the most expensive to clear goods at.[24] A report commissioned by the ports authority in October 2016, found that Nigerian authorities lose about N1 trillion annually to corruption at the ports. [25] Under new leadership, the ports authority has embarked on an anti-corruption war. Expectedly, it has come under attack, with death threats and mudslinging in tow.[26]

To demonstrate progress, Nigerian authorities announced in April 2017 that the number of days for registering a business had been reduced to two days from at least ten days, as part of reforms to ease doing business in the country.[27] Ordinarily, the activity takes longer than the statutory 2 working weeks hitherto. With that now reduced to two days, it could be reasonably expected that new business registration would be accomplished in a week, say. How was this achieved? Automation. Similar to how Singapore (and many other countries that copied its model since) was able to get rid of human-related bottlenecks to the ease of doing business, some of the tortuous tasks would now be done electronically. For instance, a lawyer would no longer be required to prepare registration documents, as some of the tasks they charge for could easily be done online by the prospective business owner. Also, such arduous tasks, in the Nigerian context at least, like registering with tax authorities, have been integrated into the government’s company registration portal. Additionally, lawyers at the business registry can now certify incorporation forms and other statutory compliance declarations for a token fee, tasks previously done by lawyers hired by the prospective business owner.

Considering how extraordinarily frustrating the Nigerian legal system is, the knotty issue of dispute resolution may be a hard nut to crack. Setting up specialist courts like Singapore did has not been similarly effective because the judiciary is as yet not equipped for the automation element. Judges still write their judgements by long-hand, there are no audio recording facilities in courts and virtually all documentation is in hard copy form. These deficiencies are why even with specialist courts like the National Industrial Court, Investments and Securities Tribunal and so on, cases can sometimes take years before resolution. And even when successful after years of litigation, red tape can be craftily deployed by a well-connected local partner or disputant to make the whole exercise seem like a total waste of time. A much broader reform of the Nigerian judiciary would have to presage any potential measure directed specifically at the ease of doing business. Understandably, the proposed DB reforms focus on those issues that can be easily fixed. But considering how important dispute resolution is to increasing investor confidence – as the Singaporean and Mauritian examples show – lack of progress in this regard only buttress the poor governance characteristic of the Nigerian business environment. And as earlier highlighted, entrenched interests, corruption and inter-agency rivalry at the ports, mean multiple inspections and continued unwholesome practices, which increase the lead time of goods clearance, would probably endure and continue to stymie the country’s trade performance. Patronage networks around doing business in Nigeria, beneficiaries of which include politicians and their lackeys in every facet of government, would be difficult to dismantle as well.

Conclusion
Nonetheless, even the slightest attempt at improving the Nigerian business environment should be applauded. Still, it would take at least a year of monitoring to determine how much difference the announced reform moves would make and if that would eventually be reflected in the Doing Businessrankings. Besides, there are other more entrenched problems that would require time and determination to fix. With Nigerian politics still relatively fragile, and even simple activities like passing the budget enmeshed in much wrangling, the risk remains that these new reforms may suffer the fate of earlier botched ones. That said, the legislature has expressed support for the efforts of the executive and aims to pass relevant legislation to ensure the DB reforms become codified in law and hopefully survive future administrations. As at late April 2017, two of the identified fifteen DB legislative bills had already been passed.

Despite recent crackdowns on treasury looters and other corrupt persons, corruption would be harder to tackle, however. There is the impression that should there be a change of government after the 2019 elections, the current anti-corruption momentum is likely to slow. Besides, a judiciary not in trend with the times would likely continue to slow the wheel of justice. And defense lawyers have proved to be quite deft at beating the system: successful prosecutions of high-profile corruption cases are rare. Thus, if one were to use the Singaporean and Mauritian success stories as templates, scepticism about the potential success of current reform proposals would be somewhat justified. Still, even the slightest reduction in red tape would bring tremendous relief to those foreign investors who are already decided on doing business in the country. Besides, foreign companies who have anyway managed to make hay despite the many constraints, could do with the efficiencies that some of the reforms would potentially bring about; that is, despite the risk of holdups down the line. But with a still fragile political fabric – evidenced by much infighting within even the ruling political party, which is an agglomeration of strange bedfellows of sorts – endemic corruption and poor governance, the reforms may yet flounder. There needs to be a “collective response” and “social consensus” around the reforms for them to succeed.

Dr. Rafiq Raji wrote this article for the NTU-SBF Centre for African Studies at the Nanyang Business School, Singapore, where he is an adjunct researcher. See link viz. https://www.ntusbfcas.com/african-business-insights/content/doing-business-can-nigeria-replicate-the-singapore-model-like-mauritius-did

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/business-can-nigeria-replicate-singapore-model-like-mauritius/

Yes, I’m with her

By Rafiq Raji, PhD

Americans go to the polls today (8 November), most of them that is; some already cast their ballots in early voting. The campaigns ahead of the election have perhaps been the most vicious and uninspiring in recent American history. There is currently a wave of populism sweeping through some western democracies. From the anti-immigrant sentiment that underpinned the decision of Britons to leave the European Union to the growing clout of similarly inclined politicians in France and elsewhere, isolationist rhetoric is winning the day, posing a significant threat to years of progress on global multilateralism, inclusion and integration. Hillary Clinton and Donald Trump, the two leading American presidential candidates, are bipolar opposites, in the most extreme of ways. As wife to an American president, senator and then secretary of state, Mrs Clinton, the Democratic Party nominee, has contributed to the shaping of global geopolitics for much of the past two decades. Her main opponent, the Republican Mr Trump, a billionaire whose wealth derives from tapping the vanity of Americans, is not similarly experienced. But considering how he has broken almost every rule and convention in American politics and still emerged the Republican Party flagbearer, underestimating him was a huge mistake. But even as a potential Trump presidency is no longer farfetched, Mr Trump, an unashamed bully, would irrespective of the outcome of the election come to exemplify that ugly side of ‘Americanness’ for some time to come. Still, the election is Mrs Clinton’s to lose. But will she win?

Beware of closet Trumpistas
Mr Trump is racist, rude, and disrespectful of women. And he ran a very dirty campaign. Both sides did actually. But it could be argued that with Mrs Clinton’s vast political experience and clout, it would have been almost impossible for Mr Trump to gain an edge over her with a clean one. So to that extent, there is some sanity in his madness. And considering how almost just as much Americans who might vote for Mrs Clinton would do so for Mr Trump, his rhetoric, reprehensible as it is, clearly resonates with not a few of them. Yes, even the educated ones, who for fear of backlash may not voice their support in public and in polls by the media, but may gladly do so in the privacy of the voter polling booth: closet Trumpistas may account for more than the margin of error in the lead Mrs Clinton had in media polls.

Some hitherto undecided voters also pitched their tents in Mr Trump’s camp in the week to election day. That is, before the country’s Federal Bureau of Investigation (FBI) reckoned Mrs Clinton did not commit a crime after all by using a private email server during her tenure as secretary of state. After clearing Mrs Clinton of any wrongdoing initially, the FBI revealed about a week to the election that it was examining newly discovered emails on a third party’s computer. The revelation proved to be costly for the potential first female American president: angst was that her carelessness could have caused state secrets to be stolen or glimpsed by unauthorised parties. Although it is not all too clear how much of that support she has regained after the FBI clearance just two days to the vote, the renewed suspicions may not have mellowed quickly enough for her to regain lost ground. Regardless, concerns raised by some leading Republicans like House Speaker Paul Ryan about her inexcusable negligence – she had to have known her error – on the email issue are not entirely without merit: Mrs Clinton did put American national security at risk.

Which of them is best for Africa?
Mrs Clinton, definitely. The Democrats are typically pro-black and pro-Africa. About sixteen years ago, Mrs Clinton’s husband signed the ‘African Growth and Opportunity Act,’ a deliberate and well-considered legislation that has proved to be better for African trade than the European Union’s ‘Economic Partnership Agreements,’ say. Similar Africa-friendly policies – ‘Power Africa’ and ‘Young African Leaders Initiative’ – by outgoing President Barack Obama, another Democrat, would likely be continued and probably enhanced under Mrs Clinton. Mr Trump’s anti-immigrant stance on the other hand, is very unnerving to African greener pasture-seekers in America, whose remittances are a major source of support back home. Not that Republicans are generally averse to the best interests of Africans or African-Americans. For instance, George W. Bush, the 43rd American president, appointed exemplary African-Americans, Colin Powell and Condoleezza Rice, to the secretaryship of state, probably the most visible public office after the country’s presidency. Mr Trump is an unusual candidate, however. His barely veiled white supremacist rhetoric is hardly just that: fears are it might become policy should he get elected. Even so, there is a risk Mrs Clinton may be complacent about the continent: Africa was barely mentioned during the campaign, if at all.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays); http://www.businessdayonline.com/category/analysis/columnist/rafiq-raji/

Time for Hailemariam to lead

By Rafiq Raji, PhD

With an economy set to grow by more than 7 percent over the next few years – after about 10 percent on average over the past five, Ethiopia is a bright spot on a continent beset by stagnation as commodity prices remain tepid. Its growing success in replicating China’s manufacture-for-export model is a source of hope for peers and partners who desire an Africa that adds more value to its resources. Cheap labour, ample power generation capacity in view, and generous investment incentives are major attractions. Still, much of what Ethiopia has been able to achieve can be traced to its stable polity, held so by an autocratic leadership that has little tolerance for the slightest dissent. Erstwhile forceful leader, Meles Zenawi, was able to hold things together, because of his credentials. He led the rebellion that freed his countrymen from the much loathed Derg military regime. Under a more genteel leader, Hailemariam Desalegn, that model has become increasingly tested. Most recently, albeit intermittently hitherto, an uprising by the Oromo and Amhara tribes – about two-thirds of the population – over land and basic human rights threatens to unravel the country’s economic miracle. It need not be so. The most recent casaulties of the face-off with authorities are more than 50, adding to about 400 believed to have been killed since 2015 under similar circumstances. About 40,000 jobs are now at risk, after protesters attacked foreign-owned establishments. For Ethiopia’s economic success to continue, the politics can no longer be ignored. Room has to be made for the quite diverse polity. Mr Hailemariam has a chance to do this. But to succeed, he would need to be his own man.

Address the concerns
The Oromo and Amhara peoples feel marginalised by the ruling minority Tigray tribe, about 7 percent of the population, which dominates the government and military. The authorities have met their agitations with brute force. This approach worked in the past, on the surface at least. Not this time: this recent unrest was triggered precisely because of the authorities’ heavyhandedness to what are widely believed to be legitimate concerns. The troubles this time could be potentially more damaging than past ones: foreign investors are being targeted. Lingering terrorist threats from neighbours are daunting enough; add unrest by a majority of the population, and you have a combustible mix. And the protests are growing nationwide; these are not isolated and distant pockets of dissatisfaction. It is widespread. And they could spread even more. Solution then? Address the concerns. The Oromo want more self-determination. The Amhara likewise. Authorities might be quick to point out that the country operates a republic of semi-independent states, with enormous leeway guaranteed them in the Constitution, including the right to secede. That is not the case in reality. There needs to be more inclusion. A devolution of actual powers to the regions might be a good start.

Allow more room for dissent and political expression
It was always going to be a huge task for Mr Hailemariam to fill the shoes of his larger than life predecessor – Mr Zenawi had a force of personality that is palpably missing in his successor. Already perceived to be weak, he likely fears those views could become entrenched if the current unrest is treated with kid gloves. Still, Mr Hailemariam has an opportunity here. It is in time of crisis that leaders often emerge; tested at least, in a manner that cements their authority to the point where they are able to make bolder moves. The longer the Oromo and Amhara protests and deaths continue at the hands of the security forces, the more hardened the protesters would get. And now they may have caught on to the one thing that would get the attention of the ruling elite: targeting foreign investors. If there is anything that has made the autocratic leadership tolerable, it is the veneer of stability it has engendered, the type investors crave. They have shown that confidence with their pockets, pouring money into manufacturing and agriculture. Ethiopia has the only other light railway mass transit system in sub-Saharan Africa outside of South Africa. And only just recently, it opened a Chinese-built railway to Djibouti, whose seaport it relies on. Its development-before-democracy paradigm faces its toughest test yet. Just as foreign investment gains have come about by the authorities’ strong grip, their reluctance to adopt a more democratic approach may be what unravels them. And frankly, a desire for equity by a genuinely aggrieved people is not farfetched. Land sold to foreign investors should be well compensated for. Locals should be given greater consideration in employment. And there should be a preference for dialogue over coercion. The Oromo and Amhara are too numerous and determined to be put to rest by force. The authorities must engage them and find a solution that is acceptable within the bounds of reason.

Tough love by powers could help
Democratic reforms would be easier under Mr Hailemariam. But to fend off likely resistance from the Tigray elite that dominates the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), his hand would need to be strengthened. He is not Tigray. Neither is he an Ethiopian orthodox christian. World powers have leverage: about $3 billion in aid. The United States has already raised significant concerns. Together with others – German chancellor Angela Merkel visits this week, they should engage the leadership, making the point that the protests provide a unique opportunity to finally embark on much needed democratic reforms. The Oromo and Amhara are likely to be less agitated if they believe they are able to participate in the democratic process. Not the charade midwifed by the authorities hitherto: how is it that not a single seat in parliament is occupied by an opposition party? Ms Merkel has refused an invitation to address the ‘lawmakers.’ She plans to speak to opposition parties though. Fact is, it is when people feel stifled and find no means to exert their opinions that they resort to insurrection. True, the minority Tigray worry if they did that, they could be overwhelmed. That is often not the case. And even so, they might have little choice now that more than half of the population has had enough. And in this age of instant news and social media, it would be foolhardy for the authorities to think that they could quell yet again another uprising with force. A state of emergency has been declared. Sadly, the authorities may yet learn a lesson.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/time-for-hailemariam-to-lead/

What is Japan’s African game?

By Rafiq Raji, PhD

The 6th Tokyo International Conference on African Development Summit (TICADVI), held on 27-28 August in Nairobi, Kenya, has come and gone. But what did it achieve? Some US$30 billion in aid and investments over the next three years were promised, half of what China pledged late last year at its similarly themed get-together, the Forum on China-Africa Cooperation (FOCAC); also its sixth meeting then. Some 73 memoranda of understanding were also signed, a lot of which were related to infrastructure, power generation especially. Others were in the health, education and expectedly, oil and gas sectors. A friend who attended the summit was particularly excited about some of the products on display at the exhibition along the sidelines of the event, like pay-as-you-go solar power, supplements for maize porridge, and so on.

Like China, Japan is involved in quite a few infrastructure projects in various African countries, albeit to a lesser degree. And Japanese companies already do quite a great deal of business in most of these. Chinese companies increasingly so as well. In sum though, China’s engagement with the continent is more intense and widespread. The Japanese make up for this in other ways. Japanese brands evoke feelings of quality, brilliance and efficiency. From electronics to cars, they are quite ubiquitous across the continent. Despite China’s growing closeness, similar sentiments are barely associated with its brands, if at all. Chinese goods are still considered inferior. Surprisingly, their cheapness barely appeals commensurately. Even so, China’s experience and relatively ample resources may be more germane to African needs. No matter. Both are willing. Sand in the wheels? Both are staunch rivals, albeit they feign some level of maturity in front of their African ‘friends’ – an official Chinese delegation attended TICADVI.

They all want the same thing
When there are numerous suitors for a potential bride, it is often ironic that blessings do not always follow. The one being sought after might overestimate her value, dither, or hope for better opportunities that may never come. Africa is one of many frontiers of interest to these world powers. So for Japan and China, longstanding rivals, whose volatile relationship is writ large by a territorial dispute over eight islands in the East China Sea, Africa provides a vast field for them to spar. Even so, they both really want the same thing: influence. Like China, Japan is also interested in the continent’s mineral resources. Resource-poor Japan seeks fuel for its energy needs, as its nuclear-dominated system have been mostly shut down since the 2011 Fukushima mishap. Both are also counting on African countries to pursue varied agendas at the United Nations and other multilateral institutions. Like the Europeans and Americans before them, Japan and China are also building military bases on the continent. Simply put, they are pursuing their own interests. Knowing this could be a blessing for African countries, whose negotiating positions are enhanced as a result. The temptation to pitch one against the other should be resisted, however. Instead, African countries should articulate what their development needs are and then go with the partner that best ensures their fulfilment. Japan is not offering as much money as China is. But it has one advantage over the latter. It is more technologically advanced. Its projects are executed with the highest standards and are delivered on time. And they last. China, on the other hand, knows only too well how steep the road to development can be. It is likely a better teacher on how to traverse that road than Japan could ever be at the moment. There need not be a dilemma in any case. Both can help.

Accept only the help that liberates you
As the Japanese prime minister, Shinzo Abe, was engaged in his charm offensive – the TICAD conference was being held on African soil for the first time – Chinese officials were quick to deride his efforts. It was almost the same way the Americans were all too quick to point out how the Chinese then newfound interest in Africa was going to be similarly or more exploitative. Truth is, these supposed development partners go into these relationships often because they already see more advantages for themselves. Or at least, they see the costs and benefits as evenly balanced – not in the African case: whether the partner is China, Japan, America or Europe, the advantages are tilted towards the other side. And the toast is always the same: we want to help. That is all very well. What African countries need the most, in addition to infrastructure, is technology and skills transfer. In doing this though, the situation can no longer be as it is currently, whereby these so-called partners set up businesses on the continent, bring their own staff, integrate little and barely mask their disdain. The scorecards cannot continue to be about how many billions of dollars our partners’ supposed benevolence allowed for each time. Thankfully, more energy at these summits is now being devoted towards changing this lopsided paradigm.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/en/what-is-japans-african-game/ 

Volatile environments test the resilience of firms: The experience of businesses in #Nigeria during the 2015-16 FX scarcity

By Rafiq Raji, PhD

Kindly click on the link below for the article.

https://ntusbfcas.com/african-business-insights/content/volatile-environments-test-the-resilience-of-firms-the-experience-of-businesses-in-nigeria-during-the-2015-16-fx-scarcity  

Nigeria-China relations may work this time

By Rafiq Raji, PhD

This past week, Nigeria’s president Muhammadu Buhari was in China. He was given full honours by the Chinese government. Nigerian authorities are hailing the trip as a huge success. They point to the more than US$6 billion worth of investments agreed between Nigerian and Chinese businesses – earlier statements credited to Nigeria’s foreign minister, Mr Geoffrey Onyeama, by Reuters suggested a US$6 billion infrastructure loan was agreed, later debunked by President Buhari’s spokesman. In fairness to Mr Onyeama, he did not say a new agreement was signed. Quoting him in the 12 April 2016 Reuters article: “It won’t need an agreement to be signed; it is just to identify the projects and we access it.” With more clarity on what actually took place, it is now known that what President Buhari did was to re-negotiate loans already agreed with the Chinese by previous Nigerian administrations, especially that of President Goodluck Jonathan. Since that is the case, it seems the loans might actually be more than US$6 billion. As I recall in November 2014 amid much fanfare, China Railway Construction Corporation Limited signed a US$12 billion contract for the 1,402-kilometre Lagos-Calabar coastal railway – the line would be a significant boost for the Niger-Delta and Southeastern regions of Nigeria and is currently a source of divisions in the Nigerian legislature: southern lawmakers accuse their northern colleagues of deliberately removing the project from the 2016 budget, putting President Buhari in a bind somewhat as he reportedly threatened to withhold his assent of the budget until the railway project is put back into the bill – China’s largest single overseas contract at the time, probably still is. If you assume the typical 85 percent Chinese funding format for Sino-Nigerian infrastructure projects, we could say the loans President Buhari successfully re-negotiated might actually be at least US$10 billion for the Lagos-Calabar railway modernization project alone. And there are others. There is the US$8.3 billion Lagos-Kano railway modernization project (contract was initially signed in 2006); Chinese funding commitment using the same ratio would be about US$7 billion. Although some of the funding for these projects were provided by the Chinese government to earlier Nigerian administrations – and diverted to other means by Nigerian authorities to the dismay of their Chinese counterparts – there could be about US$13 billion (taking a median figure) in re-negotiated debt obligations for the Nigerian side. It is probably why Nigerian authorities might not want too much focus on the loans because they are likely more than has been reported. While I worry about Nigeria’s rising debt burden, what worries me more is that most of the borrowings usually end up being spent wastefully on recurrent expenditure. Only recently, Nigeria’s top scribe revealed US$3 billion (600 billion naira) is borrowed monthly by the government to pay wages, based on media reports. Still, if indeed the funds – Chinese or otherwise – are actually used for the designated infrastructure projects and are completed, it would not be overly concerning. Although Nigerian authorities have not revealed whether the local content of the infrastructure projects was re-negotiated as well, it is likely Chinese companies would still supply the labour, equipment and materials for them. Notwithstanding, if Nigeria gets the infrastructure in the end, it would be just as well.

A currency swap agreement with the Industrial and Commercial Bank of China (ICBC) – that country’s largest bank – was also signed by Nigeria’s central bank during the trip; and has since been a source of controversy of some sorts. Most initially wondered why the agreement was not with the Chinese central bank, the People’s Bank of China (PBOC). News making the rounds is that both central banks actually agreed in principle on a currency swap – potential size of US$4-5 billion – with modalities still being negotiated. It is being reported in the media that the Central Bank of Nigeria (CBN) actually proposed a US$10 billion currency swap. A demurral by the Chinese is why about half of that is being considered as more likely. Still, it would be a relatively good outcome. As there are potential downsides, its significance should not be exaggerated however. A currency swap is a two-way instrument. Just like Nigerians would be able to buy Chinese goods using the naira – as opposed to first purchasing the US dollar and then converting to Chinese Yuan – the Chinese would also be able to buy Nigerian goods in naira. And what do the Chinese buy from Nigeria? Crude oil mostly. And since the naira is overvalued, Nigeria would lose significant value for that commodity in that case. That is in addition to the valuable US dollars the country would lose if crude oil sales come under the arrangement. Also bear in mind; the Chinese would be in possession of the US dollar equivalent of the Chinese Yuan Nigeria keeps with the PBOC as foreign exchange reserves. There are other concerns. With the swap, Nigeria’s net position would likely more often be negative. How so? China sells at least four times as much goods to Nigeria, mostly manufactures. And if Nigeria is looking to diversify its economy, it is not in its best interest to make it easier to import Chinese goods. Probably to put some modicum of dignity on the fact that Nigeria was actually in China with a begging bowl, the Nigerian president kept harping on the trade imbalance in favour of China – China accounts for more than 80 percent of its total trade with Nigeria. But is that the fault of the Chinese? You correct a trade imbalance by first building your own industries or say only importing as much as you export. Whereas China’s exports to Nigeria are largely manufactures – machinery, equipment, processed goods, etc. – and very diversified, more than 80 percent of China’s imports from Nigeria are crude oil and gas. In 2013 – most recent annual data available from the National Bureau of Statistics of China – China’s exports to Nigeria was US$12 billion (88 percent of total trade) and its imports were US$ 1.6 billion (12 percent of total trade), putting its total trade with Nigeria in that year at US$13.6 billion. Nigerian authorities put total 2015 trade with China at US$14.9 billion. In two columns in February 2016 – “Africa should renegotiate EPAs for manufactures’ trade parity” – I make a case for manufactures’ trade parity as a model for correcting the significant trade imbalances that exists between African countries and their western and eastern trade partners. So is there any advantage to the swap agreement? Oh yes. Nigerian banks are saved some hassle. And Lagos would effectively be the West African hub for Renminbi transactions. But in light of the aforementioned concerns, the CBN has to ensure that Nigerians are protected as it negotiates the terms.

So what does China get in return? China seeks influence primarily. In any case, it is not really giving much away. On 8 April 2016, acting on instructions from Chinese authorities, Kenya forcefully repatriated eight Taiwanese – charged and acquitted by a Kenyan court in a cyber crime case – to China, not Taiwan. It probably had no choice in the matter. Apart from the many Kenyan infrastructure projects being funded by China, Kenya is also currently negotiating a US$600 million Chinese loan. Nonetheless, the relationship with China is an excellent opportunity. China does not see the relationship as competitive. What Nigeria – and indeed Africa at large – could gain from China is what China is giving up. There is an opportunity in labour-intensive manufacturing as China ascends to advanced stuff. Still, power and infrastructure deficits are constraints. Even so, Nigeria could use special economic zones with designated infrastructure assets to get around them. Progress on this front has been slow, however. More importantly, the real potential gain from the China-Nigeria relationship is if it engenders the transfer of skills and technology from China. This is possible. China is helping Ethiopia in diverse ways in this regard – see my column on 22 December 2015: “East African countries seem to have cracked the Chinese code.” This should also be Nigeria’s emphasis. Fundamentally, China would be happy to help if it finds a Nigerian side that espouses some of the values it holds dear. Integrity and honesty are few examples. At this point, it is important to point out that there are aspects of Chinese culture that are not entirely pleasant. Racism is entrenched in Chinese culture and is at the root of its unpleasant labour practices in Nigeria and other African countries. Still, if the Chinese find honest Nigerian partners who fulfill their promises, there is no limit to the potential gains for the Nigerian side. In this Nigerian president at least, they may have found one such partner. That is also the impression one senses from the Chinese side.

Also published in my BusinessDay Nigeria newspaper back-page column. See link viz. http://businessdayonline.com/2016/04/nigeria-china-relations-may-work-this-time/