Tag Archives: Development

Are we thinking about the digital future?

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

If God wills, I shall be particpating in what I hope would be an exciting event on 31 January. Themed “Nigeria in the World, the World in Nigeria”, panelists at the “Nigeria Economic Outlook Conference 2018” (#NEOC18) would discuss what Nigeria’s place could be in a post-oil world. Tony Seba, a Stanford University scholar in entrepreneurship, disruption and clean energy with an enviable record of correct predictions, posits crude oil demand would peak at about 100 million barrels per day (mbpd) by 2020, three years from now. A decade after, by 2030, he supposes it could be about 70 mbpd. That is not so bad, you probably reckoned just now. If his estimations are vindicated, the price for a barrel of crude oil would not be so tolerable at about $25 by 2021-22; that is about 4-5 years from now. Why would these happen? Mr Seba believes 95 percent of passenger miles would be self-driving, electric and on-demand by 2030. His analysis is not sentimental. It is economic. By his reckoning, it would be ten times less expensive to ride electric, autonomous and on-demand than owning a car. While the likelihood that these new transport technologies would make it to African countries within these timeframes is slim, the impact would almost certainly be immediately felt by oil-producing ones like Nigeria. So are we preparing for this future? Our education system remains an archaic rote-style nonsense. Our job market teaches little of tangible utility for a digital world. And our government wants to grow more yam tubers for export. If our country remains in its current ill-prepared state, this near digital future could be bleak for us indeed.

Action talk
Incidentally, the #NEOC18 is coming after the just concluded World Economic Forum (WEF) in Davos. The flurry of ideas was simply extraordinary. I followed the proceedings extensively from my very warm abode in Lagos – if you are left behind, there is nobody to blame but yourself. (See my Premium Times column for my observations: https://opinion.premiumtimesng.com/2018/01/26/davos-insights-for-africa-by-rafiq-raji/.) Artificial intelligence was on everyone’s lips. Its unimaginable possibilities, good and bad, have everyone’s antenna up. What really intrigues me is that these happenings are also discussed animatedly by the Nigerian intelligentsia. Unfortunately, these conversations are not translating into policy and action. We cannot continue like this. The Nigerian who designed the Chevrolet Volt, an electric car, is back home. As far as I know, his mandate is to develop an auto industry in the country. I suspect his efforts are geared towards the futility of trying to build a fossil-fuel based car industry. If that is the case, I do not need to be a seer to know his years doing that are going to be wasted. Why not an electric car industry? He knows how to build one, doesn’t he? Someone might ask: where is the power? I would reply: why not a solar-powered one then? The sun is free, is it not? Besides, a solar-powered car is not just a concept: it has already been builit.

Step up
If we are serious as a country, we will put building a robust power and internet infrastructure at the top of our priorities. Off-grid power solutions are already taking off. And some well-meaning entrepreneurs have also been doing their bit in broadband access and developing coding capacity. MainOneand Andela are world-class Nigerian companies. They operate here and are run by Nigerians. They are evidence of our possibilities if and when we decide to put on our thinking caps. Nigeria needs more of them. The inequality of the future is not going to be so much between rich and poor as it would be between those acting on their knowledge for change and those who know but are doing nothing or are simply just ignorant. The knowledge gap would become contemporaneous with the wealth gap.

What else can we do? We could start acquiring the skills that allow us speak the “language of technology”, at least. You could also ask yourself how what you currently do for a living could change in the next decade or so because of technology; and what you are going to do about it. Digital banks would get better. Cars would become autonomous. Robots would be able to perform surgery. Manufacturing is going to become totally automated. Retail would become entirely online. In that event, what are you going to become, be able to do, and how are you going to earn a living? Of course, as these technologies evolve there is the sometimes mistaken assumption that human beings would be static and not similarly dynamic. Instead, it is more likely that as our current needs get cared for by machines, new ones would evolve precisely because of these disruptions. And it would likely be humans who are first able to handle or innovate to solve these new problems before machines are able to do them far better. So whether it is artifical intelligence, big data or something else currently just the pigment of the imagination of someone somewhere, no one can say for sure what the digital future would be like exactly. One thing is certain, though, unless poor economies step up their game, they would be left behind. Again.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/thinking-digital-future/

Davos insights for Africa

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Africa’s representation at the 2018 World Economic Forum (WEF), themed “Creating a Shared Future in a Fractured World”, was small. The forum has always been primarily focused on America and Europe anyway. Last year, China stole the spotlight. And a few years ago, Africa got its chance. With regional forums now, the Davos meeting is increasingly focused on global themes and issues. And the major attraction this year was none other than Donald Trump, the American president. Once he arrived (thank goodness, it was on the last day), everything became about him. India’s prime minister Narendra Modi was probably delighted he gave the forum’s keynote speech on the first day (23 January); long before “The Donald” arrived. Mr Modi made some deep points. But the part that resonated with me was that about data. He posited that in today’s world and in fact the future one, data is the biggest asset. And he who controls data controls the world. He is ahead of the curve. It was also a veiled boast, I think. India is firing ahead on the technological front. Like China, it is racing ahead to ensure that it would be an active participant in what would entirely soon become a digital world economy. China has a date for when that time might be upon us: 2025. That is the target year for its ambitious technological plan, which if realised, would put it at the forefront of technological leadership globally. There is the pertinent question, of course, about whether that digital future would not be exclusionary. Ever-evolving tech skillsets would be required by anyone who desires to be an active participant in the digital economy. So steps need to be urgently taken by African countries to ensure their citizens are able to compete in that future world. The mastery of basic technologies has to be the least qualification for anyone who passes through the education system. Technology has to be seen in the same way as English (or French and Arabic in other countries) is regarded as a foundation subject for basic education.

Technology as language
Technology is a language. If you do not know how to speak a language, you cannot participate in a conversation in that language. If the language of the future world is technology, what then would be your fate if you cannot speak it? You hear talk about up-skilling and re-skilling. What I think the focus should be on is what I call “dynamic skilling.” It is not entirely novel; you may have heard of “continous learning.” It is similar. But my concept of dynamic skilling is premised on how if the world of work would likely continue to change as technology evolves, then the individual that desires not to be changed (i.e., replaced) must also ensure that his skills are similarly dynamic. The foundation for any such eventuality is basic knowledge about technology. Thus, vocational skills of the future are not likely to be how to be a good plumber, carpenter, or electrician. Instead, it would be “simple” things like being able to code an app, use a digital currency, and so on. Any country which is not thinking in this manner, right now, would again be left behind. Fortunately (for African countries, at least), the extraordinary thing about emerging technologies like artificial intelligence, big data, and so on, is that they are equalizers; up to a point. Vintage is an advantage. One who starts early may remain ahead because of the advantages of experience and ownership of data acquired in the process. Even so, African governments could, for instance, momentarily start to insist on the ownership and control of the data of their citizens and all digital activities in their domain. That way, they would be able to ensure that their citizens benefit from whatever technological progress happens on the back of their data assets.

New paradigm
Benedikt Sobotka of the Eurasian Resources Group, in an interview with CNBC Africa during the WEF, made a point that all African governments need to muse on. Electric vehicles (EVs) rely on cobalt-based batteries. Where is cobalt found in abundance? The Democratic Republic of Congo (DRC) and Zambia. In the next decade or so, EVs would probably replace all fossil-fuel vehicles. That future can be Africa-led if the relevant governments put in place policies that ensure the cobalt mined in their jurisdictions would be used to build an African EV industry; as opposed to a mining one just for the taxes. By insisting on the batteries being built on the continent, or adding some meaningful value to the cobalt at least, before it is shipped to China and elsewhere, the DRC and Zambia would be able to participate in what is likely going to be a very lucrative global value chain (GVC). What is happening now? China is buying up the precious mineral. Cobalt is being mined and shipped abroad to build batteries that would power EVs the future world would use to wean itself of oil and gas that some key African countries rely on and failed to build industries around. African countries can be part of the new world right now. By the way, did I travel to Davos to arrive at these insights? Go figure.

Also published in my Premium Times Nigeria column. See link viz. https://opinion.premiumtimesng.com/2018/01/26/davos-insights-for-africa-by-rafiq-raji/

Ethiopia: Hailemariam must do more to build trust

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

About mid-January, hitherto incarcerated opposition leader of the Oromo Federalist Congress (OFC), Merera Gudina, was released by the Ethiopian authorities. More than five hundred dissidents involved in unrests in 2015 and 2016 have also been earmarked for release. The imprisoned ones could be said to be the lucky ones. Others died on the streets at the hands of the oft-brutish security forces. Considering the antecedents of the ruling Tigray-dominated Ethiopian People’s Revolutionary Democratic Front (EPRDF) party, Dr Gudina likely never reckoned his release would be so soon or so easy. Mind you, he had already spent more than a year in prison. His fellow comrades who took on the authorities in the more distant past could not have dared hope to be so lucky. Much earlier detainees essentially resigned to their fates. The EPRDF’s sudden magnanimity has pundits wondering what the catch is. Ordinarily, it makes sense that the government finally decided to extend an olive branch to the opposition. There have been perennial agitations by the Oromo and Amhara ethnic groups, who together constitute about two-thirds of the population, over myriad issues from land to the odd marginalisation here and there. To douse the tensions, the authorities certainly needed to do more than a cosmetic fix. A more inclusive cabinet in the aftermath of one of the now many protests by the Oromos and others did not seem to be satisfactory or adequate to placate the agitators. And unlike Meles Zenawi, the former legendary leader of the EPRDF, prime minister Hailemariam Desalegn’s clout in the party structures is weak. Thus, his consensual style is more forced than voluntary. While this would have been a disadvantage in a quasi-communist regime, it is informative when decisions such as the recent amnesty granted opposition leaders are reached. It was likely decided as a collective. Still Mr Hailemariam must be given some credit. He is leader, after all. In my column of 11 Oct 2016 (“Time for Hailemariam to lead”), I did urge Mr Hailemariam to be bolder and allow more room for dissent and political expression and for world powers to take a tougher stance towards a country that still remains dependent on their beneficence. Because even as Mr Hailemariam could not hope to grow in stature to match Mr Meles, the responsibility was now his to ensure that Ethiopia continued to be a trailblazer on many fronts on the African continent. It does seem like he came to that realisation himself. So if anyone should get credit for this recent positive move, it is Mr Hailemariam. There is only one little problem. Many are sceptical about the genuineness of the EPRDF’s reconciliation move. The EPRDF is well-known for its utter dislike of opposition of any kind. Students of politics also know that power is rarely ceded voluntarily. Nor are political moves ever altruistic. Thus, the opposition, as well as pundits, believe the EPRDF has something up its sleeve. A likely explanation for this recent move may simply be self-interest, though; on the part of most of the EPRDF apparatchiks, at least. Something significant needed to be done to stem the tide of increasingly popular antagonism towards the ruling EPRDF elite. But if the motivation is indeed noble, then the onus is on the EPRDF, and Mr Hailemariam specifically, to prove they are genuinely seeking to reconcile with other political groups in the country.

Good ground
Despite the scepticism, the authorities’ reconciliation move adds to what remains a largely positive narrative; on the economic front, at least. Ethiopia continues to churn out good growth figures and it is making significant strides in logistics, infrastructure, and manufacturing. Most recently, economic growth was more than 8 percent; and is expected to remain so for another two years, thereafter slowing to above 7 percent. And when the 6,450 mega watts (MW) Grand Ethiopian Renaissance Dam (GERD) is completed, Ethiopia would not only have abundant power to fire its industrial ambitions, it would have some left to aid its neighbours achieve theirs as well. In this regard, though, the authorities have had to contend with what have now become incessant disagreements with other countries dependent on the River Nile which feeds the GERD. Egypt and Sudan are currently at loggerheads, with speculations that should calm nerves not prevail, an armed conflict might be imminent. Egypt and Ethiopia have, however, demonstrated remarkable maturity despite their differences. They recently entered into development agreements, vowing to not let their differences over the GERD stop them from engaging in friendly and mutually beneficial relations. Credit for the amity must clearly go to Ethiopia, though, in light of the converse situation between Egypt and Sudan. It is thus not unlikely that Mr Hailemariam genuinely desires to smooth relations internally and externally. With outsiders, it is not so difficult to demonstrate the truth of his intentions; as there are markers by which both sides can measure progress. With distrustful compatriots, however, it would take more than the release of prisoners to build trust.

Open politics
So how should Mr Hailemariam prove he really means business? He could promise genuine elections when the next ones are due, for one. That is, all parties would be able to participate and campaign freely without the typical strong-arm tactics of bans, intimidation, imprisonment and result manipulation. There is not a single member of the opposition in the current parliamentary cohort. In the 2015 parliamentary elections, the EPRDF won 500 of the 547 seats. The remaining 47? It went to parties allied with the EPRDF. Surely, it is not because of a lack of interest or a shortage of candidates from the other side. It is by design. Until the EPRDF lets go of its fears and allows plural, free and fair elections, it should not entertain the hope that it could succeed in winning the hearts and minds of its opponents. Thing is, there is yet to be proof that it genuinely gives a darn.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/ethiopia-hailemariam-must-build-trust/

Rise of the peoples’ assembly

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

We the people…”; that is how most constitutions start. Of course, the politicians who tend to refer to those words the most are usually the ones who also hold them in contempt the most. It used to be the case that they could actually get away with the disgust they often have for the very people that voted them into office. Aloof and conveniently tone-deaf for most of their tenures initially, their amnesia is miraculously cured at the near-end of their typical four to five-year first term in office, when it dawns on them that should they not now grovel to the same people they cared little about hitherto, they may soon lose the office that has been the source of their ostentation. In other words, as much as they dislike the very people they are supposed to serve, they know they are ultimately vulnerable to their whim. Power truly belongs to the people. Shrewd politicians realise this very early on. And the successful ones are able to hold sway over the affairs of their fellow men and women for as long as the Heavens allow irrespective of whether they hold office or not because they stay close to the people and go with their ever-changing tide of opinion. Inevitably, they are populists. Politicians, even the supposedly altruistic ones, do not like to admit it. But ultimately, it is the desire to rule that really drives them. Power is the end, not the means.

All about power
A person has to have a certain level of hubris to think himself qualified to rule over a multitude. Some do not realise this until they lose an election. Otherwise what would motivate some men to seek political office repeatedly even as they lose with the same frequency. Take Kenyan opposition figure Raila Odinga, for instance, who has been aspiring to be president for almost all of his political life. He probably made his last futile attempt last year. Probably realising he no longer stands a chance, he now seeks to be president of a so-called “peoples’ assembly”. If what has happened since the idea was first mooted is anything to go by, it has not been as successful as he might have hoped. An earlier botched swearing-in as the “peoples’ president” is now supposed to happen anytime soon or never. Perhaps taking a cue from his older fellow opposition politician, longsuffering Ugandan presidential contender Kizza Besigye also called for the establishment of a peoples’ assembly in early January. What instigated his call was the recent enactment of a law that removed presidential age limits, enabling longtime president Yoweri Museveni to run for office again. In both cases, the opposition politician’s frustration made them resort to the people. Had they been more successful, it is hardly likely their reckoning would ever sway towards them. Their evolution lays bare what they wanted all along: power. They are not any different from their supposed antagonists in office. And were they to secure power themselves, they may behave similarly as the politicians they oust or worse.

Yours to wield
This new trend of African opposition politicians drifting towards alternative and mostly informal platforms to wield power after failing to secure it via state institutions is not entirely novel. They are simply latching on to something that already started without their urging. What is a peoples’ assembly? What is it supposed to achieve? Is there somewhere they are supposed to gather? Are they voted for? How long do the members serve in office? The peoples’ assembly is you and I. When Nigerians finally lost their patience with an effective but wayward police commando unit, they raised their voices. Were they heard? You bet they were. Nigerian authorities were finally forced to go after marauding Fulani herdsmen, long maiming and killing innocent farmers with impunity, after the people said enough! South Africans have been unrelenting in their insistence that the “capture” of their state by private persons – who have, in collusion with the very people they elected, been pilfering their commonwealth – must stop and the culprits punished. Did their voices matter? Yes. Now a judicial commission of inquiry is slated to get to the bottom of the matter. But for pressure by Ghanaians on their government during the infamous “dumsor” period of power load-shedding and cuts, they may have suffered a little while longer. Opposition politicians are clearly being opportunistic. A peoples’ assembly is not something you organise per se. It is leader-less. Put another way, all of its members are leaders. Before the advent of social media, people power manifested itself in African countries only on occasion. Now, it can be as immediate as the time it takes to type a hashtag. We all have the power to make a change.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/rise-peoples-assembly/

#FuelScarcity: Multiple pricing can work

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Nigerians are a hypocritical bunch. I am Nigerian. It is curious that fuel suddenly became scarce after signals began to emerge that President Muhammadu Buhari might be interested in seeking a second term in office. Incidentally, former vice president Atiku Abubakar moved to another political party in obvious pursuance of his own presidential ambition at about the same time. Now there is increased violence here and there, gas pipelines supplying power stations are suddenly catching fire and fuel is scarce. Even though intuition should not suffice to attribute causation, it is a little too much of a coincidence that these negative events are happening just as the political cycle changed into a higher gear. Recent killings by criminals in the middle-belt region, who to witnesses looked like “Fulani herdsmen”, can be dealt with by the security agencies; if they choose to. Pipelines can be policed; costly but doable. Besides, many already know to turn on their generators when there is a power cut; which is almost everytime. But how did fuel supply become short all of a sudden? Mr Buhari blames saboteurs. (See? Intuition can be reliable.) Considering the timing – the scarcity started curiously during the Christmas festivities – the president may be on to something. In any case, he would not have made such a pronouncement if his security chiefs did not show strong evidence of sabotage. Even so, the fuel scarcity has a robust economic explanation.

Call it anything but…
Fuel marketers would have had a terrible Christmas if they continued to sell fuel at the current N145 per litre without some support from the government. About a year ago, when the retail price was set, crude oil was selling for less. And the naira was artificially stronger. On those two variables alone, it would not require a stroke of genius to know that should everything else remain the same, it cannot be profitable for fuel retailers to continue selling at that price. To make the point, the marketers likely chose the best opportunity for them to be heard. Well, they succeeded. Most analysts, if not all, suggest it would be politically suicidal for Mr Buhari to increase the price of fuel at just the moment he is trying to woo the citizenry to allow him a second chance at the State House. He did get away with past price increases, though. But now, “the times they are a-changin’.” If for political reasons the Buhari administration cannot now afford to increase the price of fuel like other more sensible countries have done, there is only one option available to it. And there is a word for it: subsidy. Wait a minute, the government does not pay subsidy on fuel anymore. So how have marketers been able to continue supplying fuel for the most part of the second half of last year – when crude oil prices appreciated significantly – without going bankrupt? It has to be that they had been receiving some form of support. We just must not call it “subsidy”; too sensitive.

Multiple choice
But should a temporary solution be again applied to what is a perennially recurring problem? The authorities probably hope they would be able to manage the situation until the mega refinery being built by the country’s richest man Aliko Dangote is completed. But at what cost? During the most recent fuel scarcity period, how were so-called black marketers able to sell their stock? I am not aware that any of them sold for less than twice the official retail price of N145. Their customers were not ghosts. There are many Nigerians who are willing to make the trade-off between price and availability. What could be wrong with having a system where this set of people get to pay a premium for the convenience of shorter lead times and assured supply at private filling stations while those not as endowed buy at the official price at filling stations of state oil company, NNPC? Yes, there are not enough of them. Heard of franchising, anyone? The NNPC could simply approve a number of filling stations per locale to supply fuel it imports and supplies to them at the official price. And as part of the arrangement, the approved filling stations would be branded with its logo. That way, anyone who desires to buy fuel at the official price could simply go to an NNPC-branded filling station. And those who do not want the inconvenience of likely queues at the official stations could simply buy fuel at a likely higher price at the private ones. The authorities should give it a try.

Also published in my BusinessDay Nigeria newspaper column (9 Jan 2018). See link viz. http://www.businessdayonline.com/fuelscarcity-multiple-pricing-can-work/

South Africa: Free higher education is complicated

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

If you asked university officials whether they desired free education for the poor, they would probably answer in the affirmative. Ask them if it is sustainable under the government’s recently announced plan, they are not likely to be so sunny. What is probably feasible is a system whereby an obviously brilliant and promising student is not prevented from higher education because he or she is poor. If South Africa were abundantly wealthy, free education might not be potentially problematic. Sadly, the country is not. Not at the moment, at least. And if the palpable absence of the finance minister or his representative at a media briefing on the new policy in early January is anything to go by, the fiscal authorities are likely at their wits’ end to fund what was clearly a unilateral pronouncement by President Jacob Zuma.

As the new academic session begins, university authorities have announced they would not allow walk-in registrations. Ultranationalist Economic Freedom Fighters (EFF) party leader, Julius Malema, had urged prospective students to simply turn up at any university of their choice for admission. It is not difficult to see the potential complications that this would cause. The authorities have disabused any such action by learners who just passed their qualifying exams (“matric”) – results for the class of 2017 were released in early January. Hitherto, those who could not afford varsity would have simply sought employment in jobs where a matric certificate suffices. With higher education now “free”, they are now able to pursue their dreams. Because Mr Zuma’s proclamation was impromptu, those who hitherto did not apply to universities due to financial constraints would have ordinarily needed to wait a year if disruptions are to be avoided. Unsurprisingly, the EFF, and understandably, the affected prospective students, would have none of it. To manage the situation, the authorities have instead advised that those who qualify should follow the normal application process; an online portal has been designated for the task.

China works
Free education, whether at the basic or higher level, is not novel. It has been tried in many jurisdictions. Swedes attend university for free, for instance. And their degrees are very competitive. So the policy does work. But Sweden is rich, South Africa is not. In their heyday, communist regimes also provided free higher education to their comrade citizens. They succeeded to some extent. The times were a signifcant motivation, though. There was a cold war between a mostly democratic west and a mostly communist east. To the extent that they were able to compete quite well with the west on many technological fronts suggest free education is not only feasible but does not necessarily stifle innovation. In other words, poor countries can successfully educate their citizens for free. To some extent. Because when you look at how the west and east have evolved, there is a strong case for the clearly more developed west’s capitalist model. What about China then? Well, it realised free higher education was sub-optimal after a while: it abolished the policy in 1985. Instead, poor Chinese who desire a university education compete for scholarships. And those with ample means began to have a choice in the early 1980s, when Chinese authorities allowed the establishment of private universities.

My heart, my head
To be clear, one is not in anyway suggesting that the majority of black South Africans be left out in the cold without the prospect of prosperity that higher education is supposed to provide, eventually; ideally. I recall quite well during my doctoral studies at a top South African university how frustrated, and in fact angry, some black South African students were at the very high fees their sponsors had to scrape to pay. But the success of western universities can be directly traced to students paying the economic cost of their education. And the means through which they acquire the funding are in part responsible for the high value placed on it. A loans system means a student upon graduation is incentivized to find employment or engage in some entrepreneurial venture to clear his or her indebtedness. It also means that employers must pay an economically viable wage. Market forces that have been found to engender optimal pricing for goods and services have also been found to serve the education system quite well. So as a practicing economist, I see how fraught with risks for the economy the new free education policy is. As an African who has witnessed the pains of many black South Africans, however, I desire that they are able to achieve their wildest dreams. I am conflicted.

Also published in my Premium Times Nigeria column. See link viz. https://opinion.premiumtimesng.com/2018/01/05/south-africa-the-complications-of-free-higher-education-by-rafiq-raji/

South Africa: Zuma goes legacy shopping

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

After much anticipation, the ruling African National Congress (ANC) party’s leadership race started during the weekend (15-20 December). It got off to a slow start. Ahead of the elective conference, I sought the views of fellow Africa economists for an article for African Business magazine on what the implications for the South African economy could be depending on who emerges victorious. (See link viz. http://africanbusinessmagazine.com/region/southern-africa/south-africa-markets-weigh-ancs-next-leader/). I also published my preliminary personal views. (See link viz. https://macroafricaintel.com/2017/12/15/macroafricaintel-south-africa-a-race-of-three/). Although deputy president Cyril Ramaphosa was leading with nominations and expected to win, the race still had an element of uncertainty. There were a few twists and turns, for sure. The national executive committee (NEC) decided in an emergency meeting before the start of the conference – which was actually the reason for the lengthy delay in the first place – that nullified structures of the Kwazulu-Natal and Free State provinces by the courts would not vote, for instance. Incidentally, these were the strongholds of one of the leading presidential contenders, Nkosazana Dlamini-Zuma, ex-wife to outgoing party president, Jacob Zuma; who incidentally gave his own shocker just before the start of proceedings. He announced a free education policy; much to the dismay of market participants. It did reveal one thing, though. President Zuma does not want all that is remembered about his presidency to be the scandals that plagued it. He wants a good legacy. This late in the game, you probably wonder. I actually did think Mr Zuma would do something desperate to secure his postion in the aftermath of the conference. But considering the negative reaction of market participants to finance minister Malusi Gigaba’s mid-term budget and the sharp reaction of the rand to rumours before the conference that Mr Zuma might announce a free education policy and his denial afterwards, whatever potential outrageous move Mr Zuma was going to make, I did not think free education would be it. That said, it was the perfect populist move. Free education is such a popular issue with the masses that no matter the wrongs Mr Zuma may have committed, they could be overlooked on the back of it. That said, it is a negative for the fiscus and the authorities’ oft-touted fiscal consolidation drift. The move also raises fears that earlier denials about potentially negative policies like the declaration of a state of emergency might actually just be another ruse.

Worry about money later
Mr Gigaba, who was delivering a speech at a business breakfast event at the ANC conference when Mr Zuma announced his free education policy, says whatever is done would be done in a fiscally sustainable way. He left the details to the 2018 budget in February. Did he even know about it, though? Because it is highly unlikely he would have known about it without at least mentioning it during his speech. His remarks were made afterwards, when reporters accosted him on his way out of the breakfast venue. Besides, it made naught of the many right things he said in his speech. In any case, S&P Global Ratings’ decision in November to downgrade the country’s rating further into junk territory has clearly now been vindicated. And Moody’s? Well, if this does not move the rating agency, nothing else will. Free education is desirable. But a sustainable model is what is needed, not a populist, financially constraining and unsustainable move like the one Mr Zuma just made.

Factions for nothing and something
One key thing palpable from the conference proceedings are the deep divisions within the ANC. Most are just for mundane reasons. But some are ideological. Take the issue of land expropriation. The party’s youth wing wants it done without compensation. The older cadres reason some compensation would be appropriate. How the party should be structured is also an issue. It was proposed at the conference that there should be two deputy presidents, for instance. The argument proffered in support of this was that it would help unify the party. It was really Mr Zuma’s idea. He had earlier opined that the second position presidential candidate should automatically get a deputy presidency; a development that would have required having two slots available. The proposal did not enjoy majority support and was thus turned down. Take another example. The ANC women’s league’s official position was to support the leading female candidate for president; that is, Ms Dlamini-Zuma. Instead, outgoing party chairperson, Baleka Mbete, a woman and hitherto a presidential contender, chose to support the male frontrunner; Mr Ramaphosa. Her reasons made sense: Mr Ramaphasa was a better candidate to beat whoever the opposition might present for the 2019 elections. But you get the dynamics, at least. As I submit this column, no one could confidently say who would win. In fact, rumours surfaced South Africa might have its first female president this week.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. http://www.businessdayonline.com/south-africa-zuma-goes-legacy-shopping/

Europe could do more for Africa

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

It is a little annoying that this year’s African Union (AU) – European Union (EU) summit (29-30 November), the fifth now, has been overshadowed by recent revelations by CNN – an American news organisation much reviled by President Donald Trump – of black Africans being enslaved in Libya on their way to Europe illegally. Europe’s concerns about increasing illegal migration from African countries, often at great peril – for those who choose to make the journey, that is – would ordinarily have been the focal point at the summit regardless. European governments have committed to helping with evacuating the victims and prosecuting the culprits. Of course, it is not unlikely that the most secret bit of their ruminations wonders if the ugly phenomenon may not finally be the deterrent they so desperately seek to stop the rising illegal immigration rate of Africans to Europe. European governments have been at their wits’ end trying to stop the uncontrollable flow hitherto. Of course, the bad press that comes with many that die on the journey across the sea is not necessarily helpful. And it speaks to the motivation of the travellers if despite the dangers of the journey, more continue to embark on it. Even so, EU countries have become more stringent, as their citizens increasingly worry about losing jobs to migrants who do not mind lower pay; albeit their eyes are typically set on better skilled fellow Europeans. Upon arrival on the shores of Europe, often that of Italy, and after being rescued, the few that “made it” amongst the multitude at the beginning of the perilous journey back home, are sent to camps where they would sometimes stay for months or years. In the past, they could transition from these camps to what they eventually find to be a less than ideal “dream life” in Europe. Lately, sterner restrictions have increasingly made even this less likely: more are repartriated home these days. But these are the lucky ones. They are alive and have a chance to rebuild their lives. That said, the proportion of Africans that make this dangerous journeys pale in comparison to the many, youths mostly, who stay behind and try to make a meaning of their lives. Themed “Investing in the youth for a sustainable future”, it is this latter group that the 5th AU-EU Summit in Abidjan focuses on.

Faith and works
So at least, European governments know what the problem is. 60 percent of Africa’s 1.3 billion population is aged below 25 years. That is 761 million people. One estimate put the number of young Africans entering the labour market annually at about 10 million. Of these, only about 30 percent secure wage employment. The other 70 percent? We know some seek greener pastures abroad, for sure; and clearly in not so salubrious ways for most. Crucially, the majority are idle, thus posing a security risk not only to their countries, the African continent, but abroad as well. Trying to resolve the problem is at the core of the joint Africa-EU strategy. The advocacy here is that what has been done thus far, laudable though they are, could be much more. The European Union is quick to tout its 7-year €30 billion official development aid to 2020, for instance. It is a drop in the ocean. Compare with this: Africa needs at least $90 billion annually over at least a decade to plug its infrastructure deficit alone. There is a consensus, at least, that aid is not the solution. Better trade, could be, though. In this regard, the EU could be more forthcoming. Its Economic Partnership Agreements (EPAs) with African countries are controversial. Some African countries have reservations about them; Nigeria for instance. And there are quite a few amongst the ones that signed them which did so grudgingly. One issue is usually about the potential loss of revenue that African governments would suffer from allowing reciprocal tariff-free European access to African markets. To be fair, there has been some accommodation by the EU to compensate for this. The problem is that it pales in comparison to the potential loss. The great matter is how the EPAs in their current form might stymie Africa’s industrialization. Of course, it could be argued that automation and the so-called fourth industrial revolution are greater and more imminent threats. Even so, Europe should back its good faith with more action.

Diversified Nigerian economy still about oil

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Last week, I was part of a brilliant panel at the 2017 Bonds, Loans and Sukuk Nigeria Briefing event in Lagos that discussed the Nigerian economic outlook for the coming year. With the economy largely looking upward, the panel was naturally upbeat about the future; no doubt helped by the release of better than expected Q3 GDP data just about 30 minutes earlier. The forecasts one had just before the data release had to be momentarily revised upwards, for instance. Above 1 percent GDP growth rate for 2017 is beginning to look feasible certainly; from earlier projections of below 1 percent. More importantly, earlier estimates of about 2 percent for 2018 seem somewhat conservative now. With planned ramped-up public spending, because of the political cycle no less, expected lower inflation and interest rates, likely appreciation of the naira on the back of likely high for longer crude oil prices, 3 percent GDP growth next year would not be farfetched at all. One veteran company board guru in attendance agreed as much in private.

What if
Amid this optimism, however, an experienced foreign portfolio manager rightly asked a so-called disconfirming question. What if oil prices go south again? Of course, recent events suggest that scenario is not likely for another year, at least. But if one were to learn from history, sometimes all it takes for things to go awry can be no more than a single event. For example, if anyone said previously that Russia would be crucial to solving the Syrian and North Korean crises and indeed be germane to whether the oil producers’ cartel OPEC (which meets on 30 November) would be able to sustain the efficacy of its production cuts, you would have been sceptical. But that is exactly the case now. No one could have envisaged the radical anti-corruption move by Crown Prince Mohammed bin Salman (MBS) of Saudi Arabia or that his power would be formalized so quickly, for instance. Incidentally, the Saudi royal’s youthful exuberance is already becoming writ large: while the Yemeni war is still ongoing and the cold shoulder towards Qatar persists, MBS virtually held hostage the head of government of a sovereign country; and with the benefit of hindsight clearly forced him to read out a resignation letter that was intended to instigate a conflict with Iran. Otherwise there is no other explanation for why Lebanese prime minister Saad Hariri would, following summons from the Saudis, quit office in Riyadh on supposed intelligence of plans to assassinate him and then suddenly change his mind after what is believed to be an internationally brokered “release” from their watchful eye. (Upon returning to Beirut, Mr Hariri announced he would not be leaving office after all.) And since then, MBS has been unrelenting in his acerbic rhetoric towards the Iranian leadership. At this rate, it is beginning to seem like the bad blood between the Arabs and Persians might be a better trick for keeping the price of crude oil above $50 than any coordinated production cuts could ever do; albeit the Saudi and Iranian oil ministers have been largely speaking with one voice on an expected extension of the period for the production cuts. Besides, both countries need oil prices to remain high.

Political tune dictates
So what was my reply to the portfolio manager I referred to earlier? The problem with the Nigerian economy has never been about its structure. An economy that is 90 percent non-oil is not any sense of the word a mono-economy. It has always been the policy response. Unlike the popular perception, there is not so much a fixation on the exchange rate by foreign portfolio investors as there is on the crude oil price: they know to fly to safety the moment it seems like it would sustainably be below $50. Without saying so explicitly, what he really meant to ask about was the likelihood of capital controls if oil prices tanked again. And my view is that irrespective of the very nice commentary coming from the lips of officials at the central bank about the many lessons they have learnt during this most recent foreign exchange crisis, if another one comes about in the coming year, they would likely respond in a similar or worse fashion. Why? Electioneering ahead of the 2019 elections has begun in earnest. So, we are already in a political cycle. Within such a context, does anyone really think the Central Bank of Nigeria (CBN) would simply hands off if crude oil prices go back to the $30-$40 area? Bear in mind that even at the current above-$50 price levels, the CBN is believed to still participate actively in the buoyant investors’ and exporters’ (I&E) FX window; albeit on both the demand and supply sides. Thus, should crude oil prices fall again, I doubt very much the CBN would behave any differently; especially under a government that is keen on a second term and is led by a president that is very sensitive to the level of the exchange rate. To be fair, it would not be because the CBN does not know the right thing to do. And its officials were definitely not dumb in the past. They simply did not have the political space to do the smart thing. In the coming year, that space would become even smaller.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/diversified-nigerian-economy-still-oil/

African central banks to close year cautiously

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Over the course of this business week (starts 20 November), central banks of the largest regional economies on the African continent would decide on interest rates. They are likely to keep them unchanged. Even as inflation has been slowing gradually in Nigeria, it remains high. And it is primarily driven by food inflation. Improved agricultural production on the back of a good harvest is expected to moderate prices over time. Besides the authorities are currently marketing a Eurobond that could be as much as $5.5 billion if everything goes well. It is not likely the Central Bank of Nigeria (CBN) would like to be seen making decisions other than ones that are data-dependent. In any case, CBN governor Godwin Emefiele has signalled the benchmark rate would stay pat at 14 percent for the remainder of 2017, with potential cuts next year when inflation would have slowed considerably.

For South Africa, the rand went into a tailspin lately, rising above the psychological 14.0 level for much of the past two weeks, as rumours persist about the desire of the Jacob Zuma-led government to make higher education free, amid well-known financial constraints. With a pliable finance minister at the helm, it is also now widely believed President Zuma has successfully ‘captured’ the Treasury. So even, as annual consumer inflation likely slowed to 4.8 percent in October, from 5.1 percent earlier, it may accelerate in November and December on the back of rand weakness and volatility. The headline would probably be no more than 5 percent by year-end, though; within the 3-6 percent inflation target band of the South African Reserve Bank (SARB). Over a 12-18 month horizon, consumer inflation would probably slow to 3-4 percent, however. Under different circumstances, this could justify a rate cut. However, the November monetary policy committee (MPC) meeting, the last this year and one just weeks before a tense leadership contest in the ruling African National Congress (ANC) party, require the SARB to exercise the utmost restraint. And even as the SARB pretends not to be perturbed by market moves, it does pay attention to the inflationary impact of rand weakness and volatility; and indeed the political noise that tends to be the trigger lately. A balanced outcome would thus be for the benchamark rate to remain unchanged at 6.75 percent.

And for Kenya, ongoing troubles related to a controversial presidential election rerun boycotted by the opposition, mean the Central Bank of Kenya (CBK) would need to continue exercising caution. It has shown much dexterity throughout the impasse thus far, though, as the shilling has remained largely stable. And inflation has been slowing; came out at 5.7 percent in October from 7.1 percent in the prior month. More importantly, inflation expectations suggest the headline would likely come out much lower in coming months; about 4.5 percent in December, say, and plausibly less than zero percent in Q2-2018 due to base effects. Even so, it would be better if it kept its benchmark rate unchanged at 10 percent at this meeting with a view to easing policy when the political situation improves.

Politics, politics, politics
The elective conference of South Africa’s ruling ANC party in December is on everyone’s minds. Mr Zuma’s rhetoric about the preferred candidate by the business community has not been comforting. The president has all but mentioned his deputy, Cyril Ramaphosa, in name when making accusations about the presence of western-backed traitors in the ANC. Judging from his countenance and body language, Mr Zuma is likely to do everything in his power to block Mr Ramaphosa from replacing him. Turns out, though, Mr Ramaphosa is leading in support from the party’s branches, whose delegates to the conference would elect the next party president. Many reckon if Mr Ramaphosa wins, he would move swiftly against Mr Zuma in a bid to replace him as head of state much sooner. Should his rival and Mr Zuma’s ex-wife, Nkosazana Dlamini-Zuma win, however, it is highly probable Mr Zuma would retain his position till it expires in 2019. To further this goal, it is believed Mr Zuma might fire Mr Ramaphosa as deputy president in the coming weeks. Ironically, this could actually boost Mr Ramaphosa’s chances.

In the Nigerian case, all indications suggest President Muhammadu Buhari would be seeking a second term in office; after ill-health hitherto increasingly made it unlikely he would do so. His recent activities point to a full campaign mode. He visited the southeastern part of the country recently; albeit to campaign for his party’s candidate at elections in one of the states there. But that only provided cover for his visit; he seemed reluctant to embrace the region hitherto. He and his aides vehemently deny this, of course. His defence rings hollow in the face of his actions, however. His inner circle is very exclusive. A recently announced ambitious N8.6 trillion budget for next year also has political coloration. Put simply, the political cycle is in full steam. There are thus risks of fiscal slippages as the administration rushes to show it has been doing well. Recently announced plans to appoint more ministers are not necessarily borne out of a desire for efficiency as they are about dishing out patronage. Such behaviour tends to cascade down to lower levels of government, with negative effects for the fiscus.

Leading opposition figure in Kenya, Raila Odinga, who recently returned from an American trip amidst police-induced chaos, has been leading the charge for secession in the western and coastal areas. Political motivations inform the recent ratcheting up of tensions in this regard. Besides, Mr Odinga is advocating the estalishment of a Peoples’ Assembly via a proclamation of parliament, where the ruling Jubilee party, which is averse to the proposal, has a majority. Continued protests and tight security measures have been stifling business activities and would definitely weigh on economic growth in the fourth quarter of this year. A ruling by the Supreme Court on 20 November on petitions about the conduct of the presidential election rerun could either ease or heighten tensions. In the past, the outcome would have been expectedly one that would not cause much disruptions. After a bold landmark ruling cancelling the first poll in August, the court’s judgement could go either way. With such political dynamics about in these key African countries, it makes sense for their central banks to be on guard.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/african-central-banks-close-year-cautiously/