Tag Archives: Leadership

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.

Flattered Trump achieves little in Asia

By Rafiq Raji, PhD

Donald Trump, the American president, concludes his 5-country Asian trip in The Philippines today (14 November). Heralding his arrival in Beijing a week earlier – his third stop after earlier ones in Japan and South Korea – was a reminder of China’s trade surplus with America, data for which came out at US$26.6 billion for October; about US$223 billion thus far this year. And if he thought his trip would make China buy at least as much American goods and services as go the other way, he was a tad disappointed. Of course, there was much pomp about the US$253.4 billion in deals signed between the two delegations. But much of these were not substantive. And some were actually just old deals. The extent of the divergence in the views of the Chinese president, Xi Jinping, and President Trump, would become writ large in Da Nang, Vietnam, at the Asia-Pacific Economic Cooperation (APEC) summit, where they both headed afterwards. They provided sharply contrasting visions on trade in their speeches to the gathering of Asian-Pacific leaders. While President Xi espoused multilateralism, openness, and globalisation, Mr Trump was unapologetically insular in his views. Brief incidental interactions with Russian president, Vladimir Putin, at the APEC summit, in place of a much anticipated formal meeting, did not yield much either. Because even though the Kremlin published a joint statement on the crisis in Syria, there was not much there that was new; a missed opportunity. It did not help of course that the controversy over alleged Russian meddling in the 2016 American presidential elections would not just go away; no doubt made worse by Mr Trump’s equivocation on the matter. In fact, what little progress that was made during his time in Asia was actually on matters antithetical to his agenda. A deal was reached by the 11 countries remaining in the Trans-Pacific Partnership (TPP) trade agreement he ditched, for instance; albeit there were a few hiccups here and there before that came about.

Playground rhetoric
Mr Trump came out a little bruised on the North Korean matter as well. After initially striking a somewhat conciliatory tone towards the communist regime, urging it to do a deal over its nuclear weapons programme, he adopted an aggressive posture shortly afterwards in his address to the South Korean legislature; defiantly telling the volatile man up north not to test America’s might. Unsurprisingly, the North Korean regime replied with insults, calling Mr Trump an ‘old lunatic’, ‘warmonger’ and ‘dotard.’ Not one to take such expletives lying down, the American president threw back a few of his own, suggestively referring to Kim Jong-un, the North Korean leader, as ‘short’ and ‘fat’. Even so, if there is a slight chance of some deal with the communist regime, Mr Trump’s unusual style probably makes him best-placed to make it happen. China remains crucial to any potential progress, however. Unfortunately, they did not offer more than they already had on the matter.

Flatter to naught
The Japanese were more gracious at least; they imposed additional unilateral sanctions on North Korea. Not that this could necessarily be attributed to Mr Trump’s powers of persuasion: North Korea fired missiles over Japan in mid-September. And this was despite Mr Trump’s taunts at prime minister Shinzo Abe: He went on unabashedly about how the Japanese were inferior to Americans and wondered aloud why the Japanese did not shoot down the North Korean missile, suggesting how if they had American-made weapons, they would have been able to do so easily. (The Japanese are officially pacifist but have a military for self-defense purposes.) Little wonder then his Japanese trip turned out to be a failure somewhat. He did not get much from them on trade; a major issue for him. (Like China, Japan also maintains trade surpluses with America; albeit at 9 percent of the total American trade deficit, it pales in comparison to China’s 47 percent.) As if to buttress the point, the Japanese ruled out a potential Free Trade agreement (FTA) with the Americans, Mr Trump’s preferred route to dealing with trade imbalances. Instead, Japan led the effort to ensure a deal was reached on the so-called TPP-11. The Asians were all smiles but gave him little.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/flattered-trump-achieves-little-asia/

2018 budget should be passed before year end

By Rafiq Raji, PhD

Muhammadu Buhari, the Nigerian president, presents his 2018 budget statement to the legislature on 7 November. He reportedly wanted to do it in late October; to allow ample time for the spending proposals to be considered and passed by December. Some lawmakers have expressed reservations about this. BusinessDay, the newspaper which publishes this column, found out why. There are at least three executive proposals currently under consideration by the lawmakers. First is the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). Second is a N135.6 billion virement proposal. And third, a US$5.5 billion foreign borrowing request. My view is that the lawmakers can get them all done on or before 31 December. And they should. Considering how much they get paid, it would not be too much to ask that they go into overdrive, consider and pass them all before heading for their Christmas break.

More spending
In the MTEF, the 2018 spending estimate is put at N8.6 trillion, up by about 16 percent relative to the 2017 budget of N7.4 trillion. Oil production is assumed at 2.3 million barrels per day (mbpd), which would probably be no more than 1.8 mbpd if a likely OPEC production cap in November is sanctioned. But even this level of production may be weighed on by imminent militant attacks on oil and gas infrastructure by agitators in the Niger Delta region. Additional tax measures are planned. A 15 percent tax on luxury goods from 5 percent currently, for instance. An ongoing tax amnesty programme till March 2018 should also boost the government’s finances. Tax revenue performance this year has been quite impressive, with respect to VAT at least; N797.5 billion was realised between January and October 2017, up about 20 percent from the same period last year.

Better narrative
It is not news that the 2017 budget was only partially implemented; never mind shortfalls here and there even for the parts that were. As the authorities likely plan to issue a US$5.5 billion eurobond imminently, it would help a great deal if investors are able to see how things are beginning to indeed change for the better. There have been some positive developments lately. The World Bank recently affirmed the authorities’ ease of doing business reforms are working, raising Nigeria’s ranking 24 places to 145th out of 190 countries. Central bank governor Godwin Emefiele was also recently conferred with an award by Forbes magazine. And in late October, Nigeria kept its place in the MSCI Frontier Markets Index (country weight of 8 percent); attributed to a rebound in the foreign exchange market. So, imagine how truly positive the Nigerian investment narrative would be if the authorities are able to also demonstrate they are succeeding with fiscal policy.

Good plan
Concerns have been raised about the supposedly planned US$5.5 billion eurobond, though. The country’s historical pains with indebtedness make Nigerians naturally wary. Public debt of N19.6 trillion (US$64.2 billion) in June, about 16 percent of 2016 GDP of US$405 billion, should ordinarily not be concerning. But electioneering for the 2019 polls has started in earnest. And President Buhari, hitherto thought might not be seeking a second term in light of his fragile health, recently signalled he has decided otherwise. So there is the risk that new borrowings might not be spent wisely. In response, finance minister Kemi Adeosun is taking pains to explain the rationale behind the plan. Of the US$5.5 billion they plan to borrow, US$3 billion would be used to refinance the authorities’ current debt portfolio. The remaining US$2.5 billion, which would be new borrowing, is intended to in part fill a hole in the 2017 budget; already appropriated for. It seems like a good plan, if you ask me.

Be bold
Feelers that came out initially were that the planned foreign borrowing would be done in two parts. I do not believe this to be wise. Interest rates are rising in the developed world, with the American Federal Reserve expected to hike rates again in December. And only last week, the Bank of England raised its benchmark rate by 25 basis points to 0.5 percent, the first time since 2007. What this portends for African sovereigns looking to issue eurobonds is that potential subscribers are going to insist on higher yields; albeit they would by far still not be as dear as those in their domestic debt markets.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/2018-budget-passed-year-end/