Tag Archives: Poverty Alleviation

What is Japan’s African game?

By Rafiq Raji, PhD

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

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

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

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

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

No need for Buhari emergency powers

By Rafiq Raji, PhD

Protect the old man from himself
Good men are rare. Leaders that are good men are scantier, more so in Africa – an old teacher of mine would disagree: she doesn’t think there is a dichotomy between leadership and goodness. Leaders are good men. I did wonder aloud though where she’d put those different shades of grey, that matters leaders sometimes have to grapple with, often take. A country of mixed fortunes, even during the best of times, Nigeria this time has the rather unusual good fortune of having a leader that is at least honest. Muhammadu Buhari means well for Nigeria. He has good intentions certainly. But good men are also human. There is a storied saying: ‘the road to hell is paved with good intentions.’ I have read varied versions of a likely ‘Emergency Economic Stabilisation Bill 2016.’ There is nothing in there that cannot be legislated into laws. Put simply, it is not necessary to grant President Buhari additional powers that he could abuse. Mr Buhari is likely nostalgic, by his own not so subtle admission in any case, of when he could simply issue decrees. One would not be totally wrong if one thought there is a part of him that probably craves the wide-ranging powers that an economic emergency declaration would enable him wield. This is no trifling matter. In my column of 16 August 2016 (“You are hereby directed to cut interest rates. Really?”), I highlighted the unabashed disposition of one of Mr Buhari’s closest eggheads, Nasir El-Rufai, governor of a northern state bordering the Nigerian capital, towards cutting interest rates via legislation. Shortly after, the Central Bank of Nigeria (CBN) directed that banks should allocate 60 percent of their foreign exchange to manufacturing firms. The Nigerian leader’s preference for a strong naira is also well-known. And now there is talk of a bill that could grant the executive branch the very powers needed to do all these without prior legislative oversight or approval. Bear in mind, the highly controversial ‘War Against Indiscipline’ policy of the 1980s military dictatorship of Mr Buhari is set for a rebirth. Surely, it cannot be too difficult to see how these sequence of events is not necessarily coincidental.

Red herring is a fish too
There is a practice in government: when it is about to implement a potentially controversial policy, a media leak is engineered to test potential reactions. If the public backlash is deemed manageable, the policy gets the nod. A similarly well-known legislative practice is to bury potentially controversial laws beneath a deluge of minutiae in supposedly mundane laws. Thus, the fine print of any potential economic emergency bill should be thoroughly scrutinized; clause by clause. Nigerians must come out forcefully against any attempt at turning Mr Buhari’s democratic mandate into a dictatorship. Especially because this time, those who should know, prominent economists and the organised private sector, have chosen to hold brief for the administration; probably in good faith. Even so, they are mistaken. And to think that even as they know the factors – cronyism, nepotism, tribalism, rent-seeking, corruption, and sometimes just plain incompetence – that made past economic emergency measures fail, remain or have worsened, they would still elect to think that things could be any different this time, is a little depressing.

There is an American parallel. Then US treasury secretary Henry Paulson introduced a bill (with the exact same title) during the 2008 global financial crisis. Thing is, theirs was mostly for extra-budgetary spending. Not at first. Mr Paulson’s original meagre 3-page proposal would have granted him a carte blanche to spend as much as US$500 billion to purchase distressed bank assets without prior legislative appropriation. He would also have been immune from legislative and judicial scrutiny. Naturally enough, US lawmakers shut it down. Although what was eventually passed did allow for unprecedented extra-budgetary spending, about US$700 billion for a troubled assets relief programme (TARP), it made sure to require legislative oversight. What the Nigerian government is purportedly about to propose is even more far-reaching. And yet the circumstances are not nearly as dire. Some laws, it goes, designed precisely to guard against untoward executive discretion, are to be suspended for the duration of the planned emergency. Why not simply amend the laws? More puzzling, most of the recommendations of the purported bill that were let slip to the media, are currently within the powers of the executive branch to implement. Visa issuance reforms do not require legislative approval. Reducing the time it takes to clear goods at the ports is totally within the capacity and powers of the port authorities. The Nigerian president can, with the stroke of a pen, instruct the myriad agencies causing bottlenecks at the ports to take a hike. Physical inspection of goods, which increases the clearing time for goods at the ports to days, could be eliminated by simply buying and installing scanners. And how is it that such emergency spending – if haste were key – couldn’t be speedily appropriated for via a supplementary budget bill?

Reform for the long-run
More importantly, the advantage of dire circumstances is that you are able to get buy-in much more easily than during normal times. The Land Use Act, which grants the government an undeserved right to all land and thus stymies investment, needs to be reviewed. The Petroleum Industry Bill, dithering on which has led to an exodus of capital from the sector, needs to be passed with dispatch. Double taxation needs to be eliminated. Multiple agency inspections at the ports need to be abolished. There should not be preferential access to foreign exchange at the central bank. Authorities should take advantage of the challenging but propitious times to enact or review laws needed to put the economy on a sustainable growth path. Not short-term emergency measures. My fear is that the leadership of the legislature may be open to a deal with the executive, in light of its legal troubles. This would be a betrayal. So if it finds at any time that its resolve may waver, it should take heed in the saying that no good deed goes unpunished.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz.  http://businessdayonline.com/no-need-for-buhari-emergency-powers/

What should a chastened ANC do?

By Rafiq Raji, PhD

Change or we will punish you
Local elections this week (3 August), apart from being a test of President Jacob Zuma’s and the ruling African National Congress (ANC) party’s popularity, could also be a turning point in South African politics. Polls suggest the Democratic Alliance (DA) – the official opposition party – may win key municipalities: Johannesburg, Tshwane, and Nelson Mandela Bay. In any case, there are indications the ANC may need to find coalition partners in some, as it may not be able to secure enough votes to remain in charge. In other instances, it is the DA that would need the support of other parties. Even so, DA’s likely triumph would be a victory for liberalism: the ANC would not need to shift all too much to the left. DA gains would be a positive on other fronts. It would be the clearest warning yet to the ANC from the electorate: clean up your act. Furthermore, it would signal a welcome departure – albeit likely still meek – from racial politics.

Even as Mr Zuma is decried by the comfortable bourgeoisie in cities, he remains a popular politician among the common folk. So, elitist and middle-class city dwellers may harp on all the wrongs committed by Mr Zuma, his victories – he survived an impeachment vote and got off many corruption scandals quite leniently – pyrrhic though they might be, are a source of inspiration for black South Africans with similarly poor backgrounds: mostly older, little educated (if at all), live in the hinterlands, and are extremely loyal to the ANC. Still, even these staunch supporters know the ANC is failing them: services are poor, jobs are scarce, and opportunities are sparse.

But would Mr Zuma be bothered? If it is the vantage Mr Zuma that we have come to know, he will probably just shrug it off. In any case, the ANC would likely still win the general election in 2019, albeit probably not as popularly hitherto. Because even as the DA likely makes gains in the cities, it is doubtful it would be able to make similar progress in villages and homesteads far and wide – it can’t easily shake off the perception that it is a ‘white’ party. For now.

The Economic Freedom Fighters (EFF), the ultra-leftist offshoot of the ANC, is better placed to win the support of rural dwellers. But it is inexperienced: only has seats in parliament. Council seats it is able to secure in these local elections, its first, would provide it the opportunity to demonstrate it can deliver where the ANC has failed: improve service delivery, create jobs, and provide more housing.

Nonetheless, the ANC has the higher ground. And its support is the most wide-ranging, and would likely remain so for a while. Thus, a potential rebuke of the ANC at the polls this week, would not be so much a rebuff of the ANC, as it would be a cry for change. A call for a reformed ANC.

Time for ANC reformers to assert themselves
Reformist elements within the ANC need to assert themselves much more forcefully, not just in the back-rooms. First, get Mr Zuma out. Second, insist that Mr Cyril Ramaphosa, the deputy president and Mr Zuma’s likely successor, take a deputy from the younger cadres. Third, reassess the utility of the tripartite alliance with the South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU). That with COSATU especially: unless organized labour gives way on the minimum wage – which is relatively high – and supports policies that engender labour-intensive industries, unemployment will continue to rise; the rate of which is about 27 percent currently. A 2014 paper by the renowned African political economy scholar, Robert Rotberg, partly blaims COSATU’s ‘labour aristocracy approach,’ for ‘the failure to create myriad jobs.’ ANC’s acquiescence with COSATU’s stance, even as the labour market dysfunction is writ large, is defeatist and has to change. Only visionary leadership, of that ilk by the old man now gone, would be able to bring this about.

Youth and vigour perhaps?
The demographics of registered voters suggest there is a gap that a coalition of opposition parties (or a new centrist party drawing its membership from reformist elements in the ANC, DA, and others) could fill. About a quarter of registered voters are aged between 18 and 29: so-called post-apartheid ‘born-frees,’ oldest of whom are now 22 years old, fall under this group. Together with those aged 30-39, this cohort is about half of the voters’ roll. They do not share the loyalty of older South Africans to the ANC. They simply want jobs. The EFF has been quick to target them. Quite surprisingly, it has not enjoyed the type of wide appeal amongst them that you would intuitively expect, judging from its showing in polls thus far. And even as DA optics are ‘youthful,’ the perception that it remains a ‘white party’ is one that still resonates with the cohort. So, the ANC would probably be able to retain its numbers among their ranks, albeit increasingly less so. That is, those who still choose to participate in the political process. For there are many quite disillusioned. And signs of unrest are emerging: apart from sometimes violent protests against unpopular party choices, there have been at least a dozen politically-motivated killings of ANC members this year, mostly relatively young cadres. Some erstwhile ANC members – not necessarily young – are choosing to contest these local elections as independent candidates. Another group of rebels formed its own political party, the ‘Forum for Service Delivery’ in Rustenburg (a platinum mining city in the North West province), just so it could contest. To keep the youth (and indeed other cadres) in the fold, a reformed ANC may need to purge its upper echelons of older (and veteran) members. Better still, it should make candidates’ selection more democratic. Otherwise, it could have more rebellions on its hands.

Also published in my Business Day Nigeria newspaper back-page column (Tuesdays). See link viz. https://businessdayonline.com/what-should-a-chastened-anc-do/

Non-violence is Juju’s best bet

By Rafiq Raji, PhD

South Africa’s President Jacob Zuma probably regrets the day he decided Julius Malema had to be removed as president of the African National Congress (ANC) Youth League and expelled from the ruling ANC party. ‘Juju’ – as Mr Malema is affectionately known (which actually means ‘sorcery’ in popular Nigerian parlance) – has been unrelenting in his onslaught against the embattled South African leader. Mr Zuma probably assumed Juju lacked enough substance to be able to carry his own weight outside of the ANC. He judged poorly. With no ANC party machinery to restrain him, Juju has been firing on all cylinders. President Zuma has been easy prey in any case. With all the numerous corruption allegations against Mr Zuma, Mr Malema has been spoilt for choice. More substantively, the Economic Freedom Fighters (EFF) – the ultra-leftist and populist party Mr Malema founded in July 2013, just a little over a year after his ejection from the ruling ANC in April 2012 – went ahead to secure significant gains in the May 2014 general elections, earning more than 1 million votes and securing 25 seats in the 400-member South African parliament; no small feat for a youth leader in about 2 years after being removed from his comfort zone. A little digression: For Nigerian and other African youths who harp constantly about old men refusing to give up power, Mr Malema’s rise is instructive. No one hands over power voluntarily.

In a revealing interview with Al Jazeera recently, Mr Malema threatened a violent retaliation should authorities continue to harass and beat up EFF members. He actually threatened to remove President Zuma’s government “through the barrel of a gun,” raising longstanding worries about a potentially violent dimension to EFF’s economic freedom advocacy. Having watched the interview myself, it is noticeable his remarks were premeditated and well thought through. He offered the view without pressure from the interviewer, Jonah Hull – who by the way did a great job masking his excitement at the excellent scoop and was incidentally once at the receiving end of Juju’s acerbic tongue. To ensure that the remarks were fully taken, the interviewer asked him to clarify them and was candid as to why. Mr Malema was unrelenting. In response, the ANC has asked the police to investigate Mr Malema for treason, an overreaction by most accounts. Analysts agree that since his threat of violence was conditional, the charges are not likely to hold. Incidentally, the National Prosecution Authority (NPA) faces a dilemma. Just last week, a South African High Court set aside an earlier ruling that quashed about 800 corruption charges against Mr Zuma – which enabled him become president after the ouster of then President Thabo Mbeki. If the NPA chooses to pursue Mr Malema – the case for which is very weak – while refusing to pursue charges against Mr Zuma, it would raise questions about responsibility and diligence. It would certainly raise eyebrows if the almost 800 corruption charges are not reinstituted against the South African president; especially as he is not likely to thread the path of honour and resign, despite wide-ranging calls for him to do so. In any case, Mr Malema re-affirmed his threat of violence conditional upon same from authorities at the very well-attended Economic Freedom Fighters (EFF) manifesto launch – which dwarfed earlier launch events by rival parties, especially that of the ruling ANC – on 30 April 2016.

Juju and his EFF have been successful thus far due to their fervent, aggressive, and populist but non-violent rhetoric. This approach broadens their appeal. I hope the EFF would not test this recent violent rhetorical approach any further. It would do no one any good. And if Juju desires revolutionary credentials, he should know that glory would only come if he successfully uses non-violent means to mobilize the majority of South Africans – especially its teeming youth population (who are mostly unemployed by the way) – towards building the rainbow nation of Nelson Mandela’s dreams; one where there is not only racial equality but economic equity as well. There is a lot of history and knowledge on how ownership of assets by itself does not create wealth. Africa’s relatively slow progress provides ample evidence on this. Skill and expertise matter. In Africa, South Africa has the enviable position of having both rich mineral and highly skilled human resources. Its leaders, whether in the ANC or the EFF, must strive to harness both. What needs to be found is the right balance between seeking equity for all South Africans while continuing to provide incentives for capitalism to thrive and for wealth to continue to be created. Despite his socialist rhetoric, I still believe this is Julius Malema’s desire as well. If not, it may fall on him to provide that dose of realism when the EFF eventually secures power. What is likely in local government elections slated for August – EFF’s first – is that the EFF would likely win some council seats. This should enable it show South Africans its own flavour of governance as it aims to secure the presidency in due course. But there is now not any doubt that the EFF has become a force to be reckoned with. Judging from the overwhelming show of support for the EFF during the weekend, the radical party may actually be in a position to determine who becomes South Africa’s next president in 2019; that is, if it does not succeed in getting its own candidate elected. But with its current momentum, it would not surprise me at all if the EFF actually produces the next South African president in 2019. Still, the party needs to convert its supporters into actual voters. Also, Mr Malema should not be totally dismissive of the Democratic Alliance (DA) – currently South Africa’s leading opposition party in parliament. Although the party’s first black leader, Mmusi Maimane, has been relatively successful in projecting an increasing sense of diversity within the DA, that is not yet a reality in fact. DA’s task should now be to work harder towards being seen more as an aspirational party for all South Africans as opposed to the middle-class and white interests party it is still perceived to be. All of these are possible in an atmosphere of non-violence. So even as Juju and his EFF become ever more popular, voices should and must be raised high to ensure Juju gets the message that non-violence is his best bet to succeed; as is also the case for all South Africans.

Also published in my BusinessDay Nigeria newspaper back-page column. See link viz. http://businessdayonline.com/2016/05/non-violence-is-jujus-best-bet/

Social assistance benefits the poor

By Rafiq Raji, PhD

Published by BusinessDay Nigeria Newspaper on 12 Jan 2016. See link viz. http://businessdayonline.com/2016/01/social-assistance-benefits-the-poor/

Social safety nets help reduce the number of people in poverty by 8 percent on average, a World Bank study shows. They involve the provision of regular and predictable support to poor and vulnerable people. Coverage and adequacy of benefits are crucial to success. For instance, Kenya’s social safety nets, which cover 20 percent of its population, have been found to reduce the poverty headcount by 1.7 percent. In Nigeria and Ghana where coverage is lower at 1-6 percent, the reduction rate is 0.1 percent. More positive outcomes are recorded when more of the money spent by the poor on basic needs are covered by welfare. Less than 2 percent of Nigeria’s population currently benefit from some form of government-sponsored assistance. In South Africa, such assistance is accessible and being provided to more than half of the population. Increasing agitations by the citizenry in Nigeria and across Africa have roots in poverty. There is thus an urgent necessity for African governments to ramp up safety nets targeted at the poorest.

Nigeria ranks among the bottom five of countries in Sub-Saharan Africa that provide some form of social assistance to its citizens. At 0.3 percent of the size of its economy in 2014, it falls short of the average 1.5-1.9 percent of gross domestic product (GDP) in resources devoted by poor and rich countries to social safety nets (SSNs). In his 2016 budget speech, Nigeria’s President Buhari announced 500 billion naira ($2.5 billion) would be spent on social interventions. Nigerian authorities have an opportunity to divert monies hitherto wasted on fuel subsidies into such initiatives. Studies show the rich benefit more from fuel subsidies than the poor. Social assistance would be a better use of scarce resources. If well communicated and implemented, the move could enjoy popular support. Labour unions – which oppose the removal of fuel subsidies – might also be better persuaded. A key part of the initiative is the payment of a monthly stipend of 5,000 naira ($25) to the country’s poorest, subject to conditions of immunization and school enrolment; a conditional cash transfer (CCT). Prior to this major proposal by the central government, the northwestern state of Kano already operated a similar initiative for girls’ education. As at 2014, it covered more than 16,000 girls, based on World Bank data.

There is a rich literature that supports the effectiveness of CCTs in alleviating poverty. The largest CCT programme by scale and perhaps the most successful is Brazil’s Bolsa Familia with 49 million beneficiaries (24% of the population). However, CCTs are just one of a bouquet of SSNs. African countries feature more prominently in the unconditional cash transfers (UCTs) category. UCTs do not require beneficiaries to fulfill conditions to remain eligible for cash distributions. For instance, South Africa provides child support to 11 million of its citizens. 5 million Ghanaians also get free uniforms and books, an unconditional in-kind transfer (UIT). The proposed Nigerian social interventions would include a homegrown school-feeding programme, grants for university graduates after their compulsory national youth service, and micro credit loans for eligible citizens. Nigerian authorities hope to create at least 1 million jobs – less than 1% of its population – from these initiatives in 2016. This would need to be scaled up rapidly to have the desired impact. However, even when there is scale, CCTs could be ineffective if they don’t cover a significant portion of the poor’s consumption basket. According to the World Bank, most CCTs cover just 10% of the consumption of the average poor person, inadequate by most measures. Half of the minimum wage ($90) might be a better benchmark. At a time of great financial strain for Nigerian authorities, a $25 monthly stipend is a good first step. Policy must envisage a need for this to be increased in the future.

For CCTs to succeed, monitoring and punishment for noncompliance with conditions are crucial. Effective monitoring depends on robust social and beneficiary registries. This is a potential bottleneck in the Nigerian case. Without a strong national identity card database, authorities are likely to be accused of dishing out patronage if the eligibility criteria are not rule-based. A fairer and less troublesome approach might be for authorities to only select those who already have national identity cards. As Nigerian authorities continue to grapple with terrorism and other security threats, an identity card requirement for potential beneficiaries would enable it document its poorest citizens who are the most vulnerable to being lured into terrorist acts. Coordination is also very important. In most jurisdictions, a federal ministry is assigned responsibility for managing SSNs. In the Nigerian case, the ministry of labour and employment might be more appropriate. In some countries, a coordinating commission under the presidency is set up. Either model would do well in the Nigerian context. For sustainability, institutionalization is key. Thus, the draft National Social Protection Policy Framework needs to be passed into law with dispatch as a matter of national priority.

Clearly, the planned social interventions by the Nigerian government would require a lot of technical expertise. Tremendous care would be needed to ensure the social assistance initiatives are designed and implemented properly. In doing this, the very complex nature of Nigeria’s polity must be taken into consideration. For instance, eligibility and selection criteria that are not transparent and rule-based could generate ethnic and religious bias perceptions. Rigorous targeting criteria and processes would be crucial to success. Corruption – ghost beneficiaries or outright stealing – and fiscal deterioration are also potential drawbacks. A multilateral institution with extensive experience and a robust governance culture might thus be in the best position to design and manage the initial phases of the planned social interventions. Sources at the World Bank confirm they are working with Nigerian authorities on the design of a new national social safety nets programme that includes targeted cash transfers to the poor. They also confirm a request for financing of the programme has been made by the Nigerian government.

Also published on my company’s website on 13 Jan 2016. See link viz. http://macroafricaintelligence.com/2016/01/13/thematic-social-assistance-benefits-the-poor/ 

 

Africans have a romantic view of the Chinese; it is not mutual. #afdbam2014, #AfricaRising, #Africa

We had been kept waiting from more than an hour (that is conservative by the way). The date is 16th of June 2012. It had been a very tiring and long journey. This young and curious African’s excitement knew no bounds. When you dream of traveling the world, China is usually a long shot. So, the fatigue of the journey paled in comparison to one’s joy at finally being provided with the opportunity to experience and learn about one of the world’s oldest civilizations. So, I look around me; we are seated in a waiting area in the Immigration section of the Shanghai Pudong International Airport. I had wondered hours earlier why the immigration official told me to step aside after going through my documents. I had no doubt they were as perfect as they could be. So looking around me, I noticed a common factor. We were all African. In my head, I’m trying to look for another reason why we’d be accorded such “privilege”. My fears would be confirmed after what seemed like eternity. Each one of us was called forward, told to stand in front of a wall, and our picture was taken. Our national passports had pictures surely. And as I recall, there was a visa application process that required you providing more pictures. I would later find out that the Chinese found it necessary to take those pictures because apparently it could be sometimes difficult for their officials to distinguish African faces. I would also find out that some Africans had impersonated fellow Africans in the past to enter the country. Note the emphasis on Africans. It is not likely a mug shot would have been forced on a Briton or American of African descent. It is also likely the Chinese decided on this method for its cost advantages. The raison d’etre for their action is not unique. When you arrive at the Dubai International Airport, the immigration authorities demand a compulsory eye-scan for citizens of certain countries. Let’s just say, I had the road to myself on the way to my hotel. My fellow Emirates Airline passengers were probably long engaged in the activities of nature by the time I finally made it to my hotel.

None of that was going to spoil my party, however. Once I was settled in Shanghai, I couldn’t wait to see The Bund. Incidentally, it was a walking distance from our hotel. The other major attraction for me was the Oriental Pearl TV Tower in Pudong. As nice as Shanghai was, however, I couldn’t wait to get to Beijing. I was going to climb The Great Wall of China no matter what. So yes, after a week, off to Beijing at last. I made sure to visit the sites featured in the film, “The Last Emperor”. On the morning after my arrival in Beijing, my first point of call was The Forbidden City. Words cannot describe the sheer scale of that edifice. Of course, you couldn’t get there without passing through Tiananmen Square. And the crowds. I was like a drop of black ink on a white cloth, a familiar place to say the least. We kept walking from one gate to another. It reached a point when you simply wanted to ask, how many more gates? One thing I did observe was that the names of the gates were written in Arabic. Muslims are mostly in the Xinjiang Province, so I’m not quite sure how that came about. I’m sure there are answers to be found in history. Another addition to a long to-do list, I guess.

The Badaling Great Wall is an hour’s drive from Beijing. Of course, the tour operators make it worth your while by organizing educational stops along the way; museums mostly. There is a legend I’m told about those who climb the Great Wall to the very top. I gather you are supposed to live a very long life if you achieve the feat. There is a lift to the top if you can wait in what seems a never-ending queue. I climbed the Great Wall with some bravado. I managed to convince myself I’d be able to make it to the top. Well, I didn’t. After my knees began wobbling, I finally allowed reason to prevail after reaching midway up the Wall, got a friendly Chinese to take a picture and started on my way back down. The return trip wasn’t as easy as I thought it would be. There were no steps for the greater length of the Wall. The moral of the legend certainly became writ large. If you could climb the wall, if you had the stamina to climb it to the top, then it is likely you had it in you to meander through the ups and downs of life. It was thus reasonable to expect that you’d live long! We’ll know in the fullness of time, I guess. Back in Beijing the same day, I finally got to rest my knees on one of the benches in the surroundings of the Summer Palace. On my way there, while still trying to get a cab, I was accosted by a Chinese woman who said she was a student and wanted to practice speaking English with me (most Chinese you meet on the street assume a seemingly self-assured black is American or British). Let’s just say, I politely declined. It was the wise thing to do. I had no doubt in my mind the entire trip was documented by the Chinese authorities. Being black and some would say tall, it was hard to be missed. What was my overall impression of the trip? Great! It is one thing to learn about a place in a book or movie, it is quite another to visit. The experience of the latter was worth all the trouble.

“The Chinese are our friends”. Kenneth Kaunda, the former President of Zambia is telling Zeinab Badawi of the BBC in April 2014. Africans have a romantic view of the Chinese. In Lagos, Johannesburg and other major African cities, you’ll find posh Chinese restaurants. We love Chinese food (I was hard-pressed to find similar restaurants in China itself!). That esteemed view is not misplaced, however. A civilization that has lasted that long should be admired, copied even. Most African leaders go to China as special guests. They are treated with pomp and pageantry. Whether as students or guests of the government, they returned to their home countries from China, with a favourable view. This is not by accident. The Chinese are some of the shrewdest people in the world. Without experience and knowledge, you do not stand a chance at a negotiating table with the Chinese, however. Africans have been lazy in their relationship with the Chinese. A country of very hardworking people, China is prevailing today because from the very beginning, it understood the singular objective of politics, whether international or local, is to achieve superiority. At the very foundation of this, is first the recognition that no one is responsible for guarding your interests but yourself. Africans cannot expect the Chinese to look out for their interests. In fact, it would be disrespectful for them to do so. So while the Chinese may be accused of neo-colonialism in their relationship with Africa, it needs to be pointed out that all of the hitherto skewed deals with them were not made by force. It was not done under the barrel of a gun. Africa willy-nilly signed away its resources for what seemed like good deals on the face of it, but were really very sub-optimal for the continent. It is the value-chain, stupid! The value chain!

In spite of all these, the Chinese have demonstrated greater will to help lift Africa up than most of our other so-called international “partners”. China-Africa trade reached USD210.2bn in 2013 from just USD10.6bn in 2000. In addition to increased foreign direct investment (USD2.5bn in 2012), it has been sponsoring the setting up of Special Economic Zones in various African countries, a model it used to spur foreign investments at a similar stage of its own economic evolution. China has been investing more in other parts of the world, however. Its USD2.5bn Africa direct investment in 2012 just constituted 4% of its total outward foreign direct investment. What is one’s point? No matter how hard the Chinese try to help us (if you take it their African venture is not self-interested, which it is), Africa would only be lifted up by African capital, African labour, and African innovation! There is no other way. Our friends can only help nudge us on the way. They cannot, however, take us to our destination. They are farther ahead on the road we are all travelling. On infrastructure alone, Africa needs more than USD75bn a year to address its deficit. That is more than twice the USD30bn capital of various kinds the Chinese plan to avail the continent in 2013-15. African financial and multilateral institutions have to start thinking hard about how to intermediate the continent’s own capital for its own development. That is the only way.

Why Africa’s rise has not been inclusive; or has it? Part 2 #Africa, #Nigeria, #WEF, #MDGs, #PovertyAlleviation

A dimension to this debate that is not enjoying, as much attention is the possibility that perhaps there has been more economic growth inclusion in Sub-Saharan Africa (SSA) than the data suggests. Perhaps, it is not only the GDP data that hitherto weren’t reflective of the actual size of some SSA economies. Poverty statistics may very well be inaccurate on the upside as well. Of course, more could be done to accelerate poverty alleviation. But if the data doesn’t reflect more accurately the true state of affairs, some winning strategies may be unknowingly jettisoned as a result. Thus, as mundane as it may seem, getting the data right is a crucial step towards increasing economic and financial inclusion on the sub-continent. The IMF/World Bank and the Bill & Melinda Gates Foundation have been working with some of SSA’s statistical bodies to improve the accuracy and promptness of data coming out of the sub-continent.

 

A case in point is Nigeria (a discussion on Africa inevitably leads back to its largest and most intriguing economy). According to the Nigerian Bureau of Statistics, 72.3% of the country’s households buy mobile phone recharge cards every month. The only other non-food items that enjoyed such a priority in household expenditure were kerosene (72.7%) and soap & washing powder (90.9%). With more than 50% of Nigeria’s populationreported to be below the poverty line, it begs the question of where more than 70% of its households find the money to buy that much recharge cards or even find it in their budgets to purchase them in the first place. Much more revealing is how much they spend.

 

The mean expenditure on phone recharge cards by more than 70% (about the same percentage of its population supposedly living below the poverty line) of Nigeria’s households is 20,874 Nigerian Naira (140 US dollars). Isn’t the much-touted poverty line 1.25 US dollars a day and thus 37.5 US dollars a month? So if we summed up those non-food items that more than 70% of the country’s households spend money on (soap & washing powder, kerosene, and recharge cards), one gets a sense of the typical expenditure of the average Nigerian. The NBS reports monthly mean expenditure of Nigeria’s households on those items as follows: kerosene (6,660 naira (US$44)), soap & washing powder (5,510 naira (US$37)), and as earlier highlighted, US$140 on recharge cards. Thus, Nigerians spend more than 200 US dollars (US$221) on non-food items every month. That is approximately 6 times the poverty line. And one is not aware that they’ve gone hungry as a result.

 

A consumables, services (or in fact aspirational goods) multinational company thus looking to invest in the country (or sub-continent) before the above data was available would have come to the most erroneous decision that there was not enough consumer spending power to warrant a major capital allocation. This is why some of the international corporates already invested on the sub-continent do their own consumer research; earning bountiful profits as a result of course. And who in their right minds would make it widely known that there was such bountiful harvest to be had in what one widely read magazine once dubbed “the hopeless continent”. Well, the cat is out of the bag as they say. The world now knows of the opportunities that abound in Africa. The narratives (or questions) therefore these days about SSA opportunities are not so much if? But where? When? How long? Is it sustainable? How do I manage risks? So if the world is genuinely determined to reduce inequality and increase economic and financial inclusion on the continent, simple! Invest more. Increased investment in the various sectors of the continent’s economies is definitely one way to increase the inclusivity of its continuing high growth.

 

A point to note, however, is how the Africa’s economic evolution has been counterintuitive. Typically an economy should evolve from a primary extractive industry base to manufacturing & construction (secondary industry) and eventually services (tertiary industry). In Africa, the extractive industry remains dominant. In countries where some progress has been made, it has largely been in the services sector (with relatively fewer jobs created). The development of a manufacturing-led economy thus remains a continuing struggle for most countries on the continent. It is a significant factor in one’s view for why SSA’s high growth has not been as inclusive as it could (or should) be. So, another measure to addressing the inclusion question is for African governments and their partners to implement policies aimed at building a strong industrial base. The one policy area that has the most potential of achieving this would be a disproportionate focus on ramping up the continent’s power production capacity. No amount of investments in the continent’s power sector is too much. Of course, it needs to be pointed out that it is the labour-intensive type of manufacturing that is pertinent for Africa at this time.

Why Africa’s rise has not been inclusive; or has it? Part I #Africa, #Nigeria, #WEF, #MDGs, #PovertyAlleviation

The World Bank reports 7 of the 10 most unequal countries in the world are in Sub-Saharan Africa (SSA). Why, some ask, has Africa’s high GDP growth of at least 5% over the past decade not taken as many people as should be the case out of poverty? The question is increasingly being raised as it is now almost certain that poverty would not have been halved by 2015 as envisaged by the United Nations’ Millennium Development Goals (MDGs). Data from the World Bank shows poverty incidence on the sub-continent in 1990 of 56.5% only reduced by 8 percentage points to 48.5% in 2010. The troubling paradox comes against the backdrop of the increasing number of US dollar billionaires on the continent. According to Forbes magazine, the wealth of Africa’s richest man, Aliko Dangote, increased more than 8 times to USD25 billion in 2014 (36% of which was acquired over the past year) from USD3.3 billion in 2008 when he debuted on Forbes’ billionaires list. Yet during that period (2008-10), poverty incidence in Sub-Saharan Africa only reduced by 0.7ppts to 48.5 in 2010 from 49.2 in 2008. Ventures Africa magazine actually reckons Africa’s billionaires have at least USD143 billion in total wealth. That is at least 11% of SSA’s 2013 GDP of USD1.3 trillion.

Incidentally, most of these estimates are quite conservative since they don’t include undocumented (or hidden) and informal wealth acquired or stolen by former dictators and corrupt government functionaries. For instance, the Tana High Level Forum on African Security estimates that at least USD1.8 trillion was illegally acquired and removed from Africa between 1970 and 2009. That is twice (2 times) SSA’s 2009 GDP of USD897 million. Another report jointly authored by the African Development Bank (AfDB) and Global Financial Integrity puts cumulative illicit flows out of Africa between 1980 and 2009 at USD1.2 trillion to USD1.4 trillion. These estimates are not inflation and opportunity cost adjusted by the way. In other words, if the inflation rate during the period were to be considered, the figure could be much more staggering. Never mind the other immeasurable and exponential benefits that could have accrued from spending on education, infrastructure and social grants during this period. In fact, if we assumed that USD1 trillion to USD2 trillion was the wealth accumulated between 1980 and 2009 and further assumed that USD33 billion to USD67 billion was the amount of wealth created each year, the future value using SSA’s average inflation rate of 18% for the same period amounts to USD26 trillion to USD53 trillion. That is 20 to 40 times SSA’s 2013 GDP (and 35% to 70% of the World’s 2013 GDP)! If you think these figures border on exaggeration, let us look at another example. Africa’s largest economy, Nigeria (39% of SSA GDP), earned at least USD643 billion (1.3 times its rebased 2013 GDP) between 1980 and 2009 from crude oil. That is 32-64% of the assumed USD1 trillion to USD2 trillion accumulated wealth in the sub-continent during the period. And Nigeria is just one of 45 countries in Sub-Saharan Africa. Clearly, the inequality gap in Africa has not been for a dearth of resources.

The staggering inequality gap in SSA is certainly a source of worry for its richest. A week before the 2014 WEF on Africa that the continent’s richest man is also co-chairing, Aliko Dangote announced an endowment of USD1.2 billion (c. 5% of his wealth) to his “Dangote Foundation” (founded in 1994) to support education, health and youth empowerment in Nigeria. The foundation’s model is largely based on a concept that is increasingly gaining attention in development circles; cash transfer programmes – according to Forbes, the Dangote Foundation disburses 50-80 US dollars in cash to Nigeria’s poor rural women and youths to start small businesses. Initiatives such as this, if emulated by the many formal (and even more informal or shadow economy) billionaires in Africa would go a long way in accelerating poverty reduction in Africa.

In its upcoming planned two-part 2015 Report on Africa, the World Bank would assess the state of poverty and inequality in Africa and also provide suggestions on how to accelerate poverty reduction on the continent. At a briefing during the Centre for the Study of African Economies (CSAE) Conference of the University of Oxford in March 2014, its officials highlighted their preliminary thoughts on how they reckon Africa’s high growth could be more broadly shared. They include the maintenance of strong macroeconomic discipline, building better human and physical capital, promoting growth in places and sectors where the poor are and the creation of social protection and promotion systems that enable them to be shared. That part about social protection and promotion systems is increasingly gaining resonance amongst officials of the bank and other development experts. Another highly regarded economist at the conference wondered if it was not an attempt at a “latin-americanization” of Africa; a not-so-veiled reference to the likely motivation of the esteemed economists for wanting to experiment with conditional cash transfers (CCTs) in Sub-Saharan Africa because of the relative success of a similar programme in Latin America (Brazil in particular). Its research showed families systematically invested part of the CCTs they received in human and physical capital and even saved as well. It is thus likely the Bretton Woods institution is now convinced the same policy could be adapted for Africa. Simply put, the World Bank reckons CCTs are a real policy option; in addition to sustained economic growth and increased agricultural productivity of course. A significant caveat though is that the potential success of such a policy would be contingent on good governance. Incidentally, that caveat may actually be the key to accelerating poverty reduction in Africa. Most (if not all) of past poverty reduction interventions in Africa have failed principally because of poor governance and corruption.

Cash transfers wouldn’t necessarily constitute an innovation in Africa, however. South Africa devotes a significant portion of its yearly budget to social assistance programmes. Its success with these programmes remain mixed with some critics arguing it has created a culture of dependence and remains a significant point of difference between the country’s ruling and opposition parties. According to South Africa’s Economic Policy Research Institute, social grants helped reduce the poverty rate in the country – for its lowest poverty line set at 131.27 South African Rand (ZAR131.27) in 1993 and ZAR497.45 (approximately 50 US dollars) in 2013 – to 38 percent in 2013 from 45 percent in 1993. So, there is evidence that supports the case for CT/CCT interventions. However, in the same period, South Africa’s unemployment rate increased to 25 percent in 2013 from 20 percent in 1994. A balanced view therefore would likely be that it should be one of a bouquet of policy interventions aimed at accelerating poverty reduction on the continent. To one’s mind, however, the focus should be on good governance. It is the foundation that all policy interventions must build on if they are to succeed.