The potential impact of a Chinese slowdown on Africa’s economies

The FT reports:

For Africa’s non-oil exporters, the collapse in crude prices has provided a cushion. But, with many African countries import-dependent, the depreciation of currencies affects inflation and the cost of imports. It will also put a strain on those nations that have taken advantage of investors’ search for yields to tap into international capital markets.

The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years. “In the past, foreign exchange weakness in Africa was largely shrugged off. Economies adapted and found a way to cope with it, but the recent surge in eurobond issuance has been a game-changer,” says Razia Khan, chief economist for Africa at Standard Chartered.

“Now, when currencies depreciate, external risks are magnified, public debt ratios rise, and perceptions of sovereign creditworthiness alter quite dramatically.”

Prof. Deborah Brautigam of SAIS sees the following happening:

  • Prices for African commodities will worsen, then improve. In recent years, China’s slower growth has pushed down prices for gold, crude oil, copper, platinum and iron ore. South Africa’s mining sector was expected to lose over 10,000 jobs due to lower demand
  • Africa will import even more from China. Cheaper Chinese exports will please African consumers while putting Africa’s manufacturers at a further disadvantage. There will be more pressure for tariff protections
  • [L]ow wages in Ethiopia and elsewhere had been attracting significant factory investment from China. With costs now relatively lower in China, the push to relocate factories overseas will slow. This will save Chinese jobs, but postpones Africa’s own structural transformation.

And concludes that:

In the short term it is hard to see how this devaluation can help Africa, notably its productive and export sectors.

The thing to note is that different African countries have different kinds of exposure to China. The commodity exporters (both petroleum and metals) will be hit hard. The effects will be somewhat attenuated in countries exposed primarily through Chinese FDI and infrastructure loans. Domestic fiscal reorganization and resources from the AfDB and other partners should plug a fair bit of the hole left by declining Chinese investments (although certainly nowhere near all of it). And with regard to sovereign debt, a Chinese downturn might persuade the US Central Bank to delay its planned rate hike — which would be good for African currencies and keep the cost of borrowing low.

Lastly, for geopolitical reasons I don’t see China rapidly reducing its footprint on the Continent. In any case, as Howard French makes clear in his latest book, there is a fair bit of (unofficial) private Chinese investment in Africa. Turmoil back home may incentivize these entrepreneurs to plant even deeper roots in Africa and expatriate less of their profits. The net result will be slower growth in Africa. And like in China, slower growth will challenge prevailing political bargains in democracies and autocracies alike.

Nairobi Matatu Routes on Google Maps

Screen Shot 2015-08-27 at 10.48.26 AM

A screen shot of the commute from Ongata Rongai to Kahawa West

Launching the matatu routes in Google emphasizes the need to study the informal transit networks that shuttle masses of people around in sub-Saharan Africa, southeast Asia, and south Asia. “You’re saying this is part of the system,” said Klopp. And since the GTFS data structure and the Nairobi data are open source, Digital Matatus gives other groups in Mexico City, Manila, Dhaka, China, and elsewhere a plan to collect and disseminate data on their transit. The collaboration has already received requests from around the world to map their cities.

Digital Matatus has also started talks with four more cities in Africa—Kampala, Accra, Lusaka, and Maputo—to use the same methods to map their informal mass transit systems. “So many of our problems in developing cities where you have extreme poverty and awful environmental conditions—they’re always tied in some way to the transport sector,” said Cervero. “It’s very chaotic and unmanaged, so this is a huge first step towards enhancing those services.”

People in Nairobi still use the paper maps because the matatu routes have not changed since their release, and the ultimate goal is a formal transit system with set maps, times, and prices. But hopefully “formal” will still mean you enjoy your commute with twinkling disco balls and a good beat.

Wired has the rest of the story on how this happened here.

This is a cool development that will hopefully inform Nairobi County’s infrastructure planning going forward. It should not take 2.5 hours to travel across the city from Kahawa West to Rongai, a distance of only 24 miles.

How much does it cost to construct an MDG borehole in Abuja?

The Premium Times of Nigeria reports:

Nigeria’s Millennium Development Goals (MDG) office spent N154.2 million to construct a single borehole in Abuja, in a shocking example of contract inflation that has helped undermine the country’s ability to achieve its MDG goals.

Drilling a single borehole drilling in Abuja averages N1.5 million. A hydrology firm told PREMIUM TIMES that the amount should cover drilling and casing, installation of a solar-powered submersible pump, steel tower for the tanks, tanks, pipes, joints & suckers, installation and labour.

The firm allowed an expanded estimate of N10 million if a water treatment facility is included alongside other optional accessories.

The Abuja borehole, constructed at Gwarinpa, an expansive estate in the federal capital, had no such fittings. Indeed, the borehole had long become dysfunctional and was no longer dispensing water to the residents when PREMIUM TIMES visited in June 2015.

Still, the Abuja MDG office told this newspaper it was more concerned with service delivery to the people, than the amount it takes to do so (emphasis added).

“Policy interventions are already risky in the best of circumstances”

Here’s a paragraph to ponder:

Ethnographic nuance is neither a luxury nor the result of a kind of methodological altruism to be extended by the soft-hearted. It is, in purely positivist terms, the epistemological due diligence work required before one can talk meaningfully about other people’s intentions, motivations, or desires. The risk in foregoing it is not simply that one might miss some of the local color of individual ‘cases.’ It is one of misrecognition. Analysis based on such misrecognition may mistake symptoms for causes, or two formally similar situations as being comparable despite their different etiologies. To extend the medical metaphor one step further, misdiagnosis is unfortunate, but a flawed prescription based on such a misrecognition can be deadly. Policy interventions are already risky in the best circumstances. (p. 353)

That’s from political anthropologist Mike McGovern’s review of Paul Collier’s Bottom Billion and Wars, Guns, and Votes.

Also, if you haven’t read McGovern’s Making War in Cote d’Ivoire you should. And for those interested in an ethnographic take on Sekou Toure’s attempts to modernize remake Guinea check out Unmasking the State. It starts off dense (I only read about half the book last summer while on a short trip to Conakry), but gives a good peek into the logics of rule under Toure and the reactions these elicited from Guineans.

H/T Rachel Strohm.

Fascinating case of failed Coasian bargaining

How much would you pay in order not to listen to loud street music while working in your office?

The Washington Post (our new hometown paper) has an interesting story on this:

The band’s brassy riffs at 15th Street and New York Avenue NW always delight the hordes of tourists heading toward the White House. But the very spot that’s proved so profitable for Spread Love to pull in tips has also earned it the enmity of employees at two major Washington institutions: the Treasury Department and the law firm of Skadden, Arps, Slate, Meagher & Flom.

Apparently, the economists in charge of our nation’s financial stability and the attorneys who represent many of our country’s corporate high-rollers and white-collar criminal defendants are struggling to focus inside their offices because the band is so loud. They are hearing Spread Love spreading its love too much.

So the office workers offered to pay the band $200 a week. The band members declined, saying that they typically make that amount in an hour (unverified) from tourists.

The band’s director insists that they can sell the office workers a little quiet, if the price is right (just how much do the office workers value a little quiet while working? And what’s the band members’ opportunity cost of not spreading love?)

Apparently the band’s act is totally legal, as DC’s noise regulations are subordinate to individuals’ first amendment rights.

Also, notice how in certain instances government policies can create value for specific subsets of citizens by simply allocating “property” rights.

On the failure of constitutional engineering in Burundi

Burundi’s post-conflict constitution provides a robust array of formal checks to personal rule. Article 164 mandates a 60-40 Hutu-Tutsi split in National Assembly and 50-50 split in the Senate in order to ensure that the majority Hutu (85%) do not violate the rights of the minority Tutsi (14%). The Batwa (1%) are also guaranteed representation in Parliament through special nomination. Burundi also has a proportional representation (PR) system with a closed list that requires political parties to nominate no more than two thirds of candidates from the same ethnic group. Article 257 of the constitution reinforces the principle of ethnic balance by mandating a 50-50 split in the military. Furthermore, according to Article 300 any amendment to the constitution requires an 80% super-majority in the National Assembly and two thirds of the Senate (this is why Nkurunziza failed in an attempt to amend the constitution in early 2014).

So how did Nkurunziza manage to overcome all these formal institutional checks on his power and engineer a technical third term in office? For answers see here.

Hint: elite consensus on acceptable bounds of political behavior matters a great deal. Looking back, the framers of the Burundian constitution probably should have focused on intra-Hutu balance of power as much as they did on the Hutu-Tutsi balance. Nkurunziza succeeded because not enough Hutu elites (within his own divided party) were willing to punish his blatant contravention of term limits on a questionable technicality. Perhaps they will stand up to him if he tries again in 2020.

The Obama Visit to Kenya: Four Key Issues Deserving Special Attention

This weekend Kenya is hosting the 2015 Global Entrepreneurship Summit. The chief guest at the summit is U.S. president Barack Obama. Mr. Obama is scheduled to hold bilateral talks with his host President Uhuru Kenyatta; and will also give two public speeches on the sidelines of the summit — one at Kenyatta University and another at the Moi International Sports Centre in Kasarani. Here are the things I hope Obama and his team will focus on while in Kenya:

  • Infrastructure Development and FDI: Kenya is currently in the middle of an epic infrastructure investment drive (power generation and transmission, roads, railway lines, ports, and water systems). The most impactful thing the U.S. president can do for Kenyans is to facilitate a more robust involvement by the U.S. private sector in these projects – either through private investment or PPPs (Public-Private Partnerships). And perhaps the most natural place for U.S. companies to put in even more money is Kenya’s buzzing tech scene. IBM, Intel, Google, Microsoft, and GE have led the way. More need to follow.
  • A New Approach to Civil Society Support: The Kenyan government still has a lot to do in terms of governance reforms. But the way partners like the U.S. and the EU approach the challenge needs to change. The 2010 Constitution devolved and, by a large measure, professionalized government in Kenya. Unfortunately, the Kenyan Civil Society appears to not have caught up. The same can be said about political affairs officers in various embassies in Nairobi. The new institutional game is different and favors Think Tanks with deep research benches as opposed to multipurpose activists. Support for the Kenyan Civil Society therefore needs to catch up to this reality. Project cycles need to be elongated. Also, if I were a donor with a large pot of money I would focus a lot of energy in getting governance right in a few of Kenya’s 47 counties as an example to the rest. These subnational units have substantial financial and political resources that make them ideal testing grounds for public policies. They are also sources of future national politicians.
  • Taking Security Seriously: Kenya continues to be mired in the conflict in Somalia as part of the AMISOM mission. The involvement has exposed Kenya to terror attacks by al-Shabaab – the most bloody of which was the Garissa University College attack that left 148 people dead. The U.S. has been a key partner of AMISOM, providing equipment, funds, intelligence, and air support. Given its leverage, America could do more in making sure that Kenya’s involvement in Somalia does not lead to an erosion of KDF’s professionalism. Credible reports have linked KDF officers to the smuggling of charcoal and sugar, activities that line the coffers of al-Shabaab. There is also evidence that the Generals are the ones driving Kenya’s Somalia policy, instead of elected civilians. U.S. support should be predicated on civilian control, a healthy reverence of military professionalism, and an appreciation of the local and regional consequences of American actions in Somalia. America also needs to realize that Kenya is still a young democracy struggling to consolidate rule of law. Unlawful arrests, disappearances, and executions of suspected terrorists who are Kenyan nationals must stop. The fight against al-Shabaab must not be allowed to erode hard fought gains in the quest for rule of law.
  • A Constructive Political Engagement About Reforms: The U.S. can help Kenya clean up its public sector through reforms founded on political reality. For example, presently corruption appears to be worsening in the country. This is both a function of media exposure and dispersal of power. More people in government now have access to state coffers – mainly throught the tender process (as a result tenderpreneurs abound). Corruption is also political. The president is ultimately a politician who wants to be reelected. the same applies to MPs and Governors and Senators. Many of them engage in corruption as a means of campaign finance (Harambees are expensive). Tackling corruption therefore requires more than mere moralizing about its ills on society. All involved must be willing to address the hard and uncomfortable truths about the political economy of the vice. This would mean, for instance, coming up with a way to allow politicians access to campaign money in a legal and transparent manner. It may also entail some form of amnesty for past offenders (you can’t jail the entire public service). Corruption in Kenya is not a simple law enforcement problem. The same logic applies to other reform initiatives. They are likely to succeed if grounded on political realities, instead of some notion of a moral failing among Kenyan politicians.

Here are some pieces I liked about Obama’s trip to Africa:

– Charles Kenny on why Obama is selling Africa short

– Todd Moss on Obama’s missed opportunity in Africa 

– The challenges facing power Africa in Nigeria

Presidential Salaries in Africa

Paul Biya of Cameroon earns $610,000 per annum, 229 times the earnings of the average Cameroonian.* Screen Shot 2015-07-22 at 10.31.57 PM

Think about it for a second: Paul Biya earns $210,000 more than Barack Obama.

Notice that these figures do not include all manner of allowances.

Source: Daily Nation

*Note that the interns at the Daily Nation mixed up Mauritania and Mauritius. The CNN bug is contagious.

The politics of unemployment numbers

I just discovered the website Africa Check. It’s a fantastic resource dedicated to “sorting fact from fiction.” Three posts caught my eye, on unemployment numbers in Nigeria, Zimbabwe, and South Africa.

In Zimbabwe:

Zimbabwe’s unemployment rate is 4%, 60%, or 95% depending on who you ask. The ruling ZANU-PF, in a campaign manifesto, admitted that the rate was 60%! You know things are really bad when a ruling party (in an election year!) says that this big a proportion of the working-age population is unemployed. The World Bank apparently claims that the rate is closer to 5.4%.

In Nigeria:

The state stats agency controversially claimed that the unemployment rate is only 7.5% (for the last quarter of Goodluck Jonathan’s presidency). Tolu Ogunlesi then offered this explainer on how the government arrived at the number. The numbers suggest that the actual figure varies from 7.5 to 24.2 depending on the choice of cut-off for what it means to be employed. 

And in South Africa:

ANC claims that the unemployment rate at the end of 2013 was 21.9% but skeptics insist that the actual figure closer to 24.1%. 

World Bank Recruitment Drive for African Nationals

Are you a national of an African country? Do you have a Masters’ degree and are interested in working for the World Bank Group? Then be sure to apply here before AUGUST 31, 2015. The positions (covering 22 different issue areas) may be based either in DC or in country offices.

“Qualifications for the entry level is a Master’s degree plus 5 years of relevant professional experience. For mid-career professionals, the requirements are a Master’s degree plus 8 years of relevant professional experience. Ideal candidates for these positions must have a demonstrated capacity for strategic thinking, the ability to conduct dialogue on relevant development policies and priorities, and be fluent in English with very good writing and communication skills.

All applications must be received by August 31, 2015. Applications received after the closing date will not be considered.”

More on this here.

H/T Teresa