Econometric evidence against Dodd-Frank as applied in the DRC

This study is the first to provide econometric evidence of the relationship between conflict and mineral endowments in the DRC. While there are vivid debates and speculations around the motives of armed groups, I find that price shocks lead to armed groups violence, between groups and in order to acquire territory hosting the mineral (not to more pillages). This result is in line with other reports based on qualitative data, such UN (2002). Second, I find that interventions aimed at constraining armed groups ability to collect taxes increase violence against civilians in the short-run. Interventions that attempt to weaken armed groups finances have become dominant among policy circles. In particular, the United States issued the Dodd-Frank legislation in 2012, aimed at constraining purchases of minerals whose trade is a source of finance to armed groups. Governments interested in “cleaning” the mineral chain, thus, may need to protect civilians in the aftermath of these interventions, and provide alternative occupations to combatants who lose access to revenues from taxes as a result of these interventions. 

That is Columbia’s Raul Sanchez de la Sierra in a neat paper on the origins of states. Check it out here (H/T Chris Blattman)

For more on this subject see this over at HuffPost.

The 2013 Resource Governance Index

The 2013 Resource Governance Index (published by the Revenue Watch Institute) is out. The top performing African countries include Ghana, Liberia?, Zambia and South Africa, with partial fulfillment. The bottom performing countries are Equatorial Guinea, Zimbabwe, South Sudan, the Democratic Republic of Congo and Mozambique.

The 58 nations included in the report “produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper.” Ghana, where we are doing some evaluation  work on extractive sector transparency initiatives, is the best performing African country on the list. Image

More here. 

And in related news, The Africa Progress Report was released last week. The report details the massive loss of revenue by African governments through mismanagement – either by commission and/or omission – of extractive resources. For instance:

The report details five deals between 2010 and 2012, which cost the Democratic Republic of the Congo over US$1.3 billion in revenues through the undervaluation of assets and sale to foreign investors. This sum represents twice the annual health and education budgets of a country with one of the worst child mortality rates in the world and seven million pupils out of school.

The DRC alone is estimated to have 24 trillion dollars worth of untapped mineral resources.

The most bizarre case of resource management in Africa is Equatorial Guinea, a coutnry that is ranked 43rd on the global per capital GNI index but ranks 136th on the Human Development Index (2011).

Below is a map showing flows related to Africa’s vast resources:

RESOURCE-MAP

Thoughts from Sierra Leone

“Many Westerners I met in West Africa took it as an article of faith that all of the region’s woes were the result of outside malfeasance – someone else’s fault, going back to colonialism and the slave trade. After two years in Freetown I not only cannot agree, but I think such views – promulgating as they do an abdication of responsibility – are bad for Africa. The Western world undoubtedly committed atrocities to the continent. But today it is up to Africans to carve out a brighter future for themselves.”

That is Simon Akam in a piece reviewing his time in Sierra Leone that has sort of gone viral.

It is the kind of thinking that I wish informed all of the West’s engagement with Africa. Most of Africa’s problems are African. Period.

Africa does not need Oxfam to tell the world to forget about its wars and famines and instead focus on its natural beauty or whatever else that is more positive. It is not the responsibility of Oxfam to feed Africans but that of the kleptocratic African ruling elite. The Oxfams of this world only serve to let Africa’s Mobutus off the hook.

When an African head of state appoints his son as defense minister and then cannot beat back a ragtag rebel alliance armed with AKs on jeeps we should not send troops to help him. He should be left to stew in his own soup.

For far too long the predominantly humanitarian approach in dealing with Africa has allowed the absolute triumph of absolute mediocrity in much of the continent. This must change if Africa is to consolidate the political and economic gains made over the last two decades.

Capital flight continues to plague poor nations

According to the Center for International Policy:

“Exactly 10 times the $100bn spent on aid and debt write-offs by rich countries is siphoned out of developing countries, with corporations responsible for 60 per cent of that figure through a web of trusts, nominee accounts and the flagrant mispricing of goods to escape tax………

Cracking down on tax havens and the evasion of taxes by some of the world’s biggest companies is seen as the ‘missing link’ in the poverty alleviation agenda.”

This got me thinking, perhaps naively, why it is that rulers (i.e. presidents and their entourage, most of whom fuel capital flight) in the Global South cannot secure their own property rights.

It makes sense that Mobutu and Co. (perhaps the worst pilferers ever) did not invest in Zaire (presently the moribund DRC) and so siphoned (or allowed allied firms to do so) billions abroad because the country lacked attractive investment options, mostly because of weak property rights. But it is also true that throughout his over three decades in power he and his buddies were perhaps the best placed Zaireans to secure their own property rights. Why didn’t they do it?

The quick answer might be that they had a very limited subjective time horizon and lived in constant fear of coups.

Most of the arguments out there stop here. Time horizon is king. Limited time horizons are bad for long-term investment. Yada yada yada.

But shouldn’t we also expect that after say 10 years in power a leader or elite group updates and realizes that may be they are there to stay, and start laying the foundation for local use of stolen wealth? Some certainly have – Kenya’s Moi and his henchmen come to mind.

The reasons for these leaders to invest locally are legion. The state of the roads, hospitals (think of say Ugandan elites who have to fly to Kenya or South Africa for medical care), insecurity (in Kenya MPs have been attacked by armed robbers), schools, etc etc in these places make it such that an average person in say Palo Alto enjoys a much higher standard of living than some of the wealthier people in the Global South.

What is the point of living in Kinshasa with billions in Europe, and with only one life to live? At what point does it make sense to use some of the money to improve the living standards (even in the most selfish way) in the place where one actually lives?

At the very least, don’t these guys mind the very dusty roads to their residences?

PS: The local use of wealth is, of course, relative. Even Chinese leaders, despite their massive domestic investments, still stash money abroad where property rights are more secure.

Who is the M23?

Jason Stearns over at Congo Siasa provides a link to a backgrounder worth reading on the rebel group.

Also with regard to the M23, Onyango-Obbo of the East African has some advice for Kabila:

In the past 15 years, the Banyamulenge have fought the same fight in the DRC [ “the persecution of the Congolese Tutsis”]. Kabila can be smart, offer them a political deal and save DRC, or choose the destructive path preferred by successive Congolese governments of recent years and lose eastern DRC — or even power in Kinshasa.

Criticisms and ultimatums to the eastern DRC rebels like that issued at last week’s Kampala emergency summit, and international condemnation and sanctions, will not change that fact.

I share Onyango-Obbo’s view on this matter.

The international community’s singular focus on the humanitarian disaster in eastern DRC (caused by Rwanda’s and Uganda’s meddling) is giving Kabila a chance to kick the can down the road one more time – until the next time that a group of a few hundred men with guns chase his troops out of town and kill and rape and loot and cause all manner of harm to innocent civilians while they are at it. Then the same dance will be orchestrated – condemnations from the UNSC and bloggers, regional summits, a few resolutions that never get implemented, etc.

The present hue and cry in the media about the M23 misses the fact that you can’t simply wish away the de facto power imbalances in eastern Congo by appealing to humanitarian concerns. The woefully incompetent FARDC and the Kinshasa government cannot tackle the better organized rebels backed by more savvy armies in Uganda and Rwanda.

To end the conflict in eastern Congo Kabila must give a lot of concessions to the rebels. Without concrete concessions the conflict will merely have been postponed to a later date.

The alternative is for Kabila and his Kinshasa cronies to wake up one day and decide to lead a competent government and national armed force that will deter Rwanda, a country that is 88 times smaller with almost 7 times fewer people, from meddling within their country’s territory. That is, if they can.

What Obama’s re-election means for US Africa Policy

On the 14th of June this year President Obama outlined his policy for Sub-Saharan Africa. Included in the policy statement were four key strategic objectives: (1) strengthen democratic institutions; (2) spur economic growth, trade, and investment; (3) advance peace and security; and (4) promote opportunity and development.

In my view, of the four aspirational goals the one that will receive the most attention in the near future will be the third (especially security).

US strategic security interests in Africa mainly involve two key concerns: (1) China’s growing economic presence in the region and (2) the spread of Al-Qaeda linked groups in the region, stretching from Somalia to Mauritania (This is why Mali featured more prominently than the EU in the Presidential foreign policy debate). Before talking about China, here are my thoughts on the US campaign against  al-Qaeda in Africa.

While I don’t foresee any success in the creation of an African base for AFRICOM, the US will continue to cooperate with AU member states in fighting Islamist extremism in the region. The “successful” AU mission in Somalia could provide a blueprint for future operations against potential terror groups. The biggest lesson from Somalia is that the US cannot just pick one nation (in this case Ethiopia) to fight its wars in the region, and that a collaborative effort with the blessing of the regional umbrella organization (the AU) and others such as IGAD can deliver results.

Having helped (both directly and indirectly) in the ouster of Al-Shabaab from strategic locations in Somalia, the next big task will be dealing with the mushrooming Islamist extremism in the Sahel (especially in northern Mali but also in Niger and Nigeria).

The problem of extremism in the Sahel is further compounded by the link of some of the groups to the drug trade flowing from Latin America and into Europe. There is significant evidence that drug money has financed the activities of separatist groups in northern Mali. The fight against these groups will necessarily involve dealing with this crucial source of finance. This means that for the operation to succeed the US will have to engage in capacity building and the strengthening (and clean-up) of security institutions (especially the armies) in states like Guinea, Guinea-Bissau, South Africa, Kenya, among others, in which officials in the security sector have been implicated in the drug trade.

The Sahelian challenge might yet prove more formidable than Somalia. The latter case had relatively stable neighbors that served to contain the anarchy. The Sahel (Sahelistan, if you will) is much larger and includes some of the least governed spaces on the planet.

On China, the US (and for that matter, the rest of the West) has to change its present approach of total freak-out overt suspicion over Chinese involvement in Africa. Africans need protection from China only as much as they need protection from the West. China is not out to “exploit” Africa any more than the West has. Nobody should expect China to engage Africa more benevolently than the West did for the better part of the last 60 years (Mobutu and Bokassa were not that different from Bashir and Mugabe).

A constructive approach ought to include policies designed to strengthen African states so that they can engage China on their own terms. It is ultimately African leaders who mortgage their resources and sovereignty to China (or the West). Instead of focusing too much on China, a better approach might be one that creates strong regional organizations (like the SADC or the EAC) that can improve the bargaining power of African states.

The other policy objectives outlined by Obama appear to fall in the business-as-usual category. Democracy promotion will not yield much in the face of other more pressing priorities (notice how security has triumphed over democracy in Mali). And unless the US is willing to get involved in massive infrastructure projects like China has (last time I checked they were in 35 African states), I don’t see how it can help spur economic growth in the region (AGOA was great, but Africa needs something better). Plus the US continues to be hampered in its development-promotion efforts by its aversion to state industrial policy. It’s about time Foggy Bottom realized that it is really hard to have a thriving private sector and American-style free enterprise in places with bad roads, very few (and bad) schools, and governments that are run by personalist dictators. In these instances some corruption-laden developmental state policies may be the best way to go.

A Ugandan journalist and a politician respond to Kony 2012

Angelo Izama, Ugandan journalist (and a good friend of yours truly) has a thoughtful op-ed piece in the Times. He makes the case that:

Campaigns like “Kony 2012” aspire to frame the debate about these criminals and inspire action to stop them. Instead, they simply conscript our outrage to advance a specific political agenda — in this case, increased military action.

African leaders, after all, are adept at pursuing their own agendas by using the resources that foreign players inject and the narratives that they prefer — whether the post-9/11 war on terror or the anti-Kony crusade. And these campaigns succeed by abducting our anger and holding it hostage. Often they replace the fanaticism of evil men with our own arrogance, and, worse, ignorance. Moreover, they blind us by focusing on the agents of evil and not their principals.

At the same time over at FP Nobert Mao, politician from northern Uganda and former presidential candidate, has the following to say:

It’s clear that the aim of the video [Kony 2012] was never intellectual stimulation. I don’t think the founders of Invisible Children are the foremost analysts of the complicated political, historical and security dynamics in our troubled part of Africa. They certainly wouldn’t earn high marks in African Studies. But I will go to my grave convinced that they have the most beautiful trait on earth — compassion.

Such sentiments matter, even today.  There are those who say the war is over in Northern Uganda. I say the guns are silent but the war is not over. The sky is overcast with an explosive mix of dubious oil deals, land grabs, arms proliferation, neglected ex-combatants, and a volatile neighborhood full of regimes determined to fish in troubled waters. What we have is a tentative peace. Our region is pregnant with the seeds of conflict. The military action in the jungles of Congo may capture Kony, but we need to do more to plant the seeds of peace founded on democracy, equitable development, and justice. Like peace, war too has its mothers, fathers, midwives, babysitters, and patrons. Perhaps Kony 2012 will help sort out the actors. The video has certainly shaken the fence, making fence-sitting very uncomfortable, indeed.

The two may disagree on the usefulness of tactics such as those that made the now famous video, but they certainly agree on the need to acknowledge agency of local actors in all these problems that require outside intervention.

My two cents on this is that there is definitely room for Africans to shape the narrative and tactics of advocacy in Western capitals (or elsewhere). Emotionally charged  mobilization tactics, like Kony 2012, are definitely a distraction from the real issues. But they also present an opportunity for African actors to leverage international attention and support against their own leaders who refuse to deal with problems that affect their daily lives. I am glad that in the case of Kony 2012 Ugandans have stepped in to provide perspective on the narrative and, hopefully, influence the eventual response by the relevant policymakers in DC.

$500 million, and for what?

Congolese go to the polls on Monday, the 28th of November. The result of the election is almost a foregone conclusion. Incumbent president Joseph Kabila looks set to win another term in office – another 5 years to continue the mismanagement of the DRC’s resources through shady mining deals.

According to the Economist:

Whatever the result, doubts about the election’s fairness will persist, not least because of a perception that the electoral commission’s head is a friend of the president. Logistical problems are also ubiquitous, despite an election budget of $500m or so. As well as 11 presidential candidates, 18,000 hopefuls, including several pop stars and a rebel leader accused of ordering the rape of more than 300 women in eastern Congo last year, are contesting 500 seats in parliament. Some of the ballots will exceed 50 pages, which will surely daunt even the minority of voters who can read.

(Read the whole piece here)

If I were in charge of the promotion of democracy in the DRC I would push for a system of staggered elections, both nationally and at the provincial level. I would also try and broker a deal to create a government of national unity in Kinshasa (representing the provinces) and competitive elections at the provincial level. In my view, the longer that everyone keeps pretending that the Congo – with its 70m+ and landmass the size of Western Europe – can be run by a single central government in Kinshasa – the longer it will take to put the country on the path of institutional development that will be conducive to long run economic growth.

Centralized state development definitely makes sense for smaller African states (think of the infamous trio of the Mano River basin). But if you are the DRC, capacity development in the capital must necessarily be accompanied by the strengthening of institutions at the provincial level – with more emphasis, in my view, on the latter than the former.

The number one problem facing the DRC right now is woeful state incapacity. It is doubtful that elections alone will force politicians’ hand in the right direction.

For more on the elections follow Congo Siasa.

The Consequences of Dodd-Frank in the Kivus

The dusty streets of Goma, North Kivu’s capital and a mining hub, illustrate Congo’s ills. Metals dealerships dominated the city’s economy until last year but are mostly padlocked now. Repair shops and bars that relied on mining business are empty. So are most public offices. Local government, financed by mining taxes, is insolvent; salaries have not been paid in full for months.

In the past year Goma has suffered a miserable decline. Hundreds of mines in the surrounding countryside have cut output by as much as 95%. At the Humule coltan mine a few gumbooted miners scramble up a red-earth ravine where last year there were thousands. Most stopped coming because they could no longer find buyers for their nuggets of coltan, a metal used in electronic gadgets. They blame what they call “the American law”.

That is the Economist reporting on the mining sector in the DRC.

Dodd-Frank (found here) is a lesson in the failure of solutions imposed from 30,000 feet. As has been stressed by many DRC experts (see Mvemba, Aronson and Seay, for instance), the problem with eastern DRC is not a law enforcement problem but a weak state problem.

With that in mind, it is sad that Joseph Kabila, the man who has failed to pacify the country, is poised for reelection this November. Good governance, even in relatively peaceful and cohesive states, take a long time to evolve. Once can only imagine how much longer Congolese will have to wait before they can get an effective and accountable state.

For  a slightly different opinion check out AFJN.

quick hits

Mau Mau veterans allowed to sue the UK government for atrocities committed during Kenya’s independence rebellion. The court might have just opened a pandora’s box for a whole lot of lawsuits.

Kim on the ongoing protests in Malawi. Kenya’s Daily Nation reports that at least 12 people have died in the protests over the last two days.

Pardhan on the limits of the NGO movement in global development.

Some cool graphics showing the cellular connection map of the US.

The US will, after all, be sending humanitarian aid to Al-Shabab controlled areas suffering the ongoing famine in Somalia. I hope this does not turn into a farcical repeat of Ethiopia in the 1980s. Back then food aid was used as a weapon of war by both government and Meles Zenawi’s rebel forces.

Lastly, remember Glencore? The firm that has been involved in not so clean mineral deals in the DRC? Well, they are now in South Sudan. I hope Juba doesn’t go this route. You can’t stay clean while playing with someone covered in mud.