How Eastern Africa can avoid the resource curse

This post originally appeared on the African Development Bank’s Integrating Africa Blog, where yours truly is a regular contributor. 

Eastern Africa is the new fossil fuel frontier (for more check out this (pdf) Deloitte report). In the last few years Kenya, Uganda, Tanzania and Mozambique have discovered large quantities of commercially viable oil and gas deposits, with the potential for even more discoveries as more aggressive prospecting continues. There is reason to be upbeat about the region’s economic prospects over the next three decades, or at least before the oil runs out. But the optimism must be tempered by an acknowledgement of the dangers that come with the newfound resource wealth. Of particular concern are issues of governance and sound economic management.

We are all too aware of the dangers of the resource curse. This is when the discovery and exploitation of natural resources leads to a deterioration of governance, descent into autocracy and a fall in living standards. Associated with the resource curse is the problem of the Dutch disease, which occurs when natural resource exports (e.g. oil and gas) lead to an appreciation of the exchange rate, thereby hurting other export sectors and destroying the ability of a country to diversify its export basket. The new resource-rich Eastern African states face the risk of having both problems, and to avoid them they must cooperate.

In many ways Eastern African states are lucky to be late arrivals at the oil and gas game. Unlike their counterparts in Western and Central Africa, nearly all of them are now nominal electoral democracies with varying degrees of institutionalized systems to ensure transparency in the management of public resources. Across the region, the Big Man syndrome is on the decline. But challenges remain. Recent accusations of secrecy, corruption and bribery surrounding government deals with mining companies suggest that there is a lot of room for improvement as far as the strengthening of institutions that enforce transparency (such as parliaments) is concerned. It is on this front that there is opportunity for regional cooperation to improve transparency and resource management.

While it is easy for governments to ignore weak domestic oversight institutions and civil society organizations, it is much harder to renege on international agreements and treaties. A regional approach to setting standards of transparency and accountability could therefore help ensure that the ongoing oil and gas bonanza does not give way to sorrow and regret three decades down the road. In addition, such an approach would facilitate easier cross-border operations for the oil majors that are currently operational in multiple countries, not to mention drastically reduce the political risk of entering the region’s energy sector. It would also leave individual countries in a stronger bargaining position by limiting opportunities for multinational firms to engage in cross-border regulatory arbitrage.

The way to implement regional cooperation and oversight would be something akin to the African Peer Review Mechanism, but with a permanent regional body and secretariat (perhaps under the East African Community, EAC). Such a body would be mandated to ensure the harmonization of laws to meet global standards of transparency and protection of private property rights. The body would also be mandated to conduct audits of national governments’ use of revenue from resources. The aim of the effort would be to normalize best practices among states and to institute a global standard for states to aspire more – more like the way aspirations for membership in the European Union has been a catalyst for domestic reforms in the former Yugoslavia and Eastern Europe.

Regional cooperation would also provide political cover to politicians with regard to economically questionable fuel subsidies. The realities of democratic government are such that politicians often find themselves forced to concede to demands for fuel subsidies from voters. But history shows that more often that not subsidies come at an enormous cost to the economy and instead of benefitting the poor only benefit middlemen. In addition, as the case of Nigeria shows, once implemented such policies are never easy to roll back both due to politics and the power of entrenched interests. Regional agreements capping any fuel subsidies at reasonable levels would be an excellent way to tie politicians’ hands in a credible manner, while at the same time providing them with political cover against domestic criticism.

Beyond issues of governance, there is need for cooperation on regional infrastructure development in order to reap maximum value for investment and avoid unnecessary wastes and redundancies. Landlocked Uganda and South Sudan will require massive investments in infrastructure to be able to access global energy markets. The two countries’ oil fields are 1,300 km and 1,720 km from the sea through Kenya, respectively. One would hope that as these projects are being studied and implemented, there will be consideration for how to leverage the oil and gas inspired projects to cater to other exports sectors – such as agriculture, tourism and light manufacturing – as well. KPMG, the professional services firm, recently reported that transportation costs eat up as much as 20 per cent of Africa’s foreign exchange earnings.  There is clearly a need to ensure that the planned new roads and railways serve to reduce the cost of exports for all outward oriented sectors in the region. Embedding other exports sectors (such as agriculture, timber, domestic transport, etc.) in the process of developing new transportation infrastructure will minimize the likelihood of their being completely crowded out by the energy sector.

In isolation, each country’s resource sector policy is currently informed by domestic political economy considerations and regional geo-politics. There is an emerging sense of securitization of resources, with each country trying to ensure that the exploitation of its resources does not depend too much on its neighbours. Because of the relatively small size of the different countries’ economies, the risk of ending up with economically inefficient but expensive pipelines, roads and railways is real. South Sudan is currently deciding whether to build a pipeline through Kenya (most likely), through Ethiopia, or stick with the current export route for its oil through Sudan (least preferred due to testy relations). For national security and sovereignty reasons, Uganda is planning on a 30,000-barrel per day refinery in Hoima, despite warnings from industry players that the refinery may not be viable in the long run. Some have argued for the expansion of East Africa’s sole refinery in Mombasa to capture gains from economies of scale, an option that Uganda feels puts its energy security too much in Kenya’s hands.

In the meantime, Kenya and Tanzania are locked in competition over who will emerge as the “gateway to Eastern Africa,” with plans to construct mega-ports in Lamu and Tanga (Mwambani), respectively. While competition is healthy and therefore welcome, this is an area where there is more need for coordination than there is for competition among Eastern African governments. The costs involved are enormous, hence the need for cooperation to avoid any unnecessary redundancies and ensure that the ports realize sufficient returns to justify the investment. Kenya’s planned Lamu Port South Susan Ethiopia Transport Corridor (LAPSSET) project will cost US $24.7 billion. Tanzania’s Mwambani Port and Railway Corridor (Mwaporc) project will cost US $32 billion.

Chapter 15 of the EAC treaty has specific mandates for cooperation in infrastructure development. As far as transport infrastructure goes, so far cooperation has mostly been around Articles 90 (Roads), 91 (Railways) and 92 (Civil Aviation and Air Transport). There is a need to deepen cooperation in the implementation of Article 93 (Maritime Transport and Ports) that, among other things, mandates the establishment of a common regional maritime transport policy and a “harmonious traffic organization system for the optimal use of maritime transport services.”

The contribution of inefficient ports to transportation costs in the regional cannot be ignored. Presently, the EAC’s surface transportation costs, associated with logistics, are the highest of any region in the world. According to the African Development Bank’s State of Infrastructure in East Africa report, these costs are mainly due to administrative and customs delays at ports and delays at borders and on roads. Regional cooperation can help accelerate the process of reforming EAC’s ports, a process that so far has been stifled (at least in Kenya) by domestic political constituencies opposed to the liberalization of the management of ports. The move by the East African Legislative Assembly to pass bills establishing one-stop border posts (OSBPs) and harmonized maximum vehicle loads regulations is therefore a step in the right direction.

Going back to the issue of governance, more integrated regional cooperation in the planning and implementation of infrastructure development projects has the potential to insulate the projects from domestic politics and patronage networks that often limit transparency in the tendering process. Presently, Uganda is in the middle of a row with four different Chinese construction firms over confusion in the tendering process for a new rail link to South Sudan and port on Lake Victoria. The four firms signed different memoranda with different government departments in what appears to be at best a massive lapse in coordination of government activities or at worst a case of competition for rents by over-ambitious tenderpreneurs.  This does not inspire confidence in the future of the project. A possible remedy to these kinds of problems is to have a permanent and independent committee for regional infrastructure to oversee all projects that involve cross-border infrastructure development.

In conclusion, I would like to reiterate that Eastern Africa is lucky to have discovered oil and gas in the age of democracy, transparency and good governance. This will serve to ensure that the different states do not descend into the outright kleptocracy that defined Africa’s resource sector under the likes of Abacha and Mobutu in an earlier time. That said, a lot remains to be done to ensure that the region’s resources will be exploited to the benefit of its people. In this regard there is a lot to be gained from binding regional agreements and treaties to ensure transparency and sound economic management of public resources. Solely relying on weak domestic institutions and civil society organizations will not work.

Museveni: UN missions stifling state capacity development in Africa

The Daily Nation reports:

Ugandan President Yoweri Museveni has said UN peacekeeping missions [especially in the DRC] are derailing efforts by African governments to end conflicts.

He criticised the UN system of peacekeeping saying: “External support by the UN makes governments lazy and they don’ t focus on internal reconciliation.”

“The mistake is internal actors with no correct vision and the UN which does not focus on internal capacity building but instead focusing on peace keeping all the time. Without the internal solutions, you can’t have peace, ” Mr Museveni said in a statement on Thursday.

Some Congolese and experts on the DRC may disagree with Museveni’s analysis but it has some truth to it. As I pointed out in an African Arguments post several months ago, there is no short cut to fixing the Congo. State capacity development must be THE overriding concern (for more on this see here and here).

Also, The International Crisis Group has a nice piece on the recent takeover of the mining town of Lubumbashi by Mai-Mai fighters. The writer notes:

Since President Joseph Kabila’s controversial election victory in November 2011, government control over DRC territory has been in drastic decline. Beyond the fall of Goma to the M23 rebellion, Kinshasa has failed to repel the activities of various other armed groups: the Mai-Mai Morgan in Province Orientale, the Ituri Resistance Patriotic Front (FRPI) and the Mai-Mai Yakutumba in South Kivu, Rayia Mutomboki in North and South Kivu, as well as the Mai-Mai Gédéon in Katanga. (On the eastern Congo armed groups, see the October 2012 briefing Eastern Congo: Why Stabilisation Failed. On the Katanga armed groups, see the report Katanga: The Congo’s Forgotten Crisis.)

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.

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.

Africa’s Singapore or Uganda waiting to happen?

Yet Rwanda has one huge advantage: the rule of law. No African country has done more to curb corruption. Ministers have been jailed for it. Transparency International, a watchdog, reckons Rwanda is less graft-ridden than Greece or Italy (though companies owned by the ruling party play an outsized role in the economy). “I have never paid a bribe and I don’t know anyone who has had to pay a bribe,” says Josh Ruxin, one of the owners of Heaven, a restaurant in Kigali, the capital.

The country is blessedly free of red tape, too. It ranks 45th in the World Bank’s index of the ease of doing business, above any African nation bar South Africa and Mauritius. Registering a firm takes three days and is dirt cheap. Property rights are strengthening, as well—the government is giving peasants formal title to their land.

That is the Economist on Rwanda. I remain cautiously optimistic about Kagame’s brand of effective authoritarianism. I just hope that he will not be tempted to degenerate into the Musevenis of this world.

Links I liked

I just discovered Chri’s Blog on Madagascar and other Africa-related issues.

For those with a flavor of finance and capital markets and the political economy of development be sure to read Frontier Markets.

Germany is on the hunt for the UN security council seat in Africa.

And lastly, Justice – Uganda style:

Vice president upsets the president during tenure, president fires vice after election. Former vice gets accused of corruption. President declares former vice innocent, but leaves the matter up to the “independent” Inspectorate of Government. Here’s a quote from the president:

“What I know is that there was a power struggle between Bukenya and some businessmen but I found no merit in the case. But since the Inspectorate of Government is an independent body, let them investigate thoroughly.”

Yeah right.

Is Uganda experiencing its 1991 moment?

UPDATE II: Angelo over at TIA offers an analysis of the ongoing situation in the development of Uganda’s oil sector. After months of under-the-table maneuvers by the executive it appears that the Ugandan legislature has finally found its voice. Angelo credits this both on the rise of independents and internal divisions within the ruling party, NRM.

Perhaps in an attempt to deflect from its recent woes the government has also been trying to prosecute those involved in the mega-corruption surrounding procurement for construction projects in the run-up to the commonwealth summit in 2007. Senior officials, including a cabinet minister, have since resigned over this saga.

Many of us thought that the oil money would buy Museveni more time in State House, Entebbe. But the other thing the discovery of oil has done is increase the stakes. It remains to be seen how far Ugandan politicians and their coalitions within and without NRM are willing to go in order to get their fair share of the cake. I would not want to be M7 right now.

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UPDATE: Joel D. Barkan has a nice piece outlining Uganda’s and Museveni’s many challenges are potential scenarios of the continuing struggle for accountable government in Uganda.

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The early 1990s were a heady time on the African continent. Student riots, mass strikes, opposition rallies and international pressure were causing many a one party African dictator sleepless nights.

By dint of history, Yoweri Museveni of Uganda escaped the winds of change that were sweeping through the continent. Having brought stability to Kampala and most of southern Uganda following the 1981-86 bush war, he had gone ahead to preside over the longest stretch of sustained economic growth in Uganda’s history. Many loved him. He was able to sell his weird idea of no party democracy to the masses. As a result Uganda’s first multiparty elections took place in 2006, a full 20 years after Museveni came to power.

But the long honeymoon for Museveni – the champion of Ugandan security and growth since 1986 – appears to be in its twilight. Since the last elections early this year, protests have rocked Kampala and other major urban centres across the country. Earlier today on twitter Ugandan journalist Andrew Mwenda argued that Museveni’s success will be the source of his downfall. Economic growth has created a lot of powerful forces with a lot to lose as Museveni continues to restrict political space in his bid to cling to power.

In a new article in the Journal of Democracy, Angelo Izama, another Ugandan journalist, echoes the same claims. The Ugandan masses can no longer tolerate the regime’s sins of misgovernance. High level sleaze in government, economic mismanagement (recent walk to work riots were in reaction to high inflation, partly related to runaway campaign spending by Museveni) and general fatigue with the overbearing Ugandan securocracy have ignited protests by the masses, beyond those called for by the main opposition party.

By all accounts Museveni is in a tight corner, despite his 68% win in the February 2011 polls.

But as many Uganda experts would quickly add, do not count M7 out just yet. The recent discovery of oil in the Lake Albert region is expected to provide a steady supply of cash to prop up the regime into the immediate future. Furthermore, the Ugandan opposition remains divided and unable to come up with a singular message against the regime’s many failures in the recent past.

That said, the cat appears to have been let out of the bag. Like many of his regional counterparts back in 1991, Museveni will have to make significant concessions if he is to survive the latest street protests.

But just how much time does Museveni have?

In my view, a lot of time. This is partly because Museveni has successfully convinced Ugandans – including many in the opposition and media that are opposed to his rule – that he is indispensable. Many, in the same breath, decry the sleaze and economic mismanagement in his administration but admire his regional military adventurism and opportunistic “independent mindedness.”

There is simply no compelling (and credible) replacement for Museveni in the public psyche (yet). The opposition leader Kizza Besigye, Museveni’s personal physician turned foe, is a pale shadow of his former self.

The other reason is Uganda’s weak civil society – a direct product of the country’s tumultuous history since the mid-1960s. Not enough indigenous independent wealth has been created to support a nascent opposition and civil society movement as was the case in Kenya, among other early experimenters with electoral pluralism, in the early 1990s.

Being the adroit politician that he is, Museveni will definitely play this reality to his advantage into the foreseeable future.

For the sake of Ugandans and the hope of a freer East African Community, I hope I am wrong.

Birthday politics in Uganda

President Museveni’s plans to succeed himself in 2016 have come under fresh attack. Activists in Uganda staged a mock birthday party, complete with gifts, to celebrate Museveni’s 73rd birthday. Police dispersed participants at the mock party and even seized the birthday cake.

The politics behind Museveni’s date of birth stem from the fact that the Ugandan constitution bars those over 75 to run for president. Museveni insists that he is 68, which means that he will be 73 in 2016 and still eligible to run for president. The opposition maintains that based on its own research the president is 73.

It appears that the latest strategy of the Ugandan opposition is to de-legitimize Museveni using his own rules.

So why should Museveni care if a bunch of activists stage a mock birthday party for him?

The beginning of the downfall of authoritarian systems is when the opposition goes legal on the regime. By highlighting the inconsistencies in the legal structure and challenging the regime using its own rules, the opposition forces the regime to continue tinkering with the very same rules.

But tinkering with the rules creates winners and losers within the regime. Ultimately it is those that find themselves with the short end of the stick that jump ship and join the opposition in an effort to oust the ancien regime.

President Museveni should consult with Kenya’s former President Moi on how events unfolded after the fiasco that was the 1988 mlolongo (queuing) election. It will take time, but kila mwizi ako na siku arubaini (every thief has forty days).

You can find the BBC story on the Uganda protests here.

No ICC hearings in Kenya

The ICC Pre-Trial Chamber Judge Ekaterina Trendafilova on Wednesday decided that the trial of suspects of the 2007-08 election violence in Kenya will not be held in the country.

Great move.

I am of the view that holding the hearings in Kenya would have created an unnecessary distraction from the important task of implementing Kenya’s new constitution. Already, the bigwigs accused of masterminding the violence that killed 1300 and displaced over 300,000 Kenyans have ethnicized their predicament. Holding the hearings in Kenya would have handed them an opportunity for a circus of ethnicity-charged rallies and demonstrations in Nairobi.

The ICC continues to be a source of debate in Kenya and across Africa. Many have faulted the court’s apparent bias against African leaders. Some have even called it a form of neocolonialism. While admitting that the court could use a little bit more tact [principally by acknowledging that it cannot be apolitical BECAUSE it is an international court SANS a world government] I still think that it is the best hope of ending impunity on the African continent – at least until African leaders internalize the fact that it is not cool to kill your own people.

Among the cases that should have been handled with a sensitivity to political realities include Sudan and Libya [and may be the LRA in Uganda]. Kenya’s Ocampo Six, the DRC’s Jean-Pierre Bemba and Cote d’Ivoire’s Laurent Gbagbo, on the other hand, should not raise questions of national sovereignty. Murderous dictators and their henchmen do not have internal affairs. In any case sovereignty for many an African country means nothing more than sovereignty for the president and his cronies.

Related posts here and here.

this is how museveni treats the opposition in uganda

Uganda is experiencing hike in food and fuel prices – partly because of the rise in global oil prices but also because of “election money.” The Ugandan opposition has been organizing “walk to work” protests against the government’s inability to tackle inflation. In this video, the main opposition leader in Uganda gets to experience the full force of Museveni’s thugs security forces.

Museveni’s rule in Uganda will only get stronger because of the recent discovery of oil in the country. So much for someone who 25 years ago when he first assumed power was seen to represent a new crop of African leaders who were poised to usher in the era of African prosperity. Increasingly in Museveni I see a bungling but eloquent Paul Biya with a touch of faux egalitarianism.