Africans Covered 98% of the Cost of Administering Colonial French West Africa (AOF)

Elise Huillery writes in the Journal of Economic History:

What share of French expenditure was allocated to West Africa? What share of West Africa’s revenue was provided by France? These two questions are crucial since scholars and politicians who claim colonization had a “positive role” make essentially the two arguments that the colonies benefited from imperial public investments and that mainland taxpayers sacrificed local investments for investments in the colonies.

I find that the costs of AOF’s colonization for the metropolis were low. From 1844 to 1957 France devoted on average 0.29 percent of its public expenditures to AOF’s colonization. Colonization of French West Africa was profitable for France to the extent that the impact on cumulative domestic production exceeded 3.2 billion 1914 francs. The military cost of conquest and pacification accounts for the vast majority (80 percent) of the average annual cost. The cost of central administration in Paris accounts for another 4 percent. So subsidies to AOF account for only 16 percent of the average annual cost, meaning that less than 0.05 percent of annual total metropolis public expenditures were devoted to AOF’s development.

For French West African taxpayers, French contribution was not as beneficial as has been argued. From 1907 to 19578 the metropolis provided about 2 percent of French West Africa’s public revenue. Local taxes thus accounted for nearly all of French West Africa’s revenue. These resources supported the cost of French civil servants whose salaries were disproportionally high compared to the limited financial capacity of the local population. Administrators, teachers, doctors, engineers, lawyers, and so on, were paid French salaries and got an additional allowance for being abroad. Thus, in the colonial public finance system, most revenues were collected on an African basis while being spent on a French basis. To illustrate this point, I show that colonial executives (eight governors and their cabinets) and district administrators (about 120 French civil servants) together accounted for more than 13 percent of local public expenditures.

The rest of this very fascinating paper is here.

Besides the headline finding, also interesting in the paper are: (i) the extent to which Paris subsidized private firms involved in the colonial enterprise; and (ii) the structure of the public finance system that allowed the AOF administration to borrow directly from French banks with the full backing of Paris (which allowed for lower rates). This might explain the persistence of the monetary relationship between former AOF territories and Paris in the form of the CFA and a common central bank (BCEAO).Screen Shot 2015-07-05 at 12.05.23 AM

As I keep saying, Economic History is hot again. And sooner rather than later it’s going to become more apparent to more people that African political and economic history did not begin in 1960, or for that matter in 1884-5. And neither was it just about the unimaginably catastrophic Atlantic experience.

Quick thoughts on presidential term limits and the political crisis in Burundi

The president of Burundi is about (or not) to join the list of African leaders who have successfully overcome constitutional term limits in a bid to hang on to power. Currently (based on observed attempts in other African countries and their success rate) the odds are roughly 50-50 that Mr. Pierre Nkurunziza will succeed. The last president to try this move was Blaise Compaore of Burkina Faso who ended up getting deposed by the military after mass protests paralyzed Burkina’s major cities.

Successful term limit extensions have so far happened in Burkina Faso (first time), Cameroon, Chad, Djibouti, Gabon, Guinea, Namibia, Togo, and Uganda. Presidents have also tried, but failed, to abolish term limits in Burkina Faso (second time), Malawi, Niger, Nigeria, Senegal, Zambia. Countries that are about to go through a term limit test in the near future include Angola, Burundi, Republic of Congo (Congo-Brazzaville), the Democratic Republic of Congo (DRC), Liberia, Rwanda, and Sierra Leone. Heads of State in Benin, Cape Verde, Ghana, Kenya, Mali, Mozambique, Sao Tome e Principe, Tanzania, and Namibia (after Nujoma) have so far obeyed term limits and stepped down at the end of their second constitutional terms.

To the best of my knowledge only Sudan, The Gambia, Equatorial Guinea, and Eritrea have presidential systems without constitutional term limits. Parliamentary systems in South Africa, Lesotho, Swaziland, Ethiopia, and Botswana do not have limits, although the norm of two terms exists in Botswana and South Africa (and perhaps soon in Ethiopia?).

So what we see in the existing data is that conditional on *overtly* trying to scrap term limits African Heads of State are more likely to succeed than not (9 successes, 6 failures). However, this observation doesn’t tell us anything about the presidents who did not formally consider term limit extensions. For instance, in Kenya (Moi) and Ghana (Rawlings), presidents did not initiate formal debate on the subject but were widely rumored to have tried to do so. So it’s probably the case that presidents who are more likely to succeed self-select into formally initiating public debate on the subject of term limit extension, thereby tilting the balance. And if you factor in the countries that have had more than one episode of term-limited presidents stepping down, suddenly the odds look pretty good for the consolidation of the norm of term limits in Sub Saharan Africa.

I wouldn’t rule out, in the next decade or so, the adoption of an African Union resolution (akin to the one against coups) that sanctions Heads of State who violate constitutional term limits.

So will Nkurunziza succeed? What does this mean for political stability in Burundi? And what can the East African Community and the wider international community do about it? For my thoughts regarding these questions check out my post for the Monkey Cage blog at the Washington Post here.

Correction: An earlier draft of this post listed Zimbabwe as one of the countries without term limits. The 2013 Constitution limits presidents to two terms (with a minimum of three years counting as full term (see Section 91).

Africa’s newfound love with creditors: Bond bubble in the making?

I know it is increasingly becoming not kosher to put a damper on the Africa Rising narrative (these guys missed the memo, H/T Vanessa) but here is a much needed caution from Joe Stiglitz and Hamid Rashid, over at Project Syndicate, on SSA’s emerging appetite for private market debt (Africa needs US $90b for infrastructure; it can only raise $60 through taxes, FDI and concessional loans):

To the extent that this new lending is based on Africa’s strengthening economic fundamentals, the recent spate of sovereign-bond issues is a welcome sign. But here, as elsewhere, the record of private-sector credit assessments should leave one wary. So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?

…….Evidence of either irrational exuberance or market expectations of a bailout is already mounting. How else can one explain Zambia’s ability to lock in a rate that was lower than the yield on a Spanish bond issue, even though Spain’s [which is not Uganda…] credit rating is four grades higher? Indeed, except for Namibia, all of these Sub-Saharan sovereign-bond issuers have “speculative” credit ratings, putting their issues in the “junk bond” category and signaling significant default risk.

The risks are real, especially when you consider the exposure to global commodity prices among the ten African countries that have floated bonds so far – Ghana, Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania.

In order to justify the exposure to the relatively higher risk and lending rates on the bond market (average debt period 11.2 years at 6.2% compared to 28.7 years at 1.6% for concessional loans) African governments must ensure prudent investment in sectors that will yield the biggest bang for the buck. And that also means having elaborate plans for specific projects with adequate consideration of the risks involved.

Here in Zambia (which is heavily dependent on Copper prices), the Finance Minister recently had to come out to defend how the country is using the $750 million it raised last year on the bond market (2013-14 budget here). Apparently there was no comprehensive plan for the cash so some of the money is still in the bank awaiting allocation to projects (It better be earning net positive real interest).

“They are fighting each other. By the time they have projects to finance, they will have earned quite a lot of interest from the Eurobond money they deposited. So, all the money is being used properly,” he [Finance Minister] said.

Following the initial success the country’s public sector plans to absorb another $4.5b in debt that will raise debt/GDP ratio from current ~25% to 30%. One hopes that there will be better (prior) planning this time round.

Indeed, last month FT had a story on growing fears over an Emerging (and Frontier) Markets bond bubble which had the following opening paragraph:

As far as financial follies go, tulip mania takes some beating. But future economic historians may look back at the time when investors financed a convention centre in Rwanda as the moment that the rush into emerging market bonds became frothy.

The piece also highlights the fact that the new rush to lend to African governments is not entirely driven by fundamentals – It is also a result of excess liquidity occasioned by ongoing quantitative easing in the wake of the Great Recession.

I remain optimistic about the incentive system that private borrowing will create for African governments (profit motive of creditors demands for sound macro management) and the potential for this to result in a nice virtuous cycle (if there is one thing I learned in Prof. Shiller’s class, it is the power of positive feedback in the markets).

But I also hope that when the big three “global” central banks start mopping up the cash they have been throwing around we won’t have a repeat of the 1980s, or worse, a cross between the 1980s (largely sovereign defaults) and the 1990s (largely private sector defaults) if the African private sector manages to get in on the action.

African governments, please proceed with caution.

Georgetown MSFS Launches New Africa Scholarship

The application deadline is January 15, 2014. Spread the word.

Starting in fall 2014, the Master of Science in Foreign Service (MSFS) at Georgetown University is offering a full- tuition scholarship for a talented graduate student from sub-Saharan Africa.

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MSFS is a two-year, full-time graduate degree program in international affairs. Students will take courses in international relations, international trade, international finance, statistics and analytical tools and history. In addition, students choose an area of concentration such as International Relations and Security, International Development or International Business.

Do African leaders have a voice?

That is the question asked by Africa Is A Country:

These days, well-behaved African heads of state are rewarded by Barack Obama with the chance to meet with him in groups of four and have their picture taken with him. It’s like meeting Beyonce, but you get to call it a state visit. That’s what happened on Friday when Malawi’s Joyce Banda, Senegal’s Macky Sall, Cape Verde’s José Maria Neves and Sierra Leone’s Ernest Bai Koroma were paraded before the White House press corps, sitting in star-struck silence as Barack reeled off a kind of wikipedia-level roll-call of their accomplishments. They beamed like competition winners. It was all very feudal.

….. The East African called it as they saw it: “The meeting was to reward them for their support for US interests in Africa.” Though some others wanted to be there. In Uganda, some sites were wringing their hands over why Museveni hadn’t been invited.

The post raises an important question especially with regard to the recent rise in African assertiveness. Most of this has been restricted to elite circles with regard to the ICC and general Western meddling presence on the continent. 

Among the many posts I hope to write soon – the dissertation and life permitting – is one on African IR (yes, African International Relations). For a very long time the Continent has engaged the world in disaggregated terms – mostly as a result of individual weakness. But recently some countries have realized their power (For instance Uganda and Kenya in their military and diplomatic usefulness, respectively) and are more than willing to exercise those powers. The realization of individual power has also catalyzed a tendency to use the regional bloc – the AU – as a leverage in wider international engagements (I expect Kenya’s president-elect Uhuru Kenyatta to use the AU a lot in dealing with the charges he faces at the ICC). 

And among the African elite I expect a new sense of self-confidence, with calls like these to become louder and more common. Whether the Western governments (and regular Western Africa watchers) will adapt fast enough or be caught flat-footed is still unclear, especially after the ill-considered and tactless obvious attempt to influence the outcome of the Kenyan election. Also worth considering is whether this new-found African assertiveness will result in actual progress and attempts at catching up with the developed world or turn out to be a mere echo of the empty rhetoric of African pride – a la Zaireanization – that was championed by a kleptocratic navel-gazing African elite of decades past.

In which I write about Africa’s emerging drug problem

The globalization of terrorism over the last decade has created a situation in which the number one threat to international security is no longer strong, conquering states, but failing ones that provide safe havens for terrorist organizations. Drug trafficking in Africa reflects the heart of this concern. The illicit trade is both contributing to the deterioration of state institutions – which could result in state collapse – and financing terrorist groups like AQIM and Al-Shabaab. So far the international community has not treated the matter with the urgency it deserves. The consequences of inaction will be dire, as has already been seen in Central America. The region’s misfortune of being an important transit route between South American cocaine production centers and North American consumers has resulted in the highest murder rates in the world, fueled by transnational organized crime and drug trafficking. The statistics are astonishing: Among 20-year old men in some Central American countries, 1 in 50 will be murdered before they are 32Africa, a region already replete with weak states, might be next if drug trafficking on the continent continues to grow.

More on this here.

In which I write about elections and democratic consolidation..

I have a piece in the July issue of the Journal of Democracy emphasizing the need to focus on legislative elections just as much as presidential elections.

Reflecting the immense powers of the typical “big man” president on the Continent, many election watchers (academics, journalists and “democracy practitioners” alike) have tended to focus almost exclusively on the outcomes of presidential elections. I make the case that cleaning up the conduct of legislative elections is equally important in the quest for democratic consolidation in SSA.

More on this here.

Senegal’s Democracy Still Shaky

Macky Sall’s party, the Benno Bokk Yakaar (United in Hope) coalition won 119 of the 150 seats (79.3%) in the just-concluded legislative elections in Senegal. President Sall assumed office this year after defeating former President Abdoulaye Wade who had been in power for over 12 years. Mr. Wade’s party got a total of 12 seats (8%). In the last legislative elections (2007) Mr. Wade’s coalition won 87.3% of the seats. Turnout in Sunday’s poll was a paltry 37% – a 3 percentage point improvement from 2007 (According to the African Elections database).

President Sall’s big legislative win is a bad omen for democratic consolidation in Senegal – and a sign of a shaky party structure characterized by unstable cycling super-majorities (see here). One would have hoped for a more competitive showing by former President Wade’s PDS in order to provide a formidable check on the president. With these results Sall might also fall into the temptation of trying to legislate his opponents out of political contention just like Wade did, and succeeded for a while.

More on this here.

Bingu wa Mutharika, Malawian President, is dead

The Daily Nation reports the passing away of Malawian President Bingu wa Mutharika (May he rest in peace).

Vice President Joyce Banda is next in line to run the country, according to the constitution.

But her succession to power could create new political tensions, because Mutharika kicked her out of the ruling party in 2010 as he chose to groom his brother as heir apparent instead of her.

The official silence has heightened anxieties in Malawi, which has seen growing discontent with Mutharika’s government over the last year. Rights groups have accused Mutharika of mismanaging the economy and trampling on democracy.

Mutharika’s death is a trend that will continue in the next couple of years; of Africa independence-era leaders passing on due to natural causes.

The last time I counted about six current African presidents were born after 1959. This number will only go up in the next couple of years. Hopefully, this will mean a new crop of competent leaders without  the baggage of the anti-colonial movement and with enough confidence to chart a new course for their respective countries rather than merely trying to recreate what their dad’s bosses had back home.

This is not to say that younger leaders will automatically be better. Gambia’s Jammeh and the DRC’s Kabila are constantly redefining the possibilities of youthful mediocrity in important leadership positions.

The looming generational change of guard will mostly benefit the few African states (like Malawi, Kenya, Senegal, Tanzania, Zambia, etc) that avoided the scourge of the junior officers in their political history.

President Macky Sall of Senegal could prove to be the first of this new generation of leaders.

Quick hits

On Somalia’s (non) recovery.

For his troubles with the Wade government Youssou Ndour gets appointed to the new Cabinet of President Sall.

The unintended consequences of the Malian coup continue to mushroom. AQIM seems to be taking advantage of the power vacuum left in the north of the country. Lots of people scared out of their wits over the latest developments.

Scientists in Kenya are working on a male contraception pill. May be this time the product will be good enough to overcome cultural barriers and the gender politics of contraception?