Tag Archives: accra

Africa-China Fact of the Month

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This is from the China-Africa Project:

In purely economic terms, China matters a LOT to Africa but Africa is effectively meaningless to China. Last year, China did more than $4.14 trillion in total global trade. So that means Africa represents just 4.8% of China’s global trade balance, effectively a rounding error for the world’s second-largest economy.

For some additional context, consider that China does more trade with just Germany ($225.7 billion)  and about the same with Australia ($194.6 billion) than it does with all of Africa.

More on this here.

 

Colonial education, social status, and social mobility in Uganda

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This is from an exciting paper by zu Selhausen et al. in Economic History Review:

This article uses Anglican marriage registers from colonial and post‐colonial Uganda to investigate long‐term trends and determinants of intergenerational social mobility and colonial elite formation among Christian African men. It shows that the colonial era opened up new labour opportunities for these African converts, enabling them to take large steps up the social ladder regardless of their social origin. Contrary to the widespread belief that British indirect rule perpetuated the power of African political elites (chiefs), this article shows that a remarkably fluid colonial labour economy actually undermined their social advantages.

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conditional probability of entering Class I (Kampala)

Sons of chiefs gradually lost their high social‐status monopoly to a new, commercially orientated, and well‐educated class of Anglican Ugandans, who mostly came from non‐elite and sometimes even lower‐class backgrounds. The study also documents that the colonial administration and the Anglican mission functioned as key steps on the ladder to upward mobility. Mission education helped provide the skills and social reference needed to climb the ladder in exchange for compliance with the laws of the Anglican Church. These social mobility patterns persisted throughout the post‐colonial era, despite rising levels of informal labour during Idi Amin’s dictatorship.

Status inversion/disruption during colonialism is significantly under-appreciated as a cause of elite political instability in post-colonial Africa (paper on this coming soon). Ghana, Nigeria, and Uganda are paradigmatic examples of this phenomenon of educated “commoners” butting heads with established pre-colonial ruling elites following independence. 

The authors also call for a more nuanced understanding of political power under British indirect rule:

Although many Ugandan chiefs were appointed as administrative officials under indirect colonial rule and in this way exercised both political and economic power over the local population, our micro‐evidence portrays a society in which access to secondary education and a labour market seemingly based on meritocratic criteria caused chiefs’ colonial power gradually to disappear. This shift, which was helped by colonial land reforms and increased African access to Kampala’s formal labour market, challenges the perception of British indirect rule as ‘decentralised despotism’. It also illustrates how mission education did more to foster social mobility among our sampled grooms than to entrench the traditional privileged classes.

Read the whole paper here (gated).

 

 

Patchwork Leviathans? Pockets of Excellence in Otherwise Dysfunctional States

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This is from Erin Metz McDonnell:

Within seemingly weak states, exceptionally effective subunits lie hidden. These high- performing niches exhibit organizational characteristics distinct from poor-performing peer organizations, but also distinct from high-functioning organizations in Western countries. This article develops the concept of interstitial bureaucracy to explain how and why unusually high-performing state organizations in developing countries invert canonical features of Weberian bureaucracy. Interstices are distinct-yet-embedded subsystems characterized by practices inconsistent with those of the dominant institution. This interstitial position poses particular challenges and requires unique solutions. Interstices cluster together scarce proto- bureaucratic resources to cultivate durable distinction from the status quo, while managing disruptions arising from interdependencies with the wider neopatrimonial field. I propose a framework for how bureaucratic interstices respond to those challenges, generalizing from organizational comparisons within the Ghanaian state and abbreviated historical comparison cases from the nineteenth-century United States, early-twentieth-century China, mid- twentieth-century Kenya, and early-twenty-first-century Nigeria.

…… Monolithically dysfunctional administrations are the exception, not the rule— albeit the exception that has long captured popular and academic attention (Evans 1989; Helman and Ratner 1992). Instead, many states regarded as uniformly ineffectual have great internal variation, with agencies spanning a continuum from ineffectual quagmires to competently achieving organizational man- dates in the public interest. These state “leviathans” are patch-worked: they are cobbled together from scarce available resources, with organizational diversity sewn loosely together into the semblance of unity. In such states, adapted Weberian-style bureaucracy exists in interstices—niches within predominantly neopatrimonial administrations.

The sociology of state and nation building, and development in general, is underrated.

Read the whole thing here.

Tyler Cowen Goes to Lagos

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MR’s Tyler Cowen (also Professor of Economics at George Mason) recently spent six days in Lagos. Here is what he has to say about Africa’s biggest and most economically dynamic city:

A trip is often defined by its surprises, so here are my biggest revelations from six days in Lagos, Nigeria.

Most of all, I found Lagos to be much safer than advertised. It is frequently described as one of the most dangerous cities on earth. Many people told me I was crazy to go there, and some Nigerian expats warned me I might not get out of the airport alive.

The reality is that I walked around freely and in many parts of town. I didn’t try to go everywhere or at all hours, and I may have been lucky. Yet not once did I feel threatened, and I strongly suspect that a trip to Lagos is safer than a trip to Rio de Janeiro, a major tourist destination. (In my first trip to Rio I was attacked by children with pointed sticks. In my second I found myself caught in a gunfight between drug lords). Many Lagos residents credit the advent of closed-circuit television cameras for their safety improvements.

So if you’re an experienced traveler, and tempted to visit Africa’s largest and arguably most dynamic city, don’t let safety concerns be a deal killer.

Read the whole thing here.

I have never been to Lagos, and look forward to fixing this in 2017. So far my experience of West African (commercial) capitals is limited to Dakar, Accra, Lome, Conakry, Nouakchott and Monrovia (I like them in that order). Dakar edges Accra only by a whisker, mostly on account of the seascape. I have spent way more time in Accra, and therefore my ranking might also be a function of my knowledge of Accra a little too well.

Accra beats all other cities on food. It has the most variety, and nearly all of the offerings beat the bland stuff that we East Africans consume. The grilled tilapia and banku is unbeatable.

Oh, and I must admit that I have a slight preference for Senegalese jollof. My wife insists that Ghanaian jollof is the best jollof (ahead of both the Nigerian and Senegalese variations). I look forward to sampling Naija jollof so we can finally settle this disagreement.

Africa’s looming debt crises

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The 1980s are calling. According to Bloomberg:

Zambia’s kwacha fell the most on record after Moody’s Investors Service cut the credit rating of Africa’s second-biggest copper producer, a move the government rejected and told investors to ignore…..

Zambia’s economy faces “a perfect storm” of plunging prices for the copper it relies on for 70 percent of export earnings at the same time as its worst power shortage, Ronak Gopaldas, a credit risk analyst at Rand Merchant Bank in Johannesburg, said by phone. Growth will slow to 3.4 percent in 2015, missing the government’s revised target of 5 percent, Barclays Plc said in a note last week. That would be the most sluggish pace since 2001.

The looming debt crisis will hit Zambia and other commodity exporters hard. As I noted two years ago, the vast majority of the African countries that have floated dollar-denominated bonds are heavily dependent on commodity exports. Many of them are already experiencing fiscal blues on account of the global commodity slump (see for example Angola, Zambia and Ghana). This will probably get worse. And the double whammy of plummeting currencies and reduced commodity exports will increase the real cost of external debt (on top of fueling domestic inflation). I do not envy African central bankers.

Making sure that the looming debt crises do not result in a disastrous retrenchment of the state in Africa, like happened in the 1980s and 1990s, is perhaps the biggest development challenge of our time. Too bad all the attention within the development community is focused elsewhere.

The Anatomy of Tax Evasion in Africa

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Africa Confidential has a great piece analyzing leaked documents from PwC, the professional services firm, showing the various arrangements that enable multinational companies to evade taxes in Africa. You can read the whole piece here (gated).

  • One of the measures PwC advised multinationals to take was to create a wholly-owned Luxembourg-based subsidiary which would hold the rights to intellectual property used by the rest of the group. The rest of the group would then pay licensing fees to the Luxembourg-based subsidiary which, by agreement with the authorities, would be granted tax relief of up to 80%……
  • A second tax avoidance mechanism simply involved the companies becoming incorporated in Luxembourg. In 2010, Luxembourg concluded an agreement with several companies of the Socfin (Société financière) agribusiness group, which was founded during the reign of Belgian King Leopold II by the late Belgian businessman Adrien Hallet. The companies chose Luxembourg as their base and made an agreement under which their dividends were subject to a modest 15% withholding tax, a lower figure than those in force where their farms are located (20% in Congo-K and Indonesia, 18% in Côte d’Ivoire).
transfer-pricing

The art of hiding profits

Altogether, Socfin subsidiaries in Africa [in Sierra Leone, Nigeria, Liberia, Cote d’Ivoire, and Cameroon] and Indonesia produced 123,660t. of rubber and 380,770t. of palm oil in 2012. The combined turnover of its main African subsidiaries reached €271 mn. in 2013. The list also includes the 100%-owned Plantations Socfinaf Ghana Ltd. (PSG) and Socfin-Brabanta (Congo-Kinshasa). Socfin also holds 88% of Agripalma in São Tomé e Príncipe and 5% of Red Lands Roses (Kenya).

  • A third mechanism involves cross-border lending within a group of companies. Companies registered in Luxembourg are exempt from tax on income from interest.

According to the Thabo Mbeki High Level Panel report between 1980 and 2009 between 1.2tr and 1.4tr left Africa in illicit flows. These figures are most likely an understatement. Multinationals, like the ones highlighted by Africa Confidential, accounted for 60% of these flows.

Alex Cobhan, of the Tax Justice Network, has a neat summary of the various components of illicit financial flows (IFFs) and how to measure them. He also proposes measures that could help limit IFFs, including: (i) eliminating anonymous ownership of companies, trusts, and foundations; (ii) ensuring that all bilateral trade and investment flows occur between jurisdictions which exchange tax information on an automatic basis; and (iii) making all multinational corporations publish data about their economic activity and taxation on a country-by-country basis.

Alex Cobham blogs here.

Happy Independence Day Ghana!

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Ghana is 57 today, having gained independence from the UK on the 6th of March, 1957.

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Back then the independence of Ghana (named after the historic empire that existed in parts of present day Mali and Mauritania) had a lot of symbolic value given that it was the first majority black African country to gain independence.

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

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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.

The 2013 Resource Governance Index

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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

Georgetown MSFS Launches New Africa Scholarship

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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.

Resource sector accountability in Africa: The supply side story

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I was recently in Ghana for some preliminary work on an evaluation project that a few colleagues at IPRE Group and I will be working on later this year. On my trip I talked to people engaged in transparency initiatives targeting Ghana’s extractive sector. Most of you probably know that Ghana is the second biggest exporter of gold in the region, after South Africa. It also recently joined the club of African oil exporters. In the recent past Ghana has been touted as a model for transparency and accountability in the resource sector (I wrote about it here). EITI commended the country for going beyond the recommended minimum reporting threshold. That said, the country still has a long way to go, especially with regard to the gold sector (most of the publicized initiatives concentrate on the oil sector, forgetting the much older gold mining sector.)

My conversations with some of the CSOs working on various kinds of transparency initiatives revealed to me that the problem of government opaqueness in reference to resource sectors is not just because of lack of political will. It is also about governments’ lack of capacity to supply accountability. Take the example of oil drilling. In order to provide transparency to its citizens the government has to have a proper revenue management system (complete with accurate models of predicted production, prices, etc); well trained technical staff that can hold their own against the savvy experts (engineers, geologists, etc) of the oil companies; and the technical means of delivering information in a digestible form to the masses. As it is in most governments, Ghana included, ministries in charge of resources are often staffed by loyal political appointees, some whom lack the technical expertise to effectively carry out their jobs.

This is not to downplay the political economy aspects of resource sector accountability. Just to say that there is a difference between Obiang’ and Mahama. For the former, technical fixes may do little to increase transparency in Equatorial Guinea’s oil sector. But for the latter, the political situation necessitates the provision of set minimum levels of accountability. So to the extent that there is a failure to do so in the case of Ghana we should not be quick to scream politics but instead also consider ways of improving the state’s capacity to supply transparency and accountability.

Atta Mills, President of Ghana, is dead

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The BBC reports:

Ghana’s President [John Atta Mills], who was suffering from throat cancer, has died in the capital, Accra.

A statement from his office said the 68-year-old died a few hours after being taken ill, but did not give details.

Vice President Dramani Mahama is due to be sworn in as the new president.

Ghana is scheduled to hold general elections later this year. With the passing of Mr. Mills it is unclear who will become the ruling party’s presidential candidate (more on this soon).

More on this here, here and here.

Another African country strikes black gold, in massive amounts

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UPDATE: The office of the president in Uganda is saying that the oil around Lake Albert may be double what was initially thought. According to Bloomberg:

” Uganda may hold deposits of as many as 6 billion barrels of oil, more than double the current estimate, according to the office of the nation’s presidency.

“Some analysts estimate that Uganda’s Albertine Graben may hold more than 6 billion barrels of oil,” the presidential office said in an e-mail statement yesterday. The estimate is well above the discovered deposits with a potential of 2.5 billion barrels, it said.”

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Namibia has joined Ghana and Uganda as the latest winners of the oil lottery in Africa.

According to the Independent Online:

An estimated 11 billion barrels in oil reserves have been found off Namibia’s coast, with the first production planned within four years, mines and energy minister Isak Katali announced Wednesday.

The finding could put Namibia on par with neighbouring Angola, whose reserves are estimated at around 13 billion barrels and whose production rivals Africa’s top producer Nigeria.

With just over 2.1 million people and already rich in Uranium, Namibia stands to gain immensely from the new discovery – if it is managed sanely, that is.

Between the other new African petro-states, Ghana (with its fledgling democracy) hopes to rival Botswana as the poster child of exemplary mineral management on the continent. Uganda, however, appears poised to be yet another data point in support of the oil curse theory (see earlier post below).

Africa’s budding narco-states?

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UPDATE:

The Kenyan Prime Minister just admitted to the presence of drug money in Kenyan politics. Huge. Also, check the UNODC’s drug trafficking patterns for East Africa.

Also, does anyone out there have a copy of the report on drug trafficking in Kenya? Care to share?

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I have written before about the growing problem of drug-trafficking that is creating new problems for already fragile African states.

Of note is the fact that the problem is not just limited to the usual suspects – weak or failing states – but also extends to countries that most would consider to have it together, like Ghana, South Africa and Kenya.

According to Reuters, “cocaine moves through West Africa” while “heroin transits through the eastern part of the continent.”

The most alarming thing about this new trend is that in most of these African countries drug-trafficking happens with the consent of those in government.

For instance, in Guinea the son of former president Conte was for a long time a leading drug kingpin. In Guinea-Bissau President Vieira’s and Gen. Na Waie’s deaths in March of last year were a result of drug-related feuds. In Ghana President Atta Mills has lamented that the drug lords are too powerful to rein in. In Kenya, a woman (rumored to be) close to the president and other elites have been linked to the drug trade. Indeed on June 1st President Obama listed a sitting Kenyan Member of Parliament (Harun Mwau) as a global drug kingpin.

In South Africa former Chief of Police, Jackie Selebi, was jailed for 10 years in 2010 on drug charges. More recently the wife of the South African Intelligence Minister (Sheryl Cwele) was found guilty of having connections to the illicit trade. In 2009 a Boeing 727 crashed and was later set ablaze by suspected drug traffickers in Mali. The plane is believed to have been a drug cargo plane from Latin America destined for Europe. Other African states whose drug connections have also come to light include The Gambia (where rumors abound that President Jammeh is himself involved in the trade in drugs and arms in collusion with the Bissauian army) and Mozambique (H/T kmmonroe). You can find related news stories here and here.

Clearly, this is a real problem that if not nipped in the bud has the potential of growing to Mexican proportions, especially considering the already low levels of state capacity in most of Africa.

The Global Commission on Drug Policy also addresses this issue in their newly released report:

In just a few years, West Africa has become a major transit and re-packaging hub for cocaine following a strategic shift of Latin American drug syndicates toward the European market. Profiting from weak governance, endemic poverty, instability and ill-equipped police and judicial institutions, and bolstered by the enormous value of the drug trade, criminal networks have infiltrated governments, state institutions and the military. Corruption and money laundering, driven by the drug trade, pervert local politics and skew local economies.

A dangerous scenario is emerging as narco-traffic threatens to metastasize into broader political and security challenges. Initial international responses to support regional and national action have not been able to reverse this trend. New evidence suggests that criminal networks are expanding operations and strengthening their positions through new alliances, notably with armed groups. Current responses need to be urgently scaled up and coordinated under West African leadership, with international financial and technical support. Responses should integrate
law enforcement and judicial approaches with social, development and conflict prevention policies – and they should involve governments and civil society alike.

sunday roundup

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Easterly goes to church in Ghana.

This post has pictures on some interesting way to use bed nets…. It seems like the only way we shall ever eliminate malaria on the Continent is by getting rid of all the mosquitoes. Other tropical places have done it. Why can’t it be done on the Continent, at least in the urban areas??

And lastly, I found this video clip totally cool.

Happy Sunday!

JAMBO!