China & Civic Architecture in Africa

China just finished a 150 million Yuan four-year project to build Burundi a new presidential palace in Bunjumbura. This is but one of many installments of China’s ongoing influences on civic architecture on the Continent. The Burundian presidential palace is grand, and sitting on an elevation appears to have been designed to project the occupant’s power. While likely not the best use of that much money in Burundi, it is an important investment in the physical manifestation of Burundian stateness.

Other major civic buildings on the continent funded and (to be) built by China include the African Union headquarters in Addis Ababa, Ethiopia, the ECOWAS headquarters in Abuja, Nigeria, and Senegal’s Museum of Black Civilizations in Dakar.

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The Museum of Black Civilizations in Dakar, Senegal

Concerns over costs (and espionage) aside, one of the under-appreciated effects of Sino-Africa relations in China’s continuing influence on African architecture. From train stations, to hotels, to high-rise apartment blocks, to libraries, China’s influence is making an indelible mark on Africa’s landscape. At the moment much of this appears to be cut-and-paste jobs with little, if any, African influence. But it is ineluctable that over time many of these foreign designs will be infused with local sensibilities and tastes in the continuing process of architectural evolution on the Continent (no more fake marble and chandeliers please!).

It is fair to say that the state of civic architecture in many African states is wanting. Many civic structures exist as physical embodiments of the malaise afflicting the African state.  The last golden age of public buildings died with the independence generation. The era’s designs focused on function, but also the implicit desire to project state power — Dar es Salaam’s austere public buildings with their long hallways and exposure to the elements (for ventilation) quickly come to mind. The economic crises of the long decade (1980-1995) virtually stalled much of the region’s architectural evolution as far as civic buildings were concerned.

The current iteration of Sino-African relations is changing this. More capitals (sub-national, national and regional) are seeing the construction of civic buildings befitting their stature. The influence of these developments will likely travel beyond their aesthetic impacts on Africa’s architectural landscape. Civic buildings are also monuments to the idea of the state.

 

Here’s why African states value their economic and political ties with China

This is from an excellent essay by  in Foreign Policy:

…. when former U.S. Secretary of State Rex Tillerson raised a cautionary alarm for Africans to be wary of Chinese predatory investments just a few months ago, his lecturing tone did not go over well. Many African leaders reacted negatively to the underlying assumption that they were not qualified to figure out profitable from predatory investments on their own.

Sierra Leonean President Julius Maada Bio rebuked the warning as misguided, saying, “We are not fools in Africa. … At difficult times, when we needed help most, China was there for us.”

The expansion of Confucius Institutes across Africa is another part of the push worth engaging with. With more than 50 Confucius Institutes teaching Chinese language, as well as the Communist Party’s version of Chinese history and culture, more and more Africans have the chance to study Chinese and travel to China on cultural scholarships. In 2015, approximately 50,000 African students attended Chinese universities, compared with 40,000 in the United States and the United Kingdom. Elementary and middle schools in several African countries are now offering Mandarin as a foreign language.

I highly recommend that you read the whole thing.

H/T Judd Devermont

Portugal used to claim to be a big country

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This map is based on one produced by Henrique Galvão in 1934, supporting the imperial ambitions of the then-new Portuguese dictator Antonio Salazar.”

Angola (pop. 30m) is three and a half times the size of Germany (pop. 83m).

If you are interested in learning more about Angola and Mozambique, see here and here.

Public Debt in African States

This is from the IMF:

Screen Shot 2018-11-23 at 10.27.45 AMCountries in sub-Saharan Africa accumulated external debt at a faster pace than low- and middle- income countries in other regions in 2017: the combined external debt stock rose 15.5 percent from the previous year to $535 billion. Much of this increase was driven by a sharp rise in borrowing by two of the region’s largest economies, Nigeria and South Africa, where the external debt stock rose 29 percent and 21 percent respectively.

Export growth is not keeping up with rising levels of external debt:

….In 2017, the ratio was largely unchanged from the prior year, at an average of 138 percent. However, this ratio was close to double the average of 70 percent in 2010. Moreover, the average ratio masks wide disparity between countries. At the end of 2017 54 percent of countries in the region had an external debt-to-export ratio over 150 percent, as compared to 28 percent of countries in 2010 and the number of countries where the ratio surpassed 200 percent more than doubled, from 6 countries to 14 countries, over the same period. Most of these countries are ones that benefitted from HIPC and MDRI relief, including Burundi, Ethiopia, Niger, Senegal and Tanzania.

Bond issuance is dominated by a handful of countries:

Bond issuance by sovereign governments and pub- lic-sector entities in the region rose to $27 billion in 2017, a more than fourfold increase over 2016, driven to a large extent by a surge in issuance in South Africa to $19 billion from $4 billion in 2016, 70 percent of bond issuance in the region last year. An important factor was non-resident purchase of bonds issued in the South African domestic market. Bond issuance by other countries in the region totaled $8 billion, a tenfold increase from 2016, reflecting continued investors’ confidence and search for yield. Issuing countries in 2017 were Nigeria ($4.8 billion), Cote d’Ivoire ($2 billion), Senegal ($1.1 billion), and Gabon ($0.2 billion). Nigeria’s $3 billion Eurobond issuance marked the country’s largest such operation to date, and at end 2017, bond issuance accounted for one third of the country’s outstanding external debt.

Overall, while the data suggests that things may not be as bad as they were over the lost long decade (1980-1995), the trends are not encouraging. Total reserves as a share of external debt peaked around 2010 and have been in decline since. Screen Shot 2018-11-23 at 10.54.37 AM

It’s getting easier to do business in Africa

At least according to the World Bank Group:

Sub-Saharan Africa has been the region with the highest number of reforms each year since 2012. This year, Doing Business captured a record 107 reforms across 40 economies in Sub-Saharan Africa, and the region’s private sector is feeling the impact of these improvements. The aver- age time and cost to register a business, for example, has declined from 59 days and 192% of income per capita in 2006 to 23 days and 40% of income per capita today. Furthermore, the average paid-in minimum capital has fallen from 212% of income per capita to 11% of income per capita in the same period.

See the 2019 Doing Business Report here.

Here are some questions from last year on the integrity of the Doing Business Index.

The Case for Term Limits, Angola Edition

The erasure of Jose Eduardo dos Santos’ 38-year rule in Angola appears to be accelerating. Angola does not have executive term limits, but Eduardo dos Santos finally stepped down as president in late 2017.

On Wednesday his successor, Joao Lourenço, removed replaced his son (Jose Filomeno dos Santos) as head of Angola’s $5b sovereign wealth fund. This follows the sacking of Isabel dos Santos (Africa’s wealthiest woman) as head of the country’s state oil company last year. President Lourenço has also moved to replace key security chiefs in sub-Saharan Africa’s third largest economy and second biggest oil producer.

When Eduardo dos Santos said he’d retire I was skeptical. The anointment of his defense minister, Joao Lourenço, as his successor (while retaining position atop the ruling party) did little to change my mind. But like in Mozambique and Zambia before it, the mere change of guard in Angola appears to have initiated a process of elite churn that is accompanied by a dismantling of the old order (at the very least within the ruling party).

Now, there is no guarantee that this will lead to normatively desirable outcomes (such as better governance and service delivery in Angola). Change for its own sake is only good up to a point. But it is a testament to the political importance of term limits. Regular leadership turnover is a nice way of ensuring that no single interest group or ruling cabal completely dominates a country’s political economy.

Relatedly, I am not a close watcher of Angola but recent events have led me to update my view of the level of institutionalization of MPLA. For a long time I thought that it was just an electoral/patronage SPV for Eduardo dos Santos. But news events seem to suggest that its powers transferred almost intact to Joao Lourenço (I could be wrong of course).

 

On North Korea’s Lucrative Relationship With African States

A number of African countries have close ties to North Korea. And it is for the very same reasons that these states have (or had) ties with Cuba, China, and USSR/Russia:

Namibian officials describe a different North Korea — a longtime ally, a partner in development and an affordable contractor. Since the 1960s, when North Korea began providing support for African nations during their independence struggles with European colonial powers, the regime has fostered political ties on the continent that have turned into commercial relationships.

Recall that it is China that was willing to come to the aid of landlocked Zambia after apartheid South Africa and apartheid-lite Southern Rhodesia threatened the country’s trade links on account of its support for nationalists from both countries. The USSR and Cuba were also vital allies of African nationalist liberation movements at a time when the West was mired in doublespeak over decolonization and racial equality on the Continent. Cuba, in particular, committed blood and treasure in the liberation of Angola and Southwest Africa (Namibia).

Nelson Mandela vowed never to forget friends that aided the ANC against apartheid:

All to say that China, Russia, Cuba, and North Korea are not merely using African states. It has always been a game played on the basis of mutual interests, with the distribution of benefits dictated by the prevailing balance of bargaining power.

Variagated Africa: Trends in Economic Performance in Two Charts

This is from the IMF’s Monique Newiak:

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In summary:

Non-commodity exporters, around half of the countries in the region, continue to perform well with growth levels at 4 percent or more. Those countries benefit from lower oil import prices, improvements in their business environments, and strong infrastructure investment. Countries such as Côte d’Ivoire, Ethiopia, Senegal, and Tanzania are expected to continue to grow at more than 6 percent for the next couple of years.

Most commodity exporters, however, are under severe economic strain. This is particularly the case for oil exporters like Angola, Nigeria, and five of the six countries from the Central African Economic and Monetary Union, whose near-term prospects have worsened significantly in recent months despite the modest uptick in oil prices. In these countries, repercussions from the initial shock are now spreading beyond the oil-related sectors to the entire economy, and the slowdown risks becoming deeply entrenched.

It should be obvious, but it bears repeating that there is quite a bit of variation in economic performance across the 55 states on this vast continent.

My personal Africa growth index consists of Senegal, Cote d’Ivoire, Nigeria, Ghana, Gabon, Cameroon, Ethiopia, Kenya, Zambia, Angola, and South Africa. And despite ongoing turbulence in a number of the key economies in this basket, I am confident that the turbulence will not completely erase the gains of the last two decades.

 

How to avoid the resource curse, or how Norway spends its $882 billion global fund

This is from the Economist:

This week the “Pension Fund Global” was worth Nkr7.3 trillion ($882 billion), more than double national GDP. No sovereign-wealth fund is bigger (see chart). It owns over 2% of all listed shares in Europe and over 1% globally. Its largest holdings are in Alphabet, Apple, Microsoft and Nestlé, among 9,000-odd firms in 78 countries.

In designing the fund, Norway got a lot right. Its independence is not constitutionally guaranteed, but it is protected as a separate unit within the central bank, overseen by the finance ministry and monitored by parliament. It is run frugally and transparently; every investment it makes is detailed online.

Other funds might copy those structures, but would struggle to mimic the Nordic values that underpin them. Yngve Slyngstad, its boss, says growth came “faster than anyone had envisaged”, and that a culture of political trust made it uncontroversial to save as much as possible. A budgetary rule stops the government from drawing down more than the fund’s expected annual returns (set at 4% a year). The capital, in theory, is never touched. Martin Skancke, who used to oversee the fund’s operations from the finance ministry, attributes the trust the institution enjoys to relatively high levels of equality and cultural homogeneity. It also helps that many rural areas recall poverty just two generations ago.

Consider this your regular reminder that the “resource curse” is not a universal phenomenon. See also Botswana, the United States, Chile, Canada, and Australia.

More on this here.

Several African public figures (and associates) mentioned in the Panama Papers

The Guardian has an excellent summary of what you need to know about the Panama Papers, the data leak of the century from the Panama-based law firm Mossack Fonseca.The firms specializes, among other things, in incorporating companies in offshore jurisdictions that guarantee secrecy of ownership.

Here is a map of the companies and clients mentioned in the leaked documents (source). Apparently, the entire haul (2.6 terabytes of data) has information on 214,000 shell companies spanning the period between 1970 to 2016.

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The leaked documents show links to 72 current or former heads of state and government. So far the highest-ranking public official most likely to resign as a result  of the leak is the Prime Minister of Iceland, Sigmundur Gunnlaugsson (see story here and here)

For a list of African public officials mentioned in the leaked documents see here. And I am sure we are going to hear a lot about all these rich people in developing countries.Screen Shot 2016-04-03 at 9.18.42 PM

Closer to home, the Daily Nation reports that Kenya’s Deputy Chief Justice, Kalpana Rawal, “has been linked to a string of shell companies registered in a notorious Caribbean tax haven popular with tax dodgers, dictators and drug dealers.” Justice Rawal has been dodging retirement for a while. May be after the latest revelations might find a reason to call it quits.

The ICIJ website has neat figures summarizing some of the findings from the massive data haul. Also, here is a Bloomberg story on the tax haven that is the United States. 

Some Africanist inside baseball

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Falling Oil Prices Weighing Down Angolan Economy

According to the IMF:

kwanzaThe oil price shock is adversely impacting the economy. Angola’s oil basket is projected to average US$53 per bbl in 2015, from slightly over US$100 per bbl in 2014, leading to large declines in fiscal revenue and exports. While oil production has recovered following the completion of maintenance work, non-oil GDP growth is expected to decelerate to 2.1 percent in 2015. The industrial, construction and services sectors are adjusting to the decline in private consumption and public investment and lingering difficulties to obtain foreign currency. Inflation is projected to reach close to 14 percent by end-2015, exceeding the National Bank of Angola (BNA)’s 7-9 percent objective. The 2015 budget will allow the central government deficit to fall to 3.5 percent of GDP, compared to 6.4 percent last year. Public debt, however, is projected to increase significantly to 57.4 percent of GDP, of which 14.7 percent of GDP corresponds to the state-owned oil company Sonangol, by end-2015. The external current account deficit is expected to reach 7.6 percent of GDP in 2015; and international reserves to drop to US$22.3 billion (about 7 months of 2016 imports) by end-2015. Meanwhile, a wide spread emerged between the parallel and primary market exchange rates, pointing to an imbalance in the foreign exchange market.

The economic situation in 2016 is likely to remain challenging as international oil prices are not expected to recover and risks are on the downside. Growth is projected to remain stable at 3.5 percent in 2016, with the oil sector growing by about 4 percent. The non-oil sector is expected to show a small improvement, growing by 3.4 percent year-on-year, driven mainly by a stronger recovery in agriculture. Inflation is projected to slow to 13 percent at end-2016, as the effect of the recent monetary tightening is expected to be felt more clearly in the second half of 2016.

More on this here.

Sam Pa, middleman in many Sino-African business deals, detained in China

The FT reports: 

The future of a secretive Hong Kong-based business network at the heart of China’s advance into Africa has been thrown into doubt after reports that its frontman, a jet-setting tycoon with seven names and ties to the intelligence services, has been caught up in a Communist party investigation.

Mr Pa’s detention came a day after Chinese state media announced that Su Shulin, the governor of Fujian Province and a former chairman of state-owned oil group Sinopec, had been placed under investigation for “suspected serious disciplinary offences” by the ruling party’s anti-graft body.

Mr. Pa was the main focus of a May 2015 US military report on predatory investments in the Continent’s extractive sector. It will be interesting to see if Pa’s arrest has any tangible effect on Chinese dealings with the handful of economically opaque dictatorial regimes on the Continent (esp Angola).

Africa’s looming debt crises

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 potential impact of a Chinese slowdown on Africa’s economies

The FT reports:

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

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

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

Prof. Deborah Brautigam of SAIS sees the following happening:

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

And concludes that:

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

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

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