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.

Variagated Africa: Trends in Economic Performance in Two Charts

This is from the IMF’s Monique Newiak:

screen-shot-2016-10-28-at-1-12-28-pm

screen-shot-2016-10-28-at-1-12-42-pm

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.

The top 20 best countries to invest your money in Africa

This is according to the latest Ernst & Young’s Africa Attractiveness Report (2016). Kenya is ranked 4th. Ahead of Tunisia, Mauritius, and Botswana. You just need to spend a few hours in Nairobi, or the other 46 county headquarters, to understand why. While economic inequality remains to be a huge (political) challenge, it’s hard to argue against the structural transformations underway in the Kenyan economy.

Screen Shot 2016-07-26 at 11.41.28 AM.png

Screen Shot 2016-07-26 at 11.36.26 AM

More on this year.

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.

Screen Shot 2016-04-03 at 9.41.32 PM

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

Screen Shot 2015-12-01 at 8.58.24 PM

Why are Kenyan politicians politicizing the military?

Botswana, Gabon, Kenya, Malawi, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe are the only continental sub-Saharan African states to have never experienced military rule. Each country has managed to do so via well orchestrated coup-proofing strategies of ethnic balancing and material payoffs to the men and women with the guns and tanks. 

Kenya, in particular, has perfected this art. Because of its fractious ethnic politics, ethnic balancing within the officer corps has been key to Kenya’s coup-proofing. Kenyatta (who spoke Kikuyu) had a bit of a hard time in the beginning with a Kamba and Kalenjin speakers dominated military but eventually succeeded in having his co-ethnics in key positions. But before he did so he ensured Kikuyu dominance over the paramilitary force, the General Service Unit (GSU) to balance the military. Through the 60s and 70s, Kenyatta ensured that the GSU and police could handle their own against the military in case stuff hit the fan. Moi continued along this path, so much so that for a while in the media the typical accent of a security officer – whether police or military – became an accent from the North Rift. Under Moi the Kenyan army became “Kalenjin at the bottom, Kalenjin at the middle, and Kalenjin at the top.”

Beyond the ethnic balancing, Kenya has also coup-proofed by keeping the generals wealthy and OUT OF POLITICS – at least not overtly. The generals in Kenya are probably some of the wealthiest on the Continent. I went to high school with the son of an Air Force Major General whose family was always taking foreign trips to exotic places and always made a big splash on visiting days. The only estimates I could find are from the 1960s when nearly “two thirds of the military budget went to pay and allowances, most of it to officers.” A lot of them also got free land for cash crop farming and lucrative business deals (some illegal) from the Kenyatta and Moi governments. Keenly aware of West Africa’s junior officer problem following 1981 Moi extended land grants to junior officers as well. 

But despite their importance as leaders of a key national institution, most Kenyans, yours truly included, do not know much about the top generals in the army. The one chief of staff that I remember hearing a lot about in my childhood days was Gen. Mahmood Mohamed, the man who played a big role in quelling the 1982 coup attempt. For the most part I only saw these guys in the media on national holidays when they rode on the president’s Land Rover. 

In other words, I think it is fair to say that, contrary to arguments made by N’Diaye, for the most part the Kenyan military has historically been fairly professionalized and depoliticized relative to other countries in the neighborhood. There is no evidence to suggest that ethnic balancing has severely interfered with the process of professionalization. Kenyan presidents’ preferred agents for dirty political work have always been the intelligence service, the police and paramilitary units, but never (to the best of my knowledge) the military. Indeed the US and British militaries have had very close technical cooperation with the Kenyan military through training, material assistance and more recently joint operations, resulting in a relatively highly trained force that has for the most part stayed clear of politics.  

But this consensus appears to be slowly eroding. Before the 2013 General Elections the former Prime Minister Raila Odinga accused the military and the intelligence service of colluding with his opponent, Uhuru Kenyatta, to rig the presidential election. And now the heads of the military and intelligence service are reportedly contemplating suing a former aide to Mr. Odinga for defamation. Increasingly, the military is being dragged down to the level of the marionette-esque GSU and Police, perennial hatchet men for whoever occupies State House.

This cannot end well. 

Coup proofing is hard. And the thing with coups is that once the genie is out of the box you can’t take it back. Coups just breed more coups.

This is why the generals must be left fat and happy and in the barracks, or busy keeping the peace (and hopefully not facilitating charcoal exports) in Somalia’s Jubaland State. Do your ethnic balancing and all, but by all means KEEP THEM OUT OF POLITICS (I am glad the current Defense Minister has no political constituency).

The last thing Kenya needs is a Zimbabwe situation in which there is open bad blood between the military and the opposition. 

Plus Kenya, based on its per capita income, ethnic politics, and minimal experience with genuine democratic government, is still not beyond the coup trap to be able to safely play politics with the military. If you doubt me, go find out the last time Brazil, Thailand and Turkey had generals in charge. 

We finally have a winner for the Mo Ibrahim Prize

UPDATE: Check out the Mo Ibrahim Index of Governance here. The usually suspects – Botswana, Cape Verde and Mauritius –  lead the pack.

*************************************************

The BBC reports:

Former Cape Verde President Pedro Verona Pires has been awarded this year’s $5m (£3.2m) Mo Ibrahim prize for good governance in Africa.

The prize committee said Mr Pires, who stepped down in August, had helped make the archipelago off the West African coast a “model of democracy, stability and increased prosperity”.

The prize is supposed to be awarded each year to a democratically elected leader who has voluntarily left office.

There has been no winner for two years. The committee said there had been no suitable candidate.

The $5m award, given over 10 years followed by $200,000 a year for life, is the world’s most valuable individual prize. The previous winners are Botswana’s President Festus Mogae and Mozambique’s Joaquim Chissano.

In case you are wondering why African incumbents – including Cameroon’s Paul Biya and Senegal’s Wade – do not find the world’s most valuable individual prize worth their time check out an earlier post in which I attempted to calculate the opportunity cost of accepting the award. Notice that my calculation did not factor in the probability of not winning the prize even after stepping down or that of winding up at the Hague or dead.

The prize is a nice carrot and is part of a larger and highly commendable, I should add, attempt at an ideational change on what it means to be a good president. But it almost naively assumes that the only reason autocrats stay in power beyond their “use by” date is for the money.

If that were the case Gbagbo and Gaddafi would surely have done the right thing.

If I were on the committee I would ask Mo to consider channeling some of the money from years without winners to countries with promise – to help facilitate institutional reforms – all in an attempt to make the environment safe for the incumbent and his cronies in case he chooses to step down.

Rants and Raves / Thoughts on the African Union

The African Union (AU) has had a rough few months. The diplomatic failures in Zimbabwe, Cote d’Ivoire, and Madagascar exposed the organization’s incompetence. The misguided anti-ICC crusade continues to cement the image of the organization as nothing more than a club of out-of-date and tone deaf autocrats. To many observers, calls for “African  Solutions to African Problems” amid all this failure has been seen as a cover of impunity and mediocre leadership on the African continent.

It says a lot that the current chairman of AU is President Theodore Obiang’ of Equatorial Guinea; a man who leads an oil-rich country of under 0.7 million people, with a per capita income of more than 30,000; but with more than 70% of its population living on less than $2 a day.

The epitome of the organization’s woes was the total snub it got from NATO before the military campaign against Libya’s Gaddafi, one of the AU’s main patrons. The AU was created by the Sirte Declaration, in Libya. Mr. Gaddafi’s influence ranged from his “African Kings” caucus (in which he was the King of Kings) to investments from Libya’s Sovereign wealth fund. I bet Gaddafi had a hand in the organization’s green flag.

So what ails the African Union?

The AU’s problems are legion. In my view, the following are some of the key ones.

  1. Lack of a regional hegemon(s): The AU faces massive collective action problems. With no regional hegemon(s) to act as the rudder of the organization, most of the organization’s resolutions are not worth the paper they get written on. The rotating chairmanship is a distraction from the real leadership needed in the organization. For instance, I had to google it to find out who’s currently in charge of the presidency of the EU (Poland). Everybody knows that France and Germany run the EU. Their word has gravitas in the Union. In the AU on the other hand, there is no leader. Could it be Navel-gaving South Africa or serially under-performing Nigeria?
  2. Too much political control: Most successful international organizations, despite having political principals, tend to have technical agents that are to some extent shielded from the principals. The AU is political through and through. The key decision-making body is the assembly of heads of state. The council of ministers does nothing. And the commission is all bark and no bite. Cronies of dictators staff most of the key positions in the organization.
  3. Disconnect from the masses: Most Africans have no idea what exactly the AU does. What is the point of the organization? Is it to preserve Africa’s borders? Is it to defend the likes of Gaddafi when the ICC’s Mr. Ocampo comes calling? Giving the people a voice in the Union might force the organization to do the people’s bidding, instead of being a protector of impunity in the name of African sovereignty.

What would reforming the AU entail?

  1. Radical restructuring: Like all inter-state organizations, the AU’s leadership should reflect regional power differences. The current assembly – in which Chad has the same power as Nigeria – makes no sense. There should be a smaller assembly of sub-regional representatives (West – Nigeria; East-Ethiopia; North – Egypt; and South-South Africa) with veto power and the mandate to implement the organization’s resolutions.
  2. Competent staffing: The practice of presidents appointing their sisters-in-law as AU representatives should go. An injection of competent expertise into the organization would go a long way in making it appear to be a more politically independent, competent and respectable organization.
  3. Direct elections to the AU parliament or no parliament at all: Instead of having the members’ parliaments elect representatives to the AU parliament, there should be direct elections. If that cannot happen then the parliament should be scrapped all together. A toothless and unrepresentative parliament is a waste of resources.
  4. Constructive and focused engagement with the rest of the world: Who is the AU chief foreign policy person? Are there permanent representatives in Beijing, Brussels, Brasilia, New Delhi and Washington? Why aren’t they trying to initiate a collective bargaining approach when dealing with these global powers (even if it is at the sub-regional level)? And what with the siege mentality? Not every condemnation of African leaders’ incompetence and mediocrity is a neo-colonial conspiracy, you know. For instance, instead of whining against the ICC’s Africa bias, the AU should clean up its own house. It doesn’t matter that George Bush is not being tried for crimes against Iraqis. The last time I checked none of the leaders of Switzerland was being tried for crimes committed in the German cantons.
  5. A more consistent commitment to progressive ideals: The AU is the only organization in the world that includes in its charter the provision to intervene in its member countries under the principle of responsibility to protect. If the AU were slightly more serious, the disasters in Zimbabwe, Cote Ivoire and Madagascar could have been nipped in the bud. As things stand it is only tiny Botswana that keeps shouting about the organization’s commitment to proper governance and responsibility to protect.

I am not a fan of the idea of the United States of Africa. That said, I believe that a regional organization like the AU can be a force for good. But in order for it to fulfill its purpose, it has to change. The change must reflect the regional power balance; it must increase the competence quotient in the AU and it must increase the voice of the average African within the organization.

institutions, culture and economic development

I am currently taking a class taught by Avner Greif, an economist/economic historian at Stanford in the tradition of New Institutional Economics. The class introduces ideas about economic development from a perspective that does not get much attention from economists, i.e. culture and its impact on long-run institutional development.

In one of the readings Tabellini argues that:

Well functioning legal institutions breed good values, since legal enforcement is particularly relevant between unrelated individuals. …… better informal enforcement sustained by ongoing relations in a closed network may be counterproductive for values.

Thus, the model predicts that clan based societies develop very different value systems compared to modern societies that rely on the abstract rule of law.

That’s in The Scope of Cooperation.

The paper provides a model of the recursive interaction between good institutions and culture. The scope of cooperation and interaction matters for institutional and economic outcomes. Clannishness, whether in Southern Italy or Mogadishu, is bad for economic development.

But you need a functional state system for people to be able to even contemplate abandoning the insurance scheme that is the clan. The model predicts two steady-state equilibria. Institutionally speaking, you are either Botswana or Chad.

africa in the news

Forget about the elections in Tanzania or the Ivory Coast. What matters for the American audience as far as news from Africa go are human interest stories such as this one which made it to the front page of the New York Times.

I echo the point of the Times piece. It really sucks being a hunter-gatherer in Botswana. And by extension, it really sucks being a citizen of Chad, Niger, Uganda or any one of the 40 other countries that make up sub-Saharan Africa. Despite the “good news” (see earlier post below) things are really bad on the Continent.

Africa deserves all the bad press it gets. Period. The only problem is that Africans have not been able to participate effectively in the discourse on their continent or attempted to contextualize the bad press. The continent long lost the game of framing the narrative.

the ingredients of development

I am in the middle of writing a piece contrasting a subset of African and non-African dictatorships over the last half century. As most of you might know, quite a number of African countries have been mournfully commemorating celebrating 50 years of independence from European empires. Many of them, including the behemoth and perennial under-achiever that is Nigeria, have almost nothing to show for over half a century of self-rule. Disease, endemic poverty, general political and socio-economic stuntedness are what come to mind when one thinks of these places, and with good reason. Look at the latest UN HDI report if you think that Africa’s bad press is nothing but unfair afro-pessimism.

And keeping with the theme of development, here is a blog post that I really liked about Botswana, a country that many like to cite as Africa’s success story.

Lastly, a brief lesson on the Political Economy of Development.

southern adventurism?

Charles Onyango-Obbo, in Africa Review, has a piece documenting the cases of infidelity in Southern Africa involving the wives of heads of state. From Swaziland to South Africa to Zambia heads of state have had to manage spouses with “restless skirts.” Mr. Onyango-Obbo argues that part of the reason is that “Southern Africa as a region tends to have a more liberal take on sexual matters” adding that

“It is a mining region, and for over two generations men have left their families behind to go and work in the mines in a neighbouring. Some never returned, others did infrequently – often with second wives they had married. Just like lonely miners sought out newscompanionships in the new areas they worked and lived in, the wives they left at home eventually also filled the void left by their long-absent husbands.”

Although I don’t quite agree with Onyango-Obbo’s assertion that Southern Africans are more liberal when it comes to sexual matters, I do think that labor migration necessitated by the mining sector in the sub-region has had a profound impact not only on the institution of marriage but also on health outcomes. As a result the sub-region has the highest HIV infection rates in the world. I must also add that governments in the region have realized this and are trying to deal with the problem. Botswana, for instance, has an elaborate and fairly well run programme of providing HIV positive individuals with ARVs. South Africa, emerging from years of denial under Mbeki, is also trying to catch up.

botswana’s ian khama (and the bdp) faces his stiffest challenge yet

Ian Khama has not had the presidency he dreamed of. The son of Botswana’s founding president faces his stiffest challenge yet since assuming office. A group of lawmakers from his party, the Botswana Democratic Party (BDP), have threatened to jump ship and form their own party. If enough of them do, President Khama may be forced to resign and call fresh elections. The BDP has run Botswana since independence in 1966.

Read more here…

corruption in South Africa

South African democracy still has a long way to go. My greatest fear is that ANC supremacy might get into the heads of the party bosses and have them collapse the distinction between party and state. There are already allegations of corruption within the top ranks of the ANC. Ironically, if corruption is to be tackled head on within the ANC, Jacob Zuma is the right man for the job, his own failings notwithstanding. He seems to have a direct connection with average ANC supporters and could use this to rein in party bosses, or at least make them steal less.

It is hard being a disciplined hegemonic party. Tanzania’s CCM is a lesson in what the ANC should avoid. Botswana’s BDP might be a better example of a relatively disciplined hegemonic party. The party has ruled Botswana since 1966 without falling into the temptations of grand corruption and power grabbing.

Edit: Recent events have shown cracks beginning to form within the BDP. The world is watching what Ian Khama, son of Seretse Khama is prepared to do to secure his presidency in the face of increasing opposition.