Tag Archives: Commodities

Variagated Africa: Trends in Economic Performance in Two Charts

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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.

 

Resource Dependence in Africa (with some thoughts on Mozambique)

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Source: The World Bank

Source: The World Bank. Click on image to enlarge  

This map shows resource rents as a share of GDP for the period 2009-2013. Note that the colouring on the map is about to change, with the Indian Ocean east coast getting some of the hydrocarbon action that has hitherto been a preserve of the Atlantic coast and a couple of landlocked states like Chad, Sudan and South Sudan (The biggest change in West Africa will most likely be in Guinea once the mining of its high grade iron ore in the Simandou Mountains gets going. A few contractual and logistical hurdles still stand in the way of the mega mining project).

The eastern African states of Kenya, Uganda, Tanzania and Mozambique are about to get a shade or more redder. Kenya and Uganda will start producing oil between 2016-17. Tanzania and Mozambique have massive amounts of natural gas, with Mozambique having recently climbed to top four in the world with a capacity to meet total global demand for more than two years.

As you may have guessed Mozambique is by far the country to watch out for as far as the ongoing eastern African resource bonanza is concerned. The country will continue to see a rapid rise in coal production, ultimately producing an estimated 42 million tons in 2017. Mozambique’s Gold production is also expected to more than triple by 2017 relative to its 2011 level. Estimates suggest that based on the full capacity exploitation of coal and gas alone the Mozambican economy could rise to become SSA’s third or fourth largest (after Nigeria, South Africa and (or ahead of) Angola). Going by the 2012 GDP figures from the Bank, that would be a change from US$14 billion to about $114 billion.

Have you enrolled in Portuguese classes yet?

As Mozambique gets wealthier in the next five years at a vertiginous pace, it will be interesting to see if it will go the Angola way. Both are former Portuguese colonies that had drawn out civil wars. Both tried to have democratic elections but then the ruling parties managed to completely vanquish the opposition. And both continue to be ruled by overwhelmingly dominant parties that appear to have consolidated power.

My hunch is that Mozambique is different, as FRELIMO is less of a one man show than is the MPLA. Indeed FRELIMO just selected a successor to Guebuza, the Defense Minister Filipe Nyusi (Nyusi’s background in engineering and the railway sector should prove useful for the development of the country’s coal industry).

The Tanzanian model of dominant/hegemonic party with term limits appears to have spread south. And that is a good thing. The other African country that appears to be embracing this model is Ethiopia (I think I can now say that the Zenawi succession was smooth and that Desalegn, also an engineer, is credibly term limtied).

Kampala, Kigali and Yaounde should borrow a leaf from these guys (that is, as a second best strategy given that their respective leaders do not seem to be into the idea of competitive politics).

For more on the politics and management of natural resources in Africa see here, here and here.

Kleptocracy and Debt: Vulture Funds to the Rescue?

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I am currently working on a project on commodities in SSA and have been amazed both by the region’s mineral wealth and how much of it gets stolen by local elites in cahoots with large MNCs. It is one thing to read about corruption from 30,000 feet. Getting an up-close view is another matter. The examples of the two Congos are instructive…

Congo-Brazzaville is one of the top oil producers in Africa. It is also a dirt poor country, with over 70% of its people living below the poverty line. Like in Equatorial Guinea (and other petro-states in the region), the ruling cabal in Brazzaville has turned the country’s oil wealth into private property – the symbol of which is the president’s son’s extravagant expenditures in European capitals (For more details see below).

[youtube.com/watch?v=VpGU1hsuSpU&feature=player_embedded]

These details of the sleaze around oil revenues in Congo were unearthed, by among others, Elliot Associates, a “vulture fund.”

Across the river in the other Congo (Congo-Kinshasa aka DRC) another vulture fund is trying to get Kinshasa to pay up. The vulture fund, FG Hemisphere, paid $3.3m for the debt to a Bosnian state-owned company, and then went ahead and sued for $100m in the courts of Jersey to recover the debt. Recently the Privy Council in the UK, the final appeals court, ruled in favor of Kinshasa. For more on this see the Guardian (here, here and here), which has been following this particularly case closely.

The Democratic Republic of Congo has a mineral wealth estimated to be around $24 trillion. It is also one of the least and poorest governed places on the planet. A recent report indicated that as much as 5 billion dollars in revenue from minerals has disappeared from the state coffers in the recent past.

Should Brazzaville and Kinshasa be forced to pay up?

Opinion over the utility of venture funds is divided. There are those that blame them for going after the poorest countries, asking for taxpayers to pay for their rulers’ (sometimes dead and gone, like Mobutu) largesse. But there area also those who contend that the best way of making rulers less willing to steal is by forcing them to pay up their debts – especially considering that debt forgiveness alone cannot end corruption.

Eric Joyce, writing in the Guardian puts it thus:

Campaigners have always maintained that if FGH is unable to collect the debt then the money will go instead to public works in the DRC. This is simply not true. The doctrine of “sovereign immunity” applies across the world and it is therefore not possible for any creditor, “vulture” or otherwise, to access funds that have a sovereign purpose – that is, public expenditure. Creditors can only target cash being used to trade.

With this in mind, perhaps the do-gooders campaigning for debt cancellation and recovery of stolen monies could team up with vulture funds. The latter have both the expertise and financial incentive to go after monies hidden in foreign bank accounts and shell companies registered in tax havens. Just a thought.

All Roads Lead to Monopsony? Moyo on China’s Commodity Grab

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Following the success of Dead Aid (which I enjoyed very much), Dambisa Moyo tried a repeat with Winner Take All – a book on China’s rising dominance of global commodity markets – with very little success.

The first half of Winner Take All is mostly a recount of statistics (most of which are already in the public domain) and general information on the state of the global commodity markets. It is not until the second half of the book that Moyo delves into the real issues regarding her subject matter – global commodities and China’s insatiable appetite for the same. But even then, the chapters are rather short on actual information on China and are instead full of comparative statics with the rest of the world (or more accurately, mostly the United States of America).

Moyo is not a China expert, and it shows in Winner Take All.

If you are looking for an indepth take of Chinese firms involved in the global commodity markets, their specific investments, strategies and relationships with the Chinese authorities, you will be disappointed. Moyo simply treats all of China as a single actor. There is no domestic politics. There is no discussion of redistributive concerns within China and how they will impact China’s economic performance. There is no nuance on the potential impact of China’s impending demographic decline (except in the concluding chapter). In the end the whole thing reads like it should be a special in the Atlantic Monthly rather than a stand-alone book.

The book, mistakenly, falls into the trap of Western declinism, suggesting that China will undoubtedly emerge to be the ultimate monopsonist in the global commodity markets (almost unchallenged). There is also loose talk of potential for conflict over resources – something that is contradictory to discussions in other sections of the book that emphasize the symbiotic relationship between China and the rest of the world.

The greatest strength of the book is its balanced take on the economic, political and social effects of the rise of China – especially with regard to Chinese investments in the rest of the world. The “Angola Model” of infrastructure-for-resources, discussed in the book, is far superior to the Swiss-accounts-for-resources model that has been the preserve of the West in many resource-rich developing countries over the last half century.

Winner Take All is a far cry from the provocative Dead Aid. It lacks a substantive discussion on the political economy of China’s economic rise (whether domestically or globally). Instead, it gives perspective (for those not in the know) of the implications of China’s economic rise.

Most importantly, it is also a welcome addition to the works of scholars like Deborah Brautigam who continue to remind us – and rightly so – that China’s economic adventures in the developing world have net positive benefits, despite the overwhelmingly negative press. For this reason I would recommend the book.