Tackling Africa’s Image Problem

Back in 2000….









And now…

The latest issue of the Economist has “Africa” on the cover, with the pronouncement that the continent has, in the last ten years, moved from hopeless to hopeful.

Africa’s enthusiasm for technology is boosting growth. It has more than 600m mobile-phone users—more than America or Europe. Since roads are generally dreadful, advances in communications, with mobile banking and telephonic agro-info, have been a huge boon. Around a tenth of Africa’s land mass is covered by mobile-internet services—a higher proportion than in India. The health of many millions of Africans has also improved, thanks in part to the wider distribution of mosquito nets and the gradual easing of the ravages of HIV/AIDS. Skills are improving: productivity is growing by nearly 3% a year, compared with 2.3% in America.

All this is happening partly because Africa is at last getting a taste of peace and decent government. For three decades after African countries threw off their colonial shackles, not a single one (bar the Indian Ocean island of Mauritius) peacefully ousted a government or president at the ballot box. But since Benin set the mainland trend in 1991, it has happened more than 30 times—far more often than in the Arab world.

Population trends could enhance these promising developments. A bulge of better-educated young people of working age is entering the job market and birth rates are beginning to decline. As the proportion of working-age people to dependents rises, growth should get a boost. Asia enjoyed such a “demographic dividend”, which began three decades ago and is now tailing off. In Africa it is just starting.

More on this here.

There is no worthy ex-president in Africa, at least not this year

The Mo Ibrahim award goes to no one this year. The award is intended for former African presidents that have shown good leadership by peacefully relinquishing power and then doing some good after that (mediating a conflict or facilitating dialogue over disputed elections and what not). It’s a $ 5 million award for the first ten years outside of office, followed by $ 200,000 every year for life. Yes, African presidents have to be bribed to relinquish power.

But why aren’t they giving up?

Crude back of the envelope calculations reveals that the answer lies in the macro-economics of these countries. For example, in Uganda, the interest rate is slightly less than the inflation rate (at least according to the central bank website). Which means that if you put your money in the bank or invest it in treasury bills you will not be making much in the long-run.

Now assuming Museveni expects to live for 30 years after he retires, my back of the envelope calculations reveal a present value of only $ 22 million from the Mo Ibrahim award. This is probably change compared to what the big man in Kampala (well, now in Entebbe –  it’s close to the airport for easy escape in case stuff hits the fun) can make every year for the next 30 years if he stays in power. For instance, assuming that Uganda’s economy will grow at an average of 2% over the 30 years and that Museveni takes away 0.1% of the country’s GDP of 34.23 b (at PPP), then the man will have a present value of 25 m. Notice that 25>22, and by the way 0.1% is a very conservative estimate.

So it could be that what Mo needs to attract more contenders willing to relinquish power is more money. $5 million for 10 years and then $200,000 per year for life thereafter is simply not enough.

Alternatively, instead of just giving the ex-presidents the money, it should come with a guarantee that the Mo Ibrahim Foundation will help them invest the money in the international markets. This way, their frame of reference will not be the potential returns in their domestic economies  – which may not add much value to the award money – but the more lucrative international markets.