Tyler Cowen Goes to Lagos

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.

Old Habits Die Hard: Rio Tinto allegedly bribed government officials in Guinea

Regular readers may recall that in Simandou Guinea has one of the richest iron ore deposits in the world; and that it is a development project that I have been following for a while.

You may also recall the infamous story of how Israeli tycoon Benny Steinmetz paid nothing for exploration rights in a half of Simandou, proceeded to invest about $160m in developing the mine, only to flip it a couple of years later for $2.5b. The Brazilian mining giant Vale was the unfortunate victim of Steinmetz’s scheme.

According to The Intercept:

An investigation by the current government of Guinea found that a shell company controlled by BSGR paid at least $2.4 million to Mamadie Touré, a wife of the former dictator [Lansana Conte], in return for her help in acquiring the rights to the mine for BSGR. Earlier this year the government annulled BSGR’s stake in the mine, saying the firm had obtained it through corruption.

Others on the payroll included then Minister for Mines, Mahmoud Thiam, who preferred to spend his earnings on a Lamborghini, an apartment in Manhattan (%1.5m), and an estate in Dutchess County ($3.75m). All paid for in cash. After the death of President Lansana Conte and the election of Alpha Conde, the government of Guinea successfully repossessed the mine from Vale and vowed to clean up the mining sector.

But old habits die hard.

It now emerges that President Alpha Conde, who successfully managed to get the illegally acquired half of Simandou, was himself allegedly paid about $10.5m in bribes to secure Rio Tinto’s rights to the other half.  May be I am too naive, but are these side payments enough to give away billions of dollars worth of value? It is sad enough that Conde may have taken the bribe. But it is doubly disappointing that his price was so low.

Why don’t people like Conde and Thiam think of setting up their own mining companies, or contractors to the global giants?

How does one begin the process of inculcating a sense of an encompassing interest in an otherwise rapacious elite?

Here is the story from the FT:

Rio Tinto’s lawyers uncovered more than a year ago internal emails about a questionable $10.5m payment to a consultant, but the mining company did not alert law enforcement authorities and investors about the matter until last week. The Anglo-Australian group said on November 9 that it had notified authorities after discovering emails from 2011 that referred to the payment to the consultant, who helped head off a threat to Rio’s claim to the giant Simandou iron ore project in Guinea.

In the emails, seen by the Financial Times, Alan Davies, the executive in charge of Simandou, discusses with Tom Albanese, then chief executive, and Sam Walsh, then head of iron ore, paying a $10.5m fee to François Polge de Combret, a former top French banker and classmate of Guinea’s president. Following an internal inquiry begun in August, Rio said last week that it had referred the matter to law enforcement authorities in the UK, the US and Australia. The company now faces years of scrutiny and the risk of large fines if it is found to have broken anti-corruption laws.

In another section:

The dispute over Simandou dates back to 2008, when the Guinean dictator of the day stripped Rio of the rights to the northern half of the project and handed them to BSG Resources, the mining arm of Israeli diamond tycoon Beny Steinmetz’s family conglomerate. BSGR went on to agree a $2.5bn deal to bring in Vale of Brazil as its partner.

In 2011, Rio secured its claim to the remaining half of Simandou with a $700m payment to the then new government of President Alpha Condé — a deal which, the emails indicate, Mr de Combret helped to facilitate. The ex-Lazard banker declined to comment.

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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“Policy interventions are already risky in the best of circumstances”

Here’s a paragraph to ponder:

Ethnographic nuance is neither a luxury nor the result of a kind of methodological altruism to be extended by the soft-hearted. It is, in purely positivist terms, the epistemological due diligence work required before one can talk meaningfully about other people’s intentions, motivations, or desires. The risk in foregoing it is not simply that one might miss some of the local color of individual ‘cases.’ It is one of misrecognition. Analysis based on such misrecognition may mistake symptoms for causes, or two formally similar situations as being comparable despite their different etiologies. To extend the medical metaphor one step further, misdiagnosis is unfortunate, but a flawed prescription based on such a misrecognition can be deadly. Policy interventions are already risky in the best circumstances. (p. 353)

That’s from political anthropologist Mike McGovern’s review of Paul Collier’s Bottom Billion and Wars, Guns, and Votes.

Also, if you haven’t read McGovern’s Making War in Cote d’Ivoire you should. And for those interested in an ethnographic take on Sekou Toure’s attempts to modernize remake Guinea check out Unmasking the State. It starts off dense (I only read about half the book last summer while on a short trip to Conakry), but gives a good peek into the logics of rule under Toure and the reactions these elicited from Guineans.

H/T Rachel Strohm.

Quick thoughts on presidential term limits and the political crisis in Burundi

The president of Burundi is about (or not) to join the list of African leaders who have successfully overcome constitutional term limits in a bid to hang on to power. Currently (based on observed attempts in other African countries and their success rate) the odds are roughly 50-50 that Mr. Pierre Nkurunziza will succeed. The last president to try this move was Blaise Compaore of Burkina Faso who ended up getting deposed by the military after mass protests paralyzed Burkina’s major cities.

Successful term limit extensions have so far happened in Burkina Faso (first time), Cameroon, Chad, Djibouti, Gabon, Guinea, Namibia, Togo, and Uganda. Presidents have also tried, but failed, to abolish term limits in Burkina Faso (second time), Malawi, Niger, Nigeria, Senegal, Zambia. Countries that are about to go through a term limit test in the near future include Angola, Burundi, Republic of Congo (Congo-Brazzaville), the Democratic Republic of Congo (DRC), Liberia, Rwanda, and Sierra Leone. Heads of State in Benin, Cape Verde, Ghana, Kenya, Mali, Mozambique, Sao Tome e Principe, Tanzania, and Namibia (after Nujoma) have so far obeyed term limits and stepped down at the end of their second constitutional terms.

To the best of my knowledge only Sudan, The Gambia, Equatorial Guinea, and Eritrea have presidential systems without constitutional term limits. Parliamentary systems in South Africa, Lesotho, Swaziland, Ethiopia, and Botswana do not have limits, although the norm of two terms exists in Botswana and South Africa (and perhaps soon in Ethiopia?).

So what we see in the existing data is that conditional on *overtly* trying to scrap term limits African Heads of State are more likely to succeed than not (9 successes, 6 failures). However, this observation doesn’t tell us anything about the presidents who did not formally consider term limit extensions. For instance, in Kenya (Moi) and Ghana (Rawlings), presidents did not initiate formal debate on the subject but were widely rumored to have tried to do so. So it’s probably the case that presidents who are more likely to succeed self-select into formally initiating public debate on the subject of term limit extension, thereby tilting the balance. And if you factor in the countries that have had more than one episode of term-limited presidents stepping down, suddenly the odds look pretty good for the consolidation of the norm of term limits in Sub Saharan Africa.

I wouldn’t rule out, in the next decade or so, the adoption of an African Union resolution (akin to the one against coups) that sanctions Heads of State who violate constitutional term limits.

So will Nkurunziza succeed? What does this mean for political stability in Burundi? And what can the East African Community and the wider international community do about it? For my thoughts regarding these questions check out my post for the Monkey Cage blog at the Washington Post here.

Correction: An earlier draft of this post listed Zimbabwe as one of the countries without term limits. The 2013 Constitution limits presidents to two terms (with a minimum of three years counting as full term (see Section 91).

On the IMF and Ebola

Did IMF policies lead to the inability of the health systems in Liberia, Guinea, and Sierra Leone to contain the ongoing Ebola outbreak?

There has been a lot of back and forth on this question in the blogosphere, the most prominent being posts over at the Monkey Cage Blog by Benton and Dionne on the one hand, and Blattman on the other.

It’s really hard to pin the total collapse of the health sectors in the Mano River Region on specific IMF policies. We don’t have counterfactual Mano River Regions that: (a) did not experience civil wars in the early 1990s, (b) did not have to implement structural adjustment policies (because of severe self-inflicted fiscal distress), and/or (c) reformed their institutions and systems of government to make them more responsive and efficient in providing social services before the outbreak in late 2013.

So the best we can do, really, is to speculate (see this informative post by Morten Jerven).

As Blattman argues, countries that required IMF help from the late 1980s did so because their central banks and treasuries had failed at managing their fiscal and monetary policies (the IMF was essentially a central bank of last resort). Which raises the possibility that perhaps we should blame these countries’ troubles on the Latin American countries that made everyone realize that the developing world’s debt in the early 1980s was unsustainable; or the world commodity crises of the 1970s.

In light of the events of the early 1980s, a plausible simple defense of the IMF is that things could have been much worse (total financial collapse) if it had not intervened. In other words, that it is not clear whether, left to their own devices, highly indebted developing countries would have had an autonomous recovery in a manner that would have laid the foundation for their healthcare systems to be strong enough to identify and contain an Ebola outbreak in their respective remote rural regions in late 2013.

That said, IMF interventions – whatever the justifications – had consequences. The discussion in the blogosphere so far has almost exclusively focused on the fiscal effects of IMF policies (specifically with regard to social spending). But as Herbst has argued in “The Structural Adjustment of Politics in Africa,” there were political consequences as well:

……… there has been almost no attention devoted to what structural adjustment, if implemented, means for the way that politics is actually carried out in African nations. The failure to examine the long-term consequences of economic reform for politics is particularly surprising given that the major instruments of structural adjustment — public sector reform, devaluation, elimination of marketing boards—threaten to change not only the constituencies that African leaders look to for support but the way in which leaders relate to their supporters in the countries south of the Sahara.

……… The paper finds that structural adjustment makes the political climate much riskier for leaders while weakening the central apparatus of the state on which rulers have long relied to stay in power.

Time horizon concerns have significant effects on whether politicians choose to invest in public goods.  The obvious question then is: Without top-down procrustean IMF intervention back then, would highly indebted governments have avoided total economic meltdown via policies that were (relatively more) incentive compatible with their unique political economies? The studies highlighted by Dionne and Benton delve into some of the political economy consequences of SAPs, and the specific ways in which they impacted social service provision.

So going back to the question of whether the IMF reduced the Mano River Region’s capacity to handle Ebola, the simple answer is that we can’t tell for sure. The case for a direct causal relationship is weak at best. But there are also lots of possible causal mechanisms that indirectly implicate the IMF. There is a reason why so many smart academics criticized the implementation of SAPs.

The lesson here is twofold:

(i) Neither the Bank nor the IMF are omnipotent puppet masters able to direct public policy in developing countries. But the same developing countries also lack the ability to perfectly sidestep the policy prescriptions from the IFIs. They have agency, but in very tight corners.

and (ii) International intervention should always, to the extent that is reasonably possible, be embedded in domestic political economies. We (the royal we in development research & practice) like talking about self-enforcing this and that, but then prefer to play “neutral” and “apolitical” interveners all the time. Because we do not live in a world of benevolent social planners, there is seldom anything like a disinterested, value-neutral, and victimless intervention.

Ebola Cases Growing in Sierra Leone

According to FT:

The WHO estimates that as December 8 Sierra Leone had 7,798 registered cases, overtaking Liberia for the first time since the outbreak started. According to the Geneva-based WHO, the number of cases is still “slightly increasing” in Guinea, “stable or declining” in Liberia and “may still be increasing in Sierra Leone”.

More here.

Quick random hits

 

1. As usual, great career advice for those in the academy from Chris Blattman.

2. Boring Development asks some interesting questions re RCTs, and questions the internal validity assumption many of them trumpet. Which raises the question, if RCTs are cannot guarantee internal validity can results so obtained be useful for policy development? My general response here is that not all RCTs are useful for policy development. The obvious incentives to publish clearly skew the design and implementation of studies in a way that makes only a fraction of them useful for policymakers (the IRB process notwithstanding). But all things considered, randomistas have probably made the world a better place.

3. An unfolding case in Guinea could drastically change what is permissible in the process of acquiring concessions from dubious governments. Benny Steinmetz of BSGR bought the Simandou concession in late 2008 during the last days of the administration of ailing dictator Lansana Conte (allegedly with the help of Mr. Conte’s fourth wife). According to FT, BSGR spent a mere $160m for the rights to mine in Simandou. Less than two years later, the company sold 51% of its rights to the Brazilian mining giant Vale for $2.5 billion, $500m of which was in cash. Last week a government committee investigating the Conte-BSGR deal found evidence of corruption and recommended that BSGR and Vale be stripped of their rights to Simandou. If the ruling sticks, lots of contracts in several resource rich states in Africa will become open for legal review thereby drastically lowering the costs of renegotiation (even for the dictators who singed them).

Resource Dependence in Africa (with some thoughts on Mozambique)

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.