Variagated Africa: Trends in Economic Performance in Two Charts

This is from the IMF’s Monique Newiak:



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.


Nigeria has a shockingly tiny government

These are figures from an IMF Article IV country report in April of this year:

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The one thing that jumped at me from this table was how little(as a share of total national output) the Nigerian public sector spends. The government barely takes in 10% of GDP in revenues; and spends between 11-12%. Also, for a country at its level of development (and with an economy of its size), Nigeria is weirdly debt free (relatively speaking).

You may be thinking that these figures must exclude state government expenditures — and you are wrong. The 11-12% figure is inclusive of state government expenditures.

In my view, this is a PFM smoking gun on the distortionary effects of oil dependence. Nigerian policymakers appear to be sated with the little revenue they are consuming (as a share of GDP) from the oil sector.

For a comparative perspective, take a look at Kenya’s numbers:

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The Kenyan government gobbles up about a fifth of GDP in revenues, and spends about a quarter. The Nigerian government only takes in a tenth of GPD and spends just a little over a tenth. In addition, the Kenyan government’s debt/GDP ratio is twice Nigeria’s.

General government spending as a share of GDP within the OECD ranges from 33.7% in Switzerland to 58.1 in Finland. The OCED debt/GDP ratio average is 90%.

Back in grad school I took Avner Greif’s economic history class in which he emphasized the importance of organizations for economic development. Societies, big and small, organize out of poverty — by building and maintaining socially-attuned institutions that lower transaction costs. The scope and intensity of organizational capacity therefore matters for economic development (For more see here). It takes a well ordered state.

And from these two tables, it is fair to say that the Nigerian state is underperforming relative to its organizational potential. Perhaps it’s time more people in Abuja started reading Alexander Gerschenkron (however dated this might be).



Mozambique may have squandered up to $2b of borrowed money

Public Finance is emerging to be one of the biggest development challenges of our age. Here’s Africa Confidential on Mozambique’s hidden loans, which may amount to more than $2b.

Screen Shot 2016-05-12 at 1.38.32 PMSources close to Rosário Fernandes, ex-head of the revenue authority, the Autoridade Tributária de Moçambique, have told us of systematic diversions of taxes straight into the pockets of the Frelimo elite, especially in the later years of President Guebuza’s term of office, when he exercised enormous patronage. Massively inflated contracts were commonplace. The latest to emerge is the extravagant, nearly complete, Bank of Mozambique building in Maputo, which boasts a helicopter landing pad on the roof. Originally estimated to cost $90 mn., the final cost is reckoned at at least $300 mn., with kickbacks and ‘commissions’ accounting for the cost inflation, say Frelimo sources.

Guebuza engaged in an ultimately doomed attempt to extend his term of office, which ended in October 2014, and this partly explains the extraordinary scale of his liberality towards loyalists, sources formerly close to him told us (AC Vol 53 No 18, The Putin option). The schemes became increasingly brazen, and the creation in 2013 and 2014 of three companies – Empresa Moçambicana de Atum (Ematum), Proindicus and Mozambique Asset Management (MAM) – was the culmination of this programme. The companies, which received the totality of the $2 bn. now owed by the state, were mainly in the field of maritime security, even though it was the intelligence and security services that provided the management. They bypassed parliament, illegally, and defence procurement, effectively privatising, as one commentator put it, national security while lining the pockets of the elite into the bargain. Yet the ill-equipped companies could not cope and quickly collapsed. Ematum, which originally claimed to be focused on tuna fishing, is no longer operating its few licensed vessels because it cannot pay salaries (AC Vol 56 No 24, Nyusi’s nightmare).

Kenya, Zambia, among others, have also borrowed enormous amounts of money that have not been properly accounted for. Several of these countries have recently gotten cover from the IMF that all is well. But the IMF has strong incentives to save face and maintain confidence that it does its job.

If Mozambique could do it, what stops more sophisticated treasuries elsewhere on the Continent?

I am increasingly convinced that Africa’s newfound love with international creditors is a bond bubble waiting to happen. The 1980s and early 1990s sucked. And we might be headed for a repeat if the African states floating eurobonds continue on the same path.

the african problem

Sub-Saharan Africa is in dire straights. It is the most sick, hungry, poor and ignorant region of the world. It is a region infested with despots and illiberal democrats who for decades have led their nations to economy ruin and pre-modern tribal divisions and ways of living.

As the world watches one of this region’s promising nations descend into chaos, it is important for us to ask each other hard questions about the African Problem. I say the African Problem problem because it is not by chance that from Senegal to Somalia, Chad to South Africa, there is not much success to talk about. Poverty, disease and ignorance rule supreme.

We need to ask each other hard questions because racially sensitive Westerners (or Easterners for that matter) on whom we depend for most of “our” solutions will not ask us these questions; Is it our culture? Why haven’t we managed to shed the tribe in almost a decade into the 21st century? Why do we tolerate such appalling levels of mediocrity among us? Why don’t we demand more from our leaders? Why don’t we produce real leaders.

Our dictators compare woefully to those from other regions. Pinochet murdered Chileans, enriched himself, but also modernised the economy. Lenin had a weird ideology and some intellect behind his murderous leadership but he modernised Russia. Suharto did not run Indonesia into the ground. And now we turn to Africa: Samuel Doe, “Emperor” Bokasa, Iddi Amin, Obiang, Abacha and all the other Nigerian generals, Mobutu, Mugabe, Charles Taylor…. etc. This is a list of common criminals. Nearly all of them lack (ed) an iota of ideology behind their leadership, nearly all impoverished their people more than they were before, and all are a shame to all Africans. None of them knew what it means to be leader of a people or peoples.

These leaders got obscene amounts of wealth while their country men and women walked around naked, sick, hungry and ignorant.

How hard can it be? Why haven’t we succeeded in having successful socio-cultural and economic institutions that work for us? Does anyone care? Of what use is a million dollars to any African anywhere if Reuters is showing pictures of naked flood victims from Mozambique??? Why are we stuck in pre-modernity?

The many questions aside, the one thing that is clear is that Africa needs to change fast or it will never catch up with the rest of the world. We should not confuse pre-modern subsistence existence with culture. People live in mud houses and roam around with emaciated goats not because they love it but because they can’t afford or do not know any better.