South Sudan: A runaway kleptocracy or a gradual evolution towards statehood with an encompassing interest?

The Sentry, a project co-founded by George Clooney and John Prendergast, has a nice report that details corruption at the highest levels of the South Sudanese government.

How do President Kiir’s children afford to live in such apparent luxury? Corporate records for Combined Holding Limited (CHL), a South Sudanese holding company incorporated in February 2016, provide one clue. These records reveal basic information about the company: the date of incorporation, names of shareholders, their contact information and a copy of their passport. One of CHL’s shareholders is a 12- year-old child with the surnames “Salva Kiir Mayardit” whose passport lists his occupation as “Son of President.” But, this hardly makes this child unique among members of President Kiir’s immediate family.

In total, The Sentry found that at least seven of President Kiir’s children have held stakes in a wide range of business ventures, especially in the extractive and financial sectors. Corporate filings obtained by The Sentry show that South Sudan’s first family appears to be active in the country’s oil and mining industries. Another document obtained by The Sentry, dated June 26, 2015, indicates that Thiik Kiir—the president’s 28-year-old son—owned 35 percent of Nile Link Petroleum. Adocument filed in 2014 lists Mayar Kiir—Thiik’s 29-year-old brother whose passport also confirms he is the president’s son—as owner of half of Oil Line & Hydrocarbons Limited, with the remaining shares held by three Kenyan businessmen.

A document dated May 25, 2015, lists Mayar Kiir as a 50 percent shareholder in Specialist Services Co. Ltd., a company that describes itself as being involved in “oilfield services and petroleum supply.” Another document indicates that Adut Salva Mayar, the president’s daughter, has owned shares of Rocky Mining Industries Limited. Yet another document reports that Anok Kiir, President Kiir’s 29- year-old daughter, has held a 45 percent stake in CPA Petroleum. And, according to another corporate record, Winnie Salva Kiir, the president’s 20-year-old daughter, held an 11 percent stake in Fortune Minerals & Construction. The same document indicates that, as of March 2016, the three largest shareholders of Fortune Minerals are Chinese investors.

You should read the whole thing here.

You’d be interested to know that Salva Kiir and Riek Machar live screen-shot-2016-09-12-at-4-55-03-pmonly a short drive from each other in Nairobi, Kenya.

The idea that the leaders of South Sudan are stealing state resources left, right, and centre is totally abhorrent. Tens of thousands have died since the resumption of civil conflict. Millions are in dire need of humanitarian aid.

The international community has its work cut out for it. South Sudan lacks a functional state apparatus. It is yet to get to the point of stationary banditry.

Which is why I think that it would be misguided to presume that the key problems with South Sudan are endemic corruption or the lack of “good governance.”

Should we really expect the president of a (struggling) oil producing 5-year old state to make $60,000 a year and not dip into state coffers once in a while? After all, Kiir’s *perceived* peers are likely not some low-level bureaucrats here in DC but other leaders of the world and the Davos crowd. This is not to say that if Kiir were paid more he would necessarily be less corrupt. The point is that I am not particularly shocked that Kiir and his collaborators in the pillaging of South Sudan want and have acquired the same material comforts that most leaders in the world have.

The historically inclined might even argue that this is South Sudan’s enclosure movement.

Should one take that view, then the solution to the current problem would not be the *relative* impoverishment of the South Sudanese putative “upper class,” but investments in the expansion of this social category so that there is sufficient intra-elite accountability across the different socio-cultural groups in the country. The strategy of integrating rebel leaders into the SPLA could have served this purpose, but the downside is that it incentivized the proliferation of warlordism in the hope of being bought off by Juba.

Perhaps one of the most important questions to ask about South Sudan is how the international community can help Kiir and his henchmen invest their (ill-gotten) wealth in Juba instead of Nairobi or Kampala.

If left alone, South Sudan will likely remain to be a runaway kleptocratic failed state instead of gradually moving towards a stable state with sufficient coercive powers.

The student of the political economy of institutions in me is somewhat convinced that horizontal intra-elite accountability is probably the best way out for South Sudan (if they can establish intra-elite political stability to begin with). The hope that vertical accountability through regular “free and fair” elections will help keep a globalized elite running a fractious post-conflict state honest and accountable is phantasmic. At the moment the domestic audience costs for engaging in corruption are very low for Kiir and other elites, and will likely stay that way for the foreseeable future.

And don’t even mention “political will.” There are no “good” leaders in the world. Just properly incentivized individuals.

Again, definitely read the report.

Do you need a reason to visit Kenya?

Kenya’s economy is growing at 5.9%. It is a frontier economy of 46 million with lots of opportunities for investment in sectors as diverse as tech, infrastructure, agribusiness, and light manufacturing. Kenya is also a gateway to the wider Eastern Africa region, with a market of about 120 million.

But if you are not a potential investor and just want to visit, here are some pictures to help you along…

Facebook founder Mark Zuckerberg visited Nairobi this week for business. He also found time to visit Lake Naivasha, a quick two hour “safari lite” destination to the northwest of Nairobi. The best thing about Nairobi is that it is the only city in the world with a national park (not a zoo) within city limits. Zuckerberg could have gone for a game drive in Nairobi, if he wanted to. The pictures were posted on Zuckerberg’s Facebook account.

Now go ahead and book those tickets.

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).



Workshop Fatigue: Residents of Kibera Demand Sitting Allowances to Attend NGO Meetings

The residents of Kibera, in Nairobi,  have a message for foreign aid groups in their community: if you want us to come hear what you have to say, you need to pay us.

So many non-governmental organizations (NGOs) have flooded this poor area that many locals have become disillusioned by the foreigners who say they want to help.

Inundated by invitations to go to meetings and trainings put on by NGOs, the  residents now seek compensation for their time. The handouts, known as “sitting allowances,” generally range from about $1 – $3 per hour, which can buy a fair amount here.

“Trust me, no one will go without the sitting allowance,” said Sharon Ogolla, 20, as she stands outside the hair salon she runs with her mother.

Asked whether most locals go to hear what the NGOs have to say, or just to collect the payment, Ogolla said, “Well, both, but mostly, honestly, to get the fee.”

For more see here. You should also read it for commentary on misguided foreign interventions.

H/T Laura Seay.

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.

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More on this year.

Is Brexit good or bad for Africa?

Writing in Foreign Policy, Alex de Waal is certain that Brexit is terrible for African countries, and that “[e]verything from the economy to peacekeeping missions will suffer.”

The damage to British interests is significant, but the losses for [African countries] could be greater still. In campaigning to leave the European Union, Minister for Africa James Duddridge argued that Britain would be able to forge stronger ties with the continent if it were unencumbered by EU inefficiencies in aid and trade. Perhaps if Duddridge had a blank slate on which to construct a new Africa policy, he could do better than Britain’s existing one, which is part bilateral and part multilateral through the EU.farage But no policy is ever built on a blank slate, and surveying the post-Brexit political wreckage, he is now faced with a salvage job that will involve decoupling Britain from numerous EU-led peace and development initiatives and renegotiating dozens of trade deals. Even deftly managed by Duddridge or his successor, the Brexit will leave Britain with a fraction of the influence it currently wields in Africa.

And over at Africa is a Country Grive Chelwa notes that:

The one obvious channel through which Brexit could affect economies in Africa is if it triggers a recession in the UK. A recession might affect trade and investment between the two regions. The Bank of England thinks a recession might very well be on the cards. A study reviewing all studies that have estimated the likely economic impact of Brexit found: “GDP losses for the UK in the range of 10% or more [could not] be ruled out in the long run.”

How much trade takes place between the UK and Africa? Not much, it turns out. Combining data from the UK’s Office for National Statistics (ONS) and the United Nations Conference on Trade and Development (UNCTAD) for 2014, the latest year for which we have comparable data, we calculated that exports from Africa to the UK represent about 5% of Africa’s total exports. Africa is more worried about a slowdown in China, its biggest trading partner by far.

…. The UK doesn’t have the same influence on the continent that it did decades ago. And Brexit will be further proof of that. If the UK sneezes Africa will … well Africa will say “bless you” and move on.

On balance, I agree with Chelwa. It appears that with regard to the UK-Africa relationship, the Brits stand to lose more than Africa as a unit following Brexit. This is for the following reasons:

  1. Lacking the amplifying effects of the EU, UK influence in Africa will be diminished. This is bad for the UK, but not necessarily so for African states. Notice that the UK’s security objectives in Somalia or elsewhere on the Continent have not suddenly changed following the Brexit vote. We should disabuse ourselves of the notion that the UK involvement in these theatres of conflict is out of pure benevolence. It is largely to protect British interests (tourists, MNCs, aid workers, other tied aid, etc). Those interests have not suddenly changed with Brexit. Is a post-Brexit UK better off with a stable Somalia? I think so. Viewed this way, what Brexit has done is not to change British interests in Africa but to increase the UK’s transaction costs in catering to those interests. The Brits may invest less in specific peacekeeping operations, but their self-interest dictates that they will not suddenly close the taps on these investments.
  2. A diminished UK diminishes Europe, which may reduce Europe’s leverage vis-a-vis African countries. This outcome could cut both ways. On the one hand, it may exacerbate the moral hazard problem faced by African leaders by allowing them to play different European powers off each other (why invest in good governance if Europe is always at the ready to help if things go south?) But on the other hand, a weaker Europe may be less willing to bail out African leaders all the time. This might force these leaders to take their jobs seriously, thereby improving the welfare of their citizens. 
  3. It is not clear that decoupling UK aid from the rest of Europe will necessarily lead to the UK cutting its aid budget. In fact, the opposite might prove true. Going its own way may force the UK to put more aid pounds into projects in the region than it currently does under a joint EU aid budget. Again, increased transaction costs may mean the UK spending more money than it currently does in Africa, which is good for African economies. Plus the UK is likely to find itself needing to make up for the lost amplifying effects of the EU with more aid pounds.
  4. A recession in the UK may prove contagious. This would be bad for the world economy, and Africa would not be an exception. That said, I don’t think economic turbulence in Africa would necessarily lead to the conflicts of the early 1990s. With a few glaring exceptions, most African countries would be able to withstand a global recession without collapsing. We saw this during the Great Recession.
  5. The world is learning a lot about democracy by observing the challenges it currently faces in the West. Suddenly, corrosive ethnic politics is not exclusive to poor countries. “Leaders” like Donald J. Trump and Boris Johnson are not things that only happen in Zimbabwe or Nicaragua. These data points will serve to demystify democracy as a system of governance, and refocus global attention on what really makes democracy work — a stable intra-elite consensus coupled with reasonably sufficient responsiveness to the electorate (down with the fetishization of elections!!!) This will be a valuable lesson for Africa and other developing regions of the world. The ongoing sociopolitical troubles in the West are bound to liberate the worldview of leaders and other elites in the Global South, and will empower them to mold their own societies in their own image, instead of trying to turn them into Denmarks. The often-misrepresented “European mystique” has lost its shine. And this is a good thing for the world.

This is not to say that Africa’s economies will be able to weather Brexit without any non-trivial hiccups. South Africa, Nigeria, and Kenya are probably the most exposed (in that order). Other African economies will be exposed to the extent that economic troubles in the UK lead to a global recession (the gold exporters might even benefit…)

And Western security policies and support for missions in Somalia and across the Sahel may face short-term uncertainties. But these experiences will not necessarily be catastrophic (on the security front, America will most likely steady the ship).

In fact, I tend to think that the long-run impact of these experiences will be positive. English speaking African economies will have incentives to diversify their export destinations away from the UK. African countries will have more leverage vis-a-vis the UK and (a fractured) Europe (and the US). And the lessons from the political upheavals in the West will serve to liberate Global South elites to mold their own societies in their own image and in a manner that respects sociopolitical realities in their specific contexts.

Five Things You Should Know About the Ongoing Monday Protests in Kenya

Over the last couple of weeks opposition parties in Kenya have staged public protests across the country demanding for personnel changes at the Independent Electoral and Boundaries Commission (IEBC) — Kenya’s electoral management body (EMB). This week’s Monday demonstrations turned violent in some towns and cities, with at least four people reported dead at the hands of anti-riot police.

The organizers of the protests have vowed to keep at it every Monday until the current IEBC commissioners resign. Here are the five things you need to know about the protests:

  1. A plurality of Kenyans have lost faith in the IEBC (see here). Screen Shot 2016-06-07 at 8.07.41 PMIn the run up to the 2013 election, several members of the commission (then known as IIEC) and its secretariat were implicated in graft (known as the chickengate scandal) involving a number of British companies. These individuals’ accomplices were found guilty by UK courts; and court documents explicitly mentioned the Kenyans that were bribed by their UK counterparts. Yet a number of those adversely mentioned in the UK court documents continue to remain in office — including the chairman of the commission, Issack Hassan. It is partially for this reason that a plurality of Kenyans (including politicians on both sides of the political divide) have lost faith in the IEBC.
  2. Opposition politicians, including those in CORD and KANU, want the IEBC reconstituted over suspicions that its current leadership favors incumbent Uhuru Kenyatta and the governing Jubilee Alliance. CORD (in my view, erroneously) maintains that the IEBC was used to rig the 2013 election in favor of President Kenyatta. KANU has most recently accused the same EMB of rigging the Kericho senatorial by-election in favor of the Jubilee candidate. CORD has also argued that its failure to meet the threshold for a popular referendum (dubbed Okoa Kenya) —  whose main thrust was a change in Kenya’s electoral laws — was a result of bias within the IEBC. CORD wants the IEBC reconstituted and the new commission to have proportional representation of parliamentary political parties. Although the constitution lays out the procedure for removing commissioners of an independent entity like IEBC (through Parliament), CORD is wary of this option due to its minority status in the legislature. Initially it pinned its hopes on a popular referendum. But when that failed it resorted to mass action in a bid to strategically influence any eventual institutional reform of the IEBC (in my view this eventuality can partially be blamed on the singular failure of the(Jubilee) leadership of the National Assembly).
  3. The Uhuru Kenyatta Administration is caught between a rock and a hard place. On the one hand, it is hard for the administration to defend an obviously tainted EMB. This would also go against its continued claim that the IEBC is an independent body. But at the same time, the administration needs a reform path that will not embolden the opposition. The thinking within the Jubilee Alliance appears to be that if they give in to CORD on IEBC, what will CORD demand next? The contention that any and all reforms touching on the IEBC should follow constitutionally stipulated channels is partly motivated by this fear. In this regard, if CORD is genuine about surgical reforms specifically targeting the IEBC, it’s leadership should perhaps think of a way to credibly signal to the Kenyatta Administration that their reform agenda is limited in scope. From a purely political standpoint, President Kenyatta has reason to be cautious about the potential to open a whole pandoras box of constitutional reforms.
  4. Police brutality is (still) common in Kenya. Screen Shot 2016-06-07 at 7.27.32 PMOne of the goals of Kenya’s new political dispensation following the adoption of a new constitution in 2010 was police reform (majority of the 1,300 killed in the post-election violence of 2007-8 were shot by police). The institution even changed its name from Police Force to Police Service; and an independent police oversight authority was created (to democratize the institution through civilian oversight). But experience since 2013 has shown that these attempts at reform have not yielded any tangible results. The Police Service is still as corrupt as ever. And has little consideration for constitutional limits to its use of force (see image). Which means that more Kenyans will be killed in the hands of the police if the Monday protests continue.
  5. The 2017 presidential contest will likely be more competitive than most people think. Six months ago I would have predicted a landslide reelection victory for President Uhuru Kenyatta in 2017. Not anymore. President Kenyatta is still the favorite to win (because of incumbency advantage). But the jostling over control of the IEBC and the Supreme Court are telltale signs that the political class is expecting a close contest that will likely be disputed. It says a lot that despite being the incumbent, President Kenyatta’s poll numbers have stubbornly stuck in the low 40s (he can thank mind-blowing corruption and general Public Sector incompetence for that). This means that unless we see a drastic shift in regional alliances, next year’s election will most likely go to a runoff contest between Kenyatta and Odinga — which will be close. The more reason to have credible institutions in the form of a trusted IEBC and a Supreme Court beyond reproach. 

What does this say about overall political stability in Kenya? At this point in time I am a lot  more worried about county-level electoral violence than a 2007-08 style national disaster. That said, there is reason to fear that continued police brutality, especially targeting opposition supporters, may trigger wider civilian violence against presumed Jubilee supporters.

It is a little too early to talk specifics about next year’s presidential election. But what is clear is that Kenyatta’s reelection battle will no longer be a walk in the park.

A Tentative (Mixed) Public Health Victory: The Slow Retrenchment of HIV-AIDS

This is from the Economist, on the state of the fight against HIV-AIDS.

The next UN target is that, by 2020, 90% of those infected should have been diagnosed and know their status, 90% of those so diagnosed should be on ARVs, and 90% of those on ARVs should have suppressed viral loads. That is ambitious, but history suggests those in the field will rise to the challenge.

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The blue line is testament to George W. Bush’s No. 1 foreign policy success: PEPFAR.

But we should count our chickens just yet. The trends in the graph above are not uniform across the globe. As I noted in a previous post, there is quite a bit of heterogeneity both across and within countries. For example, in East Africa, Uganda is lagging Kenya and Tanzania in the quest to tame the virus (see below).

On a different note, this is yet another data point to suggest that Yoweri Museveni has hit the inflection point, and from now on all his machinations to stay in power will wipe out the achievements of his first 20 years in power.