On North Korea’s Lucrative Relationship With African States

A number of African countries have close ties to North Korea. And it is for the very same reasons that these states have (or had) ties with Cuba, China, and USSR/Russia:

Namibian officials describe a different North Korea — a longtime ally, a partner in development and an affordable contractor. Since the 1960s, when North Korea began providing support for African nations during their independence struggles with European colonial powers, the regime has fostered political ties on the continent that have turned into commercial relationships.

Recall that it is China that was willing to come to the aid of landlocked Zambia after apartheid South Africa and apartheid-lite Southern Rhodesia threatened the country’s trade links on account of its support for nationalists from both countries. The USSR and Cuba were also vital allies of African nationalist liberation movements at a time when the West was mired in doublespeak over decolonization and racial equality on the Continent. Cuba, in particular, committed blood and treasure in the liberation of Angola and Southwest Africa (Namibia).

Nelson Mandela vowed never to forget friends that aided the ANC against apartheid:

All to say that China, Russia, Cuba, and North Korea are not merely using African states. It has always been a game played on the basis of mutual interests, with the distribution of benefits dictated by the prevailing balance of bargaining power.

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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.

Powering Africa Into the Next Decade

The African Development Bank has made power generation its top priority (see list of power projects here). The US-led initiative, Power Africa, is focusing capital on some very big and interesting projects. I’m not sure if the AfDB was the instigator of the new trend (even before President Adesina), but several serious African governments have recently prioritized power generation (looking at you, Pretoria). Here’s a sample:

A 450MW gas-fired power plant near Nigeria’s Benin City. In 2014 Nigeria flared more than 290b standard cubic feet of gas.

Twenty international banks and equity funders have committed $900m to the Azura-Edo Independent Power Project, a 450MW gas-fired open-cycle power plant to be built in the country’s Edo State.

A joint venture of Siemens and Julius Berger Nigeria will start building the plant, which is expected to start generating in 2018.

Considered a model for future plants in terms of its private financing, the plant will also burn Nigeria’s natural gas, of which many billions of cubic feet are now routinely flared off as waste.

Zambia and Zimbabwe are in an advanced stage of making the 2400MW Batoka Gorge dam and power station a reality.

Construction of the Batoka Gorge hydroelectric power station to be located on the Zambezi River approximately 54km downstream of Victoria Falls is projected to commence early next year.

….That is why I am saying that we are closer to the fulfillment of the dream for the construction of the dam. Once construction starts it will take five years and we expect it to be completed by 2023.

Nambia set to build its biggest gas-fired power plant since independence.

The $450m plant to be located in Walvis Bay, is set to generate about 250 megawatts, 50 per cent of what the country currently generates internally (500 megawatts)

And lastly, Ethiopia’s mega dam and power plant will generate about 6,000MW:

When Ethiopia completes construction of the [Grand Renaissance] dam in 2017, it will stand 170 metres tall (550 feet) and 1.8km (1.1 miles) wide. Its reservoir will be able to hold more than the volume of the entire Blue Nile, the tributary on which it sits (see map). And it will produce 6,000 megawatts of electricity, more than double Ethiopia’s current measly output, which leaves three out of four people in the dark.

 

Some Africanist inside baseball

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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).

Why are Kenyan politicians politicizing the military?

Botswana, Gabon, Kenya, Malawi, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe are the only continental sub-Saharan African states to have never experienced military rule. Each country has managed to do so via well orchestrated coup-proofing strategies of ethnic balancing and material payoffs to the men and women with the guns and tanks. 

Kenya, in particular, has perfected this art. Because of its fractious ethnic politics, ethnic balancing within the officer corps has been key to Kenya’s coup-proofing. Kenyatta (who spoke Kikuyu) had a bit of a hard time in the beginning with a Kamba and Kalenjin speakers dominated military but eventually succeeded in having his co-ethnics in key positions. But before he did so he ensured Kikuyu dominance over the paramilitary force, the General Service Unit (GSU) to balance the military. Through the 60s and 70s, Kenyatta ensured that the GSU and police could handle their own against the military in case stuff hit the fan. Moi continued along this path, so much so that for a while in the media the typical accent of a security officer – whether police or military – became an accent from the North Rift. Under Moi the Kenyan army became “Kalenjin at the bottom, Kalenjin at the middle, and Kalenjin at the top.”

Beyond the ethnic balancing, Kenya has also coup-proofed by keeping the generals wealthy and OUT OF POLITICS – at least not overtly. The generals in Kenya are probably some of the wealthiest on the Continent. I went to high school with the son of an Air Force Major General whose family was always taking foreign trips to exotic places and always made a big splash on visiting days. The only estimates I could find are from the 1960s when nearly “two thirds of the military budget went to pay and allowances, most of it to officers.” A lot of them also got free land for cash crop farming and lucrative business deals (some illegal) from the Kenyatta and Moi governments. Keenly aware of West Africa’s junior officer problem following 1981 Moi extended land grants to junior officers as well. 

But despite their importance as leaders of a key national institution, most Kenyans, yours truly included, do not know much about the top generals in the army. The one chief of staff that I remember hearing a lot about in my childhood days was Gen. Mahmood Mohamed, the man who played a big role in quelling the 1982 coup attempt. For the most part I only saw these guys in the media on national holidays when they rode on the president’s Land Rover. 

In other words, I think it is fair to say that, contrary to arguments made by N’Diaye, for the most part the Kenyan military has historically been fairly professionalized and depoliticized relative to other countries in the neighborhood. There is no evidence to suggest that ethnic balancing has severely interfered with the process of professionalization. Kenyan presidents’ preferred agents for dirty political work have always been the intelligence service, the police and paramilitary units, but never (to the best of my knowledge) the military. Indeed the US and British militaries have had very close technical cooperation with the Kenyan military through training, material assistance and more recently joint operations, resulting in a relatively highly trained force that has for the most part stayed clear of politics.  

But this consensus appears to be slowly eroding. Before the 2013 General Elections the former Prime Minister Raila Odinga accused the military and the intelligence service of colluding with his opponent, Uhuru Kenyatta, to rig the presidential election. And now the heads of the military and intelligence service are reportedly contemplating suing a former aide to Mr. Odinga for defamation. Increasingly, the military is being dragged down to the level of the marionette-esque GSU and Police, perennial hatchet men for whoever occupies State House.

This cannot end well. 

Coup proofing is hard. And the thing with coups is that once the genie is out of the box you can’t take it back. Coups just breed more coups.

This is why the generals must be left fat and happy and in the barracks, or busy keeping the peace (and hopefully not facilitating charcoal exports) in Somalia’s Jubaland State. Do your ethnic balancing and all, but by all means KEEP THEM OUT OF POLITICS (I am glad the current Defense Minister has no political constituency).

The last thing Kenya needs is a Zimbabwe situation in which there is open bad blood between the military and the opposition. 

Plus Kenya, based on its per capita income, ethnic politics, and minimal experience with genuine democratic government, is still not beyond the coup trap to be able to safely play politics with the military. If you doubt me, go find out the last time Brazil, Thailand and Turkey had generals in charge. 

Africa’s newfound love with creditors: Bond bubble in the making?

I know it is increasingly becoming not kosher to put a damper on the Africa Rising narrative (these guys missed the memo, H/T Vanessa) but here is a much needed caution from Joe Stiglitz and Hamid Rashid, over at Project Syndicate, on SSA’s emerging appetite for private market debt (Africa needs US $90b for infrastructure; it can only raise $60 through taxes, FDI and concessional loans):

To the extent that this new lending is based on Africa’s strengthening economic fundamentals, the recent spate of sovereign-bond issues is a welcome sign. But here, as elsewhere, the record of private-sector credit assessments should leave one wary. So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world’s next debt crisis?

…….Evidence of either irrational exuberance or market expectations of a bailout is already mounting. How else can one explain Zambia’s ability to lock in a rate that was lower than the yield on a Spanish bond issue, even though Spain’s [which is not Uganda…] credit rating is four grades higher? Indeed, except for Namibia, all of these Sub-Saharan sovereign-bond issuers have “speculative” credit ratings, putting their issues in the “junk bond” category and signaling significant default risk.

The risks are real, especially when you consider the exposure to global commodity prices among the ten African countries that have floated bonds so far – Ghana, Gabon, the Democratic Republic of the Congo, Côte d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania.

In order to justify the exposure to the relatively higher risk and lending rates on the bond market (average debt period 11.2 years at 6.2% compared to 28.7 years at 1.6% for concessional loans) African governments must ensure prudent investment in sectors that will yield the biggest bang for the buck. And that also means having elaborate plans for specific projects with adequate consideration of the risks involved.

Here in Zambia (which is heavily dependent on Copper prices), the Finance Minister recently had to come out to defend how the country is using the $750 million it raised last year on the bond market (2013-14 budget here). Apparently there was no comprehensive plan for the cash so some of the money is still in the bank awaiting allocation to projects (It better be earning net positive real interest).

“They are fighting each other. By the time they have projects to finance, they will have earned quite a lot of interest from the Eurobond money they deposited. So, all the money is being used properly,” he [Finance Minister] said.

Following the initial success the country’s public sector plans to absorb another $4.5b in debt that will raise debt/GDP ratio from current ~25% to 30%. One hopes that there will be better (prior) planning this time round.

Indeed, last month FT had a story on growing fears over an Emerging (and Frontier) Markets bond bubble which had the following opening paragraph:

As far as financial follies go, tulip mania takes some beating. But future economic historians may look back at the time when investors financed a convention centre in Rwanda as the moment that the rush into emerging market bonds became frothy.

The piece also highlights the fact that the new rush to lend to African governments is not entirely driven by fundamentals – It is also a result of excess liquidity occasioned by ongoing quantitative easing in the wake of the Great Recession.

I remain optimistic about the incentive system that private borrowing will create for African governments (profit motive of creditors demands for sound macro management) and the potential for this to result in a nice virtuous cycle (if there is one thing I learned in Prof. Shiller’s class, it is the power of positive feedback in the markets).

But I also hope that when the big three “global” central banks start mopping up the cash they have been throwing around we won’t have a repeat of the 1980s, or worse, a cross between the 1980s (largely sovereign defaults) and the 1990s (largely private sector defaults) if the African private sector manages to get in on the action.

African governments, please proceed with caution.

Another African country strikes black gold, in massive amounts

UPDATE: The office of the president in Uganda is saying that the oil around Lake Albert may be double what was initially thought. According to Bloomberg:

” Uganda may hold deposits of as many as 6 billion barrels of oil, more than double the current estimate, according to the office of the nation’s presidency.

“Some analysts estimate that Uganda’s Albertine Graben may hold more than 6 billion barrels of oil,” the presidential office said in an e-mail statement yesterday. The estimate is well above the discovered deposits with a potential of 2.5 billion barrels, it said.”

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Namibia has joined Ghana and Uganda as the latest winners of the oil lottery in Africa.

According to the Independent Online:

An estimated 11 billion barrels in oil reserves have been found off Namibia’s coast, with the first production planned within four years, mines and energy minister Isak Katali announced Wednesday.

The finding could put Namibia on par with neighbouring Angola, whose reserves are estimated at around 13 billion barrels and whose production rivals Africa’s top producer Nigeria.

With just over 2.1 million people and already rich in Uranium, Namibia stands to gain immensely from the new discovery – if it is managed sanely, that is.

Between the other new African petro-states, Ghana (with its fledgling democracy) hopes to rival Botswana as the poster child of exemplary mineral management on the continent. Uganda, however, appears poised to be yet another data point in support of the oil curse theory (see earlier post below).