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.

Reading the Torah in Abuja, and how the Talmud Became a Bestseller in South Korea

This is from The Economist:

In Abuja, the capital, there are at least four small communities of Igbo-speakers that have opened synagogues. (Jews joke that every town needs at least two so that members can hold a grudge, and refuse to attend one of them.) In one, on the outskirts of the city, there is a gospel lilt to the songs: members taught themselves to read Hebrew and then had to make up the tunes, says one…..

It might seem odd that people would sign up to join a small faith whose members have suffered centuries of oppression. Yet Uri Palti, Israel’s ambassador to Nigeria, reckons there are more than 40 such communities across the country. Daniel Lis, an academic, thinks there may be thousands of Nigerians who practise Judaism. Millions more of the Igbo tribe (sic) believe that they are descended from biblical Israelites. Across Africa as a whole there may be thousands more self-declared Jews. One community in eastern Uganda, the Abayudaya, adopted the faith almost a century ago. Its rabbi was recently elected the country’s first Jewish member of parliament.

And this is from the New Yorker:

About an hour’s drive north of Seoul, in the Gwangju Mountains, nearly fifty South Korean children pore over a book. The text is an unlikely choice: the Talmud, the fifteen-hundred-year-old book of Jewish laws. The students are not Jewish, nor are their teachers, and they have no interest in converting. Most have never met a Jew before. But, according to the founder of their school, the students enrolled with the goal of receiving a “Jewish education” in addition to a Korean one.

When I toured the boarding school last year, the students, who ranged in age from four to nineteen, were seated cross-legged on the floor of a small tentlike auditorium. Standing in front of a whiteboard, their teacher, Park Hyunjun, was explaining that Jews pray wearing two small black boxes, known as tefillin, to help them remember God’s word. He used the Hebrew words shel rosh (“on the head”) and shel yad (“on the arm”) to describe where the boxes are worn. Inside these boxes, he said, was parchment that contained verses from one of the holiest Jewish prayers, the Shema, which Jews recite daily. As the room filled with murmurings of the Shema in Korean, the dean of the school leaned over to me and said that the students recited the prayer daily, too, “with the goal of memorizing it.”

Both are pretty interesting reads. Definitely worth your time.

Some key facts about Chinese lending to African states (new dataset)

Deborah Brautigam and collaborators are about to release a much-anticipated dataset on Chinese loans to African states. Details on the launch event at SAIS here.

And here are some key facts:

  • Who gets the Lion’s share of the Dragon’s loans?  Angola received 25% of all Chinese loans to Africa between 2000 and 2015, almost all of them backed by Angolan oil.
  • Bloomberg and Fitch, take note: Did China Eximbank really lend more than the World Bank in Africa? SAIS-CARI data shows cumulative 2001 to 2010 China Eximbank loan to Africa amount to only US$27.2 billion, not your figure of US$67.2 billion. The World Bank is still a larger lender than China Eximbank.
  • What do Chinese loans pay for in Africa? Transportation. Between 2000 and 2014, transportation received the largest share: US$23.6 billion worth.
  • What are the biggest Chinese loan-financed infrastructure projects in Africa? No. 1: Kenya’s Mombasa-Nairobi Standard Gauge Railway Phase I, funded by US$3.6 billion worth of Chinese loans; No.2: Ethiopia’s Addis-Djibouti Railway, funded at US$2.5 billion. Both were signed in 2013.

Data Problems Everywhere

This is from the Economist:

GOVERNMENT statisticians shun the limelight, which only ever finds them when things go awry. So it is with India’s national bean counters, who are struggling to convince the world that an economy with idle factories, sagging exports and ailing banks grew by 7.5% in 2015, as their models purport to show. Ever since a new methodology for calculating GDP was adopted last year, India has appeared to be the world’s fastest-growing big economy, outpacing China. But scepticism about the data is growing even faster.

… Investors, at any rate, roundly disbelieve India’s growth figures. Nevsky Capital, a hedge fund, cited dodgy data from India, among other places, as a reason to shut up shop at the start of the year. Even the government’s own chief economic adviser has admitted he is sometimes flummoxed by the data. A cottage industry has sprung up to cater to the sceptics, blending various indicators of economic activity to produce new gauges of growth.

Such home-brewed statistics have been common in China for some time: Li Keqiang, now the country’s premier, admitted as a provincial governor that he all but ignored “man-made” economic statistics in favour of hard-to-fiddle data such as railway-cargo volumes, electricity consumption and loans made by banks. The Economist began publishing a “Keqiang Index” when his habits became known in 2010.

Ambit Capital, a broker based in Mumbai, now computes its own “Keqiang Index” for India, which implies a real growth rate of 5.4%. Economists at HSBC, a bank, think 5.9-6% is closer to the truth.

More on this here.

Alex de Waal on the African Academy

In a recent article Tufts’ Alex de Waal makes an important point on the nature of policy research in Africa:

……. Analysis is shaped to suit the audience, and scholars end up speaking their language. Rather than evidence-based policy, there is policy-based evidence-making [emphasis mine]. The paradigm of this is engaging with western governments, the World Bank or the United Nations. Much of the policy-related discourse on good governance, post-conflict reconstruction and development takes place in a fantasy land that exists only in the minds of international civil servants.

A little bit harsh, but not completely off the mark. As I’ve written before, we need to make a distinction between research that is meant to inform policy in specific contexts, and that which is designed to generate general knowledge (and perhaps most importantly, for reviewers). What is good for reviewers is seldom useful for policymakers.

That said, I don’t think the burden to produce policy-relevant research (for African states) should be on scholars based in the West.

Africa-based scholars are the best placed to produce policy-relevant research in their own countries. They are the ones who are best able to grapple with the policy judgement calls that often require one to take political positions. Foreign researchers have to worry about research permits (for themselves or their sponsor donor agencies) and therefore have strong incentives to recommend “politically neutral” and “technical” (read apolitical) policy solutions. Of course not every researcher conforms to the type suggested here. But there is no denying that foreign scholars face slightly different incentives than their domestic counterparts.

Where there might be some mileage on this front is with the “public sector” research arms of the World Bank and the African Development Bank.

On African academics, de Waal has this to say:

…… the structure of academic rewards and careers systematically disadvantages those who do not have the skills or capacities for this kind of high-end quantitative endeavour or have serious misgivings about it. This causes severe dissonance between actual lived experience and the academic work that is validated by universities.

… Supervisors in foreign universities rarely have the subject matter expertise, so they tend to guide students towards more theoretical approaches. Examiners and peer reviewers likewise reward and reinforce their own disciplinary biases. On the other hand, it is common to see junior Western scholars doing rather uninteresting quantitative studies or superficial case studies. Despite their shortcomings these studies are published. These scholars, then, become the group that undertakes peer review.

The African scholar of political science may be compelled to adopt a schizoid personality. To become an academic in a Western university she or he may be obliged to unlearn important knowledge, and learn frameworks and skills that are actually irrelevant to the situation at hand but are necessary for being considered a professional academic.

Here I think de Waal moves dangerously close to endorsing “African Exceptionalism.” It is almost as if the African grad student shows up in grad school imbued with unique knowledge of the Continent that is inaccessible to their potential advisers and colleagues. Also, I don’t think the study of Africa should be pigeonholed as existing outside basic rules of evidence-based policymaking and properly identified causal stories. Despite the enduring allure of the idea, Africa is not exceptional.

As a social scientist, my knowledge of Kenya is largely informed by my experience as a Nairobian. Over the years I have had to learn a lot about the rest of Kenya, in much the same way an Australian would. In doing so I incurred a lower cost than a hypothetical Australian would, for sure, but the cost was not zero. The point here is that it is not necessarily true that I have an innate ability to *know* Kenyan politics better than an Australian ever would if they invested the time and effort.

And who is to say that I would necessarily be able to articulate a research agenda on whatever subject in Malawi better than a Southern Californian? What proportion of Kenyans can locate Bangui on a map?

In my view, much of the handwringing about the methodologies employed in the study of the Continent misses the point. The problem is not that Western academics are asking the wrong questions, or that certain methodological approaches are privileged over others. The real problem is that there is a limited pool of high quality Africa-based scholars. Increasing the pool of talented Africa-based researchers would boost the variety of perspectives and methodologies employed in the study of the region — to the benefit of all involved. This can be achieved by providing better funding opportunities for African universities and incentivizing high quality research by Africa-based faculty.

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.

Screen Shot 2016-04-03 at 9.41.32 PM

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. 

The State of Sub-National Government in Nigeria (Public Finance is Hard)

This is from the March Africa Research Institute (ARI) report on the state of sub-national government in Nigeria:

Screen Shot 2016-03-30 at 6.33.32 PMA federal structure, whose prime objective was to maintain security by curbing regional and ethnic influence, does not foster development. Despite receiving about half the national revenue – a sum of N2.7 trillion in 2014 (US$13.5 billion at current official exchange rate) – state governments fail to provide the services that could materially improve the lives of tens of millions of Nigerians. The 2015 United Nations Human Development Index ranked Nigeria 152nd out of 187 countries. State authorities are not accountable to citizens, state institutions are weak and corruption is endemic. The 774 LGAs – the most proximate form of government for most Nigerians – have all but ceased to function. Furthermore, groups armed by or linked to state governors have been responsible for the most deadly outbreaks of violence of the past decade: ethnic clashes in Plateau state, conflict in the Niger Delta and the Boko Haram insurgency.

… If oil were at US$20 a barrel, at 2014 budget levels only three states would be able to cover their recurrent costs with recurrent revenues: Lagos, because it generates substantial revenues internally and depends less on federal transfers; Kano, because of the amount the state receives in federal transfers due to the large number of local government areas; and Katsina, because the overhead and personnel costs are very low compared to other states.

And on Lagosian exceptionalism:

…. to raise tax revenues from various sources, including property, required a promise of benefits; and to make it sustainable those benefits had to be delivered to taxpayers. Federal funding resumed in 2007, but taxes still produce 60% of Lagos’s revenue. Its IGR, about N300 billion (US$1.5 billion) in 2014, is equivalent to the combined IGR of 32 of Nigeria’s 35 other states.4

Reliance on IGR made the Lagos state government more accountable to its electorate, who in turn became more aware of their right to judge its performance. Under Tinubu’s protégé and successor, Babatunde Fashola, crime was reduced, the environment improved, roads were built and the transport system expanded. Prompt action to contain a possible outbreak of Ebola in 2014 demonstrated governmental competence. Now that Fashola is a federal minister, many expect Nasir el-Rufai in Kaduna state, in the north-west, to earn the reputation as Nigeria’s most praiseworthy state governor. Elected in 2015, el-Rufai moved quickly to close the state’s commercial bank accounts; eliminate “ghost workers” from the payroll by introducing digital ID for the civil service; concentrate resources on infrastructure, transport and public services; and ensure that LGAs receive their correct share of funding.

The report is definitely worth a look. You can find it here.

Incentivizing Workshops as Substitutes for Actual Governing: The Case of Nigeria

This is from the FT:

According to figures released by the ministry, travel was the single biggest government line item from 2012 to 2014, at N248bn ($1.25bn) for the three years combined (the ministry did not provide annual figures). This is equivalent to an extraordinary 18 per cent of total government spending [Emphasis added].

……. A 2012 investigation by Nigerian newspaper Punch found that wealthy Nigerians spent $6.5bn on private planes between 2007 and 2012, making the country the biggest market for them in Africa.

Not all of them were bought with private funds. Under former president Goodluck Jonathan, Nigeria’s Presidential Air Fleet (PAF) acquired several new private jets, bringing its total to 11.

And you know a non-trivial proportion of these “study tours,” conferences, and meetings were either expensive shopping trips on the government’s tab or ploys to earn inflated per diems.

This is an instance where I’d endorse a move to “leapfrog” meetings, workshops, and conferences.

Nigeria’s Africa Internet Group posts the Continent’s first “unicorn” startup

This is from the FT:

Africa Internet Group is set to become the continent’s first “unicorn” after securing an investment valuing the ecommerce group at more than $1bn.

… African Internet Group’s valuation could be matched by Interswitch, the Nigerian fintech group that processes payments for banks, if the company decides to float later this year.

Over the next couple of decades the mobile and tech market in Africa will only grow bigger — watch out for Nigeria, Kenya, Ghana, Cote d’Ivoire ….. and Ethiopia when they finally liberalize (which I hope will happen sooner rather than later). According to the same FT piece:

Smartphones have begun to transform the way Africans live and work. The continent is projected to have 360m smartphones by 2025, when internet penetration on the continent will hit 50 per cent, according to McKinsey Consultants.

H/T Tyler Cowen.

Median vs Per Capita Income in Africa

CGD’s Anna Diofasi and Nancy Birdsall compiled median income (2011 PPP) data for 144 countries. In the data they find interesting cases of a mismatch between median and per capita incomes:

the median reflects how much the person at the 50th percentile of the income distribution earns (or spends), giving us a better picture of the well-being of a “typical” individual in a given country. Take Nigeria and Tanzania: in 2010, Nigeria’s GDP per capita (at PPP) was $5,123; Tanzania’s stood at only $2,111. This suggests that Nigerians were more than twice as well off as Tanzanians. Yet, if we compare consumption medians, a different picture emerges: a Nigerian at the middle of the income distribution lived on $1.80 a day, while his or her Tanzanian counterpart had 20 cents more to spend, at $2 a day.

I got curious and made maps of median (2011 $$) and per capita (2010 $$) incomes on the Continent.

income differences

What is going on with median incomes in Central Africa from CAR through to Mozambique? Also, what’s up with Zambia?