The EAC: A Model for Boosting Intra-Africa Trade?

The Economist reports:

Since its resurrection in 2000, officials are more often found toasting its success. A regional club of six countries, the EAC is now the most integrated trading bloc on the continent. Its members agreed on a customs union in 2005, and a common market in 2010. The region is richer and more peaceful as a result, argues a new paper* from the International Growth Centre, a research organisation.

Many things boost trade, from growth to international deals. The researchers use some fancy modelling to pick out the effect of the EAC. They find that bilateral trade between member countries was a whopping 213% higher in 2011 than it would otherwise have been. Trade gains from other regional blocs in the continent are smaller: around 110% in the Southern African Development Community (SADC), and 80% in the Common Market for Eastern and Southern Africa (COMESA).

Planned infrastructure links over the next decade should add a positive shine to these figures.

Now if only regional integration had a similarly sanguine implication for democratic consolidation among the member countries of the EAC…

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.

Screen Shot 2016-06-06 at 9.07.02 AM

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.

Interesting Fact of the Month

On life expectancy on the Continent:

Malawi has led the way, with life expectancy at birth rising 42 per cent from 44.1 years in 2000 to 62.7 in 2014, according to data from the World Bank.

Zambia and Zimbabwe have both seen rises of 38 per cent over the same period, with longevity in Rwanda, Botswana and Sierra Leone up more than 30 per cent.

Uganda, Ethiopia, the Republic of Congo, Niger and Kenya have all witnessed rises of more than 20 per cent. Overall, of the 37 countries to have seen life expectancy rise by more than 10 per cent since 2000, 30 are in sub-Saharan Africa, including the 15 with the biggest gains, as the table below shows.

Not one sub-Saharan country saw life expectancy fall between 2000 and 2014.

Public health for the win.

The full FT piece is here.

Uganda chooses Tanzania over Kenya in pipeline deal

The Business Daily reports:

Uganda will take its oil to the market through Tanzania’s Tanga port, leaving Kenya to build its own pipeline to Lamu, if the positions taken at the just-ended talks in Kampala are maintained.

It turns out that Kenyan negotiators showed up without having done their homework. For example:

….. it has also emerged that the Kenyan officials participating in the Kampala talks may not have had all their facts right as they tried to address the concerns raised by Uganda over the northern route for the pipeline.

This is odd, given Amb. Amina Mohamed’s chops. Or should we be asking questions of the energy ministry?

Screen Shot 2016-04-16 at 5.04.17 PMUganda’s decision should be treated as new information on the capacity of the Kenyan state to execute large scale infrastructure projects. Kenya really wanted this deal, and the fact that the negotiators could not seal the deal with Uganda suggests that there is no there there as far as Nairobi’s capacity to execute on LAPSSET is concerned. This will undoubtedly impact the Kenyatta administration’s ability to originate new projects related to the $25b LAPSSET development plan.

The economics of the choice of pipeline appeared to not have mattered:

A joint pipeline between Kenya and Uganda would have had an initial throughput of 300,000 barrels per day (200,000 barrels for Uganda and 100,000 barrels for Kenya). This could have earned the pipeline companies $1.66 billion a year, which would be shared between the countries according to throughput.

…… If the two countries go for a standalone pipeline, Uganda will lose $300 million every year due to an increase of $4.07 in tariff per barrel, and Kenya will lose $250 million per year due to the increased tariff of $6.96 per barrel.

All else equal, this is probably a net positive development for the future of the East African Community (EAC). It is obviously a big financial and political loss for Kenya (and for that matter, Uganda) but it will dampen the idea of a two-speed EAC — with Kenya, Uganda, and Rwanda in the fast lane and Tanzania and Burundi in the slow lane.

 

An East African Geopolitical Dilemma: Which pipeline route makes most sense for Uganda?

Bloomberg reports:

Screen Shot 2016-03-25 at 9.34.21 AMKenya is competing with Tanzania to build the pipeline from oilfields in Hoima, western Uganda. It would either traverse northern Kenya’s desert to a proposed port at Lamu, near the border with Somalia, or south past Lake Victoria to Tanga on Tanzania’s coast. A third option would be through the southern Kenyan town of Nakuru.

Tanzanian President John Magufuli said earlier this month he’d agreed with Museveni to route the conduit via his country at a cost of about $4 billion, with funding from Total SA. The Kenyan option favored by Tullow, which has oil discoveries in Uganda and Kenya, may cost $5 billion, according to an estimate by Nagoya, Japan-based Toyota Tsusho Corp.

Uganda is in a rush to get its oil to market. It also wants to make sure that it does not tie its hands in an obsolescing bargain with Kenya. Being landlocked, the country already depends a great deal on Kenya as an overland route for its imports and exports. The pipeline would add to Nairobi’s bargaining power vis-a-vis Kampala.

In an open letter to President Yoweri Museveni, Angelo Izama, a Ugandan journalist (and a friend of yours truly) articulates these concerns and concludes that it is better for Uganda to build the pipeline through Tanzania in order to minimize its political risk exposure:

It is not rocket science that routing both commercial traffic and oil through Kenya would give Nairobi near total influence on economic matters and would, added to Kenya’s already considerable market penetration in Uganda, leave little wiggle-room for unforeseen and some predictable hazards. The Ugandan domestic commercial and industrial community as well as consumers remember well how helpless they were when disruptions followed the Kenyan election of 2007 (even when some of us had urged the government earlier to restock fuel in anticipation of political violence). Many also live with the challenges of a single port to our import-addicted economy and the cost to family fortunes whenever Nairobi pulls bureaucratic red tape. Obviously being landlocked is not a “non-issue” as you framed it in Kyankwanzi. It needs to be placed in a detailed context. I have some reservations over your optimistic take on political and market integration, and that said, clearly having one member, in this case Kenya, within this greater EAC community with more power and influence than the rest is not an advantage to the growth of the community and may in fact prove rather dangerous. This as I recall has been the common fear cited in our neighbourhood about Uganda’s aggressive military spending (to which the Kenyan government responded with its own expenditure in the decade ending 2018).

The official reason given by Uganda for considering the Tanzania option (see map) is that construction of the Kenyan pipeline would be delayed (due to corruption, expensive land [Kenyans and land!], security threats from al-Shabaab, and the fact that the Lamu Port is yet to be completed).

All these are reasonable concerns.

Plus, it would have been foolish for Uganda not to strengthen its bargaining position by CREDIBLY demonstrating that it is considering BOTH options.

But Uganda must also know that whatever the outcome, this is an obsolescing bargain. Once the pipeline is constructed, it will be at the mercy of the host country government.

It is for this reason that it should seriously consider the kinds of future governments that might be in office in Nairobi and Dodoma/Dar es Salaam.

To this end Ugandan policymakers need to ask themselves the question: Would you rather deal with a government that partially answers to private sector interests and operates in a context of weak parties; or do you want to be at the mercy of a party-state in which some politically-motivated party stalwarts can actually influence official policy?

Understood this way, Uganda’s concern should be about what happens after the deal has been sealed; rather than the operational concerns that have thus far been raised by Kampala.

Notice that Kenya has been able to protect its existing oil pipeline well enough. Rioters may have uprooted the railway in 2007, but that was because they felt that Museveni was supporting their political opponent (Museveni could be more discreet in the future). Also, it is a lot harder to uproot a pipeline buried in the ground. The construction delays due to land issues can also be solved (and in Kenyan fashion, at whatever cost) — notice how fast Kenya is building the new standard gauge (SGR) railway line from Mombasa to Nairobi despite the well documented shenanigans around land compensation (More on this in a World Bank report I co-authored in my grad school days here).

Perhaps more importantly, the Kenyan option is attractive because Kenya also has oil, and will have to protect the pipeline anyway. This scenario also guarantees a private sector overlap between the two countries — in the form of Tullow or whoever buys its stake — that will be in a position to iron out any future misunderstandings.

Tanzania is also an attractive option. The pipeline will be $1 billion cheaper. Because it passes through largely uninhabited land, construction will be speedy. And the port at Tanga is a lot further from the Somalia border than Lamu, and should be easier to protect.

All this to say that the operational concerns raised by Kampala are a mere bargaining tool. These issues can be ironed out regardless of the host country. The big question is what happens AFTER the pipeline is constructed.

And here, I don’t see why Tanzania is necessarily a slam dunk.

The history of the EAC (see here for example) tells us that Kenya tends to subject its foreign policy to concentrated private interests. Tanzania on the other hand has a record of having a principled an ideologically driven (and sometimes nationalist) foreign policy with significant input from well-placed party officials. Put differently, the calculation of political risk in Kenya involves fewer structural veto players than in Tanzania. Ceteris paribus, it seems that it would be cheaper to manage the long-run political risk in Kenya than in Tanzania.

That said, the Tanzania option makes a lot of sense in a zero sum game. As Angelo puts it:

I have some reservations over your [Museveni’s] optimistic take on political and market integration, and that said, clearly having one member, in this case Kenya, within this greater EAC community with more power and influence than the rest is not an advantage to the growth of the community and may in fact prove rather dangerous.

But even this consideration only makes sense in the short run. Assuming all goes well for Tanzania, in the long run the country’s economy is on course to catch up to Kenya’s. Dodoma will then have sufficient political and economic muscle to push around land-locked Uganda if it ever so wishes.

To reiterate, the simple question Museveni should ask himself is: who would you rather negotiate with once the pipeline is built?

I don’t envy the Ugandan negotiators. And they have not helped themselves by publicly stating their eagerness to get their oil to market ASAP.

The Continuing Deterioration of Uganda Under Museveni: The Case of HIV & AIDS

In the 1990s Uganda was typically considered to be one of the success stories in the management of the AIDS epidemic in SSA. However, as is shown below, since the early 2000s Uganda has significantly lagged its regional peers (Kenya and Tanzania) in the fight against HIV/AIDS. New infections are declining in Kenya and Tanzania but increasing in Uganda. HIV prevalence also appears to be increasing in Uganda, while either declining or keeping steady in Tanzania and Kenya. Lastly, of the three countries, the rate of decline in AIDS-related deaths has been slowest in Uganda.

It’s not clear to me why the HIV/AIDS situation has deteriorated in Uganda since the late 1990s relative to its neighbors. After all, the three countries have been receiving cash from PEPFAR since 2004 (which explains the decline in AIDS related mortality in the mid-2000s after the use of ARTs became widespread).

My hunch is that this is a reflection of Yoweri Museveni’s gradual loss of control of the state institutions that he has worked hard to build since 1986. It is also probably related to the manner in which Museveni chose to deal with the advent of competitive politics in Uganda after the end of the no-party “movement” era. His strategy has come to be defined by a willingness to basically buy off anyone and everyone — at the expense of state institutions and specific government agencies.

Consider this:

The OIG auditors identified stock-outs of key medicines, particularly those to treat HIV, in 70% of 50 health facilities visited which could result in treatment disruption for patients. Furthermore, 54% of the health facilities visited had accumulated expired medicines. 68% of facilities reported stock-outs of anti-malaria medicines and test kits and 64% of the facilities reported stock-outs of tuberculosis medicines of between one week and three months.

The OIG concluded that the supply chain system does not effectively distribute and account for medicines financed by the Global Fund. There were reported cases of theft, including 40 cartons of artemisinin-based combination therapies; an unexplained difference of US$21.4 million between recorded and actual stocks at the central warehouse; and a difference of US$1.9 million between commodities received and actually dispensed to patients from January 2014 to June 2015 in eight high-volume facilities visited by the auditors.

Screen Shot 2016-03-05 at 9.20.11 AMUganda’s post civil war economic recovery may have been impressive (see graph), but it should no longer be something for Museveni to hang his hat on. It is clear that the longer Museveni stays in office, the more he is going to undo his very own achievements in the earlier years of his three-decade rule.

 

 

Evidence of Ballot Box Stuffing in Uganda’s Presidential Election

As is the case in many electoral autocracies, Yoweri Museveni probably did not need to rig the just-concluded Ugandan presidential election. By most accounts it appears that he still has significant support in much of Uganda’s countryside, where most voters reside. And despite a late surge the leading opposition bloc lacked the organizational muscle to deal with an entrenched incumbent. For example, it failed to field candidates for legislative elections at the same rate as the ruling party. The opposition’s late surge also meant that not enough pro-Besigye supporters had registered to vote since it wasn’t clear that he was going to mount a serious challenge this time round after the experience of 2011.

But we also know that dictators never want to simply win. They like to win with overwhelming landslides in order to demonstrate their super-popularity and to deter any future challengers (agents of the regime, like those running electoral management bodies, also have an incentive to inflate the dictator’s numbers as a show of loyalty — see here, for example).

So it is not surprising that Museveni stuffed ballot boxes (or had them stuffed in his name) in certain areas — some of which registered 100% turnout!

Of the 28,010 voting stations, 130 of them had 100% voter turnout, 113 of which voted 90% or more for the eventual winner and incumbent, Yoweri Museveni (42,768 votes for him in these stations). 105 of these highly suspicious stations occurred in just 4 districts:

Ugandan districts

More on this here.

 

Tanzania suspends construction of $10b Bagamoyo port

An agreement for the initial development of the Bagamoyo Port Project was signed in March 2013 during the visit of the Chinese President Xi Jinping as part of the Tsh1.28 trillion infrastructure package deals. The agreement specified that $500 million would be designated for port financing for the year of 2013 to allow the project to start.

Tanzania and Kenya are locked in a competition for the title of gateway to East and Central Africa, and so far Kenya is winning. Transportation costs on the southern corridor are almost 1.5 times those on Kenya’s northern corridor. Bagamoyo was supposed to take the fight to Mombasa (and Lamu). Now Dodoma will focus on upgrading the ports in Dar and Mtwara (and Tanga).

The cancellation of the project is a reasonable policy move. The cost would’ve severely stressed Tanzania’s fiscal position; and the 20m container capacity was a little too ambitious, to say the least.

Also, this development probably increases the probability that Uganda’s oil pipeline to the coast will be routed through Kenya (see here and here).

On oil and political risk in Uganda

The problem Uganda now faces has been made possible by the Bilateral Investment Treaty signed in 2000 with the Netherlands. According to the treaty, all Dutch investors in Uganda have the right to pursue arbitration before the World Bank court if they feel treated unfairly. The French company Total Uganda registered itself as a Dutch company.

This is known as the Dutch Sandwich; you put a Dutch company in between and then you become a Dutch investor. Which turns the treaty into a tool to drag a state before a tribunal of three men in Washington, having a commercial background and the ability to award billion dollar fines, without a possibility to appeal. If Uganda is condemned to a compensation but refuses to pay, the company has the right to seize Ugandan assets in the world.

…. A new interactive map made by Dutch journalists, with all known ISDS cases in the world, shows that ISDS is mainly used against developing countries. Sometimes because they clearly behaved badly towards an investor, but in other cases it’s more likely that it is used as a bargaining tool and a threat by multinational companies for better deals. Litigation costs amount to 8 million dollars on average, calculated the Organisation for Economic Co-operation and Development.

More on this here.

Total Uganda (or is it Total Netherlands?) is probably trying to dodge taxes in Uganda. But the Ugandan government lacks the means to effectively counteract this since it insists on keeping the details of its production sharing agreement with the French Dutch company secret. So there’s that.

The OAU is dead, long live the AU

On Friday, the African Union approved draft plans to send troops to the conflict-ridden Burundi even without permission from Bujumbura in what could be a historic move to stop the country’s impending implosion.

The move by the AU Peace and Security Council reached on Friday despite initial opposition from the Burundi delegation invoked a rarely-used clause in AU Constitutive Act.

Article 4(h) of the AU Constitutive Act provides for sending of troops to a member country under circumstances of war crime, genocide or crimes against humanity without that country’s permission.

More on the African Union’s 5000 strong force for Burundi here. The actual AU resolution establishing the African Prevention and Protection Mission in Burundi (MAPROBU) is available here. Paul D. Williams, an associate professor of international affairs at George Washington University, parses the text of the AU communique here.

This semester I taught a class on intra-Africa IR, mostly looking at economic and security cooperation from 1963 to the present. One of the issues we wrestled with in the class was whether the AU was any different from the OAU, despite the language of Article 4(h). The OAU was notoriously ineffectual in dealing with conflict in Africa, on account of its many non-interference clauses.

Doubts about the AU and its ability to effectively originate an intervention in the face of intra-state conflicts were reinforced by:

(i) its continued commitment to the “equality” of member states (no regional hegemons — like Nigeria, Ethiopia, or South Africa — were given any formal status of first among equals);

(ii) the the deliberate weakening of the Peace and Security Council (PSC) — which has no permanent membership (5 elected for 3 years, 10 for 2 years);

(iv) the fact that the chairmanship of the PSC rotates monthly (by country name alphabetical order), giving any one chair hardly any time to develop the connections required for effective operations of such a sensitive post in a major IO;

(v) the structure of the regional distribution of seats on the PSC which incentivizes a sub-regional logic of seat allocation, as opposed to actual efficiency of the PSC.

It is therefore interesting that 4(h) was today invoked to justify intervention in Burundi, without the direct consent of Bujumbura (Nkurunziza may yet save face by inviting the AU mission under 4(j)).

Also interesting is the fact that the troops will be under the banner of the East African Standby Force (EASF) and not the AU. This will expose the actual operations of the mission to the same EAC politics that I outlined in an earlier post here (for the two of you out there who care to know, the different (sub)regional standby forces actually have formal relationships with the AU, so they are not totally run by the sub-regional RECs but can be seen as a practical first step in the aspirational goal of a continental standby force, someday).

Who said intra-African IR is boring (or does not exist)?

Also, watch out for a draft paper on the politics of intra-Africa IR soon…