tag:theconversation.com,2011:/uk/topics/african-economy-9168/articles
African economy – The Conversation
2022-09-06T17:48:58Z
tag:theconversation.com,2011:article/189575
2022-09-06T17:48:58Z
2022-09-06T17:48:58Z
Colombia’s new left-wing government: three opportunities to build stronger ties with Africa
<figure><img src="https://images.theconversation.com/files/482953/original/file-20220906-20-9rrrcy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Inauguration ceremony of Colombian President Gustavo Petro, left, and vice president Francia Marquez in Bogota, on 7 August.</span> <span class="attribution"><span class="source">EFE-EPA/Mauricio Duenas Castaneda</span></span></figcaption></figure><p>The recent <a href="https://www.pbs.org/newshour/world/in-historic-shift-gustavo-petro-sworn-in-as-colombias-first-leftist-president">election</a> of Colombia’s first left-wing president, Gustavo Petro, and first black vice-president, Francia Márquez, creates a new opening to revitalise ties with Africa.</p>
<p>Colombia is often overlooked as a nation of interest because of its <a href="https://cntraveler.com/story/how-colombia-once-consumed-by-violence-became-your-next-destination">reputation for violence</a>. Its negative standing results mainly from the decades-long armed conflict between previous governments and the Marxist-Leninist group FARC. The conflict has been linked to the production and export of <a href="https://www.peaceinsight.org/en/articles/drug-trafficking-colombian-conflict/?location=colombia&theme=">illicit drugs</a>. It ended with the signing of a <a href="https://www.peaceagreements.org/wview/1845/Final%20Agreement%20to%20End%20the%20Armed%20Conflict%20and%20Build%20a%20Stable%20and%20Lasting%20Peace">peace agreement</a> in 2016. </p>
<p>Despite such a reputation, the country is an important regional economic hub. In 2021, its <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CO">GDP</a> was US$315 billion, the third largest in South America, after Brazil and Argentina. The International Monetary Fund <a href="https://blogs.imf.org/2022/04/26/latin-america-faces-unusually-high-risks/">predicts</a> that the country’s economy will grow at 5.8% in 2022.</p>
<p>The election of Petro and Márquez provides three opportunities for stronger Africa-Colombia relations that can yield mutual benefits. These are Colombia’s cultural and historical ties with Africa, strong trade potential and south-south cooperation.</p>
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Read more:
<a href="https://theconversation.com/colombia-gustavo-petro-and-francia-marquez-have-achieved-a-historic-victory-for-the-left-so-who-are-they-186221">Colombia: Gustavo Petro and Francia Márquez have achieved a historic victory for the left – so who are they?</a>
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<h2>Three opportunities</h2>
<p><strong>Colombia’s strong African roots</strong></p>
<p>Márquez is Colombia’s first black woman vice-president. Her election could enhance Afro-Colombians’ <a href="https://www.nytimes.com/2022/08/06/world/americas/francia-marquez-colombia-vp-style.html">consciousness</a> of their African ancestry. It’s also an opportunity to diversify Colombia’s foreign policy, by strengthening cultural connections
with African nations.</p>
<p>The Afro-Colombian community includes <a href="https://www.justice.gov/eoir/page/file/1277501/download">4.7 million</a> people, around 10% of Colombia’s population of <a href="https://data.worldbank.org/indicator/SP.POP.TOTL?locations=CO">51 million</a>. They are the descendants of Africans who came to Colombia during the <a href="https://www.britannica.com/topic/transatlantic-slave-trade">transatlantic slave trade</a>. </p>
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Read more:
<a href="https://theconversation.com/book-review-how-africa-was-central-to-the-making-of-the-modern-world-175656">Book review: how Africa was central to the making of the modern world</a>
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<p><strong>Unlocking the trade potential</strong></p>
<p>Colombia lags considerably behind countries like Brazil in trade and political ties with Africa. Colombia and African nations can better explore and exploit their comparative advantages in goods and services. </p>
<p>Their trade volumes are still <a href="https://tradingeconomics.com/colombia/">low</a>, showing a significant opportunity for new commercial relations. In 2021, Colombia imported around $150 million in goods and services from Africa, only 0.25% of its total imports. Its exports to Africa were around $400 million, only 0.98% of its exports. No African country features among Colombia’s top 30 trading partners. </p>
<p>In his inaugural speech, Petro said Colombia would seek to build stronger economic alliances with <a href="https://www.elcolombiano.com/colombia/asi-fue-el-discurso-de-posesion-de-gustavo-petro-KJ18337973">African</a> countries. Colombia’s focus on energy, mining and agrifood means that African countries have much to gain from partnerships with it. </p>
<p>Visa systems on both sides need to be relaxed. South Africa, for example, does not have an embassy in Bogotá. Its diplomatic relations with Colombia are led by its embassy in Caracas, Venezuela. The countries have had a healthy relationship since 1994, but it has often faced difficulties in getting visas. </p>
<p>Another challenge is related to connectivity between South America and Africa. In the past, most flights between Africa and South America went through São Paulo, Brazil. The COVID pandemic reduced the number of flights. By 2022, the only connections between South America and Africa were via Angola or Ethiopia. <a href="https://www.avianca.com/">Avianca</a>, Colombia’s national airline, could provide a new route to help improve connectivity. </p>
<p><strong>Promoting south-south cooperation</strong></p>
<p>During the election campaign and her activist history, Márquez often used the African idea of <a href="https://indepaz.org.co/wp-content/uploads/2022/03/Francia-Marquez-III.pdf">ubuntu</a> (humanness) to promote interdependence within (and between) societies. </p>
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Read more:
<a href="https://theconversation.com/what-archbishop-tutus-ubuntu-credo-teaches-the-world-about-justice-and-harmony-84730">What Archbishop Tutu's ubuntu credo teaches the world about justice and harmony</a>
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<p>Colombia could also look to Africa for lessons, share experiences and identify opportunities to deal with land use and distribution. Márquez has presented views that show the importance of dealing with land issues in a way that <a href="https://www.usip.org/publications/2022/05/vice-presidential-candidates-lay-out-visions-colombias-future">empowers poor people</a>.</p>
<p>Technical cooperation programmes can be essential in realising the potential benefits of interdependence. For instance, Colombia has a long experience in developing public <a href="https://discovery.ucl.ac.uk/id/eprint/10139712/">transport systems</a>. These have become essential for social integration and environmental sustainability. </p>
<p>Cities like Medellín have already become an example of how to provide efficient public transport for <a href="https://discovery.ucl.ac.uk/id/eprint/10139712/">poor urban neighbourhoods</a>.</p>
<p>Colombia’s Agency of International Cooperation has already signed a framework agreement with the <a href="https://www.nepad.org/">African Union Development Agency</a> to bolster technical assistance in Africa.</p>
<h2>Looking forward</h2>
<p>African countries should seek further interactions with the global south to increase their voice and agency in pursuit of a fairer international order. For instance, agriculture, food security and climate change are important areas where Colombia and the African continent could jointly influence global <a href="https://au.int/en/pressreleases/20220221/working-relations-key-continued-africa-latin-america-ties">discussions</a> that directly affect the developing world.</p>
<p>Colombia’s chargé d’affaires to South Africa, Jose Ignacio Julião Alí, told me the new moment</p>
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<p>marks an opportunity to close gaps between emerging countries with similar challenges, in terms of social cohesion and reconciliation, climate and environmental focus as part of megadiverse regions.</p>
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<p>The world’s economic relationships are shifting and new powers such as China, Brazil and India are rising. Petro’s and Márquez’s election offers a chance to deepen Africa-Colombia relations and cooperation.</p><img src="https://counter.theconversation.com/content/189575/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gustavo de Carvalho is also affiliated with the South African Institute of International Affairs (SAIIA). </span></em></p>
Colombia is an important South American regional hub and potentially important trade partner for Africa.
Gustavo de Carvalho, Research Fellow at Institute for Global African Affairs, University of Johannesburg
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/186843
2022-08-19T13:19:32Z
2022-08-19T13:19:32Z
The African Union has had a shaky two decades but problems can be solved
<figure><img src="https://images.theconversation.com/files/477885/original/file-20220805-29611-thzafi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Egyptian President Abdel Fattah El-Sisi making a speech at the AU headquarters.</span> <span class="attribution"><span class="source">Minasse Wondimu Hailu/Anadolu Agency/Getty Images</span></span></figcaption></figure><p>On 9 September 1999, the Heads of State and Government of the <a href="https://www.sahistory.org.za/article/organisation-african-unity-oau">Organisation of African Unity</a> issued the Sirte declaration calling for the establishment of an <a href="https://au.int/en/overview">African Union</a> (AU). </p>
<p>Their mission was to accelerate the process of integration on the continent while addressing multifaceted social, economic and political problems. The AU was founded in May 2001 and officially launched on 9 July 2002 in Durban, South Africa. </p>
<p>Its 20th anniversary is a useful moment to examine how far the AU has progressed towards meeting its core objectives. There is no dearth of <a href="https://www.economist.com/middle-east-and-africa/2022/02/12/the-african-union-is-less-effective-at-20-than-it-was-at-two">criticism</a> of the union from scholars, analysts and journalists. </p>
<p>Some of the criticism is about <a href="https://au.int/en/pressreleases/20190604/aga-platform-raises-concerns-over-weak-governance-trends">poor governance</a>, implementation problems and rising security issues. It seems, too, that citizens of member states lack trust in the AU. </p>
<p>Most of these criticisms are fair, given that the AU was expected to carry Africa in to the future through the ideals of African renaissance and Pan Africanism. The <a href="https://au.int/en/about/vision">mission statement</a> spoke of “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena”. </p>
<p>Based on my previously <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2767503">published research</a>, the commitment of African leaders remains the most pressing obstacle to African renaissance and development. </p>
<p>Governance of the AU is as good as its leadership. Therefore, the type of governance within member countries, especially among the regional leaders, affects the governance of the union. </p>
<p>The differences between the hope inspired by the union at inception and the reality of dashed hopes 20 years later can be partly linked to the quality of leadership in countries that championed the current AU. </p>
<h2>Progress</h2>
<p>Despite the governance problem, the AU has made some progress in peacekeeping across the continent by establishing the African Standby Force in December 2003. </p>
<p>To ensure effective operation, the force is decentralised and coordinated at a regional level. It is expected to manage <a href="https://theconversation.com/the-african-union-at-20-a-lot-has-been-achieved-despite-many-flaws-175932">insurgency-related conflicts</a> in various countries. The Standby Force is yet to start full operation, however.</p>
<p>Since the COVID-19 pandemic, the AU has elevated the <a href="https://africacdc.org/">Africa Centres for Disease Control and Prevention</a> from a specialised technical institution to a public health agency with regional collaboration centres. This action is an improvement. It will help in tackling future epidemics and will support member states’ public health in general. </p>
<p>In 2015, the Heads of State and Government created <a href="https://au.int/en/agenda2063/overview">Agenda 2063</a> with 20 priority goals. The initiative is supposed to be based on lessons of past experiences and the understanding that globalisation can provide new development opportunities for the continent.</p>
<p>The Agenda has highlighted important areas that would accelerate the development of member states. For example, it led to the launch of the Programme for Infrastructure Development in Africa in 2020. The goal of the programme is to intensify regional economic integration, which has been held back by a poor transport network. </p>
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Read more:
<a href="https://theconversation.com/the-african-union-at-20-some-reason-to-cheer-but-lots-of-work-ahead-183651">The African Union at 20: some reason to cheer, but lots of work ahead</a>
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<h2>Disappointments</h2>
<p>The regional peacekeeping process has not translated into regional economic integration and a socio-economic framework for development. </p>
<p>Economic development remains the AU’s weakest area. The <a href="https://www.nepad.org/">New Partnership for Africa’s Development</a> was supposed to develop a homegrown policy framework for sustainable economic development. Its goals include eradicating poverty, promoting growth and integrating Africa into the world economy. </p>
<p>The AU has also been criticised for its lack of consultation with member states’ civil society stakeholders. Consultation of civil society would contribute to accountability and provide a sense of ownership for the citizens of member states.</p>
<p>The AU’s inability to implement its economic development framework remains an obstacle to achieving its goals. The importance of regional integration cannot be exaggerated given the low proportion of inter-African trade when compared with other regions. The <a href="https://www.scielo.br/j/cint/a/kjGF6hQVNj9v4jfm8kXJwKQ/?lang=en&format=pdf">volume of trade</a> among countries of the continent is around 15% of total trade, while in Europe, North America, and Latin America, rates are 68%, 37% and 20% respectively. </p>
<p>More trade among African countries would improve manufacturing, reduce dependency on natural resources and expand the African market.</p>
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Read more:
<a href="https://theconversation.com/pan-african-integration-has-made-progress-but-needs-a-change-of-mindset-183541">Pan-African integration has made progress but needs a change of mindset</a>
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<h2>Way forward</h2>
<p>The introduction of <a href="https://au.int/en/agenda2063/overview">Agenda 2063</a> as a development framework is the first step forward. To avoid a repeat of the discarded <a href="https://repository.uneca.org/handle/10855/14129">Lagos Plan of Action</a> it is important that the AU aligns the agenda with its values of self-reliance and inclusiveness. </p>
<p>To achieve this, the Agenda 2063 agency needs to expand its consultation with civil society and stakeholders of member states. This would increase participation by member state citizens, improve the sharing of information and tighten up accountability. </p>
<p>Funding for projects is one of the biggest challenges facing the AU. It still depends on external funding for its own operations. A solution would be a binding institutional arrangement where members have to contribute funds and there are penalties for not doing so. </p>
<p>The AU has had a shaky two decades burdened with intertwined problems of governance, external dependence and poor capacity. But these problems are not insurmountable. A prosperous and united Africa is within reach if the AU addresses its core problems and fosters more participation of member state citizens.</p><img src="https://counter.theconversation.com/content/186843/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patricia Agupusi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The commitment of African leaders remains the greatest obstacle to African renaissance and development. Consultation with citizens is also called for.
Patricia Agupusi, Professorial Lecturer, American University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/162633
2021-06-14T15:09:52Z
2021-06-14T15:09:52Z
Stereotypes about young jobless South Africans are wrong: what they’re really up to
<figure><img src="https://images.theconversation.com/files/406143/original/file-20210614-73866-7r6c4c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Makeshift shops have mushroomed as people try to make ends meet amid South Africa's excessive unemployment.</span> <span class="attribution"><span class="source">Hobermunemployment. an Collection/Universal Images Group via Getty Images</span></span></figcaption></figure><p>South Africa has one of the highest youth unemployment rates in the world. A whopping <a href="http://www.statssa.gov.za/?p=14415">63%</a> of its young people between the ages of 15 and 24 years are jobless. A large proportion of these young people have never worked in the formal economy.</p>
<p>The media frequently portray young people excluded from wage work as inactive, aimless and alienated from mainstream society. This image feeds into fears of crime, violence and social unrest in which people who are jobless are cast as a “<a href="https://insideeducation.co.za/2021/06/07/south-africas-youth-unemployment-crisis-a-ticking-time-bomb/">ticking time bomb</a>” that poses a threat to a country’s stability.</p>
<p>But this is a very misleading characterisation. Most analyses of unemployed youth fail to grapple with the reality that unemployment in the sense of “doing nothing” is not a feasible option for most young people.</p>
<p>As research in many parts of Africa, including <a href="https://journals.sagepub.com/doi/abs/10.1177/0309132517690039?journalCode=phgb">Kenya</a>, <a href="https://link.springer.com/article/10.1007/s12132-012-9156-y">Ethiopia</a> and <a href="https://www.tandfonline.com/doi/abs/10.1080/03057070.2010.485784">Zimbabwe</a>,
has shown, unemployed young people use a wide range of economic strategies and practices to acquire an income. </p>
<p>I conducted <a href="https://www.tandfonline.com/doi/full/10.1080/02533952.2021.1909949?src=">research</a> in Zandspruit informal settlement, north of Johannesburg, in 2015 and 2016, on the lives, livelihoods and struggles of mostly young men who were either unemployed or marginally employed. It included life and work history interviews with 37 young people, a survey of 100 young people and a mapping exercise of the local economy, including semi-structured interviews with 40 local business owners. </p>
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Read more:
<a href="https://theconversation.com/how-covid-19-is-likely-to-slow-down-a-decade-of-youth-development-in-africa-159288">How COVID-19 is likely to slow down a decade of youth development in Africa</a>
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<p>My <a href="https://www.tandfonline.com/doi/full/10.1080/02533952.2021.1909949?src=">study</a> showed that many unemployed young people are engaged in a variety of economic activities. Many of these are not necessarily recorded as a form of self employment or informal employment, but they consume a large part of young people’s lives.</p>
<h2>Survival strategies</h2>
<p>I found that livelihoods included running car wash ventures, fixing people’s cars as informal mechanics, and renting back rooms or shacks. Other activities included wiring illegal electricity connections for a fee and street-side gambling. They also acquired sponsorship from NGOs and local politicians to support local initiatives and community based organisations that helped local youth access educational and economic opportunities.</p>
<p>These livelihood strategies rarely constituted a formalised business or enterprise. Many young people in Zandspruit combined short stints in the formal economy with forms of “hustling” and self-employment. </p>
<p>In many instances, informal livelihoods were taken up because of the loss of a job or the failure to find one. There was also evidence of young men rejecting jobs in some of the low-paying sectors, in favour of self employment in the informal economy. </p>
<p>This not only reflects a desire for greater social autonomy and social power – something that low end wage employment denied them. It also shows the importance of investing in highly localised relationships in a time of generalised precariousness. </p>
<p>These informal livelihoods are embedded in networks and social relations that are critical to young people surviving unemployment. </p>
<p>Take a car wash business for example. While often analysed as a standalone business or enterprise, my research highlighted how it also operates as a connecting point for a dense web of social relations that underpin and connect various informal enterprises. These included the taxi industry (drivers and washers), informal mechanics, a <em>chesanyama</em> (barbecue joint) and the local drug trade.</p>
<p>A car wash also provides a space where young men (most of whom also make a living informally) can gather to socialise and pass time. These social relationships are a critical part of young men gaining leverage within a particular niche of the local economy. They also serve as a critical source of male sociality and mutual aid that one young man described as “<a href="https://www.tandfonline.com/doi/full/10.1080/02533952.2021.1909949?src=">communal living</a>”.</p>
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Read more:
<a href="https://theconversation.com/how-giving-young-people-basic-financial-skills-helps-them-find-jobs-118860">How giving young people basic financial skills helps them find jobs</a>
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<p>The relationship between the young men who gather at car wash stands to pass time and “hustle” a living are premised on an understanding of “flexible reciprocity”, whereby those who currently have money, or are employed in some form, help those who are without. These networks of support offered an informal kind of “insurance”, as one of my interlocutors put it, but also social relations that provided alternative avenues to earn an income. As Sandile, aged 27, explained:</p>
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<p>There is a big communal living. You are not going to starve when you have friends.</p>
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<p>The social embeddedness of informal work is a double-edged sword. On the one hand, these relations of interdependence are a critical source of support and solidarity. On the other hand, the relations are embedded within complex power dynamics that can reproduce forms of social differentiation and inequality.</p>
<p>They also require informal entrepreneurs to invest so much in personal relationships, fees and protection that many are left with little money to invest in improving their business. </p>
<h2>What needs to be done</h2>
<p>Given the failure of the formal economy to produce enough jobs, policy makers and governments often present self employment in the informal economy as the solution to youth unemployment. </p>
<p>For instance, the provincial government of Gauteng, the country’s economic hub, has identified the mostly informal “<a href="https://www.gep.co.za/wp-content/uploads/2018/12/Gauteng-Township-Economy-Revitalisation-Strategy-2014-2019.pdf">township economy</a>” as key to tackling unemployment and promoting entrepreneurship.</p>
<p><a href="https://www.tandfonline.com/doi/abs/10.1080/03736245.1982.10559651?journalCode=rsag20#:%7E:text=Positioned%20just%20to%20the%20west,3">Townships</a> are historically black urban residential areas. They are mostly characterised by underdevelopment and high levels of poverty.</p>
<p>The renewed interest in the “township economy” is important considering the extent of unemployment, poverty and the damaging legacy of township marginalisation under apartheid. <a href="https://ccs.ukzn.ac.za/files/Bond%20Townships.pdf">Townships</a> were seen as labour dormitories for white businesses in towns and suburbs, and not intended to have their own viable economies. </p>
<p>But the government’s interest in township economies as the generators of jobs, entrepreneurship and “<a href="https://www.gep.co.za/wp-content/uploads/2018/12/Gauteng-Township-Economy-Revitalisation-Strategy-2014-2019.pdf">socially inclusive wealth</a>” is woefully out of sync with the reality of most township enterprises. They are too small to offer an escape from poverty.</p>
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Read more:
<a href="https://theconversation.com/more-children-in-zimbabwe-are-working-to-survive-whats-needed-149033">More children in Zimbabwe are working to survive: what's needed</a>
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<p>While the idea of entrepreneurship is gaining traction among young people, research suggests that only a small number see it as a viable livelihood and <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwimvZe7lY_xAhVHY8AKHR_OCu4QFjAFegQICRAD&url=https%3A%2F%2Fwww.uj.ac.za%2Ffaculties%2Fhumanities%2Fcsda%2FDocuments%2FSiyakha_Report___Oct_2016_Print_FINAL%255B1%255D.pdf&usg=AOvVaw3gRgEBzDsvwJ3Gh3qLvvib">something to strive towards</a>.</p>
<p>The majority have a strong preference for stable formal sector jobs, which they associate with economic stability and social mobility.</p>
<p>The growing insecurity of jobs in the formal economy highlights the urgency of <a href="https://theconversation.com/why-south-africa-needs-to-ensure-income-security-beyond-the-pandemic-137551?fbclid=IwAR2VQ5qwKv0ZvVJWt2qBfB17xLpfRs9p_TMS0xDJPxnDk0q0mOrpi9Rhni4">stronger social protection and income support</a> for young people.</p><img src="https://counter.theconversation.com/content/162633/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hannah J. Dawson receives funding from the National Research Foundation of South Africa (grant number: 116768), which I gratefully acknowledge. </span></em></p>
Many unemployed young people are engaged in a variety of economic activities. These may not necessarily be recognised as a form of self employment or informal employment.
Hannah J. Dawson, Senior Researcher, Southern Centre for Inequality Studies, University of the Witwatersrand
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/141638
2020-07-12T08:32:15Z
2020-07-12T08:32:15Z
Independence is at the heart of the African Development Bank’s ability to be effective
<figure><img src="https://images.theconversation.com/files/346537/original/file-20200709-62-1gs5hgm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Akinwumi Adesina leads a bank that has the USA as its second largest shareholder</span> <span class="attribution"><span class="source">CGIAR/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Independence is a cardinal pillar for organisations that are set up to deliver a public good. Their success depends on it.</p>
<p>This is particularly true of development banks such as African Development Bank, <a href="https://www.afdb.org/en">AfDB </a> and <a href="https://www.iadb.org/en">Inter-American Development Bank</a>. Independence is even more important in these instances because these institutions are owned by – and are meant to cater for – numerous regional member states.</p>
<p>In my view their ability to deliver on the objective of assisting member states attain economic growth and sustainable development is inexorably dependent on their independence. By this I mean their capacity to focus productively on their goals and missions without external sway. </p>
<p>There are two aspects to this independence. The first is objective independence. This talks to how the institution is set up, who has shares in it and the like. Regional development banks typically get shareholder contributions of capital (which determines country shareholdings). They then go to capital markets to borrow multiples of their capital base (money from shareholders). Objective independence depends on shareholder contributions. </p>
<p>The second aspect of independence is implicit independence. This talks to the ability of the bank to borrow from capital markets. The reputation of the bank is key to its ability to mobilise capital to pursue bold development plans. </p>
<p>The AfDB is one of four main regional banks of the world. The other three are the <a href="https://www.adb.org/">Asia Development Bank</a>, <a href="https://www.iadb.org/en">Inter-American Development Bank</a> and <a href="https://www.ebrd.com/home">European Bank for Construction and Development</a>. </p>
<h2>Objective indepedence</h2>
<p>Objective independence is conventionally reflected in the distribution of capital contribution (ownership share subscription) of member states. This speaks to voting rights and associated board of governors’ and directors’ compositions. </p>
<p>This aspect of the bank independence gives details of the governance architecture around decision making and the day-to-day running of the bank. The bank president and board of directors – appointed by a board of governors – are mandated to implement decisions and run the daily affairs of the bank.</p>
<p>It is in this aspect of bank independence that non-regional member states are typically invited to foster transparency of governance, inject diversity, and enrich board decisions with global best practice. These are often governments or organisations invited from developed, well-performing or geographically representative countries. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=284&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=284&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=284&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=357&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=357&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344522/original/file-20200629-155303-cl5r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=357&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Screen Shot at AM.</span>
</figcaption>
</figure>
<p>All four of the world’s biggest regional development banks have explored the benefit of non-regional member states.</p>
<p>But the AfDB falls short on this score. This is because non-regional members dominate the top capital contributors of the bank’s capital base. This “league table” ranking typically reflects the voting rights accorded member states. And unlike the other regional banks, three of the top five capital contributors in AfDB are non-African states. And 50% or more of the top 10 contributors are also non-African states. </p>
<p>One, therefore, has to ask where are Kenya, Ghana, Morocco, Ethiopia, Cote-d’Ivoire, Tunisia, Senegal, Angola – and others – in response to the vital imperative of ensuring their regional bank’s independence? This list is of countries that could be, but are not, among the top capital contributors to AfDB’s ownership and capital base. </p>
<p>These kinds of skewed voting rights put a dangerously destabilising power in the hands of a non-regional member who at any time may get the itch for autocracy. This was <a href="https://www.bbc.com/news/world-africa-52831185">demonstrated</a> recently when the US brashly attempted to veto a corporate governance guided decision of the bank’s board, mainly by virtue of its relative voting right. </p>
<p>This kind of possibility clearly compromises the independence of the bank.</p>
<p>Sensibly, this should have been anticipated. A carefully nuanced structuring of board powers should have been put in place, with checks against such a likelihood. Such a balancing act would also have endeavoured to imbue regional member states with some “power of insistence” on determining their collective goals and mission. </p>
<p>That said, regional member states’ contribution heft, still remains the best path to ensuring robustness of this aspect of bank independence.</p>
<h2>Implicit independence</h2>
<p>Implicit independence is reflected in the capacity (reputation) of the bank to mobilise substantial capital, usually in multiples of its capital base, for prosecuting grand development agendas of the region that need huge capital outlay. </p>
<p>Until recently, this had evidently not been explored by the African Development Bank.</p>
<p>This capacity is usually flagged by two factors. Firstly, conceiving and articulating a well-thought out development agenda. Secondly, the extent of the bonding role provided by non-regional developed country member states, whose capital markets or partnering development organisations may be sources of this primary capital raising.</p>
<p>The record on this source of bank independence has been significantly brightened under the current leadership of the bank headed by Dr Akinwunmi Adesina. Starting in 2018, the bank set itself the ambitious goal of mobilising substantial capital to support development projects of its regional member states. </p>
<p>The bank embarked on a host of roadshows, securing for the first time, commitments of between <a href="https://pfbc-cbfp.org">$30 billion - $60 billion</a>.</p>
<p>This kind of substantial capital mobilisation is vital for the effectiveness of any development bank. Particularly, in light of the fledgling nature of Africa’s organised capital markets – with the exception of South Africa – it is an enormously important capacity for AfDB to build. </p>
<p>For instance, as Africa’s only premier development bank, AfDB was the first and only African development organisation <a href="https://www.afdb.org/en/news-and-events/african-development-bank-covid-19-response-moving-commitment-action-36188">to offer any meaningful support</a> to regional member countries’ effort at managing the devastating consequences of Covid-19. </p>
<p>Under Adesina’s leadership, a coherent and clearly articulated (and encouragingly ambitious) continental development agenda has been set down. Under the rubric of <a href="https://www.afdb.org/en/high5s">“High Fives” </a> it covers power, food, industrialisation, integration and improving the quality of life in and for Africa.</p>
<h2>Vital role</h2>
<p>The upside potentials of these projects are evidently great and promising. </p>
<p>But, for this promise to become a reality, the AfDB needs to be effective at its mission, via robust bank independence. </p>
<p>The bank’s leadership needs its hands strengthened by the cooperation and support of African countries. For a start, African countries must increase their ownership subscriptions in their only regional bank.</p><img src="https://counter.theconversation.com/content/141638/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kalu Ojah does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
There is concern over the growing influence of non-regional players in decision making at the regional bank.
Kalu Ojah, Professor of Finance & Deputy Head of School, Wits Business School, University of the Witwatersrand
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/112806
2019-03-05T14:15:13Z
2019-03-05T14:15:13Z
Nigeria: what Muhammadu Buhari’s re-election means for Africa’s biggest economy
<p>Muhammadu Buhari was <a href="https://www.theguardian.com/world/2019/feb/26/muhammadu-buhari-to-claim-victory-in-nigerias-presidential-election">re-elected as president</a> of Nigeria in late February, winning 56% of the vote share in a poll shrouded in controversy. After polling day was <a href="https://theconversation.com/nigerias-election-delay-why-and-what-next-111962">delayed by a week</a> on the eve of the election, the result was met with <a href="https://www.aljazeera.com/news/2019/02/buhari-reelected-nigeria-president-electoral-commission-190227033031779.html">allegations of election irregularities</a>. Turnout was low, and only <a href="https://www.bbc.co.uk/news/world-africa-47381382">35% of those registered voted</a>, compared to 44% when Buhari was elected in 2015. </p>
<p>The competition was fierce. The race for the presidency was between the incumbent, Buhari, and a pro-market multimillionaire, Atiku Abubakar, the opposition leader. Before the poll, <a href="https://www.bloomberg.com/news/articles/2019-02-12/election-may-mark-turning-point-for-nigeria-s-battered-stocks">investors predicted</a> victory for Abubakar could have boosted Nigeria’s medium-term economic growth, though there were concerns over historic <a href="https://www.bloomberg.com/news/articles/2019-02-08/nigeria-s-tough-decision-former-dictator-or-alleged-kleptocrat">allegations of corruption</a> surrounding him. He denies any wrongdoing.</p>
<p>Buhari, a former military general, focused his first term in office on tackling <a href="https://www.cfr.org/blog/nigeria-sees-more-high-level-corruption-convictions-under-buhari">corruption</a> and security issues but was <a href="https://theconversation.com/buhari-failed-to-fix-nigerias-economy-but-he-may-still-have-the-edge-110196">widely criticised</a> for neglecting the economy. Some of his economic policies drove investors away and <a href="https://www.bloomberg.com/news/articles/2017-06-19/nigeria-s-half-measures-on-currency-regime-are-only-half-working">were detrimental to growth</a>. </p>
<p>In 2015, Nigeria introduced <a href="https://www.bloomberg.com/news/articles/2019-01-10/oil-fell-unemployment-soared-and-now-nigeria-votes-quicktake">capital controls</a>, measures to limit the flow of foreign capital in and out of the domestic economy. This was of concern to investors who feared they may not be able to repatriate funds out of the country. In the same year, the government pegged Nigeria’s currency, the naira, to the US dollar, which <a href="https://www.reuters.com/article/us-nigeria-currency/nigerian-naira-tumbles-30-percent-after-peg-removed-idUSKCN0Z61F7">significantly reduced foreign currency reserves</a>. The peg was eventually removed in 2016 – a decision welcomed by investors, though it <a href="https://www.ft.com/content/b0753e96-36cd-11e6-a780-b48ed7b6126f">sharply devalued the naira</a> against the dollar.</p>
<p>Since Buhari was first elected in May 2015, Nigeria’s stock market has been the world’s worst performer, losing <a href="https://www.bloomberg.com/news/articles/2019-02-27/nigeria-s-vote-the-numbers-the-surprises-the-market-reaction">almost half its value</a> in dollar terms, according to Bloomberg. And stocks <a href="https://www.bloomberg.com/news/articles/2019-02-28/bank-stocks-in-nigeria-fall-most-since-2016-after-buhari-victory">fell immediately</a> after Buhari’s re-election was announced. This came after the Nigerian stock exchange suffered a <a href="http://businesselitesafrica.com/trending/nse-loses-540-6-million-after-election-delays/">$540.6m loss</a> in one day after the elections were postponed by a week. </p>
<p>Still, international bond markets <a href="https://www.nasdaq.com/article/nigerian-bonds-rally-after-buhari-wins-reelection-20190227-00695">reacted positively</a> to the election result, and there was a rise in dollar-denominated bonds, often favoured by international investors. Naira bonds <a href="https://www.bloomberg.com/news/articles/2019-02-27/nigeria-s-vote-the-numbers-the-surprises-the-market-reaction">also rose</a> after the results were announced, indicating bond traders are more focused on the currency and bond yields on offer. </p>
<h2>Buhari’s priorities</h2>
<p>In his first term, Buhari focused a great deal on Nigeria’s security challenges. Knowing he faces a strong political opposition and that people are desperate for economic growth and its benefits, he now needs to turn his attention more squarely on the economy. This requires a shift in the government’s economic policy to embrace much more market-driven policies, such as the decision his government took in 2016 to remove the naira peg against the dollar. </p>
<p>To boost domestic business and investment, the government also needs to encourage private sector investment in infrastructure. So far, the government has permitted the private sector to invest in some infrastructure projects, particularly <a href="https://www.vanguardngr.com/2019/02/dangote-5-others-partner-fg-on-road-construction-across-states/">road building</a>, but this needs to be expanded to others, including rail.</p>
<h2>Finance and industry</h2>
<p>Buhari’s victory is likely to mean stability for the financial sector, particularly if the Central Bank of Nigeria governor, Godwin Emefiele, retains his position. Abubakar had <a href="https://www.bloomberg.com/news/articles/2019-01-16/abubakar-will-change-nigeria-s-central-bank-governor-if-elected">threatened</a> to remove the governor if he won. If Emefiele stays and his term, which comes to an end in June, is renewed, this would support stability in the financial markets. It would mean no radical changes to monetary and exchange rate policies, which can affect the price and value of financial assets, are likely to occur. Also, no major changes are expected to occur in the industrial sector, although there is continuing urgency to develop Nigeria’s manufacturing base to boost employment. </p>
<p>The country’s <a href="https://www.reuters.com/article/nigeria-budget-idUSL5N16V360">high fiscal deficit, debt levels</a> and <a href="https://tradingeconomics.com/nigeria/corruption-rank">corruption levels</a> could no doubt dampen investor confidence in Nigeria. Buhari also faces <a href="https://theconversation.com/buhari-failed-to-fix-nigerias-economy-but-he-may-still-have-the-edge-110196">criticism</a> over his inexperienced policy advisers, which could diminish the credibility of new policy announcements in the future. It’s also unclear whether there is going to be a cabinet reshuffle, or if key ministers, such as the finance minister, will remain in post. </p>
<p>Still, major changes in the policy environment are not expected under Buhari’s second term in office. As investors like predictability, policy continuity could help improve investor sentiment.</p>
<p>Nigeria’s governance also needs to be underpinned by principles built around the rule of law, which are critical for building any viable market economy. The six dimensions of governance, coined by the World Bank’s <a href="http://info.worldbank.org/governance/wgi/#home">World Governance Indicators Project</a>, speak to the heart of the challenges Nigeria faces. These are: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption. Strengthening these six dimensions could help set Nigeria along the path of recovery and then growth again.</p>
<p>With all its woes, Nigeria still remains the largest economy in Africa and the largest oil producer on the continent. With a huge market and a huge potential for foreign investment, every wise investor should have their eyes on this country.</p><img src="https://counter.theconversation.com/content/112806/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Iwa Salami does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Investors favoured Muhammadu Buhari’s opponent, Atiku Abubakar. So what are the Nigerian president’s economic priorities?
Iwa Salami, Senior Lecturer in Financial Law and Regulation, University of East London
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/88602
2018-03-11T09:01:45Z
2018-03-11T09:01:45Z
How Kinshasa’s markets are captured by powerful private interests
<figure><img src="https://images.theconversation.com/files/207465/original/file-20180222-152354-1y2j78f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A vendor at the Sigida Market, in Kinshasa, Democratic Republic of Congo.
</span> <span class="attribution"><span class="source">ReutersS/Robert Carrubba</span></span></figcaption></figure><p>Kinshasa, the capital of the Democratic Republic of the Congo (DRC), is home to 10 million people. With an estimated 400 markets and <a href="http://www.streetnet.org.za/docs/reports/2012/en/CongoReport.pdf">over 1 million traders</a>, markets are an important supplier of goods and source of livelihood. They are also an important source of revenue for the state.</p>
<p>Our ongoing <a href="https://www.uantwerpen.be/en/research-groups/iob/publications/working-papers/wp-2018/wp-201803/">research</a> found that markets are also a major source of private revenue. A wide variety of actors are in constant competition for their share of revenue. These include market administrators, mayors, security officials, provincial ministers, high ranking bureaucrats, family members of the President, Presidential advisors, family members of high ranking civil servants. All are fighting to get their piece of the market income.</p>
<p>On the markets, private revenue is being collected through what are locally called “informal taxes”. These aren’t entered into formal revenue streams, but are directly received by the civil servants and their superiors. A whole <a href="https://www.radiookapi.net/actualite/2014/08/15/kinshasa-une-ong-denonce-la-multiplicite-de-taxes-au-marche-central">variety</a> of those <a href="http://acpcongo.com/acp/fiscalite-lodep-deplore-la-multiplicite-des-taxes-au-marche-central-de-kinshasa/">taxes</a> are been collected on markets. They are referred to by a range of names, from ‘hygiene tax’, to ‘economy tax’, or ‘standard and conventional safety tax’. </p>
<p>On top of this <a href="https://www.uantwerpen.be/en/research-groups/iob/publications/working-papers/wp-2018/wp-201803/">our research</a> also shows how the majority of the “formal” and officially acknowledged taxes aren’t fed into the formal hierarchy and revenue flow as they are supposed to be. Instead they are kept locally. In other words market administrators and civil servants do not pass on collected taxes, but pocket them. </p>
<p>This leads to a situation in which traders feel they are <a href="http://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwj-pLydhtjZAhWnC8AKHZ0DAzIQFgg2MAE&url=http%3A%2F%2Fwww.odeprdc.cd%2Findex.php%2Fdocuments%2Fetudes%3Fdownload%3D11%3Amarche-central-de-kinshasa&usg=AOvVaw08A-81yHDK9KXE_WWIE26y">overburdened by various forms of revenue extraction</a>.</p>
<p>This isn’t surprising, as there is an unwritten understanding among Congolese that civil servants should fend for themselves by extracting revenue from citizens. People in the DRC jokingly refer to this practice as <a href="https://books.google.be/books?id=sj9mDQAAQBAJ&pg=PA76&lpg=PA76&dq=Article+15+Congo&source=bl&ots=zSfvpniv5H&sig=jjRcHjmBeZd_3N-tKq-kdSjMjPg&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQhEMAQ#v=onepage&q=Article%2015%20Congo&f=false">‘Article 15’</a> – parlance for <a href="https://books.google.be/books?id=_5EoYIaHk70C&pg=PA38&lpg=PA38&dq=Article+15+Congo&source=bl&ots=F7MlGZiNMQ&sig=XzQmtELffHeyICR1jlKOod2ZZSU&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQg3MAI#v=onepage&q=Article%2015%20Congo&f=false">an imaginary article</a> in the country’s constitution which gives civil servants licence to ‘fend for themselves.’</p>
<p>This way of doing things <a href="https://books.google.be/books?id=sj9mDQAAQBAJ&pg=PA76&lpg=PA76&dq=Article+15+Congo&source=bl&ots=zSfvpniv5H&sig=jjRcHjmBeZd_3N-tKq-kdSjMjPg&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQhEMAQ#v=onepage&q=Article%2015%20Congo&f=false">emerged in the 1970s</a>. It was (in)famously launched in a <a href="https://books.google.be/books?id=Em05DQAAQBAJ&pg=PA213&lpg=PA213&dq=Mobutu+Yibana+Mayele+1976&source=bl&ots=C-lr_mcA2n&sig=4Fo1jzCKdz1r-uZsgetVZdc8Lik&hl=nl&sa=X&ved=0ahUKEwjtooix0NzZAhXlLMAKHXKnDqAQ6AEIRzAI#v=onepage&q=Mobutu%20Yibana%20Mayele%201976&f=false">speech</a> delivered by President Mobutu Sese Seko in 1976 in which he famously encouraged his civil servants to ‘steal cleverly’: </p>
<blockquote>
<p>If you want to steal, steal a little cleverly, in a nice way. Only if you steal so much as to become rich overnight, you will be caught.</p>
</blockquote>
<p>The speech effectively led to a de-facto privatisation of public services: the state <a href="http://riftvalley.net/news/l%E2%80%99uniforme-du-policier-symbole-de-fiert%C3%A9-cause-de-malheur-et-source-de-revenu#.WqERReSotZV">uniform</a> became a way for civil servants to extract revenue. </p>
<p>More surprising, and less documented, is the degree to which higher-level actors intervene to appropriate these revenue streams.</p>
<h2>Repurposed</h2>
<p>First, higher level political networks play an important role in revenue extraction in the markets. In our <a href="https://www.uantwerpen.be/images/uantwerpen/container2673/files/Publications/WP/2018/wp-201803.pdf">research</a>, we show how important revenue flows are directly controlled by higher level political actors. This can happen in one of two ways. Either through direct control of particular taxes. Or spatially, in which markets are divided in different zones of interest, in which various actors are able to extract revenue in ‘their’ zone.</p>
<p>The high level influence is most explicit in the <a href="https://www.youtube.com/watch?v=BkCxOt2dZw8">Marché de la Liberté</a>. This is the most profitable market in Kinshasa, with high symbolic value. It was constructed by former President Laurent Désiré Kabila as a present to the Kinshasa population. </p>
<p>The Marché de la Liberté has been repurposed as a vehicle for private rent generation through all these measures. Firstly, the market isn’t governed as a state public entity, but by agents who are financially and politically accountable to political elites. Revenues are collected privately and beyond public scrutiny. Staff aren’t employed by the public administration but come from presidential networks. Taxes are not collected by the mandated public servants but by individuals outside the public administration. </p>
<p>Secondly, various actors rely on their personal connections to gain access to the biggest share of (private) revenue – a system which is locally called ‘branchement’. In this system, actors rely on links based on family, ethnicity or regional, political party affiliations, or simply through financial linkages: a common practice is to provide financial or in kind incentives to higher-level authorities. </p>
<p>This practice – which also occurs in other sectors such as the <a href="https://www.tandfonline.com/doi/abs/10.1080/19392206.2011.628629">police</a> –provides protection which enables and strengthens private extraction. For example, market administrators pay a weekly amount to higher-level civil servants and politicians, which allows the administrators to keep most of the collected market revenue.</p>
<h2>Unstable situation</h2>
<p>The situation in markets such as the Marché de la Liberté aren’t stable and prone to conflict. For example, in a number of markets conflicts were encountered between finance officers, market administrators and mayors – all of whom were relying on their respective links such as their political party, the governor or presidential advisors to try and reduce the others’ access to income, or even push them out of the market. </p>
<p>In addition, changes in these power configurations at the higher level in turn create changes at the local level. When patrons lose their position – whether this is a minister, high level civil servant, presidential advisor or other – the clients (such as market administrators) lose their protection and access to revenue.</p>
<p>In sum, the outcome for the market traders themselves is rather grim: they are largely dependent on circumstances beyond their control, which they navigate by continuously looking for better connections (‘branchement), which should help to protect them- now or in the future. At the same time, this makes the traders vulnerable, due to their dependence on these connections, and due to the strong monetisation of these connections.</p><img src="https://counter.theconversation.com/content/88602/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research is part of the Secure Livelihoods Research Consortium, funded by the UK’s Department for International Development (DFID) as part of the Secure Livelihoods Consortium.
</span></em></p><p class="fine-print"><em><span>Albert Malukisa Nkuku is a member of Antwerp University team for the project Secure Livelihoods Research Consortium program, coordinated by ODI and financed by DFID, focusing on public services in the Républic Democratic of Congo. He receives funding from DFID via ODI/University of Antwerp.</span></em></p>
Graft is common in the way that markets in Kinshasa are run.
Kristof Titeca, Lecturer in International Development, University of Antwerp
Albert Malukisa Nkuku, Post-doctoral research fellow at the Institute of Development Policy, University of Antwerp
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/90882
2018-03-01T14:09:26Z
2018-03-01T14:09:26Z
Insights into commercial contracting from South Africa’s informal sector
<figure><img src="https://images.theconversation.com/files/208464/original/file-20180301-152569-144j4ar.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Media Club/Flcker</span></span></figcaption></figure><p>What happens when African societal norms meet modern commercial practice? From boardrooms in Sandton to the cultural mash-up and the <a href="http://eprints.lse.ac.uk/42043/1/Hull_Introduction_popular_economies_2012.pdf">“popular economy”</a> of a South African township, African business people of different ethnicities and world views are contracting on a daily basis. </p>
<p>Is there anything peculiarly “African” about this process, or are all business people the conventional profit-maximising individuals of <a href="https://www.thoughtco.com/free-market-economy-definition-1146100">free market economic theory</a>? The answer here informs the related policy question as to whether South Africa needs to develop a dedicated indigenous law of contract. </p>
<p>It is often said that <a href="https://mg.co.za/article/2016-12-22-00-the-age-of-humanism-is-ending/">humanist</a> values matter in the traditional African political economy, or that African communities run on a principle of <a href="http://www.puk.ac.za/opencms/export/PUK/html/fakulteite/regte/per/issues/98v1mokg.pdf">ubuntu (humanness/communal solidarity)</a>. Sometimes this is contrasted with the <a href="https://www.tandfonline.com/loi/rjhr20">liberal individualism</a> of “Western” society. Is this valid? </p>
<p>At the end of 2017, we published an <a href="http://www.tandfonline.com/doi/pdf/10.1080/02587203.2017.1392430">article</a> in the <a href="https://www.tandfonline.com/loi/rjhr20">South African Journal on Human Rights</a> which laid out a new theory for the study of commercial contracting in South Africa. We set about moving the study of contracting from the centralised law of the state into the context of what happens in the popular economy – the space where the informal and formal sectors meet.</p>
<p>The formal and informal worlds shape each other, giving rise to an interesting intersection. We think that the South African popular economy is a good micro-context to study, since the “Western” norms said to characterise the central state’s law of contract play less of a role here.</p>
<p>Our findings are preliminary and rest on research done by social scientists. We’ve also included a measure of contract and economic theory. </p>
<p>Why should South African lawyers be interested? Our project is partly ideological. We believe that the study of indigenous business norms is a worthwhile exercise in any African country. Yet there’s no legal debate on the issue. African customary law courses do not address these more business-related points and commercial law courses do not speak to African customary norms. </p>
<p>The reason for this is that there are notional <a href="http://www.law.uct.ac.za/sites/default/files/image_tool/images/99/2018_LAW_handbook%20final_0.pdf">boundaries</a> between the two legal subjects. As legal historian <a href="http://assets.cambridge.org/97805217/91564/frontmatter/9780521791564_frontmatter.pdf">Martin Chanock</a> has shown, this is as a result of South African history, with past discriminatory rules about which law to apply in which situations shaping the development of both customary and common law. </p>
<p>We aim to change this trend. Here are our preliminary ideas.</p>
<h2>Indigenous cultural practices</h2>
<p>What legal norms regulate contemporary cultural practices such as the <a href="https://www.africanresponse.co.za/assets/press/2012StokvelHiddenEconomy.pdf">stokvel</a> (a common informal savings and credit association), the <a href="https://www.researchgate.net/publication/228546451_The_Management_of_Risk_by_Burial_Societies_in_South_Africa">burial society</a> (a stokvel which helps save towards funeral expenses), the township <a href="https://dspace.nwu.ac.za/bitstream/handle/10394/8260/No_65%282012%29_Mashigo_P.pdf?sequence=1&isAllowed=y">loan-shark</a>, or other types of commercial activity which exist as an alternative to the formal sector banking, insurance and financial services industries? </p>
<p>The published literature of economic anthropologists working on the popular economy in South Africa throws up <a href="https://www.erikbaehre.nl/files/publications/erik_bahre_money_and_violence.pdf">recurring stories</a> about financial activity in this sector. Most speak to the role of community in contracting. </p>
<p>This makes perfect sense: contracting occurs in a social and economic context. Who hasn’t relied on a threat to another’s reputation (such as by gossip or via social media) to enforce performance? Even more simply, if there is no one else to provide your supply of goods or services, threatening never to do repeat business with you again can be an effective way of ensuring a response from you when you won’t pay me. </p>
<p>In short, <a href="https://www.researchgate.net/publication/271815351_Nonlegal_Sanctions_in_Commercial_Relationships">social forces</a> shape contracts: the stronger the sense of community, the more effective these sanctions are likely to be. The result: A <a href="http://www.theactivistinvestor.com/The_Activist_Investor/Blog/Entries/2015/9/29_What_is_Private_Ordering.html">privately ordered</a> system of business behaviour, which exists without reference to the governing law of the state. The underlying adhesive: community.</p>
<p>In the absence of conventional forms of collateral, <a href="https://econrsa.org/system/files/publications/policy_papers/pp19.pdf">my contract partner’s knowledge of my financial standing and habits</a> will serve as a guarantor of payment. </p>
<p>While trust may not always be present, and altruistically putting another’s needs before one’s own may be difficult when money is tight and economic needs press, a <a href="http://science.jrank.org/pages/8772/Communitarianism-in-African-Thought-Gyekye-on-Moderate-Communitarianism.html">moderate sense of community</a> does indeed characterise contracting in this setting. This leaves room for private property and individual financial goals, but ensures that one prioritises communal relations when making economic decisions.</p>
<p>We have described these informal rules and regulations as adhering to the concept of ubuntu. Retired Constitutional Court judge, Yvonne Mokgoro, defines ubuntu using the African saying:</p>
<blockquote>
<p>a human being is a human being through other human beings. </p>
</blockquote>
<p>This means that a person’s individual existence and welfare are relative to that of her community. </p>
<h2>Context sensitive law</h2>
<p>How are we then to define ubuntu in a given contractual setting in South Africa? “With reference to context,” is our answer. The notion of community described above requires a certain type of social environment. We think that this environment is to be found in South Africa’s popular economy and the relevant empirical literature supports this view. But what about high value contracts between South Africa’s blue chip companies? </p>
<p>We believe that contract law should be context sensitive. This should include which business community’s norms are used in determining the outcome of a given commercial dispute. This is not to say that corporates aren’t African, but rather that the value of community may be different. And even in the informal sector, contracts must be honoured. Under the South African Constitution, common and customary law are presently separate parallel branches. Our research will inform future arguments about how these two branches may influence each other. </p>
<p>To guide the courts and the development of South African law, research into indigenous commercial contracting is required. This should in turn inform the discussion of how to make contracting in South Africa more African and how to transform the legal curricula in universities. </p>
<p>We will be testing our theories through our own empirical study in this ongoing project. We want to know what norms and procedures govern business relations in this sector where disputes almost never <a href="http://www.saflii.org/za/cases/ZAECHC/2005/34.html">reach the courts</a>.</p><img src="https://counter.theconversation.com/content/90882/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hutchison receives funding from the National Research Foundation of South Africa (grant number 111748). Any opinion, finding and conclusion, or recommendation expressed in this material is that of the authors and the NRF does not accept any liability in this regard. . </span></em></p><p class="fine-print"><em><span>Nkanyiso Sibanda does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
South African commercial law courses do not address the question of what norms and procedures govern business relations in indigenous African communities.
Andrew Hutchison, Associate Professor of Commercial Law, University of Cape Town
Nkanyiso Sibanda, LLD - Private Law, University of the Western Cape
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/81366
2017-08-13T08:40:46Z
2017-08-13T08:40:46Z
The African middle class matters: but not for the reasons commonly put forward
<figure><img src="https://images.theconversation.com/files/181465/original/file-20170808-16039-13cbs39.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The debate about Africa's middle class has largely ignored earlier analyses on African elites.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>These days the African middle class is widely discussed as a phenomenon considered indicative of social change.</p>
<p>But a great deal of the debate hasn’t been very well informed. For a long time contributions lacked a rigorous analysis, failing to examine the so-called middle class in terms of its potential as a proper class. People involved in the debate hardly bothered to engage with the more methodological aspects of the analysis of classes, which has a long tradition in social sciences and should be an integral part of any analysis.</p>
<p>Most problematic was the fiddling with figures, which classified people according to a minimum income as middle class. This is clearly not a very sensible way to approach proper class definition. It puts almost exclusive emphasis on financial and monetary aspects. But professional and social status, cultural norms and lifestyle related attributes as well as political orientation(s) and influence were often ignored. Where they were considered, it was often only in passing.</p>
<p>The debate largely ignored earlier analyses on African elites. It promoted the assumption that the middle class(es) are a positive ingredient for the development of and in African societies. </p>
<p>But such optimism is unhelpful both in terms of the potential economic role of these loosely defined middle classes, as well as the expectations about their political relevance.</p>
<p>In the meantime that’s started to change. Scholars from various disciplines related to African Studies are gaining the upper hand and claiming ownership. <a href="http://witspress.co.za/catalogue/the-rise-of-africas-middle-class/">New publications</a> testify to increasingly concerted efforts to respond with different and more nuanced perspectives.</p>
<p>These engagements offer insights based on more than lofty generalisations void of any social realities on the ground. Rather, the case studies test some of the assumptions and are able to portrait existing identities and practices of social segments of societies, which might be considered as middle class - or not. </p>
<p>So then, what class is the middle class?</p>
<h2>Caution required</h2>
<p>What is lumped together as middle classes represent at best an opaque awareness – if not about themselves (in the plural) – then at least about society and their position, aims and aspirations. Such ambiguity explains the different political and social orientations of members of a middle class, their different roles and positions in social struggles and their difference in interests.</p>
<p>The conclusions seem to suggest that there is no social force in the making, which by status and definition would indeed be the torch bearer for more democracy, participation, human rights, social equality and redistribution of wealth beyond benefiting just the group. One might call this a class interest, shared by many members of these middle classes across the continent. </p>
<p>But depending on the circumstances, ethnicity, pigmentation and other criteria (not least religion) matter at least as much as (at best) diffuse class awareness.</p>
<p>This should not stand in the way of continued interest in this species called middle class, which at a closer look is not as new as some contributions to the wider debate suggest. After all, there were always some middle layers of societies with a set of differing interests and orientations – only that their visibility and size in African countries seems to have increased lately.</p>
<p>But we should be much more cautious about providing simplified and sweeping explanations about the scope for potential social and political reforms and the impact on transformation of societies these middle classes are able – or willing – to promote.</p>
<p>After all, it is neither the middle class(es) nor even the upper fifth of the income pyramid that has any influence on the distribution of wealth in societies. They too are at the receiving end. </p>
<p>It is indeed the top decimal if not the top 5% or an even smaller fraction that <a href="https://www.theguardian.com/profile/andy-sumner">drives inequality</a>, and it is these haves that have grasped the steering wheel. Their forms of appropriation and enrichment are the ultimate determinants of the scope and limit of poverty reduction by means of redistributive measures in favour of those in the bottom half of society.</p>
<p>To understand inequalities and the mechanisms of their reproduction, the motto coined by University of Cambridge economist <a href="http://www.econ.cam.ac.uk/people/emeritus/jgp5">Gabriel Palma </a> is appropriate. He points to the decisive impact of the wealthy segment of societies as regards growing inequalities on a global scale and <a href="http://www.networkideas.org/featart/mar2011/Palma.pdf">concludes</a>: </p>
<blockquote>
<p>It’s the share of the rich, stupid.</p>
</blockquote>
<p>One is tempted to suspect that the middle class(es) hype seeks to propose a historical mission of these social layers in terms of future perspectives. But, in the light of the real (also material and political) power relations and structures of societies and the global economy, they are never able to live up to this mission.</p>
<p>Despite this sobering conclusion, the current engagement with the phenomenon called the African middle class(es) is anything but obsolete. Independent of their size, they signify modified social relations in African societies, which indeed deserve attention and rigorous analysis – with the emphasis on the latter.</p>
<p><em>These edited extracts are from the Introduction and Conclusion of Henning Melber (ed.), <a href="http://witspress.co.za/catalogue/the-rise-of-africas-middle-class/">The Rise of Africa’s Middle Class</a>: Myths, Realities and Critical Engagements.</em></p><img src="https://counter.theconversation.com/content/81366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Henning Melber does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
We should be wary of simplified and sweeping explanations about the scope for potential social and political reforms the middle classes can promote.
Henning Melber, Extraordinary Professor, Department of Political Sciences, University of Pretoria
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/76365
2017-04-23T10:20:43Z
2017-04-23T10:20:43Z
It’s time to lift the ideological haze in debates about Africa’s middle class
<figure><img src="https://images.theconversation.com/files/166142/original/file-20170420-20050-7nf56g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The middle classes in the Global South gained growing attention since the turn of the century, mainly through their rapid ascendancy in the Asian emerging economies. A side effect of the economic growth during these ‘fat years’ was a relative increase of monetary income for a growing number of <a href="http://www.worldbank.org/en/news/press-release/2015/10/04/world-bank-forecasts-global-poverty-to-fall-below-10-for-first-time-major-hurdles-remain-in-goal-to-end-poverty-by-2030">households</a>.</p>
<p>This also benefited some lower income groups in resource-rich African economies. Many among these crossed the defined poverty levels, which were raised in late 2015 from US$ 1.25 a person a day to <a href="https://www.theguardian.com/global-development-professionals-network/2015/nov/01/global-poverty-is-worse-than-you-think-could-you-live-on-190-a-day">US$ 1.90</a>. As some economists had suggested, from as little as US$2 they were considered as entering the <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/4013/WPS4816.pdf">“middle class”</a>. </p>
<p>The ominous term was rising like a phoenix from the ashes to characterise this trend. It added another label to the packaging of a <a href="https://www.socialeurope.eu/2013/11/neoliberal-discourse-learning/">neo-liberal discourse</a>. By emphasising the free market paradigm as creating the best opportunities for all, it suggests that everyone benefits from a <a href="https://global.britannica.com/topic/neoliberalism">laissez-faire economy</a>.</p>
<p>But the middle class concept remained vague and limited to number crunching. The minimum threshold for entering a so-called middle class in monetary terms was critically vulnerable to a setback into impoverishment. After all, one sixth of the world’s population has to make a fragile living on US$ 2 to 3 a day.</p>
<p>The African Development Bank played a defining role in promoting the debate. Using the US$2 benchmark, it declared some 300 million Africans (about a third of the continent’s population) as <a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/The%20Middle%20of%20the%20Pyramid_The%20Middle%20of%20the%20Pyramid.pdf">being middle class</a> in 2011. A year later it expanded its guesstimates to 300 million to 500 million. It also set them up as being very important.</p>
<p>Such monetary acrobatics aside, the analytical deficit which characterises such classification is seriously problematic. The so-called middle class appears to be a “muddling class”. Rigorously explored differentiation remained largely absent – not to mention any substantial class analysis. Professional activities, social status, cultural, ethnic or religious affinities or lifestyle as well as political orientations were hardly (if at all) considered.</p>
<p>But lived experiences matter if one is in search of how to define a middle class as an array of collective identities. Such necessary debate has in the meantime arrived in <a href="https://globalmiddleclasses.wordpress.com/2017/01/11/the-middle-class-in-africa-comparative-perspectives-and-lived-experiences/#more-259">African studies</a>. And the claim to ownership is also reflected in a just published <a href="http://witspress.co.za/catalogue/the-rise-of-africas-middle-class/%20and%20https://www.zedbooks.net/shop/book/the-rise-of-africas-middle-class/">volume</a> that documents the need to deconstruct the mystification of the middle class being declared as the torchbearers of progress and development.</p>
<h2>Politics, economic growth and the middle class</h2>
<p>As alerted in a paper by <a href="https://www.wider.unu.edu/sites/default/files/wp2014-101.pdf">UNU-WIDER</a>, a new middle class as a meaningful social actor does require a collective identity in pursuance of common interests. Once upon a time this was called <a href="http://study.com/academy/lesson/karl-marx-theory-of-class-consciousness-and-false-consciousness.html">class-consciousness</a>, based on a “class in itself” while acting as a “class for itself”. After all, which “middle” is occupied by an African “middle class”, if this is not positioned also in terms of class awareness and behaviour?</p>
<p>Politically such middle classes seem not as democratic as many of those singing their praises assume. Middle classes have shown ambiguities - ranging from politically progressive engagement to a status-quo oriented, conservative approach to policies (if being political at all). African realities are not different.</p>
<p>In South Africa, the only consistency of the black middle class in historical perspective is its political inconsistency, as political scientist Roger Southall has <a href="https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S0022278X14000445">suggested</a>. They are no more likely to hold democratic values than other black South Africans. In fact, they are more likely to want government to secure higher order needs such as proper service delivery, infrastructure and rule of law according to their <a href="https://theconversation.com/survey-sheds-light-on-who-marched-against-president-zuma-and-why-76271">living circumstances</a> rather than basic, survival needs.</p>
<p>It remains dubious that middle classes in Africa by their sheer existence promote economic growth. Their increase was mainly a limited result of the trickle down effects of the resource based economic growth rates during the first decade of the 21st century since then in decline. This had hardly economic potential stimulating productive investment that contributes towards sustainable economic growth.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/166094/original/file-20170420-20093-1h9tmoc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Doubt shrouds claims that a growing middle class benefits the poor.</span>
<span class="attribution"><span class="source">Reuters/Mike Hutchings</span></span>
</figcaption>
</figure>
<p>There’s also little evidence of any correlation between economic growth and social progress, as a working paper of the IMF <a href="https://www.imf.org/external/pubs/ft/wp/2013/wp1353.pdf">concludes</a>. While during the “fat years” the poor partly became a little less poor, the rich got much richer. Even the African Development Bank admits that the income discrepancies as measured by the Gini-coefficient have increased, while six among the ten most unequal countries in the world <a href="https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/ADER%202012%20(En).pdf">are in Africa</a>.</p>
<p><a href="https://www.cgdev.org/expert/nancy-birdsall">Nancy Birdsall</a>, president emeritus of the Centre for Global Development, is among the most prominent advocates and protagonists of the middle class. She argues in support of a middle class rather than a pro-poor developmental orientation. But even she concedes that a sensible political economy analysis needs to differentiate between the rich with political leverage and <a href="http://www.sabc.co.za/news/a/9a5242004ce34374a4d9bf271348019a/Africa%E2%80%99s-rising-middle-class:-time-to-sort-out-fact-from-fiction-20162505">the rest</a>.</p>
<p>She remains nevertheless adamant that the middle class is an ingredient for good governance. This is based on her assumption that continued economic growth reduces inequalities. She further hypothesises that a growing middle class has a greater interest in an accountable government and supports a social contract, which taxes it as an investment into collective public goods to the benefit of <a href="http://www.palgrave-journals.com/ejdr/journal/v27/n2/full/ejdr20153a.html">also the poor</a>. <a href="http://www.palgrave-journals.com/ejdr/journal/v27/n2/pdf/ejdr20153a.pdf">Dream on</a>!</p>
<h2>Time to lift the ideological haze</h2>
<p>It remains necessary to put the record straight and lift the ideological haze. Already the United Nations Development Programme’s Human Development <a href="http://hdr.undp.org/en/2013-report">2013 report</a>, which also promoted the <a href="http://d-nb.info/1045939153/34">middle class hype</a>, predicted that 80% of middle classes would come from the global South by 2030, but only 2% from Sub-Saharan Africa. </p>
<p>Recent assessments claim that it’s not the middle of African societies which expands, but the lower and higher social groups.</p>
<p>According to a report by the <a href="http://www.pewglobal.org/2015/07/08/a-global-middle-class-is-more-promise-than-reality/">Pew Research Centre</a> only a few African countries had a meaningful increase of those in the middle-income category. </p>
<p>And the Economist, which earlier shifted its doomsday visions of a “Hopeless Continent” towards <a href="https://www.howwemadeitinafrica.com/how-the-economist-changed-its-tune-on-africa/">“Africa Rising”</a> and the <a href="http://www.economist.com/news/special-report/21572377-african-lives-have-already-greatly-improved-over-past-decade-says-oliver-august">“Continent of Hope”</a>, now concludes that Africans are mainly <a href="http://www.economist.com/news/middle-east-and-africa/21676774-africans-are-mainly-rich-or-poor-not-middle-class-should-worry">rich or poor but not middle class</a>.</p>
<p>Fortunately, the debate has created sufficient awareness among scholars to explore the fact and fiction of the assumed <a href="https://www.giga-hamburg.de/en/publication/africas-new-middle-class">transformative power</a> of a middle class. This also includes the need to be sensitive towards ideological smokescreens which try to make us believe that a middle class is the cure. In reality, little has changed when it comes to leverage and control over social and political affairs. </p>
<p>The current engagement with the African middle class phenomenon is nevertheless anything but obsolete. Independent of their numbers, middle class members signify modified social relations. These deserve attention and analysis with the emphasis on social relations. </p>
<p>Cambridge Economist <a href="https://newleftreview.org/II/78/goran-therborn-class-in-the-21st-century">Göran Therborn</a> stresses that discourse on class is always of social relevance. The boom of the middle class debate is therefore a remarkable symptom of our decade. Social class will remain a category of central importance, and bringing the class back in can do no harm.</p>
<p><em>Henning Melber is the author of <a href="https://www.zedbooks.net/shop/book/the-rise-of-africas-middle-class/">The Rise of Africa’s Middle Class</a>.</em></p><img src="https://counter.theconversation.com/content/76365/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Henning Melber does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The middle class concept in Africa has remained vague and limited to number crunching. The minimum threshold for entering it in monetary terms was critically vulnerable to a setback into poverty.
Henning Melber, Extraordinary Professor, Department of Political Sciences, University of Pretoria
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/61176
2016-06-22T14:24:55Z
2016-06-22T14:24:55Z
Illegal fishing is a major threat to Africa’s blue economy
<figure><img src="https://images.theconversation.com/files/126969/original/image-20160616-15117-1ud517u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A man carries marlins to the market in Mogadishu, the capital of Somalia. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/au_unistphotostream/8571826320/in/photolist-e4sRjY-crYC8o-9rPydx-q8Ffvb-cXs1hA-tZ2Xk-ap1ZKS-9bKoag-e9rLfT-5Qy2va-cXs9Nh-dKKKQb-cXrX9m-bo3JAU-hXV447-cXs43w-cNFsy3-a4Uk1Q-4SHbcE-pY4Sku-pHNoic-7xDntq-6qa5o7-pHQkGj-8JNbHx-8JNhLc-pHM2mA-5SzCfD-gzyCj-7etXFh-pH5Yec-5NYqjh-nPcZ9X-9cdfRA-pZZKAZ-p3HkLt-cFxUv7-pH2kt6-7yQ5sS-F9R8xx-71Xuwu-cXrcsy-a4Ru2Z-5Qa5g8-7yLikx-cXrLMb-3mkeoH-8P3MDh-cXshU9-5QC7Rf">AMISOM Public Information</a></span></figcaption></figure><p>The blue economy lies <a href="http://www.uneca.org/sites/default/files/PublicationFiles/blueeco-policy-handbook_en.pdf">at the heart of globalisation</a>. Ninety percent of international trade takes place via the sea and 95% of global communication relies on underwater networks. The blue economy encompasses all economic activity in and around rivers, lakes, streams, riverbanks, shorelines, groundwater, freshwater, seas and oceans.</p>
<p>The blue economy is mostly unknown, overlooked and underdeveloped in Africa. It could represent a major growth driver. </p>
<p>Its potential is not lost on the African Union (AU), which has made the blue economy one of the <a href="http://agenda2063.au.int/en/">priority areas</a> for the next 10 years: the blue economy holds immense potential as a key to a prosperous Africa. The United Nations Economic Commission for Africa (UNECA) and Seychelles Vice President Danny Faure share this outlook, seeing the blue economy as a potential source of <a href="http://www.uneca.org/stories/blue-economy-africa%E2%80%99s-future">blue gold</a>.</p>
<p>But where does it currently stand in Africa? Does it benefit African economies?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/126162/original/image-20160610-29222-rcy5n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fishing boats returning to shore in Nouakchott, Mauritania.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/m1key-me/14675718065/in/photolist-upnU2Y-ohSLQo-8dv2VY-7ahGu7-5NXA5E-aeouQa-omQTFP-isg4ih-qB4Ehd-nUJcU5-6NoGqD-pfM3vV-hTCevV-pY54uU-p4o5nq-EKJTh-skfCgq-e6bFFb-de3J4r-DTjeV-pbk2s8-auPYRt-6Uawmm-4vku23-oxyR9A-gkB1PX-9znhab-9qmks8-8wLFxa-isNnX8-cNFsy3-a4Uk1Q-4SHbcE-7Spvmi-8QvZV4-8dhFqD-pY4Sku-cXrVfG-pHNoic-cACZej-qhSHkx-7xDntq-6WocG8-b8qzTi-6qa5o7-e4sRjY-crYC8o-9rPydx-pHQkGj-q8Ffvb/">Michał Huniewicz/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Strategic significance</h2>
<p>The strategic significance of the blue economy for Africa is clear. UNECA has gone so far as to publish a <a href="http://www.uneca.org/publications/africas-blue-economy-policy-handbook">policy handbook</a> on the topic, echoing the African Union’s position.</p>
<p>According to the handbook, 38 of Africa’s 54 countries are coastal states and more than 90% of import-export occurs via the sea. The territorial waters controlled by African nations stretch out over 13 million km², with a continental shelf of about 6.5 million km², including exclusive economic zones. For the AU, the blue economy represents a new frontier of African renaissance.</p>
<p>There are tensions between African nations over the <a href="http://www.peaceau.org/uploads/au-2-en-2013-delim-a-demar-user-guide.pdf">demarcation of maritime borders</a>. But the fishing industry employs nearly 12.3 million Africans. And the blue economy could potentially solve nutritional and food security problems for nearly 200 million Africans. It has the potential to provide vital nutrition through underused resources in fresh and salt water fish. </p>
<p>A grassroots, holistic and collaborative approach would make it possible to establish a blue development strategy, taking into account climate change and sustainable development. But several outside forces jeopardise its success.</p>
<h2>The danger of illegal fishing</h2>
<p>Blue economic activities are hampered by natural phenomena like storms and rising sea levels. But they are also impeded by human activities such as piracy, and the arms and slave trades. Illegal fishing is one of the most significant threats.</p>
<p>Based on Africa’s financial inflows and outflows, <a href="http://www.uneca.org/publications/africas-blue-economy-policy-handbook">UNECA reckons</a> that the continent loses US$42 billion per year through illegal fishing and logging activities.</p>
<p>The <a href="http://www.uneca.org/sites/default/files/PublicationFiles/blueeco-policy-handbook_en.pdf">plundering of Africa’s blue economy</a>, perpetrated by European, Asian and Russian ships, is a reality. In <a href="http://www.un.org/africarenewal/magazine/july-2009/safeguarding-africa%E2%80%99s-fishing-waters">West Africa</a>, the economic loss is estimated at about $700 million per year.</p>
<p>Illegal fishing – untaxed and unregulated – impoverishes nations and triggers cross-border population displacement. According to <a href="http://www.thinkingafrica.org/V2/portfolio/economie-bleue-et-pillage-des-ressources-halieutiques-en-afrique-kombe/">Professor Jean-François Akandji-Kombé</a> at the University of Paris, the current situation can be explained by the fact that:</p>
<blockquote>
<p>The sea as economic entity is a new concept in Africa. For a long time, the continent didn’t have the means to exploit marine resources, or the means to assert political power over the seas. There were no seafaring people or nations to speak of in Africa. These people, these nations focused on the land, not the sea.</p>
</blockquote>
<p>The European Union has woken up to the magnitude of the systematic plunder of African fishing resources, and its potential political consequences. In recent years, it has been working to establish fishery <a href="http://ec.europa.eu/fisheries/cfp/international/agreements/index_en.htm">partnership agreements</a> with African countries like Cape Verde, the Comoros, Côte d’Ivoire, Gabon, Guinea-Bissau, Liberia, Madagascar, Mauritania, Morocco, Mozambique, São Tomé and Príncipe, Senegal and the Seychelles.</p>
<p>China’s policy has been remarkably shameless regarding illegal fishing. A number of African states hold Chinese vessels <a href="http://www.voanews.com/content/china-expands-global-fishing-fleet/2815656.html">responsible</a> for plundering African maritime resources and have called on the Chinese government to <a href="http://m.voanews.com/a/african-countries-call-for-china-to-stop-illegal-fishing/3133482.html">stop illegal fishing in West Africa</a>.</p>
<p>African governments must therefore come up with strategic frameworks if their people are to reap the benefits of this potential bounty.</p>
<p><em>Translated from the French by Alice Heathwood for <a href="http://www.fastforword.fr/">Fast for Word</a>.</em></p><img src="https://counter.theconversation.com/content/61176/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adam Abdou Hassan is a member of the Institute for Research and Teaching on Peace in Africa (Thinking Africa).</span></em></p>
The blue economy is unknown, overlooked and underdeveloped in Africa. It could represent a major growth driver for the continent.
Adam Abdou Hassan, Enseignant chercheur, Université de Rouen Normandie
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/59563
2016-06-07T10:56:22Z
2016-06-07T10:56:22Z
To transform Africa’s economies, African companies matter too
<p>A consistent feature of global analyses of Africa’s economic prospects is their fickleness. In the years since the global financial crisis in 2008, forecasts about Africa have swerved from <a href="http://www.afdb.org/en/knowledge/publications/african-economic-outlook/african-economic-outlook-2009/">deep pessimism</a> to <a href="http://www.economist.com/news/special-report/21572377-african-lives-have-already-greatly-improved-over-past-decade-says-oliver-august">heady optimism</a>, and back to a bearish outlook of <a href="http://www.imf.org/external/pubs/ft/reo/2015/afr/eng/sreo1015.htm">slow growth and fragility</a>. </p>
<p>The vacillation in perceptions of African economies closely mirrors both the boom and bust cycle of global commodity prices, and the sentiments of Western and Chinese investors. But as global attention shifts yet again to the <a href="https://theconversation.com/time-for-africa-to-transition-from-extractive-to-learning-economies-59089">urgency of diversifying</a> Africa’s economies from unprocessed commodities, the role of the domestic African private sector remains poorly understood by outsiders, especially academics. </p>
<p>The media has fared slightly better in <a href="http://www.theafricareport.com/East-Horn-Africa/africans-investing-in-africa.html">spotlighting</a> the exploits of tycoons such as Sudanese telecoms giant <a href="http://mo.ibrahim.foundation/">Mo Ibrahim</a>, Nigerian cement magnate <a href="http://www.forbes.com/profile/aliko-dangote/">Aliko Dangote</a>, Zimbabwean telecoms entrepreneur <a href="http://www.forbes.com/sites/mfonobongnsehe/2013/02/24/five-lessons-from-zimbabwes-richest-man-strive-masiyiwa/#63655a10cfc2">Strive Masiyiwa</a> and others. But although African business owners have been powerful forces in African economies since the colonial period, they are often ignored in research and analysis. </p>
<h2>Bust and boom</h2>
<p>There’s history to this. From Nigeria, to Ivory Coast, Kenya and Zambia, the economic crises of the 1980s preceded the decline of agro-industry, manufacturing and other productive sectors which were dominated by thriving, domestic private and state-owned enterprises. The “<a href="http://journals.cambridge.org/action/displayFulltext?type=1&fid=2559428&jid=MOA&volumeId=21&issueId=01&aid=2559420">Ivorian Miracle</a>” or Ivory Coast’s golden age of economic prosperity between 1960 and the 1990s was built on cocoa exports and smallholder farming. The post-Cold War civil conflicts which ravaged countries such as Angola, Sierra Leone and Liberia, snuffed their nascent domestic private sectors. </p>
<p>Multinational corporations, development agencies and non-governmental organisations all stepped in, filling the investment gap that was left in the extraction industries and social services such as health and education. This economic decline was closely followed by a waning media and academic interest in African enterprises. The <a href="http://www.tandfonline.com/loi/wjab20#.V0_DlpErJhE">Journal of African Business</a> only started publication in the year 2000.</p>
<p>At the turn of the 21st century, privatisation and economic liberalisation brought a new wave of empowerment to African firms in industry, often with executives transitioning into business from careers in politics or the military. </p>
<p>As my new <a href="http://www.globaleconomicgovernance.org/sites/geg/files/GEG%20WP_115%20The%20Successes%20and%20Failures%20of%20Economic%20Reform%20in%20Nigeria%E2%80%99s%20Post-Military%20Political%20Settlement%20-%20Zainab%20Usman.pdf">research on Nigeria</a> points out, the country’s telecommunications revolution was powered by the African multinational telecoms firms, MTN and Econet, which had Nigerian shareholders. Some, such as MTN shareholder <a href="http://www.forbes.com/profile/sani-bello/">Colonel Sani Bello (rtd)</a> were in the military. The telecoms industry in Nigeria grew by 1,000% in the first year after liberalisation in 2001. </p>
<p>In the oil industry, local content laws empowered credible indigenous Nigerian oil companies firms such as Oando and Seplat, but also enabled <a href="http://uk.reuters.com/article/nigeria-oil-idUKL8N1261PW20151006">rapacious newcomers</a> such as Seven Energy and Atlantic Energy to enter the fray. </p>
<h2>Dynamic and experienced</h2>
<p>The academia and the media are, for the most part, stuck in a rut with reporting on the African private sector: focused on foreign investment, particularly <a href="https://theconversation.com/what-does-chinas-role-in-africa-say-about-its-growing-global-footprint-49474">China’s presence in Africa</a>, but missing out a dynamic element of Africa’s ongoing economic transformation. This is not to say that there are no publications whatsoever on African enterprises, but they are very few and far between for the continent’s size.</p>
<p>Yet African entrepreneurs are crucial to the growth of Africa’s economies. Many entrepreneurs currently operating across the continent have significant experience and are intrinsic to the complex process of economic diversification. Reforms in a number of countries at the turn of the century energised existing companies to expand their interests across industries and borders, becoming big multinationals in financial services, telecommunications, entertainment, retail and hospitality. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125008/original/image-20160602-23288-1uvws43.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Shoprite store in Luanda, Zambia.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/colalife/23891805375/sizes/l">ColaLife/flickr.com</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>For example, DSTV, MTN and Shoprite are now South African multinationals ubiquitous across Africa – unleashed by the end of apartheid rule. In financial services, some successful African firms cut their teeth through decades of trial and error, bankruptcies and mergers, and are now competing with foreign firms. UBA, Access Bank and other Nigerian banks used the springboard of reforms in the mid-2000s to recapitalise and expand across the continent alongside Ecobank and other big <a href="http://www.economist.com/news/finance-and-economics/21572768-across-africa-banks-are-expanding-their-returns-arent-continent-dreams">pan-African banks</a>.</p>
<p>The entrepreneurs running these firms tend to have a longer planning horizon necessary for kick-starting industries that are not reliant on extractives. This is pivotal to economic diversification in Africa. Because they are often indigenous and so physically and psychologically invested in their operating environments, they have risk mitigation strategies which often elude their foreign counterparts.</p>
<p>Of course, indigenous companies can often descend into cronyism, rent-seeking and abuse of proximity to political power. The 1980s and 1990s in Africa were a wasteland of collapsing firms kept on life support with costly subsidies by cash-strapped governments. And <a href="http://news.bbc.co.uk/1/hi/business/8205731.stm">Nigeria’s banks</a> suffered their own major crisis in 2009.</p>
<p>Certain entrepreneurs have leveraged their proximity to power to lobby for favourable policies, tax breaks and gain dominant market share, but also to expand across industries and countries. With 95% market share, Safaricom, the force behind Kenya and East Africa’s mobile banking revolution is accused of <a href="http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa">monopolising the mobile money market</a>. So has Dangote, whose companies are often accused of <a href="http://www.forbes.com/sites/abrambrown/2015/03/04/the-little-known-15-billion-empire-of-africas-richest-man/#4b7b80ae61e0">undercutting local and foreign competitors</a> in cement production. </p>
<h2>Small firms, big weight</h2>
<p>Development agencies from UN agencies to the African Development Bank have focused on improving the productivity of micro and small enterprises, which provide <a href="http://www.afdb.org/en/news-and-events/article/the-afdb-sme-program-approval-boosting-inclusive-growth-in-africa-12135/">more than 45% of employment</a> in sub-Saharan Africa. And Africa’s “tech start-ups” are <a href="http://thenextweb.com/africa/2016/04/19/banks-woo-african-startups-keep-innovation-trend/#gref">never far</a> from the headlines. </p>
<p>Yet, recognising the relationship between influential African conglomerates and the ubiquitous small companies in trade, cottage-industry manufacturing and agriculture is vital to understanding Africa’s ongoing economic transformation. For example, tax breaks and other business incentives in <a href="http://www.worldbank.org/afr/wps/wp17.htm">Export Processing Zones</a> that are popping up across the continent are more beneficial to large-scale firms than smaller ones, according to a <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/2268/600590PUB0ID181onomic09780821386385.pdf?sequence=1">World Bank study</a>. At the same time, they also provide an opening for understanding how linkages with powerful big businesses could enable smaller businesses to break into national and global markets. </p>
<p>The agenda to diversify Africa’s economies from dependence on resources and an informal sector is accelerating. But poverty reduction and economic diversification cannot be achieved unless more research and investigations are made to develop a deeper understanding of the dynamic landscape of African enterprise, including both big and small businesses.</p><img src="https://counter.theconversation.com/content/59563/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zainab Usman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The dynamism of domestic businesses are too often overlooked by researchers and analysts.
Zainab Usman, Doctoral Candidate in International Development, University of Oxford
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55818
2016-03-09T04:41:32Z
2016-03-09T04:41:32Z
Why Zimbabwe’s diamond mines need better regulation, not state ownership
<figure><img src="https://images.theconversation.com/files/114269/original/image-20160308-22126-iqilgh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Zimbabwe needs more responsible diamond mining companies, not fly-by-night operators</span> <span class="attribution"><span class="source">Reuters/Goran Tomasevic </span></span></figcaption></figure><p>Zimbabwe, like many African countries, faces an ongoing struggle to secure fair compensation for its mineral wealth. The question of how to maximise government revenues from the mining sector is a complex matter. </p>
<p>But turning the sector over to state-owned mining companies has <a href="http://link.springer.com/article/10.1023%2FA%3A1012817825552">rarely optimised</a> mining revenues. What’s needed instead are improvements in management practices, regulations, regulatory capacity and the investment environment. </p>
<p>This issue is back in the Zimbabwean spotlight after the country’s president, Robert Mugabe, announced that the government will <a href="http://www.reuters.com/article/us-zimbabwe-diamonds-idUSKCN0W52J3">take over</a> all diamond operations. His move came soon after the government failed to renew mining licences. Private mining companies were ordered to cease operations, leave their equipment and vacate their premises. </p>
<p>Diamond mining in Zimbabwe has a short but turbulent history. The country’s diamond resources are concentrated in Marange, in its eastern region near the border with Mozambique. A number of private mining companies have operated in partnership with the state-owned Zimbabwe Mining Development Corporation (ZMDC) since the late 2000s. This arrangement began after thousands of artisanal miners were violently <a href="https://www.hrw.org/news/2011/08/30/zimbabwe-rampant-abuses-marange-diamond-fields">forced off</a> the newly discovered alluvial deposits.</p>
<p>The government holds a 50% share in diamond operations through ZMDC. Despite this, it has reportedly received <a href="http://www.theindependent.co.zw/2015/08/28/zimbabwes-diamonds-lose-bling/">insignificant revenues</a> from the sector in recent years. </p>
<p><a href="http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/12182845/Robert-Mugabe-announces-government-to-take-over-all-Zimbabwes-diamond-operations.html">Royalty payments</a>, which are calculated on production volume, plunged to a mere US$23 million last year. That’s down from US$84 million in 2014. Tax payments, which are calculated on profits, have also been negligible. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=506&fit=crop&dpr=1 754w, https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=506&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/114268/original/image-20160308-22138-krysjx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=506&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Zimbabwe may have lost as much as US$14 billion of potential diamond revenue according to former finance minister Tendai Biti.</span>
<span class="attribution"><span class="source">Reuters/Philimon Bulawayo</span></span>
</figcaption>
</figure>
<p>Zimbabwe’s former finance minister, Tendai Biti, <a href="http://www.thestandard.co.zw/2016/02/28/zim-diamonds-saga-rages-on/">recently estimated</a> that mining companies may have looted as much as US$14 billion from Zimbabwe over the past seven years. </p>
<h2>Other factors explain declining revenues</h2>
<p>It is very possible that the decline in royalty payments and tax revenues is due to production volumes being under-reported, tax avoidance and diamond smuggling. Zimbabwe has inadequate regulation and the diamond sector lacks transparency. But there are a number of other factors that have likely contributed to the sector’s declining production and government revenues.</p>
<p>First, Marange – Zimbabwe’s largest diamond field – is an alluvial deposit. This makes production at low cost possible, using very basic technology and sometimes even just bare hands. The result has been rapid depletion of the deposit.</p>
<p>Some <a href="http://www.theindependent.co.zw/2015/10/23/diamond-output-hits-rock-bottom/">experts believe</a> that much of Marange’s alluvial resources have already been exploited. This would leave mainly kimberlites, which are more capital intensive to produce. </p>
<p>Second, about 90% of Marange’s diamonds are of relatively low quality. They therefore don’t yield high prices on the world market. They also tend to sell at discounted prices on world markets because of trade sanctions that have been <a href="http://www.consilium.europa.eu/en/press/press-releases/2016/02/15-zimbabwe-eu-prolongs-sanctions-by-one-year/">extended</a> to early 2017. These are being enforced by the US and the European Union because of human rights violations. </p>
<p>Third, mining companies have resisted government pressure to develop open-pit or underground operations. Given the low quality, alluvial nature of Marange’s deposits and the fact that they are likely already very depleted, it is unclear whether upgrading operations to reach deeper resources would be economically viable. </p>
<p>Even if upgrading operations were feasible, this would require considerable capital investment. Mining companies are unlikely to make these investments because Zimbabwe’s business environment is unstable and threatening. </p>
<p>Such an oppressive business environment hits mining companies the hardest. They cannot move their operations elsewhere, as they are tied to where the natural resources are located. </p>
<p>Zimbabwe also has an inclination towards expropriation. It is therefore hardly surprising that mining companies are reluctant to invest, preferring the easy pickings of alluvial mining. </p>
<h2>State control</h2>
<p>The newly created state-owned Zimbabwe Consolidated Diamond Corporation is set to take over the mining companies’ assets and assume all production operations. But consolidating operations under state ownership is not, in isolation, going to solve government’s efforts to raise its revenues from the sector.</p>
<p>There is a very good reason that only a handful of state-owned mining companies are engaged in production operations worldwide. Where they have been established they have tended to be less efficient, partly because they are often shielded from competition. They have also been more poorly managed than their private-sector counterparts, leading to <a href="http://www.mckinsey.com/industries/public-sector/our-insights/improving-performance-at-state-owned-enterprises">deficient outcomes</a>. </p>
<p>Successful state participation in the mining sector is rare. Among the few exceptions are Debswana in Botswana and Namdeb in Namibia. Both are joint ventures between the governments and the diamond giant De Beers. But their experiences cannot be easily replicated in Zimbabwe.</p>
<p>For starters, Zimbabwe’s alluvial diamond deposits may be far more fleeting than the deep, extensive deposits in Botswana and Namibia. This makes it improbable that Zimbabwe will enjoy the same long-term horizons as those countries.</p>
<p>Further, Zimbabwe lacks a trusted, experienced and private-sector company with the capital and technical expertise needed to develop open-pit or underground mines. Zimbabwe also lacks the resources to go it alone. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/114273/original/image-20160308-22135-rv91cl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Robert Mugabe’s plan to consolidate diamond mining under state ownership will not, on its own, increase government’s revenue from the sector.</span>
<span class="attribution"><span class="source">Reuters/Philimon Bulawayo</span></span>
</figcaption>
</figure>
<h2>The alternative to state ownership</h2>
<p>Rather than state ownership, Zimbabwe needs to improve management practices, regulations, regulatory capacity and the investment environment. Necessary reforms include enacting a comprehensive regulatory regime to govern the fiscal and other facets of the entire diamond supply chain. In addition, Zimbabwe should ensure strict transparency and accountability of the diamond sector. </p>
<p>All mining sector laws and regulations should comply with international standards. These include the <a href="https://eiti.org/eiti">Extractive Industries Transparency Initiative</a> and Kimberly Process Certification Scheme <a href="http://www.kimberleyprocess.com/">minimum requirements</a>. All contracts should be published, together with production volume and revenue information. It is also vital that state-owned entities be subject to the same reporting, disclosure and other requirements as private companies. </p>
<p>The capacity to regulate the mining sector must be strengthened. Relevant regulatory institutions must have autonomy and adequate enforcement capabilities. This is particularly pertinent since the Zimbabwean government will be acting as both a commercial entity and as the regulator. </p>
<p>As a commercial entity it will be aiming to maximise profits, potentially at any cost. As the regulator it will be enforcing environmental, social and other regulations, which may lower the profitability of operations. </p>
<p>Given this conflict of interests, the government may fail to adequately regulate the diamond sector. Otherwise regulatory failures may lead to corruption, revenue leakages, and social and environmental violations.</p>
<p>Finally, it is imperative that government improves Zimbabwe’s investment environment to attract more responsible mining companies. Until then, only fly-by-night investors with high-risk thresholds will be willing to operate in its mining sector. But with such investors, Zimbabwe’s diamond mining will continue to yield little benefit for the country.</p><img src="https://counter.theconversation.com/content/55818/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Logan is affiliated with the International Growth Centre. </span></em></p>
Zimbabwe has said it will take over all diamond mining operations in the country. But what is needed to maximise revenues isn’t state ownership, but improvements in existing regulatory practices.
Sarah Logan, Economist, International Growth Centre
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55677
2016-03-08T04:39:18Z
2016-03-08T04:39:18Z
Can agriculture in Africa sustain a nourishing rural non-farm economy?
<figure><img src="https://images.theconversation.com/files/114095/original/image-20160307-31289-1xi6ua8.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">When agriculture is disconnected from the local economy, its contribution to local economic development is limited.</span> <span class="attribution"><span class="source">David Neves</span></span></figcaption></figure><p>After being out of fashion for a long period, agriculture has been coming back into the spotlight again as part of development policy. Amid rising concerns about food insecurity and high expectations from agribusiness, policymakers have started to emphasise the importance of agriculture as a <a href="http://dfid-agriculture-consultation.nri.org/launchpapers/roleofagriculture.pdf">source of employment</a>. </p>
<p>Across Africa interest in agricultural investment as a source of employment growth and profit <a href="http://www.nepad.org/foodsecurity/agriculture/about">is growing</a>. In South Africa, the National Development Plan identifies agriculture as the potential basis of <a href="http://www.gov.za/issues/government-priority-creating-decent-jobs">one million new jobs</a>. </p>
<p>But how realistic are these hopes? In our globalised and competitive world, agricultural development is not a great direct generator of jobs. In fact, increases in the intensity, efficiency or competitiveness of agriculture often push large numbers of people <a href="http://www.plaas.org.za/blog/land-grabbing-southeast-asia-%E2%80%93-what-can-africa-learn">off the land</a>. Farm workers, less efficient small farmers, and women often get the short end of the stick.</p>
<p>Policymakers often assume that this is an inevitable part of progress. In the past, displaced rural labour has often found alternative employment in the cities. But in many parts of the world, including sub-Saharan Africa, the prospects for this are slender. Agricultural development may enrich a few – but it can also swell the numbers of the urban poor. </p>
<p>Agricultural development can only serve inclusive growth if it contributes to an inclusive and diverse rural non-farm economy. Unfortunately, policymakers tend to ignore this issue. Agricultural policy is not much concerned with labour markets, while industry and trade ministers tend to concentrate on urban issues. </p>
<p>This is an important gap. Policymakers need to ask how different pathways of agricultural development affect non-farm employment.</p>
<h2>A different approach</h2>
<p>A recent multi-country <a href="http://www.plaas.org.za/smead">research project</a> funded by <a href="https://degrp.odi.org/">DfID and the ESRC</a> suggests that the right kind agricultural development can indeed stimulate rural non-farm job creation. But the links are neither simple nor direct. </p>
<p>The study by the <a href="http://www.plaas.org.za/">Institute for Poverty, Land and Agrarian Studies (PLAAS)</a> at the University of the Western Cape investigated linkages between agriculture and the non-farm economy. It focused on three rural districts: Weenen in South Africa, Mchinji in Malawi, and Mazowe and Masvingo in Zimbabwe. </p>
<p>Rather than the social accounting matrices usually used for this kind of research, PLAAS and its partners took a qualitative approach. They carefully mapped the flows of money and resources that connect local agricultural enterprises to upstream and downstream markets.</p>
<p>What has emerged is a complex picture. What is good for the farmer is not necessarily good for the non-farm economy. Farmers with deeper pockets may not always spend their gains in ways that benefit their neighbours. Rather, beneficial effects depend on the local political economy. </p>
<p>Three factors are particularly important:</p>
<ol>
<li><p>the scale and ownership of agriculture itself;</p></li>
<li><p>the pattern and design of upstream and downstream linkages between farmers and the rest of the economy; and</p></li>
<li><p>the nature of local social dynamics and power relations.</p></li>
</ol>
<h2>Different landscapes</h2>
<p>Each case study revealed a very different scenario. In <a href="http://www.plaas.org.za/plaas-publications/rr-45-smead-malawi">Mchinji</a> small-scale farmers on communal land accessed local fresh produce markets by venturing into horticulture. Many new local livelihood opportunities were created – but these were small and vulnerable. </p>
<p>In <a href="http://www.plaas.org.za/plaas-publications/pb37-smead-zimbabwe">Mazowe</a>, small-scale tobacco growers who benefited from Fast-Track Land Reform made good money from distant markets, particularly China. This in turn created many opportunities for specialised local entrepreneurs.</p>
<p>In Weenen, large-scale agriculture turned out to be disconnected from the local economy. It had upstream and downstream links to distant markets but contributed little to employment in the area.</p>
<h2>What works?</h2>
<p>An analysis of the spatial patterns revealed by these case studies suggested some important insights. Simply being connected to distant markets is not enough to guarantee that agricultural development benefits the local non-farm economy. </p>
<p>Access to distant markets can support local employment. But this only happens if such farms are located in dense local networks that are socially embedded and not characterised by highly unequal power relations. </p>
<p>Where there are such networks, the local economy can benefit from trade and income flows. These benefits accrue through the purchase of intermediate inputs, and from local consumption and investment expenditure. They also come about through local retail, processing and transport of agricultural produce.</p>
<p>The scale of agriculture is an important factor too. In the South African case study, large-scale commercial farmers gained good incomes from highly efficient farms that served distant markets. But they also bought their inputs from distant suppliers. They provided little employment locally, and most of their spending on goods and services took place elsewhere. In Malawi, the same tended to be true of large estate farms. </p>
<p>This contrasted strongly with Zimbabwe where, for instance, the opportunities linked to small livestock farming and to small tobacco farmers’ windfalls from trade with China circulated in the local economy. </p>
<p>In all these cases, a common pattern emerges. Where large-scale agriculture is owned by distant players or by a farming elite with few local political or social commitments, the economic networks they create are unlikely to stimulate local opportunities.</p>
<p>Similarly, some kinds of economic integration can actually worsen marginalisation and unemployment. The positive spin-offs of agricultural development in Zimbabwe and Malawi, for instance, seem to be strongly linked to the absence of powerful, vertically integrated and internationally owned corporate food retail chains and supermarkets. </p>
<p>When big supermarkets enter, they create some formal sector jobs. But they also marginalise local farmers, compete with local traders, and suck money out of the local economy. In contrast, small and locally owned retail enterprises and markets are a key element of the agrarian structure. While often modest and not very glamorous, they are crucial for circulating money and economic opportunities.</p>
<p>In all three countries, the research suggests that ensuring an inclusive rural economy is about much more than growth in agricultural trade. Aside from exporting agricultural produce, rural economies tap into national and urban economies via social grants and public service salaries.</p>
<p>Links are also developed through the expansion of the non-agricultural urban economy into rural areas. The existence of migrant networks and “stretched” households that straddle the urban-rural divide also helps. </p>
<p>Additionally, many agricultural entrepreneurs also depend on other, non-agricultural service industries. These include tourism, hospitality, the building trade and small town services.</p>
<p>So, while agriculture can contribute to local employment, it is better able to do so when there is a diverse, rural non-agricultural economy. This diverse economy can ensure that more money is circulating in the local markets, benefiting farmers and other entrepreneurs dependent on agriculture. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/114097/original/image-20160307-31289-apyntg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Zimbabwe’s non-farm economy has benefited from the profits of tobacco farmers.</span>
<span class="attribution"><span class="source">REUTERS/Philimon Bulawayo</span></span>
</figcaption>
</figure>
<h2>Implications</h2>
<p>These findings have important implications for agricultural and economic policy. </p>
<p>First, they suggest that agricultural policy should promote smallholder agriculture – not simply as a contribution to food security, but also as a source of employment, and as a powerful hub for forward and backward linkages into the local economy.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/114099/original/image-20160307-31277-jmw97r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Better support for local retail and informal markets is often neglected by planners.</span>
<span class="attribution"><span class="source">David Neves</span></span>
</figcaption>
</figure>
<p>In South Africa, while there has been lots of pro-small farmer rhetoric, agricultural and land reform policy is in practice still biased towards large scale farming. The time is overdue for genuine pro-small farmer land reform. </p>
<p>Where rainfall and markets allow, this kind of land reform can make an important contribution to the rural economy and the survival and welfare strategies of poor South Africans. Such a policy would also enable beleaguered medium-scale white farmers – who contribute little to food security anyway – to exit the market.</p>
<p>Elsewhere in Africa, land and investment deals that create large-scale farming enterprises, externally owned and plugged into distant export markets, are unlikely to contribute to local employment. They should not be supported in the mistaken belief that they do.</p>
<p>Maximising the economic benefit from agricultural development and smallholder farming requires better support for local retail and informal markets often disregarded by urban planners. These markets include those for livestock and fresh produce.</p>
<p>Finally, local planning, land use, zoning and anti-trust law and policy should be geared to protecting small informal growers, markets and retailers from being swamped by large-scale agriculture and the intrusion of powerful corporate retailers into rural markets.</p>
<hr>
<p><em>The study, done by PLAAS, on which this article is based was part of the <a href="http://degrp.squarespace.com/">Growth Research Programme</a> funded by the British Department for International Development and Economic and Social Research Council.</em></p><img src="https://counter.theconversation.com/content/55677/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andries du Toit received funding from the UK Department for International Development and the Economic and Social Research Council to conduct this research. </span></em></p>
Agriculture can only contribute to rural growth and development to the benefit of all if it links with an inclusive and diverse rural non-farm economy.
Andries du Toit, Director, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55114
2016-03-07T04:30:17Z
2016-03-07T04:30:17Z
Nigeria needs a credible economic plan – not a confab
<figure><img src="https://images.theconversation.com/files/113250/original/image-20160229-4105-e27qg5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wole Soyinka should rather galvanise like-minded Nigerians and demand that Nigeria’s looted treasury be returned.</span> <span class="attribution"><span class="source">Reuters/Akintunde Akinleye</span></span></figcaption></figure><p>Nobel Laureate professor <a href="http://www.biography.com/people/wole-soyinka-9489566">Wole Soyinka</a> recently called for an emergency <a href="http://www.vanguardngr.com/2016/02/the-call-for-economic-confab/">national conference</a> on the Nigerian economy. This suggests that the economy is not only in dire straits, but headed toward a cataclysmic cliff. For an artistic and creative intellectual titan like <a href="http://www.nobelprize.org/nobel_prizes/literature/laureates/1986/soyinka-bio.html">Soyinka</a> to dabble in the <a href="http://www.theatlantic.com/business/archive/2013/12/why-economics-is-really-called-the-dismal-science/282454/">“dismal science”</a> of economics portrays an urgency that can’t easily be ignored.</p>
<p>But how bad, really, is the Nigerian economy? And would a conference help?</p>
<p>On the first question it is worth noting that economic downturns neither surprise nor alarm economists. We believe that every economy that reaches the peak of the business cycle must eventually slow down. Sometimes they reach what is referred to as a “trough”, or the very bottom of the cycle. </p>
<p>Some economies are more resilient than others. They are able to minimise the impact of an inevitable downturn, as well as rebound quickly, mainly through sound economic management. </p>
<p>On the second, I do not recall any country that has solved its economic problems via an emergency national confab. There is nothing wrong with discussing a nation’s economic problems, but seeking solutions through a conference will be at best far-fetched, and at worst illusory. </p>
<h2>How bad is it?</h2>
<p>The Nigerian economy is indeed under severe strain. But not everything is as bad as it seems.</p>
<p>The country’s currency has suffered a <a href="http://www.bloomberg.com/news/articles/2016-02-11/naira-drops-to-record-in-unofficial-trading-on-dollar-scarcity">steep slide</a>, depreciating by over 25% in the past year. But analysts should be circumspect when they generalise about the impact of Naira depreciation.</p>
<p>Subsistence farmers across Nigerian villages who receive <a href="http://www.vanguardngr.com/2015/04/nigerians-living-abroad-remitted-21bn-in-2014-world-bank/">remittances</a> from relatives abroad will find themselves unexpectedly awash with stacks of Naira. </p>
<p>Nor do <a href="http://www.economist.com/news/middle-east-and-africa/21577113-if-only-nigeria-could-revamp-its-farms-feed-yourself">subsistence farmers</a> have to fret about the inflationary implications of a depreciating currency since they produce nearly all of their daily needs. Farmers who sell exported products like cocoa, palm oil, palm kernel, and groundnuts might even see a spike in the demand for their products, following changes in relative prices induced by a depreciating Naira.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113255/original/image-20160229-4090-13sqpao.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Farmers who sell exported products like cocoa and palm oil might benefit from the depreciation of the naira against the US dollar.</span>
<span class="attribution"><span class="source">Reuters/Joe Penney</span></span>
</figcaption>
</figure>
<p>Ordinary folks don’t shop at mega supermarkets and malls like Shoprite. This means that they don’t need to worry about a spike in the prices of imported goods. This, in turn, will be a boon to local manufacturers who source their production inputs locally. This would be good for jobs and for government revenue. Don’t forget that China boosted its exports of manufactured goods by deliberately undervaluing the Yuan. </p>
<p>I’m also not perturbed by the inexorable decline in Nigeria’s GDP growth rate, from an average of 9% between 2000 and 2010, to the current 4%. Stellar economic growth in Nigeria occurred when a barrel of crude oil sold for more than US$100. Now that a barrel barely sells for $30, the country’s growth rate is expected to shave a percentage point or so from the current level. </p>
<p>The country’s anaemic growth rate isn’t my main concern. A major concern is the fact that Nigeria’s economic growth has never been inclusive and equitable. </p>
<p>When the country’s growth rate peaked in the 2000s, a 2014 <a href="http://www.mckinsey.com/global-themes/middle-east-and-africa/nigerias-renewal-delivering-inclusive-growth">report</a> by the McKinsey Global Institute showed that only one-quarter of Nigerians benefited. The rest wallowed in abject poverty, which now stands at an alarming rate of 70% of the country’s <a href="http://data.un.org/CountryProfile.aspx?crName=NIGERIA">population</a> of almost 200 million.</p>
<p>And what about the country’s rapidly disappearing foreign reserves? Should I worry about that as well? No. Reserves in Nigeria have often been used to supply cheap foreign currencies to the Nigerian elite. They have used these for various unproductive activities and illicit financial transactions.</p>
<p>These include money laundering, medical tourism, acquisition of choice real estate in Dubai and other expensive cities, and lavish vacations. </p>
<p>There may be a silver lining to the depletion of Nigeria’s oil-driven <a href="http://thenewsnigeria.com.ng/2016/02/nigerias-forex-reserves-down-by-1-1bn/">foreign reserves</a> from $54 billion in 2008 to the current level of roughly $28 billion. It has the potential of forcing the country to explore broader sources of foreign exchange, including the neglected agricultural sector, agro-processing and resource-based industrialisation.</p>
<p>Nigerian President Muhammadu Buhari has said he is worried that a depreciating Naira and a rapidly depleting foreign reserves will have a negative impact on unemployment. Economists estimate that joblessness is more than 50% – a more credible figure than the National Bureau of Statistics’ 9.9%. </p>
<p>I believe that many Nigerian youths have in fact given up looking for jobs. They have come to the bitter realisation that looking for a job in Nigeria an exercise in futility. They have become what labour economists refer to as “discouraged workers” – that is, unemployed people who have looked for jobs for years and have given up doing so. </p>
<h2>How sound economic polices are made</h2>
<p>Countries solve their economic problems when citizens willingly elect leaders that credibly promise economic renaissance, and then hold them accountable. When elected leaders fail to deliver they ought to be voted out of power, as the previous administration in Nigeria learnt.</p>
<p>When US President Barack Obama assumed office in 2009 he inherited an economy that was more distressed than Nigeria’s. He was saddled with a whopping $10 trillion in <a href="http://www.cbsnews.com/news/national-debt-hits-record-11-trillion/">debt</a> (or 72% of the GDP), and an unemployment rate of 10%. </p>
<p>But Obama did not call for an emergency national conference. He assembled an economic team and proposed an economic blueprint for extricating the economy from the doldrums. His massive economic stimulus program worked. Four years later he cruised into re-election.</p>
<p>Buhari and his administration have pledged to turn the Nigerian economy around. They have also undertaken to provide economic succour to millions of Nigerians trapped in extreme poverty. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=402&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=402&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=402&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=506&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=506&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113251/original/image-20160229-4063-1in2jim.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=506&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Muhammadu Buhari needs time to turn Nigeria’s economy around.</span>
<span class="attribution"><span class="source">Reuters/Vincent Kessler</span></span>
</figcaption>
</figure>
<p>Let us give them a chance to articulate and implement their economic policies. There will be plenty of time and talking heads ready to dissect the administration’s economic performance come 2019.</p>
<p>Rather than call for an emergency conference on the economy, Soyinka should do what he does best: galvanise like-minded Nigerians and demand that all those who looted Nigeria’s treasury (especially the over $2 billion designated for arms purchase to fight Boko Haram) <a href="http://www.vanguardngr.com/2015/11/treasury-looters-now-returning-stolen-funds-buhari-2/">return</a> their ill-gotten wealth. </p>
<p>Getting those stolen funds back and investing them productively in developing the agricultural sector, supporting small businesses, as well as providing microcredit to informal sector workers, would help cushion the effects of the slowdown in the economy, and perhaps lay the foundation for a diversified economy.</p>
<hr>
<p><em>Steve Onyeiwu is author of Emerging Issues in Contemporary African Economies (Palgrave/Macmillan, 2015).</em></p><img src="https://counter.theconversation.com/content/55114/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Nigeria’s economy is indeed under severe strain but sub-Saharn Africa’s most populus nation won’t solve its economic problems via an emergency national confab.
Stephen Onyeiwu, Professor of Economics, Allegheny College
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55179
2016-03-05T21:15:51Z
2016-03-05T21:15:51Z
Ghana needs a new strategy to create decent jobs and reduce inequality
<figure><img src="https://images.theconversation.com/files/113129/original/image-20160227-26673-42ob2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Agriculture remains the major source of employment in Ghana, even though its share in the economy has been in steady decline</span> <span class="attribution"><span class="source">Reuters/Thierry Gouegnon</span></span></figcaption></figure><p><em>Ghana, the first sub-Saharan country to gain independence, is celebrating the 59th anniversary of its freedom from British rule this year. According to <a href="http://www.anc.org.za/show.php?id=2981">Nelson Mandela</a>, Ghana’s independence on March 6, 1957, provided much strength and great inspiration to African liberation movements.</em></p>
<hr>
<p>Ghana’s status as one of the <a href="http://www.mckinsey.com/global-themes/middle-east-and-africa/lions-on-the-move">African Lions</a> is linked to the country’s remarkable growth performance. This culminated in it attaining <a href="http://www.worldbank.org/en/news/feature/2011/07/18/ghana-looks-to-retool-its-economy-as-it-reaches-middle-income-status">lower-middle income status</a> in 2011. But the weak employment effect of Ghana’s growth, coupled with rising inequality against the backdrop of declining poverty, calls for a rethink of Ghana’s growth strategy. </p>
<p>The starting point would be for policymakers to acknowledge the adverse consequences of a strong obsession with economic growth, regardless of the source of the growth and its job creation effect.</p>
<p>Growth is a necessary condition. But it can only pass the sufficient condition test if it translates into the generation of productive and high-earning jobs. This requires a redirection of growth strategy towards the promotion of manufacturing activities that are strongly linked with agriculture. </p>
<h2>Slower employment growth</h2>
<p>A key indicator of the health of an economy is the availability of jobs and their quality. This is measured by rates of unemployment and joblessness as well as poverty incidence and income inequality. </p>
<p>Employment growth in Ghana has generally been slower than economic growth, raising concerns about the quality of the country’s growth. Ghana’s employment growth lags behind economic growth, with an estimated <a href="http://onlinelibrary.wiley.com/doi/10.1111/1467-8268.12037/abstract">employment elasticity</a> of output of 0.47. This suggests that every 1% of annual economic growth yields 0.47% growth of total employment.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113396/original/image-20160301-31040-10758sr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The manufacturing sector is Ghana’s best hope for quality jobs.</span>
<span class="attribution"><span class="source">Reuters/Francis Kokoroko</span></span>
</figcaption>
</figure>
<p>Beside the slow rate of job creation is the dominance of <a href="http://isser.edu.gh/images/Publication_files/Policies_and_Options_for_Ghanas_Economic_Development.pdf">vulnerable</a> employment and the working poverty rate. In 2010, seven out of ten jobs were estimated to be vulnerable. Only one out of five jobs could be considered as productive jobs that meet the standard of <a href="http://www.ilo.org/global/topics/decent-work/lang--en/index.htm">decent work</a>.</p>
<p>Workers in vulnerable employment tend to lack formal work arrangements, including adequate social security. And the working poverty rate remains a challenge with one out of every five persons employed belonging to poor households.</p>
<h2>Robust economic growth, shortage of skills</h2>
<p>Economic growth and job creation depend on the size and quality of the labour force. The availability of human resources in the right quantity and quality form the foundation of growth and development. Ghana’s population of 26.3 million has been growing at an annual average of 2.5% over the last three decades. </p>
<p>The size of Ghana’s labour force in 2013 stood at 12.31 million (94.8% in employment and 5.2% unemployed). This is up from 6.04 million in 1992, which translates into 3.4% annual growth on average. Thus the economically active – 47% of total population – are responsible for feeding the entire population.</p>
<p>Ghana has a shortage of high skilled professionals. It is also short of semi-specialised skills, such as technical and vocational skills. Anecdotal evidence suggests that when Ghana started producing oil commercially in late 2010, there were specific skills that were difficult to obtain domestically. These include engineers, drillers, production and operation workers. The industry had to rely on people from Côte d’Ivoire and Nigeria.</p>
<p>There are estimated supply deficits in graduates in medicine and health, engineering and technical skills and business administration, and an oversupply of graduates in arts/social sciences and agriculture. </p>
<p>This is generally linked to the fact that Ghana’s education system tends to produce humanities graduates in excess of what the economy requires. Scientists, engineers, and technologists needed for the manufacturing sector are produced in limited numbers. </p>
<p>Clearly, even though some jobs have been created in response to economic growth, most have occurred in the informal sector. On the other hand, the low quality of workers produced by the education system means a chunk of the labour force cannot access formal sector jobs that offer better pay and working conditions. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113393/original/image-20160301-31056-1ba6y1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Most jobs in Ghana have been created in the informal sector.</span>
<span class="attribution"><span class="source">Reuters/Francis Kokoroko</span></span>
</figcaption>
</figure>
<p>The changing structure of growth and employment leads to the widening in earnings differentials and an increase in inequality. Indeed, poverty in Ghana has declined considerably over the last two decades, but the country continues to battle with rising inequality. </p>
<p>The slower growth of higher-earning wage and self-employment, as against fast-growing vulnerable and informal sector employment, is a major driver of widening inequality.</p>
<h2>Crafting a new growth strategy</h2>
<p>Thus, fixing the problem of the declining manufacturing sub-sector and raising productivity in agriculture should be the priority of policy towards more inclusive growth. This calls for investment in areas that would promote manufacturing and agricultural activities where the potential for job creation is high.</p>
<p>The business operating environment must also be addressed. Macroeconomic instability culminating in high interest rates, and high taxes coupled with chronic energy problems make manufacturers less competitive. This makes them more fragile within a trade environment where firms face global competition.</p>
<p>Investment in the energy sector to ensure a consistent power supply within a stable macroeconomic environment would be a major step towards reducing constraints facing the manufacturing sector. The business environment could also be improved if the country’s institutional arrangements and regulatory framework are properly streamlined in line with best practices.</p>
<p>On the supply side, low quality of labour requires urgent policy attention. Education and skills development have seen some improvement over the last three decades. But the pace appears to be slow. The link between education and productivity is quite clear. A comprehensive review of the education system is needed to assess the medium and long term relevance of education and skills development.</p>
<p>Key policy interventions that would improve agriculture productivity include: </p>
<ul>
<li><p>agriculture research support through improvement in agriculture extension services;</p></li>
<li><p>development of irrigation schemes to promote uninterrupted farming activities;</p></li>
<li><p>provision of guaranteed price; and</p></li>
<li><p>buffer stock facility.</p></li>
</ul>
<p>Ghana could also leverage the strong growth performance of low labour absorption sectors of mining and oil extraction to boost growth in other sectors. It could do this by channelling returns from these sectors into infrastructure to support growth in agriculture and manufacturing.</p>
<hr>
<p><em>This article is an edited extract from a <a href="https://www.wider.unu.edu/publication/understanding-ghana%E2%80%99s-growth-success-story-and-job-creation-challenges">working paper</a>, which is part of a <a href="https://www.wider.unu.edu/project/understanding-african-lions-growth-traps-and-opportunities-six-dominant-african-economies">collaboration</a> between UNU-WIDER, the Brookings Institution and the Development Policy Research Unit (DPRU) at the University of Cape Town on Understanding the African Lions: Growth Traps and Opportunities in Six Dominant African Economies.</em></p><img src="https://counter.theconversation.com/content/55179/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The working paper from which this article is extracted was funded by UNU-WIDER.</span></em></p><p class="fine-print"><em><span>William Baah-Boateng is a senior research fellow of African Centre for Economic Transformation (ACET); Fellow of International Institute for Advanced Studies (IIAS); and external Fellow of Institute of Fiscal Studies (IFS), all based in Accra. He is currently a member of Presidential Committee on Emoluments, an ad hoc committee.
</span></em></p>
Economic growth is a necessary condition for development. But it can only pass the sufficient condition test if growth translates into high-earning jobs. Ghana’s recent history illustrates this.
Ernest Aryeetey, Professor of Economics and Vice Chancellor, University of Ghana
William Baah-Boateng, Senior Lecturer, Economics, University of Ghana
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55592
2016-03-03T07:59:28Z
2016-03-03T07:59:28Z
What South Sudan will gain from joining the East African Community
<figure><img src="https://images.theconversation.com/files/113589/original/image-20160302-25918-1le6fuf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Sudan is a landlocked country with poor infrastructure. Joining the East African Community will open new avenues for trade.</span> <span class="attribution"><span class="source">Reuters/Adriane Ohanesian </span></span></figcaption></figure><p>South Sudan’s <a href="http://www.eac.int/news-and-media/statements/20160302/joint-communique-17th-ordinary-summit-east-african-community-heads-state">accession</a> to the <a href="http://www.eac.int/about/overview">East African Community</a> could prove a major step forward in the economic development of the world’s newest nation.</p>
<p>On March 2, the East African Community Heads of State Summit admitted South Sudan as its newest member. Accession negotiations had <a href="http://www.eac.int/news/index.php?option=com_content&view=article&id=1382:south-sudan-high-level-delegation-meet-eac-team-to-prepare-for-accession-negotiations&catid=48:eac-latest&Itemid=69">commenced</a> in November 2014. The relatively accelerated timeline to its conclusion is a strong indication of the willingness of all sides to admit South Sudan to the community.</p>
<p>To date, oil revenues have <a href="http://www.theigc.org/wp-content/uploads/2015/07/Harding-2012-Policy-Brief.pdf">financed</a> more than 90% of South Sudan’s budget. Such singular reliance on commodity and resource revenues is generally a risky and unsustainable approach to development. </p>
<p>This is true of South Sudan. The <a href="http://www.crisisgroup.org/en/regions/africa/horn-of-africa/south-sudan/217-south-sudan-a-civil-war-by-any-other-name.aspx">civil war</a> that broke out in 2013 disrupted oil production. This was compounded by the drop in <a href="http://pubdocs.worldbank.org/pubdocs/publicdoc/2016/2/891891454514292219/CMO-Pink-Sheet-February-2016.pdf">oil prices</a> from more than $100 per barrel in 2013 to $35 per barrel currently. These two factors mean that South Sudan can no longer rely on this source of revenue. Hence, regional integration will be an important route to diversifying its economy.</p>
<h2>Hindrances to economic development</h2>
<p>One of the major hindrances facing South Sudan in participating actively in regional and world trade has been high transport costs. South Sudan is a landlocked country with poor domestic infrastructure. Most of its road network is <a href="https://www.cia.gov/library/publications/the-world-factbook/fields/2085.html">unpaved</a>.</p>
<p>Studies of informal, cross-border trade between Uganda and South Sudan show <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/09/06/000386194_20110906015906/Rendered/PDF/638090BRI0Sout00Box0361527B0PUBLIC0.pdf">substantial mark-ups</a> on goods once they enter Juba market. The largest portion of the increase in price is <a href="http://www.doingbusiness.org/data/exploreeconomies/%7E/media/giawb/doing%20business/documents/profiles/country/SSD.pdf?ver=3">attributed</a> to transport costs as well as other stamps and duties along the way. This is particularly challenging for a country like South Sudan that relies primarily on imports.</p>
<p>As part of the East African Community, South Sudan will be able to benefit from ongoing and future regional infrastructure projects. These include the <a href="http://www.nation.co.ke/business/Design-of-Lamu-Port-berths-complete/-/996/2778368/-/13vjpt4/-/index.html">port</a> that is being constructed in Lamu, Kenya, and the <a href="http://www.eassy.org/">EASSy cable</a>, a 10,000km submarine fibre-optic cable along the coast of eastern and southern Africa. </p>
<p>As infrastructure development is an expensive undertaking, regional collaboration will be vital for improving South Sudan’s connectivity. Improved connectivity will, in turn, lower transport costs and thus the price of consumer goods in the country. At the same time, it will also improve access and competitiveness in regional markets for South Sudanese exports.</p>
<p>In terms of economic diversification, agriculture is one potential area South Sudan could capitalise on. According to some estimates, 70% of land in South Sudan is <a href="http://www.intechopen.com/books/application-of-geographic-information-systems/assessing-agricultural-potential-in-south-sudan-a-spatial-analysis-method">suitable for agriculture</a>, but less than 4% is currently being cultivated. </p>
<p>If South Sudan can move towards mechanised agriculture, it not only has the opportunity to increase in-country production, but also to potentially export to the region. For example, the extensive flood plains of the Greater Bahr-el-Ghazal and Upper Nile areas may be suitable for rice production. To ensure its products are competitive, investments in infrastructure and connectivity will be essential.</p>
<p>In the short term, there will be some costs to accession. However, many of these costs can be mitigated with appropriate negotiations and domestic reforms. In particular, there is the potential that the cost of living may increase for consumers, as in some cases the <a href="https://www.imf.org/external/pubs/ft/scr/2014/cr14345.pdf">current customs tariff</a> bands in South Sudan are lower than the common external tariff it will have to adopt.</p>
<p>Rwanda is an example of a country that faced a similar challenge and managed to <a href="http://www.theigc.org/wp-content/uploads/2014/10/Frazer-2012-Working-Paper.pdf">mitigate the effects</a> by negotiating various flexible arrangements, including longer transition periods for implementation. South Sudan has the opportunity to learn from and follow on Rwanda’s lead.</p>
<p><a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/South_Sudan_-_A_Study_on_Competitiveness_and_Cross_Border_Trade_With_Neighbouring_Countries.pdf">Labour costs</a> in South Sudan are among the highest in the region. Years of conflict have left the population with <a href="http://www.theigc.org/wp-content/uploads/2015/03/Eissa-2013-Policy-Brief.pdf">low levels</a> of education and skills. In the short run, this may present another barrier for South Sudan in attracting foreign direct investment flows. </p>
<p>Rather than investing in South Sudan, firms may locate in other community countries and export their products to South Sudan, benefiting from the favourable tariff structure.</p>
<p>As South Sudan undertakes domestic reforms and investment in infrastructure to lower the costs of production, firms will increasingly look to locate there. Additionally the Common Market Protocol also provides for the <a href="http://www.eac.int/commonmarket/index.php?option=com_content&view=article&id=80&Itemid=117">free movement</a> of labour. </p>
<p>Although this is a politically sensitive topic, it would be advantageous for the government to embrace it. Foreign labour could lower domestic costs of production while filling the skills gap. Furthermore, there are very likely to be spill-over effects in terms of skills for the domestic labour force.</p>
<h2>Opportune moment</h2>
<p>It is an opportune moment for South Sudan to accede to the regional bloc. As the world’s newest country, it is still in the phase of developing many domestic laws, policies and regulations. </p>
<p>Rather than having to retrofit laws and regulations at a later stage, South Sudan can benefit from learning and adopting those that reflect best practice. This will not only facilitate smoother integration, it will bring about transparency and conformity into its national laws. This will act as a strong signal for the private sector and others that South Sudan is pursuing growth-enhancing economic reforms.</p>
<p>Despite costs in the short run, <a href="http://www.theigc.org/wp-content/uploads/2016/03/Haas-et-al-2016-Policy-note.pdf">significant benefits</a> from South Sudan’s accession are expected to accrue in the medium to long run. As successful examples like Rwanda have shown, regional integration can enhance growth and thus support poverty reduction.</p>
<p>South Sudan can learn from the history of existing East African Community members. It also then has a place at the negotiating table, which it can use to advocate for future policies that are advantageous for its domestic growth. But the key to unlocking and maximising the benefits of regional integration will lie in domestic reforms targeted at creating a stable and competitive macroeconomic environment.</p><img src="https://counter.theconversation.com/content/55592/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Astrid R.N. Haas is affiliated with the International Growth Centre.</span></em></p>
Countries like Rwanda have shown that regional integration can enhance growth and reduce poverty. South Sudan should follow its lead in its engagement with the East African Community.
Astrid R.N. Haas, Country Economist for South Sudan and Uganda, International Growth Centre
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/53233
2016-03-02T04:25:11Z
2016-03-02T04:25:11Z
Ghana: lessons from Nkrumah’s fallout with his economic adviser
<figure><img src="https://images.theconversation.com/files/112393/original/image-20160222-23457-1yifcg6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Arthur Lewis' impossible mission was to make possible Kwame Nkrumah’s famous slogan: seek ye first the political kingdom ...</span> <span class="attribution"><span class="source">Reuters/Sahra Abdi</span></span></figcaption></figure><p><em>Ghana, the first sub-Saharan country to gain independence, celebrates the 59th anniversary of its freedom from British rule this year. According to <a href="http://www.anc.org.za/show.php?id=2981">Nelson Mandela</a> Ghana’s independence on March 6, 1957, provided much strength and great inspiration to African liberation movements. This article is a foundation essay. These are longer than usual and take a wider look at a key issue affecting society</em> </p>
<hr>
<p>Ghana was to become the testing ground for <a href="http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1979/lewis-bio.html">Arthur Lewis’</a> ideas on economic development. The excitement surrounding Ghana’s independence in 1957 as tropical Africa’s first decolonised territory captivated Lewis as thoroughly as it did African nationalists and Afrophiles around the world. Lewis, a St Lucian, went on to win the Nobel Memorial Prize in Economics in 1979. </p>
<p>A veritable who’s who of intellectuals of African descent living in the Americas flocked to Accra. They were determined to show the world that Africans could govern themselves and achieve more for their people than the colonial rulers had. They were eager to make Ghana a shining example to inspire independence movements across the continent.</p>
<p>If, then, Lewis saw Ghana as a proving ground for his ideas on economic development, later scholars have viewed the Kwame Nkrumah years (1951-66) as a case study of striking failure. </p>
<p>From a country that seemed on the threshold of robust economic progress, it descended into economic misery and political instability.</p>
<p>Although Lewis was remarkably well informed on Ghana and knew many Ghanaian officials personally, he was not fully prepared for the complexities of his new position. Nor was he prepared for the fragility of Ghanaian economics and politics. </p>
<h2>Seek ye first the political kingdom</h2>
<p>The expectations surrounding Lewis at the time of his arrival were staggering. Since they were also highly contradictory, he could not meet all of them. </p>
<p>The Ghanaian politicians insisted that Lewis assert Ghana’s economic independence from its former colonial rulers and from the outside world. They looked to him to design financial institutions that would free Ghana from the British economy and promote rising standards of living as well as economic strength. Lewis was supposed to make possible Nkrumah’s famous slogan:</p>
<blockquote>
<p>Seek ye first the political kingdom and all things will be added to it.</p>
</blockquote>
<p>On the other hand, the British, the Americans, the international financial community, and representatives of the World Bank and the International Monetary Fund, wanted something quite different. They looked to Lewis to be a moderating influence – procapitalist and pro-Western. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112505/original/image-20160223-16444-1315dl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The World Bank and the IMF looked to Lewis to be a moderating influence on Nkrumah.</span>
<span class="attribution"><span class="source">Reuters/Yuri Gripas</span></span>
</figcaption>
</figure>
<p>The radical wing of the Ghanaian political elite alarmed the British and the Americans. Perhaps no-one more troubled the Westerners than the Ghanaian prime minister himself, whose political and economic preferences were far from clear at this time.</p>
<p>The dramatic and heavily charged clash between an economic expert (Lewis) and a political leader (Nkrumah) was repeated again and again in the late 1950s and early 1960s. This was happening as African states, emerging from colonial rule, sought to buttress their political independence with economic progress. Economic advisers and ministers, some of whom were Africans and some not, regularly had to sacrifice their economic projects to the patronage-building ambitions of politicians.</p>
<p>Rarely, however, are observers afforded the opportunity that the <a href="http://findingaids.princeton.edu/collections/MC092">Lewis Papers</a> provide to view the underlying tensions involving the political and economic elites that were so often covered up by anodyne formal announcements. The two men saw Ghana’s independence from different vantage points even though they were united in wanting the country to enjoy economic progress. </p>
<h2>Politicians versus economists</h2>
<p>Nkrumah believed that the political leadership had the obligation to set the economic agenda and that economists should then design programs that would make it possible to achieve these goals.</p>
<p>In contrast, Lewis believed that only the economists could determine what could achieved, and only they could delineate the appropriate methods for realising these goals. The proper role of the political leaders was to speak the truth to the people and to promote realistic views of what economic experts told them that their countries could accomplish.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=906&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=906&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=906&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1139&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1139&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112506/original/image-20160223-16451-4jvqsq.gif?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1139&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Arthur Lewis believed that only the economists could determine what could achieved.</span>
</figcaption>
</figure>
<p>Lewis complained that Nkrumah regarded economists as mere technicians, whose task it was to realise the economic dreams of the public and the politicians – no matter how unrealistic. </p>
<p>Nkrumah countered, depicting Lewis and the other economists with whom he worked politically naive, badly misunderstanding the pressing demands that ruling over a decolonised polity placed on the political elite. </p>
<p>Political leaders in fragile, newly independent polities had to build coalitions, use patronage to solidify their political authority and even coerce the opposition. They had to be responsive to the high hopes that their peoples carried about the meaning of political independence.</p>
<p>Even so, Lewis was hardly the dominant economic policymaker in the first two years of Ghanaian independence as some have wanted to argue. He tried to impose his precepts on Ghana for the first eight months when Nkrumah and other ministers regularly sought him out. </p>
<p>But Lewis ceased to count after that. He was distressed as he witnessed the alteration of his development plans to the point where in private correspondence he described the final document as “awful” and “one of the worst plans ever written”.</p>
<h2>A policy fraught with danger</h2>
<p>As Lewis made clear in all of his writings in this period, the most critical issue in achieving development was raising the investment rate from the customary 4% or 5% that characterised mostly less-developed economies to something in the order of 15% to 20%. </p>
<p>What better way to achieve such a breakthrough than to capture the windfall profits from the rising world prices for cocoa. Yet the chief economic adviser was aware that this policy was fraught with danger. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112403/original/image-20160222-25891-3oq7lq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Nkrumah taxed Ghana’s region from which half of cocoa exports came and used the revenue in other parts of the country.</span>
<span class="attribution"><span class="source">Reuters/Kwasi Kpodo</span></span>
</figcaption>
</figure>
<p>The state was taxing Ghana’s most dynamic and prosperous region, from which half of the country’s cocoa exports and all of its timber and gold came. It was also the area in which the opposition to the Convention Peoples’ Party (CPP) was the most intense. It was using a large portion of this wealth in other parts of the country.</p>
<p>In his opinion, the monies had to be spent in ways that could be seen to contribute to economic and social betterment. If not, the political anger would be irrepressible. </p>
<p>Yet Lewis was also aware that the pressures on Nkrumah and the CPP leadership to use these funds to solidify their political support and build patron-client relationships were substantial. The tensions between what the CPP leaders wanted to do with the funds and what Lewis thought the monies should be used for were a constant source of conflict between Lewis and the CPP leadership.</p>
<p>Lewis was right that Nkrumah’s profligate use of political patronage was bound be self-defeating in the long run. Equally valid was his insistence that Ghana’s five-year plan needed to be fiscally sound and should be shorn of its many showy but economically wasteful programs. </p>
<p>But believing that Nkrumah would give Lewis a free hand in economic matters, as Lewis claimed he had been promised, revealed a high degree of political insensitivity – even naivete. </p>
<h2>Tensions tearing at the Ghanaian cabinet</h2>
<p>Lewis’s position from the outset was an awkward one, if not impossible. On the one hand, the Ghanaians wanted him to lead the country to economic prosperity and economic autonomy. The officials at the United Nations, who paid his salary, as well as those in Britain and the US, looked to him to steer Ghana in the direction of the Western capitalist world.</p>
<p>The tensions tearing at the Ghanaian cabinet, to say nothing of the pressures that came from the growing opposition in Ghana, put Lewis under even greater pressure. The left wing in the party favoured radical political and economic policies. They wanted Lewis to promote state intervention in the country’s economic affairs. </p>
<p>Just as adamant, however, was the right wing of the party, who believed that Ghana continued to need support from the great capitalist powers in the world. </p>
<p>Even for an individual of the most extraordinary personal flexibility, let alone a person like Lewis, who was a rationalist through and through, believing that politicians should embrace the right economic thinking – even when the short-run political consequences were unfavourable – navigating these stormy waters would have been problematic.</p>
<hr>
<p><em>This is based on an <a href="http://press.princeton.edu/titles/8045.html">extract</a> from W Arthur Lewis and the Birth of Development Economics by Robert L. Tignor. © 2005 Princeton University Press. Reprinted by permission</em></p><img src="https://counter.theconversation.com/content/53233/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Tignor does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Nobel laureate and Kwame Nkrumah’s economic adviser Arthur Lewis saw Ghana as a testing ground for his ideas on economic development. But he was met with fierce resistance.
Robert Tignor, Professor of Modern and Contemporary History, Emeritus, Princeton University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/55253
2016-02-25T04:20:22Z
2016-02-25T04:20:22Z
What Museveni’s priorities must be if Uganda is to become middle income
<figure><img src="https://images.theconversation.com/files/112572/original/image-20160223-16441-19sb8a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">To achieve faster growth and development Uganda must move workers from agriculture into manufacturing </span> <span class="attribution"><span class="source">REUTERS/Hudson Apunyo</span></span></figcaption></figure><p>One of the main areas of interest for Ugandans in the run up to the <a href="http://www.reuters.com/article/us-uganda-election-idUSKCN0VT08A">2016 elections</a> was the state of the economy. The Electoral Commission has declared Yoweri Museveni the winner although to date, the opposition still disputes the results. </p>
<p>In the previous decades, Uganda <a href="http://www.worldbank.org/en/country/uganda/overview">grew rapidly</a>. Thanks to this growth it managed to <a href="http://www.ug.undp.org/content/uganda/en/home/presscenter/articles/2014/12/08/uganda-poverty-status-report-2014-launched.html">reduce</a> poverty rates.</p>
<p>Uganda benefited from a favourable external environment. Factors included substantial debt relief, high commodity prices, plentiful donor financing and relatively low borrowing costs. This is now no longer the case. Instead <a href="http://www.bbc.com/news/world-africa-12421747">Museveni</a> and his new administration will have to confront some hard external realities. These include lower commodity prices, declining donor flows (especially budget support), and the need to rein in the fiscal deficit.</p>
<p>The sharp <a href="http://ugandabankers.org/here-is-why-the-uganda-shilling-is-weakening/">depreciation</a> of the Uganda Shilling (<a href="http://www.monitor.co.ug/Business/Ugandans-to-pay-more-due-to-falling-Shilling--scarce-dollars/-/688322/3051470/-/vga15z/-/index.html">about 27%</a> against the dollar between September 2014 and September 2015) has been a particular short run concern for the electorate. The weakening of the shilling led to increases in domestic prices, with annual core <a href="http://www.monitor.co.ug/News/National/Inflation-reduces-to-76-says-UBOS-report/-/688334/3058134/-/1427779z/-/index.html">inflation rate</a> at 7.1% in January 2016, compared to <a href="https://www.bou.or.ug/bou/bou-downloads/press_releases/2015/Mar/Consumer-Price-Index-for-March-2015.pd">3.7%</a> in March 2015. The depreciation reflects its current account deficit - the widening gap between what the country pays for its imports and what it earns from its exports. It is therefore a necessary adjustment to make Uganda’s exports more competitive. </p>
<p>Although there have been many calls for the Bank of Uganda to stem the depreciation of the currency its monetary policy, aimed at relieving the inflationary pressures of the depreciation, has contributed to a relatively stable macroeconomic environment. The Bank has done a stellar job in stabilising inflation through increases in <a href="http://www.bloomberg.com/news/articles/2015-10-20/uganda-raises-interest-rate-to-17-as-cpi-hits-two-year-high">interest rates</a>, beginning in April 2015. This has helped position the economy for an eventual return to trend growth, although this also means that borrowing has become more costly for the private sector in the short run. </p>
<h2>Shift towards modern industries needed</h2>
<p>Beyond this, the medium term challenge is to accelerate the pace of moving workers from jobs in agriculture and the informal sector into modern industries. This is what economists call the structural transformation of an economy. This will also be a necessary precondition to tackling the high unemployment rate as the manufacturing sector should provide more opportunities for formal employment.</p>
<p>Uganda has performed comparatively well in terms of raising its <a href="http://www.brookings.edu/%7E/media/Research/Files/Papers/2014/11/learning-to-compete/L2C_WP9_Obwona-et-al.pdf?la=en">manufacturing productivity</a>. But the sector is still characterised by limited value addition. It is also not yet contributing significantly to creating jobs, as one would predict.</p>
<p>Here urbanisation will be an enormous opportunity in the coming decade. Uganda can tap this opportunity by using economies of agglomeration to drive new industries and exports to achieve new levels in productivity. To do this, investments in urban infrastructure as well as targeted policies will be necessary <a href="https://theconversation.com/why-kampala-holds-single-biggest-growth-opportunity-for-uganda-52230">to promote density and connectivity</a>. This is the model best illustrated by the economic growth of the East Asian Tigers. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112573/original/image-20160223-16436-hoc5de.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">President Museveni must help Uganda emulate East Asian Tigers.</span>
<span class="attribution"><span class="source">REUTERS/James Akena</span></span>
</figcaption>
</figure>
<p>Accelerating the economy’s structural transformation will therefore have to be one of the major focuses for Museveni’s new term.</p>
<h2>Opportunites in East Africa</h2>
<p>Regional integration will be another key route in increasing Uganda’s export competitiveness and creating jobs. Slower global growth and weaker commodity prices mean that it is in Uganda’s interest to look for more opportunities in the East Africa region. One potential area is linking firms to regional value chains, which can then function as stepping stones to global value chains. </p>
<p>But the government should also resist the temptation to try and pick and thus promote potential “winning industries”. It is not always clear where a country’s comparative advantage lies. The focus when looking to increase export competitiveness should be on investments that create a favourable environment for the private sector as a whole.</p>
<p>Agriculture, the sector that currently employs the largest share of Ugandans, should not be ignored. Raising productivity will also be important in this sector. To do this, Ugandans will need to use more inputs.</p>
<p>But, as recent <a href="http://www.theigc.org/project/dealing-with-fake-agricultural-inputs/">research</a> has shown, the big challenge here is the prevailing issue of fake inputs. Examples include substandard fertilisers and seeds that are sold on the market. These do not produce higher yields. This means that farmers, rightly so, do not want to invest in them. Tackling this problem and providing an enabling environment for farmers will raise agricultural productivity. </p>
<p>In addition, better connectivity through investments in roads and electricity as well as appropriate trade policy will bolster an enabling environment. Larger agribusiness could emerge, employing more people.</p>
<p>In his post-election interview, President Museveni <a href="http://allafrica.com/stories/201602221176.html">vowed</a> that Uganda will become a middle income country within five years. That time frame is very ambitious, but Uganda’s long-term growth prospects still look good. </p>
<p>Although current GDP growth forecast for 2015/16 is <a href="http://www.capitalmarketsinafrica.com/ugandas-gdp-forecast-slash-to-5-in-20152016-fiscal-year-imf/">below trend</a> at 5.0%, the Centre for International Development at Harvard University <a href="http://atlas.cid.harvard.edu/rankings/growth-predictions/">projects</a> that East African nations, including Uganda, will be among the fastest growing economies. They are forecast to achieve average annual growth of 5.5% between now and 2024. These forecasts are based on a measure of <a href="http://atlas.cid.harvard.edu/about/">economic complexity</a>, which takes into account the diversity and sophistication of productive capabilities used to produce a country’s exports. </p>
<p>However, Museveni will still have to realise this potential. This means not only growing the economy but, more importantly, accelerating structural change. Such a change can be achieved by creating an environment that enables firms to be created and shifts the average Ugandan from the informal to the formal economy. This will also come from investments in human capital, including quality education and health care services. Such investments will ensure that Ugandans can harness opportunities from economic growth.</p><img src="https://counter.theconversation.com/content/55253/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Astrid Haas works for the International Growth Centre (IGC)</span></em></p>
To achieve its ambition of becoming a middle income country, Uganda must accelerate the movement of workers from agriculture and the informal sector into modern industries.
Astrid R.N. Haas, Country Economist for South Sudan and Uganda at International Growth Centre, London School of Economics and Political Science
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/46956
2015-09-23T04:29:17Z
2015-09-23T04:29:17Z
What young Africans want from business education programmes
<figure><img src="https://images.theconversation.com/files/95526/original/image-20150921-31504-k9rs3o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Young entrepreneurs like Nigerian taxi boss Bankole Cardoso (26) want to learn how to do business - but they also want something very different from the traditional, structured MBA.</span> <span class="attribution"><span class="source">REUTERS/Akintunde Akinleye</span></span></figcaption></figure><p>If you ask people what they consider the world’s most prestigious business degree, most are likely to answer, “An MBA.” Indeed, the Master of Business Administration remains a hugely popular business degree and still <a href="http://www.mbanews.com.au/amba-global-conference-global-mba-trends/">impresses</a> many employers.</p>
<p>Germany, the Netherlands, Poland and Denmark are among 29 countries where interest in the MBA is at a <a href="http://www.mbanews.com.au/amba-global-conference-global-mba-trends/">nine-year high</a>. There are a number of growing Asian and South American countries on the same list.</p>
<p>But Africa is bucking the trend. New research by the Association of African Business Schools (AABS) <a href="http://www.mbaworld.com/%7E/media/Files/Publications/AMBA_AABS_Report_2015.ashx">reveals</a> what the continent’s <a href="https://theconversation.com/renaissance-or-mirage-can-africa-sustain-its-growth-41828">large youth population </a> - and it’s very different to the traditional MBA model.</p>
<h2>Short, sharp and online</h2>
<p>The research shows that many African students simply don’t believe an MBA is relevant to their needs. They prefer shorter, more modular business courses and want these to combine elements of blended learning - such as online components - with contact time. Students also want more flexibility than is built into traditional business education programmes.</p>
<p>There is also a move towards shorter and more hands on programmes and services. These include executive education, quick interventions and business support services. </p>
<p>Both these trends are being driven by an increased access to technology and the rapid development of new online learning applications. </p>
<h2>Do it yourself</h2>
<p>The Global Entrepreneurship Monitor’s 2014 report described young people in sub-Saharan Africa as among the <a href="http://www.gemconsortium.org/report">most entrepreneurial</a> in the world.</p>
<p>Several African countries are recording <a href="http://www.wsj.com/articles/african-economies-to-grow-4-5-on-average-in-2015-1432544482">strong economic growth</a>. Despite this, unemployment is rising - which explains why many young Africans are looking for ways to go it alone.</p>
<p>Traditionally, low education levels have posed a major barrier to such entrepreneurship. But post-school entrepreneurial business education is on the rise - and that must be at least partly responsible for what the 2014 report found and what is echoed by the AABS report.</p>
<p>Numerous business incubators and entrepreneurial programmes have sprung up across the continent. Entrepreneurship is increasingly part of most business schools’ core offerings rather than being just an add-on or elective.</p>
<p>An <a href="http://www.universityworldnews.com/article.php?story=20150403005252111">entrepreneurial network</a> for Africa’s business schools, the African Academic Association on Entrepreneurship’s, was launched in 2015.</p>
<p>This underscores the growing value that is being placed on entrepreneurship education. It also reflects another trend: the increase in partnerships and support networks. Nearly 80% of the business schools surveyed have ties with international business schools. 82% have links with schools within Africa. </p>
<h2>Values over value</h2>
<p>Globally, young people seem increasingly aware about social and environmental issues and have a greater sense of social responsibility. This is evident in the rising numbers of business students who elect to <a href="http://www.mbaworld.com/%7E/media/Files/Publications/AMBA_AABS_Report_2015.ashx">stay in Africa</a> and reinvest in their communities.</p>
<p>The report also reveals that this new generation of African business students is not overly interested in building careers in finance or consulting. Instead, they are motivated by entrepreneurship and innovation. They want to engage with their communities. </p>
<p>The shift towards a more values-driven approach to business and business education is underpinned by sustainability and social responsibility. In Africa, sustainable and ethical business solutions are seen to be a major catalyst for transforming communities, improving living conditions and creating more opportunities for others.</p>
<p>These aspirations reflect the continent’s ambitions for greater unity and a sense that Africans must and can do it for themselves. At the 25th Ordinary Session of the African Union heads of State Summit held in June this year in Johannesburg, African nations recommitted themselves to <a href="http://www.southafrica.info/africa/au-summit-150615.htm#.VfvPqVzxgeM%23ixzz3m4zNvjn9#ixzz3m59st6xu">creating</a> a prosperous, peaceful and technologically advanced continent.</p>
<p>Business schools have a vital role to play by inspiring and equipping students to be part of this new path of development and make meaningful and lasting changes while running successful businesses. </p>
<p>The AABS report found that several of the continent’s older business schools - among them the University of Stellenbosch Business School, the University of Cape Town Graduate School of Business, the Gordon Institute of Business Science (all in South Africa) and Nigeria’s Lagos Business school - are examples of those which practise what they preach.</p>
<p>These schools are looking beyond their traditional markets to engage with entrepreneurs in nearby poorer areas. They are offering personal business advice to local companies as part of their entrepreneurship work.</p>
<h2>The rise of the private provider</h2>
<p>The demand for business school education in Africa is growing exponentially and is already outstripping supply. There are a few world-ranked institutions and programmes operating alongside smaller, less developed schools. In all, there are only about 100 fully operational and identifiable business schools on the continent compared to an estimated 4000 in India.</p>
<p>Numerous private training providers are inevitably stepping into this gap, many specialising in executive education or short courses.</p>
<p>There are already 100 or more such private providers, including corporate training initiatives, in <a href="http://www.mbaworld.com/%7E/media/Files/Publications/AMBA_AABS_Report_2015.ashx">Addis Ababa alone</a> - but just one university. This demonstrates how the market is opening up in some territories.</p>
<p>There is no doubt that the management education market will continue to diversify throughout Africa to address the demands of a growing number of learners. The mix is likely to include public-private partnerships and other forms of collaboration. Technology will play a central role and novel forms of delivery and content will be norm. </p>
<p>The MBA, while far from dead, will no longer be the only kid on the block.</p><img src="https://counter.theconversation.com/content/46956/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Walter Baets is affiliated with Graduate School of Business UCT and the Chair of the African Association of Business School (AABS). </span></em></p>
Young, entrepreneurial Africans want more flexibility and values-based learning than they feel is offered by a traditional MBA.
Walter Baets, Allan Gray Chair in Values Based Leadership and Director of the UCT Graduate School of Business, University of Cape Town
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/42228
2015-07-28T20:06:46Z
2015-07-28T20:06:46Z
Africa needs more infrastructure investment that boosts long-term jobs growth
<p>President Barack Obama’s trip to Kenya and Ethiopia has focused on trade, investment and entrepreneurship. </p>
<p>One of the highlight of the visit occurred this past weekend when he <a href="http://fortune.com/2015/07/23/obama-africa-kenya/">hosted</a> the Global Entrepreneurship Summit in Nairobi, where thousands of top business leaders, entrepreneurs and politicians <a href="http://www.mediamaxnetwork.co.ke/people-daily/157114/who-is-who-in-summit-attendance-with-obama/">gathered</a> to discuss opportunities and challenges in today’s Africa. Obama called on American investors to fund African entrepreneurs to support job creation, backing it up with a pledge of more than US$1 billion in new private and US government commitments for start-ups. </p>
<p>Less discussed, however, was infrastructure investment and the role it plays in driving employment, particularly as China and others pour billions into projects across Africa. </p>
<p>Africa has seen a surge in infrastructure investment in recent decades, most notably in the construction of roads, ports, bridges and airports, yet the continent still has a serious infrastructure gap. The World Bank <a href="http://siteresources.worldbank.org/INTAFRICA/Resources/aicd_overview_english_no-embargo.pdf">estimates</a> the continent must spend $93 billion a year through 2020 to close it. </p>
<p>More importantly, however, questions linger over how successful these investments have been in promoting long-term growth in employment. </p>
<p>In particular, concerns have been raised that many of the recent developments suffer from a short-term mindset and make only a small dent in employment beyond the life of the project. Others, such as some financed by the Chinese, <a href="http://globalpublicsquare.blogs.cnn.com/2012/10/29/is-china-good-or-bad-for-africa/">bring in</a> their own labor force for much of the work, which further limits the long-term impact on local employment.</p>
<p>So the question is: with hundreds of billions of cash in the pipeline, how can countries on the continent get the most out of all that investment? </p>
<h2>An infrastructure surge</h2>
<p>Africa has experienced a surge in major infrastructure development projects over the past two decades, which has <a href="http://www.southafrica.info/business/economy/development/infrastructure-160812.htm#.VbZNVVmJlkM">created</a> many employment opportunities for local communities. They’ve also boosted the marketability of local products. </p>
<p>For instance, due to lack of viable railway infrastructure and machinery, the food chain supply between rural communities (zone of production) and cities (place of consumption) has been disconnected, creating food insecurity for many people. To address this challenge, the Democratic Republic of the Congo <a href="http://radiookapi.net/actualite/2015/07/27/lubumbashi-joseph-kabila-inaugure-18-nouvelles-locomotives-de-la-sncc/">invested</a> $31 million in new locomotives and millions more restoring railways to make it easier to market and sell local products.</p>
<p>More broadly, the value of mega-projects under construction in Africa <a href="http://www2.deloitte.com/content/dam/Deloitte/za/Documents/manufacturing/za_africa_construction_trends_2015_10032015.pdf">soared</a> 46% last year to $326 billion, according to Deloitte. Almost half of that was in southern Africa, and 80% involved the transport or energy and power sectors. </p>
<p>Such developments <a href="http://www.worldbank.org/content/dam/Worldbank/Event/Africa/Investing%20in%20Africa%20Forum/2015/investing-in-africa-forum-china-and-africa.pdf">have provided</a> significant opportunities for both skilled and unskilled residents alike as the projects are usually quite labor-intensive. </p>
<p>Every $1 billion invested in infrastructure has the <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/08/10/000158349_20120810092350/Rendered/PDF/WPS6164.pdf">potential</a> to generate, on average, about 110,000 related jobs in oil-importing countries and 49,000 jobs in oil-exporting countries, according to the World Bank.</p>
<p>In 2012, the African Development Bank <a href="http://www.theeastafrican.co.ke/news/AfDB-plans-bond-to-develop-Africa-infrastructure-/-/2558/1476984/-/7p89ly/-/index.html">raised</a> $22 billion from a pan-African infrastructure bond to invest based on its <a href="http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/programme-for-infrastructure-development-in-africa-pida/">Programme for Infrastructure Development in Africa</a> (PIDA) project. Another $368 billion is expected to be <a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/The_Dakar_Agenda_for_Action__DAA__-_Moving_Forward_Financing_for_Africa%E2%80%99s_Infrastructure.pdf">invested</a> through 2040 on roads, ports, hospitals, schools and other key infrastructure, which is expected to create hundreds of thousands of jobs. </p>
<p>Resource-rich Angola in the south and Kenya in the east are two countries that have been among the biggest beneficiaries of this growing investment and show how these projects can facilitate strong economic growth. </p>
<p>Angola, for instance, is a prime example of the success of state-led infrastructure spending, primarily through its partnership with China. The impact of these projects on job creation has been encouraging, helping reduce unemployment to 26% in 2014 from 35% eight years earlier. That’s still quite high, but it’s a start. </p>
<p>Kenya, where Obama spent most of his Africa trip, has invested mainly in its energy and railroad infrastructure. That investment is estimated to have boosted growth in the country to 6%–7% through 2017, compared with 5.4% in 2014, providing its citizens with additional employment. </p>
<p>These examples and many more demonstrate how promising infrastructure investment in Africa can be. </p>
<h2>Costs versus benefits</h2>
<p>But the promise isn’t always fulfilled. One of the main concerns about these projects is that they are contract-based, tied to the duration of the development. </p>
<p>While they generate useful economic opportunities during implementation, many of them often provide only short-term employment gains and fail to provide a long-term sustainable solution to Africa’s persistent underemployment problems. Because the initial jobs are tied to contracts, most people employed in these infrastructure development projects will not be able to secure long-term employment at the closure of their contracts.</p>
<p>Other complaints include the poor working conditions, which are often below international standards and provide limited safety, especially in labor-intensive infrastructure projects. And again, their contract-based nature mean they <a href="http://www.chinaafricaproject.com/chinese-companies-labor-dilemma-kenya/">lack</a> minimum wages, legal protections and security. </p>
<p>The question then becomes: are these projects worth it, despite the problems? </p>
<h2>Anticipating what comes next</h2>
<p>All in all, despite the shortfalls, infrastructure development in Africa has been positive. Whether in developed or developing countries, the economic benefits of such projects can generally be seen over the long run. </p>
<p>But these projects give a greater boost when they are linked with critical economic sectors such as agriculture, energy and farming. Or when officials anticipate what economic opportunities could be kickstarted by a project and ensure they translate into serious long-term employment. </p>
<p>In the Democratic Republic of the Congo, for instance, roads, ports and other projects are serving as a means toward developing other economic sectors, notably agriculture, tourism, mining and trade. This serves as an anticipatory mechanism within government planning to help ensure sustainable economic growth and social development. </p>
<p>Policies along these lines will be of greater benefit to other African countries as well. </p>
<h2>How to get the most out of a project</h2>
<p>Governments can follow a few policy suggestions to help ensure they get the most out of infrastructure investment. </p>
<p>For example, governments and other stakeholders should emphasize skills transfer so that after a project is complete, locals can be employed in keeping up the road or bridge. The Democratic Republic of the Congo can be used again as example of how local governments are establishing maintenance and public recycling groups in major cities. This will not only help ensure sustainability of the infrastructure, it will also guarantee long-term jobs for a large number of people. </p>
<p>Anticipating what comes after a project ends is key so that during its development workers can be trained in other jobs that will result, thus offsetting the sudden drop in unemployment at completion. </p>
<p>Africa has complex economic and politic issues and huge infrastructure needs that will drive growth and employment for decades to come. The benefits are many. By taking a careful strategic approach, countries can ensure the short-term projects translate into long-term economic and employment gains.</p><img src="https://counter.theconversation.com/content/42228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yvan Yenda Ilunga does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Concerns have been raised that the mammoth infrastructure projects taking place across Africa provide only a short-term jobs boost.
Yvan Yenda Ilunga, Visiting Scholar in The Division of Global Affairs, Rutgers University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/43662
2015-07-03T04:27:48Z
2015-07-03T04:27:48Z
Private universities in Africa are missing a trick
<figure><img src="https://images.theconversation.com/files/86996/original/image-20150701-31882-zguzk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prospective students storm the gates at the University of Johannesburg in 2012. The demand for universities is soaring across Africa.</span> <span class="attribution"><span class="source">Adrian de Kock/EPA</span></span></figcaption></figure><p>Private universities are <a href="http://unesdoc.unesco.org/images/0015/001502/150255e.pdf">mushrooming</a> across Africa. This growth is largely a response to the continent’s soaring demand for higher education. </p>
<p>Research <a href="http://cdn.mg.co.za/content/documents/2015/03/06/african-higher-education-summit.pdf">shows</a> that the number of tertiary students in Africa almost trebled between 1999 and 2012, from more than 3.5 million students to more than 9.5 million.</p>
<p>The model for private institutions differs from country to country. For instance, many of <a href="http://www.nuc.edu.ng/pages/universities.asp?ty=3">Nigeria’s</a> approximately 60 private universities are less than a decade old and are owned by churches, businesses or even politicians. </p>
<p>In Ghana, these institutions are called university colleges – privately established but managed and accredited by older public universities. Most of Liberia’s private universities were <a href="http://www.cuttingtonuniversity.edu.lr/">established</a> by Christian missionary groups. </p>
<p>No matter their structure and location, these private institutions are a valuable addition to Africa’s higher education landscape – and, ultimately, the <a href="http://www.worldbank.org/en/news/feature/2015/03/12/setting-goals-to-revitalize-africas-higher-education-systems">continent’s economies</a>. </p>
<p>For one thing, they broaden access to higher education. In many countries, governments have focused their education funding on the primary and secondary sectors. This matches most donors’ priorities and the United Nations’ <a href="http://www.un.org/millenniumgoals/">Millennium Development Goals</a>. </p>
<p>Public institutions are <a href="http://www.universityworldnews.com/article.php?story=20130628103833793">scrambling for money</a>. They are also <a href="http://www.universityworldnews.com/article.php?story=20131219200337393">crammed to capacity</a> and simply cannot cater for the <a href="http://thepienews.com/news/african-tertiary-education-cant-meet-demand/">growing number</a> of young Africans who want a university degree.</p>
<p>Though private universities are an important part of the sector, far more must be done to make them powerhouses of knowledge, research and graduate output.</p>
<h2>Flaws in the system</h2>
<p>About 90% of <a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/AfDB_Human_Capital_Strategy_for_Africa_2014-2018.pdf">Africa’s jobs</a> are in the informal economy, which is associated with low productivity, low quality and low pay. At the same time, the continent is urbanising rapidly and a natural resources boom has handed some countries a <a href="http://www.bdlive.co.za/opinion/2015/02/10/africa-needs-to-put-natural-resources-to-good-use">golden growth opportunity</a>. Africa badly needs the kind of skilled people that a good university can produce such as engineers, scientists and computer technicians.</p>
<p>Private universities are uniquely poised to address the continent’s economic and development needs. They don’t rely on government funding and are not subject to government pressure. They are often smaller than their public counterparts and are less bureaucratic by their very nature, so decisions can be made quickly. </p>
<p>Since their founders often come from the private sector, they ought to have better links to various industries and a better understanding of what kind of employees those industries need.</p>
<p>So what is holding them back?</p>
<p>The first constraint is that there is a shortage of PhDs on the continent. In <a href="http://www.universityworldnews.com/article.php?story=20111209195021937">Nigeria</a> and <a href="http://www.universityworldnews.com/article.php?story=20141030132504527">Kenya</a>, most university lecturers don’t have PhDs. The only way private institutions can get around the shortage is to employ senior academics from public universities on a contract basis. </p>
<p>These academics won’t quit their full-time jobs or give up the pensions they’ve been working towards for years. They consider the public sector more stable – but they welcome the extra income. The quality of teaching naturally suffers when academics are trying to do both their full-time and a part-time job.</p>
<p>Without senior academics qualified to supervise postgraduates, private institutions struggle to develop and produce their own research. There is also very little capacity for revamping existing curricula or developing totally new course material. </p>
<p>This means that private institutions tend to recycle public unversities’ old curricula so they are really not offering their students anything new or groundbreaking, and certainly nothing to justify considerably higher <a href="http://mg.co.za/article/2015-03-16-so-you-think-your-african-university-fees-are-expensive-try-america">fees</a>.</p>
<h2>A functional model</h2>
<p>Although governments do not fund private universities, they do have an important role to play in building, supporting and monitoring the sector. They need to regulate private institutions so that they offer good quality education and qualification. </p>
<p>There is much to learn from Ghana’s model of university colleges. These encourage a good working relationship between private and public institutions. This is far more constructive than the rivalry that exists between the two sectors elsewhere on the continent.</p>
<p>Governments have the authority to bring public and private institutions to the same table and help them to establish productive partnerships. These can ultimately only benefit the entire higher education system – and Africa’s university students.</p><img src="https://counter.theconversation.com/content/43662/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Akanimo Odon is affiliated with Xn Foundation.</span></em></p>
Africa needs private universities. But far more must be done to make them powerhouses of knowledge, research and graduate output.
Akanimo Odon, Honorary/visiting fellow, Lancaster University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/39023
2015-04-22T10:03:25Z
2015-04-22T10:03:25Z
Africa’s destiny depends on building a vibrant middle class
<figure><img src="https://images.theconversation.com/files/78831/original/image-20150421-17614-106k4ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African nations can look to Nigeria and Tanzania for recent examples of smart policies that boost the middle class.</span> <span class="attribution"><span class="source">Flag map via www.shutterstock.com</span></span></figcaption></figure><p>The global financial crisis felled many nations and companies, leading to the collapse of banks and recessions in the biggest economies in the world. But most African countries passed through the storm without experiencing much of a blip. </p>
<p>Many factors deserve credit for Africa’s ability to steer through the credit crunch largely unhurt. One notable factor was the growing number of small businesses in all sectors of the economy across the continent – and more micro-finance institutions to serve them – that helped propel growth and avoid disaster when bigger companies lagged. </p>
<p>Unfortunately, these businesses, such as small-scale local cooperatives in agriculture in the Democratic Republic of Congo, were set up merely as “survival strategies” with a very limited framework. The initiatives were not designed to ensure long-term economic sustainability. Many were intended only to help economies shoulder through the crisis, not spur growth. </p>
<p>But in reality these policies have shown that Africa’s economic growth and development rely and will continue to rely on the fate of small- and medium-sized enterprises (SMEs) – which are too often dismissed as “informal economic activities” that deserve little attention. </p>
<h2>Reliable partners</h2>
<p>Tanzania, Zambia and Kenya have taken the lead in proving that small businesses can be reliable partners.</p>
<p>For instance in Tanzania, up to 75% of banks <a href="http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=1120:smes-in-africa-growth-despite-constraints&catid=82:african-industry-a-business&Itemid=266">offer</a> substantial loans to SMEs, in contrast to some countries where bankers are still reluctant to trust them. </p>
<p>But small businesses can’t thrive without a strong and growing middle class, something most African countries continue to lack. An increasing body of research shows the link between a vibrant middle class and a healthy economy. It was a key ingredient that <a href="http://courses.wcupa.edu/jones/his311/notes/mid-clas.htm">fueled</a> European prosperity throughout the 19th and 20th centuries. </p>
<p>Of course, a thriving middle class is necessary for more than just driving economic growth. It’s the only way to lift hundreds of millions of Africans out of abject poverty through inclusive social and economic policies that work for all. African governments must do more to build on the recent successes in increasing entrepreneurship and to pursue policies that lift more of their citizens out of poverty, where too many of them reside. </p>
<h2>Path out of poverty</h2>
<p>Sub-Saharan Africa alone has an estimated 218 million residents living in extreme poverty on less than $1 a day, that’s more than one out of every four people. </p>
<p>Beyond the humanitarian calamity, it means a significant share of the population can’t afford to buy commodities at market prices – and can’t help sustain small businesses. Finding a way to lift more of these people out of poverty will increase the size of the consumer market, foster more sustainable entrepreneurial activity and bolster local and regional economic growth. </p>
<p>In fact, a middle class and small businesses go hand and hand, each feeding off of and building the other. One cannot survive and thrive without the other. </p>
<h2>On the road to growth</h2>
<p>Some progress has already been made. </p>
<p>Africa’s middle class <a href="http://www.theglobeandmail.com/report-on-business/international-business/african-and-mideast-business/africas-middle-class-boom-is-real-study-shows-and-its-gaining-speed/article20127909/">has tripled</a> over the past 14 years as its 11 biggest economies have grown tenfold in the period, according to a study conducted by Standard Bank. </p>
<p>Almost 15 million households are now deemed middle class, up from 4.6 million in 2000, with Nigeria leading the way and east African countries lagging behind. The bank forecast that the middle classes in those 11 countries will swell by another 25 million by 2030. Almost a third of all middle class households by then will be in Nigeria, which is finally diversifying away from oil and growing its telecommunication sector, film industry (Nollyhood) and other segments at a grassroots level.</p>
<p>But that still represents just a fraction of the 1 billion Africans – projected to reach 1.9 billion by 2050 – and includes people living on just $15 a day. </p>
<p>In order to capitalize on the demographics and keep the pace of economic growth high, governments need to implement strategies that enhance entrepreneurship, the capabilities of SMEs and the middle class. </p>
<h2>Examples of success</h2>
<p>Nigeria leads the way with policies and government programs such as the <a href="http://allafrica.com/stories/201408140731.html">Micro, Small and Medium Enterprises Development Fund</a> implemented by the country’s central bank. While its main purpose was to support small businesses, it has helped build a Nigerian middle class as well. </p>
<p>South Africa has also succeeded in implementing national policies that promote small-and medium-size enterprises, facilitate economic inclusion while establishing a strong and sustainable middle class. </p>
<p>One of these is the Black Economic Empowerment program, created in 2003 to relieve the inequalities caused by apartheid and facilitate more economic inclusion. It demonstrates the importance of tailoring initiatives at groups that have been marginalized. </p>
<p>Statistics show that there has been <a href="http://www.mistra.org.za/Library/ConferencePaper/Documents/Middle%20Class%20in%20South%20Africa-Significance,%20role%20and%20impact.pdf">dramatic growth</a> in the size of the middle class since apartheid ended in 1994. Back then, South Africa’s middle class was dominated by whites at 69.1%, while Indians made up 18.5%, mixed race or “Coloureds” comprised 9.1% and Africans just 3.3%. Today, Africans make up 51% of the middle class, followed by whites at 34%, Coloureds at 9% and Indians at 6%. </p>
<p>But that only tells part of the story. While the country’s wealth is being shared more equitably among its many ethnic groups, the overall middle class <a href="http://www.essa2013.org.za/fullpaper/essa2013_2562.pdf">remains</a> relatively small at about 17% of the population. That’s up from 8.1% two decades ago, but more needs to be done. </p>
<h2>Shifting policies?</h2>
<p>And here’s where policies that foster thriving entrepreneurship and a growing middle class go hand in hand. To build the former, governments need to implement policies such as project financing and establish skills training centers, which will then support the latter. Small- and medium-sized enterprises are the foundation for a strong middle class. </p>
<p>Too many government policies have instead focused on luring large multinational companies. While they do contribute to overall gross domestic product, <a href="http://www.worldbank.org/content/dam/Worldbank/document/LAC/LatinAmericanEntrepreneurs.pdf">research</a> including some data from the World Bank have shown that these multinationals do <a href="http://siteresources.worldbank.org/INTARD/Resources/sleeping_giant.pdf">little</a> to <a href="http://www.oecd.org/investment/investmentfordevelopment/1959815.pdf">facilitate</a> local economic development. Governments have argued that the benefits of hosting these companies will trickle down and alleviate poverty. But the <a href="http://knowledge.wharton.upenn.edu/article/the-resource-curse-why-africas-oil-riches-dont-trickle-down-to-africans">evidence</a> suggests otherwise. For instance, the sharp contrast between multimillion oil facilities around the Niger Delta and the high level of poverty in nearby rural communities exemplifies the limitation if not failure of the trickle-down economic policy.</p>
<h2>Permanent vulnerability</h2>
<p>This focus on luring a few large companies has also tended to make these economies over reliant on a single sector of the economy. </p>
<p>Nigeria’s economy, for example, has experienced phenomenal growth in recent years but is now at risk because of plunging oil prices. </p>
<p>This dependency on one or few economic activities has put many African countries in a position of permanent vulnerability. These economies need a broad base to create more sustainable growth for the long term. </p>
<p>In order to avoid such economic vulnerabilities, and in order to build a strong middle-class economy, it is imperative that African governments find ways of formalizing and integrating more small businesses into the “formal economy.”</p>
<p>Private initiatives need to be backed up by a strong political will to support small businesses with subsidies. Such practices will encourage local communities and investors to invest and work with local businesses and ultimately help build the middle class.</p>
<p>The middle class economy in Africa requires a multi-stakeholder approach that includes governments and private ventures. If the right policies are followed, investors will then know that the future and success of Africa’s economy are in Africa’s middle class and the small-and medium-sized enterprises it supports.</p><img src="https://counter.theconversation.com/content/39023/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yvan Yenda Ilunga does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Some countries in Africa have made great strides bolstering the middle class by supporting small businesses, but more needs to be done.
Yvan Yenda Ilunga, Visiting Scholar in The Division of Global Affairs, Rutgers University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/39547
2015-04-07T08:37:03Z
2015-04-07T08:37:03Z
Nigeria: economic priorities are clear – here is what Buhari needs to do
<p>Nigeria is at a tipping point. Although it has recorded impressive GDP growth in recent years, this growth needs to be inclusive to be sustainable. Now that <a href="https://theconversation.com/buhari-wins-as-nigeria-turns-its-back-on-jonathan-39619">Muhammadu Buhari has been declared the winner</a> of the recent presidential election, he will have to make some important economic choices. His government can consolidate the several positive steps taken by the administration of his predecessor Goodluck Jonathan, or it could chart a different course that takes the country in a different and unknown direction.</p>
<p>Prior to Jonathan’s administration, governance in Nigeria was dominated by personalities who ruled by the dictates of either their personal preferences, or ethnic and religious chauvinism. This resulted in dismal growth. Yet it is important to note that over the past decade, Nigeria has seen notable growth, built up its institutions, and claimed its rightful place as <a href="http://www.bloomberg.com/news/articles/2014-04-06/nigerian-economy-overtakes-south-africa-s-on-rebased-gdp">Africa’s largest economy</a> after a rebasing of its GDP. </p>
<p>Nigeria is certainly not Africa’s most developed country, but it is important to give credit where it’s due for these achievements, which have taken place amid the world’s greatest recession in recent memory.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76837/original/image-20150401-31296-11szrfq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Republican amibitions</h2>
<p>Political cronyism in this huge, complex state, is one of the main reasons that Nigeria has historically been bedevilled with such dysfunctional governance, volatile economic performance and shallow growth. </p>
<p>The country has an incredibly heavy and powerful central government which Nigeria’s many ethnic groups do not accept because of disagreements over the sharing of the country’s wealth. These ethnic groups have aspirations for their region’s development that have never been satisfied by the centre, and a large number – particularly the Igbo, Ijaw, the Efik but also Yoruba – are quite republican as a result. </p>
<p>It is not surprising then that Nigeria’s lack of social cohesion has led to a current arrangement that breeds corruption, infighting, the prolonged insecurity caused <a href="https://theconversation.com/boko-harams-six-years-of-terror-have-revealed-the-depth-of-nigerias-troubles-36164">by Boko Haram</a> in the north, and policies that have had the opposite effect to growth. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76902/original/image-20150402-32416-dh5pew.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ajaokuta factory in 1994.</span>
<span class="attribution"><a class="source" href="http://commons.wikimedia.org/wiki/File:Ajaokuta-factory.JPG">Kreecher</a></span>
</figcaption>
</figure>
<p>The Ajaokuta steel mill, for example, has been a <a href="http://www.ukessays.com/essays/construction/failure-of-the-ajaokuta-steel-rolling-mill-project-construction-essay.php">financial sinkhole</a>. Then there was the maintenance of government-owned refinaries that perennially operated at far less than 50% of capacity, the electricity matter (which gobbled at least US$10 billion under Obasanjo’s government alone) until Jonathan successfully privatised/unbundled its production and distribution, and plans to resuscitate agri-based production and reform education which had seen no follow-through before the current government.</p>
<p>In order to embed a new era of sustainable and inclusive growth, Nigeria must focus on political reform and deepen ongoing economic reforms. Buhari needs to set some early priorities, as well as setting out clearly whether the private or the public sectors should play a more prominent role in the economy. Buhari is <a href="http://www.bbc.co.uk/news/world-africa-12890807">fabled to be incorruptible</a> but the same may not be said for those around him. Indeed, a major worry is that government-led production could be a concealed platform for high-level corruption and wasteful spending. There is some argument that the drive for profit that usually governs private sector-led production would at least lead to more productivity.</p>
<h2>Action not talk</h2>
<p>Buhari’s victorious APC party is a political coalition bridging both the south-west and north of Nigeria. South-westerners (the Yoruba) have been among those most <a href="National%20Conference">vociferous in calls</a> to restructure Nigeria’s political re-organisation, particularly during a National Conference convened by Jonathan in 2013. Past national talk shops were evidently just that – talk shops. </p>
<p>But this one was different because many Nigerians believed the conference was not convened to placate aggrieved ethnicities or for political foot dragging by someone leaving office. Instead, a reputed chairman oversaw the proceedings; people from all works of life and ethnicities were involved; there was no political interference from the presidency; no subject regarding restructuring of the polity was a taboo. Recommendations <a href="https://www.premiumtimesng.com/national-conference/wp-content/uploads/National-Conference-2014-Report-August-2014-Table-of-Contents-Chapters-1-7.pdf">in a subsequent report</a> were split into two: those implementable via executive powers and those that needed legislative ratification – both of which Jonathan promised to move towards after the elections.</p>
<p>Buhari’s administration can get off the starting-blocks quickly by continuing this process, particularly the devolution of power and resources from the centre to states or regions. The north used to be a bastion of agricultural production, while the south had a cottage industry of manufacturing and a high work rate. However, with the fixation on oil, agricultural production has been effectively abandoned. This process needs to be reversed. </p>
<h2>No going back</h2>
<p>One of the first specific priorities for Buhari should be to avoid the temptation of destructive policy U-turns that could set the country back. Jonathan’s administration made some footprints in the sand when it came to economic reforms that Buhari should follow and deepen. </p>
<p>His economic team must build on the established efficient budgeting and fiscal management that befits a rich resource-based economy that is supported by a credible national bureau of statistics producing clear data. There should also be efforts to ease the burden of oil subsidies on the country’s recurrent budget expenditure – which has perennially been greater than 80% of total budget (pushed slightly lower under Jonathan’s administration). </p>
<p>Buhari should insist the newly improved, but <a href="http://af.reuters.com/article/investingNews/idAFKBN0M91UG20150313">long overdue petroleum industry bill</a>, which sets out a raft of reforms to the oil sector, gets quickly passed into law. The country also needs to push hard to strengthen the development and management of its capital markets, with a view to making Nigeria a regional hub of finance. This should include a beefed-up, independent Security Exchange Commission, upgrading the Nigeria Stock Exchange’s soft and hard infrastructures, and better linking with capital markets in the West African region and beyond.</p>
<h2>Infrastructure and employment</h2>
<p>Continuing the relentless rehabilitation of infrastructure including electricity, roads, railways, aviation and ports is a key priority – <a href="https://theconversation.com/buhari-wins-but-the-new-president-of-nigeria-faces-an-enormous-challenge-39291">across all regions of Nigeria</a> – as is the reawakening of agriculture, as credible paths for diversifying Nigeria’s economy. The incoming government should also seriously revamp its provision of the key social infrastructures of healthcare and education. </p>
<p>But perhaps most urgently, Buhari’s government should seriously address employment issues. Nigeria’s teeming young adult population is so hungry for jobs that <a href="http://leadership.ng/news/355764/immigration-recruitment-tragedy-23-feared-dead">several people were killed</a> in a stampede when one government department for immigration services conducted a recruitment exercise on a football pitch last year. Youth unemployment <a href="http://www.vanguardngr.com/2013/12/54-nigerian-youths-unemployed-2012/">stood at 54%</a> in 2012. </p>
<p>Unemployment is just the end symptom of the fundamental maladies which Buhari must address as his priorities. But he will also have to deal with external pressures, such as the <a href="http://www.theguardian.com/world/2015/mar/05/the-fall-in-oil-price-could-be-a-turning-point-for-nigerians-economy">vacillation of world oil prices</a> that have hit Nigeria hard, and the growing instability in West Africa. Buhari’s incoming government will have its work cut out for it to take Nigeria forward.</p><img src="https://counter.theconversation.com/content/39547/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kalu Ojah does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Back at the helm, Muhammadu Buhari must turn his attention to corruption, unemployment, infrastructure and the economy.
Kalu Ojah, Professor of Finance, Wits Business School, University of the Witwatersrand
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/37009
2015-02-25T10:56:54Z
2015-02-25T10:56:54Z
Eye on Africa: US and China tussle for economic influence
<p>The US and China are increasingly rivals on the world stage, competing over resources, policy and influence. One region where China has spent years establishing a foothold is Africa. Now the US is also keen to reassert itself after years of economic neglect.</p>
<p>The US fired the latest salvo late last year when it <a href="http://www.usatoday.com/story/news/2014/08/05/obama-ebola-us-africa-leaders-summit/13626363/">pledged to provide</a> at least US$14 billion in public and private assistance in areas such as clean energy, energy, aviation and banking. President Barack Obama told leaders of 50 African countries attending the US-Africa Leaders Summit that Coca-Cola will provide clean water, General Electric will assist with infrastructure development, and Marriott will build more hotels.</p>
<p>But there was a catch, as always. The governments who receive the investments must do more to bolster the rule of law, reform regulations and root out corruption.</p>
<p>That’s a key difference between the US and China in their approaches to Africa and elsewhere. The US likes to attach strings, the Chinese just want to do business. And that’s why China’s economic footprint in Africa dwarfs that of the US. Indeed, it surpassed the US as the continent’s <a href="http://www.brookings.edu/blogs/brookings-now/posts/2014/05/8-facts-about-china-investment-in-africa">largest trading partner</a> in 2009. </p>
<p>About $200 billion of goods and services <a href="http://www.csmonitor.com/World/Africa/Africa-Monitor/2014/0319/China-s-trade-with-Africa-at-record-high">flowed between China and Africa</a> in 2013, double the $85 billion in trade the US had with the continent.</p>
<p>Africa still offers promise to both superpowers, one waxing, one waning, as a region not yet fully developed but boasting many fast-growing economies. In their pursuit of economic gain, the US and China eye Africa as a fertile land of opportunity. As they race to establish economic control on the continent, it is important to carefully examine the strategies they’re employing. </p>
<p>While their economic goals are similar, their terms of engagement are diametrically opposed. </p>
<h2>China’s model: investment without meddling</h2>
<p>China’s strategy in Africa diverges from the traditional model exemplified by the World Bank and International Monetary Fund. That model, which has regulated the principles underlying international investment and trade for decades, aims to establish accountability and ethics at the center of economic cooperation. Critics contend this model is too Western-centric.</p>
<p>China utilizes a “doing business” model that ostensibly treats African states as equal partners and steers clear of their internal affairs – a strategy that appeals to countries used to Western colonies and dictates. </p>
<p>It’s built on three strategies that China has used successfully to achieve its African trade goals: flexibility, focusing on infrastructure and cementing partnerships with small businesses. </p>
<p><strong>Flexibility.</strong> China invests in Africa with a high degree of flexibility and pays little heed to the existence (or nonexistence) of credible financial institutions, contrary to the norm of American and European investment. Instead, its sole focus is on gaining access to natural resources such as copper and gold, with no interest in building up African institutions. </p>
<p>While this approach draws criticism for its lack of accountability, China has managed to <a href="http://www.cmi.no/publications/file/3938-china-and-angola-strategic-partnership-or-marriage.pdf">seduce many African governments</a> such as Angola and the Democratic Republic of the Congo with the notion of an equal partnership without internal meddling.</p>
<p><strong>Infrastructure.</strong> China has long been Africa’s top infrastructure partner. New roads, bridges, hydroelectric dams, schools and hospitals are going up across the country as a result, bolstering economic growth. This hasn’t been without criticism: many question the long-term viability of the structures being built and the fact that Chinese workers are imported to do most of the work. Thus while buildings and bridges may rise, few jobs are directly created. </p>
<p><strong>Small business.</strong> Lastly, small business owners in Africa and their Chinese counterparts have established strong ties, particularly in clothing and construction. Trade in these sectors <a href="http://usa.chinadaily.com.cn/epaper/2013-06/14/content_16621036.htm">has exploded</a>. Yet again, the rapidity with which these partnerships have developed has created some unease among consumers and analysts. The quality of the Chinese products being imported is often low and comes with no warranty or other guarantee.</p>
<p>Despite the problems and criticisms, these three strategies exemplify why the Chinese model has been successful in Africa. </p>
<h2>The US model: building strong institutions</h2>
<p>The US has a long history of engagement in Africa, particularly in terms of aid and political and military influence – the case of Rwanda since 1994 exemplifies this. In recent years the USA has been shifting toward building economic ties with the continent.</p>
<p>That’s now accelerating as developing countries such as China and Brazil dominate growth in the global economy, prompting the Obama administration to launch the <a href="http://www.whitehouse.gov/the-press-office/2014/08/06/statement-chair-us-africa-leaders-summit">US-Africa partnership</a>. Previous efforts were bilateral, this new framework has truly continental ambitions. </p>
<p>The US strategy boils down to building strong institutions and focusing on macro projects. </p>
<p><strong>State building.</strong> The main thrust of US investment has long been made through development agencies and financial institutions such as the World Bank and IMF, following the <a href="http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty">traditional model</a> promoted through structural adjustment mechanisms which focuses on poverty reduction, institutional reforms and free market with highly macro-economic focus in its implementation. </p>
<p>With many countries on the continent still in the process of state-building such as the Democratic Republic of Congo and Central Africa Republic, the US focus on institutional reforms and accountability as a precondition of aid should be encouraged. This approach not only facilitates monitoring and management of the funds distributed. It also helps establish a less corrupt economic space for private enterprise. That, in turn, attracts other foreign investors and makes the state more sustainable. </p>
<p>Based on my personal experience, however, this strategy isn’t well received by Africans, who regard it as another symbol of an unequal partnership, with the US imposing its conditions. This inflexible and sometimes overbearing approach sometimes brings more frustration than interest in cooperation. </p>
<p><strong>Big projects.</strong> The second US strategy of targeting macro projects in energy, mining and other sectors also often falls flat. The rationale behind making such investments is valid but the idea that the benefits will trickle down has failed to bear fruit. The promotion of economic growth in Africa requires the creation of a stronger middle class, which in turn requires more small- and medium-sized businesses. </p>
<p>On this, China gets it right. The US will need to reconsider this focus and do more to deal with Africans at the micro level if it wants to establish a long and lasting presence there.</p>
<p>Additionally, the US tendency to interfere in the political affairs of many countries in Africa – such as Libya – gets in the way of cooperation. </p>
<p>Economic cooperation needs to be based on mutual trust, and this is only be possible if the US is less forceful in its terms of partnership. Unless the US becomes more flexible, it is unlikely to rival China as Africa’s top partner.</p>
<h2>Everyone can win</h2>
<p>Both the Chinese and the American terms of engagement in Africa may be strategically and ideologically valid and justifiable. There are strengths and weaknesses to both approaches. </p>
<p>China’s flexibility in contracts and everything else creates a fast win—win situation but does not promote good governance or state building, both of which are sorely needed in Africa. </p>
<p>The US focus on the need for institutional reforms is important, but without a more flexible and adaptive approach this will not work. </p>
<p>As the US shows a growing economic interest in Africa, a key question will be whether the Obama administration can establish a stronger partnership that focuses on business ties and not military force. </p>
<p>Just as China can learn from the US emphasis on state building, the Americans should take a page from the Chinese playbook. The end result would be truly a win-win for everyone.</p><img src="https://counter.theconversation.com/content/37009/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yvan Yenda Ilunga does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
China supplanted the US as Africa’s biggest partner in 2009, but the Americans are hoping to catch up.
Yvan Yenda Ilunga, PhD Student, The Division of Global Affairs, Rutgers University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/28677
2014-07-01T11:34:31Z
2014-07-01T11:34:31Z
African football will only improve once African nations do
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/52756/original/4hxyjhp9-1404207220.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Nigerian hopes, dashed by France.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/turcain/9283349666/in/photolist-8bgWiX-xGqHG-8bke6A-o5v8No-nQ3THu-nR9M7p-38grCo-38gbRu-38bSwX-f9kzFj-nQ4eSB-nQ4hHB-nQ3Tjd-8dvdNp-nXu1aX-oapjbh-2wfqtU-f9kB9A-f96mgV-nZTRKm-nZTTKo-f9kA8N-f9kAqS-nZHreB-nZTvAU-nZTHJ1-o11Drx-nZUYKo-nZHfjk-nZTybd-o2MSWk-o11uDT-f9kzo9-f9kC9U-f96n4B-f9kAD3-f96nBZ-f96mGX-o2MXbH-eUNTv-8KPPpP-8KSTYQ-twHH7-e8kskp-8KSRoN-89FAMn-f6rJEb-f72LL1-f6rJeE-f6cFe6/">Eser Karadağ</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p><a href="http://www.citifmonline.com/2014/06/30/nigeria-knocked-out-of-the-world-cup/">Nigeria</a> and <a href="http://www.kickoff.com/worldcup2014/news/46210/african-heartbreak-as-algeria-bow-out">Algeria</a> both fell out of the World Cup at the last 16 stage, competing heroically against France and Germany and showing amazing discipline and shape for 70 of the 90 minutes. Then tiredness clearly began setting in. Brief lapses in concentration allowed the European teams to win.</p>
<p>Few African teams, especially sub-Saharan ones, ever progress beyond the last 16, and so it went this year. Before Algeria and Nigeria were knocked out, The Ivory Coast, Ghana and Cameroon had already left the tournament. Surprise upstarts have come not from Africa, but from Latin America.</p>
<p>Costa Rica, a small country with only 5m inhabitants, played with admirable style and effort. Chile gave Brazil a huge extra-time fright. Colombia delighted everyone by being even more stylish than the Brazilians. Whether Costa Rica or Colombia progress beyond the quarter-finals remains to be seen.</p>
<p>Meanwhile, the African teams were once again wracked by controversy. Seven Cameroonian players were <a href="http://www.bbc.co.uk/sport/0/football/28102841">accused of match-fixing</a>. The <a href="http://www.aljazeera.com/sport/brazil2014/2014/06/nigerias-revolting-world-cup-squad-201463002159987622.html">Nigerian</a> and <a href="http://www.bbc.co.uk/sport/0/football/28065553">Ghanaian</a> teams threatened “industrial action” to ensure they received their bonuses. The tournament was treated to the spectacle of an aeroplane <a href="http://www.independent.co.uk/sport/football/worldcup/world-cup-2014-cashstrapped-ghana-ask-for-prize-money-early-as-government-flies-3-million-in-cash-to-brazil-to-pay-angry-players-9564231.html">flown from Ghana with a shipment of banknotes</a> to pay the players in cash, since no-one seemed to trust the Ghanaian football authorities to honour their undertakings in any other way. Then, when Ghana went out, the country’s president mooted an <a href="http://www.bbc.co.uk/sport/0/football/28079417">official inquiry</a> into the team’s poor performance.</p>
<h2>Going pro</h2>
<p>Throughout Africa, high hopes and huge expectations are counterweighted by meagre national resources, which are widely <a href="http://www.issafrica.org/iss-today/clamping-down-on-corruption-in-africas-extractive-industries">subject to corrupt pilfering</a>. National football associations become sources of personal income, and people fight to become association presidents – not because they are experts in football development, but simply to have leverage over money. </p>
<p>And so organised football, like organised civil society with foreign links, becomes an alternative to a corrupt political life lived for personal enrichment. In this sense, at least, corruption is diversifying. But it does no good for the sport, especially at the prestigious international level.</p>
<p>The African teams of today are very different from those of even recent World Cups. Nearly every player is now a professional employed by a “big” team. They work at Chelsea, at AC Milan, Galatasary, and, even when playing with minor European teams, they are participating in aspirational set-ups. These players know what goes into a successful team. </p>
<p>But as soon as they get to national level, their coaches (Stephen Keshi aside) tend to be a step down; their national associations are inept, as well as <a href="http://www.africa.com/blog/2013-africas-dark-year-in-football/">corrupt</a>. At a certain point, and this point was clearly avoided by both Nigeria and Algeria, teams think they are destined not to win, wonder why they should try, and think instead of maximising their compensation for the inconvenience the World Cup has caused them. </p>
<h2>Big business</h2>
<p>The president of Ghana can order as many enquiries as he likes, but football today is a big business and should be treated like one. That means African football associations need to have the efficiency and dynamism of international corporations. It might take some of the glamour and romance out of the game – but it also might do something to cut down on the embarrassments.</p>
<p>It’s not just football, of course. Earlier this year, Kenyan athletes <a href="http://www.forbes.com/sites/robertwood/2014/01/25/youd-run-too-if-your-take-home-pay-was-only-15/">threatened to stop competing</a> if their international prize money was subject to taxation. The athletes were wrong to think they should be exempt from what should be a widened tax base designed to boost the country’s revenue; all countries simply have to do this. But even if in some cases they themselves were the nation’s emerging sporting oligarchs, they still refused to pay money into a system used by political figures to steal money for personal gain.</p>
<p>To that extent, the president of Ghana’s enquiry might come to a simple solution: football gets better as the nation gets better. Football wins if the nation’s government wants to win as a nation – not as a grouping of sectional, personal, and often very petty interests.</p>
<hr>
<p><em>Next, read: <a href="https://theconversation.com/the-shocking-disparity-in-african-footballers-pay-28367">The shocking disparity in African footballers’ pay</a></em></p><img src="https://counter.theconversation.com/content/28677/count.gif" alt="The Conversation" width="1" height="1" />
Nigeria and Algeria both fell out of the World Cup at the last 16 stage, competing heroically against France and Germany and showing amazing discipline and shape for 70 of the 90 minutes. Then tiredness…
Stephen Chan, Professor of World Politics, SOAS, University of London
Licensed as Creative Commons – attribution, no derivatives.