Public Opinion, Democracy And Market Reform In Africa
Michael Bratton and Robert Mattes.
Reviewed By Devra Moehler.
Observers of sub-Saharan Africa are sharply divided over the consequences of democratic and market reforms. Bratton, Mattes, and Gyimah-Boadi enter this polarized debate armed with extensive data about how ordinary Africans feel about the changes underway. The authors are generally hopeful about the prospects for democracy, noting that Africans define democracy in liberal terms, prefer democratic regimes, and give civil and political freedoms precedence over economic goods when evaluating their governments. (They are less sanguine about the popularity of market reforms.) And in sharp contrast to the social and cultural explanations that are prevalent in African studies, these authors' contention is that Africans are influenced more by what they know and experience than by who they are and what they believe. As the first comprehensive review of public opinion in sub-Saharan Africa, this book is essential reading for those interested in democracy and development -- and will have a dramatic impact on the political economy of reform in Africa and elsewhere.
South Korean Government Takes Steps To Alleviate Hunger In Africa
Kirsty Taylor.
Korea will further help tackle hunger in Africa following the Korean launch of a major UN report on the issue. The Korea International Cooperation Agency said Thursday that it will launch new rural development projects over the next 18 months in African nations including Uganda, the Democratic Republic of Congo, Ghana and Ethiopia. The projects to be started by the end of 2013 were announced at the Korean launch of the UN Africa Human Development Report 2012.
Senior Foreign Ministry and KOICA officials were joined by United Nations Development Programme Seoul Policy Centre director Anne-Isabelle Degryse-Blateau and Kenyan Ambassador Ngovi Kitau to discuss ways Korea could help to end food poverty in sub-Saharan Africa. Although the region is currently enjoying economic growth, the report warns that this will be unsustainable while hunger still affects almost a quarter of its people. The report calls for new policy approaches to help develop wide-ranging sectors beyond just agriculture, from rural infrastructure to health services.
Deputy Director of KOICA’s Evaluation Office, Park Sook-hyun, agreed with this approach. “Tying politics, food security, tackling agricultural improvements and giving people choices, especially women, together is key to boosting development in a holistic way in sub-Saharan Africa,” she said.
“To help address these challenges, KOICA will launch a number of new rural development projects in Africa in 2012 and 2013, including income-generating projects in northern Uganda with the WFP, water and sanitation projects in rural Democratic Republic of Congo and a range of projects in Ghana, Rwanda and Ethiopia.”
Korea’s support to Africa’s agricultural sector has risen from $400,000 in 2001 to $14 million in 2010. More than 12 African countries, including Tanzania, Ethiopia, Zimbabwe and the DRC have already benefited from KOICA projects. While Korean government contributions continue to increase, Oh Hye-jin of MOFAT’s Humanitarian Assistance Division said that aid budget difficulties must be overcome to further boost funds.
“The Ministry of Foreign Affairs and Trade plans to expand its food and agriculture related projects and cooperation by increasing ODA in this sector, however it is true that we are having difficulties in securing sufficient budget due to domestic political circumstances and difference of perspective with the finance authorities,” she said. “However, we will continue to cooperate with international organizations such as the World Food Program, the World Bank and UNDP and actively participate in discussions on food security issues.”
Warning that GDP growth rates in Africa have not yet translated into eliminating malnutrition, the UNDP’s Blateau said that Korea had valuable resources to help on the issue. “Korea is boosting its overseas development assistance and has many policy lessons and climate-resilient technologies it can share in the context of tackling food security in Africa. It can play an important role in supporting countries to tackle these challenges,” she said.
Ambassador Kitau said that addressing new challenges such as climate change, and working to empower women could help his region. “Despite the fact that Africa has a lot of water, land, the right climate and economic growth, we are still facing difficulties. One of them is that the prevalence of malnutrition in children fell only by 1 percent in the last 10 years as compared to 10 percent in Asia,” he said. “These are some of the issues that need to be addressed and I am happy that the UN is leaning more towards policy and strategy, which can help many of our governments.” The UN report calls for immediate actions in the four key areas of agricultural productivity, nutrition, access to food and empowerment of the rural poor.
Hunger In The Midst of Plenty As A Retardant to Sustainable Development In sub-Saharan Africa: A UNDP Report Concludes.
Sub-Saharan Africa cannot sustain its present economic resurgence unless it eliminates the hunger that affects nearly a quarter of its people, the United Nations Development Programme (UNDP) argues in the newly released Africa Human Development Report: Towards a Food Secure Future.
“Impressive GDP growth rates in Africa have not translated into the elimination of hunger and malnutrition. Inclusive growth, policies and people-centered approaches to food security are needed,” said Anne-Isabelle Degryse-Blateau, UNDP Seoul Policy Centre Director.
Arguing that action focused on agriculture alone will not end food insecurity either, the Report calls for new approaches covering multiple sectors: from rural infrastructure to health services, to new forms of social protection and empowering local communities. Ensuring that the poor and vulnerable have greater voice through strengthened local government and civil society groups is also needed to ensure food security for all. The quickening pace of change and new economic vitality on the continent make this an opportune time for action and the knowledge, technology and resources for closing the food security deficit are already available today the report says.
“Korea is boosting its overseas development assistance and has many policy lessons and climate resilient technologies it can share in the context of tackling food security in Africa. It can play an important role in supporting countries tackle these challenges” said Ms Blateau.
“This report makes sense. Tying politics, food security, tackling agricultural improvements and giving people choices, especially women, together is key to boosting development in a holistic way in sub-Saharan Africa” said, Ms. Park Sook Hyun, Deputy Director of the Korea International Cooperation Agency’s Evaluation Office.
"To help address these challenges, KOICA will launch a number of new rural development projects in Africa in 2012 and 2013, including income generating projects in northern Uganda with the WFP, water and sanitation projects in rural Democratic Republic of Congo and a range of projects in Ghana, Rwanda and Ethiopia” Ms. Park said.
KOICA’s support to the agricultural sector in Africa has risen from 0.4 million USD in 2001 to 14 million in 2010. More than 12 African countries, including Tanzania, Ethiopia, Zimbabwe, and The Democratic Republic of Congo have benefited from irrigation projects, rural development projects, rice processing projects, training opportunities and other initiatives.
KOICA’s mid-term strategy for the Agricultural and Fishery sector from 2011-2015 emphasizes working more closely with UN and other development agencies on tackling food security issues for the rural poor in Africa and around the world.
Hunger among plenty
With more than one in four of its 856 million people undernourished, Sub-Saharan Africa remains the world’s most food-insecure region. At the moment, more than 15 million people are at risk in the Sahel alone – across the semi-arid belt from Senegal to Chad; and an equal number in the Horn of Africa remain vulnerable after last year’s food crisis in Djibouti, Ethiopia, Kenya, and Somalia. Hunger and extended periods of malnutrition not only devastate families and communities in the short term, but leave a legacy with future generations which impairs livelihoods and undermines human development.
Food security, as defined by the 1996 world leaders’ Food Summit, means that people can consistently access sufficient and nutritious food to meet their dietary needs for an active and healthy life at a price they can afford.
Policies to build food security
While acknowledging that there are no quick fixes, the report argues that food security can be achieved through immediate action in four critical areas; increasing agricultural productivity; ending decades of bias against agriculture and women; encouraging the innovative and entrepreneurial spirit of Africa’s growing youth population and placing a greater emphasis on nutrition while expanding access to health services, education, sanitation, and clean water.
Building resilience: Getting food from field to table in Sub-Saharan Africa is fraught with risk.
Countries should take measures to lower people’s and communities’ vulnerability to natural disasters and civil conflict, seasonal or volatile changes in food prices and climate change. The Report recommends social protection programmes such as crop insurance, employment guarantee schemes, and cash transfers – all of which can shield people from these risks and boost incomes.
Empowerment and social justice: Achieving food security in sub-Saharan Africa will remain out of reach so long as the rural poor, and especially women, do not have more control over their own lives.
Ensuring access to land, markets and information is an important step to empowerment. Bridging the gender divide is particularly vital: giving women access to better education, more direct control over resources and a more decisive voice in decision making can dramatically increase food security.
Access must be coupled with more participation in civic debate. This in turn, must be linked with greater accountability by governments and other organizations.
For too long the face of Africa has been one of dehumanizing hunger. The time for change is long overdue, the Report argues
US Troops To Deploy In Cameroon
U.S. Africa Command Public Affairs.
At the invitation of and in coordination with the government of Cameroon, U.S. military forces will partner with Cameroon's Ministry of Defense on a temporary, expeditionary contingency support location. The combined activities conducted at this location are designed to better enhance the capability and capacity of our partners in the Cameroon defense forces to promote stability and security within Cameroon and the surrounding region.
The deployed personnel will support Intelligence, Surveillance, and Reconnaissance (ISR) flights being conducted in the area. The results of these ISR flights will better enable African partners to secure their borders against violent/illegal activities disrupting our common desire for stability in the region. Most importantly, all information collected by U.S. unarmed remotely piloted aircraft is used to support international counter-violent extremist organization operations.
Nigeria's Missing $20 Billion; Follow The Money!
In a special report on how Nigeria’s elites and public officials mismanaged the country’s oil revenue, Tim Cocks and Joe Brock of Reuters, provide evidence and analysis that lend substance to the allegations made by the erstwhile governor of Nigeria’s Central Bank, Lamido Sanusi.
Tim Cocks and Joe Brocks. In late 2013, Nigeria's then central bank governor Lamido Sanusi wrote to President Goodluck Jonathan claiming that the state oil company had failed to remit tens of billions of oil revenues it owed the state.
After the letter was leaked to Reuters and a local news site, Jonathan publicly dismissed the claim and replaced Sanusi, saying the banker had mismanaged the central bank's budget. A Senate committee later found Sanusi’s account lacked substance.
Sanusi has since become Emir of Kano, the country's second highest Islamic authority, and has smoothed over relations with the president. He declined to discuss his earlier assertions. Before he was sacked, though, the central banker submitted to Nigeria’s parliament more than 300 pages of documentation in support of his claim. Reuters has reviewed that dossier, which offers one of the most comprehensive studies of waste, mismanagement and what Sanusi called “leakages” of cash in Nigeria’s oil industry. Detailed here, the dossier includes oil contracts, confidential government letters, private presidential correspondence and legal opinions.
Sanusi’s letter and documents do not state whether he thinks the money was stolen or lost through mismanagement. Nor did he make allegations of illegal acts against any specific individuals or entities. Both corruption and bad governance are perennial problems in Africa’s most populous nation, and central issues in elections due on Feb. 14.
Nigeria’s oil industry accounts for around 95 percent of the country’s foreign exchange earnings. If Nigeria continued to leak cash at the rate described in his letter to the president, Sanusi said at the time, the consequences for the economy would be disastrous. Specifically, the failure of state-owned Nigerian National Petroleum Corporation “to remit foreign exchange to the Federation Account in a period of rising oil prices has made our management of exchange rates and price stability ... extremely difficult," he wrote. "The central bank of Nigeria is always blamed for high rates of interest,” but “given these leakages, the alternative is a devalued currency ... and financial instability."
That is exactly what has happened. As oil prices have plummeted to around $55 a barrel, half their level at the beginning of 2014, Sanusi’s successor Godwin Emefiele has devalued the naira, Nigeria’s currency, by 8 percent, and raised interest rates for the first time in more than two years.
Nigerian foreign exchange reserves are down around 20 percent on a year ago, while the balance in the country's oil savings account has fallen from $9 billion in December 2012 to $2.5 billion at the start of this year, even though oil prices were buoyant over much of that period. Finance Minister Ngozi Okonjo-Iweala told reporters at a press conference in November that a significant portion of that money was distributed to the powerful governors of Nigeria’s 36 states instead of being saved for a rainy day.
Nigerians are rarely shocked by stories of billions going unaccounted for, or ending up with politically powerful individuals. Africa’s largest oil producer has for years consistently ranked towards the bottom of Transparency International’s Corruption Perceptions Index.
Sanusi handed his documents to a parliamentary inquiry set up last February to investigate the assertion in his letter that billions of dollars in oil revenue had not reached the central bank. He told the inquiry that state oil group NNPC had made $67 billion worth of oil sales in the previous 19 months. Of that, he said, between $10.8 billion and $20 billion was unaccounted for.
A spokesman for the president declined to comment on the specific contents of Sanusi’s dossier. He referred to a statement made at the time the banker was pushed out. It said the government “remains committed to ensuring integrity and accountability and discipline in every sector of the economy ... And indeed we look forward to a situation whereby Mr. Sanusi will continue to assist the legislature in their investigations.”
Those investigations include a “forensic audit” of the oil industry set up by Okonjo-Iweala. The audit was given to Jonathan on Feb. 2 and he said he would hand it on to Nigeria’s auditor general. NNPC said on Feb. 5 it had received a copy of the audit, before it was made public. The firm said the audit cleared it of wrongdoing, although it found NNPC owed the government $1.48 billion for a separate shortfall.
A spokesman for NNPC rejected Sanusi's allegations and referred Reuters to last August’s Senate inquiry. The inquiry expressed satisfaction that most of the money not remitted was withheld for legitimate reasons. But it urged the NNPC to remit $700 million that the committee said it could not account for.
Diezani Alison-Madueke, the oil minister who oversees NNPC, did not respond to a request for comment. She told the inquiry at the time that the correct sum for money not remitted was $10.8 billion, which was to pay for subsidies.
The NNPC has consistently said it did nothing wrong. The oil company said last year that Sanusi’s allegations came from his "misunderstanding" of how the oil industry works. The central bank is “a banking outfit ... how will they understand petroleum engineering issues?" then managing director Andrew Yakubu asked journalists. "They are not auditors."
Sanusi’s claims were seen by some Nigerians as part of the historic tensions between the country’s mostly Christian south and poorer, mostly Muslim north. Jonathan and oil minister Alison-Madueke are Christians from the oil-producing Niger Delta in the south. Sanusi is a Muslim from the country’s north, as is Muhammadu Buhari, a former military ruler of Nigeria who is the main presidential candidate running against Jonathan. The two regions have historically taken it in turns to hold the presidency. Since 2009, though, Jonathan has broken with this tradition.
Sanusi has said any notion there were religious or ethnic politics behind his allegations is absurd. He has declined to be interviewed since becoming the Emir of Kano.
But last April, two months after he was sacked but before he took on his new role, Sanusi told Reuters he worried that the sheer quantities of cash going missing were “unsustainable.”
“You are taking what doesn’t belong to you and transferring it to private hands,” he told Reuters. “The state is captive to vested interests.”
NO-BID CONTRACTS
Sanusi’s documents identify three key mechanisms through which Nigeria has allegedly allowed middlemen to channel oil funds away from the central bank. Among the recipients, Sanusi alleges, are government officials and high-flying society figures.
The three mechanisms are: contracts awarded non-competitively to two companies that did not supply services but sub-contracted the work; a kerosene subsidy that doesn’t help the people it is meant to; and a series of complex, opaque "swap deals" that might be short-changing the state.
Sanusi’s concerns around the first of these mechanisms centre on the 2011 sale by Royal Dutch Shell of its interests in five oil fields. The blocks were majority-owned by NNPC. The government, keen to end the domination of the oil industry by foreign oil majors, had been encouraging Shell and others to sell to local firms.
Shell sold its interest in the fields to companies in Poland and Britain. But the new owners did not get the same rights Shell had. To promote local control, the NNPC gave the right to operate the fields to its own subsidiary, the Nigerian Petroleum Development Company (NPDC). Without soliciting bids, the NPDC signed "strategic partnership agreements" worth around $6.6 billion with two other local firms to manage them.
One firm, Seven Energy, signed for three fields; another, Atlantic Energy, for two. Seven Energy was co-founded in 2004 by Kola Aluko, an oil trader and Christian southerner. Aluko also co-owned Atlantic with another southerner, former oil trader Jide Omokore. Atlantic was incorporated the day before it signed the deals.
Geneva-based Aluko is a high-profile member of Nigeria's elite. He owns a fleet of supercars, including a Ferrari 458 GT2 that he races with Swiss team Kessel Racing. He also owns a $50 million yacht, according to Forbes magazine, and divides his time between a $40 million home in Los Angeles, an $8.6 million duplex on Fifth Avenue in New York, and homes in Abuja and Geneva. A colleague describes him as a "work hard, play harder kind of guy. He’s extravagant. That’s just his style.” Aluko, whose stake in Seven is now minimal, did not respond to emailed questions.
Omokore has also become rich from oil and gas. Forbes has estimated annual revenue at another of his companies, Energy Resources Group, at $400 million. His jet-setting lifestyle is a regular feature in the local press. Omokore could not be reached for comment. Reuters has reviewed the contracts the firms signed with NPDC. They give Seven Energy 10 percent of profits in the three oil blocks it operates, while Atlantic gets 30 percent of profits in its two blocks. The contracts also show that, unlike Shell, neither firm pays royalties, profit tax or duties to the state.
Both companies quickly sub-contracted production work to other operators, according to Sanusi's submission to parliament and several market sources. The companies did not disclose terms of these contracts. Atlantic does not publish accounts, but Seven’s 2013 annual report shows its deal with NPDC helped its revenue more than triple to $345 million.
In May 2013, Nigeria’s parliament threatened to investigate the NPDC contracts because they were not issued through competitive tender. But the NNPC argued no tender was needed because the contracts involved no sale of equity in the oil fields; the probe did not go ahead. Sanusi did not accuse Seven and Atlantic of any illegalities, but he did question why the NPDC chose those companies. His report said the deals’ only purpose seemed to be “acquiring assets belonging to the federation (state) and transferring the income to private hands."
Asked about this, NNPC referred to the Senate report, which found that no-bid partnership agreements are not new. It also said that "it may be good policy to encourage indigenous players by giving them greater participation," but called for such deals "to be conducted in a transparent and competitive manner." Seven did not comment. It says on its website its agreement with NPDC pre-dated the Jonathan administration and included an allowance for taxes. The company says it has invested more than $500 million, more than doubled production from its three blocks, and paid $48.8 million in taxes in 2013. Atlantic did not comment.
KEROSENE SUBSIDIES
The second mechanism Sanusi’s report identifies as problematic is a decades-old state subsidy provided to retailers of kerosene, the fuel most Nigerians use for cooking. Nigeria lacks the refining capacity to make kerosene, so imports it instead. The government then sells the kerosene to retailers at a cheaper price than the import price. This subsidy is meant to make kerosene affordable for the poor. In reality, though, retailers have long hiked prices so consumers pay much more than official levels.
In June 2009, Jonathan’s predecessor, Umaru Yar'Adua, ordered a halt to the scheme on the grounds that it was not working. But the subsidies carried on regardless. The NNPC told parliament last February that it still deducts billions of dollars a year from its earnings to cover it. In his report, Sanusi called the kerosene subsidy a "racket" that lines the pockets of private kerosene retailers and NNPC staff. The report estimated the cost of the subsidy at $100 million a month. It said kerosene retailers – there are hundreds of them around the country – routinely charged customers much higher prices than the government pays to import the fuel.
Sanusi’s report included an analysis of kerosene prices across Nigeria’s 36 states over two years. It found that the government buys kerosene at 150 naira per litre from importers and then sells it to retailers at just 40 naira per litre. Sanusi’s analysis found consumers pay an average of 170-200 naira per litre, and sometimes as much as 270 naira. “The margin of 300 percent to 500 percent over purchase price is economic rent, which never got to the man on the street,” Sanusi wrote. NNPC said in a statement last year that it can't force retailers to sell kerosene at the subsidised price.
SWAP DEALS
The third mechanism Sanusi identified involves other types of refined petroleum products, such as gasoline. Like kerosene, these are also imported. Nigeria is Africa’s biggest oil producer but it depends on imports for 80 percent of its fuel needs because its refining capacity is tiny.To pay for the imported products, Nigeria barters its crude oil. Sanusi’s dossier focuses on these barter exchanges, which are known as "swap deals." The idea is that importers who bring in refined fuel worth a given amount receive an “equivalent value” in crude oil.
How that equivalent value is determined is unclear. Sanusi said he was uncertain how much, if anything, is lost in these deals. But he expressed concern at the sheer value of oil that changes hands and the lack of oversight. His report estimated that between 2010 and 2011, traders involved in swap deals effectively bartered 200,000 barrels of crude a day – worth nearly $20 million at average crude prices over the period - for a loosely determined equivalent value in refined products. It is impossible to tell, he said, if all the refined products were delivered, let alone if the terms were fair. “It was clear to us that these transactions ... were not properly structured, monitored and audited,” he wrote.
Sanusi wrote in his report that mismanagement and “leakages” of cash in the industry cost Nigeria billions of dollars a year.
Since the price of oil has fallen by around half since the start of 2014, such losses are even more significant. As it approaches elections, Nigeria faces plummeting oil revenues and a lack of buffers to shield the economy. Construction projects are on hold and the government is struggling to pay its sizeable workforce. Multiple scandals in the oil sector since Jonathan took power have boosted the popularity of his rival, former military leader Muhammadu Buhari. Remembered by some for deposing a civilian government in a 1983 coup and trampling on civil liberties, the sandal-wearing general often promises to "free Nigeria from corruption."
Jonathan, too, says he will “clean up” Nigeria. By using technology and strengthening institutions, “I will solve the problem of corruption in this country,” he told a crowd in Ibadan in January.
Life "Under The Electricity Grid" In Nigeria
Jared Kalow.
In July, 2015, Nigerian President Buhari and President Obama spoke at length in the Oval Office. Much of the discussion focused on defeating Boko Haram and rooting out corruption in Nigeria. Yet, President Obama’s Power Africa Initiative, which aims to help provide access to 60 million households and businesses across Africa, was also high on the agenda. That is no surprise. Over 80 million Nigerians currently live without electricity and the general public is becoming increasingly negative about the pace of power sector improvements. So, where should Power Africa and other partners focus their efforts in Nigeria? One place is the millions of Nigerians – 31 million according to our latest findings – who may live in an area where electricity is available, yet do not have access.
A recent bottom-up study suggests that 98 percent of unconnected Nigerians could access the national grid by 2030. Yet others have challenged the fundamental premise of expanding centralized power generation and distribution. Instead, they emphasize the importance of mini-grid and off-grid solutions, arguing that national grids cannot reach large segments of the population anytime soon. Not to mention, they perpetuate dependence on fossil fuel-based power plants.
We recently tried to shed some further light on the debate by estimating an often-ignored category of people – those who live “under the grid.” These people live in an area where electricity is available, but do not have access to it for any number of reasons. At the time, our back-of-the-envelope estimates suggested that up to 36 percent of Nigerians could actually live under the grid.
Based on constructive feedback, we have now recalculated these estimates using a more rigorous approach. In short, we analyzed Demographic and Health Survey GPS data and then directly mapped it onto the national transmission grid (see methodological note here). Here’s what we found:
- Top-Line Estimate: There could be roughly 31 million Nigerians living under the grid. This represents almost 40 percent of all Nigerians without electricity.
- Wealth Distribution: Over half (56 percent) of these people fall into either the fourth or fifth wealth quintiles (e.g., poorest or poorer categories). Only 14 percent are in the top two wealth quintiles. In other words, living under the grid is disproportionately skewed toward poor households.
- Urban/Rural Divide: Contrary to popular perceptions, nearly three-quarters of under-the-grid Nigerians (72 percent) live in rural areas. Almost 9 million under-the-grid Nigerians live in urban areas.
- Distance from Transmission Lines: Many under-the-grid Nigerians live relatively close to the central grid (see figures 1 and 2 below). For instance, nearly 30 percent (9 million) live within 10km of a high-voltage transmission line (or just over 6 miles). Almost 80 percent live within 50km (roughly 30 miles).
While our revised methodology is considerably more robust than the previous effort, there are still at least two methodological challenges that must be considered.
- Lack of Transmission Voltage Data: There is no publicly available data on low voltage distribution lines (under 132 kV) in Nigeria, which limits our ability to measure unconnected households’ true distance from the grid. In practical terms, this means that our distance measures are upwardly biased (and likely significantly so).
- Non-Specific DHS Electricity Data: The DHS does not explicitly differentiate whether households receive electricity from a generator or the national grid. For this reason, we used a more conservative definition of "under the grid."
Overall, this exploratory analysis illustrates that the existing all-or-nothing debate about “on-grid” and “off-grid” solutions is far too simplistic. There are millions of people who live in areas without any access to the national power grid. There are millions more who live in areas with near universal connections, but who suffer from notoriously unreliable power services. And then, there are yet millions more who live under the grid but for some reason – such as high connection costs or unresponsive utilities – do not have a connection. And many of these people – over 20 million according to our latest estimates – are located in rural areas.
There are unique challenges, plus many overlapping ones, for providing and improving the reliability of power for each of these groups. Fundamentally, this will require a nuanced all-of-the-above strategy, which includes new grid extension, distributed power solutions, targeted efforts for connecting under-the-grid households, and systemic regulatory reforms. Absent this, Nigeria and other African countries will never reach their lofty ambitions of achieving universal access.
US Senate Re-Introduces The Electrify Africa Act
Ben Leo.
On August 14, 2015 the US Senate Foreign Relations Committee (SFRC), led by Chairman Bob Corker (R-TN) and Ranking Member Ben Cardin (D-MD), dropped its long awaited Electrify Africa Act of 2015. This follows a House companion version, which was introduced in June. Both actions are good news for US development, foreign, and commercial policy in Sub-Saharan Africa. Whereas the last Congress was unable to get similar legislation over the finish line, we are hoping that this one will get the job done. There are three key reasons why this is so important.
First, it would provide a long-term authorization for President Obama’s Power Africa initiative. This is absolutely essential given the time required to overhaul and expand complex power systems. Put differently, this is a long-term initiative that requires long-term bipartisan support. Absent conclusive congressional action, Power Africa has a real risk of fizzling out after the current administration leaves office.
Second, the Electrify Africa Act would require that the President outline a comprehensive "all of the above" strategy for boosting energy access. This doesn’t just pertain to power generation sources. It also means focusing on other critical components of the energy sector chain – including transmission and distribution – and regulatory frameworks. Naturally this leads to questions that extend beyond the increasingly stale debate over “on-grid” and “off-grid” solutions, including those about how to provide access to the roughly 31 million Nigerians living ‘under the grid’ but without a grid connection for any number of reasons. While Power Africa has pursued an "all of the above" strategy, it is unclear how some of the initiative’s individual projects and programs fit together. This requirement of the legislation will help address this challenge as well as formalize some of Power Africa’s more opportunistic efforts.
Third, this bill is chock full of reforms to US development agencies. In some ways, it actually could be called the OPIC Reform Act of 2015. Many of these reforms are limited solely to the African power sector, such as simplifying the approval process for smaller energy projects or allowing for local currency guarantees to facilitate local lending.
Others would affect OPIC’s overall governance structure and all of its financing activities, making the agency more efficient, effective, and accountable to US taxpayers. This includes requiring that OPIC publicly disclose detailed information on all of its sponsored projects; making OPIC’s Board of Directors bipartisan; and establishing the agency’s own Inspector General position that reports directly to OPIC’s Board of Directors.
There is still a long path to climb before this bill becomes law. But today was a big milestone. And it is heartening that there continues to be strong, bipartisan support for helping to address African energy poverty.
Electricity in Africa; There Must Be A better Way To Light Up The Continent
THE stylishly dressed men and women window-shopping in the air-conditioned cool of the Lagos Palms shopping mall speak of a Nigerian economy and middle class on the rise. But out the back, the stench of diesel fumes hanging heavily in the muggy tropical air is evidence of failings that are holding back Africa’s biggest economy: banks of diesel generators chug away to supply eye-wateringly expensive power because Nigeria’s rickety national grid is so unreliable.
Across Africa investors joke about living in a “bring-your-own-infrastructure” continent, in which firms must provide independent generators, water purification and even sewage treatment when building a factory or hotel. Of these the costliest is often power. Nigeria, which has a population three times larger than South Africa’s, generates just a tenth as much electricity.
Power from private generators costs $0.35 per kilowatt-hour or more, ten times more than electricity from the grid in most other countries. Analysts at Coronation, a South African asset manager, reckon electricity accounts for 6% of costs at Nigeria’s biggest banks (each branch needs a generator) and 10% of the costs of telephone companies (each cellphone mast must have its own power).
Even India’s ramshackle infrastructure looks good by comparison. Nigeria may produce roughly as much output per person as India, but it has only one-fifth the generating capacity per head, according to McKinsey, a consulting firm. China, meanwhile, is building new power plants so rapidly that it is adding the equivalent of an Africa to its grid every two years. The World Bank reckons that power shortages trim more than two percentage points from annual growth in GDP on average in Africa; in Nigeria the loss has been almost four percentage points a year.
After a drought in investment in new generating capacity lasting almost three decades, blooms of new power plants are now sprouting across sub-Saharan Africa like acacia seeds after a rainstorm. A tally by The Economist of announced power projects (under construction or at an advanced stage of planning) suggests that the region’s electricity-generating capacity will increase by more than half by the end of the decade.
In the longer term governments have set what are probably over-ambitious targets. Angola, for instance, wants to increase its annual generating capacity from 1,800mW to 9,000mW by 2025.
South Africa, which already generates about two-thirds of the region’s power, is adding about 15,000mW to its grid—about as much as the rest of sub-Saharan Africa produces now. Most of this will come from massive coal-fired power stations such as the one at Medupi, site of an existing coal mine. It alone will produce more power than Nigeria when it comes into service. Almost as much new power will be of a greener variety, given that South Africa has approved 64 renewable-energy projects ranging from fields of wind turbines and solar cells to generators that burn sugarcane.
In other countries most of the new energy will be renewable or from gas, which is cleaner than coal. Ethiopia is building Africa’s largest hydroelectric and geothermal plants. Between them the two projects will triple the country’s power production. Kenya is drilling holes deep into the Rift Valley in Hell’s Gate National Park to build what will ultimately be the world’s largest single geothermal plant. At Lake Turkana, a particularly windy spot farther north in the Rift Valley, private investors are building Africa’s biggest wind farm.
Two forces are driving the expansion. First, a number of African countries have either opened their markets to private investors or adopted clearer regulations that encourage investment. Take South Africa. For years it insisted that new capacity should be built only by the state-owned generator, Eskom. But in 2008 the country experienced crippling power shortages that forced mines and factories to cut production and sent millions of South Africans to bed early. The government reversed course and encouraged private investment in renewable energy sources.
Nigeria last year privatised state-owned distribution companies, while Kenya, Ghana and Tanzania are all attracting foreign investment. Anton Eberhard of the University of Cape Town reckons that, although investment by governments in power has largely remained stable, there have been big increases from other investors, including Chinese state-owned firms.
A second factor is the rapidly falling cost of renewable energy. Africa has some of the world’s best potential sites for wind, solar and hydropower. Investors are proving readier to test the market by putting up a few windmills than by committing to big power stations. Wind farms and solar parks can also provide decentralised or “off-grid” power directly to customers, reducing the load on congested transmission lines. Given the high cost of power from diesel generators in Africa, renewable energy can be an attractive alternative.
Ahmed Heikal, chairman of Qalaa Holdings, an investment firm with holdings in several power producers, thinks that in Africa a “new model [of renewable energy] that bypasses the government is emerging”. It is one in which firms are able to offer competitively priced renewable power without the hefty government subsidies needed to encourage investment elsewhere, such as solar parks in cloudy Germany or offshore wind farms in the rough waters of the North Sea. Africa has the potential to jump from being the world’s electricity laggard to a leader in renewables—if inefficient governments don’t hold it back.
Currency Wars: The making Of The Next Global Crisis
By James Rickards.
In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.
Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of countries' stealing growth from their trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation, and sometimes actual violence. Left unchecked, the next currency war could lead to a crisis worse than the panic of 2008.
Currency wars have happened before-twice in the last century alone-and they always end badly. Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed. And the next crash is overdue. Recent headlines about the debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are all indicators of the growing conflict.
As James Rickards argues in Currency Wars, this is more than just a concern for economists and investors. The United States is facing serious threats to its national security, from clandestine gold purchases by China to the hidden agendas of sovereign wealth funds. Greater than any single threat is the very real danger of the collapse of the dollar itself.
Baffling to many observers is the rank failure of economists to foresee or prevent the economic catastrophes of recent years. Not only have their theories failed to prevent calamity, they are making the currency wars worse. The U. S. Federal Reserve has engaged in the greatest gamble in the history of finance, a sustained effort to stimulate the economy by printing money on a trillion-dollar scale. Its solutions present hidden new dangers while resolving none of the current dilemmas.
While the outcome of the new currency war is not yet certain, some version of the worst-case scenario is almost inevitable if U.S. and world economic leaders fail to learn from the mistakes of their predecessors. Rickards untangles the web of failed paradigms, wishful thinking, and arrogance driving current public policy and points the way toward a more inform
The Lion Awakes: An Adventure in Africa's Economic Miracle
By Ashish J. Thakkar.
More movies are made in Nigeria than Hollywood each year. M-pesa, arguably the world’s most successful mobile payments system, is a Kenyan creation. There are signs that not only is Africa’s brain drain reversing but that outsiders are increasingly viewing the continent as a land of opportunity rather than a place to be pitied.
These are just a few of the themes explored by Ashsh Thakkar in this book. Thakkar uses his own life story — Rwandan genocide survivor, Ugandan school dropout-turned-entrepreneur at 15, and now, aged 34, founder and head of the diversified Mara Group that employs thousands of people in 22 African countries — as the backbone of an entertaining voyage around the continent’s burgeoning business scene.
He uses myriad examples to demonstrate just how resourceful Africans are — from well-known figures such as Sudanese-British billionaire Mo Ibrahim to William Kamkwamba, the Malawian who at the age of 14 built a windmill out of scrap, and the Kenyan techies creating life-changing apps for farmers.
The author rightly highlights how much of the sea-change has been possible only due to a telecoms revolution. But Thakkar, whose ventures include financial services company Atlas Mara, a partnership with ex-Barclays boss Bob Diamond accepts Africa’s development is still nascent: “The shoes you’re wearing? That computer on your desk? The car you’re driving? We need to get to the position where those products are made in Africa.”
A significant impediment to faster growth, Thakkar believes, is that few Africans receive sufficient support to realise their potential and a good chunk of the book is devoted to the importance of mentoring.
Aid, particularly of the western variety, meanwhile, comes in for excoriating criticism. Thakkar insists that while philanthropy has a key role in Africa’s development, trade — as espoused by China — is the answer, not donations by well-meaning but misguided governments, aid agencies and celebrities.
Should we buy Thakkar’s overflowing exuberance? There are reasons to be wary. He and Diamond failed to raise their $400m target in a recent Atlas Mara funding round. The Mara Group is private so there is little public scrutiny of its successes or failures.
Thakkar also undermines his thesis by the extremely hagiographic account of how Paul Kagame, the Rwandan president, has transformed the tiny landlocked country. There is no denying that in 1994 the nation was a genocidal basket case and it now ranks well above the vast majority of its neighbours in annual surveys. But the way Thakkar glosses over Kagame’s human rights record and treatment of political opponents is jarring. And, as Thakkar goes to great lengths to emphasise, Africa is a disparate and varied continent, and not a single entity. There are many of its 54 nations that are either not named or barely mentioned.
But these issues should not deter readers from what is ultimately a feel-good story backed by sufficient evidence to be broadly credible. Who knows, perhaps we all will soon be driving African-made cars?