Who Are The Major Players In The World's Oil Market?

Sam Null.

The world oil market is complex. Governments as well as private companies play roles in moving oil from producers to consumers. Government-owned national oil companies (NOCs) control most of the world’s proved oil reserves (78% in 2012) and oil production (58% in 2012). International oil companies (IOCs), which are often stockholder-owned corporations, make up the balance of global oil reserves and production. Proved reserves are the amount of oil in a given area, known with reasonable certainty, that today's technology can recover cost-effectively. Worldwide proved oil reserves are about 1.6 trillion barrels and global oil production averages roughly 90 million barrels a day.

There are three types of companies that supply crude oil to the global market. Each type has different operational strategies and production-related goals:

 

  1. International oil companies (IOCs): Includes companies like ExxonMobil, BP, and Royal Dutch Shell. These companies are entirely investor-owned and primarily seek to increase their shareholder value. As a result, they tend to make investment decisions based on economic factors. These companies typically move quickly to develop and produce the oil resources available to them and sell their output in the global market. Although these producers are affected by the laws of the countries in which they produce oil, all decisions are ultimately made in the interest of the company and its shareholders, not a government.
  2. National oil companies (NOCs): Operate as an extension of a government or a government agency. This category includes Saudi Aramco (Saudi Arabia), Pemex (Mexico), the China National Petroleum Corporation (CNPC) and PdVSA (Venezuela), among other examples. These companies support their governments' programs financially and sometimes strategically. They often provide fuels to their domestic consumers at a lower price than they would provide fuels to the international market. These companies do not always have the incentive, means, or intention to develop their reserves at the same pace as international oil companies. Due to the diverse objectives of their countries' governments, these NOCs pursue goals that are not necessarily market-oriented. The NOCs' goals often include employing citizens, furthering a government's domestic or foreign policies, generating long-term revenue to pay for government programs, and supplying inexpensive domestic energy. All NOCs belonging to members of the Organization of the Petroleum Exporting Countries (OPEC) fall into this category.
  3. NOCs with strategic and operational autonomy: These NOCs function as corporate entities and do not operate as an extension of the government of their country. This third category includes Petrobras (Brazil) and Statoil (Norway). These companies often balance profit-oriented concerns and the objectives of their country with the development of their corporate strategy. While these companies may support their country's goals, they are primarily commercially driven.

In 2012, 100 companies produced 84% of the world's oil. NOCs accounted for 58% of global oil production.

OPEC is a group that includes some of the world's most oil-rich countries. Together, these countries controlled approximately 73% of the world's total proved oil reserves in 2013 and they produced 40% of the world's total oil supply that year. Each OPEC country has at least one NOC, but most also allow international oil companies to operate within their borders.

OPEC seeks to manage the oil production of its member countries by setting crude oil output targets for each member except Iraq, for which there is no current target. The track record of compliance with OPEC quotas is mixed because production decisions are ultimately in the hands of the individual member countries.

In general, there are three main factors that determine OPEC's market power, or how effectively the organization can influence oil prices:

* How unwilling or unable consumers are to move away from using oil

* How competitive non-OPEC producers become as the price of oil increases

* How efficiently OPEC producers can supply oil compared with non-OPEC producers

OPEC's oil exports represented about 62% of the total seaborne crude oil traded internationally in 2013, according to data from Lloyd's List Intelligence tanker tracking service. The difference between market demand and oil supplied by non-OPEC sources is often referred to as “the call on OPEC.” Saudi Arabia, the largest oil producer within OPEC and the world's largest oil exporter, historically has had the largest share of the world's spare production capacity. As a whole, OPEC maintains the world's entire spare capacity for oil production. It is generally not cost-effective for international oil companies to develop and maintain idle spare production capacity, because the IOC business model maximizes revenue by continuing to produce oil as long as the price of selling that commodity is higher than the cost of getting an additional barrel of oil to market.

EIA defines spare capacity as the volume of oil production that can be brought on line within 30 days and sustained for at least 90 days. Spare capacity can also be thought of as the difference between a country's current oil production and its maximum oil production capacity. Should a disruption occur, oil producers can use spare capacity to moderate increases in world oil prices by boosting production to offset lost oil supplies.


As Oil Prices Slump, Many African Countries Would Benefit While Nigeria and Sudan Bear The Brunt.

The price of oil halved between June 2014 and March 2015. This was mainly due to increased oil supply – particularly in the US, which last year saw the highest volume increase since records began in 1900. An overall slowdown in global demand has contributed to the price drop as well.

Low oil prices are bad news for Africa’s major oil exporters. But this is not the whole story. In fact, lower prices and lower inflation will be a boon for African oil importers and consumers, improving growth prospects for many African countries. If governments pursue smart policies, they can translate these opportunities into sustained benefits to their economies.

Nigeria and Sudan among oil exporters that would suffer the most

An oil price drop directly hurts exporters. If prices fall by around 30% between 2015 and 2014, as predicted by the International Monetary Fund and World Bank), we estimate that sub-Saharan Africa will lose $63 billion – around 5% of the region’s gross domestic product (GDP). Oil exporters like Nigeria, Angola, Equatorial Guinea, Republic of Congo, Gabon and Sudan will bear the brunt.

We are already seeing this starting to happen. The value of African oil exports to the European Union, US, Japan and China fell by $25 billion, or 13%, last year. Exports to the US account for much of that, where fracking has helped reduced its demand for oil imports by 44%, but exports to the EU also declined substantially, by 10%. And the drop in the value of sub-Saharan African oil exports to these countries was most noticeable in the last quarter of 2014, when they fell by 17% year-on-year. Exports from Nigeria fell by 14% ($11 billion, or 2.1% of GDP).

But oil importers and consumers stand to gain

At the same time, the sub-Saharan African countries that rely on importing oil will be the biggest winners. We estimate that the 30% oil price drop would reduce imports by around $15 billion, with the major gainers including South Africa, Tanzania, Kenya and Ethiopia. The value of Tanzania’s oil imports have already dropped by 20% ($800 million, or 2.5% of GDP) over the 12 months to January 2015.

There is a further group that will benefit: consumers. Between June 2014 and February 2015, inflation fell by 2% in Tanzania, South Africa and Kenya. If inflation remains low, real disposable incomes will rise correspondingly, which could increase consumer spending by around $10 billion across sub-Saharan Africa.

And this is good news for growth prospects in these countries. The World Bank’s forecast for growth in Kenya in 2015, for example, was recently revised up from 4.7% to 6%, citing lower oil prices. So even as we face a period of slow global growth, Africa’s oil importers stand to gain. Generally, African countries also gain indirectly when low oil prices boost world growth.

How African economies can mitigate shocks – and sustain the benefits

So how can the oil exporters minimise their exports losses? In the short term, they can put in place macro financial instruments such as introducing less monetary tightening than would have been the case without the oil price decline. They also need to reduce fiscal deficits and lower oil benchmark prices in budgeting processes.

Ultimately however, Nigeria and other oil exporters need to reduce their economies’ dependence on volatile oil prices, by increasing energy efficiency and diversifying trade and production. If the oil price drop can be a catalyst for economic transformation, it could bring sustained benefits.

As for the oil importers, the long-term benefits of falling oil prices are by no means guaranteed. Kenya, South Africa and others need to take advantage of this opportunity to invest in skills, infrastructure and technology for the long-term. There are further measures that all countries can take to enhance the positive effects of oil price declines on lower inflation, for example, ensuring that consumers quickly see the benefits of falling oil prices on cheaper food and other goods. This is also an opportunity for governments to reduce oil price subsidies or increase taxes – an obvious strategy that is not just sound economics but sound environmental policy too.

Finally, this is a moment for all countries to recognise the need to foster cooperation between the winners and losers of the recent oil price changes. Whether at the global, G20 or national level, we need common facilities for managing future oil shocks.


From Strong Men To Strong Institutions: An Assessment Of Africa’s Transition Towards More Political Contestability

 

Vera Songwe.

As President Obama said during his recent address at the African Union, "There's a lot that I'd like to do to keep America moving. But the law is the law, and no person is above the law, not even the president."
This sentence, uttered during his speech to the African Union last month, summarizes President Obama’s message to Africa when it comes to the need for strong institutions. In his speech he highlighted that the first president of the United States, George Washington (1789-1797), refused to run for a third term in 1798—during the nascent years of the republic—despite popular acclaim and instead stepped down to ensure there was peaceful transition and the principles of democracy upheld. South Africa’s Nelson Mandela did the same thing.
In 1940 President Franklin D. Roosevelt, however, in an unprecedented move in U.S. history—and about a century and a half after George Washington—sought a third and a fourth third term and won. Those were extraordinary times some would say: World War II had begun. However, shortly before the 44th president of United States was born, and before many African countries got independence in 1951 the United States Congress moved to ratify an amendment to the U.S. constitution formerly limiting presidential terms to two. The amendment was passed in 1947 and took four years to ratify. Thus, it took the U.S. from George Washington to Harry Truman, 1797 to 1951, to strengthen and perfect this institution. Thus, even in America building institutions takes time, but, once built, they are respected: No one has since dared to change the 22nd Amendment, even as America continues to strive to build a more perfect union.
Africa's early experience with representation: A timid one
The concept of elected representation (representative government) began on the continent at independence towards the end of the 1950s for some and the 1960s for most. As Figure 1 shows, from the 1950s to the 1980s the number of uncontested (single party) elections increased substantially. The continent went from having less than five uncontested elections in the 1950s to over 37 uncontested elections by the 1980s. One could term this period “the learning years,” as countries were experimenting with the concepts of the ballot box and representative rule. By the end of 1980 almost all countries on the continent had organized elections at least three times, and the moment was ripe for more inclusive and contested representation. Citizens began to demand more representation. But leaders remained reluctant for the most part to opening up. Unrest set in.

rawlings
From uncontested elections to coups: A tortuous transition
The transition from uncontested elections to contested elections was not a peaceful one, with a multitude of military interventions around the continent. In fact, the decade 1980-1989 saw the most coups in the history of Africa. In this way, the 1980s also saw the most government transitions overall, but mostly in an uncontested setting. By the end of the 1990s many countries had experienced the cost of coup d’états, and there was a growing rejection of military coups and the emergence of opposition parties across the continent. This experience helped Africa transition from uncontested to contested elections.

Multiparty elections become a more common, though not universal, political transition
By the 1990s the transition trend in African countries had resolutely migrated from a dominance of uncontested elections to contested elections. The number of contested elections grew exponentially from less than 20 in the 1980s to a staggering 72 in the 1990s as countries introduced term limits, reduced mandates from seven years to five years or less, and adopted new constitutions. This trend was consolidated at the end of the last decade and the concept of contested elections—multi-party elections—became commonplace.
From contested elections to leadership transitions: Institution building launched
Africa is at a new crossroads in its institutional building process. While the number of uncontested elections and coup d’états has dropped, the number of contested elections leading to leadership transitions is not proportionally increasing. In addition, there are a number of countries that have experienced only one leadership transition since independence, and none of those transitions was competitive. In addition to the intransience of many leaders, another great and growing fear is that of backsliding. Leaders elected through an open and contested process, with clear and transparent constitutions in place, are beginning to question the need for term limits. There is a groundswell of initiatives across the continent of presidents trying to change constitutions not to bring more stability to the system but to regress. In Burkina Faso and Burundi these attempts have led to civil unrest and the loss of lives. These are the groups to whom President Obama was referring to when he now famously said to the African Union, “I think if I ran [again], I could win. But I can’t.” Over the next year, Africa will see elections in the Democratic Republic of the Congo, Uganda, Republic of the Congo, Rwanda, Gabon, Chad, and Equatorial Guinea—all countries where presidents have met their term limits. How Africa defines this decade will depend on what happens in all these countries and many more with elections before the end of 2020 in which sitting presidents will have met their term limits.
Emerging truisms
First, while many countries have moved from single party to peaceful, contested elections there is still significant dominance of incumbents winning elections. This trend implies that the competitive process is not ripe enough to deliver the results contests are meant to produce.
Second, the countries with the most leadership transitions have been those where the competitive process has been circumvented like in Nigeria, Comoros, Libya, Benin, Ghana, and Somalia. These countries have had the most leadership transitions, but most of these have been as a result of non-competitive processes and most of the time by military takeovers. In fact, the countries with the most transitions are countries that have had the most number of coups. Nigeria leads the pack with over 16 transitions of 6 coups, followed by others like Comoros with 5 coups and over 12 leadership transitions. Importantly, Ghana and Nigeria transitioned from coup d’états into competitive elections and have never gone back but have rather continued to perfect the competitive process. These two countries have even had leaders die in office, but as a testament to their competitive experience and their institutions, the competitive process was orderly restored or maintained. Despite these developments, they are outliers and the process of peaceful contestation resulting in leadership transitions is not yet a consistent and dominant normal.
Third, initial conditions seem to matter: Countries that launched competitive transition processes shortly after independence—like Mauritius, Zambia, and Botswana—have succeeded in keeping the momentum and have not been plagued by coups or other disruptions in leadership. Whereas countries like Liberia that launched mock contestations where the same leader was reelected ended up with coups before settling once again into competitive election processes.
Fourth, looking ahead to the rest of this decade, there are ominous signs that citizens in countries where a truly competitive process has not taken root will be fertile ground for popular uprisings and instability—including, unfortunately, terror. As President Obama recently noted, “If we sacrifice liberty in the name of security we risk losing both.” This truth is all the more relevant in countries with rapidly expanding youth populations, low literacy rates, and rising unemployment.
The continent has clearly leap-frogged into the process of contested elections and representation. What the United States took a century and a half to accomplish, some African countries have accomplished in less than 40 years. The process has been, at times, tortuous; there is still backsliding in some countries and inertia in others. However, clearly emerging is a resolute move towards more contested elections and leadership transitions.
Importantly, over the next five years the role of citizens, the role of African Union, and leadership demonstrated by other countries like the U.S. will be critical in determining how Africa’s leadership transition history evolves. Will the African Union succeed in adopting legislation that makes term limits binding? Will Western countries support civil society in isolating leaders who attempt to circumvent their constitutions? Will President Obama take positive measures to ensure the hopes and dreams of so many of the youth that listened to him come to pass when the sun sets on this decade?
In the meantime, while we celebrate countries like Mauritius, Botswana, Cape Verde, Benin, Zambia, Botswana, Kenya, Ghana, and many others, we cannot lose sight of the fact that there is still a lot more to do to perfect the institutions for representation in these countries and on the continent as a whole. To protect and strengthen these institutions a number of challenges need to be tackled such as dealing with the  cost of contested elections, developing transparent and inclusive electoral codes, clarifying the election process (in many countries election day is not set in the constitution),  perfecting the voting systems, building credible  electoral commissions, and most of all protecting the will of the people—first to exercise their civic duty to participate in the contest and second to accept the results.  Here Africa can learn from itself but also from other countries and could even provide solutions for the world to employ. The African Union, like the U.S. Congress of 1947 can take on these challenges, and with the youth of Africa by her side, an Africa with leaders chosen by the people with dignity and peace underpinned by strong institutions will emerge.


The Unions Of Two Continents to Resolve Conflicts And Strengthen Security In Africa

The EU and the African Union are developing a security and development partnership, based on enhancing dialogue between warring factions, overseeing Africa’s peace and security architecture, and supporting African security operations, speakers told an EPC Policy Dialogue organised in cooperation with the Hanns-Seidel-Stiftung. This should also focus on providing security as countries emerge from conflicts in order for them to develop, and civil society should be encouraged to play a major role in this.

Martin Kastler, Head of Department, Development Policy and Coordination of EU projects, Hanns-Seidel-Stiftung, said the Union must strengthen its responsibility towards Africa through a clear, fair partnership. The EU is supporting African security and development, and fostering an EU-African-Union (AU) framework. As part of this, the Union is working with the AU Peace and Security Council, supporting its capacity building and crisis management programs.
Key priorities
Daniela Dicorrado Andreoni, Head of the Peace and Security Sector, Directorate-General for Development, European Commission, said that while the EU is working with the AU on security and development, this has to take account of the asymmetries between the two bodies. Firstly, it took the EU 50 years to develop its European Security and Defence Policy (ESDP), whereas the AU is a fledgling organisation which has put security and defence at the heart of its policies. Secondly, Africa’s security architecture is designed to be implemented within the continent, whereas ESDP operates outside the EU.
These differences mean one cannot predict how the strategy will be implemented, said Ms Dicorrado. Previous relations were built on economic and development aid links, but globalisation gives the EU more scope for using its security capacity to help solve conflicts in Africa. This strategy encompasses and articulates the “nexus between security and development”, she said, and is based on three priorities: enhancing dialogue between warring factions; overseeing Africa’s peace and security architecture; and supporting African security operations.
Most importantly, it avoids a “top down” or “Brussels” approach and concentrates on decentralising operations in Africa, moving beyond an institutional approach to involving civil society and other actors who have a stake in settling conflicts. The EU Implementation Team on the Africa-EU Partnership on Peace and Security, chaired by General Pierre-Michel Joana, Special Advisor for African peacekeeping capabilities, will work with the African Union’s implementation team as well as with regional teams. The EU has moved on from the time when it just “signed cheques” for the activities it supported in Africa.
Defining the ‘security-development nexus’
Stefan Mair, Director of Studies, German Institute for International and Security Affairs (SWP), said one needed to start by defining the term ‘security-development nexus’. There is a broad consensus that development and security are inextricably linked: development is impossible in a security vacuum and a country which is under-developed risks sliding into conflict. However, the causal relationship between these elements has never been proven and there have been cases, such as Yugoslavia, where security collapsed in what was a reasonably well-developed country. One must also examine the terms ‘development’ and ‘security’, as current definitions of ‘security’ are so broad that they can include ‘development’. Since 9/11, ‘security’ has been expanded to included new risks, such as climate change or migration.
The meaning of ‘security’ also depends on the continent. In the US, ‘security concerns’ cover migration or terrorism, whereas in Africa ‘security concerns’ apply to the activities of a dictator or to criminal gangs. So how should this security-development policy be implemented? asked Dr Mair. Some believe that development should be a tool to support security. For example, during the Cold War, development aid was used to bolster authoritarian leaders in Africa to keep them within the Western bloc, while today, US development aid supports President Pervez Musharraf in Pakistan.
Since 9/11, European governments’ ministers responsible for development cooperation argue that development aid is a means of countering the root causes of terrorism, and therefore demand increased funding. Dr Mair said that while he did not disagree with the general consensus on the meaning of the development-security nexus, it was too simplistic and could lead to conceptual confusions, making it impossible to set priorities.
Focusing on post-conflict reconstruction
Cheryl Hendricks, Senior Research Fellow, Pretoria Office, Institute for Security Studies (ISS), South Africa, explained that her organisation is a think tank that concentrates on African peace and security issues and assists the African Union’s Peace and Security Council. While agreeing about the conceptual confusion between ‘development’ and ‘security’, she said the concept of protecting ‘human security’ has been accepted for more than a decade and must be supported by ‘hard security’ at the local level.
In Africa, the number of civil wars is decreasing, but the number of inter-state wars and low-intensity conflicts is increasing. Given the fragility of states that emerge from these conflicts, more attention should be focused on post-conflict reconstruction, establishing security in order for development to get underway. As part of its peace and security architecture, the AU has established the 15-member African Peace and Security Council, and a ‘Panel of the Wise’ to advise on peace activities, although this panel needs to “flex its muscles” more.
African peace-making takes two forms: either using elder statesmen to persuade people to conclude peace agreements, or involving civil society to negotiate peace, and she felt this second approach should be employed more often. The EU is helping Africa develop a “continental early warning system”, and the ISS has begun training those who will be involved. While the EU-Africa partnership is far more equal than before, asymmetries still exist and the Union sometimes fails to understand what is required.
Ms Hendricks praised the increasing use of United Nations Resolution 1325 on ‘women, peace and security’, which gives women a larger role in peace-building, but said more women need to be active in the armed forces before they can take a lead in post-conflict reconstruction.
In addition, more attention should be paid to disaster management in Africa. For example, the South African Development Community (SADAC) attempted to solve the crisis in Zimbabwe through the offices of South Africa President Thabo Mbeki, but this failed because of the lack of legal tools or instruments to back it up. Much of the EU’s action plan for security in Africa is based on building capacity, and while Africa may lack skills and experience, it has capacity but this is underused. Any training should build on this, not start anew, said Ms Hendricks. Overall, it would be better to set fewer targets, rather than designing a “shopping list” of actions, as success in a few areas would have greater impact.


Voices of the Poor

By Narayan, Deepa, Ed.; Petesch, Patti, Ed.

This book, the last volume in a three-part series, draws on a large-scale worldwide poverty study to present the views, experiences, and aspirations of poor people in 14 selected countries. In each country, interviews and discussion groups were held in 8-15 rural and urban communities that reflected the most prevalent poverty groups and the diversity of poverty in that country. The countries are Ghana, Malawi, Nigeria, Bangladesh, India, Indonesia, Bosnia and Herzegovina, Bulgaria, Kyrgyz Republic, Russian Federation, Argentina, Brazil, Ecuador, and Jamaica. The chapters bring to life the peculiarities of what it means to be poor in various communities, including the perceived global, local, and environmental causes of poverty; the contributions of governments, institutions, and community organizations to well-being or their lack; the struggle for education; poor health conditions; discrimination and violence against women; child welfare, child labor, and young people's loss of hope; and survival strategies. Despite very different regions and contexts, four major themes emerged: (1) the diversity of assets and capabilities needed by poor people to survive and overcome poverty; (2) the profound impact of economy-wide policies and shocks on poor people's lives; (3) the negative effects of the culture of mediating institutions on well-intended policies; and (4) the persistence of gender inequity in households and societies, and the acute vulnerability of children in struggling households. Policy recommendations focus on reversing state failure to reduce poverty and human suffering. Appendices present development indicators for the 14 countries, currency exchange rates, and an overview of study themes and methods. (SV)


Extortion Fees From Trans-Saharan Migrants through Libya As Source of Funds For Terrorism in Africa

Wend William.

The phenomenon of migrants traversing the hostile terrain of northern Africa to Europe is not new—not the routes or the dangers. A decade ago,experts estimated that about 2,000 migrants drowned each year attempting to cross the Mediterranean and untold numbers perished in the desert. But after the collapse of the Gaddafi regime in 2011, the number of people crossing the Mediterranean from Libya (the Central Mediterranean route) has grown exponentially—resulting in a 277 percent increase since 2013.

In fact, 60 percent of all migrants caught illegally entering Europe in 2013 came on boats from Libya. On those boats, nearly half were Syrians (39,651) and Eritreans (33,559) who were granted “protection status,” provided to persons fleeing conflict or persecution or for other humanitarian reasons. As a result, they received residence permits, access to employment, education, and healthcare among other benefits. Sub-Saharan migrants contributed the next largest cohort (26,340) crossing the Mediterranean from Libya. Only a fraction of these received protection status as they were deemed to be “economic migrants”—those merely seeking to improve their standard of living.

Whether fleeing conflict or persecution or seeking to improve one’s standard of living, many African migrants converge on the same Central Mediterranean route (see graphic below). With many Sub-Saharan countries facing an expanding youth bulge, the number of African migrants is likely to rise in the coming years. Indeed, more young migrants than ever (including a growing number of women and minors as young as 14) are embarking on the risky journey toward Libya’s coast.

Transnational criminal and terrorist networks benefit most from the migration flows

As migrants make their way across the desert and eventually the Mediterranean, they increasingly face exploitation and abuse at the hands of transnational criminal rings and extremist groups. Trafficking and torture of Eritrean migrants is well-documented in Sudan and Egypt. As criminal and terrorist groups have found control over these smuggling and trafficking routes to be highly lucrative, their role in this illicit activity can only be expected to grow.

Criminal-Economies-in-the-Trans-Sahara-2z2xdf38ci9zx586e9udc0

Source: Global Initiative against Transnational Organized Crime, 2015

In response to the rising demand, the migrant smuggling economy has bloomed. On Libya’s coast it is valued at $255-$323 million a year and dwarfs Libya’s other illicit enterprises. The fees migrants pay for safe passage to Libya and beyond do not just go to small-time smugglers. Various groups also charge a “protection” tax for anyone crossing their path. For many migrants coming through West Africa, their money finds its way into the hands of terrorist groups like al Qaeda in the Islamic Maghreb (AQIM), al Mourabitoun (formed by Mokhtar Belmokhtar), Ansar Dine, and Ansar al Sharia who control swaths of territory through Algeria, Libya, Mali, and Niger. Migrants coming from the Middle East, increasingly encounter the Islamic State (IS), which has attacked refugee camps in western Syria to increase the flow of Syrians south toward Egypt through IS-controlled territories for the purpose of raising revenue.

Extortion of migrants is just one way criminal and terrorist networks benefit from gaining a foothold in fragile countries. The lasting damage they do to these societies is another. As organized crime becomes rooted in areas where state security and judicial institutions are weak or corrupt, it becomes far more difficult to eradicate. For many of these areas the illicit economy brings one of the only means of subsistence. Eventually, the communities become more disposed toward the criminal activity at the expense of rule of law.

The entrenchment of organized criminal and terrorist groups in the vacuum provided by weak government control has already been seen in parts of northern Mali and Niger, southern Algeria, and in Libya. This, in turn, diminishes economic investment (and job prospects) as well as the space to build state structures, democracy, and stability.

Priorities for Action

Much of the focus on the Central Mediterranean migration crisis has been on the heightened European efforts at interdiction. Likewise, much of the instability in Libya is viewed through the lens of the growing influence of terrorist groups like the Islamic State. However, the intertwining of the migration crisis and terrorist groups highlights other priorities such as:

Stabilization. Stabilizing Libya is central to stemming the immediate migration crisis. Doing so will also directly affect an important source of revenue going to the Islamic State and other terrorist and criminal groups that are exploiting the crisis for their financial gain.

The migration crisis also shines a light on the desperation of citizens living under repressive African states such as Eritrea. International diplomatic and humanitarian engagement in Eritrea and other authoritarian states in Africa can help address a key segment of the Central Mediterranean migration crisis at its source.

Raising the Costs on Human Smugglers. External efforts must also focus on criminalizing migrant smuggling—not the migrants. Central to these efforts will be the need to raise the cost and risk for smugglers. Reinstating an effective police presence, which used to exist under Gaddafi’s regime, would discourage smugglers who now don’t even feel the need to hide their human cargo. Niger also recently placed legal responsibility on transport “companies” to ensure their travelers have valid documents. Otherwise, these groups are at risk of having their assets confiscated.

Better Information for Source Migrant Communities. For the migrants and the communities through which they pass, more information and direct assistance is necessary. UNHCR, for example, has set up skills training and awareness-raising workshops for Eritrean migrants in Ethiopia to dissuade them from continuing onward to Europe. The EU has plans to set up a presence in Agadez, a hub of West African migration, to tackle the smuggling economy that has infiltrated every aspect of this central Nigerien town.

Further reading:

 


China In Africa Is Good, But Can Discourage Industrialization In The Continent

Edward Paice and Jonathan Bhalla.
“China: friend or foe?” was the title of a special Q & A session with the BBC’s World Affairs Editor, John Simpson, on Tuesday 30 July. Of course loaded leading questions – cast in binary terms – tend to produce answers that are of little value. “China is neither good nor bad. China is a combination of these things”, says Zhong Jianhua, China’s Special Representative on African Affairs – a far more satisfactory starting point for discussion.
Nowhere is the debate about China’s motives and practices more live than in Africa. China is either the saviour the continent has long awaited, or neocolonialist gargantuan solely intent on sucking up oil and minerals as fast as it can in the murkiest possible fashion. The reality is more complex – and it is evolving far more rapidly than the stilted relations between Africa and the West.
In March 2013, Lamido Sanusi, Governor of the Central Bank of Nigeria, delivered the boldest assessment to date of China-Africa relations by a senior African policymaker. In an open letter to the Financial Times, he argued that Sino-African trade patterns were “a significant contributor to Africa’s deindustrialisation and underdevelopment” and smacked of “the essence of colonialism”.  He called on Africans to “remove their rose-tinted glasses through which we view China”. The dragon-slayers cheered. The immediate response from China was muted and, when it came, more considered.
Zhong Jianhua is the most senior Chinese government official to have voiced his reaction to Sanusi’s accusations in detail and on the record. In an interview with Africa Research Institute, an independent and non-partisan think-tank in London, Zhong was characteristically urbane. “I would argue that Mr Sanusi made a number of important points that have been overlooked”, he says. A highly respected career diplomat, Zhong knows the form. But his take on the broadside from Nigeria, China’s fourth largest trade partner in Africa, is also illuminating.
For Zhong, the most important feature of Sanusi’s polemic is his insistence that Africa must start to compete with China. “Africa is strong enough to fight economically”, says Zhong, “but this is the first time we are hearing that it is willing to do so. I welcome this kind of attitude”.  He believes that Africa’s dilemma is similar to that confronted by Deng Xiaoping’s China in the late 1970s and early 1980s. China chose to modernise and industrialise by “opening up” [Chinese word] and “going out” [Chinese words] – it chose to compete.
The process was “a hard battle” for China, akin to a “revolution”, according to Zhong. While Africa is “on the point of take-off”, its leaders will need to steer through something similar to achieve sustainable and transformative development. It will require revenues from raw materials “to be managed and invested well”, and investment in skills if the continent is to compete for manufacturing jobs. As it was for China, commercial agricultural development – small and large scale – is an absolute pre-requisite for Africa. Above all, it will require determination, tenacity and visionary leadership.
Is the positive, supportive rhetoric merely the stock-in-trade of China’s top diplomat in Africa? Maybe, but often overlooked in any discussion of China’s engagement with Africa is the vulnerability of China itself. The political project of the Communist Party of China is almost entirely reliant on foreign markets and resources to drive its economy and legitimise the state.  Although it is the world’s second largest economy, China also remains a developing economy confronting immense challenges. Counter-intuitive as it may seem to Africans who lament their lack of bargaining power, China and its partner countries in Africa are mutually dependent.
This is a point and opportunity grasped – unsurprisingly – by Sanusi, but not by all African policymakers. Just as China’s deep pockets, “can do” mentality, and respect provided resource-rich African governments with unfamiliar and welcome room for manoeuvre on the international stage during the 2000s, options for dealing with China in its many guises have now emerged. The canny have learnt fast and are reading the game well – something that Zhong acknowledges China needs to emulate when he asserts “we want – and need – to improve our understanding of Africa”.
Playing hard-ball with China may not be an option for every African government. But understanding that the Chinese government feel morally obliged to give if they are also to take is imperative – as is knowing what to ask for. Sanusi knows what to ask for – he has effectively challenged China to deliver jobs to Nigeria if it wants greater access to oil and other commodities.
Sanusi rejects “a divorce” from China. He is far too pragmatic for that. But he has called time on the honeymoon and has set out his terms – the tough business of making the marriage work has begun. He is likely to find China receptive. “We are happy to move forward together,” says Zhong. “Chinese reform and prosperity have benefitted the whole world – and African development and prosperity will also benefit the whole world”.
Although there will still be much talk, particularly from China, of win-win relationships with Africa – and of Chinese neocolonialist exploitation from Africans – patterns of engagement which emerge in the next decade will be much more complex, even messier, than in the last. This will be confusing for the dragon-slayers and panda-huggers: “China: friend or foe” will prove be a singularly inadequate frame of reference. But it will be fascinating for the rest of us to observe.


How Not To Mismanage A Country's Sovereign Wealth Fund

Norway's sovereign wealth fund, the country's collective bank account now valued at $1 trillion and built from off-shore oil reserves, is often held up as a prime example of how such funds can succeed.The usual rule: make prudent investments, stick to them, be transparent and watch the money grow exponentially.
But Norway's Government Pension Fund, as it is formally called, is only one of an estimated 80 or so sovereign wealth funds worldwide that collectively holds $7 trillion US. Other such funds probably also hold lessons for how governments can save wisely for future generations. Lessons that might apply to Alberta's Heritage Savings Trust Fund, which began in 1976 with the best of intentions, but seems to have stalled out at roughly $17.2 billion.
But rating these sovereign wealth funds, it turns out, is a subjective affair.
"How do you define success?" asks Michael Maduell, president of the U.S.-based Sovereign Wealth Fund Institute, a research organization. "Is it investment returns? Is it their goals?"
By most measures, Norway's 25-year-old fund — easily the largest in the world and considered very well-run — comes out a top performer.
"For sure, it's the most successful," says Greg Poelzer, a University of Saskatchewan professor who has delved into the "global lessons from Norway" in a recent report published by the Macdonald-Laurier Institute.
One of the keys, he says, was Norway's decision to move all its oil revenues out of general revenues, a strategy that set the stage for greater economic stability. "You don't have this overheating," says Poelzer. "You don't have a super-high inflation and you also avoid, especially with government budgets, the roller-coasters which we're seeing in Alberta right now ."
Other measures
Beyond size, though, there are other measures of success for sovereign wealth funds, says Pat Schena, an adjunct professor of international business at the Fletcher School at Tufts University in Massachusetts. "Another measure might be in the quality of the management of the fund," he says, pointing to funds in Australia and New Zealand, and to some degree, he says, AIMCo, which manages the Alberta fund. "People view them … very positively because of their transparency and good governance."
Poelzer sees other successful funds closer to home, in places such as Alaska and North Dakota.
The $52.8-billion Alaska Permanent Fund, he says, has "done very well." "One of the things they did commit to was putting 25 per cent of their oil reserves into the fund and that again has showed a lot of foresight. "Right now where they're going through economic difficulties, because of the downturn in the price of oil, they're in better shape than they would have been otherwise."
Happy residents
The investment strategy for the Alaska fund is more aggressive than Norway's.
"They'll invest in hedge funds, they'll invest in private equity vehicles. They'll even allow and buy large stakes in companies," says Maduell.
But Alaskans seem happy with the results, he says. "Every year everyone there gets a dividend." Poelzer also sees a good investment strategy in North Dakota, where oil started booming from the Bakken formation and state legislators set up the North Dakota Legacy Fund in 2010. It is now worth an estimated $2.4 billion. "What's interesting from a Canadian perspective," Poelzer says, is "we often like to think of ourselves as the more progressive, gentler, kinder, forward-thinking country, and in the middle of the western part of the United States, their legislators have had the foresight to put at least 30 per cent of their resource revenues into a permanent fund."
Alberta, by contrast, didn't stick with its original plan of setting aside 30 per cent of its non-renewable resource income when the fund was set up in 1976. By 1987, all that resource revenue went straight to general revenues and the fund has "stagnated" ever since, Poelzer notes in a report. Poelzer also sees echoes of Norway in the North Dakota approach, as Norway, too, was a poor jurisdiction before its oil boom. "You understand why it's important to save for the future because bad times can return, and I think that's the perspective North Dakota took as well," he says. "They're part of the Dust Bowl in the '30s, they've gone through tough times … so they know they have to be smart with the cards they've been dealt."
Put the money back
Maduell says many funds aspire to be like Norway's, but some of them have their own strengths, which are worth noting. In Chile, a country heavily reliant on copper exports, two mineral funds have been established. The admirable qualities there are the structure and fiscal discipline exercised around the funds.
"They had some withdrawals a few years ago, and then they were able to put that money back," says Maduell.
That doesn't always happen. Observers point to Ireland as an example of a country where the sovereign wealth fund moved off its original path.
The Irish National Pensions Reserve Fund had been "very well run," says Schena.
But when two big Irish banks ran into trouble, the fund was used to bail them out. Not unlike Alberta, where the government's own figures show that $36.5 billion in investment income from the Heritage Fund has been transferred into general revenues in recent decades, to look after everything from health care and education to roads and social programs.
Two years ago, when oil prices were rocketing up, Alberta announced it would change tack and begin keeping the investment income in the fund, starting in 2016. Premier Jim Prentice is now saying that by 2019/20, 25 per cent of energy revenues will go to the fund. Over time, he says, that will rise to 50 per cent. "I truly believe that one of the great mistakes we have made has been to let our commitment to the Heritage Fund lapse, and that is something I will change," he told Albertans in a televised address this week.
The Irish case is "an example of a fund where…it was used to save the country, but that wiped out the wealth fund pretty much," says Schena. However sovereign wealth funds grow, they seem poised to be a bigger global investment player. "They're becoming an investor class that's being taken seriously," says Maduell.
"It's another large investor class that's going to be on par competing … with the big players doing deals."


Revisiting President Buhari’s Stance On Governance and Ministerial Appointments As Nigerians Impatiently Wait

Muhammadu Buhari, President of Nigeria.

This month, the world moved a step closer to the defeat of Boko Haram, the jihadist group that has terrorized hundreds of thousands in the northern states of Nigeria. In one of my first acts since taking office as president six weeks ago, I have replaced the heads of Nigeria’s army, navy and air force. Our new military leadership has not been chosen because of their familiarity with those in government, as was too often the case in the past, but on their track records and qualifications alone.

These new military leaders will be based in Borno State in northern Nigeria, where the headquarters of the armed services has been relocated. This shift of resources and command directly to the front line, in addition to the replacement of the head of the State Security Service, Nigeria’s intelligence organization, and a new emphasis on working in partnership with our neighbors, has equipped us to take the fight directly to Boko Haram.

Already we are beginning to see a degrading of Boko Haram’s capabilities as a fighting force. In recent weeks, it appears to have shifted away from confronting the military directly to an increase in attacks on civilian areas, as we saw only last week when an elderly woman and 10-year-old girl blew themselves up at a Muslim prayer gathering in northeastern Nigeria. We should not be confused by this change, hateful as it is: It does not mean that Boko Haram is succeeding in its aims — it shows that it is losing.

While we work to defeat the terrorists, I ask the people of Nigeria and the world for resolve and fortitude. The campaign we will wage will not be easy; it may not be swift. We should expect stages of success and also moments when it may appear that our advances have been checked. But no one should have any doubt as to the strength of our collective will or my commitment to rid this nation of terror and bring back peace and normalcy to all affected areas. Similarly, my determination should not be underestimated in other matters. This includes instilling good governance and tackling the scourge of corruption that has held Nigeria back for too long.

 As I meet with President Obama today — the first time a president of the United States will encounter a Nigerian counterpart following the peaceful transfer of power in a contested election in our history — I will be discussing my plans for critical reforms. So, too, will I discuss why the formation of my administration is taking time and, crucially, why it must. Already there are voices saying these changes are taking too long — even though only six weeks have passed since my inauguration. I hear such calls, but this task cannot and should not be rushed.

When cabinet ministers are appointed in September, it will be some months after I took the oath of office. It is worth noting that Obama himself did not have his full Cabinet in place for several months after first taking office; the United States did not cease to function in the interim. In Nigeria’s case, it would neither be prudent nor serve the interests of sound government to have made these appointments immediately on my elevation to the presidency; instead, Nigeria must first put new rules of conduct and good governance in place.

I cannot stress how important it is to ensure that this process is carried out correctly, just as it has been crucial to first install the correct leadership of the military and security services before we fully take the fight to Boko Haram. There are too few examples in the history of Nigeria since independence where it can be said that good management and governance were instituted at a national level. This lack of a governance framework has allowed many of those in charge, devoid of any real checks and balances, to plunder. The fact that I now seek Obama’s assistance in locating and returning $150 billion in funds stolen in the past decade and held in foreign bank accounts on behalf of former, corrupt officials is testament to how badly Nigeria has been run. This way of conducting our affairs cannot continue.

Indeed, the failure of governance, it can be argued, has been as much a factor in Nigeria’s inability thus far to defeat Boko Haram as have been issues with the military campaign itself.

So the path we must take is simple, even if it is not easy: First, instill rules and good governance; second, install officials who are experienced and capable of managing state agencies and ministries; and third, seek to recover funds stolen under previous regimes so that this money can be invested in Nigeria for the benefit of all of our citizens.

We seek the support and partnership of the United States in these tasks. The importance of the fight against terrorism and corruption in Nigeria, Africa’s most powerful economy and largest populace, cannot be underestimated. Our allies can provide much-needed military training and intelligence as our soldiers take the war effort to Boko Haram. Similarly, we look to U.S. businesses as well as the Obama administration to help develop governance initiatives that can ensure that Nigeria’s wealth benefits all its people, not just a few. By taking these steps, we will be positioned to benefit from increased investment — particularly in energy and electricity — from the United States.

I was elected on a platform of change. I know this is what the people of Nigeria desire more than anything else. I know they are impatient for action. I realize the world waits to see evidence that my administration will be different from all those that came before. Yet reforming my country after so many years of abuse cannot be achieved overnight. In our campaigns against both Boko Haram and corruption, we should remain steadfast and remember, as it is said: “Have patience. All things become difficult before they become easy.”


Despite Realized Economic Growth African Spending On Healthcare Remains Inadequate

Noam Levey.

The little boy born just before sunset was lucky. He had stopped breathing just after his mother delivered him into a shawl as she lay in a cramped hospital ward here in this provincial town 100 miles north of the capital, Maputo. Fortunately, a group of nurses was a few beds away. After a frenzied, 15-minute scramble with a suction machine and ventilator bag, they resuscitated the baby.
Two hours later, there would have been no nurse. The ward is staffed only until 7 p.m. The boy probably would have died, joining tens of thousands of children who perish prematurely every year in this southern African nation.
On the other side of the continent, Ebola has focused attention on the inability of local health systems to contain a major disease outbreak. But even in African nations untouched by the epidemic, health systems are struggling with insufficient financing and poor organization. That is holding back progress against malaria, HIV/AIDS and basic health problems such as infant mortality.
Although children in Mozambique have substantially better odds of surviving than two decades ago, they are still 15 times more likely to die before turning 5 than an American child.
"It seems like healthcare is always at the end of the queue," said Dr. Inacio Chichango Jr., the 31-year-old director of the Chokwe hospital.
Despite rapid economic growth, countries including Mozambique are spending on areas other than healthcare, leaving much of Africa with too few clinics, hospital beds, doctors and health workers and with inadequate systems for linking them together. At the Chokwe hospital, doctors have had to make do without an ultrasound machine since spring.

Over the last decade, more than half of sub-Saharan countries have either cut the share of government spending devoted to healthcare, or barely increased it, according to World Health Organization data. In Mozambique, healthcare dropped from 15% of the government budget in 2001 to 9% in 2012.
Although simply spending more isn't sufficient, additional investment is frequently necessary, said former World Bank health director Julian Schweitzer, who now advises developing countries for Results for Development Institute, a Washington-based nonprofit.
"Countries that have been successful have built systems. They trained doctors and health workers, expanded insurance schemes, created financial incentives.... These countries learned you have to do all these things together."
Ethiopia, still one of the world's poorest countries, has deployed nearly 40,000 community heath workers in the last decade.
And after its 1994 genocide, Rwanda built a national health insurance system and began rewarding clinics that provide appropriate care, such as delivering babies in health facilities rather than at home.

The two countries are among just 10 worldwide on track to meet the United Nations' 2015 targets for reducing child and maternal mortality.
The lagging investment in health elsewhere in Africa is even more worrisome at a time when many industrialized nations, including the United States, are under pressure to scale back foreign assistance amid their own economic struggles.
After nearly tripling between 2000 and 2010, global health aid has hit a plateau over the last four years, according to data compiled by the Institute for Health Metrics and Evaluation at the University of Washington.
"The need here is still huge," warned Jean-Luc Anglade, chief of mission in Mozambique for Doctors Without Borders.
The aid group — which for months led the international response to Ebola — has developed new systems to distribute drugs to HIV/AIDS patients in Mozambique. The country has some of the highest infection rates in the world.

Rapid economic growth in Mozambique, where large coal and natural gas deposits have been discovered in recent years, had fueled hopes that the national government would assume responsibility for more of these health services.
As in many cities in Africa, the growth is transforming Maputo, a once-sleepy capital where luxury hotels and bank towers now rise over the pastel Art Deco buildings that Portuguese colonizers built in the last century.
The government in recent years has put up a new airport and sports stadium. Sprawling villas now line the Indian Ocean beachfront on the road north from town.
"We don't have any politicians talking about health. There are no champions," said Jorge Martin, an activist for CIP, a local advocacy group that has highlighted Mozambique's under-investment in health as well as its reluctance to sufficiently tax foreign companies.
"Oil and gas are changing things," he said. "But they are like a poisoned present that only looks beautiful."

Dr. Francisco Mbofana, Mozambique's public health director, insisted that the country's leaders are committed to greater investment.
"Healthcare is a priority of the government," he said, noting plans to deploy thousands of community health workers in coming years. "We are expecting more progress."
Not far from Chokwe, there are some signs of change in Zucula, a village of straw huts in the shade of banana plants and cashew nut trees.
Crisaldo Julio Mawelele, a young community health worker who dreams of becoming a doctor, makes regular stops here, working with villagers on hygiene and nutrition and on treating basic illnesses.
On one visit, she tended to a listless toddler whose grandmother carried him on her back to a clearing at the center of the village. The little boy, who had recently been treated for malaria and anemia, now had severe diarrhea.
After examining him carefully as he sat in his grandmother's lap, Mawelele gave the grandmother a packet of electrolytes and ground up a zinc tablet for him.
Mawelele is one of about 3,000 such health workers in the country, part of the system being developed jointly by the Health Ministry and the United Nations Children's Fund, or UNICEF. The government aims to eventually expand the force to 12,000.
In a country where one doctor can have responsibility for tens of thousands of patients, the health workers are a first line of defense against malaria, pneumonia and diarrhea, three of the deadliest threats to young children. Many global health experts believe such programs can make a huge difference if implemented correctly.
Each worker is given basic medical training and outfitted with a green bag with basic diagnostic kits, antibiotics and other drugs to treat the three illnesses.
Mawelele, who grew up in this village, said she enjoys the work. She wanted to do something to help her community.
But the challenge remains enormous. UNICEF delayed a planned transfer of the health worker program to the Health Ministry amid concerns the program wasn't ready to operate on its own.

For her part, Mawelele faces her own obstacles. She was without malaria kits for much of this year and had to wait more than six months for a paycheck from last year.
Reporting for this story was partially supported by a fellowship from the International Center for Journalists and the United Nations Foundation.