My Beauty Best Teacher

Stephen Thomsen has just published a paper(PDF) on the increasing level of private investment in Africa:
"...Private capital flows to Africa in the form of foreign direct investment (FDI) are growing. While in the past much of this investment was limited to the raw materials sector, the current wave involves firms from more countries and sectors than ever before.
• Foreign investors, including from within Africa itself, invested almost $50 billion in Africa during 2000–03. While this represents only a small share of global flows, the more relevant comparison is with the size of the African economy. By this measure sub-Saharan Africa attracts almost as much FDI as Southeast Asia.
• Although Europe remains the principal source of investment, a rising share is coming both from Asia and from within Africa itself.
• Investors have been influenced by improvements in governance, most notably with respect to the business climate, where the desire to attract foreign investors can provide a strong incentive for African governments to reform their policies and practices. Although much remains to be done, some countries have nevertheless made great progress in areas such as political and economic stabilization, privatization and simplification of cumbersome regulations.
• This foreign investment also has implications for patterns of trade and integration. Many African exports are channelled through multinational enterprises, helping to integrate African countries both with one another and with the global economy.
Via Owen.org

The BBC reports that Foreign investment is failing to yield the expected benefits. "...The expectation for foreign direct investment to create growth, to create diversification, technology spillover and jobs has not really been fully realised according to expectations,"UNCTAD said.
The organisation pointed to the example of South Africa and Botswana, which encourage companies to do more of the 'value-adding' processing of diamonds domestically, rather than sending them abroad..."

Warrick Smith writes(PDF) about the potential of entrepreneurship in the developing world. "...Today, few informed commentators question that the private sector plays a critical role in growth and poverty reduction. The ideological debates of the past are giving way to more pragmatic discussions about how best to unleash and expand that contribution while preserving other social values. New research is also providing fresh insights into what works and what doesn’t...when assessing the contribution of entrepreneurship to development,we need a more encompassing view. We need to include peasant farmers toiling in their fields in Uganda and Bangladesh; street vendors peddling their wares in La Paz and Manila; and microenterprises in Cairo and Istanbul...The private sector is the principal source of investment, with domestic private investment substantially overshadowing foreign investment across the developing world...The private sector accounts for about 90 percent of jobs in developing countries, .and poor people rate self-employment and jobs as the two most promising ways to improve their situation. But employment is not the only mechanism. A vibrant private sector expands the availability and reduces the prices of goods in society, including goods consumed by poor people. And firms and commercial transactions are the main source of taxes from which governments can empower the poor through investments in health, education and other public goods, as well as through direct income transfers..."

Jean-Louis Warnholz at Bottom Billion:

Africa, all too often, is seen as a place do to charity, not business. Returns may be high, but there is a degree of discomfort to take profits out of the country amidst widespread poverty. Jeff Chu, Senior Editor at Fast Company Magazine traveled to Rwanda and sheds light on President Kagame’s investment strategy and the quest to change the country’s reputation. Rwanda’s development vision requires substantial foreign investment to create jobs and raise standards of living. This strategy rests on entrepreneurs taking the country seriously as an investment proposition...[continue reading]

A report on methods to increase private capital flows to SSA stated:

The supply of assets is still very limited, and, in addition to the public companies already listed on stock exchanges, the number of private firms listed needs to be increased. In some cases, privatization of public assets offers the best avenue for increasing the supply of assets in the economy and attracting foreign investors. While foreign investment can play a valuable role in stimulating capital markets in Africa, the growth and stability of these markets will require the development of a healthy base of domestic investors. Pension reform and the promotion of mutual funds could encourage domestic investment in fledgling stock markets.

The UN's OSAA office reports that "...Remittances from Africans working abroad in the period 2000-2003 averaged about US$17 billion per annum virtually overtaking Foreign Direct Investment flows which averaged about $15 billion per annum during the same period...workers remittances boost disposable incomes, produce multiplier effects, and make education more affordable Private transfers are large and stable sources of foreign exchange for poor countries and are more likely to reach poor households than other capital flows. The average per capita remittance by migrants in developed countries is around US$ 200 per month. In the light of this it is becoming imperative that the cost of transmitting remittances needs to be reduced to allow African countries receive larger private capital flows..."
Via NextBillion

In an address (see video) to The House Committee on International Relations George Ayittey stated that:

Africa's experience shows that a corrupt government is incapable of efficient economic management and eliciting the sacrifices necessary for the development effort. A corrupt African government cannot attract foreign investment or spur domestic investment. Like the colonial state, the predatory African state is also
extractive. Under colonialism, Africa's resources and wealth were plundered for the development of metropolitan European countries. Today the tiny, parasitic ruling elites use their governing authority to exploit and extract resources from the productive members of the society. These resources are then spent lavishly by the elites on themselves or siphoned out of Africa.

Is the Government in Accra about to shoot itself and cross-border integration in the foot? Thompson Ayodele and Olusegun Sotola of IPPA write:

The Ghana Investment Protection Council, GIPC, recently revived a regulation that requires foreign-owned businesses based in Ghana to raise at least $300,000 before they are allowed to operate. These measures are imposed to shield indigenous business owners from foreign competitors. This is hinged on the belief that there is a need to curtail the influx of neighbouring countries‘ nationals from crowding out local business interests and creating job loss for Ghanaians.
Although the argument that the policy is designed to witch-hunt the nationals of any country has been debunked by the Ghanaian authorities, industry watchers and experts are not convinced. What is evident in view of the investment pattern is that the regulation is directly aimed at local entrepreneurs from West African countries who want to invest in Ghana and not against Chinese or Indian entrepreneurs whose chunk of foreign investments‘ loans are guaranteed by their governments. Thus, raising the specified amount won‘t be a problem for the Chinese and the Indians. By and large the policy will have more direct bearing on small and medium, scale businesses owned by nationals of West African countries as they do not enjoy the protection offered by their Chinese and Indian counterparts.

The Colonialism-Imperialism Paradigm Is Kaput
George B. N. Ayittey, Ph.D.
June 26, 2005.

Africas paradox is galling: immense mineral wealth yet inexorably mired in steaming squalor, misery, deprivation, and chaos. A few countries have sprinted ahead but Africas overall economic performance remains abysmal, lagging behind those of other regions in the Third World. The United Nations Development Program (UNDP) has warned that at the prevailing rates black Africa would take another 150 years to reach some of the development targets agreed by UN members for 2015. (Financial Times, July 9, 2003; p.1). Who ruined Africa?

The causes of Africas lack of development have always evoked heated emotional debates. On one hand are those who portray Africa as a victim of powerful external forces and conspiracies a group that may be described as externalists.On the other are those who believe that the causes of Africa's crisis lie mostly within African in the nature of government (governance) or how Africa runs its own affairs. This group may be described as the internalists.

The Externalists

The externalists believe that Africa's woes are due to external factors such as the lingering effects of Western colonialism and imperialism, the pernicious effects of the slave trade, racist conspiracy plots, exploitation by avaricious multinational corporations, an unjust international economic system, inadequate flows of foreign aid, the neo-liberal policies of the World Bank, IMF, and deteriorating terms of trade. Disciples of the externalist creed include most African leaders, scholars, and intellectual radicals. For decades, the externalist position held sway, attributing the causes of almost every African problem to such external factors.

In his book, The Africans, African scholar and historian Professor Ali Mazrui, examining Africas crises, attributed most of Africas woes to Western colonialism and imperialism. "The West harmed Africa's indigenous technological development in a number of ways" (164). Africa's collapsing infrastructure (roads, railways, and utilities) is due to the "shallowness of Western institutions," "the lopsided nature of colonial acculturation" and "the moral contradictions of Western political tutelage" (202). In fact, "the political decay is partly a consequence of colonial institutions without cultural roots in Africa" (199). Therefore, self congratulatory western assertions of contributing to Africa's modernization are shallow: "The West has contributed far
less to Africa than Africa has contributed to the industrial civilization of the West" (164). Decay in law enforcement and mismanagement of funds can be traced to Western colonialism too. "The
pervasive atmosphere in much of the land is one of rust and dust, stagnation and decay, especially within those institutions which were originally bequeathed by the West signal the slow death of an alien civilization" (204) and Africa's rebellion "against westernization
masquerading as modernity" (211). Western institutions are doomed "to grind to a standstill in Africa" or decay. "Where Islam is already established, the decay of western civilization is good for Islam since it helps to neutralize a major threat" (19).

Many African leaders also subscribed to and espoused similar views ascribing the causes of Africa's crises to external factors. In fact, since independence in the sixties, almost every African malaise was alleged to have been caused by the operation or conspiracy of extrinsic agents. This externalist doctrine totally absolved the leadership of any responsibility for the mess in Africa. The leadership was above reproach and could never be faulted. President Mobutu even blamed
corruption on European colonialism. Asked who introduced corruption into Zaire, he retorted: "European businessmen were the ones who said, 'I sell you this thing for $1,000, but $200 will be for your (Swiss bank) account'" (New African, July, 1988, 25).

In his address to the third Congress of the Democratic Union of Malian People recently, President Moussa Traore observed that, The world economy is passing through a period characterized by monetary disorder and slow trade exchanges. The worsening crisis is affecting all countries, particularly developing countries. Due to the difficult situation, which is compounded by the serious drought, socio economic life has been affected by serious imbalances
that have jeopardized our country's development growth. Debt servicing, characterized mainly by state to state debts are a heavy burden on the state budget. The drop in the price of cotton which accounts for much of the country's foreign earnings, has led to a great reduction in export
earnings" (West Africa, 16 May 1988, 876).

President Danial arap Moi accused the IMF and other development partners of denying Kenya development funds, thus triggering mass poverty (The Washington Times, June 3, 1999; p.A12). According to the Chairman of Ghanas ruling NDC, Issifu Ali, whatever economic crisis the nation was going through had been caused by external factors. He said the NDC has since 1982 adopted pragmatic policies for the progress of Ghana, adding that the macro-economic environment of 1999 has been undermined by global economic developments" (The Independent, Nov 18, 1999; p.3). Said the Zimbabwe Independent (April 27, 1999), Mugabe
rejects the criticism of those who blame the government for the economic crisis. It is, he says, the fault of greedy Western powers, the IMF, the Asian financial crisis and the drought (p. 25).

Naturally, African leaders would deny any responsibility and blame everybody else except themselves for the mess in Africa. The New Economic Partnership for African Development (NEPAD) echoes this orthodoxy when it claims that Africas impoverishment has been accentuated by the legacy of colonialism and other historical legacies, such as the Cold War and the unjust international economic system. Colonialism subverted the "traditional structures, institutions and values," creating an economy "subservient to the economic and political
needs of the imperial powers" (para 21). Colonialism, according to NEPAD, retarded the development of an entrepreneurial and middle class with managerial capability. At independence, Africa inherited a "weak capitalist class," which explains the "weak accumulation process, weak states and dysfunctional economies." (para 22). More recent reasons for Africa's dire condition include "its continued marginalization from globalization process." (para 2). NEPAD seeks $64 billion in investments from the West.

Frankly, this colonialism-imperialism card has been so overplayed that it has lost its relevance and credence. Even Africas children dont buy it. Chernoh Bah, president of the Children's Forum asserted that Africa's socio economic problems are a direct repercussion of incompetent and corrupt political leaders who usurped political office via the gun. "Some blame colonialism for Africa' plight while others blame the continent's harsh climatic conditions. I think the reason is the kind of political systems we have had over the past decades, he said. (Standard Times [Freetown], April 2, 2003; web posted). At the United Nations Children's Summit held in May 2002 in New York, youngsters from Africa ripped into their leaders for failing to improve
their education and health. "You get loans that will be paid in 20 to 30 years and we have nothing to pay them with, because when you get the money, you embezzle it, you eat it, said 12-year-old Joseph Tamale from Uganda (BBC News, May 10, 2002).

The Internalists

Internalists are the new and angry generation of Africans, who are fed up with African leaders who refuse to take responsibility for their own failures and, instead use colonialism and other external factors as convenient alibis to conceal their own incompetence and mismanagement.
Internalists believe that, while external factors have played a role, internal factors have been far more significant in causing Africas crisis. This school of thought maintains that while it is true Western colonialism and imperialism did harm Africa and continues to do so, Africa's condition has been made immeasurably worse by such internal factors as misguided leadership, misgovernance, systemic corruption, capital flight, economic mismanagement, declining investment, collapsed infrastructure, decayed institutions, senseless civil wars, political
tyranny, flagrant violations of human rights, and military vandalism. In fact, one can identify a whole lot of them but these will suffice. U.N. Secretary-General, Kofi Annan, himself an African, lashed out at African leaders at the Organization of African Unity (OAU) Summit in Lome in July 2000. He pointedly told them that they are to blame for most of the continent's problems. Instead of being exploited for the benefit of the people, Africas mineral resources have been so
mismanaged and plundered that they are now the source of our misery (Daily Graphic, July 12, 2000; p.5). Earlier in the year at a press conference in London in April, 2000, Kofi Annan, lambasted African leaders who he says have subverted democracy and lined their pockets
with public funds, although he stopped short of naming names (The African-American Observer, April 25 May 1, 2000; p.10). During a brief stop-over in Accra, he disclosed in a Joy FM radio station interview that "Africa is the region giving him the biggest headache as the
Security Council spends 60 to 70% of its time on Africa. He admitted sadly that the conflicts on the continent embarrasses and pains him as an African" (The Guide, July 18-24, 2000; p.8).

Ordinary people are speaking out too. Said Akobeng Eric, a Ghanaian, in a letter to the Free Press (29 March - 11 April 1996): "A big obstacle to economic growth in Africa is the tendency to put all blame, failures and shortcomings on outside forces. Progress might have been achieved if we had always tried first to remove the mote in our own eyes" (2). Angry
at deteriorating economic conditions in Ghana, thousands of Ghanaians marched through the streets of the capital city, Accra, the economic crisis is due to external forces and therefore, beyond his control, then he should step aside and allow a competent person who can
manage the crisis to take over," Atta Frimpong demanded (The Ghanaian Chronicle, Nov 29, 1999; p.1). Appiah Dankwah, another protestor blamed the NDC government for mismanaging the resources of the nation.

By the 1990s, African governments had completely lost touch with their people; in fact, they were at war with their people. Citing "the credibility gap between the people and the leadership built up through years of mismanagement," Mr. Mohammed Boudiaf, the head of Algeria's
High Executive Council (HEC), lamented: "A large segment of the population has, I am afraid, lost confidence in the capacity of the leadership to provide jobs, housing, health care and its ability to combat corruption" (Financial Times, June 17, 1992; p. 4). Indeed, said Simon Agbo, a farmer in Ogbadibo, south of Makurdi, Benue state capital in Nigeria: "I heard we have a new government. It makes no difference to me. Here we have no light ( electricity), we have no water. There is no road. We have no school. The government does nothing for us (The
Washington Times, Oct 21, 1999; p.A19).

Rafael Marques, a journalist, jailed and convicted of defamation for a 1999 article in which he characterized President Jose Eduardo dos Santos of Angola as a dictator, wrote: "The government has created a stateless state here in Angola. Each citizen is responsible for his own health and welfare while the government is accountable to no one. The MPLA and
UNITA are like two gangs and the people of Angola are innocent bystanders caught in the middle of a drive-by shooting" (The Washington Post, Sept 18, 2000; p.A1).

As a result of the failure to provide the basic necessities of life, the state and those in power have increasingly alienated themselves from those they rule and from whom they claim to derive their legitimacy. The growing gap between the leaders and the people has made the leaders increasingly insecure, sensitive, repressive and less responsive to the wishes of society. The mass of the people in turn regard the state and its organs with fear, suspicion and cynicism because as far as they are concerned, they are no longer legitimate or relevant in their lives. The government does nothing for them. Insecure African despots spend inordinate amounts on the military and security forces, subverting other state institutions squelch dissent, prop them up in power, and serve their parochial interests. The masses on the other hand, sensing their
inability to meaningfully influence the policies of the state and the behaviors of those in positions of power, develop apathy and withdraw from participation in the political process for safety reasons.

Government, as an institution that cares about its people and attends to their needs, has ceased to exist in many African countries. What exists is a vampire state, where the government has been hijacked by a phalanx of unrepentant bandits and crooks, who use the machinery of the
state to enrich themselves, their cronies and tribesmen, while excluding everyone else (the politics of exclusion). The richest persons in Africa are heads of state and ministers. Quite often, the chief bandit is the head of state himself.

At an African civic groups meeting in Addis Ababa, Ethiopia, Nigeria's President, Olusegun Obasanjo, claimed that corrupt African leaders have stolen at least $140 billion (95 billion) from their people in the decades since independence (The London Independent, June 14, 2002. Web
posted at www.independent.co.uk). In August 2004, an African Union report claimed that Africa loses an estimated $148 billion annually to corrupt practices, a figure which represents 25 percent of the continent's Gross Domestic Product (GDP). But these are gross underestimates. According to one UN estimate, $200 billion or 90 percent of the sub-Saharan part of the continent's gross domestic product was shipped to foreign banks in 1991 alone (The New York Times, Feb 4, 1996; p.4). Nigeria's past rulers stole or misused 220 billion ($396 billion) -- that is as much as all the western aid given to Africa in almost four decades. The looting of Africa's most populous country amounted to a sum equivalent to 300 years of British aid for the
continent (The London Telegraph, June 25, 2005; web posted). If this sum had been divided equally among Nigerias 120 million people, its income per capita would be at least $3,000, instead of the miserable $265, which is about the same as it was when it gained its independence in 1960. Between 1970 and 2004, more than $400 billion in oil money
flowed into Nigerian governments coffers. What happened to the oil money?

Eventually the vampire state metastasizes into what Africans call a coconut republic and implodes when politically-excluded groups rise up in rebellion: Somalia (1993), Rwanda (1994), Burundi (1995), Zaire (1996), Sierra Leone (1998), Liberia (1999), Ivory Coast (2000), and
Togo (2005). Only reform intellectual, economic, political and institutional will save Africa but the leadership is not interested. Period.

Ask these leaders to develop their countries and they will develop their pockets. Ask them to seek foreign investment and they will seek a foreign country to invest their booty. Ask them to cut bloated state bureaucracies or government spending and they will set up a Ministry of
Less Government Spending. Ask them to establish better systems of governance and they will set up a Ministry of Good Governance (Tanzania). Ask them to curb corruption and they will set up an Anti-Corruption Commission with no teeth and then sack the Commissioner if he gets too close to the fat cats (Kenya). Ask them to establish democracy and they will empanel a coterie of fawning sycophants to write the electoral rules, hold fraudulent elections with opposition leaders either disqualified or in jail, and return themselves to power (Ivory Coast, Rwanda). Ask them to reduce state hegemony in the economy and place more reliance on the private sector and they will create a Ministry of Private Enterprise (Ghana). Ask them to privatize inefficient state-owned enterprises and they will sell them off at fire-sale prices to their cronies. In 1992, in accordance with World Bank loan conditionalities, the Government of Uganda began a
privatization effort to sell-off 142 of its state-owned enterprises. However, in 1998, the process was halted twice by Ugandas own parliament because, according to the chair of a parliamentary select committee, Tom Omongole, it had been derailed by corruption, implicating three senior ministers who had "political responsibility" (The East African, June 14, 1999). The sale of these 142 enterprises was initially projected to generate 900 billion Ugandan shillings or $500
million. However, by the autumn of 1999 the revenue balance was only 3.7 billion Ushs.

Now, their recalcitrance has transmogrified into extortion. Ask them to move a foot and they will demand foreign aid in order to do so. In 2003, some 30,000 ghost names were discovered on the payroll of the Ministry of Education, costing the government $1.2 million a month in salaries heisted by living workers. When Ghana demanded foreign aid to purge these ghost names, Japan ponied up $5 million.

The reform process has stalled through vexatious chicanery, strong-arm tactics, deception, and vaunted acrobatics. Only 16 out of the 54 African countries are democratic and fewer than 8 African countries can be described as economic success stories. Intellectual freedom remains
in the Stalinist era: only 8 African countries have a free and independent media. But without genuine reform, more African countries will implode -- Chad, Cameroon, Central African Republic, Equatorial Guinea, Guinea, Togo and Zimbabwe are already teetering on the brink

The slave trade, Western colonialism, imperialism and external factors have nothing to do with the naked plunder and wrong choices made by bad African leaders. The World Bank has nothing to do with monumental leadership failure in Africa. The IMF, which most African leaders relish
vilifying, has nothing to do with petrol (gasoline) shortages in Nigeria. Nor do Western agricultural subsidies have anything to do with why African governments cant supply reliable electricity and safe drinking water to their people. The slave trade has nothing to do with
Nigeria turning itself into the scam capital of the world.

The Flaws in the Externalist Position

The issue of Western culpability or complicity in causing Africas woes evokes such intense emotionalism that it often clouds rational analysis of our problems in Africa. Let us strip the issue of its emotionalism and examine it rationally.

Historical Wrongs Committed by the West

The Slave Trade/Colonialism

Everyone agrees that the slave trade was at once a brutally inhumane treatment that can ever be meted out to a people. The horrors of capture, the trans-shipment, the loss of millions of able-bodied men, the atrocities that were committed by European slave traders, etc. are all documented. We all agree to the humiliating experience of colonial subjugation. The discrimination against African natives, the exploitation of Africa's mineral wealth and artifacts, etc. -- we also agree on that.

Remedies

We may seek compensation (reparations) for the harm that slavery did to us. We may seek the return of the stolen booty. Ethiopia has just received its ancient obelisk, stolen by the Italian colonialists. But even here, African leaders have debauched the issue.

Back in August 1999, representatives of African governments met in Accra and issued a declaration: "Africa is demanding $777 trillion from Western Europe and the Americas in reparation for enslaving Africans while colonizing the continent" (Pan African News Agency, August 18, 1999). It added that the money would be demanded from ''all those nations of Western Europe and the Americas and institutions, who participated and benefited from the slave trade and colonialism''. Dr. Hamet Maulana and Debra Kofie, co-chairpersons of the commission, urged that worldwide monitoring and networking systems be instituted to ensure
that reparation and repatriation will be achieved by 2004. Problem is, U.S. GNP is only $12 trillion and amount asked- $777 trillion- exceeds the combined sum of the GNPs of the entire Western world! According to the British governments Office of National Statistics, The United
Kingdom -- that is England, Wales, Scotland and Northern Ireland -- is officially valued at $8.8 trillion, a sum that includes all of its property and buildings, machinery, roads, bridges, planes, trains and automobiles. It also includes all the money deposited in its banks and other financial institutions. Plus everything on the shelves at Harrods (The New York Times, Jan 1, 2004; p.A4). So how do African leaders hope to collect $777 trillion?

We may argue all we want about the size of reparations but these historical wrongs cannot repeat, cannot -- be used to justify the cruel atrocities and grotesque misdeeds African leaders commit against their own people. Winning independence for their respective countries gives no African leader -- none of them -- the license to do what they want with their people and countries.

European slave traders or colonialists did not tell President Mugabe to raze down shanty-towns, destroying the propertied of hundreds of thousands of Zimbabweans and rendering more than 1.5 million HOMELESS. American imperialists did not tell President Meles Zenawi of Ethiopia
to order his security forces to open fire on student demonstrators, killing more than 40 of them on June 15, 2005. British racists did not tell President Isaiah Afwerki of Eritrea to shut down all the private newspapers in Eritrea and jail all their editors and journalists.

These leaders must be held ACCOUNTABLE for their actions. Historical wrongs by the West do not factor in here because they are a separate issue and CANNOT be used to excuse wrongful actions taken by African leaders TODAY.

Colonial Legacies

It is also agreed that the colonial legacies bequeathed to Africa were pitiful. What the Portuguese left behind in Guinea-Bissau, after 200 years of colonial rule, was a small brewery for their local servicemen. There was no social development; industry was not encouraged. African colonies were to serve as sources of raw material and cheap labor for the industrial machines of Metropolitan Europe. The colonial economies were based on export mono-culture: the export of one or two cash crops.

Colonial education was geared toward training male clerks for the colonial administration. The Belgians and Portuguese never encouraged university education as that would teach African natives of their political rights. When Tanzania gained its independence in 1964, it had only 4 university graduates.

Infrastructure was Spartan. Few roads and railways were built. Even where built in West Africa, they exhibited a dendritic pattern: Straight from the coast to the hinterland to evacuate some mineral or cash crop.

All this is true but heres the problem: After independence, we, African elites, did not maintain, let alone keep the little infrastructure we inherited from the colonialists. In fact, we destroyed them! Infrastructure crumbled in the post colonial period. The few universities we got in Ghana and Nigeria decayed. In Uganda, Makerere University used to be called the Harvard of Africa in the 1950s. By 1980, it was a shambles. In Zaire, the Belgian colonialists put down only 2,000 miles of paved road appalling for that huge country the size of Texas. By 1990, only 200 miles were usable. So who do you blame: the Belgian colonialists for not laying down enough roads OR Mobutu for failing to maintain the little that Zaire got? Later, we learned that Mobutu allowed the roads and infrastructure to crumble in Zaire because it made it difficult for the opposition to organize against him!
(contd)

Africa ready for business writes:

"... remittances are expected to continue growing over time. Of course this movement is not without challenges. There are several challenges to Diasporian Investment that I have heard on several occasions. The two that seem to be more major are the small numbers of "one-stop-shop" business start-up/investment centers in Africa and also the ease of obtaining information (or lack thereof) relative to making investment decisions.
However, over time I believe that these are obstacles that can and will be overcome. The sheer growth in numbers of Africa's Diasporian ( plus Foreign Investors) investing in Africa almost neccessitates this. Furthermore, these challenges and risks could be part of the reason that Africa's stock markets have outperformed some of the world's most bullish markets.

In January, a 7.0 earthquake hit Haiti and over 230,000 people tragically died. In February, a 8.8 earthquake hit Chile and over 700 people tragically died. Even though the earthquake that hit Chile was nearly 500 times more powerful than the one that hit Haiti (Earthquake magnitudes are measured on a logarithmic scale), Chile's death toll was only a tiny fraction of Haiti's. Why the difference?

The liberals point to building codes, regulation, and strong government involvement in society are the reason for the difference in death and destruction between the two states. On liberal talk radio, callers and hosts praise the communists who ruled Chile in the 1960's and forced business to adopt strict building codes. They praise the government building inspectors who work hard enforcing these regulations. And they point to the strong and active government in Chile that took control of the situation and told people where to go when the quake struck.

The BBC says this to explain the difference:

People in Chile knew the safest places to go to when the earthquake struck. Chile has developed a seismic design code for new buildings, which has made them better able to stay standing in an earthquake.

Chile was better prepared, with strict building codes, robust emergency response and a long history of handling seismic catastrophes.

Builders cut corners all the time, and are interested in building at the lowest possible cost. They are perfectly happy to shift the burden to the owners and the insurance companies. And occupants don't know risk either, and happily live in old brick unreinforced structures in the middle of earthquake zones. Building codes, and their proper enforcement, are about the only thing protecting them.

It's not by chance that Chileans were living in houses of brick—and Haitians in houses of straw—when the wolf arrived to try to blow them down. In 1973, the year the proto-Chavista government of Salvador Allende was overthrown by Gen. Augusto Pinochet, Chile was an economic shambles. Inflation topped out at an annual rate of 1000%, foreign-currency reserves were totally depleted, and per capita GDP was roughly that of Peru and well below Argentina's.

In March 1975, Pinochet had a 45-minute meeting with Friedman and asked him to write a letter proposing some remedies. Friedman responded a month later with an eight-point proposal that largely mirrored the themes of the Chicago Boys- sharp reductions to government spending and the money supply; privatization of state-owned companies; the elimination of obstacles to free enterprise and foreign investment, and so on.

As for Chile, Pinochet appointed a succession of Chicago Boys to senior economic posts. By 1990, the year he ceded power, per capita GDP had risen by 40% (in 2005 dollars) even as Peru and Argentina stagnated. Pinochet's democratic successors—all of them nominally left-of-center—only deepened the liberalization drive. Result: Chileans have become South America's richest people. They have the continent's lowest level of corruption, the lowest infant-mortality rate, and the lowest number of people living below the poverty line.

Chile also has some of the world's strictest building codes. That makes sense for a country that straddles two massive tectonic plates. But having codes is one thing, enforcing them is another. The quality and consistency of enforcement is typically correlated to the wealth of nations. The poorer the country, the likelier people are to scrimp on rebar, or use poor quality concrete, or lie about compliance.

In the words of George Ayittey, Africa Unchained is about “unleashing the entrepreneurial talents and creative energies of the real African people…and a blueprint for Africa’s future.”

Dr. George Ayittey, a distinguished professor at American University in Washington, D.C. and the first among his generation to recognize that “African problems must be solved by Africans,” has written this book to help push Africa on to prosperity. His approach to the solution of African problems was much derided by some in the 90s, but is now gaining popularity with reformers and world leaders in the new search for ways to help Africa.

Whether at the front of Congress, in conference rooms at the World Bank and IMF,on numerous radio and television talk shows; or during the various crises which have engulfed the continent, Ayittey has sturdily maintained the “solution by Africans” approach as a departure point for solving the seemingly intractable problems on the continent.

Ayittey, in a sense, has all along been the Jeremiah of Africa, saying things that some don’t want to hear. Will his critics, who are many, now wait for result or would they rush out to call him a false prophet?

In Africa Unchained he sets out to explain why and how Africa ought to besaved.In a characteristic manner, Ayittey is unsparing in his prescriptions for Africa, and in his criticism of the African elite. He has no faith in either the current leadership, or the ones preceding them. Rather, he places faith in the new leaders to come, whom he calls the “African Cheetah,” his version of the term “Asian Tiger.”

Ayittey is often criticized, mostly by his fellow intellectuals, for his brutal assessments of conditions in Africa. They describe him variously as an “Uncle Tom,” a “Sell-Out,” or an Afro-pessimist.

Often, his response to these critics has been to draw “a distinction between African leaders and the African people,” or the field hands who are governed and the men in the state houses who are the governors.

In Africa Unchained, Ayittey’s analysis of the historical facts of Africa’s post independence experience makes his usual harsh style credible. So when he asks in his prologue “if I have a very strong cutlass (machete) whom should I go after?” you know exactly whom he has gone after and why.

For Ayittey, the problems gained their most impetus during the post colonial period, when leaders got their priorities mixed. Cherished leaders like Nkrumah and Nyerere are drubbed for policies Ayittey claims were wrong headed.

This writer would agree that, indeed, some of these policies, as described by Ayittey, were wrong; but differs in thinking that the period was also one of intense experimentation, and, therefore, things were likely to go wrong.

Many things under Nkrumah went right. The grace for his period is that no one would today doubt the sincerity with which he tackled the experiment. As for Nkrumah stashing money abroad, nothing has been tendered as evidence other than the hearsay which started on February 24, 1966 when he was overthrown.

Nkrumah, after nine years in office, never had the chance to self-adjust his policies before being overthrown. Those leaders who came after had the benefit and the responsibility to amend some of his policies. And indeed, Ayittey agrees with this assertion. Thus, it is the failure to do so by these pretenders to leadership that must give Ayittey’s book real vitality.

Ayittey condemns statist intervention in the economy. He commends some governments for recognizing lately the need to move from socialist models to allow foreign capital infusion by making their markets “more open, permitting profit repatriation.”

These governments had hoped to attract Foreign Direct Investment (FDI) to spark growth and development . But Ayittey laments that all the good intentions and the innovations are yet to overcome the “negative image” that Africa has acquired over the years. Thus the economies of these countries still remain sluggish.

Africa continues to remain unattractive for the investor; contrary to all evidence of healthy returns on investment. Not even rich Africans prefer to keep their monies there. Ayittey chastises the late president of the Ivory Coast, Houphouet Boigny, for asking “what sensible man does not keep his wealth in Switzerland, the whole world’s bank?”

It is perplexing to read Ayittey’s book and still be aware that some have called him a sell-out. His love for Africa is apparent in this book. His description of the “low level” efficiencies that make Africa work is lovely to read. What he calls the “astonishing degree of functionality, participatory form of democracy, rule of customary law and accountability of the traditional African society,” is respectful and easy to applaud. These are words of facts as well as love. He cannot be the Afro-pessimist his detractors sometimes call him. Otherwise, how could he put so much faith in the simple African peasant he calls “Atingah”?

The critical question to ask is: Is Ayittey being a romantic by placing so much faith in the African peasant and the simple things that so far have provided “low level” efficiencies to the economies of Africa? The notion may sound simplistic to some. But given that the technological and scientific marvels of the West had their primitive beginnings, I will give this approach a strong support. The experiments have been done. The need now is to provide the right environment to nurture the confidence that will make the feats possible. And this is what effective leadership can do.

As Ayittey’s long held view of solution for the African problem suggests, salvation “does not lie…in the crisis-laden modern sector.” It rides on the “backs of the Atingas (peasants) in Africa.”

Instead of investing in the Atingas, who support the bulk of the economy in Africa, Ayittey says African leaders have forgotten them in the shuffle for development and that the low class Atingas (peasants) never featured in the grandiose developmental schemes of post colonial Africa.

For Ayittey, it is possible to turn Africa around. This means empowering the peasants and freeing them to pursue the various enterprises they are already good at. Africa needs “a completely new approach” and an absolute paradigm shift for this to happen, according to Ayititey.

Ayittey describes the attempts so far as mostly disingenuous. And he blames this on the elite, whom he calls “the vampire parasitic elite minority group.” No wonder the majority of his critics, are found in this group.

Africa Unchained is Ayittey’s third book. It is published by Palgrave Macmillan. It was released about a month ago and already has caught the attention of the book world with favorable reviews from the likes of The Wall Street Journal and The New York Times.

For anyone in academe, government or a seeker of solution for Africa’s seemingly intractable problems, Africa Unchained is the book to read.


E. Ablorh-Odjidja, Washington, DC, March 21, 2005

Reuters released a story revealing some pretty shocking things going on over confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong:

As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.

The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.

In June, 2009, the head of China's powerful sovereign wealth fund met with Geithner and requested that he lean on regulators at the U.S. Federal Reserve to speed up the approval of its $1.2 billion investment in Morgan Stanley, according to the cables, which were provided to Reuters by a third party.

Although the cables do not mention if Geithner took any action, China's deal to buy Morgan Stanley shares was announced the very next day.

From the IMF's Regional Economic Outlook for Sub-Saharan Africa,2008(PDF):

The term “emerging market” was coined in 1980 to refer to countries that had stock markets and were in transition toward having the features of the mature stock markets in industrial countries.This box suggests that some African countries fit within the emerging market group and supports this view by benchmarking these African economies of 2007 against the ASEAN countries (Indonesia, Malaysia, Philippines, Singapore,and Thailand) of 1980, when the term “emerging market” entered the lexicon.
Selected African countries compare favorably with the ASEAN countries of 1980. The ASEAN countries were already experiencing strong economic growth. Yet, in many other respects, the ASEAN countries looked quite different from what we see today. Inflation rates were still high in some cases, the depth of their financial sectors was limited, foreign direct investment had yet to accelerate, and their financial
resources, reflected in international reserves, were adequate but not high. Many African countries have perhaps reached broader macroeconomic stability than the 1980 ASEAN benchmark. Growth is strong, inflation moderate, and international reserves relatively high. Like ASEAN, financial depth remains limited.Foreign direct investment is quite high, although this is in large part a reflection of the larger share of naturalresources such as oil in the case of African countries.2 Debt-to-GDP ratios are low.

Arah Childress writes in the WSJ:

Democracy is making gradual gains in sub-Saharan Africa. The trend is driven by a cadre of activists, armed with little more than determination and cheap cellphones, who are outmaneuvering Africa's ruling strongmen...The democratic gains across sub-Saharan Africa come amid the fastest economic growth the region has seen in three decades. Foreign investment is flooding in on the back of soaring prices for the oil, metals and minerals that are plentiful across the continent. The boom, coupled with the region's democratic progress, offers some hope that after a period of post-colonial turmoil, sub-Saharan Africa may be slowly emerging into a more peaceful and prosperous era.[continue reading]

Odhiambo Ocholla of Suntra Investment Bank writes:

Kenya desperately needs development capital, and current inflows from remittances are fast becoming a source of financial resources.I propose that a Diaspora Development Bond be introduced with appropriate incentives to attract investment from our nationals in the Diaspora.Such a bond can be structured in such way that it does not compete with traditional remittances, as this would be an investment vehicle.
Diaspora development bonds are typically long-dated securities, which a country has to redeem only upon maturity. Thus, Diaspora bonds are a source of foreign financing that is long-term in nature.The Diaspora purchases of bonds issued by their country of origin are likely to be driven by a sense of patriotism and the desire to contribute to the development of the home country...[continue reading]