African leadership: the golden age
The continent’s current crop of leaders is more acquiescent than their post-colonial predecessors in dealing with external attempts at unwarranted interference
Former Nigerian military leader Yakubu Gowon had a telling exchange with US President Richard Nixon in 1971. Invited for a state visit, Gowon, according to a recently declassified American diplomatic cable, said he was too busy administering his country. The army general promised Nixon he would consider a possible future visit – but never did. Gowon never visited the US during his nine-year tenure and is the only Nigerian leader not to have done so. When, shortly after his election in 2015, President Muhammadu Buhari flew out to meet President Barack Obama even before he had named a cabinet, the Nigerian media did not miss the opportunity to draw a contrast. The Lagos-based newspaper Premium Times lamented the country’s foregone “golden era” of diplomacy. It supported this position with another revelation from declassified US cables.
This time the revelations concerned how, in an effort to protect farmers, Nigeria’s President Shehu Shagari resisted President Jimmy Carter’s bid to sell American rice in Nigeria. The idea of an African leader rebuffing a superpower in defence of his compatriots excites advocates of truly independent African leadership. If nothing else, it is strikingly at variance with the more acquiescent mood of the continent’s current leaders, who these days may require a US or EU visit to validate their mandates. At a time of a renewed scramble for Africa, such diplomatic encounters have triggered questions about Africa’s continued ability to check unwarranted external influence. More importantly, they have led some to ask whether Africa’s era of people-oriented leadership ended shortly after the colonial period. Both questions arise in the context of celebrated leadership figures such as Patrice Lumumba, Kwame Nkrumah, Julius Nyerere, Amilcar Cabral, Nelson Mandela, and Thomas Sankara.
“African leadership has changed over the years,” says John Magbadelo, lead director at the Abuja-based Centre for African and Asian Studies. “African leaders [who] emerged from the independence struggles through which they wrenched power from colonial administrations were different in several respects from their military and civilian successors.” In 1969, Africa had just three leaders whose power was based on multiparty elections; by 2018 that number had grown to 43. Within the same period, the number of those who gained power in single-party systems fell from 11 to zero. The number of leaders who came to power through coups d’état also dropped from eight to zero, according to the Brookings Institution’s African Leadership Transitions Tracker. Despite apparent democratic advances, the continent remains beset by leadership problems, mirrored by conflicts, corruption and woeful performance on all key economic and life indicators.
Former lead member of the African Union High-
Level Advisory Group Mehari Maru
Africa’s foreign policy has also become less assertive. Acknowledging the leadership problem, the organisers of the $5 million annual Mo Ibrahim Prize – the continent’s most prestigious award for former heads of state – said they had found no worthy recipient for six years between 2007 and 2017. Many analysts argue that Africa’s leadership problem has lingered for decades, since the pre- and earlier post-independence era, which they see as the continent’s golden age of people-oriented leadership. That period saw leaders confront colonialists, win independence and lead their fledgling nations to early political and economic progress. “The current [generation of] democratic African leaders are spineless because the situation in much of the continent has gone from bad to worse over the years,” Magbadelo told Africa in Fact. “African youths are braving the Mediterranean Sea [each year] in a futile search for greener pastures in Europe because they cannot see any hope for survival in their countries.”
So, how much has African leadership changed over the decades, and how were past leaders able to do better, while warding off unwarranted external influence? Historically, Africa’s leadership problem almost certainly predates the colonial era. In a 2016 paper, “Traditional Leadership and Corruption in Pre-Colonial Africa: How the Past Affects the Present”, Benson Igboin describes corruption during a time when African kings reigned with unlimited powers, and were regarded as God’s representatives. The lack of accountability allowed bad governance to fester, and chiefs were seldom called to account for their stewardship of their kingdoms’ resources. In recent history, the first factor that enabled a more assertive leadership was political. Mehari Maru, a scholar on African governance and former lead member of the African Union High-Level Advisory Group, traces three political phases since the independence era.
These are: the pan-African solidarity era, during which leaders mainly mobilised for the anti-colonial and anti-apartheid struggle; the confusion and division era, when the cold war between the US and USSR led to ideological struggle between supporters of the west and the east; and the period of intervention and integration. The first era, which produced heavyweights like Kwame Nkrumah (Ghana), Jomo Kenyatta (Kenya) and Julius Nyerere (Tanzania), was also the most people-oriented. Many leaders in this category asserted the foreign policies of their newly liberated countries in defence of their people. According to Maru, the next era, signposted by the cold war, saw the rise of undemocratic political groups, dictatorial governance styles and bloody political changes through military coups.
It produced dictators such as Muammar Gaddafi, Mengistu Haile Mariam, Houari Boumédienne, Said Barre and Mobutu Sese Seko, who were feared at home and also proved tough for the western world and the eastern bloc. “In a sense, the courage that the military rulers projected onto the global stage was a defence mechanism to assuage their feelings of guilt for displacing democratically elected administrations,” Magbadelo told Africa in Fact. That “courage” faded after the collapse of the Soviet Union, with the US becoming the world leader. The third leadership era was born under US pressure for political and economic reforms in Africa, which resulted in the rise of civilian leaders. Africa also ceased to be a proxy for either the West or the East, but that neutrality cost Africa its influence. There were signs of deference to the US for the role it had played in the implementation of governance reforms in Africa.
Moreover, most African countries came under structural adjustment programmes facilitated by the World Bank and the International Monetary Fund (IMF) – western-inspired institutions that shaped the global economy in the second half of the 20th century. “Africa lost its voice,” says Emmanuel Akyeampong, professor of history at Harvard University’s Centre for African Studies. “With only one game in town, African political parties no longer fought over ideology or foreign policy, but over who could better implement structural adjustment and be more loyal to the United States.” It was Africa’s initial lack of relationship with these economic institutions that was the second factor – besides politics – that enabled independence-era leaders to be more assertive and people-centred. The Bretton Woods Institutions – including what would later become the World Trade Organization – were all new organisations in the 1950s and 1960s.
This allowed African leaders, in the first two decades of independence, more autonomy in defining their paths of economic development and governance, according to Akyeampong. But everything changed after 1989, with the collapse of the Soviet Union. Today’s African leaders are not necessarily weaker than their post-independence predecessors, says Yolanda Spies, a senior research fellow of African diplomacy and foreign policy at the University of Johannesburg. The open defiance of western powers in particular shown by some past leaders was not always an indication of their diplomatic strength, because the cold war afforded many of them opportunities to double-deal with both east and west. Even so, the US cables also show that some African leaders snubbed the imperialist west because they were loyal to the opposite side of the ideological divide.
Another factor in perceptions of these former leaders, Spies argues, was the limited media scrutiny that existed in those decades. This may also have been an advantage, since very little was known about leaders’ public and private lives. “We live in an era of unprecedented media scrutiny. If we had had the kind of 24/7 scrutiny of leaders then, as we have now, we would not romanticise them as much,” Spies told Africa in Fact. Yet, while the political and economic contexts of each of the leadership eras may differ, Akyeampong argues that few leaders in modern Africa have the integrity of their predecessors. To put it another way, if a country’s corruption index reflects the integrity level of its leaders, the results today are not impressive. On average, half of the 20 countries in the world with the highest perceived levels of corruption in the past decade are in Africa, according to Transparency International. “Integrity has become a rare quality in African politics today,” Akyeampong says.
“The first generation of African leaders was patriotic: shaped in the crucible of colonial rule, they wanted better for their new nation states.” Akyeampong recalls a 2018 visit to the widow of Ahmed Sékou Touré, Guinea’s first head of state from 1958 to 1984: she was living in the only home she and her husband ever had in the capital, Conakry. It was also the house where Nkrumah, Ghana’s first head of state, had lived after he was deposed in 1966, until his death in 1972. Touré was notable for leading Guinea to vote “no” in a continent-wide 1958 referendum on whether former French colonies should join the new Francophone community that was being proposed at the time. He demanded outright independence. “The leaders of the first generation were of a different ilk,” says Akyeampong. Former US President John F Kennedy rejected the “socialist” and “communist” labels that were commonly attached to African leaders like Touré, he adds.
“He decided that they were ‘patriotic nationalists’, and what the United States needed to do was to assist them with economic development, [because] these leaders valued the prosperity of their countries over ideology.” With new powers like China challenging the US for dominance in Africa, there are still bright spots of good leadership on the continent, notes Spies. Rwanda’s Paul Kagame continues to be a reference point, as is Botswana’s former president, Ian Khama. Ethiopia’s new prime minister, Abiy Ahmed, helped to end the 20-year war with his country’s neighbour, Eritrea, shortly after taking office, and recently helped to end the standoff between Sudanese security forces and pro-democracy protesters. Meanwhile, more African countries are becoming democratic, and the number of opposition wins is growing and more incumbents are conceding defeat. “That is leadership,” Spies says.
“We saw very little of that in Africa until very recently. It sends a powerful diplomatic message – that leaders value their people, and that they value their institutions.” But more needs to be done with regard to Africa’s foreign policy, says Maru. Kagame is making some effort to assert African autonomy, but his stance is not usual among contemporary African leaders. Perhaps this is because there are considerable challenges in developing a coherent continental approach to foreign relations. In Maru’s view, what is needed is “a pan-African level leadership that could withstand unwarranted interferences from external forces, including the US, China, Russia, the UAE, Saudi Arabia, and Turkey.” But there are considerable challenges in developing a coherent continental approach to foreign relations. The African Union (AU), formed in 1999 with the goal of forging a common front in global affairs while pushing for Africa’s development, has yet to provide such a coherent approach.
First, the AU has no clear foreign policy guiding its dealings with other continents and big countries – unlike the US, China and the EU, which have policies on Africa. Its structure is also seen as too centralised and weak to support effective policy implementation internally to Africa, let alone as regards foreign policy. The regional histories of north, Francophone and Anglophone Africa bring with them different ties with different parts of the world. Also, Africa’s underwhelming economic position, despite its vast natural resources, continues to make it vulnerable in external negotiations. Then there is the complex problem of how ties – in some cases, cultural and religious – between AU member nations and foreign countries sometimes hinder efforts at achieving joint decisions. A recent example is Sudan where military rulers relying on support from Saudi Arabia, the UAE and Egypt, held onto power despite the AU’s warnings and its suspension of the north-east African country.
After the removal of long-time ruler Omar al-Bashir on 11 April this year, the AU initially demanded the restoration of civilian rule within 15 days. Sudan’s military leaders later received a 60-day extension, thanks to Egypt’s President Abdel Fattah al-Sisi, who, as the AU’s current president, rallied a few leaders to support the effort. The AU finally suspended Sudan after 3 June, when the security forces killed scores of protesters and wounded many more. Sisi reportedly tried to block the decision. Sudan has for years relied on its Arab allies for support, especially since losing most of its oil revenues to newly independent South Sudan in 2011. This year, amid the political turmoil, Saudi Arabia and the UAE sent in half a billion dollars in aid and promised another $2.5 billion, handing a critical lifeline to the country’s military rulers. Africa requires partnerships, not subservience, to succeed, says Magbadelo.
Ultimately, its development will depend on quality leadership and on Africans. “Africa’s vision to attain development does not need the concurrence of any superpower, but the determination of its leadership to implement policies that would institutionalise structures that harmonise and utilise the creativity and productivity of African people for the overall development of the continent,” he says.
Lead director at the Abuja-based Centre for African and Asian Studies John Magbadelo.
Diaspora bonds: alternative financing
Poor African countries can tap into their rich expatriates’ savings
By Nontobeko Mtshali
They are dollars wrapped with care—money that is homebound to villages and towns across the globe sent by relatives who have migrated in pursuit of greener pastures or refuge. These remittances to developing countries are expected to reach $516 billion dollars next year, an increase from the $404 billion recorded in 2013, according to the IMF. Global remittances to Africa went from $19.5 billion in 2004 and tripled to $63.8 billion in 2014, according to the World Bank. In addition to supporting parents and helping to put siblings through college, remittances play a major role in the economies of many countries. In an estimate slightly above the IMF’s, Dilip Ratha, an economist and manager of the World Bank’s migration and remittances unit, said the $413 billion international migrants sent home to families and friends in developing countries in 2013 was three times larger than the $135 billion that went towards global development aid over the same period. “We endlessly debate and discuss about development aid, while we ignore remittances as small change,” Mr Ratha said last year.
“True, people send $200 per month on average. But repeated month after month by millions of people, these sums of money add up to rivers of foreign currency.” Remittances to Egypt are three times larger than the revenue the government collects from the Suez Canal, Mr Ratha said. In poorer, fragile and conflict-ridden countries, remittances are “a lifeline”, he added. An example is Somalia, where they account for 35% of the country’s GDP. More governments in Africa are trying to harness this pool of funds by issuing diaspora bonds to pay for economic development. These bonds offer an alternative source of finance for countries that are too dependent on volatile commodities. Diaspora bonds have been around for decades. China and Japan were the first to issue them in the 1930s. But they came back in favour after the 2008 global recession, when aid to needy countries began to erode. The World Bank and the IMF started promoting diaspora bonds as an alternative source of capital to pay for development and costly infrastructure projects. Ethiopia was the first African country to issue a diaspora bond, in 2008.
“There have been regular bond issuances in African countries on the international market which were not restricted to a specific audience and could therefore be bought by the diaspora, for example, the Moroccan issuance in 2010 and Senegalese, Namibian, Nigerian and Zambian issuances in 2011 and 2012,” according to the African Development Bank (ADB). “For governments that have large diaspora populations, the bonds provide an opportunity to tap into a capital market beyond international investors, foreign direct investment or loans,” wrote Meiji Fatunla, then editor of a blog on the African Arguments news site. “If governments have experienced difficulties raising money on the international market or attracting investment, diaspora bonds can be an attractive new source of financing.” Many institutional investors may perceive investing in developing economies as a high-risk outlay, but expats may be savvier financiers because they know more about their homeland’s potential and pitfalls.
As a result, it may often cost governments less to borrow from their citizens who are living overseas, according to a 2010 report on diaspora investments by the Migration Policy Institute (MPI), a think-tank in Washington, DC. “This difference in risk perception can lead to a ‘patriotic discount’ on expected returns,” the MPI report found. This markdown was the difference between the market interest rate for government debt and the interest rate that expats are willing to accept. While the willingness of migrants to invest is not purely a financial decision, governments still need to ensure that their houses are in order before pulling on nationalist heartstrings. “Evidence suggests that patriotic discounts are particularly meaningful among first-generation immigrants and when the country of origin faces an external threat” such as a foreign invasion, according to the MPI report. But succeeding generations are less likely to invest, the report warned. “In countries where capital markets are less developed, such as in much of Africa and Central America…diasporas might play the role of ‘first movers’ and contribute to innovation and price discovery as well as to scale.”
First-generation diasporas may be more interested in direct investment and may be more prone to patriotic discounts, while second and higher generation diasporas may find portfolio investment a more accessible and less time-intensive approach, the report says. However, all members of the diaspora, regardless of age, are “less forgiving when their countries of origin face financial challenges due to domestic mismanagement”, it concludes. Ethiopia learnt this lesson the hard way. Its first diaspora bond, issued in 2008, was intended to finance a hydroelectric project for the Ethiopian Electric Power Corporation, but failed to meet its funding target. The state has been tight-lipped over how much it intended to raise and how much funding it managed to attract. It only conceded that sales were slow. The bond failed to meet its revenue goal because of a “lack of trust in the ability of the utility to service the debt, the full faith and credit guarantee of the government and the overall political climate in Ethiopia”, said ADB analysts, Seliatou Kayode-Anglade and Nana Spio-Garbrah, in a 2012 brief.
This did not stop the country from issuing another diaspora bond in 2011 to finance the Grand Renaissance Dam, currently under construction on the Blue Nile near the Sudan border. It is set to be Africa’s largest hydroelectric dam but information on the amount raised so far through the diaspora bond for this $4.8 billion project has not been released. According to media reports, however, 80% of the funding was sourced from local taxes and the remaining 20% from treasury bonds. Ethiopians abroad and at home contributed the project’s first $350m and government workers donated amounts equivalent to a month of their salaries, according to Africa Renewal, a UN publication. More recently, Nigeria and Zimbabwe have also hopped onto the bond bandwagon. In March this year the Nigerian Senate approved outgoing President Goodluck Jonathan’s request to increase the revenue target of the country’s diaspora bond from $100m to $300m.
Raising the bond to $300m was needed to compensate for Nigeria’s dwindling oil revenues as oil prices have plummeted, said Ehigie Uzamere, head of a Senate committee that recommended the increase, according to This Day newspaper. The $100m diaspora bond in the 2012-2014 borrowing plan was too small considering the number of Nigerians living abroad, he added. Estimates of Nigerians living abroad range from 5m to 15m, according to www.nigeriandiaspora.com, a research site. Patrick Chinamasa, Zimbabwe’s finance minister, reportedly told Parliament last June that he was considering raising funds through diaspora bonds to pay for some of the country’s small hydroelectric schemes. According to a World Bank official, over 3m Zimbabweans are estimated to have left the country since 2000, mostly to escape the country’s socioeconomic decline and political troubles. Countries need do to their homework before issuing diaspora bonds, the ADB analysts Mesdames Kayode-Anglade and Spio-Garbrah advise.
Relying on a country’s emigration figures is not enough, they warn. They need to look at education levels, income, how communities save their money and investment patterns, among other factors. The issuing country may need to conduct surveys in each destination country after determining countries or regions to target, they said in their brief. Ultimately, trust is critical to determining the success of a diaspora bond. “Good governance, transparency and political stability are the foundations of success,” wrote the ADB analysts. “Investors resident abroad, given their distance and in some cases, the underlying reason for their departure from the home country, must feel that the government has the capacity and goodwill to manage proceeds properly.”
Namibia: justice delayed
Despite attempts at reform, Namibia’s courts are inefficient and deny litigants the right to a speedy trial
By Frederico Links
In September 2015, the Namibian High Court, in the country’s capital Windhoek, found Geoffrey Mwilima, a former opposition parliamentarian, and 29 others guilty in the so-called Caprivi treason trial. The court convicted the accused of a range of offences, including high treason, murder and attempted murder. However, another 35 people were acquitted. The legal drama was “the longest criminal trial in Namibia’s history”, according to The Namibian, an online newspaper. The verdict stemmed from an attack on August 2nd 1999 by members of a secessionist rebel group, the Caprivi Liberation Army, on a military base and police station in Namibia’s northeastern Zambezi region, formerly known as the Caprivi region. Eleven people, including three policemen and three soldiers, were killed. The Namibian authorities arrested around 300 people on suspicion of participating in the attack, or of sympathising with it, and a few days later charged 132 of them.
Nico Horn, a professor of law at the University of Namibia and former state advocate, was very critical of the Namibian judicial system’s handling of the trial. “A more intelligent way of prosecuting would have [kept] ringleaders together and those [presented] for minor crimes separate,” he said to a local news outlet in September. The people who had been acquitted had spent 16 years in prison and would likely want to sue the state, Professor Horn added. From its beginning the trial got caught up in procedural issues. The High Court refused an application for bail by 53 of the defendants in September 2001. Another application for bail by two of the defendants was refused in December 2002. In June 2003 Albert Kawana, then (and again presently) justice minister, told parliament that the trial would take “between two or three years” to conclude. He blamed the accused, “who decided to enforce their rights before the courts of law”, for the delay.
International human-rights NGO Amnesty International (AI) questioned the “inordinate length of time” the state was taking to bring the accused to trial, citing its own “Fair Trials Manual” of 1998. Then, in February 2004, Judge Elton Hoff in the High Court ruled that 13 of the defendants had been brought “irregularly” to trial, having been returned to Namibia without formal extradition procedures from Zambia and Botswana, where they had sought political asylum. Ten of the accused were convicted and sentenced in 2007, but the Supreme Court set the convictions aside, judging that Namibian authorities had not followed formal extradition procedures. Over the years the High Court had to free some of the accused from imprisonment for several reasons, including lack of evidence and the deaths of witnesses. During the long years of the trial, some 22 people died in custody, according to official figures. Arguments in the High Court trial finally closed in August 2014.
By September 2015, when Judge Elton Hoff finally began handing down his judgment in the case, only 65 suspects out of the original 300 remained in the dock. Arguments in mitigation were expected to take place in early October, according to The Namibian. The slow pace of the Caprivi treason trial was not unique. In late 2008, the Law Society of Namibia (LSN), a body representing lawyers in the country, said that the large number of cases that were clogging the courts was having “a deleterious effect on the rule of law and human rights in Namibia”. Judges and magistrates who needlessly allowed cases to drag on should face misconduct charges, the LSN said. Article 12 of Namibia’s constitution stipulates that every trial must be fair and conducted within “a reasonable time”, though it does not define the length of such a period. Namibia is a signatory to various regional, continental and international protocols and treaties that bind it to this legal principle, including the African Charter on Human and Peoples’ Rights and the International Covenant on Civil and Political Rights.
These instruments do not specify time limits. The High Court and the JSC have tried to accelerate justice by writing guidelines, which came into effect on December 1st 2009, and include prescriptions of the time it should take to deliver a judgement. A new case management system was also introduced, requiring judges to do their job properly. But other factors continued to bedevil the system, among them mismanagement by judicial officers and administrative staff, corruption, perennial understaffing and under-resourcing. Poor police investigative work and a lack of competence among prosecutors and magistrates have compounded these problems. Speaking at a workshop in February 2015, the prosecutor-general, Martha Imalwa suggested extending court working hours into the evenings and holding weekend courts to deal with the case backlog. From May 2011 to November 2012, the High Court finalised an average of 58 cases per month, more than three times the average 17 cases a month it had adjudicated in 2010.
In 2014 the High Court also introduced alternative dispute resolution or mediation as an option in civil matters to expedite cases and reduce legal costs. More than 500 court-accredited mediations were completed between June 2014 and March 2015, according to the High Court’s chief registrar, Elsie Schickerling. In 2014, Hage Geingob, then Namibia’s prime minister and now president, pushed through a raft of constitutional amendments to make the justice system more efficient. Critics have accused Mr Geingob and the political party of which he is vice-president, the Swapo Party (formerly the South-West African People’s Organisation), of using their parliamentary majority to push through amendments to the constitution. One of the proposed amendments includes the creation of an office independent of the justice ministry to administer the courts at all levels. A draft bill that would pave the way for the establishment of the Office of the Judiciary had yet to be tabled, Chief Justice Shivute told staff at the Keetmanshoop Magistrate’s office on September 14th 2015. Yet cases still drag on.
Namibia’s ombudsman, John Walters, wrote to Judge Petrus Damaseb in mid-2015 to enquire about outstanding judgments that had been brought to his attention. In reply, the judge president, who presides over the country’s High Court, said that all the matters in question would be finalised by late October 2015. Systemic problems, such as overloaded dockets, continue to impair the High Court’s efficiency, according to Toni Hancox, director of the Legal Assistance Centre, a public interest law firm based in Windhoek. Judges are still taking too long to hand down judgments, even interlocutory ones that are intended to provide clarity on points of law, she says. Meanwhile, few or no reforms have been successfully introduced at the lower court level. In June 2013, the ombudsman released a scathing report detailing a dismal scenario of long delays and bottlenecks. Among others, the report mentions the case of Daniel Shakasha, who was being held in the Walvis Bay prison, and filed an appeal against his guilty verdict and imprisonment in September 2005 with the clerk of the court there.
After receiving no response, he sought the assistance of the ombudsman, who sent the clerk a series of letters asking about the case, between November 2006 and November 2012. Even so, the clerk never filed the appeal. On January 8th 2013, the Walvis Bay prison authority informed the ombudsman that Mr Shakasha had been released. “His right of appeal was frustrated by the individual failing of the clerk of the court to timeously prepare and file the appeal record with the registrar,” the report concluded. In international terms, Namibia gets relatively high marks. It is ranked 53 out of 188 countries in the World Bank’s 2015 rule of law rankings. According to the 2015 Ibrahim Index of African Governance, the country was 4th in Africa for upholding the rule of law in 2014. Yet it would appear that the recent flurry of reform initiatives has so far had little effect on the slow pace of justice. At the time of writing, the last stages of the Caprivi treason trial had been yet again postponed, until March 30th 2016. If there is no further delay, it will have taken 17 years to conclude the trial. Mr Walters, the ombudsman, remains critical of “the unreasonable amount of time from arrest to the conclusion of a matter” in Namibia.
Madagascar: wrangling blocks investment
A precarious stability in this island nation has not restored investor interest
By Emilie Filou
On November 19th last year, a group of potential investors gathered in the rarefied surroundings of Lancaster House in London, a stunning 19th century building, all gilded ceilings, stately rooms and grand staircases. They were attending the UK-Madagascar Trade and Investment Forum, a conference organised to generate interest in the African island country’s economic potential. The speakers included Hery Rajaonarimampianina, president of Madagascar, as well as ministers from key sectors such as energy, mining, tourism and trade. The delegation was keen to convey the message that Madagascar was open for business. Mr Rajaonarimampianina’s election in December 2013 had followed “a long period of economic and political crisis (2009-2013), marked by the country’s suspension from various international bodies and a stark decline in foreign investment”, according to the website of Developing Markets Associates, an investment advisory company that helped to organise the conference. T
he election of President Rajaonarimampianina “appears to have ushered in a new era of relative political normalcy, accompanied by steady economic recovery”, it said. “Madagascar has extraordinary potential for foreign direct investment (FDI) attraction as it is endowed with rich natural resources, a young population and vast fertile land,” according a December 2015 report by the United Nations Conference on Trade and Development (UNCTAD). It was an unusual endorsement. “‘Extraordinary’ is not a word we use a lot at the UN,” says Stephania Bonilla-Féret, an economist who led the UNCTAD review of the country’s investment policy. More specifically, the country’s natural resources include graphite, chromite, coal, bauxite, salt quarts, tar sand, semiprecious stones, mica, fish and hydropower, according to the UN Public-Private Alliance for Rural Development. In addition, Madagascar has an estimated 20 billion barrels in oil reserves, according to consulting firm Moore Stephens.
The question is why there hasn’t been a mad scramble to invest in the country. Economic recovery, since the president’s election, has proved disappointing: estimates of growth in GDP for 2015 range from 1.9% to 2.3%, while the Economist Intelligence Unit expects growth to average 3% in 2016 and 2017. And the recent decline of FDI flows to the country from $812m in 2012 to $351m in 2014 indicates that investors are keeping their distance. A number of factors have come into play, chief amongst them political instability, according to Geoffrey Tassinari, chairman and CEO of Madagascar Development Partners, a private equity fund based in Madagascar. Though the democratic presidential and parliamentary elections of December 2013 passed off successfully, Mr Rajaonarimampianina, whose party was formed only after he was elected, has struggled to secure a majority in parliament, where shifting coalitions are involved in “wrangling for…dominance”, says a 2014 report by the International Crisis Group.
In May 2015, parliament impeached Mr Rajaonarimampianina, but the constitutional court rejected the vote. This was followed by a vote of no confidence in the government a month later, which was narrowly defeated. This tempestuous relationship between president and parliament has created a climate of uncertainty. Senate elections were only held in January 2016, almost two years after the end of the crisis. The uncertainty has also prevented Madagascar from getting on with political and economic reforms, says Ms Bonilla-Féret. And the endless politicking has also had a knock-on effect on donor funding. Donors such as the World Bank, the EU and the IMF had announced they would resume funding after the 2013 elections, and made substantial commitments. But disbursements have been slow, held up by unmet conditions of reforms and governance improvements. Mr Tassinari says that this reticence has put off investors. “Until donors release their funding, [investors] will remain bystanders,” he says.
Then there are the hard realities of doing business in Madagascar. The country ranks 164th out of 189 in the World Bank’s Doing Business 2016 report, which ranks the ease of starting and operating a firm in a country. One of the biggest challenges is the dismal state of the infrastructure. Rolling blackouts are a daily occurrence, for instance, while the 2016 World Bank report ranks Madagascar as the second worse country for electricity access. Most companies must rent generators to secure their power supply, at great cost. Many must also fund their own schools, clinics and fire services. “We can only rely on ourselves,” says Mr Tassinari. “That’s an obstacle to entry for smaller investors who don’t have the…financial, technical or human means [of] big companies.” Roads are few, and in dreadful condition, making imports and exports long and costly. The banking sector is small and rather conservative, making it hard for investors to fi nance their projects, Mr Tassinari explains.
In its 2015 review, UNCTAD identified a number of regulatory shortcomings that hindered investments, including uncertainties regarding land ownership by foreigners, poor implementation of regulations and insufficient resources to prevent and fIght corruption. Critics say that the government has displayed plenty of good will, but that it does not seem to be enough to overcome the inertia in the system. They also blame the vested interests of a few established players who, they say, would rather maintain the status quo. Such challenging circumstances are not unique in Africa. But what many feel has really let Madagascar down is lack of vision. One exasperated conference delegate in London said that he was appalled by the government’s lack of ambition. “Everything I heard today smacks of the old growth model— natural resource exploitation, big hotels for tourism. Madagascar keeps making these tiny baby steps but it needs to make a giant leap.”
Mr Tassinari says that it was former president Marc Ravalomanana’s Madagascar Action Plan (MAP) that spurred his company to invest in Madagascar back in 2004-5. “The MAP really set out a vision for Madagascar, and it had the backing of the donors,” he says. “The Plan National de Développement [PND, the current administration’s blueprint] isn’t as compelling—it’s too vague.” One prospective investor in the power sector said he wanted more clarity on government projects, along with electricity tariff adjustments and reforms of Jirama, the flailing state-owned power utility. “If the government came to market with a few well-prepared projects they wanted to prioritise, asking developers for their interest and putting the regulatory framework in place to develop these projects, Madagascar would become a much higher priority than it currently is,” he said. Ms Bonilla-Féret says that it is essential for Madagascar to refine its policy objectives if FDI is to be an engine of development there. “The question is: who do you want to invest [in the country]? And what do you want from them?”
South Africa: drive into Africa
Many assume that South African businesses are a natural fit for other markets on the continent, but experience is showing otherwise
By Peter De Ionno
For South African business, driven in part by a stagnating domestic economy likely to return growth of 0.8% at best in 2016, a bigger future lies north of the Limpopo, where growth in sub-Saharan economies is expected to average 4.5%. The World Bank’s latest South African GDP growth prediction is the lowest since 2009. That too could tumble over the precipice if predicted downgrades by international ratings agencies come to pass, turning the country’s investment paper into junk and prompting the slump into a recession. No wonder then that South African business is spending billions looking for new markets. But Africa is not a single, unitary investment destination. It includes 55 countries, 1.2 billion people speaking 2,000 languages and dialects, and a jigsaw of markets and jurisdictions, each shaped by different histories and cultures with economies regulated by myriad regulations and customs.
South African businesses trekking north must learn to deal with business systems, mainly informal, and legal codes that are not only unfamiliar, but part of countries where the economic landscape can be destabilised by terrorism and ethnic conflict. Analysts have observed that the barriers and obstacles to trade between African countries, particularly at border crossings where ever-longer queues of trucks can be delayed for days on end, are markedly more difficult to surmount than connections to markets in developed countries. Overlaying these new markets with templates based on high-level models such as South Africa’s King Codes on governance, as well as strategies that have historically proven profitable in South Africa— with its unique demographics, wealth and high levels of development concentrated in the top 20%—just won’t work.
While all agree that best practice corporate governance is the only path to ensuring that Africa’s economy grows sustainably and meets the needs of its people, it is honoured more in the breach than in the observance in many parts of the continent. The big South African formal retailers have had varying levels of success with their frontier forays, which have seen them open some 1,500 stores. Shoprite is the frontrunner, having started beyond South Africa in 1995. It now operates more than 320 stores in 14 countries, which last year generated R19 billion ($1.21 billion) in sales, or 16.4% of the group’s turnover. Shoprite founder, Whitey Basson, declined to be interviewed for this article, but his online profile says he was motivated by a desire to win the approval of African leaders by enhancing food security in major African cities. The firm’s first store in Lusaka, Zambia, at first imported all merchandise including fresh produce, arousing local anger. Shoprite had to develop local suppliers of fresh goods where possible.
Now, some 80% of goods on Shoprite’s African shelves come from non-South African sources—another indication of the ease of external connections over intra- African trade, which the Industrial Development Corporation (IDC) says averaged only 10% between 2007 and 2012. An early venture into Egypt failed because of red tape and restrictive legislation, but the greatest impediment to African expansion—as experienced by other retailers too—was the lack of suitable sites for its stores. Shoprite’s solution has been to build its own shopping centres, with its supermarkets as the anchor. Shoprite Holdings is Africa’s largest retailer and is listed on both the Namibian and Zambian stock exchanges in addition to its main listing on the Johannesburg Stock Exchange (JSE). In the 12 months to June last year, Shoprite said it had invested R1.5 billion ($95.9 million) in its African expansion, opening another 30 supermarkets, mostly in Angola and Nigeria. That was more than double its R697 million ($44.57 million) South African expansion budget.
Another South African company, Woolworths, an upmarket retailer, operates more than 65 stores in 11 African countries. It took a knock in 2013, when it pulled out of Nigeria after its stores failed to connect with local customers. The lack of suitable shopping malls also crimped its expansion plans. Later, its R20 billion ($1.28 billion) acquisition of the David Jones department stores in Australia signalled a turn away from Africa. Sales on the continent account for about 5% of its business. Mr Price, a value fashion retailer, has done better, with about 9% of its business coming from its African expansion, notably in Ghana. Much of its success is attributed to its cash-based model in countries where credit financing is relatively undeveloped. Martyn Davies, managing director of Emerging Markets & Africa at Deloitte Frontier Advisory, offers a warning to businesses moving operations into Africa.
Although adherence to the highest standards of corporate governance remains best practice, there are many markets where that ideal may be impossible to achieve and pragmatism trumps all else, he says. Mr Davies, who has advised more than 30 of the JSE’s top 100 listed firms, says the fall of some African countries into states of “ungovernment” means that principles of good governance remain simply that: good ideas that cannot be applied in the face of lawlessness. In Nigeria, the local arm of South African-based telecommunications multinational, MTN Group, is facing the imposition of a record $15.6 billion (R245 billion) fine for failing to disconnect 5.1 million unregistered and improperly-registered SIM cards as required by the regulating Nigerian Communications Commission (NCC).
MTN, Africa’s biggest mobile operator, announced that its 2015 results had taken a 51% hit on its full-year profit, with its headline earnings per share (HEPS) falling to 746 cents as the company set aside R9.29 billion (about $590 million) towards its fine obligations. It would be easy to see this as a spectacular corporate governance failure and an own goal by MTN Nigeria. After all, MTN cannot claim ignorance that its failure to properly register SIM cards would render it liable for a penalty of Naira 200,000 (about $1,000) per unregistered subscriber. In March, two weeks before the Nigerian House of Representatives trebled the original fine imposed after MTN missed a mid-2015 deadline, President Muhammadu Buhari said MTN had cost people their lives, and fuelled the Boko Haram insurgency in north-eastern Nigeria by failing to disconnect the unregistered users.
MTN did not respond to requests for comment. Mr Davies says that MTN had no choice but to accept being penalised for breaching the regulations, although the size of the fine makes the case unique. “In…Nigeria there are a lot of arbitrary impositions on business. Companies like MTN are simply seen as cash cows to be milked.” With the economy in decline, this kind of pressure on business will only increase. He also questions whether anybody can run a business in Nigeria or Angola and maintain the highest standards of corporate governance, while navigating the day-to-day demands of rampant corruption. “Standards of governance must be set by the government of a particular country, but unless they are enforced by strong internal independent institutions they won’t mean very much,” says Mr Davies. The kinds of challenges facing businesses in such countries range from impositions on logistics that can hold to ransom imports of equipment and stock deliveries, to the more personal and visceral, where executives or even their families are caught up in roadblocks and the payment of a bribe means the difference between safe passage and detention, or worse.
Every business should aim to adhere to the highest ethical standards, he says, while upholding the laws in all the jurisdictions in which they operate and maintaining responsible and transparent relations with their customers, suppliers, workers and communities. In some countries, however, this remains impossible. “Most foreign business operators will find that pragmatism is the best policy to deal with difficult local conditions if it becomes a matter of survival”, he suggests. Mr Davies adds that South Africa’s reputation as a beacon of corporate governance based on the adoption of the King Codes—which outline principles of leadership, sustainability and corporate citizenship—as well as high international regard for the JSE and the country’s well-regulated, technically advanced banking sector, is fading. “Issues of state capture point to cracks in our government’s commitment to good governance.
As in other countries, difficult economic times go together with standards slipping,” he says. Pressed to identify the best and worst countries for across-the-board adherence to corporate governance principles, Mr Davies says South Africa still leads the continent, with Botswana, Mauritius, Rwanda and Kenya following. On the downside, he lists Nigeria, Chad, Niger, Sudan, Angola and Congo as countries where the challenges and failures in the application of best practice corporate governance, all too frequently, outweigh the wins.