Is patrimonialism compatible with economic development?

Patrimonialism is understood to describe systems in which personal relationships are mediated through and maintained by personal connections between leaders and subjects.  Jobs go to members of your family or tribe for instance, in order to spread prosperity within the group and to keep them on your side.  There is an element of reciprocity in this – support can be withdrawn by either patron or client at any time.  Patrimonialism can cement social bonds in smaller settings, but can distort power and aid corruption in large institutions.

Patrimonialism is often contrasted with rational-legal authority, where impersonal bureaucratic logic is the defining characteristic of the political system.  This is an ideal state, which is in practice never achieved.  The term “neo-patrimonialism” tends to be used to indicate that the system has a veneer of rational-legal authority on the surface, it has elections for example, but is actually run on patrimonial lines: you vote for your patron who promises to bring home the pork, and are subsequently rewarded.

Of course, all societies have a degree of patrimonialism in them, in some ways it is the cement the glues social groups together.  But what is the effect of patrimonialism on economic development?  Some scholars, such as Theobald, argue that a lack of development leads to patrimonialism – it is not possible to pay civil servants from the state treasury, as there is not a reliable revenue source so you rely on your supporters, who are not necessarily the most qualified.  Englebert goes on to argue that patrimonialism leads to a lack of development; leaders need to resort to short-term measures to ensure support, such as paying people to vote for them out of the health budget, as institutional legitimacy is lacking.

However, the relationship with development could perhaps be due to the level of corruption in society, rather than the degree to which it is patrimonial.  Or as Booth and Goloba  argue, the direction the patrimonial state takes can be decided from above if the leadership governs under an appropriate ideological framework.  In Rwanda for instance, they argue that the ruling elite has, through a system of state-run monopolies, acquired an interest in the long-run development of society.  If society as a whole is made more prosperous through the use of these enterprises to kick-start capitalism, there is no need for short-term measures through corrupt networks.  Anti-corruption efforts from the top down support this.

Is this still patrimonialism though?  If jobs are awarded to the best people, even outsiders, and profits are shared throughout society generally, where is the direct reciprocal relationship between the ruling class and the people?

References

Pitcher, M. Moran and M. Johnston, “Rethinking Patrimonialism and Neo-patrimonialism in Africa”, African Studies Review 52:1, April 2009, 125-156

David Booth and Frederick Gulooba-Mutebi, ‘Developmental Patrimonialism? The Case of Rwanda, African Affairs, 111/444, 2012, pp.379-403

Advertisements

Statehood and pan-Africanism

Looking at the idea of the state through Western eyes, we have a clear idea of what it should be, even if we find it difficult to pin down in words.  Theories of statehood, from Weber onwards, tend to take their definitions from a Western starting point. Criticisms of African states tend to accuse them of weakness if they don’t meet these ideals.  However, Weber sets a standard that few states conform to all of the time, and a more flexible definition, like Brownlie’s, focusing on a stable territory and a functioning government, is vague and flexible enough to fit reality more comfortably.

Jackson and Rosberg’s emphasis on external recognition from other states is interesting in light of pan-African movements and organisations.  Does membership of the African Union confer legitimacy on weak states?  This is interesting in the face of general arguments attempting to explain the apparent lack of success of any pan-African enterprise by focusing on the lack of enthusiasm to cede sovereignty in the wake of long independence struggles.  This suggests the idea and commitment to statehood is alive and well and that the level of integration conferred by regional and continental bodies may well be at just the right level, balancing all interests.

The profusion of regional bodies as well as the AU suggests that actually the idea of the state is stronger than expected.  The fact that for example SADC was founded within a year of the AU, and then in 1999 Angola, the DRC, Namibia and Tanzania signed a separate defence treaty within that makes me wonder if these organisations are not being used to counter-balance each other and in totality achieve the initial goal – peace and security on the continent for individual states.  It is a way of pooling risk without diluting sovereignty.

In the same vein, a state can appear weak if its institutions do not function to Western eyes, if there is widespread evasion of taxation, if bribery and corruption is rife, if rule by decree is the norm, but if the overall effect of this is to keep rival power-centres under control, that may be enough.  Ultimately a state has to benefit society, from peasants to elites.  Various groups may evade engagement at times, but if it works …

References

Jackson, Robert H., & Rosberg, Carl G. (1982). Why Africa’s Weak States Persist: The  Empirical and the Juridical in Statehood. World Politics, 35(1), 1-24.

Nathan, Laurie. “Synopsis of Community of insecurity: SADC’s struggle for peace and security in southern Africa.” African Security Review 22:3 (2013): 181-189.

Welz, Martin (2012), Integrating Africa: Decolonization’s Legacies, Sovereignty and the African Union. London and New York: Routledge, Introduction.

Weiss, T. and M. Welz, “The UN and the African Union in Mali and beyond: a shotgun wedding?”, International Affairs, 90, 2014, 889–905.

Colonialism in Africa

How did the colonial experience differ in different countries in Africa? To what extent does colonialism still exercise an enduring effect?

Colonialism in Africa was mainly structured through three systems: white settler-run states, indirect rule and direct rule. Even within these categories the experience differed, as Crowder has emphasised in his discussion of the differences between French and British indirect rule. Each of these systems has had a lasting effect on the societies that were colonised. For example the confiscation of land to farm by white settlers still creates dilemmas for modern day Zimbabwe. Favouring one ethnic group to rule indirectly, such as in Uganda or Rwanda, creates a division in society that cannot be easily reversed and that is going to make peaceful governance more difficult. In many cases the unfavoured class during colonial rule still suffers to this day; in some cases it appears to the sceptic that liberation fighters were actually fighting not against colonialism, not to change the system, but to seize control of it to exploit for their own benefit.

I thought Mazrui’s discussion of Africa’s apparent receptivity to foreign culture and religion was interesting, especially when considered in light of Amilcar Cabral’s argument for the importance of indigenous culture for liberation struggles. Attempts to replace local culture and with foreign language and religion seem a pretty enduring legacy of colonialism. However, Mazrui’s point that France now needs francophone Africa to justify its place as a global power, is thought-provoking. France clearly still benefits economically from its colonies but could French Africa gain the advantage from the colonial experience in the future?

Lastly, discussion around the nature of China’s role in Africa touches on Mazrui’s concerns over the potential for recolonisation. An article in the Financial Times this week stated that the greatest amount of foreign investment in Africa comes from the West – China ranked seventh in the list for greenfield capital expenditure in 2014. France was the highest foreign direct investor, followed by Greece, the US, China and Belgium. Is the criticism focused on China therefore a little neo-colonial in itself, serving to protect these countries’ investments and influence against uspurption by another power?

References

Ali Mazrui, Africa and other civilisations: conquest and counter conquest, in J. Harbeson, D. Rothschild, Africa in World Politics, Boulder: Westview Press, 110-35

M. Crowder, 1964, Indirect Rule: French and British-style, Africa, 34: 197-205

A. Cabral, 1970, History is a weapon: national liberation and culture

Courtney Fingar, West leads direct investment into Africa, Financial Times, 6 October 2015

Can we generalise about African politics?

How can we study African politics? Are there any unifying themes or is the continent just too diverse? Several writers, such as Owomoyela, have argued that it is possible to make generalising statements about African politics, cultures, “relational habits”, etc, without implying a “monothlithic uniformity”. I’m not convinced there are any statements that can truely be appIied to the entire continent to distinguish it from, say, European politics.

It is possible to consider the continent as a whole, but one must take care to remain open to different perspectives, whilst allowing the evidence to dictate the theory. Using theory as a prop could lead to the imposition or projection of an idea of Africa that does not exist. We don’t want to fall into a varient of Edward Said’s Orientalism, “a Western style for dominating, restructuring and having authority over the Orient”. This for me is the result of studying Africa from a modernisation or development perspective for example. Modernisation here means Westernising, and assumes a rightful progression to being like “us”, as Western proponents would see it.

Similarly, a school of thought such as Pan-Africanism obviously aims to unite the people of the continent and identified a common bond amongst Africans. I can’t help wondering though whether the overwhelming and all-encompassing experience of colonialism was here creating an illusion of unity when actually this one factor was just so massive that other differences were overlooked temporarily.

Viewing the subject through broad schools of thought may help (or hinder) study and should be used with caution. Looking at things from a realist/liberal/constructivist perspective can help to organise thoughts, organise subject matter into themes and begin to formulate questions and theories to lead to new knowledge. However, using a starting point such as realism for example, can lead to selective seeing – we just ignore what we don’t want to acknowledge because it doesn’t fit. This feels like it could lead back to Said’s Orientalism or the blind hope of pan-Africanism.

A good methodology could be to take single case studies, analyse them in terms of the structure-agency debate, and extrapolate from there. Durkheim’s “social facts” that constrain individuals will always play a role in politics and should be borne in mind alongside Weber’s emphasis on individual agency. A lot of political events can appear unpredictable or unexplainable and the combination of structure/agency examined with the unique impact of timing can be a good starting point to begin understanding one situation and from there perhaps finding a more general understanding of politics, in Africa or elsewhere. The question should always be why has this happened here and not elsewhere and now and not before?

Even trying to find a common thread in different situations like this has dangers though – needing to organise polities into groups could lead to tidying-up exercises, as argued by Allen. Perhaps we should just acknowledge the inherent diversity of politics in Africa and stop trying to fit geography to political theory.

References

Chris Allen, 1995, Understanding African Politics, Review of African Political Economy, 22(65): 301-320

Naomi Chazan et al., 1999, Politics and Society in Contemporary Africa, chapter 1, The Diversity of African Politics: Trends and Approaches, Lynne Reinner Publishers

Phil Clark, Bringing the Peasants Back In, Again: State Power and Local Agency in Rwanda’s Gacaca Courts, Journal of Eastern African Studies, 8,2, 2014 pp.191-213

Phil Clark, Lecture 30 September 2015 at SOAS, Theorising Politics, Diversity and Disorder in Africa

Oyekan Owomoyela, 1994, With Friends Like These … A Critique of Pervasive Anti-Africanisms in Current African Studies Epistemology and Methodology, African Studies Review, 37(3): 77-101

Can Angola step away from the oil?

Angola is currently third biggest economy in Africa, behind only South Africa and Nigeria.[i] Since the discovery of oil in 1955 in the Kwanza basin, the commodity has come to represent the country’s great success story, despite the setback of a devastating 27-year civil war. Angola is the second-largest oil producer on the continent, with estimated gross reserves of 9bn barrels. Oil currently makes up around 60% of government revenue and 98% of exports.[ii] Oil production is now mostly offshore, around Cabinda and in the Lower Congo basin, mostly because the war made onshore exploration so difficult.[iii] It’s likely that there is still great potential in Angolan soil.

It’s not surprising then, that the recent drop in the oil price has badly affected the country’s economy, combined with volatile currency fluctuations. The oil wealth has, as in most places, also not been of widespread benefit and Angola needs a massive amount of investment in basic services such as healthcare, education, infrastructure and agriculture.[iv] The non-oil economy, amounts to only 10% of government revenue.[v]

The government does appear to be responding to this however, and has launched a policy of diversification and reforms to encourage foreign investment.

There is significant work to do. Despite the oil wealth, only around a third of Angolans have a reliable electricity supply; power outages are frequent and disruptive. Foreign investors receive tax breaks – which impact the government’s ability to raise the revenue needed to fund essential reforms – but a complex bureaucracy and foreign currency restrictions still make investing less attractive.[vi] Overall it has been a lose-lose situation for most Angolans.

The government has developed a new National Energy Power Security Strategy Policy to try to make some inroads in basic living standards. It is hoped that it will lead to structural reform, public private partnerships and basically, a transformation of the power sector. In conjunction with this, their Electricity Sector Transformation Program aims to increase the power access rate so that it reaches two-thirds of the people by 2025, and up the overall power generation capacity to 8,742 megawatts.[vii]

Reforms to the private investment law and changes to a credit scheme for local businesses should also start to turn things around for the economy.[viii] But is it enough? With more than 30% of Angolans still living on less than $1.25 a day,[ix] can these changes make a difference when investors still face delays, inefficiency and corruption?

[i] Angola, Japan : Signing of First Japanese ODA Loan Agreement with Angola, TendersInfo, 18 August 2015

[ii] Oil and Gas: Oil and Luanda’s best-laid plans, The Africa Report, 4 May 2015

[iii] Angola Energy Profile: Second-Largest Oil Producer In Sub-Saharan Africa – Analysis, Eurasia Review, 21 March 2015

[iv] Report – Angola – Sovereign Wealth Fund – Angola’s Wealth of Options, The Banker, 1 June 2015

[v] Angola economy: Moves to boost non-oil sector, EIU ViewsWire, 7 April 2015

[vi] Angola, Japan : Signing of First Japanese ODA Loan Agreement with Angola, TendersInfo, 18 August 2015

[vii] Angola, Japan : Signing of First Japanese ODA Loan Agreement with Angola, TendersInfo, 18 August 2015

[viii] Angola economy: Moves to boost non-oil sector, EIU ViewsWire, 7 April 2015

[ix] Angola Energy Profile: Second-Largest Oil Producer In Sub-Saharan Africa – Analysis, Eurasia Review, 21 March 2015

Eritrea and the UK

The Battle of Keren was a decisive moment for the UK and Eritrea in the Second World War, marking a turning point in the war against Italy and the beginning of the UK’s occupation of Eritrea.  The successful storming of the apparently impenetrable Italian position on high on the ridge at Keren comes to mind when contemplating the plight of many Eritreans currently languishing in the refugee camp at Calais.  The crossing to the UK may be less dangerous, but the feat must seem equally impossible.

The UK government is taking a hard-line approach to Europe’s refugee crisis – and it’s a politically intractable problem: how to balance the moral case which calls for the assistance of those in need, with the reality that immigration is a hot potato in British politics and the Conservative party cannot afford to lose votes to rivals such as UKIP.

European Commission figures show that of the 185,000 people who applied for asylum for the first time across the EU in the first three months of this year, only a very small proportion applied in the UK. Most of those lodging applications in Britain were from Pakistan, followed by Eritrea and Syria.[i] New government figures show that net migration to the UK is at record levels, and Ipsos Mori’s August issues index poll reported the highest ever level of concern about immigration – 50% of respondents gave immigration as one of the most important issues facing Britain. Ipsos Mori attributed this rise in concern to blanket media reports of the “migrant crisis”, creating a climate of fear, rather than a reflection of the number of migrants in the country, which have not changed significantly for many years.[ii]

However, statistics released last month showed that only a third of Eritreans that applied for asylum in the UK in the second quarter of 2015 were granted it, compared with nearly two-thirds in the previous quarter.  The reason for this sudden drop is that the government redefined the rules for Eritreans after Isaias Afwerki’s government insisted that escapees can return home if they sign an apology and pay a penalty.  The government also stated that the national service programme would be capped at four years.[iii] Considerable scepticism surrounds these promises, although the Eritrean government may actually be feeling under some pressure from this unprecedented publicity.

It is easy to criticise those against giving asylum to refugees, but for those working in menial, low paid jobs, new entrants to the market (both for jobs and housing) are a threat in a way that they just aren’t for middle class commentators who call for mercy.  Greater investment needs to be made in putting the case for assisting refugees, many of whom have a greater connection to the UK than many British people realise.  The UK’s occupation of Eritrea after the Second World War was a footnote in English history that many are totally unaware of.  The UK was a benign dictator in comparison to the Italians, yes, but we still looted most of the equipment at the port of Massawa, carrying off most of the industrial facilities as war booty when the country was clearly in need of support.  British indifference to the Ethiopian annexation and the subsequent war of independence was unsurprising.  But we can’t always deal with the world on our own terms.

[i] 6 charts and a map that show where Europe’s refugees are coming from – and the perilous journeys they are taking: Record numbers of people fleeing war, persecution and poverty are entering the EU, Lizzie Dearden, The Independent, 2 September 2015, http://www.independent.co.uk/news/world/europe/refugee-crisis-six-charts-that-show-where-refugees-are-coming-from-where-they-are-going-and-how-they-are-getting-to-europe-10482415.html

[ii] Migration figures: what do the numbers really mean? Although immigration causes concern among half the public, it is a key ingredient in economic success and draws in highly skilled workers, Alan Travis, The Guardian, 28  August  2015, http://www.theguardian.com/uk-news/2015/aug/27/migration-figures-what-do-the-numbers-really-mean

[iii][iii] Eritrea is Africa’s North Korea – but UK bureaucrats won’t accept its citizens are refugees, Ian Birrell, The Independent, 30 August 2015, http://www.independent.co.uk/voices/eritrea-is-africas-north-korea–but-uk-bureaucrats-wont-accept-its-citizens-are-refugees-10478885.html

The Technology, Media & Telecommunications sector in South Africa

The telecoms sector in South Africa is one of the most mature on the continent – the voice market is saturated and mobile broadband is not far behind[i] – 17% of South African have a smartphone.  As a result, subscriber growth is slower than elsewhere in Africa but net revenue potential is high, what with higher incomes, a large and increasing population and continued economic growth.[ii]

Recent liberalisation has revolutionised the tech arena, leading to lower prices and a surge of new entrants into the market.  Teraco is the biggest provider of carrier neutral data centres in Africa, with data centres in Cape Town, Durban and Johannesburg.[iii] Submarine cables are no longer subject to a monopoly and this has boosted industry no end. Current regulatory hurdles include WiMAX and LTE spectrum licensing and the unbundling of the local loop,[iv] but overall the outlook is bright.

Digital social media are advanced enough to support an online advertising and marketing sector. South Africa is leading in Africa in online shopping, banking, social media and cloud computing.[v] MVNOs are a growing proposition, and there’s scope for regional platforms to spread across borders. A recent Deloitte study predicts a second wave of “more mature mobile banking services: mobile-only banks, micro-finance, insurance. Banking could take a new shape with mobile-only banks such as TYME in South Africa (MTN, SABA, retailers Pic’n’Pay and Boxer).”[vi]

A diverse range of businesses are thriving in this space. In terms of business services, you have companies like Panda Security, which offers a collection of free antivirus tools on a “freemium” basis.[vii] FaxFX provides a free fax to email service subsidised by corporate fax customers[viii] and Everlytic produces cloud marketing software that manages campaigns across email, mobile and social media.[ix] The company has experienced an astonishing 606% growth rate since 2010.[x] Another fast grower, Adapt IT provides technology services to other businesses and has grown by 295% in the last five years.[xi] And then there’s Afrihost, an ISP providing broadband, web hosting mobile data, domain registration, and the like.[xii]

In banking, a subsidiary of the Bank of Athens,[xiii] since 2004, WIZZIT has offered South Africans a low-cost, transactional bank account that uses any mobile on any network for making and receiving payments, together with a MasterCard debit card.[xiv] Likewise, FNB’s eWallet allows anyone to send money to anyone with a South African mobile number; the money is transferred instantly and can be used to withdraw cash from FNB ATMs, buy prepaid airtime or electricity.[xv]

In the education sector, Spark Schools are an affordable private school network in South Africa which operation on a “blended-learning model”, where students spend a quarter of each day learning online or with educational software. This keeps costs down and ensures children gain a good understanding of technology and are more independent in their learning. Spark Schools plans to open 64 schools over the next 10 years, educating 64,000 students. Eventually they hope to bring their unique learning model into established and new schools in South Africa and the rest of the continent.[xvi]

But it’s not all plain sailing.  Homegrown social network Mxit, launched in 2005 by Herman Heunis, rocketed in popularity to become the top social network in South Africa, with (it claimed) 50 million registered users worldwide – including 17 million in South Africa.  These figures are not entirely believable, but even on Mxit’s own figures by 2014 they were down to 4.9 million users.  They have, unsurprisingly, not released numbers since then.[xvii]

Mxit appears to have failed to evolve; it was based on pre-smartphone mobile platforms and was abandoned as its core users switched to newer models.[xviii] That said, as recently as November 2014 it reportedly still has very highly engaged users in South Africa – the average user signs in five times a day, and spends 105 minutes a day online.[xix]

Is the success of the tech sector in South Africa a consequence of exaggerated wishful thinking though?  It has been argued that behind the hype are actually surprisingly few key players or thought leaders, a reliance on grants and NGO funding rather than proper, genuine investment in start-ups and a bureaucratic culture that strangles entrepreneurship at birth.[xx] Lack of security, democracy and the rule of law undoubtedly hinder true prosperity and South Africa’s brain drain has not helped.

South Africa’s schools have not truly recovered from apartheid era inequalities and deficiencies.  Witwatersrand University recently published the results of its sixth consecutive skills trend survey on South Africa’s ICT sector. The report’s author, Adrian Schofield believes South Africa is running the risk of lagging behind countries like Kenya, Nigeria and Egypt, which are much more focused on harnessing technology to grow their economies. Conversely, South Africa suffers a shortfall in graduates in science, technology, engineering, and mathematics disciplines and a long list of failed government technology projects. South Africa’s enormous pool of unemployed young people needs to be nurtured and given the opportunities to explore their own talent.[xxi]

[i] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[ii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[iii] Permira makes first African investment in data centre firm Teraco, Reuters, 4 December 2014, http://uk.reuters.com/article/2014/12/04/permira-africa-teraco-idUSL6N0TO3R320141204

[iv] South Africa – Key Statistics, Telecom Market and Regulatory Overviews, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Key-Statistics-Telecom-Market-and-Regulatory-Overviews.html

[v] South Africa – Digital Economy and Media Markets – Insights and Statistics, Budde Reports, 4 May 2015, http://www.budde.com.au/Research/South-Africa-Digital-Economy-and-Media-Markets-Insights-and-Statistics.html

[vi] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[vii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[viii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[ix] Everlytic, http://www.everlytic.co.za/

[x] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xi] Technology: Fast 50 Africa winners announced, Deloitte, 24 November 2014, http://deloitteblog.co.za/2014/11/24/technology-fast-50-africa-winners-announced/

[xii] Afrihost, https://www.afrihost.com/

[xiii] The future of Telecoms in Africa: The “blueprint for the brave”, Deloitte, 29 April 2014, http://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_TheFutureOfTelecomsInAfricaFinal_29042014.pdf

[xiv] AdvisoryStories from the Field – WIZZIT Micro-lending Pilot (South Africa), IFC, 28 September 2011, http://www.ifc.org/wps/wcm/connect/8e150880487ebb4b855bed51e3a7223f/IFC+Wizzit_MobileMoneyMicro-LendingCaseStudy.pdf?MOD=AJPERES

[xv] eWallet, FNB, 2015, https://www.fnb.co.za/ways-to-bank/ewallet.html

[xvi] Spark Schools, Clayton Christensen Institute, 2013, http://www.christenseninstitute.org/spark-schools/

[xvii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xviii] Mxit: the rise and collapse of ‘Africa’s largest social network’, Memeburn, 27 February 2015, http://memeburn.com/2015/02/mxit-the-rise-and-collapse-of-africas-largest-social-network/

[xix] South African Social Media Landscape 2015, World Wide Worx, November 2014, http://www.worldwideworx.com/wp-content/uploads/2014/11/Exec-Summary-Social-Media-2015.pdf

[xx] 2014 LSE Africa Summit: Africa tech hubs – A tale of hope or hype?, Africa at LSE, 5 March 2014, http://blogs.lse.ac.uk/africaatlse/2014/03/05/2014-lse-africa-summit-africa-tech-hubs-a-tale-of-hope-or-hype/

[xxi] S.Africa’s ICT sector lacks critical skills, CNBC, 12 February 2015

http://www.cnbcafrica.com/news/southern-africa/2014/11/18/south-africa-ict-skills-shortage/

Circles in the sand?

The West African Rail Loop is a part of a mammoth project aiming to connect Abidjan in Cote d’Ivoire to Cotonou in Benin, via Niamey in Niger and Ouagadougou in Burkina Faso.  It’s being built in sections: a seven-year effort was announced in 2013 to build the Cote d’Ivoire-Niger section[i]; work started on the Niger-Benin section in February this year.  The first phase will connect Cotonou and Niamey. Work will then move on to extend the line 137km from Parakou to Gaya.  It will eventually reach all the way to Niamey and link up with the West Africa Railway and a coastal line running through Nigeria, Benin, Togo and Ghana,[ii] an incredibly exciting prospect for anyone who loves to travel in the region.

The main aim of the railway is to boost trade – a 2011 study by the Economic Community of West African States reported that road freight across the region travels at an excruciating 1.6km an hour,[iii] hardly surprising to anyone who has passed along these often narrow, dusty, potholed roads, despite the improvements in recent years.

One beneficiary will be a profitable manganese mine at Tambao in north east Burkina Faso – French engineers have dreamt for years of linking the raw materials to ports on the coast. The extension of the line on to Niger will be a massive improvement to the infrastructure of the country, which currently has no working railways[iv] and no easy access to the sea.  Niger depends on its neighbours’ ports and roads to move its main export – uranium – to the coast, and the government hopes to quadruple the revenue earned from this trade over the next ten years.  The uranium industry made up only 5.8% of GDP in 2010, despite comprising over 70% of Niger’s exports. Reducing transportation costs will play an important part in redressing the balance here.

But the benefits will be felt more widely, it’s hoped, with reductions in transit times leading to a decrease in consumer prices as most imports will come by train. The coastal countries ought to prosper too – the passage of goods from the centre accounts for a whopping 90% of Cotonou’s work alone.[v]

For the Benin to Niger section, up to 40% of the cost of the project is likely to come from partners, 10% each from the governments concerned and 20% from Nigerian and Beninese private sector partners, according to officials in Nigeria.[vi] Bolloré Africa Logistics has won the contract for this part of the line, thought to be costing some $1.6 billion, under a build, operate, transfer arrangement, where private investors put in the initial investment and run the project at first, before passing ownership to the government.[vii] The company also plans to restore the track between Abidjan in Côte d’Ivoire to Kaya in Burkina Faso.[viii]

The Niger to Ivory Coast section is reportedly being paid for by France and the EU – with substantial investment coming from Romanian financier Frank Timiş, who owns the mining rights at Tambao and will benefit exponentially from the railway.

The project has apparently been delayed in part due to a conflict between Timiş and Vincent Bolloré, the man behind the aforementioned Bolloré Africa Logistics, as they battle for control of the line.[ix] It’s thought that Niger’s upcoming elections (due next year) will move things on though as the government seeks to demonstrate its ability to get things done.[x]  Plans have been mooted for these continental rail networks since in the 1950s so this will be quite an achievement!

A West African rail loop will really boost trade, competition, cooperation and tourism in West Africa, let’s hope the governments of the region can maintain the momentum to keep this thing on track.

[i] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[ii] Benin-Niger railway project launched, Rail Journal, 20 March 2015, http://www.railjournal.com/index.php/africa/benin-niger-railway-project-launched.html

[iii] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[iv] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[v] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[vi] Rail line work between Niger and Benin to begin next month, African Review, 25 March 2014, http://www.africanreview.com/transport-a-logistics/rail/construction-on-railway-line-between-niger-and-benin-to-begin-in-april-2014

[vii] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

[viii] Rail infrastructures in Africa: Sitarail rehabilitates the railway between Abidjan and Kaya, Bolloré Africa Logistics, 17 May 2014, http://www.bollore-africa-logistics.com/en/media/medianews/rail-infrastructures-in-africa.html

[ix] Niger to Ivory Coast rail link lays tracks for African infrastructure expansion, The Guardian, 19 August 2013, http://www.theguardian.com/global-development/2013/aug/19/niger-ivory-coast-rail-link

[x] West Africa: New railway network aims to boost inter-regional trade, Africa Renewal Online, December 2014, http://www.un.org/africarenewal/magazine/december-2014/west-africa-new-railway-network-aims-boost-inter-regional-trade

The mobile payments revolution

Sub-Saharan Africa, and Kenya in particular, is a world leader in mobile payments – 12% of adults are thought to use mobile payments across the continent[i] and it is estimated that 25-40% of Kenya’s wealth passes through M-Pesa, the leading service in Kenya.[ii]

Whilst entrepreneurial spirit is an obvious factor in the success of such services across Africa, government support certainly plays a part.  Safaricom, the telco behind M-Pesa, is around 35% owned by the government, and is the country’s largest taxpayer, which helps to preserve its monopoly in Kenya.[iii] M-Pesa is easy to use (you don’t need a smartphone) and has enabled all sorts of small payments that were previously hampered by banking bureaucracy and charges.  Other services available in Kenya and elsewhere include Straight2Bank’s electronic banking wallet[iv] – Airtel is also attempting to break into the market.[v]

However, Safaricom has a de facto monopoly of the mobile payments market in Kenya – which has quite possibly been vital to its success – and critics accuse the company of abusing its position, charging high fees (up to 10%) and imposing penalties on users who call other networks.[vi]

Airtel is one rival that would certainly benefit from increased regulation in the market, enabling interoperability which would doubtless aid consumers.  The Kenyan Equity Bank is looking to break into the mobile payments market in alliance with Airtel, with a newly launched joint-venture, Equitel.  This service uses plastic SIM adaptors, which sit on top of a SIM card so that customers can switch between difference operators.  It hopes this will enable Equity Bank’s customers to transfer money more easily.  This is an interesting development, and one that threatens Safaricom – it’s a lot harder to get a banking licence than it is to enter the mobile sphere.[vii]

And Equity Bank is not alone in seeking to capitalise here, Mastercard and Ecobank have hooked up to fight back against the telcos, issuing cards and launching a payment gateway network to make it easier to make old fashioned card payments.[viii]

And that’s before taking into account the start-up scene.  The next generation of companies are looking to simplify international payments, help low-income users break into the system, and improve the online shopping experience.  Leading lights here include UK-based WorldRemit and DoPay and Singaporean Coda Payments.[ix]

And mobile payment services have found success in less obvious ways, one Kenyan business, SteamaCo, has enabled its customers to use solar micro-grids with mobile technology to send performance updates and payments using mobile payment technology.[x]

However, M-Pesa’s success is to some extent due to its monopoly – the more people use it the more useful it is.[xi]  Attempts to replicate M-Pesa’s success in the Netherlands failed because established banks wouldn’t cooperate.[xii]  To make this a global success story, a lot more work needs to be done.

References and further reading

[i] Banking in Africa: ‘We need to be innovative: mass adoption, then profit’, The Guardian, 30 June 2015, http://www.theguardian.com/global-development-professionals-network/2015/jun/30/barclays-boss-financial-inclusion-africa

[ii] Phones4Power: using mobile phones to run micro-grids in Africa, The Guardian, 19 June 2015, http://www.theguardian.com/sustainable-business/2015/jun/19/phones4power-using-mobile-phones-to-run-micro-grids-in-africa

[iii] Telecoms in Kenya: A new east Africa campaign, The Economist, 11 July 2015, http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

[iv] Standard Chartered partners with Indosat to launch Straight2Bank Wallet in Indonesia, FinExtra, 10 July 2015, http://www.finextra.com/news/announcement.aspx?pressreleaseid=60427

[v] Telecoms in Kenya: A new east Africa campaign, The Economist, 11 July 2015, http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

[vi] Telecoms in Kenya: A new east Africa campaign, The Economist, 11 July 2015, http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

[vii] Telecoms in Kenya: A new east Africa campaign, The Economist, 11 July 2015, http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

[viii] Here’s what happened in payments this week, The Business Insider, 27 June 2015

[ix] Startups are bringing mobile banking to remote villages, The Guardian, 4 June 2015, http://www.theguardian.com/sustainable-business/2015/jun/04/world-remit-do-pay-financial-services-western-union-world-bank

[x] Phones4Power: using mobile phones to run micro-grids in Africa, The Guardian, 19 June 2015, http://www.theguardian.com/sustainable-business/2015/jun/19/phones4power-using-mobile-phones-to-run-micro-grids-in-africa

[xi] Telecoms in Kenya: A new east Africa campaign, The Economist, 11 July 2015, http://www.economist.com/news/business/21657378-two-african-business-giants-go-head-head-over-mobile-telecoms-and-payments-new-east-africa

[xii] Banking in Africa: ‘We need to be innovative: mass adoption, then profit’, The Guardian, 30 June 2015, http://www.theguardian.com/global-development-professionals-network/2015/jun/30/barclays-boss-financial-inclusion-africa