Sudath Perera has every reason to be content. He started up his textiles factory outside the Kenyan capital Nairobi nine years ago; today, he employs 1500 workers and turns over between 18 and 20 million U.S. dollars a year.

“We are contributing to the local economy by creating employment,” he says. “And indirectly there are a lot of local suppliers also relying on us.”

Perera’s factory is one of thousands of businesses on the continent that are taking advantage of a U.S. trade programme under which certain goods from around 40 sub-Saharan African countries can be imported to the States duty-free.

It’s known as AGOA – the African Growth and Opportunity Act – and was one of the main reasons for U.S. Secretary of State Hillary Clinton’s visit to the continent.

“The ingredients are all here for an extraordinary explosion of growth, prosperity and progress,” said Clinton at the AGOA forum in Nairobi last week. “I know how important it is to translate legislation like AGOA into daily changes that people can look to.”

Many on the continent say they’re already feeling those changes. Textiles factory worker Christine Mwende didn’t have a job before Perera employed her; and though the 120 dollar-a-month salary she makes is low by Western standards, she says it’s made all the difference.

“This job has really helped me,” she told Reuters Africa Journal correspondent Vivianne Mukakizima. “When I started working here, my child had not started school – but he is now in class 4.”

(more…)

Eritrea’s President Isaias Afwerki has guarded his country jealousy since independence, pushing a self-reliant attitude that encourages Eritreans to rebuild Eritrea for themselves.

But in order to develop the potentially lucrative mining and trade sectors, he will have to open up the country more to foreign money and therefore possible foreign influence.

The government intends to launch free trade zones at its main ports in Massawa and Assab on its Red Sea coast, and dozens of firms, including from China, India and Dubai, have already registered to operate there to take advantage of the bustling cargo shipping lanes.

Reserves of gold, zinc and copper have been found in Eritrea and analysts are predicting a mining boom. Fourteen foreign firms are exploring in the country and the first project is expected to start producing gold by late 2010.

“We believe mining will play an important role in boosting the economy and the government is committed to develop it,” Alem Kibreab, director-general of mines, told Reuters Africa Journal.

The authorities want the sector to be developed slowly and carefully to prevent the so-called “resources curse”, where oil and minerals have spawned and corruption violence in Africa.

After the long struggle for independence from Ethiopia and subsequent border dispute, expectations for the development of the economy to support the population of 4 million are high - although Afwerki says the mining sector is no magic solution.

“Let’s not be misled that this gold is going to change everything and let’s not be relaxed,” he said. “Getting relaxed and trying to rely on, or at least anticipating to heavily rely on this resource may be crippling.”

-Michael Keating is director of the Africa Progress Panel. The opinions expressed are his own.-

After a decade of solid progress Africa is now facing the daunting task - at a time of economic crisis - of maintaining stability, economic growth and employment, addressing food security and combating climate change. No country on the continent is escaping the impact of volatile fuel and commodity prices, the drop in global demand and trade.

The global economic crisis, however, is serving as a wake-up call for both African leaders and their international partners. The Africa Progress Panel’s 2009 report, launched Wednesday in Cape Town by panel members Kofi Annan, Graca Machel and Linah Mohohlo, argues just this.

Africa is rich in potential and there is an, often overlooked, opportunity to be seized. More investment is needed in Africa’s real economy, particularly infrastructure, renewable energy, agriculture and communications. The explosion of mobile telephony and spread of financial services to the poor have shown the potential for innovative development models.

There is also an opportunity to set a low carbon growth and development agenda, investing in the Africa’s vast solar, hydro, wind, thermal and biomass resources. A continental "green growth" strategy might attract the financial and technological support of richer countries, not least as Africa can contribute solutions to the global climate change challenge. Investment in such initiatives will not only generate jobs and boost trade in Africa, but also create markets for the world.

To cope with crisis and to seize these opportunities, Africa needs determined and accountable leadership at the national level and concerted presence and negotiation capacity on the global stage. Sceptics see both in short supply and fear that crisis will unravel progress on governance and accountability.

But this does not mean that the rest of the world can walk away. Whilst the primary responsibility rests with African leaders, businesses can play a key role, as can Africa’s trading and donor partners.

Many of Africa’s problems, including financial instability and rising temperatures, have been imported. Her partners share responsibility for tackling them. They also have an interest to do so: social tension and political instability in Africa have clear international costs and consequences. One way they can offer their support is by ensuring that global deals, whether on trade, climate change, health, migration or financial regulation, take Africa’s development needs into account.

Additionally, at a time when other financial flows are faltering, more and more predictable aid can help governments meet urgent social needs and reinforce practical capacities, including to attract investment, strengthen fiscal and accountability systems, including for revenues from the extractive industries.

International organizations can catalyse public-private partnerships to fast forward infrastructure and clean energy projects that create jobs, strengthen market access and intra-regional trade. Governments can also do much more to put policies and incentives in place to encourage entrepreneurship.

While progress depends upon partnerships, shared responsibility and responsible use of revenues, the critical ingredient is leadership. A number of countries, including some emerging from conflict, have shown what is possible. But can these individual examples be replicated? The future of Africa may depend on it.

The acknowledgement by Zimbabwe’s central bank governor that it raided the private bank accounts of companies and donors to fund President Robert Mugabe’s government during the economic crisis has increased speculation over his fate under the new national unity government.

Central Bank Governor Gideon Gono said the central bank took foreign currency from private accounts to help pay for some $2 billion in loans to state-owned companies and utilities and for power and grain imports. He said the government still had to repay about $1.2 billion, so the bank could repay the money it owes.

Heading the central bank at a time Zimbabwe was suffering economic collapse and hyperinflation that touched at least 231 million percent a year (according to official figures) was never going to be a badge of honour for the governor, but as he made clear in his statement, Zimbabwe’s problems went beyond economics.

“It was a political problem and not an economic one that drove us into the difficulties this nation experienced, and quasi-fiscal operations were a response to those political challenges we have now resolved through the inclusive government,” the statement said. “Our call is to let bygones be bygones and for everyone and every entity to start anew and open a new page.”

Gono has come under pressure from Prime Minister Morgan Tsvangirai’s Movement for Democratic Change (MDC) to resign since the former opposition party joined Mugabe in a unity government in February. Western diplomats have also said Gono’s departure could help bring a resumption of badly needed aid.

Are his days numbered now Tsvangirai and Mugabe seem to be working together more closely than many might have expected?

Earlier this month, Zambian economist Dambisa Moyo argued that Africa needs Western countries to cut long term aid that has brought dependency, distorted economies and fuelled bureaucracy and corruption. The comments on the blog posting suggested that many readers agreed. In a response, Savio Carvalho, Uganda country director for aid agency Oxfam GB, says that aid can help the continent escape poverty - if done in the right way:

In early January, I travelled to war-ravaged northern Uganda to a dusty village in Pobura and Kal parish in Kitgum District. We were there to see the completion of a 16km dirt road constructed by the community with support from Oxfam under an EU-funded programme.

The road is bringing benefits in the form of access to markets, education and health care. Some parents say their daughters feel safer walking to school on the road instead of through the bushes. Many families have used the wages earned from construction work to pay for school fees and medical treatment. This is the impact of aid.

Having lived and worked in east Africa, I have witnessed the positive effects of aid. But done badly, it can be very limiting and even has the potential to create more harm. To avoid this, it must be provided within an enabling environment in which it is used as a catalyst for change and not as an end in itself. Governments must show leadership through an accountable system.

For individuals, access to resources – including aid - is like an investment. Aid can build up poor people’s assets, support good governance and enhance skills and capacities to bring about transformation. But it can become a bane when it makes communities dependent, lazy and hopeless. Governments, aid agencies and the United Nations need to ensure the delivery of aid is well planned and coordinated, leading to higher self-reliance among poor communities.

Aid is also beneficial when trade is fair. There are several examples in Africa, like the case of coffee farmers in Uganda, where aid has been used effectively to improve the overall quality of the coffee seeds, thereby giving farmers better prices for their produce. When they have access to markets at home and abroad, they generate income which is ploughed back into increased output, better access to health and education, and overall improvement in the quality of their lives. To make this happen, developed countries need to stop procrastinating and put in place fair trade practices.

Aid works well if governments are accountable – in other words, when they are responsible and encourage active citizenship. On this continent, civil society is still weak and needs to be nourished. But stopping aid will not resolve frustrations about poor governance, which is partly a result of weak public scrutiny. Aid should be used to help fight corruption and promote accountability through active input from ordinary people.

As I have argued here, receiving aid is not just an act of charity. It should be understood as the right of poor communities to a life of dignity. As stated in international conventions, people have a right to good health, food, water and education. We all need to ensure the planet’s resources are equitably distributed. As Mahatma Gandhi said, you must be the change you want to see in the world.

So what do you think? Which argument is most convincing?

Zimbabwe’s opposition leader Morgan Tsvangirai became the new prime minister on Wednesday, sworn in by President Robert Mugabe — his old political rival.

Tsvangirai vowed to rescue the stricken economy and called on the international community to help salvage the economy of Zimbabwe where unemployment is above 90 percent, prices double every day and half the 12 million population need food aid.

The new unity government will also have to grapple with a cholera epidemic that has killed nearly 3,500 people, the worst outbreak of the disease in Africa in 15 years. Millions of Zimbabweans who fled the country will be cautious about coming back until they see results.

Foreign investors and Western donors have made it clear money will come only when a new democratic government is formed and bold economic reforms are taken - such as reversing nationalisation policies.

What are the prospects for the unity government given the historic animosity between Mugabe and Tsvangirai, the shear scale of Zimbabwe’s economic collapse and the ongoing detention of opposition activists?

Far from being all bad news for Africa, the global financial crisis is a chance to break a dependence on development aid that has kept it in poverty, argues Zambian economist Dambisa Moyo, who has just published a new book “Dead Aid”.

Moyo’s book, her first, comes out at a time when Western campaigners, financial institutions and some African governments have been warning of the danger posed to Africa by the crisis and calling for more money from developed countries as a result. The former World Bank and Goldman Sachs economist spoke to Reuters in London.

“I’m not saying its going to be easy, I’m just saying that there is a real opportunity for policymakers to focus on coming up with more innovative ways of financing economic development. In a way the crisis actually provides the African governments with the situation where they cannot rely on aid budgets coming through from the West.”

Moyo believes more than $1 trillion in development aid over the past 50 years has only entrenched Africa’s poverty, distorted economies and fuelled bureaucracy and corruption. She sees alternatives such as encouraging trade - particularly with emerging markets - encouraging foreign direct investment, microfinancing for enterprise and seeking funds from capital markets.

Moyo is not discouraged by the fact that all those options appear more difficult in the current environment.

“It just means the onus is on African governments to come up with a more compelling story as to why African governments are overseeing real asset investment not derivative products we don’t really understand.”

“If you focus on traditional markets like Europe and the United States, you come to the conclusion that markets are really damaged and it’s very hard to raise money in those markets, but if you start to look towards China for example which has $4 trillion of reserves, all of a sudden you could see there might be another opportunity to do a bond issue in the Chinese market for example.”

“The model that’s coming up, that I’m proposing, is essentially one where Africa and Africans become equal partners with the rest of the world, not one where there is kind of a donor and a recipient, where Africans are kind of viewed as secondary citizens,” she said.

“There is no other system, whether a political system or a business system, that has stayed as the status quo for 60 years when we all know it’s not doing what it’s supposed to do, it’s not generating growth and it’s not alleviating poverty.”

Moyo is not worried about the impact of aid being taken away:

“It actually tends to pool at the top so it’s not like the average African is going to suffer. They don’t see the aid anyway. Essentially it‘s going to really affect the bureaucratic processes at the top and would really impact on corruption.”

“You could take me to country X in Africa and say ‘look at this girl here and she’s going to school because of aid’. Yes, that’s true but on a macro aggregate perspective these economies are not growing. They’re not growing fast enough to ensure that when that girl is done with her schooling she can find a job.”

Moyo is unimpressed by Western campaigners such as rock stars Bob Geldof and Bono calling for lots more aid for Africa.

“I fundamentally object to the notion that Africa needs more aid and I do think it’s time to have many more Africans speak out, especially the policymakers, because many of the policymakers actually don’t support aid  and yet they stay in the background and they allow this money to come into the economy.”

“You very rarely see Africans on the global stage saying ‘actually we would like to have much more aid please’.”

“I do think a gap has opened up to allow other people to formulate a view on coming to the global debate and offering opinions as to what they think Africans want. But maybe we should start a website called ‘Ask the African’ because I think you might be quite surprised to find that people say ‘we want jobs’, I wouldn’t mind a flat screen television, I wouldn’t mind having my kids go on holiday sometimes …’”

Picture: Helen Jones photography

In the relative political calm of the Indian Ocean, Madagascar has long been a centre of turbulence.

Now another political crisis is brewing as the opposition accuses President Marc Ravalomanana of abuse of power and threatening democracy. Tens of thousands of opposition protesters demonstrated in Antananarivo on Wednesday, two days after an earlier rally descended into violence that left nearly 40 people dead.

The bodies of most the victims were found in a burned out clothing store. The authorities said they were looters who got trapped.

Ravalomanana and opposition leader Andry Rajoelina are very different characters.

The president is a self made millionaire. In his early twenties, he started selling yoghurt off the back of a bicycle. Today, at 59, he is a dairy tycoon with extensive business interests.

Rajoelina is 34 years old and nicknamed TGV, after the French high speed train, for his rapid-fire manner.

He is incensed that the authorities closed down his private TV station after it broadcast an interview with the former president, Didier Ratsiraka. Since he was elected mayor of the capital - a position Ravalomanana once held - Rajoelina has been one of the most vocal critics of the presidency.

Residents of the capital say they now fear a return to the political deadlock of 2001/2002. Then, a dispute over presidential election results between Ravalomanana and Ratsiraka degenerated into eight months of political instability. The economy took a serious hit.

The latest troubles will be no help for Madagascar as it tries to promote itself as a tourist destination alongside other Indian Ocean islands, particularly when the global financial crisis is likely to cut tourist numbers overall.

Even more important are the billions of dollars of foreign investment in mining and oil exploration. Continued turbulence could put that in doubt too.

Can Madagascar afford another long political crisis? How can it be resolved? What do you think?

President Mwai Kibaki’s naming of a key ally, Uhuru Kenyatta, as his new finance minister to replace another supporter, Amos Kimunya, does not come as a surprise to some.
Kimunya, who stepped down last July after he was accused of corruption in the handling of the sale of a luxury hotel, has also returned to parliament — replacing Kenyatta as trade minister.
Kimunya was not reinstated even after he was cleared by an official enquiry into the controversial sale of the luxury Grand Regency Hotel in the capital.

The long wait for someone to fill the finance position suggested to some that Kibaki was not comfortable bringing his ally back, given his tainted name.
His appointment to the trade ministry could mean Kibaki did not want to lose him from the cabinet altogether, although some analysts say it was a move to save face.
Pundits also say Kibaki did not have much room to manoeuvre in picking Kenyatta. Many MPs who support the president are parliamentary neophytes without much experience in running a powerful ministry like the treasury.

But the wealthy Kenyatta is an old name in Kenyan politics. His father was an independence hero and the east African country’s first president.
Political analysts think Kibaki could be positioning key allies, such as Kenyatta and Kimunya, for a stab at the presidency in 2012.
Ironically, Kenyatta contested for the top job against Kibaki in 2002. But the finance ministry post will not be easy. Kenya macroeconomic indicators are weak — GDP growth in 2008 is estimated to have halved to 3.5 percent, compared with 7 percent in 2007, and annual inflation in December reached a staggering 27.7 percent.
The budget deficit is yawning and is expected to widen further as the government subsidises food costs for some 10 million Kenyans facing hunger.
The government also faces uncertainty financing its $12 billion budget for the current fiscal year after it was forced to cancel plans for a $500 million Eurobond because of the global economic woes.
This is further exacerbated by tighter revenue flows.
So even though Kibaki may have appointed Kenyatta with 2012 in mind, the difficult job of getting the economy to grow during a global recession might not endear the new finance minister to many in the poor country.
Has Kibaki made a good decision?

Good news and bad news for Africa from the latest take on global risks from the World Economic Forum. Not much danger for most of the continent, it says, from an asset bubble burst. That’s the good. The bad, of course, is that this is because there are not many financial assets to bubble. In fact, it deems the overall exposure even to economic risks is small because African economies are not particularly tied in to global markets.

Actually, the report shows that there are two Africas. Mapped by their susceptibility for economic and asset bubble trouble, most African countries are bunched together in a low risk range. But another, smaller cluster, including Nigeria and South Africa, finds itself in much more peril and shares space on the WEF risk map with Western and Eastern Europe.

Good news, in a contradictory sort of way.