Africa News blog
African business, politics and lifestyle
This past holiday season in Kenya was quite a contrast to the preceding year.
While in 2008 December was dry and dusty, last month was marked by heavy rains across the country, making for soggy barbecues and muddy cars for the many urban Kenyans who usually like to spend Christmas with their families in the rural areas.
The rains have killed 20 people and displaced many more through flooding. But they are vital, given the country’s reliance on agriculture, which accounts for nearly a quarter of the country’s GDP and employs about two thirds of the entire population.
A prolonged drought had cut agricultural output, forced the government to appeal for funds to
feed about 10 million starving people and to liberalise imports of the staple maize crop.
Together with the emerging recovery of the global economy, the rains are giving rise to
optimism that the economy could grow by 3-4 percent in 2010 from an expected 2-2.5 percent in 2009.
The optimists also point to various government projects aimed at stimulating the economy, a
resurgent tourism sector and sustained monetary easing by the central bank as proof of a
possible rise in growth this year.
A few days back, I had the pleasure to moderate a lively debate on investment prospects in Africa involving private sector panellists and representatives of the World Bank and International Monetary Fund.
The tone was upbeat, but discussion turned heated when it came to debt restructuring in Ivory Coast.
While it might sound obscure (and I won’t go into all the details) it raised broader questions about the role of the international financial institutions in Africa and how that may be reinforced by the global financial crisis.
The concern of some in the private sector was that foreign investors with exposure to local debt in Ivory Coast looked set to suffer the same restructuring terms that holders of foreign debt would have to bear – with the approval of the IMF. Their argument was that this would discourage foreign investors from buying local bonds in Africa.
The IMF came back robustly, saying it was only playing by the rules in Ivory Coast and suggesting that investors make closer checks before putting in their money.
But private sector participants were unclear where this might leave them in future, particularly at a time many African states are eyeing bond markets again.
Some voiced broader concern over how the international financial institutions see the private sector’s role.
Before the credit crisis, a number of African countries had begun turning to international capital markets. But Eurobond plans were put on hold when global markets seized up and the institutions stepped back in to provide emergency help to hard-hit countries. Amounts have been substantial even compared to the $10 billion in concessional financing promised by China over three years. The IMF board approved a $1.4 billion standby loan arrangement for Angola this week.
The question now is how this may change the longer term balance in sources of finance for African states.
Is the private sector overly wary of institutions that are simply doing their best to give emergency help now and fend off future debt crises? Or are those institutions muscling back in to impose their dominance in telling African states how they should go about managing their debts and getting the finance they need? How will Chinese money affect the balance?
Pictures: A money dealer counts the Nigerian naira on a machine in his office in the commercial capital of Lagos, January 13, 2009. REUTERS/Akintunde Akinleye; Dominique Strauss-Kahn, managing director, International Monetary Fund (IMF), is introduced at the International Economic Forum of the Americas conference in Montreal, June 8, 2009. REUTERS/Christinne Muschi
A project in Ethiopia that helps destitute women become self-reliant by providing them with paid employment has attracted a lot of attention from politicians visiting Addis Ababa for an international get-together.
Alem Abebe is a 14-year-old girl who left home three years ago and made her way to the capital. She now earns 50 US cents a day working at the Abebech Gobena project in one of the city’s slums. It’s not enough to send money home, but enough to survive — and to pay for night school.
World Bank President Robert Zoellick ended a visit to Africa this week with the pronouncement that this century belonged to the continent’s development despite damage to economies from the global financial crisis.
Those who remember what were flagged by some at the time as “Africa’s decades” in the 1980s and 1990s may have cause for scepticism given that in many countries they turned out disastrous despite early hopes.
The overthrow of Madagascar’s leader may have had nothing to do with events elsewhere in Africa, but after four violent changes of power within eight months the question is bound to arise as to whether the continent is returning to old ways.
Three years without coups between 2005 and last year had appeared to some, including foreign investors, to have indicated a fundamental change from the first turbulent decades after independence. This spate of violent overthrows could now be another reason for investors to tread more warily again, particularly as Africa feels the impact of the global financial crisis.
Buoyed by recent discoveries of commercial scale oil deposits in Uganda, east African policy makers, foreign oil explorers and their local partners trooped to a five-star hotel on the Kenyan coast this week to reflect on the progress and chart future strategies.Viewed as a frontier region for oil exploration, east Africa’s first major oil find was made by Tullow Oil and Heritage Oil companies in the Albertine Basin, which spans the border between Uganda and the Democratic Republic of Congo (whose improving relations are making the exploitation of the reserves look morel ikely).Before that, Tanzania had found vast reserves of natural gas in Songo Songo and Mnazi Bay areas.Just like Rwanda, which hopes to revolutionise electricity generation in the region through methane gas from Lake Kivu, Tanzania hopes to power cars from the gas and generate much needed electricity from its natural gas.The regional economic power house Kenya has, however, had disappointing results so far in its search for oil.Although 32 wells have been sunk here since the 1950s, only traces of oil and gas have been found. It is now reprocessing data gathered over that period in the hope new knowledge and technology will reveal hidden deposits.Drilling, an expensive affair that prospectors say can cost a firm $200 million for one well, took a commercial break in the 1980s. But it has also seen a resurgence of interest, thanks to last year’s rise of crude in global markets.Kenya issued 14 exploration licenses last year and China National Offshore Oil Corporation (CNOOC) is set to sink its first well in the second half of this year in the eastern province.Kiraitu Murungi, the nation’s energy minister, told the meeting in Mombasa they were praying day and night for the new well and data reprocessing to show signs of oil.On the other hand, Uganda — long reliant on Kenya’s ageing oil refinery for its supply of petroleum products — has grand plans for its newfound oil resources.They include the construction of a state of the art modern refinery at an estimated cost of $1.3 billion to process its oil as well as oil from any new finds in the region.Uganda’s energy and mineral development minister, Hillary Onek, spoke of the plans with a grin and added that the region, believed to share common geology, could be headed for a better future as it taps its oil and gas reserves to power development.However, as officials and oil prospectors retired to the hotel’s restaurants and beach bar for a drink in the evenings, they must have wondered if a few obstacles may not block the path to that prosperous future.The global financial crisis is weighing heavily on the finance base of some companies prospecting in the region.Lack of local skilled manpower in oil and gas industry is also worrying. So is the big question of how to equitably manage revenues from oil and gas so that oil and gas do not turn into a curse for the region as they have elsewhere on the continent.Is east Africa ready to handle oil and gas? Will oil discoveries help local communities?
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.
For those looking to invest in Africa, the best prospects are in Nigeria and Ethiopia according to a new index of potential investment destinations published this week.
But should anybody want to put money into Africa at a time the global financial crisis and falling prices for export commodities, on which the continent is so reliant, have discouraged investors who had begun to see some African countries as promising frontier markets?
HIV infection rates in Africa have slowed since the start of the decade, but statistics still make very grim reading on the worst affected continent – of the global total of 2.1 million deaths due to AIDS in 2007, 1.6 million were in sub-Saharan Africa.
An estimated 1.7 million people were infected with HIV in sub-Saharan Africa in 2007 compared to 2.2 million new infections in 2001.
If anyone in Africa was worried that the global financial crisis might dim China’s interest in the continent, President Hu Jintao will be visiting this week to give some reassurances – as well as possibly to temper any unrealistic hopes for the amount of assistance to be expected.
As Chris Buckley reported from Beijing, this visit is also about China showing the wider world that it is a responsible power.