THE recent "tuna fleet" scandal in Mozambique raises questions about whether another African success story might be heading for choppy waters, WRITES DIANNA GAMES.
The country is facing censure over evidence that the government may be using a big chunk of $850m raised on international capital markets three years ago to buy arms and not the large fleet of fishing boats the money was earmarked for.
Earlier this month, the International Monetary Fund (IMF) cancelled the second tranche of a $285m emergency loan it had granted at the end of last year and cancelled an IMF mission to the country scheduled for later this year.
Mozambique’s credit rating has also been cut in the wake of the evidence of misuse of the money.
The capital-raising exercise was initiated by the government, which said in its investment prospectus it wanted to raise money for the expansion of the country’s newly launched and totally unknown tuna fishing company, Ematum.
The deal immediately raised eyebrows, with donors asking questions about why a country with significant development challenges would raise its debt profile to this extent just for fishing boats.
The critics of the deal were proved right when it later emerged that most of the money was, in fact, spent on security.
Africa Confidential reported subsequently that the Mozambican government raised debt to the tune of closer to $1.5bn in a series of undisclosed deals — information that has apparently shocked the IMF, which has just lent Mozambique funds to help it with its current economic woes.
The evidence has come to light in the wake of Mozambique’s attempt to restructure the bond, which it is battling to repay.
This has raised fears of a default ahead of the seven-year payment term.Read more ...
- Published in Business Day SA, 25 April 2016. Picture: Jeremy Glynn.
THE admission by Nestlé that it overestimated the size of Africa’s middle class has caused ripples in the "Africa rising" story. But it is also a much needed reality check for companies that have pinned their hopes — and their investments — on ambitious growth forecasts of the middle-class pot of gold, writes DIANNA GAMES
Pubished in Business Day SA, June 22 2015.
Last week, the multinational food producer said it was cutting 15% of its workforce across 21 African countries and reducing its product lines. In 2008, it decided to invest heavily in sub-Saharan Africa based on projections of rising middle-class demand. Last week, it said turnover was way short of growth forecasts.
Much new investment in Africa in recent years has been based on the potential of this rising middle class despite the fact that the size and actual spending capacity of this category of consumer is rather hazy.
The African Development Bank’s 2011 research estimated that 34% of Africa’s population — 313-million people — was middle class.
As long as politicians enjoy official passports and visa-free travel to many countries in Africa, the political will to change the situation will not be there, writes DIANNA GAMES
Published in Business Day SA on 8 June 2015
THE best African passports to have are those from The Gambia, Côte d’Ivoire or Kenya. Why? Because travellers with these passports need visas for just 41% of African countries, lower than the average of 55% of countries requiring Africans to have visas for other African countries
The worst to have is a Somali passport, even though the country does not require visitors to have visas — rather unsurprisingly.
These findings from research conducted by McKinsey were part of a broader discussion at the recent African Development Bank annual meetings in Abidjan, where business people, politicians and others raised questions about why the free movement of people across the continent, enshrined in the founding principles of pan-African organisations, is still difficult. The issue is one of the sticky items on the agenda of the Tripartite Free Trade Area negotiations, which are scheduled to be launched at this week’s African Union summit in Johannesburg. The free trade area, due to be launched in 2017, will cover an area stretching from Egypt to Cape Town.
Many of those governments around the table will be the same officials who have visa regimes in place for fellow Africans. Read more ...
Nigeria’s agriculture minister who takes over the bank this year has the energy and vision to take this premier African institution into the future, writes DIANNA GAMES
Published in Business Day SA, 1 June 2015
THE new African Development Bank (AfDB) president, Nigeria’s Akinwumi Adesina, has been a breath of fresh air in African agriculture.
As Nigeria’s agriculture minister, he worked to cut Nigeria’s $11bn-a-year import bill for basic foodstuffs by looking at innovative funding mechanisms, tackling corruption and improving efficiency.
He tried to reframe the sector as being a critical catalyst for growth rather than a tool for poverty alleviation. "We were looking at agriculture as a developmental activity, like a social sector in which you manage poor people in rural areas. But agriculture is not a social sector… (it) is a business."
Muhammadu Buhari may have ben handed a poisoned chalice, having to balance tackling a litany of economic and security problems while satisfying Nigerians' expectations of change, writes DIANNA GAMES
Published in Business Day SA, 25 May 2015
NIGERIA is facing a crisis of expectations as it heads for one of the most auspicious moments in its relatively short 16-year democracy.
The inauguration later this week of Muhammadu Buhari is expected to bring significant change to this large, complex nation.
Not only will Nigeria have a different head of state, it will have a new cabinet and two-thirds of the 36 states will be changing governors after the opposition All Progressives Congress won at the polls this year, displacing the Peoples’ Democratic Party, which had governed Nigeria since 1999.
While this presents an opportunity for a new broom to sweep away much of the rot that has dogged Nigeria’s progress, it’s a formidable task. Read more ...
The outgoing president has become a household name in Africa for his stellar performance and innovative policies. He leaves big shoes to fill, writes DIANNA GAMES.
Published in Business Day SA, 11 May 2015
A LANDMARK election is coming up later this month that will affect Africa’s fortunes over the next decade — and yet most Africans are unaware of it.
The election of a new president of the African Development Bank (AfDB) looms as Donald Kaberuka spends his last few months in office after a decade at the helm.
When Kaberuka, former finance minister of Rwanda, was voted into the job in 2005, Africa was a different place. There was no talk of Africa rising, China was just starting to make its mark in Africa and the 2008 financial crash lay in the future. Africa was awash with fragile states and the possibility of middle-income nations emerging across the continent was some way off. Read more ...
Mugabe's many excuses for a feeble economy have worn thin in Zimbabwe, where many people still await an "indepence dividend" as the country markets 35 years of independence, writes DIANNA GAMES
Published in Business Day SA, 13 April 2015
ZIMBABWE President Robert Mugabe raised some laughs with offbeat remarks and jokes during his state visit to SA last week. Back home, though, there was little to smile about as the country headed for its 35th anniversary of independence this weekend.
After decades in power, Mugabe presides over an economy that the African Development Bank has described as "fragile".
The bank says Zimbabwe is undergoing "structural regression", the key features of which are accelerating informalisation of the economy and de-industrialisation.
Mugabe’s bellicose speech about black empowerment delivered to an applauding audience at a business forum in Pretoria last week failed to mention that about 55,000 people have lost their jobs in the three years to 2014 as 4,610 companies closed their doors, unable to survive the economic ravages his populist policies have wrought.
Mugabe’s administration, with few scapegoats left to blame for the state of the economy, still tries to point the finger at sanctions as the reason for its misfortune. While limited, targeted sanctions are in place, many of the world’s wealthy emerging markets have no sanctions whatsoever against Zimbabwe, but they are not investing there.
South Africa may be more sophisticated than other important markets in Africa, but political complacency and stagnating economic growth are getting foreign - and local - investors to look at high growth and good returns north of the border, writes DIANNA GAMES
Published in Business Day SA, 30 March 2015
AFRICANS from other countries often ask me why SA is squandering its obvious advantages. Many of them come from countries that have hit economic rock bottom and know what a long, hard road it is to recovery.
Although it is still easier to operate in than most other African countries, it is generally regarded as being on a downward trajectory, characterised by slow economic growth, policy confusion and a focus on short-term political priorities.
The country may be considerably more sophisticated than other important markets in Africa, but political complacency and stagnating economic growth have served to highlight, inadvertently, what competitors north of the border are offering — high growth, good returns and improving governance.
A survey conducted by the Economist Corporate Network among more than 200 CEOs, both local and foreign, in 25 industries across Africa, reflects an unfortunate trend — the relative decline of SA as a key market of choice for Africa-based investors over the next five years.
AFTER the announcement of Nigeria’s statistical triumph, I expected a chest-thumping, jubilant response in the country. Instead, news that Nigeria had become the biggest economy in Africa, with gross domestic product of an astonishing $510bn, was greeted with a sober, even dismissive, response by the media, professionals and ordinary people.
"It’s too soon to exhale," a banking professional last week. "We have too much to do. Our macroeconomic fundamentals are not in place. Things are just not where we need them to be. There is no reason for celebration."
Another said the statistics had, if anything, highlighted the lost opportunity. "Imagine how big we would be if our governments had invested oil profits in this economy since 1990," he said referring to the last time the economy was measured.
Having first visited Nigeria in the early 1990s and seen the differences in the country between then and now, I believe Nigeria does have a lot to celebrate, even if the road ahead is still a long and rocky one. In 1990, Nigeria was still dealing with the economic fallout of a series of military coups d’etat. Since its first post-independence election in 1964, Nigeria’s political condition has been more one of military than democratic rule, mostly by leaders with little interest in economic growth.
When the economy was last measured, Maj-Gen Ibrahim Babangida, who took power in 1985 from another coup leader, was in charge. He took over a state in crisis, a situation precipitated by distortions brought about by the country’s dependence on resources and worsened by the oil price crash of the 1980s.
He introduced a comprehensive economic "emergency" plan, setting in motion privatisation of state companies, financial sector reform, the revival of agriculture, and cut back imports. But he was also the architect, many Nigerians say, of patronage and corruption, despite being a proponent of fiscal prudence. Under his watch, foreign debt ballooned. And, by dragging out the promised return to democracy for eight years and annulling a presidential election held to facilitate this handover, he paved the way for another coup in 1993.
Sani Abacha, Nigeria’s last military ruler, presided over an economy hollowed out by grand corruption. He ran the oil business as his private fiefdom, dictating oil deals from his presidential villa. The central bank was in effect his piggy bank. State utilities in key areas such as telecoms and power were run into the ground through neglect and underinvestment.
Abacha died suddenly in late 1998, paving the way for the democratic era Nigeria has enjoyed since then.
There was talk of a rebasing exercise after the 1999 democratic elections but it is held that this was scuppered by the intention of the Obasanjo regime to secure debt relief from the multilateral lenders and the Paris Club, which would have not been possible if Nigeria had emerged, then, as a middle-income country. The decision paid off. And the economic trajectory, as is now common cause, has been strongly upward — even if the 7% growth rate now turns out to be lower as a result of the rebasing.
Nigeria has a long way to go. The gap between rich and poor is widening; it remains one of the poorest countries in the world and has a tiny tax base, despite a rapidly growing private sector. It is easy to look at the significant infrastructural development in cities such as Lagos and Abuja as being progress and forget the underdevelopment elsewhere in the country.
There are many reasons to criticise Nigeria’s progress and economic governance. But it is also easy to forget how far it has come since 1990.
The question now is whether the political leaders and technocrats use the country’s new status as the biggest economy in Africa as an excuse to continue to underperform or whether they will set it on a path towards its true potential, where Nigeria’s, rather than political interests, are primary.
• Games is CEO of consulting company Africa @ Work.
THE struggle in Zimbabwe’s ruling Zanu (PF) to inherit the mantle of power from President Robert Mugabe has spread from the political battleground to the state-owned media.
Publications such as The Herald and Sunday Mail once filled their pages with vitriol directed at the opposition Movement for Democratic Change (MDC. They attacked critics of the president, covering the government’s own shortcomings with thundering editorials about the threat of neocolonialism and other distractions.
The ruling party was out of bounds for journalists employed by the state.
Now it is open season.
There are different theories about why the ruling party is turning on itself. One is the succession battle between factions jockeying for their candidate to succeed Mugabe.
These factions are using the state media to discredit each other by selectively exposing corruption linked to their opponents.
Officials are trying to paint these disclosures as an attack on corruption in principle. But it is hard not to believe this is not being driven by political expedience, particularly as many of the scandals being aired are not new.
Bribes sought by ministers, the activities of the diamond mining companies that have been unaccountable to the nation for years, dodgy infrastructure projects and others are all in the spotlight.
Another theory is that the state is looking for scapegoats to blame for the poor condition of its finances.
It seems as if state-owned enterprises are the target in this regard.
Once protected by the ruling party despite the fact they were mismanaged, inefficient, and were a drain on an ailing fiscus during the darkest days of the economy, the state continued to support them.
They were a key source of patronage and control for Zanu (PF).
But now the gloves are off. Earlier this year, the state caused a furore by disclosing that managers of parastatals were earning obscene salaries.
In one case, the manager of the country’s biggest medical aid society was "found" to be earning $535,000 (R5.3m) a month, with benefits, while the organisation was in debt to service providers and in arrears with tax.
Those exposed include entities that have struggled to pay workers even while paying ridiculous salaries to managers. The saga has been dubbed "salarygate" by a furious public. The minister has now capped salaries of managers in state-owned enterprises and local authorities at R60,000.
But many believe the government is not acting to rein in graft because it is the right thing to do, but because it needs to find money to pay public servants’ salaries — an increasing concern. Public servants, estimated at 230,000 people, swallow up almost 75% of the state’s monthly revenues.
The government is already struggling to pay their salaries, and paid them several days late this month.
It is now under pressure to implement a significant pay hike promised by Mugabe during last year’s election campaign. The deadline for the new packages has been shifted from February to April. But it will take a miracle to meet this new deadline.
The lack of liquidity in Zimbabwe is not only the state’s problem.
I attended a number of results presentations last week at which a lack of liquidity was raised by companies as a significant issue affecting their performance and future planning.
The number of retrenchments is rising rapidly. Last year, more than 120 companies applied to the Retrenchment Board for permission to shed workers, and trade unions say nearly 10,000 were laid off. The trend has continued this year. Economists say Zimbabwe is operating at a third of its capacity. The government’s economic recovery programme has been widely panned as being unworkable, and investor confidence is low.
And while the government casts around for miracles, the public servants, a key plank of Zanu (PF)’s support base, are getting restive.