How Not to Spend $1.4 Billion

From a recent article in HealthAffairs:

The President’s Emergency Plan for AIDS Relief (PEPFAR) has been the largest funder of abstinence and faithfulness programming in sub-Saharan Africa, with a cumulative investment of over US $1.4 billion in the period 2004–13. […]

Using nationally representative surveys from twenty-two sub-Saharan African countries, we compared trends between people living in countries that received PEPFAR abstinence and faithfulness funding and those living in countries that did not in the period 1998–2013. We found no evidence to suggest that PEPFAR funding was associated with population-level reductions in any of the five [tested outcomes indicative of risky sexual behavior].

In other words: For most people, abstinence sucks and telling them that it’s cool doesn’t change their minds, even if you spend $1.4 billion on it. Not very surprising, because as NPR notes:

At the time, there was little evidence to suggest abstinence programs work. Randomized-control trials in the U.S. had shown that abstinence education programs didn’t prevent teenage pregnancies or decrease high-risk sexual behavior.

The results of the study are pretty damming:

PEPFAR funding wasn’t associated with changes in young people’s choices about sex. Bendavid and his team could find no detectable differences in the rates of teenage pregnancies, average number of sexual partners and age at first sexual intercourse in countries that had received PEFPAR money compared with those that hadn’t.

As the NPR story points out, PEPFAR is credited with saving millions of lives by providing HIV drugs and preventing HIV transmissions from mothers to newborns. That work is commendable. But it makes me sad to think about how many more lives could have been saved, if some conservative politicians wouldn’t have insisted on spending a ridiculous amount of money on programs that had little hope of achieving the desired outcomes, simply because they hoped to push their opinion about the right way to have sex on others.

 

The Grand Migration Bargain Begins

European governments don’t want to have any pesky migrants crossing the Mediterranean? Niger says it can arrange that, for a cool € 1 billion no less. That is the amount the Niger government told a delegation of E.U. foreign ministers it needs to curb the flow of illegal migrants through its territory. With Nigeria to the South and Libya to the North, Niger is currently an important stepping stone for African migrants who hope to reach Europe by sea.

Niger’s government has been emboldened by the € 3 billion migration deal between the E.U. and Turkey, which was negotiated back in March. E.U. member states, it seems, are willing to pay virtually unlimited amounts of money to stop migrants from crossing into E.U. territory.

With up to 150.000 migrants estimated to pass through Niger per year, the E.U. will essentially be paying about € 6.600 per individual to Niger’s government alone (assuming it agrees to Niger’s demands). Talks are underway with authorities in Libya as well and several other African countries are already recipients of large sums related to migration control.

We are fast approaching the point where the E.U. could pay all migrants a sum equivalent to the average yearly income of some of the poorer E.U. member states. Or cover several months worth of health and unemployment insurance.

Given that migrants are a net economic positive for the receiving societies, paying vast amounts of money to keep them out obviously makes no sense at all. Instead, European governments are too cowardly (vis-à-vis racist and outspoken opposition on the streets) to take the necessary steps to implement a functioning path to legal migration, or are opposed to it on ideological grounds.

Europe of course is by and large a rich place and will be able to shoulder this “idiocy tax” one way or the other. The real damage is done in Africa (and Turkey), where repressive and malfunctioning regimes are legitimized by these kinds of bargains. To put matters into perspective: Niger’s most recent public yearly military expenditure (2012) was $73.1 million. It’s revised 2015 budget was $2.9 billion. If the E.U. pays even a fraction of the €1 billion per year, especially when designated for border protection and the combat of criminal people smugglers, tasks usually reserved for the security forces, it will essentially guarantee Niger’s government financial and diplomatic immunity from any challenges domestic political opposition could pose to its power.

Brian Klaas: Africa’s Catch-22

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Some astute observations in a new article on Good Governance Africa:

Conflict in Africa can result in economic devastation that lingers on far beyond the last crack of gunfire, because aid and trade matter more to the continent’s economic growth than they do to others. The loss of international partners—and foreign direct investment in particular—can drain an African country of its economic lifeblood for years after a coup d’état or a civil war. […]

In research recently conducted for One Earth Future, an anti-conflict think tank based in Denver, Colorado, Jay Ulfelder and this author found evidence that the reactions of Western governments to conflict in other countries can create self-fulfilling economic prophecies. In some cases at least, there is evidence that the economic fortunes of a country after a coup, civil war, or an unconstitutional change of government may be largely dictated by international actors—particularly major powers in the West.[…]

These diplomatic responses are not random. They are carefully constructed with reference to geopolitics. Unfortunately, sub-Saharan Africa is in the geopolitical periphery. As a result, some countries outside of the region may receive more favorable diplomatic treatment in the wake of political violence, thereby ensuring continuity or even an increase in foreign direct investment. Government signals provide an important cue to investors, particularly when sanctions are involved—as they often are—with post-conflict, and particularly, post-coup governments.

I have for some time now arrived at the conclusion that – with very few exceptions – foreign policy responses to crises are made up on the fly, in a high-stress and low-information environment based on historical and personal experiences and reference points. African countries are more at the receiving end of this than any other, because western diplomats and bureaucrats are less likely to be experts on the issues that matter to the continent than for any other region.

There are two basic solutions to this: Either resist the urge to react instantaneously to everything that is happening in the world, if you come to the conclusion that your government doesn’t have the institutional capacity and knowledge to formulate a response on short notice. But this goes against the basic instinct of state departments and foreign ministers everywhere and wouldn’t necessarily be desirable in the first place.

Or governments decide to purposefully and diligently invest in developing the expertise and personnel necessary to make informed and coherent choices, even under pressure. That wouldn’t come cheap, but would probably be cheaper than dealing with the fallout of a botched crisis response.

Rosebell Kagumire: Male survivors of rape in northern Uganda and Ongwen trial

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Some really interesting information on sexual and gender based crimes during Uganda’s civil war. Every now and then a story like this about male rape survivors surfaces, making clear that this is a much more common feature of conflict than is generally known. The public (and to a certain extend the victims) are increasingly outspoken when it comes to sexual crimes against women, but male victims still have to fight tremendous stigmatization. In Uganda’s case, this is compounded by the fact that one of the conflict parties (the National Resistance Movement/Army) is still in power:

The question of justice at home is the biggest. Yes Ongwen’s trial is key and but for most survivors like Okidi, a trial of one side of the conflict will not bring him peace and justice. Many of the crimes committed before the ICC came into force and especially those by NRA (later called UPDF) have remained unaddressed. Uganda government is still yet to deliver on reconciliation, reparations and real tangible reconstruction and healing of the survivors of the conflict in northern Uganda.

via Rosebell’s Blog.

China in the Indigenization Trap

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From Brooking’s Africa in Focus blog:

Zimbabwe clamped down with the enforcement of its controversial indigenization law—requiring foreign companies with assets of more than $500,000 to transfer or sell a 51 percent stake to indigenous Zimbabweans this month. The deadline of April 1 had been set earlier in March in accordance with the controversial 2008 indigenization law requiring foreign companies to submit plans for such indigenization or face the risk of closure. […]

According to Chinese statistics, China has been the largest foreign investor in Zimbabwe for years, with total FDI of more than $600 million in 2013. Among all African destinations for Chinese investment, Zimbabwe has ranked among top three in the past three years.According to official Chinese media, currently there are more than 10,000 Chinese nationals living and working in Zimbabwe. Many Chinese companies in Zimbabwe are actively engaged in contractor services, including telecommunications, irrigation, power, and construction. […]

Chinese investment in the diamond mining industry seems to have taken the worst hit. Indeed, the indigenization of diamond mining industry has been interpreted by Chinese analysts as the government’s “nationalization” of the diamond mines. The two Chinese diamond companies, Anjin and Jinan, began their mining operations in Marange in 2012, reportedly with the Zimbabwean partner holding 51 percent of the share. Nevertheless, the Zimbabwean government ordered forced evictions of the companies in February, unless they become a part of the Zimbabwe Consolidated Diamond Company (ZCDC). The ZCDC, founded in 2015, is believed to be the government’s puppet to consolidate the ownership of diamond mines. Anjin has filed a law suit at the Zimbabwean Supreme Court to dispute the government’s decision.

Very interesting look at China’s competing interests (political vs. economical) and perspectives in Zimbabwe, as well as a broader discussion of the indigenization policy of Zimbabwe’s government.

Mozambique’s Billion Dollar Debacle

I’ve already linked to a piece about Mozambique’s debt scandal in last week’s newsletter, but now that the affair is playing out, I think it warrants another look.

Mozambique had to come clean to the IMF last week that it has a higher debt burden than previously known. In total, the government kept loans to the tune of $1.1 billion of the public books, which corresponds to about 8 percent of GDP.

Mozambique had to fess up, because it had to ask its creditors of another, publicly known loan to restructure that debt. Or as Simon Allison writes in the Daily Maverick:

In 2013, Mozambique secured about $850-million from foreign investors to help turn around the struggling tuna industry, even though the revenue forecasts were wildly optimistic. If this sounds fishy – well, it is.

Turns out, most of the money went to the military to pay for six speedboats and three patrol ships, all on order from a French company.

As a consequence, the IMF stopped the disbursement of the second tranche of a $282.9 million loan, because Mozambique’s government had agreed to declare all its obligations as part of the deal.

Now the whole affair is becoming really expensive for Mozambique’s tax payers really fast. The “Tuna Bond” will be restructured to be paid back at a later date, but at a higher interest rate. Combined with a plummeting exchange rate, this will results in millions of dollars in additional costs. Mozambique has also been downgraded by credit rating agencies, increasing the cost of future loans substantially.

Of course the whole affair begs a few questions. For example, why did the government go on such a borrowing spree and who would lend to a country like Mozambique?

The answer is natural gas. In 2011, Mozambique announced the discovery of major offshore natural gas fields and while it wasn’t supposed to come online until 2018, the loans were basically a dividend from the future, from the perspective of Mozambique’s policy makers. I mean, what could possibly go wrong?

Turns out, the world economy can go wrong, with oil and gas prices currently hovering at rock bottom prices. This has also pushed back efforts to bring Mozambique’s gas to market, likely delaying the timetable until after 2020.

What lessons can be learned from this debacle? First of all, is there a reason why countries like Mozambique, which are heavily dependent on development aid and IMF/World Bank support are even allowed to receive non-public loans? The creditors of the $1.1 billion facility are Credit Suisse and Russia’s VTB bank, which could have been obliged by international rules to announce and disclose the deal, shielding Mozambique’s tax payers and international institutions like the IMF from the financial fallout.

Institutions like the IMF should also have taken a much more critical stance towards military spending, especially when financed by borrowing against future natural resource rents. That a French company benefited from the sale may have played a role in muting criticism here. But Mozambique has only very limited naval security needs, which would have been fulfilled by a much smaller investment, which should have been transparent and separate from economic development spending.

Lastly, this is another example for why the rights of creditors need to be pared down in international lending. As it stands now, creditors like banks and hedge funds have little to fear, they almost always get paid out in full, to the detriment of the common citizens of the countries they lend to, no matter how obvious the red flags were when they decided to lend their money to a government without any form of reliable income or economic growth strategy.

Chinese Loans in Africa

If you read anything about Africa you have probably come across the discussion that surrounds China’s economic activities on the continent. It can be a quite divisive topic, though one that isn’t really based on a good empirical insights. There simply isn’t a lot of good data in the public domain on China’s economic impact and decisions in Africa.

The China Africa Research Initiative at John Hopkins University has just made a big step to change this deplorable state of affairs. Long time China in Africa blogger Deborah Brautigam and several of her colleagues took the wraps off a comprehensive database of Chinese loans to development projects in Africa.

There has been a lot of hype around Chinese money flowing into Africa, with some commentators alleging that these kind of loans have been increasing exponentially in recent years. And because loans to infrastructure and resource development projects are the main form of Chinese assistance to African governments, understanding the scale of this phenomenon really matters for understanding China’s Africa politics at large.

If you are at all interested in the issue, be sure to check out the full briefing. If you just want a best of, read on.

First of all, we are talking about much less money than some of the hype would want you to believe. From 2000 to 2014, Chinese banks, contractors and government agencies extended $86.9 billion worth of loans to African governments. The largest share of this, $59.6 billion, was contributed by China Eximbank, which leaves the World Bank as the single largest funder of African development. Simply put, Western angst about being overrun by China in Africa are largely unfounded, especially because the growth of Chinese loans to African recipient is linear, not exponential.

China is also targeting its loans pretty narrowly. More than 50 percent of the total was disbursed to just five countries: Angola, Ethiopia, Sudan, Kenya and the DR Congo, with Angola alone receiving 23 percent. Angola also received five of the 22 lines of financing worth $1 billion or more, though all of these were loans at commercial rates to the state-owned oil company Sonangol. Almost all loans to Angola were designed to be paid back in oil.

Roughly two thirds of loans went to Infrastructure or mining projects, with transport and energy taking the lion’s share at 48 percent.

From these numbers, it is pretty clear to me that China is playing a pretty rational economic game with respect to its interests in Africa. On the one hand it is investing heavily in natural resources, especially oil. That is understandable, given China’s position as the world’s workbench and increasing domestic consumption of energy. Because China is pretty flush with foreign currency reserves, providing lines of credit backed by resources is a smart strategy.

On the other hand, China is using its credit to develop export opportunities. Ethiopia doesn’t have a lot of oil, but it has made a real push in terms of extending basic transport infrastructure and developing its hydro power generation potential over the last two decades. China happens to have a lot of expertise and very competitive companies in these sectors, because it underwent the same transition a few years earlier.

The Chinese government via its banks and Chinese suppliers are basically providing African governments with the cash they need to pay Chinese companies to build these infrastructure projects. I imagine that in many cases, the money doesn’t even leave China but only travels overseas on paper.

I doubt that any Western government would handle things differently under similar circumstances. That doesn’t mean, though, that I think this approach is completely unproblematic.

With Sudan, Angola and Ethiopia in the top spots of Chinese loan recipients, it is clear that China doesn’t care about the impacts its money has on African domestic politics. The Chinese government isn’t specifically seeking out dictatorships to cooperate with (after all, Kenya and Ghana are on top spots as well), it just doesn’t care. At all.

There isn’t much sense in whining about this, especially when Western governments don’t seem to care much as well. A more constructive approach would be to ask how decision making incentives could be shaped differently, to make all governments more interested in the effects of their development assistance/financial assistance on local politics.

Uganda Opts for Tanzania Over Kenya for Important Pipeline

The writing has been on the wall for a few days, but today came the definite announcement: Uganda will partner with Tanzania, not Kenya, to build a pipeline and export its crude oil production.This is devastating news to the Kenyan government, which had hoped to use the same infrastructure to export its own oil production and will cost both Uganda and Kenya a lot of money:

Uganda will lose $300 million every year due to an increase of $4.07 in tariff per barrel, and Kenya will lose $250 million per year due to the increased tariff of $6.96 per barrel.

The reasons for Uganda’s decision are complex. Some concerns voiced about Kenya’s proposal relate to the difficult terrain in the Rift Valley, which can be avoided by passing through Tanzania’s Lake Victoria Basin. But the most important factor seems to have been limited confidence in Kenya’s government.

Kenya’s northern and Eastern provinces are notoriously insecure, due to intercommunal violence and conflicts in South Sudan, southern Ethiopia and in Somalia. Militants linked to Al Shabab regularly stage attacks with high casualty rates in areas that the pipeline will pass through, for example. The pipeline’s financing is still unclear and the designated export port at Lamu is still far away from completion.

In addition, Kenya’s delegation to the final negotiations seems to have inspired little confidence that they are on top of these problems in their Ugandan counterparts:

However, it has also emerged that the Kenyan officials participating in the Kampala talks may not have had all their facts right as they tried to address the concerns raised by Uganda over the northern route for the pipeline.

In contrast, Tanzania can offer an existing port, Tanga, and a very stable political environment. French oil giant Total has offered to finance the construction costs of the pipeline, as well as 40 percent of the planned Ugandan refinery at Hoima, while Tullow oil, the UK company which runs the Ugandan oil fields, seems to prefer the northern route through Kenya because it has interests along that pipeline corridor as well.

For the Kenyan government, this decision is about more than just the pipeline. The pipeline project is linked to a whole slew of infrastructure projects, ranging from a standard gauge railway to a high-capacity power transmission line linking Kenya and Ethiopia. Uganda’s decision will make it even harder to finance these ambitious projects and keep them on schedule.

From Uganda’s perspective, short-term profit seems to have trumped long-term decision making. President Museveni has recently been reelected in a contested election that turned out to be the most expensive in the country’s history, largely due to the plundering of state coffers to finance Museveni’s campaign and his outsized security apparatus. Uganda’s economic and human development performance has been lacking behind neighboring countries in recent years and the frustration among the overwhelmingly young population with the government is palatable. Uganda is broke and Museveni needs a lot of money quickly.

This is not to say that Ugandan worries about the Kenyan government’s reliability are unfounded. President Kenyatta and Vice President Ruto have presided over a disastrous military intervention in neighboring Somalia and have been unable to curb intercommunal violence, especially in the cost area.

From a regional point of view, the decision as both its pros and cons. On the one hand the competition between Tanzania and Kenya has a potential to produce future political rivalry. But as Ken Opalo points out

All else equal, this is probably a net positive development for the future of the East African Community (EAC). It is obviously a big financial and political loss for Kenya (and for that matter, Uganda) but it will dampen the idea of a two-speed EAC — with Kenya, Uganda, and Rwanda in the fast lane and Tanzania and Burundi in the slow lane.

It’s a Good Time to Be a Dictator Again

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There was a brief period of time when it looked like openly fraternizing with authoritarian rulers might go out of style, especially in Africa.

The Cold War’s end suddenly obviated the West’s need to prop up local allies — and Russia simply didn’t have the means anymore to do the same thing. The brutal civil wars of the 1990s and 2000s brought the deadly consequences of dictatorship to the fore, and a new crop of African rulers promised to usher in multi-party democracy.

In stark contrast to the situation in the Middle East, most African countries weren’t strategically significant. To top it all off, the Arab Spring discredited Western foreign policy in North Africa — specifically, the hemisphere’s dealings with the likes of Muammar Gaddafi in Libya, Zine El Abidine Ben Ali in Tunisia and Hosni Mubarak in Egypt.

Western governments promised to have seen the error of their ways and solemnly swore to really push for democracy in Africa, and without foul compromises this time around.

Well, those feelings were short-lived. With right-wing populists breathing down the necks of European governments due to the migrant crisis and defense companies in dire need of sales after the financial crisis massacred Western defense budgets, any autocrat who has something to offer is back in the game.

Read the rest on War is Boring!

Is France Prepared to Fight in a Hostile Environment?

Is France Prepared to Fight in a Hostile Environment?

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From France 24:

Demonstrators stormed an airport runway in northern Mali on Monday to protest against arrests by French forces of people suspected of links to Islamist militants who operate in the region, local officials and witnesses said.

Security forces fired warning shots and teargas to deter the mostly female protesters in the town of Kidal who also ransacked and set fire to airport facilities, said a local official, witnesses and the U.N. mission in Mali, MINUSMA.

The protests appear to mark a deterioration in relations between foreign forces and the local community in Kidal, a town at the centre of a separatist movement and violence by Islamist militants, some of whom are linked to al Qaeda.

One person died and six were injured, said Ahmoudane Ag Ikmasse, who represents Kidal in the national assembly. Ikmasse said he was in the capital Bamako but was in contact with people in Kidal.

A doctor in Kidal’s health centre said two died from gunshot wounds.

When France started its military intervention in January 2013, it was greeted as a liberator by southern Malians and parts of the northern population. But France has not been able to resolve the political conflicts within Malian society and instead concentrated on hunting down members of terrorist organizations like al-Qaeda in the Islamic Maghreb (AQIM).

France’s strategy has been described as “permission to kill” suspects without any transparency why certain individuals were designated as targets. Unfortunately for the French forces, AQIM’s and other terrorist organizational structures overlap considerably with purely criminal endeavors, primarily large-scale smuggling of narcotics and contraband within the wider region. Smuggling in turn, while also a contributor to AQIM’s finances, is widely accepted among the local population as a normal way to make a living, with few other economic opportunities available.

Under these circumstances, it is almost assured that France’s aggressive anti-terrorism operation results in a lot of people perceived as innocent either in body bags or in prisoners after pre-dawn raids.  With political tensions complicating the picture, France’s position vis à vis the local population will become ever more precarious and other international forces, like the U.N. and E.U. missions, are liable to become swept up in the anti-French sentiment.

So if France so far wasn’t even able to limit the activities of isolated groups like AQIM, how will the international presence fare if large parts of the population especially in northern Mali turn hostile?