Africa’s Defense Industry Is the Most Corrupt in the World – In the worst cases, armies have in effect taken over their governments

Of the world’s inhabited continents, Africa has by no means the biggest defense sector. Fifty-four African states are responsible for less than three percent — or about $50 billion — of the world’s military expenditure. But the continent also has experienced the largest increase in military spending, an astronomical 90 percent since 2005.

This by itself isn’t surprising. Conflict in a number of North and Sahelian African countries, and a boom in commodity prices in the years after the financial crisis, swelled the war chests of many resource-dependent governments in the region.

Read more on War is Boring.

Podcast: Africa’s Boom and Bust

Mansour Sy and Lorenzo Fioramonti join us to share some very different but equally thought-provoking visions on how Africa should approach falling commodities prices, a trend that has thrown many African economies into disarray.

Listen to Podcast on African Arguments.

These Are the Wars That Will Rage in Africa in 2016 – Violent conflict remains in clusters while the continent grows more peaceful

With the exception of Syria, African countries currently get the worst rep when it comes to violence and conflict. Virtually every story coming out of the continent seems to showcase one atrocity or another.

This narrative is both true and false. In 2014, Africa experienced more than half of worldwide conflict incidents, despite having only about 16 percent of the world population. This is a slightly larger share of the world’s conflicts than even during the chaotic years of the post-Cold War 1990s.

But there are two important caveats…

Read more on War is Boring.

Podcast: That was Africa’s 2015

We are joined by Richard Dowden, Director of the Royal African Society, and Yinka Adegoke, the editor of Quartz Africa, to discuss the big trends of Africa’s 2015.

Published on African Arguments.

Podcast: China in Africa with Deborah Brautigam

In this edition of the podcast, we are joined by Deborah Brautigam, author of Will Africa feed China and The Dragon’s Gift: The Real Story of China in Africa to talk about China-Africa relations and misconceptions of China’s role on the African continent.

Podcast: Economic Statistics in Africa with Morten Jerven

We talk with Morten Jerven, author of “Poor Numbers” and “Africa: Why Economists get it Wrong” about the quality of economic statistics in Africa and why it matters.

Find the shownotes on African Arguments.

The World’s Poorest Continent Spent an Extra $50 Billion on Weapons Last Year

Good news, world military spending declined last year.

According to several new reports published by the Stockholm International Peace Research Institute, global military spending decreased by 0.4 percent in 2014.

Unfortunately, that decrease is due to America’s military spending cuts. Excluding the United States, spending actually went up 3.1 percent across the globe — and nowhere did it increase more dramatically than in Africa. …

Read more on War is Boring.

Agriculture in Africa: Great Hopes and Great Challanges

Agriculture in Africa may prove to be pivotal in the continent’s development, much more so than oil, gas or minerals. It has the potential to transform Africa’s role in the international economy and its internal political cohesion. But this potential comes with huge challenges, because before agriculture can be transformative for African societies and economies, it needs to be transformed itself.

“Agriculture is sexy”, at least according to Bruno Wenn, managing director of German financial institution Deutsche Investitions- und Entwicklungsgesellschaft, speaking at the International Economic Forum on Africa in Paris in October. Practically all international organisations tend to agree with that statement, although it is usually framed in more technical terms.

Speaking at the same event, Carlos Lopes, executive secretary of the United Nations Economic Commission for Africa, nicely summed up the reason for everybody’s hopes for the African agricultural sector: “We have the largest reserves of arable land in the world, 60 percent, and the lowest productivity where it is already used. That results in an enormous potential to feed the world.”

A Moral Imperative and Good Business

Feeding the world is high on the international agenda because while we produce enough food for everybody at the moment — hunger is a problem of distribution, not production — this could change over the coming decades. The world population will grow by another two billion people until 2050 and with increasing wealth in countries like China and India, many more people will demand resource intensive foods like meat. While there is enormous potential in reducing food waste, increasing production will likely be necessary to ensure continuous abundance.

This makes developing the agricultural sector in Africa both a moral imperative and lucrative business. Additionally, increasing food production in Africa would have many political advantages for the continent. It would cut dependence from outside powers like the United States for basic foodstuffs, allow for a strengthening of regional trade networks and secure political stability. “Bread riots” due to high prices and governments’ inability to continuously subsidize imported grains are a common occurrence in many countries across the continent.

Apart from foodstuffs, there is also a great global appetite for agricultural commodities. Cut flowers for the European market, cocoa and coffee for the world’s café’s and cotton from West Africa all promise earnings for governments and businesses on the scale of oil and gold.

The development community is also pushing for the transformation of the agricultural sector. Africa’s agriculture is dominated by smallholders and increasing their income potential could contribute enormously to lifting broad sections of African societies out of poverty. Lastly, while economic reserves of “hard” commodities like oil, gas and gold are limited to relatively few African countries, agriculture is possible across the continent and will still be when all current oil fields have long been depleted.

Challenges Not Taken Seriously

But the transformation of the agricultural sector is also fraught with challenges that make the common “resource curse” look like a minor policy issue. And while problems associated with the extraction of hard commodities are commonly accepted and high on the international agenda by now, many issues of the agricultural sector are still treated like second-class citizens in the realm of policy making.

The raw potential of agriculture in Africa is also one of its main weaknesses. The reason for the continent’s low agricultural productivity are decades of neglect and mismanagement, reaching back to colonial times. The necessary infrastructure to develop the sector — roads, storing facilities and ports — are mostly in a desolate condition and rebuilding it will take much more investment and time than constructing that one pipeline or rail track to exploit the latest oil or mineral deposit, due to the decentralized nature of agricultural production.

For example, food worth $4 Billion is wasted in Africa annually due to insufficient processing, storage and infrastructure. This corresponds to enough food to feed 48 Million people.

African states will also need to figure out their individual agricultural strategy. Some, like Côte d’Ivoire, are already major players in producing commodities like cocoa. All countries will have to balance the temptation of producing hard-currency-earning export products with the necessity of providing basic food security for their population. A possible solution to make this policy decision less of a dilemma would be a tighter regional integration of agricultural trade and production, but this process has just started and will probably need decades to come to fruition.

Governments will also need to make policy decision about their place in global agricultural value chains. As little as 40 per cent of the world market price of cocoa makes it into the hands of cocoa farmers, for example, severely limiting the potential profit for countries exporting the raw product. Similarly to recent “local beneficiation” legislation introduced by Botswana and South Africa for hard commodities, developing policies to capture a greater share of value added on “soft” agricultural commodities needs to reside high on Africa’s political agenda to enable a true transformation of the sector.

Betting on the production of soft commodities for export also reintroduces the question of economic independence into the debate. As Bruno Wenn pointed out in Paris: “Whenever we in Europe decide to change regulations [on agricultural production] due to health policies, it might be a nightmare for small farmers in Africa to comply.”

This can turn out to be a real problem, especially because protectionism is well established in international agricultural politics. If the European Union for example decides that it needs to protect its domestic production of fruits from cheaper Kenyan exports, all it potentially has to do is change some of its regulations in a way it knows smallholders in Africa will have a hard time complying with. This type of behaviour is certainly not without precedent and presents an enormous risk for producers.

Another sensitive issue that has already made into the reports of several large advocacy organizations is the practice of land-grabbing. Commonly only discussed in the context of foreign investors buying large tracts of land in Africa for rock-bottom prices, there are also a few famous cases of African elites themselves developing a taste for land ownership. The Kenyatta family in Kenya for example is probably the largest landholder in the country and many open questions remain about the legality of these acquisitions. With prices for virtually all agricultural products set to rise on the world market, we can expect more investors — from Africa and abroad — to develop a taste for land ownership. And because large-scale farming is often associated with increased productivity, although there is no inherent causation in reality — governments and international institutions might be happy to support this process from a policy perspective.

African societies will need to work out for themselves how to deal with this dynamic. In the context of still unclear ownership, pervasive corruption, high level of distrust towards authorities and the emotional component that connects land issues and identity, this is certainly not a trivial task.

Finally, much of the “green revolution” that has made transforming agriculture in India and other developing countries possible over the last decades relies on extensive use of fossil fuels for fertilizing, intensive use of soil and water resources and formerly pristine habitats as well as genetically modified organism. Everything on this list presents serious environmental concerns and using the same methods to develop the agricultural sector in Africa would have profound consequences on local ecosystems.

Charting a New Course

It is about time for African governments, societies and businesses to solve these issues and in some respects, progress has already been made: large sums are invested into infrastructure by those countries who have the money to do so; Countries like Kenya, Ethiopia, Morocco and South Africa are already reaping the literal fruits of successfully positioning themselves as extensions of European agricultural markets; Mobile technology delivers the foundation for an ongoing revolution of financing small-scale farming and homegrown and international banks start to take investing in the sector seriously.

Too much of the debate is still fragmented, though. Issues of finance, poverty reduction and environmental concerns are still treated as different subjects by governments, NGOs and investors. But agriculture, much more than any other human activity, connects social, economic and environmental issues and to successfully transform the African agricultural sector all actors will need to recognize this.

A critical look at Germany’s resource strategy from Africa’s perspective

Germany is not exactly the most prolific investor in Africa’s resource sector. But as an export oriented economy with a solid reputation for world-class mechanical engineering, engine construction and specialised tooling, a considerable share of Africa’s mineral exports wind up in Germany somewhere along their value chain. Additionally, Germany has considerable influence on European Union policy, making the country an important actor in the use of Africa’s resources.

While Germany was a mining country once, today the only “hard” commodity produced on any scale is coal (and even this fuel is imported to satisfy demand). Especially Germany’s once abundant mineral reserves are completely exhausted. Especially over the last years, with world market prices sky high and exporters like China artificially curbing supply, this has resulted in demands from Germany’s industry for political support for securing access to essential mineral resources.

The government’s answer is its 2010 Resource Strategy (pdf, German), which was designed with considerable input from industry interest groups. As official policy from one of the world’s most powerful governments, it is worth looking at possible consequences for resource politics in Africa.

Government supported investment and trade

Two core objectives of the strategy are to diversify Germany’s resource sources and secure favourable trade agreements. While the focus on diversification is positive for Africa’s economies, as Germany has traditionally stronger links to resource producers in Latin America, the emphasis on trade is not. Germany has a long history of pushing the free trade agenda and supports this policy strongly on EU level. Free Trade Agreements (FTA) have been struck with many developing countries on a bilateral level and the German government has also used organisations like the WTO to further this goal.

Of course different opinions exist on the consequences of FTA’s, but I’m firmly in the camp that sees little benefit for developing countries. To often, FTA’s lock countries into unfavourable arrangements with Western companies. Especially clauses strengthening investor’s rights, giving them immunity from changes of law that would impact their investment negatively, often undermine efforts of developing countries to shape their resource sectors to be more profitable and less environmentally damaging. African countries should be very careful when entering into these agreements, ideally avoiding them completely. FTA’s could also limit African country’s efforts to demand a higher local content.

Lip service to human rights and environmental protection

The strategy states that

It is one of [the strategy’s] main goals to further the responsible and transparent handling of resources (Good Governance) and the sustainable use of resources while securing human rights and strengthening internationally accepted social and ecological standards. – p 22

This dedication to securing human rights in the resource sector is probably more lip service than anything else. As much was made clear in a discussion with government officials about this topic during a workshop on the German resource strategy. The government representative made it clear that human rights, environmental protection and corruption are “within the domain of the host country” and not the responsibility of the investing country (Germany).

This low level of dedication is deplorable, because Germany has considerable power to positively influence whole value chains, if it chooses to do so. A good example is the development of a certification system for “conflict minerals” from the DR Congo under the leadership of Germany’s ministry for economic corporation. Here Germany has successfully developed a model that could in theory guarantee social and ecological standards in mineral production (while of course being ineffective in its stated purpose – undermining the financing armed groups). Together with strong EU regulations, this could fundamentally change industry practice in a positive way, but so far Germany doesn’t seem to be interested in playing a constructive role. An interesting test will be the government’s position to the EU counterpart of the Dodd-Frank act regulating the import of conflict minerals. More on this in a later post.

It should also be noted that the German Government didn’t go out of its way to get input from African (or any other) resource exporting countries or civil society. The only interest group consistently involved in the process was the German industry. This is bad for virtually everybody involved. African governments weren’t able to give input on how to design the policy to make it favourable to them, increasing the likelihood that it would actually pay of for German importers; African and German civil society weren’t able to raise social or environmental concerns, increasing possible harm done to African countries in the long run and the German government lost out on the possibility to offset its limited direct influence on African resource markets through innovative policy making.

A civil society alternative

As a reaction to the content and process of the resource strategy, civil society in Germany has asked the Government to review the policy. Its position paper (pdf, German) lists three main demands:

1. Lower consumption of raw materials

2. Human rights and due diligence procedures  for companies

3. Democratize resource policy

I don’t want to go into too much detail on the content of these demands, but I think that their adoption would be in the interest of African countries as well. Reduced resource use in Western countries would decrease environmental damages in exporting countries, without necessarily limiting long-term earnings from resources. Strong due diligence laws and more transparency in the shaping of resource politics in some of the world’s leading consumer markets would have tremendous positive effects on issues like corruption and human rights violations linked to mining. African governments and civil society should engage intensively with policies like the German resource strategy, because they can have tremendous repercussions on the other side of the world – it depends on their design, if these repercussions end up being good or bad for the people facing them.

War is Boring: Africa Roundup (Congo, Mali, Mauritania, Guinea-Bissau)

Fighters of the MNLA in Mali. Photo via Maghrebia on Flickr.

The latest installment of my regular Africa conflict roundup for warisboring.com

Congo

A large-scale mutiny-come-rebellion rocks the eastern part of the Democratic Replublic of Congo since Easter. Never the most peaceful of places, the situation in the Kivu provinces bordering Rwanda escalated, when army general Bosco “The Terminator” Ntaganda decided to defect from his position.

Ntaganda is searched for by the International Criminal Court on charges of crimes against humanity. (The ICC recently sentenced Ntaganda’s former superior Thomas Lubanga in a related case.) A military commander of a powerful rebel group, the CNDP, Ntaganda protected himself from prosecution by leading an internal coup against CNDP leader Laurent Nkunda and bringing the CNDP into the fold of the government. This deal — in which Rwanda played an important part — gave Ntaganda the highest army command in the Kivus and didn’t touch the CNDP structures, which persisted in parrallel to the normal chain of command. […]

Read more on the current situation in the DR Congo, Mali, Mauritania and Guinea-Bissau here.