Kenya Wants to Displace the Displaced

Kenya has threatened to close down all refugee camps within its territory and send all refugees, all 600,000 of them, back to their home countries.

This is not the first time that the Kenyan government has announced to make the country a refugee-free zone. But previous threats have been squarely aimed at increasing international funding for supporting the refugee population, which largely originates from neighboring Somalia, South Sudan and Ethiopia. But this time, many observers think that the government is serious, as it has already shuttered the government agency responsible for dealing with refugees.

Kenya has been a hostile environment for refugees for a few years now, in many ways providing the template for the European reaction to the massive influx of Syrian refugees. Kenya, a developing nation, has some legitimate concerns: housing and feeding such a massive refugee population has economic ramifications and Kenyan security services has identified camps like Dadaab, the world’s largest, as a staging ground for terrorist attacks by the Somali group al-Shabab.

For these reasons, the refugee question has become highly politicized. And with presidential elections coming up in August 2017, it doesn’t take a great amount of cynicism to see this as a campaign move by President Kenyatta.

The Kenyan government has of course to answer for their own responsibility for the ongoing violence in Somalia. Kenyan troops invaded the southern part of their neighbor in 2011, intent on creating a buffer zone towards the notoriously unstable neighbor in anticipation of the development of a major pipeline and infrastructure project along the common border. But instead of working with the federal Somali government, Kenya has chosen to support a local strong man, Sheikh Madobe and push for the autonomy of the buffer zone, greatly compromising efforts to unify Somalia after decades of civil war.

The Kenyan army has also failed to expel al-Shabab from the southern parts of Somalia. And Kenyan officers have been implicated in profiting from sugar and charcoal trafficking, al-Shabab’s major source of income. Scapegoating the Somali refugee and immigrant population has also been used to deflect from the incapability of Kenyan security forces to prevent and contain terror attacks. In contrast to statements by the Kenyan government, many of the local operatives of al-Shabab are Kenyan citizens and wouldn’t be affected by an expulsion of the refugee population.

These arguments of course won’t sway the Kenyan government. Western pressure and money would, though. But it is questionable if the E.U. and U.S. can muster the motivation and resources to do so. Both powers face highly controversial debates over refugees and immigration domestically and have not reacted to increased refugee populations with commensurate funding.

So what would happen if Kenya actually does close down the camps? One scenario would be that a significant part of the refugee population stays in Kenya, but moves within the country to find ways and means to support itself. But this outcome would actually be worse for the Kenyan government than the status quo. It would loose the ability to effectively control and supply these refugees and given Kenya’s inclination to nasty intercommunal conflicts over land rights, having several hundred thousand people roaming the country in search for a place to settle down would be a recipe for disaster.

The government’s only priority can therefore be to expel these people. As no other country in the region will be willing to accept more than half a million refugees, their countries of origin are the only option. But neither Somalia, nor South Sudan have overcome the instability and conflicts that have motivated these people to flee in the first place. And without a well-organized and prepared effort, simply herding people back over the border will doom many of them to misery and death because they will have no means of supporting themselves.

To be clear: Kenya, like other African countries with considerable refugee populations, should have earned our respect for providing shelter to such a large number of refugees for a considerable length of time. But despite the challenges associated with this, giving up now is simply not an option. Both international law and basic human decency leave only one response to the Kenyan government’s threats: Suck it up. And think about your own potential to alleviate the conflicts in Somalia and South Sudan. There’s a lot of it.

But the international community has to accept responsibility as well. The easiest is financial: overall funding for all 2016 humanitarian appeals is currently at only 22 percent of the required $14.7 billion (a mere 0.4 percent of U.S. federal spending). Dedicating only a fraction of the world’s military expenditure to humanitarian assistance would reduce many of the problems that countries like Kenya face.

But there is also a political responsibility. With the number of refugees, asylum seekers and internally displaced persons the highest it has been since the end of the Second World War, wealthy industrialized nations have welcomed only a fraction of those in need world wide. The overwhelming majority have found refuge in countries of the global South. All countries should therefore re-examine their capacity to accept more victims of war, violence and displacement.

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.

A Basic Income for Some Kenyans

Unconditional cash transfers are the New Hot Thing™ in development right now. I’m myself quite a fan of this idea and wish that it would be employed more broadly. Now one of the NGOs at the forefront of this particular movement is taking an even more radical step. In the words of Michael Faye and Paul Niehaus of GiveDirectly in Slate:

We’re planning to provide at least 6,000 Kenyans with a basic income for 10 to 15 years. These recipients are some of the most vulnerable people in the world, living on the U.S. equivalent of less than a dollar. And we’re going to work with leading academic researchers, including Abhijit Banerjee of MIT, to rigorously test the impacts.

An unconditional basic income happens to be another policy that I’m a huge fan of. Based on the limited evidence we have (nobody actually ever tried this on a national level), a basic income can have tremendous impacts on health and education, no matter if in developed or underdeveloped countries.

In the African context, there has been one similar project in Namibia in 2008 which showed promising early results, but which was not accompanied by adequate research and only lasted for a couple of years. Alaska has a very low basic income derived from oil profits and a German initiative doles out one-year basic incomes funded by donations. The idea is picking up steam, though, with Switzerland poised to hold a referendum on a national basic income, which would give all Swiss adults a basic income of about $1,650 per month, no questions asked. If you want a broad overview over the discussion about basic incomes (in industrialized nations), the current episode of popular radio show/podcast Freakonomics has you covered.

I really hope that GiveDirectly’s initiative in Kenya succeeds and produces reliable data on the effect of a guaranteed basic income in the setting of a developing economy (which is a slightly different proposition from a basic income in an industrialized rich country).

What If We Just Gave Poor People a Basic Income for Life? That’s What We’re About to Test. via Ken Opalo

Dozens of Kenyan Soldiers Die in Somalia Base Horror – ‘The area was full of bodies’

During the early morning hours of Friday, Jan. 15, several vehicles strapped with explosives drove into the perimeter defenses of the Kenyan base in El Adde in southwestern Somalia. With the perimeter breached, around 200 militants stormed the camp and killed dozens of soldiers.

The attackers were of course members of Al Shabab, a long standing Somali Islamist group that still holds considerable territory, while the Kenyan soldiers were part of the African Union Mission in Somalia, an African peacekeeping force that has been fighting Al Shabab for years in cooperation with Somali government forces and allied local militias…

Read more on War is Boring.

Rich links: diamonds and bushmen in Botswana

As usual, the web’s most interesting reads:

Diamonds and Bushmen

Charity Survival International alleges that the government of Botswana systematically uses access to water as weapon to drive the country’s Bushmen out of their diamond rich reservation. The Independent

South Sudan plans allocation of new exploration blocks

The East African country will hold an auction to sell exploration licences to new oil blocks. If exploration proves successful, additional oil production could significantly enhance government income. Voice of America

Tullow Oil stops exploration in Kenya

After demonstrations in Kenya’s Turkana region by local communities demanding a greater share of jobs and higher income from Tullow’s operations, the British company has suspended all exploration activity in the area. Kenya hopes to significantly add to its natural resources portfolio with oil deposits currently appraised by Tullow. Sabahi | the Star | African Mining Brief

Zambia first cancels, then reinstates tax on unrefined copper exports

Only days Zambia has cancelled a 10% export tax on unrefined copper and other minerals, the country’s president Michael Sata has ordered his government to reintroduce the tax. Lifting the regulation had been a key demand of international mining firms, which argued that Zambia doesn’t have the necessary smelting capacity to process all ores in the country itself and that the additional tax would make operations uncompetitive. African Mining Brief

The future of Tanzania’s mining sector

Tanzania sports quite a wealth of various precious metals, gemstones, fossil fuels and other minerals. But falling gold prices and power challenges have made some investors weary. Mining Weekly | Daily News

Other stuff

  • How can African countries use their oil revenue for lasting development? the Guardian
  • Angola has opened a training centre for oil industry related professions: Mining Review
  • Women are breaking into the male dominated mining sector in Zimbabwe: IRIN

Rich Links: Oil and Uranium across Africa

Quite a long list of noteworthy reading material this time around:

Falling gold prices lead to job cuts

Mining company AngloGold Ashanti Limited will lay off 400 miners in Ghana, reacting to falling prices for gold on the world market. Gold has fallen by $500 over the last months, coming down from a historic heigh point. The lay-offs in Ghana are the first signs of wider repercussions for gold miners around Africa. Mining Review

Oil – a blessing or a curse?

A series of articles from different media look at the benefits and drawbacks of petroleum exploitation for African societies. AllAfrica/This is Africa | AllAfrica/NewVision | AllAfrica/Deutsche Welle

Uncertain times for Somalia’s oil and gas business

Recent finds bring hope for new revenues for Somalia’s embattled government, but the recent attacks on a Kenyan shopping centre also put the remaining challenges for foreign investment under the spotlight. AllAfrica/Sabahi | Africa Confidential (subscription required)

Uranium mining around Africa

There is a rising interest in uranium mining across Africa. Recent articles look at projects in Tanzania and Botswana. Mining Review | African Mining Brief | AllAfrica/Tanzania Daily News

Petroleum exploitation in central Africa

The Jeune Afrique takes a look at the fortunes of the petroleum industry in central Africa. Jeune Afrique

East African states take stake in Ugandan refinery

The planned refinery project in Uganda, which will be provided with oil from the country’s nascent oil fields, has been given another boost with neighbouring states Kenya, Rwanda, Tanzania and Burundi agreeing to take a 40 per cent stake in the project together with the host country. The remaining 60 per cent will be financed by private companies involved in the exploitation of oil reserves. Engineering News | Africa Energy Intelligence

Benefication laws in Zambia lead to growing backlog for copper stocks

After the Zambian government has enacted laws forcing copper mining companies to process a larger part of their production in the country itself, those companies complain over limited smelting capacities. Stockpiles have been growing, according to the industry and threaten to block operations at the mines. Some observers allege that the bottleneck has been created intentionally by investors, to force the government to loosen the new regulations. Mining Review

Oil theft in Nigeria

A look at the origins and consequences of oil theft in Nigeria. Baobab | the guardian

Rich Links: Natural Gas in Tanzania, Nuclear Power in South Africa and More

As always, the best links from around the internet:

New policy on natural gas coming soon in Tanzania

The government of Tanzania is on the verge of passing a new national policy on natural gas exploitation. So far the country has no specific official policy in that sector and the new legislation wants to address specifically the issue of local content. AllAfrica/Tanzania Daily News (2)

South Africa aims for new nuclear power plants

The South African government pushes for the construction of new nuclear power plants to increase the generation of nuclear energy from 1,800 MW to 9,600 MW per year by 2030. Key financial decisions are planned to be taken this financial year. South Africa currently runs the only active nuclear power plant on the African continent and pursues a large nuclear capacity under the label of “clean” and indigenous energy. AllAfrica/SouthAfrica.info

Resources in the DR Congo

A detailed look at the trends and challenges of the natural resources sector in the Democratic Republic of the Congo. Ventures Africa

The dangers of the use mercury in gold mining

Mercury is used by the great majority of artisanal gold miners in Africa, numbering millions, but its use results in dramatic health problems. A new international treaty aims to reduce the amount of mercury used, but changing entrenched practices in local communities will be hard. The Economist

Search for oil kills whales off Madagascar

A sonar system, operated by Exxon Mobile to explore oil fields off the Madagascan coast, is the reason for the death of dozens of melon-headed whales. This is the finding of an independent scientific commission. Global Post

Three alternatives for South Sudanese oil

The governments of South Sudan and Kenya are currently planning the establishment of a new pipeline corridor to transfer Sudanese oil to the Indian Sea at Lamu. This article argues that the better alternatives would be to transfer the oil by either rail or road. AllAfrica/Pambazuka News

High hopes for Rwandan mining sector

The Rwandan government wants the country’s mining exports to triple by 2017. AllAfrica/Rwanda Focus

Rich Links: Mining in Kenya, Child Labour and Oil in Uganda

As usual, the best articles from around the internet:

Kenya revokes mining licences, plans new mining policy

The Kenyan government has revoked all mining licences given out between January and May this year, citing “questionable circumstances” in their allocation. With high hopes for the mining sector, the government also plans to put in place a new mining policy soon. Mining Review

Legalization vs. child labour in mining

In an interesting article, author Dan Paget argues that advocacy organizations like Human Rights Watch are focussing too much on the practice of child labour in mining to the detriment of pushing the agenda for legalizing small-scale artisanal mining. Reports by these organisations, according to his argument, have tremendous power to shape the debate and policy around artisanal mining in Africa and give incentives to governments to keep these practices illegal or in a legal grey zone. Pushing for legalization, on the other hand, would give governments the power to effectively regulate the sector, providing a sustainable way to end child labour in the long-term. Think Africa Press

Uganda issues oil production license to Chinese firm, wants to start producing crude in 2016

Chinese company CNOOC has received a licence to start crude oil production at the Kingfisher field from the Ugandan government, with the first crude expected to flow in 2016. Uganda has put high hopes on its oil reserves, with several refineries in planning to satisfy local fuel demands. Successfully bringing oil online is a cornerstone of current president Museveni’s bid to stay in power. AllAfrica/The Independent

For further reading on Uganda’s oil sector, I recommend a recent report by Dutch research organization IPIS, “Business, Human Rights and Uganda’s Oil”.

Rich Links: Strikes, Child Labour and Groundwater

Regularly, we bring you the best links from around the internet on everything from exciting new resource discoveries to strikes and market developments. Most pieces we link to will include a look at the political angle of the raw news:

Looming strikes in South African gold mines:

The Union ACMU rejects a settlement between two other unions and gold mining companies, demanding better terms for its members. Employers on the other hand claim that any further strikes would be illegal and unprotected. The stage seems to be set for a confrontation: MiningReview.com

Child labor in Tanzanian gold mines:

Child labour is still common in Tanzanian mines, reports ThinkAfricaPress

Vast groundwater reserves discovered in Kenya’s Turkana region

Politicians are euphoric, but the remoteness of the reserves and their depth (300 meters) make it unlikely that talk of a “game changer” comes true. More likely are profound positive local consequences: Daily Maverick

Microcredits revisited

In 2008 I entered the microcredit business.That year I discovered the peer-to-peer lending platform MyC4, which lets you lend money to entrepreneurs in various African countries. My initial views on the platform were published in the German weekly “Der Freitag” but for those who don’t speak German or don’t like klicking links, here is a short round-up on MyC4:

Open loans on MyC4

As “investor”* you can open an account with MyC4. The platform then let’s you choose from a number of open loans, which have been vetted by local partner organizations, the so-called “providers”. The lending itself is competitive – it uses the “Dutch” auction system. You can place a bid (say 20 € at 15%) on an open loan. Once the total loan amount has been funded, new bids need to be better than the existing ones. The worst bid of a loan will be kicked out if another investor makes a better offer, thereby reducing the average interest on the loan. Once the interest passes a predetermined threshold (usually between 10 and 15%) the provider can close the loan, but most loans end up several percentage points below the asked interest. This system is supposed to ensure that investors with varying doing good/making profit expectations can participate in the platform.

Over the years, I dedicated a total of 1000 € from my savings to MyC4. My objective was to make a modest profit, which would render my investment sustainable. Sometimes during the last year I realized that my approach was not working out and I stopped reinvesting. Now almost all my loans are either paid back or defaulted and I can try to draw a conclusion.

The good

As of today, I have invested a total of 2070.12 € through the platform. This is double the amount of money I actually put into it. This is possible, as MyC4 loans are repaid on a monthly schedule, thereby opening the door for rapid reinvestments. From a social perspective, I think this is far better than donating money, as this way I can give again and again and again, all while leaving a maximum of responsibility with the borrower, who after all knows best what he needs the money for.

The bad

While the social aspect of the experiment certainly worked out, the idea of making a profit sure didn’t. 17 of the 97 loans I participated in defaulted (an unacceptable  20% default rate), which resulted in a total loss of ca. 200 €. Worse, even the 73 loans that were fully repaid only barely broke even, because of massive currency deprecation.**

This criticism has to be qualified though. First of all, 73 hard-working entrepreneurs honored their contracts and repaid loans that asked for interest rates far higher than those common in the EU or USA. They deserve applause. Of those who didn’t repay in full (the average defaulted loan resulted in a 50% loss of the invested capital) we don’t know the stories and it may well be that some of them are not personally responsible for what happened.

Also, a part of these losses is due to beginner mistakes made by myself. Especially in the beginning, I did not spread the investments over enough borrowers, providers, countries and industries. I also didn’t calculate currency risk correctly, which resulted in the bad result for the repaid loans.

Most importantly though, a huge part of the losses is due to a Ponzi Scheme run by one of the providers, which gave rise to huge criticism on how MyC4 was run:

The ugly

I don’t want to examine the whole story, but fact is that one of MyC4’s Kenyan providers put up fake loans on the platform, raked in the money of the lenders and subsequently made off with it. MyC4 itself did not participate in this criminal behavior, but  they certainly neglected their duty to check on their business partners and ensure compliance to transparency standarts.

I guess at least half of my losses are due to this racket. As far as I know, there are still court proceedings going on in Kenya relating to this case, but I doubt that I will see any of the money I lost again.

MyC4 has made several changes to its procedures as a consequence, but I doubt that anything safe of a total makeover of the legal framework in the respective countries could fully mitigate the risk of such a thing happening again.

The long and the short of it

Investing in MyC4 has been a mixed experience. While it was certainly more effective than simply buying a goat through a donation to a large NGO in terms of “helping”, the promised profits have not materialized. As I said, I have transfered practically all of my remaining investment as a consequence of this.

But I will return! I am still convinced that micro-lending is a great way to combine supporting entrepreneurs in the developing world and making a small profit. While MyC4 had to fight many problems over the last few years, the changes they have made seem to result in a much more stable platform which reduces (though not eliminates) the risk of defaults and outright theft. Also, countries like Uganda and Ghana will join the ranks of oil-exporting nations this year, which will likely reduce the volatility of their currencies.

My new investment in MyC4 will reflect my experiences. I will adhere religiously to a doctrine of spreading my loans over various countries, providers and industries. I will limit the value of a single investment to a maximum of 20 €. And I will be more rigorous in calculating my asked interest rate to make sure that I ideally realize a profit around 3%.

Are you investing in microloans, either thorugh MyC4, kiva or other organizations? Which experiences have you made?

 

  • While competing platforms like kiva focus on the “giving” aspect of microcredits, the approach of MyC4 focusses on “profit” for both the borrower and the lender.

** The main culprit for this one was the weakness of the East Africa Shilling currencies over the last years. This seems to be normalizing now.