Month: December 2018

Africa not a priority in new USA Strategy

Posted on Updated on

This article first appeared in my weekly column with the Business Daily on December 23, 2018

On December 13, John Bolton, National Security Advisor to the President of the United States of America (USA), announced the Trump Administration’s New Africa Strategy. The new strategy is aimed at furthering USA priorities which he identified as: advancing USA trade and commercial ties in Africa; countering the threat from radical Islamic terrorism, and ensuring that USA taxpayer dollars for aid are used efficiently and effectively. However, a significant portion of his announcement was focused on primarily attacking China and secondarily Russia. He stated China uses bribes, opaque agreements, and the strategic use of debt to hold states in Africa captive to Beijing’s wishes, and that China employs predatory actions to advance Chinese global dominance. The focus of this article will be on the economic and political economy elements of the announcement. There are both positive and negative elements in the outlined strategy.

Image result for USA flag in Africa

(source: https://www.redbubble.com/people/theshirtyurt/works/13039066-african-american-africa-united-states-flag?grid_pos=65&p=canvas-print)

In terms of the positives, the USA seems to have woken up to the reality that economic and commercial ties between the USA and Africa can be significantly strengthened. The new strategy will focus on new bilateral trade agreements and ensure that economic ties apply positive pressure towards improving governance and business practices in Africa. This is welcome. The USA recently announced the establishment of the U.S. International Development Finance Corporation which has new finance capabilities and higher lending limits than its predecessor OPIC. While financing will target US entities, the reality is that this can have a positive knock on effect on providing creative financing options for the African private sector and thus positively inform private sector development in Africa.

However, there were many problematic elements to the announcement. The first is that the announcement was made by the National Security Advisor, not the State Department. The contextualization of the Africa strategy in this manner insinuates that US Security priorities are the primary motivation for the strategy.

Secondly, the content and tone of Bolton’s speech used such biased language against China in particular that it made it seem as though the US administration views Africa as a pawn in its larger anti-China global strategy. The speech left the feeling that the USA wants African governments to choose between Washington and Beijing, and that if the latter is chosen, retaliatory action should be expected. Such simplistic, binary thinking is outdated and out of place in a complex multipolar world where Africa has numerous economic and development partners from across the globe Indeed, the editorial board of the Financial Times picked up on this and stated that, ‘It is unlikely many Africans will welcome the prospect of returning to the era of “us or them” depicted in this vision, or feel much sympathy if America is the one left behind’. Africans are already linking the speech to the dark days of the Cold War where millions of Africans suffered and died in proxy wars on the continent.  But the world has changed since the Cold War, the speech seemed to miss that point.

President Donald Trump

(source: https://www.businessdailyafrica.com/analysis/columnists/African-welfare-nonpriority-in-new-United-States/4259356-4907684-51k4ez/index.html)

Finally, the announcement unnecessarily underplayed significant strengths the USA has in Africa. At the moment, the USA is the top FDI player in Africa, way ahead of China for example. The US government and private sector have significant experience in Africa and working with African private sector in truly creative and useful ways. This should have been highlighted and strengthened under the new strategy. Further, where is AGOA in all this?

In short, the new strategy is blinkered by China and does not appear to have African welfare as a key consideration. In fact, it seems as though it is America First, China second and Africa last.

Anzetse Were is a development economist; anzetsew@gmail.com

The importance of African agency in modern times

Posted on Updated on

This article first appeared in my weekly column with the Business Daily on December 16, 2018

A few weeks ago I attended a seminar organised by the South African Institute of International Affairs (SAIIA) on African agency in the context of Sino-African relations. What became clear over the course of the conversation is that African agency is important in any relationship the continent has with others. ‘African agency’ partly drawn from the paper by SAIIA, can be defined as Africa’s ability to make independent decisions, strengthen its bargaining power and pursue its interests. There are several issues of which to take note when African agency is discussed.

Firstly, there are numerous centres of African agency; government, private sector, civil society, communities, and academia and think tanks for example. And within each of the centres are sub-centres where specific thematic areas of interest and priorities emerge. Further, each centre of agency has differing abilities to exercise and voice their agency. African governments, due to the way modern countries are structured, are often the most obvious centre of agency.  And foreign governments use African governments as key centres of interaction thereby amplifying the power of the agency of African governments. However, the agency of African governments may not necessarily reflect the interests and priorities of African publics as a whole. A key example is with regard to the increase in public debt across the continent. In my view this is a direct reflection of the debt appetite and agency of African governments, not African publics. In countries like Kenya, there is clear disgruntlement with how this government agency is being used to accrue public debt in a context of financial mismanagement and corruption.

Secondly, African agency is not always a good thing; agency can be predatory or emancipatory, for example. For instance, certain segments of the African private sector routinely exercise their agency to contribute to illicit financial outflows from the continent. In short, certain elements of African private sector exercise their agency in a predatory manner that denies Africans of revenue that should rightly be theirs. Thus, just because an African actor is exercising agency, one cannot assume that this it is good for the continent.

Image result for Africa EU governments 2018

(source: https://www.dw.com/en/chancellor-angela-merkel-holds-berlin-summit-for-compact-with-africa-project/a-46065155)

Thirdly, because there are so many different types of actors with agency in Africa, there can be disagreement within Africa as to whose agency is best for the continent. Further, because there are so many centres of agency, their interests can be pitted against each other. For example, African governments can disagree with each other and exercise their agency in manners that undercut each other, and the agency of certain elements of private sector may not align with the interests of government, for example. Thus, it is crucial that different African actors understand the importance of being clear as to what their priorities are and expect resistance for other African actors. This is not to say there are no key issues on which some consensus can be found, but the effort to create this has to be deliberate as it will likely not emerge organically.

Finally, African agency is growing in importance as Africa functions in a world where not only China is demonstrating interest in Africa, other developing economies from Asia, Gulf States and South America are too. Further, Africa’s traditional partners in the forms of Europe and North America are re-focusing on Africa as a key point of interest. Thus, let Africans know that they will only be heard if they are organised, because it is only through deliberate organisation that key agents of interests from Africa will emerge.

Anzetse Were is a development economist; anzetsew@gmail.com

Forcing tax on informal business a bad idea

Posted on Updated on

This article first appeared in my weekly column in the Business Daily on December 9, 2018

Last week, the Kenya Revenue Authority (KRA) announced that informal traders will be required to log onto its iTax platform and pay the presumptive tax before county governments can renew their business permits for next year. This means that informal traders who do not pay the tax will not have their single business permits or trading licences renewed in January. While it may look like this move is inspired by the KRA, it is actually an initiative of the National Treasury which is facing pressure to raise more revenue to meet debt obligations in particular. But this move is problematic for several reasons.

Firstly, a key motivation for informality is the tax burden. Informal businesses engage in subsistence business activity, barely able to meet their financial needs let alone tax obligations. The reality is that functioning as a formal business entity is expensive and most Kenyans simply cannot afford the costs linked to formality. It would be more prudent for Treasury to support what other arms of government such as the Ministry of Industry are doing to improve the performance of informal business so that they are more profitable in the long run and in a stronger position to pay tax. Slapping new tax on businesses that are barely staying afloat is insensitive and imprudent and will engender resistance to this move across the country.

tax-identification-number

Secondly, it is not clear what informal business will get in return for tax compliance. Almost without exception, informal businesses operate in poor quality and insecure physical spaces with no access to decent roads, water and sanitation facilities, electricity or even permanent physical structures. Will paying the presumptive tax change this or will informal businesses have tax eat into their income with no related improvement in their operating environment? Without a clear demonstration of the return informal businesses will get for compliance, there will be little motivation to comply.

Thirdly, this move will atangonise rather than support the sector that is the biggest employer in Kenya. As of 2017, over 14 million Kenyans earn a living in the informal sector. New taxes will place new financial pressure on millions of Kenyans who earn a living in a very difficult environment. In addition to serious problems with physical work space, those who work in the informal sector have lower quality jobs and are more vulnerable to job loss. In trying to force tax compliance without addressing the serious challenges informal businesses face in trying to earn a living, government signals it is out of touch with the reality of most Kenyans.

Finally, Kenya’s fiscal space makes it clear that the move to tax the informal sector is informed more by the need to pay Treasury’s debt binge than improve service delivery to Kenyans. Kenyans are being punished for what has clearly been unsustainable fiscal strategy. The focus of Treasury should be to redress its fiscal missteps, ramp down on expenditure increases, and make sure that public funds are used for their intended purposes. The Kenyan public continues to air its deep concerns with the mismanagement of public funds and forcing the hands of millions of Kenyans to pay taxes when most feel government is not financially accountable to them is unwise. One will likely find that Kenyans will be more willing to pay tax if they are assured they will benefit from compliance rather than public funds being siphoned in illegal and corrupt activity.

In short, this new move to force tax compliance is a bad idea. It will antagonize millions of Kenyans while failing to address the real problem of unsustainable fiscal policy.

Anzetse Were is a development economist; anzetsew@gmail.com

The fracturing of the Western Alliance and implications for Africa

Posted on

This article first appeared my weekly column with the Business Daily on December 2, 2018

 

Global geopolitical dynamics have been undergoing significant shifts recently. Of particular interest is the Western Alliance, or the spirit of allied cooperation that had defined the relationship between the USA and Europe for decades. This is changing due to two factors.

The first is Brexit and the fracturing of the European alliance. Through Brexit, divided as the vote was, Britain told the world and Africa that they were unhappy with their relationship with the rest of EU and wanted out. African entities can no longer assume that the approach and priorities of EU strategy in Africa will be done in reference to or coordination with Britain going forward, and vice versa. The bad blood that has emerged between Britain and the EU as a result of Brexit is common knowledge and there are serious questions as to whether there will be any sustainable coordination between Britain and EU in areas such as African policy going forward. What was once a strong European alliance acting in a fairly united manner in Africa, is now a fraught relationship that no longer enjoys the spirit of mutual trust, cooperation and coordination that had defined their relationship for decades.

Image result for brexit

(source: https://www.bbc.com/news/uk-politics-32810887)

The second is dynamic is the souring of relations between the USA and the EU. The EuroAmerican alliance has been one with which the continent has had to contend for a long time. Their joint focus on development, governance, human rights, anti-terrorism and the financing of civil society has been a point of commonality in this alliance. Dynamics have clearly changed since President Trump took over. The Foreign Policy magazine reported that Trump’s views toward the EU have been consistently negative for years and that during the presidential campaign he made several disparaging remarks about the EU. More recently, there has been serious concern in EU capitals that the Trump administration is considering imposing tariffs on EU cars and auto parts. What once seemed to be a stable partnership is being fundamentally challenged and weakened.

Image result for us eu trade war

(source: https://sputniknews.com/business/201707271055926078-trade-war-us-sanctions/)

Africa is watching the weakening of the EuroAmerican alliance with interest particularly in the context of a rising China. Africa’s relationship with China is well known, and both Europe and North America have signaled their concern with strengthening Sino-African relations. But quite frankly, the strongest alliances in the world, both within Europe and between Europe and the USA, are falling apart at a time when China seems bent on consolidating its power and expanding its influence across the globe. Given the concern emanating from Europe and North America with regards to Sino-African relations, the time for the unbuckling of the alliance is not now.

What are the implications of this fracturing of the Western alliance for Africa? Will we see the bickering on Brexit and between the USA and EU result in markedly disjointed foreign policy action in Africa? To what extent does the weakening of the alliance deepen a global leadership vacuum that China seems ready to take up? The bottom line is that while old allies grapple with new problems, they are not in a position to effectively stem the strengthening of Sino-African relations in particular. What this means for Africa is that the world is becoming even more multipolar. Where there was once a monolith, stands a body divided. As usual, it is for Africa to read the signs of the times and leverage changing geopolitical dynamics to its advantage.

Anzetse Were is a development economist; anzetsew@gmail.com