Politics

What China’s One Belt, One Road initiative means for Africa

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This article first appeared in my weekly column with the Business Daily on May 21, 2017

Last week China announced a plan to build a vast global infrastructure network linking Africa, Asia, Europe and the Middle East into ‘One Belt, One Road’. China plans to spend up to USD 3 trillion on infrastructure in an effort that seems to be centred more on linking 60 countries in the world with China, not necessarily each other. This One Belt initiative is perhaps part of China’s determination to position itself as the world’s leader in the context of Trump’s insular USA. This initiative has two-fold implications for Africa: the opportunities and potential problems that it creates.

One belt, one road

(source: https://qz.com/983581/chinas-new-silk-road-one-belt-one-road-project-has-one-major-pitfall-for-african-countries/)

In terms of opportunity, obviously African needs continued financial support in infrastructure development. The Africa Development Bank (AfDB) estimates that Africa’s infrastructure deficit amounts to USD 93 billion annually until 2021. In this sense any effort to support the development of Africa’s infrastructure is welcome.

Secondly, this is an opportunity for Africa to negotiate the specifics of the type of infrastructure the continent requires and create a win-win situation where Africa leverages Chinese financing to not only address priority infrastructure gaps, but also better interlink the continent.

However there are multiple challenges the first of which is that Europe, India and Japan seem edgy about this initiative and have distanced themselves from it. According to India’s Economic Times, India and Japan are together embarking upon multiple infrastructure projects across Africa and Asia in what could be viewed as pushback against China’s One Belt initiative. The countries have launched their own infrastructure development projects linking Asia-Pacific to Africa to balance China’s influence in the region.

Europe is also edgy because the initiative has not been collaborative and comes across as an edict from China; countries in the initiative were not consulted. Europe is also uneasy with the lack of details and transparency of the initiative seeing it as a new strategy to further enable China to sell Chinese products to the world.

Secondly, analysts have pointed out that from an Africa perspective, the One Belt seems to continue the colonial legacy of building infrastructure to get resources out of the continent, not interlink the continent. Will the initiative entrench Africa’s position as a mere raw material supplier to China and facilitate the natural resource exploitation of the continent?

Image result for Africa infrastructure

(source: africanbusinessmagazine.com/wordpress/wp-content/uploads/2017/01/Africa-infrastructure-1k.jpg)

Additionally, there are concerns with how the financing will be structured and deployed. Will financing be debt or grants? It can be argued that China needs to increase its free aid toward Africa in order to build its image as a global leader. Further, who will build the infrastructure? Africa has grown weary of China linking its financing to the contracting of Chinese companies. Will this infrastructure drive employ Africans and use African companies? If not, then it can argued that Africa will merely be borrowing money from China to pay itself back.

Linked to the point above, is the fact that Africa is already deeply indebted to China. In Kenya, China owns half of the country’s external debt. Kenya will pay about KES 60 billion to the China Ex-Im Bank alone over the next three years.  Kenya and Africa do not need more debt from China, and if this initiative is primarily debt-financed (in a non-concessionary manner), it will cause considerable concern in African capitals.

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

TV Panel interview on food security in Kenya

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On May 15, 2017 I was part of a panel discussing food security in Kenya with a focus on maize.

 

 

TV Panel feature on the cost of living in Kenya

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On May 11, 2017 I was interviewed on cost of living issues in Kenya.

Problems with financial accountability at county level

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This article first appeared in my weekly column with the Business Daily on May 7, 2017

The management of public funds is an issue about which the Kenyan populace is passionate. However, the conversation on financial accountability in Kenya tends to be focused on National Government only. While this is right and warranted, Kenyans ought to extend the scrutiny on the accounting of public finances to county governments as well. One of the main purposes of devolution was to bring public finances closer to citizens in a manner that would allow them to have a say in how county budgets were planned for and used. This does not seem to be happening.

As the research firm International Budget Partnership (IBP) points out, the constitution of Kenya and the 2012 Public Finance Management Act (PFMA) require each of Kenya’s 47 counties to publish budget information during the formulation, approval, implementation, and audit stages of the budget cycle. In February 2017, IBP assessed documents related to budget estimates and implementation by county governments that were meant to be produced and made available on their websites between July and December 2016. IBP found that only 2 counties, Elgeyo Marakwet and Siaya, had approved budget estimate documents available on line. In terms of budget implementation documents, IBP found again, only two counties, Baringo and Kirinyaga, had published their first quarter implementation reports for 2016/17 online.

Image result for kenya counties

(source: gabriellubale.com/wp-content/uploads/2012/09/47-Counties-Of-Kenya.jpg)

The dearth of information on budgets by county governments is worrying due to several reasons. Firstly, citizens cannot be sure of how public funds are being planned for and used. The lack of budget estimates and implementation documents means that not only do citizens not know how county governments stated they would use funds, they also do not know how county government actually used the funds. The lack of both budget estimates and implementation documents means that citizens cannot hold county governments financially accountable; there is no documentation against which accountability can be gauged.

Secondly, although the lack of information does not automatically mean funds are being embezzled, the lack of budget reporting facilitates embezzlement.  The fact that most county governments are not accounting for funds, as per the PFMA, provides leeway for unauthorised spending by county governments.

Image result for embezzlement clipart

(source: https://us.123rf.com/)

So why aren’t county governments publishing budget related documents? The first could be a capacity issue. In work I have done on county governments, it is clear that there are massive capacity constraints in county governments. Does every county government have competent and well staffed financial management staff and systems? If not, this constraint should be communicated by county governments so that remedial action can be taken. Obviously the second reason why county governments are not publishing documents is because they enjoy the lack of scrutiny as it allows ‘flexibility’ in the use of public funds.

As Kenyans gear up for elections in August, they should demand considerable improvements in the accounting of public funds by their respective county governments. Aspirants should be taken to task on how they will ensure that the citizenry is fully aware of budget use and that all documents are made public within the stipulated timelines.

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

 

TV Interview: Panel feature on Labour Day

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On May 1, 2017, I was part of a panel on NTV talking about labour and employment issues in Kenya

Three threats to the Kenyan economy

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This article first appeared in my weekly column with the Business Daily on April 30, 2017


Kenya registered relatively healthy GDP growth in 2016 at 5.8 percent. This is an important figure as the average rate of growth for Africa in 2016 was 1.3 percent. It has been noted that in Africa’s current multispeed growth phase, East Africa will be important in pulling up the economic growth of the continent due to limited exposure to the commodities and fairly diversified economies. In this context, Kenya is important for the continent’s growth as East Africa’s largest economy.

That said, it should be noted that there are clear threats to robust economic growth this year. While there are external factors that may mute growth such as Brexit and new policies by the Trump administration, the focus of the analysis in this article will be on domestic threats to growth in 2017.

The first threat is the drought; the Central Bank of Kenya (CBK) has already warned that the economic growth will be negatively affected in 2017 due to the drought. The production of Kenya’s key export, tea has been ravaged; production is expected to drop by 12 to 30 percent. And it cannot be guaranteed that any loss in forex due to lower volumes will be mitigated by higher tea prices. Livestock production has also been devastated. It is estimated that the drought has led to losses of 40 to 60 percent, particularly in the North East and Coast. Secondly, the drought has pushed up inflation which stood at 10.28 percent in March, far above the government ceiling of 7.5 percent. The cost of food has been particularly affected, forcing low income families to put more money aside for basic food needs. Finally, the drought has led to higher electricity prices due to Kenya’s reliance on hydropower; about 39 percent of installed capacity is hydro. Increases in the cost of electricity inflates the price of manufactured goods for the end consumer.

Image result for Kenya drought

(source: thetropixs.com/wp-content/uploads/2017/03/Kenyans-drought-1.jpg)

The second threat to Kenya’s economy is the interest rate cap which is linked to a contraction in lending. As this paper reported, Treasury stated that lending to businesses and homes grew just 4.3 percent in the year to December, down from 20.6 percent in a similar period in 2015. The 4.3 percent credit increase is well below what the CBK says is ideal loan growth of 12 to 15 percent which is required to support economic growth and job creation. Muted lending, particularly to SMEs due to the interest rate cap, will put a damper on the country’s growth engine.

The final threat to Kenya’s economy this year is the general election. Business mogul Aliko Dangote made the point that in Africa many investors often choose to wait for an election outcome before making further investments. Wary local and foreign investors pull back investment in a country and adopt a ‘wait and see’ attitude until elections are finished and the stability of the incoming administration has been established. The IMF echoes this concern stating that the elections in Kenya this year may contain growth momentum.

Image result for Kenya election

(source: https://www.standardmedia.co.ke/ureport-uploads/file-56948d06e60f9.jpg)

The reality is that economic growth ought not be affected by any of the factors above; they could be avoided or better managed. And while the economy is resilient and will continue to grow, the economic impact of the factors detailed above is already being felt by millions of Kenyans.

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

 

The Importance of Shadowing in African Political Accountability

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This article first appeared in my weekly column with the Business Daily on April 2, 2017

A Shadow Cabinet consists of a senior group of opposition spokespeople who, under the leadership of the Leader of the Opposition, form an alternative cabinet to that of the government, and whose members shadow or mark each individual member of the Cabinet. There is much use for the concept of Shadow Cabinets in the context of Africa’s political and economic development.

If every member of the Cabinet in ruling administrations in Kenya and Africa in general, knew they had an individual or team of qualified professionals scrutinising their policy, strategy and actions in their respective ministries two developments would likely occur. Firstly, the scrutiny would make cabinets more thoughtful and effective in policy and strategy development and implementation as cabinets would know all official communication and activity would engender an informed response and critique. If Shadow Cabinets were created in a context where Shadow roles were taken seriously, government would know that vague, incomplete or inaccurate information as well as inadequately thought through strategies would meet credible resistance. Secondly, the actions of Shadow Cabinets would give the general electorate a sense of how the Opposition would govern if they were in power. The track record of Shadow Cabinet critiques would present citizens with a clearer idea of how Opposition would address key challenges in the country. Image result for cabinet government

(source: http://media.dods.co.uk)

In Kenya the concept of a Shadow Cabinet is particularly important because political parties are not drawn along ideological lines. Unlike other parts of the world, political parties in this country are drawn along personalities and tribal lines. Further, political parties always realign and change composition in each election period, changing the dynamic of the leadership in the parties. As a result, in Kenya it is very difficult to know how an Opposition government would govern the country. I have long wanted to read Shadow Budgets as well as Shadow Policies on Agriculture, Education, Health and Finance for example. What would fiscal and monetary policy look like in an Opposition government? How would an Opposition government have handled the teachers’ and doctors’ strikes? How would Opposition address corruption if they were in government? These are all valid questions.

The frustration I have as a Kenyan is that I often do not know how governments will govern until they get into power. While Party Manifestos are produced every election year, they do not form a solid and consistence basis of engagement for analysis. Further, it seems Manifestos are political tools used during electioneering that are swiftly forgotten once elections are completed.

https://www.tutorialspoint.com/indian_economy/images/government_budget.jpg

(source: https://www.tutorialspoint.com/indian_economy/images/government_budget)

The time has come for Africans to demand Shadow Cabinets. In doing so citizen interests will be protected through the application of clearly thought out and consistent pressure applied on governments enhancing political and financial accountability. Further, the political landscape in Africa would stabilise as it would no longer be a guessing game as to how an incoming administration would rule the country.

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