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Africa

Trump and African Economic Development: Unwelcome Curse or Latent Chance?

 5 min read / 

For many countries, president Trump, who has consistently insisted on the “America First” strategy during his campaign will hardly be an indication of better trade relations and economic opportunities with their American partners.  While Trump’s presidency seems to have mainly negative impacts on African economic development at first sight,  there are vast emerging chances for a more independent continent.

It was clear from the beginning that Donald Trump taking office in January as the U.S.’s 45th president had major ramifications for Africa’s economies. Trump’s climate-change denying government team with its focus on “America first” will have unavoidable negative effects on African businesses. These negative effects will include to a downsizing or an outright collapse of Obama’s initiatives, like Trade Africa and Doing Business in Africa, which have supported trade efforts and business activities between African nations and the US. Trade Africa was able to double inter-regional trade between countries of the East African Community and increase their exports to the US by 40%.

After Trump has alienated African Muslims with his previous comments and insensitive immigration policy, this will further deteriorate productive exchanges between the US and the African continent. What’s worse, the rise in the dollar following Trump’s promise of a reinvigorated growth in the US, will lead to an outflow of capital from African economies. Paying back old debt and taking out new loans will be more difficult for both African governments and businesses with their depreciated currencies.

Not All Doom and Gloom

While these facts are certainly worrying, the bigger picture for African development under Trump might be less bleak than many assume. Most important for stable economic development is a conflict-free environment, which at first sight seems to be threatened by a cut in funding for the U. S. Institute of Peace that has so far provided security in African regions. However, Trump has simultaneously committed to a continued security-cooperation through AFRICOM to focus on fighting terrorism on the continent, as recent military actions suggest.  Though more combative, the U.S.’s peacekeeping efforts, which is so vital for sustainable economic development, won’t change significantly.  In fact, the US budget proposal aims to increase defense spending by $52bn, with a part of this going to America’s counterterrorism policy in Africa.

There is no denying that Trump’s administration plans to cut foreign aid and development assistance in the future, affecting Obama’s programs like Feed the Future and Power Africa. While this sounds concerning, less money does not always mean worse outcomes. Plenty of robust research by Acemoglu, Johnson and Robinson has shown the importance of effective and inclusive institutions for sustainable economic growth. The good functioning of institutions, however, is all too often undermined by foreign aid as it reinforces old structures and corruption (as vindicated by both Moyo and Easterly).

Less aid might be painful initially, but citizens’ demands for economic opportunities and growth can lead to positive regime changes and constructive institution-building as long as the country’s stability is guaranteed. Fortunately, Trump’s administration considers a strengthening of stabilising forces through AFRICOM. Being sufficiently optimistic, therefore, one can consider Trump’s cut in direct aid a further material incentive for African economies to abandon the substantial dependence on developed countries and to start an economic development path that is self-sustaining.

Trump Administration to Blame?

That this will be the right strategy one can see even more when looking at the developments of American-African trade. Nevertheless, it is not Trump’s new administration which is solely to blame for this. Indeed, there was a wide consensus that Trump’s “America First” prioritisation of the US will mean no good for Africa’s economic development. The African Growth and Opportunity Act (AGOA) that promoted trade and production between the US and Africa seems under threat.  Although African economies were never the direct target of Trump’s protectionism, there appears to exist a fear that higher tariffs on agricultural goods and natural resources will imply lower exports, jobs and slowing economic development.

This does not only ignore the fact that a stronger dollar might increase US imports from African businesses despite potentially higher tariffs. It also disregards the general trend of reduced imports from the United States since the Obama administration. In fact, 2015 was the fourth year in decline for U.S imports from Africa. Whereas imports from Africa were still at $50bn in 2013, they dropped to $35bn in 2014 and have now fallen to around $25 bn in 2015/2016- half of what the US used to import 3 years ago. Irrespective of Trump’s new policies, one has to recognize the bigger picture. There has been a general trend of consistently lower purchases of the two most important African exports: oil and natural resources (diamond, steel and iron), down 50% and 36% respectively in 2015.

Conclusion

This has significant implications. Whereas Trump’s changing policy on business exchanges, foreign aid and trade does not necessarily lead to a deadly shock to African development, it is a big enough incentive for African governments to finally change their strategy on economic development that focuses less on developed countries like the US and more on the continent’s own potential. With the fastest growing economies in the world, regional trade integration is a priority. While the work on the Continental Free Trade Agreement (CFTA) is under way, a prioritisation would definitely be desirable, as Africa currently has the lowest intra-regional trade in the world.

Increasing trade within Africa would not only end the continents pure dependence on developed countries. It would also shift its production and comparative advantage away from the heavy reliance on natural resources towards more sustainable, decentralized business opportunities. Only with a focus on its own internal capacities will Africa be able to have long-lasting economic development in the future. This therefore raises the question if Trump is an unwelcome curse or a latent chance for African development.

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Africa

Investing in Zimbabwe – Gamble or Jackpot?

 6 min read / 

Investing Zimbabwe

After nearly four decades of rule, Robert Mugabe finally stepped down as president of Zimbabwe late last year. A nation that has been crippled by corruption, plagued by poverty and ostracised from the international community now has an unprecedented opportunity to reform its economy and re-establish itself as a major African power. President Emmerson Mnangagwa has already announced his intention to revive the country’s flagging finances, open up to foreign investors and crack down on corruption.

The first signs are encouraging. On January 15th, South African tycoon Robert Gumede pledged to invest $1.2 billion in the country to develop IT and infrastructure projects. But Mnangagwa and his new government must learn from past mistakes if Zimbabwe is to realise its potential. Otherwise, the country will almost certainly lapse back into the stagnation, inequality and squalor that came to define the Mugabe era.

Is Zimbabwe a bull market?

If history is any guide, foreign investors would be wise to play it safe. This is not the first time a hopeful figure ousts an ageing African dictator after decades of misrule, promising reform only to prove themselves equally unfit for the task. The most notable example is perhaps the Democratic Republic of Congo (DRC), which spent three decades under the thumb of its own Mugabe-like figure: Mobutu Sese Soko. Mobutu, a textbook totalitarian, embezzled substantial amounts of state aid, played minority groups against each other and ruled with an iron fist.

After his ouster in 1997, hopes were high that the DRC’s new leader – Laurent Kabila – would steer the country in a more judicial direction. Instead, Kabila maintained the same power structure as his predecessor and ramped up the violence. His forces slaughtered thousands of Rwandan refugees within months of taking the presidency. Assassinated by one of his own bodyguards just four years into his regime, Kabila was replaced by his son, Joseph, who is still clinging to power today.

Though Joseph Kabila has proven to be slightly less bloodthirsty than the father, he appears to be every bit as addicted to his position. Despite agreeing to step down in December 2016, Kabila has repeatedly delayed elections, citing logistical obstacles and financial deficiencies. Protests at his continued reign have become increasingly violent – seven were killed at the turn of the year – while his most popular political opponent, Moïse Katumbi, has been hounded out of the country on entirely politically motivated fraud charges.

Recent polls suggest Katumbi would replace Kabila with ease, though the former provincial governor and current opposition leader is reluctant to return to his homeland as he fears for his life. Katumbi is asking for international protection and is leveraging his time abroad to maintain global pressure on Kabila’s regime.

Unsurprisingly, foreign investment in the DRC has cratered. Most outside commercial interests in the country are concentrated in the mining sector – itself embroiled in international scandals involving Dan Gertler, an Israeli tycoon added to the U.S. sanctions list for his ties to the murderous leadership in Kinshasa. Economic development has stagnated and the country’s GDP per capita stands at around half of its 1970s levels.

There are eerie parallels – not to mention unsavoury connections – between the Congolese and Zimbabwean political ordeals. When Robert Mugabe came to power as the first prime minister of the newly liberated Zimbabwe in 1980, his appointment was greeted with rapturous optimism by the world. Mugabe was even nominated for the Nobel Peace Prize the following year. Unfortunately, the ‘freedom fighter’ rapidly showed his true colours, using intimidation, bribery and, at times, outright slaughter to maintain his grip on power. The Matabeleland Massacres alone which claimed between 10,000 and 20,000 civilian victims between 1983 and 1987.

Mugabe prioritised military endeavours and total control over society, famously proclaiming in 1998 that “countries don’t go bankrupt!” when sending troops to the Congo in support of the elder Kabila. At the same time, he oversaw the decimation of his own country’s economy. Mugabe’s continued threats to nationalize the nation’s best performing industries has discouraged foreign direct investment (FDI). In 1992, the Land Acquisition Act decreed that the government could lawfully strip white landowners of their property and redistribute it among the indigenous population.

This bill was forcibly enacted in 2000 when 4,000 white farmers were forced into giving up their land. Mugabe then gifted the assets to friends, relatives and assorted cronies instead of promoting the interests of impoverished Zimbabweans. Agricultural output plummeted immediately. The resulting food shortages prompted the need for increased imports, financed by an unsustainably zealous attitude towards money-printing.

Predictably, inflation spiralled out of control. At its peak in 2008, monthly inflation reached 7,900,000,000% and prices doubled overnight. Gross national income (GNI) per capita fell from $890 USD in 1990 to just $300 in 2008; only in recent years has it returned to the previous levels. Even now, inflation remains at 348%. The industrial sector is operating at below 30% capacity and unemployment remains above 90%. Clearly, reform is needed – and fast.

Can Mnangagwa do it?

Fortunately for him, Zimbabwe’s economic opportunities are still there for the taking. The country was formerly known as the “breadbasket” of Africa, but a glance at its natural resources makes such a description seem positively miserly. With the world’s third-largest reserves of platinum, the fifth-biggest lithium production output and plentiful mines of coal, copper, diamonds, gold and iron ore, the country is a veritable cornucopia of resources. Mnangagwa hopes to harness that potential with a raft of measures designed to boost the economy by 4.5% in 2018.

Among other incentives, Mnangagwa has pledged to repeal the indigenisation law (so crucial to Mugabe’s regime and so damaging to the economy) from all industries except platinum and diamonds. He has also indicated that local businesses will be granted a tax amnesty on interest and fees, allowing them to clear debts and concentrate on the future. Additionally, he will also need to introduce a stable domestic currency in order to combat cash shortages that currently result in Zimbabweans queuing outside banks for days on end. Only then will the target of 4.5% become feasible.

Democracy just as important as the dollar

Even if Mnangagwa is successful in enacting his proposed measures (in itself a tall order), all that will mean nothing if he can’t get his own house in order. Corrupt political institutions will not encourage FDI or catapult the country out of its current pariah state, and if Zimbabwe is to flourish, it will need the help of the international community.

The signs thus far do not seem encouraging. New Justice Minister Ziyambi Ziyambi has dismissed calls for electoral reform, claiming they are not needed. Mnangagwa’s opponents say that the new president – and longtime Mugabe lieutenant – will turn out to be a carbon copy of his predecessor. Unless Mnangagwa can banish such anxieties and demonstrate a real desire to reform, Zimbabweans could come to face the same Sisyphean fate as their Congolese counterparts.

Keep reading |  6 min read

Africa

Zimbabwe’s President Announces the Country’s First Free Elections

 1 min read / 

Zimbabwe’s President, Emmerson Mnangagwa, has declared a clean break with the past by announcing the country’s first post-Mugabe elections.

The elections, which are expected to take place in the next four to five months, will be completely free and fair, according to the new president, Under his predecessor, Robert Mugabe, elections were rigged, opponents were intimidated and calls for electoral reform were either ignored or silenced.

The move is expected to form part of a charm offensive for Mnangagwa to attract much-needed investment into the country. Under Mugabe, the once-prosperous Zimbabwean economy went into freefall with land forcefully reallocated to party cronies and the imposition of a harmful indigenisation law which curtailed potential investment from abroad.

Some remain cynical over the President’s bon homie. Up until the coup in November, Mnangagwa was Mugabe’s longstanding ally and henchmen. The opposition has said Mnangagwa’s Zanu PF has already made moves to win the rural vote by gifting all-terrain vehicles to tribal chiefs. Something the President has refuted.

Mnangagwa, nicknamed ‘the crocodile’ for his political cunning, has said he plans to attend the Davos Economic Forum later this month. He has also expressed interest in reforging close ties with Britain, its former colonial power.

Keep reading |  1 min read

Africa

Standing Defiant: African Countries Respond to Trump’s Comments

 5 min read / 

Africa Trump

Trump’s recent bout of racism has given African states the opportunity to exert considerable agency on the world stage and also take the moral high ground of dignity and respect. Though Trump’s comments are of a vulgar and vile nature, they represent nothing new: African countries are severely misunderstood and misrepresented in mindsets and media, in particular by those of some western publics.

This is to everyone’s detriment, as African countries are strategic partners in trade and security and will only grow more vital to the state of global, economic and political affairs – it is estimated that the majority of the world’s population growth will take place on the African continent.

The African Union’s Response

Trump’s comments are an opportunity for the African Union, or AU, and for individual African states to exert agency and also strengthen their moral standing. Trump’s outright racism and the ensuing African diplomatic response and the strong voices on social media represent a key moment in recognising Africa’s all too often under-appreciated importance to global affairs. The African Union condemned Trump’s comments in the strongest of terms, and issued a statement declaring that:

“The African Union Mission wishes to express its infuriation, disappointment and outrage over the unfortunate comment made by Mr. Donald Trump, President of the United States of America, which remarks dishonor the celebrated American creed and respect for diversity and human dignity.” The comments were further characterized by African envoys as “outrageous, racist, and xenophobic.”

Botswana has been a major voice in this response, describing the comments as “irresponsible, reprehensible, and racist.” Among the larger African states, Nigeria has not issued an official response, though South Africa is issuing a diplomatic protest over the comments, stressing that “relations between South Africa and the United States, and between the rest of Africa and the United States, must be based on mutual respect and understanding.” US diplomats were summoned in Ghana, Botswana, and Senegal – more African countries are expected to follow suit.

American Views on Africa

The racism and ethnocentrism inherent in labelling “distant” countries (such as Haiti and nations in Africa) pejoratively is nothing new. Though most Americans would not express their worldviews in such crass and vulgar terms, there is widespread ignorance about African countries, with little recognition that African countries represent strategic trade and security partners, not to mention their vast cultural wealth. This problem lies in all facets of American society, from predominantly negative and homogenising news coverage about the African continent to the Eurocentric focus of the education system.

These comments were made in a larger context of domestic demographic change within the US, in which white people will enter minority status by 2044, in addition to the global power shifts of the wider world. Not only are Trump’s comments steeped in racism and ignorance, but they represent the uncertainty and deep discomfort many white Americans feel in the midst of the changing domestic demographics and a world order in which the US is no longer the lone superpower.

Africa is the Future

The African continent is the future, as African population growth will account for the majority of the world’s global population with half of the world being African by 2100. African countries are already strategic partners in trade and security, and will only become stronger players in global political and economic affairs.

Though it is certainly a desired goal for public opinion – the worldviews of western publics in particular – to recognise and appreciate the importance of African countries in their right and their integral significance to international relations, in some respects it doesn’t matter what Americans might think about a massive continent of 54 countries. As John and Jean Comaroff have written in ‘Theory from the South‘, “Lagos is not catching up to us. Rather, we are the ones catching up to Lagos.” African countries are not waiting on Western publics’ enlightenment.

Due to the rise of emerging powers changing the global landscape of power relations, African countries have more opportunity than ever to exert agency in selecting their partners and leveraging relations for national gain. Though the US is a key economic partner for much of the continent, African countries have many other options and it is well known that the approach of China and other emerging powers are, in many respects, regarded more positively than traditional western approaches. Relations between the US and African countries have been marked by longstanding goodwill, but Trump’s comments may complicate relations, ranging from security cooperation to trade ties.

Most important is African ownership of African development, in which the harmonisation of external partners aligns with domestically articulated goals and aims in respect to the continent’s nations. African countries, and all of the diversity within them, must be appreciated in their own right and understood on their own terms.

Conclusion

African countries have their own visions and national development plans and are charting a course marked by innovation and holistic strategies aimed at meeting both human and environmental needs. It is time African countries are recognised and respected for the leaders they are on the world stage and that western publics realise that society’s global future is very much an African one.

Trump’s comments are of course vulgar and crude, but should make people think very seriously about society’s own failings in how people portray – and learn about – Africa, an incredibly diverse continent of 54 countries, from our media to our classrooms. Africa is the future, and – following Trump’s comments – African countries have taken the opportunity to exert agency on the world stage and take the moral high ground.

Keep reading |  5 min read

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