As oil prices climb, what future for Africa's rail system?

Just a half decade ago, the freight rail industry in the United States was teetering on the edge of relevance. Its infrastructure was shoddy. People where moving goods by other transport. Major railroads laid off nearly 5,000 workers in 2002. Today, many of those jobs have been rehired. New tracks have been added for the first time in 80 years. Further upgrades to rail infrastructure has also been completed, increasing train speeds and delivery times. As the Washington Post points out, trains are much more efficient than trucks: A train can transport a ton of freight on just one gallon of diesel fuel, three times more energy economical than a semi.

Blame it on the combination of growing global trade, high gasoline prices and environmental marketing: freight rail is back in the United States.

On the rails in Africa
What about Africa? Although catching up, business on the continent still suffers from high transport costs and a host of other infrastructure issues, which keeps it in the lower tier of world trade.

It’s not that Africans don’t acknowledge the bonus of having a good rail system. They merely have to hark back at their history to find that reliable, efficient transport is a necessary ingredient of trade. “All new countries must remain ‘savage’ as long as the lack a means of transport,” began a 1904 New York Times article on railways in colonial Africa. It’s true. Africa’s colonial masters exploited the continent’s people and resources through a relatively vast network of railroad lines, mostly built with forced labor. Following independence, some of those railways expanded; in many places, however, they fell victim of neglect due to financial reasons or war and chaos.

A widespread argument today claims that better transport infrastructure means easier movement of people, and possibly more important, goods. It will allow landlocked countries like Burkina Faso, Niger and Mali with better access to ports in Lome, Abidjan and Tema, Ghana. Also, efficient rail service will decrease distances of the supply chain. All this will boost trade and economic opportunity, of course. A World Bank program has been launched to develop all forms of African transport, including rail.

Other factors exist: A smooth running railway is much less dangerous than a hundred thousand trucks – many of questionable repair – on the roads. Railways, if planned correctly, will also decrease traffic in clogged urban areas.

Hot Links
How to bring this about? The African Union – along with national transport ministers – is currently toying with the idea of “linking” African countries via a number of key corridors to create a continental-wide rail system. However, hurdles exist in this scheme, argues Jeff Radebe, South Africa’s minister of transport. First, there are a good number of missing links, especially in underdeveloped African countries. Also, in some countries it remains difficult to bring the private sector on board in government schemes (more on this later); funding commitments are hard to come by; and, cross border issues remain.

Regardless, Radebe points out that the following projects are already underway:

• Linking the lines of South Africa, Botswana and Namibia
• Strengthening ties between South Africa and Mozambique and Lesotho and ports in South Africa;
• Increasing regulatory ties in east Africa also, between Kenya, Uganda, Tanzania, Zambia and Swaziland.

In the dream stage remains a plan to link the rails of West Africa and South Africa. Also, to create a rail/pedestrian/auto bridge over the Congo river to connect Brazzaville and Kinshasa.

Don’t call it privatization
The World Bank would like shift of the responsibility of Africa’s transport infrastructure from a primarily government function to one involving the private sector. These partnerships will most likely come in the form of national governments working alongside international concerns, but the World Bank also envisions small- and medium-sized entrepreneurs getting on board. This web of public/private partnerships will help create adequate legal, regulatory – and most importantly – financial framework to build better transport across the continent, increasing trade, competition, access to rural areas, etc. More than ten years ago, the World Bank argued that throughout Africa problems remain liberalizing the transport sector, where partnerships like these are not only difficult to initiate – but illegal. (They didn’t say which ones.)

Yet, the approval of the private sector is vital to build the continent’s necessary transport infrastructure, because: 1) let’s be honest, transport is primarily used by commercial entities; 2) national governments have a long history of backing away from regulatory and financial responsibilities in the transport domain, especially equipment heavy physical infrastructure like railways; 3) the private sector can provide a large amount of funding, which can be hard for governments to accumulate. (A point I don’t really agree with, unless you are talking of “international private sector.”); finally, 4) providing the public sector with a voice will increase service.

In the fight against street traders, the problem is us

Here lies perhaps the most honest argument regarding the conflict between city governments and unlicensed street hawkers. (This fight first came to light after the city of Dakar attempted to evict the street peddlers, but every city in West Africa has the problem.)

Some may argue these vendors selling their goods on the side of the road pose a nuisance (and worsen traffic); others may claim street hawkers are merely innovative entrepreneurs providing a necessary service to their clients; finally, there are those who point out that if these (mostly young) people couldn’t sell goods on the side of the road, no other economic opportunities would exist for them.

Everybody is correct here, but it doesn’t come closer to curing the problem. Creating jobs and economic development would be nice, but people have been saying that for decades. In some ways, this debate reminds me about the war against prostitution. Locking up prostitutes won’t solve anything. If you want to solve the prostitution dilemma, you must go after the clients.

From Dr. Khumalo in the Concord Times:

I suspect some hypocrisy in the way we tend to address very important social issues. Most people tend to portray street trading in a very negative light and are ready to scold government for not urgently addressing it. But honestly, given the scale of street trading in and around the city, and our participation in it, does it not make one wonder whether any government will be able to curb it? As usual, many people see an easy solution to street trading; government must create new markets around the city and traders will be persuaded to go to those markets. Yes this is indeed plausible given the recent achievement in other African countries. But street trading in Sierra Leone will take much more than just creating markets and forcing hawkers to move to those markets.

Probably even the entire army deplored at the city centre cannot stop hawkers, because it is much more an issue of survival as it is cultural.

If we are honest with ourselves, it probably may be less than one percent of the population that does not buy from hawkers. Every now and then, in taxes, poda-poda and private cars, we anticipate the traffic slow down or deliberately break traffic rules just to buy a few essentials from hawkers. We find it less burdensome to buy from street traders than taking time to go to the often busy and unhealthy markets to buy our stuff. But we are simply being rational to behave that way given the fact that no reasonable human being prefers inconvenience to comfort, although buying from hawkers itself is fraught with some risks. We would prefer to buy from the streets and avoid the threat of pickpockets that now occupy the few crowded markets around town. Thus culturally, we have been used to the idea of hawkers going around announcing their goods at our homes. In the villages and many big towns today (perhaps to some extent the city where "Ernest power" is fluctuating) we are still familiar to the cries of small boys selling kerosene in the evening. We like to be heralded to goods; fish dae! Ah geh dee sawa sawa!

Liberia's profits grow from its flag of convenience registry

Liberia is expected to ring up $19 million in profits from ships flying its flag of convenience in 2008, according to Reuters.

With a total of nearly 2,600 ships, representing 82-million tons, the West African nation enjoys the second largest active flag of convenience registry, after Panama. The government claims it will continue to use this loophole in seafaring law to collect revenue, which is administered out of an office in the U.S. state of Virginia.

Flags of Convenience in general, and Liberia’s in particular, have enjoyed a tumultuous history. The flag of convenience designation allows a ship to fly the flag of a country other than its country of ownership. According to the International Transport Workers’ Federation, a group working to eliminate this special status, the FOC allows ship owners to circumvent taxes, labor laws and the ability of countries to enforce minimum standards on sea vessels. There are presently 32 countries allowing the flag of convenience designation, and the ITWF claims (.pdf, page 10) Liberia’s ships average 12 years of age, which is on the low end of all ship registries. (The average for the U.S. is 23 years; Japan is 13 years and 17 years for Panama.)

During the Liberian civil war, the government of Charles Taylor was under sanctions from the United Nations Security Council. However, a report from Global Witness and the International Transport Workers Federation found that the government was using the flag of convenience status to illegally make money for the government by registering ships and hiring some of those ships to illegally transport diamonds and, more commonly, wood out of the country. (Logging was an important source of illicit revenue for the Taylor government.)

Here’s a short introduction to Liberia’s flag of convenience, from William Langewiesche, formally of the Atlantic, where the article appeared in Sept. 2003

No one pretends that a ship comes from the home port painted on its stern, or that it has ever been anywhere near. Panama is the largest maritime nation on earth, and is followed by bloody Liberia, which hardly exists. No coastline is required either. There are ships that hail from La Paz, in landlocked Bolivia. There are ships that hail from the Mongolian desert. The registries themselves are rarely based in the countries whose name they carry: Panama is considered to be an old-fashioned "flag," because its consulates collect the registration fees, but "Liberia" is run by a company in Virginia, "Cambodia" by another in South Korea, and the proud "Bahamas" by a group in the City of London. The system, generally known as "flags of convenience," began around World War II, but its big expansion occurred only in the 1990s - and in direct reaction to an international attempt to impose controls. By shopping globally, shipowners found that they could choose the laws that were applied to them rather than haplessly submitting as ordinary citizens must to the arbitrary jurisdictions of their native states. The effect was to lower operating costs - for crews and upkeep - and to limit the financial consequences of the occasional foundering or loss of a ship. The advantages were so great that even the most conservative and well-established shipowners, who were perhaps not naturally inclined to play along, found that they had no choice but to do so. What's more, because of the registration fees that the shipowners could offer to cash-strapped governments, the various flags competed for the business, and the deals kept getting better.

Bring me your gas: West African pipeline to open in April

The pipeline that will bring gas from Niger to other West African states will begin flowing in April, three months behind schedule.

From Reuters:

The 678 km (420 mile) pipeline will transport natural gas from Nigeria's Niger Delta to Benin, Togo and Ghana to help ease chronic power shortages around West Africa, seen as a major hindrance to development in the region.

The first gas had been expected to flow through the pipeline to Ghana's western port of Takoradi on Dec. 23 but was delayed after leaks were detected in supply pipelines in Nigeria which needed cleaning and repair work.

The $620 million West African Gas Pipeline (WAGP) starts at the Itoki terminal in southeastern Nigeria and heads eastward across Benin and Togo to reach Takoradi in western Ghana.

Jack Derickson, Managing Director of the West African Pipeline Company (WAPCo), said the pipeline had been ready since December but the state-owned Nigeria Gas Company (NGC) was still repairing its own system from Warri in the Niger Delta to Itoki.

"The current hold-up is repair of the NGC system several hundred miles upstream of WAGP. Our understanding is those repairs are nearly complete," Derickson told Reuters, adding gas was likely to flow by April.

Ivey Business Journal interviews Jeffrey Sachs

I can get a little glib and dismissive about Jeffrey Sachs, who I feel is turning into the modern-day Carl Sagan, a guy who felt a Phd in one area of study gave him carte blanche to be a know-it-all in every other field. (A prototypical blogger, if you will.)

However, Sachs a well versed economist and when he’s talking about his field, you can feel his knowledge. Here’s a quick excerpt of an interview with him by the Ivey Business Journal.

Ivey Business Journal: In The End of Poverty, you write that “clinical economics,” as you call it, is one solution to leading people out of the poverty trap. Describe clinical economics?

Jeffrey Sachs: Clinical economics means doing economic development with the same precision and attention to science -- and I'd also add ethical standards -- as does the practice of good clinical medicine. Having been married to a clinical pediatrician now for 27 years, I’ve observed the essence of good clinical medicine, which is of course having a rigorous science base and then being able to provide a good differential diagnosis, as the doctors call it, to any particular patient and the patient's conditions.

So when you see the problem of extreme poverty, just as when you see a fever, one has to understand that there are many possible underlying causes. Treating the symptoms is almost never sufficient. There is almost never a single possible cause for a specific economic syndrome. And just as with clinical medicine, the key is to make a good diagnosis from the various possibilities and then make a good regimen in response. Part of the problem with economics as it's practised now is its very glib attitude, where people often try to peddle their single magic bullets or believe what has worked in one place automatically works the same way in another, rather than understand that since the underlying conditions are different, we need specific approaches that are well-tailored to the specific problems. In the case of Africa, where I have directed a lot of my attention in the past dozen years, I put a lot of stress on Africa's unique geographical burdens of disease, tropical agriculture in a savannah climate, and the problems of isolation, with the lack of basic infrastructure needed for high levels of productivity. This combination of disease, flagging agricultural productivity and chronic food shortages, and the problems of economic isolation need to be addressed specifically in an African context to break the poverty trap and enable Africa to get on a path of development.

IBJ: In The End of Poverty, you say that governments in Africa need to create an environment conducive to business coming in. You also believe that corruption and misrule are not the problem. How do you create an environment that's conducive to business coming in while ignoring the corruption and misrule?

JS: There is certainly corruption in Africa but there's corruption everywhere, including in our own country, of course. The point I'm making is that there is not only corruption in many parts of Africa, but that the situation is no worse and often considerably better than it is in much faster growing parts of the world, particularly in Asia. The point is really a diagnostic point that we absolutely, simplistically I would say, rush to the Big C, corruption, as the explanation for Africa's problems, ignoring the challenges that I mentioned before which I think are the much bigger ones, and therefore we fail to keep problems of corruption in perspective. It has become both an excuse for inaction and a kind of paralyzing factor in discussion, a kind of showstopper. “Well, we can't do anything, there's so much corruption.” The fact of the matter is that it's simply not true and it's not really a sound or full explanation. It's a misunderstanding to think that I somehow condone this or condone corruption or feel that it isn't a problem. I don't mean to say that. I just mean to say that we have exaggerated this one problem to the neglect of many other programs designed to promote economic development. We're not helpless in simply thinking that our option is to hand money over to corrupt officials and that's the end of it. Either we do it or we don't do it. No, the fact is that we can design the delivery mechanisms of assistance programs in ways that keep the corruption in check, that are designed for, according to transparent performance standards with milestones, audits, regular monitoring, the kinds of things that one does to account for what is often a relatively weak management environment. Of course we have to respond to the realities, but we aren't helpless in the face of these problems.

Let them eat palm oil

Comparing the tax structure of modern-day Benin with those in the pre-colonial kingdom of Dahomey.

Buy your loved ones a Ghana savings bond

It’s really called a Golden Jubilee Savings Bond, and it is expected to raise 50 million GH Cedis ($53 million) to pay for infrastructural development of the country.

Speaking to the Ghana News Agency in Accra yesterday, Mr Mawuli Hedo, Senior Corporate Advisor of SAS Finance Group, said in addition to the launch, the experts would spend some time to educate Ghanaians living in the Diaspora the prospects of the bond.

He said: "the bonds offer a good investment opportunity for Ghanaians living abroad due to its high rate of interest. "In the face of falling interest rates, the effective rate of 16.1 percent on these bonds is very attractive," Mr Hedo said.

The jubilee savings bond would be issued at a face value of 10 GH cedis and in multiples of 10 GH cedis thereafter. Interest rate for the bond would be fixed at the prevailing five-year Government of Ghana rate on the issue date for investors.

Retail investors would receive additional interest of 0.5 percent plus the prevailing rate on the Government of Ghana five-year Bond.

It has a five-year maturity period, which would be fixed on the purchase date with a minimum holding period of three years after which they might be redeemed at face value plus accrued interest. There is an early redemption charge of 1.5 percent in the fourth year and one percent in the fifth (5th) year.

On the intersection of taxes and services in Africa

Let’s talk about taxes. It’s something I know little of, and frankly don’t spend much time thinking about. I stumbled across a few studies regarding taxes in Africa, which offer a much different view than the tax debates I am used to hearing in the United States.

One, African governments get much of their tax revenue (outside of import duties) from firms, businesses and other corporations. One reason for this is simplicity. Tucked inside a World Bank report on Burkina Faso a few years back was the fact that the government couldn’t start a more complete personal income tax regime because it had not yet created a full tax roll. (One problem was the guy compiling the list left for another job, forcing the government to find somebody else, which set them back about six months.)

Businesses are much easier to track than individuals. They need licenses, plenty of licenses to do business, so they are easy to place on a tax roll. Unlike families, it’s hard for businesses to hide all their assets. A friend who grew up in Dogon Country in Mali told me of his father hiding things like television sets and a few of his brothers every time a tax collector would come around. I thought you had a few more kids? The collector would ask. No, no they died, his father would reply.

One of the reasons Africans are so leery about paying taxes is that, like people elsewhere, many feel the quality of government services pale in comparison to their tax bill. They have a legitimate beef. A decade-old IMF-sponsored report found that after investigating taxes and services in eight sub-Saharan African countries, researchers found the distribution of resources are surprisingly unequal: Significant government services are often priced out of reach for the poorest.

For example, schools. Reviewing the charges parents pay to send their children to school – tuition, books, uniforms – the study’s authors, David E. Sahn and Steven D. Younger, discovered primary public schooling is by and far the most progressive service across the board. That means the prices are low enough that the poor benefit from the service – going to school – more in relative terms than the rich. (Studies show that a person’s average income increases for each year of school completed.)

However, as pupils climb the education ladder, school fees become proportionally more regressive, pricing out the poorest families. That’s a truth I know from Burkina Faso, where many of my friends from poor farming families were forced to quit school after finishing their primary education.

Universities are the most regressive educational institutions of all. Although African colleges may have be famously overcrowded (and provide little future job security), only those toward the upper economic tiers can usually afford to send a child.

Health Care
Researchers also tracked the relative costs of health care. They found that the most equitably priced health clinics were those who they offered the most simple of services. For the more sophisticated health units, their prices become more regressive. There’s also an urban-rural dichotomy at work. On average, people make less money in rural areas than in cities, and researchers found the fees charged by rural health centers (often providing fewer services) were more progressive than the costs of urban health centers. (Strangely, those in need of health services have many more choices for care in urban areas than in villages.)

If we can generalize, the truly poor only benefit from the most basic of government services: primary education and basic health care. Anything more complex becomes disproportionably too expensive for those at the bottom economic rungs. You could argue that if a government’s mission is to help reduce poverty and inequality, they are failing in these eight sub-Saharan African states. Think of it from another vantage point. Governments are aiding the wealthy – those who can afford to go elsewhere for schooling and health care – and charging the poor to do so.

It’s not all bad news, however, in these eight representative countries: Ghana, Mauritania, Tanzania, Uganda, Guinea, Madagascar, Cote d’Ivoire and South Africa. These governments, the researchers found, generally have created a set of very progressive tax arrangements. Some of the continent’s most prolific taxes – VAT, wage, sin taxes like alcohol and cigarettes and surcharges for gasoline – are fundamentally skewed towards aiding the poor.

Nigerian solution
Another issue for taxes in Africa is their complexity and opacity. In Nigeria, which is beginning an overhaul of its tax system, Thompson Ayodele argues in the Entrepreneur there are presently 35 different taxes collected by all levels of government. To make matters more complicated, tax collectors are known to negotiate the amount of tax liabilities with different businesses, further depleting their legitimacy. When taxes become convoluted or duplicated, he says, people find ways to stop paying them, further driving down government revenue.

Ayodele, the director of the Lagos-based think tank Initiative for Public Policy Analysis, feels that the Nigerian government must balance the need to gain revenue through taxes while not scaring off potential investors. Thus, the government should rethink taxes not as a form of revenue, but a method to lure foreign direct investment, which creates jobs, raises incomes and doing so, increases tax rolls.

One way not to do this is by raising business taxes too high, which force owners to pass the expense directly on to customers, who may already be living on a tight budget. Instead, the government should look at creating a flat tax for corporations, which has been tried to great success in places in former Soviet-dominated Eastern Europe like Estonia and Slovakia.

There is also a precedent in the United States. U.S. politicians often decry the country’s official high corporate tax rate, but studies have found that U.S.-based corporations pay less in taxes than businesses in other countries. That’s because the tortuous nature of U.S. tax law allows those with the means to hire a coterie of lawyers the added bonus of hiding revenue and creating tax havens overseas. In SmartMoney, Igor Greenwald argues that the U.S. government should decrease the current corporate tax rate of 32 percent to, say, 28 percent (Sweden’s rate), and pick up lost revenue by eliminating the code’s countless exemptions and industry-specific perks. A lower tax rate will decrease the attraction of tax havens and businesses (and government) will be thankful for a more straight forward tax code that should help lead to uniform bills year in and year out.

You can take your taxes
Throughout the world, taxes are the most visible manifestation of government’s relationship with its citizens. The tension between high taxes and poor services is universal. That is why even the most abusive of governments understand the need to balance revenue and provide essential services. (Two old clichés: Some people still speak fondly of Stalin because each year, prices for food actually went down. Most of Chile’s middle class were said to endure Pinochet’s brutal rule because taxes were low.) Governments also understand that history provides many examples of revolutions being ignited over overzealous tax rates in poorly run countries. No matter what form of government a country has, providing proper services at the right price is a universal need.

Here’s an argument. As West Africans become better educated, they are finding their voices to make more demands on their governments. This new confidence will certainly transform the debate of taxation, fees and services. If West Africans believe that governments have the duty to decrease poverty and increase equality, the continent’s statehouses and parliaments will have their work cut out for them.

Ignoring its own advice to other nations, U.S. government plans no ‘shock treatment’ for ailing economy

File this under irony (or is that ironical?). Maybe development guru Jeffrey Sachs could offer a helping hand.

From the Los Angeles Times:

In the 1990s, when Latin America and Asia were rocked by financial crises similar to the one now dogging the United States, Washington officials were quick with stern advice: Don't bail out distressed banks. Don't intervene when stock market and real estate bubbles pop. Let your overblown economies shrink to their natural levels.

"It was all, 'You've got to be tough and take your castor oil,' " said Joseph E. Stiglitz, the Nobel Prize-winning economist, chairman of the Council of Economic Advisors under President Clinton and former vice president of the World Bank.

To date, U.S. officials haven't followed any of the advice they so readily dispensed to others. They have tried to aid troubled banks. They have slashed interest rates to help the struggling housing and stock markets. They have made it clear that they will go to extreme lengths to keep the American economy out of recession.

A muder in Burkina Faso raises all kinds of difficult questions

Murder makes an interesting topic. It’s almost too late to pass of this as local news, but murder, murder always makes for an interesting topic. Queue ominous choral music. Allude to overtones of money, power and the universal need to better oneself. This also may be a story about race and the place foreigners occupy in West Africa. But at the bottom, I'll argue, this tale most likely concerns ideas about the rich impeding the economic growth of the poor.

It was nearly two weeks ago when the corpse of Idrissa Ouedraogo, a money changer who plied his trade in front of the airport, was found in his house. His friends and colleagues noted that had been with a Lebanese who had apparently wanted to change around $50,000.

Shortly after finding the body, the authorities discovered that the Lebanese and his driver had fled in his boss’ car for Cote d’Ivoire, which is where he lived eight months prior to moving to Ouagadougou. In fact, he had an Ivorian passport and an Ivorian wife with an eight month old baby. He apparently told border guards that he was borrowing his boss’ car to take his sick baby to a hospital in Abidjan, where he could get better treatment because of his Ivorian nationality.

As the news circulated through town, the small Lebanese community of roughly 800 held two overriding fears. First, they worried over the act of the new member of their community, who would not fare well if he was caught in Burkina Faso. Secondly, this class of merchants and businessmen who were part of a Diaspora long installed in West Africa feared for their safety and security of their businesses if the local population were to inflict retribution for the murder of their compatriot. Community and political leaders immediately relayed messages down to Lebanese in Abidjan as Burkinabé authorities relayed notices to Interpol.

This proved to be too late. The Lebanese escaped from Abidjan on a Royal Air Maroc flight, yet he was also missed by the authorities in Casablanca. By the time the law caught up with him, he had arrived in Beirut.

By decree of the government, the press didn’t publish much information regarding the crime, especially the name or origin of the perpetrator. Since the body was not found until Friday morning, the newspapers were out of the game until their Monday editions came out. The radio and television – where most people receive their news – were mostly silent on the matter. Of course, this may have helped fuel the rumor mill, wrote another blogger in Burkina.

Lebanese shopkeepers in Ouagadougou closed up their shops on Friday afternoon. Until Tuesday morning they remained shuttered.

Lessons from another murder
When the press came back online involving the crime early next week, their argument for silence was a healthy fear of retribution. It was not the first time a perceived rich and power business entity would feel the wrath of people who felt justice had been cheated. It was not much less than a year ago when another murder, or set of murders, shook Ouagadougou.

As I recall, two men called upon Modibo Maiga, main owner of Kundé bars, chain in Ouagadougou known for their loud music, dancing and all-night festivities, to purchase his truck. The two took the truck out for a test drive, and their friends never saw them again. A few days later, their bodies were found in a reservoir near the edge of town. They had been decapitated, and I believe their sex organs were removed. The city was shocked – not only because of the murders, but their brutality. I remember driving through town and trying to turn left as the funeral procession arrived. I must have waited 15 minutes before attempting to take another route.

Rumors flew that it was black magic that attracted so many people to the Kunde bars – not the more earth-bound system of cold beer, loud music and dance girls. To keep the bars full every day and night, Kunde’s owners had to pay their debts to the spirits through these ritual killings. As someone who has lived in Burkina Faso pointed out to me, black magic is common here, but it never appears to be a force of good. It is used to harm people.

The number, and anger, of these mourners soon grew. The subtext, of course, is money and power. The chain of bars have made Kunde’s owners rich and acquainted them with those in power. Most Ouagalais understand that this recipe means a pardon would be forthcoming for these crimes. The crowd that began gathering at the original Kunde bars had other plans. All told, more than half of the chains 33 bars were burnt down, but not before their interiors were looted. One Kunde employee was killed. A crowd then took revenge on the home of Modibo Maiga, lighting it on fire and blocking the fire trucks from arriving on the scene.

The leaders of the Kunde bar were taken into custody for what the police called “protection.” And a few days later, they appeared at a press conference exclaiming their innocence. They had been cleared by the police, and would now help the victims’ families properly mourn the dead. Even with the destruction of more than 20 of their bars. (Many reopened within the month; some never would.)

The idea of vigilante justice is nothing new to Burkina Faso. The press patted itself on the back with the knowledge they may have stopped groups rampaging through Lebanese stores over the murder of Idrissa. That’s because more so even than the owners of the Kunde, the Lebanese are seen by most as rich merchants and business owners. But they are also seen as being mostly foreign, which can translates into appearing above the law.

A history lesson
Since their arrival in West Africa at the tail end of the 19^th century, it has been hard for the Lebanese to not be seen as being separate and above the law. The continent was under colonial rule then, and it was French authorities who re-routed Lebanese stopping in Marseilles on the way to immigrating to Brazil and the U.S. Some of the passengers did not have enough fare to reach the Western Hemisphere; others could not pass U.S. health tests. The French simply routed their boats to Dakar, by then the French capital of West Africa. These immigrants had left behind abject poverty in Lebanon, Michael Crowder in West Africa Under Colonial Rule explains, and decided that facing difficulties in West Africa made more sense than returning home empty handed.

In fact, the opposite happened. Their fortunes quickly took off. Unlike European merchants in West Africa, Lebanese were willing to live at a level even below local standards. The Lebanese were content with living with lower profit margins, which allowed them to sell their wares at prices below their competitors. They hired family members, paying them little and keeping overhead low. They returned most profits to the business. Learning African languages were not above them. Nor was haggling. What truly set them apart was credit. Through other Lebanese family members, one could get credit to set themselves up in business.

Their numbers quickly grew. In French West Africa, a census counted 28 Lebanese in 1897; three years later, there were 276. At the end of the twentieth century’s first decade, 1,100 Lebanese were counted. By the end of the 1920s, Lebanese virtually ran all the retail and middleman trade throughout much of West Africa. Africans were relegated to traditional trades, like kola nuts, cattle and dried fish. Otherwise they merely became producers in their own economy. Europeans moved on to the large import-export houses and some colonial set asides.

By independence, Lebanese traders and businessmen were firmly established everywhere in West Africa. I know a Lebanese man born 40 years ago in Dakar whose father, he tells me, opened the first candy factory in West Africa. He makes soap in Burkina and plastic bags in Cote d’Ivoire. Who knows what his sons will do. If they want, they’ll have access to a pool of credit much deeper than 99 out of 100 entrepreneurial Africans. This lack of credit is perceived as the major stumbling block for Africans to expand their business ventures. As Crowder points out, the difference in credit is not only due to perceived and real riches of Lebanese, but also to nuances of African culture. “The African was bound by his extended family so that profits which would be ploughed back by the Lebanese to his business would have to be spent on a cousin, a wedding, a funeral, a baptismal ceremony.”

In the mind of some Africans, the Lebanese now held the position vacated by former European colonial masters. Instead of running political lives as the Europeans did, the Lebanese controlled the commercial and economic lives of Africans. They also hired Africans, and as this blogger points out, they are seen as being very strict. In some communities this lead to hostility. This could stem from the impotence Africans feel in the face of this growing economic power.

At least to one observer this power meant Lebanese were in cahoots with often corrupt African leaders, who understood how tied Lebanese businesses interests were to the rest of the region. As a side note, a Burkinabé friend says he has a bet with his friends, asking them to call him when they spot a Lebanese in a local gas station. He’s convinced the Lebanese are surreptitiously importing gas into the country without paying import duties – in full knowledge of those in power – depriving the state of much needed financial resources and providing cheaper gas for their people.

From Lansana Gberie in A Dirty War in West Africa: The RUF and the Destruction of Sierra Leone:

For well over a century in West Africa the Lebanese have failed (or rather refused) to integrate into their host societies, concentrating almost wholly on trading. A large number of the more successful continued to maintain close ties to the politics of the Middle East, a reality that only compounds their image in much of West Africa as exploitative and corrupt. Lacking serious local political ties, the Lebanese in West Africa have over the decades since independence shown no scruples about working with unsavory political and other groups as long as money can be made. It is therefore not surprising a number of key Lebanese figures in the region were implicated in the ‘conflict’ diamond trade with the RUF.

Back to Ouagadougou
The reason for Lebanese closing their businesses were two fold: to keep the crowds from attacking their employees and their stock; and to show proper respect for the dead. When shops reopened Tuesday, Lebanese owners unfailingly told the press how they unquestionably closed their doors for the weekend, at a time when they did their best business, citing their “enormous” loss to profits. The leader of the Lebanese community quickly pointed out that the killer was not a real member of the Burkinabé Lebanese community; rather, he was portrayed as being merely a somebody who came up here a few months ago from Cote d’Ivoire to help manage a shop. For its part, the Lebanese Consul will pay the victim’s family $225 a month for five years. They have also engaged the services of two lawyers, one for the prosecution and one for the defense, for the capital trial, which will take place in Beirut because the two countries don’t share an extradition treaty. (Even if they did, the Consul candidly admitted that it was doubtful the government of Lebanon would extradite a “compatriot”) Two members of the victim’s family will also travel to witness the travel

As the press duly noted, not as much as a harsh word was spoken towards a Lebanese in the days after the murder. Not to their faces at least. Some observers have detected a grumbling undercurrent, not only against Lebanese but towards all foreigners who appear to live above the law. I’ll argue that economics plays a much larger role than any xenophobia creeping into Burkinabé culture.

The economic differences between foreigners and locals are apparent with anyone with working eyes. Should it be this drastic, however? Burkina Faso is staring down the barrel of nearly seven years of economic growth. More than the Lebanese and a few connected locals should be profiting from this. Yet people aren’t. Even as huge mansions go up and fancy BMWs and Mercedes 4x4s start to clog the streets.

Of course, finding a pathway to economic growth isn’t the responsibility of the Lebanese. The next time a splashy murder like this comes about, however, they may have wished their Burkinabé partners in government did a little more for the common person.

Automation project underway at Ghana Stock Exchange

In a move to bring Ghana’s Stock Exchange closer to international standards, trading and other activities will be automated in the next few months.

According to My Joy Online:

This will replace the current manual trading system, where the brokers have to place their orders and bids on a white board during trading sessions on the floor for allotment to be done.

The platform, being executed at a cost of 1.88 million-dollars, will allow trading to be done on line and on real time basis by the touch of a button.

Trading commenced at the Stock Exchange on November 12, 1991. Presently there are 34 listed companies traded on the exchange and total market capitalization (as of June 30) is more than $12 million. On January 10, 2008 (yesterday) some 77,800 shares were traded. The exchange has 16 licensed stock broking firms, and custodial services for non-residents are provided by Barclays Bank of Ghana.

Good investment, bad investment: exports in the age of globalization

Instead of rummaging through hotel mini-bars in Lisbon, at least a few Africans got together and debated the state of economies and exports in the age of globalization.

The verdict at the Helsinki Process on Globalization and Democracy, held in Dar es Salaam, Tanzania: Africans should not be concentrating on solely export products. Rather, they should build up local and regional markets.

From IPS

‘The assumption is if we export primary commodities, they will raise capital which will have a ‘trickle-down effect’ and address developmental needs. But, as you know, that is not happening, despite many of our goods and resources being exported,’’ said Michelle Pressend, senior researcher at the South African international relations think tank the Institute for Global Dialogue.

"We should only trade in things we don’t have. For example, if we can’t manufacture medical equipment, we can import it. But food and basic necessities are things that African countries can produce themselves.’’

‘‘Countries need to take into account their resource bases. There are countries that are water scarce, like South Africa, Namibia and Botswana. Perhaps they shouldn’t be focusing on agriculture. Maybe this should be left to countries like Zambia and Zimbabwe that have water. They should be growing maize and other agricultural products.’’

Most African economies are dependent on a single commodity for a majority of export GDP, placing African states at the mercy of often fickle international commodities markets. However, these export commodities provide the chance to African governments to earn foreign currency, which they can buy other exports.

Another problem with relying on commodities is that African states don’t recoup any benefit by producing or finishing the commodities. For example, the cocoa grown in Cote d’Ivoire and Ghana is processed in Europe, where it becomes high-value chocolate (and other things). The same goes with Shea butter in Burkina Faso. What’s stopping countries from investing to be able to “finish” one of their commodities?

Investors are now flocking to Africa and its expanding economies. However, many of these projects seem to be of the resource-based industries: logging, mining, etc. These may produce good short-term results – and jobs – but what is the long-term game plan here? Without technology transfer, so Africans can do the work themselves, or well planned environmental policies, rich countries will continue to reap while the Africans sow.

A worthwhile choice is increasing regional integration, another proposal brought up at the symposium in Dar es Salaam.

China and Africa, the interview

The Council on Foreign Relations recently published an often-interesting and fairly-ho-hum interview with Yang Guang, director of the Institute of West Asian and African Studies of the Chinese Academy of Social Sciences.

Before we get to ho-hum, which admittedly is a little harsh of me, the interview did net a few interesting facts.

• Guang called China a “relative latecomer” to investing in Africa. The country did not begin spending on the continent until the late 1980s, but by the end of 2006 the investments totaled $11.7 billion, which he claims in terms of all countries investing in Africa “is not a big number.”;
  
• Chinese firms producing labor-intensive goods cannot be made cheaply enough for its domestic market, which is why many looked to manufacture those products in Africa;
  
• China counts about 800 different enterprises investing in Africa, 100 of those are state owned;
  
• Much of the push for African investment exists because much of the continent is now more open to investment;
  
• Chinese investment has created 70,000 jobs in Africa;
  
• He did not think African countries should look to China as a model of economic development because each country has its own national circumstances.

Now, the bad news
These tidbits aside, Guang danced around a lot of issues, including the question of oil-centric investing, the place of corporate responsibility in Chinese firms and the country’s arm sales to Sudan. Part of his evasion of these question may be due to the fact that I can’t see CFR asking American businessmen about corporate responsibility (and receiving an honest response), or pressing a U.S. government official on the scope and breadth of American arms sales to foreign countries.

Anyway, I found his answer regarding China’s relationship with the Sudanese government very illuminating.

There are different understandings about the issue of Sudan, but the Chinese understanding is for a country as poor as Sudan, the first priority is the basic needs of the people, and to see their living standards increase. Economic development is the top priority for this country. Therefore, if we want to help these people to resolve their problems, then we have to start by resolving their development problems.

It has been true, in my view, that in practice the Chinese understanding is correct, because during the past few years this country went from a net oil importer to a net oil exporter. The fiscal budget has improved significantly, the economic growth rate is also rapid and, interestingly, the oil income has also contributed to the resolution of domestic conflicts. If you look at the CPA [Comprehensive Peace Agreement], you may find that one of the components is the distribution of oil income. It is distributed on the basis of 50-50, so in other words the black people in the south can also benefit from this and poor people can also benefit from this result of oil development.

Chinese companies are very proud of this contribution to the Sudanese people. The United States argues that this is not a good regime, with a dictatorship and things like that, but Chinese foreign policy is non interference in domestic affairs and actually it is very hard to see whether a regime is a dictatorship or not. You have to find a commonly acceptable standard, so if this kind of standard does not exist, you cannot impose a one-sided view onto the others.

I believe that, due to the different cultural backgrounds, due to the different levels of economic development, it would be hard to find a uniform model of political development for the African countries. The best way is probably to observe and respect the efforts of the African countries in exploring their own way of political development. Otherwise, if you try to impose a model on them, there is little chance to succeed.

Authority Stealing: African musicians fight music pirates

Unbeknownst to Africa’s countless tourists and more than a few of the continent’s teenagers, it appears that buying music cassettes and compact disks off the street is most likely illegal. That’s because the music is probably pirated.

This illegal music market costs musicians $10 million a year in Ghana alone and has become a serious hindrance to a vibrant industry, says John Mensah-Sarpong, president of a Ghanaian music industry group.

Music pirating is a $4.5 billion industry worldwide – at least in 2003 it was. The industry group IFPI claims that in most African countries seven out of ten CDs sold are pirated. The worst case scenario belongs to Morocco, where organization leaders say nearly all recorded music is pirated. Things are better in South Africa, the continent’s largest economy, where pirating makes up 40 percent of music. In Ghana, Mensah-Sarpong said his organization estimates pirated music to make up 20 percent of the cassette market alone.

Musicians are taking a beating
African musicians have long decried the illegal copying of their songs to the press, only to leave the interview, walk a few feet outside and see kids hustling pirated CDs and cassettes in the full sunlight. Relations between musicians and piraters came to blows in Abidjan in the spring when Ivorian reggae star Fadel Dey was attacked when he and a group of musicians confronted a group of hawkers selling his counterfeit cassettes. Dey claimed he and his musician friends merely wanted to show authorities how the scourge of counterfeiting affects their lives. What they got was a beating.

“The result of their act of bravado was a not exactly what they had hoped for,” writes Daniel Brown in MondoMix.

Witnesses say that police stood by idly as the artists were set upon by a large group of hawkers and men armed with rocks and sticks. Dey and fellow-musician Gbazza Figaro were knocked unconscious by bricks. Dey needed over a dozen stitches, and was close to losing an eye. He has since left hospital and is in a stable condition.

Big-time African musicians like Youssou N’Dour have long railed against the effects of piracy on the industry. In a recent interview with China Radio International, Amadou of the Malian duet Amadou & Mariam claimed piracy was killing African culture.

Piracy can damage our chance of succeeding. But it's not just that. It affects everybody. It's a deplorable phenomenon. It kills creativity. It kills culture. It kills the creators. We tell young people who are copying and downloading music illegally that they are killing the music. If you really like an artist and you want him to go on making the music you enjoy, well then, why don't you pay for his CD so that he can make a living. We can't survive just on what we are paid for giving concerts. There have to be rights too. It's copyright that allows the artist to earn his living and to keep on working.

How good does it sound in an old taxi?
Some record executives assert African authorities knowingly look the other way when it comes to music copyright issues. It’s another form of the culture of impunity, they say. One could make the argument that pirated music offers regular Africans the chance to afford real African music – even though the production quality is often hit-or-miss.

Outside of pirated music, copyright issues do exist at almost every level of society. Radio stations often use famous songs for advertisements; the same with television news programs and dramas. In Nigeria, musicians are becoming more aggressive and taking royalty cases to other media. "We have many cases in court right now,” said Nigerian superstar King Sunny Ade, the Chair of the Musical Copyright Society of Nigeria, in an interview with African Entertainment. "We're fighting with the Nigerian Copyright Commission, because we want them to make sure that all radio stations, television stations and so on, pay the royalties to the musicians.

Sunny Ade said the country has instituted the anti-pirated Hologram seal, which acts as a certificate of authentication for the compact disk. The industry group the Recording Industry of South Africa, claims the introduction of the Hologram has been ineffective in the southern part of the continent. Instead, that organization is focusing on educating listeners on the legalities of record piracy and illegal music downloading. In Ghana, Mensah-Sarpong pushed for the government to establish a Copyright Tribunal to assist musicians take legal action against copyright offenders.

As the burgeoning young population becomes increasingly more technology savvy, downloading music has developed into an important front in the fight against piracy, at least in Burkina Faso. One of the CD hawkers I know in Ouagadougou claims the hordes of young people using the internet has greatly depressed his revenues from selling pirated CDs. “I used to make money doing this, but people don’t buy music anymore,” my friend told me in downtown Ouagadougou. “Now everybody goes to the Cyber to get their music. You don’t have to be that rich to get one of those MP3 players and take the music with you.”