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Governance reform could see African economies benefit to tune of £23bn

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The latest edition of PwC’s bimonthly Global Economy Watch has found that African economies could receive a windfall of £23bn if each economy applied similar governance reforms equivalent to those made by Cote d’Ivoire since 2013.

The continent-wide economic analysis modelled the performance of each country across six of the World Bank’s Worldwide Governance Indicators (2013-17), which covers aspects such as regulatory quality, rule of law and government effectiveness.

The analysis has found that if each African economy made an improvement to governance equivalent to that made by Côte d’Ivoire over the past four years, these gains would be worth around $23bn if realised across the continent.

The countries with the largest potential gains are those with a comparatively high GDP per head but a poor track record on governance. Accordingly, oil-rich Libya and Equatorial Guinea would see the greatest increase, with each person gaining an additional $400 and $200, respectively.

Those with lower GDP per capita, such as Niger and Malawi, would see a smaller improvement, despite their governance rank being below the average for the region. By contrast, economies like Rwanda, which have made similar improvements to Côte d’Ivoire, would also only realise a small benefit, with greater gains made through further diversification of their economies.

Regional differences are significant

The forecast also notes strong regional differences in economic growth across the continent. Economic growth has been particularly strong in East Africa (at around 3% a year since 2013). Central Africa, by contrast, saw annual real GDP per capita fall by an average of 1.3% over the period. North Africa and the Southern region experienced very sluggish growth (of 0.4% and 0.8% a year respectively), while West Africa saw faster growth of 1.9% a year.

Mike Jakeman, senior economist at PwC UK says,

‘Given that Africa contains more countries than any other land mass on earth, it is vital that we consider each economy in its own terms. Economic performance has varied wildly in recent years, but the correlation between strong economic growth and improvements in governance suggests a way for all of Africa to grow more quickly.

‘It is important to acknowledge the real benefits that governance reform can bring. Improved governance can also help countries identify other opportunities for growth. Although we should move away from a single narrative about the African economy, we can also acknowledge areas of mutual interest and benefit across regional economies.’

Manufacturing has driven the global slowdown

Looking at the recent performance of the global economy, the report also explores the causes of the slowdown since mid-2018. The weakness appears concentrated in the manufacturing sector, with purchasing managers indices for the US, China and the euro zone, in particular, declining.

Mike Jakeman says, ‘There are two interrelated stories here. The first is the effect of the US-China trade conflict, which is causing disruptions to supply chains suppressing appetite for trade. This is bad news for Europe, especially, which is a big exporter to both the US and China.

‘The second is the Chinese government’s attempt to deleverage its highly indebted corporate sector, which is likely to have exerted downward pressure on its own manufacturing output and those of its main suppliers. However, the cooling effect of the trade war on the economy has led the government to prioritise its GDP target of 6-6.5% over its deleveraging programme.

‘This short-term relaxation of policy, especially if combined with an armistice on trade, could be enough to re-inject some momentum into the global economy in the remainder of 2019.’

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Africa

The Transitioning Democracy of Sudan

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Sudan has been the focus of conflict for much of its six decades as an independent nation. Despite being an anomaly in a region crippled with totalitarian populism and escalating violence, the country hasn’t witnessed much economic or political stability in years. While the civic-military coalition, leading a democratic transition towards elections, has managed to subside the fragments of civil war, growing hostility in the peripheries has begun threatening the modest reforms made in the past two years. The recent coup attempt is a befitting example of the plans that are budding within the echelons of the Sudanese military to drag the country back into the closet. And while the attempt got thwarted, it is not a success to boast. But it is a warning that the transition would not be as smooth a ride as one might have hoped.

The problems today are only a reflection of Sudan’s issues in the past: especially which led to the revolution. The civil unrest began in Sudan back in December 2018. Sudan’s long-serving ruler, Omer al-Bashir, had turned Sudan into an international outcast during his 30-year rule of tyranny and economic isolation. Naturally, Sudan perished as an economic pariah: especially after the independence of South Sudan. With the loss of oil revenues and almost 95% of its exports, Sudan inched on the brink of collapse. In response, Bashir’s regime resorted to impose draconian austerity measures instead of reforming the economy and inviting investment. The cuts in domestic subsidies over fuel and food items led to steep price hikes: eventually sparking protests across the east and spreading like wildfire to the capital, Khartoum.

In April 2019, after months of persistent protests, the army ousted Bashir’s government; established a council of generals, also known as the ‘Transitional Military Council.’ The power-sharing agreement between the civilian and military forces established an interim government for a period of 39 months. Subsequently, the pro-democracy movement nominated Mr. Abdalla Hamdok as the Prime Minister: responsible for orchestrating the general elections at the end of the transitional period. The agreement coalesced the civilian and military powers to expunge rebellious factions from society and establish a stable economy for the successive government. However, the aspirations overlooked ground realities.

Sudan currently stands in the third year of the transitional arrangement that hailed as a victory. However, the regime is now most vulnerable when the defiance is stronger than ever. Despite achieving respite through peace agreements with the rebels in Sudan, the proliferation of arms and artillery never abated. In reality, the armed attacks have spiraled over the past two years after a brief hiatus achieved by the peace accords. The conflict stems from the share of resources between different societal fractions around Darfur, Kordofan, and the Blue Nile. According to UN estimates, the surging violence has displaced more than 410,000 people across Sub-Saharan Africa in 2021. The expulsion is six times the rate of displacement recorded last year. According to the retreating UN peacekeeping mission, the authorities have all but failed to calm the rampant banditry and violence: partially manifested by the coup attempt that managed to breach the government’s order.

The regional instability is only half the story. Since the displacement of Bashir’s regime, Sudan has rarely witnessed stability, let alone surplus dividends to celebrate. Despite thawing relations with Israel and joining the IMF program, Sudan has felt little relief in return. The sharp price hikes and gripping unemployment which triggered the coup back in 2019 never receded: galloped instead. Currently, inflation runs rampant above 400%, while the Sudanese Pound has massively devalued under conditions dictated by the IMF. And despite bagging some success in negotiating International debt relief, the Hamdok regime has struggled to invite foreign investment and create jobs: majorly due to endemic conflicts that still run skin-deep in the fabric of the Sudanese society.

While the coup attempt failed, it is still not a sigh of relief for the fragile government. The deep-rooted analysis of the coup attempt reveals a stark reality: the military factions – at least some – are no longer sated in being equal-footed with a civilian regime. Moreover, the perpetrators tried to leverage the widening disquiet within the country by blocking roads and attempting to sabotage state-run media: hoping to gain public support. The population is indeed frustrated by the economic desperation; the failure of the coup attempt means that people have still not given up hope in a democratic government and a free-and-fair election. Nonetheless, it is not the first tranche of the army to rebel, and it certainly won’t be the last. The only way to salvage democracy is to stabilize Sudan’s economy and resolve inter-communal violence before leading the county towards elections. Otherwise, it is apparent that Bashir’s political apparatus is so deeply entrenched in Sudan’s ruling network that even if the transitional government survives multiple coups, an elected government would ultimately wither.

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Money seized from Equatorial Guinea VP Goes into Vaccine

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As a classic precedence, the Justice Department of the United States has decided that $26.6m (£20m) seized from Equatorial Guinea’s Vice-President Teodorin Nguema Obiang Mangue be used on purchasing COVID-19 vaccines and other essential medical programmes in Equitorial Guinea, located on the west coast of central Africa.

“Wherever possible, kleptocrats will not be allowed to retain the benefits of corruption,” an official said in a statement, and reported by British Broadcasting Corporation.

Obiang was forced to sell a mansion in Malibu, California, a Ferrari and various Michael Jackson memorabilia as part of a settlement he reached with the US authorities in 2014 after being accused of corruption and money-laundering. He denied the charges.

The agreement stated that $10.3m of the money from the sale would be forfeited to the US and the rest would be distributed to a charity or other organisation for the benefit of the people of Equatorial Guinea, the Justice Department said.

The UN is to receive $19.25m to purchase and administer COVID-19 vaccines to at least 600,000 people in Equatorial Guinea, while a US-based charity is to get $6.35m for other medical programmes in Equatorial Guinea.

Teodorin Nguema has been working in position as Vice-President since 2012, before that he held numerous government positions, including Minister of Agriculture and Forestry. Known for his unquestionable lavish lifestyle, he has been the subject of a number of international criminal charges and sanctions for alleged embezzlement and corruption. He has a fleet of branded cars and a number of houses, and two houses alone in South Africa,

Teodorin Nguema has often drawn criticisms in the international media for lavish spending, while majority of the estimated 1.5 million population wallows in abject poverty. Subsistence farming predominates, with shabby infrastructure in the country. Equatorial Guinea consists of two parts, an insular and a mainland region. Equatorial Guinea is the third-largest oil producer in sub-Saharan Africa.

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African Union’s Inaction on Ethiopia Deplorable – Open Letter

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The crisis in northern Ethiopia has resulted in millions of people in need of emergency assistance and protection. © UNICEF/Christine Nesbitt

A group of African intellectuals says in an open letter that it is appalled and dismayed by the steadily deteriorating situation in Ethiopia. The letter, signed by 58 people, says the African Union’s lack of effective engagement in the crisis is deplorable. The letter calls on regional bloc IGAD and the AU to “proactively take up their mandates with respect to providing mediation for the protagonists to this conflict”.

The letter also asks for “all possible political support” for the AU’s Special Envoy for the Horn of Africa, Olusegun Obasanjo, whose appointment was announced on August 26, 2021. A United Nations Security Council meeting on the same day welcomed the former Nigerian president’s appointment.

Earlier in August 2021, UN  chief Antonio Guterres appealed for a ceasefire, unrestricted aid access and an Ethiopian-led political dialogue. He told the council these steps were essential to preserve Ethiopia’s unity and the stability of the region and to ease the humanitarian crisis. He said that he had been in close contact with Ethiopian Prime Minister Abiy Ahmed and had received a letter from the leader of the Tigray region in response to his appeal. “The UN is ready to work together with the African Union and other key partners to support such a dialogue,” he said.

August 26, 2021 was only the second time during the conflict that the council held a public meeting to discuss the situation. Britain, Estonia, France, Ireland, Norway and the United States requested the session.

Fighting between the national government and the Tigray People’s Liberation Front broke out in November 2020, leaving millions facing emergency or crisis levels of food insecurity, according to the United Nations. Both sides have been accused of atrocities.

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