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Where next for Africa: a new vision for new development policy

As Africa continues to battle the public health crisis and the socio-economic impacts of the COVID-19 pandemic, I have been amazed, befuddled and despondent all at the same time at the responses we have seen. How African medical professions have responded and coordinated with resources and budgets that are tiny in comparison to their international counterparts. How nations like Togo have moved to cushion their citizens and the ingenuity and innovation shown by individuals and companies have all given me hope. The hope that we have the imagination, drive, and generosity to confront and overcome any challenge. However, the police brutality and human rights abuses and in some cases the outright denial of the virus by some has also given me pause for thought and reminded us how easy it is for our demons to take advantage of a crisis.  

Like many, in both my work and my writing I have been preoccupied with, as Dr King once put it “the fierce urgency of now”. How do we stop the virus, protect livelihoods, and reignite our economies? These are all valid concerns that deserve significant thought and effort. However, it strikes me that we also could and should be thinking beyond the pandemic. Crafting a vision for our continent that takes advantage of the extraordinary opportunity before us.  

The global pandemic has broken norms, systems, and preconceptions, which had limited the range of possible actions and policies we were able to pursue. Out of crisis comes opportunity. 70 years ago, Europe used the devastation of a world war to remake itself as a bastion of social democracy and regional cooperation. That required vision. People who recognised that despite the devastation, there was an opportunity to break with the past and reimagine what Europe could be. And went on to sell those visions to politicians, and people to create a shared vision that could be worked towards. Today the member states of the EU may squabble, but they do not plunge into periodic globally destructive wars and their citizens enjoy a near border-less continent with broad strong social safety nets. 

What is our vision for our countries, regions, and continent? What can we rally around, work towards and achieve for us and our children? There is an opportunity to build a better Africa out of this global disaster and we must seize it.  

The system is broken, and the opportunity is open 

The global Coronavirus pandemic has fundamentally broken or changed a number of aspects of global politics, economics, and policy norms that Africa can take advantage of.  

1. Capitalism is being questioned  

Markets are powerful things that can do a lot of good. However, this pandemic has reminded us that when markets are skewed and inequalities exist those will be amplified by crisis, and, more fundamentally that markets cannot do everything. Public goods and services, like public health, cannot be privatised and subjected to market efficiencies without consequence. Markets must have limits. Out of their failure during this crisis, we can remake them, to be fairer and draw boundaries around where the logic of markets ends and the public good takes precedence and we can remake the social contract to have fair markets and strong public services reinforcing each other.  

2. Social safety nets are possible.  

Before the crisis things like basic income, housing for all, or UHC were all dismissed as too expensive, too unwieldy (especially for African governments) and potentially undermining hard work and personal responsibility. In a crisis that was no one’s fault, we have seen governments design and deploy large scale social safety nets like cash transfer programs and rapidly expand public health systems to protect the most vulnerable and deal with the crisis. This is can also be a reality beyond the pandemic, Basic incomes and universal health coverage can be done and will be powerful tools for ending poverty.  

3. We can make things  

The pandemic disrupted global supply chains and across the continent things that were once easy to import suddenly had to be made here. Lo and behold we have discovered that we can make things like Personal Protective Equipment, Ventilators and even our own tests. If we can make things, we must make sure we never end up in a situation where we cannot produce the medicines and medical supplies we need, where we cannot supply our construction industries or stock our shop shelves. In short, there is an opportunity to rethink our industrial policies (as I have previously written about) around industries and businesses that now recognise the need for resilient local supply chains.  

4. Corporate tax is cool again  

With all the government spending that is going on around the world, it will eventually have to be paid for somehow, and there are few better sources of revenue than the multinationals adept at gaming the system. As countries around the world clamp down on tax avoidance and evasion Africa can do the same. Reshaping its tax systems (as I have written about previously here) to tax profits where they are made. An Africa that can replace aid and debt with sustainable revenue is an Africa with her destiny in her own hands.  

5. Global political space 

Global geopolitics, for so long defined and defended by the USA is fragmenting. With the USA becoming more insular, China on the rise but untrusted, a Europe busy trying to hold itself together, Africa has an opportunity. To reject the notion that we are a playground for global power games and redefine ourselves as a leader on issues like climate change, tax and trade that have for so long befuddled others and negatively affected Africa. Even forge a new alliance with emerging and middle powers around the world who do not hold ambitions of domination but of shared prosperity and calm. 

6. We are young and hungry  

Millennials around the world are despondent cohort, our working lives defined by recessions, pandemics and polarising politics. However, in Africa, this is not necessarily the case. I am constantly amazed by the determination and refusal to give up that the continents young people display. Young African’s are inventing, innovating, and breaking barriers in culture, business, science, and politics. Rather than being depressed like our western counterparts we can be Generation Hope. We must harness the hustle, embrace the creativity, and nurture the deep yearning for a better tomorrow. A crisis of the magnitude we are experiencing now opens the door for us to experiment, to leap into the unknown led by a generation of hope.  

That vision thing  

In these opportunities, brought about by an unprecedented crisis, I see the space to construct a new development vision for our continent. A vision anchored in the dignity of our people. A vision that looks to achieve our own moon shots of ending poverty, disease, and desperation, where our fates are decided in our capitals rather than those in foreign lands. And where prosperity Is not built by climbing over the backs of others but through our innovation and drive that allows us to stand on the shoulders of each other.  

My writing usually addresses dry development policy subjects like budgets, trade, and labour policy, but fundamentally development policy is anchored in a vision of a better future. For the last 30 or so years, those visions in Africa have been stunted by uninspiring inhuman aims such as achieving middle–income status or industrialisation. The pandemic allows us to once again centre our development visions on the dreams of our people. Visions that we can identify with, rally around, work towards together and proudly proclaim our individual roles however small in achieving those goals.  

Without an underlying inspiring vision, our development policy is lost. It is misdirected into white elephant projects, filled with other people’s priorities, and spelled out in consultant gobbledygook and buzzwords. The crisis of the pandemic offers an opportunity to reclaim and reframe Africa’s development vision, let us seize it.  

Core features for African Post-Covid-19 economic stimulus packages.

The global coronavirus pandemic has not only put public health and health systems under threat it has undermined livelihoods, businesses, and economies across the continent. As a result, many policymakers are turning their attention to how to get those economies started again, as they shift from the public health response. Some countries such as South Africa and Kenya have already released details on their stimulus packages. Each African country will need to come up with a package that works for them specifically. However, as diverse as these packages may be there are some core features and opportunities that I think apply to most if not all African states. That will not only aid in jumpstarting their economies but lay a foundation for long-term growth through tax reform, building social safety nets, and putting money in the right places. African states may not have the financial firepower that the developed world has deployed to keep their economies alive, but with some creative and bold policymaking African governments can not only jumpstart their economies out of the Coronavirus malaise but also lay the foundations for long term growth.

Investing in the right places

There are two sectors, agriculture, and the informal economy, that define sub-Saharan African economies, and will require specific focus in any form of stimulus.

Agriculture is the foundation of the African economy. At least 60% the population of sub-Saharan Africa are smallholder farmers, and about 23% of sub-Saharan Africa’s GDP comes from agriculture. Stimulus measures aimed at the agriculture sector are critical. This should include

  • Subsidies for inputs (fertiliser, seed, pesticides, etc.) for farmers, that will ease the cost of farming in a tough year.
  • Heavy investment in small farmer training and education that will enhance the skills and productivity of small farmers.
  • Investment in rural infrastructure such as warehouses and rural roads that improve farmer incomes cut the cost of storing and moving goods from farm to market, making those goods cheaper for consumers.
  • Facilitating through guarantees the provision of credit to businesses along the agricultural value chain that provides services to farmers, move agricultural goods or process agricultural goods.

Boosting agricultural incomes, productivity, and efficiency, will not only help drive growth out of the crisis but also help make food cheaper and more plentiful for consumers. In short, an agriculture targeted stimulus could be the foundation for long term food security

The second critical sector is the informal sector. The IMF has estimated that on average the informal sector contributes between 25% and 65% of GDP in Sub-Saharan Africa with Mauritius and South Africa at the low-end under 25% and Tanzania (over 50%) and Nigeria (over 60%) at the other end, and that the sector accounts for between 30% to 90% of non-agricultural employment.

For the informal sector, the key to a stimulus lies in cheap credit (or grants if the government can afford it). Many informal businesses have been subjected to weeks or months of low business volumes (or none at all) due to restrictions put in place to control the virus. This means they do not have working capital, to reopen and restart they will require this capital, and cheap credit is a quick and effective means of providing it. Governments can provide credit to Micro and small enterprises (as most informal businesses are) through existing channels that the informal sector already uses, such as mobile lending, cooperatives, savings groups, and microfinance institutions. Restarting the informal sector is critical to ensuring that people have jobs and incomes, livelihoods that do not just keep the economy turning but the food on tables and kids in school.

Combined the agriculture and the informal sector account for at least 40% of most African economies and are the primary providers of employment. The design of any African economic stimulus must have a significant focus on these two sectors if it is going to have any significant impact.

Tax reform

Some countries have introduced a set of tax cuts to ease consumer pain and help save businesses money. While tax relief will help a bit, outside of South Africa the tax base of most African countries is simply not big enough for tax cuts to have a big simulative effect.

However, taxes are a problem across the continent. African governments, do not collect enough taxes relying on a narrow base of taxpayers paying into a system riddled with tax loopholes, breaks and exemptions. Furthermore, the crisis will put millions out of work and cut the revenues of businesses significantly. However, as the American saying goes, never let a good crisis go to waste. This crisis presents a perfect opportunity for African governments to pursue genuine tax reform, that will help broaden the tax base and mobilize domestic funding for development rather than debt.

We can do this by reforming the tax system to make it, simpler. Make it easy to pay, easy to track and hard to confuse, this can be done through a combination of.

  • Removing existing individual and corporate tax breaks and exemptions while bringing down headline corporate tax rates.
  • Removing transfer pricing loopholes that allow large corporations to avoid paying local taxes.
  • Put in place new frameworks that will assess the proposed and existing tax breaks based on their verifiable impact. In other words, the impact of existing tax breaks should be clearly evident in the data and the justification for a new tax break should also include clear indicators on if it is working. This would prevent the myriad of loopholes creeping back into the system

Getting more companies in the tax net, on an evening playing field while doing away with all the complexity that enables the avoidance of taxes will broaden the tax base. This can be accompanied by a marginal lowering of headline rates as there will be more people and companies paying taxes. A smaller burden on more people will result in less stress on consumers and companies and higher tax revenue when the post-crisis recovery starts.

Safety Nets

One thing the crisis has done is put severe stress on the safety nets and support systems that most Africans rely on. Those with jobs, both formal and informal, often support their immediate and extended families. Foreign remittances (migrant workers sending money back home) has grown by ten times in the last 2 decades. This is a critical source of income and support for millions around the continent and in many countries is one of the largest sources of foreign currency and inward investment. Domestic and international transfers which essentially form our social safety nets are being ravaged. As the domestic economy sheds jobs and opportunities, incomes whether formal or informal will be cut or lost entirely. Internationally, as we have already seen job losses will be immense, and African migrants will be part of that and the World Bank expects international remittances to fall by 23%. Millions around the continent will be without vital support from struggling friends and families and governments must step in. This can take one of two forms:

  1. Give people money. Cash transfers (as I laid out in a previous post) are simple and effective and in a crisis potentially lifesaving. In Togo the government has deployed a cash transfer program called Novissi targeted at people whose daily income is no longer guaranteed due to disruptions caused by the Coronavirus crisis, using existing mobile money platforms. The cash transfer does not fully replace people’s incomes, but it does provide a lifeline, ensuring that people do fall into desperation. It also shows that a mass cash transfer program is possible and need not break the bank.

 

  1. The second option is to invest heavily and quickly in the provision and delivery of key services. Ensure that critical needs such as power, healthcare, sanitation are provided cheaply or free as widely as possible and that critical income-generating venues such as food markets can run with social distancing and sanitary measures in place, that would ensure income generation but also keep people safe.

Neither of these two solutions (or a combination of both) should be short term solutions. Building viable social safety nets is a key need across the continent and if included in a stimulus package, they could be the basis for long term remaking of the social contract across the continent. Without putting in place viable safety nets to replace the informal ones that are being worn thin by the pandemic we may see more people forced into desperate poverty, which would set endanger millions more lives and threaten social stability.

Speed is key

 

The primary goal of any stimulus plan is to move an economy out of a crisis or recession. To do so the stimulus must be deployed quickly before too many businesses and consumers go broke or permanently change how they do things. In deploying their stimulus programs, African governments must ensure that they are deployed quickly. Businesses need credit before they go bankrupt, farmers need inputs before the next planting season and people need to eat today not next quarter. Getting a stimulus package out of government treasuries and into the economy as quickly as possible will amplify its effectiveness.

The right type of stimulus

 

No two stimulus programs will be the same, African economies are diverse and the priorities of each government differ. However, there are common features across the continent that will need to be addressed. With limited resources, we must be smart and bold. That requires putting our resources where the majority of African’s earn their livelihoods in the agricultural sector and informal economy. Making sure that vulnerable communities whose livelihoods have been decimated or support systems undone, get adequate support. And it is an opportunity to reset a tax system that is not fit for purpose to one that can raise the resources we need to fund our long-term development.

African economies need a jumpstart out of what the IMF is calling “an unprecedented threat to development”. As we design our stimulus programs, we must do so in a way that does not just tick the boxes of orthodox economic thinking but addresses the realities of our economies and looks to the future.

 

 

Making it through the crisis: Africa’s crisis response policy

A few weeks ago I wrote a piece on what Africa can do to kickstart its economy and drive long term growth after the coronavirus crisis has ended. What’s becoming clear is that the crisis will be longer and deeper than many had first thought. This poses the question, what policies do we need to put in place so that when it ends, we are in a position to kickstart a recovery.

African governments do not have the financial firepower or operational capability that developed countries have deployed. But I do not believe that means we are hobbled. As policy responses around the world are showing, what was previously thought impossible, too expensive or too complex is doable. The same applies to Africa. To make it through the crisis we must abandon the art of the possible and attempt the impossible. This crisis presents critical obligations to African policymakers, that we must be bold and creative to save lives, livelihoods and possibly the state itself. This crisis also presents policymakers with an opportunity, to redefine what policy in Africa can do, particularly when health, wealth and well-being of its people are at its centre.

The Nature of the crisis

This crisis is unlike anything Africa has seen before. Its effects are multiple, simultaneous and intense.

First, this crisis will last longer than many of us thought. Until there is a widely available vaccine or cure, we will continue to see outbreaks, travel restrictions, social distancing, quarantines etc. In various parts of the world and Africa as governments try to avoid a second wave. Considering the staggered way in which the virus has spread across the world, it’s estimated that the most severe restrictions will continue for the next 3-6 months and various restrictions could remain in place for up to 18 months until medical solutions are widely available.

Economically the World Bank predicts the continent could lose between $37 billion and $79 billion in output and face a recession of –5.1% (negative 5.1%). Furthermore, agricultural production (the most important sector in terms of output and employment on the continent) could contract by between 2.6% and 7%. This is an economic disaster for the continent. The formal sector will be defined by falls in productivity, revenues and severe job losses. In the informal sector which accounts for 89% of employment on the continent, its traders, farmers, vendors, MSME’s, tradespeople who rely on daily incomes are facing disaster if those incomes are disrupted endangering their ability to afford food and shelter not just for them but also the people who rely on them.

This crisis will also stretch our healthcare systems, in many cases past their breaking points. Endangering, the lives of those with Covid-19 and the lives of those who need medical attention for things other than Covid-19 (expectant mothers, HIV-AIDS patients, cancer patients, malaria patients etc.).

Internationally, help (financial or technical) from the traditional donor/development aid community will not be as forthcoming, as it has been during previous crises, as they try to deal with the crises within their borders. Thus, Africa cannot rely on the international community as we have become accustomed to doing.

With all these effects, in responding to this crisis we have to have a core goal. That we have to keep our people fed, healthy and secure livelihoods as far as is possible. Which means designing and implementing a mechanism to enable people to keep themselves fed and secure. Providing lifelines to the informal and formal sectors, so that people have livelihoods to sustain themselves in the long run. Restructuring how our governments communicate with the public to ensure that the measures taken are as effective as possible and provide a foundation for re-forging our societies.

Keeping people fed and secure

This is probably the biggest headache facing African policymakers in their response to the crisis, and many will default to what they know, distributing foodstuffs. However, what we need in a situation like the current crisis where millions of people who were ok now fall into vulnerability, is a solution that is big, simple and fast. One solution that encapsulates all three is cash transfers. Give vulnerable populations money and trust them to know how best to use it. As I have previously written, cash transfers are effective, and people are rarely irresponsible with them. With innovations like mobile money which has permeated across much of the continent, it is possible to get money where it needs to go and to do it quickly. And, it avoids the mess of corruption and delays associated with government procurement. Finally, it puts money where the economy needs it. In the hands of consumers who buy their food and other essentials from the informal economy, keeping those value chains alive.

How do we pay for this? Simple, print money. The UK is doing this. Those afraid of inflation should note that the money would be replacing depleted economic activity, thus limiting the inflationary impact.

Reinforcing health systems

First, African countries need to devote more resources to public health. For decades we have let public health fall into a state of disrepair and underfunding. Over the short term, this needs to be remedied by immediately ramping up funding, and resourcing over the short term to fund the immediate Covid-19 response. As well as thinking through how to implement public health measures in an African context. Rather than lockdowns, how can we make markets which are critical nodes of the food system sanitary and credibly social distant? How do we make informal settlements where people share multiple spaces as safe as possible?

But it also represents an opportunity to start long term investment in community health. If we want to keep hospitals free to treat Covid-19 we need to deliver care to people in their communities. This means public health communication and education, provision of basic care at a grassroots level and investing in preventative infrastructure (sanitation, water, clean cooking etc). That could over the long-term form the basis of a viable universal healthcare system.

Paying for this will require shifting resources for normal noncritical spending (non-salary and critical operations) to the health systems, delaying or freezing development projects and tapping into capital markets (borrowing) where possible.

A lifeline to the economy

Through no fault of their own, businesses across the continent are suffering as demand falls, export markets go into lockdown, their supply chains are disrupted, and their consumers stay at home. To save jobs, livelihoods and in some cases whole industries. Many governments have already put in place tax holidays and encouraged banks to renegotiate loans with businesses. However, in a recession predicted to be deep, more is needed, and this could consist of several measures such as:

  • The utilisation of domestic private sector capacity by the government as part of the crisis response. Using streamlined public procurement to buy goods and services (e.g. Masks, logistics and transport, beds etc.) that are needed by the government to respond to the crisis. This will help keep some local businesses alive and build local capacity.
  • An SME loan program divided into two tranches. The first tranche would be given now, to keep SME’s alive and the second tranche would be given when the WHO declares the crisis over to enable SME’s to quickly restart their operations. This can be done by the banking sector backed by a guarantee given by the central bank in case of defaults. The guarantee would have 2 conditions: low-interest rates and a 6-12-month grace period before the loan payments start to give SME, breathing room. This would have the effect of giving SME’s working capital and keeping the credit system alive.
  • Safe business programs. Many businesses require social interaction such as open markets, salons & barbershops, restaurants bars and clubs, etc. We should be developing guidelines and rules for safe interactions in these businesses that integrate sanitary measures and social distancing (where possible) to enable these businesses to reopen as early as possible without endangering public health.
  • Utility bill and commercial rent holidays to ease pressure on businesses with reduced cash flows. Utility providers and commercial landlords can be provided with tax credits to offset the reduced revenue. I

Communicating with the public

I have written previously on the need for effective and persistent communications strategies to be built into policy design. This is critically important during a crisis, where not only do the public need to know what is happening, they need to buy into it, trust what their governments are saying and understand that it is being done for the public good. For that to happen governments have to change how they communicate with their publics from talking at them to engaging with them, this means:

  • Be honest. Now is not the time for bluster or false assertions. If governments lie and people die as a result, trust will be fundamentally broken, and people will be unwilling to listen again. Thus, governments must lay out the truth to their people, what this crisis will do to every one’s health, livelihoods and general welfare and why they are implementing exceptional measures.
  • Explain your thinking. Governments will be implementing measures that will affect people’s lives in a multitude of ways. As the heavy hand of government, intervenes in people’s lives in unprecedented ways, the government must explain why, what drove the thinking, and what they are hoping to achieve
  • Accept and respond to criticism. No policy response will be perfect. Being able to acknowledge where something has not gone as planned or was not implemented properly and communicating real action taken to fix it, will build trust and support.
  • Communicate often. This is a constantly evolving crisis; people need to be updated regularly. In times like these, there is no such thing as talking too little.
  • Engage across channels. To reach everyone, you must go where they are, which means going beyond traditional media onto social media, and breaking language barriers. If information is inaccessible, then it may as well not exist.

Communicating, honestly, effectively, and openly will help reshape the relationship that has been characterised by a lack of trust between opaque African governments and populaces that have long been indifferent to whatever pronouncements and declarations those governments make. Rebuilding trust can be the basis for rebuilding the sense of community and society that too many African countries have lost, reinforced by genuine efforts to assist people.

A pan-African response

Though the international community may be pre-occupied, it does not mean the pan-African community cannot respond. Though we may not have the money or the resources that the developed world can deploy, we can cooperate to ease the pain of the crisis. Critical areas of cooperation would be:

  • Sharing data and information on how the pandemic is evolving in each country. providing public health officials and policymakers valuable data on the epidemiology of the virus within similar demographics that can help every country fine-tune their response.
  • Sharing policy responses. What measures have implemented in other African states, how effective have they been, can they be adopted elsewhere.
  • Sharing resources. If the crisis has eased in one country but is ramping up in another, they could provide resources (equipment, personnel, money) to help in that fight.
  • Buy Africa first. Stimulating the African private sector by encouraging African governments to buy what they cannot find at home (e.g. if there is a food shortage) in other African countries before looking abroad.
  • Engage the world as one. While African states do not agree on everything, this crisis will bring us together on various things. One of the most important of those things is Debt. Africa needs debt relief to give it the fiscal space to pay for the virus response and a post-crisis stimulus. Rather than have each African country go to its bilateral and development partners on its own to beg for debt relief or a payment pause. The message will be much more powerful if the continent speaks and negotiates with one voice, increasing its bargaining power and the momentum behind the issue.

Unprecedented crisis – an unprecedented response

This crisis is unlike anything Africa has ever seen before. Even the Ebola crisis of 2014 did not threaten the whole continent and had significant international assistance. It is hampering our health systems, economies and socio-cultural way of doing things on a scale we have never had to deal with.

This is by no means a comprehensive look at the policies that can or should be implemented. The policy interventions I have presented are a few among many that a lot of talented and clever people are thinking of across the continent. What I have tried to lay out in this piece is that this dual health and economic crisis is a threat to us all. And responding to this crisis requires a multi-pronged approach that is big and bold. That will need African governments to get out of their comfort zones and implement measures such as cash transfers which they have termed too expensive or too hard,  shift money from cherished infrastructure and other projects to the health system, invest in the private sector especially SME’s in new ways and talk to the public in a more genuine way.

If we do not respond in a big and bold manner, many African nations will emerge from this crisis hobbled, suffering extended socio-economic aftereffects and much more likely to suffer civil and political unrest. If we can respond with boldness then we could lay the foundations for a genuine recovery after the crisis, a public health system that isn’t an oxymoron, a reset of the relationship between private enterprise the and public good and a  much more positive relationship between the government and its peoples. I’m hopeful that maybe, this time, African leaders and policymakers will recognise this crisis for the threat it is and start thinking big and acting boldly.

After the crisis: driving Africa’s post-Coronavirus recovery

Right now, and understandably so, African governments are focused on dealing with the immediate health crisis presented by Covid-19. Preventing the spread of the disease among African populations and treating those who are already sick, are the priority of government right now. However, eventually, this crisis will pass, public health authorities will eventually manage to control the spread of the disease and effective treatment measures (or vaccines) will be developed. When the crisis is over its negative economic impact will become clear, and African governments will need effective strategies that to foster economic recovery in the short term and a medium to long term strategy to fix the fragilities in African economies exposed by the crisis.

The economic impact of the crisis

For Africa, this crisis will have many effects on the economy.

  • For oil and commodity-exporting countries, the fall in prices will drastically cut their tax revenue as well as related incomes within the economy.
  • Disruptions to trade will hit manufacturers and projects on the continent as they cannot get enough of the components or raw materials they need. Similarly, retailers who import goods to sell may run out of stock. Combined this will drive inflation and possibly force manufacturers or projects to shut down.
  • Disruptions to trade will also hurt those economies such as Kenya, Ethiopia, SA, and Ghana who export agricultural goods and produce, where the majority of the population is involved in agriculture, falling prices and exports will hurt incomes of both businesses and households.
  • The tourist industry, which is a top income earner in several African economies will be severely hurt by the travel restrictions and quarantines on the primary tourist markets in the USA and Europe. Across the continent’s tourist destinations, hotels, conferencing destinations, resorts, parks etc, will be bleeding money and jobs. While the continent’s airlines will be suffering massive losses as passenger numbers plummet.
  • A global economic downturn will shift investor sentiment, international investors will be warier of investing in Africa and we are already seeing the impact as stock markets across the continent register large falls as international investors withdraw their funding.
  • In China (which is now Africa’s largest trading partner and investor) the government will be more focused on economic recovery at home. Meaning that some of the expected Chinese investment on the continent will likely be delayed.

Short term response – kickstarting the economy

For all African economies, the combination of a global economic slowdown and the economic impacts described earlier will decrease both private sector activity and public sector revenues and spending. In an environment where most African governments were already struggling with large debts and deficits, what can we do kickstart the economy once the crisis is over.

Forget spending focus on tax

The first impulse of much African government will be to spend, to use the government’s ability to spend large amounts of money to create demand within the economy. Frankly, this won’t work in Africa at least over the short term. This is because African governments are incredibly inefficient (and often corrupt) so it not only takes a while for governments to spend money it also means that the not all the money intended for a specific purpose necessarily reaches it. Secondly, the money has to be found, which for many governments on the continent is a problem.

A short-term policy response intended to kickstart the economy must be something that is quick and has an immediate impact on the bottom lines of businesses and people’s pockets and the best tool for that at the moment is taxes and credit. For businesses, the key is helping them preserve cash flow so they can make it through the worst and drive a recovery.

  • There are a lot of taxes and fees that are levied on the short term (monthly, weekly, or daily) income of businesses (especially SME’s) such as turnover taxes, or licenses. Governments should consider waiving these for short term (3 to 6 months), that will enable businesses to preserve cash flow.
  • Statutory payments to public social safety net schemes e.g. health insurance, social security etc. which are usually paid by businesses on behalf of employees could be waived for the short term which would make it cheaper for businesses to retain people in employment.
  • Work with banks and the wider financial sector to come up with solutions (e.g. invoice discounting backed by government bonds) that would ensure that all pending government bills are paid quickly. This would put money in the pockets of companies that business with the government quickly, which will help ensure there is cash flowing through the system.

For individuals and households, the highest impact thing government can do to put money in pockets and help demand recover is again taxes, specifically VAT, which is often levied on (almost) everything. If VAT can be waived, for the short term, on critical items that people commonly buy (food items, data and mobile phone credit, soap, water, electricity) it will give people some extra money which they can spend on other things, and help drive the recovery of aggregate demand within the economy.

Long term response – long term growth and resilience

The crisis has exposed some key fragilities in African economies. But, as the Americans like to say, never let a good crisis go to waste, in other words in crisis there is an opportunity. Africa can use the opportunity of this crisis to build in greater resilience and the foundations of long term growth into its economy.

Trade

Africa can take advantage of the fragility that has been exposed in global supply chains. Companies both in Africa and globally will be looking to diversify their supply chains so that in future they are not as widely disrupted by a crisis in a particular part of the world (namely China).

With its significant labour pool, government focus on industrialization and improving infrastructure Africa offers a potentially attractive location for diversified supply chains.

For African companies specifically, governments would do well to focus on those goods and products whose production and distribution has been disrupted and encourage their production in Africa. Taking advantage of the soon to be active Africa Continental Free Trade Area, African based supply chains could prove to be more resilient for African producers and consumers than those based abroad. Investing these would not only foster resilience but create jobs and income as well.

FDI

As happened after the global financial crisis Central Banks in the developed world have responded by cutting interest rates, as a result, yields on government bonds are close to zero or in negative yield territory. This will likely be the case for some time after the crisis has passed as Central Bank’s try to fuel a quick recovery. As a result, investors from these markets will be looking for higher yields from their capital, which they cannot get at home. This will give them a greater appetite for risk with the payoff being higher returns, Africa will present multiple opportunities for these investors to try and take advantage of with their greater risk appetites. If we identified the right project’s and opportunities (such as privatisations or stock market flotations) that would benefit from these flows, and package them right we can direct this money to places where it will have a long term positive impact.

Domestic investment

International capital markets will be distorted for some time after this crisis, by central bank and government stimulus policies. It will thus be important to put in place policies that encourage domestic investors (e.g. pension funds, mutual funds, etc) to engage with and invest in African businesses and commodities.

Structural reform

Crises offer governments the opportunity to address issues that would otherwise be politically impossible to address. For instance, a public health crisis emphasises the need for Universal Health Care, an expensive proposition which government are not usually brave enough to attempt. However, a health crisis offers the opportunity for a fundamental reshaping of the health sector. The same goes for government finances, its hard to take away MP’s perks, the cars of senior civil servants, cancel the vanity project of politicians. However, a public health and economic crisis can serve as a valid reason to cut the fat that will not elicit too many questions or a fightback.

Conclusion

Just as we cannot afford to be lax in how they respond to the crisis, African governments cannot be lax in how they deal with its economic consequences. Otherwise, an economic crisis will follow swiftly on the heels of the public health on. If we do not have a strategy to deal with it we may end up with an economic crisis that disrupts more lives than the Coronavirus.

As I have suggested in this article there are tools that the government can use over the short term to put more money in the hands of businesses and individuals. This can help spark a recovery. Over the medium, to long term, there are a number of policies that government can pursue to equip Africa economies with the tools they need to weather future crises as well as lay the foundations for a more robust African economy.

Crises suck, we have to ensure they don’t last longer than is necessary.

Policy lessons for the Africa Continental Free Trade Area

On May 30th, 2019, thirty days after the 22nd African state had deposited the instruments of ratification, the African Continental Free Trade Agreement (AfCFTA) came into force. For many, the AfCFTA is a cause for significant optimism. As the wider world (mainly the west) is increasingly questioning globalisation and integration, Africa is moving closer together. The AfCFTA is at the centre of that, a pan-continental free trade area that the African Development Bank thinks ‘will stimulate intra-African trade by up to $35 billion per year, creating a 52% increase in trade by 2022; and a vital $10 billion decrease in imports from outside Africa’.

The ambition is incredible, “a single continental market for goods and services, with free movement of businesspersons and investments”, but, as they say, the proof is in the pudding. Africa has tried this before (although on a smaller scale). There are a number of Regional Economic Communities (REC’s), around the continent. However, when it comes to trade, they have never quite hit their potential.

Figure 1: African Regional Economic Communities approved by the AU

 

For the AfCFTA to work we need to learn from the lessons that have held our own REC’s back as well as lessons from economic and trade areas such as the EU. Most important is that we must be the understanding that for the AfCFTA to meet its potential it must be designed with people at its centre and the social, economic and political realities of the diverse continent in mind.

1 – The Brexit lesson: a people-centred union

When it comes to trade unions, the elephant in the room is Brexit. One of the main drivers behind the Brexit vote was that it was seen as a project of the elite, benefiting certain people and groups while leaving another behind. If it is to work the AfCFTA cannot be seen as an elite project, it must be centred around the people that it is intended to serve this can be done in three critical ways.

First and foremost, African’s must be involved in the technical design of the AfCFTA. This means the team putting together the rules, regulations and policies that will govern the free trade area, must consult African people, civil society and business both big and small. Their input will be critical to ensuring that it is designed around the needs and aspirations of African’s.

Second, freedom of movement must not just apply to goods and money. If people cannot travel, meet, learn and engage with each other, the continent will not be able to pull together at a grassroots level. Thus, the AfCFTA must not just be about trade but about African’s coming together as well.

Third, it’s not just enough to sign a trade agreement, you must engage and educate people about them. In a previous post, I wrote about how good communication is a critical part of any policy this applies to the AfCFTA. People and business across the continent must be educated on what it is and how they can take advantage of it.

2- Learn from the EU: equality, flexibility and tempered ambition

After two devastating wars that had engulfed the world, integration was seen as the antidote to the rivalries and interstate competition that had been so destructive. As the world’s most successful trade union (despite its recent troubles) there is much that Africa can learn from the EU as it embarks on its own integration.

The first takeaway is matching ambition to reality. The first organised form of economic integration that emerged in Europe after the war was the European Coal and Steel Community. Which established a common market for coal and steel between 6 countries (France, Italy, Belgium, The Netherlands, Luxemburg and West-Germany). Though the Community was limited it went on to form the core of what we now know today as the EU, an ambition that the architects of the community held but knew they had to work towards. And therein lies the lesson for Africa. We are an incredibly diverse continent, with various countries pursuing development in their own way. Institution an all-encompassing trade union on July 1st, 2020 may be too much of political and economic shock for many to take. However, if – like Europe – we start a little smaller, with a group of goods and services that everyone can agree should be traded freely. We can, together, build the trust, institutions and relationships that will allow a wider system to succeed. This does not mean shelving the dream of a pan-African trade area, rather it means working towards it, building and expanding our common experience of it until it matches the vision.

Second, is that the political and economic power of the big countries must be balanced. As can be seen below the AfCFTA has the greatest levels of income disparity of any continental free trade agreement, and more than double the levels witnessed in blocs such as ASEAN and CARICOM.

This means that smaller countries must have genuine power in the institutional and decision-making design of the AfCFTA. The EU has historically faced a similar problem, Germany, France and the UK (though not for long) as the big political and economic powers in the union could dominate it. However, the political institutions of the EU are structured in such a way as to require consensus from all countries and that ensures that all countries have a say. It can be cumbersome and time-consuming but has been largely successful. Furthermore, the EU has been willing to be flexible, allowing some countries extra time to comply with certain rules, or like the UK to stay outside the Schengen and Euro. What this does is give some allowance for the political and economic realities of various states, thus making itself more acceptable to a wider section of the populace.

Africa’s diversity will require flexibility. We will not be able to move at the same pace, and the very real concerns that people have of being dominated by the two economic giants of the continent must be taken into account. Furthermore the aspirations and ambitions will differ from country to country, Kenya may want a trade deal with the USA but that shouldn’t mean it cannot trade with the rest of Africa within the framework AfCFTA. Flexibility allows for diversity, through which different countries and economies can develop different strenghts and specialisations. Combined, this diversity will boost trade within the contient, and beyond as Africa will be able to compete in a number of industries and products.

3- learn from ourselves: empower SME’s

Most businesses on the continent are Small or Medium Enterprises. If the AfCFTA is to be a success, it must learn from the existing regional economic communities, specifically what they fail to do – foster trade, by and between SME’s. The AfCFTA must put African SME’s front and centre. Doing this will require some imagination and bold policy moves as i have written about previously. This also ensures that the trade area won’t be the preserve of elite big businesses, and hopefully some of those SME’s will take advantage of the opportunity to grow.

Policy to make a dream a reality

I am not a sceptic. In fact, I am incredibly excited by the possibility that the AfCFTA can bring, I am in awe of the ambition and vision behind it and as an African, I am immensely proud that not only have we managed to get this far, but we are on the cusp of implementation.

However, the realist in me is afraid that if we do not get the design of the AfCFTA right it will be another in a pantheon of acronyms that litter the continent, shadows of the intent and ambition they were supposed to fulfil.

This need not be the case, if we learn the lessons from the failures of Brexit and the successes of the EU, and endeavour to keep the aspirations and endeavours of Africa’s people at its centre the AfCFTA can be the game-changer that we all hope it will be.

 

 

Redefining Transport Policy for African Cities

As a citizen of Nairobi, it is a city that despite its many charms can be extremely hard to love. Rapid urbanisation in Nairobi has seen significant growth in the number of vehicles on roads. Today, Nairobi is not only one of the world’s most congested cities, but traffic is also a significant contributor to air pollution and in a city where almost half the population walks to work it has direct impacts on the health of the city’s residents. In addition, Nairobi traffic’s horrendous safety record means that there are, on average, about 7 deaths from the 35 road crashes every day. Beyond health, economically the World Bank estimates that traffic jams cost 50m Kenyan shillings (approx. US$500,000) a day in lost productivity in Kenya’s economic hub. For residents of the city, traffic represents an everyday hazard and annoyance, that cannot effectively be avoided or dealt with, you must just bear it.

This story is not unique to Nairobi, cities across the continent are experiencing explosive growth of their urban populations, which brings with it the challenges of congestion, air pollution, and negative health impacts. Lagos suffers from ‘hellish traffic’, Accra is struggling with traffic congestion and across the continent, air pollution is causing hundreds of thousands of premature deaths every year.

So, what can be done? Traditional approaches currently being implemented are not fit for the African context, and the financial cost of building out broad public transport may not be viable for most African governments. African cities need to change their approach to public transport, to one that considers the realities of how we live and move through our cities and uses the innovations and solutions that have been developed. Using this context and experience to develop solutions that work for us. Solutions that create liveable cities for all their citizens, enhancing quality of life, livelihoods, society and the economy.

Reality informing the design of liveable African cities.

The first reality is that in most African cities the majority of people walk, cycle or take public transport. Most of that public transport, such as Matatu’s in Kenya, combi’s in Zimbabwe, Danfos in Nigeria etc.  or the increasingly ubiquitous motorbike taxis are not owned by the government. The chaos and lawlessness of public transport aside, it is generally quite efficient, getting millions of people where they need to be on a daily basis across the continent.

The second reality is that infrastructure is expensive, and urban infrastructure even more so. Beyond that, as the cases of London and New York show, public transport in cities often run at a loss and requires public subsidy. African governments are already taking on massive debts to invest in other infrastructure and don’t have the ability to indefinitely support expensive transit systems.

The third reality is that a primary cause of congestion is private cars, people who drive themselves to work, school, home etc, as African cities grow in their prosperity more people buy cars. Cars need space to move (roads) and sit (parking), but then spend most of their time idle (overnight or while people are at work), cars run on fuel emitting not only carbon but the pollutants that make our cities air near intolerable. Compounding this problem is that most cars on the continent are second hand imported from Japan, Asia and Europe while they are cheaper for consumers they are usually not in line with latest emissions and safety regulations in those markets. Continuing to design our cities around cars will only continue to prove the old urban planning idiom if you build more roads you get more cars, an experience that urbanites from around the continent can attest to.

What we need to do is build our cities around being liveable. Liveable like my definition of development is holistic, the world liveable means worth living, enjoyable and in the context of cities it refers to urban quality of life. A liveable city isn’t just an economic entity where people can earn a living it is also a place where people enjoy a decent standard of living. That means a city that is designed and governed around the needs for those who live in it, those needs include jobs but also a clean and healthy living environment, security, affordable housing, accessible public services, and mobility. Mobility isn’t just an aspect of a liveable city it is a key enabler of all the other aspects of a liveable city (you can’t have a clean environment without controlling pollution from transport). Thus, for African cities to be more liveable we need to design and govern transport services that cater to all by providing solutions that enable affordable, clean efficient modes of transport to all sections of society. With the realities briefly described above, this brings certain solutions to mind

1-   Build for pedestrians and cyclists

If a significant majority of people walk and cycle to their destinations it is inconceivable that we do not build infrastructure to cater to and encourage pedestrians and cyclists. Rather than focus on super-highways and roads for people with cars (who tend to be higher up the socioeconomic ladder) we should focus on the vast majority of our citizens. A disturbing number of road deaths around the continent are those of pedestrians and that is in large part because we design our transport infrastructure around cars and not people. Meaning that our sidewalks, footbridges, cycle lanes, footpaths, road crossings etc. are inadequate in number, where they do exist, they are badly designed and the mentality that vehicles take priority means that many drivers do not understand or care to consider pedestrians. Rather than spending billions on new urban roads and highways let us first spend it on infrastructure for people.

2-   Build on what we have

As mentioned earlier most African cities all have some form of private enterprise (busses and motorbikes) that have filled the space that governments vacated. For instance, Nairobi’s Matatu’s have developed a network that is as extensive as any of the planned public systems. Furthermore, because of the competitive nature of the system, they have had to remain relevantly affordable to their client base. There is no need to get rid of functioning system, rather policy should focus on cleaning up the chaos and illegality in the system, protecting consumers and other road users, while allowing these enterprises to grow and continue to move people around.

3-   Get cars off the road

Cars are the primary cause of congestion and pollution; thus, the solution is clear, policy and urban design should be aimed at getting those cars off the road. A straightforward way to do this is via tax, making it more expensive to drive a car in a city. Around the world, cities have imposed congestion taxes or carbon taxes. However, these are expensive to implement and track as it requires putting in place systems and processes that can track individual cars into and out of cities. A simpler solution is taxing public and private parking. Nottingham in the UK has implemented parking levy’s where private companies are charged for the parking spots their employees use. This is much easier to administrate than trying to track and tax individual car owners. More than that the impacts on the city have been positive, the money raised from the levy has been invested in improving public transport, carbon dioxide emissions have fallen by a quarter and streets that were previously clogged up are freer because fewer people drive to work.

4-   Allow non-car solutions

If you are going to tax private car users off the road, you need to give them alternative options, you need to allow innovators and entrepreneurs to develop solutions that people who may not want to take current forms of public transport and can afford something more expensive to take. This is already happening with applications like uber operating around the continent, competing against other international and local companies offering transport solutions in African cities. The Egyptian app SWVL and others offer ride-hailing services for busses. Through technology and business, the choice is no longer limited to crazy matatu or your own car, but there are options for different consumers at different price points.

Mobility for liveability

Simply put the policy solutions presented above follow a quite simple formula: fewer cars results in less pollution and congestion. Combined with investments in people-focused infrastructure, and allowing for private innovation in public transport, moving through African cities could be viable and affordable for everyone. Doing so without extensive public expenditure or severely disrupting existing industries is a significant plus.

As African cities grow, we must consider and improve their liveability. Transport is a crucial element of a liveable city. Enabling everyone, of all socioeconomic classes to move throughout the city efficiently, affordably and cleanly will improve the health, sanity and economy of African cities. For those who have to bear the exhausting and infuriating congestion that is a daily part of life in too many African cities, a novel approach to transport in African cities cannot come soon enough.

 

 

Ending violence against women is critical for development in Africa

“I dedicate this Nobel Prize to women of all countries in the world, harmed by conflict and facing violence every day… To the survivors from all over the world, I would like to tell you that through this prize, the world is listening to you and refusing to remain indifferent. The world refuses to sit idly in the face of your suffering. – 2018 Nobel Peace Prize co-laureate Denis Mukwege (Denis Mukwege and Nadia Murad were jointly awarded the 2018 Nobel Peace Prize for “their efforts to end the use of sexual violence as a weapon of war and armed conflict”)

There is a curse hanging over Africa, it is called gender-based violence. And that curse is holding back the economic, social and cultural development of the continent. Forcing half of Africa to live in fear for their lives, prosperity and sanity. If Africa is to develop, if Africa is to end poverty and provide a decent quality of life to all her peoples it cannot be done when women are regularly brutalised and oppressed.

My conception of development is that it means a life with dignity for all. At the core of dignity is security, the security of individuals, communities and their property. Thus, for Africa to develop we must end violence against women to ensure the security of all, and national policy has a critical role to play. First, we must understand gender-based violence and crucially ensure that women have a visible, and powerful say in how our societies are governed. Secondly, over the short term, policy must provide for properly trained and funded police, courts and prosecutors who can more effectively deter, detect, investigate and prosecute violence against women. Over the medium to long term, policy can be used to educate our children and young men in a way that engages them with positive conceptions of masculinity and femininity.

This is by no means a comprehensive list of the policies that governments could and should pursue to tackle a difficult and painful issue. Rather, it is merely, as always suggestions and thoughts that I hope will contribute to a discourse that will engage with, and help end gender-based violence in Africa.

Facing up to the truth

The first step too solving any problem is acknowledging and understanding it. Thus, the first policy is that governments across the continent must acknowledge that violence against women is a critical problem. It is only when you acknowledge a problem that you can marshal the resources and moral standing to deal with it. This is what was required when the AIDS epidemic swept through the continent, it was only when governments got their heads out of the sand and acknowledged the problem, did we start to slow its devastation. And the evidence, around the continent, shows that violence against women is like aids, a social, cultural and economic disaster.

  • A recent report in Ghana looking at the social and economic consequences of violence against women lays the consequences out in stark detail. The report found that; 43% of women with partners or spouses had experienced abuse in their relationships in the last 12 months. 24% of women reported experiencing workplace violence, and 18% of women have experienced violence in public spaces.
  • In South Africa, the national statistics agency reported in June 2018 that the murder rate for women increased by 117% between 2015 and 2017 and the number of women who experienced sexual offences increased by 53%.
  • The 2014 Kenya Demographic and Health Survey (KDHS) reported 45% of women in Kenya have experienced physical violence since the age of 15.
  • A UN report showed that Lesotho has the highest rates of female homicide at 18.9 per 100,000.
  • A study by the ministry of women’s affairs and social development and the United Nations Population Fund (UNPFA) in Nigeria found out that 28% of Nigerian women aged 25-29 have experienced some form of physical violence since age 15, in a country of 194 million people, even this 23% figure translates into millions of women suffering physical and sexual violence.

This is a crisis. Economically, for example, the report from Ghana lays bare the high economic costs violence against women. The report estimates that means the Ghanaian economy loses US$ 286 million (0.4% of GDP) in lost productivity alone. However, gender-based violence doesn’t just affect the economy its impacts are social and intergenerational. Gender violence deepens poverty by forcing many women to spend what little disposable income they have on medical care as a result of violence, or to miss work and the opportunities therein. Millions of school days per year are missed due to children’s exposure to the violence inflicted on their mothers. Violence against women is used to oppress women’s participation in civil, political and cultural spaces, a crucial tool that the parade of bad leaders that pervade the continent use to keep themselves in power.

Our nations, their economies, governance, society, culture and our children suffer. Violence against women is an epidemic that impoverishes all of Africa in multiple ways and needs to be stopped.

So, when we have acknowledged the problem of violence against women, we need to understand what causes it and thus start formulating the policies needed to stop it. That means making women’s voices heard.

Visibility and real power

The first policy we must pursue is engaging women not only through surveys and studies but also ensuring that there are civil, political and social spaces where women’s voices cannot only be heard but have real power, that can actively shape and implement the policy responses to gender-based violence.

This means ensuring that there is engaged public participation. By engaged I mean actively pursuing women’s views rather than just seeking the submission of their thoughts. It means ensuring that on the committees, working groups and teams that end up writing the policies, regulations and laws there is gender equity. It means actively pursuing gender equity in our politics, and that will likely require explicitly reserving seats for women in parliament and government as Rwanda does. I am personally in favour of having gender equity in political representation (that half of all representatives must be women). However, in a continent with as much diversity as ours, there will be no blanket solution that works in each country, society and community, the only way that context can be integrated into the policy responses is through the participation of the people in those communities, particularly women in shaping those responses.

Short term – enforcement

In the short term, policies have to focus on deterring violence against women, enforcing the law and providing the means for victims to heal. This would entail a number of measures but at the forefront is law enforcement. All African states have some form of criminal code, and many have gender equity laws. However, their enforcement has been lacking.

African governments should explore the creation of specialised domestic violence and sexual assault units. It is not an outlandish suggestion most African police have specialised anti-theft, criminal investigation, traffic, riot, anti-terror etc. units. The creation of a police unit that is specifically trained to investigate and prosecute violence against women and sexual harassment. Not only increasing the rate at which perpetrators are caught and jailed for their crimes but also treat the victims with respect making it more likely that women will actually report crimes.

Second, are the courts. Judges and magistrates need to be trained to handle gender violence and sexual assault cases, and not simply dismiss them on account of social or cultural norms.

Third, are prosecutors. Funding public prosecutors who are specifically detailed to prosecute domestic abuse, sexual assault and harassment, workplace harassment, child abuse, and female genital mutilation. Ensuring that court cases don’t get lost in the complexities of the criminal justice system and give the victims a greater chance at justice. These are short term policies, that, if properly implemented could have an immediate impact. Deterring crime and giving women justice.

Long term – education and culture

In the long term, simply improving the ability of law enforcement and the courts to investigate and prosecute these crimes won’t be enough. We must address the aspects of our culture, society and politics that enable violence against women.

Over the long-term education is the key. We can liberate our children, especially boys, from the societal expectations and cultural norms that perpetuate gender-based violence. By integrating gender, positive masculinity and respect into our school curriculums (as they have done in this school in Rwanda). Comprehensive gender education, where young men and women are not only taught how to respect each other but can engage frankly with negative aspects of society and culture that they themselves have encountered will help, over the long term, to get rid of the norms that make people think its alright to hit your wife, for a lecturer to harass his female students, or try and bully a female colleague at work into going out with you. Across the continent, there are a number of countries looking to review and reform their education curriculums to make them more applicable to the fast-evolving global economy and society in which we live. One of the aspects they should be adding to curricula is positive gender education. Once again it is important to reiterate, that local economic, social and cultural content must be integrated into positive gender education, where the causes of gender-based violence in those communities and countries are not only studied but are also specifically integrated into positive gender education curricula.

Conclusion

Violence against women hurts all of us, and in doing so it hinders the development of our continent. Development requires not just growing economies and building new roads but improvement in the lives of all African’s. Part of that is the safety and security of all citizens, for both men and women. Violence against women disempowers half of our citizens. It makes us poorer, politically socially and culturally. It hobbles our economies. And it shackles the next generation, scarring them emotionally, hampering them economically and perpetuating the culture that enables violence against women.

This need not be the case. Our governments must acknowledge that violence against women is a threat to Africa and make sure that Africa’s women are at the forefront of crafting the responses and policy initiatives from the government can make a real difference.

Which Way for Africa? Development Policy in a changing world

Global political-economic realities are shifting. China’s economic growth has slowed to its lowest levels in 26 years. And in the rest of Asia key economies such as India and Japan are also facing lower than expected growth. Germany, Europe’s biggest economy is cutting growth forecasts as the EU struggles to find growth and grapples with Brexit. In South America, the two largest economies of Brazil and Argentina are struggling with a recession and debt respectively. And while the US economy is riding high at the moment it is beset by recession fears, and dominated by nationalist sentiment. Politically, the geopolitical certainties that have defined the post-cold war world (a strong and engaged USA, a non-aggressive China, a stable Europe, powerful multilateral institutions, and global norms that are respected and adhered to) are crumbling. All of this implies that the global economy and geopolitics that will be less stable, less cooperative and more competitive, right at the time when the global challenges of climate change, inequality and poverty require cooperation and consensus.

These dynamics have significant implications for African policymakers and leaders. As Africa is confronted by a changing world, we need to change our approach to and strategies for our development. We must ask ourselves what these changes mean for Africa, and how can we, as African’s take advantage of the oppurtunites and mitigate the risks.

What does this all mean for Africa

For Africa, these shifting global dynamics have three significant consequences.

  1. The path to development exploited by the Asian tigers is likely closed. This path relied on increasingly open global trade and capital flows to drive export-led development and Foreign Direct Investment. Globalisation is under pressure from an increasingly protectionist developed world that is seeking to protect its own stressed working and middle classes by restricting trade (or engaging in trade wars) and the decline in the influence of global norms and institutions that had sought to broaden the reach of global markets. This means that development strategies based on the Asian model of export-led growth driving industrialisation, employment and growth are less likely to succeed.
  2. The increased geopolitical competition will see Africa become a stage for global power competition, as they search for access to new markets, resources and diplomatic allies. This dynamic is already in full swing if one looks at the competing Africa strategies of the USA and China and a new focus on Africa from the EU and Russia.
  3. The traditional multilateral forums and institutions, like the UN, World Bank and IMF that helped drive development and have in large part defined development economics and policies since the 1950s, are losing influence and relevance. This means (hopefully in my view) that there will be more space for innovative approaches to development.

A shifting approach

A changing world requires a changing approach to the world from Africa, including our approach to development.

More space for new thinking

As stated earlier, the global multilateral institutions that have defined development thinking for decades are losing their influence and thus relevance. Beyond this, the great powers (namely the USA, China, EU and Russia) are primarily focused on domestic issues like faltering growth, fractious populist politics, inequality, and geopolitical competition in the Middle East and Pacific. What this gives Africa is the ideological and intellectual space to redefine development. Rather, than follow the lead of the World Bank or try to copy the Asian tigers, we have the opportunity to Africanise development (something I have previously talked about here). To decide what matters to us, how African’s envision their future and how we are going to get there.

Internal markets

As globalisation falters and countries become more protective around issues of trade, immigration and capital flows, we cannot rely on global trade and FDI to drive our development, something that African countries currently spend a lot of time trying to attract. Furthermore, outside of Asia, there are no significant high growth markets where we can build demand for African goods. What this means for us is that we can focus more attention on our own internal markets. On policies that foster intra-African trade, promote the growth of SME’s, enhance Agriculture, investing in science and technology and face up to the challenges of climate change together.

Focusing on our own markets and fostering growth that isn’t dependent on western capital looking for returns or Chinese demand for raw materials, will likely prove to more sustainable over the long term. It won’t be instantaneous and no one should expect miracles in the short term, but African markets are one of the last underdeveloped markets with high growth potential if we do not take advantage of our own markets someone else will.

Engaging smartly with competing powers

As the world shifts from being a unipolar dominated by the west/USA to one where there are competing world powers and interests, African leaders would do well to learn from the lessons of the cold war, and not latch themselves to one side or the other for better or worse. Rather, we need to understand and engage with the West and East strategically and cooperatively, acknowledging our own relative weakness in terms of economic, political and military power and having very clear achievable strategic goals. Using, smart consistent engagement with world powers to get the capital we need to help fund development.

A whole new world

A changing world can be seen as a problem or an opportunity. For Africa, I see it as an opportunity. One where we can reshape the development of the continent to one that happens on our own terms with the benefits accruing at home. However, it will be a problem if we do not change our approach to engaging with the world and development in a new global context. We may find ourselves at the mercy of global powers, with wasted investment in development strategies that are not applicable anymore. For the opportunity to become reality will require a coherent vision and then the boldness and imagination to execute it from our policymakers. Something, I have no doubt the continent possesses, the trick will be to harness it.

Good communication is good policy

In 2017, in his Jamhuri day (Kenya’s independence day) speech, President Kenyatta of Kenya announced his Big Four Agenda. To enhance the manufacturing sector, to build 500,000 affordable homes, to ensure all Kenyans are food secure and to build and deploy a universal health coverage (UHC) system to ensure all Kenyans have access to affordable health care. Since then technical committees have sat and designed the requisite policies, regulations and actions needed to make this a reality. However, in a recent conversation, I had with someone working on the UHC policy, I was struck when told that without better political support, and funding; UHC in Kenya would remain consigned to the realm of flowery speeches. A policy that could save millions of Kenyans misery and bankruptcy will die a slow death for lack of money and support.

Africa does not lack for good policy. Around the continent, there are reams of policy that could genuinely change people’s lives sitting on shelves in the offices of government departments, think-tanks, civil society groups and universities, all of them gathering dust. In the world of policy, good policy is often stopped by two things political reality and financial constraints. Ambitious policy rarely ever survives the gauntlet that those two constraints pose. In a previous post, I talked about reforms that would enable governments to better implement good and ambitious policy. In this post, I want to take a step back and examine how we can get good policy to the stage of implementation in the first place with proper funding commitment and political support built using effective and persistent communication

 

Embedding core policy support

Policy has to be sold. To the public, to those who will implement it, to experts, to civil society, to the media and even to digital influencers. This selling is done via communication with all those stakeholders. Crucially, this communication has to start before policy gets to the implementation phase. Public opinion has (as Samantha Power once put it) a circular problem. Circular, because public opinion is rarely roused on its own, it is usually provoked by public leadership (e.g. political or other community leaders making something an issue), and public leadership is usually itself provoked by public opinion (e.g. public outrage at a particular issue provoking a political response). Thus, when done properly, communicating policy is a journey. A journey that first builds a base of support for the ideas and goals behind the policy and how it is relevant and beneficial among key stakeholders. A presidential speech or two and some articles in the newspapers are not enough, you need to engage people who will form the core base of support in forums, spaces, and channels where they are comfortable and attentive.

Getting public support

Once you have that critical base of support you then need to sell your policies to the two most important groups of stakeholders; the public and people within government who have to implement it.

Effective broad public communication is not merely a matter of adverts or getting a popular musician or sportsman to tout a particular policy. It is a multi-channel and messenger affair. Rather than telling the public that some policy is good for them, you need to engage people, from the mass media right down to community forums and door to door campaigns. That way you build an understanding of the policy, its goals and benefits at an individual, community and mass level. By successfully selling a policy to the public, you can bypass the political viability problem. When people quote political viability as a problem, they are usually referring to the lack of political support for a particular policy. However, by building public support through smart and inclusive communications, you can create political viability through public pressure. And with political viability and support, you have the ability to get proper funding.

The people within the government are usually forgotten in policy advocacy campaigns, but it is crucial that you get the support of the people who will be implementing the policy. Do they understand it, do they understand the impact it will have on the lives of their fellow citizens, do they see what role they are playing in bringing those positive outcomes to life. If the people implementing the policy don’t buy into its chances of success diminish significantly. The people in government who are implementing the policy need to understand and back the policy because they, they are also the people who have to defend and sell those policies to the public and political policymakers and if they aren’t invested, then the investment of others likely won’t follow.

Communicating Policy Implementation and beyond

Getting support for a policy is not enough though. Communication does not stop at implementation. Rather communication is an essential element of implementation. Stakeholders and the wider public need to know and understand what is happening with a policy that they lent their support to, to get it off the ground. They need to understand what progress is being made, the successes, and achievements of the policy. Beyond keeping people up to date, this allows you to make mistakes, to withstand the inevitable missteps that happen in all complex programs. However, because you have been open and upfront with your stakeholders and the public about those mistakes and clearly communicated solutions for these problems, you will be in a much better position to recover from any issues with an understanding public willing to cut you some slack.

Communicating policy in Africa

African governments can be singularly terrible at communicating policy. Policy generally comes as a surprise, presented as a fait accompli something from on high that is good for development and thus good for you and you better not question it. Which ends up with people being suspicious about those policies, and the people who are charged with implementation see it as just another order they need to carry out (or look like they are carrying out as opposed to being invested in the policy and its success.

Policy does not sell itself, even if it is fantastic. It needs to be communicated to all the people that will be impacted by it. It’s an often-overlooked part of the policy process, especially in Africa. Around the continent, it’s not just Kenya attempting to implement some form of universal health coverage. South Africa is exploring plans, Lagos state is set to make it mandatory, Tanzania has a political commitment to do so. As Africa explores and tries to implement ambitious policies such as these, policymakers and governments need to understand that part of good policy is good communications. That through effective communication they can build broad effective support for their policies and in doing so create the political will that will give them the political and financial ability to actually implement them properly.

Africanising credit – Financing SME’s

Agriculture and SME’s (small and medium enterprises) are the backbone of Africa’s economy and societies. SME’s make up to 90% of all businesses in sub-Saharan Africa[1]. In Ghana approximately 92% of all local businesses are SME’s, providing up to 85% of manufacturing jobs in the country and contributing about 70% to the country’s GDP. In Nigeria, 37 million SMEs employ about 60 million people and account for about 48% of the country’s GDP. In South Africa, there are more than 2.2 million SMEs, about 1.5 million of them in the informal sector. As much as governments around the continent are looking to industrialise through attracting investment in large scale manufacturing, we cannot develop without our SME’s. SME’s provide the livelihoods for a significant number African’s and if they succeed, African economies and development will succeed.

However, SME’s also face an incredibly tough time. In South Africa, the Department of Small Business Development estimates that between 70%-80% of SME’s do not make it past their first year. In Kenya, the National Bureau of statistics found that at least 46% of Micro Small and Medium enterprises do not make it past their first year. What is preventing them from succeeding? Among the multitude of factors (some covered previously on this blog), one of the biggest is credit. The London Stock Exchange estimates that African SME’s face a funding gap of at least $140 billion African businesses find it incredibly hard to access credit, and credit is the fuel of the modern economy. Without credit, there is no safety net for businesses and farmers when things get a little tough. Without credit, it’s hard to fund growth and innovation. Without credit most businesses and farmers are limited to subsistence, to just surviving, because to develop we need those businesses to thrive.

Thus, the policy question becomes what can be done to ensure more credit gets to the SME’s. If the financial sector is not fit for purpose, how do we move beyond traditional definitions of collateral and banking to kickstart credit to these key sectors? The answer for many governments around the continent and development finance institutions (DFI’s) has been to try some sort of SME financing scheme such as giving banks money or guarantees to lend money to SME’s. However, this hasn’t worked, thus what’s needed is a new approach, based on evidence that takes advantage of new trends and technologies and thinks beyond banks. If so, the continent may be able to turbocharge their economies by enabling businesses that actually exist rather than those they hope will be created.

Understanding SME’s financing needs

Knowing that there is a problem and understanding the nature of that problem are two different things. Judging by their rhetoric, African governments understand the importance of SME’s to their economies and are more than willing to make commitments to improve their lot. However, before making promises to SME’s and formulating policies on the basis of those promises it is necessary to understand SME’s needs.

Thus, the first thing that African governments must do as they attempt to unlock the financing problem that SME’s face is to talk to SME’s. Understand whether the majority SME’s need financing to fund their day to day operations (working capital financing), credit to invest and grow their businesses, or trade financing to help fulfil orders or ensure that they have sufficient levels of stock. Secondly, governments need to understand how much money different types of SME’s actually require. Understanding the financing needs of SME’s will enable governments to design or enable solutions that SME’s actually need. Third, is for governments to understand the participants in the SME sector. Such as the nature of formal and informal player, the challenges facing SME’s in different sectors such as manufacturing, agriculture or the arts, the region of the country they are in etc. If the rhetoric of African governments is to become reality and SME’s are really going to be empowered African governments would do well to make a good faith effort to understand them properly first.

Beyond banking

As stated earlier many of the efforts to jumpstart SME financing have involved banks, with governments and DFI’s providing lines of credit or guarantees specifically earmarked for onward lending to SME’s. Around the continent there exist a plethora of government-owned development banks, private banks, and funds whose sole purpose is to lend to SME’s and start-ups. What’s clear is that traditional funding models (a bank loan) are not necessarily meeting the needs of African SME’s a report by the London Stock Exchange Group has placed the funding gap for African SMEs at more than $140bn. The report goes on to point out that among the key hurdles to SME’s accessing finance are:

  • Onerous credit checks from banks (especially foreign banks) restrict SME participation as SMEs often lack the track record and meaningful data inputs required.
  • Credit Bureaus (where defaulters are blacklisted) have, rather than de-risking credit, turned into a negative reinforcement tool as smaller companies run the risk of being ‘blacklisted’ if a single loan repayment is delayed.
  • Prohibitive collateral requirements: lenders seek high levels of collateral to mitigate the high risk associated with lending to SMEs

It may be time to think beyond bank loans when we ask how we can provide African SME’s with viable sustainable credit options. Across the continent, digital and mobile-based lenders are helping to fill the credit gap with innovative and ever-changing credit risk models allows them to better understand credit risk. Allowing them to lend to small business owners, traders and farmers to access short term credit. Often referred to as short term credit, this type of lending allows businesses to meet short-term funding gaps. For example, if an agricultural produce trader wants to stock for the day or week, they are limited to buying only what they can afford at that particular moment in time. However, with access to short term credit they can borrow, buy more produce, sell more produce and at the end of the day after paying the loan back they have made more money. This is not an abstract example it happens every day, especially in Kenya where mobile lending is now common. If banks are not willing to fill this gap, what policymakers and regulatory bodies such as central banks need to do is think about how we can we enable digital lenders to better meet the needs of SME’s. What regulations, consumer protections and standards do we need to put in place that will allow this industry to grow sustainably? Not just lending small traders but also possibly to larger SME’s enabling them to meet their own short-term finance needs.

Secondly, governments should start thinking about investing rather than trying to push banks to give out loans. In a previous post urging a rethink of industrialisation policy on the continent, I talked about the U.S. Governments Small Business Investment Company (SBIC) program to facilitate the flow of long-term capital to America’s small businesses. The SBIC either directly invests or facilitates private capital investment into Small businesses. Crucially these investments are long term giving small business the opportunity, capital and time to grow. Though it has lost money on some investments its investments in companies like Apple, FedEx, and Whole foods outweigh any losses made through the profits, jobs, Intellectual property and innovation that have brought trillions of dollars’ worth of wealth to the US economy. African governments must show the same willingness to invest in African businesses as the private sector (banks and investors) have not done so yet and we cannot sit around hoping it will. Public agencies with a clear mandate to invest or encourage investment in SME’s which show potential for growth will have hits and misses, not every investment is a success. But every investment like this is a positive bet in the future of your country and its citizens, it’s a sign to others that there is a path for them too, but most of all it puts public money where it could do real good not locked in a bank vault.

Making things just a little easier

Teddy Roosevelt once said that “Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty.” The same applies to running an SME in Africa. Business is not for the faint-hearted, nor should it be, but neither should it be filled with potentially moveable obstacles that make It nearly impossible to succeed. Africa’s SME sector is astounding. It has survived natural disasters and the disaster that has been government policy and ignorance of small businesses. If SME’s are to not just survive but thrive it will require governments to adopt policies that make things just a little easier for them outside of the easing of access to credit.

The first of those policies is a tax. Africa’s tax systems tend to be overly complex and burdensome. With businesses often having to pay multiple taxes, that they can ill afford. Simplifying tax systems to be coherent and so simple, so that they can be understood and paid easily should be a priority. If not, many SME’s will either avoid paying taxes or struggle under the burden of being law abiding citizens.

Second, trust. A public register where key information about companies is available to banks, lenders, governments, investors, customers, etc. to have some trust in the credibility and trustworthiness of these companies.

Third would by altering our laws, specifically our employment laws to fit the reality of SME’s and labour in Africa rather than acting as if all employers were large corporations. I have written more extensively on that here.

Finally, is training and networking. Facilitating the training around financing, marketing and tax/regulatory compliance could equip SME’s with tools they need to succeed and enable them to make better use of the funds they do manage to get. Networking is simple, merely using the government’s power to bring people together, to bring SME’s, investors, financiers and potential customers together, and letting them do their thing.

Creating the right environment need not be complex, a few concrete policy actions from the government would act as a stimulus to SME’s and those that may provide credit to them, making things just a little bit easier.

Conclusion

SME’s are the lifeblood of African economies. They provide livelihoods to hundreds of millions around the continent, and alongside agriculture, they are the key that will unlock Africa’s economic potential. To do that they will need access to credit. Thus far efforts to improve credit provision to SME’s on the continent have not been as successful as hoped. This calls for some new thinking; thinking based on a deeper understanding of the challenges facing SME’s. New thinking about how we can move beyond the limitations of banks to harness new technologies and approaches to provide credit to Africa’s SME’s. And to Identify and implement the key policy interventions that governments can make to provide the right environment in which SME’s can thrive.

If we get this right, if we can get SME’s to thrive, then Africa Rising won’t be an old meme but a future reality.

[1] https://www.ifc.org/wps/wcm/connect/REGION__EXT_Content/Regions/Sub-Saharan+Africa/Advisory+Services/SustainableBusiness/SME_Initiatives/