In DepthColumns

Sat,18Nov2017

Columns

New reality for the world's heavyweight financiers

Gemma Ware

 

The ‘philanthrocapitalism’ of rich financiers in New York and London could soon fade. Eager to put the rigours of the boardroom to work solving the world’s problems, these ‘new philanthropists’ started their own foundations and played by their own rules. Inspired by the philanthropy of Microsoft’s Bill Gates, Scottish tycoon Sir Tom Hunter pledged to give £1bn to charity over his lifetime. Hedge-fund billionaire Arpad Busson founded Absolute Return for Kids to work on HIV/AIDS prevention in Southern Africa, and regularly raises upwards of £25m pounds from wealthy friends at an annual gala dinner. ?

 

Some just pushed their way in. One charity, started in 2002 by Irish property-developer Niall Mellon, built 11,000 homes in South African townships by flying in groups of international volunteers to do the work, but had to be told to slow down by the municipalities, which struggled to keep up building new drains and roads.?

 

According to a survey by the New York-based Foundation Centre, giving by 80 of the largest US foundations totalled $5.4bn in 2007, a 70% increase from 2002, with Sub-Saharan Africa receiving more than 40% of international spending. But with investments crippled, nearly half of these foundations admitted the current financial crisis would focus their minds on domestic issues. Though bruised – Busson’s investments, for example, suffered from Bernard Madoff’s ponzi-scheme fraud – the financial turmoil is unlikely to be the death-knell of the philanthrocapitalists. The Bill and Melinda Gates Foundation lost 20% of the value of its assets in 2008, but it still plans to increase spending from $3.3bn in 2008, to $3.8bn in 2009. 

 

Back to Aid in Crisis, Who is helping whom? 

Federal Business in Abuja

Gemma Ware

 

It is an unwritten law in Nigeria’s corporate world that all the major regions of the country must be represented on a company’s board. It is called ‘federal character’ and there is even a parastatal organisation for its management in Abuja called the Federal Character Commission.?

 

Federal character underlies the business dealings of such prominent figures as Ibrahim Babangida, Shehu Yar’Adua, Sani Abacha and the late Chief M.K.O. Abiola, who had all been business partners at one time or the other. Habib Bank, founded by Abiola and Shehu Yar’Adua, has been absorbed into one of the country’s most successful financial institutions, Bank PHB. Inter-ethnic representation in the formal (and informal) private sector seems to help glue the otherwise fractious country together more effectively than any debates held on the floor of the National Assembly.

 

Sometimes seen as the most federal of all Nigerians despite their defeat in former Biafra, Igbos readily adapt to life anywhere in Nigeria and have widespread property holdings in Abuja. They bought the land from their Hausa/Fulani business partners, who are often better connected when it comes to government allocations. Such financially advantageous relationships help explain how Nigeria has avoided any return to the Biafran war.

 

?No matter the challenges of nationhood, war is never an option. “We have intermarried and welded too much in business to engage in warfare like the one in Rwanda,” says Sam Emehelu, who publishes a golf journal. “In the course of my work, I have met the cream of Nigerian society, and ethnic considerations are the last thing on their mind when they mingle – and when they mingle, they talk deals.” 

 

Back to Nigeria's Family Wars

The long Yar'Adua legacy

Gemma Ware

 

President Umaru Yar’Adua’s father, Musa Yar’Adua, was the first minister of Lagos federal territory during Nigeria’s First Republic, between October 1960 and January 1966. Musa in turn was the son of Malam Umaru, an Islamic scholar and aristocrat, first appointed by the British as matawali (treasurer) of Katsina Emirate, one of the leading emirates that had emerged after the conquest of Hausaland by the early 19th-century Islamic scholar and reformer, Sheikh Usman Danfodio.?

 

Musa had three wives and many children. One of the wives, Hajiya Dada, had 12 children, including Shehu and Umaru Yar’Adua. Shehu joined the army after his secondary-school education and years later rose to become the second-in-command in the military regime that emerged following the February 1976 attempted coup in which General Murtala Mohammed was killed. The regime was led by a triumvirate of Generals Olusegun Obasanjo, Theophilus Danjuma and Shehu Yar’Adua. After their retirement in 1979, all three retained their interest in the affairs of state.

 

?Shehu started a political movement, which eventually became the basis of the Social Democratic Party, one of two parties allowed to register by General Ibrahim Babangida’s regime (1985-1993), but Babangida barred him from contesting the leadership. Thereafter, Shehu became the spearhead of the opposition to General Sani Abacha’s regime of 1993-1998. Abacha detained Shehu on a trumped-up charge of an attempted coup. He and Obasanjo were tried and sentenced to death. Pressure from home and abroad forced Abacha to commute the sentences to life. Obasanjo survived but Shehu was killed in prison in December 1997.

 

Back to Nigeria's Family Wars

Stirring a livestock revolution

Gemma Ware

 

Understanding the ‘hidden’ market and removing barriers holding it back is an essential way of bringing the livestock revolution to the pockets of the rural poor, something at which India has been remarkably successful. The head of the International Livestock Research Institute, Carlos Seré, says: “It’s a very distributed thing – it doesn’t show up in the official statistics, it’s part of the cash economy – that little bit of income that a family gains from the milk of one cow, which is driving the school fees, paying the medical bills.” ?

 

Tackling the barriers to trade in animal products is essential. In most countries, pasteurisation is a necessary procedure before any commercialisation of milk can take place. But in Kenya, which has a large urban population, the cost of getting milk to a factory and pasteurising it doubles the cost, putting it out of reach of the poor, who have little choice but to buy illegal, raw milk. The risks of milk spoiling in a hot climate are high, but if raw milk is drawn from the cow at 8:00am, sold to a neighbour who is boiling it at 9:00am, the risks are negligible. Of the near 3bn litres of milk produced annually in Kenya, only around 15% goes through official pasteurisation channels.

 

?Legalising the sale of raw milk, as now planned, will help Kenyan dairy farmers. A new form of packaging has been produced, and special cooling procedures and certifications are being put in place. Once a farmer has had a certain amount of training in the handling and retail of raw milk, he will be able to become a legal seller. This could ensure that the farm-gate prices are stronger, and there is less profit for clandestine middlemen.

 

Back to Africa dreams of feeding the world

Africa dreams of feeding the world

Gemma Ware

Despite poor soils and lack of investment, there is enough arable land in Africa to take advantage of fast-growing global appetites

 The reset button of the world economy may have been pressed, but many in Africa still have fresh memories of the hunger riots that convulsed several capital cities in the first half of 2008. Bad harvests in major grain producers, years of under-investment in African agriculture, rising demand from Asia and a bubble in the world’s commodities markets all contributed to push the price of bread, rice and other staple foods out of reach. Slum-dwellers, locked into the cash economies of Africa’s cities, with little ability to grow their own food, were furious.?

In a context where Africa is failing to feed its own children, it may appear in bad taste to suggest that Africa should plan to export food to Asia. The announcement, soon hastily withdrawn, that the South Korean company Daewoo Logistics was to lease half of Madagascar’s arable land to produce maize and palm oil, raised a barrage of international criticism and protest. Is this, many wondered, the latest chapter in the neocolonial exploitation of Africa’s resources? In a continent plagued by droughts, locust storms and floods, where 28% of children are undernourished, isn’t it irresponsible to be sending yet more African export crops abroad??Meat and dairy prices

Not wishing to be tarred by the same brush, Xu Weizhong, deputy director of the Institute of Asian-African Studies in Beijing, told The Africa Report: “If this is true, it is a very irresponsible way of doing things. This is not the way in which China itself would act.” ?

However, voices from within the global agricultural science establishment do not believe it is grotesque to imagine African farmers growing food to be sold in Beijing and beyond. “We’re convinced that the future for rice farming lies in Africa,” says Papa Seck, director-general of the Cotonou-based Africa Rice Centre. “This continent has more potential than any other area of the world because of its land and water resources. Our studies have found that local rice production, under irrigated conditions, can be as competitive as in Asia and much cheaper than in the US.” This was a key theme of the recent annual meeting of the Consultative Group on International Agricultural Research in Maputo.?

Grain crunch?

Agriculture may be Africa’s Achilles heel, but it is also a source of hope and huge untapped potential. “You go to any market in Africa after midnight, you will see mountains of food being discarded,” notes Peter Hartman, director-general of the International Institute of Tropical Agriculture (IITA) in Ibadan, Nigeria. In the rural areas, millions of tonnes of food simply go to waste because of poor local storage facilities and inefficient transport into towns and cities. The challenge of these so-called ‘post-harvest losses’ is one of processing food into forms that do not spoil before they reach the dinner table.

Connecting the hunger of the cities to the farmers in the countryside is an achievable goal, a well-worn path towards economic development, and one being followed by China, India and, lately, Vietnam.

Globally, agriculture has now reached a critical conjuncture. Water tables around the world in major grain growers like the US, India and Egypt are at a record low, prompting fears of a coming ‘grain crunch’. Climate change may reduce the amount of fresh water arriving from Himalayan glaciers by 2035, affecting around 2.4bn people living in regional river basins. Growing Asian demand for meat is placing ever-greater strain on current resources. There is little doubt that the structural factors underpinning the world’s food crises have not gone away. But as Rahm Emmanuel, President Barack Obama’s chief-of-staff, might say, it would be a shame for a good crisis to go to waste.


Former Nigerian President Olusegun Obasanjo
on fertiliser, agricultural banks and whether
Africa should be trying to feed Asia.
Read more
.  

Africa’s current comparative advantage is that it has a large amount of under-utilised arable land, which gives the continent an opportunity to integrate itself better into the global economic system. With China occupying the cheap manufacturing rung of the ladder, and India sitting firmly on services, agricultural production is something that Africa could make its own, before building up enough steam for a genuine African industrial revolution. That this has not happened is attributed by the IITA’s Hartman to the continent’s intellectuals who thought that “agriculture was just a phase they could skip” on the way to industrialisation, and to political leaders with little interest in farming.?

Given Africa’s massive unemployment problem, the urgent need for investment in agriculture is self-evident for the president of the Alliance for a Green Revolution in Agriculture, Namande Njongi, who reckons that “creating jobs in agriculture is almost 100 times cheaper than in industry”. So far, however, “Africa’s emphasis has been to invest in areas outside of agriculture, which employ much fewer people, and where it costs a lot more to create a job,” he adds.

In practice, huge and fundamental investment is needed to bring about change, and most especially in African infrastructure: small tertiary roads that would allow a farmer to get things to market, railways to move fresh fruit and vegetables quickly, power supplies that keep refrigeration units in abattoirs working, well-managed water tables and irrigation systems, and docks that expedite the import of vital feed, fertilisers or seeds.

Sticking to what you know?

The list of demands is a long one. The answer to the lack of productivity in African agriculture will be one that tackles the many different levels of the problem, including the poor health of African soils, and inadequate use of fertilisers, pesticides, mechanisation and high-yield crop varieties. At the top must be the ability to change the mindset of risk-averse African farmers, who currently stick to what they know, given the vagaries of past experiments. Professor Firmino Mucavele, advisor to Mozambique’s President Armando Guebuza, underlines: “In Africa, 80% of our farmers are women and at least 50% are illiterate. Our messages about the newest methods on productivity don’t reach them.”

Stirring a livestock revolution

 

Of nearly 3bn litres of milk produced
each year in Kenya, only 15% is
pasteurised through official channels.
Read more

 

Pessimism need not reign, as recent huge productivity gains in Malawi can testify. While feeding the Chinese is perhaps for tomorrow, cassava farmers in Nigeria are feeding China’s pigs today. Without trying to rush the African peasant farmer into something different, it may be possible to invite business to fill the gap. In 2002, the IITA, with the support of former President Olusegun Obasanjo, launched an 18-month media blitz aimed at local investors to convince them of the potential of agribusiness. The scheme was targeted at second-tier investors rather than the ‘big boys’ interested in banks and telecoms. As a result, some $300m was generated by cassava processing in Nigeria last year, and there are hopes that exports could eventually be worth $5bn.?

 Processing of cassava – either drying it into gari or cassava flour, or fermentation into ethanol – is one key to success, creating alternative outlets for a raw product that otherwise would pile up, come harvest time, and then quickly devalue. “When we began,” explains Hartman, “cassava was known as the ‘poor man’s crop’. Now its called an ‘industrial crop’.” It is earning its moniker.

The Malawian plywood sector previously extracted starch from maize for glue, but is now switching to cassava to take advantage of its high starch content. Both the paper and laundry industries are dependent on starch. Cassava is being used in animal feed across South America and Asia. Ethanol is extracted from the root, oil companies use starch to lubricate their drill bits and by-products also feed into the food and beverage industry.

Connecting farmers to markets is an ancient method of boosting rural incomes. But there has been a tendency to prioritise exports at the expense of domestic markets. Africa’s macroeconomic stabilisation of the 1990s and 2000s – inflation brought under control, the slow extension of credit to the wider population, economies growing – has meant that increasing percentages of national populations, mostly in the towns and cities, are earning higher incomes, generating a significant shift in consumption patterns. Tapping into this growth in local demand is a critical first step.

While someone earning under $2 a day will spend most on staples, like rice, bread, maize or cassava, people who have a higher income want more animal products: milk, butter, eggs and meat. There is also a greater demand for fruit and vegetables. This diversification of demand can be seen most clearly in North Africa, where per capita incomes are around $2,000-$3,000 a year and where supermarkets and dairies are booming (see Company Focus, page 76).

Wake-up call?

Once the local markets are properly supplied, those farmers who are doing slightly better will have a greater amount of capital to sink into export projects. One day, perhaps, packs full of Kenyan milk will be boxed up and sent to India or China. South Korea could prefer Mozambican frozen beef to US imports. Indonesia might import maize from South Africa.

“Look at China – twenty years ago they used to eat 10kg of meat per capita, now it is 50kg,” says Carlos Seré, head of the International Livestock Research Institute. The hunger riots were not the sound of a dream trampled underfoot, they were a wake-up call. In ten years time, there will be domestic and export markets both clamouring for food. No time for the African farmer to be out for lunch.

The Obama administration's objectives for Africa

Gemma Ware

 

In order to improve relations with the continent, the new US presidential team will have to tackle some difficult conflicts

 

The Obama administration needs to address several short-term goals for Africa, then assure a long-term focus that will leave a lasting legacy.?

 

In the short term, it will need to revamp US policy in the Horn of Africa, and specifically toward Somalia. It is essential that a new diplomatic strategy be devised, including for Middle EasternUS trade with Sub-Saharan Africa countries and the UN as well as Somalia’s neighbours, to manage the potential chaos following Ethiopian troop withdrawal from Somalia and to prevent the radical, anti-Western Al Shabaab movement taking full power.

 

?Secondly, it must address the continuing crisis in Darfur. There, it will need to assess the practicality of harsher sanctions or a no-fly zone, perhaps using the consideration of these steps as a bargaining chip with the regime in Khartoum, in order to start a new peace process. Much more support will need to be provided directly to the UN/AU peacekeeping force there.?

 

Preserving gains

 

?Finally, the crisis in the [Democratic Republic of] Congo requires stronger US support for the UN peace process, including support for a much larger and stronger UN peacekeeping operation there.

 

For the longer term, the Obama administration needs first to consolidate and preserve the gains of the Bush administration, e.g:

 

  • the bipartisan support for a vigorous HIV/AIDS programme already authorised for $48bn over the next five years;?

  • the support of well-governed regimes under the Millennium Challenge Account;?

  • special trade advantages for Africa under the African Growth and Opportunity Act; ?

  • generally higher aid levels leading to a doubling of aid by 2010.

 

?Secondly, it must go beyond these objectives: through broadening the HIV/AIDS programme to include more support for health infrastructure, adding substantial assistance for agriculture and further measures to contain the consequences of climate change.?

 

It must also help strengthen Africa’s weak trade capacity in order to be able to ultimately remove Africa’s special preferences. This requires a new strategy with Africa in the Doha round, that aims for the World Trade Organisation to treat Africa as a single trading entity – not divided between middle-income and least-developed countries. Additional aims should be building Africa’s manufacturing and other competitive processes, and discouraging the European Partnership Agreements and similar bilateral trade agreements which divide Africa and reduce the potential for sub-regional trading blocs. ?

 

A legacy in the making ?

 

Finally, the Obama administration should make its greatest single legacy the improvement of African governance, transparency and democracy. This is where President Obama has great credibility, allowing him to address these often-sensitive issues directly with African leaders and societies. These objectives will require strong public and political support, aggressive prosecution and urging similar prosecution by our Western allies of multinational firms that bribe African officials, and substantial support to building the institutions of accountability such as the judiciary, parliaments, a free press and civil society.?

 

The African Union, weakened in recent years by peacekeeping problems in Darfur and Somalia, and losing erstwhile strong leadership from Nigeria and South Africa, will need to be encouraged and supported to play a stronger role in support of democracy and peace, as envisioned in its charter. Subregional organisations, such as the Southern African Development Community and Economic Community of West African States, should be similarly encouraged and supported.?

 

With high priority crises elsewhere, the Obama administration can only accomplish these objectives, and avoid Africa falling to the back of the line, by:

 

  • empowering the assistant secretary of state for african affairs through high level backing by the secretary of state and the president so that it is known that he/she speaks with the full authority and backing of those high level officials.??

  • providing the Africa bureaus at the State Department and US Agency for International Development with substantially increased personnel so that they can carry out complex peace negotiations in Sudan, Somalia and Congo, and advance a broader development and trade agenda. At present staffing levels, this will be impossible.

Page 64 of 66

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