Politics

Thu,17Jan2019

Politics

Interview: Dambisa Moyo, author of Dead Aid

 

The Africa Report: You talk about the vicious cycle of aid. How has it damaged Africa?

 

Dambisa Moyo: There are four big problems that emerge from aid. One is the obvious one: the corruption, the fact that you’re giving somebody something for free, no strings attached.

The second problem is aid dependency, which is the whole notion that you create a society heavily burdened and laden with bureaucracy, which is very inefficient and essentially kills off the entrepreneurial culture.

The third problem has to do with this economic term called ‘Dutch disease’, although they usually call it the oil curse. It actually applies to aid as well, where you have these large inflows of capital which really kill off the export sector.

Then finally, disenfranchising the middle class; governments become beholden or responsible to report to donors and they don’t have any obligation to report to the domestic citizenry.

 

Do you think charitable aid causes the same problems?

 

To me, the current situation in Africa should not be, and is not, the model under which I think anybody wants a continent to survive.

Do we want 25,000 NGOs running around a continent? If the aspiration is to ensure economic growth in these countries and reduce poverty, then the ultimate goal should be [for NGOs] to say that we want to ensure that at some point in the future we no longer exist because we would have attained those goals.

The question then becomes, are these NGOs doing what will ensure they cease to exist? It’s not obvious that they are.?

 

How responsible is the aid industry for continuing the open-ended aid cycle?

 

We know that countries that have relied on aid have consistently done worse than countries that don’t. We know that countries that have used the capital markets have much more transparency, they often attract more foreign direct investment than countries who do not.

Why are we focusing on an interventionist model when we know that this is not the model that has delivered growth?

 

Should some government-to-government aid strengthen civil society in Africa?

 

What you should be looking to do is to ensure that you have the growth of a middle class – which is what happens in the rest of the world – a middle class that has economic power and therefore starts to push on certain civil society reforms or requirements, things like property rights and so on.

From my perspective it seems very short-sighted and almost naïve to continue to rely on aid.

  

Dambisa Moyo is a former banker with Goldman Sachs and author of Dead Aid: Why aid is not working and how there is a better way for Africa

  

Back to Aid in Crisis, Who is helping whom? 

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? 

AU Commissioner for Infrastructure: Infrastructure is a building block for unity

 

At a continental level, the African Union Commission’s priorities for infrastructure development include transportation, water, communications, ICT and energy. The most recent AU Summit was dedicated to transport and energy, but the previous summit’s theme was water and sanitation. The next will focus on ICT.?

 

Naturally, the AU is mainly concentrating on continental and regional programmes, but that does not mean that we are not also taking care of national ones. If you think about it, any continental plan consists of regional projects. And what are regional projects? They are composed of schemes which are implemented at a national level. There is, therefore, no contradiction between the national and the continental. We want to ensure that when our member states are putting together their national plans that they consider how these will fit into regional and continental strategies. It is here that the AU has a big role to play.?

 

In order to implement successfully any regional or continental project, policies, strategies, regulations and standards should be harmonised. This is one of the major tasks of the African Union Commission. We can also help to coordinate the different initiatives. An important part of this is the Programme for Infrastructure Development in Africa (PIDA), the objective of which is to work out a plan of action for improving infrastructure on the continent, with a view to having a single African vision.

 

??At the moment each of the regional economic communities (RECs) has its own plans and projects. And yes, some of them are doing well, but they are doing it separately. Through PIDA, we are looking to integrate all their efforts and put them together in one programme: a master plan for Africa. ?

 

PIDA will harmonise work, preventing any duplication of effort and any wasting of money. PIDA will set policies, strategies and priorities, and it will establish a mechanism which will monitor and guarantee the implementation of infrastructure programmes. We have to do this in conjunction with our development partners. There is also a role to be played by the RECs. There is also a role for the African Development Bank and for the Economic Commission for Africa. We need to work together hand in hand to implement this continental programme.?

 

We also need to recognise that the current global financial crisis is having an impact on infrastructure development and that we will have to look for the appropriate solutions in order to overcome these difficulties. Currently, funding for infrastructure programmes comes from a mix of public and private sources, but given what is happening in the world today we should be looking for alternatives. We should open our doors to trade between African countries and strengthen cooperation between the regions. In this way we can anchor the financing of some of our projects. ?

 

We should also allow the private sector to be more involved in these projects. This implies that we need to establish favourable conditions for investment. We should give the private sector the confidence and the assurance that will allow it to contribute and to be involved. It is true that the private sector is doing well in some regions, but we cannot rely only on private investment. We also need to strengthen public-private partnerships. ?

 

All the regions have made a start and the AU should help to coordinate their efforts. There is no discrimination between the regions: all of them are African regions. But we are looking to those regions which are doing well to help and support the others. ?

 

To have a ‘United States of Africa’ means to have an integrated infrastructure. What we are doing to integrate infrastructure development is a basic element of building integration in other areas. The physical integration of the continent by roads and through energy is the engine for the development of Africa as a whole. We would hope that by 2020 we would have hydropower resources economically exploited, electrical networks, gas and oil pipelines regionally and inter-regionally connected, and to have roads linking African capitals. So we are working together, developing our continent and building our infrastructure which will support our United States of Africa.

Green and Gold Standards

 

Carbon in Numbers
$330.8m size of voluntary
carbon credit market
$63.7bn size of regulatory
market
2% Africa's share of the
global carbon market

Accusations of illegitimacy are one of the biggest challenges to Africa’s voluntary carbon market. Nhambita, a project in Mozambique run by Envirotrade, a British company owned by socialite Robin Birley, came under scrutiny this year for selling offsets before they were verified. But John Grace, professor of environmental biology at the University of Edinburgh and the project’s scientific advisor, explained that getting money up-front – selling emissions before they have gone through lengthy certification processes – is the only way to get projects started. In fact, Nhambita is certified by Plan Vivo – the oldest carbon-offset scheme – and verification is scheduled from another scheme, SmartWood.?

 

Part of the problem is the variety of voluntary standards, each with a different structure, methodology and focus. They include the Voluntary Carbon Standard, the Climate, Community and Biodversity Standard, and the Gold Standard, which, as its name suggests, is considered the industry’s best. ?

 

Stepping up confidence could help smaller projects access carbon markets. A new initiative in Kenya plans to sell carbon microcredits, whereby people are rewarded for using a Gold Standard-certified stove through a weekly payment sent to their mobile phones. 

 

Back to Carbon Credits, Voluntary solutions for climate change

Carbon Credits: Voluntary solutions for climate change

 

There is growing momentum to involve Africa in the carbon-credit trade, now worth some $64bn a year, but strict regulations may keep it away from certified global markets

 

Anew project to protect some 425,000 hectares of rainforest in Madagascar’s Andasibe-Mantadia corridor might seem a win-win proposition for the local population – which can benefit by selling non-timber products like fruits, vegetables and fibres – as well as for the rare lemurs that live there. But many African projects like this one have been left out of the lucrative regulated market in carbon credits that has been growing rapidly worldwide.?

 

Africa is now taking the matter into its own hands and developing the conditions for more carbon-credit trade and for more direct benefits on the ground. Last December saw the launch of the Africa Climate Solution, an initiative led by the Common Market for Eastern and Southern Africa (COMESA), which is also lobbying for the inclusion of projects such as ‘avoided deforestation’, the ‘re-vegetation’ of degraded land, as well as agro-forestry and sustainable agriculture schemes that can operate within regulated global carbon markets. “If they are included, we can take the pressure off our existing forests and use the carbon market to help lift poor farmers out of poverty,” said Sindiso Ngwenya, COMESA’s general secretary.?

Green and gold standards

 

There is a wide variety of
voluntary carbon schemes.
Read more. 

 

Africa still only makes up only 2% of the world carbon-credit market, whether of the regulatory kind – through the Kyoto Protocol’s Clean Development Mechanism (CDM), whereby industrialised countries can offset their own emissions by investing in low-carbon projects in developing countries – or in the sprawling voluntary market, which is certified mainly by independent alliances or NGOs. ?

 

The CDM market for certified emission reductions (CERs) has complex and rigid regulation mechanisms. Only projects from a number of pre-selected (mostly heavy, polluting and large-scale) industries qualify. Those industries get carbon credits through adopting new, more environmentally-friendly technology.

 

?In Africa, 46% of the current carbon projects are forestry-based, but forestry has so far been largely excluded from the regulatory market. Only one out of the 1,383 registered CDM projects worldwide is forestry-related, and it is in China.?

 

Take-off will be delayed?

 

Because CDM registration can take several years, there are long time-lags between initial investment and the first revenue from a project. Green Resources, a Norwegian forestry company that has been planting trees in East Africa since 1997, has yet to sell emission reductions, which is a “terrible frustration”, according to its managing director Mads Asprem. The company’s first project in Tanzania fell foul of CDM criteria because it began before the CDM starting point in 2000. Other, more recent, projects in Tanzania and Uganda have been in the pipeline for months and are still not registered.?

 

The chairman of the Uganda Carbon Bureau, Bill Farmer, who advises entrepreneurs interested in venturing into the carbon market, warns of the difficulties for companies with little financial clout operating in African economies that lack the infrastructure and business environment to facilitate project development. ?

 

The alternative for the smaller projects is the voluntary market. Although the lack of regulation and liability to scams have given the market a bad name, a number of new voluntary standards have emerged, and some of these are backed by methodologies just as rigorous as the CDM process.?

 Registered CDM projects

The result is a new-found legitimacy. The voluntary market is “more adapted to our project types and sizes”, says Farmer. “It’s also, in many cases, a learning experience before coming head-on with the CDM.”?

 

The price of voluntary credits, unlike the market-driven CERs, can vary hugely depending on the size of the project and the type of verification. Forestry and renewable offsets tend to be the dearest on the market, with Africa proving the most expensive at $13.70 per credit, compared to $5.80 in Asia.?

 

Still, while the price of CERs has gone down, the price of Voluntary Emission Reductions (VERs) has gone up. “The price difference between CERs and VERs is much smaller – €10 for CER, €7-8 for VER – and for the extra inconvenience the CDM involves, project developers may well be more inclined to opt for VER,” said Edward Hanrahan, head of voluntary sales at J.P. Morgan, which last year acquired Climate Care, one of the UK’s biggest sellers of carbon offsets.?

 

Baby steps?

 

The Uganda Carbon Bureau’s Bill Farmer points out that conventional financial institutions are not flexible enough for a market that is still in its infancy, which is why he has been trying to create a local carbon market of companies keen to become carbon neutral, a market that is less risk-averse and more tolerant of relaxed standards.?

 

Information provider Ecosystem Marketplace produces an annual “State of the Carbon Markets” report. Its managing director, Katherine Hamilton, says new standards have raised the bar and many projects that would have started trading credits during the CDM-registration phase are now waiting for the standard’s approval.?

 

Such was the experience of Norway’s Green Resources. The company estimates it has produced 500,000 tonnes of CO2-equivalent carbon credits since it began operating – half of which has been independently verified by the Swiss company SGS – but refuses to sell them until they are certified to the highest standards available. “If we sold them now, they wouldn’t have the same value,” says Green Resources’ Asprem.?

 

Despite these different approaches, experts agree that Africa has huge potential in trading carbon credits, particularly if ‘avoided deforestation’ and land-use projects are included in climate-change-mitigation efforts. Asprem says that such projects would also help the most destitute in Africa: “If you plant trees where there is no economic activity, with no other employment, it makes a huge difference, socially and economically.”

 

?The World Bank is investing actively in Africa’s fledgling carbon market: 22% of its carbon projects are in Africa, and the continent accounts for a third of projects from its BioCarbon Fund, a $91m facility dedicated to ‘carbon sequestration’ initiatives through forests and agro-ecosystems. It has also helped fund Madgascar’s Andasibe-Mantadia project, which is now well under way.

 

The UN Framework Convention on Climate Change, which runs the CDM and is organising a major conference in Copenhagen in December 2009 that will draw a post-Kyoto road-map, accepts that Africa has mostly missed out on the regulatory market. But this is slowly beginning to change. While there are currently only 29 registered projects in Africa, mainly in Northern and Southern Africa, 94 more are in the pipeline. 

Mining: Weathering the storm

 

Africa’s mining companies are rethinking strategies and lowering budgets in light of the downturn in metal demand but are by no means giving up their hopes for a recovery

 

Across the continent, Africa’s leading mining firms have had to hunker down to cope with the global recession, and yet there is still plenty of action on the most promising frontiers the continent has to offer.?

 

Even in the Democratic Republic of Congo (DRC), where many companies ceased production when copper prices plunged, there are still some bright prospects, such as at the huge but long-delayed Tenke Fungurume mine. The project’s stakeholders, US-based Freeport McMoRan and Canada’s Lundin Mining, have been pouring in resources to develop Tenke, pressing towards a scheduled start to production in the second quarter of the year.?

 

According to Paul Conibear, senior vice president of Lundin, in the initial phase Tenke will produce 115,000 tonnes of copper and 8,000 tonnes of cobalt per annum, and the company is projecting $1.75bn in capital expenditure, to add to the $1.9bn it spent last year. Freeport and Lundin have so far brazenly refused the DRC government’s attempt to increase the state’s current stake in Tenke (17.5%) via its mining-contracts review. They appear to be daring the government to take punitive action, which would disrupt almost the best-capitalised and mostpromising mining operation in the country.

 

Life with less glitter

 

Copper prices 2008-9?The shine has nevertheless come off the bright prospects for copper of a year ago. With the price outlook at around half the average of $6,959 per tonne of 2008, the governments of Zambia and DRC have had to back down from their ambitious attempts to squeeze more revenue from the sector. On 30 January, Zambia abolished a 25% windfall tax it had slapped on mining companies to their outrage and threats of legal action in April 2008. Many Zambian mining companies have laid off workers as they have reduced or suspended operations.?

 

Typical of companies’ new strategies is the action taken by Toronto-listed First Quantum Minerals, which has copper mines in Zambia, DRC and Mauritania. It has slashed its capital expenditure programme from $430m in 2008 to $190m this year, to focus primarily on committed projects like its Kolwezi copper and cobalt mine in DRC and its copper and gold mine at Guelb Moghrein in Mauritania. But First Quantum is still expanding output at its Frontier copper mine near Sakania, DRC, and at Kansanshi in Zambia. Company president Clive Newall told The Africa Report: “We are now optimising for costs.”?

 

“The global economic slowdown and the continuing weakness in financial markets have created a challenging environment for the entire resource industry,” explained First Quantum’s CEO, Philip Pascall. Although the company hopes to generate surplus cash even at low copper prices, Pascall noted, “further measures may be required in due course.”?

 

Other companies have taken harder hits. In November, Toronto-listed Katanga Mining stopped operations at the Tilwezembe open pit and at its Kolwezi concentrator. A month later, Toronto-listed Anvil Mining put its Dikulushi mine in eastern Katanga on care and maintenance, and stopped its operations in Kolwezi entirely. Anvil stopped mining at Kinsevere near Lubumbashi too, and is at present just processing its stockpiles of concentrate. In what will be a major test of market sentiment towards base metals in general, and the DRC in particular, Anvil hopes to raise more than $200m to develop Kinsevere by the end of June. With the company’s share price in the doldrums and banks averse to lending even in much more stable African countries, it is a tough proposition. But according to a senior Anvil manager, “the asset is a good one and we are optimistic the funds will come from somewhere, in time.”?

 

A gleaming safe haven?

 

While African base-metal miners may be having a hard time, the prospects are better for gold miners. Gold has so far benefited from the economic and financial crisis, with investors once again using it as a safe haven from the carnage in global equity and property markets. With the gold price edging towards $1,000 per ounce, there are predictions it could peak at $1,300 sometime this year or next.?

 

Gold prices 2008-9The rising gold price and the weakening South African rand have both helped South African gold producers. DRDGold, for example, saw operating profits in the fourth quarter of 2008 rise more than 60% from their third quarter level, despite a 15% fall in production. Harmony, another major South African producer, has been using the rising gold price to rid itself of debt but is cautious going forward. CEO Graham Biggs told The Africa Report: “Although the gold price at the moment encourages further exploration, for us, for now, further significant expansion is on hold. We are conserving cash, but still maintaining existing levels of production, and seeking to convert some of our estimated 253m resource ounces into reserves.”

 

?It is the same story with South Africa’s Randgold, most of whose resources are in West Africa, where it is financing capital expenditure from cash flow. Randgold CEO Mark Bristow told The Africa Report: “We have the cash, and have financed our capital expenditure ourselves and paid a dividend too. As a result of all this work, we have found lots of new resources to supplement our current flagship of Loulo in Mali, including Massara in Senegal, which is looking good, Bambadji, also in Senegal, and Toyou in Côte d’Ivoire, which is scheduled to begin production in the first quarter of 2010.”?

 

With mining companies chastened by massive falls in market capitalisation and by investors’ shrinking appetite for risk, their overall mood seems likely to remain one of extreme caution for some time to come.

Hopes rise for renewed economic integration

 

DRC, Rwanda, Burundi mapFormer enemies Rwanda and Democratic Republic of Congo (DRC) have resumed diplomatic relations and engaged in a joint military operation to establish peace and security in eastern DRC. This has led to the arrest of General Laurent Nkunda, leader of the Tutsi insurgency of the Congrès National pour la Défense du Peuple since 2004. Joint forces have also been fighting Rwandan Hutu rebels.

 

Amid the earlier instability in 2008, the European Union’s development commissioner, Louis Michel, repeatedly called for a relaunch of the Economic Community of the Great Lakes Countries (ECGLC), set up in 1976 to promote regional economic cooperation and development, only to fall apart in 1994.?

 

The methane gas in Lake Kivu is a resource shared by Rwanda and DRC, which already cooperate in hydropower generation at Ruzizi. A planned Ruzizi III plant could provide up to 145 MW to Rwanda, DRC and Burundi in the future.?

 

Many hope the shared methane gas could further the regional goals of the ECGLC. “Rwanda and Congo are ultimately the same people,” says Henri Yav Mulang, chairman of the Congolese Chamber of Commerce in Kinshasa. “In these troubled times, economic cooperation can bring us together.” International experts remain to be convinced. “Promoting cooperation between Rwanda and the DRC in the extraction of methane from Lake Kivu could contribute to peace but will likely not make a big difference if other sources of conflict… are not dealt with,” says Professor James Putzel, director of the Crisis States Research Programme at the London School of Economics.

 

Back toPower, Miracle gas to generate hope

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