Tag Archives: Ghana

The Economist’s Take on Recent Reforms in West Africa

Bye-bye Big Men

Governance in much of Africa is visibly improving, though progress is uneven

Infrastructure meets tradition

LEAVING THE IVORIAN commercial capital, Abidjan, at 7am, you run straight into what is known as the civil-servant rush hour. The president has decreed that administrators must be at their desks by 7.30am, and most are. A Western ambassador says disbelievingly, “If you are five minutes late for a meeting, you have missed the first five minutes.” Having travelled to the office on elevated dual carriageways, civil servants leap into lifts and ride up to their desks on the upper floors of modern glass towers. Some sneakily keep an iPad or some other electronic gadget with which to while away the time.

Governance in Côte d’Ivoire is rarely as good as it looks. Bribes still solve problems faster than meetings. The opposition spitefully boycotted the most recent elections. Deep cleavages run across the political landscape. And yet the national accounts are in order, debts are coming down and new roads are being built. This is the picture in much of Africa. The allocation of power is becoming fairer and its use more competent, as in Ghana, though there is much more to do, especially in resource-rich nations like Nigeria.

African governments are beginning to accept the importance of good governance, not least for improving the lot of the poor. Rulers travelling on presidential planes strut their stuff at the World Economic Forum in Davos and declare their undying interest in “capacity-building”. Behind the jargon a remarkable change is taking place. The default means of allocating power in Africa now is to hold elections, and elections are generally becoming fairer. Sceptics rightly bemoan voter fraud and intimidation, and plenty of polls are still stolen. But the margins of victory that autocrats dare to award themselves are shrinking. Indeed, quite a few have discovered, in forced retirement, that by allowing notional democracy they have started something they cannot stop.

Until 1991 it was almost unknown for a ruling party to be peacefully ousted at the polls. Since Benin ticked up a first in that year it has happened almost three dozen times. In many countries such an event cements tentative gains, as it did in Ghana in 1992 and again in 2000. Crossing the border from Côte d’Ivoire into Ghana, the visitor immediately becomes aware that democratic expression here is unrestrained. An election is under way and supporters of the ruling party and the opposition cheerfully line one side of the road each, holding megaphones and waving banners. Opinion polls put the two main parties neck-and-neck even though the present government has achieved impressive economic growth: GDP increased by 14% in 2011.

After a few hours on the road, just past the city of Takoradi, the country’s economic turbo-charger comes into view. Pipelines run along the road and diggers make huge holes for storage tanks. A vast oilfield has been found nearby, but celebrations were muted. Ghanaians know that a resource bonanza can be dangerous and politicians may get greedy, so administrators are now being trained in handling a large influx of oil revenues. At a leafy campus with neatly trimmed grass on the outskirts of Accra, the capital, they learn about transparency, accountability and the intricacies of transfer pricing.

This stuff matters. Some of the biggest obstacles to better governance are not murderous tyrants but a lack of bureaucratic competence and a divided opposition. Ageing autocrats die eventually, but bad habits will not go away of their own accord. Robert Mugabe, Zimbabwe’s dictator, now aged 89, could be deposed if rivals, with whom he has been forced to share power since the most recent election, were better at their jobs. Still, in neighbouring Zambia opposition politicians outmanoeuvred a tired government in 2011 and took office.

Luckily, competence is on the rise in Africa. White elephants are still being created, but are now generally designed to serve larger and more inclusive groups of people. South Africa’s football stadiums built for the 2010 World Cup (pictured) are in that category, as are many new dams and airports.

Politicians and officials are learning new skills to run such projects. It is hard to quantify the change, but traipsing in and out of ministries across the continent builds up a measure of confidence. There are plenty of shortcomings and allegations of corruption, but in a fair number of African countries the bureaucracies are not far behind standards in, say, India.

Transport management in particular has become much better. A bus ride from Accra across three African borders in one day is instructive. Departing at sunrise, the 15-seater easily crosses into Togo where it passes well-run port installations and warehouses. An hour later it arrives in Benin. The driver ignores the outstretched hands of traffic policemen. After a few more hours the bus reaches Nigeria amid throngs of packed lorries on their way to Onitsha, Africa’s largest market. Most of the bus passengers are professionals, including several telecoms engineers who commute weekly. All four countries have sensible transit policies and trade actively with each other.

White elephants are still being created, but now generally for larger and more inclusive groups of people

What has brought about this change? Across Africa both voters and leaders are better educated than they were even half a generation ago. Many of those in power are the first in their families with a university degree. Standards of political debate have risen thanks to better schools, modern media and the return of diaspora members who bring new ideas with them.

One lesson in particular seems to have sunk in: the need for solid and durable institutions. In the past, good practice all too often lapsed quickly after a change of incumbent. Foreign advisers ram home the need for institution-building. “Everyone is nagging us about it, from TB to Mo,” says an Oxford-educated official, referring to Tony Blair, a former British prime minister who now runs an African governance initiative, and Mo Ibrahim, an Anglo-Sudanese telecoms billionaire who awards prizes for political leadership.

Size matters here. Benin is nicely democratic—it has more political parties than cities—but with a mere 9m people it carries little weight. Nigeria, on the other hand, has 160m, so along with Kenya and South Africa it sets the tone in regional meetings and institutions—and it still struggles to get things right. When the parliament’s speaker needed a bit of extra cash before leaving office in 2011 (on top of more than $1m a year he got in pay and expenses) he gave himself a $65m government loan. He was charged but later acquitted.

Nigeria is famous for corruption, yet at issue is more than thievery. Members of the elite systematically loot state coffers, then subvert the electoral system to protect themselves. Everybody knows it, and a few straight arrows in the government talk about it openly. Perhaps half the substantial (but misreported) oil revenues of Africa’s biggest oil producer go missing. Moderate estimates suggest that at least $4 billion-8 billion is stolen every year, money that could pay for schools and hospitals. One official reckons the country has lost more than $380 billion since independence in 1960. Yet not a single politician has been imprisoned for graft. The day that Nigeria works properly, the battle for Africa’s future will have been won.

One step at a time

Such an outcome is not inconceivable. Take Lagos, the commercial capital, long a byword for chaos and skulduggery. The bus from Accra inches forward on an eight-lane bridge in dense traffic. The last 30 miles take longer than the previous 300. The city is choking. Roads jam up daily. Commuters sometimes sleep in their cars. Businessmen schedule at most two out-of-office meetings a day. Built on a swamp by the Atlantic, Lagos spreads out unplanned. Two out of three residents live in wooden slums. Already home to 20m people, the city is expected to double in size within a generation. When most of the public infrastructure was built in the 1970s, the population was perhaps 2m.

But help is on the way. The governor of Lagos, Babatunde Fashola, has begun an impressive campaign to clean up the city. Yaba bus station, where the bus eventually arrives at 9pm, used to be full of pickpockets and rowdy vendors. Now there is an orderly queue for taxis. The Chinese are building a vast urban rail network. Public buses have been assigned separate lanes. When the governor heard they were being used by unauthorised vehicles, he strode out one morning and made a citizen arrest of a stunned colonel.

The governor is playing to the crowd, but why not? The transformation of Lagos is worth trumpeting. Its economy is now bigger than the whole of Kenya’s. Tax revenue has increased from $4m to $97m a month in little more than a decade. Tax rates have stayed the same but the amounts being collected have risen dramatically thanks to the deployment of private tax “farmers” who get a commission.

Better governance is creeping beyond the metropolis. When your correspondent e-mails the governor of Ekiti state in impoverished central Nigeria he gets a reply within minutes, with the entire cabinet copied in and being told to assist with a visit. After a six-hour drive north, seven interviews across the capital, Ado Ekiti, are arranged in the space of a few hours. Cabinet members are mostly foreign-educated and highly motivated and have private-sector experience. A new employment agency sends out job advertisements by text message. All secondary-school pupils are getting free laptops with solar panels. All civil servants, including teachers, are tested annually; those who fail stand to lose their job.

To be sure, this sort of governance is still the exception. A visit to the capital, Abuja, another six-hour drive north flanked by red earth dotted with filthy shacks, is sobering. The seat of government moved here two decades ago to escape swampy Lagos; now it is as chaotic as the former capital. A programme to subsidise fuel alone cost the government $6.8 billion in theft in three years (on top of the billions wasted on the market-distorting subsidy itself). Shady deals between officials and oil companies have swallowed an estimated $29 billion in the past decade. Yet more than half of all Nigerians live on less than $1 per day and get almost no electricity because the grid has collapsed.

Still, even Abuja is not without hope. Inside gleaming ministerial palaces dotted along new ring roads a band of reformers is at work. They are in a minority, but seemingly fearless. The central-bank governor has started cleaning up the financial sector. The finance minister, Ngozi Okonjo-Iweala (who recently published a memoir entitled “Reforming the Unreformable”), is reducing fuel subsidies and thus the scope for theft. A special task force in the president’s office is privatizing electricity assets. The reformers have encountered strong opposition, as much from an understandably suspicious public as from the wily crooks who stand to lose out. The good guys are winning, but it will be a long time before they triumph.

A very brief chronology of the Nigerian oil economy

English: Flag of the Organization of Petroleum...

A colleague of mine casually asked me yesterday about Nigeria’s oil economy after independence.  Many isolated events and economic explanations came to mind, but I was surprised when I couldn’t give her a succinct chronology. I thought I would write a paragraph or two to remedy this.

More Nigerians slowly moved from subsistence agriculture to private enterprise around independence, and oil, which had been discovered three years earlier, quickly become the basis of economic growth. Shell had been the first to commercially drill in the country, but in 1960 other companies such as Mobil and Agip were competing for their own stake.  Hopes were high. Oil profitability was greatest during the “Golden Decade” of the 1970s, in which Nigeria became the wealthiest country in Africa. Between 1958 and 1974, production rose from just over 5000 to 2.3 million barrels per day and government revenue increased from N200,000 to N3.7 billion. Within two years, state profit increased by almost 50% to an all-time high of N5.3 billion in 1976. Nigeria bolstered profits when it joined OPEC in 1971, an organization which helped to construct the global petroleum scarcity, and thus the massive profitability of fossil fuels at the time. The economic prosperity was short-lived however.

 

In accordance with the resource curse, the 1970’s oil boom led to a near complete economic crash in the following decade. Nigeria had made an almost total shift away from the traded and diversified agricultural sector to the non-traded sector of petroleum, and projected revenues for petroleum were high. Based on this, President Murtala Mohammed spent and borrowed billions on grand-scale modernization projects.   However, such spending and borrowing in a mono-economy proved highly problematic during the sharp decrease in world oil prices under Babangida in the 1980s. Domestic inflation became so high that even basic food stuffs become too expensive for consumers and Nigeria had to default on numerous debts. To create more jobs for Nigerians, the government forced out the thousands of West African workers who had immigrated to the country to take advantage of the employment in the formerly booming economy.  Rather than take a conditional IMF loan like Ghana did, the government implemented a controversial Structural Adjustment Program (SAP) that proved largely unsuccessful. The economic decline was so severe that by 1989 Nigeria was labeled a low-income country and qualified for World Bank assistance.

 

Despite a slight revival in the 1990s, the economy has yet to recover to early 1970’s levels of prosperity. Today, ¾ of Nigerians live below the poverty line, in a country that produces around 2.6 billion barrels of oil daily. Petroleum accounts for 80% of budgetary revenues and as a result, high inflation has hurt investments for the average Nigerian and made international investment aside from fossil fuels a near impossibility. Few jobs in the oil sector have been created for Nigerians and wealth distribution is grossly unequal. Robert Bates argues the Nigerian oil crisis and subsequent loss of export taxes is what caused the state to become predatory for its income, thus laying the groundwork for today’s poor and often corrupt governance.

 

So, there is the short of it, more or less. There was steady growth of the oil sector in the 1960s, a complete boom in the 1970s that created the “oil state” as we know it, a crash in the 1980s, then a slight improvement in oil revenue in the 1990s that leveled out to what we have today.