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Monday, September 19, 2016

Kenya’s local content law must empower resource-rich communities

Kenya will soon join the ranks of oil exporting countries. President Kenyatta declared that Kenya would pump and export an estimated 2000 barrels of oil per day before the next general elections. At the current oil prices, these petroleum exports will generate enough revenue to pay about 203 members of the national assembly their salaries and allowances for one year.

But is Kenya prepared to navigate the slippery slope of the hydrocarbons bonanza? Can oil revenues drive equitable or shared prosperity? Our record and experience with massive cash receipts like the Euro Bond is not inspiring.

Africa’s experience with hydrocarbons and mineral ore has not been rosy. In a majority of Africa’s resource-rich countries, exploitation of natural resources is invariably linked to corruption, economic stagnation, conflict, social inequality and widespread poverty. This apparent paradox is referred to as the Resource Curse. Paul Collier, Oxford University Economist, has argued that poor management of large inflows of natural resource revenues makes other export activities noncompetitive and stifles economic diversification, leading to lower economic growth.

For a long tine Nigeria was the poster boy of the Resource Curse. Armed, rebels operating under the name of the Movement for the Emancipation of the Niger Delta (MEND), have intensified attacks on oil platforms and pumping stations. According to leaked internal financial data accessed by the Guardian, Royal Dutch Shell paid Nigerian security forces hundreds of millions of dollars a year to guard their installations and staff in the Niger delta.

A raft of legal interventions, including sovereign wealth fund, benefit sharing as well as detailed regulations that specify production agreements are in various stages of drafting, public consultation and debate. All of these are intended to ensure that Kenya averts a Resource Curse and receipts from natural resources contribute to share economic prosperity.

The latest in this plethora of laws and regulations is the Local Content Bill published by the Senate. The intent of the Bill is to create a framework to support “indigenization” of financial, technical capacity and local value capture across all activities in the extractive sector, especially oil and gas.

The supreme purpose of local content legislation is to move communities beyond benefit sharing to equitable economic participation. This is especially critical for communities in the Rift Valley and Kenya’s coastal region who have been marginalized for over six decades. Hence, the local content legislation must give primacy to County Governments. Real and durable prosperity at a scale that diminishes the risk of a Resource Curse can only come through robust economic participation by local communities in whose locality the natural are found.

The Bill should establish devolved local content development committees, which must be embedded in planning units of resource-rich Counties. These committees in consultation with local stakeholders should develop local content plans. Such plans must address specific investment, development and human capacity needs.

Bust most of all governments, both county and national, must make fundamental investments in human capital and physical infrastructure to make local content aspirations feasible.

Monday, September 12, 2016

Six decades of failure should inform Africa’s agricultural transformation

A legion of organizations and experts advise African farmers and government on how to make agriculture more productive and profitable. But after nearly six decades of public, private and donor investments, African farms are the least productive and African farmers are among the poorest people on the planet.

According to Harvard’s Calestous Juma, Africa imports nearly 83 per cent of its food. Nigeria, Africa’s largest economy, spends about $5 billion on food imports annually. In 2014, Africa spent over $35 billion on importing food. Moreover, Africa is also the largest recipient of food aid.

Africa is a hungry continent. In this country for instance farmers, producers of food, can hardly afford two nutritious meals a day. Children who are born in rural farm households are often hungry, malnourished, and stunted.  It is estimated that 40 per cent of all children in sub-Saharan Africa are stunted from malnutrition, which hampers physical and cognitive development and deepens inter-generational poverty.

Low farm productivity and the hunger associated with it have catastrophic economic and social consequences. For example, it is estimated that under-nutrition causes 45% of all child deaths in sub-Saharan Africa – 3.1 million deaths annually. Moreover, a study by United Nations Economic Commission and World Food Program estimates that Uganda loses about 5.6 percent of its GDP because of malnutrition.

The story of Africa’s chronic hunger and under-performing agricultural sector has existed side by side with the Africa Rising narrative over the past two decades. It is a tale of two continents; bustling cities with a surging middle class side by side with indelible hunger and debilitating malnutrition. Who really cares?

There is no shortage of honest, genuine do-gooders on the continent. Out of pity and the kindness of their hearts they have grappled with Africa’s hunger crises for nearly a century. They come with the best ideas, solutions that have worked in their countries and other continents. Six decades after the Green Revolution transformed the Asian continent African farmers are still cannot produce enough to food to feed their families.

Interventions by motley crowd of experts and development agencies have left mountains of failure but we have failed to curve out even a grain of wisdom. In many cases we have repeated the same old failed, idiotic interventions expecting different results.

Honestly, I am baffled that in the 21st century, with everything we know about biodiversity, environmental services and climate change, we still have this crazy illusion that somehow a green revolution is a plausible formula for agricultural transformation in Africa.

To be fair some things have worked and there are some bright spots. For example, what is Kenya Tea Development Authority so successful when the coffee and pyrethrum sector collapsed? Why is small dairy in per-urban Nairobi so successful? Why are the small farms in the curvaceous slopes of Kisii more productive than the sprawling vast plains of Homa Bay?

Africa’s agriculture and food opportunity is truly exceptional. Can we learn from the failures of the past six decades?

Wednesday, September 7, 2016

Africa must take charge of its development agenda

In 1993 when Japan organized the first Tokyo International Conference on African Development (TICAD) only five African leaders attended. But 23 years later nearly 40 African heads of state and government participated at the sixth TICAD conference held in Nairobi last week. 

What began as a foreign policy strategy with the sole purpose of enabling Japan to acquire the status of great power in a post-cold war world is now a global convening of significant repute. Moreover, the sixth TICAD could not have been timelier. The year 2016 is considered the first year of implementation of the SDGs and Africa’s Agenda 2063. 

Agenda 2063 is commitment to action by African leaders to join hands and build a prosperous and united Africa over the next 50 years. A 50-year development-planning horizon is odd and inspires little confidence about the sense of urgency or seriousness among African leaders. 

Virtually every major global power has hosted or hosts a regular forum to gather Africans to talk about their interests and how they plan to enable Africa’s development and prosperity. In 2014, the US convened the first US-Africa Leaders Summit. China, India and Europe have regular conferences. 

Obviously, your guess is as good as mine.  The purpose of such meetings is to discuss how to deepen trade and economic ties with the African continent. Such meetings are often used by the conveners to reassure Africa of their friendship as well as make all kinds of promises including pushing for reforms with the United Nations to create a permanent seat for Africa in the UN Security Council. 

Africa is considered as the “final frontier” of the world economy. All consequential global players, including Israel, want a piece of the action. So any interest in Africa’s development or prosperity is rolled neatly into deep and undisguised in economic and foreign policy interests. What baffles me is why African countries as a collective, are not clear-eyed and more discerning of the intentions of the so-called development partnerships. 

Honestly, I think that TICAD from the first conference in 1993 up to the sixth one held in Nairobi in August 2016 has been a sorry comedy of empty promises and grand posturing. Pledges about Japan’s commitment to ensuring every African child attends and completes school are unmet. Now there is a fresh pledge to support investments in the power sector, agriculture and health.   

China recently pledged $60 billion in aid. At TICAD, Japan promised $30 billion in development aid. This is petty change. In my view this is such little money, given that Africa’s combined GDP is about $2.4 trillion.
Mobilizing external resources and building economic and trade ties is great for Africa. However, it is time for Africans to take charge of their own development. Africa must mobilize taxes and domestic savings more aggressively so we can prioritize and finance Africa’s progress.

Africans must take themselves seriously. And these perfunctory development conferences must end. We are not poor and we must not be treated as needing charity.


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