The Divergence & Sustainability Doubts of Africa’s Economic Growth

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The October issue of the Africa Pulse report, a publication of the World Bank that highlights the state of economic growth in Sub-Saharan Africa (SSA), reveals that the region’s rate of economic growth for 2016 will be 1.6%. This is the lowest rate of economic growth that SSA would have registered for the last two decades and it is in fact lower than the previously forecasted 3% expansion of the real Gross Domestic Product (GDP) for 2016.

In addition, the 1.6% rate of economic growth is lower than that of the Emerging Markets & Developing Economies (EMDEs) which is projected to be 3.5% and the global growth rate of 2.3%. It marginally surpasses that of the advanced economies by a mere +0.1. However, it is expected that SSA’s economic growth rate will pick up in 2017 heading into the medium term. The World Bank analysts forecast that SSA will register an economic growth rate of 2.9% in 2017 and 3.6% in 2018.

Several factors have been identified as the causes of the slump in the economic growth for SSA in 2016. They include the incidence of low commodity prices in the global market, tight financial conditions in USA and the Euro Area that have occasioned a reduction of capital flows into the region, policy uncertainty in the domestic economies, droughts, political and security threats and the slowing down of the growth of China’s economy.

One startling fact documented in the report is the nature of economic growth exhibited by the respective economies of the states that make up SSA; some of the economies are registering relatively high rates of economic growth, a few are growing a bit slowly and others are experiencing a continuous contraction of their GDP.

The economies of Ethiopia, Rwanda, Tanzania, Cote d’Ivoire and Senegal are projected to register economic growth rates of above 6%. The performance of these economies has been attributed to several factors key among them; good monetary and fiscal policies, better business regulating environments, the diverse structure of the commodities exported and more effective public institutions.

On a general scale, this has an implication that the other countries’ economies that are playing catch-up with the aforementioned ones, and those whose economic performance is dwindling are operating in the middle or at the extreme end of the continuum that is an aggregation of the stated metrics. This is in fact where the divergence stems from and paints a picture of a continent fantasizing with the aspect of Africa Rising.

Primary Causes of the Economic Slump

Considering the general economic performance of SSA, there are more doubts than hopes in light of the envisaged economic resurgence of the region in the second decade of the 21^st century. Externally, the continued internationalization of capital and the global integration of different regional economies cannot be disregarded or disputed for that matter. The global financial crisis of 2008 and the Eurozone Crisis thereafter are deeply interlinked to the decline in the economic growth rate of SSA. As a direct result of this, the financial resources funneled to the SSA region have significantly decreased and this is especially with regards to the flow of capital to the region. The aftermath of the crises has resulted in the crafting and drafting of stricter monetary and fiscal policies in the USA and in Europe. The USA and the Euro Area are still gravitating towards the equilibrium hence the effects of the adjustments.

One of the primary causes of this decline in the economic growth of SSA has been the decreasing commodity prices in the global market. This has greatly affected the commodities from SSA that are exported to Europe, the Americas and Asia.  The commodities that have largely been affected are oil and the minerals. The increase in the supply of oil has resulted in low prices of the product and this has seriously dented the African economies that are dependent on it. The economies dependent on the minerals have also experienced the economic misfortunes in the world market.

To a larger extent, Nigeria and South Africa which make up 50% of the GDP of SSA, experienced near-recession situations in their respective second quarters. Nigeria chiefly depends on oil while South Africa’s economy is largely fueled by the revenues realized from the minerals. Other countries such as Botswana, Angola, Chad, and the Democratic Republic of Congo among others have suffered from this.

Sustainability of the Growth Momentum

Before the economic slump that began in 2015, SSA had registered an average economic growth rate of approximately 5% per year for over ten years. The paradox from the sustained economic growth rate was the failure to cut on the levels of poverty and unemployment in the region. This is perhaps a pointer that the growth was not anchored on feasible policy frameworks.

The sustainability of the economic growth of SSA is a mirage basing on the prevailing form and nature of the economic model of the region. An interesting fact is the growth and expansion of the service sector compared to the manufacturing sector whose growth is relatively slower. The other regions of the world, in the course of their economic growth and subsequent structural transformation, the manufacturing sectors were developed into the largest contributors of their GDPs. This should trigger economic curiosity in light of the different nature of SSA’s growth trajectory.

Logically, a thriving manufacturing sector creates the economic momentum through the backward and forward linkages with the other sectors within the economy. The failure to heavily invest in the manufacturing sector has led to the failure to diversify the exported commodities.

The doubts in the sustainability of the growth momentum of SSA can be traced to the peripheral role played by the agricultural sector. The sector contributes 30% of the region’s GDP and 2/3 (67%) of the region’s labour force but its total factor productivity is very low compared to the other regions of the world. To effectively reduce the poverty and unemployment levels in SSA, special attention must be paid to the agricultural sector. Its development through the establishment of agro-based industries will further create other external industrial linkages which will set up a stronger foundation for the manufacturing sector and a vibrant service sector.

Back On Track: Fundamental Policy Prescriptions

The future of SSA is bright but the formulated policies need to reflect the current situation and address the reality on the ground. The economies of SSA have to diversify the commodities that they export. This entails value addition of the products and even diversification of the markets in which the commodities are exported to. This will reduce the uncertainties associated with the fluctuations of the commodity prices.

The development of the agricultural sector should be prioritized given its contribution to the region’s GDP and the labour force in the sector. The policies formulated ought to focus on the sector’s commercialization, leveraging on technology and special programmes tailor-made to harness the productivity of the smallholder farmers.

More investments should be made in the manufacturing sector. The investments in this sector should mirror the on-going investments in infrastructure.

Above all, the SSA countries must create friendly business environments that encourage, promote and attract investors both domestically and externally. Intertwined to this is the need to ensure that there is a lot of efficiency in the public sector such as a reduction in the red tapes and the levels of corruption.

Addressing uniformly the challenge of economic growth divergence is a challenge in itself as different SSA states have a lot of dynamism as far as economic management is concerned. But the divergence is a cause to worry about as it may lead to cases of immigration which often precipitate the xenophobic effects. This is why the growth trajectory of SSA ought to be consistent and in due course sustainable.

After the Grand Merger; What Are the Stakes & Possibilities?

The dissolution of the affiliate parties that made up the Jubilee coalition to form a single entity in the name of Jubilee Party of Kenya is undoubtedly a critical juncture in the country’s political history. What remains to be seen largely is if and how the newly formed party will be able to survive and thrive in the long-term. The survival of the new kid on the block is pegged on a number of factors and of course its formation might also politically emasculate the other parties which have positioned themselves as outright competitors for political power.

One of the pitfalls that the Jubilee Party needs to strategically circumvent is the sharing of the party positions. The sharing of the party positions on interim basis, as initially perceived, would be done in such a manner so as to accommodate at least all the parties that were dissolved en route to the grand merger. But word has it that the then officials of the now defunct Jubilee Alliance Party (JAP) are touted to take over the administration of the party secretariat on an interim basis. The probability that the Jubilee Party will conduct party elections before the forthcoming general election is very minimal and may not even happen because of the likelihood of the emergence of political faults and rifts within the party.

This implies that a well crafted road map is needed so as to accommodate the possible dissenting voices. But a point to ponder is if the former members of the smaller parties should be able to get an almost equal share of the party positions with the likes of the defunct United Republican Party (URP) and The National Alliance (TNA). This certainly cannot happen. So what is the probable leverage to counter this? My hunch is that the former members of the dissolved smaller parties will be promised lucrative positions in government in the event that President Kenyatta is re-elected. Therefore, as at now, the issue of sharing the party positions isn’t a Herculean task as such.

Another hurdle that lays ahead of Jubilee Party’s path to seamless political operations is the aspect of party primaries. Nominations have always been a thorn in the flesh of political parties in Kenya and how the President’s new party will deal with this particular challenge will largely determine its existence in the medium-term to the long-term. The foremost strategy that has been hatched to ward off this challenge is the intention of having the Independent Electoral and Boundaries Commission (IEBC) conduct the party nominations.

The perception that is shared among the party’s stalwarts and political faithful is that the conduction of the party’s primaries by the state’s electoral body guarantees transparency in the nomination process. But will this move be able to counter the machine politics within the party? Seeking for political favors from the party’s honchos will aggressively take place considering the fact that the nomination process is expected to be a battle of its own kind. The reality that certain candidates might be favored by the party’s ‘who and who’ cannot be dispensed whatsoever and hence how this weighty political matter will be handled is an absolute fundamental question.

The level of aggressiveness in terms of the machine politics will determine the rate of the pre-nominations turnover. In this case, the stakes are generally high for the party’s primaries and those who might not be in good terms with the high and mighty risk a bleak political future because this is a black and white matter that even the IEBC by overseeing the party’s nominations cannot control.

So, what is the possibility in view of this scenario? Defections might take place long before the end of the window stipulated by the respective piece of legislation. This may be a tricky affair for the Jubilee Party especially if the defectors appear to be very popular on the ground. In the event that such defectors win political seats, it would as well have worked against the party’s wish to have an unmatched majority in Parliament.

Heading towards the 2017 general election, the strategists of the Jubilee Party cannot ignore the fact that the presence of the Chama Cha Mashinani (CCM) and the Kenya African National Union (KANU) especially in the Rift Valley region portend a treacherous political path for the party. The possibility that KANU will collaborate with Isaac Ruto’s CCM is relatively high as the two seek to position themselves strategically as alternative political havens for the Rift Valley residents bearing in mind that URP has been dissolved. That whether KANU and CCM will give the Jubilee Party a run for its money or if the latter will totally enfeeble the two remains to be witnessed but from my perspective, it is still early to make definite conclusions on this issue.

What makes the political drift in the Rift region to be interesting is the Moi-Ruto (Deputy President) factor of just who owes who and what? On one hand DP Ruto claims that Gideon Moi should support him because he religiously supported Toroitich Moi. But a disclaimer on this political hot potato is the bitterness within the elderly Moi on how the Deputy President wrestled the kingpin status away from him as he had strategically groomed his son, Gideon Moi, to take over. Therefore, the Baringo Senator is charged with the mandate of re-claiming the status of the region’s kingpin from DP Ruto and this moment being the sunset years of the former second president, then the political battle might as well intensify.

The possibility that the Jubilee Party is on course to being Kenya’s largest political party is relatively high, basing though on the primary vagueness of the current state of affairs. However, to ensure that it delivers a political sucker punch to its competitors, the Jubilee Party has created a window for forming pre-election and post-election pacts and coalitions with other willing political parties. This really maximizes its chances of securing a majority in both Houses.

Ultimately, the vibrancy of the Jubilee Party is furtherly pegged on the organization of the political parties on the other side of the political divide. The organization of the opposition political parties will irrefutably determine and affect the modus operandi of the Jubilee party; a disjointed opposition will guarantee a not-so-difficult sail through for the Jubilee party whereas a properly oiled opposition will certainly create a vicious electoral battle.

Presciently, the Jubilee strategists are well prepared to counter Raila Odinga and largely CORD. Whether Odinga will vie for the presidency or not, his political moves cannot be ignored whatsoever.  So what if the much rumored ‘Super Alliance’ the possible coalition of the Orange party, Wiper, Ford Kenya, Amani National Congress and KANU takes shape? This would highly counter Jubilee’s moves especially when a partnership involving Gideon Moi plus either Kalonzo or Mudavadi is fronted for the presidency. However, at the moment, this is largely an expected scenario and perhaps a political illusion.

At the end of it all, the bottom line is whether the Jubilee Party will stand against the test of time and usher in a new political era as it has been envisaged, different from the other past junctures. Only time will tell.

Of the Current Scramble for Africa: Is the Continent’s Future Mortgaged?

What were the imaginations and visions of the African leaders about the continent’s outlook and progress during the dawn of independence? Of course they envisaged a continent that is highly prosperous and absolutely independent from the neo-colonial tendencies of their former colonial masters and free from the hegemonic socio-economic and political practices of the foreign states.

It is unfortunate and disappointing at the same time that such aspirations of a truly independent Africa have been dealt a huge blow forthrightly by a cocktail of factors; both internal and external factors. Internally, it is well known that majority of the African leaders are the real enemies of the continent’s progress as they have perfected and sharpened the act and art of siphoning the resources that are meant to be tapped for the benefit of the African citizens. Externally, the imperialistic tendencies of some of the well-known Western states, the advances by some of the Asian economies and other emerging economies of the world continue to hinder the progress of Africa.

Unlike the first scramble for Africa which largely involved coercion, the current scramble for the continent entails the application of non-coercive practices. The first scramble for Africa involved the signing of treaties and agreements which is still the case with the current scramble. Some of these treaties are in good faith and for the common good but systemically, they are somewhat skewed in favour of the foreign nations so that at the end of the day Africa suffers from the haemorrhage of her economic resources and this isn’t different from the treaties signed in the pre-colonial and colonial period.

Most critically, the first scramble for the continent was informed by the need to fuel the economic well-being of the imperialist states of the time and hence, the desire to cheaply obtain economic resources from Africa. Similarly, the on-going scramble for Africa is anchored on the aspirations of the advanced and advancing economies to position themselves strategically in the world’s geo-political flux of gaining the status of a superpower state. And so this necessitates the sapping of economic resources from Africa.

One fundamental question that Africans need to keep asking is why the world’s leading economies are running to Africa to sign the so called “development partnerships” and “development agreements”. I presume that forward-thinking and patriotic Africans are constantly asking this pertinent question.

A few days ago, the sixth Tokyo International Conference of Africa’s Development (TICAD) took place in Kenya’s capital, Nairobi. A number of deals concerning and related to development were signed by the African heads of states as well as the heads of governments and the Japanese government. This is just one of the many events that are used by the leading economies to lure the African leadership into signing agreements that are largely in favour of the former.

Objectively, some of the agreements as noted before, play a big role in propelling the continent’s economic engine and it is a fact that cannot be disputed. But it is high time that Africa’s leadership carries out an evaluation of these agreements from those ones signed or entered to from the 1960s up to now to clearly establish their costs and the benefits. This is a basic exercise that the African Union (AU) needs to be regularly doing. We ought to know by way of comparison, qualitatively and quantitatively, the ultimate benefits realized by the African countries against those ones by the foreign states.

TICAD is similar to other existing development initiatives by the world’s leading economies to shop for economic resources in Africa. Other development initiatives include: the Forum on China-Africa Cooperation (FOCAC), the USA-Africa Partnership, the Africa-European Union Partnership, the Africa-India Cooperation Agreement, the Korea-Africa Forum, and the Africa-Turkey Partnership among others.

In taking stock of these agreements and partnerships which in general are supposed to enhance the economic well-being of the concerned parties and entities, focus should be directed towards the ratio, rate and level of the exports and imports to and from the foreign states. It is common knowledge that the amount of Africa’s exports to other continents and countries of the world is seriously dwarfed by the level of imports from these units to Africa.

One may argue that the exports from Africa are largely primary products that are highly deficient of value addition which is an undisputable fact. But is it not economically freakish that a significant proportion of Africa’s imports leave the continent as exports in their primary form?

As much as we appreciate the efforts by the foreign nations through their multi-national corporations to promote value addition, a lot still needs to be done. This includes the following: Firstly, there is urgent need to assess the operations of the multi-national corporations especially on matters relating to capital flight from the continent through sinister and covetous economic activities such as tax evasion. Secondly, the so-called trading partners and the multi-lateral institutions should show strong commitment to curb the drain of economic resources from Africa.

In dissecting the current scramble for Africa, it is vitally important that we gain a thorough and clear understanding of the strands of dynamism that underpin this matter of continental and international interest and concern as well. After the dawn of independence, the Bretton Woods institutions saw it ideologically fit to build and develop the economic capacity of African countries by funneling financial resources in form of financial aid to them. Practically and realistically, foreign aid has remarkably failed to catapult the continent’s economic potential contrary to the initial expectations.

A closer look at the decision by these institutions to advance financial assistance to Africa needs to be made. The Bretton Woods institutions are controlled by the Western nations and so by them giving the financial assistance to Africa implies that they must get something in return. In short, they operate on a quid pro quo basis… there are no free things in this world that is highly enmeshed in capitalism. To an extent, the Bretton Woods institution could have been providing financial assistance to Africa with hidden intentions; to find a way to exploit the continent’s economic resources.

The emergence of China and other economies has necessitated a paradigm shift in terms of financial assistance and foreign aid to the African countries. The current foreign aid dispensation especially from the East doesn’t front for conditionalities, which is diametric from the old order championed by the Western nations. As a matter of fact, this policy of non-interference has also been fantastically dangerous for Africa as it has promoted the siphoning of economic resources from the continent.

The change in dynamics with respect to financial assistance in terms of embracing the mantra of Foreign Direct Investment (FDI) is fundamental for the economic growth and development of Africa. But unless there is a degree of near-proportionality and equality in the trade partnerships then our resources will be forever subjected to the predatory nature of the leading economies of the world. It is thus a great responsibility of Africa’s leadership to seize the moment and exercise bold leadership other than mortgaging the future of the world’s resource-rich continent through the talk shops.

Capping of Interest Rates Is a Parlous Policy

After going through all the legislative stages, the Banking Amendment Bill 2015 now awaits President Kenyatta’s assent or dissent. Many economists, policy analysts and concerned citizens have expressed their varying opinions on this serious policy matter, either in the affirmative or negative.

There is no doubt that the institutionalization of the usury laws or simply the capping/controlling of interest rates within the economy elicits emotions and passions. The subjection of interest rates to legal control(s) is a controversial issue, always debated either with doses of naïveté or with the showmanship of great scholarly discourse on the other side of the continuum.

Two schools of thought are prevalent in this particular economic disquisition. The first school of thought advocates for the capping of the interest rates in order to enable the borrowers to access credit/loans at affordable and reasonable interest rates. The second school of thought is largely diametric to the first one and it argues that controlling interest rates significantly reduces the availability of credit in the market.

For proper understanding, it is vitally important that one is aware of the different interest rate capping regimes. The first regime is known as the interest rate controls where the central bank is tasked with the mandate of instituting a ceiling of the interest rates in the economy. The second regime is known as the usury laws whereby a specific organ of the government is supposed to control the interest rates. In most cases, the organ that normally plays this role is Parliament through the formulation of the respective pieces of legislation. The third regime is known as the de facto ceiling in which the controls are put in place by way of agreement, that is, without formal legislation. This regime is usually as a result of pressure from the civil society or through political pressure.

Kenya’s case, therefore, can be classified as falling under the usury laws regime. Fast forward, the rationale for capping of the interest rates ought to be examined. The rationale, however, is kindred to the two schools of thought. The general agreement is that the interest rate controls are necessary for the following main reasons: protect consumers from excessive interest rates, increase access to finance, make loans to be more affordable.

The key precept underlying the enactment of this policy is to keep in check the financial institutions that charge very high interest rates to the borrowers. In due course, there is a general consensus that capping of interest rates should be based on the advent and prevalence of market failure in the whole economy or within certain sectors of the economy.

The credit market just like any other market (commodity market) can experience market failure. Market failure, in simple terms, is an economic state in which the forces of demand and supply are skewed; in other words, the forces are distorted. Market failure in the credit market implies that the market is unable to “freely” lower the level of the interest rates. The Kenyan credit market has been unable to effectively bring down the interest rates and to an extent, this can be deemed as a form of market failure.

But does the Banking Amendment Bill 2015 take into consideration the fundamentals that have contributed to the relatively higher interest rates in the state? In my opinion it doesn’t because it overrides the two main objectives of controlling interest rates at least according to the global best practice; targeting a definite sector or industry of the economy and being a short-term policy intervention.

This legislation seeking to curb the interest rates is amorphous because it doesn’t target a specific sector/industry of the economy and furthermore it is vague in terms of the time span in which the capping will be effected. It would have been economically sound if the capping of the interest rates would have targeted, for instance, to improve the accessibility of loans for people involved in agricultural activities or even the jua kali sector because they are the largest contributors of employment in the economy.

The problem with majority of the Members of Parliament is that they don’t subject most of the legislative discussions and legislations to logic and rationality. This leads to the passage of populist legislations in the name of protecting the citizens.

Primary Causes of High Interest Rates in Kenya

There are two main causes of the high interest rates in the state; the first one is the oligopolistic nature of the credit market and the second reason is the voracious appetite for borrowing fashioned by the current administration. Kenya’s credit market is perceived as competitive, but just how competitive is it? Out of the forty two commercial banks in the economy, six of them (deemed to be the largest) control 52.4% of the credit market. This implies that the remaining thirty six banks control the remaining 47.6%, with an average share of 1.32% per bank. This is utterly ridiculous. The situation is not rosy for the microfinance institutions. According to statistics by the Central Bank of Kenya, three microfinance institutions control about 93% of the respective market share.

The determination of the interest rates in the market, in view of the above cases, will be subject to the behavior of the dominant financial institutions. The habit of the ruling administration to engage in wanton borrowing is also a significant cause because the government can borrow at any level of interest rate.

Effects of Interest Rate Controls

If the Banking Amendment Bill 2015 will be assented by the president, then the following effects are likely to be witnessed, or otherwise experienced in the economy. First, the access to financial resources by a certain segment of borrowers will be limited as the financial institutions may: establish rigid credit terms, raise the minimum size of the loans, increase and even add other non-interest fees and charges. The borrowers who will be highly affected include the first time borrowers and low-income borrowers. All these measures will be put in place by the financial institutions because of the need to maintain similar profit margins.

Secondly, the overall cost of credit (loans) for all the potential borrowers will go up owing to the expected terms to be instituted by the financial institutions. Thirdly, capping of the interest rates may occasion some of the financial institutions to withdraw from advancing credit to certain areas or sectors due to the imminent high operation costs. Another effect will be reduced investments in new markets by these entities. The other consequence will be the rise of more informal lenders (Shylocks) with the intention of filling the financial vacuum created.

The bottom line, irrespective of the individual effects, will slacken the pace and rate of financial inclusion in Kenya’s economy.

Policy Prescriptions

To address the matter of effectively lowering the interest rates, other policies other than capping of interest rates should be formulated and implemented. The first policy must obviously address the issue of competition. Kenya’s credit market needs healthy competition and this can be made possible through the amalgamation and consolidation of the small banks and the other financial institutions. We can have very few but very competitive financial institutions. The Central Bank of Kenya under the stewardship of Dr. Patrick Njoroge is putting in place measures to facilitate healthy competition and it may take a number of years.

The government should also significantly reduce on the rate at which it has been borrowing from the domestic market. There is need therefore for the Treasury chiefs to effect fiscal policies anchored on absolute austerity so as to create a conducive economic environment with regards to the level of interest rates.

Formulation of laws to control interest rates in the whole economy is illogical because such capping is supposed to spur growth and development in a certain sector/industry. In Kenya’s case, the Banking Amendment Bill 2015 doesn’t address any specific sector and President Kenyatta needs to dissent it. I believe that if Kenya’s credit market will be very competitive and free from control by a few large banks then relatively low interest rates will definitely be a reality in addition to the implementation fiscal measures that promote low levels of government borrowing.

South Sudan’s Civil Strife in Perspective

Paul Collier, a professor of economics and public policy in the Blavatnik School of Government at the University of Oxford, documents in his book known as The Bottom Billion that civil war is likely to occur in a country that experiences the following conditions: low income among the citizens, slow economic growth or stagnation or a decline in economic growth and of course outright dependence on primary commodities.

South Sudan has the third largest oil reserves in Sub Saharan Africa. In South Sudan, oil is the largest primary commodity and as a matter of fact, 98% of the country’s revenue stream comes from the oil proceeds. This largely implies that South Sudan’s economy is primarily dependent on oil.

The occasional relapses of South Sudan into civil war, which is now turning out to be a permanent feature of the state, is a function of a series of factors which are endogenous. These factors, however, can be summed up into one; weak institutions. More specifically, such factors include elitism, corruption, unresolved questions about the natural resources (read oil), and negative ethnicity.

Juba began on a wrong footing after its separation from Khartoum following the successful conduction of a plebiscite. South Sudan had not incorporated a strong institutional framework in its system of governance especially in terms of transparency and accountability. Oil was already there even before the creation and formation of the South Sudanese state. Therefore, before its separation from the north, the elites including other power brokers had already begun positioning themselves to illicitly benefit from the oil revenue. The institutional framework of governance that was established after her independence thus seemed to favour the elites; the barons of graft and the barons of ethnicity.

The several factions and rebel groups in South Sudan are motivated by the fact that once you have power, acquisition of wealth through corruption and other voracious means is assured. The fight for the control of the economic resources is the epicenter of the civil strife. In this case, for South Sudan, the main channels for the economic resources is first through the oil revenues and secondly through the foreign aid by donors, the multi-lateral institutions and other governments.

If 98% of the total revenue stream into the country is through the proceeds from oil, then it implies that the remaining 2% is through the financial aid from the mentioned entities. On average, as per the 2015 statistical figures, South Sudan’s net oil income is approximately $1.715 billion. If this represents the 98% then the remaining 2%, which translates to $35 million, comes from other sources. However, these figures only represent the revenue and are exclusive of the Foreign Direct Investment (FDI) by various units like the European Union, the USA, and China among others.

The bottom line as to why Salva Kiir, Riek Machar and other rebel leaders subject the citizens of South Sudan to unending misery and suffering is the perception that the former leads a corrupt administration and that his cronies are responsible for siphoning the resources of the state. This has of course placed the Kiir-led administration on a defensive mode prompting the government to make huge allocations of the national budget towards military spending.

According to a report by the Stockholm International Peace Research Institute released in April 2015, South Sudan spent $1.08 billion on the military. Compare this against the total revenue of the country at that time at approximately $1.75 billion. This translates to 62% of the total revenue. According to the national budget of the Government of South Sudan, 40% of the expenditure caters for the operations and activities of the military. If in 2014 the military spending was $1.08 billion (40% of national budget) it implies that the total budget was $2.7 billion. This makes South Sudan the state with the highest proportion of its revenue directed towards military spending in the world.

If 40% of the budget and more than 60% of the revenue caters for the military expenditure it means that the capitation for development, specifically infrastructural development, is constricted. For instance, a study carried out by Oxfam International revealed that only 5% of the 2013/14 budget was used on healthcare, education and infrastructure combined. This is a hint that a larger proportion of the budget is skewed in favour of the recurrent expenditure; a huge chunk is devoted towards the payment of salaries and wages.

Again, factor in corruption and you’ll realize that the South Sudanese citizens hardly benefit from the government. And of course going by the Corruption Perception Index prepared and released by Transparency International in December 2014, South Sudan ranks at position 171 out of 175 countries. The survival of the rebels in this state is majorly through two ways: one is through proceeds from a black market in the regions which they control and two, through funding from the communities in the diaspora.

Going Forward

To ensure that South Sudan doesn’t fall into the abyss that encumbered Somalia, certain measures need to be taken. Firstly, the demilitarization of Juba has to be given the first priority. The high number of rifles and other war equipments/machineries has to be effectively reduced because going by the recent happenings assassination of the key leaders is imminent.

Concomitant to the above, the African Union and the United Nation’s Organization need to strongly advocate for the prosecution of Salva Kiir, Riek Machar and any other leader found to have committed crimes against humanity. The International Criminal Court should commence its investigations into the atrocities in South Sudan. This is certainly where I find most of the African leaders very dishonest in opposing the ICC. The South Sudanese nationals are suffering and urgent action needs to be taken by prosecuting these despots who have shown no goodwill in actualizing the vision and aspirations of the South Sudanese people.

Thirdly, a three-pronged economic policy approach ought to be implemented. One of the facets of this policy has to focus on addressing the macroeconomic issues including the budgetary structure, the fiscal deficits, inflation, corruption and others. The 2016/17 budget has a deficit of $1.1 billion (25 % of the GDP) which the International Monetary Fund notes that it has to be cut to around $300 million for fiscal sustainability. Another key macroeconomic issue that has to be largely looked at and viable solutions arrived at pertains the distribution of wealth. Institutions and systems have to be established that track the goods and services provided to the public from the resource wealth.

Most importantly, another aspect of the economic policy would be for China to call for better governance in the country by virtue of being the biggest shareholder in the oil industry with 120 oil enterprises. This is the problem with the Chinese developmental policy in Africa; exploration of natural resources without advocating for establishment of efficient governance systems.

The third tenet of the economic policy relates to the admission of expatriates to offer technical services. With a literacy rate of 27% for individuals aged above 15 years, it means that the economy of South Sudan needs a relatively large pool of expatriates. This, however, is a function of the realization of political stability in the state.

South Sudan’s development in reverse can be permanently solved by first addressing the fundamentals; the institutions of governance and consequently issues about resource as well as wealth distribution.

Africa’s Progress Dependent on Strong Intra-African Trade & Efficient Governance

This month, two major conferences took place; the 27^th African Union Summit in Kigali and the 14^th conference of the United Nations’ Conference on Trade and Development (UNCTAD) in Nairobi. The discussions at these events will undoubtedly shape the development trajectory of Africa. I will not explicitly delve into the specific outcomes of the conferences but outline the fundamentals that need to be wholesomely addressed for Africa to experience significant socio-economic growth and development.

As I have documented before, the progress of Africa largely depends on the willpower and effort of the Africans. However, the input of the developed economies and the emerging economies cannot be ignored. Fast forward, at the 14^th edition of the UNCTAD, the developed economies resisted the efforts of the developing countries to strengthen UNCTAD and make it the main international body with the mandate of addressing trade inequalities and other pertinent issues that revolve around international trade. The developed countries cited that already the World Trade Organization has been tasked with that mandate.

The move by the developed economies to block such an initiative is a hegemonic disposition. To set the record straight, the WTO is an amorphous institution and not as solid and definite as other multilateral institutions in terms of their scope of work and operations. The WTO only serves as a platform for trade negotiations for the member states. This is certainly an impediment fronted by the developed nations of the world.

The progress of Africa should not be tied down by the red tapes created by the developed nations in the disguise of promoting trade discussions through the WTO or the UNCTAD. This leads to some of the fundamental issues that are to be tackled efficiently and effectively by the African countries and the respective trading partners.

The level of intra-African trade which currently accounts for 11.3% of the total trade activities of the continent needs to increase. This implies that 88.7% of Africa’s trading activities are with the other regions of the world. One key step in enhancing intra-African trade is to do away with the extant regional blocs. Africa has 8 regional economic blocs with each having its own trade concessions and agreements. According to a policy paper known as “Regional Integration: Uniting to Compete” by the Mo Ibrahim Foundation published in 2014, at least 28 African countries belong to 3 or more regional communities/groupings and 39 countries are members of more than one regional economic community.

The 8 regional blocs were the fruits of the 1991 Abuja Treaty under the auspices of the defunct Organization of African Unity (OAU) that were considered as the foundation for the African Economic Community envisaged to be established by 2028. This African Economic Community will operate on the basis of a customs and monetary union. The realization of the economic integration of the African states is a function of the free border movement across the African countries. A positive development is that during the 27^th AU Summit, the visa-free access services were launched though on a piloting phase.

But caution must be taken in relation to the opening up of the borders and the imminent economic integration of the African states. An expected challenge as a result of the economic integration of African economies will centre either on the advent of convergence or the furtherance of divergence; that is, will the integration promote collective development or it will lead to a wider gap between the slightly well-off African countries and those that are less developed? Research shows that the economic integration of economies that are at nearly the same level especially the developing economies leads to more divergence than convergence; stronger economies and weaker economies producing similar commodities within the same region implies that the former has an edge over the latter (competitive advantage).

The enactment of the free border movement will obviously lead to immigration whose consequences are likely to be: brain drain from the failed states such as Somalia and South Sudan, xenophobic attacks, populist and neo-fascist politics in countries with a relatively larger proportion of immigrants, terrorism, drug trafficking among others. The realization of the intra-African trade is however dependent on the degree of spatial inclusion; infrastructural development.

The question of illicit financial flows from Africa needs a viable and almost permanent solution. The 14^th edition of the UNCTAD witnessed a number of advocacy groups calling for the multilateral institutions and the developed nations to pay attention to this issue. There have been a number of initiatives and conventions to tackle the stated matter. But conventions entail mere talk and less action. It has been established that Africa loses about $50 billion annually through illicit financial flows. This translates to about 2% of the continent’s Gross Domestic Product (GDP). 

More startling, however, were the revelations by Curtis Research documented in a research paper entitled “Honest Accounts? The True Story of Africa’s Billion Dollar Losses,” published in July 2014. The report reveals that the total financial inflows (aid, foreign direct investments, loans) to Africa amount to an average of $134 billion annually compared to an outflow of $192 billion thus a deficit of $58 billion. This translates to 5.8% of the GDP for the inflows and 8% of the GDP for the outflows. 

This is a bit skewed because Africa seems to lose more than what it gains from the various trade concessions and negotiated pacts with the other regions of the world. There is need, therefore, for the formulation of international treaties, laws and framework that should guide the economic activities between Africa and the other developed economies and emerging markets to significantly cut on this financial haemorrhage. 

But also the respective African governments have a primary role to play in institutionalizing efficient governance systems and structures. One is to weed out corruption especially in the procurement processes because some of the multi-national corporations (MNCs) seem to be bribing the government officials. The cost of corruption definitely increases the operations cost of these MNCs implying that the more flawed the system of governance the higher the amount of the repatriated profits from the continent. Poor governance creates a fertile ground for tax evasion and the prevalence of the black market.

Therefore, in seeking to address the developmental challenges affecting Africa, priority has to be accorded to the facilitation of intra-African trade and the enabling factors such as infrastructure and governance issues in terms of the illicit financial flows from the continent and generally the financial outflows from the continent.