Category Archives: Africa

The Real Problem for Intra-African Trade

Photo: BBC / AFP

Photo: BBC / AFP

This post is continuation of a previous article on regional integration in Africa.

Reducing tariffs is a great start for increasing trade within Africa, but important non-tariff barriers (NTBs) must also be reduced in order to boost trade both within and outside of the continent. In fact, the United Nations Economic Commission for Africa found the costs of NTBs in 2010 were higher than the costs of tariffs. The African Development Bank notes that, “while tariffs have progressively fallen, the key challenge to intra-African trade is non-tariff barriers that stifle the movement of goods, services and people across borders.”

What sort of non-tariff barriers exist in Africa? Infrastructure across the continent is poor, discouraging the movement of goods and people. Less than a quarter of roads are paved, and those are often filled with potholes. It’s not uncommon for airfare with a layover in Europe or Asia to be cheaper than direct intra-continental flights. Meanwhile, seaports are crumbling and rail connection is paltry.

“Thick borders” are also an issue, created by burdensome administrative procedures for clearing goods for import and export. Lines of trucks at the border lead to waits measured in days due to excessive bureaucratic red tape and burdensome administrative procedures. A report by Transparency International (TI) and TradeMark East Africa (TMEA) found that drivers at Rwanda-Tanzania customs stations spent an average of 72 hours obtaining customs clearance. World Bank economist Paul Brenton found that a truck serving supermarkets across a Southern Africa border may need to carry up to 1600 documents to comply with different countries’ requirements for permits, licenses, and other required paperwork.

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Can Regional Integration Help Africa Reach Its Economic Potential?

Headquarters of the South African Development Community in Gaborone, Botswana. (Photo: Wikimedia Commons)

Headquarters of the South African Development Community in Gaborone, Botswana. (Photo: Wikimedia Commons)

Much of the discussion at last year’s landmark U.S.-Africa Leaders Summit in Washington, DC, focused on transatlantic trade and investment between the U.S. and African countries – for example, the need to renew the African Growth and Opportunity Act, which aims to promote trade with the U.S. by removing tariffs on a number of African exports. Another theme that was prevalent throughout the summit, however, was the need to open up borders, reduce barriers, and increase trade between African nations.

It’s becoming quite common to talk about the rise of Africa and the potential return on investment in a continent often compared, demographically and economically, to countries like China and India. In fact, even developing sub-Saharan Africa is slightly richer than India on a per capita basis, and the continent as a whole has a larger GDP. The economic potential of Africa’s billion people, as both workers and consumers, is only beginning to be tapped.

These statistics are accurate and encouraging, but they can also be slightly misleading. Africa is not a single country, like China or India. It is 54 different countries with 54 different sets of borders and laws creating 54 fragmented, often tiny markets. Doing business in China or India means over a billion people as potential customers or employees. But there is no equivalent “African market.” Investing in Cameroon does not give you much access to Algeria or Zimbabwe, or any country in between. High tariffs, bureaucratic red tape at the borders, and poor infrastructure all make it hard for goods, capital, and workers to move freely through the continent.

Undeniable progress has been made in regards to tariffs, with the establishment of regional trade blocs such as the Southern African Development Community (SADC), Economic Community of West African States (ECOWAS), and the East African Community (EAC). Yet there is still much that needs to be done to unite the continent and also to integrate it with the rest of the world.

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Kenya’s Renewed Commitment to Fight Corruption Needs the Private Sector


This post originally appeared on the Corporate Compliance Trends blog.

When I visited Nairobi a few weeks ago, the signs of President Obama’s recent visit to attend the Global Entrepreneurship Summit were still clearly visible all around – from welcome posters to the spruced-up cityscape. I was in Kenya to work with CIPE’s partner organization, Kenya Association of Manufacturers (KAM), on a training-of-trainers workshop devoted to anti-corruption compliance and practical ways in which mid-sized companies in particular can implement robust compliance programs. The topic is quite timely.

Corruption remains a key problems in Kenya, affecting both the country’s democratic and economic development prospects. It was one of the leading issued discussed during President Obama’s visit, which resulted in an agreement signed between the Kenyan government and the U.S. to introduce new anti-graft measures. The 29-point deal stipulates, among other things, that Kenya will step up investigations into corruption cases, increased U.S. assistance and advice to Kenyan anti-corruption agencies and advice on relevant legislation, and international commitments by Kenya to join the Egmont Group of Financial Intelligence Units and the Extractive Industries Transparency Initiative (EITI).

At the same time, profound challenges persist. Within days of Obama’s visit, Kenya’s Office of the Auditor-General released a troubling report that brought to light some uncomfortable numbers. According to the report, only 26% of money spent and collected by the government has been fully approved in an audit for 2013-2014. The health department alone failed to account for 22 billion Kenyan shillings ($216 million) worth of spending. What is more, over 12,000 false names were discovered on the government payroll.

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How Average Citizens are Helping Set Budget Priorities in Kenya

“There is no development that can be done if it’s not budgeted for.” These are the words of Edwin Kiprono, the president of Kerio Community Trust Fund, explaining the importance of citizen’s alternative budgets in Kenya.

In 2010, Kenya adopted a new constitution, establishing a system of devolution in which more control and responsibility was shifted from the national government to newly-created county-level governments. These governments, which began operating in 2013, now oversee certain aspects of local health care, infrastructure, and education. For the first time, the counties are now expected to raise their own revenue through taxes and fees and establish their own budgets for spending that revenue.

Such a move provides great opportunity for local development to be taken into the hands of local citizens – but it also requires citizens to be engaged and provide input and feedback to their local governments.

Throughout Kenya, CIPE has been working with local partners to develop citizen’s alternative budgets – a system of participatory budgeting made possible through the devolved government system. One of the counties CIPE has been working in is Elgeyo Marakwet – a diverse county in which citizens have various and competing concerns and opinions on what the priorities of their county should be when developing a budget and spending its resources.

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How Bitcoin Could Cut the Cost of Remittances and Aid

Photo: Erich Hersman, Flickr

Photo: Eric Hersman, Flickr

By Mary Beliveau

Those wishing to send aid, remittances, and investment overseas face exchange rate manipulation and inflated fees when using traditional money transfer services. One emerging alternative to using these services is to transfer Bitcoin internationally. Bitcoin is alluring because financial institutions do not manage its online trade. The transfer of Bitcoin is therefore much less costly than transferring traditional currencies because it bypasses bank fees and regulation.

Several organizations are already beginning to trade and transfer Bitcoin across international borders, and profitable businesses have developed plans to facilitate these trades. Although hesitant investors remain wary of Bitcoin, optimists see the potential to make a big splash in the way $167 billion of foreign aid and $436 billion of global remittances are transferred to the developing world.

Bank-less money transfers are swiftly becoming the norm in the developing world, where less than fifty percent of adults own a bank account. Hassle-free mobile money services such as Kenya’s M-Pesa, Vodacom Tanzania and MTN Uganda are used in lieu of credit and debit cards in these areas. However, the benefits of convenience and low cost mobile transfers are largely limited to domestic transactions.

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Carrying Crude Oil to Newcastle: The Resource Curse Strikes Again in Nigeria

Source: Newswire NGR

Source: Newswire NGR

By Otito Greg-Obi

On May 20th, 2015 the lights went out in Nigeria, Africa’s biggest oil producer. Nigeria suffers from a phenomenon known as the curse of oil which is a subset of a larger issue known as the resource curse. The idea behind the curse of oil is that countries with large oil reserves cannot seem to manage revenues in a way that benefits the majority of the population economically and socially. Some of the symptoms of the curse of oil include lack of economic diversification, revenue volatility, inability to provide public goods and services, corruption, government inefficiency and the Dutch Disease.

As soon as the massive fuel shortage in Nigeria struck, numerous businesses and banks shut down. Power outages also affected common households because neighborhoods are typically powered by individually owned generators due to inconsistent provision of public utilities. As soon as licensed gas stations closed down, black market vendors looking to make a quick Naira (Nigeria’s currency) began selling low quality oil at exorbitant prices. The shortage exemplifies the curse of oil by revealing an inability to provide a crucial public good. Furthermore, the shortage unveils the existence of corruption in black market practices.

Oil importers shut down operations claiming that the government owed them $2 billion. Nigeria’s Minister of Finance Okonjo-Iweala countered that importers misrepresented the debt in an attempt to recover lost revenue from the recent decrease in value of the Naira due to global declining oil prices. The global decrease of oil prices is a perfect example of the volatility that comes with the curse of oil and how it can complicate economic transactions between the governments and oil corporations.

Fortunately, oil suppliers and distributors eventually met with the government for negotiations that put an end to the crisis. The specifics of the negotiations have not been revealed but it appears that the crisis has been averted for now. But as global oil prices continue to decline, economic shocks are imminent. What will the government do to thwart the curse of oil?

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A Trinity of Trade: Africa soon to Launch TFTA

Map of TFTA

By Otito Greg-Obi

Recently, African heads of state gathered together in Egypt to sign the Tripartite Free Trade Area agreement (TFTA) which will join the forces of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC).

Free trade is crucial to global economies because it reduces tariff barriers which in turn results in trade creation. The benefits of trade for developing nations in general are numerous. To name a few: first and foremost, trade allows for specialization meaning countries can build a comparative advantage by focusing on producing goods with low opportunity costs. Secondly, trade encourages healthy competition which incentivizes businesses to increase efficiency and cut costs. Lastly, trade can reduce dependence on existing markets and stabilize countries affected by seasonal changes in markets.

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