How can African Businesses capitalise on the current Geopolitical changes?

Africans can take control of their natural resources
Africa’s industrial potential had been stifled by the legacies of colonialism which left behind weak institutions and an infrastructure designed to enhance extraction of the continent’s resources. Structural adjustment programmes had particularly negative effects on technological accumulation, human capital development and export performance. However, Africa’s resources wealth accounts for approximately three-quarters of the world’s platinum supply, half of its diamonds and chromium, one fifth of gold and uranium supplies, just over half of the world’s uncultivated arable land, with the potential to become the breadbasket for the world, and has gas and oil production in over 30 countries. With the abundance of resources and the rising global demand for them, Africa must manage its resources carefully.

Currently, there are far too many economies in Africa that are dependent on the production and export of primary commodities. These are generating prosperity and development in other regions instead of in Africa, exporting jobs and opportunities. The continent runs the risk of marginalising its own role in international trade if it does not add value to its commodities. Commodity-based industrialisation therefore offers the scope for value addition as well as forward and backward linkages. Ethiopia’s leather industry and Nigeria’s oil supply industry provide good yet random examples of linkages that are not only developing, but also deepening into high value-added activities. Such initiatives must become the norm.

Africa’s economic future will be determined by how it designs and implements effective policies to promote industrialisation. There is an urgent need to address infrastructure constraints and bottlenecks, facilitate the development of the commodity sector and linkages, boost availability of unskilled and semi-skilled jobs, provide job training in higher artisanal skills and deploy data driven evidence to inform planning. These all present opportunities for Africa and its partners to better collaborate without depriving Africa of the benefits of its resource boom.

Africa’s demographic dividend
Africa’s population is projected to double attaining close to 2.3bn people over the next 40 years. This will represent about half of the globe’s total population growth. Africa is also the only continent with a significantly growing youth population. Projections suggest that in less than three generations, 41% of the world’s youth will be African. By 2050, Africa’s youth will constitute over a quarter of the world’s labour force. By the end of the century, the continent will have the lowest dependency ratio in the world.

In addition, Africa is experiencing an unprecedented rate of urban growth. Projections indicate that between 2010 and 2025, some African cities will account for up to 85% of the population. This will mean a transition from a rural to a predominantly urban society, with the largest cities on the continent, Lagos and Kinshasa, growing to 15m people by 2025, and others such as Dar es Salaam reaching 7m. Cities in Africa generate approximately 55% of the continent’s total GDP relative to cities in developed countries that generate approximately 90% of their GDP. Being cognisant of the related challenges, such as the need to ensure essential services to cater for this phenomenon, the opportunities for economic growth, poverty reduction and human development are profound.

Approximately 54% of Africa’s youth is currently unemployed and more than three-quarters live on less than $2 a day. A correlation and lessons to be learnt can be drawn from Asian emerging markets, where 40% of its rapid economic growth between 1965 and 1990 was attributed to an increase in the working age population.

However, a youth population of such magnitude also indicates that the real challenge of the 21st century is the ability to address this demographic imbalance in a manner that will preserve the interests of future generations. A demographic dividend is needed. Inspired by Jean-Jacques Rousseau’s seminal work The Social Contract, there is need for a new intergenerational social contract that is driven by the necessity to balance the needs of the current and future generations; between a young Africa and an aging population elsewhere in the world.


African partnerships with new emerging economies
The once dominant influence of the West is diminishing and it will have to metamorphose a new relationship with Africa. India, China and new players have increased their engagement in Africa in rather dramatic ways, transforming Africa’s traditional trade and investment relations. The largest increases in FDI to Africa in recent years have come from the BRICS, targeting Africa’s natural resources, from oil in Angola, Algeria, Nigeria and Sudan to mining in Niger, Mauritania, Zambia and Liberia.

It is however, a very partial view of what is going on. There is significant diversification of investments. For example, India is investing in social services, textiles and medium-sized enterprises, as well as technology and China is investing heavily in Africa’s infrastructure and services. Ways of doing business have been revolutionised, accompanied by advances in technology.

This new paradigm of engagement reflects cooperation in which partners see themselves as peers in mutually beneficial relationships. Interest in Africa from a larger pool of partners is favourable to the continent and is creating choice. Africa in turn, is well positioned to be a more assertive player in the global arena and to capitalise on the different development models and comparative advantages offered by the array of partners. To benefit fully, Africa must strengthen its institutions, take the lead in negotiating, designing and implementing strategies with partners to leverage its comparative advantages as well as broker good deals. Africa must transform from being perceived as a price taker to a price maker.

The Africa-EU future
Europe and Africa have historical and geographical relationships. Europe has been more of a trade, development and investment partner while Africa has been a crucial source of hard and soft commodities for Europe, such as strategic metals and minerals and captive market. Having said this, perhaps the most successful area in its long partnership has been in the thematic area of peace and security.

The EU-Africa partnership over the last decade has evolved under the framework of the Joint Africa-EU Strategy from one that was criticised for being an unbalanced donor-recipient relationship to one that promised a profound change in its approach to Africa. In 2007, the Joint Africa-EU Strategy was premised on principles of equal participation and representation, as well as to treat Africa as one.

However, development and political cooperation between the two continents has not resulted in any fundamental transformation; instead the gap has only become wider. This can be attributed to factors such as dwindling development budgets that have been affected by the euro zone’s sovereign debt crisis; in turn, the financial expectations under the Joint Strategy have not been delivered. The emergence of new economies rival Europe’s historic role and style of development aid cooperation in Africa. Several partnership agreements have since mushroomed, such as the Cotonou Agreement, fragmenting the strategy.

The fourth Africa-EU summit therefore comes at an opportune time for both continents to develop consensus on what they want and how to transform the Africa-EU relationship. In the new landscape of multi-polar partnerships, Africa needs a coherent strategy so that its development is not compromised by competition among potential partners. In doing so, mutual accountability, mechanisms of enforcement, mechanisms that foster compliance of multinational firms to international norms and standards should be indispensable features for the future partnerships. It is time for Africa to capitalise on the geopolitical changes but by driving and owning the process.

Culled from Carlos Lopes's blog

Africa needs Double Digit Growth to catch up with the rest of world

Arnold Ekpe

Doing business and investing in Africa is currently all the rage. The IFC predicts that sub-Saharan Africa’s economic growth for this year will come in at around 5.1%. But is the continent only looking attractive because many other parts of the world are doing so poorly?

This topic was raised by Arnold Ekpe, former CEO of Ecobank, during a panel discussion at the recent New York Forum Africa, held in Gabon.

“Africa is in fashion and Africa is sexy, but really if you stand back and ask yourself what is going on – Africa looks very attractive because all the others are doing so badly. Growth in Africa is not accelerating from 5% to 7% to 10% to 12%, as it should be. However, Europe is in crisis, the US is in recovery, China has slowed down, therefore if you are doing 5-6%, that looks very good. On the contrary, when… those regions start to grow [again], then Africa will not look that good,” said Ekpe.

He noted that the continent needs double digit growth in order to catch up with the rest of world.
“The point I’m making is not that Africa is not growing… it is that we can grow a lot faster, we should be catching up, we should not be ambling along,” Ekpe added.

Ekpe is regarded as one of the most influential African businessmen of his generation. Ecobank was established in Togo in 1985 as an initiative to create a private African banking institution in West Africa. Ekpe was CEO of the bank from 1996 to 2001. He rejoined as CEO in 2005, and led the growth and transformation of Ecobank into a leading pan-African financial institution with a presence in 33 countries. At the end of 2012, Ekpe retired from his position as CEO.

During the Forum, Ekpe called on African governments to make it easier to do business on the continent. “I’ve often wondered why we don’t have an African Union passport, because that would make travelling in Africa so easy. It is actually easier to travel in Africa with a European passport, than it is with an African passport.”

He said that Africans should, themselves, invest in the continent and not wait on foreign investors. “There are significant pools of capital in Africa that we can tap into… I think building a road from Libreville (Gabon) to Brazzaville (Congo) can be done by the governments themselves, and that would stimulate and improve trade… But if you are waiting for the foreigners to come and do it for you when you know there is a need… then I think we start to see why Africa is not growing as fast as it should be.”

‘Inclusive Business is the Key to Africa’s Economic Growth’

Prof Walter Baets

A report launched at this year’s World Economic Forum places inclusive business front and centre of economic thinking going into what is considered a decisive era for Africa’s development and the world. The time could not be better, says Professor Walter Baets, director of the UCT Graduate School of Business, but such a major project requires major shifts in thinking.

“Africa needs to re-dream business, including more people, encouraging people to be more economically active and redistributing wealth in novel ways, while nurturing dignity and self-respect,” says Baets. “If the continent wants to move ahead, merely adopting prescribed ways of doing things or adapting them slightly is not enough. We need to take what we know, dissect it, probe it, stretch it, turn it upside down and inside out and make it better.”

The report, Realising Africa’s Wealth – Building inclusive business for shared prosperity, promotes inclusivity as the ‘key to boosting economic growth and sustainable development’ across Africa and details key constraints and opportunities for inclusivity in the business environment. It suggests four areas of support for business: providing awareness, knowledge and technology for operating in low-income regions; implementation support in terms of logistics, transaction and marketing; providing micro business support and assistance; and, financial motivation in the form of incentives and investment.

Baets says inclusivity is not a new concept for business but that it has mostly been sidelined in the past.

“Its appearance on the agenda this year is not out of choice but necessity as business as usual continues to take us toward a dead-end. If we don’t change our thinking now and start making the drastic changes needed on a global level, we’ll find ourselves in serious trouble,” he says.
Inclusive business argues for the inclusion of low-income communities in its value chain – both as producers and consumers – not at the cost of profitability, but for the gain of society and the environment.

“Unfortunately the same crippling assumptions about this simple concept continue to rear their heads in talks about economic development that have been preventing the wide-scale adoption of the inclusive model,” says Baets. “A prevailing assumption is that the World Bank’s prescribed way of developing emerging economies is the most effective. In fact, there is very little proof that they are indeed successful enough to elicit such loyalty to them.”

According to Baets, there are many examples of countries that have progressed well without applying International Monetary Fund and World Bank growth strategies notably Brazil, and most high-growth African countries.

The other assumption is that government is responsible for driving inclusivity and that it should do everything to create the necessary environment for it and that the best vehicle to advance this is entrepreneurship.

“Of course, government should work to create the conditions that nurture this transformation, but true inclusivity is a massive project that really should be driven by business – government may have the mandate but business provides the means,” says Baets.

According to Baets, a major paradigm shift is required, one that challenges the way business approaches old problems as sustainable development creates a complex labyrinth of opportunities and pitfalls for business. And managers will play a pivotal role in this transformation of the corporate agenda.

“There is a need for new perspectives if the themes of responsibility, sustainability and corporate growth are to be reconciled,” he says.

Baets says it won’t be the WEF or the World Bank or governments that change things for the better, it will be those business leaders who shun tradition for positive progress and who take the long term sustainability route rather than the win-now route.

“To start, we must give up our accepted assumptions and confront the collective rationale that says there is still time. There isn’t.”

Source: How We Made it in Africa

Nigeria to Privatise 10 Power Plants

* Nigeria is privatising mismanaged state assets
* Ten state power plants to be sold in 2014 - adviser
* Electricity shortages are huge brake on economy

By Joe Brock

ABUJA - Nigeria will privatise 10 more state power plants by mid-2014, advisers to the government said on Monday, as part of plans to overhaul the country's feeble electricity sector.
President Goodluck Jonathan pledged nearly three years ago to privatise the bulk of Nigeria's electricity sector, in an effort to end chronic power shortages that are the biggest brake on growth in Africa's second largest economy.


Although Jonathan's roadmap is more than a year behind schedule, the government accepted deposits in April for 10 generation and five distribution companies that were created by unbundling the defunct state electricity firm.

Private firms will take control of these companies by the end of this year, the government says. The sell-off of the state power firm is expected to raise around $2.5 billion.

Nigeria now plans to sell 10 more power plants, all of them gas fired. Private investors must submit their interest in buying the plants on July 19 and preferred bidders will be announced in January next year, before handing over the power plants, advisers on the transaction CPCS told Reuters.

"We expect all the plants to be commissioned before June next year when private bidders should take over," Arif Mohiuddin, a partner at CPCS said.

The 10 plants will have combined electricity generation output of 5,000 megawatts, Mohiuddin said, which would double Nigeria's current capacity.

These power plants make up the National Integrated Power Project (NIPP), a plan set up in 2004 by then President Olusegun Obasanjo as a 'fast-track' solution to electricity shortages.
The fact that only six of these plants have been completed, nine years after the NIPP was formed, is a sign of how slowly electricity reforms are moving, industry experts say.

Nigeria has so far spent $15-$20 billion on the mismanaged NIPP, industry experts say. It is unlikely the sale of the plants will come close to recouping these funds, which could prompt wrangling between disgruntled politicians.

Mohiuddin declined to give valuations for NIPP plants.

A lack of investment in the transmission network, which remains in public hands, poor gas supply and labour disputes threaten to delay progress in boosting power output further.
Despite being the continent's top oil producer and holding the world's ninth largest gas reserves, Nigeria's power output is a tenth of South Africa's for a population three times the size. Sorting it out could seal Jonathan's legacy.

It would also cut business costs by up to 40 percent, add 3 percent to GDP and ease mass unemployment that fuels unrest seen in rampant oil theft in the south and a bloody Islamist insurgency in the north, economists say.

Though government plans to boost power output tenfold by 2020 will not come close to being met, a significant improvement could be felt in 2-3 years, industry experts say.

Source: Reuters

Lagos Economy could be equivalent to that of Ghana

Lagos, commercial Capital of Nigeria

Lagos, Nigeria’s commercial hub, could soon have a US$45 billion economy – equivalent to that of Ghana, according to a recent report produced by Renaissance Capital economist Yvonne Mhango.

Mhango says that the size of Lagos State’s economy is currently about US$32 billion, or 12% of Nigeria’s total GDP. However, in 2014 Nigeria is expected to change the base year for its GDP calculation. Nigeria’s GDP is currently calculated by using 1990 as a base year, which does not account for the rapid development of the services, telecoms, and entertainment industries. The rebasing is expected to boost the GDP of Africa’s most populous country by about 40%.

“By our estimates, the Lagos State economy will become Africa’s 13^th biggest economy in 2014, around $45 billion,” notes Mhango.

According to Anna Rosenberg, a senior analyst for sub-Saharan Africa at Frontier Strategy Group, Nigeria’s rebased GDP figures, when they are released, are likely to make Nigeria the largest economy in sub-Saharan Africa, surpassing South Africa. “Nigeria will surpass South Africa as the continent’s largest economy when GDP is revised upwards between 40-60%. It is unclear however, when the new figures will be released. But if GDP increases by 40%, Nigeria’s economy would swell from $275 billion to $385 billion,” said Rosenberg. “South Africa’s economic output is $378.9 billion.”

Accra, Capital of Ghana

Although Lagos is the smallest of Nigeria’s 36 states by area, it is by far the most densely populated.

“Lagos State has parallels with South Africa’s smallest province Gauteng, in that it is Nigeria’s smallest, but most densely populated state,” says Mhango. “This will be no surprise to readers that have travelled to Lagos and experienced its congestion. Lagos State accounts for only 0.5% of Nigeria’s total area of 924,000 km², yet it has the country’s second biggest population, behind Kano.”

Source: How We Made It in Africa

Arthur K. Africa’s Priorities and Development

By: Arthur Kobina Kennedy /Orangeburg, South Carolina

Africa and Africans!

Each time I contemplate our promise and our predicament, I weep in frustration.

A few weeks ago, I was summoned to the television to watch a program about Ghana. One of America’s biggest networks was discussing Ghanaians and the importance we attach to funerals. They had gone to cover a funeral in New York, complete with traditional dancers and people dressed in impressive traditional finery. During the accompanying interviews, one of the speakers waxed eloquently about how important the dead are to us. As I watched, I recalled the story of the patient who was admitted to the Psychiatric hospital in Accra and recovered. When the family was informed of the good news and invited to come for the recovered patient, weeks passed without anyone in the family showing up. After a while, the hospital sent the same family a message that the patient had died. Within days, the family showed up with a large entourage—with a coffin—ready to collect the body and to give their departed relative a fitting burial. Contrast this with the case of my elderly patient in Cape Coast who could not show up for appointments and could not take care of herself basically because of age and infirmity. As my nurse remarked, “Doc, when she dies, you would be amazed at the family members who would show up to give her a fitting funeral.” While our reverence for the dead is commendable, I am sure that many will appreciate a little bit of the attention and goodwill given in death, before death.

This distortion of priorities is in abundance across Africa. We are obsessed with exporting oil while our citizens are queuing for it. We make plans to export food even while our citizens are starving. We build presidential palaces while the masses lack basic housing and we buy Presidential jets and luxury vehicles for dignitaries even while we lack public transport systems.

Recently in Ghana, it came to light that the government has paid at least 39 million Ghana cedis to MP’s of the fifth Parliament as ex-gratia even while University lecturers and Doctors are on strike because of outstanding allowances. Surprisingly, there have been many defenders of this incomprehensible policy of paying lawmakers money for goodwill while public servants wait for the payment of allowances which they have earned.

In Kenya’s March 6th election, Uhuru Kenyatta was behind in the polls and under UN indictment, together with his running mate for their role in the death of over 1,200 Kenyans when the West got involved. When US and British diplomats decided to intervene, Kenyans did something that would be incomprehensible anywhere outside Africa—they rallied to Kenyatta’s banner. To Kenyans, thumbing their noses at the British and the Americans mattered more than justice for their countrymen who died after the 2007 elections. Never mind that despite our sensitivity to our independence, many African countries happily and proudly take “budgetary support” from the West.

In Nigeria’s 2013 budget, there is a whopping 4 billion Naira appropriation for the “First Lady’s Mission House.”! Indeed, Nobel laureate Wole Soyinka has described this as a “mind-boggling misappropriation.” This is happening in the country where the poor have little hope, there is massive unemployment and according to former US President Clinton, Boko Haram’s rise may be linked to the unusually high poverty rate in the north.

Unfortunately, even the media, which elsewhere is the voice of the people and of accountability, have often here in Africa, been part of the trivialization. Too many of our news and analysis programs are filled with irrelevancies and vitriol that retards our development. The examples are endless but the dark role played by radio in the Rwandan massacre should stand as an eternal reminder of the evil that media can do to us.

Despite the popular fallacy that this is Africa’s century, we are still in the grip of an attitudinal approach that seems to emphasize what is trivial at the expense of what is important.

In too many places, simple problems that affect the many are ignored while the grievances of the powerful engage the rulers.

Would it not make more sense in Ghana to deal with the problems of our University teachers and doctors before those of our legislators? After all, we are all affected by hospitals which are not functioning at full capacity, regardless of our politics. Why would America pay for the care of our HIV/AIDS patients while our governments are pre-occupied with the privileges of the powerful?

Would it not be more principled for the Kenyans to show their independence by dealing with those responsible for the 2007 killings instead of being upset with the International Criminal Court and the West? Why would non-Kenyans like former UN Secretary General Kofi Annan and the ICC’s Fatou Bensouda care more about justice for the victims of the 2007 election violence than Kenyans?

In Nigeria’s case, would it not make more sense to spend the money for the first lady’s Mission House on education or health for the poor? If Nigeria’s leaders were responsive to the voice of Nigerians, why would there be such indifference to the opinions of Nigerians?

Those who have called on Ghanaian leaders to address the increasing agitations on the labour front due to its potential to cause social problems have been attacked by the punditocracy. While we all hope for the best, we must take counsel from history. Societies that are persistently unjust cannot be continually peaceful. The rise of Cromwell in Britain was the unleashing of violence against the ruling elite. The 1973 coup in Chile occurred despite the fact that Chile had gone for a century without a coup. All it took was two years of bad governance.

There are those who define democracy, maybe in jest, as “the madness of the many for the enjoyment of the few.” Let us prove that here in Africa, that definition is wrong.

Our leaders and citizens must be guided, consistently by the public interest and the needs of the greatest number in all their dealings.

Let us move forward—together.

Source: Joyonline

African Youth do not benefit from Fast Economic Growth

It may have one of the fastest growing economies in the world -- but if you're young and out of work in Africa, the future remains bleak.

The search for employment is a daily struggle for 24-year-old Sherrif Mohamed. He's one of millions of young unemployed Africans whose lives have stalled, despite economic growth across the continent.

Sherrif lives in Egypt, where until recently he was pursuing a university education. The revolution that ousted Hosni Mubarak forced him out of school and into a job market, which has continued to worsen. The uprising kept tourists away and investors out -- and Egypt is yet to recover.

Around 30% of 18 to 29-year-olds are now out of work -- a figure that's echoed across Africa. Sherrif's lack of a qualification narrows his employment prospects further.

"Now there are no jobs whatsoever," he said. "I've tried working in restaurants, coffee shops, clothing stores and lately worked at my brother's store. But the wages are not sustainable at all."

Thousands of miles away in Kenya, more disillusioned young adults walk the corridors of the University of Nairobi. Unlike Sherrif, they'll get to complete their studies and enter the job market as skilled professionals. But with Kenya's youth unemployment rate standing at 40%, they feel their prospects of work are equally slim.

Eunice Kilonzo is a promising student on the campus. She said: "I'm competing with around 700 people to get the same job, probably in the same place. So the chance of getting a job is pretty thin."

She places the blame firmly at the feet of her government. Eunice feels the job market will not improve in line with economic growth until the education system is revamped.

"If the market is way beyond your education level, there won't be productivity. We need to change everything about the education system. I cannot go into the library and study a book that was published in 1969. We are in 2012."

For Eunice and Sherriff, economic forecasts make for irrelevant reading. Africa's economy is expected to grow by 4.5% this year and by 4.8% the next, and its youth population is set to double by 2045, according to the African Economic Outlook report. But the headlines that herald a burgeoning economy aren't translating into the jobs they need.

 If jobless growth continues, they believe young Africans will continue to find themselves unemployed or, more frequently, underemployed in informal jobs.

World Bank Chief Economist Shantayanan Devarajan agrees that creating employment is the biggest hurdle that African nations will have to overcome.

"In low income African countries people can't afford to be unemployed. They are working in the informal sector with very low earnings and very low productivity.

"One reason for that low productivity is that these people have had very little education.

"On the other hand it's a huge opportunity because we can train them and can improve the quality of education. The other point is the rest of the world is aging, so Africa will become the place with all the young people."

The African Economic Outlook report also speaks of the importance of unlocking the potential offered by the region's youth. But it says the continent must modernize its industries and develop sustainable private sectors, in order to do so.

While, such harsh warnings are not relevant for all of Africa, the sentiment behind them is important. Devarajan agrees that private firms could provide an important source of jobs for the young and says African businessmen are taking advantage of the opportunities available now.

"Macroeconomic policies in Africa have improved inexorably in the last 10 to 15 years," he added.

"We've had commodity price booms in the past but those haven't translated to this kind of sustained growth before. And that means there is hope for a better future for Africa. This is not hype, this is real."

 Source: CNN

Africa loses $50bn yearly to Foreign Companies

It comes as no surprise that large sums of money illicitly leave Ghana each year, but the scale of this movement, as revealed in a new report by the UN Economic Commission for Africa, is shocking.

The report, compiled by a high-level panel probing the illicit financial flows from Africa and chaired by Thabo Mbeki, the former President of South Africa, says between 2000 and 2008, the average illicit flows of money from Ghana and other parts of Africa, amounted to $50 billion per year, which is also the estimate for the current year.

“Despite all the pious statements about social responsibility made by multinationals, the trend is getting worse,” the UN report has stated.

The panel points an accusing finger at the global multinationals that use a variety of means to siphon vast amounts that the developing world, including Ghana, desperately needs. The panel described this horrendous practice as ‘economic sabotage’ adding that the illegal transfers undermine trade and threatens the socio-economic fabric of poor communities in Africa.

According to the report, Africa has lost an estimated $854 billion over a 39-year period from 1970–2008. This works out at an average of $22 billion per annum – an amount that could have easily made a huge difference in the lives of the continent’s poorer communities.

The report says that “just one third of the loss associated with illicit financial flows would have been enough to fully cover the continent’s external debt which reached $279 billion in 2008”, and that for every $1 received in aid, $10 is lost in illicit transfers.

According to Global Financial Integrity, illicit financial flows refer to money that is illegally earned, transferred or utilised. This is different from capital flight, which encompasses both licit and illicit cross-border transfer of funds.

Who are the main culprits involved in this massive drain of Africa’s resources? The report says that two African regions – West Africa and Central Africa – are responsible for a large chunk of illicit flows from Africa of about 49 per cent, while North Africa follows with 18 per cent; the other parts of the continent – East and Southern – account for the rest.

 In terms of individual countries, Nigeria leads the bottom 10 hall of shame with cumulative illicit transfers of $212.7 billion, followed by Egypt with $105.2 billion, South Africa with $81.8 billion, Morocco with $33.9 billion, Angola with $29.5 billion, Algeria with 426.1 billion, Cote d’Ivoire with $21.6 billion, Sudan with $16.6 billion, Ethiopia with $16.5 billion and Republic of Congo with $16.2 billion.

The most popular method of illicit transfers is trade mispricing. This involves both local companies and multinationals. The panel believes that multinationals, with their strong global presence and influence are the main perpetrators. According to the World Trade Organisation, corporations control around 60 per cent of world trade, amounting to $40 trillion.

In addition to mispricing, corporations are involved in the equally damaging practice of tax avoidance and evasion and laundered commercial transactions. These activities, says the report, shift money beyond the reach of domestic authorities and, in effect, denies them the ability to put such resources in their own development.

Throw into this mix illicit and illegal transfers involving theft, bribery and other forms of corruption by government officials, drug trading, racketeering, counterfeiting, contraband and terrorist financing and you have a witch’s brew of malfeasance.

The report quotes studies from Global Financial Integrity which pinpointed a number of African countries in which the national wealth has been captured by unaccountable elite and also the multinational banks that do business with these elites.

Africa, with its underdeveloped governance structures, is particularly vulnerable to this form of exploitation. While the outside world has always been very quick to pin the corruption label on Africa, we have always argued that it takes two to make this deadly dance work. Now it is obvious that powerful multinationals are as complicit, in fact more so, in sucking Africa’s lifeblood as the worst local despot. 

Source: Economic Tribune 

Africa must beware of the Chinese influence

By:  Kofi Adu Domfeh

The Chinese are aiding African countries with finance and infrastructural development, investing in multibillion-dollar projects in roads and transport, schools, hospitals and stadia.

As Africa's largest trading partner, the socio-economic benefits of the Chinese new found love with Africa looks enticing and welcomed.

But there is growing concern for African leaders to beware of the inherent dangers of organized crime involving Chinese dissidents migrated into Africa as part of the investment package.

In the past three months alone, the Chinese have been in the headlines for all the bad reasons across Africa.

In Nigeria, 13 Chinese nationals were arrested on suspicion of engaging in prostitution in the country.

Some of the Chinese nationals allegedly connive with some Nigerians to traffic teenage girls into the country under the pretext of offering them jobs in factories.

Preliminary investigation by the Nigeria Immigration Service confirmed that most of the women were sponsored into the country by some "criminal human traffickers who are currently at large".

Earlier, the Nigerian immigration officials had arrested 45 Chinese nationals for alleged illegal textile trading – the Chinese workers had been engaged in "lowly rated activities" that should be reserved for Nigerians and were "depriving them of job opportunities".

In Kenya, there are agitations for Chinese citizens engaged in hawking business without valid work permits and documents to be arrested, prosecuted and deported.

The local traders claim the Chinese hawkers are driving them out of business with cheap, substandard and subsidized goods.

Similar concerns have been raised by traders in Ghana, leading to the establishment of a taskforce to flush out foreigners in the country’s retail business.

Groups of Chinese nationals have also been arrested in a series of crackdowns for allegedly mining gold illegally – hundreds of the Chinese are reported to be engaged in illegal mining in the West African country.

A special Chinese police force in Angola is working to extradite 37 suspected gangsters from Angola, who were arrested for alleged crimes such as kidnapping, armed robbery, extortion, human trafficking and forced prostitution.

In South Africa and Zimbabwe, Chinese nationals have been arrested for diverse criminal offenses.

An April 2010 Editorial titled “Chinese Organised Crime and Africa” by Dr. Gary K. Busch stated that: “Chinese organised criminal entities operate in virtually every African state, especially where there is a sea coast and a mining/extractive industry. The Chinese are not the exclusive organised criminal structures in Africa but they have some unique niche markets”.

Indeed, the situation of the involvement of Chinese organised crime in Africa is becoming very serious and alarming.

In an era where there have been arguments for powerhouses like the United States to yield gracefully to China's rise, can volatile Africa overcome the tide of Chinese crime?

On America Foreign Policy, a Princeton Student Editorials on Global Politics reported that “while China’s relationship with the countries of Africa may strictly not qualify as that of a neocolonialist nature, there are critical problems in the way it deals with local populations that alienates them and generates resentment… It is ultimately in China’s own interest to review its involvement in Africa in order to sustain its economic growth and maintain its international credibility”.

Africa is said to be the next big success to hit the world after been battered with slavery and colonialism. But leaders on the continent would need to have a critical thinking and fashion out policies that inure to the common good of the African.

AfDB advocates increased Women Entrepreneurship in Africa

AFRICAN Development Bank (AfDB) has called on African countries to tackle the negative factors that are inhibiting the expected development of women entrepreneurship on the continent.

President of the bank, Donald Kaberuka, in his speech at the second African Women Economic summit in Lagos at the weekend, identified the factors as lack of collateral, outdated customary laws and practices, which prevent women’s right to properties and challenges of registering new businesses in the region.

According to him, some banks do not recognize women’s credit worthiness, ‘although they receive high credit rating from micro-finance institutions. “We must move on from these rudimentary constraints to issues such as innovative financing opportunities, mentorships and partnerships for women in business.

“Much more needs to be done to enhance the productivity of women in economic development. But the situation is not dismal. We are building upon previous achievements - reflected in our presence in this room today”, he said.

Kaberuka explained that women have always played a pivotal role in the socio-economic development of Africa. As farmers, entrepreneurs, traders and innovators, they are key economic actors in the continent, adding, “I believe, strongly believe investing in women differently is essential to revitalise our economies.

Earlier, Nigeria’s Minister of Finance, Ngozi Okonjo-Iweala, in a keynote address, emphasised that women’s economic empowerment was no longer an option because investing in women who constitute half of the continent’s population was the only way to sustain the growth recorded across the continent.

“Women are the third largest emerging markets in the globe. Women are the third largest sources of growth. One of the fastest ways to sustain current growth is to invest in women,” Okonjo-Iweala said.

She recommended the establishment of a specialised Bank to take up the financial interest of women, who do not have access to investment finance due to a host of reasons.

Also addressing the gathering, New Faces New Voices Executive Director, Nomsa Daniels, said in the next two years, the organisation would focus attention on the development of a data base on women participation in entrepreneurship, financing and the economy.

She said the group, which currently has chapters in 16 countries, would also organise capacity building programmes, financial education and enlightenment courses for women.

New Faces New Voices Advisor and a former AfDB Vice President and Chief Operating Officer, Nkosana Moyo, explained that finding ways of empowering women with quality health, education and finance was of utmost importance. “Women are actually a huge market segment and the most essential tool we need for the development of the continent. So, we need to develop financial products that can help to fully utilise their potentials.”

Source: The Guardian, Nigeria

How fair is a ‘free market’ like Ghana?

By: Kwame Yeboah; pinsonchapta@yahoo.com. ikyeboah.blogspot.com   

      

I do not lay claim to any sophisticated knowledge in economics. I am not a celebrated economist neither am I a distant relative of Karl Marx nor Adams Smith. Indeed my last contact with economics was twelve years ago in secondary school and even then I suck. I do not intend to judge and I do not expect to be judged. The motive of this article is to expose the inefficiencies in the free market system that has been bequeathed on countries like Ghana.

The most prominent legacy of the Cold War era is perhaps the spread of democracy and the free market system. In the 21st century, all politicians with little exception advertise their democratic and free market credentials. This is not restricted to prominent leaders like Obama and Cameron but also for Basher al- Alssad of Syria. Even the most obviously anti democratic parties and governments say they believe in democracy and the free market.

So what is a free market?
A free market is a market where government makes little or no intervention in regulating prices, demand and supply in the market. Rather market forces are allowed to interact to determine the level of demand, supply and prices. The virtue of the free market t is that it gives people the freedom to buy or sell what they want. People are responsible for their singular actions and the state only plays a watch-dog role. All these benefits notwithstanding, the free market system harbors a lot of ills which most casual observers have either not seen or refused to admit.

Imagine an ordinary day in the life of a Banker in a free market like Ghana. After work, she stops at a bar for a drink, goes to the market to buy some fresh vegetables for dinner, and fetches a cake she had ordered the previous day. After dinner she goes to the mall in town to take advantage of a big sales promotion that had been advertised on the radio all week. Then on her way home she passed by a fast food joint nearby to have a burger. Quite a routine for most working class Ghanaians.

The chances are pretty good that our banker friend has been cheated or exploited on a number of occasions. Chances are that the premium whisky she ordered at the bar was actually a cheap substitute, that the ‘fresh’ vegetables were days old, that the ‘sale’ prices that were written on the tickets at the mall were actually the original prices while the prices printed on the tickets were 30% higher than the store usually charges. That the cake she ordered was the same one a customer had rejected three days ago, cleaned and stored and re-sold to her. That the burger she ordered at the restaurant had been dropped on the filthy kitchen floor only to be returned to the grill, cleaned up and served to her. Don’t consider this an abstract case, people who have worked on factory floors, restaurants, shopping malls etc, will agree that these are daily events.

It is common these days for shops to remark left and right shoes whose mates have gone astray and sell them. Sales men are trained to tell customers that everyone has one foot bigger than the other. Tap water is sometimes bottled and sold to you as ‘pure’ water. In television and stereo repair shops, either you are charged for unnecessary repairs or the repairs are not done at all. Sometimes charges are determined by the customer’s willingness to pay. A repair on an expensive system may cost twice as much as the same repair on an inexpensive set. Sales persons in a boutique are instructed to tell customers “they look great” especially when the item is expensive. In some cases sales persons will drive you to buy low selling goods by killing your appetite for the one you really came to the shop to buy.

So the question is- why do businesses and sales people in Ghana indulge in such deceptive and dishonest practices? The answer lies in the competition that arises as a result of the free market.

As a business man, if other shopping malls were running ‘sales’ that weren’t really sales and the public were deceived, then your mall had three choices. Either it runs a real sale, and sacrificed on profits that its competitors didn’t sacrifice. Or it didn’t run a sale at all, and lost customers to its competitor’s fake sales. Or you did what your competitors did in order to survive the competition. Clearly the last option is what most ‘normal’ businessmen will fancy.

On top of these competitive pressures faced by the bosses, the pay structure in many businesses establishes incentives for salespeople without recourse to ethics or method. When the money a salesperson takes home consists largely of sales commissions and bonuses, then honesty can sell for a huge price. This puts salespersons in the position of having to chose between being honest and paying the rent. This situation is however good news for the boss because it encourages employees to work hard to make the company profitable and to stand any chance of surviving the competition. And it’s great news for the hard working unscrupulous sales guy whose dishonest methods will be rewarded by fat commissions.

As the free market practices make it increasingly difficult to earn an ‘honest living’ the cost of living will be substantial. Our little hope comes from government regulations and monitoring. But then again it has proven not to be the solution. The reason is that if we assume that the only reason people will stay away from dishonest business practices is the fear of being caught and punished, the job of monitoring even becomes more difficult. There are so many businesses in Ghana that have different motivations to cheat and it will take thousands of inspectors to make it work. Obviously this number of inspectors is not feasible. But even if it was, we will have another problem- considering we set out an army of inspectors into town, how can we be assured that they will also not be corrupt. We will need another set of supervisors to control these inspectors.

Obviously it is clear that as long as the free market stays around, we will forever be at the mercy of the experts- those who try to beat the competition by selling us things we do not need or at prices way above how much they are worth. This fear was clearly echoed by Prof Arnold S. Relman –An American professor of social medicine when he said “Most of us believe we are parties to a social contract. We are not vendors, and we are not merely free economic agents in a free market”.

How fair is a ‘free market’ like Ghana?

By: Kwame Yeboah; pinsonchapta@yahoo.com. ikyeboah.blogspot.com   

      

I do not lay claim to any sophisticated knowledge in economics. I am not a celebrated economist neither am I a distant relative of Karl Marx nor Adams Smith. Indeed my last contact with economics was twelve years ago in secondary school and even then I suck. I do not intend to judge and I do not expect to be judged. The motive of this article is to expose the inefficiencies in the free market system that has been bequeathed on countries like Ghana.

The most prominent legacy of the Cold War era is perhaps the spread of democracy and the free market system. In the 21st century, all politicians with little exception advertise their democratic and free market credentials. This is not restricted to prominent leaders like Obama and Cameron but also for Basher al- Alssad of Syria. Even the most obviously anti democratic parties and governments say they believe in democracy and the free market.

So what is a free market?
A free market is a market where government makes little or no intervention in regulating prices, demand and supply in the market. Rather market forces are allowed to interact to determine the level of demand, supply and prices. The virtue of the free market t is that it gives people the freedom to buy or sell what they want. People are responsible for their singular actions and the state only plays a watch-dog role. All these benefits notwithstanding, the free market system harbors a lot of ills which most casual observers have either not seen or refused to admit.

Imagine an ordinary day in the life of a Banker in a free market like Ghana. After work, she stops at a bar for a drink, goes to the market to buy some fresh vegetables for dinner, and fetches a cake she had ordered the previous day. After dinner she goes to the mall in town to take advantage of a big sales promotion that had been advertised on the radio all week. Then on her way home she passed by a fast food joint nearby to have a burger. Quite a routine for most working class Ghanaians.

The chances are pretty good that our banker friend has been cheated or exploited on a number of occasions. Chances are that the premium whisky she ordered at the bar was actually a cheap substitute, that the ‘fresh’ vegetables were days old, that the ‘sale’ prices that were written on the tickets at the mall were actually the original prices while the prices printed on the tickets were 30% higher than the store usually charges. That the cake she ordered was the same one a customer had rejected three days ago, cleaned and stored and re-sold to her. That the burger she ordered at the restaurant had been dropped on the filthy kitchen floor only to be returned to the grill, cleaned up and served to her. Don’t consider this an abstract case, people who have worked on factory floors, restaurants, shopping malls etc, will agree that these are daily events.

It is common these days for shops to remark left and right shoes whose mates have gone astray and sell them. Sales men are trained to tell customers that everyone has one foot bigger than the other. Tap water is sometimes bottled and sold to you as ‘pure’ water. In television and stereo repair shops, either you are charged for unnecessary repairs or the repairs are not done at all. Sometimes charges are determined by the customer’s willingness to pay. A repair on an expensive system may cost twice as much as the same repair on an inexpensive set. Sales persons in a boutique are instructed to tell customers “they look great” especially when the item is expensive. In some cases sales persons will drive you to buy low selling goods by killing your appetite for the one you really came to the shop to buy.

So the question is- why do businesses and sales people in Ghana indulge in such deceptive and dishonest practices? The answer lies in the competition that arises as a result of the free market.

As a business man, if other shopping malls were running ‘sales’ that weren’t really sales and the public were deceived, then your mall had three choices. Either it runs a real sale, and sacrificed on profits that its competitors didn’t sacrifice. Or it didn’t run a sale at all, and lost customers to its competitor’s fake sales. Or you did what your competitors did in order to survive the competition. Clearly the last option is what most ‘normal’ businessmen will fancy.

On top of these competitive pressures faced by the bosses, the pay structure in many businesses establishes incentives for salespeople without recourse to ethics or method. When the money a salesperson takes home consists largely of sales commissions and bonuses, then honesty can sell for a huge price. This puts salespersons in the position of having to chose between being honest and paying the rent. This situation is however good news for the boss because it encourages employees to work hard to make the company profitable and to stand any chance of surviving the competition. And it’s great news for the hard working unscrupulous sales guy whose dishonest methods will be rewarded by fat commissions.

As the free market practices make it increasingly difficult to earn an ‘honest living’ the cost of living will be substantial. Our little hope comes from government regulations and monitoring. But then again it has proven not to be the solution. The reason is that if we assume that the only reason people will stay away from dishonest business practices is the fear of being caught and punished, the job of monitoring even becomes more difficult. There are so many businesses in Ghana that have different motivations to cheat and it will take thousands of inspectors to make it work. Obviously this number of inspectors is not feasible. But even if it was, we will have another problem- considering we set out an army of inspectors into town, how can we be assured that they will also not be corrupt. We will need another set of supervisors to control these inspectors.

Obviously it is clear that as long as the free market stays around, we will forever be at the mercy of the experts- those who try to beat the competition by selling us things we do not need or at prices way above how much they are worth. This fear was clearly echoed by Prof Arnold S. Relman –An American professor of social medicine when he said “Most of us believe we are parties to a social contract. We are not vendors, and we are not merely free economic agents in a free market”.

How fair is a ‘free market’ like Ghana?

By: Kwame Yeboah; pinsonchapta@yahoo.com. ikyeboah.blogspot.com   

      

I do not lay claim to any sophisticated knowledge in economics. I am not a celebrated economist neither am I a distant relative of Karl Marx nor Adams Smith. Indeed my last contact with economics was twelve years ago in secondary school and even then I suck. I do not intend to judge and I do not expect to be judged. The motive of this article is to expose the inefficiencies in the free market system that has been bequeathed on countries like Ghana.

The most prominent legacy of the Cold War era is perhaps the spread of democracy and the free market system. In the 21st century, all politicians with little exception advertise their democratic and free market credentials. This is not restricted to prominent leaders like Obama and Cameron but also for Basher al- Alssad of Syria. Even the most obviously anti democratic parties and governments say they believe in democracy and the free market.

So what is a free market?
A free market is a market where government makes little or no intervention in regulating prices, demand and supply in the market. Rather market forces are allowed to interact to determine the level of demand, supply and prices. The virtue of the free market t is that it gives people the freedom to buy or sell what they want. People are responsible for their singular actions and the state only plays a watch-dog role. All these benefits notwithstanding, the free market system harbors a lot of ills which most casual observers have either not seen or refused to admit.

Imagine an ordinary day in the life of a Banker in a free market like Ghana. After work, she stops at a bar for a drink, goes to the market to buy some fresh vegetables for dinner, and fetches a cake she had ordered the previous day. After dinner she goes to the mall in town to take advantage of a big sales promotion that had been advertised on the radio all week. Then on her way home she passed by a fast food joint nearby to have a burger. Quite a routine for most working class Ghanaians.

The chances are pretty good that our banker friend has been cheated or exploited on a number of occasions. Chances are that the premium whisky she ordered at the bar was actually a cheap substitute, that the ‘fresh’ vegetables were days old, that the ‘sale’ prices that were written on the tickets at the mall were actually the original prices while the prices printed on the tickets were 30% higher than the store usually charges. That the cake she ordered was the same one a customer had rejected three days ago, cleaned and stored and re-sold to her. That the burger she ordered at the restaurant had been dropped on the filthy kitchen floor only to be returned to the grill, cleaned up and served to her. Don’t consider this an abstract case, people who have worked on factory floors, restaurants, shopping malls etc, will agree that these are daily events.

It is common these days for shops to remark left and right shoes whose mates have gone astray and sell them. Sales men are trained to tell customers that everyone has one foot bigger than the other. Tap water is sometimes bottled and sold to you as ‘pure’ water. In television and stereo repair shops, either you are charged for unnecessary repairs or the repairs are not done at all. Sometimes charges are determined by the customer’s willingness to pay. A repair on an expensive system may cost twice as much as the same repair on an inexpensive set. Sales persons in a boutique are instructed to tell customers “they look great” especially when the item is expensive. In some cases sales persons will drive you to buy low selling goods by killing your appetite for the one you really came to the shop to buy.

So the question is- why do businesses and sales people in Ghana indulge in such deceptive and dishonest practices? The answer lies in the competition that arises as a result of the free market.

As a business man, if other shopping malls were running ‘sales’ that weren’t really sales and the public were deceived, then your mall had three choices. Either it runs a real sale, and sacrificed on profits that its competitors didn’t sacrifice. Or it didn’t run a sale at all, and lost customers to its competitor’s fake sales. Or you did what your competitors did in order to survive the competition. Clearly the last option is what most ‘normal’ businessmen will fancy.

On top of these competitive pressures faced by the bosses, the pay structure in many businesses establishes incentives for salespeople without recourse to ethics or method. When the money a salesperson takes home consists largely of sales commissions and bonuses, then honesty can sell for a huge price. This puts salespersons in the position of having to chose between being honest and paying the rent. This situation is however good news for the boss because it encourages employees to work hard to make the company profitable and to stand any chance of surviving the competition. And it’s great news for the hard working unscrupulous sales guy whose dishonest methods will be rewarded by fat commissions.

As the free market practices make it increasingly difficult to earn an ‘honest living’ the cost of living will be substantial. Our little hope comes from government regulations and monitoring. But then again it has proven not to be the solution. The reason is that if we assume that the only reason people will stay away from dishonest business practices is the fear of being caught and punished, the job of monitoring even becomes more difficult. There are so many businesses in Ghana that have different motivations to cheat and it will take thousands of inspectors to make it work. Obviously this number of inspectors is not feasible. But even if it was, we will have another problem- considering we set out an army of inspectors into town, how can we be assured that they will also not be corrupt. We will need another set of supervisors to control these inspectors.

Obviously it is clear that as long as the free market stays around, we will forever be at the mercy of the experts- those who try to beat the competition by selling us things we do not need or at prices way above how much they are worth. This fear was clearly echoed by Prof Arnold S. Relman –An American professor of social medicine when he said “Most of us believe we are parties to a social contract. We are not vendors, and we are not merely free economic agents in a free market”.

How fair is a ‘free market’ like Ghana?

By: Kwame Yeboah; pinsonchapta@yahoo.com. ikyeboah.blogspot.com   

      

I do not lay claim to any sophisticated knowledge in economics. I am not a celebrated economist neither am I a distant relative of Karl Marx nor Adams Smith. Indeed my last contact with economics was twelve years ago in secondary school and even then I suck. I do not intend to judge and I do not expect to be judged. The motive of this article is to expose the inefficiencies in the free market system that has been bequeathed on countries like Ghana.

The most prominent legacy of the Cold War era is perhaps the spread of democracy and the free market system. In the 21st century, all politicians with little exception advertise their democratic and free market credentials. This is not restricted to prominent leaders like Obama and Cameron but also for Basher al- Alssad of Syria. Even the most obviously anti democratic parties and governments say they believe in democracy and the free market.

So what is a free market?
A free market is a market where government makes little or no intervention in regulating prices, demand and supply in the market. Rather market forces are allowed to interact to determine the level of demand, supply and prices. The virtue of the free market t is that it gives people the freedom to buy or sell what they want. People are responsible for their singular actions and the state only plays a watch-dog role. All these benefits notwithstanding, the free market system harbors a lot of ills which most casual observers have either not seen or refused to admit.

Imagine an ordinary day in the life of a Banker in a free market like Ghana. After work, she stops at a bar for a drink, goes to the market to buy some fresh vegetables for dinner, and fetches a cake she had ordered the previous day. After dinner she goes to the mall in town to take advantage of a big sales promotion that had been advertised on the radio all week. Then on her way home she passed by a fast food joint nearby to have a burger. Quite a routine for most working class Ghanaians.

The chances are pretty good that our banker friend has been cheated or exploited on a number of occasions. Chances are that the premium whisky she ordered at the bar was actually a cheap substitute, that the ‘fresh’ vegetables were days old, that the ‘sale’ prices that were written on the tickets at the mall were actually the original prices while the prices printed on the tickets were 30% higher than the store usually charges. That the cake she ordered was the same one a customer had rejected three days ago, cleaned and stored and re-sold to her. That the burger she ordered at the restaurant had been dropped on the filthy kitchen floor only to be returned to the grill, cleaned up and served to her. Don’t consider this an abstract case, people who have worked on factory floors, restaurants, shopping malls etc, will agree that these are daily events.

It is common these days for shops to remark left and right shoes whose mates have gone astray and sell them. Sales men are trained to tell customers that everyone has one foot bigger than the other. Tap water is sometimes bottled and sold to you as ‘pure’ water. In television and stereo repair shops, either you are charged for unnecessary repairs or the repairs are not done at all. Sometimes charges are determined by the customer’s willingness to pay. A repair on an expensive system may cost twice as much as the same repair on an inexpensive set. Sales persons in a boutique are instructed to tell customers “they look great” especially when the item is expensive. In some cases sales persons will drive you to buy low selling goods by killing your appetite for the one you really came to the shop to buy.

So the question is- why do businesses and sales people in Ghana indulge in such deceptive and dishonest practices? The answer lies in the competition that arises as a result of the free market.

As a business man, if other shopping malls were running ‘sales’ that weren’t really sales and the public were deceived, then your mall had three choices. Either it runs a real sale, and sacrificed on profits that its competitors didn’t sacrifice. Or it didn’t run a sale at all, and lost customers to its competitor’s fake sales. Or you did what your competitors did in order to survive the competition. Clearly the last option is what most ‘normal’ businessmen will fancy.

On top of these competitive pressures faced by the bosses, the pay structure in many businesses establishes incentives for salespeople without recourse to ethics or method. When the money a salesperson takes home consists largely of sales commissions and bonuses, then honesty can sell for a huge price. This puts salespersons in the position of having to chose between being honest and paying the rent. This situation is however good news for the boss because it encourages employees to work hard to make the company profitable and to stand any chance of surviving the competition. And it’s great news for the hard working unscrupulous sales guy whose dishonest methods will be rewarded by fat commissions.

As the free market practices make it increasingly difficult to earn an ‘honest living’ the cost of living will be substantial. Our little hope comes from government regulations and monitoring. But then again it has proven not to be the solution. The reason is that if we assume that the only reason people will stay away from dishonest business practices is the fear of being caught and punished, the job of monitoring even becomes more difficult. There are so many businesses in Ghana that have different motivations to cheat and it will take thousands of inspectors to make it work. Obviously this number of inspectors is not feasible. But even if it was, we will have another problem- considering we set out an army of inspectors into town, how can we be assured that they will also not be corrupt. We will need another set of supervisors to control these inspectors.

Obviously it is clear that as long as the free market stays around, we will forever be at the mercy of the experts- those who try to beat the competition by selling us things we do not need or at prices way above how much they are worth. This fear was clearly echoed by Prof Arnold S. Relman –An American professor of social medicine when he said “Most of us believe we are parties to a social contract. We are not vendors, and we are not merely free economic agents in a free market”.

EPA – EU’s Fight for Raw Materials & Markets for Its Products

By: Prosper Kwesi Acquah; Business & Financial Analyst,
Member of Volta Advocacy Forum. Email: prosper@ghanacountryservices.com

 A lot has been said and written about the Economic Partnership Agreement (EPA) being tabled by the EU for 98 African, Caribbean and Pacific (ACP) countries to sign. I am by no means an expert on EPA issues but from the little I know about the EPA, my strong opinion is that Ghana should NOT sign the EPA even if the terms are acceptable to the country. Instead Ghana should only sign as a member of the ECOWAS grouping. This article intends to share my thoughts in arriving at the conclusion above.

The EPAs are supposed to be reciprocal trade liberalization agreements which is meant to replace a non reciprocal agreement which expired in 2008. As part of the EPA, the EU is seeking the elimination of duties on about 80% of goods exported by the EU to ACP countries in return for a similar access to the EU market by ACP countries. According to the Socialist Group of the European Parliament, “the EPAs were intended to be centered on the objective of reducing and eventually eradicating poverty, consistent with the objectives of sustainable development and gradual integration of the ACP countries into the world economy”; a very laudable objective. Yet the negotiations have been bedeviled with a lot of acrimony, accusations and suspicions which has delayed the ratification and signing of the agreements by the six regional blocks that constitute the ACP. One wonders if the true objective of the EPAs is as stated above, and why the EU should coerce any country or regional block to sign the agreement.

The truth is that the EPAs are not as much about the interests of Sub Saharan Africa, the Caribbean or the Pacific countries as it is about Europe becoming more economically competitive. The EPAs are about finding market for European products, having access to cheaper raw materials from Africa and being able to compete with China, India and recently Brazil in the African market. When Africa exports raw materials duty free to the EU market, EU manufacturers will be able to buy these raw materials at cheaper prices because the saving from not paying import duties will be passed on to them. After production the EU manufacturers will be able to export their products to Africa duty free thereby achieving additional cost savings. The cost savings on both raw materials and finished goods is likely to make EU goods competitive with goods manufactured from China and other emerging countries.

It is very important for EU products to be competitive in the African market because most developed economies are experiencing little or no growth and in some cases shrinkage. It is obvious that products manufactured in Europe are unable to compete with those manufactured in Asia even in the European market let alone compete in the African market. The EU therefore sees the EPAs as its main way of becoming competitive again.

As much as every economist agrees that exports are very important to the development of ACP countries, the goods or products being exported are even more important. As figures show, ECOWAS for instance exports primarily raw materials to the EU market. ECOWAS countries cannot develop or become competitive from exporting unprocessed raw materials to the EU, China or USA only to turn around and import products that have been manufactured using those same raw materials. To develop, we must grow the domestic production capacities of member countries, increase agricultural production and industrialize just as China and Brazil are doing. This is the only way we can enhance regional integration, provide employment for our people, ensure food security and reduce conflicts in the region.

For Ghana and other ACP countries, any economic agreement that it signs should have these overriding aims of:

• Building the capacity of its people from advances of science and technology

• Ensuring sustainable development of its people and economy

• Regional (ECOWAS) integration

• Integration of the economies of all the ACP countries

• Enhancing the growth of key sectors of the economy such as manufacturing, agriculture etc.

• Ensuring development that sustains the environment – agreements should not be exploitative

The question we need to be asking ourselves is that will the EPA ensure that we achieve at minimum the things listed above? How complementary is the EPA to the developmental goals of Ghana, the ECOWAS region or the ACP countries. Will this agreement support Ghana’s goals of transitioning from being a raw material exporting nation to an industrialized manufacturing country? According to the European Commission (EC) /Eurostat figures, the EU imported EUR 1.5B worth of goods from Ghana of which only 2.8% were manufactured goods. Over 95% of these goods were unprocessed food (mainly cocoa), crude materials and mineral fuels. This pattern of exporting raw materials from Ghana or Africa to the rest of the world has persisted for decades and we can all attest to its consequences, – highly import dependent, collapse of the manufacturing sector and chronic high unemployment rates.

Since 2008, the EU has not being able to finalize these EPAs. There have been several accusations by ACP countries, European development organizations and even the Socialist Group of the European parliament against the negotiation styles used by the EU. Some of the accusations include the fact that the EU is using divide and rule tactics by beginning negotiations with individual countries when negotiations seem to stall with the regional groupings. For instance when negotiations with ECOWAS stalled, the EU decided to negotiate directly with Ivory Coast, Cameroun, Ghana etc.

The approaches of the EU seem to go contrary to their stated aim of ensuring regional integration within and across the ACP regions. The EU in recent times has resorted to threats and coercion by insisting that countries such as Ghana ratify or sign the EPAs by certain arbitrary deadline. The question is why should countries be pressured into singing agreements that are in their own interest? ACP countries should be wise enough to know when agreements are in their interest. The EPAs are primarily designed to secure and safeguard the interests of the EU and its people and not that of ACP countries.

It is not surprising to know that in November 2008, the European Commission (EC) adopted ‘Communication 699’ titled “The Raw Material Initiative (RMI) – meeting our critical needs for growth and jobs in Europe” which sort to outline the EUs strategy to respond to the raw materials challenge it faces. One of main pillars of the RMI according to the EU is “to ensure a level playing field in access to resources in third countries”. Also as part of its ‘Europe 2020 Strategy’, the EU has a flagship strategy "An industrial policy for the globalization era" and that strategy foresees the setting up of a framework for a modern industrial policy that will "address all elements of the increasingly international value chain from access to raw materials to after-sales service". Exactly what the EPAs seek to achieve is to guarantee access to raw materials and market for manufactured European goods.

One communication document from the EC also states “The Trade strategy for raw materials takes full advantage of the Market Access Partnership (such as the EPA). Furthermore, efforts are being made to introduce disciplines on export duties in the context of negotiations of some Free Trade Agreements.
The EU has also been using the opportunity of WTO accessions to include this issue in negotiations with a range of candidate countries relevant from a raw materials supply perspective.” The EU’s goals for the EPAs are too obvious.

We should be very suspicious of any negotiation in which one party coerces and threatens the other while negotiations are still ongoing. Ghana and for that matter other sub Saharan African countries should not be intimidated by the tricks of the EU. The truth is that the EU’s BATNA (Best Alternative to a Negotiated Agreement) is very low and that for the ACP countries is very high. The EU cannot export their finished products to the Americas, Asia, Australia or anywhere else apart from Africa. On the other hand Africa currently is unable to produce enough for its domestic needs let alone for export. The Chinese, Europeans and Americans are battling for the African market as a destination for their products. The EPAs seem to be the EU’s way of gaining some advantages over the competition. It therefore stands to reason that all that Africa will be exporting to the EU are raw materials. If those raw materials are exported to the EU duty free, it provides cheaper inputs for European manufacturers thus reducing their cost of production and improving their competitiveness with the Chinese.

ECOWAS Export to the EU

Source: Eurostat(online data code: DS_018995)

The chart above shows that of the EUR 21.2B worth of goods that the EU imported from ECOWAS countries in 2010, mineral fuels constituted 67% (EUR 14.3B), food and live animals 22% (EUR 4.6B) and crude material 6% (EUR 1.2B); all these goods (94% of ECOWAS’s exports to the EU) can safely be described as raw materials or primary goods, largely unprocessed.

If Ghana should sign an EPA and ECOWAS refuses to sign, the EU will flood Ghana with its manufactured goods while at the same time exploiting what is left of the country’s natural resources. Other ECOWAS countries such as Nigeria will most probably respond to Ghana’s actions by placing a ban on goods from Ghana (disregarding all ECOWAS agreements). It must be noted that signing an EPA with the EU is not bad in itself. What some of us are advocating is that the terms should be well negotiated so as to protect and even boost local industries and employment. For instance I don’t believe any trade or civil society group will be against the importation of construction and agricultural equipment into Ghana duty free; these organizations will however oppose the importation of agricultural products, furniture and the like into the country duty free. Some will even advocate a total ban on the importation of such products.

An agreement negotiated by ECOWAS is more likely to result in favorable terms for all its member countries than that which is negotiated by any single member country. In any case why should an individual country such as Ghana negotiate an EPA with a regional block, the EU?

ECOWAS and for that matter Ghana must ensure that before they sign the EPA, it must address the following important issues;

i. The list of EU products exempt from import duties should not include any agricultural product since EU countries continue to subsidize their farmers

ii. All other EU products that enjoy subsidies directly or indirectly must not be exempt from import duties.

iii. The percentage of EU goods exempt from duties should be negotiated down to below 50%.

iv. There should not be any ambiguities in the list of products or goods that Ghana or ECOWAS countries can export to the EU.

v. The EU must set up structures to ensure that Ghanaian and ECOWAS producers and manufacturers are able to meet the so called EU standards for their goods and products.

vi. The EPA should not include any intellectual property rules or clauses. As the EU will use that to bar the importation of certain products from China as well as block the use of certain technologies to develop local industry.

vii. The effect of the EPA on government tariff revenue is properly modeled out and understood.

viii. The EPA must at the minimum not hinder regional trade and integration.

ix. ACP countries should reserve the right to review the agreement every three (3) years and perform impact assessment to decide whether to abrogate or re-endorse it.

In my view as a pan-African, history tells us a lot about the human rights and good governance records of European countries when they divided up and colonized the African continent. It is therefore obvious that this agreement is not about human rights and good governance but rather about cheap raw materials and market for Europe’s products. It’s about competition with Chinese products. I am curious to know why the EU is pushing these agreements down the throats of ACP countries, (black countries). Why are countries such as Algeria, Egypt, Libya, Morocco and Tunisia not included in these EPAs? The only way the EU and other so called developed countries can continue to dictate to Africa is to keep the continent economically colonized. Just as India and Brazil in recent years, Ghana, Nigeria, Kenya and the likes can liberate themselves economically if concerted efforts are made at achieving that end.

To conclude, as I have indicated earlier, I am not necessarily against the signing of an EPA by Ghana or ECOWAS; my main concern is that there seem to be a lot of red flags that must be watched carefully. Ghana and ECOWAS negotiators must ensure that any agreement signed with the EU, Brazil, China, India or any other resource hungry economy is in the interest of the guy on the streets of Nima in Accra or Apapa in Lagos. All the issues I have raised in this article must be looked at intensely; we should not be swayed by promises of Aid and Grants. We must beware of aids and grants; they have not been able to transform our economies after depending on same for over half a century.