Friday, 9 December 2011

Africa's Data Problems

Obtaining reliable data from many places on the 
African continent is still a big challenge. Economic data published by the UN and other related agencies give workable estimates, yes, but to achieve near-uniform development across sectors, a breakthrough in data collection, organization and analysis is imperative. The failure of a majority of state institutions of National Planning to achieve remarkable results in sub-Saharan Africa has its foundations in the fractured framework of data handling and analysis in African nations. Consequently, where there is no dearth of political will, the governments still lack the crucial information they need to drive sustainable growth in many African states. We cannot continue to rely on the estimates of international agencies to come to the knowledge of ourselves and our environment. This protracted dependence will do no good to African states in the long term. Africa must 'own' and drive the growth she wants. Nigeria provides an example. 

The Nigerian economy has been projected to exceed that of South Africa, the continent’s largest economy, in a little over a decade (though it might happen sooner with the current plans to use the reference year for computing Nigeria’s real GDP as 2008). A cursory survey of both economies brings an apparent disparity to the fore: the informal economy in Nigeria is largely unaccounted for compared to that of South Africa. This of course has fostered the flourishing of a cancerous culture of tax evasion in Nigeria over many years. In the place of the Federal Inland Revenue Service (FIRS), the ‘taxes’ are paid to a unique set of amateur regulators who have instituted themselves as protectors of certain informal enterprises.  In the end, such loopholes filter through to the central government with the result that insufficient resources weaken not just fiscal policy, but wreck the national development plan even while it is still in black and white.

Seemingly, the UN (or the IMF or the World Bank), with all its mandates and great responsibilities (with the result that it should probably be busier than any other non-profit entity in the world), has more information about a country than the country itself. Of course state information is an essential resource for the delivery of its mandate, but do the international agencies desire prosperity more for any African state than the state desires for itself? 

For Africa's real transformation, a revolution in our capacity to collect, interpret and analyze data – all done correctly – will catalyze and accelerate the process of African development. The tools are available already, what needs developing is our capacity – African Education – and the right deployment of this capacity in high probability setups for not just lifting Africa from poverty but also going forward to being able to tackle 21st century challenges. The rest of civilization provides Africa with a rich history of invaluable lessons. The opportunities are tremendous. 

Finally, the educational system of the typical African state leaves a lot to be desired. As more  investments are projected to flow into Africa in the coming decade, the local management of such investments becomes a priority. The 'rich' human resources in Africa may NOT be useful if incompetence is the order of the day and the inability to handle economic prosperity is as pervasive as oxygen. 

*  *  *

Saturday, 5 November 2011

Africa and the Chinese Question [4]

“The world is in the middle of a huge demographic transition that will have a significant effect on long-term economic trends”
– Mapping the Markets, The Economist (2006)

Part 3 of this series was concluded with the idea that a new benchmark index must be formulated by African societies that will serve the following purposes: first, as a basis for compromise during sector-investment negotiations and finally, as a guide for deeper integration with other emerging markets. The definition and adoption of a sound contextual framework are key steps in African economic policy development and should not be misconstrued as conspiratorial efforts to place the welfare of the African above that of her trading or investment partners. Instead, the framework should be viewed as a necessary underpinning that will highlight the foibles of the current system of doing business, correct them and move to guarantee 21st century mutual benefits for all parties involved.

Since the dawn of the 20th century, the demographic standing of any geographical region has become a critical economic factor in determining sector-resource allocation, the future directions of that region and the ripple effects of regional activities on the larger global economy. With the growth rate of the ageing populations of the developed world projected to continue northward (as a result of low infertility and increased life expectancy), there will be an unvoiced demand on Africa and other developing states to export her teeming youth to run and maintain the established systems of advanced economies. This demand arises from the obvious pressures of the generic African society, not necessarily from developed nations. The underlying mechanics of this human-capital export scheme are not novel. Noticeably, shifts in geographical locations have become unnecessary as technology becomes more interleaved with business activities – more young Africans are going to be working for multinational corporations of western origin domiciled in Afro-localities. Africa must grow and develop, but as long as the current structure that impels GDP growth persists, her prosperity will largely be determined by the business cycles of advanced economies, whose interests the multinationals represent (understandably), and emerging markets.

As mentioned earlier, the characteristic African growth trend is high GDP growth rates and meagre HDI growth. According to a 2011 economic report released by a synergy between the African Union and the United Nations Economic Commission for Africa,

The improved economic performance achieved over the last decade has not been translated into commensurate reductions in unemployment and poverty, nor significant progress towards the Millennium Development Goals (MDGs), especially in sub-Saharan Africa. The continent is experiencing a jobless recovery; apparently perpetuating a fundamental feature of its previous growth spell...the [African] development process has to be planned for several reasons. The changes required are substantial and therefore the decisions cannot be optimally made by free market forces...

Without trivializing the preceding sections of the AU-UN report, I choose to prey on the secondary clause that contains “free market forces”; this brings the Chinese to the fore again, albeit in a way that demands we take a superficial look at their economic growth model.

The Chinese system of socialism, interlaced with some features of free market ideology, has elevated her economy from the doldrums that resulted from the fall-out of the Cultural Revolution of the mid-sixties. 1983 circa, marked a year of opening for the Chinese market to the world when Deng Xiaoping reversed some of the debilitating policies of Chinese revolutionary, Mao Zedong. However, the state retained control of the economy and continued to counter Harvard economist, Joseph Schumpeter’s theory of “Creative Destruction”, as the state played a central role in allocating resources to sectors of the Chinese economy based on partisan prejudices. Hinging her economy on exports and being fully aware of the tides of floating exchange rates, China adopted a fixed exchange rate policy to encourage her local industries and keep her exports competitive on the international market. Discounting the relative closed-door, policy stance maintained by the Chinese economists, it is clear that China’s currently enviable, economic position cannot be diametrically attributed to the interplay of “free market forces”. 

Without ambiguity, the required structure that will lift Africa economically and socially cannot be left to the whims of the global economic order. I do not, by this submission, suggest that African economies implement fixed exchange rates or close our doors to foreign trade – indeed foreign trade is in our best interest – but we must become proactive and act ‘offensively’ (rather than defensively) to the mercurial landscape of global economics. A major transition occurred in China’s economic fundamentals when more emphasis was placed on the intellectual evolution of the ordinary Chinese and the development of a strong knowledge economy while manual labour was and is gradually (but progressively) being relegated to the back-seat. The US and Japan have been the early champions at converting raw intellectual capital to great products and services, while the former imperialist machine – the United Kingdom – has been playing catch-up, choosing the financial services space instead. The global trend is clear; at a point in its economic history, the United States manufactured a great percentage of its goods in the US until China and other Asian economies presented themselves as cheaper manufacturing destinations, with great human populations and low-wage regimes playing the role of process catalysts. China’s dominance in the global outsourcing manufacturing sector can only continue for as long as the Chinese knowledge-economy reaches a globally competitive stage. As Chinese demographic data suggests, this is inevitable. In a few years, the Chinese economy will morph into a high-capacity service-based economy with mass goods manufacturing outsourced to Africa and other developing Asia-Pacific economies. Whether Africa will be able to play that role is a different matter altogether. Currently, however, Africa does not show any desire to follow this historical developmental trend. Another source of pressure for Africa will emerge as a consequence of the current economic crisis ravaging the industrialized world.

In coming to terms with her unfavourable demographics and dwindling reputation for innovation, the United States is making serious attempts at reviewing her immigration laws and policies; the idea is to strengthen the United States’ position on the pinnacle of innovation in the world. According to history, I believe the US will reassert that enviable position, by word and by action. Job growth and unemployment are major issues as the 2012 US election year looms. Some states have taken steps to increase the retirement age – putting more of the population to work and reducing social services expenditure. Everything will be done to attract the world’s best – again. Developing economies will have to work harder to keep their professional and skilled citizens or else they will be at the losing end of the intense global competition that will result when the current crisis is over. With the demographic data tilting towards an exponential growth of retirees in advanced economies like the US and the UK, the tendency is for a gradual but steady exodus to occur from the southern hemisphere to the northern hemisphere. The cerebral elite of many African states have become conscious global citizens. They cannot be pinned down to a distressing geographical location for too long, besides the legacy atmosphere of Afro-nationalism continues to wane by the day. They will, by choice or by the pressures of the environment, move to places in the world where their life and work are treated as assets of first priority.


Saturday, 8 October 2011

Africa and the Chinese Question [3]

"We shall [here] define PROGRESS as the increasing CONTROL of the environment by LIFE." - from The Lessons of History by Will & Ariel Durant 

A simple inference from previous parts of this work is that China has made relatively consistent progress over the last couple of decades. Historically high global commodity1 prices lend credence to this fact. Africa, a rich haven of raw materials, has 'witnessed' her trade volume with China increase by more than 20% from $91billion in 2009 to $110billion in 20102. Turning the searchlight on Australia, a developed country, rich in commodities but running a substantially diversified economy, we see another resource-rich nation with high economic activities similar to that between China and Africa; between 2010 and 2011, Australian exports (with iron-ore constituting a great proportion) to China represented 33.05% of all merchandise exports to east Asia3. The value of exports to east Asia in monetary terms is put at more than A$170billion (around US$166billion) by the Department of Foreign Affairs and Trade of the Australian government. The high economic growth in China continues to demand ever more resources to fuel and encourage her staggering growth rates. I explain this further with the chart4 below:

The graph shows the relationship between two sets of data; China's GDP growth rate from 1999 to 2010 and the average yearly Commodity Metals Price Index for the same period. The green line represents the Commodity Metals Prices Index while the red line represents China's GDP growth rate. Immediately apparent is the steady, almost proportional growth of both data sets. A considerable depreciation in the price index (-7.8%) is observed between 2007 and 2008 when correspondingly China's growth momentum lost 4.6 percentage points. This was during the credit crisis. The calculated correlation is 63.85%, which I consider to be relatively high using the growth data of a single country.  

However, it is important to look though the screen of increased trade volumes and GDP to some other "less-news-making" data. The Human Development Index (HDI) serves a useful purpose in this regard. The question of its bias and inadequacy is an argument for another day. Australia has continued to remain in the top five of the HDI trend data while many African societies have continued to remain at the bottom. It is general knowledge that Africa has continued to grapple with the concept of a resource curse; the ability to convert her  favourable demographic status and raw materials to social prosperity has not been exploited (or is absent?). In Africa, we find that it has become commonplace to resist any comparison with the developed world (like Australia), but I ask, against what or who shall we compare ourselves? I see no point in belabouring the problems of Africa; my objective for this work is purely advisory. The thirteenth chapter of Will and Ariel Durant's book, The Lessons of History, bears the title, "Is Progress Real?". That question is blowing in the wind.

As is usual and normal for any entity, China will tend to tread a path of least resistance in her journey to sustained economic glory. More importantly, the necessary back-up structures and frameworks of redundancy will be created to guarantee that China is not stopped in her steps - why should China be stopped? With this in mind, I am constrained to infer that Africa's trade volume with China can only increase, as Africa (discounting all neo-imperialistic reasoning and general paranoia) presents little or no policy resistance to any malign trade conditions between herself and China. The events that have transpired in Zambia recently present a strong case study. China's growth has demanded more copper than ever before. Zambia happens to be a nation with one of the largest, export-grade copper deposits. The Chinese thinking in establishing a copper mining plant in the Zambian Copper-belt region is analogous to a multinational that decides to cut costs by procuring a commodity at the source of extraction, in the process bypassing the vagaries of the international commodities market.  All other (proclaimed) incentives such as GDP growth for the local economy, community development and social elevation are secondary. Of course that is understandable. China must grow. I resist the temptation of deliberating on the issue of the mine workers' demands and the ensuing political issues because I believe that the springboard of any mutual Afro-Chinese economic interplay must transcend the levels of an employee-employer relationship. 

However what is clear from the foregoing is that China's mission in Africa is one that is justified by the simple theory of natural selection. China must survive. Her ideological foundations must thrive and evolve. If Africa must play at a respectable level of international trade and negotiation, then as a matter of unequal priority, she must substantially improve her "Gross Intellectual Product". Africa will have to define a new index for collective progress and relate to China and the rest of the world based on that definition. Africa has survived for too long on instinct. Instinct has its place in human relations but when complex, human systems have been thought through and designed, instinct may become an individual's (or a people's) undoing. be continued

1 A commodity is a physical product such as grain (like wheat) or metal (like aluminium) which can be exchanged for a similar product and investors can buy and sell as a means of speculation and hedge against future risk through a futures exchange. 
2 Source: Standard Chartered
Source: data computed with inputs from the Department of Foreign Affairs and Trade of the Australian Government. 
4 Chart was plotted with China's GDP growth rate inputs from The World Bank Group and historical Commodity Metal Price Index inputs from The International Monetary Fund. 

Sunday, 2 October 2011

Africa and the Chinese Question [2]

"The SOCIALIST system will eventually replace the CAPITALIST system; this is an objective law independent of human will. No matter how hard the reactionaries try to prevent the advance of the wheel of history, sooner or later revolution will take place and will surely triumph."

- excerpt from Mao Zedong's speech at the joint meeting of the Supreme Soviet of the USSR in celebration of the 40th anniversary of the Bolshevik Revolution (November 6th, 1957).

[In order to achieve brevity in this series and focus primarily on the factors that I believe should inspire Africa's policies and handling of economic issues regarding China, I will skip the details of the fundamental ideologies and flash-points in the history of the People's Republic of China (PRC), but will make references to what I consider relevant to the current discourse]

In the first part of this series, I laid a general background describing the 'special' connection between the United States and China. The excerpt above, adapted from Chairman Mao's speech in the former Soviet Union, is very informative for our current economic epoch. It provides a necessary perspective into the unfolding relationship between the US, representing much of the developed world and China and how the dealings between the world's bastion of free markets and the increasingly prosperous socialists will form the framework which Africa might be forced to operate within over the next couple of decades.

As has been echoed from the political standpoint by the former US Secretary of State, Henry Kissinger and the private sector angle by Martin Sorrell, CEO of WPP Group, China is only a ‘returning’ world power. This is a view held by many. My opinion is that China is returning as a more open society compared to her pre-20th century status as a relatively isolated, self-sufficient economy. I believe that China’s isolation could be attributed to the fact that the characteristically high, internal economic activities could sustain the nation and maintaining little or no contact with the West (mainly the British) assuaged her fears about imperialism which was sweeping across the entire world during the era. The infamous Opium Wars represented the first, concerted steps in the introduction of the Chinese economy to the world (it goes the other way too).  

With economic strength comes higher negotiating power and prestige in the arena of international politics. Needless to say, China currently possesses such capacity and resources in great proportions. However, China had previously assumed a back-seat position as the rest of the moved on, mainly due to the tightly-controlled economy and late catch-up to the digital directions of the world. China has managed her finances well over the decades, growing her economy from single to double digit growth rates by the mid-2000s as the graphical illustration below shows*.

While the rest of the world, especially the capitalist pack, throttled on, inventing ever-more complex financial debt instruments and subjecting their economies to series of booms and bursts, China for a large part of the two decades maintained a relatively silent, closed economy (only joining the World Trade Organization in 2001) and relying heavily on her power of exports. China's fixed exchange rate has helped her maintain competition in the international market for her cheap exports. By this I mean that China's exchange rate (to the US Dollar) is not left to float; with China's large pool of foreign exchange reserves, efforts are continually made to sell the yuan (or officially the Renminbi) while racking up greenbacks. Of course, the higher the supply of yuan in the Chinese economy, the lower the value and the less amount of goods a Chinese can purchase (and managing inflation becomes a challenge as a result). 

I consider it pertinent to state that China has attained her current status without adopting the innovation ideologies of capitalism and will, if she ever had any doubts before the credit crunch of 2007-2008 (till date), stick to her reformed socialism (with Chinese characteristics) principles. One could argue against Chairman Mao's statement, arming himself with the reality of the collapse of the Soviet Union in 1991, highlighting that we are inherently limited in our grasp of what the future holds. On the other hand, the same debater would be defenceless in the face of the current phase of the evolution of the global financial system. Yes, I consider it an evolution because since the Great Depression, the global financial order has witnessed various boom and burst cycles typified by credit expansion, miscalculation of risk, relaxation of lending rules and credit rating agencies, bubble growth, more credit expansion, bubble burst, higher regulation and the cycle repeats itself. 

It is also important to note that China's current position in the global marketplace was engendered to a large degree by the United States' consumer-driven economy. As the US and the rest of the developed world maintained the running of the capitalist engine, China grew and expanded with the free-market ideology as the main catalyst (even though de-localized). The capitalist system (with all its benefits and flaws) has abetted and proven 'successful' the socialist system (with Chinese characteristics). 

to be continued...

* Source:, The World Bank Group.

Tuesday, 27 September 2011

Africa and the Chinese Question [1]

A single superpower emerged at the end of the cold war and continued to dominate international politics and global events until that revered position was challenged at the dawn of the 21st century. 

The American way of life permeated every nook and cranny in the world as the 'American Dream' translated to a 'Global Dream'. The United States of America was founded upon three main tenets; the right to life, liberty and the pursuit of happiness. The multi-faceted expressions of this ideology have continued to improve the living standard of the average American over the 230+ years of the existence of the United States. The limits of the creativity of the human mind have been stretched continually on no other better test-bed than America. A typical American sees himself and is seen as a first-class global citizen, one before whom all doors are open and no request is denied. In many ways than few, this ideology is the fulcrum upon which all American endeavours have been established and sustained and has served (and continues to serve) its purpose to a degree never before envisaged by mortals. In retrospect and comparison, no other system has worked as optimally as possible to tap into the hidden potentials of mankind and utilize the discoveries for the common benefit of the human race as the American system has. 

The historic commitment to the American way of life also empowered the esoteric aspirations of more than a billion 'unique' individuals. In the years that followed the abandonment of the gold-standard and the assertion of the US Dollar as the world's reserve currency, the economics of the world became more determined by the fine desires of the average US consumer, and the American government, in a bid to keep the capitalist engine running and uphold her commitment to the pursuit of happiness, started running fiscal deficits - and the deficits continued to increase. A fiscal deficit describes a condition in which a government's total (budget) expenditure exceeds her total revenue generated. (Of course the high level of economic activity has been upheld as a good predicate for a deficit-running economy by the distinguished economist, John Maynard Keynes. That makes sense, but my submission is that perception can be different from reality). When governments run deficits, they must borrow money to run and maintain the economy. They do so by issuing government debt, known as bonds. These bonds are issued with a promise to pay back with interest to the lender. The maturity period for a bond can vary from 1 year (short-term) through 5 years (short-term) to 30 years (long-term). A shorter-term government debt - treasury bills (T-bills) - is also issued, bearing a maturity period of less than 1 year. 

On the other side of the globe, however, something important was happening. The more than 1 billion unique individuals - the Chinese - were racking up massive current account surpluses as the export component of her account continued to increase. With more than one-sixth of the world's population and relative low wages (cheap labour), she started out manufacturing very cheap, sub-standard goods and kept it up until standards improved and China became the largest exporter of goods in the world*. According to China's Bureau of National Statistics, China's population hit 1.339 billion by November 2010 and her total exports value was at $1,581 billion** by the end of the same year (just to be sure, that is about $1.6trillion). This leads me to compute each Chinese resident's contribution to the nation's export value as $1,180.73. (I understand that the demographics of the Chinese population would place it at a much higher value). These figures give an indication of the size and potential of China. 

In addition to the surplus balance of trade (higher export value than imports), a savings culture was also developed in China which surged monetary reserves to more than $1trillion. As her reserves kept increasing, she decided to put some dollars to interest-yielding ventures and the best investment destination was the United States of America. In high school biology, I remember studying a special relationship known as symbiosis, which defines a mutually beneficial association between two organisms. A similar relationship developed between the United States and China; the US was running deficits year in, year out, while China was piling up greenbacks. Consequently, to borrow David Smick's phrase, an 'ocean of capital' started flowing between the US and China. 

To be continued...

* CIA World Factbook
** if the EU is factored in as a single entity, China becomes the second largest

Thursday, 22 September 2011

Africa's Critical Moment

I believe strongly that the margin that existed, if it ever did, between the unfortunate plane of ignorance and economic struggle in Africa and the glorified heights of enlightenment and prosperity in the West, has diminished substantially. Today we are exposed to tools and resources that if employed in the most optimal, value-oriented manner can spur a sustained wave of economic growth and development in Africa. As much as I appreciate the political and cultural challenges facing Africa, let's look at the following cases:

Aliko Dangote of Dangote Group founded his business in 1981. He is involved in the  production and distribution of various consumables from spaghetti to cement. He is widely regarded as one of the greatest businessmen from Africa whose net worth of $13.8billion is definitely a head-turner*

Mark Zuckerberg, the twenty-something year old co-founder of Facebook Inc., on the other hand, started off in 2004. The social network has swelled exponentially to a 750-million user base and is currently valued at $82 billion**. Mark's net worth is standing tall at $17.5billion.***

That information is just enough to allow us compare. Yes, they operate in very different sectors and under very different circumstances, but a 23-year difference in the establishment of both corporations is a thing to ponder about. What becomes immediately apparent is the organic proliferation of tools and resources over the years that can cause a giant leap in the economic well being of any global citizen.

However, excluding a few Africans like Dangote, a vast majority, whose frequent exposure to these resources stuns the average westerner, have chosen (unconsciously or not) to merely increase their purchasing power. Such a venture is definitely not malign, but it is only when economic strength is exercised in the right direction that it becomes the extraordinary experiences we forever marvel at in the northern hemisphere.

The current global challenges-the US and Eurozone Sovereign Debt Crisis, the (almost) balancing effect of emerging markets (such as the BRICS), the Arab Spring and others-provide a unique opportunity for the explosive growth and development of the African mind. Every time a revolution occurred in history, that moment became, for those who understood the times, a point of inflexion in their mental orientation and they seized the opportunity to make great strides; the French Revolution of 1789, the Russian Revolution of 1917, the end of WWII and the events that followed all yield credence to my argument. A new world order will emerge from the current state of things. Lots will be divided - again. We must take the necessary aggressive steps to ensure that in the next decade of prosperity that follows the current global issues, Africa is not again treated as one with a begging bowl.

Let's drop the begging bowl and get to work.

Good evening.

*Forbes, March 2011.
**Bloomberg, September 2011.
***Forbes, September 2011.

Tuesday, 20 September 2011

Dexter's Desk Live!

Hello everyone,

Welcome to Dexter's Desk! Like every venture that has a beginning, this represents one of the first steps in participating and contributing to Africa's economic expansion and igniting and sustaining the fire of innovation in Africa.


The global engine of capitalism is today challenged by problems whose solutions seem to have eluded the human race. But like we've learnt from the premature clamouring for the closure of the US Patent Office at the dawn of the 20th century (as many believed that everything that could ever be invented had already been invented), there's always more work to do, more rivers to cross, more mountains to level and more valleys to raise. We, as Africans, must now begin to contribute in innovative ways to finding solutions to, not just our problems, but to global problems. The global financial crisis is not hurting Africa as much as it is ruining the fortunes of the world's most advanced economies. Unfortunately, for a majority that is something to be merry about. Africa's historical complacency operates under the false pretext that there is (almost) little to lose - since 'he that is down fears no fall'. On maps and charts describing the global financial crisis, there is frequently no allusion to the fate of Africa (except South Africa, of course). But we must be illuminated to know and understand that we've got a lot to lose. We cannot keep reclining in the back-seat every decade as contributory solutions to every economic crisis are proffered by every other continent except Africa (even if those solutions stand upon faulty fundamentals). What is Africa's stake in the global scheme of things? 


Good evening.