“Let them drink bubbles . . .” The Nairobi Curse revisited in a time of hunger

Back in March 2010–well before the last widespread famine in 2011–I wrote a piece here called “The Nairobi Curse” suggesting an analogy between the role of Nairobi in Kenya’s overall political and economic development and “the resource curse” faced by those countries prized by outsiders for oil, for example.

With famine being reprised I was reminded of the “Nairobi Curse”  when I noticed on the “KenyaBuzz” Nairobi entertainment and happenings newsletter a charming little story, “Nairobi’s Newest Wine Shop Delivers In A Different Kind Of Way”, promoting “Wine and Bubbles”, a French couples’ couple of Nairobi stores selling French wine.  The expat Nairobian explained that he had hoped to grow vineyards in Kenya but learned on moving from France that the climate was not conducive so he was selling French wine instead.

The growth market of course is introducing wine tastes to what is invariably called the “Kenyan Middle Class”–basically the third tier wealthy Kenyan of the Nairobi professional/managerial class.  The sort of people who would be upper middle class in a much more broadly and deeply prosperous country where most people had enough to eat with a per capita income several times that of Kenya’s.

Here is my original post:

This is Kenya’s version of “the oil curse” or “the resource curse”.

 

Nairobi is the place to be in Sub-Saharan Africa (and outside of South Africa) for international meetings and conferences.  It is a relatively comfortable place to live for middle class or wealthy Westerners, or young aid workers.  An international city with a certain level of cosmopolitanism, yet of manageable size and scope relative to so many burgeoning cities of the less developed “South”.  A headquarters for two UN agencies.  A diplomatic critical mass, with lots of representation from all sorts of countries around the world that have little obvious presence in Africa, but also a crossroads for representation of everyone playing for a major piece of the pie (Iran, Libya, China, India, the Gulf States–as well as obviously the US and Europe).  And you can go on business, and then take a safari on the side.

 

From the US, soldiers go to Djibouti (the Combined Joint Task Force-Horn of Africa, at Camp Lemonier) while diplomats go to Nairobi.  The US runs its Somali diplomacy from the Embassy to Kenya rather than Djibouti which would be the more obvious place on paper.  Likewise, Somali politicians tend to live much of the time in Nairobi.   Nairobi is the place to invest cash generated in Somalia.

Nairobi is the “back office”, and in some cases the only office, for much of relatively huge amount of US aid-related effort for Southern Sudan, as well as that from other countries.

 

Nairobi has something like 8% of the Kenyan population, and perhaps 60% of the GDP (don’t let anyone tell you they know any of these figures too precisely).  Perhaps 50-60 percent of the population lives in informal settlements (“slums”) whereas the other half lives as “the other half”.  Most national level Kenyan politicians holding office live primarily in Nairobi (although they may have homes in a constituency they represent in Parliament as well).

 

When I was the East Africa Director, based in Nairobi, for IRI (where our much bigger Sudan program was also  headquartered) as an American I felt that my government at that time (2007-2008) was falling into the trap of recreating a Cold War paradigm for our international relations by looking around through our “War on Terrorism” telescope.  And that in Kenya there were a lot of international interests that valued stability over reforms for reasons that related more to the current role of Nairobi than the long term interests of Kenyan development.

 

Certainly Nairobi is a resource that has great value–as does oil, for instance–it’s just a question of whether Kenyans can find a way to use it to the broad advantage of the nation or whether it will continue to be exploited to disproportionately benefit the most powerful.  Including being used to help keep them in power when more Kenyans want democratic change.

 

Just this past week Kenya hosted an IGAD meeting on Sudan–and flouted its obligations as a party to the Rome Treaty on the ICC by inviting President Bashir of Sudan while under indictment.  Meanwhile the ICC is considering whether to allow formal  investigation of key Kenyan leaders for the post-election violence from 2007-08.  But Nairobi is such a great place to have these conferences . . . and Sudan is so important (Khartoum is no Nairobi, but it has oil).

How will the Iran nuclear deal play out in East Africa?

I wish I had a clear sense of how this might develop but I don’t.  It seems to me that there may be several areas of impact over the next few years:

+Diplomatic leverage of Museveni, Kenyatta, Kigame et al vis-a-vis the United States will be reduced as one of the main US “asks”–UN votes to maintain nuclear-related sanctions against Iran–drops away.

+While I do not foresee the current US administration raising expectations for other US priorities from these East African leaders, the next US administration might feel some greater freedom to address “the democratic recession,” declining press freedom, and other issues on the formal US policy list.

+Oil prices:  if a lot more Iranian oil gets to market both in the near term from the immediate impact of lifting sanctions and the longer term from the increase in capacity associated with ramped up foreign investment, the prospects for oil production in Uganda and Kenya will be impacted, especially as related to the 2021-22 election cycle.

+Iran will reassume a stronger role in trade and finance in the region and thus compete more strongly with Israel, Saudi Arabia and the Gulf States.

+Iran will presumably increase its regional naval presence.

+The fall of the Gaddafi regime in Libya and subsequent sad state of affairs in that country reduced one major “petrocash” player in East African politics; an Iran less cash-strapped by UN sanctions might have aspirations to finance East African politicians aside from its espionage/security/terrorism enagement.

New Developments on Iran’s Geopolitcal Efforts in Africa–another challenge for democracy?

Uganda, Iran and the Security-Democracy Trade Space?

High Level  U.S. Delegation Carries Requests to Museveni on Fair Elections and Iran Sanctions

Salim Lone book talk and today’s public radio stories

Salim Lone last week at Chatham House, London, speaking on Kenya’s Pre- and Post-Election Challenges: The End of the Kibaki-Raila Decade ahead of the publication of his book, War and Peace in Kenya.

From NPR’s All Things Considered today, “Kenya’s Free Schools Bring a Torrent of Students”:

A study published by Britain’s Sussex University in 2007 found that Kenya’s free schools were “a matter of political expediency … not adequately planned and resourced,” and as a result, there have actually been more dropouts and a falling quality of education.

Conversely, the number of private schools has increased tenfold as parents look for alternatives to overcrowded classrooms.

The situation is similar in neighboring Tanzania, which did away with school fees a year earlier in 2002. The student population also skyrocketed, leading to packed classrooms, book shortages, overused toilets, a teacher scarcity and an increase in paddling students to keep order.

And here is a good “Wealth and Poverty” feature from American Public Radio’s Marketplace on an international folk art market in Santa Fe, New Mexico with craftspeople from a number of African countries participating.  Interesting discussion of globalization and the impact of imports of used clothing.

State of U.S. economic interchange with Kenya

So where do things stand economically between the United States and Kenya at the start of the Administration’s “new policy” for Sub-Saharan Africa?

Faded Aid

From the East African’s coverage of the Gration resignation, Envoy’s exit underlines new US strategy in Africa:

Over the past five years, the US clout in the local economic scene has been declining as Kenya continues to look east, specifically to China, India and Japan for aid. Whereas the US continues to be a major source of development aid, disbursing an estimated $3 billion between 2008 and 2011, China, India and Japan have emerged as new sources of infrastructure funding.

China is currently carrying out improvements of roads in Nairobi, while Japan is actively supporting the country’s energy sector.

America’s support has largely focused on health and military funding, with the US government set to give Kenya $14 million in military help this year.

In trade, whereas imports from the US have stagnated at Ksh45 billion ($535 million) since 2007, Kenya’s imports from China and India have more than tripled, rising from Ksh46 billion ($547 million) and Ksh56 billion ($667 million) to Ksh144 billion ($1.7 billion) and Ksh148 billion ($1.8 billion) respectively.

Kenyans had been hoping that General Gration, who spent his childhood in Democratic Republic of the Congo and Kenya, and spoke fluent Kiswahili, would take US-Kenya relations to a new level given his knowledge of Kenya, its people, its language, and its culture.  .  .  .

Assistant Secretary of State Carson testified on June 28 before the Senate Foreign Relations Committee on “Economic Statecraft” emphasizing the importance of the renewal of the Third Country Fabric provisions under AGOA, and the harm caused by uncertainty:

. . . As you know, many African countries are not taking full advantage of the benefits of AGOA. However, some AGOA beneficiary countries take good advantage of the provisions for fabric and apparel product lines. The third country fabric provision component of AGOA was designed to provide an opportunity for AGOA-qualified countries to be more competitive in labor intensive textile processes such as sewing, stitching, and cutting fabric.

It was widely recognized that most African countries were not able to compete in the more capital intensive process of producing fabric from raw cotton. African manufacturers have successfully used the AGOA third country fabric provision to create jobs, not just in the manufacturing countries but have used this provision to create cross-border pan-African supply chains. These supply chains also encourage regional integration – one of our key goals for the continent. Fabric and apparel exports are the second largest AGOA export after extractive industry products. However, these imports still account for less than two percent of U.S. imports.

I’d like to say a few words about what is likely to happen if third country fabric is not renewed. In our globally linked world, American buyers place orders six to nine to twelve months ahead. 95 percent of AGOA apparel and textile exports enter under the third country provision. And the AGOA third country fabric provision is the only way that African textile and apparel companies can remain competitive with larger producers such as China, Vietnam, and Bangladesh.

Without our help, jobs will continue to disappear in some of Africa’s most vulnerable economies, affecting primarily women and the families they support. Eighty-five percent of these imports come from just four countries: Lesotho, Kenya, Mauritius, and Swaziland.I know that diplomats from these countries have come to see you to emphasize the disproportionate effect that lack of renewal of this provision will have on their economies.

The effects of the loss of orders are troubling. At the AGOA Forum, the Swazi Minister for Trade told AGOA delegates that the loss of the provision will “shut the country down”. The textile and apparel sector is the largest formal sector employer with over 15,000 jobs and employment is already 41 percent in this small, landlocked country. Loss of just one of these jobs means that ten people lose their livelihood, since Swazi officials calculate that each textile job directly supports ten people. Lack of orders have already led to plants closures in Namibia, robbing people of their legitimate livelihoods and governments of much needed tax revenues. The Mauritians report that their orders are down 30 percent since January due to the uncertainty whether this provision will be renewed in a timely fashion.

The Trade and Politics Blog indicates that passage of the new bi-partisan legislation to extend the third country fabric provision is finally expected by the end of July before the Congressional Augut recess.  I hope this get squared away as soon as possible.

See “Africa Bureau announces vision to revitalize AGOA” and comment by Dr. Richard Mutule Kilonzo, Chief Executive, Kenya Export Processing Zones Authority:

The potential impact of a delayed renewal of the third country fabric provision of AGOA is grave. Third country fabric is the most successful components of the AGOA legislation and can be credited with over 100,000 direct jobs in Sub-Saharan Africa. Apparel orders are drying up due to the uncertainty surrounding the provision. In Kenya alone, over 40,000 factory workers could very likely lose their jobs if third country fabric is not renewed in a timely manner. The apparel industry in SSA rely on the third country fabric provision; without it there is a very real possibility that the investors in the apparel factories will pack up and move production to some other part of the world as happened in Madagascar following its loss of AGOA eligibility in 2009. This would cause enormous economic strife in countries that are strong partners of the United States. On September 30, 2012, the third country fabric AGOA provision will expire. With barely six months to go, further delay threatens the lives of 1 Million people, mostly women who work in the apparel sector. We estimate that each factory worker supports ten additional people. If third country fabric is not renewed soon, these jobs will disappear and Africa’s poverty rate will sour by over 55%.

Africa Bureau announces vision to revitalize AGOA

Assistant Secretary of State Johnnie Carson at CSIS from African Press Organization (APO):

While AGOA has achieved a certain amount of success, it has not solved Africa’s challenges and the region has not experienced a genuine economic revolution. Africa also continues to struggle to compete in an increasingly competitive global economy. For these reasons I am fully committed to revitalizing AGOA.

AGOA remains the centerpiece of our trade and investment policy with Africa. In 2012 the third country multi-fiber provision which allows textile producers to source their raw materials from other countries is set to expire and in 2015 the AGOA legislation itself will end. I would like to outline the State Department Africa Bureau’s vision for the next steps on AGOA:

1. Renew AGOA through 2025. The uncertainty about renewing the legislation creates a disincentive for potential investors to source production in AGOA eligible countries.

2. Renew the Third Country Multi-Fiber provision through 2022. The rules of origin for fabric under AGOA are one of the most important incentives to invest in textile production in AGOA eligible countries. This component of AGOA allows textile producers in AGOA countries to source their raw materials from other countries and still maintain their preferred access to the U.S. market.

3. Add South Africa to the Third Country Multi-Fiber provision. South Africa is the only AGOA eligible country not eligible for this provision and also the country best suited to take advantage of it.

4. Continue USAID’s Trade Hub and capacity building programs. Without this type of strong trade capacity building program AGOA cannot succeed.

5. Ensure that the Department of Commerce’s Foreign Commercial Service maintains their presence in Dakar and Accra. This is crucial not only for AGOA but for all of our economic initiatives in Africa.

6. Increase USDA’s capacity to provide phytosanitary certification. Agriculture exports remain an important and underutilized component of AGOA.

7. Tax incentives for earnings from AGOA investment. AGOA already provides substantial tariff savings for U.S. companies importing eligible products from Africa, but there are no other types of tax incentives provided under the legislation. Recommend that the U.S. government support an effort to eliminate the U.S. tax on repatriated revenues from American companies that invest in factories in Africa that produce AGOA exports to the US.

There has been a great deal of impressive economic news coming out of Africa recently. I am very encouraged by these positive developments. However, it is not the time for us to become complacent. Africa still faces huge challenges and we need to continue and revitalize our economic partnership. This is not only in the interest of our African partners, but in our interest as well. We need to maintain and improve upon AGOA today in order to continue to play a role in the growing dynamism in Africa tomorrow.

In the meantime, Russia is also seeking to “up its game” in African trade and investment.  Here is a link to “Buziness Africa”, a Russian magazine covering the subject, including AGOA.

New IMF Survey Predicts 5%+ Average Growth in Sub-Saharan Africa

IMF Regional Economic Outlook: Sub-Saharan Africa

The IMF identifies the biggest risk to a return to record pre-financial crisis growth levels in the region as an overall global slowdown, and also notes risk to the pace of policy reforms from the large number of elections scheduled for 2011.

Sub-Saharan Africa’s trading patterns have shown some dramatic shifts during the last few years toward China and other parts of developing Asia, the report said. These shifts were so marked that, by 2009, China’s share in the sub-Saharan Africa’s total exports and imports exceeded that between China and most other regions in the world.
Exports of goods and services make relatively small contributions to aggregate demand in most sub-Saharan African countries. Europe and other advanced countries remain the region’s dominant trading partners. However, in a minority of countries— including the major natural resource exporters— the impact of developing Asia on global export demand and commodity prices is expected to be significant in both the short and long term.

Overall, trade with Asia is therefore likely to be an increasingly important factor in maintaining growth for the region on its current trajectory. But the key drivers of African growth are likely to remain: political stability; the business climate, including the prudent exploitation of natural resources; and the quality of economic management.

Some optimistic observations on development and democracy, and some more aid-trade stories

“A New Dawn for Africa” from Johnathan Dembleby in the Daily Telegraph.

The boss of the call centre was born in Nairobi but left for the States to make his fortune. He became a big player in corporate America but now he is back home, running Kenya’s largest call centre, which has contracts with Britain and the United States as well as domestically. What brought him back? “I saw a chance to make serious money here. If they can do it in India, why not Kenya?” He abhors Africa’s “begging-bowl image” and the cronyism and corruption that bedevil his own country, but he is an optimist. “Of course we need better leadership but Kenya is full of entrepreneurs – that’s the way forward.”
. . . .
There are scores, hundreds, thousands of such examples. It is not yet a flood but it is more than a trickle as a steady stream of African émigrés return to make a better life for themselves and their families in their own countries. This “brain gain” does not yet balance the “brain drain” but it is a symptom that much of Africa is changing for the better. While the fundamental conditions for a thriving economy – the rule of law and transparency – are not yet deeply rooted in any African state, the foundations are at last being nurtured in many of them.
. . . .
Democracy is still a fragile flower but has started to bloom in many parts of the continent including Nigeria. Though instability is a constant predicament, tyrants and military dictators are now the exception not the rule. Freedom of expression, dramatically enhanced by Twitter and Facebook and the ubiquitous mobile phone, is proving exceptionally difficult to suppress except by the kind of brute force that only a tiny minority of African regimes are nowadays willing to exercise. Whether it is for these reasons or because they have been voting with their feet to confirm the latest New Scientist survey – which reports that regardless of their multiple tribulations, Nigeria is home to the happiest people on earth – some 10,000 Nigerians returned home last year. A similar flow is reported in many other countries.

None of this is to magic away the desperate circumstances that millions of Africans endure. Over the past 40 years, I have witnessed far too much hunger and too many deaths from disease, conflict and tyranny to be a Pangloss about this continent. The suffering is heart-breaking, the inequities are offensive, and the corruption is corrosive. My point is that these miseries are very far from being the whole story. The Africans I met on my 7,000-mile journey through nine countries resent the pitying and patronising attitudes that are so often adopted towards them by a Western world which – from their perspective – doles out aid with one hand while nicking the oil and minerals (by which the continent is blessed in super-abundance) with the other.

Again and again, at every level, people told me: “Don’t give us aid – trade with us fairly. Stop ripping us off.” Of course, most of them don’t mean that literally; they simply want a relationship with the rest of the world that is grounded in greater respect and understanding. Well-meaning sound bites like Tony Blair’s “Africa is a scar on the conscience of the world” inadvertently label as “victims” hundreds of millions of energetic and hard-working individuals who are resilient, inventive and enterprising – and who live in vibrant and peaceable communities that have much to teach our own dysfunctional societies.

On the aid front, “Dar rushes to spend $700M as U.S. official jets in”, from The East African. Worth noting that this $700M from the Millennium Challenge Corporation for Tanzania approaches twice the amount of the annual budget for AFRICOM. A BBC report asks five years after the Gleneagles Summit: “Did more African aid deliver fewer coups?”

And back on the entrepreneurial side, see “Trader in grasshopper delicacy hops to fortune” from the Standard.

Trade and Aid [Update]

A Good African Tale: an African entrepreneur struggles for recognition in rich county markets from the Economist.

Update: “Rwanda Coffee Success Story” from William Easterly’s AidWatch (HT Texas in Africa)

Nick Wadham’s latest in Time: Bad Charity (All I got was this lousy t-shirt) — and his related blog post, Top-Down Aid for Africa.

Texas in Africa has a great related multi-part series of discussion questions May 4-7 about the Western approach to aid and development in Africa:

This week I’ve been trying to sketch an outline of how Westerners tend to develop and characterize our relationship with Africa and the people who live there, specifically with reference to the international aid and development system. I’ve argued that the savior mentality is misguided, that Africa is not rightfully ours to save, and that a better way to assist would be through a paradigm of empowerment. . . .
Today I want to conclude this series by thinking about what is probably the biggest barrier to moving into an empowerment paradigm: the governments that give and receive aid. . . .
Why? Because aid – for donor governments and the governments which receive the bulk of aid – is inherently political. Except in cases involving natural disasters or epidemic disease, donors don’t typically give freely to everyone out of the goodness of their intentions. Aid projects are funded at least in part (and sometimes entirely) on the basis of donor priorities. When aid projects take into account the real, expressed needs of recipients (which is, I’m glad to say, increasingly real for most project), they are often structured in such a way as to advantage suppliers or producers in the donor state, or to reward good governance or provide support to an ally.
As we might expect, there is often a contrast between donor goals and what is actually needed in order to improve the material situations of the recipients. . . .


UPDATE
NYTimes: “At Front Lines, AIDs War is Falling Apart”; “Paper Cuts: How Obama’s Father Came to Hawaii”; “Letters: From Kenya to America”

Reuters: Donors to slash Tanzania budget aid.

Nick Wadhams at NPR:“Somali Pirates Take the Money and Run, to Kenya”

The Times (London): Book review–“War Games: The Story of Aid and War in Modern Times by Linda Polman
Humanitarian aid prolongs conflict and misery because the bad guys learn how to exploit it”
;
“Easy Money: the great aid scam”

“With Flights to Europe Grounded, Kenya’s Produce Wilts”

With Flights to Europe Grounded, Kenya’s Produce Wilts Jeffrey Gettleman in the NYTimes

A good article, worth reading.

If farmers in Africa’s Great Rift Valley ever doubted that they were intricately tied into the global economy, they know now that they are. Because of a volcanic eruption more than 5,000 miles away, Kenyan horticulture, which as the top foreign exchange earner is a critical piece of the national economy, is losing $3 million a day and shedding jobs.

The pickers are not picking. The washers are not washing. Temporary workers have been told to go home because refrigerated warehouses at the airport are stuffed with ripening fruit, vegetables and flowers, and there is no room for more until planes can take away the produce. Already, millions of roses, lilies and carnations have wilted.

“Volcano, volcano, volcano,” grumbled Ronald Osotsi, whose $90-a-month job scrubbing baby courgettes, which are zucchinis, and French beans is now endangered. “That’s all anyone is talking about.” He sat on a log outside a vegetable processing plant in Nairobi, next to other glum-faced workers eating a cheap lunch of fried bread and beans.

Election-driven riots, the Sept. 11 terrorist attacks and stunningly bad harvests have all left their mark on Kenya’s agriculture industry, which is based in the Rift Valley, Kenya’s breadbasket and the cradle of mankind.

But industry insiders say they have never suffered like this.

“It’s a terrible nightmare,” said Stephen Mbithi, the chief executive officer of the Fresh Produce Exporters Association of Kenya. He rattled off some figures: Two million pounds of fresh produce is normally shipped out of Kenya every night. Eighty-two percent of that goes to Europe, and more than a third goes solely to Britain, whose airports have been among those shut down by the volcano’s eruption. Five thousand Kenyan field hands have been laid off in the past few days, and others may be jobless soon. The only way to alleviate this would be to restore the air bridge to Europe, which would necessitate the equivalent of 10 Boeing 747s of cargo space — per night.

“There is no diversionary market,” Mr. Mbithi said. “Flowers and courgettes are not something the average Kenyan buys.”