African Supply Chains Go Local
The Covid-19 pandemic has disrupted supply chains for foreign goods into Africa and made local entrepreneurs recognize the need to prioritize local manufacturing. Many retailers in Africa had simply imported goods, flying in products from China and India and then reselling them. British property consultancy Knight Frank showed in a recent study that transport costs constitute 50-75% of the prices of African retail goods.
“People want to get rich quickly, so the fastest way is to import goods and charge a high markup – many successful people have done this,” explains Alex Demissie of the consultancy Africa Rising. “They do have pride for their countries [and homegrown products], but if there’s a lot of hassle, people will always use the easiest way to make money.” His consultancy sees a trend of more capital goods and machines to help local manufacturing taking place in Africa. “This is a very positive development for small and mid-sized companies – international firms who are investing in African countries are actively looking for local components that they can use in their factories on site,” says Demissie.
“Supply chains have become longer and more complicated, and hence more vulnerable,” says Andrew Alli of Southbridge, a pan-African consulting advisory and financial services firm. “We see a trend of diasporas returning to their countries to produce goods for these big international companies, such as making zippers for clothing firms. Supply chains are moving closer to these factories.”
Investments made by Chinese firms in Ethiopia and Kenya over the last three years have greatly improved rail connectivity, making it much easier to import and export goods, and the establishment of special economic zones in Ethiopia, Ghana and Nigeria are helping these countries to start local production centres.
African entrepreneurs also depended on imports from China and India because current cross-border supply chains within the continent are still weak and fragmented. South Africa, Morocco and Egypt have sophisticated supply chains similar to those of developed countries, but the rest of the continent is still trailing far behind, due to weak infrastructure. “It takes too long at customs to bring in the goods. Some of these nations are facing similar obstacles to Southeast Asian countries and China at the beginning of the 1980s,” says Mr Demissie.
Another boost to local supply chain creation is the Africa-wide free-trade agreement which entered into force last year. Commerce was due to have started on July 1 but has been delayed by the pandemic which forced the cancellation of tariff reduction and other negotiations. It may be tentatively shifted to January 1 next year. This is unlikely to face any further delays, even if a second wave of coronavirus infections hits the region, according to the deal’s top official Wamkele Mene. When fully operational by 2030, the agreement will create the world’s biggest free-trade zone by area.
China’s Palaces of Influence
China’s “palace diplomacy” is winning the hearts and minds of some African leaders but may be compromising their country’s and individual security. A Heritage Foundation report shows that Chinese companies have built or renovated 186 African government buildings since 1966, including the offices or residences of 24 heads of state. Of 70 such buildings where financing information was available, the Chinese government or Chinese companies financed all but three with 45 receiving a direct or partial subsidy directly from Beijing.
Some of the more recent examples include a $ 22 million presidential palace in Burundi, the fifth least developed country in the world, a $ 100 million parliament building in Zimbabwe whose economy is in severe recession, and $ 66 million worth of ministerial annexes in Liberia.
“Palace diplomacy helps explain the reason behind an increasingly obvious phenomenon: Many African rulers will likely side with Beijing over Washington on key strategic issues and in international fora like the United Nations,” says the author of the report. This construction effort goes hand-in-hand with Chinese telecom firms like Huawei building intra-governmental telecom networks which it has done for 14 African governments. The report was publicly criticized by the Chinese Ministry of Foreign Affairs.
The Kenyan government is under pressure to renegotiate the terms of the Chinese loans it took to build the Mombasa-Nairobi standard gauge railway. The rail service is not generating enough revenue to cover its costs and debts. But Kenya has to pay $ 940 million to the Chinese Exim Bank and China Development Bank by end-June in interest and other payments. Kenya has already had to table a supplementary budget in April for nearly $ 1 billion to pay a number of Chinese banks and Beijing. The Kenyan government also owes a Chinese logistics firm $ 380 million in unpaid bills, in part because of the unviability of the railway.
Myth of Chinese Aloofness
It has long been argued that Chinese in Africa tend to keep themselves separate from the locals. This is probably an exaggeration or at least no longer true for the one to two million Chinese living in Africa today. A study by Yan Hairong and a research team from Hong Kong Polytechnic University looked at Chinese in Zambia, Kenya, Tanzania, South Africa and other countries and concluded Chinese integration depended on a host of factors, including “local political environment, recentness of migration, language barriers and corporate policies”
The degree of Chinese integration depended most of all on the nature of their work. Contract workers tended to stay for a few years working on a project for a large Chinese company and included engineers, managers and skilled workers. These, the study found, “had the most interaction with locals…because they lived and sometimes ate with their local colleagues.” Migrant entrepreneurs, often small and medium businessmen, were more likely to become long term residents and bring their families. This group tended to live in small groups in cities. Thus in Luanda, Angola, there are a number of informal settlements of less affluent Chinese shop-owners and businessmen. Even among this group, Chinese retailers had the most engagement with local Africans. Chinese were also more likely than even Indian and European expatriates to speak and learn a local African language.
US Standing Damaged
The African Union condemned the killing of George Floyd, an unarmed black American choked to death by a US police officer in an incident that triggered weeks of racial violence across the United States. The riots are seen as further eroding the US’s once considerable influence in a continent that has seen a spurt in Chinese economic and diplomatic activity.
The African Union Commission’s chairman, Moussa Faki Mahamat, joined officials from Nigeria, South Africa and Ghana to condemn the murder and berated the US for failing to deal with racial discrimination. Bloomberg described these as “remarks that contrast sharply with the guarded diplomatic tones typically used in interactions with the world’s biggest economy.”
Though the Trump administration contributed $ 400 million to help Africa handle the Covid-19 pandemic, much of the goodwill from this has evaporated with the Floyd death and US President Donald Trump’s handling of the aftermath. “The US has traditionally been seen as that beacon of democracy that says you need to treat protesters with decency and stand up for rights,” said Adewunmi Emoruwa, the lead strategist at Gatefield, an advisory firm based in Abuja. “Now we see the looting, the arson, the near anarchy going on in the US, and the brutal police response. Africa is saying that maybe the US isn’t all we thought they were.”
President Trump’s derogatory reference in 2018 to African countries and his plans to quit the World Health Organization – headed by a former Ethiopian health minister – have not helped. The US government’s call for an independent probe into corruption allegations against the Nigerian head of the African Development Bank have riled the largest African country. But most damaging has been the sense that despite the US being the largest aid donor to the continent, its president has no interest in Africa.
Covid Debt Relief Helps Angola
Angola and Pakistan will be the overwhelming beneficiaries of the Group of Twenty’s debt service suspension initiative following the pandemic. Out of the $ 12.2 billion in total relief, Angola will get $3.4 billion which is about 28% of the total. The World Bank released estimates for these figures in June. Angola, struggling from the oil price crash and Covid-19, has total debt of $ 21.7 billion. The bank and the International Monetary Fund agreed that these resources would be better used if diverted to public health spending rather than payments to rich countries.
The bulk of the debt covered is owed to China, one reason Angola and Pakistan have benefited the most. Almost 60% of the debt repayments by the world’s poorest countries this year is owed to China, says the World Bank. Beijing has granted Angola a three-year moratorium on interest and instalment payments on its debt. “We are encouraged by the degree of commitment by China,” World Bank President David Malpass said. The move “has benefits for China over the long term in that it will have relationships with countries that are improved after the COVID pandemic.”
Over half of the African migrants interviewed on the Somali border seeking to make the perilous crossing of the Red Sea into Yemen and then the Persian Gulf had not heard of the Covid-19 pandemic. The International Organization for Migration, a United Nations agency, surveys migrants for data purposes but added a question about the virus. In the week ending June 20, it found 51% of the 3471 people it interviewed had never heard of Covid-19.
While Covid-19 continued to spread, an Ebola virus outbreak in eastern Congo, the second-worst in history, was officially declared over by the World Health Organisation this month. The outbreak lasted two years and killed 2280 people. Containing the virus was hampered by battles within the Congolese governments, attacks on healthcare facilities and suspicion among local communities. A new Ebola vaccine was a crucial new element in handling the epidemic.
However, a new but smaller outbreak of Ebola has taken place in the northwestern part of the country. Thirteen people have died since the outbreak was announced on June 1 but that part of the country is relatively peaceful and governance structures more robust.
CBI Files Charges Over Rovuma
The Central Bureau of Investigation has charged Videocon Group’s chairman, Venugopal Dhoot, with financial irregularities when he sold a consortium of Indian banks his firm’s oil and gas assets in Mozambique in 2013. Videocon acquired a 10% stake in the Rovuma Area 1 offshore block from the US firm Anadarko in 2008, at a time when the Mozambican block was still being explored. Partly because of its own debt issues, Videocon then sold its stake to the state-owned Oil and Natural Gas Corporation and Oil India for $ 2.5 billion. The CBI claims Videocon in connivance with unknown bank officials deliberately violated financial regulations to give Videocon access to excessive funds. Business Standard quoted a former oil and gas ministry official saying that “due process” had been followed and a committee of secretaries “approved the investment.” Others mentioned in the article warned that a “witchhunt” of officials should be avoided at a time when China’s footprint in Mozambique is growing, including operating in Rovuma Area 4 block. Videocon exited just as seismic exploration of Rovuma Area 1 indicated the presence of gas. Today the block has an estimated 75 trillion cubic feet of natural gas.
Cameroon’s Israel Connection
An elite Cameroonian army unit, the Rapid Intervention Battalion (BIR), that is at the forefront of Cameroonian President Paul Biya’s violent repression of a secessionist movement in the English-speaking north of his country, is trained by Israeli mercenaries. The BIR has been accused by human rights groups of extensive torture, arbitrary killings, rape of women and the burning of villages. The BIR operates under Biya’s personal direction and is believed to be funded by an off-budget account of the Cameroonian national oil industry. “The BIR is sort of Mr Biya’s private army because they are not answerable to the regular army chain of command,” explains Kah Walla, an opposition politician in Cameroon. “You have a dictatorial president, who has shown himself to be repressive [and] then created a private armed force. And, of course, this has increased the level of repression.”
BIR receives weapons and training from a number of private Israeli contractors, according to an investigation by the Royal African Society of the UK and Israel’s Channel 12. One of the more prominent ones is Eran Moas who is personally worth tens of millions of dollars as a consequence. Israelis are involved in the training, command and supply of weapons to the BIR. One former BIR recruit, who graduated in 2015, says that about a hundred Israeli trainers spent three months in Cameroon training his cohort and claimed to have been paid around $1,000 a day. Biya has had close ties with Israel ever since a failed coup in 1984 led him to believe former colonial rulers, France, wanted him overthrown and he went looking for alternative backers.
Africans in Indian Football
African students have had a mixed experience in India, but African footballers have generally found greater acceptance. The first African footballer to play professionally in India was a Nigerian, David Williams, who played for Tamil Nadu in the 1970s. It was Chima Okorie, who played for a number of Calcutta clubs, who “blazed a trail for a success of African stars.” A number of African footballers are cheated by fraudulent agents who bring them to India and then abandon them, some of them fortunately find jobs nonetheless. The captain of Kashmir FC is a Nigerian, Loveday Enyinnaya, while Ivorian Lancine Toure played for a string of Indian clubs in Calcutta, Punjab and the Northeast before moving to Bangladesh. Being cheated is a more common fate for African footballers than problems over their skin colour. Toure says racism is “borne out of a lack of education and awareness.” A 2018 Malayalam movie Sudani from Nigeria is about the travails of an African footballer in India.
A Rwandan football player, Ukizemwabo Bevanue, trapped in Kerala by the Covid-19 epidemic was not only provided food and shelter by the villagers, they raised money for him to send back to his family in Rwanda and have now raised money to buy a ticket for him to return home. Bevanue said, “I am sad that I cannot give back anything for this love and care of the people of Kerala.” Like much of Kerala, Kadakam village is a fervent participant in the local seven-aside football league and the local club took the lead in supporting Bevanue.