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Technology & Information

Kenya’s minimum income tax hits startups, CEO says

Kenya’s introduction of a minimum business income tax of 1% on January 1st could have a devastating impact on the innovation economy, according to an executive in the tech sector.

Thanks to innovations such as mobile money, Kenya has one of the most advanced tech scenes among Africa’s celebrated ‘Silicon Savannah’ tech hubs.

In the past, ICT firms flocked to Nairobi where policymakers made a push for startups to thrive by reducing regulatory hurdles, but the new tax could temper exuberance for the sector.

Daniel Yu, CEO and founder of Sokowatch, an e-commerce startup that supplies informal shopkeepers with goods, argues that it will push low-margin high-volume businesses like his into loss-making models.

E-commerce business models like Amazon, which took years to reach profitability, require heavy investments in infrastructure and logistics with very small initial returns, he says.

For example, big e-commerce companies like Sokowatch or Jumia might only be able to recuperate $1 from every $100 spent.

If further taxes are claimed by the government, then these types of long-term transformative companies will no longer be viable.

This could have a huge impact on Kenya’s status as a startup destination in Africa, Yu says.

“If you are an investor, are you going to back the next e-commerce giant in Africa in Kenya if you know that the initial cost of doing business is likely to run into the hundreds of thousands and millions of dollars before your business in this market will get profitable?” he says.

Companies like Sokowatch, an online supplier of goods to micro retailers, make a sizable contribution to the government budget by bringing thousands of informal shopkeepers to the attention of tax authorities and paying corporation taxes and VAT.

“It’s short-sighted,” he says. “With this anti-innovation policy in place, the authorities are likely to drive away revenue in the long term where they would otherwise be collecting if they didn’t have this policy in place.”

The government should introduce exemptions for early-stage companies which are not yet profitable rather than using the tax as a “blunt instrument” on all businesses regardless of size, he says.

The Kenya Revenue Authority (KRA) says the purpose of the tax is encouraging equity and fairness in the tax system.

“The reality is that unfortunately, we have very similar conversations with regulators in other markets where authorities just don’t understand how you can have a loss-making business. They don’t understand the notion of investing and building out for long-term value. They think it is some kind of scheme or nefarious activity,” says Yu.

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Finance & Services

African sovereigns walk slippery debt path

While stronger African economies are keen to issue Eurobonds to global markets, lured by low interest rates and optimism about vaccines, risks remain for weaker countries that are seen not to be distancing themselves from some Covid-19 debt relief packages. 

Investors seem spooked by uncertainty over what debt relief could mean for repayments of private bonds and African sovereigns that urgently need money but have weaker credit ratings may have to think twice.

A world flush with cash is hunting higher-yielding investments and demand is good for Eurobonds issued by governments with good economic management and stronger international credit ratings (B and higher). 

In addition, some African countries are showing good recoveries from the economic effects of the pandemic, with rapid bounces back to levels seen at the start of 2020. 

On 13 January, Benin (rated B+/B by Standard & Poor’s and Fitch) raised €1bn ($1.2bn) made up of $849m in an 11-year Eurobond at 5.125%, and $364m with a 31-year bond at 7.25%, one of the few African Eurobonds with a tenor of over 30 years. 

It attracted nearly $3.6bn in bids from 125 investors and some of the proceeds will be used for early repayment of a Eurobond due in 2026.

Investors queue up for Egypt bonds

In February, Egypt (rated B+/stable) issued $3.75bn of bonds in three tranches to finance the budget deficit. According to reports, 40 investors were queuing up, with $16.5bn to offer. 

The sale was $750m in five-year bonds on a yield of 3.875%, $1.5bn in 10-year bonds on an 5.875% yield and $1.5bn in 40-year bonds yielding 7.5%, better for the issuer than the initial estimated rates. 

The global pandemic has crushed Egypt’s tourism industry and foreign direct investment, both major sources of hard currency. The advisors on the Eurobond include Citi, First Abu Dhabi Bank and Goldman Sachs. Egypt had also raised $750m in September 2020 by issuing five-year green bonds. 

According to Mohamed Abu Basha, Head of Macroeconomic Research at EFG Hermes: “It’s a good time for the issuance, considering the drop in yields over the past few months and the positive outlook for emerging markets this year.”

Côte d’Ivoire was the first government in sub-Saharan Africa to raise debt on international bond markets after the pandemic, with a €1bn ($1.2bn) 12-year Eurobond on 25 November. The country is rated B+/positive and the issue was oversubscribed five times and achieved a record low yield of 5.0%. 

Morocco raises $3bn

Morocco (highly rated, although on 23 October Fitch cut the rating from BBB- to BB+) raised $3bn on 9 December in three tranches: $750m with a maturity of seven years (and coupon of 2.375%), $1bn maturing after 12 years (coupon 3%) and $125bn in 30-year debt (coupon 4%). 

This was managed by Barclays, BNP Paribas, JP Morgan and Natixis. Demand totalled $13bn from 480 investors, according to the Ministry of Economy and Finance, and followed a “NetRoadshow” by economy minister Mohamed Benchaaboun with the international investor community.

On 24 September, before the rating cut, Morocco had also issued a €1bn ($1.2bn) bond in two equal tranches. A five-year tranche (with a coupon of 1.375%) was issued at a yield to maturity of 1.495% and a 10-year tranche (coupon 2%) at yield to maturity of 2.176%. 

South Africa (last November Fitch had downgraded it from BB/Negative to BB-/Negative and Moody’s from Ba1 to Ba2) may even be strong enough to avoid the foreign currency risk of raising money on international markets in 2021 after surprisingly strong tax receipts. 

Treasury may achieve a surplus of R45bn-R100bn ($3.1bn-$6.8bn). The yield on domestic Treasury bonds has fallen dramatically since March 2020 and this could mean it can afford to raise debt only in the domestic market. 

Kirean Siney of ETM Analytics said: “While the international debt market is an attractive financing option given the low rates, Treasury will be cautious of the FX risk attached to issuing foreign currency debt.” 

The last foreign bond was $5bn in 2019, and in 2020 South Africa focused on international borrowing from the IMF and multilateral banks. In February, South Africa’s President Cyril Ramaphosa said he could see signs of an economic recovery but warned it would be “uneven”, with many people out of their jobs.

Debt relief spreads contagion 

Weaker countries suffering the debilitating effects of Covid-19 on their economies may find that treatment, in the form of some debt-relief packages, brings its own contagion and leads to credit downgrades.   

In late January, Ethiopia’s Finance Ministry said it would use the “Common Framework” initiative of the G20 group of advanced countries announced last November. This extends the previously agreed Debt Service Suspension Initiative (DSSI) to ask private lenders to agree to the same concessions as government lenders.

Prices of an existing 10-year Ethiopian government Eurobond immediately fell in secondary market trading, from roughly $1 to under $0.92 per $1 nominal value of debt. 

Contagion spread to trading in debt from Cameroon and Mozambique, seen as likely to have similar issues. 

Lower prices mean investors were demanding higher interest rates and anticipate higher risk. On 9 February, Fitch downgraded Ethiopia’s long-term foreign-currency issuer default rating from B to CCC and Standard & Poor’s also downgraded.

According to Fitch: “The G20 CF (Common Framework), agreed in November 2020 by the G20 and Paris Club, goes beyond the DSSI that took effect in May 2020, in that it requires countries to seek debt treatment by private creditors and that this should be comparable with the debt treatment provided by official bilateral creditors. 

“This could mean that Ethiopia’s one outstanding Eurobond and other commercial debt would need to be restructured, potentially representing a distressed debt exchange under Fitch’s sovereign rating criteria. There remains uncertainty over how the G20 CF will be implemented in practice.”

Jan Friederich, Head of Middle East and Africa sovereign ratings at Fitch, said the agency will probably downgrade any country that uses the new framework if private sector borrowers are affected: 

“There is a lot of push from the public sector (major governments and the IMF) for countries to use these instruments which are being offered. We have had interactions with the official side that showed clear frustration about the lack of private sector involvement.”

However, Ethiopia’s downgrade may also reflect domestic issues, including a civil war and emerging news of massacres in Tigray region, spiralling ethnic violence in other parts of the country and border clashes with Sudan. World Bank and other funders could hold back if more details emerge about atrocities. 

Countries that do not use the Common Framework are not likely to be affected. Ratings agency S&P Global said it would continue “case by case assessment”.  

Adding to the worries, Zambia defaulted by missing a $42.5m coupon payment on a Eurobond last November. Its ability to negotiate with creditors was hampered because the government could not reveal details on its extensive Chinese borrowing. 

On 27 January, the IMF announced that Chad was the first to ask officially for debt structuring under the framework but it does not have any Eurobonds or other publicly-traded debt.

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Finance & Services

‘The women’s banking market is an economic priority’

Josephine Anan-Ankomah
Josephine Anan-Ankomah, Group, Ecobank Group Executive, Commercial Banking.

Lending to women and women-led businesses has always made sense. Data from lenders in developing countries across the world has shown time and again that non-performing loans to women SMEs are consistently lower than in portfolios comprising men and women. 

In a similar vein, data from leading listed companies in the US and UK has also demonstrated that a more diverse board will generate better returns for investors. Christine Lagarde, then head of the IMF, famously said, in reference to the Lehman Brothers collapse, that had it been Lehman Sisters, the outcome for the bank would have been different. The firm would most probably have been better run, more conservative in its risk taking and would have avoided massive gambles on products it didn’t understand. 

Yet female entrepreneurs face structural and cultural barriers to expanding their businesses. As a result, women accounted for just 33% of the continent’s GDP in 2018 and the African Development Bank estimates the financing gap for women-led businesses at $42bn a year. Closing this gap requires a concerted and deliberate approach, according to Josephine Anan-Ankomah, Ecobank’s Group Executive for Commercial Banking.

Can you outline the bank’s performance in Commercial Banking based on the trends from last year and Covid-19?

Covid-19 has been a mixed bag of events. Given Ecobank’s extensive footprint across 33 markets across Africa we were able to see first-hand the effects of the pandemic. This has been a period characterised by border closures, curfews, lockdowns and restrictions on the movement of people.

But Covid-19 has not been all doom and gloom. There is a silver lining. The tremendous uptake on our digital platforms and solutions is a major positive outcome. Our investment in technology and digital solutions in prior years paid off, making the transition from in-branch banking to banking on digital platforms quite seamless. Customers did not face disruptions in making and receiving payments. Our customers who are employers were able to continue paying salaries to their employees using our digital platforms and reducing the use of cash, which could be a vector of transmission. Another positive was a rebound in the savings habit as customers held onto their cash savings given the uncertainty caused by the pandemic.

The pandemic also led to an important collaboration with the African Union’s Development Agency – AUDA-NEPAD – focused on strengthening Africa’s response to micro, small and medium enterprises (MSMEs) as they recover from the impact of the pandemic. This initiative aims at empowering MSMEs with access to capabilities, markets and finance as governments restart Africa’s economies.

Ecobank also launched its Ellevate programme, in which 10% of the loan portfolio will be dedicated to women-led businesses and businesses with a strong representation of women on boards. How will it work?

Let’s put the Ellevate by Ecobank programme in context. Women constitute roughly half of the population in Africa. SMEs account for up to 90% of all businesses in Africa and women own about a third of all registered African SMEs. One in four female adults in Africa starts or manages a business, making the continent one of the highest in terms of women entrepreneurs across the world. Women also invest as much as 90% of their incomes into their families and communities.

Ellevate by Ecobank offers women an end-to-end partnership in which they gain access to financial and non-financial services. The non-financial services extend to financial education, information on products and services, networking opportunities and recognition. This is our value proposition and it distinguishes us from other women’s programmes. Today, you will find dedicated Ellevate by Ecobank desk managers ready to attend to the needs of women across our footprint.

This means that any business founded by a woman or at least 50% owned by a woman or women qualifies for the programme. A business whose management or board is made up of 20% or more women also qualifies. Another criterion we consider is the number of women employed by a business. If the business employs more than 30% women, it qualifies for the programme and so do companies that manufacture products specifically for women, for example, cosmetics, sanitary and mother-care products.

We are committed to devoting approximately 10% of our commercial banking loan book to support this market. We will do this through tailored loan products and on favourable terms.

Do banks need to be proactive about changing the way they go about business to lend to SMEs and overlooked sectors of the economy?

We recognise three basic needs – access to credit, markets and capabilities. We like to provide solutions from the point of view of the customer, what we call the “outside in” approach. Thus in lending to SMEs, we recognise that most of them do not have audited financial statements. We have therefore designed credit programmes that enable us to lend to them, for example, on the back of confirmed contracts and cashflows that we can ringfence.

We use the value chain approach, which enables us to identify and “follow” the cashflows they generate from work that they do for large corporates who typically bank with us. We also have tailor-made lending products around the services they provide to credible large corporates.

Our regional collection accounts and internet banking platform, which is customised for SMEs, have helped to facilitate cross-border payments and put us in pole position to leverage the opportunities that the African Continental Free Trade Area (AfCFTA) presents. We have further strategically partnered with Google to develop an online presence tailored for SMEs.

At the launch of the initiative, you said that women entrepreneurs needed a different relationship with their banks. Can you explain what you meant by this?

The women’s market is not simply a gender issue, it is an economic priority. Women are said to be risk averse but we believe instead that they are rather risk aware. Women value personal relationships and take into consideration other issues rather than simply focusing on the transactional side of the business.

Typically, they want to have as much information as they possibly can before taking a decision. They view the opportunity to discuss issues with their financial service provider as a chance to explore possible options before arriving at a decision.

The success of Ellevate will depend on our ability to understand that women are not looking for pretty products tied with pink ribbons – they are looking for insightful solutions that meet their needs as they juggle different roles. For example, they are as interested in expanding their business as in planning for the children’s education or ensuring that they stay in good shape and health. Our ability to design products that meet these needs end-to-end will ensure that we are successful.

How can data help to improve the programme and lending to women?

Our decision to launch a women’s programme has opened up the possibility of building very useful data that can enhance the programme as we go along. In developing the programme, we recognised the need to have gender disaggregated data. The data to be collected in terms of women-owned businesses, product performance, loan repayment patterns, etc, would help us assess the situation and develop appropriate, evidence-based information to meet the needs of our women.

The data gathered could feed back into improved services and products and this would ultimately have a positive impact on our women as we build up their skills and enable them to scale up their businesses.

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Technology & Information

Time to safeguard Africa’s elections

The digitisation of democracy in Africa is driving an increasingly important role for private enterprise at every stage of the electoral process.

The companies at the forefront of the election business provide the technical expertise to navigate the new digital world, from facilitating biometric registration and electronic voting, to advising political parties on online messaging, to providing arenas for online political discussion.

However, these enterprises have varying levels of transparency, professional integrity, and electoral expertise.

With many key votes coming up in 2021 in places such as  Congo-Brazzaville, Djibouti, Central African Republic, Côte d’Ivoire, Benin, Chad and Ethiopia, it is more important than ever for authorities to implement effective measures to verify the integrity of companies that serve their electorates in the democratic process.

The three components of the private election economy in Africa are: election administration consultants, social networks and apps, and political campaign consultants. Each is likely to play a crucial role in the upcoming elections.

Starting from the mid-2000s, African election authorities have been increasingly supported by election administration consultants. These are businesses that provide technology such as facial recognition software to verify electoral rolls, voting machines and vote-counting capabilities.

The need to minimise social contact during the pandemic has also increased demand for such contractors, who are broadening their offering to include measures to contain the spread of Covid-19.

While the details of these contracts often remain unpublished, available information shows that tens of millions of dollars a year are being spent, often replacing pre-existing equipment. The examples are too many to cite.

Niger awarded French company Gemalto a US $20m contract for biometric voting software in preparation for their election earlier this year. Meanwhile, Chad replaced its entire fleet of French-procured biometric identification machines purchased in 2015, with new Belgian machines in advance of its upcoming election in April.

Open Zambia, a website citing itself as the country’s only source of independent news, reports that the election commission signed a $16m contract with UK-based Smartmatic for new voter registration devices in advance of the August 12 general election.

To date, almost half of all African states have contracted private business to provide biometric machines to register electors on the voter roll. More than twenty businesses specialising in electoral technologies have now signed contracts with African electoral authorities, though few of these hail from the continent itself.

The extent of the involvement will, for many, invoke the memory of Miru Systems’ involvement in selling more than 100,000 voting machines to the Democratic Republic of the Congo in advance of the 2018 election. The contract was estimated at $150m by the Enough Project, a civil society organisation.

Voters clamour at an EU election observation site. Image Credit: Ben Graham Jones.

Around two thirds of the voting machines allocated for the capital burnt down in a fire in Kinshasa’s election commission warehouse the week before election day.

The South Korean company, whose tablet-like voting machines were at the centre of the controversy, was criticised by both Congolese civil society organisations and the National Election Commission of South Korea itself. A report by US investigative group, The Sentry stressed that the ‘vulnerabilities include potential threats to ballot secrecy as well as results manipulation’.

Following the highly contested election results, the African Union expressed “serious doubts” over the process in an unprecedented statement.

It is not just election commissions who offer opportunities to private enterprise in elections – political parties frequently draw on the advice of private companies to tailor their campaign messaging, typically by harnessing data.

This increasingly means harnessing data to target campaign messages online.  Unfortunately, the speed with which data technology has progressed has surpassed the ability of regulators to exercise oversight.

Civil society organisations often undertake heroic efforts but suffer from insufficient resourcing and expertise.

The vacuum of oversight was demonstrated through the involvement of now-defunct political consultancy Cambridge Analytica in the Kenyan elections. While many details of the British firm’s operations in Kenya remain unclear – the country had no data protection law at the time of the 2017 election – and we know that elsewhere, the organisation harvested more than 50m Facebook profiles.

Covid-19 has accelerated the rate at which election campaigns are moving online, amplifying the potential benefits of data-based microtargeting.

The solution is not over-regulation and censorship, which tends just to galvanise discontent with the electoral system. Instead, election authorities must equip themselves with the expertise and will to effectively prevent organisations with questionable track records in data protection from being involved in election campaigns, and to respond to such violations when they occur.

It is the responsibility of election bodies to demand transparency, to allow African citizens themselves to pass judgment on multimillion-dollar election contracts.

The third component of the private election economy is social networks themselves.

As Covid accelerates ongoing digitisation of election campaigns, this highlights the need for effective oversight, without which social networks provide an easy means for parties to exceed legally-mandated spending limits.

Progress has been made. For example, Facebook’s ads library, which documents ad spending, now displays more information than it did in the past about spending on its platform during African elections.

Yet significant disparities remain. Full ‘ad library reports’ are available for only 6 African countries, compared with all 27 EU member states. While high-profile scandals have prompted action from Facebook, the lack of meaningful oversight across the continent leaves the door open for opaque practices on many other online platforms.

The volume of disinformation spread through closed-messaging apps such as WhatsApp, which is wildly popular in countries such as Ghana, Kenya and South Africa, has prompted African initiatives such as WhatsCrap to counter the spread of misleading claims.

Yet privacy concerns can often hamper investigations into the spread of disinformation over such networks. The growing accessibility and persuasiveness of so-called ‘deepfake technology’ – videos which use AI-technology to make it appear as if public figures are saying anything the creator desires – will only exacerbate this problem through 2021.

But the picture is not all doom and gloom. Private enterprises are playing a vital role in many aspects of the electoral process: Microsoft, for example, is rolling out a range of technologies that can help citizens across the globe identify disinformation on social networks.

Yet a vacuum of oversight, transparency and regulatory expertise poses critical risks for many upcoming African elections in 2021 and beyond.

For the sake of the companies making a positive difference on the continent, for voters themselves, and for the integrity of democracy, the time is ripe for states to take the necessary steps to ensure that only those organisations that play by the rules participate in the business of elections in Africa.

Ben Graham Jones is a British consultant on electoral assistance, election observation methodology, and disinformation mitigation. He has worked on 16 elections for organisations including the EU and the OSCE.

Camille Forite, PhD is a French elections specialist with a focus on Africa and Latin America. She has worked for the OSCE and the United Nations.

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Trade & Investment

‘Don’t stand in my way!’ says WTO’s Okonjo-Iweala

“She is going to rock the place!” promised Christine Lagarde, currently president of the European Central Bank and formerly the managing director of the IMF. She was responding to a question on the impact the new director-general of the World Trade Organisation (WTO), Ngozi Okonjo-Iweala would have on the institution.

Ngozi Okonjo-Iweala
Ngozi Okonjo-Iweala at her home in Potomac, Maryland, near Washington DC. Photo: AFP / Eric Baradat

Lagarde, who has interacted with Okonjo-Iweala on various issues and platforms over a long period and who is regarded as an excellent judge of character, said: “She is this wonderful, soft, very gentle woman with an authentic approach to problems but, boy, under that soft glove there is a hard hand and a strong will behind it.” 

This is as perfect a description of the phenomenon called Ngozi Okonjo-Iweala as can be made. Over the years, as editor of African Business and African Banker magazines, I have had the opportunity of meeting her on a few occasions.

She always came across as somebody that is totally unaffected by her high positions – whether as managing director of the World Bank or as the minister of finance (twice) of Africa’s biggest economy, Nigeria. She was always gracious, had a ready smile and despite all the hustle and bustle that always surrounded her, was razor-sharp on the activity at hand – even if this was nothing more than exchanging pleasantries with a journalist like myself.

People in her position are often expected to make speeches at whatever event they grace – and Okonjo-Iweala has been in constant demand by organisations big and small across the world for decades. Usually, the dignitaries stick to a well-worked formula aimed at making sure no one is displeased but saying little else. When Okonjo-Iweala spoke however, no matter how briefly, you listened and remembered.

Whenever you came across her, whether in smaller gatherings or large international conferences, there was never any doubt that you were in the presence of a formidable intellect. It was this intellect and the steely determination she had already exhibited from childhood that delivered a magna cum laude (highest distinction) graduation from Harvard University in 1976, and later, her doctorate in economics from the Massachusetts Institute of Technology in 1981.

Tough beginnings

But her early life was anything but easy. Although her father, Professor Chukwuka Okonjo, was the Obi (king) of Ogwashi-Ukwu in Delta State, Ngozi found herself having to take care of her siblings from a young age. Both her parents were studying in Europe and the children were being brought up by their grandmother, a strict disciplinarian who believed in self-sufficiency. 

This was also a fraught period in Nigeria’s history, and the Biafran civil war later wreaked havoc across many parts of the country. After her father’s return to Nigeria as a lecturer, he was recruited as a brigadier in the Biafran army and the family had to be constantly on the move.

“I was eating one meal a day and children were dying,” she told Forbes magazine in an interview last year. “So, I learned to live very frugally. I often say I can sleep on a mud floor as well as a feathered bed and be very comfortable. It has made me someone who can do without things in life because of what we went through.” 

According to the Guardian newspaper of London, during these difficult days, her three-year-old sister had become dangerously ill with malaria. She carried her for three miles to the doctor’s surgery, wriggled her way through a big crowd of patients and had to climb through a window to reach the doctor, who was able to save her sister’s life in the nick of time.

First brush with economics

Okonjo-Iweala was educated at Queen’s School, Enugu, St. Anne’s School, Molete, Ibadan, and the International School Ibadan before leaving for the US and Harvard University. 

For someone who is regarded as perhaps the most polished economist in Africa and in the very top drawer worldwide, Ngozi’s first brush with economics nearly brought her to tears.

She recalled, in an earlier interview with Forbes, an occasion when in order to stop the young Ngozi pestering him, her father, who was a mathematical economist, handed her a book to read while he concentrated on working on his paper. 

Although Ngozi was an avid reader, devouring books by the sackful, the book was about economics and it bored her so much she resolved never to go near economics again. Even her stint at Harvard should not have happened as her godmother was very keen for her to go to Cambridge. She passed the entrance exams for both institutions but followed her mother to the US to take up a teaching post and ended up not only at Harvard but studying economics – but only because she could not do geography as a core subject!

Once she had come to terms with economics, she fell in love with it. She says: “Economics was really something that explained the world to me. It captured the common sense of the way the world works with analytics and the dynamics of development, which have intrigued and concerned me all my life.”

Ngozi Okonjo-Iweala (L) is congratulated by her sister, Dr Njideka Udochi, upon receiving confirmation of her appointment as DG of the WTO. Photo: AFP / Eric Baradat

Rise to prominence

She was to spend 25 years delving into all facets of economics as they played out at national and international levels, working at the World Bank. Her common-sense approach as well as eye for detail saw her rising rapidly to become managing director, the second-highest position in the institution.

While she did not exactly rock the World Bank, she nevertheless shook it from time to time, ensuring that development issues were not being swept under the carpet or dealt with in a cursory manner, as had been the case previously. Colleagues say she also inspired other Africans at the bank to raise difficult questions instead of faithfully toeing the orthodox line as they had been wont to.

It was when she was invited to become Nigeria’s minister of finance by President Olusegun Obasanjo in 2003 that she began shaking things with considerable force. Despite high oil prices, Nigeria’s economy was being strangled by a growing debt burden, owed mostly to the Paris Club of Western nations.

Okonjo-Iweala’s negotiations with the Paris Club are now considered a classic in the art. She persuaded the Paris Club to write off most of the debt, including the outright cancellation of $18bn. One of her World Bank colleagues, David de Ferranti, is on record as saying: “The way she brought about the debt deal was incredible. Very few people could have done that.”

With the need for frugality and discipline instilled in her since childhood, Okonjo-Iweala set about housekeeping duties at the Finance Ministry, putting in policies to stabilise the country’s volatile microeconomic environment. She insisted on all states publishing their financial statements each month, introduced electronic management systems to curb corruption and improve transparency, and obtained the country’s first-ever sovereign credit rating from Fitch.

Her battle to force through reforms earned the nickname Okonjo-Wahala (Okonjo the Trouble Woman), but she was undaunted. 

“I don’t care what names they call me,” she told the Guardian in 2005. “I’m a fighter; I’m very focused on what I’m doing, and relentless in what I want to achieve, almost to a fault. If you get in my way you get kicked.”

She also took on the Foreign Ministry portfolio for a few months at the end of her first term.

Uncompromising campaigner

Her second stint as minister of finance was during the President Goodluck Jonathan administration (2011–2015). She had very clear ideas about how to raise living standards for ordinary people, by establishing mortgage refinancing arrangements, creating enterprise-oriented organisations for women and youth, which generated hundreds of thousands of jobs, and she worked with the national statistics department to re-base GDP calculations, with the result that Nigerians woke up one day to learn that their country, and not South Africa, had the biggest economy on the continent.

But what really marked her second stint as finance minister was her uncompromising campaign to end the oil-subsidy scandal that was costing the country billions of dollars every month. She guillotined the subsidy (only a small proportion of which went to ordinary vehicle owners) but this set off a storm of protests.

However, the government, lacking her iron will, bowed to the pressure and the ban was lifted – although it was reintroduced in 2016 by the new administration. 

During this time, Okonjo-Iweala was subjected to death threats and her mother was kidnapped in a bid to force her to revoke the ban. But she did not take a backward step and would have felt left down when the rest of the administration caved in. When the kidnappers realised they could not bully her into changing her policies, they released her mother unharmed.

Shaker-up in chief

Although Ngozi Okonjo-Iweala was the overwhelming favourite to be appointed (by consensus) as the new director-general of the WTO, the US’s then president, Donald Trump, predictably threw a spanner in the works, refusing to support her candidature and instead, backing the Korean nominee, Yoo Myung-hee

When Trump was ignominiously shown the door at the White House following his election defeat, Yoo Myung-hee, perhaps after a quiet word with Joe Biden, withdrew her candidature, thus confirming Okonjo-Iweala as the new DG of the organisation – to the obvious and pointed relief of the staff at the WTO.  

What can Okonjo-Iweala achieve at the WTO? Will her being the first woman and first African (and in fact, the first American as she has a dual nationality) to hold this position affect what she does?

There is no doubt that the WTO, which was formed in 1995 to regulate international trade, serve as a forum for negotiations, arbitrate trade conflicts and monitor the implementation of trade agreements, has been in a bad way for quite some time. 

Regional trading blocs, such as the EU and ASEAN, have acquired greater importance, while the often open flouting of international rules, including intellectual property, by China and others has gone unpunished. Donald Trump’s hostility to global bodies such as the UN and WHO extended to the WTO, which he worked relentlessly to hollow out and make irrelevant.

But it is also clear that in the current climate of looming trade wars, rising nationalism and protectionism, and the unchecked reach and power of mega corporations such as Facebook and Google, a strong WTO is needed more than ever. 

It needs shaking up from top to bottom and who better to do so than Ngozi Okonjo-Iweala – the Trouble Woman who does not take a backward step?

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Trade & Investment

Can Ngozi Okonjo-Iweala shake up the WTO?

Ngozi Okonjo-Iweala’s remarkable achievement in being selected as the director-general of the World Trade Organisation (WTO) cannot be understated. She is the first African and first female to head the organisation.

Until the turn of the century, developing countries were barely allowed into the “Green Room” processes where the great powers brokered deals among themselves that were then foisted on the developing world. They were, in the language of economics, “price takers”. Having an African DG was unimaginable. 

The director-general of the WTO is not a price-maker for the developing world, but the position carries heightened challenges for an organisation that may see the new DG as a price-broker of another sort – that of revising the organisation and bringing the major powers back to its negotiating rooms.

The WTO has not delivered on its main task, a multilateral trade deal, for nearly two decades, and the US-China trade conflict has brought important adjudicative processes at the WTO to a halt. The US has accused the WTO of unfair decisions and refused to appoint judges to the appellate body, bringing its work to a halt since last year. 

Can Ngozi Okonjo-Iweala help revitalise and reform the WTO? The DG comes to the WTO with distinguished credentials and support from important quarters. She was trained as a development economist at Harvard and MIT. She was managing director of the World Bank, economic advisor to the president of Nigeria and, subsequently, the finance minister of Nigeria. Her 2014 book drawing upon lessons from Nigeria was called Reforming the Unreformable. The title also seems apt for a WTO that has been torn apart by trade conflicts. 

Here are a few of Okonjo-Iweala’s challenges and the expertise she can bring to address them.

US-China trade conflict

The US-China trade war intensified during the Trump administration and threatens the very existence of the WTO. China’s share of global merchandise exports has more than doubled from 5% 20 years ago to nearly 13.6% in 2019, well ahead of the 9% share from the US. The US-China trade deficit on goods was $310bn in 2020, up from $83bn in 2001 when China joined the WTO.

The US has accused China of not playing by global trade rules and “stealing” its intellectual property. The Trump administration slapped down an escalating series of tariffs on Chinese goods, and China agreed in 2019 to buy $200bn of US goods in 2020 and 2021, and change its intellectual property rights practices. Estimates show that China is behind both commitments.

Okonjo-Iweala was careful not to critique China during her campaign to be DG, but knows that handling the US complaints against China will be the biggest part of her job. Okonjo-Iweala is a dual US-Nigerian citizen and garnered support from around the world, but the Trump administration vetoed her candidacy to favour the South Korean minister of trade Yoo Myung-hee, who was previously the country’s ambassador to China. The WTO delayed the selection process and in early February the Biden administration threw in its support for Okonjo-Iweala. 

In many ways the trade war with China is bigger than the WTO, and its parameters shift in places away from Geneva. The end-2020 EU-China Investment Deal, signed just as the Biden administration was coming in, was seen as an acquiescence to China and revealed the EU’s inability to stand up to the emergent power. 

But there are many things a rejuvenated WTO can undertake to bring confidence to the world trading system. Reforms of the dispute settlement body, and clarification of many rules that the US alleges unfairly advantage China would be a start. Despite the new EU-China deal, a worldwide coalition against China is not impossible. 

To China’s advantage, the Trump administration was incapable of building such a coalition. A few directors-general in the past have moved the organisation to take bold measures. With support from the EU and the US, Okonjo-Iweala could manage the fallout of a global coalition against China, and has room to manoeuvre to bring greater conformity from China at the WTO.

The secretariat

Okonjo-Iweala’s unique strength may be in boosting the morale of the organisation’s highly competent staff who have seen their role reduced from being at the forefront of governance for the global economy to becoming a sideshow. Nevertheless, this staff is uniquely capable of thinking of the future of world trade and its crucial connection to the domestic political economies of its trading partners. 

Trained as an economist and having occupied high policy positions, Okonjo-Iweala can lead the WTO out of its policy and intellectual insignificance. While WTO staff regularly note that they act on behalf of member states, the secretariat shapes research and initiatives that help international trade and move member states in key directions. 

An example is the recent World Trade Report 2020. Subtitled Government Policies to Promote Innovation in the Digital Age, it takes seriously the challenge to world trade from new technologies and the rebirth of industrial policies. 

The outgoing US trade representative Robert Light­hizer, a lawyer by training, remarked that Okonjo-Iweala did not understand world trade. The field is now wide open for Okonjo-Iweala to prove him wrong.

Domestic institutions

The WTO is about trade deals but has lost its ability to bring them about because of the domestic institutions that must support and ratify them. The director-general of the WTO cannot influence governments and trade bodies, but Okonjo-Iweala understands domestic obstacles both as an economist and a policymaker. Reforming the Unreformable showcases some important macroeconomic achievements but always with parallel adjustments in domestic institutions. 

International trade theory no longer rests solely on a country’s unique endowment of resources, skills, and capital. It is about firms and how they gain global advantages. This opens the window to industrial policies that can allow firms to be innovative in the global economy. Lawyers do not understand such equations. Economists do. 

Humility and toughness

It remains to be seen if Ngozi Okonjo-Iweala can translate her intellectual and policy acumen into rejuvenating the WTO. But there are three things that Okonjo-Iweala does not have to prove. 

First, she brings her considerable moral force to an organisation known for horse-trading tariffs and non-tariff barriers. Along with US vice-president Kamala Harris, the new director-general of the WTO is one of the most powerful women in the world. That both are women of colour is hugely important but secondary to their leadership skills. 

Second, Okonjo-Iweala’s commitment to the left-behinds of the developing world can provide the WTO with a sense of purpose. The WTO’s Doha development round – begun in 2001 – died years ago, unable to deliver its promises. Smart directives from the WTO can direct the developing world toward much-needed policy reforms that will encourage innovation and export diversification. 

Third, Okonjo-Iweala knows how to build coalitions and may be a tough negotiator. She sits on the board of several international organisations, including the global vaccine alliance GAVI. Her nomination survived the Trump administration’s veto. Okonjo-Iweala has noted that she knows how to sleep on the cold floor. Anyone who grows up in the developing world understands that statement as equal part humility, equal part toughness.

JP Singh is professor of international commerce and policy at the Schar School of Policy and Government, George Mason University, USA, and Richard von Weizsäcker Fellow at the Robert Bosch Academy, Berlin.

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Technology & Information Trade & Investment

Four lessons Africa should learn from the pandemic

Every country has learned something about themselves, the world, and their place in it in the wake of the Covid-19 pandemic. These lessons will inform how they emerge from the other side of the public health crisis and the economic fallout it has triggered. This piece focuses on four interrelated lessons that have emerged about Africa and its place in the world.

We must break free of the tyranny of low expectations

As the health crisis unfolded across the world, concerns understandably arose about how Africa, with its weak public health infrastructure, would withstand the onslaught of a global infectious disease outbreak.

When our worst fears did not initially materialise and the early numbers from Africa confounded expectations, the response was disappointing but unsurprising. The conversation was not about attempting to understand what Africa had done well that could be replicated elsewhere. Rather, the discourse seemed tinged with surprise that Africa was not living up to the low expectations. 

We have spent the last two decades railing against an inexorably negative image of Africa. There have been campaigns of “Africa Rising,” “Lions on the Move,” and “Africa’s Century.” But none of those campaigns appears to have altered low international expectations of Africa.

Africa needs to set its own expectations. But Africa’s promising early response to this outbreak has not led to public discussions about investing in public health by African governments. 

The continent must not interpret the avoidance of a worst-case Covid-19 scenario as a ringing endorsement of its long-term underinvestment in public health.

Africa cannot rely on handouts 

Without a seat at the table and a voice in setting the agenda, Africa is invariably placed at the end of the line. Mostly wealthy governments have spent close to $12 trillion propping up their economies against the Covid fallout, according to the IMF, with the cost of borrowing particularly cheap.

But Africa’s meagre goal of $300bn in concessional lending over three years to blunt the impact of the crisis remains unfulfilled, suggesting that the continent is still not seen as a priority for global economic policymakers.

Then there are the vaccines. While some philanthropists and Western donors put money into Covax, the global effort to strengthen vaccine access for the poor, for the most part Western governments remain focused on their own countries.

As Western governments poured billions into vaccine development and secured advance access to millions of doses, a US government official likened the process to donning oxygen masks on a plane – you put on your mask before you help others. However, this metaphor raises a problem – what happens to everyone else if masks are only available in business class? 

This is not the last health crisis we will face, nor is it the last economic crisis. A world in which we are invariably looking for handouts, depending on someone to come and save us, is one in which we are perennially last.

We cannot allow the AfCFTA to fail

China recently unveiled its new economic vision – one in which the US is no longer the centre of global demand. Its “dual circulation” strategy aims at reducing the country’s dependence on overseas markets and technology in its long-term development. Chinese President Xi Jinping raised the idea in May and later explained that the country will rely on internal circulation for domestic production, distribution, and consumption, supported by innovation and upgrades in the economy. 

In truth, there is nothing new about this and it appears that the pandemic has only accelerated China’s predetermined course, but it could have severe implications for Africa, which has become increasingly economically dependent on China.

In the grand economic visions of the future – whether was the US decoupling from the world economy under President Trump or dual circulation in China – Africa plays no meaningful role. This is understandable given that regional integration in Africa remains non-existent, except on paper. If African leaders needed a clear justification for not letting the AfCFTA flounder, this is it.

Africa must prepare for a world beyond oil

Across the world, nations, regions, and private companies have made massive bets on a post-carbon future. Large investors are reducing their exposure to fossil fuel assets. Investment in oil and gas is now seen as inherently riskier than in renewables. 

Nothing drives home this point better than Tesla. The company, which will produce about 500,000 electonic vehicles this year, has blown past a market cap of over $500bn dollars and is more valuable than Toyota, Daimler, Volkswagen, and Honda combined.

These companies will produce over 25m vehicles this year. Toyota alone will make more vehicles than Tesla has made during its entire existence, but investors have bet that Tesla is the future, and that future portends deep pain and scars for Africa’s petroleum-exporting economies and their role in the region. 

As tragic as the Covid crisis could be, it has at least given us a taste of what the state of government revenues would be – permanently – when large petroleum assets become stranded. That future carries implications for all our exports and our own economic growth.

Gyude Moore is a senior policy fellow at the Center for Global Development. He previously served as Liberia’s minister of public works.

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Technology & Information

Africa’s Covax vaccines roll in

Côte d’Ivoire became the second country on the continent and in the world to receive a shipment of coronavirus vaccines from the Covax facility on Friday.

The global initiative designed to ensure equal access to the life-saving shots delivered 504,000 doses of the AstraZeneca/Oxford to Abidjan International Airport, kicking off the country’s vaccination programme.

The shipment, which included 505,000 syringes, was made by a UNICEF plane from India’s Serum Institute, which is licenced to manufacture Britain’s vaccine candidate.

Ghana received 600,000 doses of the AstraZeneca/Oxford vaccine, which is currently the only supplier to the Covax facility, on Wednesday.

Covax is aiming to supply 1.8bn doses to poorer countries in 2021, covering up to 20% of their populations.

The WHO-led initiative hopes to have shipped nearly 90m Covid-19 vaccines to Africa by March, with talks underway with Pfizer-BioNTech to also supply jabs.

Many African countries are yet to receive their doses of the discounted vaccines despite having reached out to the facility.

South Africa, the continent’s worst affected country, has been told it will receive 12m vaccines, enough to inoculate 10% of the population, from April to June.

The rainbow nation had received one million doses of the AstraZeneca/Oxford vaccine from India in early February but paused the rollout due to questions over the vaccine’s efficacy against South Africa’s Covid-19 variant.

Instead, it has started the distribution of 80,000 doses of the locally produced Johnson & Johnson vaccine, with nine million more doses expected.

In the first phase of South Africa’s vaccine programme, healthcare workers were the first to receive the jab, administered in one dose. With J&J shots not yet authorised for general use anywhere in the world, the shots were issued as part of an observational study.

Bi-lateral deals

Other countries that have started vaccinating without the Covax facility include South Africa, Senegal, Algeria, Morocco, Zimbabwe, Egypt, Equatorial Guinea, Seychelles, and Guinea.

Zimbabwe received its first shipment of 200,000 Sinopharm vaccines donated by China in mid-February, with vaccines distributed to health workers days later.

Seychelles became the first country on the continent to issue vaccines in January, with doses from China’s Sinopharm. Other African countries to receive doses from China include Equatorial Guinea and Egypt.

Algeria and Guinea have started administering Russia’s Sputnik V vaccine.

Russia had offered the African Union 300m doses of its vaccine, though it was recently revealed that the multilateral body will have to pay three times the price of the AstraZeneca/Oxford for the doses.

Elsewhere, Kenya is set to receive more than 4m doses of the Covax vaccine next week, according to a statement by the facility.

There are 24 countries in Africa that are expected to start receiving vaccines from the Covax facility in the coming weeks, WHO regional director for Africa, Dr. Matshidiso Moeti, said on Thursday.

“This is a much-awaited leap forward for African nations that have spent months preparing from the sidelines while wealthier countries raced ahead with vaccination,” she said. 

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Review: Formation, by Fola Fagbule and Feyi Fawehinmi

The historian, journalist and author Robert Harris once famously remarked: “History is too important to be left to historians.” Formation’s authors, Fola Fagbule and Feyi Fawehinmi, took this message to heart. 

The finance professionals’ intriguing study tracks the unlikely series of events and characters that led to the creation of the modern Nigerian nation: from 1804 when the first jihadists began their attack on a collection of independent nations, to 1914 when Nigeria took on its current shape through the amalgamation of three territories under British colonial rule. 

The book aims to sheds light on an increasingly forgotten and mythologised period of Nigeria’s history, where violence was a primary organising principle for elite competition and the attainment of political power. 

The authors begin their story with a description of Nigeria’s two principle waterways – the Niger and Benue. The two rivers at the centre of the narrative, say Fagbule and Fawehinmi, “are the raison d’être for Nigeria in the first place” which served “at once to attract and divide the humans of Nigeria”.

The Niger has long been pivotal to the history of the West Africa region in general, a vital route for commodities including salt, and a key intersection with trans-Saharan trade routes which linked with the trade centres of Timbuktu and Djenne in present day Mali.

Dan Fodio: A pivotal figure

The lands watered by these great rivers have always attracted dynamic, ambitious – and occasionally grasping – characters. One of the most influential among these was Usman Dan Fodio, an ascetic sheikh who led a successful revolution by Fulani tribes against the Hausa elite, “as pivotal a figure in the nation’s history of the greatest men his country would ever see”. 

He was the early prototype for future northern Nigerian leaders – a charismatic and revolutionary Islamic preacher who rose up and built a following of people who were disaffected by the excesses of the ruling elite. 

“Unmoved by worldly power or riches, almost to the point of naïveté, the Sheikh possessed bulletproof personal integrity that has stood up to the dispassionate scrutiny of multiple histories. To borrow Kipling’s famous words – he met with triumph and disaster and treated both impostors the same.”

The years following Dan Fodio’s victorious uprising were characterised by a complex series of power struggles, conflicts and succession disputes: “Dan Fodio’s jihad, the seminal event in Nigeria’s history up to the early nineteenth century, would trigger outsized reverberations across time and space, eventually affecting the lives of millions of people across multiple continents. The immediate consequence of the jihad south of the Niger-Benue rivers would be an armed conflagration of previously unimaginable proportions.”

Hastened by the rise of Dan Fodio’s Fulani Empire, the southern Oyo Empire span into drastic decline. Its disintegration triggered a devastating civil war, driven by conflicts between the alafin, or ruler, and his chiefs, including both provincial rulers and lineage chiefs and councillors at the capital.

“An internecine, scorched earth civil war commenced, with changing allegiances, alliances, and partnerships, resulting in devastating consequences for human life across the former empire,” the authors write.

The shadow of slavery 

Meanwhile, Nigeria was gaining a global role as a major hub of the Atlantic slave trade. An increased appetite for slaves, triggered partly by the Louisiana Purchase of 1803 which doubled the size of the continental United States, fuelled vicious internal conflict in West Africa as outside powers sought labour for the American cotton fields. 

The hunt for slaves led to one of the most remarkable experiments in Nigerian history. Chief Sodeke first settled Abeokuta (translating roughly as “refuge among rocks”) in 1830 as a place of refuge from slave hunters. The village populations scattered over the open country took refuge among the rocks surrounding the city, forming a free confederacy of distinct groups, each preserving traditional customs, religious rites and the names of their original villages.

The authors see the “remarkably astute geopolitical and foreign policy posturing of this small settlement and its accomplished civil and military leaders” as a pivotal moment in Nigerian self-awareness.

The arrival of the British 

Still, despite this bold experiment, foreign interference could not be kept at bay for long. A colourful troupe of “mad men and missionaries” arrived in the country, among them pioneer explorer Mungo Park, a Scottish doctor determined to navigate the length of the River Niger.

The global Industrial Revolution, which began in the eighteenth century in Britain, hardened imperial interest in Nigeria. The authors describe how the shift in export trade away from slave trading to palm oil and other commodities “dramatically altered the state of affairs in the still inchoate country”, leading to the eventual formation of Nigeria through a combination of imperial vision and capitalist zeal.

The book chronicles the destructive consequences as the imperial elite allied with and fought existing indigenous ruling classes, in what the authors describe as a Game of Thrones in the Niger heartland.

Key among the British imperial administrators was Frederick Lugard, the driver of the country’s amalgamation and the first governor general of Nigeria. The authors say that Lugard’s vision can now be bought into its proper context, describing him as a sometimes “detestable” protagonist who nonetheless bought about events that had been a century in the making. 

“With proper context, we demonstrate how Lugard’s revolution was in many ways the completion and expansion of the work started by [Dan Fodio],” they claim. 

Formation concludes at the end of the First World War, a global catastrophe that did not exclude the newly amalgamated country of Nigeria in its ramifications.

From start to finish, covering roughly the century and a decade from 1804 to 1914, Formation is written from the viewpoint of a curious observer, centring the perspectives of indigenous peoples, and retelling Nigeria’s origin story in a way that is accessible and enjoyable to a modern audience.

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Trade & Investment

Africans take the lead on the world stage

This week, the World Bank Group named longtime vice president Makhtar Diop as head of the International Finance Corporation (IFC), making him the first African to lead the Bank’s private sector arm.

The announcement comes days after the appointment of Okonjo-Iweala Ngozi as director-general of the World Trade Organization (WTO), confirming that the global focus is finally shifting to the continent.

Diop steps into the role at a time when the IFC has refocussed its activities on developing countries over the past decade, providing private sector financing in the form of loans and direct investment, as well as advice.

Born and bred in his native Senegal, Diop burnished his credentials serving as Minister of Economy and Finance in Senegal, and as the World Bank’s country director for Brazil, Kenya, Eritrea, and Somalia.

He cut his teeth in development finance as an economist at the International Monetary Fund, gaining acclaim for his work in some of the world’s most fragile economies in New African Magazine’s 100 Most Influential Africans.

In his six years as VP for the World Bank’s Africa region, he oversaw a major expansion of the institution’s work on the continent, helping to deliver a record-breaking $70bn in commitments.

Diop is just the kind of leader Africa and, indeed, the world needs right now. His commitment to sustainable and green solutions and to gender equality, have cut a fine figure to address these imbalances.

Diop steps into the role at a time when Africa and economies around the world have been battered by Covid-19. With him, he brings an understanding that in terms of vaccine equality and food security, Africa’s economy depends on the world, and vice versa.

His indelible connection with the continent’s large and growing youthful population, which have some of the highest youth unemployment and income inequality rates in the world, make him well placed to back the right programs to stimulate job creation.

His appreciation that education is the engine to power the future of Africa’s booming population, is no less critical.

The pandemic has dealt a death blow to education on the continent, with 90% of ten year-olds unable to read and understand a simple text, according to the World Bank. This compares to 53% in low-and-middle-income countries globally.

As a member of the African diaspora, Diop is uniquely placed to address the needs of both global and local economies, and their struggles. His point of view differs vastly from people being sent to Africa from overseas to help stimulate the economy.

These people often leave without ever understanding the local context, no matter how well-educated they are. Someone from Africa, working for Africa, who also has global insight, will make a world of difference.

With both Ngozi and Diop raising the flag of the African diaspora, they will no doubt come to shape the African conversation. For this reason it will be worth watching them both closely.

By appointing Africans to key positions that drive the growth of African economies, I believe we will see a real-life impact across the continent. These leaders know first-hand what Africa needs, and understand the machinations of its people, and what is takes to improve their lives and economies.

Not only can they showcase Africa’s incredible fountain of talent, but I believe they can lift the continent to a whole new level.

Africa has shown that it’s finally ready to take a leading role on the world stage.

Gina Din-Kariuki, is the founder of Gina Din Corporate Communications which was acquired by Edelman public relations firm last year. She is a pan-Africanist and a strong advocate of women issues.