Yes East Africa Can Avoid The Resource Curse....

East Africa is the new fossil fuel frontier. In the last few years Kenya, Uganda, Tanzania and Mozambique have discovered large quantities of commercially viable oil and gas deposits, with the potential for even more discoveries as more aggressive prospecting continues. There is reason to be upbeat about the region’s economic prospects over the next three decades, or at least before the oil runs out. But the optimism must be tempered by an acknowledgement of the dangers that come with the new found resource wealth. Of particular concern are issues of governance and sound economic management.

We are all too aware of the dangers of the resource curse. This is when the discovery and exploitation of natural resources leads to a deterioration of governance, descent into autocracy and a fall in living standards. Associated with the resource curse is the problem of the Dutch disease, which occurs when natural resource exports (e.g. oil and gas) lead to an appreciation of the exchange rate, thereby hurting other export sectors and destroying the ability of a country to diversify its export basket. The new resource-rich Eastern African states face the risk of having both problems, and to avoid them they must cooperate.

In many ways Eastern African states are lucky to be late arrivals at the oil and gas game. Unlike their counterparts in Western and Central Africa, nearly all of them are now nominal electoral democracies with varying degrees of institutionalized systems to ensure transparency in the management of public resources. Across the region, the Big Man syndrome is on the decline. But challenges remain. Recent accusations of secrecy, corruption and bribery surrounding government deals with mining companies suggest that there is a lot of room for improvement as far as the strengthening of institutions that enforce transparency (such as parliaments) is concerned. It is on this front that there is opportunity for regional cooperation to improve transparency and resource management.

While it is easy for governments to ignore weak domestic oversight institutions and civil society organizations, it is much harder to renege on international agreements and treaties. A regional approach to setting standards of transparency and accountability could therefore help ensure that the ongoing oil and gas bonanza does not give way to sorrow and regret three decades down the road. In addition, such an approach would facilitate easier cross-border operations for the oil majors that are currently operational in multiple countries, not to mention drastically reduce the political risk of entering the region’s energy sector. It would also leave individual countries in a stronger bargaining position by limiting opportunities for multinational firms to engage in cross-border regulatory arbitrage.

The way to implement regional cooperation and oversight would be something akin to the African Peer Review Mechanism, but with a permanent regional body and secretariat (perhaps under the East African Community, EAC). Such a body would be mandated to ensure the harmonization of laws to meet global standards of transparency and protection of private property rights. The body would also be mandated to conduct audits of national governments’ use of revenue from resources. The aim of the effort would be to normalize best practices among states and to institute a global standard for states to aspire more – more like the way aspirations for membership in the European Union has been a catalyst for domestic reforms in the former Yugoslavia and Eastern Europe.

Regional cooperation would also provide political cover to politicians with regard to economically questionable fuel subsidies. The realities of democratic government are such that politicians often find themselves forced to concede to demands for fuel subsidies from voters. But history shows that more often that not subsidies come at an enormous cost to the economy and instead of benefitting the poor only benefit middlemen. In addition, as the case of Nigeria shows, once implemented such policies are never easy to roll back both due to politics and the power of entrenched interests. Regional agreements capping any fuel subsidies at reasonable levels would be an excellent way to tie politicians’ hands in a credible manner, while at the same time providing them with political cover against domestic criticism.

Beyond issues of governance, there is need for cooperation on regional infrastructure development in order to reap maximum value for investment and avoid unnecessary wastes and redundancies. Landlocked Uganda and South Sudan will require massive investments in infrastructure to be able to access global energy markets. The two countries’ oil fields are 1,300 km and 1,720 km from the sea through Kenya, respectively. One would hope that as these projects are being studied and implemented, there will be consideration for how to leverage the oil and gas inspired projects to cater to other exports sectors – such as agriculture, tourism and light manufacturing – as well

KPMG, the professional services firm, recently reported that transportation costs eat up as much as 20 per cent of Africa’s foreign exchange earnings.  There is clearly a need to ensure that the planned new roads and railways serve to reduce the cost of exports for all outward oriented sectors in the region. Embedding other exports sectors (such as agriculture, timber, domestic transport, etc.) in the process of developing new transportation infrastructure will minimize the likelihood of their being completely crowded out by the energy sector.

In isolation, each country’s resource sector policy is currently informed by domestic political economy considerations and regional geo-politics. There is an emerging sense of securitization of resources, with each country trying to ensure that the exploitation of its resources does not depend too much on its neighbours. Because of the relatively small size of the different countries’ economies, the risk of ending up with economically inefficient but expensive pipelines, roads and railways is real. South Sudan is currently deciding whether to build a pipeline through Kenya (most likely), through Ethiopia, or stick with the current export route for its oil through Sudan (least preferred due to testy relations).

For national security and sovereignty reasons, Uganda is planning on a 30,000-barrel per day refinery in Hoima, despite warnings from industry players that the refinery may not be viable in the long run. Some have argued for the expansion of East Africa’s sole refinery in Mombasa to capture gains from economies of scale, an option that Uganda feels puts its energy security too much in Kenya’s hands.

In the meantime, Kenya and Tanzania are locked in competition over who will emerge as the “gateway to Eastern Africa,” with plans to construct mega-ports in Lamu and Tanga (Mwambani), respectively. While competition is healthy and therefore welcome, this is an area where there is more need for coordination than there is for competition among Eastern African governments. The costs involved are enormous, hence the need for cooperation to avoid any unnecessary redundancies and ensure that the ports realize sufficient returns to justify the investment. Kenya’s planned Lamu Port South Susan Ethiopia Transport Corridor (LAPSSET) project will cost US $24.7 billion. Tanzania’s Mwambani Port and Railway Corridor (Mwaporc) project will cost US $32 billion.

Chapter 15 of the EAC treaty has specific mandates for cooperation in infrastructure development. As far as transport infrastructure goes, so far cooperation has mostly been around Articles 90 (Roads), 91 (Railways) and 92 (Civil Aviation and Air Transport). There is a need to deepen cooperation in the implementation of Article 93 (Maritime Transport and Ports) that, among other things, mandates the establishment of a common regional maritime transport policy and a “harmonious traffic organization system for the optimal use of maritime transport services.”

The contribution of inefficient ports to transportation costs in the regional cannot be ignored. Presently, the EAC’s surface transportation costs, associated with logistics, are the highest of any region in the world. According to the African Development Bank’s State of Infrastructure in East Africa report, these costs are mainly due to administrative and customs delays at ports and delays at borders and on roads. Regional cooperation can help accelerate the process of reforming EAC’s ports, a process that so far has been stifled (at least in Kenya) by domestic political constituencies opposed to the liberalization of the management of ports. The move by the East African Legislative Assembly to pass bills establishing one-stop border posts (OSBPs) and harmonized maximum vehicle loads regulations is therefore a step in the right direction.

Going back to the issue of governance, more integrated regional cooperation in the planning and implementation of infrastructure development projects has the potential to insulate the projects from domestic politics and patronage networks that often limit transparency in the tendering process. Presently, Uganda is in the middle of a row with four different Chinese construction firms over confusion in the tendering process for a new rail link to South Sudan and port on Lake Victoria. 

The four firms signed different memoranda with different government departments in what appears to be at best a massive lapse in coordination of government activities or at worst a case of competition for rents by over-ambitious tenderpreneurs.  This does not inspire confidence in the future of the project. A possible remedy to these kinds of problems is to have a permanent and independent committee for regional infrastructure to oversee all projects that involve cross-border infrastructure development.

In conclusion, I would like to reiterate that Eastern Africa is lucky to have discovered oil and gas in the age of democracy, transparency and good governance. This will serve to ensure that the different states do not descend into the outright kleptocracy that defined Africa’s resource sector under the likes of Abacha and Mobutu in an earlier time. That said, a lot remains to be done to ensure that the region’s resources will be exploited to the benefit of its people. In this regard there is a lot to be gained from binding regional agreements and treaties to ensure transparency and sound economic management of public resources. Solely relying on weak domestic institutions and civil society organizations will not work.

Why African Women Bleach & The Golden Niche Of Marketing

 

“Bleaching” is the preferred term in many parts of Africa for the use of cosmetics that lighten the tone of the skin.

In 2011, the German government funded a study by the World Health Organisation into the dangers of bleaching with these cosmetics, many of which apparently contained inorganic mercury, a substance that can cause kidney damage, suppress immunity, induce anxiety and depression, and even permanently destroy the nerves in the limbs and skin.

The report placed the stamp of authority of a leading inter-governmental agency on a matter that had long attracted negative attention: many women of African ethnicity – 77% in Nigeria for instance – around the world bleach intensely at a high risk to their health in order to feel attractive. Indeed a significant portion of their income goes into sustaining this practice.

African critics of bleaching were however surprised to learn that the practice was widespread in Asia as well, since for many of them bleaching was strictly an issue of racial pride, self-image and identity.

Those who had framed the problem as a pure African one would have been puzzled had they heard that in the preceding year Indian activists had taken on a Unilever skin brand for allegedly promoting “skin-lightening” as a way of benefitting from the close-to-$10bn global trade in skin-whitening creams.

So like several issues of similar hue, a widespread ‘third world’ problem had been construed as a uniquely African problem, and much fuss made around a self-serving ‘African exceptionalism’ charade.

A little bit of history would have also taught some of the critics that in pre-modern Europe, women routinely ate arsenic in addition to rubbing the poisonous stuff on their skin in order to lighten their tone.

A little sociology would also have thrown up the uncomfortable fact that male bleaching is rising explosively and thus made a bit of trouble for the thesis that bleaching is all about male pressure and low female self-esteem.

Also worrying for the whole “self-image” framework of looking at the ‘problem’ might be emerging evidence that ‘skin-darkening’ may be the preference for the gay community in Asia’s hottest sex-spots, contrary to folkloric beliefs that male bleachers tend to be gay.

The biggest effect by far, however, of the tendency to look at bleaching only through the emotive lenses of racial self-identity, or in the sterile fashion preferred by public health specialists, is to miss many more fascinating facts about the self-care industry, and the social psychology of marketing in general, but especially in Africa.

First of all, there are several things going on when it comes to the skin-care industry.

Scandinavian women are buying ton-loads of skin-tanning creams, and the practice is spreading across Europe, with some serious health consequences too.

Fair-skinned women in the West who darken their complexion at the risk of their health are not necessarily making a racial statement.

Whilst global sales in skin-darkening compounds are lower (near $1 billion), that is no doubt because stronger regulatory enforcement in their main markets – Europe and America – makes aggressive marketing of shady stuff much harder. But the rise of internet marketing and more frequent travel are leading to explosive sales growth.

Meanwhile, government regulators in the West continue to warn stridently about the health dangers of anti-ageing products. The sale of such products in Africa are nearly negligible largely because of the demographic realities of a younger population, which have made being old the gateway to special status. In places where being old is rather mundane, people feel more status-anxiety about growing old. In a similar vein, it is trite fact that ‘naturally fair’ people appear in African populations, and being rarer, they could have been seen as ‘exotic’.

And therein lies an intriguing clue: it is most likely such intra-population ‘status determinants’ that fuel the global urge in humans to etch medals onto our largest and most outward-projecting organ, the skin, and perhaps not some macro-ethnic identity thing. It is the need to define some niche to slot ourselves into, to be part of some rare, non-mundane, segment of the population, which drives most people to experiment with their skin tone in search for some niche shade. 

The search for ‘personalisation’, the desire to customise for self, the fear of melding into the crowd, of not standing out in some way – these are the key factors racking up sales for the various skin-change solutions. Intriguingly, in market sentiment surveys, many African women who use creams that affect the tone of their complexion routinely mention ‘chocolate’ as the shade they are aiming for.

In fact, the most successful skin products are marketed as a tool to help you carve your own niche, achieve the complexion nature’s higher powers ordained for you in the pre-life. The makers sell you on the ability of their product to unearth some unique potential of your skin, help your deeper beauty emerge, restore the natural vibrancy and vitality of your skin, help assert your individuality, and indeed find for you: a golden niche.

No product that I have seen – and in preparing to write this I did see a tonne – announces an offer to turn you into some random sample of another race, gender, or age-group. Even anti-ageing creams promise to arrest deterioration due, not to natural aging, but hostile influences of the environment, such as that vile ‘oxidation’. And truth be told, each individual’s skin is different, and its health therefore requires deliberate interventions.

That some of this skin stuff is made by snakes-oil salesmen who exploit their customers’ search for a niche is to be expected; that’s the reality of all commerce. The extremes of the trade should of course be dealt with by the appropriate laws and regulations. For example, certain substances, such as hydroquinone, are banned from use in topical products because they are dangerous. It is a simple matter of enforcing those bans.

As for the rise in the skin-care industry on the back of the individual aspirations of black women and men alike, we have only scratched the surface.

Companies like Tiossan, Tara International, Ghandour, and Natura Sarl are a few players in a fast-emerging African home-grown skin-care industry with global ambitions that do not so much as whisper ‘lighter skin’ in their marketing campaigns. Clearly, these nimble, well-run, companies have seen beyond the $10 billion skin-lightening trade and are happier targeting a healthier chunk of the more than $170 billion spent globally on cosmetics.

And what have they seen? That the deeper need that skin-care customers of all backgrounds are trying to serve is to heighten their belief in their own inner uniqueness, a yearning for a golden niche. These emerging African brands sell themselves by emphasising rare attributes of dark skin and proclaim themselves as uniquely able to serve it. Far it be from them to offer some generic ‘ethnic stranger’ as the model for these special, unique, customers they are aiming to engage.

But thinking about it critically, shouldn’t this African skin-care marketing approach – of flattering the human ego’s yearning to be unique – become the benchmark of all marketing in a post-industrial age?