Advertising Globalisation in Africa

Advertising Globalization

In Africa as you turn on Sky News an advertisement by DHL, the global courier company extols, unsurprisingly, the virtues of open trade. Bored,you turn to CNN and suddenly there is a very similar sounding advertisement from Samsung extoling the virtues of borderless trade. This is a new and very sudden change in advertising strategy from these great transnational companies that normally targets competitors like Apple or UPS. Now they are selling ideas as they have come to understand that their profitability is  now more seriously threatened by the ideological shift against globalization that is occurring throughout the world than by what any competitor can produce in direct competition with their own products.

What has happened that suddenly large transnationals feel so threatened that they need to devote considerable resources to ‘educate the public’ about the virtues of globalization. For an entire generation from the election of Presidents Reagan and Margret Thatcher in the UK in 1979/80 there has been a global consensus that that open global trade was in everyone’s interests along with low taxes on the rich, small government and an elimination of regulations was a free market formula that was unassailable part of the successful Anglo-Saxon model of economic management.

But suddenly thisfree market consensus looks like it is about to dissolve with the rise of Donald Trump in the US,Marine Le Pen in France, UKIP and  theBrexit vote in the UK along with a host of other minor right wing parties throughout Europe and Asia the consensus of the free market economists that free trade was in everyone’s interestis no longer a consensus. It is the right and not the left of the political spectrum that has more correctly gauged the mood of the electorate and is, at least in rhetoric the greatest single threat to the globalization consensus. This is what makes the transnationals so jittery. The Republican party, the UK conservatives and even the extreme right in Europe could in the past assure their patrons in these companies that come what may the global economy would remain open for business. And yet now these allies now  appear to be the greatest threat to their prosperity

 The last four decades has seen the change in the distribution of income in developed and developing countries towards those that are rich. Elites in developing countries in Africa have been enriched by their place in the global value chain but Africa still, despite empty rhetoric from capitals produces nothing but raw materials and imports consumer goods from the developed world and the BRICs.

In all fairness to the free trade economists, none, not even its most ardent supporters have ever argued that there would not be losers from free trade. They only argued as long as the winners could compensate the losers then free trade was apositive development. But the operative word was ‘could’ and not ‘should’. For many western workers, who are the bulwark of the new right wing anti-globalization consensus, globalization and rapid technological change caused by the ICT revolution have been a personal disaster. They have moved from income security in the 1970s’ and 1980’s to feeling increasingly vulnerable with the rise of China, paid technological change and global trade now. Workers in the developed world were not compensated for the impact of globalization. Globalization gave them cheap goods at Walmart and that was widely seen by policy makers as being enough. Importantly the last 30 years saw the return of China to its rightful place in human history as the world’s largest economy and this process alleviated the poverty of hundreds of millions of its people.

This was of course cold solace to the European and American working man who has seen growth and their standard of living slowly ebb away over time. But there was one other important beneficiary of these global changesand that was those who owned, traded and financed the Asian companies that increasingly produce everything that the world now consumes. Aided by tax laws in Europe and North America these elites have used the system of tax havens in in North America (e.g.  Delaware) and the EU (e.g. Luxemburg, Switzerland and the City of London) as well those in developing countries to avoid or evade their tax obligations which would enable governments to pay compensation to those who have lost out.

In time the transnationals will get better at trying to sell the message of ‘globalization good, economic nationalism, bad’.But right now their advertisements on Sky and CNN look utterly absurd, like they are preaching to the converted, speaking to those who can afford cable TV and are the beneficiaries of globalization rather than speaking to the ‘peasants’ directly. But it is not the message that needs to change but an understanding that the game is up, and those who have not benefited from the dramatic economic changes of the last generation have metaphorically, ‘gone home to get their pitch-forks’. Without serious policy change that better distributes the opportunities and benefits of global trade and technological change we will see a repetition of the closure of this second age of globalization. The first age- at the beginning of the 20^th century came to a crashing and disastrous end a century ago with the beginning of World War I.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.

 

Happy Birthday Botswana - What lessons from Namibia ?

Happy Birthday Botswana– what lessons for Namibia?

Last Friday Botswana turned 50 and celebrated its independence from Britain with a justifiable and giant party throughout the country. Botswana, Namibia’s closest neighbor, at least economically and politically has much to teach the rest of Africa and we have much to learn from both the positive and negative experiences of   that country. The country is hyped as the least corrupt country in Africa and based on observation of countries in the region, this may well be the case but it does not mean that Botswana does not have a gradually worsening corruption problem. Botswana has much to be proud of from its record as a country in what was at independence in 1966, in a turbulent and  war torn region.

Botswana went from being amongst the world’s poorest countries at independence with a GDP/capita amongst the lowest in the world ( about $70/capita in the late 1960’s) to an upper middle income country with a GDP/capita in 2015 of USD7,080. The cynics quip that if any country of two million people had 20 million carats of diamonds to export every year for 30 years they would also be rich.It is true that Botswana was  blessed by nature.  It not only found the huge Orapa diamond mine in 1967 but this was followed by the fabulously rich Jwaneng mine, much touted as the richest piece of  real estate on earth. This was in 1972 and is today the richest mine on earth where 10c of operating costs will earn. Botswana is uniquely blessed with not one but two of the richest mines in the world.

But the diamonds themselves are not enough to explain the huge rates of economic growth experienced by Botswana since independence.  Would any other country have managed that much diamond wealth as well as Botswana had?  One need merely compare other very resource rich countries in Africa and the record has been very poor. In oil rich Nigeria  40 years of  huge oil exports has resulted in a country where the vast majority of the people live below the poverty  and are getting poorer. It is estimated that almost 100 million people living on less than a $1 a day, despite economic growth, statistics have shown. The Nigerian National Bureau of Statistics said 60.9% of Nigerians in 2010 were living in "absolute poverty" - this figure had risen from 54.7% in 2004. Poverty rates in other very resource rich countries like Angola and DRC remain much higher than in Botswana.

What makes Botswana truly unique is the quality of the early political elite which remained wedded to ideas of good government, peace, economic stability and the development of its population. Where Botswana was truly blessed was not in its diamonds but that it had one of Africa’s true giants as its founding father of the nation. Sir SeretseKhama was a towering figure committed to high standards of good government not found in other parts of Africa. There was no Mobutu, Mugabe or Dos Santos family which used and exploited the nation’s wealth for their personal benefit and that of their supporters. Sir SertseKhama, while certainly no angel, was a far superior political leader to almost all his African contemporaries. Huge amounts of diamond revenue were invested in developing infrastructure, educating the population and providing good health. Botswana had an exemplary record for public health.  Moreover, while Botswana is far from any understanding of a Jeffersonian democracy and never was, there was always political stability. The army stayed in the barracks and over 50 years there has been no illegal transfer of power. Importantly there was one dominant ethnic group, the Batswana which make up 80% of the population.

But recently not all has gone Botswana’s way. The last decade has seen economic growth rates stagnate as well as the complete failure of government to escape from total diamond dependence. Indeed it can be argued that Sir SeretseKhama’s job was the easy part of its history. He took the nation’s diamond wealth and invested heavily in the human and physical infrastructure that was needed for transformation from an impoverished to a rich country. It was what followed, the period from the founding father’s death in 1979 to 2000 under the leadership of his deputy  SirKetumileMasire that was a watershed in the nation’s history. During this time, President Masireintroduced the Financial Assistance Policy (FAP) which tried in vain to diversify the economy away from its total diamond dependence by providing massive subsidies to new industries in much the same way as Namibia did with Ramatex. As long as the subsidies continued, the industry continued to operate and provide jobs,but when the government finally abandoned the policy in 2000 under the leadership of Festus Mogae, predictably the subsidized industries collapsed one after another. Unfortunately Festus Mogae and his successor, SertseKhama Ian Khama, son of the founding father, had no idea of how to replace the FAP and how to put Botswana on a path to industrial development. They replaced the FAP with a policy of providing small hand-outs to local business which was equally ineffective. They neither had the will nor the vision of leaders such as Rwanda’s Paul Kagame or Ethiopia’s late Prime Minister Meles to impose the discipline needed to achieve real international competitiveness.

But as Batswana wakes this week with a giant  case of ‘bableass’ (hangover) from the party they have just had, a future of jobless economic growth lies ahead of them. Students graduating from the University of Botswana, like their Namibian counterparts are facing prospects of ever longer periods of joblessness and many wonder why their governments bothered investing in their future. The old growth model that was the basis of the prosperity of Botswana and Namibia where the government had the revenue from the diamond mines to continue to employ legions of university graduates has come to an end. If they are unable to get real growth and diversification in the private sector the stability that was their foundation of the current prosperity will evaporate as was the case the with Tunisia. 

The key lesson, if there is one is that peace, order and good government are vital to prosperity but they are certainly not enough. The road to transformation must be defined by each country and needs to be defined by the people and those who lead. The key is to recognize that the government can no longer be the main provider of jobs and prosperity in future as it was in the past. But the aggressive policies pursued with such vigor in Ethiopia and Rwanda and needed to make Botswana and by extension Namibia competitive economies are not being pursued by government. It is politically easier to address short term issues with small band aids of money but only sound policy aimed at ensuring that investors want to invest in the country and create a dynamic private sector will get results. That involves government actually listening to the views of the private sector and taking them on board when formulating policy. This is less and less the case in both Botswana and Namibia.

These are the views of Professor Roman Grynberg and not necessarily those of his employer the University of Namibia.

Stiglitz in Namibia

Economists at 10,000 metres

It is said in Arabic that when the king hires a poet he always chops off his tongue. Poets are notoriously difficult and capricious people and are hence liable to say dreadful things that neither the kingnor his court wish to hear. And even if the king is prudent he canmake a mistake in his choice of poet. Of course the broader understanding of this Arabic aphorism was made very clear at the UN where bureaucrats arepaid the sort of stratospheric salary that most people in Africa only dream of. In the UN one was constantly reminded that you do not speak your mind because you had what UN staffers called ‘the golden gag’.

Economists, unlike poets,are less prone to capricious behavior and any good and prudent king can usually choose one based on his writings with little potential of him saying anything uncomfortable or that which he does not wish to hear.  Once, when I was working for the Commonwealth Secretariat in London I commissioned a brilliant Nobel Laureate named Joseph Stiglitz to work for us. We asked him to prepare a report on how the international community should close the Doha Round of negotiations at the World Trade Organization. Having read much of Stiglitz’s work one knew pretty well what the results of the report would be. Of course one of the truisms of all consultancy is that you never rehire a consultant who surprises you with his recommendations. A surprise is a sign of your incompetence as a bureaucrat. And yes, it also means exactly what you think it means- consultants are by and large only hired to reconfirm and provide further evidence of your own prejudices.

Professor Stiglitz flies a great deal and would almost certainly have more frequent flyer points than Santa Claus. He is paid well by his clients and he flies and sees bits of the world where various leaders wish to have his sage advice. The beauty of the flying around the world  at 10,000 metres is that you can get a really broad world view of things. The minor details of specific small places can be left to mere minions to address.

Last week at UNAM with the great man discussed the government’s plan to industrialize Namibia. I argued what I have time and again in similar discussions in Namibia and Botswana. Industrialization won’t work in Namibia, not because I don’t want it to work, but because of the economic fundamentals. The rules of globalization may be utterly repulsive to many but they are disregarded at the nation’s peril. Namibia, like neighboring Botswana, is a very high cost location to produce anything. There is simply no reason for business which has a choice to locate here. Ramatex has failed and diamond beneficiation is failing for the very much the same reason.Until Namibia addresses the reasons for its high cost structure and low productivity then all industrialization is very likely to meet a similar fate as diamond cutting and Ramatex.

Professor Stiglitz’s response to this line of argument was apparently quite reasonable. He countered that if you drill for oil and fail twice do you stop drilling or continue to look? The obvious retort is that if one does not learn from past mistakes and you continue to drill for oil in the same place you will get the same outcome. This is essentially the situation in Namibia. The reason why Namibia and Botswana are so expensive is because of the very high cost of management and professional staff. The only way to break the high cost structure is to bring in competition from skilled professionals from throughout Africa and even Asia. Despite loudly singing the AU anthem at meetings, any such suggestion is seen by Namibian officials and politicians as pure heresy. Allowing in the ‘makwerekwere’, even on a limited quota basis, get responses across southern Africa like one gets when on uses very bad language in church.

In the final analysis no amount of glossy policy papers and advice from Nobel Laureates will change the facts on the ground in Namibia. The costs of production are too high and until the government develops a real policy that will actually address this most fundamental of constraints to investment all the talk of industrialization is simply, as the Zambians so eloquently call it, ‘wayawaya’. Addressing this takes something few governments have and that is the steely will to look their people in the eye and tell them the truth about what really stops investment, growth and prosperity. Psychologists will tell you that recognizing a problem is half the battle to solving it. Not so in economics. The price of solving this problem is the political cost of imposing a high economic burden on one’s own people in order to transform the nation. In most countries this is politically too expensive and the very reason why countries may grow but don’t ever develop and transform.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed

Palapye Follies

Half way between Botswana’s two biggest  towns of Gaborone and Francistown lies the otherwise unremarkable village of Palapye. It has become a common place to stop for coffee en route to Botswana’s ‘north’and  is also the cross roads to Serowe, which leads to the  Orapa diamond mine and eventually the Okavango delta. But Palapye is more than just a physical cross roads, it is also a metaphorical cross roads between what was once a successful administration and increasingly failed set of policies. The BagammaNgwato (or more commonly Bamangwato) chieftaincy has been dominant in Botswana’s affairs  for as long as anyone can remember and is the chieftaincy of the current president Major General Seretse  Khama Ian Khama and his illustrious father Sir Seretse Khama, the father of the nation. Both Khama the younger and the elder were kings of the Bamangwato.  Three of the four presidents of post-independence Botswana were Bamangwato.

It would then not be surprising that the Bamangwato royalty and elite would tend to concentrate so much of the development of Botswana in and around their traditional heartland but in Botswana that concentration has resulted in a strange anomaly that makes Palapya worth a stop if one is interested in what is widely seen as the ‘least corrupt country in Africa’. Palapya and its infrastructure projects stands as testimony as to what Botswana’s is now doing with its massive diamond wealth. Palapya is a living thriving testimony to folly, ineptitude and probably corruption.

Taking a tour of Palapya’s infrastructure is a fascinating lesson of what can go wrong when policy making stops being based on sound analysis and the most basic question of whether a project is in the nation’s best interests, to one where infrastructure policy is developed is determined by the ‘Economics of 10%’ ie how much of a kick back one can get. 

If you are travelling from Gaborone north then the best place to start is the Botswana International University of Science and Technology (BIUST) . It would seem in this day and age when the entire international community is telling every developing country to send ever more children to university that building a second and technical university is somehow a bad idea is almost heresy. But given the jobless growth in Botswana and when one considers that Botswana already has one of the most expensive post-secondary educations system in Africa then perhaps spending another P500 million on  the first phase of the BIUST construction might not have been prudent at the time it was begun in 2009. This is especially so given that graduates from the nation’s other university , the University of Botswana, are finding almost no employment and are, in ever larger numbers surviving  through low paying internships.

Continuing north is the now infamous power station , Moropule B. This was a USD 1.7 billion World bank/African development bank/ China funded project that was designed to be completed by 2013 and was intended to ween Botswana from it’s almost complete dependence on electricity imports from South Africa. The project never worked properly because those in power decided to choose the company which ultimately built the power plant, ChinaNational Electric Corporation,   a company which had never built a power station as big as this. The then Chinese Ambassador to Botswana, Ding Xiaowen, in 2009 had reportedly advised  then Minerals and Energy Minister Ponatshego Kedikilwe that CNEC was not qualified for the job and yet Kedikilwe still went ahead with the company.  The ambassador suggested that there were other Chinese firms tendering that had considerably more experience in such projects. The project has been a complete disaster and the Minister of Minerals, Mr Kitso Mokaila , has recently mooted the possibility of selling the power plant to the private sector while still talking of renewing the old power plant at Moropule A.

The most disastrous piece of infrastructure in Palapye is not to be seen but is under the village. The North South Water Carrier I constructed in the 1990’s was a pipeline that was supposed to bring water from the relatively water rich NE part of Botswana in the Limpopo basin to the water poor capital of Gaborone. The only problem was that someone decided to build the water pipeline with  fiber-glass pipe, which according to water engineers, is a complete no-no for high pressure water transmission which is almost invariably built with steel and concrete.  It appears that the well know reason why fiberglass was chosen was because one particular head of state, who shall remain nameless to protect the guilty, had financial interests in the company which built the fiber glass pipe. The North South water carrier cost USD 1.2 billion ( P12 billion at the current exchange rate).

In the current two year drought in Botswana where the Gaborone dam is empty and the capital relies on the North South water carrier it fails regularly and Gaborone sits without both electricity and water. The government is now building North South Water Carrier II which will bring water from the Dipthong dam through Palapye to Gaborone. Hopefully this pipeline which is scheduled to be completed by 2020 will be made of sturdier stuff.

But the Palapye follies do not end with the power station that has never worked at capacity, the pipeline that does not carry water much of the time or the university that will add to the next generation of Botswana’s unemployed. Travel further north and at least two other infrastructural disasters loom on Palapye’shorizon. The oddest is the huge semi-finished tower and factory structure that was supposed to be part of the country’sonly glass factory. This was a project that was developed by the Botswana Development Corporation and is a monument to failed beneficiation and to the inept gaggle of policy makers who ran the institution before they were removed.

Botswana policy makers, reasoning that it has all the basic ingredients in country for making float glass(sand, soda ashdolomite,limestone, andsaltcake) and hence a factory seemed an obvious beneficiation exercise. The only missing ingredient was good governance. The BDC contracted with a Chinese company Shanghai Fengyue Glass which, according to a parliamentary report that was subsequently suppressed because the Minister of Finance, Kenneth Motambowho was at the time the MD of BDC sued parliament and had the report suppressed. The building contractors were fully paid before the contract was completed and millions were lost. The total is estimated publicly to be about P1.5 billion though the initial cost of the plant was P800.

Travelling further north along the main road to Francistown past the ghost glass factory is, on the right, is the regional police station at Palapye which stood empty for two years because of gross construction errors and stands are stark testimony to the nation’s gigantamania. It is a huge three story building with scores of police houses and recreation facilities. The total cost of  construction was P150  million in 2014. Given the  enormous size of the police facility one could believe that  the Bamangwato area which it serves was in the midst of huge crime wave. The size of the police station is large even by Botswana’s standards and remains largely empty at present.

The most interesting thing about Palapye is not the concentration of failed, foolish and irrational   projects in such a small village but the fact that despite the billions of pula that have been wasted, the international community, which funded so many of these, continues to religiously repeat the same dogma about Botswana being well managed and having low levels of corruption. This is in the face of so much  mounting evidence to contrary which is concentrated in such a small place. It takes a three hour drive from Gaborone to see this litany of  failure and malfeasance that is found in Palapye.

Ideas frequently outlive the circumstances that create them.  While it was once true that  Botswana had limited corruption and good infrastructure implementation under Sir SeretseKhama, but things have gone downhill and few Batswana in Gaborone who now believe there is such a thing as a major (or even minor) project that is implemented without a back-hander. But Batswana will say nothing of all this because they know that the law is not meant for the rich and powerful and they will get away with what has been done in Palapyeand elsewhere with complete impunity. And as all Batswana know from their own Tswana metaphor that, ‘if you complain too much the lions will eat you’.

These are  the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.

Sir, what is an average?

Sir, what is an Average?

This year I had one of my life’s truly shocking experiences at UNAM in my second week of class this year. I teach a moderately technical but compulsory course in Basic Microeconomics which covers 950 first year students enrolled in the faculty. At the end of the second class a young lady, fresh out of school asked me after the lecture, ‘Sir, what is an average’. This question was, to say the least, unexpected. My first reaction was disbelief that a high school graduate was asking such a question. Later camethe experience of shock, which I recognize so clearly from the experiences of my youth during the war in Indochina.When you suffer shock it is common that your visionnarrowsand all I could see was this young girl. I answered her question and then, as is so common with trauma, I simply put it to the back of my mind. It was only at 3 AM, the devil’s hour, that I woke up in a sweat and told my poor wife about the experience.She was not in the slightest amused about being woken up by a vexed teacher mumbling about a student who clearly understood almost no mathematics.

It is relatively easy to dismiss this as simply as one experience with one student at UNAM but unfortunately this was just one case and is symptomatic of a much bigger problem with the education system in Namibia. On the first day I arrived from Botswana to Namibia on a very cold day in June of last year I was put in freezing office with no heating- UNAM’s equivalent of ‘trial by refrigeration’. On my desk was a test from the previous occupant for a course called Business Mathematics which is a course taught to all first year students in the Faculty of Economic and Management Sciences. The test, like the young lady enquiring as to the meaning of an average, was a revelation. It contained questions like what is ½ +2/5? It was about the level of grade 7-9 arithmetic taught in many schools throughout the world. I went to the then Head of Department of Economics and asked what was a question paper like that doing at a university? He smiled at me and said ‘That’s not half the problem, some 80% of the students failed the course and they are up in arms about it’. I asked around about the course and found that it had been taught by three separate departments at UNAM, Mathematics, Management and now Economics. None had brilliant results and it had been, in the words of one of the teachers, ‘dumbed down’ to grade 9 level as the quality of students coming out of the school system worsened over the years.

The fact that 80% of the 800 odd students sitting such a course at this level  failed it was a clear indication of just how weak the nation’s secondary school system has become and how clearly it is failing the children of the nation and by extension, Namibia’s economy. Students who complete high school and do not know such basic arithmetic are almost certainly bound to end up unemployed or in low paid employment.

UNAM cannot be held responsible for this mess though the finger is frequently pointed in that direction. It is paid by government to educate the nation’s youth and can only take what the school system delivers to its doors. The fault as well as the solution clearly lies with the education system and thegovernment needs to recognize that the nation is suffering an education crisis. How does one deal with this? The first is to begin by recognizing that we are there is a math education crisis and that desperate times call for desperate measures. The Minister of Education has devoted considerable resource to in-service training of the many teachers who are not qualified to teach and therein lies much of the problem.

When I discussed this matter at UNAM I was told that these outcomes were a result of apartheid. As someone who saw apartheid at its ugliest and fought against it there is no doubt that it has left an indelible scar that will take a very long time to heal. But the struggle was fought for many reasons- principally for the dignity and equality of all men and women irrespective of race or color. However,there were also subsidiary objectives, one of which was to assure that Namibian (and South African) students got a first class and not an institutionalized third class education and,with the end of apartheid that Namibians would be able to determine and write their own history. Arguing that apartheid, which ended nearly a generation ago, is still responsible for all that we now see seems to be a denial of these two subsidiary objectives- giving Namibian children the right to a first class education and writing the nation’s history by a free citizenry, not by people who see themselves asthe eternal victims of a brutal history.

Once the denial of this problem ends providing schools with much more resources as well as temporary math teachers from abroad may well alleviate the problem of math education in Namibia. In time as more and more UNAM graduates will find it difficult to find well-paying jobs, as is happening throughout the region, teaching math will come to be seen as one of the few good employment opportunities and these foreign teachers will not be needed permanently. If we fail to address this issue of the quality of High School education now we will condemn an entire generation of young Namibian high school graduates to being unemployable. The school system is in effect, handing out permanent poverty and unemployment vouchers to the nation’s children and reform is essential.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM, where he is employed.

Why we should tear up the EPA.... Eventually

 

Why we should tear up the EPA…… eventually

The Economic Partnership Agreement, a free trade agreement between the European Union and six SADC countries has finally been signed last Friday by in Kasane in Botswana. Six similar EPAs are being negotiated or have been singed amongst many of 76 members of the African Caribbean and Pacific group of nations. That is both the good and the bad news. It is good news for our farmers who export their beef and grapes and the fishers who export fish to the EU. It will mean that they will be able to sell duty free into Europe’s 26 members.It is also good news for everyone else who exports goods like steel and automobiles to the European Union because after ten years of tough negotiations Namibian exporters are able to export whatever they want to Europe without paying any duty. Unfortunately we have no steel and automobile industries but South Africa does and South Africa is by far the biggest beneficiary of a trade agreement that originally it was not even supposed to sign.

What Namibia got was a continuation of the status quo in terms of the access of our exports to Europe. We can continue to export everything we make duty free. But we had that before the EPA, you say so what extra did we get? The answer is almost nothing. The Europeans know it and those who signed on Namibia’s behalf almost certainly know it. They will trot out the benefits in improvement in rules but everyone knows that almost nothing was gained and it is unlikely that our limited range of exports will not increase one dollar as a result of the EPA agreement.

The bad news is what we had to pay a great deal to get nothing. For years the government of Namibia had quite rightly been one of the strongest opponents of the EPA. The reason was simple. Not only does Namibia now have to eliminate all its tariffs on goods from the EU which would make it even harder to compete with EU exporters it also has to comply  a whole new range of EU  provisions that are anti-developmental. What are these provisions? They include things like limitation on Namibia’s right to introduce new export taxes and the use of infant industry provisions which protect new industries.  The grand daddyof all conditions in the EPA is the so-called ‘most favoured nation’ provisions whereby Namibia and the SADC countries must grant to Europe whatever they might negotiate with large economies like Brazil or India. This is the so-called ‘’we shall never negotiate again provision”’ because it means that the EU can free ride on the back of other negotiations without having negotiate yet another treaty with small African states.

Europe is simply trying to stop Africa from using the very same laws and taxes that they used to develop for almost a hundred years ago. You may ask what sort of people are these to tell a sovereign nation what its laws and export taxes must be? If you listen to the European negotiators it is being done for development according to the European negotiators who say that all these rules that they used in the past are bad for us and we should not have access to them. That is good reason- the real reason is that it is good for Europe because it helps consolidate EU exports and maintain their access to our raw materials and stops us from trying to process them here.

Many think those who negotiated the treaty for Africa to be at very best,fools and some would use stronger words. But in fact the African negotiators have done much better than the Caribbean and Pacific negotiators who signed their own EPA in 2007. They gave up everything,  export taxes MFN and infant industry because they were true believers in the free market in the case of the Caribbean. Unfortunately their heads of government were not and they sacked them all and closed the Caribbean Regional negotiating machinery. In SADC the negotiations resulted in clear limitations on what we can do  but not the sort of outright bans that the Caribbean or the Pacific foolishly agreed to. In future we shall have to ask Brussels for permission to pass new export tax laws and they may not agree.

Fortunately  MinisterSchletwein has been cleverin dealing with the EPA. He recently  mooted export tax laws of 2% of the value of mineral exports  which will be introduced presumablybefore the treaty with the EU has to be ratified in October. The provisions of the EPA limit Namibia’s ability  to introduce new export taxes but they allow us to maintain old export taxes. In the long run the treaty mean that we will give Europe what  will effectively be able to effectively veto over our commercial laws.

So who benefits  from all of this. Swaziland keeps sugar access, Lesotho improves slightly the terms of its garment exports and we, along with Botswana get to keep our beef exports to Europe. But the world is as it always was,  and the big winner is of course the biggest country- South Africa which cleverly used its small neighbours to get better access for its wine and sugar, which is what Pretoria always wanted.

Ironically the biggest loser is not Africa but Europe because it has given Africa yet another reason to despise what they have done on this continent. Before when Europe was more generous during the days of the Lome Convention and the Cotonou Agreement  ie before the EU felt hreatened by the three-headed hydra of Indian service exports, Chinese manufactures and Brazilian agriculture we had generous trade arrangements.

The Chinese are much more clever than Brussels. They come with no repulsive treaty but with what Africa so desperately needs- investment and aid that is commercially oriented. This is precisely what Europe did in the beginning of the post-colonial era under the Lome and CotonouAgreements in the 1970’s but has since given up. The Chinese are now doing it bigger and better.

ThisEPA  is an odioustreaty that we will have to sign and ratify to protect our export sectors but there will come a day when Europe is no longer relevant to Africa’s future and we will be able to tear up this dreadful treaty which aims to determine our economic future as surely as European machine guns did 100 years ago.

These are the views of Professor Roman Grynberg and not necessarily those of his employer. The writer was, much to his subsequent shame and regret,  an EPA negotiator for the Pacific Islands.

Namibia's Solidarity Tax

The Namibian Solidarity Tax

Almost every quarter that goes by in Namibia the issue of the country’s income inequality comeshome to haunt the government in one form or another. Whether it is the land issue and Affirmative Repositioning Movement last year, or the ‘Struggle kids’ now, Namibia’s  unfairdistribution of income undermines the peace and stability of the nation and the government wants to address the issue. Namibia has the world’s second worst distribution of income- yes based on the so-called Gini co-efficient which economists use to measure income inequality (zero for complete equality and 1 for complete inequality) we have the amongst highest in the worldwith a Gini co-efficient at 0.6.

In terms of inequality, the country at the very top of the world’s inequality ladder is South Africa,with a Gini co-efficient of 0.69 in 2011. This is of course no coincidence as both countries suffered under apartheid and worse still Namibia, wasa colony of apartheid South Africa. This apartheid/colonialism narrative has been the basis for explaining Namibia’s current situation. In part this is correct but it runs head long into some really uncomfortable facts. The firstfact is that South Africa despite a long period of rapid economic growth and enormous amounts of money spent on social spending over the last twenty years such as income support for the poor, RDPhousing, health and education expenditure has, much to the horror of the ANC government, actually witnessed a worsening of its distribution of income since the end of apartheid. In Namibia the two estimates that have been made of Gini co-efficients show precious little downward movement as well. The reason is straight forward –  despite the very rapid economic growth up to 2009, which is supposed to decrease inequality,  and the very large amounts spent on social programs in South Africa and Namibia the rich have gotten richer as fast as the government has increased subsidies to the poor and sowhile poverty may in part be alleviated income inequality is not effected. Poverty alleviation and income redistribution are not the same thing, they are related but almost invariably confused in public discussion.

The second really uncomfortable fact in terms of Namibia’s colonialism/apartheid narrative is the existence of Botswana. Botswana was never colonized – it was a British Protectorate and was so poor and miserable that the British did not even bother building a capital  choosingrather to administer it form Mafeking in South Africa until just before independence. Botswana had no apartheid, no colonialism and very few white settlersand yet its Gini co-efficient is not that much lower that of Namibia. Now that is a problem if you believe that the only cause of Namibia’s inequality of income is its historic legacy.

The country with one of the worst distributions of income in Asia is Papua New Guinea and what all these four countries have in common is mining. The existence of mining and petroleum puts huge amounts of wealth in the hands of mine owners and the government. The former is not inclined to lose its income and in the case of the latter, most governments are incapable of developing the fine and delicate sort of policies which really alleviate poverty effectively.

Namibia’s Minister of Finance MrCalleSchlettwein, last year suggested the implementation of a new Solidarity Tax. He has said he will raise some $600 million in extra taxes on upper income individuals. Given the personal company and withholding tax revenue of the country was $14 billion in 2013/14 this tax measure constitutes an increase of some 4% of tax burden.  While details are scarce the tax will presumably be implemented through the income tax system though some flat rate taxes on corporations are also expected. This is a good proposal, which I as an economist and one of its intended victims fully support, but the devil will be not in the detail but what the minister actually intends to do with the money.What would make the new tax more convincing to a skeptical public is the creation of a fund that would ring fence this money specifically for poverty alleviation measures. That way the public would know that existing poverty alleviation measures would continue and that this tax would actually be over and above what is already being implemented.

The best means of poverty alleviation is to give money directly to the mothers as the Brazilian ‘bolsafamilia’ fund. In order to receive money women must assure that their children are regularly inoculated against diseases and attend school so they get a monthly lump sum payment. No bureaucrats stand in between the government and the beneficiary. The money goes straight to the bank accounts of the mothers. It is enormously empowering to otherwise impoverished women and children. No system has as yet been so cost effective in alleviating the poverty of so many and redistributing income in a country also known for its inequality. Under former Brazilian President Luiz Inácio Lula da Silva poverty was decreased by approximately 30% in three years from 2003 -2006 in large part because of the program. It is widely acclaimed across the political spectrum as an excellent way of dealing with poverty and variants should be considered here in Namibia.

But in making this proposal for a Solidarity Tax Minister Schlettwein has violated one of the cardinal rules of tax policy. If you are going to hit people with a new taxes the first thing you are supposed to do, even before the tax, is to tell them all the good things you are going to do with their money. This decreases resistance to tax increases. Otherwise the taxpayer may think that, because all money is fungible, the new tax is merely a way of soaking the taxpayer to pay for the widening and unsustainable government budget deficit. Minister Schlettwein knows full well the adage that labor has legs and capital has wings and so he must finely balance tax increases in Namibia against the risk that capital will fly if he pushes tax solution too hard. But he is caught between a global economic system that creates inequality, a middle class that is myopic and hates the proposed tax, and a large and restive poor that will mean continual instability if the issue of inequality is ignored.There are no easy and painless solutions to this, most vexing of Namibia’s long term economic problems.