Pink Plastic Pearls or why our children are unemployed

Pink plastic pearls or why our children are unemployed

Just about three or four times a week you can go to Hosea Kutako airport outside Windhoek or Sir Serste Khama airport in Gaborone or any other airport in Africa and you will witness a strange phenomenon. As you watch people checking in for the Ethiopian Airlines flight you will see a large number of them are flying with no luggage, not even carry on luggage. If you ask them why you will find that these are people not going Addis Ababa but transiting there for the connecting flight to Guangzhou in southern China. In 2017 you could get a return ticket to Guangzhou with Ethiopian  for about US$800 from Windhoek. And on top of that Ethiopian Airlines would throw in 45 kilos of free luggage plus another seven as cabin luggage. This explains why people carry almost nothing when they leave for China.

These people are Africa’s new generation of Millennial traders. They carry nothing with them but return with often a hundred kilos plus of purchases they have made from Guangzhou (formerly Canton) which has for hundreds of years been the main trading hub of southern China. In 2016 it was estimated that some 500,000 Africans arrived every in Guangzhou to do one thing only and that is to buy high value to weight items and ship them back to their home country where they would be sold. What has emerged in this century has been a huge but informal trade worth what many estimate is billions in exports for China every year.

Often these informal traders return home and declare imports that are worth very little and pay only small amounts of import duty and VAT. Increasingly these informal traders and the networks that they create in their own countries has served to under-cut the prices in many established retail outlets and so have made these goods much cheaper for the average citizen. The problem is of course that this trade, even were it properly declared at the border, has the great advantage of decreasing  the cost of Chinese goods in country because it shortens what economists call the value chain between producer ie China and the African consumer.

Dr Heidi Haugen, a Norwegian sociologist undertook a recent  study of the trade between Ghana and China in pink plastic pearl earrings. This is a strange commodity, no doubt. She followed the whole chain from inputs  to final buyer in Ghana but what she discovered is a revelation. African politicians in gold producing countries dream of establishing a gold jewellery manufacturing industries but there is no local market and most African women could never afford such luxuries especially with gold trading at US$ 1280/0z. So matching pink plastic pearls earrings are commonly given out to bridesmaids at weddings in Ghana. These are cheap, about Yuan 1.7 per pair at retail price when sold by the informal traders which at the time of the study was about US0.25 per pair.

The actual value chain, as it is called is reproduced below. What is clear is that the Chinese make the pink plastic pearl earrings for about $US 0.09 per pair. The Chinese supplier then adds 32% and sells it to the Ghanaian in Guangzhou for US0.12 per pair.

 

The trader then ships the plastic pearl earrings back to Accra, paying whatever it is they do in tax, and then distribute them through his or more commonly her, network to retailers who then sell them to the happy couple who are about to get married for about US$0.25 per pair. So you ask what has this got to do with my children being unemployed? The answer is, everything! Most of the value added is made by the Ghanaian trader and retailer. But all the jobs are created in China because Ghana does not have the metal, the electrolytic coating, the plastic pearls or the glass stones. And furthermore if a Ghanaian manufacturer actually wanted to produce the pink plastic pearl earrings in Accra he would almost certainly have to import the components from China at a much higher price. What is true of pink plastic pearl earrings is unfortunately true of just about everything we consume in Africa. In Africa we make virtually nothing except holes in the ground for the big mining companies.

The jobs are created in China but the profits are made by Ghanaians with no African jobs created except retail sales in Ghana. This is the sad story of Africa, writ small in pink plastic but it is  true of almost everything consumed in Africa. It is cheaper to buy in China and trade in Africa. And so our children are unemployed not because of the brave women who travel to China not speaking a word of Mandarin and conducting their business on Google translator. They are simply trying to feed their families. It is not the fault of the retail networks that distribute these cheap products to the newlyweds. If you are looking for looking for a villain it is our fault and the fault of those who rule us, who will not dare tell the people the painful political truth, that until we have these inputs in Africa and until we can make it cheaper than the Chinese then our children will all be unemployed. But it is said, that if you point a finger at someone there are always three fingers pointed back at you.  In order for Africa to succeed it will mean great sacrifice by its peoples and we all know that we will never elect any politician who tells such ugly truths.

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

NEEEF – Towards a Credible Alternative

Several weeks ago  President Mr Hage  Geingob publicly expressed his frustration with the many Namibians, both white and black who are critics of the NEEEF (New Equitable Economic Empowerment Framework) which would see a significant portion of white owned capital transferred to previously disadvantaged groups which include black people as well as women and the handicapped. His principle frustration was what he alleged to be the lack of credible alternatives  that were being offered by the critics of the NEEEF. The NEEEF has been in the form of draft legislation since 2015 and there have been numerous consultations and countless meetings to advance the proposal to the National Assembly and making it the law of the land. It is widely expected to become law by the end of the year. 

The three or four years have passed between the 2015 draft legislation and the current consultations and this lack of definitive solutions has only served to increase the discomfort of the largely white and foreign owned businesses. Letters to the editor abound about how closed corporations, which have been used as vehicles by Namibians to avoid land and property transfer taxes, will now be subject to NEEEF and white people will be forced to sell their homes. This of course completely overlooks the fact that even the 2015 draft law proposes a minimum size of enterprise subject to NEEEF which is yet to be determined and the government of Namibia is unlikely to want to expropriate people’s homes.

But that of course is the problem. The lack of any clarity as to who and what will be covered under the final version of the NEEEF leaves the foreign and local white private sector simply unwilling to invest in Namibia  until they see final draft legislation which they know will become law. Lately there are media reports that the most controversial part of the legislation which is the obligation to sell a minimum of 25% of a business to a local previously disadvantaged individual will be dropped and an unspecified amount will be in the legislation. The wording that is proposed for the revised NEEEF legislation is yet to be made public and there is a concern from the private sector that they will still be forced to divest, there is equal concern from those who see the current distribution of wealth in Namibia as utterly unsustainable that the lack of clarity and the fear of further economic destabilization will lead to a political fudge, like Mr Schlettwein’s 1% tax increase on the rich which he has so disingenuously rebranded as the ‘Solidarity Tax’, that will achieve almost nothing.

The irony of the NEEEF is that some of its most strident critics are not white Namibians but those previously disadvantaged groups who know that the legislation will only benefit a few Namibians who have enough resources to invest in white owned businesses or who are politically connected and able to obtain access to the funding that will be needed to purchase equity in white businesses. This group does not include the vast majority of the previously disadvantaged who will remain, as ever, disadvantaged.

The absence of clarity on what NEEEF will eventually be, is harming Namibia and in particular the young people who are not finding jobs because the owners of capital are waiting for the government to finally pronounce on the matter before investing in the country

Without wishing to contradict His Excellency there are many alternatives to what is proposed which will either be a Zimbabwe style transfer from the white to the party elite or alternatively it will be nothing more than a vacuous fudge like what became of Mr Schlettwein’s so-called Solidarity Tax. The best alternative that would remove the fear of wholesale expropriation is to follow a model already widely in use in Europe and that is to help those who actually produce the wealth of the nation to become part owners of the corporations in which they work. France,  the only country in the world,  has a mandatory employee share ownership scheme for all firms above 50 employees. In total it is estimated that employee share ownership in France was worth some Euro 65 billion in 2015. Elsewhere in Europe,  like the UK and Germany employee share ownership is voluntary but is still widely used and there exist numerous tax incentives to push firms in this direction. This is a prudent and tried and tested  approach to assuring that African workers will benefit. It will also increase morale,  productivity and long term investment in these companies.

By moving away from the current NEEEF model which favors only the black rich and politically connected Namibians the government can achieve two important objectives. The first is to give certainty to white owned capital that transfers of white and foreign white to African ownership run smoothly in a tried and tested manner without fear of immediate expropriation, a move which would will only serve to increase Namibia’s monstrously high rates of unemployment. With an estimated 60,000 job losses last year the government can ill afford to continue on the current path on NEEF. But the second outcome is that unlike what is proposed under variants of the current NEEEF, a worker share ownership program would be genuinely equitable where those who produce the nation’s wealth would share in the benefits rather than politically connected who have done nothing to attain the sort of wealth that would come to them under the current variants of the NEEEF proposals.

It needs to be recalled because it seems largely forgotten by many, including some SWAPO members,  that SWAPO is at least nominally still a socialist party and not a party of tenderpreneurs, fishmongers and land speculators and so a NEEEF based on sharing the nation’s wealth with Namibia’s workers who work in the mines and factories rather than those who sit on their backs,  may well prove to be a far more rational prudent and, dare I suggest, politically popular approach than following a path that has been so unsuccessfully pursued by other African countries such as Zimbabwe, DRC and Uganda  and has only lead to economic ruin. So Mr Geingob, there is a good,  prudent and proven  alternative to NEEEF and I urge reconsideration before we either produce a disaster or an empty political fudge that does not solve the problem that it was intended to address.

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

Productivity in Namibia – A desperate need to disrupt

May is an unfair, if simply bad month to reflect on productivity levels in Namibia and is a time when there is almost no-one around to try to get data on productivity levels in the country. Four of the nation’s fourteen gazetted public holidays occur in May and they are an occasion for the ‘very hard working business elite of the country’ to shut down their operations to bridge holidays with weekends so to be able to have long extended holidays. This is because the old elite suffers no competition from a  new and hungry elite that will do whatever it takes to make a profit.

With Workers Day on  the 1^st May and Casinga Day on the 4^th the natural outcome is not just a short working week  but commonly businesses allow  managers to take 3 days holidays to create a long 9 day break. Just two weeks later on Ascension on Thursday the 10^th the next day, Friday was almost as dead as a Sunday in Windhoek with businesses and public institutions shutting their doors so their poor over-worked managers (workers can’t normally afford holidays) can take a 4  day weekend. UNAM decided to shut on Friday 11^th as it was an ‘Institutional holiday’ and much of the business community also followed suite. Of course Namibia with its 14 days  of public holidays is about on par with the rest of the SACU region where 14 days is the norm in all countries except Botswana which declares an extra public holiday whenever a public holiday falls on a weekend and so there are 16 public days but only 14 days off. 

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When you look at the figures on public holidays and weekends for the Southern African region and compare these to the number of days worked in countries with which our leaders say we are going to compete i.e China and India one can see right away why there is so little industrialization throughout Southern Africa. Even if you compare this to say Ethiopia, which is the only country in Africa that looks like it will actually industrialize, and not just write empty policy statements, the number of state holidays is 10 per year. In China there are 7 public holidays and people normally work six days per week. In India there are only three national holidays but scores of religious and regional holidays that make the country a real patch work of regional complexity. The killer is of course that Indians, like the Chinese normally work a six week in the private sector. The chart above produced by the Botswana diamond producers association shows exactly the difficulty that this creates for those thinking they are going to say, cut diamonds in Namibia and compete with India.

Of course Namibians, whether they are part of the old elite or are workers, want to earn like Belgians and work as little as they do as well. It is worth of course noting that Belgians long ago ceased cutting diamonds and handed the task over to the lowly paid Indians with who no-one in Southern Africa wants to cost compete. If Indians work 30% more days per year than Namibians and earn far less then it should hardly be surprising that the diamond cutting factories here exist only because of government subsidies such as the ban on the export of Namibia’s uncut special stones ( more than 10.8 carats) which must be processed in the country. That there is no real industrialization without state subsidy in the country is a direct result of the nation’s productivity and the low levels of output that are produced when people are actually working and not planning their

If Namibia wants to really industrialize then it needs to break the pattern of low productivity in the country and compete. There is only one way that this can be done and that requires the government to lead in a number of ways. First there has to be a decrease in the number of public holidays in the country to a level that more closely represents the situation in those countries with which we need to compete if we are ever to industrialize. If however there is one thing that will unite black Namibian workers with their white managers it is in a lynching of anyone who dares suggest that they work more days.

There is really only one way to disrupt the comfortable work habits and productivity that were developed under apartheid and continue to this day in Namibia and that is to bring in the disruptors- the people who are lean and hungry who will work not six but seven days a week and do whatever it takes to make a living and to make their families prosper. These are the immigrants, the hated foreigners but it is only they who disrupt the past patterns of never opening on Saturday and taking as many holidays as possible. These disruptors can be Africans ( Zimbabwean, Nigerians of Ugandans) or they can be Indians or Chinese but suggesting such a thing is a blasphemy in a land where productivity for the rich and comfortable or those who have jobs is not an issue.

There will of course be no mass migration of lean and hungry disruptors who often are instrumental in other countries in the very transformation that Namibia says it wants but is unwilling to pay for. Instead the government will continue to produce empty policy pronouncements about industrialization, sing the AU anthem at meetings (but no Zimbabweans, please)  and watch the nation’s children remain and become increasingly unemployed. There is absolutely no sense in Namibia’s policy circles that economic transformation has always been and will forever remain, here and elsewhere, an expensive and painful process that involves real sacrifices by the entire nation. The road to a real sustainable prosperity in Namibia is difficult and only those ignorant of economic history could think otherwise. However should we succeed the outcome will be not only a sustainable prosperity which our minerals based economy does not provide, but a future where the youth will have jobs and hope- something they do not have and will not  have if we continue on the same unproductive road.

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

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Namibia is not China’s puppet…yet!

 

Last week in a meeting with Chinese Ambassador to Namibia the ambassador appeared to be telling the President what to say when he meets Chinese President Xi Jingping next week at the African leaders summit in Beijing for the annual Beijing Summit of the Forum on China-Africa Cooperation (FOCAC) . This did not go down well. Mr Geingob  made it quite clear that he did not believe that Namibia was ‘China’s puppet’ and for the moment that remains absolutely true. Namibia remains a free nation to do what it chooses and say what it chooses  with China, the country’s old friend and liberation struggle supporter. For decades when the Western world condemned Namibia and South Africa’s liberation struggle heroes such as Nelson Mandela and Sam Nujoma as terrorists, the Chinese stood behind Africa and gave invaluable support to the struggle for freedom. But that was yesterday’s China.  

China is slowly achieving its primary political and economic objective of the 21^st century which is to return to its rightful place as the world’s largest nation and economy which it was at the beginning of the 19^th century before the European, American  and Japanese powers took over the entire coast of China with what were called ‘treaty ports’. In 1839 Britain fought the first of two so-called ‘Opium Wars’ against the imperial Chinese government to convince that country that they should not restrict the trade in opium which was the one of the few legal exports that Britain had from India that many Chinese wanted to buy. If you had Chinese silk, why would you buy cheap cottons from Manchester? Much was different then- opium was a legal drug but much was the same- the iron ships of the British navy devastated the wooden ships of the Chinese navy. In compensation the British got Chinese tea for which they have a deep and enduring love rather than having to pay for the tea in silver or gold which they definitely love more than tea, they could pay in Indian opium. For China the 19^th century ‘free trade’ in British opium was a catastrophe that resulted in what was estimated as many as 20 million drug addicts.

In the 19^th century it was not the Kali or Sinaloa cartels that controlled the trade in addictive and lethal drugs it was institution that was far more greedy and ambitious, Her Majesty’s government and its chief enforcer the British Navy, which was more murderous than anything the 21^st century drug cartels could ever hope to produce. As recompense at the end of the war the British got Hong Kong as a colony from which they could continue to trade drugs and Canton (now Guangzhou) as a treaty port where British law ruled and opium was freely traded. But Britain was not alone, France, Germany, Russia and Japan all had treaty ports where Chinese sovereignty ended. By the latter part of the 19^th century China as a nation state in effect ceased to exist as a functioning nation, it was a puppet as its entire coast was gobbled up by treaty ports of the imperialists. It was this period of great humiliation at the hands of the imperial powers that sparked the creation of the Kuomintang and the Communist Party and resulted eventually in revolution and the rise of communism in China. History is long!

After such an unhappy history one would imagine that China understood the meaning of humiliation and loss of sovereignty to greedy imperial powers  and would have learned but then power, hubris, money and time change everything.  China has been reborn as a great power, no longer easily trampled on by the European imperialists but yet in many ways it is doing precisely what the Europeans did 150 years ago but its choice of weapon is quite different and far more effective. Whereas in 1834 it was the British navy that was the principle vehicle of imperial control, but today the new Chinese empire has a more effective and peaceful weapon- debt and we in Namibia seem to love debt much more than tea.

China today has foreign exchange reserves of US$3 trillion. What do you do with that much money after you have bought as many US Treasury bills that you can? Clearly you have to be both intelligent and inventive and the Chinese are certainly both. China has assiduously used its exchange reserve to help ‘develop’ the so-called Belt and Road initiative (US$4-8 trillion) which aims to improve transport and port infrastructure all over the world to link raw materials to Chinese markets and markets to Chinese producers. By building efficient railroads and ports China will cement its commercial advantage over all other potential competitors.   

In the last three years China has embarked on an ambitious port, road and rail building program all over the developing world. It has built railways such as the Benguela railroad that will link Katanga and the Copperbelt to the Angolan coast. It is building the port at Cabinda as well as Walvis Bay. Last year China acquired its first foreign naval facility in Djibouti right under the noses of the French and Americans.

But in 2017 the Chinese government did something unparalleled in its history – it seized the port of Hambantota in southern Sri Lanka. The port which was built and funded by China as  part of, called Belt and Road and was seized because the government of Sri Lanka had failed to meet its mounting debts and the Chinese in turn did what they were legally entitled to do – they seized not only the port but also the 15,000 acres around the port which it will own for the next 99 years. Thus without a shot being fired China got exactly what British Navy got from China  in Hong Kong 180 years ago after the First Opium war- a ‘treaty port’. Similar situations are developing in Mynmar and in other regions.  

Today President Xi Jingping will tell the assembly of African leaders in Beijing that what China is doing on the African continent is about development and yes it is true, but it is about China’s development. China is now the world’s leading producer of just about everything when it comes to minerals but this will not last forever as these  Chinese resources are non-renewable and so if it wants to bring 1.3 billion Chinese to the same standard of living as the developed world then it will need resources from Africa and Asia and if it wants to sustain its trade advantage it has to make sure that those resources arrive in Chinese ports cheaply. So rather than developing Africa, China is bringing its engineering firms, its workers and its materials to build ports and railroads all over the world. These are expensive ‘gifts’ for which Africans will have to repay and when by 2022  Namibia’s debt has grown from 45% of GDP today to an estimated 70% of GDP will Mr Geingob still be able to look the nation in the face and say we are not puppets?

 

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