CAN UGANDA ESCAPE THE 'CURSE OF OIL'?

‘A growing body of evidence suggests that oil, far from being a blessing to African countries is a curse. Without exception, every developing country where oil has been discovered has seen its standard of living decline and its people suffer, while its less endowed neighbors have gone on to relative prosperity’ writes John Ghazvinian author of Untapped: The Scramble for Africa’s Oil. The example of Nigeria is instructive on its own here. Nigeria, the world’s seventh largest oil producer is ranked among the twenty poorest countries of the world, with 57 percent of the population living on less than a dollar a day according to the World Bank .
Many African countries have recently discovered oil among them, Equatorial Guinea, Angola, Sudan and until recently, Ghana and our very own Uganda.
The American charity, Catholic Relief Services projects that$ 200 billion in oil revenue will flow into the coffers of African governments over the next decade. This can only be good news, right?
Paul Collier in the 2007 bestseller, The Bottom Billion: Why the World’s Poorest Countries are Failing and What Can Be Done About it goes one better and provides economic evidence that shows that oil or broadly natural resources discoveries in poor countries actually retard economic growth or create distortions in fragile economies. And this is no arm-chair treatise. He illustrates with hard-nosed evidence how natural resources are a ‘trap’ for developing countries citing examples such as Nigeria, Gabon and Angola. Economists refer to this sudden inflow of petroleum dollars in economies as the ‘Dutch disease’ or ‘ the paradox of plenty’.
According to John Ghazvinian , only about 5 percent of the billions of dollars invested in African petroleum projects every year are actually spent in Africa.
Because most oil production is capital intensive and relies heavily on ultra modern extraction technology, only limited highly skilled openings are available and these often go to foreign nationals The paradox is that oil exploration in Africa creates far more jobs for western nationals who have the requisite skills than it does for locals.

In Untapped: The Scramble for Africa’s Oil it is shown that the oil boom in Nigeria had a negative effect on agricultural production.’ From 1970 to 1982, production of cocoa fell 43 percent, that of rubber 29 percent and ground nuts 64 percent. The percentage of Nigerians living in poverty went from 28 percent in 1980 to 66 percent in 1996.Average annual income, which in 1980 was$ 800 per person, today stands at a mere $300’.
Several studies suggest that oil booms in developing economies result in a decline in national tax revenues. That because of the sudden inflow of foreign exchange accruing from oil revenues, the incentive to generate national tax revenue diminishes. ’Between 1970 and 1993, countries without oil saw their economies grow four times faster than those of countries with oil’.
Let us lose the economic theory and bring this a little closer to home. Picture this. Uganda has started exporting oil to the international market. The proceeds from the oil will not come in Ugandan shillings but in US dollars or euros. Suddenly, the country is awash with foreign exchange. The result is that the value of the Uganda shilling artificially inflates. The effect is that imported products become cheaper and consequently, a huge national appetite for imported goods like Hummers and Plasma screens grows. Meanwhile Ugandan coffee or iron sheets from Roofings become expensive for Rwanda and Congo because of the appreciating Ugandan shilling. The local agricultural and manufacturing sectors take a hit. But the government is not too bothered about the decline in tax revenue after all there are petrodollars It doesn’t stop there. Local food production is no longer commercially viable due to reduced export demand. Agricultural farm lands are abandoned as everyone rushes to the cities to get a piece of the oil boom. As a result there is less domestic food production and urban dwellers such as those in Kampala take to imported food stuffs. This is not an imaginary story. This is the story of Gabon, a veteran oil exporter in Africa which now imports 80 percent of its food from Cameroon.
Celebrated economist Jeffrey Sachs’ Oil Revenue Management Plan’ for the management of Sao Tome’s future oil wealth that includes the establishment of a permanent fund dedicated to development projects and poverty reduction and a Norwegian-style fund for future generations should be endearing.
So, next time you hear that Uganda’s discovery of oil in Hoima and Amuru districts can only be a good thing. Think again.

THE BOTTOM BILLION: A Pedestrian Book Review

A few days before christmas a friend from Boston,MA brought a book along which he thought I would like.And Like it I did. In fact very much. Paul Collier's 'The Bottom Billion: Why the Poorest Countries Are Falling and What Can be Done About it' turned out to be an immensly cheerful and worthy companion during the holidays and it was for good reason.
Collier's 'Bottom Billion' has been described by 'The Economist' as 'set to become a classic' and its no idle praise. It's praise that is well earned. Reading Collier's book reminded me of Jeff Sachs''The End of Poverty' and William Easterly's 'The Elusive Quest for Growth' and'The White Man's Burden' it fits in well with them-dutiful efforts by eminent economists to diagonise the causes of African's economic malaise and the road map out of it.
Paul Collier should know. He was head of development research at the World Bank.He has worked ex-chief economist at the World Bank,Joseph Stiglizt-a Nobel Prize economist.
Collier is economics professor at Oxford university and head of their centre of the study on African economies.
'Bottom-Billion' breaks new ground in understanding African economies by introducing a new paradigm with in which to understand the roots of Africa's worsening poverty. Collier talks about 'traps' which bind Africa to the ground. The traps include the usual suspects, conflict,natural rseources(especially oil), being land locked and 'bad' governance. The 'traps' are not especially new in development economics but Collier has moved scholarship further by adducing enormous quantitative evidence to show their influence on African economies.
Collier's book is backed up by years of development research in Africa which he has done with coloborations with several other researchers and clearly his book is no arm-chair treatise but a work generated out of over twenty years of economic research on African economies. Some of the work is plain fresh, never having been presented before in the way he does in the book.His work on the economic significance of coups,military and civil conflicts is especially endearing coming as it is from an economist. He also lends to his work some political science methods and research in a way that is unprecedented marrying ecomomics and political science in the quest
for answers to African economic dysfunction.
The book is full of invaluable findings that are instructive. For example his research shows that countries that have been in the pits(economically speaking) take 59 years to turn the corner!
Collier brings to the fore, the dimension of international trade and its relation to African poverty suggesting that opening western markets to African goods and services can be a life line for the 'bottom billion'.
'Bottom Billion' pushes the frontiers of mainstream development economics and goes beyond the body of knowledge we have become accustomed to explain what afflicts Africa beyond the tools of traditional economics.
His book is really one on Africa and it is clear he has been to many African capitals and is aware of the inner workings in contemporary African state craft as well as having a slew of contacts from Nairobi to Abuja.
The title is a little misleading because his attention is especially focussed on Africa and not the wider developing world as the title may suggest. His last chapter' The struggle for the bottom billion' which is a call to arms to rescue African economies doesnt keep up with the high tempo that starts of with the earlier chapter and seems some what of an anti climax.
The prose has a poppy feel.Its very accessible to the lay reader and it is easy to follow without the arrogant diction of scholarship or the' linguistic sophistication' you will find in many other works of development economics. The book doesnt take itself too seriously and there are many light hearted moments and occassionally his diction induces hearty laughter(uncommon for an economists) although in this he reminds me of Robert Guest's'The Shackled Continent' or even William Easterly's 'The Elusive Quest for Growth'. Yes, even with all the tragic and desparate poverty in Africa it is possible to squeeze out a laugh.And they come plenty in 'Bottom Billion'.

ARE NGOs THE NEW COLONIAL POWERS IN AFRICA?

An article in a recent issue of Foreign Policy doesn’t mince words and calls international NGOs in Africa ‘the new colonialists ‘. In many countries, international NGOs have replaced traditional western donors and absentee states’ influence by providing services that are traditionally the responsibility of the home governments Hamid Karzai, the Afghan president prefers to call it ‘NGOism’-the growing trend where international NGOs wield increasing power and resources in fragile states or failed states as some would have us call them.
Hamid Karzai has reason to worry. In Afghanistan, 80% of services such as health care and education are provided by international and local NGOs.
International NGOs are gaining new importance in the developing world owing to the increasing preference by western countries to route donor funds through international NGOs rather than national governments which are perceived as corrupt, bureaucratic or incompetent.
According to Foreign Policy, an influential American magazine, the amount of aid flowing through NGOs in Africa rather than governments has more than tripled.
Recently the French embassy in Kampala signed an agreement with an international NGO to distribute relief supplies in Karamoja. In a bygone era this aid would be routed through the disaster ministry or the Prime Minister’s office. USAID has been channeling millions of dollars of AIDS money through intermediary International NGOs such as CARE. Considerable British relief aid in Uganda is sometimes routed through Oxfam or Save the Children.
Foreign Policy shows that spending by CARE, the international NGO, has increased by 65% since 1999 to $ 607 million in 2007. Save the Children’s budget has tripled since 1998 while Doctors without Borders (Medicine san Frontiers)’s budget has doubled since 2001 signaling increasing command of financial resources by international NGOs.
In 2006, total aid to the developing world from countries of the Organization for Economic Cooperation and Development (OECD) amounted to $325 billion. Just a third of that sum came from governments. The rest came from non-state actors principally, international NGOs.
A 2005 Newsweek report estimates that if the world’s NGOs were grouped together as a country they would rank fifth in the world in terms of the value of funds controlled.

If truth be told, NGOs have been a godsend for the millions in our countries who can’t cope unaided From safe water provision, to life -saving health care, to relief supplies, NGOs have reached our needy people faster and more efficiently than our governments. Most of what they do is ordinarily the preserve of the state but in banana republics, the state is often dysfunctional or simply cash strapped. “Like failed cousins, they are increasingly unable to and perhaps unwilling to fulfill the functions that have long defined what it means to be a state.”
An analyst has observed that we live in a period when the nation state is distrusted, or more precisely, its institutions are considered ineffective and unreliable’.
International NGOs operating in Uganda like Plan International or World Vision will tell you that they are always under constant pressure from local politicians to locate their operations in more politically expedient areas, which speaks volumes about the increasing power of NGOs in relation to that of the state in Africa.
International NGO support perpetuates a dependence syndrome by the state on NGOs and doesn’t help states develop capacity in sectors such as relief or disaster response where NGOs dominate.
It has also been observed that international NGOs suck all the best local talent on the market because of attractive salaries that the public or even private sector can’t match. A good example in Uganda is HIV/AIDS treatment health care. Some of the best medical workers have left the public health sector and are on the payroll of international AIDS research agencies.
There have also been concerns that NGOs don’t have many checks and balances or are not as accountable as say governments to the electorate or private companies to shareholders and that more regulation is needed, a kind of requiring the ‘do-gooders to prove they do good’.
‘No matter how well-intentioned, these new colonialists need weak states as much as weak states need them’ couldn’t have put it better.

OBAMA WILL WIN A SECOND TERM.

Four years from now dont tell me I didnt tell you what I am telling you now. Obama will win a second term as President of the United States. His political genuis has already shown even before he swears in. His cabinet picks and economic stimulus plans give a glimpse of what a tactician he is.

Some have called it the 'cabinet of rivals' and yes, only a deft politician would have gambled to have on the team as a bitter a rival as Hilary Clinton . Obama has said he was inspired to include his rivals after inspiration from Abraham Lincoln who claims copyright to the idea of a 'cabinet of rivals. His inclusion of Robert Gates,a republican defense secretary hold-over from Bush says good things about him. Gates is credited with turning around the pentagon after the divisive reign of Don Rumsefeld and helping turn the tide in Iraq. What one would read from this is that he is willing to make compromises and of course to address the commonly held notion that republicans are prefered when it comes to the security and defence docket. At least dubya didnt get it all wrong. Most of the rest of the team are experienced clinton-era hands such as attorney general appointee Holder and Susan Rice,ambassdor to the United Nations.

You get the sense that he will govern from the middle and if he continues on that path a second term will be within grasp.

Obama enters office with enormous public will and immense political capital. He needs to make good of his election promises. He has already indicated he will close the infamous Guantanamo bay prison. He has reitariated his plan to withdraw US troops from Iraq with a new escape clause' in consultation with the commanders'. Many will see this as backtracking and Obama will need to go through with plans to withdraw troops before the end of his first term.
It already feels like he is president even when W. still reigns at 1600. One president at a time he counsels but americans cant wait.
I am telling you, that skinny kid with a funny name will get a second term.

IS BARACK OBAMA THE SAVIOUR OF THE WORLD

Obama on the telly,Obama in the papers, Obama on bumper stickers. Why, you wonder, has the world taken on to Obama to almost mystical, spiritual proportions? And its not in Africa alone. Although the Africans have clearly outdone themselves on this one. Sometimes you wonder, who is happier about Obama's poll victory- the Americans or the Kenyans for instance? Obamamania has been witnessed in Japan, europe and the middle east. A friend of mine thinks this cant-get-enough- of Obama thing is a commentry on our own state of affairs. That because we are so repulsed by our own politics especialy down here in Africa, we look to Obama as alternative political redemption. That if we loved our politics enough we wouldnt be too distracted by Barack Obama. That its the same reason the english premiership has a cult following in Africa. That we cant stand our own soccer clubs, match fixing and mal foot ball administration. The truth of course is that Obama is a very inspirational human interest story in its own right but does our craze for him say something about how we feel about things in our own countries? Is the world looking for a saviour out of all the hopelessness, the despair, the financial quagmire in which we are mirred?. Its food for thought.

IS THE GLOBAL FINANCIAL CRISIS OVER HYPED?

Clearly the world is in the midst of a serious financial crisis and my intention is not in anyway to belittle the seriousness of the situation. It does appear though that the response of the global markets and world governments has been an over- reaction. Almost all major world economies have announced rescue packages to banks and financial institutions to stabilize economies. The US$700 billion congress- approved package as well as the bail out of AIG in the US are all well known. Europe has also caught the cold with many countries announcing rescue schemes and guarenteeing bank depoisits. The dutch government has made a loan to ING bank.
One of the the inardvertent concequences of all this has been to trigger off panic in the financial world with many institutions wary of lending and a cut bank on investment financing. There has been a rush of panic all over the global financial system and even institutions that are not yet touched in a real way by the credit crunch are in an artificial crisis mode. The result is that fear is dictating business decision making and the credit crunch has been made out to be much larger than it really is. The western financial system, from which the rest of the world takes cue, is behaving as though we are in the worst case scenario already and have skipped the preliminary stages. Consumers are wary of spending and banks dont want to lend to businesses, further excerbating the crisis. Yes, there is a crisis but is our response measured? Are we building confidence in the global financial system?






















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UGANDA'S JAZZ SENSATION!

In mid August this year,I attended Isaiah Katumwa's Jazz perfomance at Kampala Serena Hotel. It was everything it was billed out to be. Isaiah Katumwa is a truly world-class act which is not what you can say for many Ugandan artists. I kept asking my date why he is not an international star already. Boy, he has sure got the goods. Absolutely professional. He put on a several -hours, non- stop show without any opening acts or interlude.He gets the biscuit for stamina alone.

The jazz he plays is a unique brand unlike much of what is on the market. Its John Coltrane meets Hugh Masekela with an infusion of Ugandan traditional ganda beats. It was a sumptous feast for the ears and even for the eyes. The brother knows a thing or two about grooving too!

Katumwa must have been abroad for most of his earlier career because he burst on the scene only about last year. At least I got to know about him last year at a local Kampala church where he was introduced and did a short gig. It was endearing from the start.

At the show, all his hits were perfomed and were started off with a brief intro. There was a clear crowd favourite. The crowd simply couldnt get enough of it.

The stage organization and multi media outlay was another plus. Most of the video aids were appropriate to the music played and they spiced it all up.

The supporting band deserves mention too. They were up to it and a handful have what it in them to break out on their own. But Isaiah Katumwa was the offering of the evening and he didnt dissapoint.
As advertized his is truly Jazz with an African accent!