Craig Eisele on …..

April 27, 2008

African Aid… Is It Really Aid Or Just Makes Us Feel Good??

African Aid… a study in inefficiency

OK… maybe I am not going to actually do a study… most of my data is allegoric (from stories). But it is a reality that Aid to Africa is not efficient for many reasons that are solvable.

When aid is given with strings attached such as the mandated use of the donor counties personnel or equipment and supplies then it is not aid to Africa it is aid to the Donor Countries’ manufacturing or consulting firms. Expert costs can be triple or even quadruple the cost of the same services in the Donor Countries because of travel, housing (to the donor countries standards) and high salaries of Donor country employees sent to Africa.

I have traveled to Africa frequently and have been in approximately 20 countries in the continent. While Greed, fraud and corruption do exist, it is the cost of goods and services that donor countries provide that takes a great deal of the AID that is supposedly given. Cash sent to most African Countries is subject to redistribution because of other more pressing needs. And sometimes the Strings on the aid have profound negative effects on other parts of the recipient African Countries economy and existing farming or manufacturing enterprises. There is an article in this blog about Namibia and Angola and the Cattle ranching that has been devastated by some of those strings to aid there.

I understand that Donor Countries want to try and maximize benefits to their domestic enterprises when giving aid… but competition for those aid funds can significantly reduce costs and maximize the benefit of the AID to the recipient countries.

Let me move to a different part of this issue… the raising of funds for Aid Organizations. Former President Bill Clinton has stated (paraphrased) that if there was profit to be made in solving global poverty then there would be no global poverty…. But that statement is based upon a false premise… that global poverty can be solved… I am adamant on this.. GLOBAL POVERTY CANNOT BE SOLVED…. Not in my life time… and not even in this century… poverty will always be with us as long as we are a society that functions on money… someone will always be at the bottom of the scale and hence we will always have poverty. This is a fact of life that cannot be dismissed out of hand. (Please note I am not tackling the issue of the measurement of poverty or its definition at this time… maybe later)

What we can do is significantly reduce poverty by revamping and reorganizing the AID that is given and the manner in which it is given.

People think that AID is free… it is not… every aid organization has to raise funds.. that take time, personnel and money… however we can make guidelines on how much of the aid given is actually used for those ongoing fund raising and strategizing efforts as well as the Organizations basic operations and expenses.. For this I am in favor of a sliding scale ranging from 3.5% to 20% depending on the total amount raised per year. This is not include the actual administration of the project (for which I feel not more than 20 % should be allocated to non-resident administration of the ACTUAL Project)

From personal experience:

I have been forming a new NGO (Non-Government Organization) and NPO (Not for Profit Organization) called the Africa Genesis Project. The mission is to “rehabilitate” the sub Saharan “trade routs” in this region. The studies have already been done showing the benefit in trade for the respective countries (a cost benefit analysis). But it does not even begin to show the increase in employment, local economies and the attraction to FDI (Foreign Direct Investment) that would accompany such a project.

The Cost for this is fast approaching 50 BILLION US Dollars. Is that a lot of money?? Yes it is… but in comparison to the 60 Billion dollars in aid for AIDS in Africa than this is smaller and brings more advantages (in my opinion) and allows the aid for AIDS to be delivered more effectively and efficiently to a greater number of people. I agree with the need for AIDS assistance… but I also know that the people of Africa need more.When it costs only 1,000 dollars to send a container to a Kenya Port but 10,000 dollars to take it inland at twice the time and takes 5 days to repair the truck afterwards,… this is an abomination and the extra costs are something the Africans cannot afford.

Roads bring JOBS, and jobs bring economic prosperity and that in turn brings peace and stability to Africa!!!

But how can we raise such amount of funds for the overall rehabilitation of Africa?? If ANYONE expects that Africa can finance this with its current economic situation and with the Debt that it already has, then that person is not fathoming the realities of the condition of Africa and worse is dismissing the prolonged suffering of hundreds of millions of people in Africa. Further it has allowed countries like China to take advantage of this situation to give “no string” loans that continue to exacerbate the problems in Africa.

The ONLY way to really help Africa is one MASSIVE injection of Aid that can transform most of Africa into a productive society. That aid can ONLY come from Governments around the world. That raises a major problem in how to even start such a fund raising effort to implement this project.

My calculations indicate I need 50 million dollars to START this project and 500 Million Dollars to continue to promote and administer the Africa genesis Project over 7 years.

Why so much?? One word answer… POLITICS!!!

I cannot even get an appointment with my own congressional or senate representative in the United States to present this project… and the form in which I presented is not in “proper form” with the relevant brochures and packages needed to promote such a massive project. Multiply that effort with my need to approach the governments of the United Kingdom, France and the rest of the EU, Japan. Australia, Canada, and the Middle East as well as many other countries, (as this is a global issue requiring a global solution) then you start to see not only the massive size of the Africa Project in Rehabilitating these trade routes, but the Global Efforts needed to see it though. And the ONLY way is to hire (at a significant cost) “Consultants” (lobbyists) who can effectively get this project into the hands of those who can make it happen in their respective Governments.

The Africa genesis Project will Guarantee that 96% of ALL money raised for the project will be spent directly on the project and not on fundraising, promotion or administrative expenses of the organization itself. Further that NO Distribution will be to any government organization UNLESS that Organization has actually performed or is performing real work on this roads project. Simply ONLY those actually working on the Road Project will be paid and 80 percent of ALL work must be by Local African Companies and using African employees.

We realize that a lot of Equipment must be purchased for this project. It is expected that Caterpillar and John Deer will receive about 500 million dollars each for equipment and spare part orders… HOWEVER WE MUST be able to negotiate process to reduce costs and maximize benefits to AFRICA. We will NOT tolerate paying even list, let alone OVER list as Caterpillar and John Deer have indicated in my limited discussions with them. The same for every other manufacture and supplier of other equipment, materials and supplies… COSTS will be PARAMOUNT in our vigilance to assure that this work can be done UNDER BUDGET. It is though our “lobbying” efforts that we will make sure that any “strings” attached to the aid given by donor countries for domestic purchases allow us to make bidding and negotiations fair practice in our efforts to supply this project. We cannot allow unfair profits (windfalls) to accrue to anyone on the backs of Africa and its people.

And yes, even I need to get paid, as I am not independently wealthy. So for those of you questioning that, I assure you I am NOT working for free and expect compensation that is reasonable for a project of this size. However I will note that I already know that there are many problems and issues that will need to be addressed on a project this size that will NOT be in the budget … hence my “compensation” will mostly be used for the resolution of those issues and to support the Africa Genesis Organization in its endeavors. Fist Aide Stations, water well drilling, education assistance and the like are just some of those things that are NOT in the Budget for this project and need to be taken care of but NOT from the 96% of the funds that were donated and are to be used ONLY for the Road rehabilitation project as already identified.

If you are a regular reader of this blog you know I have proposed creating a “backbone” infrastructure project that would transverse Africa as well as circumnavigate the Entire Continent, that would end up being approximately 70,000 Kilometers in length. This “backbone would have a 4 to 6 lane modern highway, an Electric Power line transmission, a railroad, and Fiber Optics and Oil and Gas and water pipelines, ALL TO BE FINANCED AND OPERATED BY PRIVATE (non governmental) INVESTMENT. This Investment could approach 1 trillion dollars over 10 to 15 years.

My plans for Africa my be grandiose to some… but a real vision was needed to solidify the continent for economic, and political and peace issues and the overall heath and welfare of the people of Africa… this is my mission… to transform Africa into a place where aid is not needed as much as it is now, and to improve the human sprit of all Africans.

Craig Eisele

March 30, 2008

More Proof of the Need for a NEW Paradim for African “Aid” in Infrastructure Development


Published on Taipei Times
http://www.taipeitimes.com/News/editorials/archives/2007/12/22/2003393678

Trans-African Highway mirrors failure of Africa aid

Africans are poorer now than a quarter century ago, despite the US$568 billion in aid poured into the continent in the past 50 years. Many say what is needed is investment, not more aid

By Chris Tomlinson
AP, NAIROBI
Saturday, Dec 22, 2007, Page 9

To judge how far aid has helped Africa along the road to prosperity, just look down at the pavement — or the lack of it.

The most important highway in East Africa starts at the Indian Ocean port of Mombasa. Tens of thousands of trucks every year carry food, fuel and other goods to 100 million people in east and central Africa up a bone-jarring two-lane road.

Despite millions of aid dollars spent on roads, the wear and tear is so bad that journeys take weeks. And the cost makes it cheaper to have a container of corn shipped from Iowa than to truck it 800km to western Kenya.

In the 50 years since the first African countries won independence, the world has spent US$568 billion on Africa. Yet Africans are poorer now than a quarter century ago, and much of the money has ended up on the road to nowhere. This dismal record is sparking a vigorous debate on how best to help the world’s poorest continent, and to what degree aid is the answer.

A growing chorus of Africans is saying what they need is not handouts, but investment so they can rebuild on their own.

“Africans … are tired. They are tired of being the subject of everybody’s charity and care. And what is happening in many African countries now is the realization that nobody can do it but us,” said Ngozi Okonjo-Iweala, a World Bank managing director and former finance minister of Nigeria, at a talk on a changing Africa. “We can invite partners who support us, but we have to start.”

LIFEBLOOD

Roads are the lifeblood of an economy, the delivery system for agriculture, mining, tourism and other mainstays of African industry. But roads in Africa are few and bad. When foreign companies calculate the price of doing business on the continent, they look at figures like the cost of transportation and decide to go somewhere else.

“No one would ever have 100 million people in the rich world along a broken-down, two-lane, undivided road as we do here,” said leading economist Jeffrey Sachs about Nairobi. “If the donors were thinking about what would really provide development, it’s a proper, divided highway on which truck traffic could go.”

Truth is, they did think of it — and almost built it — 40 years ago. But today, the east-west Trans-African Highway exists only on maps. On the ground, it turns into a muddy footpath in the jungles of eastern Congo.

The story of the highway shows why aid to Africa has largely failed in the past, and what can be learned for the future.

Back in 1969, the Japanese government proposed extending the Mombasa Highway to Lagos, Nigeria on the Atlantic Ocean. The four-lane, 7,080km paved highway would be slightly longer than Interstate 90 running from Boston to Seattle across the US. It was to bring modern trade to six African countries.

By 1971, the deal had the support of the six countries, nine other rich countries and six international aid agencies. They hoped to have at least two lanes of all-weather road open by 1978.

It did not take long for problems to emerge. Dictator Idi Amin took control of Uganda and threatened neighboring Kenya, which then closed the highway.

MOBUTU

The fight reflected a constant plague for foreign aid to Africa — corrupt dictators, and donors who gave them money to protect political and economic interests. Nowhere was this exchange clearer than in Zaire, now known as Congo.

Zaire needed to build roads from scratch. But the Central African country was ruled by Mobutu Sese Seko, one of the most brutal dictators in African history.

Mobutu took power during the Cold War, at a time when the US and the Soviet Union were scrambling for influence in Africa. In the mid-1970s, he was a funnel for arms flowing to anti-communist rebels.

And so billions of dollars poured into Zaire to keep him happy, and to maintain the flow of Zairean gold, diamonds and copper to the West. Western nations largely looked the other way as the aid money disappeared into his offshore bank accounts and into the pockets of dozens of corrupt leaders.

Mobutu stopped plans for the highway in 1974, after stealing the money Belgium gave him for initial surveys. In a well-known African joke that reflects the thinking of the time, a young African dictator calls Mobutu for advice after coming under rebel attack.

“Did they come by sea?” Mobutu asks.

“No,” the younger ruler would reply.

“Did they come by air?” Mobutu asks.

“No, they came by road,” the protege answers.

“Tsk tsk, my son, I always told you,” Mobutu says. “Never build roads.”

REPAIRS, REBUILDING

Despite Mobutu in Zaire, the highway was in good condition in Kenya. In the 1970s, the East African country’s economy was booming, with trucks filled with valuable coffee and tea running downhill from 1.6km-high Nairobi and across breathtaking African savanna to the port of Mombasa.

But roads do not last forever.

The average African highway is designed to last 15 to 20 years, if properly maintained, says Andrew Gitonga, the Kenya roads project officer for the EU. Since 1983, the EU has spent US$200 million to repair Kenya’s section of the highway and has about US$120 million more of road projects planned this year.

Gitonga said the road needs to be completely rebuilt.

“There has been no standard maintenance program for 15 years, so the roads are falling into disrepair until they collapse,” he said. “Some government contracts in the past were given in an untransparent manner to unqualified contractors without clear standards.”

The transition between good road work and bad is painfully obvious when you hit a pothole at 80.5kph. A close examination of the hole will show that whoever built it skimped on the thickness of the rock bed and the asphalt surfacing, pocketing a little extra profit.

Almost every day road workers can be seen patching the holes. One man sprays in some tar, a second shovels in a little asphalt and a third goes over it twice with a compactor. Within five minutes the lane is open, with hundreds of cars every hour driving over a repair that will probably last less than six months, or until the seasonal rains wash it away.

MISGUIDED DONORS

The same neglect for maintenance has led to the slow deterioration of thousands of donor-funded projects over the years.

Just off the Mombasa highway in Nairobi, the International Committee of the Red Cross maintains its distribution hub for eastern Africa. Trucks loaded with food and supplies set off to deliver aid to some of the world’s most desperate people.

The biggest obstacle: The roads.

“The roads are in a desolate state and they are not getting any better,” says Bent Korsgaard, logistics director for the Kenya office.

A University of Minnesota study determined that big trucks cost about US$0.434 per 1.6km to operate on normal roads. In Africa, the cost for Red Cross trucks is US$2.88 per 1.6km.

A truck that follows the Trans-African Highway for the 2,400km, 21-day roundtrip to Butembo, Congo requires five days in the workshop when it gets back. It’s cheaper to hire a Russian cargo plane than to drive a truck to some cities within 1,000km.

That doesn’t even count the bribes truckers have to pay on African roads. A recent survey in West Africa found they range from about US$3.33 per 97km in Togo to US$25 in Mali.

Roads are hardly the only aid fiascos. Kenya alone is littered with dozens of half-baked, half-built projects funded by wealthy countries, monuments to good intentions gone awry.

GOOD INTENTIONS

Often donors did not understand Africa or talk to Africans. The Norwegian government built a fish processing plant on Lake Turkana in the 1970s to provide jobs for nomadic cattle herders — soon doomed in part because the local community had no fishing culture.

In a self-assessment in 1987, the World Bank found 106 out of 189 African development projects audited — almost 60 percent — had serious shortcomings or were complete failures. African agriculture projects failed 75 percent of the time.

The World Bank did better when it worked more closely with communities and better monitored projects. But a recent report on aid from the World Bank’s private arm, the International Finance Corp, found only half of its Africa projects succeed.

Aid is also hampered because it is often determined not just by what poor countries need but by what rich countries want to give to boost their own economies.

Much so-called foreign aid never leaves the country that promised it, because donor governments spend it to buy domestically-produced products or hire its own citizens as consultants. The World Bank estimates that throughout the 1980s, more than half of all aid was tied to what donor countries wanted to export, often at higher prices than could be found on the market. This practice reduced the value of aid by anywhere from 11 to 30 percent.

Under the Buy American Act, the US Agency for International Development must spend aid money to buy products and services from US suppliers whenever possible, and then deliver them aboard expensive US-flagged ships or planes.

“Foreign assistance is far from charity,” J. Brian Atwood, the USAID director under former President Bill Clinton, told Congress in 1995. “It is an investment in American jobs, American business.”

Other rich nations do the same. Japan, one of the largest donors to Africa, provides a lot of aid in the form of four-wheel-drive vehicles — despite the roads.

MILLENNIUM PROJECT

Sachs argues past aid failed because not enough was invested at every level, in every sector. In 2004, Sachs and the UN started the Millennium Project experiment to supply 12 African villages with all they need, all at once, and see if they can be self-sufficient in five years.

“The speed of results is astounding and the point is that if the resources are there, the rate of improvement is wonderful,” Sachs says. “I believe that we’re at the cusp of that now.”

Sachs’ nemesis, economist William Easterly of New York University, retorts that Sachs’ results are on a very small scale. He says only a free market can lift a nation out of poverty, and wants to see far more limited aid for specific programs with good track records, such as health care.

Easterly argues that aid bureaucracies are now rewarded for giving money that never reaches those who need it.

“It’s just not possible for outsiders with their experts to create economic development and prosperity in another country,” he said. “We should say: `There are a lot of problems and as rich outsiders we can’t fix everything, but where can we do the most good for the most people?”‘

The stakes are high. The outcome will decide if — and how — the world spends another US$568 billion on Africa.

DREAM STILL ALIVE

The dream of a world-class road network for Africa is still alive — at least on paper. The African Union has a plan to build it, but it would take tens of billions of dollars that could come only from rich countries.

The east-west Trans-African Highway is still missing about 2,939km. But West African states are building a regional network that will run from landlocked Chad to the Western port of Dakar in Senegal, and from Mauritania to Nigeria. Kenya is also building a road to neighboring Ethiopia.

Aid to Africa is going up again to about US$37per capita, from a low of US$24 in 1999. But this time the world has learned something. Aid to countries with more democratic systems has tripled at the expense of those whose leaders have unchecked power, according to the World Bank.

These days, when a new road is under construction in Kenya, white cars with EU flags on the doors visit every day to make sure every inch of the highway is built to specification.

And a maintenance contract comes with it.

October 1, 2007

Craig Eisele Creates Trans-African Development Strategies, Inc.

Craig Eisele Creates:

Trans-African Development Strategies, Inc.
 

            Trans-African Development Strategies, Inc or “TADS” is a New “Private” NGO focused on Infrastructure Development in Africa.

            The purpose of TADS is as follows:

1.    To provide Infrastructure development throughout Africa, whereas the Countries of Africa incur NO DEBT.

2.    To rehabilitate the 108,000 km of roads in Sub-Saharan Africa as identified in a study for the World Bank in 2006 (co-authored by David Wheeler) to facilitate development of trade throughout the Continent of Africa.

3.    To establish a modern limited access 4-lane “Highway” extending from the Mediterranean Cost of Africa and ending in South Africa (hopefully Cape Town, and 1 to 2 kilometers wide the full length of approximately 10,000 km.

4.    To encourage investment in the major portions of Infrastructure in the areas of Communications, Transportation and Power along the path of the “highway listed above in Item #3 and itemized below.

5.    To facilitate the development of a Trans-African Railroad

6.    To facilitate the development of a series of Pipelines to include Oil and Gas (refined and crude products) and Transportation of Water resources to areas in need.

7.    To bring a Fiber Optic Cable through the CENTER of Africa allowing Communication, Video and Internet into areas beyond the coastlines of Africa.

8.    To erect an Electric Transmission line from North to South through the Center of Africa.

9.    To develop electric Generation facilities including Hydro, Solar, Wind, Nuclear and Natural Gas along this same route.

10.  10 To assist in the development of Manufacturing Facilities and secondary and tertiary processing facilities for Natural resources to maximize value added services within Africa and to substantially add and foster job creation.

11.  To Assist in the building of Schools and Hospitals along this same pathway.

12.  Assist in the development of large scale commercial farming and ranching operations.

13.  To repeat Items 3 through 12 on at least one possibly 2 East to West Trans Continental Paths in Africa intersecting with the Primary Route of North to South and tying the Continent of Africa together with World Class Facilities.

We are certain that this will allow Africa to not only be self sufficient, but also Increases Wages to alleviate Poverty, reduce human suffering increase health care availability, and foster educational benefits throughout Africa and allow other NGO’s to better server those people who are in need but are not getting the aid they now desperately need because of the lack of infrastructure.

We also believe that the increase in GNP and GDP will spawn an increase in Tax Revenues and the ability for the countries to be able to access international financing for other projects that each individual country deems appropriate for its population.

TADS expects to raise 100 Billion Dollars of “AID” for the Roads and Highway Projects paid over the next 7 years. With Direct Spending on African Labor and materials to exceed 40 Billion Dollars up to 70 Billion dollars over the 7 year period. A Strategy to obtain these funds has been developed and refined over the last 2 years. While meet with skepticism by many the project is real and attainable despite the nay-sayers and those who would detract form the ultimate goal of a “New and Brighter Future for Africa.”

This estimate does not include anything except the road and highway projects.

TADS has a REAL Vision for Africa and invites anyone wishing to see this vision realized to participate in anyway they feel is appropriate.

While this is the first in a series of Announcements, more information will be provided over the near future.

 

Craig Eisele

Managing Director

Trans African Development Strategies, Inc.

 

September 24, 2007

FREE… that is what African Countries have been told!

FREE… that is what African Countries have been told!

By: Craig Eisele 24 August 2007

Free is just that FREE!!

What am I referring to?? 108,000 Kilometers of road rehabilitation… cost… about 40 billion US dollars… Cost to participating African Countries… ZERO!!

“What?” I can hear the disbelief coming through my computer already!! Yes… Zero Cost!!

As the Founder of Trans-African Development I have spent the last 2 years trying to find a proper way of giving Africa a boost to be self sufficient… And I believe with my whole heart that I have done just that.

So what is the problem?? Well. Besides skepticism and people who are myopic (closed minded) and without hearing me through on this plan and how it can be implemented, dismiss the idea as fanciful or impractical…. The problem appears to be that this project plan has not been able to get to the decision makers of most African Countries to present such a plan for development. The “gatekeepers”, as they are called in marketing and management terms, are blocking access and as a result they are keeping Africa from Development that is needed for the PEOPLE of Africa.

Today in AllAfrica.com there was an article (http://allafrica.com/stories/200709240087.html) co-authored by Donald Kaberuka (President of the African Development Bank) and Pascal Lamy (Director General of the WTO… World Trade Organization) that specifically referenced the need for the rebuilding of Sub-Saharan Trade Routes (by aid I presume) to facilitate Africa’s ability to Trade Inter-Africa as well as Outside the Continent of Africa. YET… I have already devised a program to do just that…. based upon the same World Bank report co-authored by David Wheeler.

How is it possible that these gentlemen, these men with intense interest in developing Africa, are not aware of this project??… It is simple… the “gatekeepers” have decided that this project is not realistic without even hearing the presentation or reading the literature that supports this project. Hence… Africa and Africans suffer the consequences.

Africa is suffering from Paralysis by Analysis at its highest levels. The “movers and shakers”, those that are willing to actually do the work, are dismissed instead of being used to implement ideas and strategies that benefit the Continent of Africa. While the People of Africa are natural entrepreneurs, some governing bodies seem to me obsessed with more and more studies as the people of Africa suffer. In my opinion, this is just plain wrong.

The Continent needs a through and complete coordination of needs to facilitate plans that benefit the people and the Communities of Africa… but that requires that there be an actual implementation plan of action and that it actually be implemented…. Personally I cannot wait that long…. And I suspect neither can the Population of Africa. So I implore ALL Countries in Africa to endorse this plan as “good” for them and for all of Africa and to let me implement this project with minimal delays!!!

I am ready to IMPLEMENT this project plan… to rehabilitate the roads necessary for trade and Development of the Continent of Africa… but I cannot do it without the governing bodies of Africa… and so far trying to get to the right people, let alone get their endorsement has been frustrating.

Today I decided to make my frustration known… to publicly announce that I stand ready to raise the money for this “gift” to Africa and to start the process of rebuilding the most basic of Infrastructure needs… ROADS.

I humbly ask those decision makers in Africa to hear my call. I ask that they endorse such a gift and see the enormous potential that such a project can and will bring to the Continent. The idea that we can ease human suffering, create Jobs, Increase Investment, and start a positive path for the Population of Africa ….to ease their suffering, reduce poverty and despair and to bring hope for a better future to fruition via this project!

NGO’s take note… as this will allow your “aid” to get to the people in a timely and reasonable safe and efficient manner… to the Industries of the World take heed… this project bring transportation of raw and finished goods to a more efficient level… and to the people of Africa… I will not stop trying to help you to be able to be self-sufficient! No NGO or Industry should hinder this project.. and in fact they should also endorse it and encourage its implementation and development with all due haste. The question is… do you have the foresight and courage to do so??

This article is not meant to inflame or denigrate any person or persons… it is strictly a call to action for those that can help… to those that want to make a difference…

I neglected to say that several Countries have endorsed this project… but naturally they do not want to be left sitting alone while the rest of Africa ignores this project. I respect their need and desire to be anonymous until we have a majority of African Nations endorsing this project.

Lastly I want to reiterate the word FREE…. few if any African Country can afford to do what I am offering to do in their own countries… the only real way to help Africa is to give it the necessary Infrastructure to allow it to develop in the way it wants to develop… the road rehabilitation offer is only a tool for Africa to use…. BUT even then… such a project MUST be WITHOUT cost to ALL AFRICAN Nations… to saddle them with more debt is only to exacerbate the problems that have kept Africa down so long… and any cost to any African Nation for this project would simply add to what is already a tragic story…. So again I want to do this project for FREE (NO COST TO ANY AFRICAN COUNTRY)!!

Next week in Tanzania there is a conference (yes ANOTHER conference) with the world Bank about Aid and Trade… I would hope that this project and the Trans-African Development Company’s proposal would be discussed and publicly acknowledged as something that has potential if not more for Africa and should be encouraged to proceed with tacit endorsement pending review…. I will be watching and waiting to see if the decision makers are finally aware of this… and hopefully share with me this dream of a revitalized Africa in the near future.

NOTE: This “Road Rehabilitation” project is in addition to the Trans African Development Company project to build a 4-lane major highway extending from the Mediterranean Sea to the tip of Southern Africa and the ancillary projects it hopes to install as well along that path.

September 2, 2007

Foreign Direct Investment Opportunities in Africa

FDI Opportunities are Local

International Trade Centre (Geneva)
NEWS
28 August 2007
Posted to the web 28 August 2007

By Karl P. Sauvant

Africa has traditionally not been on the radar screen of foreign direct investors. The reasons include the “Balkanization” of the continent and hence its small markets, its weak infrastructure and an image problem: in much of the world Africa’s image is dominated by pictures of civil war, sickness and famine.

There is truth to these pictures, of course, for some parts of Africa. But, they obscure a number of positive developments throughout the continent that, typically, do not capture the headlines. During the past few years, a number of civil wars have ended and reconstruction has begun; Liberia, with the first democratically elected female president in Africa, Ellen Sirleaf-Johnson, is an example. Through the African Peer Review Mechanism, an increasing number of countries are submitting themselves to a rigorous process of evaluation; hopefully, those that perform well will be particularly rewarded, e.g. in the framework of the G-8 process. Economic growth during the past two years has been respectable, and quite strong in a number of countries. Partly, this is because more governments have recognized that the private sector has a central role to play when it comes to wealth creation and economic development. Presidents from across the continent would agree with what the President of Ghana had announced for his country, namely the arrival of a “golden age” for business.

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All this has created a new environment for foreign direct investment (FDI). But it is more than that: the role of FDI in economic growth and development is now widely acknowledged, and all countries in Africa, without exception, are actively seeking to attract it. For that purpose, virtually all have liberalized their national regulatory framework for FDI, making it much more welcoming than it was, say, 15 years ago, by, e.g., opening sectors to such investment, reducing obstacles to the operation of foreign affiliates and offering a range of incentives. This is not to say, though, that the regulatory framework cannot be improved and, perhaps even more importantly, implemented more thoroughly; but, overall, it is certainly welcoming.

National improvements in the regulatory framework are complemented and made stronger by international investment agreements, especially bilateral investment treaties (BITs) that protect foreign investors. In fact, the BITs density for Africa (12 BITs per country) is the same as that of Latin America and the Caribbean. Most recent free trade agreements and/or association agreements with, especially, Europe and the US, also include investment chapters; the Cotonou agreement, in particular, contains strong provisions aimed at promoting FDI in Africa. Finally, the EU, Japan and the US provide preferential access to a wide range of goods and services produced in most African countries, making it attractive for foreign investors to set up shop there and export to the world’s most important markets.

But there is more: virtually all African countries are actively seeking to attract FDI by setting up investment promotion agencies to attract foreign investors, beginning with image building and ending with after-investment services. Moreover, the rise of multinational corporations from emerging markets – especially China, India, and South Africa, but also Russia and Brazil 1 – creates new sources of FDI. African countries benefit from competition among firms for profitable investment opportunities, a development already noticeable in the natural resource sector.

To be true, African IPAs vary widely in terms of the resources they have at their disposal, but they are making strides, often being helped by international organizations such as UNCTAD, UNIDO, FIAS and OECD.2

These good-news stories need to get out to adjust the image of Africa to the new reality. In the specific area of FDI, moreover, African countries need to make stronger efforts if they wish to attract more FDI (especially outside the natural resources sectors) and, equally important, to benefit from it as much as possible. To do so, they need to go below the national level and identify concrete investment opportunities at the provincial and even city levels. This is all the more important as, traditionally, foreign investors concentrate in capitals, often leaving other towns outside the mainstream of economic development. This situation is aggravated by a trend in toward urbanization – typically because people flee rural poverty. Many of them end up in slums. The challenge, then, becomes to make cities viable – and that means they need to develop a vibrant enterprise sector that provides employment and hence helps people escape from poverty, thus promoting the MDGs. This is precisely where the Millennium Cities Initiative (MCI) comes in.

The Millennium Cities Initiative

The Millennium Cities Initiative is one of a number of practical initiatives launched to help implement the Millennium Development Goals (MDGs), for halving extreme poverty, as adopted by the Heads of State and Governments at a UN Summit in 2000 and re-affirmed in September 2005 at another such Summit. Anchored in the recommendations of the Millennium Project, the independent advisory body to the UN Secretary-General which was led by Professor Jeffrey D. Sachs, the Earth-Institute based Millennium Cities Initiative assists seven cities in six African countries to become viable economic units. The cities are: Akure, Nigeria; Bamako – Segou, Mali; Blantyre, Malawi; Kisumu, Kenya; Kumasi, Ghana; and Louga, Senegal. The MCI was launched in 2006 with the strong support of the Governments of the participating countries, and it benefits from the partnership of UNDP, including its MDG Support Team, which supports African countries to develop MDG-based national development strategies. The Millennium Cities Initiative also partners actively with the Millennium Villages Project  to localize the MDGs and establish a practical framework for supporting the escape from extreme poverty in Africa.

In the broader context of City Development Strategies being prepared, the priority of the MCI is to help to create employment, stimulate enterprise development and foster economic growth in the Millennium Cities, especially by attracting FDI. The latter effort rests on three pillars:

1. Analyses to inform foreign investors.

  • The regulatory framework of FDI at the city level, not only as far as it is “on the books”, but also as it is in reality and how it could be improved, so that investors know the framework within which they have to operate. These assessments are undertaken pro bono by teams of lawyers from Carter, Ledyard & Milburn LLP; Cravath, Swaine & Moore LLP and DLA Piper. They are dovetailed with the Policy Framework for Investment developed by the OECD, and it is hoped that this Organization will eventually partner with MCI to help the countries and towns involved to improve their regulatory framework.
  • The infrastructure in each of the cities, a key FDI determinant.
  • Perhaps most importantly, analyses of commercially viable business opportunities, i.e. sectors (and even concrete projects) in which the cities, together with the Millennium Villages, have a comparative advantage, be it in the provincial, country, or international market. This effort is being undertaken by UNIDO and carried forward, on a pro bono basis, by KPMG in a major undertaking to identify business opportunities. Products and sectors with potential identified so far include such agri- and aqua-cultural products as fruit juices, dried fruits and fishes and spiced groundnuts; chocolate, cocoa powder and soap, from cocoa, and starch from cassava; mineral products, such as glass and ceramics from silica; paint from kaolin, cement from lime stone and bitumen; as well as cultural and eco-tourism.

The value of these materials depends, of course, not only on their quality but also, and very much so, on reaching potential investors, including through a modest investment promotion capacity to be developed in each city. Accordingly, MCI’s second pillar involves:

2. Dissemination to potential investors.

Several avenues are being pursued or will be pursued:

  • Investors’ missions to the cities. So far, the Governments of Germany and Finland have promised to support such missions to bring investors to two of our towns in order to explore in situ investment opportunities and conditions. We hope, of course, that, eventually, we will also be able to cover all of the cities.
  • Investors’ Roundtables in each of the six countries. These events, which are organized together with the Economist Intelligence Unit and typically involve 100-200 participants, allow a larger group of investors to familiarize themselves with the country’s regulatory and policy framework and the more specific issues involved in regional development and especially the Millennium Cities. They also involve field trips to the cities for those participants interested to do so. A Roundtable was already held in Nigeria and another one is scheduled for 17-18 July 2007 in Kenya, made possible in part thanks to the support of the Government of Finland.
  • Millennium Cities Days in strategic locations in North America, Europe and Asia, to bring representatives of the countries and cities to meet investors on their home ground. At the moment, we are still in the process of identifying cities in these regions that may want to host a Millennium Cities Day.
  • Millennium Cities Investors’ Guides which, in a concise and easily accessible manner, can reach a much larger audience than can be reached through the activities described so far. In fact, these Guides can potentially reach the universe of actual and potential foreign investors. They are, therefore, a powerful tool to put the Millennium Cities on the investment map.

The key is of course whether actual investment projects will take place and contribute to economic growth and development. The efforts described so far can be expected to do that. However, MCI’s third pillar approaches this challenge directly:

3. The development of products for export.

Thanks to the cooperation of International Trade Centre, teams of experts will work with the Millennium Cities and Villages to identify, for each of them, one or two products that can be developed immediately for the international market, thus meeting the toughest competitiveness test in a globalizing world economy. In due course, additional products will be identified, including by building especially on the efforts of UNIDO and KPMG.

In a parallel but related endeavor, the Business Alliance Against Chronic Hunger, led by the World Economic Forum and with the participation of major multinationals, seeks to develop business opportunities near Kisumu, building village-to-world market agriculture-based value chains for important products of the district.

All these activities are concrete, practical and result-oriented, and they build on the new reality in Africa. They involve a broad spectrum of supporters. Apart from those already mentioned, the Gates Foundation, the Rockefeller Foundation and private donors are involved. In many ways, the MCI team in New York and its representatives in each of the Millennium Cities is really a team of conceptualizers and connectors that helps the cities and various organizations to stimulate economic growth in an urban context. In that spirit, the MCI will also develop a Handbook which, based on its experience, will provide a framework for other cities in the developing world so that this effort can be scaled up to contribute to the implementation of the MDGs.

Conclusions

So what does all of this add up to? In spite of all sorts of limitations, the climate for FDI in Africa, as well as its regulatory framework and institutional infrastructure, today are better than they have ever been. This is reflected in the growth of FDI flows to Africa which reached some $35 billion in 2006 and they are expected to stay at this historically all-time high at least until 2010. To attract even more FDI, especially in manufacturing and services, countries will need to improve their infrastructure and identify and promote investment opportunities outside their capital cities.

In the end, all investment is local – hence local opportunities need to be brought to the attention of investors, and the local regulatory and business environment needs to be competitive. This also implies a broader lesson when it comes to Africa: investors need to differentiate and look for investment opportunities country by country, city by city, sector by sector – opportunities exist, and for all you know, your competitors are already taking advantage of them!

Karl P. Sauvant is Co-Director of the Millennium Cities Initiative and Executive Director of the Columbia Program on International Investment (a joint program of the Columbia Law School and The Earth Institute at Columbia University).  He can be reached at karl.sauvant@law.columbia.edu.  I am grateful for comments by Susan Blaustein, Joerg Simon, Stephanie Kage, and John McArthur.

See Karl P. Sauvant, ed., The Rise of Transnational Corporations from Emerging  Markets: Threat or Opportunity? (forthcoming).

For a recent discussion of FDI promotion efforts in Africa, see Jeffrey D. Sachs, “The importance of investment promotion in the poorest countries,” in Economist Intelligence Unit and Columbia Program on International Investment World Investment Prospects to 2010: Boom or Backlash? (London, UK: The Economist Intelligence Unit Ltd., 2006), pp. 78-81.

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