How bad leadership, corruption fuel poverty in Africa

More than 70 per cent of Africa’s estimated 1.2 billion people are said to be suffering from high unemployment, inequality and poverty. This is despite the continent’s huge, but largely untapped human and natural resources. Although, development experts blame this largely on inept leadership and corruption, they note that the time has come for governments across the continent to prioritise the maximisation of the abundant natural resources in their domain to put the continent on the path of sustainable economic development. OMOBOLA TOLU-KUSIMO reports.

It’s a disturbing paradox. Despite their abundant human and natural resources, virtually all the development indices in Nigeria and other countries in Africa have remained abysmally poor.

For instance, majority of Africa’s estimated 1.2 billion people continues to grapple with issues of high unemployment rate, income inequality and abject poverty, among others.

Inept leadership and unbridled corruption by most governments in Africa are said to be holding the economic growth and development of the continent down.

Rather than effectively harness their nature-endowed resources to develop their economies and become dominant players in the global economic scene, most African countries depend largely on foreign aid and loans to survive.

Weak democratic governance, lack of transparency and accountability in the management of natural resources, corruption, political instability and incessant conflicts, among others, are said to have kept majority of the people extremely poor.

Mismanagement of revenues from the few natural resources tapped has continued to fuel corruption, conflicts and poverty, which ultimately, hurt economic growth and social development.

Successive governments in countries across Africa have also not been able to pluck up the necessary courage and political will to build institutional capacity to curb the pillaging of the continent’s commonwealth.

The consensus of experts is that if African governments had built strong institutions, it would have helped in the inefficient and ineffective utilisation of the abundant resources and saved the continent’s pangs of poverty.

For instance, an October 2019 report by the World Bank stated that with good governance and transparent management, revenues from the continent’s extractive industries can reduce poverty and boost shared prosperity.

The report, which was accessed by The Nation, added that the extractive sector plays a dominant economic, social and political role in the lives of 3.5 billion people living in 81 countries, 51 of which are now compliant with the Extractive Industries Transparency Initiative,

The bank added that the extractive industries sector plays a dominant economic, social and political role in the lives of 3.5 billion people living in 81 countries, 51 of which are now compliant with the Extractive Industries Transparency Initiative (EITI).

The World Bank report, however, said many of these countries still face a myriad of challenges such as resource dependency and weak governance.

The bank, in another report, stated that “Sub-Saharan Africa’s opportunities are vast, and its challenges persistent. It, however, pointed that the continent, which is home to the world’s largest free trade area and a 1.2 billion-person market, is poised to create an entirely new development path by harnessing the potential of its resources and people.

But, average growth rates across the continent are not yet reflecting this sentiment. Growth in Sub-Saharan Africa is projected to rise to a modest 2.6 per cent in 2019, from 2.5 per cent in 2018, which is 0.2 percentage points lower than the April forecast.

However, this masks big differences between countries. Four of the fastest growing economies in the world in 2019 are in Africa: Cote d’Ivoire, Ethiopia, Ghana, and Rwanda.

The slower-than-expected overall growth in 2018 reflected ongoing global uncertainty, increasingly from domestic macroeconomic instability including poorly managed debt, inflation, and deficits; political and regulatory uncertainty; and fragility.

It also belies stronger performance in several smaller economies that continue to grow steadily. At the same time, the recovery in Nigeria, Angola, and South Africa—the region’s three largest economies—have remained fragile and are bringing down the regional average.

In Nigeria, growth in the non-oil sector has been sluggish, while in Angola the oil sector remained weak. In South Africa, low investment sentiment is weighing on economic activity.

Excluding Nigeria, South Africa, and Angola, growth in the rest of the sub-continent is expected to remain robust, although slower in some countries.

The average growth among non-resource-intensive countries is projected to edge down, reflecting the effects of tropical cyclones in Mozambique and Zimbabwe, political uncertainty in Sudan, weaker agricultural exports in Kenya, and fiscal consolidation in Senegal.

In Central African Economic and Monetary Community countries, which are also resource-intensive, activity is expected to expand at a modest pace, supported by rising oil production. Growth among metals exporters is expected to moderate, as mining production slows and metal prices fall.

Experts, however, say that several challenges remain and are holding back progress. According to them, public debt levels and debt risk are rising, which might jeopardise debt sustainability in some countries; the availability of good jobs has not kept pace with the number of entrants in the labour force.

Also, fragility is costing the subcontinent a half of a percentage point of growth per year; gender gaps persist and are keeping the continent from reaching its full growth and innovation potential, and 416 million Africans still live in extreme poverty.

As the world’s second largest continent, Africa is said to hold a huge proportion of the world’s natural resources. The commodities include energy (oil and gas); precious metals (gold, coal, iron); livestock (beef, pork, poultry); and grains (wheat, barley, corn, soya); Softs (sugar, cotton, wood, sugar, orange juice), among others.

The countries with huge mineral resources and extractive industries are Angola, Botswana, Chad, Republic of Congo (Congo-Brazzaville), Democratic Republic of Congo (DRC), Ghana, Nigeria, Sierra Leone, and South Africa.

A financial expert, Desmond Latham, during a presentation on “Overview of Markets in Africa” at the Sanlam Summer School for Financial Journalists 2019, stated that Africa accounts for 12 per cent of World’s oil, 42 per cent of its gold, and 66 per cent of world’s phosphates.

He listed others to include 44 per cent of world’s chrome, 82 per cent manganese, 95 per cent vanadium, 55 per cent cobalt, 88 per cent of its diamonds and 45 per cent of its bauxite.

He, however, expressed worries that despite these huge potential to lead the globe, over 70 per cent of the over 1.2 billion people in Africa still suffer from high unemployment, inequality and poverty.

However, initiatives like the EITI, Amnesty International, among others, have drawn worldwide attention to the need for increased transparency and accountability in the management of extractive industries.

As a result, a number of African countries, including Nigeria, Angola and Congo-Brazzaville, now publish financial and other information in the press and on government websites, including the results of audits and other assessments that have highlighted management weaknesses and other shortcomings.

Using Nigeria as a case study, findings show that the country was one of the first countries to commit to the EITI principles.  To date, its local process – the Nigerian Extractive Industries Transparency Initiative (NEITI) – remains the most ambitious and the most advanced.

According to NEITI, Nigeria has conducted and published independent audits of payments and revenues, and was the first to insist that information be published in a disaggregated fashion, making it possible to identify revenues company by company, category by category and well by well.

The country has gone further, commissioning and publishing external audits of the physical systems and business processes as well.

Recently, Nigeria’s National Assembly passed the Deep Offshore and Inland Basin Production Sharing Contract Amendment Bill into law.

In a statement made available to newsmen in Abuja, by the Executive Secretary of NEITI, Waziri Adio, NEITI has been agitating for urgent amendment of the law to forestall further revenue losses to the federation.

Adio recalled that in March 2019, NEITI published a policy brief titled “the 1993 PSCs: the Steep Cost of Inaction,” which revealed that Nigeria lost between $16.0 billion and $28.61 billion within 10 years for failure to review the terms of PSC agreement, in 2008 as was required by the law governing the PSCs.

Experts across the continent, however, say that if the resources in Africa are to be used effectively and harnessed for development, more accountable and transparent mechanisms must be developed and supported by governments, multinational corporations, legislative bodies, political parties, civic organisations and the media. Governments must also give full support to the local companies.

Experts’ views

The Regional Director, Amnesty International’s Southern Africa Regional Office (SARC) based in Johannesburg, Deprose Muchena, urged journalists across the continent to beam their searchlights at the fantastic indicators in capital and financial markets along with the rising power of the extractive industries.

He said the continent is rich in natural resources, but poor in human development because its growth strategies are pure commodities. “But the problem in Africa is that there is no strategy to direct the process for economic growth into human development.

“So, there is a contrast that sits with countries very rich in natural resources but very poor in human development. So, for these three cousin countries, they have the tendency to induce the capacity of poor people to respond to growth.

“Until our governments take specific policy measures to direct the proceeds of growth from expatriate to human development, then we will not be able to move forward. Our product leaves our soil and goes to China and turns in like seven bye products and then produce jobs for them.

“Meanwhile, local companies are dying every day, while the presidents of their countries are travelling to foreign countries to seal deals and contracts. This means the future of African countries is heading to the doldrums,” he said.

Muchena said the way forward is for “Our governments to link and connect the dot between what is happening in our extractive industries and the very weak manufacturing base. We will continue talking about how rich our continent is, but populated by very poor people. Also, regulation by the governments is important.”

Investment Analyst and Columnist with Barclay’s Africa Stockbroker and Portfolio Management, Chris Gilmour, added that to make any change happen in Africa, there is need for a huge commitment to make manufacturing and extractive industry function in a better and more transparent way.

He said African leaders are not ready to provide solution to the problems that have kept the people in poverty. “African leaders understand the problem but they are not ready to provide the solution.

“For instance, Nigeria has businessman, investor, and owner of the Dangote Group, who has interests in commodities in Nigeria and other African countries. If you ask what that one challenge to his business is, he will identify bureaucracy and red tapism and this is true,” he said.

Economic Editor at the SABC, Ms. Thandeka Gqubule-Mbeki, on her part, said the reluctance by African leaders to implement policies that can reduce unemployment and poverty rate on the continent is what may soon lead us to the doldrums.

“There are policies that could be used to alleviate the pain of the ordinary man on the street and their reluctance to do so indicate primarily the desire to run the economy in the interest of the financial services sector shows failure on their part.

“The cost of capital is too high and this has made the manufacturing companies throughout the economies to be reluctant to borrow, reluctant to expand their production and also reluctant to employ.

“Consequently, the interest rate has not been good and the level of unemployment has concomitantly risen”, she added.