Ten Key Issues to Watch in Africa in 2018

In this blog, Covington’s Africa practice  highlights ten key issues to watch in Africa in 2018.

  1. U.S. Policy: The derogatory remarks that President Trump made about Africans and Haitians, which he denies having said, create a negative image for the U.S. across the region as the year begins. Nevertheless, the administration will push forward on several fronts. Commerce Secretary, Wilbur Ross, is expected to visit Sub-Saharan Africa in the first quarter of 2018 along with members of the Presidential Advisory Committee on Doing Business in Africa (PAC-BIA), an Obama-era initiative continued under Trump. Secretary of State, Rex Tillerson, may also visit the region. As we analyze here, the Administration’s National Security Strategy focuses on combatting corruption in Africa, moving toward more reciprocal trade relationships and modernizing development finance tools. On January 17, 2018 the House passed the African Growth and Opportunity Act (AGOA) and Millennium Challenge Account (MCA) Modernization Act. The bill will provide technical assistance to help eligible partners fully utilize AGOA and, perhaps most significantly, enable the Millennium Challenge Corporation to enter into concurrent, regionally-focused compacts to promote trade among eligible partner countries. The bill is now in the Senate and will likely be passed later in the year.
  1. Anti-Corruption: Next week the African Union will meet for its 30th Summit, with the theme “Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation.” Consistent with this focus, anti-corruption initiatives are on the rise throughout the continent. For example, Angola’s new president, João Lourenço has taken swift and decisive actions to root out nepotism and corruption. In December 2017, he changed the leadership of nine public utilities and companies, including oil and gas producer Sonangol and the diamond mining company Endiama.  The election of Cyril Ramaphosa as president of the African National Congress and the prospective state prosecution of companies involved in the sprawling “state capture” investigation are likely harbingers of a continued focus on anti-corruption enforcement in South Africa in 2018. The extraterritorial application of the Foreign Corrupt Practices Act (“FCPA”), as well as other foreign anti-corruption laws such as the U.K. Bribery Act, is well-established. The extent to which the effort of African governments to fight graft will result in an increase in FCPA enforcement activity related to the continent is something to watch over the course of the year.  Against this backdrop, corporates would be well-served to focus on developing and maintaining anti-corruption compliance programs.
  1. Project Finance: Project Finance projects in Africa are likely to increase in 2018, especially in energy/power and transport sectors. For example, spending on electricity production and distribution in Sub-Saharan Africa is expected to reach $5 billion by 2025. The Power Africa initiative launched by former President Obama, and continued by the Trump Administration, is expected to contribute significantly to increased investment in infrastructure projects. The initiative’s 150 public and private sector partners have already mobilized $14 billion in actual investment in the 85 Power Africa projects that have reached final close, which will add more than 7,000 megawatts of new power generation. Additional finance is expected from China, India, and Japan. Sub-Saharan Africa’s wealth of natural resources, particularly in the oil and gas sector, will continue to attract investors. Infrastructure spending for petroleum and natural gas extraction is expected to grow at an average annual rate of 7.1 percent between now and 2025, resulting in a total investment of $8 billion over that time period. Notably, funding models are changing in Africa, and models such as public-private partnerships (PPPs) are to become more prevalent. However, in the energy sector, the preferred model of funding remains privately financed Independent Power Producers. Larger state-owned companies in South Africa have made progress in issuing bonds to raise capital, but with South Africa’s sovereign credit rating under pressure, debt capital raising by smaller State Owned Enterprises (SOEs) may prove challenging.. The African Development Bank is expected to continue to provide a platform for bridging finance, direct loans and loan guarantees supporting infrastructure financing. Southern Africa will account for the largest share of infrastructure spend and capital project activity on the continent, and most of the activity is likely to occur in the South African energy sector. Other important investment destinations include Angola, Ghana, Nigeria, and Mozambique.
  1. South Africa: There is a palpable sense in South Africa that the country has turned a critical corner in the fight against government corruption with the election of Cyril Ramaphosa as president of the ANC. Ramaphosa’s 2018 agenda is significant: root out the corruption tied to President Zuma by prosecuting individuals and entities implicated by Guptagate, restore the reputation of the ANC as a genuine party of the people, and revive South Africa’s economy. Ramaphosa must also prepare for a decisive election in 2019 while delivering on job creation and managing the tension between market-based land reform and expropriation. An early indicator of Zuma’s fate will be whether he delivers the February 8 State of the Nation address to Parliament; the expectation is that Zuma will be forced out of office over the near-term. It’s more a question of when, not if.  Analysts will also be watching to see how Ramaphosa will revitalise the State Owned Enterprises (SOEs) and whether he will act against executives in the country’s key SOEs, who have become widely regarded as having facilitated “state capture.”   
  1. Angola: President João Lourenço continues to move forward on the reforms he initiated immediately upon assuming the presidency. The government has announced plans to tap the Eurobond market, probably by June, and it announced that it will repay contractors $5 billion of arrears by 2019. The government has also published a mid-term national development plan (2018-2022) that identifies 88 actions it will take to reform the economy. Key actions include strengthening the financial sector and assessing the vulnerability “of every and any” commercial bank. Whether the government seeks a deal with the IMF to support its reform efforts will be an important issue to watch in 2018.
  1. Zimbabwe: One of the most pressing questions facing the new government in Zimbabwe is whether it can hold “free, credible, fair and indisputable” elections, as President Emmerson Mnangagwa has promised. Mnangagwa has said electoral observers from the EU, the Commonwealth and the UN would be invited to monitor the polls, a welcome departure from Mugabe’s refusal to allow international election observers. Whether the more than 3 million Zimbabweans in diaspora will be able to vote will be important to the credibility of the elections. The success of the elections will have an important bearing on whether the international community is willing to support an economic reform package, which the government needs desperately. Finance Minister Patrick Chinamasa has announced a bold economic reform program which he hopes will lead to 4.5 percent growth in 2018; how he deals with government spending, the country’s $1.8 billion to the IMF, agricultural and civil service reforms will be key early challenges.
  1. Nigeria: With presidential elections scheduled for early 2019, political jockeying will intensify in 2018 with a prime focal point being on President Buhari’s health and whether he will stand for reelection. Elections for governorships in Ekiti (July) and Osun (September) will be important indicators of the preparedness of the Independent National Electoral Commission (INEC) to manage next year’s presidential elections. The government’s action on the enduring challenges of corruption, petroleum shortages, and unreliable access to power will continue to dominate the political debate. Economic growth is expected to accelerate to 2.5 percent (it was 1 percent last year). This growth will be spurred by improving oil prices and reforms in the financial, manufacturing, and other sectors.
  1. Kenya: Warning that “lingering political uncertainty can further undermine business confidence and stunt a robust recovery,” the World Bank has downgraded its 2018 growth forecasts for Kenya from 5.5 percent to 4.9 percent. Political turmoil during the 2017 elections caused corporations to take a cautious approach to Kenya and delay investments. Healing the ethnic divisions that divide Kenya, rooting out endemic corruption, and addressing drought that has caused food prices to spike are just a few of the challenges facing President Uhuru Kenyatta. Initiatives to foster lasting reconciliation among Kenyans and regaining the confidence of investors will be key challenges for Kenyatta in 2018.
  2. Mobile Money: Mobile money will continue to grow throughout 2018 as a significant engine of economic growth and inclusion, perhaps faster in Africa than in any other region. Currently, there are 277 million mobile money accounts and 177 million bank accounts in Africa and 30 countries have enacted mobile money enabling regulation in Sub-Saharan Africa. Since 2011, there has been a ten-fold increase in the number of mobile money agents reaching approximately 1.5 million, creating a range of opportunities for small and medium enterprises.
  3. Business and Human Rights: Companies with operations in Africa should track the following legal developments in 2018. Legislative proposals in states including Australia, Netherlands, and Hong Kong may, if passed, impose additional modern slavery and child labor reporting and due diligence obligations on relevant companies with respect to their global operations and supply chains, including on the African continent. Also, coinciding with the increased promotion of “access to remedy“—the third pillar of the UN Guiding Principles on Business and Human Rights—recent judgments in the UK and Canadian courts have seen claims allowed to proceed against UK/ Canadian headquartered companies in respect of alleged human rights offences connected to their foreign subsidiaries in Zambia and Ethiopia. Judgments on the merits are pending. Companies should consider appropriate risk mitigation strategies and measures.

 

About Covington’s Africa Practice

 In November, Covington celebrated the opening of its office in Johannesburg, South Africa. With a leading  project finance team in Johannesburg, London, and Dubai, Covington is positioned to service companies’ project finance needs throughout the continent. Through its Global Problem Solving capability, Covington’s Africa practice advises clients on matters related to political and regulatory risks. Covington has also developed a special suite of services for financial institutions, banks and non-bank financial institutions across the continent. This set of services includes a focus on six key compliance areas: (1) anti-corruption (including compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act); (2) export controls and economic sanctions; (3) anti-money laundering; (4) privacy and data protection; (5) cybersecurity; and (6) competition, including cartel enforcement. If you have questions about your company’s operations in Africa, please contact Witney Schneidman at wschneidman@cov.com.

What Next for Trump and Africa?

In late December, the Trump Administration released the “National Security Strategy of the United States of America.” The nearly 70 page document lays out the foreign policy priorities of the current Administration in both thematic and regional approaches. At the time of its release, the press focused on the strategy’s emphasis on Russia and China, and the proposed policies towards these “revisionist powers.” But, there was minimal coverage on what this strategy had to say about Africa.

Nevertheless, President Trump’s recent derogatory remarks about Africans and Haitians, which he denies making, has sparked a controversy that has overshadowed the strategy as it pertains to Africa. The question is whether the Trump administration will be able to pursue aspects of the National Security Strategy (NSS) as it relates to Africa in hopes of reconstituting a “respectful engagement” that is elemental to advancing U.S. interests in the region. As the Administration contemplates its next steps in Africa, it is worth considering what the NSS suggests as it relates to the key issues of trade, corruption, and development finance and the timing of its implementation.

Trade

On the trade front, there is a clear theme in the strategy of “promot[ing] reciprocal economic relationships” (emphasis added) throughout the strategy. While there is no mention of how this strategy will be applied to Africa specifically, the current non-reciprocal trade framework of the African Growth and Opportunity Act (AGOA) was not designed to be permanent. It is unclear what is next when AGOA expires in 2025, but establishing a reciprocal trade framework is a logical progression and in line with the strategy’s goals. The Administration could transition to reciprocal trade agreements with individual countries and/or regional bodies that take into account capacity and socioeconomic levels by putting the eligible tariffs lines on a sliding scale and increasing the number of lines in which there would be reciprocity over time. This new framework would enhance the ability of the U.S. to compete against the various European Partnership Agreements in place throughout the continent. The strategy outlines that “fair and reciprocal trade, investments, and exchanges of knowledge…are necessary to succeed in today’s competitive geopolitical environment.” If the U.S. pursues a two-way trade platform between the U.S. and  African markets, it will surely help American companies down the road.

Importantly, the NSS discusses “economic integration” in Africa, a priority that the continent’s leaders and regional bodies have been trying to address for some time. In comparison to other regions, Africa has the lowest level of intra-regional trade, at just 18% (Europe, 69%; Asia, 52%; North America, 50%). There are efforts underway, via the Continental Free Trade Agreement (CFTA) and the Tripartite Free Trade Area (TFTA), that could bolster intra-Africa trade. A cost-effective action the Trump Administration could take to support Africa’s economic integration would be providing trade facilitation assistance to the continent’s regional bodies as they attempt to address the intra-regional trade gap.

Corruption

Combatting corruption is mentioned both thematically and in the Africa section of the strategy. The Administration asserts that tackling corruption around the world will help American companies “compete fairly in transparent business climates.” Tackling corruption in Africa would be a boon for the continent’s economies as well. Estimates put the annual global cost of bribery at around $1.5 to $2 trillion – roughly 2% of global GDP.

Opaque business environments and outsized political and corruption risks have depressed African markets’ full economic potential. Facing stiff competition from emerging markets in Latin America and South East Asia, African governments must make sure their commercial climate remains attractive.

The Administration appears willing to put some muscle behind addressing graft and supporting governments looking to counter it. The strategy states that “using our economic and diplomatic tools, the United States will continue to target corrupt foreign officials and work with countries to improve their ability to fight corruption.” Trend lines indicate that some African governments and their electorates are not only recognizing the adverse impacts of corruption, but are willing to support policies and candidates that seek to tackle it head on – Angola and South Africa are recent examples of this trend. African governments looking to counter corruption should recognize the Trump Administration’s heightened interest in this issue and solicit readily available capacity building programs housed primarily in the State Department’s Office of Anti-Crime Programs and the International Unit of the Department of Justice’s Money Laundering and Asset Recovery Section.

Development Finance

The National Security Strategy states that “the United States will modernize its development finance tools so that U.S. companies have incentives to capitalize on opportunities in developing countries.” In Congress, the Senate and the House are currently both drafting legislation to revamp the legislative authorities for development finance. “Modernize” is the latest catchphrase for consolidation.

The development finance tools of the U.S. government are dispersed across numerous agencies, including the Overseas Private Investment Corporation (OPIC), USAID’s Development Credit Authority, USAID’s enterprise funds, USTDA assistance, and other smaller, regionally-focused agencies. Streamlining these agencies and dedicating more resources to one central body appears to be a policy proposal that is gaining momentum in Washington.

This proposal could ultimately help address Africa’s infrastructure deficit. From energy access and transportation, to ICT systems and water, Africa’s infrastructure woes are hindering the continent’s economic growth. Closing Africa’s infrastructure quantity and quality gap relative to the developing world and the best performers in the world could increase growth of GDP per capita by 1.7% and 2.6%, respectively. With limited new public expenditures for these capital intensive projects, African governments are relying on alternative forms of financing. A key form of financing for this effort going forward will be development finance.

The idea of establishing a single U.S. development finance institution would benefit American foreign policy and help Africa address its infrastructure deficit. Indeed, such a development would be consistent with the strategy which states: “the United States will not be left behind as other states use investment and project finance to extend their influence.” An appropriately resourced American development finance agency could be a source of much needed financing for African infrastructure projects. With Africa being a stated regional priority for the new leadership of OPIC, the continent could see increased financing activity in the near to medium term.

There are indications that Commerce Secretary Wilbur Ross and Secretary of State Rex Tillerson will visit Africa in the coming months. A robust commercial strategy will be important if there is to be strong U.S.-Africa relations given the recent controversy.

Ramaphosa’s Victory: Progress or Paralysis?

The election of Cyril Ramaphosa as president of the African National Congress (ANC), and now the leading contender to become South Africa’s next president, was hailed as a “humbling rebuke” of South Africa’s President Jacob Zuma and a stark rejection of his policies, which have led to anemic economic growth, widespread corruption, and rising frustration in one of Africa’s most significant economies.

Indeed, the markets responded quickly as the South African rand initially surged by more than 4 percent on the news of Ramaphosa’s election, reaching its highest level against the dollar in six months, but were flat a day later.

Ramaphosa’s victory represents an important win for those in South Africa who reject the capture of state institutions and crony capitalism that defined Zuma’s leadership. There were widespread concerns that Nkosana Dlamini-Zuma, Ramaphosa’s rival for the leadership position, would perpetuate many of these policies and shield her ex-husband from legal prosecution for the 783 counts of corruption, fraud, racketeering, and money laundering he is facing. The process of restoring South Africa to the ideals espoused by the late Nelson Mandela and putting the nation’s economy on a sound footing will not be easy, however.

THE SMALL MARGIN OF VICTORY MEANS THE FIGHT IN THE ANC IS NOT YET OVER

Ramaphosa’s electoral victory over Dlamini-Zuma, a former minister of health and foreign affairs and chair of the African Union, was razor thin. His margin was 179 ballots cast by 4,708 delegates—the slimmest margin of victory in any ANC leadership race in the 105-year-old history of the organization. These results indicate that the ANC is evenly divided between the reformist Ramaphosa faction and the populist Zuma one.

In addition, only three of the candidates Ramaphosa supported won spots among the top six positions in the ANC: Ramaphosa himself, Gwede Mantashe as the ANC chairperson, and Paul Mashatile as the treasurer-general. The other three positions were won by Zuma supporters: David Mabuza as the party’s deputy president (who also won the most votes of all candidates), Ace Magashule as the secretary-general, and party stalwart Jessie Duarte as the deputy secretary-general. The margin of victory in these leadership races ranged from 339 to 24.

Ramaphosa did not fare any better in the vote for membership on the powerful National Executive Committee—the ANC’s chief executive body. Zuma supporters appear to constitute the majority of the 86-member committee.

The narrowness of Ramaphosa’s victory will have significant ramifications. There were those who expected that a victory by the reform wing of the party would lead to Jacob Zuma’s exit from the presidency prior to the May 2019 elections. While he will step down as party leader within a week, it is unclear whether Ramaphosa will be able to cajole or force Zuma into early retirement.

A second challenge will be economic policy. Ramaphosa has promised a “new deal” for South Africa based on an “uncompromising” rejection of waste, cronyism, and corruption. He has targeted 5 percent growth (up from the current rate of 0.7 percent), the creation of 1 million jobs within five years, and the restoration of investor confidence. The difficulty of delivering on these promises was underscored on the last day of the party congress when the ANC resolved to amend the constitution to nationalize the South African Reserve Bank and expropriate land without compensation, policies that could undermine Ramaphosa’s agenda.

THE FOCUS ON RAMAPHOSA

Perhaps the first indication of Ramaphosa’s ability to chart a new direction for the ANC will be the appointment of a national director of public prosecutions, the government office that will oversee the prosecution of Jacob Zuma on corruption charges. The high court in Pretoria earlier this month declared Zuma’s selection of Shaun Abrahams for that position “invalid,” ruling that Zuma could not appoint the person who might prosecute him. The deputy president, Ramaphosa, was given 60 days to appoint a new director of public prosecutions. Zuma’s legal team has appealed this ruling.

One of Ramaphosa’s most pressing priorities will be to retool the ANC’s message going into the 2019 elections. In last year’s municipal elections, where the ANC lost control of Johannesburg, Pretoria, and Mandela Bay to the opposition Democratic Alliance (DA), the party’s support was 54 percent, the lowest since the first democratic elections in 1994 when Nelson Mandela led the party to a victory with 62 percent of the vote. In the 2016 elections, the DA campaigned on a platform of effective service delivery while the ANC was perceived by many to be a party of self-enrichment and detached from the priorities of the majority of South Africans, namely alleviating poverty, creating jobs and restoring the country’s economic health. Reaching voters and restoring the ANC’s image as the genuine party of the people will be an uphill task for the new party president.

 

This blog was cross-posted on Brookings’ Africa in Focus.

Covington Welcomes Liberian President Sirleaf for Discussion on Emerging Public Leaders Initiative

On December 7, 2017, Covington’s Africa practice welcomed Liberian President Ellen Johnson Sirleaf for a roundtable discussion on how to expand the training and support of civil service leaders in Africa through Emerging Public Leaders (“EPL”).

Witney Schneidman, President Sirleaf, and Betsy Williams

President Sirleaf was the first woman to be inaugurated as president of an African nation in 2006. President Sirleaf explained one of the greatest challenges she faced was rebuilding Liberia’s civil service and encouraging young people to be apart of it after inheriting a nation torn apart by twenty years of civil war.

Around the same time President Sirleaf was entering office, Betsy Williams was managing the Scott Fellows program in Liberia, an effort to recruit expats and diaspora to Liberia to support various cabinet ministries. After serving as an assistant in the Ministry of Health, Ms. Williams saw first-hand the needs of the Liberian civil service and developed the concept of EPL, a non-profit designed to attract and train high-achieving young Africans to bridge the capacity gap in civil service in Africa. EPL’s flagship program, the President’s Young Professionals Program (PYPP), was launched in Liberia in 2009. PYPP has trained over 120 fellows, the majority of whom continue to serve in the Liberian government.

Michael Labson (Member of Covington’s Management Committee) and Witney Schneidman (Chair of Covington’s Africa Practice) greeting President Sirleaf

Covington gathered other non-profit experts focused on leadership development to discuss the expansion of EPL’s model throughout the African continent, including Ghana. President Sirleaf reflected on her experience with PYPP in Liberia and participants engaged in a lively discussion with her about the EPL model, her vision for the future of development in Africa, the importance of investing in African governments, and her reflections on Liberia’s handling of the Ebola crisis.

Covington represents EPL on a pro bono basis.

Opportunity in Africa: Covington Launches Johannesburg Office

Opportunity in Africa abounds. Half of the world’s 25 fastest-growing economies are on the continent and according to the United Nations (UN), half of the anticipated global population growth between now and 2050 will occur in Africa. Upwards of 800 U.S. companies have a presence in South Africa alone. Yet, challenges remain: only 35 percent of the population in Sub-Saharan Africa has access to electricity and  the World Bank estimates that an annual investment of approximately $90 billion is required to address the region’s infrastructure needs.

Inspired by the continent’s opportunities and eager to address its challenges, on November 13-15, Covington celebrated the opening of its office in Johannesburg, South Africa. As explained by the firm’s chairman Tim Hester in an interview with BBC Africa Business Report, Covington has built a top-notch project finance team in Johannesburg, London, and Dubai that is positioned to service companies throughout the continent.

The firm is also equipped to leverage its global resources to advise companies on the political and regulatory risks they may face in sub-Saharan Africa, focusing on six key compliance areas: (1) anti-corruption (including compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act; (2) export controls and economic sanctions; (3) anti-money laundering; (4) privacy and data protection; (5) cybersecurity; and (6) competition, including cartel enforcement.

Complementing this compliance focus is Covington’s Africa Practice and its unparalleled global-problem solving capabilities, led by Witney Schneidman. Covington’s capabilities in this regard were aptly demonstrated by the firm’s assistance to South African telecom operator MTN in 2016, in which Covington Partner and former U.S. Attorney General Eric Holder assisted in negotiations with the Nigerian government, resulting in a favorable resolution that reduced MTN’s financial exposure by more than half.

Mr. Holder joined the Covington delegation in South Africa in November and shared his perspective on numerous issues, including the potential for the extraterritorial application of U.S. anti-corruption laws on the continent. Mr. Holder’s comments come against the backdrop of the corruption scandal involving the Gupta family and President Jacob Zuma, which has implicated a number of prominent multi-national corporates.

As reported by Business Day, Mr. Holder’s comments emphasized the broad extra-territorial reach of U.S. corruption laws, and noted that seven of the ten largest fines levied pursuant to the FCPA were against companies based outside the United States. Mr. Holder also noted the increased cooperation among global enforcement agencies and predicted that cooperation between U.S. authorities and local authorities in Africa would increase as economic growth on the continent continues and where national security issues that affect U.S. interests emerge. As Mr. Holder explained, in view of these risks, it is critical for corporations doing business on the continent to put robust compliance programs in place.

Timothy Hester, Witney Schneidman, Robert Legh (Chair of Bowmans), and Eric Holder, Jr.

To view additional photos of Covington’s recent events in Johannesburg, click here.

Questions about Covington’s capabilities in Africa? Contact Worku Gachou at wgachou@cov.com.

A Guide to December’s ANC Party Congress

The much anticipated 54th National Elective Conference of South Africa’s ruling party, the African National Congress (ANC), is scheduled to kick-off in Johannesburg on December 16, 2017. The primary objective of the conference is to elect a successor to incumbent ANC President, President Jacob Zuma. The person appointed ANC president is expected to lead the ANC in South Africa’s general elections scheduled for 2019, and to become South Africa’s next head of state.

President Zuma is serving his last term as president, and the outcome of the ANC party congress is crucial for his life after government. Over the last 10 years, 783 criminal charges for corruption, fraud, racketeering and money laundering levied by the National Prosecuting Authority against the President have been in abeyance. With a change of the guard, and depending on the outcome of the ANC leadership battle, there is a possibility that these charges could be reinstated.

The tension in the air is palpable with predictions of the outcome of what arguably is the most important elective conference in ANC history. For the first time since the organization was founded in 1912, there are seven presidential candidates.

The two frontrunners are Cyril Ramaphosa, the current Deputy President of the ANC, and Nkosazana Dlamini-Zuma, the ex-wife of President Zuma and former Chairperson of the African Union. President Zuma is on record as supporting his ex-wife to be the heir apparent and is trying to throw his rural base behind her. Ramaphosa is believed to have the support of the urban constituencies and some grass roots backers. Many commentators argue that for President Zuma, a win by Nkosazana Dlamini-Zuma will ensure that he stays out of prison and possibly keep the pendulum of corruption, defined by his enduring relationship with the Guptas, going.

There are a number of predictions about the impact on South Africa’s political landscape if either Cyril Ramaphosa (the CR17 campaign) or Nkosazana Dlamini-Zuma (the NDZ17 campaign) wins.

One such prediction is that if the NDZ17 campaign triumphs, the ANC risks losing the 2019 General Elections. In this scenario, ANC supporters will turn their back on the party, as they would perceive a Dlamini-Zuma win as facilitating a continuation of President Zuma’s legacy of corruption and partisan control of government agencies and law enforcement institutions. The fact that Dlamini-Zuma will be the first female president in the history of the 105 year old organization does count in her favor, and so does her impeccable liberation struggle credentials.

The CR17 campaign is working to restore ANC unity and has adopted a strong anti-corruption position. A CR17 win is expected to lead to cohesion and unity of purpose within the ANC and amongst its alliance partners, the South Africa Communist Party (SACP) and trade union confederation Congress of South Africa Trade Unions (COSATU). In addition to Cyril Ramaphosa’s uncompromising stance against corruption, as well as his insistence on compliance with corporate governance, he is promising to restore confidence in public service, which has been badly depleted. Ramaphosa’s track record also gives hope to those outside government and the ANC, given Ramaphosa’s prior career as a successful businessman, trade union leader and chief negotiator of the interim constitution which guided the transition from Apartheid to democracy. Many believe that a Ramaphosa-led South Africa would stimulate economic growth and job creation and improve the provision of services throughout society. The principal weakness to Ramaphosa’s campaign are a series of emails that linked him to the Marikana massacre in 2012, where the South Africa Police Service (SAPS) opened fire on a crowd of striking mineworkers, killing 34 and leaving 78 seriously injured.

The competition for the ANC leadership post could also lead to another party split, or realignment, such as the one that occurred in 2007 after Thabo Mbeki lost the ANC presidency to President Zuma.

As far as the other five presidential candidates are concerned, they include: ANC Treasurer-General Zweli Mkhize, South African attorney and politician Mathews Phosa, Human Settlements Minister Lindiwe Sisulu, Minster in the Presidency Jeff Radebe and National Assembly Speaker Baleka Mbete.

Political analysts contend that the prospects for these candidates are not as promising as the two front runners, Ramaphosa and Dlamini-Zuma. According to the tallies released beginning of December 2017, press reports indicate that Deputy President Ramaphosa has won the endorsement for the ANC presidency from 374 branches in Gauteng and Nkosazana Dlamini-Zuma was supported by 64 branches of the province, which include Johannesburg and Pretoria. Ramaphosa secured nominations from the Western Cape, Northern Cape and Eastern Cape, while the Free State and North West back Dlamini-Zuma. The remaining two provinces are expected to announce their favoured candidates by December 5, 2017.

The current developments provide a glimpse of the race for the ANC Presidency that has essentially turned into a two-person contest. It is evident that the upcoming national elective conference of the ANC is not only important for the future of South Africa, but also for the future of the ANC. The party’s future, and perhaps that of the country, will be determined by the votes cast by the estimated 4500 ANC branch delegates in two weeks time.

Year of the Flood

Hurricane Harvey bombarded the Gulf Coast of the United States, leaving more than 250,000 people without power and causing substantial financial, physical, and emotional damage in its wake.  Though record-breaking, Harvey was not a singular event.  In 2017, severe rain events like Harvey have impacted many communities and businesses around the world.  Africa is no exception.

In the span of less than eight weeks, there were over 1,000 people killed in mudslides following torrential rains in Sierra Leone, 2,000 people displaced by floods in Uganda, more than 100,000 people fled their homes because of major flooding in Nigeria, and hundreds of homes destroyed and families displaced following storms in Niger and Sudan.

According to World Bank research severe weather events have cost an estimated $4.2 trillion between 1980 and 2014.  Experts indicate that at least some of the financial loss in 2017 could have been avoided by repairing faulty drain channels in Sierra Leone to effectively divert floodwaters, or redirecting attention to flood maps, which could have prevented construction in vulnerable floodplains surrounding Houston.

These disaster losses can impact a variety of industries including insurance, oil and gas, manufacturing, utilities, raw materials, and mining.  Knowing that other severe rain events can occur, the question is:  How can stakeholders manage the risk?

A tool businesses and communities can use is disaster risk management, which in many cases involves both disaster risk reduction (“DRR”) (prevention, preparedness, and mitigation) and humanitarian and development action (emergency response, relief, and reconstruction).

Below are three key instruments for businesses to understand when approaching disaster risk management in Africa:

Sendai Framework: Shared Responsibility

The Sendai Framework for Disaster Risk Reduction 2015-2030 (“Sendai”), and its predecessor, the Hyogo Framework, serve as a foundation for sustainable development and international cooperation regarding disaster risk management.

Sendai is a 15-year, voluntary, non-binding agreement which recognizes that the State has the primary role to reduce disaster risk but that responsibility should be shared with other stakeholders including local government and the private sector.

Adopted by the United Nations Member States at the 3rd U.N. World Conference for Disaster Risk Reduction in March 2015, and endorsed by the UN General Assembly, Sendai sets four priorities:

  1. Understanding disaster risk.
  2. Strengthening disaster risk governance to manage disaster risk.
  3. Investing in disaster risk reduction for resilience.
  4. Enhancing disaster preparedness for effective response and to “Build Back Better” in recovery, rehabilitation, and reconstruction.

The Framework also includes seven global targets which aim to reduce economic losses and critical infrastructure damage (Targets (c)-(d)), and increase the number of national and local DRR strategies and level of international cooperation (Targets (e)-(f)).

With a focus on enhancing infrastructure resilience, health and livelihoods, and the provision of adequate support to African countries to allow for the implementation of the framework (Sendai para. 43), Sendai highlights an opportunity for stakeholders in Africa to effect DRR mechanisms.

A global example of Sendai’s role in sustainable development includes the 2017 Cancun High Level Communiqué, where leaders committed to implement the Sendai Framework, in coherence with the Sustainable Development Goals, the Paris Agreement on Climate Change, the New Urban Agenda and other relevant instruments.

Africa’s Regional Platform: Sendai Plus Five

 The Africa Platform emerged from a November 25, 2016 meeting where Government Ministers, heads of delegation, and national disaster management agencies from forty seven African countries agreed on a strategic plan to align disaster risk reduction with global  priorities and targets to reduce disaster losses, based on the Sendai Framework.

The Africa Platform supplements Sendai by adopting five additional targets to augment action on disaster risk reduction.  These include:

  • Integration of DRR in school curricula.
  • Making DRR part of sustainable development planning.
  • Increasing domestic spending on DRR.
  • Expanding the number of countries testing their preparedness plans.
  • Increasing the number of partnerships for knowledge management.

Here, companies have the opportunity to partner in the knowledge management space and experience a renewed regional focus on DRR.

 UNISDR Checklist on Essentials for Business in DRR: Data Driven Decision-Making

Key provisions of the Five Essentials for Business in Disaster Risk Reduction include:

  • Promote and develop public-private partnerships for disaster risk reduction to analyze the root causes of continued non-resilient activity.
  • Leverage private sector expertise and strengths to advance disaster risk reduction and mitigation activities, including enhanced resilience and effective response.
  • Foster a collaborative exchange and dissemination of data: assessment, monitoring, prediction, forecasting and early warning purposes.
  • Support national and local risk assessments and socioeconomic cost-benefit analyses and capacity building.
  • Support the development and strengthening of national and local laws, regulations, policies, and programs.

As Former U.N. Secretary General Ban Ki Moon explained at the launch of UNISDR’s 2013 Global Assessment Report, “economic losses linked to disasters will continue to escalate, unless disaster risk management becomes a core part of business investment strategies.”

The instruments above demonstrate that governments, particularly those in Africa, have tools at their disposal when looking towards future disaster risk management. Shared responsibility, regional, and data driven decision-making targets provide guidance for investment and an opportunity for businesses to collaborate.

This has the potential to yield innovative sustainability initiatives, knowledge transfer, corporate social responsibility, and philanthropy, enabling the private sector to become a key driver of risk reduction.

Post-AGOA: Moving to a Reciprocal US-Africa Trade Arrangement

 

The global trade environment is rapidly changing and already affecting the U.S.-Africa trade relationship. Indeed, the African Growth and Opportunity Act (AGOA) was not intended to be permanent. The program was designed as a stepping stone to a more mature trade relationship between the U.S. and the continent. AGOA’s expiration date in 2025 may seem far off but given the complex nature of any trade regime—and the rapidly evolving global trade environment—it is not too soon to begin the complex and difficult work that will provide the foundation for a reciprocal relationship.

In March 2016 the East African community (EAC) took a decision to ban the import of second-hand clothing into the region. The rationale for the ban is the need to protect and promote the textile and leather works industry, which, the EAC reasons, has suffered and failed to develop due to the increased import of second-hand clothing. In response to the proposed ban the U.S.’s Secondary Materials and Recycled Textile Association (SMART) filed a petition with the Office of the U.S. Trade Representative (USTR) requesting an assessment of the EAC countries’ continued eligibility under AGOA. In July 2017 the out-of-cycle review commenced and the parties to the dispute were given an opportunity to testify before the USTR.

The EAC receives second-hand clothing from the U.S., the U.K., Germany, South Korea, Belgium, the Netherlands, Canada, Poland, Italy, JapanIndia, and Pakistan. Notably, the ban is not discriminatory as it bans all second-hand clothing. The ban has not yet been put in place, but so far some of the East African countries have increased tariffs in an effort to discourage imports on the second-hand clothing with a view of eventually phasing out their import completely.

This trade dispute between the U.S. and EAC closely follows a significant trade dispute with South Africa that involved U.S. imports of poultry products into that market. The dispute over poultry was resolved after Congress threatened to deny AGOA benefits to agricultural products from South Africa. The disputes over second-hand clothing and poultry suggest that the time may be ripe to begin moving toward a more reciprocal trade arrangement with African countries that would include the establishment of a negotiated dispute resolution mechanism as opposed to the arbitrary and unilateral out-of-cycle review that currently exists.

THE TRUMP ADMINISTRATION AND AGOA

The Trump administration has been supportive of AGOA, provided that participating African governments comply with the eligibility criteria. In a June speech, Commerce Secretary Wilbur Ross said that the U.S. will continue the transition from aid to trade, a position consistent with the Clinton, Bush, and Obama administrations as it relates to commercial policy toward Africa. The Commerce Department has also continued a high-level advisory committee on Africa that was created by President Obama.

U.S. Trade Representative Robert Lighthizer’s opening remarks at the AGOA Forum in Togo last month also signaled the Trump administration’s support for AGOA. In his comments, Lighthizer noted the bipartisan consensus supporting the program but also said there is a need for greater reciprocity in the trade relationship, given the changes that have taken place on the continent. He specifically referenced AGOA partners who are “implementing reciprocal trade agreements with major developed economies.”

ENVISIONING A POST-AGOA RELATIONSHIP

Despite the Trump administration’s apparent support for AGOA, it is important to begin exploring the structure of a post-AGOA relationship. As African countries enter into reciprocal relationships with other countries, especially the EU, U.S. companies and goods will compete at an increasing commercial disadvantage. This growing commercial disadvantage, inevitably, will pressure Congress to act to protect U.S. companies entering African markets, straining the current strong bipartisan consensus in support of AGOA.

In order to ensure an enduring and mutually beneficial trade relationship, the U.S. and the African Union should create a high-level panel to develop a framework and a path forward to a more reciprocal framework when AGOA expires in 2025. This panel, ideally chaired by Ambassador Lighthizer and AU Trade Commissioner Fatima Haram Acyl, should solicit a range of opinions and perspectives, including from academia, think tanks, private sector representatives, and members of civil society. A progress report on their deliberations would be an important part of the next AGOA Forum.

A CHANGING LANDSCAPE

There are a number of reasons for beginning to plan for the transition to a reciprocal U.S.-African trade relationship. Africa has committed to creating a Comprehensive Free Trade Agreement by the end of 2017, and three regional economic communities—SADC, EAC, and COMESA—have already formed the Tripartite Free Trade area. Africa’s progress on regional integration needs to be reflected in any new trade relationship with the U.S. to ensure that it is mutually beneficial supportive of the region’s integration efforts.

In addition, the European Union is currently negotiating Economic Partnership Agreements (EPAs) with 41 African countries through different blocs. Some EPAs have been have been signed and are now in force while some are still being negotiated. As the 2017 National Trade Estimate Report on Foreign Trade Barriers points out, “The EU-SADC EPA will further erode U.S. export competitiveness in South Africa and the region due to the greater disparities in tariff levels that U.S. exports will face under the EPA.” As the other EPAs take hold across the continent, the disparities adversely affecting American companies will intensify. And, of course, China, as Africa’s largest trading partner, adds to the pressures on U.S. commercial competitiveness in Africa. A new trade relationship between the U.S. and African nations would codify measures related to market access that would provide American companies with more certainty, which would be helpful in competing with Chinese companies.

From the U.S. side, Congress will have to develop a structure for a trade agreement that takes into account Africa’s development priorities. At the same time, market access for goods and services, government procurement, and dispute resolution mechanisms, among other issues, will need to be consistent with those arrangements that Africa’s other trade partners enjoy.

AFRICA’S NEGOTIATING CAPABILITY

The days of non-reciprocal trade arrangements are gone. The successfully negotiated EPAs between the EU and different African regions indicate the ability of African countries to negotiate reciprocal trade agreements with the developed world. The EPAs that have been concluded thus far have struck a balance between creating trade opportunities for goods from both regions as well as placing measures to protect sensitive products in African countries.

AGOA has had its winners and losers: There are countries that have benefitted greatly from AGOA while many have not taken advantage of the program’s wide range of eligible products. One needs to only look at the trade volumes between the AGOA-eligible countries and the U.S to note the disparities between the volumes of trade between certain African countries and the U.S. A post-AGOA relationship should be one that is beneficial to all parties. An analysis of the constraints of those countries that have not fully utilized AGOA is a necessary exercise and should be part of our proposed high-level U.S.-AU panel.

For some countries, particularly the least-developed countries, there may be a need for agreements with a stronger emphasis on investment while for others a reciprocal agreement granting market access with specific limits will suffice. There may also be a need to negotiate with sub-Saharan African countries within different regional groupings as opposed to trying to negotiate with the continent as a whole in order to ensure that the varied interests are sufficiently covered. When AGOA was extended in 2015, eligible countries were asked to formulate AGOA strategies. These strategies can be used to inform how the countries should be grouped in negotiating the post AGOA relationship, and they should be completed by all AGOA beneficiaries. The time is now to begin planning for the next phase of the U.S.-African trade relationship.

This blog was cross-posted on Brookings’ “Africa in Focus” blog.

African Commission on Human and Peoples’ Rights: Demonstrating a Firmer Stance?

The African Commission on Human and Peoples’ Rights has issued a decision to hold the government of the Democratic Republic of the Congo responsible for the massacre of over 70 people in Kilwa, recommending: i) that the government provide compensation of US $2.56 million to eight victims and their families (the largest sum that the Commission has ever awarded); and ii) “take all due measures to prosecute and punish agents of the state and Anvil Mining Company staff” for their alleged role in the massacre. Following seven years of deliberation by the Commission and unsuccessful attempted claims in national courts in Canada and Australia and a failed military prosecution in the Democratic Republic of Congo, this decision perhaps indicates a hardening stance by the regional human rights institution towards private companies operating in the region who are connected to alleged human rights violations.

The decision relates to human rights violations that took place in Kilwa, a remote fishing town in the South East of the Democratic Republic of Congo. In 2004, Australian mining company Anvil was operating a copper and silver mine 50 kilometres from Kilwa when a rebel force attempted to take control of the remote fishing town. The Commission found that, in response to the rebels, Congolese soldiers tortured, shelled and executed civilians. Anvil allegedly provided logistical support to the soldiers, transporting troops to the town using its helicopter and vehicles, providing food and fuel and, according to UN investigators, possibly paying some of the soldiers.

The Commission stated: “At a minimum, [extractive industry companies] should avoid engaging in actions that violate the rights of communities in their zones of operation. This includes not participating in, or supporting, violations of human and peoples’ rights.” The Commission urges the government to implement its recommendations (here) by 17 December, 2017. The African Commission’s findings and recommendations  are not formally binding. Nevertheless, the Commission reports to the Assembly of Heads of State and Government of the African Union, so the decision may create significant political pressure for the Congolese government to implement the Commission’s recommendations. ‎

In the coming months we will continue to monitor the regional and government response, providing further analysis regarding any wider implications for multinationals operating in the region.

Secret Ballot for President Zuma’s Upcoming No Confidence Vote

The speaker of the National Assembly chamber of the South African parliament, Baleka Mbete, ruled that tomorrow’s vote on the motion of no confidence in President Jacob Zuma would be conducted by secret ballot. Most of the country’s opposition parties have welcomed her ruling, viewing it as a catalyst for a different outcome. Since March 2015, three voted-on motions of no confidence in President Zuma have been quashed and five other attempts to procure a vote on such motions were scuppered by the ruling African National Congress (ANC) party

So how would a secret ballot vote enable a different outcome?

The circumstances surrounding tomorrow’s vote of no confidence are different to those surrounding previous votes of no confidence in President Zuma. For starters, the current vote was called soon after the President fired the then Minister of Finance, Pravin Gordhan and the deputy Minister of Finance, Mcebisi Jonas in an unexpected cabinet reshuffle – a move that several senior ANC officials publicly spoke out against, and which according to financial analysts was a key reason for South Africa’s credit downgrade to junk status. Further, the vote is being heard close to four months after it was originally scheduled for hearing, and numerous intervening, and unflattering, events have strengthen the opposition parties’ position.

The delay in hearing the debate was partially attributed to a Constitutional Court application moved by opposition parties, UDM (United Democratic Movement) and EFF (Economic Freedom Fighters). These opposition parties requested the Constitutional Court (the highest court in the country) to order the Speaker to conduct the vote on the motion of no confidence by secret ballot. The Speaker argued in her court papers that she did not have constitutional powers to institute a secret ballot for such vote.  The Constitutional Court declined the opposition parties’ request, stating that such an order would violate the separation of powers. Instead, the Constitutional Court, in a unanimous decision, affirmed that the speaker did have the constitutional powers to institute a secret ballot for a vote of no confidence in the President. The judgment reads: “[A]s in the case with general elections, where a secret ballot is deemed necessary to enhance the freeness and fairness of the elections, so it is with the election of the president by the National Assembly. This allows members to exercise their vote freely and effectively, in accordance with the conscience of each, without undue influence, intimidation or fear of disapproval by others…”. Bolstered by this decision, the opposition parties threatened to go to court if Baleka Mbete had refused to allow a secret ballot.

Another distinguishing circumstance is the increasing pressure being brought to bear on the President to step down from office. Marches organized by civic organizations, trade unions and opposition political parties over the past four months have drawn tens of thousands of citizens to the streets demanding that President Zuma resign. The ruling party’s alliance partners, the South African Communist Party and trade union federation, Cosatu, have publicly called for the President to step down, and have banned him from attending their respective rallies. Allegations of graft and corruption levelled against those close to the President, including his closest advisors and his sons, have not helped the President ward off the attacks against him.

Further, members of the ANC have been emboldened by public and private persona speaking out, and for the first time have broken rank calling for the President to resign. Some of the ANC members of parliament (MPs) have indicated that they would vote with their conscience (as opposed to adopting the traditional approach of toeing the party line) in the vote tomorrow. The secret ballot gives other ruling party MPs the opportunity to vote with their conscience without fear of reprisal.

The ANC has 249 MPs. For a motion of no confidence in the President to carry, the motion must be supported by a majority of the MPs (i.e. 201 of the 400 MPs in the National Assembly). The opposition parties collectively have 151 MPs in the National Assembly, and therefore need the support of 50 ANC MPs to vote with the opposition parties for the vote to carry.  Julius Malema, leader of the EFF confirmed that his party is lobbying the ANC MPs to vote their leader, President Zuma out of office. The ANC stated that it is confident that its MPs will not vote with opposition parties in the no confidence vote tomorrow.

If the motion of no confidence carries, the President and the entire cabinet must resign. The speaker of the National Assembly becomes the acting President, and the National Assembly must elect a new President from among its members at a time and on a date determined by the Chief Justice of the Constitutional Court not later than 30 days after the vacancy occurs.

A vote which many until today believed would be uneventful has suddenly become a key highlight in South Africa’s political calendar and an event in respect of which the populace keenly awaits the result – as they would ordinarily await the result of a general election.

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