Commercializing Africa’s Rapid Urbanization

In a recent interview, Executive Director of the Nairobi-based United Nations Human Settlements Programme (UN-Habitat) Dr. Joan Clos stated that “urbanization will be a big opportunity for Africa in the coming years.”  It comes as no surprise that harnessing the potential of Africa’s  urbanization will be a top agenda item at Habitat III, the major UN conference on housing and sustainable urban development that will be held in October of this year.  Already home to three of the world’s megacities, Africa is set to be more urban than rural by 2030 and two-thirds urban by 2050.  The private sector has a critical role to play in efforts to leverage the opportunities created by this rapid urbanization.  Across the region, the sector is transforming what some regard as the ills of urbanization — namely, limited space, traffic and waste — into innovative and profitable ventures. 

Coworking. In cities, space can be one of the most limited — and, as a result, one of the most expensive — commodities and therefore lends itself to collaborative consumption.  From Cape Town to Cairo, shared workspace has become all the rage on the continent particularly with the technology community.  With 40 hubs in 20 countries, Afrilabs is one of the region’s largest networks of shared workspaces.  It provides members with space but also with knowledge sharing and collaboration as well as developing capacity and financial sustainability. 

Energy harvesting.  Through piezoelectric technology, London-based Pavegen has figured out a way to harvest energy from one of the key characteristics of cities: foot traffic.  The technology works by harvesting the kinetic energy generated by footfall and converting it into electricity that can be deployed or stored.  It already has been used to generate energy from dance clubs, marathons, music festivals, public transportation stations, schools, shopping centers, and other areas where crowds gather.  At the end of last year, Pavegen launched its largest installation in Africa: a people-powered football pitch in Lagos.  The solar and kinetic energy generated by the pitch can power streetlights in the neighborhood for up to 24 hours.

Waste management. Some see waste as an urban plague whereas others recognize it as “money just lying in the streets.”  In Nigeria, WeCyclers uses a fleet of cargo bicycles to collect household recycling in densely populated low-income neighborhoods and sells the aggregated material onto local manufacturers and recycling processors.  In South Africa, Repurpose School bags repurposes plastic waste into school bags that have solar panel flaps which provide lighting for nighttime studying.  In Ethiopia, soleRebels repurposes a wide range of discarded materials from tires to clothes and transforms them into eco-friendly footwear (in fact, the world’s only World Fair Trade Organization fair trade footwear company).  In Kenya, EcoPost turns plastic waste into lumber for use in fencing, landscaping and other applications.  The list of profitable business opportunities in Africa’s waste market goes on.

These are just some of the innovators who are demonstrating that the private sector should be a leading voice in Habitat III’s discussions about realizing the opportunity presented by Africa’s  urbanization.

Africa, TPP and TTIP: Integration or Isolation?

With the demise of the Doha Development Round at the WTO Ministerial in Nairobi this past December, the multilateral approach to global trade negotiations has largely ended. Given that the number of regional trade agreements has increased from 70 in 1990 to more than 270 today, it appears that it is every region for itself when it comes to global trade.

TFTA and CFT

In certain respects, Africa is well positioned in this new era regional trade relations.

The Tripartite Free Trade Agreement (TFTA), signed in Sharm-el-Sheikh, Egypt in June 2015, brings the Common Market of Eastern and South Africa (COMESA), the East African Community (EAC) and the Southern Africa development Community (SADC) into the continent’s largest free-trade zone covering 26 countries and stretching from Cape Town to Cairo.

Already, it is estimated that the volume of intra-regional trade among these three blocks has increased from $2.3 billion in 1994 to $36 billion in 2014, a more than 12 fold increase from 7 percent to 25 percent of trade over 20 years. While low compared to the EU (70%) or Asia (50%), it is a positive trend line.

The TFTA is an important boost for regional integration in Africa and is seen as a stepping stone for Africa to realize its ambition of creating a Continental Free Trade Agreement (CFTA). Implementation is behind schedule, however, and efforts are being made to complete the negotiations within the 36 months set out in the roadmap.  Other challenges include poor infrastructure, high transaction costs and low levels of industrialization.

Africa and TPP

While Africa moves internally to increase trade among the 54 nations on the continent, a large portion of the global economy is moving toward more integrated trade across regions, as exemplified by the Trans Pacific Partnership (TPP).

The 10 countries in the Asia-Pacific region in addition to the U.S. and Canada who make up the TPP countries collectively account for 40 percent of the world’s GDP and 26 percent of the world’s trade. Moreover, TPP is likely to expand to include South Korea, Indonesia and other Asian nations.

While TPP does not appear to work against Africa’s global trade interests in the short term, it bears watching closely. Vietnam, for example, exported $7.7 billion worth of textiles and apparel to the U.S. last year even though there was a 17 percent tariff in place. In 2014, African countries, such as Ethiopia, Kenya, Lesotho and Tanzania exported nearly $1 billion worth of clothes to the U.S. under the African Growth and Opportunity Act (AGOA) with no tariffs.

Under TPP, Vietnam’s tariff on apparel exports to the U.S. will be cut significantly and baseline  growth in apparel exports to the U.S. could increase by 50 percent by 2025, according to the Eurasia Group.  This growth is expected to displace a share of China’s apparel exports to the U.S. but it could be detrimental to some African countries, such as Ethiopia and Kenya, who are seeking to ramp up their AGOA apparel export.

Africa and TTIP

The negotiation of TTIP is a more complex and immediate challenge to the U.S.-Africa trade relationship. Over the last decade the EU has put in place reciprocal Economic Partnership Agreements (EPAs) with most African nations. Last year, the U.S. last year renewed the non-reciprocal AGOA through 2025. If the U.S. does not address this asymmetry in the context of the TTIP negotiations, it will be ceding a long-term commercial advantage to European firms investing in Africa and exporting to that market.

For example, under the terms of its free trade agreement with the EU, South Africa allows imports from Europe at a 4.5 percent general tariff rate. In contrast, U.S. exports to South Africa face an average general tariff of 19.5 percent. According to USTR, the competitiveness of U.S. exports to South Africa “will further erode” once the EU-SADC EPA comes into force. The disadvantage to U.S. products and companies will increase across Africa in coming years as the EPAs enter into effect unless the U.S. takes steps now to address the imbalance.

Transitioning From AGOA

In his January 28 remarks at a hearing on the post-AGOA relationship, the U.S. Trade Representative, Ambassador Michael Froman, noted that the US has free trade agreements with 20 countries today, compared with 3 in 2000. However, none of these are in Sub-Saharan Africa, and Ambassador Froman did not propose one. He did say that he would make recommendations in June on advancing the U.S.-Africa trade and investment agenda.

Given the amount of time required to negotiate and ratify trade agreements, it is not too soon to begin laying the groundwork for the post-AGOA relationship. Clearly, reciprocity will have to be a key element of this new relationship.

In practice, the emerging trade relations with the East African Community (EAC) could serve as a precursor to a new relationship. In February 2015, the U.S. and the EAC signed a cooperation agreement that focuses on implementation of the WTO’s Trade Facilitation Agreement, enhancing food safety, plant and animal health and building capacity to meet Global Trade Standards.  In fact, over the next several years, it would be beneficial to start negotiating agreements in areas such as services, intellectual property and investment, that could provide the foundation for an FTA. Indeed, if the U.S. can be successful in creating a free trade agreement with the EAC, it is conceivable that other countries, such as Ethiopia, Mozambique and Mauritius could become part of, or “plug into,” an increasingly regional FTA with the U.S.

As for TPP, an informal mechanism should be established so that African governments can be informed about the implementation of this agreement and how it might impact Africa’s trade relations with the U.S. and Asian partners. One recommendation would be to establish a working group or advisory committee of the TPP Commission and the African Union that might meet every two years.

TTIP presents a more immediate issue. At minimum, there should be some type of advisory mechanism so that the AU can stay informed of the progress of the TTIP negotiations, given that the EU is Africa’s largest trading partner, the growing importance of U.S.-African trade relations and a need to balance the asymmetry of the EPAs and AGOA. In the spirit of reciprocity, it would also be helpful if the U.S. was invited as an observer to Africa ministerial meetings related to the TFTA and CFTA.

The global trading system may be becoming more regionalized but Africa needs to be active in this process if it is to transcend its marginalized position of 3.3% of global exports. Having a place at the table, however informal, while TPP is being implemented and TTIP is negotiated, would help to ensure that Africa does not become more isolated as it works to integrate regionally.

Witney Schneidman is a nonresident fellow at the Africa Growth Initiative in the Global Economy and Development program of the Brookings Institution. This piece was first posted on Brookings’ Africa in Focus blog.

You cannot use your hand to force the sun to set

Social media is one of the most powerful tools available to Africans — especially the sizeable youth population — who previously have felt disenfranchised, neglected, and powerless.  Across the continent, this tool has been wielded to demand accountability, strengthen democracy, and increase transparency.  Unfortunately, there are increasing efforts to attack this power.

The African Charter on Human and Peoples’ Rights (ACHPR) — as well as the national constitutions across the region — enshrines the complementary rights to receive information and to express and disseminate opinions.  These freedoms may be subject to restrictions but any such restrictions must be prescribed by law, necessary to meet a legitimate state interest, and strictly proportionate to meet that interest.  Attempts to curb social media have been characterized as efforts to pursue the legitimate state interest in protecting national security, public order, and/or public morality.  These restrictions are problematic regardless of the veracity of these claims.

Public figures are entitled to less — not more — protection and, as such, public debate is entitled to more — not less — protection. Social media is “central to all kinds of collective action” and public debate.  In a democratic society, freedom of expression “must be the subject of a lesser degree of interference when it occurs in the context of public debate relating to public figures.”  The African Court on Human and Peoples Rights and the African Commission on Human and Peoples’ Rights are in agreement that “people who assume highly visible public roles must necessarily face a higher degree of criticism than private citizens; otherwise public debate may be stifled altogether.”

Imprisonment for violations of speech and press laws is generally disproportionate and must be limited to “serious and very exceptional circumstances.” Across the region, social media users have been imprisoned for their digital activities.  This practice is in direct contravention to the ruling by the African Court on Human and Peoples’ Rights that criminal defamation laws should only be used as a last resort.  Custodial sentences for violations of laws on freedom of speech and the press are a disproportionate interference on freedom of expression rights except in “serious and very exceptional circumstances.”  (Examples of such circumstances are “incitement to international crimes, public incitement to hatred, discrimination or violence or threats against a person or a group of people because of specific criteria such as race, colour, religion or nationality.”) Not only does government criticism not rise to the level of these crimes but also “criminal defamation laws are nearly always used to punish legitimate criticism of powerful people rather than protect the right to a reputation.” 

The ACPHR has no derogation clause in the context of freedom of speech. Election day blackouts of social media platforms have been justified in light of exceptional circumstances.  Some human rights treaties contain a derogation clause “allowing states parties to adjust their obligations temporarily under the treaty in exceptional circumstances [which] include, but are not limited to, armed conflicts, civil and violent unrest, environmental and natural disasters, etc.”  However, the ACHPR contains no such derogation clause.  Therefore “limitations on the rights and freedoms enshrined in the Charter cannot be justified by emergencies or special circumstances.”  Even when human rights instruments contain derogation clauses, “states of emergency do not create a legal vacuum”; there are fundamental requirements that must be met before a government can trigger the derogation clause.  

Restrictions that target individual entities “raise the serious danger” of discriminatory and unequal treatment before the law. By law or by practice, some of the restrictions have targeted specific social media companies.  The African Commission on Human and Peoples’ Rights has noted that laws that are “made to apply specifically to one individual or legal personality raise the serious danger of discrimination and lack of equal treatment before the law guaranteed by Article 3” of the ACHPR.

The dawn of social media has helped to shine a bright light on cronyism, corruption, and other issues that for far too long have impeded development and democracy in Africa.  Governments should have a hand in empowering their people not shutting them down.  It is time to accept that you cannot use your hand to force the sun to set.

Results from Super Sunday

Yesterday’s Super Sunday — on which six countries from across the region went to the polls — was generally peaceful but demonstrated that democracy is still a work in progress in some parts of the continent.

Benin. Prime Minister Lionel Zinsou has conceded defeat to “King of Cotton” Patrice Talon.

Cape Verde.  Led by Correia e Silva, the opposition party Opposition Movement for Democracy unseated the ruling African Party for the Independence of Cape Verde.

Congo-Brazzaville. Incumbent President Denis Sassou Nguesso is set to stay in office after an election day defined by a government ban on mobile phone, internet, and motor vehicle usage as well as reports of tear gas being fired at protesters.

Niger. Incumbent President Mahamdou Issoufou will stay in office for a second term after a run-off election that, in addition to being at least partially boycotted, was against a candidate who has been in detention since the fall and was flown to France last week for medical reasons.

Senegal. Results have not yet been declared but voter turnout was low for a referendum that is regarded as an indication of the popularity of current President Macky Sall.

Zanzibar. Incumbent President Ali Mohamed Shein has been declared the winner of a do-over election that was boycotted by the main opposition party who believe that it should have been declared the winner of last fall’s elections which instead were annulled on disputed fraud charges.

Forget Super Tuesdays: six SSA countries go to the polls this Sunday

In what is being billed as Africa’s Super Sunday, this weekend will see key votes in six countries across the region.

Benin. After a first round of voting that saw 33 candidates competing to succeed outgoing President Thomas Boni Yayi, Beninese voters are returning to the polls for the runoff between Prime Minister Lionel Zinsou and businessman Patrice Talon.  With the country focused on attracting private investment in order to spur economic growth, it is a good sign that both candidates have impressive private sector credentials.  Zinsou headed France’s largest investment bank before stepping down last year to become Prime Minister of Benin.  Talon comes from modest origins but today is known as “The King of Cotton.”  This meteoric rise has endeared him to “many young Beninese, who see in him a person who knows how to create jobs and wealth on a national scale.”

Cape Verde. The West African archipelago is holding parliamentary elections that are expected to be a tight contest between the ruling socialist party and the liberal opposition party.  The incumbent PAICV party has been in power for the past fifteen years but has been heavily criticized for the high rate of youth unemployment as well as high public spending on on infrastructure projects.  As a result of the adoption of a new constitution in 1992, Cape Verdeans living abroad are able to vote in elections to the legislature but registration and turnout from the diaspora has historically been low.

Congo-Brazzaville. With the exception of five years in the mid-1990s, incumbent President Sassou Nguesso has ruled Congo-Brazzaville for over three decades.  Following last year’s controversial constitutional referendum, President Sassou Nguesso now is eligible to stand for another term.  There are seven opposition candidates but none are considered to be actual contenders.

Niger.  Having only just missed winning in the first round of voting in February, incumbent President Mahamadou Issoufou seems set to win re-election for a second term in office.  The main opposition candidate Hama Amadou has been in detention since November 2015 on trafficking allegations which he claims are politically motivated.  Only a few days ago, he was removed from prison and sent to France for specialized medical treatment.  Still, it is unclear whether the opposition will participate in the vote.  Some members of the opposition coalition announced their withdrawal and a boycott on grounds of irregularities, fraud and unfair treatment of candidates.  However, Amadou’s camp has maintained that he will take part in the run-off.  The country is regarded as a key ally in countering terrorism in West Africa and the Sahel region.

Senegal. Against the worrying trend of African leaders using constitutional referendums to extend their rule, President Macky Sall is supporting a referendum that would fulfill his campaign promise to reduce the length of presidential terms from seven years to five years.  The referendum covers other reforms including “giving more power to the National Assembly and local administrations while also expanding on existing laws about land inheritance and local communities’ control of natural resources.”  A loose coalition of Senegalese have banded together in opposition to the referendum because Sall had promised that the change would apply to his current term in office.  That point notwithstanding, it was the country’s Constitutional Council that stated that Sall could not apply the changes to his current term.

Zanzibar. Zanzibaris are returning to the polls after last October’s elections were annulled on grounds of irregularities and violations (that election observers later said they saw no evidence of).  Unfortunately, there are signs that this Sunday’s vote will not fare better.  There are reports of issues with the ballot papers and the main opposition party — whose leader declared himself winner of the October elections — is calling for a boycott of the rerun elections entirely.  Several of the other opposition parties have expressed support for the boycott.

This post was updated on March 21, 2016 to include the Cape Verdean parliamentary elections.

Intra-African travel is about to become easier, safer and more open

Intra-African travel — which is critical to unlocking the region’s tourism potential — is set to become easier, safer and more open.

Easier — Open Skies Agreement between Ethiopia and Rwanda. Ethiopia and Rwanda signed an aviation agreement that will allow their respective national carriers — Ethiopia Airlines and RwandAir — to operate in the other country’s airspace without restrictions.  In addition, under the fifth freedom arrangement, each “airline has the right to carry passengers from one country to another and from that country to a third country.”  This is a clear sign of the deepening relationship between the region’s most successful airline and one of its most ambitious ones.  This announcement follows a similar agreement entered into by Rwanda, Uganda, Kenya and South Sudan in the Fall of last year.

Safer — Installation of one of the world’s largest automatic dependent surveillance-broadcast (ADS-B) networks. The Agency for Aerial Navigation Safety in Africa and Madagascar (ASECNA) has selected Indra “to provide and deploy an ADS-B surveillance network that will cover a total of 17 countries in Africa,” primarily in West and Central Africa.  ADS-B is a satellite-based surveillance system that is part of the next generation in aviation technology.  ADS-B Out uses GPS technology to locate and broadcast data about an aircraft’s location, airspeed and other information to air traffic control displays and nearby aircraft equipped with ADS-B In.

More Open — Ghana To Introduce Visas On Arrival for All African Nationals. Ghana’s President John Mahama has announced that, starting in July, Ghana will issue visas on arrival to nationals of all 54 member states of the African Union (AU).  At present, nationals from only about 40% of African countries do not need a visa to enter Ghana or can obtain one upon arrival.  Ghana’s new visas on arrival policy is in line with the African Union’s push for a continent-wide visa free regime in order to accelerate mobility and integration across the region.  It also is particularly timely considering the recent African Development Bank report that found that “North Americans have easier travel access to the continent than Africans themselves.”

These are promising and key developments in the run-up to the African Airlines Association’s Aviation Stakeholders Convention that will be held in Rwanda in early May of this year.  The event is expected to bring together about 400 representatives from “airlines, civil aviation authorities, airports, air navigation service providers and ground handlers […] regulators, aircraft-engine manufacturers, component suppliers, service providers in the aviation industry and other aviation stakeholders.”

Diamond (Mines) Are Not Forever

In the last week of February, Zimbabwe’s President Robert Mugabe announced that all privately owned diamond mines would be nationalized and taken over by the newly created state-owned Zimbabwe Consolidated Diamond Co. The move affected six primarily Chinese companies. This decision is in keeping with the larger nationalization plan for mines that the President announced in 2012, when he denounced foreign miners and multinationals for “leaving holes in [his] country,” which is the eighth largest producer of diamonds in the world.

The Indigenization Act was the beginning of Zimbabwe’s current policy trajectory. Enacted in 2008, the Indigenization Act purportedly seeks to further the economic empowerment of black Zimbabweans by requiring that “at least 51 per centum of the shares of every public company and any other business shall be owned by indigenous Zimbabweans.” Mines and Mining Development minister Walter Chidakwa is quoted early last year saying that “[t]he 51-49% threshold is … not negotiable.” In the years since enactment, the policy has led to cronyism and stealth nationalization of foreign-owned property.

Then, the government decided to change the mechanisms of enforcing the law by devolving to line Ministries the responsibility for approving indigenization plans, presumably, in order to facilitate more foreign investment in the flailing economy. In August 2015, contrary to the previous statement of Chidakwa, there were even reports that the government had decided to abandon the policy altogether in the face of the continuing economic crisis. This is why diamond miners may have held out hopes of a policy shift away from nationalization instead of Mugabe’s latest, albeit unsurprising, move.

Legal Recourse. However, diamond miners are not leaving quietly. Many of the privately held companies still operating in Zimbabwe prior to Mugabe’s February announcement were Chinese owned. Mbada Diamonds, largest diamond miner in Marange, sued the government in the High Court. Though local courts have not traditionally been thought of as an effective option for recourse in such situations, the company resumed control of its mining assets after this move. Chinese-run company Anjin also filed suit against the government ban in the same court last Wednesday.

Furthermore, Zimbabwe, though not a party to many bilateral treaties (“BIT’), did enter into a BIT with China in 1996 that entered into force in 1998. This BIT may protect the interests of Chinese companies even further, as it prohibits a contracting party from expropriating or nationalizing “investments of investors of the other Contracting Party in its territory, unless the following conditions are met: (a) for the public interest; (b) under domestic legal procedure; (c) without discrimination; and (d) against compensation.” It’s unlikely that the Zimbabwean government would be able to establish these four elements necessary to permit the taking of the diamond mines under the BIT, but this still may not lead to a happy ending for investors. Pursuing an arbitral order and award may not offer much hope, as Zimbabwe has a reputation for refusing to pay such awards or appear in foreign proceedings to attach assets.

Political Recourse. Chinese investors may have political recourse, if nothing else. China-Zimbabwe trade was worth $1.2 billion in 2014, and Zimbabwe recently announced that the Chinese Yuan would now be accepted as legal tender in the country. The Chinese President, whom Mugabe referred to as a “true and dead friend,” visited Harare in December, signing 12 agreements for deals between the countries involving sectors such as telecommunications and power in the process. As a result, the Chinese diamond miners may be able to depend on diplomatic channels stressing the importance of this friendship between countries to mitigate or reverse some of the negative consequences of being forced to leave their mines. The Chinese Ambassador to Zimbabwe, Huang Ping, has already responded to Mugabe’s move by stating, “[w]e hope that the Zimbabwean side would earnestly safeguard the legitimate rights of the Chinese companies and employees, according to the local laws and the ‘Agreement on the encouragement and reciprocal protection of investments between China and Zimbabwe.”

Lessons for Nigeria from the US Buy American Act

Over the past few weeks, there has been a growing movement to promote local production and consumption in Nigeria as a way to address some of the economy’s woes.  One of the leading proposals is to amend the domestic Procurement Act along the lines of the US Buy American Act (BAA), the domestic preference law adopted by the US government during the Depression in the 1930s.  The US’s experience with the BAA indicates that determining what constitutes a domestic product may be one of the main implementation challenges to this proposal.

Under the BAA and its implementing regulations, the US Federal government must provide a preference for domestic end products in its construction projects and its procurement of goods.  A domestic end product is defined simply as one that is “manufactured” in the US.  However, the meaning of that definition becomes complex in a modern world where products are often the amalgamation of activities that occur in numerous locations, foreign and domestic.

What if a product is assembled in the country but is made primarily of components from foreign sources?  The BAA resolves this question by deciding that a domestically manufactured product that is made up of more than 50% foreign components (measured by cost) is deemed foreign. With the current situation with the naira driving up the cost of imports, Nigeria may seek to increase this percentage in order to reflect the fact that measuring by costs may give a false perception of how “foreign” a product is.  On the other hand, Nigeria may seek to decrease this percentage as a way to spur local sourcing.  Either approach must also take into account that the BAA provides relief from the preference when the prices and/or quality of domestic end products are unreasonable as compared to foreign end products.  With such a nascent manufacturing sector and a high level of dependence on importation, Nigeria may find that such an exception eclipses the rule itself.

What if a domestic company performs the initial steps on a product but then the product is shipped overseas for further work?  Under the BAA, manufacturing occurs where labor is applied that changes the product into a final form that is of a different character than its component materials.  Consequently, a product begun domestically, transferred overseas for further work and then returned to the originating country for testing, packaging and/or shipment might well be foreign.  As Nigeria seeks to develop a robust domestic manufacturing sector and expand its skilled workforce, there may be pressure to take a more restrictive approach to allowing any part of the manufacturing to have been done overseas.

The BAA has proven durable and continues to be viewed as an essential part of the US Federal government’s commitment to promoting labor and business in the US.  A comparable domestic preference law has potential to have a similar impact in Nigeria.  However, the above questions and other policy considerations demonstrate that implementation will be a complex challenge.

No Holidays for African Currencies

As the currency crisis plaguing Sub-Saharan Africa in 2015 continued through the recent holidays, Nigerians have learned that they can have their naira, but they can’t spend it too. Nigerians saw several restrictions on foreign exchange (“forex”) put in place, limiting what they could do with their naira. Triggered by the dive in oil prices that impacted foreign currency reserves, New Central Bank Governor (“CBG”), Godwin Emefiele, banned the use of forex for the importation of several dozen products in mid 2015. By the holiday season, the annual limit for dollar-denominated ATM transactions dropped from $50,000 to $5,000, after dropping from $150,000 mid-year.

Under directives from the Central Bank, Nigerian banks restricted customers from using their bank cards in foreign exchange transactions during December and January, when many Nigerians travel internationally. For some, the daily spend limit was only $100 a day. Desperate Nigerians resorted to travelling abroad with several bank cards to withdraw forex. The Central Bank discontinued the sale of foreign exchange to Bureau de Change operators in the country in mid-January 2016. Many online payments in foreign currencies remain blocked for Nigerian cardholders and restrictions remain in place for Nigerians looking to send money overseas. In a small reprieve, restrictions on using local cards abroad were removed in January.

The official exchange rate of US dollar to Naira is holding at 199 as President Muhammadu Buhari reaffirms that he will not devalue the currency. Forex restrictions are the government’s preferred alternative to devaluation as President Buhari expressed concerns that Nigeria’s poor would suffer with the rising inflation and costs of such a move.

However, many are critical of President Buhari’s decision. The well-respected former CBG Lamido Sanusi, commented that the drawbacks of this monetary policy outweigh any “dubious benefits.” Currently, the black market exchange rate, called the “parallel market,” has the value of one dollar at 322 N, up from 250 N just at the beginning of January. Though entities such as the IMF have called for more flexible foreign currency policies, there is no indication that official devaluation will occur any time soon. The government is, however, currently in talks with the World Bank seeking a loan package to cover the predicted deficit.

Though Nigeria’s forex restrictions were more unusual, Nigeria is far from alone in its currency troubles.

Zambia. Trouble for its large copper industry put pressure on Zambia’s kwacha in 2015, with copper selling at half its 2012 price. An extreme power shortage also hurt Zambia’s economy in 2015. Zambia resisted turning to the IMF for emergency aid, but by July 2015, the international reserves were only $3.87 billion.  The fate of the Zambian currency has been so uncertain that a national day of prayer was devoted to the struggling kwacha last year. Yet, increased interest amongst foreign investors and purposeful intervention by the Central Bank may show the kwacha making measured gains in 2016.

Ghana. The cedi depreciated 18.75% against the dollar in 2015 in one of the worst dips on the continent, now trading at around GH¢3.9 to a dollar. The dip in oil prices, high levels of imports, and repatriation of foreign currency by multinationals has been blamed for the continuing depreciation. Although the Bank of Ghana believes that depreciation will slow in 2016, others believe that the cedi will lose more value, ending the year between GH¢4.7 and GH¢5.1.

Uganda. Rapidly rising inflation, which the Central Bank believes may reach over 10% this year, is straining the resources of Ugandans. Food prices are on the rise and the value of the shilling is falling; the shilling depreciated something to the tune of 17.5% in 2015. However, most of the depreciation happened prior to September, with the shilling rallying in the latter part of the year. A tightening monetary policy and rise in exports due to the currency depreciation may shape 2016 into a more positive year for the Ugandan shilling and people.

South Africa. After losing over 25% of its value in 2015, the rand hit as low as R17.99 against the US dollar in January 2016. President Jacob Zuma removed the Finance Minister Nhlanhla Nene in December in a move now dubbed “Nenegate,” which led to uncertainty and a noticeable dip in the currency value. Spurred by low commodity prices and weak economic growth, some think that the Rand will sink to 20 ZAR per dollar before even the hike in tourism and the price of gold stems the flow.

Many other Sub-Saharan countries are experiencing similar currency woes as the African continent has not been spared from the currency and economic troubles seen around the world. The above highlighted countries are some of those hit especially hard. The best way for African governments to rein in the currency devaluation and inflation is to implement smart and strict fiscal policies that promote exports, while focusing on an expansion away from the commodity-dependence that has made them vulnerable to sharp currency fluctuations.

Khadijah Robinson is a Law Clerk and attended Harvard Law School.

How Mozambique Can Realize IMF’s Recent Predictions of Exponential Economic Growth

Early last month, the International Monetary Fund (IMF) caught the attention of investors when it issued a report predicting that Mozambique’s average economic growth rate between 2021-2025 could reach as high as 24 percent per annum and liquefied natural gas projects (LNG) could reach more than 50 percent of the country’s nominal output by the mid-2020s.  While this growth and these production levels are attainable, they are based on a number of assumptions and what the IMF describes as “various risk factors [which]could significantly change the long-term projections.”

First, gas processing facilities in the Rovuma Basin will need to begin production by 2021.  The Mozambican government already has made a significant step forward by approving the Decree-Law nº 2/2014 of 2 of December, which establishes the legal and contractual regime applicable to the LNG projects in the Areas 1 and 4 of the Rovuma Basin. According to the IMF, the total investment in these two areas could exceed one hundred billion dollars and Mozambique would become the world’s third largest LNG exporter.

Second, peace and security based on inclusive growth must be one of the government’s top priorities in the short term.  The opposition party Renamo is putting an increasing amount of pressure on the governing Frelimo party and threatening to use force to achieve its political objectives.  An unstable political situation, whether real or perceived, could deter foreign investment thereby threatening the development of the country’s gas sector and other economic development goals.

Finally, the government has been engaged in an  economic and social reform process, which will lead to significant poverty reduction in the country, although other development challenges remain such as fighting corruption.

The government will continue to  invest heavily in  public sector reform and capacity development, with the objective of improving efficiency, enhancing transparency and devolving responsibility from the highly centralized ministries to the provinces and districts. The government, according to the IMF, also needs to develop and consolidate a macroeconomic policy focused on three main goals: (i) diversification into an economy that is sustainable and not overly reliant on the mega-LNG projects; (ii) proper management of the expected financial windfalls from the gas sector; and (iii) investment in infrastructure and other critical sectors of the economy. Implementing these policies will be critical to Mozambique achieving its long-term high-growth potential.

*Sandro Jorge is a senior lawyer at Couto, Graça & Associados in Mozambique and is a guest contributor to CovAfrica.

LexBlog