South Africa to cooperate on competition law with Russia and Kenya

Earlier this month, South Africa reached agreements with Russia and Kenya to cooperate on enforcing competition law. At the Annual Competition Law, Economics and Policy Conference in Cape Town, South Africa’s Competition Commission signed Memoranda of Understanding (MOUs) with its Kenyan and Russian equivalents, the Competition Authority of Kenya (CAK) and the Federal Antimonopoly Service of the Russian Federation (FAS). The non-binding MOUs are designed to exchange technical assistance and promote cooperation on a range of competition policy issues, including enforcement and merger review.

These MOUs are part of a trend towards increased cooperation in competition law enforcement in Africa. The number of countries or regional blocs on the continent with competition laws jumped to 32 in 2015, from just 13 in 2000. In the past few years, African countries have entered more frequently into agreements with one another, usually aimed at cross-border enforcement, information sharing and mitigating regulatory conflict across jurisdictions. South Africa has been a particularly active collaborator: Since 2015, its Competition Commission has signed agreements with Brazil, India, China, and the European Commission’s Director-General Competition—and now, Russia and Kenya.

These collaborative agreements are an important step towards ensuring that African countries can more efficiently combat anti-competitive practices. Ultimately, better enforcement is crucial for achieving a range of social policy and development goals in Africa. A 2015 study has shown that anti-competitive behavior increases prices by an average of 31-49% globally. Decreasing prices for consumers can have significant effects on welfare, especially in developing countries. For instance, as estimated recently by the World Bank, a 10% reduction in the price of food staples would lift approximately 500,000 people out of poverty in Kenya, South Africa and Zambia alone. Especially as South Africa has in the past seen high food prices as a result of the so-called “bread, flour and maize meal cartels,” such numbers suggests that more muscular competition law enforcement has the potential to improve the quality of life of Africans.

South Africa-Kenya MOU

South Africa’s MOU with Kenya provides for collaboration in two main areas: (1) information sharing and technical assistance and (2) enforcement.

The information-sharing provisions of the MOU include a pledge to exchange “market research conducted in identified sectors,” as well as a promise to assist one another in developing enhanced competition policies and regulations. The MOU also provides for the two countries to exchange experts as necessary and to establish skills development programs.

On enforcement, the parties pledged to increase coordination. Specifically, the agreement provided that Kenya and South Africa will cooperate to review cross-border mergers. With respect to investigations, the two countries agreed to coordinate where possible when investigating or prosecuting the same cartelistic behavior.

Though South Africa and Kenya do not share a border, they are significant trade partners, and a number of large South African firms operate in Kenya. Accordingly, each is well positioned to gain from cooperating with the other. Moreover, the two countries already have a history of collaborating on legal matters, notably on criminal investigations: Investigators from South Africa, among other countries, are assisting Kenya in its efforts to combat money-laundering cartels.

South Africa-Russia Agreement

Much like the MOU with Kenya, South Africa’s MOU with Russia focuses primarily on encouraging information sharing and collaboration around enforcement and investigations. However, the South Africa-Russia MOU includes a few unique provisions. Rather than simply say there will be exchanges of market research, the MOU states that “the Parties will jointly identify socially sensitive markets of common interest as priorities for their cooperation.” Though the MOU itself does not specify which sectors are priorities, the FAS’s deputy chief indicated that there will be a particular focus on the pharmaceutical and automotive industries.

Challenges remain

The increase in collaborative agreements—such as South Africa’s MOUs with Kenya and Russia—are a key step towards more competitive regional and international markets. Certain challenges remain, however. Neither MOU addresses some of the structural impediments to coordinated competition policy. Two challenges are worth paying particular attention to: (1) conflicting standards for merger review and (2) the problems created by multiple agencies having concurrent jurisdiction.

First, jurisdictions have different standards for when mergers should be reviewed by competition authorities. In South Africa, the Competition Commission must be notified of mergers where the value of the proposed deal is above R560 million (approximately $40 million), and where the target firm has at least R80 million (approximately $5.7 million) in asset value. Russia has an even higher threshold: the FAS must consent to any merger where the value of the proposed merger exceeds 7 billion RUB (approximately $112 million).  In Kenya, by contrast, all mergers must be noticed to the CAK. This may create friction in implementing the MOUs between South Africa, Kenya, and Russia.

Second, the MOUs may be undermined by the fact that the competition authorities in each of the three countries do not exercise exclusive jurisdiction over competition policy and enforcement. Many sectors have their own regulators that have enforcement capacity. At their best, the competition authorities can complement these efforts by providing advice and assistance where necessary. In order to ensure the kind of international coordination that these MOUs propose, governments should focus on enhancing coordination between their sector regulators and competition authorities so as to avoid promoting forum shopping and jurisdictional conflict.

UK rules prompt businesses to report on slavery in their supply chains

According to the 2016 Global Slavery Index, an estimated 45.8 million men, women and children around the world are ensnared in some form of modern slavery, which includes slavery, servitude, forced labor and human trafficking. Sub-Saharan Africa is particularly vulnerable to this scourge: Estimates of modern slavery in Sub-Saharan Africa accounted for approximately 14 percent of the world’s total enslaved population in 2016, with the Central African Republic, Democratic Republic of Congo, Somalia, South Sudan, Sudan and Mauritania having the highest rates of modern slavery in the region.

Increasingly, businesses are called upon to demonstrate efforts to tackle slavery in their supply chains. Last year, the UK government introduced a legal requirement for certain large businesses to make annual statements on actions taken to eradicate slavery and human trafficking from their businesses and suppliers, known as the Modern Slavery Act. In late September, the publication deadline for the first companies caught by the rules expired. In forcing transparency, the requirement is intended to incentivize large businesses with the resources and market influence to address current practice and take steps to reduce their global footprint in labor exploitation. The requirement mirrors the requirement introduced in 2012 under California’s Transparency in Supply Chains Act.

Businesses, wherever incorporated—which includes US companies—are caught by the requirement if they (i) supply goods or services; (ii) carry on a business, or part of a business, in the UK; and (iii) have an annual turnover above £36 million (approximately $44 million). All businesses meeting these requirements must publish a “slavery and human trafficking statement” each year describing steps taken (if any) during the previous year to ensure that slavery and human trafficking is not occurring in the business, including its supply chain. The statement must be approved by the board of the relevant entity, signed by a director or partner, and published on the company’s website. If more than one company in the group is caught by the requirement, subsidiaries may use their parent’s statement as long as the statement covers the steps each company has taken in the relevant year.

A UK registry of statements shows that over 750 companies—the majority of which are headquartered in either the UK or the US—have now published statements. While the legal requirements themselves do not obligate businesses to produce extensive statements or reports, current market practice strongly suggests that businesses across a variety of industries—including manufacturing, energy, technology, pharmaceutical, utilities, food and drug, consumer products, and professional services—are doing more than is strictly necessary to comply with the regulations.

Unsurprisingly, few (if any) statements indicate that no steps have been taken, though such a statement would satisfy the requirements. Common initiatives include updating procurement policies and procedures to include verifying suppliers’ compliance programs, establishing internal training platforms, carrying out on-site audits of high-risk suppliers and conducting internal audits and risk assessments of the organization’s supply chains to determine which countries, industry sectors or business partnerships are at risk of harboring modern slavery practices. Companies with supply chains operating out of Sub-Saharan Africa might, for example, wish to consider the 2016 Global Slavery Index’s finding that human trafficking and forced labor are of particular concern throughout the region, especially within industries such as farming and fishing, retail sales, manual labor and factory work.

Legal sanctions for non-compliance are limited to a possible injunction to compel publication of a statement. There are no fines, unless non-compliance is in contempt of a court order to publish. Currently, the main compliance driver is, of course, reputational. The central repository of statements facilitates the comparison of approaches and levels of commitment by businesses and it is expected that consumers, investors, regulators and non-governmental organizations will apply pressure to those businesses that have failed to sufficiently engage with the reporting obligations.

The UK government hopes that these reporting requirements will, year-on-year, encourage pro-active monitoring of supply chains by businesses, help foster transparency in labor standards and ensure that organizations all over the world are held to account for modern slavery within their supply chains, whether operating in Africa or elsewhere.

The US-Africa Business Forum: Investing in solar energy

Next week, the Second U.S.-Africa Business Forum will be taking place on the occasion of the 71st Session of the UN General Assembly. The Forum will focus in particular on several sectors that are important to African economies and offer trade and investment opportunities on the continent, including infrastructure and energy. This piece explores the theme of  energy as an increasingly attractive opportunity for investment in the continent.

Solar energy is a very good and important investment in sub-Saharan Africa.

The energy is cheap, clean and relatively easy to install. It is also very beneficial to consumers. As Andy Herscowitz, the coordinator for Power Africa notes, individuals do not have to rely on an electricity grid that can be unreliable, and once they own their own systems, they are self-reliant for power.

For example, Mobisol, a German solar housing company active in Tanzania and a partner of the Power Africa initiative, provides solar panels that enable customers to power welding and pipe cutting equipment, water pumps, and egg incubators as well as fans to make cook stoves more effective. Solar-powered appliances can be “super efficient,” and utilize a fraction of the power of traditional appliances.

Moreover, an increasing amount of public money is being invested in solar energy, which mitigates risk for private investors, makes long-term capital available at competitive prices, and provides access to government expertise and other benefits that come from working with international financial institutions.

In June, for example, the World Bank through its initiative, Scaling Solar, conducted an auction in Zambia to enable the government to procure solar energy quickly and at very competitive prices. The winning bidders, Neoen/First Solar and Enel, will enjoy some of the lowest prices for solar anywhere in the world at 6.02 cents per kilowatt hour and 7.84 cents per kilowatt hour, respectively. This compares very favorably with oil-based power, which can be three to four times as expensive per kilowatt hour.

First Solar, the biggest U.S. panel producer, and France’s Neoen will jointly build a 45-megawatt power plant and Enel, an Italian sustainable energy producer, will provide power from a 28-megawatt facility. The two companies are expected to be generating electricity within a year. Enel will invest approximately $40 million in the construction of the new plant, and has signed a 25-year-long power purchase agreement for the sale of all the energy generated by the plant to the state-owned utility ZESCO.

Senegal and Madagascar are also participating in the Scaling Solar program, which may eventually spur development of 850 megawatts of solar capacity in the three countries. This could amount to investments of nearly $1 billion.

Scaling Solar was developed to help introduce solar technology to the Zambia, using competitive auctions and the endorsement of the World Bank. That helps to overcome the concerns of international banks about political risk and makes these emerging markets more appealing to developers and investors. It also includes standardized contracts, eliminating the often lengthy process of negotiating power-purchase deals one at a time. Scaling Solar is an initiative of the World Bank Group, Power Africa, the Ministry of Foreign Affairs of the Netherlands, the Ministry of Foreign Affairs of Denmark, and the Infrastructure Development Collaboration Partnership Fund (DevCo).

As part of its “High 5” initiative, the African Development Bank earlier this year also launched a multi-billion dollar New Deal on Energy for Africa, which aims to establish 75 million new off-grid connections. Since USAID’s Power Africa was launched in 2013, the program’s off-grid partners have added more than 2.5 million new electrical connections.

Thanks in part to these initiatives, solar energy in Africa is an increasingly attractive investment.

This article originally appeared on The Brookings Institution’s “Africa in Focus” blog.

SpaceX rocket explosion deals a blow to expanding internet connectivity in SSA

The explosion of the SpaceX Falcon 9 rocket yesterday was bad news for SpaceX, certainly, but the loss of the rocket’s payload is particularly troubling in light of the need to further expand internet access within Sub-Saharan Africa. That payload was the Amos-6 communications satellite, which Facebook, as part of its initiative, intended to use to provide broadband internet coverage for large zones of East, West and Southern Africa, in partnership with French satellite operator Eutelsat. Amos-6 was scheduled to launch into geostationary orbit on Saturday.

The initiative aims to provide internet access to the majority of the world’s population that is not connected to the internet—about four billion by some estimates, though the numbers differ depending on how one defines the terms “connected”or “access.” By some measures, the proportion of the population with regular internet access is estimated at an average of 19 percent for Sub-Saharan Africa—even though the region has one of the world’s highest mobile penetration rates—compared to 87 percent in North America. Complete or partial lack of connectivity occurs in large part due to problems of affordability or, to a lesser degree, lack of physical access. An estimated 300 million Africans live over 50 km away from the closest fiber or cable broadband connection, and some 400 million Africans lack any kind of internet access, period. Moreover, for many Sub-Saharan Africans, a related problem is also one of access to and cost of electricity: the cost of charging internet-enabled devices can be orders of magnitude higher than for people living in, say, North America or Europe. For instance, it costs an average of about $0.25 per year for a user to charge an iPhone once a day in the United States, whereas it would cost $0.25 for a rural Kenyan each time their phone is charged—not to mention the time spent going to and waiting at a local charge shop for the batteries to charge.

Facebook is one of several tech companies that have been addressing both the affordability and the physical remoteness constraints of providing internet access to less-connected regions in Sub-Saharan Africa. With respect to the latter constraint, Facebook has been developing new methods to deliver internet access, of which the Amos-6 satellite was a part. Internet provision via satellite solves traditional problems to land-based infrastructure, as satellite broadband technology can overcome certain geographical barriers like mountains, deserts, or dense forests, for instance.

In a Facebook post written from Kenya, Mark Zuckerberg noted that, while the explosion is “deeply disappointing,” Facebook is developing alternative methods of expanding internet connectivity in lower-income regions. These methods include OpenCellular, a small device that can set up a local wireless network in areas that lack traditional cellular infrastructure, and Aquila, the solar-powered light aircraft that would use laser technology to beam internet service down to remote areas. The Aquila aircraft are conceptualized as working in tandem with satellite technology to help provide wide-ranging internet coverage from the sky.

The problems of internet connectivity in Sub-Saharan Africa and other lower-income regions remains as urgent as ever. The internet is a major driver of growth and economic transformation, and enhancing further access in Sub-Saharan Africa through technological innovation would help unlock an unprecedented degree of entrepreneurship in the region.

DRC: Slowly lurching toward a constitutional crisis?

On September 20, barring any breakthroughs in the political dialogue between President Kabila and opposition groups, the Democratic Republic of Congo (DRC) will enter a state of constitutional crisis. This could threaten some of the democratic gains that have been made in the country in recent years.

The political trouble in the DRC has been unfolding in slow motion, with observers cautioning against the perils of the slippage in the electoral timetable, or “glissement,” for well over a year. (See our CovAfrica post from last October on the electoral slippage.) Since then, the glissement has only gotten worse, and the comprehensive electoral calendar that the Electoral Commission (CENI) published in early 2015—scheduling presidential and National Assembly elections for November 27 and the inauguration of the new president on December 19—has entirely crumbled. Little has actually been done in the necessary work of registering new voters, and the head of CENI, Corneille Nangaa, announced two weeks ago that updating the national electoral roll would actually take at least a year to complete and that elections should be delayed until July 2017, if not later. In turn, President Kabila has stated that he intends to stay in office until an election takes place. This means that President Kabila would remain in power until then, well beyond the constitutional limit. Opposition leaders have assailed the delays in updating the electoral roll, claiming that this is just a subterfuge to keep President Kabila in power beyond the end of his second five-year mandate on December 19.

The problem is—at least on the surface—one of constitutional interpretation. The Congolese opposition points to Article 73 of the DRC’s constitution, which states that CENI must schedule the election 90 days before the end of the incumbent president’s term. This would mean that, to comply with the constitution, CENI must declare the beginning of the official electoral period no later than September 20. However, President Kabila and his supporters point to Article 70, which provides that the President, at the end of his five-year term, shall remain in office until a successor effectively assumes his functions. In May, the Constitutional Court ruled that President Kabila could legally remain in office until his successor is inaugurated—which President Kabila’s supporters have characterized as a mere “prolongation,” not a whole other “term.”

The halting effort over the last nine months to start a “political dialogue” between President Kabila and opposition groups finally resulted last week in the preliminary meeting (link in French) of a preparatory committee in Kinshasa, which is ongoing and aims to reach consensus on the normative and logistical elements of the actual dialogue itself. The most pressing issues to determine in a future political dialogue would be, first, how to arrange for a free, fair, and transparent electoral process that follows the Constitutionally-required timetable, and second, what should be done if a solution is not reached by December 20. A number of opposition leaders, most notably Moïse Katumbi and Étienne Tshisekedi, boycotted the meeting of the preparatory committee and supported a nation-wide strike on August 23.

International actors have taken a range of actions aimed to forestall a crisis and encourage free, fair, and timely elections. Most visibly, the African Union-appointed negotiator, Edem Kojo, has worked hard to jumpstart a political dialogue. MONUSCO, the United Nations peacekeeping and stabilization mission in the DRC, has also played a part. Aside from providing logistical support to CENI, MONUSCO has deployed strategically during large-scale, peaceful opposition rallies, and its presence has been credited for the absence of violence by the Congolese police during such events.

Moreover, the U.S. has started imposing targeted sanctions (see our previous CovAfrica post on U.S. sanctions policy). In June, the Treasury Department placed the Kinshasa Police Commissioner, Célestin Kanyama, on the list of persons sanctioned by the U.S. government, for human rights violations. This is very much a signal to Congolese government officials that they, too, could become the target of sanctions if they impede the electoral process in the DRC or use (further) violence against the opposition. It is likely that the U.S.—and potentially the EU or individual European countries, too—would impose sanctions on additional Congolese individuals if the situation degenerates further.

In addition to the “stick” as a policy tool, there is also the “carrot.” Part of the role of U.S. diplomats in the DRC has been to help President Kabila envision what a “hero’s departure” would look like. President Kabila is in a unique position to help the DRC execute an unprecedented political transition and set a model of “alternance” for many other Sub-Saharan African countries: if he steps down now, the President could continue to be an influential figure in the country and region. Urging President Kabila and his supporters to conceptualize how a political transition could actually benefit them, and contrasting this option with the international condemnation that would result from trying to cling to power, is an important—if behind-the-scenes—aspect of U.S. policy.

However, the probability of a successful alternance and the avoidance of a constitutional crisis diminishes with each passing day. It remains to be seen whether, first, the ongoing preparatory committee meeting will lead to a full-fledged political dialogue, and then whether a sufficient number of opposition leaders will participate in this dialogue to make it legitimate in the eyes of the Congolese. Finally, even if these two necessary conditions are met, there is no guarantee that the political dialogue would lead to successful compromise between the different parties, who distrust one another. The only way to avoid such a crisis—and the attendant uncertainty and unrest this might cause—would be to succeed on all three of these conditions. Still, recent positive signs, such as President Kabila’s decision to free certain imprisoned opposition members, as well as the ongoing meeting of the preparatory committee, provide hope that a constitutional crisis may yet be avoided.

Japan and Africa: turning a new page

Is Africa becoming a strategic priority for Japan?

The Sixth Tokyo International Conference on African Development (TICAD VI), held in Nairobi, Kenya on August 27 and 28, suggests that Japan is looking at Africa differently than in the past. For one, the five previous TICADs have been held in Japan; this is the first to be convened on the continent. Moreover, in January 2014, Japanese Prime Minister Shinzo Abe visited Ethiopia, Mozambique, and Côte d’Ivoire in a trip that was largely designed to increase Japan’s visibility in Africa.

According to various reports, Mr. Abe sees Africa as a source of minerals and energy as well as a market for Japanese manufactured goods. Japan is also conscious that it is playing catch-up to its rival China on the continent. Indeed, China’s trade with Africa is worth $220 billion, which is about ten times larger than Japan’s volume of trade. In fact, China accounts for 14 percent of Africa’s exports, whereas Japan accounts for only 1 percent.

Against this backdrop, Japan increased its commitment during TICAD VI to $30 billion in investments within the next two years, including $10 billion in infrastructure projects, part of which will be implemented through the African Development Bank. Nearly 70 agreements were signed and 75 Japanese business leaders accompanied Mr. Abe to the conference in Nairobi. According to Prime Minister Abe, the goal of TICAD VI was to boost trade and aid to Africa.

In many respects, Japan’s relationship with Africa, stretching back to the first TICAD in 1993, has been predicated on development assistance. In fact, Japan is the fifth largest donor to Africa after the U.S., France, the UK and Germany.

Since becoming prime minister, Shinzo Abe has tried to involve Japan’s private sector more actively in Africa, an effort that has been sustained through TICAD VI. Among the companies that signed agreements in Nairobi were Mitsubishi Hitachi Systems LTD, a global leader in thermal power and environmental technologies, IHI Corporation, a comprehensive engineering company, and the LIXIL Group, which is involved in the housing and building industry.

Nippon Signal Company, which focuses on railway signaling and traffic signaling systems, also initialed an MOU, as did JFE Engineering Corporation, which is involved in energy, environment, urban infrastructure and industrial machinery. A Japan-Kenya Investment Agreement, which addresses issues such as national treatment, most-favored-nation treatment and procedures for dispute settlements, was also signed and Abe committed to begin consultations on an investment agreement with Côte d’Ivoire.

Japan is also investing in capacity development. Under the “Abe Initiative,” the number of future executives from Africa who have studied in Japan will soon reach a thousand. The prime minister pledged to expand this program to worksite leaders, including foremen and plant managers.

While aid programs remain an important part of Japan’s engagement, Prime Minister Abe characterized Africa as a “quality” continent, and one that is “resilient” and “stable,” in an effort to shine a more positive light on the continent to encourage Japanese investors. He sought to position TICAD VI as a follow-on to the Sustainable Development Goals that were agreed on last year at the United Nations, the COP 21 climate conference held in Paris, and the G7 Summit that Japan hosted in May. The Japanese prime minister also committed to working to ensure that an African nation has a permanent seat on the UN Security Council by 2023, “at the very latest.”

TICAD VI appears to have introduced a new energy in Japan’s engagement in Africa. How Prime Minister Abe and Japanese companies sustain this engagement will be followed closely by a range of stakeholders in Africa and elsewhere.

A summary of Congressional hearings on U.S. sanctions in Sub-Saharan Africa

This past June, the Senate Foreign Relations Subcommittee on Africa and Global Health Policy held a hearing to discuss U.S. sanctions in Sub-Saharan Africa. The United States, the European Union, and the United Nations impose far more sanctions on Sub-Saharan African targets than on any other region, and these sanction regimes have been changing over the last two decades from broader, country-level sanctions to more targeted sanctions on individuals, like asset freezes or travel bans. This hearing provided a timely opportunity to review the evolving role of sanctions in U.S. foreign policy in Africa, their effectiveness, and key areas for improvement and innovation. A range of witnesses from civil society and academia, most of whom worked previously in public service, shared varied perspectives. While, on the whole, the witnesses believed that the results of sanctions in Sub-Saharan Africa have been mixed, they shared a view that clear, well-designed, targeted sanctions, if aggressively implemented as part of a larger strategy, could significantly influence the behavior of targeted entities. We summarize the main take-aways below.

Sanctions as a tool

The strongest point of consensus among the witnesses is that sanctions are—or at least should be—a tool, and not a policy in and of themselves. In other words, sanctions should be just one of many pressure tactics applied to a target as part of a coherent and well-articulated larger strategy. Sanctions should not be implemented just to “make us feel we are doing something” or as substitutes for other actions, but rather as complements to other tools like aggressive diplomacy, peacekeeping, mediation, and support to civil society.

Brad Brooks-Rubin, policy director of the Enough Project, noted that where sanctions have failed in the region, they failed not because sanctions don’t work in Sub-Saharan Africa, but rather because they were applied only in a limited way. As successful examples of sanctions, Dr. Princeton Lyman, Senior Adviser to the United States Institute of Peace, pointed to Sierra Leone, Liberia, and Côte d’Ivoire, where restrictions in the trade of certain commodities helped weaken rebel forces. In his view, sanctions alone would not have worked in these countries if other actions such as international peacekeepers had not also been deployed.

Encourage multilateral approaches

The witnesses also agreed that U.S. sanctions should not be applied in isolation. Sue Eckert, Senior Fellow at the Watson Institute for International and Public Affairs at Brown University, testified to the growing importance of regional entities in exerting political pressure to sway targets’ behavior. When it comes to U.N. sanctions, which the U.S. has a strong role in shaping, regional sanctions from the African Union or ECOWAS actually preceded those sanctions in approximately 75% of the cases. Overall, regional African organizations are involved in about 95% of the U.N.’s sanctions on African targets. Their involvement reduces targets’ ability to evade sanctions and enhances the norm-setting and stigmatizing function of sanctions.

However, it isn’t always easy to get multilateral support on such a politically fraught issue as sanctions, as countries face different cost-benefit analyses in considering whether to impose sanctions. For instance, South Africa has not gone along with sanctions on Zimbabwe, because as a neighboring country, South Africa is concerned with the risks of economic or political collapse in Zimbabwe on its own economy and stability, and sanctions could play a role in causing or accelerating collapse. Or, in the case of the political crisis in the Democratic Republic of Congo (DRC), the U.S. has recently applied new sanctions to one individual and may be poised to impose more, but the African Union remains divided about how to approach the electoral slippage—a particularly complex issue given the DRC’s many neighbors with competing interests in the country. Dr. Lyman urged that effective DRC sanctions would need to have the support of the African Union and the U.N.

Short of obtaining multilateral support, the U.S. has in some cases even started applying “secondary” sanctions, which imposes sanctions on countries for doing business with those targets the U.S. has sanctioned. A few of the witnesses encouraged this practice, noting that it tends to be “highly effective.”

Set realistic and specific targets: regime change should not be the goal

The speakers agreed that effective sanctions require clear and realistic objectives, and that the effectiveness of sanctions should not be measured by regime change. Dr. Lyman, in particular, cautioned against attempts to use sanctions as a means of achieving deep political transformations, and pointed out that a strong sanctions regime cannot substitute for other essential elements of a democracy, like a well-organized democratic movement. Generally, the more effective sanctions are those aimed at specific objectives, such as a cease-fire, and those that do not threaten the political survival of political elites.

Several of the witnesses encouraged innovation in sanctions policy through the use of nimble, step-wise sanctions: instead of all-or-nothing sanctions that may well be ignored by the targets because they require giving up too much power at once, Dr. Lyman encouraged the adoption of “carefully layered sanctions that can be removed as steps toward transformation.” In other words, specific, smaller actions could be explicitly linked to the lifting of particular sanctions, to urge targets to modify their behavior progressively. Similarly, Dr. Todd Moss, the Chief Operating Officer for the Center for Global Development, urged policymakers to adopt a more creative use of sanctions that would “selectively encourage positive behavior.” In the words of Mr. Brad-Rubin, “[w]hen we fail to explain how the sanctions work and show that they can evolve and be nimble over time, rather than become permanent forms of punishment, we give the likes of Bashir and Mugabe easy wins.”

Clear messaging

Finally, the witnesses cautioned that sanctions can create tricky dynamics. Sanctions lose their potency over time, as targets learn to live with or get around them. However, regimes may try to spin any lifting of sanctions as a political coup for them, so removing sanctions when such action would otherwise be desirable can play into certain targets’ propaganda and prove counterproductive for the U.S. In fact, the very imposition of sanctions can be gamed by the targets, who may point to the sanctions to portray themselves—and the entire country—as victims of U.S. aggression, and shift the blame for institutional failures from their own governments to U.S. policy. Robert Mugabe in Zimbabwe frequently makes such claims, for instance. Accordingly, U.S. policymakers need to be mindful of the unintended dynamics of imposing sanctions, and should develop a clear and context-appropriate game plan for the imposition and lifting of each set of sanctions.

The witnesses discussed other unintended consequences of sanctions such as “over-compliance” by private sector actors. Companies may misunderstand the scope of the sanctions and the risks they entail, such that they avoid doing business in an entire country even when only a few individuals in that country are targeted by sanctions. Such over-compliance can result in significant economic and human costs for regular citizens.

To manage the risks of unintended consequences, the witnesses stressed the importance of careful messaging and communication. There should be clear communication—aimed at different audiences, including the targets themselves, businesses, and the greater public—of how the sanctions work, what kind of activities they will not penalize, under what circumstances sanctions will be removed, and what their connection is to underlying policy goals.

This post was written with research assistance from Summer Associate Cristina Alvarez, a student at Columbia Law School. She is not yet admitted to practice law but is supervised by principals of the firm.

As Europe divides, Africa unites with common African Union e-passport

In 2015, African Union (AU) Commissioner for Political Affairs, Dr. Aisha Abdullahi, indicated that a plan was underway to implement a single African passport. After recent announcements that the AU passport would be unveiled at the AU Summit in Kigali this month, the long-awaited continental e-passport has finally been revealed. The first recipients of the pan-African passport were Rwandan President Paul Kagame, whose country hosted the summit, and Chadian President Idriss Deby, the chairperson of the AU. Others to receive some of the first pilot passports will include heads of state, foreign ministers and permanent representatives of the member states to the AU’s Addis Ababa headquarters. The timeline for the common passport roll-out to citizens of member countries is uncertain, although AU officials hope that citizens will have access by 2018.

This long-awaited passport is targeted to address the perennial problem of border openness in sub-Saharan Africa; closed borders are cited as a substantial impediment to both intra-African trade and economic growth.

Out of the 54 countries in Africa, to date, only thirteen allow citizens from any other African country to travel without advance visas. These significant barriers to intra-African travel are believed to be a leading cause of the low levels of trade between nations on the continent. Whereas intra-European trade accounts for approximately 60% of all European trade and intra-North American trade accounts for 40% of all trade on the North American continent, intra-African trade only counts for about 13% of African trade. While a small portion of this difference may be explained by unrecorded informal trade across porous borders, the difference is nevertheless notable.

There is evidence that opening borders can lead to economic growth globally, and experiences on the African continent support this contention. For example, in 2013, Rwanda announced that travelers from any African country could receive a visa on arrival. After improving visa openness, Rwanda’s GDP growth increased to 7% in 2014, tourism revenues rose by 4%, and the number of African travelers to Rwanda increased 22%.

Rwanda has led the charge for the creation of an AU passport. Now, the Rwandan Minister of Foreign Affairs, Louise Mushikiwabo, has indicated that Rwanda is fully prepared to begin issuing the common passport to all of its citizens. In contrast, other African nations would need to enact legislation that would allow them to begin issuing the African Union passports to citizens. Based on the general response to the common passport—the AU has been “overwhelmed” by requests for the passport—it is likely that AU member countries will feel pressure from their own citizens to do so quickly.

Interestingly, Morocco—the only African country that is not currently a member of the AU—has asked to rejoin the organization after a decades-long absence during the same summit in which the AU passports were unveiled. The timing of Morocco’s request could allow the county to take advantage of the new common passport and the expanding perks of AU membership.

The unified passport will undoubtedly present challenges for countries with less advanced border-security technology and fewer resources to devote to border control. Currently, only nine African countries offer eVisas. The AU passport is biometric and considered secure, but the issuance and acceptance of these e-passports at entry points of countries currently without e-passports may present a problem.

Relaxed immigration restrictions may also lead to larger inflows of migrant workers to the more economically stable countries on the continent, which may stoke the sort of anti-immigrant sentiment that led to violence in South Africa last year.

Travelers who are not citizens of AU member countries will not be able to benefit from the common passport, and will still face the relatively restrictive entry requirements on the continent. However, the enhanced labor mobility resulting from the AU’s e-passport program  could have a catalytic effect on trans-African investments and commerce.

The Young African Leaders Initiative: soft power, smart power

In 2010, Africa’s leaders gathered at the African Union in Addis Ababa to celebrate 50 years of independence. In Washington, President Barack Obama marked the occasion by hosting a town hall meeting of young African leaders from nearly 50 countries.

What looked at the time to be a curious way to mark a significant moment in the continent’s history was in fact the genesis of what could become the most innovative Obama initiative in Africa.

When asked during the session by a young woman from Mali why he had convened such a meeting, Obama said that he wanted “to communicate directly to people who may not assume that the old ways of doing business in Africa are the ways that Africa has to do business.” The president added that he wanted the young leaders to meet each other, to develop a network of like-minded people working for a better future, and to reinforce each other’s goals and aspirations.

That town hall marked the launch of the Young African Leaders Initiative (YALI). Over the next two years, YALI engaged Africa’s youth, principally through events coordinated by U.S. embassies throughout the region. Then, during a speech in 2013 in South Africa, Obama announced the establishment of the Washington Fellowship. Subsequently renamed the Mandela Washington Fellowship (MWF), the program initially was designed to bring 500 young leaders to the U.S. for six weeks of executive leadership training at U.S. universities and four days in Washington to meet with each other, leaders in the administration, and to have a town hall with the president. In 2016, the program was increased to 1,000 fellows.

The fellows

When USAID put the application online for the first class of fellows in December 2013, the response was extraordinary. Nearly 50,000 applied for 500 slots. Similar numbers have applied for the two subsequent classes. Over the course of three classes of fellows, there have been 119,000 applications for 2,000 openings.

The U.S. government kept the qualifications relatively simple. Young men and women from each of sub-Saharan Africa’s 49 countries are eligible to participate, including from countries on which the U.S. has sanctions, such as Sudan, Eritrea, and Zimbabwe. Applicants generally have to be between 25 and 35, proficient in English, possess a proven record of leadership, and have a commitment to return to the continent. Fellows apply for one of three tracks: business and entrepreneurship, civic leadership, or public management.

review of the program found that in the first cohort, the gender split was 50/50, nearly 40 percent owned a business, and a similar number ran a nonprofit organization. Eighty percent of the class had never traveled to the U.S., and more than half grew up outside capital cities.

The key element of the fellows’ program occurs during the specialized six weeks of leadership training that takes place at nearly 40 universities across the U.S. At the universities, the fellows, in cohorts of 20, are exposed not only to programs tailored specifically for their interests, but to other young Africans who share a passion for making a difference in their communities and countries. For most fellows, meeting other young Africans from different countries is one of YALI’s key benefits, as is forging genuine ties with Americans and U.S. institutions.

The narratives of the 2,000 Mandela Washington Fellows illustrate some of the most compelling stories and realities on the African continent today.

Importantly, the MWF program is cost-efficient, as the average cost of a fellow coming to the U.S. is $24,000. At least half is paid by the participating U.S. universities and a host of companies, including Coca-Cola, IBM, the MasterCard Foundation, AECOM, Microsoft, Intel, McKinsey & Company, GE, and Proctor & Gamble, who have made grants or in-kind contributions to the fellowships and the YALI program.

YALI’s broader impact

YALI is having an impact on its participants. An initial assessment by IREX, USAID’s implementing partner, found that over 80 percent of fellows who owned businesses reported an increase in earnings in the year following their fellowship in the U.S. Business fellows also leveraged more than $3 million in new sources of support through loans, grants, equity financing, and in-kind contributions.

Fellows who participated in the civic leadership training reported that the impact of their nonprofit organizations nearly tripled to over 1.6 million beneficiaries, with an average contact per fellow increasing from less than 3,000 to just fewer than 15,000 beneficiaries.

Over 80 percent of the fellows reported that they remained in contact with other fellows during the course of the year, and 70 percent indicated they continued to be involved with their host university. The ongoing connectivity is helped by the three regional conferences in Africa that USAID convenes for program alumni, more than 200 internships on the continent—most sponsored by corporate partners—as well as funding for fellows to attend conferences and other programs after they have returned to Africa.

As part of YALI’s broader reach, USAID created four Regional Leadership Centers (RLCs)—in South Africa, Kenya, Ghana, and Senegal—that offer distance and in-class leadership training to about 3,500 participants annually.

The YALI Network (see the figure below) was established in 2013 as a means to stay connected online to the tens of thousands of young Africans who applied for the fellowship but were not selected as well as others interested in the initiative. The network, which provides access to global leaders in relevant fields and opportunities for collaboration on a range of activities, has attracted nearly 250,000 members. Participants in the RLCs and the YALI Network can earn certificates in various courses, including climate change, women’s empowerment, and the election process.

Paint Yali

Source: YALI Network

YALI, of course is not without its challenges. Recruiting from 49 countries can be exceedingly difficult, and the quality of Skype and telephone connectivity can vary significantly, which impacts the interview process. Due to the high volume of applicants, embassies have learned that they need more time to review applications. Extra efforts have been needed to accommodate fellows with disabilities. YALI’s biggest challenge, though, is winning the support of African leaders who generally have yet to embrace the program due to its unilateral launch.

What’s next?

YALI is a cost-efficient and effective way to invest in Africa’s future, especially as it concerns deepening trade and commerce with the region, strengthening democratic institutions and empowering civil society. If the next administration continues to invest in the program, YALI could become an enduring legacy program of the Obama administration much like the African Growth and Opportunity Act (AGOA) and the President’s Emergency Program on AIDS Relief (PEPFAR) are, respectively, for the Clinton and Bush administrations. Over time, YALI inevitably would contribute to a new generation of transformative African leadership and deeper ties between the U.S. and Africa in a way that few other programs do.

This article originally appeared on The Brookings Institution’s “Africa in Focus” blog.

Six things to consider when doing business in Sub-Saharan Africa

Over the past two decades, Sub-Saharan Africa has caught the attention of an increasing number of investors who are looking for new and promising opportunities. While growth has slowed in some of the region’s oil exporting countries, the “Africa Rising” narrative continues due to the region’s youthful population of 1 billion people (70 percent are under 30), rapid urbanization, and ongoing improvements in democratic governance, economic management, and peace and security. Sub-Saharan Africa remains ripe with potential and opportunity but there are important factors to consider when seeking to do business in the region.

  1. Market boundaries don’t necessarily map onto country borders.

When looking to define the market, it is important to remember that not only is Africa a large and heterogeneous continent but that market boundaries do not necessarily map onto country boundaries. Moreover, there are approximately 50 cities in Africa with one million or more people. As a consequence, one can define the market in terms of regional blocs, or countries (especially if the country is particularly populous, like Ethiopia or Nigeria), urban corridors, or sub-markets within or across countries. In certain cases, trading communities that exist on both sides of a border, or along a particular trading route, are economically similar and might be considered when defining the geography of the market. Similarly, it can make sense to look at an entire sub-region as one market; for example, the East African Community is trying to encourage precisely this outlook as it works to harmonize tariffs and standards across its five members.

  1. Strategic relationships shape business opportunities

Strong local relationships are critical to a business’s successful integration and growth on the continent. Demonstrating a sincere, long-standing commitment and having a continuous on-the-ground presence will be key to developing good partnerships with competent local partners. Given that an increasing number of countries are passing or strengthening local content laws and policies, investors should anticipate working with local partners. However, due diligence into potential partners is critical. Without an understanding of the local terrain and given the persistence of small, well-connected elites, companies risk engaging local partners who are politically exposed persons, which could trigger liability under domestic and foreign anti-corruption laws.

Finally, entering into partnerships with other stakeholders—such as local companies along the supply chain, development finance institutions, and international and local not-for-profits—can lead to a strategic division of resources to overcome market challenges. These strategic relationships can also generate a positive identity in the market for a new investor as well as invaluable market intelligence.

  1. Government involvement in the private sector is a fact of life

African governments tend to be closely involved in the private sector, both officially and unofficially. Accordingly, it is key to develop amicable working relationships with the government at all levels and to align commercial objectives with the government’s development agenda. Virtually every country has a five or ten-year development strategy and companies should be familiar with it, especially in their sector, be it health, finance, manufacturing, etc.

This type of commercial engagement strategy will enable international companies to respond appropriately if governments’ priorities or composition unexpectedly and suddenly shift in response to internal and external pressures. Companies that are nimble, flexible and not overly reliant toward any given politician, party, or policy reduces the risk that political change will upend the business model.

  1. Mind the infrastructure gap

The dearth of “hard” infrastructure—such as roads, power, telecommunications—across Africa is well known and must be accounted for in any planned business ventures. But businesses also must find ways to address deficiencies in the “soft” infrastructure, such as the existence and enforcement of legal and regulatory frameworks, quality and safety standards, and functional educational and health systems. Companies need to develop short-, medium- and long-term plans for how to bridge both the hard and soft infrastructure gaps. Additionally, companies should consider risk insurance, options for dispute resolution, and tapping into private networks that serve public functions, such as local trade associations, among other methods of working around these structural deficits.

For many investors, the shortage of skilled local talent is the most challenging aspect of the soft infrastructure gap. Uneven local educational inputs are the primary obstacle. Expats, who typically require salary premiums and visa requirements that can be challenging, are only a short-term solution. Businesses should consider investing early in on-the-job training to groom local talent, and may wish to enter into strategic partnerships with local NGOs and universities to create and nurture a talent pipeline.

  1. The market data deficit makes it harder to do business-as-usual

For an investor, the data deficit in Africa makes decision-making harder. When it comes to market and research analysis, conducting diligence on prospective local partners, or assessing customers’ credit history, investors need to be aware that traditional means of data gathering and analysis are often unavailable, which requires alternative approaches. While the data gap is narrowing thanks to the increasing use of mobile communications to collect information, at this point, on-the-ground presence remains the best way to mitigate this problem.

  1. Finding local counsel

There are very skilled lawyers across jurisdictions in Africa that can provide useful on-the-ground expertise. If possible, it is useful to interview several firms to determine the best fit and to identify potential conflicts of interest, which may be more of an issue in countries with limited numbers of qualified firms. In addition, there are a growing number of legal networks across the continent that can be useful to tap into as well.