Qatar’s conflict with its neighbors affects the Horn of Africa

Martin Plaut, School of Advanced Study

It began as a squabble between Arab allies, but the standoff between Qatar and its neighbors is threatening to engulf the Horn of Africa. When Saudi Arabia, the United Arab Emirates, Egypt, Bahrain, Yemen and the Maldives declared at the beginning of June that they were severing diplomatic relations with Qatar it appeared to be of interest mainly to the Arabian Peninsula – and the Gulf in particular.

The Saudis and their allies accused Qatar of backing international terrorism. The US, which has the Al Udeid air base in Qatar, looked askance, but did little more than use its good offices to try to ensure that the war of words did not flare into an open conflict.

File 20170618 28759 pezb6e

A Djibouti soldier along the border with Eritrea after conflict flared in 2008.
Reuters/Omar Hassan

 

But the countries just across the Red Sea have found themselves dragged into the dispute. After prevaricating for some time, Eritrea, which had hitherto good relations with Qatar, fell into line with the Saudis and broke ties with Qatar.

A statement attributed to the Eritrean government declared limited support for the rupture with Qatar. Eritrea explained that the initiative taken by the Gulf nations

is among many in the right direction that envisages full realisation of regional peace and stability.

Matters might have ended there, but such are the ties between nations on both sides of the Red Sea that this was unlikely. The UAE and Saudi Arabia have been using the Eritrean port of Assab in their war against the Houthi rebels in Yemen. Egypt – which is part of the Saudi alliance – is also reported to have plans to build a major base on an Eritrean island in the Red Sea. The Eritreans are alleged to have some 400 troops fighting against the Iranian backed Houthis.

In the circumstances, a rupture between the Saudi alliance and Qatar was highly likely to spread to the Horn. And this was exactly what took place. Qatar had been a generous donor to Eritrea. It had also played a key mediating role in Eritrea’s border conflict with Djibouti, which flared in April 2008.

The origins of the disputed border lie buried in the sands of colonial history and would never be easily resolved.

Qatar pull-out stokes tensions

The fighting left a number of Djibouti troops as prisoners of war in Eritrea and Qatar did their best to resolve this issue by mediation. Indeed, so close were the ties that when UN monitors met the political advisor to the President of Eritrea, Yemane Gebreab, in January 2013 and enquired about the Djiboutian prisoners of war, he responded that

all matters concerning the resolution of the conflict with Djibouti could only be addressed through the mediation of Qatar, and that no other intermediary was necessary.

Qatar went further, deploying some 200 of its own troops along the Eritrea-Djibouti border in an attempt to reduce the tension. The Qatari peacekeeping force only supervised a small sector of the border near Ras Dumeira. It was therefore not in a position to observe or interdict cross-border movements further to the south, but its presence was symbolically important.

So when Qataris pulled their troops out on June 12th and 13th, there was something of a vacuum, which Eritrea is reported to have promptly filled. Djibouti accused the Eritreans of moving their troops into the disputed territory. Djibouti’s Foreign Minister Mahamoud Ali Youssouf declared that his country’s military had gone into “alert”.

A senior Eritrean diplomat at the African Union said the move came after Eritrea cut diplomatic ties with Qatar and his country sought no confrontation with Djibouti.

But a terse statement from the Eritrean Ministry of Information issued days later described Qatar’s withdrawal as “hasty”. It said Eritrea had refrained from commenting because it was not privy to the action but would do so once it had all the information about the event.

The African Union, seldom swift to comment or intervene in any disputes effecting its members, finally made a move. Moussa Faki Mahamat, chairperson of the African Union Commission, tweeted that the AUC would send a delegation to Djibouti border to monitor developments and work with all parties.

More uncertainty for The Horn

These events appear to have fallen well for Ethiopia, which has been at loggerheads with Eritrea since their own border war of 1998-2000. While Eritrea and Djibouti are daggers drawn following the Qatari withdrawal, Ethiopia has refrained from taking sides between the Saudis and Qatar. Both parties have sent delegations to Addis Ababa, no doubt asking for Ethiopian support, but so far Ethiopia has sat on the fence.

Ethiopia recently announced that it would reveal a new policy towards Eritrea, but none has appeared to date. With its troublesome northern neighbor locked in a fresh controversy with Djibouti, Ethiopia may find it’s more likely to receive a sympathetic hearing for any initiative from the international community.

It will not be difficult, for instance, for Addis Ababa to portray Eritrea as a regional troublemaker, always willing to exploit a neighbor’s weakness. It should not be forgotten that since independence in 1993 Eritrea has been involved in conflicts with Yemen, Djibouti and Ethiopia – hardly a proud record.

The UN and the African Union are now engaged in trying to mediate between Eritrea and Djibouti. Meanwhile, the ongoing conflict in Yemen continues to have implications for the Horn, as the Saudis and UAE continue to use Eritrea as a rear base. The UAE is in fact seeking a further base in nearby Somaliland.

The ConversationAs ever, it’s difficult to predict how events will unfold, but sparks from Arabia can easily set the Horn alight.

Martin Plaut, Senior Research Fellow, Horn of Africa and Southern Africa, Institute of Commonwealth Studies, School of Advanced Study

This article was originally published on The Conversation. Read the original article.

Can a Free-Market Solution Solve Malawi’s Poverty Crisis?

by Ibrahim B. Anoba

The International Labour Organization (ILO) recently reported that over 12 million Malawians could become poor by 2030 if poverty reduction rates remain the same. This is despite Malawi’s slight improvement in GDP per capita since 2004, and the implementation of numerous measures to counter poverty, including increased government spendings on infrastructure and social welfare programs. Rather than reduce poverty and stimulate economic development, these policies have further impoverished the nation–half of its population earns below 687 Malawian Kwacha (less than one US dollar) per day.

Malawi Ibrahim AnobaThe International Monetary Fund (IMF) and the World Bank have assisted Malawi with numerous economic development policies since 1981 and have given millions of dollars in loans to support their implementation. Many required an increase in tax rates to make up for bigger spending on welfare programs like the Structural Adjustment Programmes (SAPs). But despite robust spending, these policies have been ineffective, mostly due to faulty structuring.

For instance, the SAPs contain proposals for trade liberalization and privatization, which are good recommendations considering Malawi’s need for a vibrant private sector, its implementation are, however, expensive for a low-income country like Malawi. The SAPs commits the country to expensive welfare schemes like agricultural subsidy programs and social safety nets. Policies like the Malawi Growth and Development Strategy (MGDS II), the Farm Input Subsidy Programme (FISP), and the Social Cash Transfer (SCT) have equally burdened the country’s revenue. The FISP alone targets 1.5 million annual beneficiaries by providing 6 million bags of seeds and fertilizers accounting to millions of dollars; the MGDS II and SCT include similarly expensive subsidy programs and all culminates into heavy financial burden Malawi has struggled to sustain. It is unlikely that Malawi’s capacity to finance them will change anytime soon, considering its dwindling revenue. Agricultural exports, which constitute 90 percent of Ethiopia’s annual income, and 80 percent of all labor force, have sharply declined due to fluctuations in international tobacco prices and the negative effect of drought on maize and cassava production.

Malawi’s economy is paying heavily for central planning. This is evident from its placement on the latest Ease of Doing Business Index (133) and global GDP competitiveness rankings (159). The country can still beat the negatives by adopting free market solutions in key sectors, especially agriculture. Privatization would open them to more investments that would result in increased economic output. This organically injects more money into the economy and increases government revenue to support the falling export earnings. Local markets would equally gain from a competitive economic climate. The cost of basic commodities like food and medical supplies would drastically reduce while the demand for labour increases. It can result in an increased share of working-age adults in the future and possibly create a demographic dividend in the end.

This increase in employment opportunities bounds to lessen government’s burden on safety nets and job creation. It is a sure way to avoid future economic disaster since Malawi must find jobs for its 6.8 million children in the next decade. Beside the labour gains, a competitive economy is necessary to attract investors. Eighty percent of Malawi’s labor force works in agriculture. The Malawian government can disengage from the sector and review its stringent regulations to reduce tax and import tariffs. If the country can achieve a competitive agricultural industry, it will eventually reflect on household income and GDP per capita.

Exploring the possibility of economic diversification would also fortify Malawi’s business climate. Having numerous productive sectors bounds to increase government revenue and shield the economy in case of shocks in the agricultural and manufacturing industries. Malawi’s overdependence on agriculture has made it vulnerable to unforeseen international market crises. But opening up the country’s budding tourism sector would reduce the pressure on agriculture and bolster its annual revenue.

Malawi’s tourism industry is among the most promising in the Southern Africa with numerous historical sites like Lake Malawi, Liwonde National Park and Mulange Mountain Reserve. Having more private investments in the industry would likely increase interest in sub-sectors especially entertainment and hospitality. Presently, tourism accounts for four percent of jobs and a similar percentage of GDP. If Malawi completely liberalized the sector, the country would have another prolific industry to its economic advantage.

Instead of the usual top-down strategies, Malawi should open its agricultural sector to more competition, diversify its economy, and build an inclusive business climate to help its mostly-young population thrive over the course of the next decade.

Market liberalization does not hurt. It simply gives  the economy a chance to grow without the hassle of centralized economic planning. After decades of unending economic travails, Malawians deserve a better life. All the government and their donors should do is simply give free markets a chance.

Ibrahim Anoba Africa Young Voices

Ibrahim B. Anoba

 

 

Ibrahim Anoba is an African Political Economy and Foreign Affairs pundit. He is an Advocate at Young Voices and lives in Lagos, Nigeria. You can follow him @Ibrahim_Anoba.

Remarks by Mozambique President Filipe Nyusi at 11th U.S.-Africa Business Summit

President Filipe Nyusi of the Republic of Mozambique delivered these remarks at the Corporate Council on Africa’s 11th biennial U.S.-Africa Business Summit in Washington, D.C., on June 14, 2017. Text provided by the Office of the President.

I was quite delighted to accept the invitation to attend this 11th Biannual USA-Africa Business Summit. This is the major business forum between Africa and the USA.
Corporate Council on Africa U.S. Africa Business Summit 2017The diversity of the companies that comprise this platform offers a number of options for business and economic cooperation that promote an integrated, endogenous and sustainable development, particularly for the emerging African economies.
Therefore, we have come to the USA with a business mission. We intend to consolidate Mozambique’s position as a safe a strategic destiny of foreign investment in Southern Africa.
We also want to reaffirm the role of the USA as a strategic partner for Mozambique’s development.

For my remarks I have chosen the theme: “USA engaging the American business people in consolidating mutually beneficial partnerships for prosperity.”

Ladies and Gentlemen,
History has recollected that the last Mozambican Head of State to attend this event was President Joaquim Chissano, in 1997, at the First Biannual Summit, precisely 20 years ago!

Mozambique President Filipe Nyusi FRELIMO

Filipe Nyusi

At that time and counting with the invaluable support of the USA, Mozambique conquered an outstanding position in Africa and in the world. Today we have come to say, Mozambique is back as a country of prosperous economy. Mozambique is back, not only because high economic value deposits of mineral resources, including coal, natural gas, among others, have been discovered, whose exploitation counts with the presence of American companies.
Mozambique is back to transform into wealth a number of potentials and business possibilities available. These opportunities cover sectors such as power generation and transmission, infrastructures, manufacture and sale of different consuming industrial products and extensive arable lands for agricultural development.
Last week during the National Forum on Infrastructures, we stated that it is now time to look forward.
Mozambique is sending vital signals of overcoming obstacles.
During this month we launched the South Coral floating LNG project in the Ruvuma Basin, an investment which attracted 15 international banks and five credit agencies for exports.
This is a major vote of confidence in Mozambique and in our Government.
Hence our statement that Mozambique is back, foreign investments are secure.

Ladies and Gentlemen,
As you might be aware, Mozambique is faced with challenges related to the economic crisis and the restoration of peace and political stability, a process in which, once again, we count on the support of the USA.
Republic of Mozambique Office of the PresidentWe nurture a justified hope that this visit may contribute to quality steps towards overcoming these challenges. These are bottlenecks not only to our prosperity, but also to further foreign investment projects in Mozambique, including American investment which is quite promising.
The People of Mozambique and the world business community are waiting, with high expectations, for developments in the exploitation of hydrocarbons in the Ruvuma Basin, particularly, natural gas projects.
The USA marks presence in this sector as a strategic partner of Mozambique. The American investment can make our country one of the major producers of natural gas in the world, both upstream and in all its value chain.
Therefore we say: Mozambique is back to the economic growth and development route.
In addition to business and economic relations, we would like to underscore in this Summit, the American Government’s assistance to our development through specific development projects.
On the other hand, the United States of America, over the next years, may become a major single investor in our country. These are transformative investments of the structure of the Mozambican economy, and they will make a sharp positive turn in the history of Mozambique and that of her relations with the USA.
Let me also acknowledge with great admiration the critical role that the Corporate Council on Africa has played in promoting investment opportunities in Africa.
When others looked at Africa as a marginalised continent host to various problems, ranging from armed conflicts, natural disasters, chronic poverty and political instability, this organisation looks at Africa as a continent of hope. It visualises an African continent of great potentials and immense opportunities that are likely to transform it and mainstream it into the global economy.

Dear Participants,
Ladies and Gentlemen,
We also bring along the agricultural sector which is the least exhaustible traditional activity and the backbone of our economy.
CCA Corporate Council on Africa Business summit 2017Mozambique possesses land for irrigation of about 3 million hectares, in more than eight priority river basins.
The major advantage is the existence of a secure market of agriculture products at national, regional and international level.
It easier to enumerate what is not grown in my country rather than list what is produced. Mozambique can almost grow everything.
We urge and encourage the American business people to take advantage of the enabling business environment, and investment opportunities and potential that exist in Mozambique to diversify their interventions.
These interventions can cover sectors of manufacturing, services, transport and communication, hotels and tourism which make the economic activities more integrated.
With a view to improving further the business environment in Mozambique, our Government will continue to undertake legal and institutional reforms aimed at streamlining procedures to increasingly attract investments.
We would like to take this opportunity to commend the African Development Bank, which is here represented by its President. His vision enables us to have this bank as an African partner for Africa and his relentless endeavours meet our specific needs.
To other African brothers and sisters here present, and beyond, we wish to congratulate them for their joint efforts to bring about progress and welfare for our peoples, in the context of the African Union Agenda 2063.
We would also like to reiterate our desire that the Corporate Council on Africa remains in the forefront in promoting investment opportunities in our continent and in helping us to build a better future for the coming generations based on an approach of sustainable and inclusive development.
To conclude, we would like to extend our appreciation to the organisers of this event for the structure and diversity of the topics on the agenda. This Summit has opened opportunities for more interaction between African and American political and business leaders.
We wish successful deliberations to the 11th USA-Africa Business Biannual Summit and that its outcomes reflect the continuous commitment of the United States of America to the development of Africa and of Mozambique, in particular.
Thank you very much for your attention!

Remarks by Secretary of Commerce Wilbur Ross at U.S.-Africa Business Summit

U.S. Secretary of Commerce Wilbur Ross delivered these remarks at the Corporate Council on Africa’s 11th U.S.-Africa Business Summit in Washington, D.C., on June 14, 2016. The text was provided “as delivered.”

Good morning. Thank you, Florie for that kind introduction.

Corporate Council on Africa U.S. Africa Business Summit 2017I also want to thank Chairman Jeff Sturchio (Ster-chee-o) and the entire team at the Corporate Council on Africa – not only for hosting this year’s summit – but for your efforts to strengthen U.S.-Africa trade over the last two decades.

I am honored to welcome President Nyusi (New-see), African Development Bank President Adesina, and the many other ministers and dignitaries here with us today …

And welcome to the esteemed group of business leaders participating in the summit.

When President Trump met with African leaders in Italy for the G7 meetings, he said, “Africa is a place of opportunity.”

And as I said during my confirmation hearing, we cannot ignore such a large, dynamic and vital part of the world.

We have received great feedback from American companies and members of our Advisory Council on Africa regarding the economic landscape of the continent.

This year, 6 African nations are on pace to be among the top 10 fastest growing countries in the world.

Visitors to African cities see cranes dotting the skyline and investors arriving from all over the world.

Visitors also notice web-based apps, such as Hello Tractor — an “Uber-Like” platform that allows rural farmers to access tractors.

Over the next five years, 19 sub-Saharan African countries are expected to achieve average growth rates of five percent or higher.

And over the last five years combined, Ethiopia’s growth rate has been second highest in the world.

Africa is moving steadily on a trajectory of economic growth and increasing self-reliance — a vision this Administration supports.

In realizing that vision, African and international efforts to promote peace and implement economic reforms are bringing a new generation into a new consumer class.

Secretary of Commerce Wilbur Ross

Wilbur Ross

Studies by McKinsey estimated that, by 2025, an additional 90 million African households will enter the consumer class, contributing to a total household purchasing power of $2.1 trillion.

This buying power is essential for sustained economic growth.

That growth is generating demand for new infrastructure, new machinery and equipment, and new consumer products and services.

The critical question that decision makers in Africa, including many of you, must ask is this: As these upward growth trends continue, with what types of partners do you want to collaborate?

I believe that, the more African nations partner with U.S. businesses, the better off both the United States and Africa will be.

In 2016, U.S. exports to Africa were approximately $21.81 billion – nearly double the $10.96 billion in U.S. exports in 2000.

Total trade between Africa and the U.S. was approximately $48.3 billion last year, up nearly $10 billion since 2000.

And our trade deficit declined in that period from $16.7 billion to $4.7 billion.

All of these numbers are moving in the right direction, so let’s work hard to have those trends continue.

Through our dedicated Commerce representatives on the ground, we hear African customers are actively seeking out American goods and services.

This is not only due to the quality of American products — It is also because American businesses have a great reputation for local engagement and corporate responsibility.

Our trade relationship is vital to the security and stability of both the United States and Africa.

But our relationship with Africa has to continue its transition from being “AID-based” to “TRADE-based.”

To that end, having two-way trade agreements, not just temporary trade preferences, would create long-term, sustainable improvements to quality of life on both sides of the Atlantic.

Bilateral trade agreements, rather than large, multilateral ones, can be very effective tools in meeting the long-term interests of the partners involved.

And studies show that developing countries with liberalized trade tend to grow faster than those that don’t.

In the meantime, we must ensure countries currently benefiting from trade preferences granted by our African Growth and Opportunity Act (AGOA – “ah-GO-ah”), continue complying with the eligibility requirements established in U.S. law.

The Administration takes these congressional requirements very seriously.

And in applying our laws, we will vigorously protect the rights of U.S. companies and workers in the global arena.

Since its inception in 2000, AGOA (“ah-GO-ah”), has given duty-free and quota-free access to the U.S. market on approximately 6,000 products from qualifying African countries.

And so, I would contend that the countries that meet the AGOA (“ah-GO-ah”) Eligibility Requirements will include the continent’s major success stories in the future.

They are the countries that have opened their economies – not restricted access to their market.

They are the countries that have: fought corruption, promoted good governance and business ethics, and sought to enforce intellectual property protections.

All of which are critical for generating growth and innovation.

One excellent opportunity that African countries currently face is the new WTO Trade Facilitation Agreement, or T-F-A.

This agreement streamlines customs operations, enhances transparency, removes red tape, and reduces costs to exporters and importers.

It came into force in February of this year.

U.S. business leaders engaged in Africa recently advised the President:

“Full implementation of the TFA is a ready-made opportunity to support the changes that Africa needs to address administrative burdens that raise trade-related transaction costs to unsustainable levels.”

And WTO estimates that, if the least developed countries fully implement this agreement, it would reduce costs and enhance competitiveness, generating a 35 percent increase in exports.

Trade facilitation already forms a key part of the reform agenda of African regional economic communities.

Wilbur Ross Bloomberg Businessweek MAGAThe TFA strengthens these efforts and provides avenues for technical assistance.

I challenge the leaders in this room to fully implement the TFA.

This brings me to a broader point.

As Commerce Secretary, I work to ensure American businesses face favorable operating environments in the countries they conduct business.

This is key to ensuring the current U.S.–Africa commercial relationship has a solid foundation for future growth based on mutual interests.

And so, I want to take a moment to speak directly to my colleagues from African governments.

It is important to make sure that U.S. companies are in the best position possible to enter new markets in Africa – and that those companies already there are successful.

I hope that when U.S. companies seeking to do business in your country encounter obstacles, you will give them the consideration they deserve and work constructively to resolve any issues.

As a former global investor myself, I appreciate how important an open and transparent business climate is to any company looking to operate in a given country or region.

Access to markets, recognition of truly international standards, due process in procurement and protection of intellectual property: These are the factors that help foster mutually beneficial relationships between U.S. companies and African governments seeking to attract investment and create jobs.

To illustrate my point, the need for infrastructure development is huge.

And the way projects are procured plays a major role in their success.

There have been many failed infrastructure projects that can be traced back to the procurement stage.

In many countries in Africa, and around the world, for that matter, procurement is decided on the basis of the lowest price.

But while many may think they are saving money, we have seen repeatedly that when life cycles and quality factors are not considered in the procurement process, projects frequently face large cost overruns, safety or performance issues, and delays.

In short, you get what you pay for.

And so low cost procurement has not always been good for Africa.

Nor has it been good for U.S. companies, who tell us they can’t or won’t enter markets where low cost procurement is the norm.

In all, I am encouraged about the U.S.–Africa economic relationship.

We’ve recently witnessed several very positive developments regarding our trade relationship with Africa that give us hope for the future.

Since January 2014, the Commerce Department’s Advocacy Center has helped American companies win 29 separate major tenders in Sub-Saharan Africa.

The value of these “wins” was approximately $7.6 billion, with $2 billion in U.S. export content.

We have also seen an ever-increasing number of small and medium sized American businesses exporting to Africa.

U.S. firms are actively bidding on an additional 147 tenders in the region valued at more than $44 billion.

We’ve witnessed more and more American businesses pursing projects across the entire continent – not just in a few targeted markets.

And we’ve started to witness a small but incrementally growing number of African companies investing and creating jobs in the United States.

For example, Sasol (SAH-Sole), the South African energy firm, is fast approaching completion of a $9 billion ethane plant in Westlake, Louisiana.

The project is creating more than 500 full-time, high-paying manufacturing jobs, more than 5,000 in construction, and thousands more support jobs in Louisiana and across the United States.

We all can benefit from more of these exchanges in both directions.

I hope you will consider the Department of Commerce and the numerous Africa experts on our team as a resource as you continue your great work.

We do everything from providing market analysis and research, to assisting firms in identifying local partners or customers.

Beyond that, I look forward to gaining further insight from our Advisory Council on Africa members – all of which are private companies successfully doing business in Africa and supporting job creation in the United States.

U.S. companies continue to make their presence known in Africa because American ingenuity, premium brands, life cycle support, and technology transfers are key differentiators that we bring to the table.

We are headed in the right direction, but there is always room to improve.

I look forward to seeing what the future holds.

Thank you again for having me today.