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Volume 1 Issue 1 Fall 2008
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Volume 1 Issue 1 October 2008

 Contents

Democratization and Reform in Tunisia 8

Kevin Hudnell - University of North Carolina

A Well Oiled Machine 16

Sam Ayres - Yale University

The Implications of Sino-African Oil Trade 29

ChoonBoon Tan, Jacob Ng - University of Michigan

The Competition for Africa 44

John Dixon - University of Georgia

Dutch Disease in Africa: A Case Study of Nigeria and Chad 50

Jason Gould and Katen N. Kapadia - University of Michigan

SAPs and Stability in Sub-Saharan Africa 60

Valerie Bieberich - University of Michigan

Corruption in Africa 71
Rhea Acuña, Sae Wha Hong, and Deepti Iyer - University of Michigan

Microfinance and Women’s Empowerment in Africa 84

Kelly Goodman, Uday Vadula - University of Michigan

Realities of the African Stock Exchanges 92

Madison Iannone - American University

South Africa and Regional Peacekeeping Efforts 96

Amy K. Frame - American University

Africom: An Introduction 107

Erin Stubbs - University of North Carolina

Book Review: Stepping Out of the Silence 112

Kendal Nystedt - University of Arizona
 Think International
October 2008

Think International is the Roosevelt Institution’s first publication dedi-

cated solely to international policy and politics, and our first national foray
into international research. Each article examines a challenge facing the
African continent from a uniquely student perspective. The articles each
contain original student research and represent an exciting starting point
for growth in international affairs.

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 Letter from the Editor

Welcome to the premiere issue of Think International. This is Roosevelt’s

official entrance into international relations, coming at a very dramatic
time in the world. Given that so much of what is going on in the world will
greatly affect current students, it isn’t surprising that students want to
put their ideas out there. And honestly, the world could use some of their
voices right now. Today’s current students have unique perspective on the
world and international relations, having grown up during the very develop-
ments that so greatly altered the international system. Times are changing
quickly, and we are the generation who has come of age in the midst of
these changes.

The unique perspective of our generation very much struck me when I

observed a conversation between a friend and his mother. His mother had
read an article detailing how graduating college students should expect
to have more than 9 careers in their lifetime. She wasn’t sure the statistic
was believable, but found it very disturbing if it was. Upon hearing the
story, my friend simply shrugged—“Yes?” The idea of globalization and the
changes it brings are simply the framework this generation lives in, along
with the current sole superpower status of the United States, the presence
of terrorism, and the ability to connect with anyone anywhere at anytime,
and it is this perspective that seems to get lost amongst the debates of
how to shape international relations. This is also the perspective brought
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of that voice.

Ellen Davis
Policy Strategist, Defense and Diplomacy
 Acknowledgements

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tion, and to Michael Stegman and the MacArthur Foundation for making this series possible.

Thank you.
 Democratization and Reform
in Tunisia
Kevin Hudnell - University of North Carolina

Washington’s support for the oppressive govern-

ment of Tunisia should come as no surprise – the
U.S. has a long and sordid history of ill-considered
support for dictators in the Middle East. U.S. back-
ing of the Shah in Iran resulted in a revolutionary movement diametrically
opposed to the West, particularly the United States. Considerable military
aid to another U.S. ally, Saddam Hussein, prevented a similar revolution in
Iraq, but Saddam’s Iraq could hardly be considered a strong geostrategic
asset.
While the mistakes of U.S. policy in the Middle East have been
reiterated for decades, and are therefore, if not particularly intelligent, at
least quite familiar, this is hardly comforting. Though it might be hoped
that U.S. experience at getting things wrong might have transformed into
some knowledge of how to get things right, current policies unreservedly
backing the Tunisian government would appear to be yet more of the
same failure.
In some cases, looking the other way while key geostrategic allies
of the U.S. repress dissidents and avoid democratization like the plague
may be a necessary, if regrettable, aspect of survival in the international
arena. In Saudi Arabia, the mildly Islamist but pro-U.S. Saudi royal fam-
ily is presumably preferable to the rabidly Islamist and anti-U.S. Wahhabi
opposition, and American energy dependency exacerbates the need for
a conciliatory policy towards the royal family. While the exchange rate
between petrodollars and human rights has always been uncertain, it is
apparently strong enough to justify rubber stamping the excesses the
Islamist regime
Tunisia has no vital geostrategic or economic val- enacts on its
ue to the U.S., and Washington’s close relationship people. Other
with Tunis is founded upon the fear of a terrorist countries, like
threat that has little or no basis in reality. Egypt, may be
so strategically
placed that any
source of stability is welcome, even if that stability is dictatorial in nature.
Yet while such special cases exist, it is more often the case that there is
no geostrategic demand so weighty that it outweighs the damage done by
U.S. support for dictatorial regimes.
Often, U.S. fears about democracy abroad and our conviction that
only dictatorships can be reliable allies is more of a knee-jerk reaction to
public opinion polls than a well-reasoned consideration of the states in
question. Recent democratizing reform in Pakistan, while inarguably prob-
lematic, has not resulted in an immediate descent into chaos and Islamist
extremism, as many feared. In time Pakistan may prove to be a stable U.S.
ally that can cooperate in the War on Terror without having to simultane-
ously deal with widespread domestic unrest. In contrast to Saudi Arabia,
Egypt, and even Pakistan, Tunisia has no vital geostrategic or economic
value to the U.S., and Washington’s close relationship with Tunis is found-
ed upon the fear of a terrorist threat that has little or no basis in reality.

A Very Brief History of Tunisian Polity

The current president of Tunisia, Zine el-Abidine Bin Ali, came to power in
1987 after deposing the former president Habib Bourguiba in a bloodless
coup. Popular unrest over Bourguiba’s autocratic tendencies and political
repression made Bin Ali a welcome change, particularly after he called for
multi-party politics, a free press, and the development of a liberal society.
The leadership of the Islamic Tendency Movement (ITM), imprisoned un-
der Bourguiba, was released and the party was allowed some participation
in politics. Bin Ali’s new constitution did not allow political parties based
on religion, however, and the ITM renamed itself Hizb an-Nahda (NP), or
Renaissance Party, a theoretically secular body.
The democratizing process rapidly fell apart. Polling results in
1989 suggested that the NP would win 25-35% of the vote in many
districts. In reaction to the perceived threat the party could one day pose
to his own Democratic Constitutional Rally (RCD) party, Bin Ali declared
the NP and political Islam in general illegal and moved to consolidate his
power before the first general election. In 1989 the RCD won every seat of
parliament, and Bin Ali was reelected with 99% of the vote. Later elec-
tions, though featuring multiple candidates, have restricted media access
to Bin Ali, and the results have been much the same – Bin Ali received
94.49% of the vote in 2004 and 99.4% of the vote in 1999.
Bin Ali’s government has maintained a veneer of democracy over
what is in reality an autocratic, single-party government. While the Tu-
nisian constitution guarantees a broad spectrum of basic rights, these
rights are routinely ignored or violated. Rights may be constitutionally
limited in the interest of “the protection of others, the respect for public
order, national defense, the development of the economy, and social prog-
ress,” which gives the government ample room to behave freely yet nomi-
nally in agreement with the constitution. Arbitrary arrests and confessions
elicited through torture are common, and an antiterrorism law enacted in
2003 has been used to criminalize and disperse or arrest peaceable politi-
cal opposition. Tunisia’s press freedoms are among the most restricted
in the Arab world, and the government uses domestic security forces to
intimidate journalists into practicing extensive self-censorship. Nongov-
ernmental organizations are routinely shut down, their property seized,
and their members prosecuted for membership in an illegal organization.
Loyal opposition parties are co-opted into the RCD and provide only token
resistance to Bin Ali’s policies.
In 2002 a number of revisions were made to the constitution by
Bin Ali. Though Bin Ali came into power criticizing the president-for-life
Bourguiba’s unlimited terms in office, the amendments abolished the term
limits on the presidency, raised the age limit for presidential candidates
from 70 to 75, and granted immunity to the president for acts committed
while in office, effectively making Bin Ali Tunisia’s second president-for-
life. Another amendment requires all citizens to defend Tunisia’s indepen-
dence, national sovereignty and integrity, which many activists fear will be
used against citizens who criticize the regime and its policies.
Throughout the 1990s the leaders of the NP were imprisoned, tor-
tured, or killed, and thousands of the party’s members have been stripped
of their citizenship and property. The surviving apparatus of the party
leadership has relocated to London, where it has attempted to continue as
the main opposition to the RCD. However, between the persecution of Isla-
mists in Tunisia and the party’s separation from the Tunisian population,
its influence and standing have diminished significantly. Rashid Ghan-
noushi, the NP’s leader-in-exile, has nevertheless crafted a complex and
unique blend of political Islam and Western democratic values, espousing
equal rights, democratic political pluralism, and liberal civil society as key
reforms that the party seeks to bring to Tunisia.
The NP has been outspoken in its rejection of Islamic terrorism.
While Bin Ali has made allegations, directly and through various media
organs, of NP ties to terrorist acts since the 1980s, all evidence suggests
that the party is truly pacifist. The NP has advocated women’s rights
far more than any other Islamist party, asserting their right to political,
economic, and social equality and barring to them only the position of
the presidency. The party is on good terms with other Tunisian opposition
parties both in Tunisia and in exile, including secular parties, and stresses
that it seeks power through the democratic system. As such, Ghannoushi
says, an Islamist government brought in through democratic means could
be voted out again just as easily if that was the will of the populace.
In the late 1990s the U.S. made some effort to institute democrat-
ic reforms in the Maghreb, and recognized the key role peaceful Islamist
parties could play in the democratic process. In 1997, then-Assistant
Secretary of State for Near Eastern affairs Robert Pelletreau said:
The U.S. government has long believed and has repeatedly stressed to
Algerian leaders at the highest level that there is an urgent need for real
political dialogue… to chart a new and democratic course for Algeria. We
agree with the major parties, which insist that this process must involve
a broadening of political participation to encompass all political forces in
the country, including Islamist leaders who reject terrorism. Pelletreau was
optimistic about this process in Tunisia. Unfortunately, the slow process
of reforming a country the U.S. populace was indifferent to was interrupt-
ed by al-Qa’ida’s terrorist attacks on September 11th.

Tunisia and the War on Terror

September 11th appeared to vindicate every act of oppression Ben Ali had
ever committed in keeping the Islamists in check. The U.S., searching for
any regional allies it could find, dropped its admittedly lackluster efforts
to democratize Tunisia and call it to account for its human rights record,
and embraced Bin Ali as a key U.S. ally in the War on Terror. After a 2003
meeting between Secretary of State Colin Powell and Tunisian Foreign
Minister Habib Bin Yahia, the State Department described Bin Ali’s govern-
ment as “a strong supporter of our campaign against terrorism.” Secre-
tary of Defense Donald Rumsfeld later remarked after meeting with the Tu-
nisian military leadership that “they [Tunisian leaders] have demonstrated,
if one looks at this successful country, the ability to create an environment
that’s hospitable to investment, enterprise, and to opportunity for their
people.” Nothing was said about democracy or human rights.
Tunisia received extensive military aid, and the U.S. has generally
accepted Bin Ali’s autocratic regime, but it is difficult to determine exactly
what Washington has gained from the U.S.-Tunisian alliance. Tunisia’s vot-
ing record in the UN does not suggest that it is a particularly staunch U.S.
ally – in 2006 Tunisia’s voting record corresponded with the U.S. record
on 6.2% of the votes, which is about the same level of agreement as the
U.S. had with North Korea and actually slightly less than U.S. agreement
with Iran. On what the State Department describes as ‘Important Votes,’
most dealing with major sanctions or human rights motions, the U.S. and
Tunisia never agreed.
While Tunisia may not have been the closest ally ideologically, Bin
Ali did play a major role in the U.S. Global War on Terror (GWOT), keeping
the Islamist political party Hizb an-Nahda firmly out of power and working
to prevent the spread of al-
Qa’ida or other jihadi terror September 11th did nothing to make
organizations into Tunisia Tunis’ political repression nobler; it
and the greater Maghreb. only provided enthusiastic U.S. en-
However, the relationship dorsement for that repression.
between Bin Ali’s work sup-
pressing Islamists and the
advancement of GWOT is tenuous at best. Given the NP’s pacifist ideol-
ogy and unequivocal rejection of the 9/11 attacks, al-Qa’ida, and suicide
terror in general, it is difficult to see how their exclusion from the politi-
cal sphere aided GWOT at all. Furthermore, since Bin Ali’s crackdown on
the NP began in the late 1980s, it is difficult to see how it was motivated
in any way by an interest in assisting the U.S. war. Bin Ali’s repression of
the Tunisian Islamist movement had always been a measure to ensure the
regime’s security against rival domestic centers of power. September 11th
did nothing to make Tunis’ political repression nobler; it only provided
enthusiastic U.S. endorsement for that repression.
The idea that Tunisia has ever been in dire peril of falling to al-
Qa’ida is also difficult to sustain. Since 9/11 there has been a single
suicide terror attack in Tunisia that may have been linked to a jihadi orga-
nization with links to al-Qa’ida. As of 27 April, 2005, only seven Tunisians
had been captured in Iraq and Afghanistan who were suspected of having
links to al-Qa’ida or other jihadi organizations. While possibly significant
compared to the three Chinese captured in the same period, these seven
hardly indicate a mass movement, let alone justify Washington’s tacit en-
dorsement of Bin Ali’s government.

Future Threats to the Status Quo

Balanced against these benefits of the U.S.-Tunisian alliance are the many
potential disasters in the country’s future if the status quo continues and
Bin Ali remains in power. One of the most immediately worrisome is the
strong possibility of a destabilizing power struggle following Bin Ali’s
death. Bin Ali is now in his 70s and purportedly has prostate cancer. He
has been careful not to groom any successor, fearing (perhaps rightly) that
a powerful lieutenant would harness popular discontent to remove him
from power in the same way he ousted Bourguiba. To prevent the emer-
gence of any rival centers of power, Bin Ali has brought in cabinet mem-
bers who lack the political background or connections needed to make
them viable competition for the presidency, and he frequently shuffles
cabinet ministers to keep them from developing loyal constituencies. As
such, a power struggle within the party would probably not end with a
competent ruler in charge even if it stayed peaceful.
Following Bin Ali’s death, according to the Tunisian constitution,
power will temporarily pass to Mohamed Ghannoushi, who has served as
the prime minister for the last nine years. Ghannoushi, while probably the
closest Tunisian polity can come to an able successor to Bin Ali, is con-
stitutionally barred from being any more than an interim president who
arranges new elections, and may not participate in them himself. While
Ghannoushi could certainly still take control of the Tunisian government
after Bin Ali’s death, the transfer of power would of necessity take the
form of a coup, which could be as easily bloody as bloodless. Leila Bin Ali,
the President’s wife, is also a potential successor. While there is absolutely
no constitutional basis for her to become President herself, she has argu-
ably the most experience in running the state besides Bin Ali himself, hav-
ing been very involved in some aspects of his government. Unfortunately,
U.S. support for either figure would cement the public perception of a
commitment to expediency over democracy and undermine our democra-
tizing efforts worldwide. ,
If no competent ruler emerges after Bin Ali’s death, the US could
not afford any ensuing violent power struggle. Foreign interference in the
Tunisian power struggle from either Algeria or Libya, its two immediate
neighbors, could be disastrous. Militarily Tunisia is significantly inferior
to both of its neighbors. Its total active military in 2005 was estimated
to be 35,000, compared to Algeria’s 127,500 and Libya’s 76,000. Given
the comparative extremism of both the Algerian and Libyan regimes, a
weak or nonexistent Tunisian government could suffer from the rise of
the jihadi-brand extremism Washington is so worried about. Against this,
one can assume that the U.S. would act to protect the current regime of
what it sees as the bastion of democracy and secularism in North Africa
if faced with the rise of its more radical neighbors. Whether or not the
U.S. military is currently capable of engaging in a third peacekeeping and
counterinsurgency effort in the Middle East is another question altogether.
Maintaining the status quo of U.S. policy is dangerous even while
Bin Ali is still alive. The prominent political scientist Robert Dahl once
noted “opposition that would be loyal if it was tolerated becomes dis-
loyal because it is not tolerated,” and such may soon be the case with the
Tunisian Islamists. The NP’s influence in Tunisia has inevitably declined
over the course of its exile in Europe. While the party maintains that it
continues to have a strong following in Tunisia, particularly on university
campuses, the same student body that it claims to court appears to be
growing increasingly radical. From 1975 to 1990, as Islamist parties were
given increasing opportunities for formal political engagement under Bour-
guiba and, at first, under Bin Ali, their stances on democracy and rights
for women and minorities moderated dramatically. Subsequent repression
and political ostracism, however, saw the movement revert to its most
radical positions on many issues. Hizb an-Nahda remains the most well
known outlet for political Islam, and given a voice it could still be the Isla-
mist rallying point for Tunisians. But if the party continues to be repressed
with the apparent blessings of the U.S., Tunisian Islamists may well turn
to another Islamist movement that is less conciliatory and more focused
on war with the West.

Taking Some Steps in a New Direction

Current U.S. policy towards Tunisia is headed down the same path as our
support for the Shah in Iran and Hussein in Iraq. Unwavering support for
Bin Ali’s repression of all political dissent can only end badly. If domestic
opposition to Bin Ali reaches such
This is an opportunity to engage a fever pitch that it succeeds in
political Islam in the ‘war of overthrowing him, then the new
ideas’ that the War on Terror is regime is likely to not be at all
supposed to be about. As slow a friendly towards the U.S., and our
learner as the U.S. government putative ally will have become an
is, it has begun to realize that enemy overnight. If Bin Ali, who
shares no ideological values with
such a war cannot be won solely
Washington, except a desire to
on the strength of military ven- hold on to power, decides that
tures – the underlying ideology he no longer needs U.S. support
must be confronted and proved to for his policies, then, again, our
be undesirable. putative ally will have become an
enemy. Only by finding a new po-
litical balance, one that satisfies the widespread discontent of the Tunisian
populace, can a sustainable and stable ally be found in Tunisia.
Washington needs to pressure Bin Ali and the Tunisian government
to regulate the status of the thousands of Tunisians who have been exiled
for their affiliation with the NP. Claiming to represent the majority of the
population – which Bin Ali most assuredly does not – loses its persuasive-
ness when one’s opponents have all been thrown out of the country. A
serious assessment needs to be made of the value of the U.S.-Tunisian al-
liance from both the U.S. and Tunisian sides. If that alliance is valuable to
the U.S., how long will it remain so? What will the repercussions be? If that
alliance is valuable to Tunisia, what are they willing to do to keep it?
Rashid Ghannoushi and Hizb an-Nahda have extended the biggest
olive branch yet seen from the Muslim world to the West, blending the
core tenets of political Islam with the core tenets of democracy and liberal
society. Allowing this olive branch to wither would be a colossal public
diplomacy failure, and will lose, possibly forever, the unique opportunity
presented in the NP. This is an opportunity to engage political Islam in the
‘war of ideas’ that the War on Terror is supposed to be about. As slow a
learner as the U.S. government is, it has begun to realize that such a war
cannot be won solely on the strength of military ventures – the underlying
ideology must be confronted and proved to be undesirable and disadvan-
tageous. Current policy makes the choice appear to be between secular-
ism and destruction, when presumably the U.S. wants Islamist movements
to choose legitimate political activity instead of violent terrorism. Allow-
ing, or even encouraging, the growth and development of peaceful and
modernizing Islamist political parties would make this clear. On the other
hand, helping to suppress a demonstrably peaceable Islamist movement
makes it difficult to sustain the argument that the U.S. is waging war on
terrorism, not the religion of Islam. Pushing for democratization in Tunisia
sends two important messages: first, that the U.S. does not approve of
dictatorship as a general rule, and second, that Islam and peaceful de-
mocracy don’t have to be mutually exclusive ideas.
The NP presents an idea of political Islam in stark contrast to that
of al-Qa’ida and the broader jihadi movement. The party, and the revo-
lutionary ideas it represents, are the best chance the West has of forg-
ing a sustainable peace with political Islam, and allowing that chance to
disappear because of an ill-considered and unnecessary alliance with a
dictatorial regime is foolish to say the least. As the U.S. strives to reinvent
itself following eight years of the Bush administration, all that is needed
to rejuvenate Tunisian polity and create, not a bastion of secularism, but a
bastion of peaceful Islamism that offers an alternative to the jihadi move-
ment’s ideology of hatred, is the audacity of hope.

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 A Well Oiled Machine:
The Disastrous Effect of Oil on
Democracy in Africa and What to
Do About It
Sam Ayres - Yale University

“WATER, WATER, EVERYWHERE, NOR ANY DROP TO DRINK.”

– Rime of the Ancient Mariner, Samuel Taylor Coleridge

The Curse
“The problem is that the good Lord didn’t see fit to put oil and gas re-
serves where there are democratic governments,” said Vice President Dick
Cheney in 2000. Maybe. But could there be another reason for the link
between oil and undemocratic regimes, aside from divine intervention (or
lack thereof)? Does oil hurt democratization in developing countries— es-
pecially in Africa?
Yes. Indeed, oil is “among the fiercest anticapitalist, antidemo-
cratic forces in Africa.” It has been shown to create governments hostile
to democratic change and the citizens who want it; corrupt, repressive
regimes’ antidemocratic and authoritarian mechanisms are greased and
powered by oil exports. Simply put, “oil wealth makes states less demo-
cratic.” Can proponents of democracy change this? Can we, in a sense, re-
place the undemocratic elements of governments and create democratic
machines (as opposed to unresponsive and repressive authoritarian ones)
that run smoothly for the benefit of the citizenry? To answer these ques-
tions, this paper seeks to first examine why oil has a chronic and severe
antidemocratic effect in developing countries; second, critique past rem-
edies that have attempted to promote democracy; and, third, detail some
new approaches which might work toward creating stable, well-functioning
democratic machines that can withstand the flow of oil between their
gears and levers. The paper will argue that one of the most important
lessons those interested in promoting democracy can take away is the ur-
gency of the situation. Africans and citizens of the global north alike who
wish to see democracy in Africa must focus, and focus quickly, on those
African countries which will soon be hearing the creak of pumpjacks.
This paper will contribute to the discourse on oil and democracy
for a few reasons. A lot of attention has been paid to the disastrous effects
of oil on economic development, known as the ‘resource curse’, wherein
“many of the poorest and most troubled states in the developing world
have, paradoxically, high levels of natural resource wealth” (and, unsur-
prisingly, are more likely to be caught in cycles of internal conflict). How-
ever, less attention has been paid to oil’s effect on democracies in develop-
ing countries.
Fewer studies still have focused exclusively, as this paper will, on
African countries. Much of the academic research into the negative effect
of oil on democratic regimes has focused on the Middle East; part of this
paper’s project is to argue that these theories can and should be applied
to Africa, which provides a good arena within which to evaluate democracy
promotion mechanisms because Africa lacks some of the variables that
complicate studies of democratization in the Middle East.
Focusing on Africa is furthermore extremely important—and press-
ing—because oil will soon start flowing in a number of African countries
where democratic promotion might have a substantial and positive effect.
Those in Africa and the West interested in seeing democracy function in
Africa are confronted by both a big challenge but also a unique opportu-
nity.

Oil in Africa
Africa plays a surprisingly large role in the global oil market, one “which is
more important to the West than most people know.” People often hear of
repressive regimes in the Middle East, and even South America, propped
up by oil revenue, but the West would do well to focus its attentions toward
Africa: the United States in 2005 imported more oil from Africa than from
the Middle East.11 More specifically, the Gulf of Guinea—the area on
the coast of West African from Nigeria down to Gabon and the Republic
of Congo— sold more barrels of oil to the United States than did Saudi
Arabia and Kuwait combined. Currently, Africa provides “one of every nine
gallons of fuel being pumped into any given car, anywhere in the world, on
any given day.” Moreover, roughly a dozen African countries are poised to
“experience little oil booms of their own,” further enlarging Africa’s role
in petro-politics. Certainly, the U.S. government and American companies
are looking toward this area for future investment, so that by 2015, it is
estimated that one of every four gallons of gas put into American cars will
be from sub-Saharan Africa.
The oil industry sees Africa as a promising place for investment.
Most of the supermajors are steadily increasing their investments in Afri-
can countries. By 2010, another $50 billion will be invested in exploring
and producing African oil. Chevron alone will spend $20 billion over five
years. What Africa lacks in sheer quantity it makes up for in accessibil-
ity and quality. The oil in much of Africa is considered to be ‘light’ and
‘sweet,’ meaning it is “easier and cheaper to refine than … Middle Eastern
crude” and less troublesome when it comes to environmental restric-
tions upon refinement. In addition, much of the oil is more accessible
and thus the shipping costs are lower because Africa is “almost entirely
surrounded by water, which significantly cuts transport-related costs and
risk.” Moreover, the continent’s business environment is incredibly favor-
able: most of the contracts between foreign or international oil companies
and the African states where they drill are what are known as production-
sharing-agreements, or PSAs, wherein the oil company is reimbursed for
all costs incurred pre-flow of oil. This is highly advantageous for the com-
panies, but not always so beneficial for the developing countries that sign
onto these deals. Finally, oil companies like when the oil is offshore—and
thus far away from any violence, instability, or political repression in the
country who owns the area being drilled. This allows companies to get in
and get out without concerning themselves with what is occurring on land.
What might not concern oil companies, however, should and does
concern those who would see democracy and a respect for human rights
promoted in Africa. There is often a nasty underbelly to the exportation of
oil. The crude can be more than merely antidemocratic; it can and does
fund some of the worst dictatorships in the world, and those funds can
often be traced back to America. Take, for example, Equatorial Guinea,
known to many as “Africa’s concentration camp.” Nearly all of the major
oil firms doing business with this country are American. In 2005, Ameri-
can companies ExxonMobil and Amerada Hess, as well as the Washington-
based Riggs Bank where Equatorial Guinea’s President Obiang deposited
over $700 million into his personal account, were brought under Senate
investigation for their allegedly illicit dealings with Equatorial Guinea.
At the hearings, Senator Carl Levin (D-Mich.) asked the head of
Riggs Bank, after dealing with Obiang, whom Levin compared to Saddam
Hussein, “How do you basically live with yourself?” Levin (and we) might
ask the same of Con-
doleeza Rice who is
The U.S. has a strategic interest in promot-
following Hess’s lead
in cozying up to “one
ing democracy in Africa if we do not want to
of the most brutal, see the continent follow the Middle East and
most corrupt and un- become a nidus of anti-Americanism while
reconstructed dicta- American funds enrich despotic rulers.
tors in the world”: not
long after this Senate
hearing, an obsequious Rice personally welcomed and met with Obiang in
Washington, calling him a “good friend.” In 1999, the same U.S. State De-
partment Rice now heads detailed in a report how Obiang’s security forces
tortured and killed prisoners by “urinat[ing] on [them], kick[ing] them in
the ribs, slic[ing] their ears with knives and smear[ing] oil over their naked
bodies to attract stinging ants.” In addition to the ethical imperative for
the U. S. to diplomatically shun dictators of the Obiang sort and to ensure
that the countries with which the US does business provide for and protect
their citizens, the U.S. has a strategic interest in promoting democracy in
Africa if we do not want to see the continent follow the Middle East and
become a nidus of anti-Americanism while American funds enrich des-
potic rulers.

How Oil Impedes Democratization

A thorough understanding of exactly how oil exportation undermines or
impedes democratic development is necessary to then examine ways to
combat oil’s corrosive effects and help build stable and secure democ-
racies in oil-rich African nations. Aside from anecdotal and journalistic
insights, there have recently been a number of empirical and theoretical
insights into the effect of oil on democracy. The most important causal
links between oil and democracy are the rentier effect (the taxation effect
and the spending effect) and the repression effect, both of which are pres-
ent in African countries.
Rentier State
Economists refer to states that rely upon natural resources for the bulk
of their exports and revenue as ‘rentier states,’ and it has been shown in
such cases that oil wealth “inhibits democratization.” Specifically, rentier
states are “countries that receive on a regular basis substantial amounts
of economic rent.” In other words, a rentier state’s “whole society can live
as rentiers, that is, on unearned income from wealth.” Imagine these oil-
rich countries as landlords: extractive industries like oil and diamonds, as
opposed to industries like agriculture, earn such high amounts of revenue
relative to the labor input and overhead required that it is as if they are
earning ‘rent’ on the land they happen to own without having to put much
work in. This is the root cause behind the economic resource curse.
And yet, “[a]s devastating as the effects of the rentier state are
on the economy of a resource-rich nation”—indeed, roughly 1/3 of the
people in the bottom billion economically live in resource-rich nations—
“they pale in comparison with the political effects.” “The heart of the
resource curse is that resource rents make democracy malfunction” be-
cause they so drastically “divorce the government and its management of
the economy from the day-to-day needs and the economic activity of the
population.”

Taxation Effect
One of the ways governments in oil-rich countries become divorced from
the populace is through the ‘taxation effect.’ The taxation effect might
be stated as follows (inverting the well-known cri de ceour of the Ameri-
can Revolution): “no representation without taxation.” The taxation effect
in an oil-rich country “suggests that when governments derive sufficient
revenues from the sale of oil, they are likely to tax their populations less
heavily or not at all, and the public in turn will be less likely to demand ac-
countability from—and representation in—their government.” This lack of
need to tax negatively affects the actions and ideology of both the politi-
cians and, importantly, the citizenry:

“When leaders no longer feel the need to tax their citizens to raise revenue, they
become far less interested in what those citizens think about them, and unre-
sponsive to complaints about their job performance. Meanwhile, citizens who
pay little or nothing in taxes become far less interested in politics, and begin to
see the cash-rich state as simply a source of lucrative contracts and easy favors.”

Thus, oil revenue limits or acts against what Carothers calls both the “sup-
ply” of democracy—the state or government institutions are less receptive
to democratic input because they don’t need to be—and the “demand” of
democracy—citizens lack a democratic mentality, and are thus less likely
to demand democratic processes.
Case Study: Nigeria
The preeminent example of the devastating taxation effect in Africa is
Nigeria, a country universally recognized to be “a case study in the sort
of chaos and destruction that an oil boom can wreak on an otherwise
promising nation.” In Nigeria, the lack of taxation, which shifted the gov-
ernment’s attention away from the people, has now shifted the people’s
attention away from politics, and specifically away from democracy and
the process it is meant to bring about: the provision of public goods.
Many people have given up on ‘demanding’ democracy because
the government never supplied it, and now their only means for procur-
ing a livelihood is to ‘cheat’ as well. As one observer noted, “After years
of watching their patrimony squandered in this way, a large percentage of
the … population feels abandoned by both national and local politicians,
and has settled on illegal bunkering as the most direct way to ensure that
they benefit from their own oil wealth.” The failure of democracy and sub-
sequent lack of democratic demand has had dangerous consequences: it
disenfranchised and thus estranged factions within the country—who have
now armed themselves. Thus, Nigeria provides a good illustration of Col-
lier’s conclusion. In addition, Nigeria leads to the next problem, the spend-
ing effect, where what gets undermined when there is no taxation is “not
electoral competition but the political restraints on how power is used.”

Spending Effect
A rentier state’s movement toward democratization is also severely
crippled by the spending effect, wherein the vast amount of oil wealth
available to politicians allows them to spend in ways (namely, through
patronage) that “dampen latent pressures for democratization.”50 This is
arguably the single biggest problem afflicting democratization in oil-rich
developing nations, especially in Africa. The vast amount of oil-wealth in
developing democracies hinders democratization in two ways: by com-
pletely undermining free, fair, and competitive elections and through sub-
sequently deflating the demand for greater, more structural advancements
toward democratization.
A vast amount of oil-wealth (resource rents) in the pocketbooks of
politicians undermines the way in which elections can be competitive and
fair. “An abundance of resource rents alters how electoral competition is
conducted,” Collier notes, so that it becomes the “survival of the fattest.”
The vast amount of cash on-hand allows for politicians to essentially buy
votes and, thus, power. In non-corrupt elections, politicians must try to
win votes in the “most cost-effective manner,” which normally takes the
form of providing public services and public goods to the citizenry (so that
a large group of people benefit from the money spent). This is the record
upon which the politician will then be judged by the populous. As such,
politicians see the provision of public goods—i.e., responding to the needs
of the public—as the path to winning an election: the candidate seeks to
“deliver public services such as infrastructure and security more effectively
than rivals can.” It is, theoretically, a competition between who can best
provide for and respond to the citizenry.
 The exact opposite happens in resource-rich developing democra-
cies. These countries, when in the infancy of democracy, are more suscep-
tible to patronage systems because buying votes becomes cost-effective
for two reasons. First, oil-rich countries in Africa are especially (but not
exclusively) susceptible to patronage electioneering because of their
ethnic loyalties and diversity. Essentially, “[p]atronage starts to look cost-
effective for a political party if votes can be bought wholesale by bribing a
few opinion leaders,” and this happens when and where ethnic allegiances
are strong. Collier found that in developing democracies, politicians can
manipulate the group-voting practices because “voter loyalty to ethnic
communities is strong and … the objective information available to the
typical voter is weak.”
This propensity to vote along ethnic lines (and thus at the urging
of one or a few ethnic or community leaders) combines with a second
cause to entrench a disastrous system of patronage election: a lot of
cash, and no one to stop politicians from stealing it. When checks-and-
balances are in place, patronage is too expensive and difficult. However, in
immature democracies (or non-democracies, for that matter), the govern-
ment does not find it hard to funnel the public money into “slush funds”
because there are no strong and “effective” checks and balances.
Thus, we see how oil wealth in immature democracies creates a
nasty and destructive cycle. Few or weak internal checks and balances
ensure that elections are non¬competitive, so the leaders who benefit
from the undemocratic process maintain the status quo and thus further
undercut democratization. In Collier’s terminology, it follows that without
“limit[s] [on] how power is used,” power can be “achieved” in an unfair
and patently undemocratic manner. Thus, the system rewards those poli-
ticians who can strategically cheat by distributing large sums of money to
buy votes: it creates “the survival of the fattest.”

Case Study: Gabon

Gabon illustrates the spending effect in practice, since oil has held the
country in a
Gabon’s chances for true democratization have stage of demo-
been brought to a screeching halt, along with its cratic stagna-
rusty $4 billion ‘choo-choo train’, not through tion (without an
force or violent repression, but through the sheer overly oppres-
overabundance of oil wealth and the chronic non- sive or violent
existence of checks and balances. regime) for
decades. Omar
Bongo has now
been president of Gabon for 40 years, even after single-handedly showing
off the truly sui generis levels of corruption and waste capable in African
countries. Bongo insisted on building the Trans-Gabonais railroad, which
was forecasted to be an irresponsible and “crippl[ing]” project that would
obviate any chances Gabon had for healthy development. Fourteen years
and $4 billion later, President Bongo’s “spectacular mismanagement of
his country’s oil boom … left him with ‘little more than a handful of rust-
ing factories, a choo-choo train, and a massive government debt.’”
In a functioning democracy, President Bongo would have been
voted out—he failed, and failed miserably, to provide a public good. But
despite his (criminal) financial malfeasance, Bongo is still president for
precisely the reason outlined above: patronage undercuts electoral compe-
tition. He has shown “an impressive ability to buy the loyalty of potential
opposition figures at home.” In the words one Gabonese sociologist:

“Every time ordinary people try to create a political party, the pow-
ers that be find out who their leader is, call him in, and hand him a fat en-
velope. He quickly shuts his mouth and you never hear from him again.”

As a result, there is no electoral competition and “no credible

alternative to rally behind” politically. This is a case where, it should be
noted, Gabon’s chances for true democratization have been brought to
a screeching halt, along with its rusty $4 billion ‘choo-choo train’, not
through force or violent repression, but through the sheer overabundance
of oil wealth and the chronic nonexistence of checks and balances.

Repression Effect
Not all oil-rich dictators retain power through loads of cash like Bongo;
some opt for less benign tools. Thus, when the repression effect takes hold
in resource-rich countries, the citizens in those countries find themselves
confronted not with the suasion of Bongo’s money, but with tanks and
guns and batons. In other words, citizens in oil-rich countries “may want
democracy as much as citizens elsewhere, but resource wealth … allow[s]
their government to spend more on internal security and so block the
population’s democratic aspirations.”
There are two reasons why the repression effect comes about, and
oil is at the root of both. First, the government can afford to arm itself.
Second, the presence of oil brings about the need, in the government’s
eyes at least, for a larger military presence. Because resources are often
located in “concentrated” areas of the country, extraction often fosters or
exacerbates conflict between the government and local peoples at those
sites. For example, the Niger Delta has seen a huge increase in armed
groups, who are both upset with the government’s extraction policies and
able to buy arms caches because of their illegal bunkering. Ross shows
through regression analysis that “racial, national, or language divisions do
not explain why oil-rich states spend so heavily on repression”— rather,
the data indicate that oil-rich states’ military spending is in response to
domestic pressures, often for democratic change. In other words, the
backlash from mismanagement, graft, corruption, and generally undemo-
cratic governance often forces the government to resort to military build-
up to secure itself against mounting domestic pressures. As an indication
of this need, OPEC members’ military budgets from 1984 to 1994 were
ten times those of other non-OPEC developing countries, and three times
those of developed non-OPEC countries.
It is not hard to see how a large, intimidating military presence
impedes the processes necessary for democratization: the ability to con-
gregate, to speak and publish freely, and to participate in free, fair elec-
tions can be put to a very real by the mere presences of baton-wielding or
rifle-strapped soldiers.
Case Example: Congo
In the 1990s and early 2000s, the Republic of Congo was plagued by a
bloody civil conflict, in which 10,000 Congolese died. The conflict is widely
accepted to have been over oil, which started to flow in the 1990s. Indeed,
the large military build-up by the government intimidated critics into qui-
etude and suppressed movements toward democratization (as predicted
by the repression effect). The year 2002 marked one of the fist times that
criticism of the government was openly voiced (by the Archbishop of Braz-
zaville). In the words of a Congolese human-rights activist, the oil manage-
ment by the government was a “taboo” issue. As Ghazvinian succinctly
sums up: “oil has fueled a bloody civil war that has left the population
traumatized and afraid to speak out against the country’s high-level cor-
ruption.” Evidently, the state’s oil-financed repression was effective.

What To Do?
All of these problems boil down to one phenomenon: the leaders have vast
amounts of oil revenue to use at whim. As I have outlined, this oil revenue
allows leaders to circumvent necessary taxation, gut competitive elections,
and build up militaries to maintain power by suppressing or intimidating
popular movements for democracy. So, what can be done to combat the
devastating effect of crude? Some ideas on what and what not to do—and
when—can be drawn from the knowledge that was applied to a real-world
example: Chad. This case study provides an opportunity to survey why the
Chad project failed and points to some of the most promising potential
remedies for countries that will soon start see the thick, black liquid spurt.

Chad
In 1998, between 800 million and 1 billion barrels of crude oil were
discovered by ExxonMobil’s seismic explorations in the chronically under-
developed country of Chad. A number of factors at play set Chad up to be
a prototype for success: the international community, especially the World
Bank, having seen oil’s ravaging effects, saw Chad as a place where oil
revenue might, for once, not impede an African country’s development and
democratization. ExxonMobil had seen the same corrosive effect of oil in
the countries where they drilled—and were aware of the growing outside
concern over this corrosion—so the supermajor was worried about a PR
disaster (to boot, the oil would have to run through 600 miles of pipeline
cutting through the Cameroonian rain forest in order to eventually empty
into the Gulf of Guinea, as Chad is landlocked).
This gave the World Bank a position of “leverage”: ExxonMobil
needed a good PR face, while Chad needed the infrastructure help and
was “totally dependent on international aid.” As such, “never before had
[the World Bank] had such a chance to lay out chapter and verse how a
government could and could not spend its money.” So, the World Bank,
Chad, and ExxonMobil teamed up to ‘do this one right’, by demanding
that all of the oil royalties go directly from ExxonMobil to an escrow ac-
count at the Citibank in London. The delineation of how Chad could spend
its oil revenue was as follows: 10% went to permanent savings for when
the oil was no longer flowing; 80% had to go to priority sectors (education,
health, development, infrastructure, and a stipulated 5% for the oil-pro-
ducing region); the remaining 10% could be used at the Chadian govern-
ment’s discretion.
By 2005, Chad was the most corrupt country in the world. (It is
still one of the most corrupt—and disintegrating—countries.) In 2005,
Chad began funneling money from the priority sectors to arms: the repres-
sion effect had taken its course. This was not exactly what the Bank had
hoped for, and it earned Chad a stern call from Bank President Wolfowitz,
who then froze the Citibank escrow funds and stopped all debt-relief pay-
ments to Chad. What went wrong? A critique of the implementation of the
World Bank’s plan provides useful suggestions for how to prevent such a
failure in the future.

Time-Sensitivity
ExxonMobil was ‘too fast’ for Chad. In other words, the World Bank had
been “too optimistic about the speed of Chad’s capacity building” poten-
tial. This is the “two-speed” problem: ExxonMobil finished its construction
and was pumping a full year ahead of when the Chadian government and
the World Bank had planned on it. This left Chad with weak capacity and
infrastructure and drastically unable to handle the flow of oil. This ensured
that, among other things, the country, and especially the area of extrac-
tion, was damaged politically, environmentally, structurally, and socially.
(Indeed, the damage on all facets is so extensive that the World Bank is
currently calling on ExxonMobil to compensate families in the area of drill-
ing.)
This makes salient one of the most important lessons: timing is
everything. More specifically, it is imperative to make sure that the host
country has some of the most basic democratic mechanisms in place be-
fore any oil starts to flow. If it does not, a “moratorium” should be enacted
for as long as possible (as was suggested in the case of Chad), and the oil
companies need to comply. It is relatively widely agreed that the reason
Norway was able to escape the resource curse and its devastating effects
on internal politics was because it put in place restraints and checks and
balances “before it got its oil.” Once the pumpheads start moving, politics
is another game entirely. Sadly, many knew this before the Chad debacle.
Civil society and non-governmental organizations warned the World Bank
about moving too quickly without buttressing the capacity of the govern-
ment of Chad, given its notorious corruption and “institutional weakness.”
According to the Publish What You Pay Coalition, the “World Bank ignored
civil society concerns … and gambled that its capacity building projects
could rapidly increase the government’s ability to manage unprecedented
revenues transparently.”
The World Bank’s intentions and initial plan were promising, and
hopefully they have learned their lesson (albeit the hard way), because the
Bank’s role in future democracy promotion will be invaluable—according
to the chairman of Transparency International, the World Bank is “the
most powerful force against corruption in the world nowadays.” Thus,
future escrow accounts should be set up, under the Bank’s auspices, but
further limits need to be built into these agreements to regulate a govern-
ment’s ability to amend the rules mid-game, as Chad did.

Level of Production
More generally, the lessons learned from the non-parallel timing in Chad
make clear how much the level of oil production determines a country’s
ability to democratize. Given limited time and resources, democracy pro-
motion efforts should be focused, specifically, on those countries where oil
is not yet flowing (but will) or countries that are only pumping a relatively
small amount. Uganda would be a prime country which to focus on. Ugan-
da is coming off of 21 years of civil war, and despite a relatively strong
Parliament, it has a police and army with authoritarian habits and a term-
limit-allergic President. In addition to the threats to democracy posed by
oil, it is vital to ensure that the oil revenue and drilling (which is taking
place in the volatile region between the DRC and Uganda, and near to a
number of war-zones) does not re-disturb any of the region’s conflicts.
Moreover, there is time: oil production will begin at the end of
2008 or early in 2009. Industry reports, however, set the timeline for full
production between 2013 and 2015. Ross’s statistical regression confirms
my prescription: the negative effect of oil on democratization “is larger
when oil exports are a small fraction of the economy, and it drops as the
country grows more reliant on oil.” In other words, “barrel for barrel, oil
harms democracy more in oil-poor countries than in oil-rich ones.” Thus,
the countries in Africa that will be most susceptible to oil’s deleterious
effects—and thus most receptive to democracy promotion efforts—are the
low- or soon-to-be producing states: Uganda, Mozambique, Madagascar,
Kenya, Ethiopia, The Gambia, Sao Tome and Principe, and Senegal.

Transparency
But what exactly should be done in these countries? First and foremost,
there should be transparency in the government’s oil deals, which is
especially difficult in the current climate of the extractive industry. It is
important to know that by their nature, extractive industry contracts (often
PSAs) are highly secretive due to industry competition. ExxonMobil does
not want Country B to know the revenue-sharing deal it negotiated with
Country A, as this would limit its bargaining potential.
Two campaigns are underway to combat corruption within the
extractive industry, one which focuses on government transparency and
the other on corporate transparency. The first is the Extractive Industries
Transparency Initiative (EITI), supported by the IMF. The EITI focuses its
efforts on the governments themselves by using incentives to get countries
to publish their budgets. The oil companies “love EITI” because it “takes
the pressure off them and puts it onto African governments to disclose.”
As of December 2007, the EITI currently had no compliant countries, and
only a few ‘candidate’ countries. Another campaign is the Publish What
You Pay (PWYP) coalition. PWYP pressures the oil companies to, as their
name suggests, publish what they pay state governments in oil revenue.
This can sometimes backfire on the oil company.
In 2001, British Petroleum (BP) took a giant step forward and
declared its intention to publish what it paid to Angola. Angola was not
pleased: it threatened to revoke all of BP’s drilling contracts with Angola
and sent a copy of the letter to every other oil company to send a clear
message that transparency of that sort was not Angola’s modus operandi.
One solution to this dilemma is to force all IOCs to publish what they pay
by law—either international or domestic—so that countries like Angola
cannot use transparency as a pretense for nullifying contracts. Passing
such a law within the oil-producing country might, of course, prove quite
difficult if those in charge of passing such restrictive legislation are ben-
efiting from the very embezzlement it targets. For this reason, laws requir-
ing disclosure could and should be passed in the (non-African) countries
where the IOCs are registered or deposit their revenue.

Return On Investment
As Shaxson notes, the downfall of both of these transparency campaigns
is that they focus exclusively on oil revenues. Rather, transparency cam-
paigns should focus on government spending, which is where a lot of the
waste—through embezzlement—occurs (remember Bongo’s choo-choo
train?). One answer is to have countries require that “all public investment
projects…meet a minimum rate of return.” For example, Botswana has
been able to “have a radically different balance between electoral competi-
tion and checks and balances” than has Nigeria because of the former’s
laws regarding rate of
return. Given limited time and resources, democ-
racy promotion efforts should be focused,
Free Press specifically, on those countries where oil is
But transparency cam- not yet flowing (but will) or countries that
paigns imposed from are only pumping a relatively small amount.
the outside only go so
far. For this reason,
one of the oldest tricks in the book might just be the best: a homegrown
free and vibrant press. It is no coincidence that the President of Equato-
rial Guinea has a $700 million dollar bank account in Washington D.C. and
that the country is ranked among the most censored in terms of press
freedom. Even in cases that are not so extreme, the free press seems to
be incredibly influential. Collier states unequivocally, “If any restraint is
important, it is surely a free press.” After all, the patronage system is only
possible when the voting public severely lacks objective information—when
they are told how to vote by superiors within the community or ethnic
group. A free press can help to wrest the grip of the patronage system
that holds African oil-rich democracies hostage.
The Oil Spill
More and more of the oil Americans put into their cars will come from
Africa, because after “September 11, 2001, … the West began to un-
derstand better Africa’s value as a reliable alternative energy supplier.”
However, this may not be all it’s cracked up to be if the US is not careful—
Africa may begin to look less like an alternative to the Middle East and
more like an imitation of it. While the oil companies may not pay much
attention to the welfare of those on-shore or in the streets, the US should
because its image is tied to the footprint of these companies. Many have
begun to detect that the actions of American oil companies are beginning
to engender serious anti-American sentiment; unsurprisingly, those who
saw no benefits from the oil told Shaxson, “It is the Americans who are
letting this happen … [t]he people are starting to hate Americans,” while
another man reported to Ghazvinian, in reference to Chevron (an Ameri-
can company), “But you see, people are starting to hate them.” It is in the
interest of Americans for the citizens of these African countries to be free
and secure as democratic citizens.

***
Oil exportation in African countries is severely and consistently
an antidemocratic force when not approached in the proper way. Without
transparency, checks and balances, a free press, and other democratic
keystones, oil will either keep a country in a dismal state of democratic
stagnation, or corrode whatever democratic gains it has made. It is thus
imperative that steps be taken in those countries where the crude is either
not yet pumping or is flowing at only a trickle if the African citizens there
are to see a democratic government that respects their rights and liveli-
hoods as much as it seeks the oil—and money—that flows around them.
The ability to promote democracy in these developing African countries
is severely and permanently limited once the oil starts to flow. For this
reason, it is a race against the pump in places where oil has started to be
drilled—Chad, for example—but also in those places where the dark, thick
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 The Implications of Sino-African
Oil Trade
ChoonBoon Tan, Jacob Ng - University of Michigan

China’s annual GDP growth rate has averaged 9 %

over the past four years, reflecting a rapid expan-
sion in the Chinese economy . This economic
growth has been accompanied by an exponential
growth in energy consumption. From 1995 to 2005, China’s oil consump-
tion more than doubled . China’s total consumption of crude oil reached
346 million tons in 2007 and 46.05% of that consumption had to be met
by imports . China’s increased dependence on oil imports forced it to
build trade relationships with countries outside its borders. This search for
low-cost natural resources has included countries from across the Middle
East to Africa.

Graph 1: China’s Oil Consumption & Production, 1989 – 2005

Source: “BP Statistical Review of World Energy,”

BP Global: Reports and Publication, British Petroleum. 2007

With 100 billion barrels of proven oil reserves, African nations have
become a major source of oil for China. According to Chinese government
statistics, China’s overall trade with Africa rose from $10.6 billion in 2000
to $40 billion in 2005, and the relationship is poised to increase even fur-
ther in the coming years . Currently, Nigeria and Sudan are the largest oil
producers in Sub-Saharan Africa . As of 2005, Nigeria produced roughly
2.4 million barrels per day (bdp) of oil while Sudan’s average production
was 400,000 bpd . The oil trade with China brings both positive and nega-
tive implications for these two countries. This paper seeks to explore these
implications and will highlight Nigeria and Sudan as case studies. In ana-
lyzing these two countries, economic and political progress is tracked us-
ing economic indicators such as Gross Domestic Product (GDP), Inflation,
Income Equality and social indicators such as the Transparency Index.
 In the first case study on Nigeria, there will be an illustration of its
domestic problems before and after China’s foray, as well as the implica-
tions of the oil trade between China and Nigeria. This first case study will
conclude with potential solutions for the country. The second case study
will cover controversial Sudan, and its relationship with China in the oil
industry. This includes the implications of oil trade brought about by the
Chinese, as well as the human rights issue surrounding Sudan. Similarly,
the second case study wraps up with recommended steps for the Suda-
nese government to ameliorate the current situation in its country. Lastly,
the conclusion of this paper will highlight that trade between China and
African nations is mutually beneficial as long as relevant steps are taken
to prevent the ascendency of social, economic and political problems that
were mentioned in the earlier part of the paper.

CASE STUDY: NIGERIA

The Nigerian Oil Industry and Economy

Nigeria is the top oil producer in Africa, and the twelfth largest oil pro-
ducer in the world, with a daily production of 2.443 million (bpd) . With
proven oil reserves of 36.22 billion barrels , Nigeria relies heavily on its
oil industry, which accounts for 95% of its total export revenue . Despite
an increase in global demand for oil, Nigeria remains one of the poorest
nations, with 60% of the population living below the poverty line . Addi-
tionally, the country is plagued with high unemployment rates, inflation,
corruption, civil unrest, oil infrastructure vandalism, security issues, and
environmental damage resulting from its oil sector.

Niger River Delta and its Insecurity

The Niger Delta is the epicenter of Nigeria’s oil industry, as well as the
site of violent insurgencies among the different ethnic groups residing
in the region. The root of the conflict is the wealth distribution policy of
the government. While most of the country’s revenue generated from oil
production originates from that area, the people of Niger Delta continue
to live in extreme poverty and face widespread environmental degradation
due to oil production operations. The various ethnic groups believe that
revenue derived from oil production should be principally distributed back
to the locals instead of the federal government – a government that ranked
147 out of 179 in Transparency International’s Corruption Perceptions
Index 2006 . Due to a lack of transparency and a high level of corruption,
a huge portion of the oil-money is siphoned off and does not trickle down
to the citizens of the nation.
The first significant militant attack in the Niger Delta took place in
the 1990s, and since then, many others have followed. The ethnic groups’
guerrilla tactics include the damaging of oil infrastructure, kidnapping of
international oil workers, sabotaging of oil pipelines and “bunkering” (oil
theft). The international oil firms that have been affected by this guerrilla
warfare include Shell, Chevron and Daewoo & Korea Gas Corporation. The
social unrest has damaging effects on Nigeria’s exports and its economy.
Sino-Nigerian Oil Trade
Historically, established Western oil firms have dominated Nigeria’s oil in-
dustry. China was never a dominant player in Africa’s largest oil producer
until recently. But with China’s increased prominence on the world stage,
and its provision of unconditional foreign aid, technological transfer, and
help in infrastructural development to Africa, Nigeria found trading terms
to be more favorable with the Chinese than the West, and began granting
concessions to Chinese oil companies.
Towards the end of 2004, Sinopec and the Nigerian National Petro-
leum Company (NNPC) signed agreements to develop Oil Mining Leases
(OML) located in the Niger Delta . Subsequently, more contracts between
the two countries have followed. PetroChina then signed an agreement
with the Nigerian government to locate upstream oil and gas assets that
could be integrated with its downstream projects shortly after. In July
2007, China National Offshore Oil Corporation (CNOOC) signed an $800
million contract that ensured a supply of 30,000 bpd to China over a
five-year period. More significantly, the Nigerian government granted the
Chinese four oil exploration licenses in exchange for $4 billion of infra-
structure investment in April 2006 .

Negative Implications of the Sino-Nigerian Oil Trade

One pressing problem surrounding Sino-Nigerian oil trade is militant guer-
rilla warfare. Violence and unrest led by oppressed ethnic groups continue
to plague the oil-rich Niger Delta. Terrorist attacks targeted at the Chinese
include car bombings and multiple kidnappings of Chinese nationals .
Many attribute the violence to Chinese oil production and see the insur-
gency as a last resort by locals to prevent the unfair exploitation of their
natural resources.
Ironically, but not surprisingly given the surrounding context, the
influx of oil wealth has had a detrimental impact on the lives of ordinary
Nigerians. With its large and increasing oil revenues, the Nigerian govern-
ment has embarked on an acceleration of government spending in the
water, roads, electricity, education, security and healthcare sectors . This
has exerted inflationary pressures on consumer prices. As seen in Graph
2, consumer prices have been rising steadily in the past decade. The pur-
chasing power of Nigeria’s largely poor population has commensurately
decreased with increased prices of goods and services.
 Graph 2: Rising Consumer Prices 1999-2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

The Sino-Nigerian oil trade has also caused unemployment in the

Nigerian economy. The oil trade is accompanied by trade of other goods
and services, which equates to a deluge of cheap Chinese products in the
Nigerian market. These cheap products have a competitive edge over
Nigerian products. As a result, many Nigerian firms have been forced to
shut down, causing further unemployment. One notable example is Nige-
ria’s textile industry, where sixty-five Nigerian textile mills have ceased
their operations and 150,000 textile workers were retrenched over the past
decade . Additionally, when Chinese oil firms entered Nigeria, they brought
in Chinese workers; they did not choose to employ local Nigerians because
they were deemed “unskilled.” The increased oil and associated trade with
China has not relieved Nigeria’s large unemployment numbers and in
some cases has even precipitated it.

Positive Implications of the Sino-Nigerian Oil Trade

According to the International Monetary Fund (IMF), there was a sharp
increase in Nigeria’s GDP in the years since the Chinese oil firms entered
Nigeria. As shown in Graph 3, GDP rose from 4 trillion Naira (Nigeria’s
domestic currency) in 1995 to 7.5 trillion Naira in 2007. As seen in Graph
4, Nigeria’s GDP growth rate has consistently exceeded 5% in the past 5
years. This indicates a rapidly growing economy, brought about in part
because of increasing oil trade with China. If Nigeria were to capitalize on
this tremendous opportunity for growth with prudent economic policies,
it could potentially lift its citizens out of extreme poverty and its political
and economic structures out of corruption, inefficiency and chaos.
 Graph 3: Rising Gross Domestic Product
at Constant Prices, 1995 - 2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

Graph 4: Increase in Annual Percentage Change of

Gross Domestic Product at Constant Prices, 1999 - 2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

Sino-Nigerian oil trade has also led to infrastructure development
in Nigeria; oil agreements and financial grants often come hand in hand
when working with the Chinese government. The initiation of the rede-
velopment of Nigeria’s foundering railway system was one substantial
advancement. In October 2006, the Nigerian government signed a $2.5
billion loan facility with China, a significant part of which was channeled
to finance the refurbishment of Nigeria’s railway system . Such develop-
ments have a healthy multiplier effect on Nigeria’s economy, including
economic growth and job creation. Infrastructure development allows for
improved accessibility to Nigeria’s provinces and thus the people of Nige-
ria’s various regions gain greater economic participation. Improved trans-
portation systems also allow Nigerians greater access to public amenities
like schools and hospitals and raises social welfare.
Chinese involvement in Nigeria’s oil trade has brought about both
positives and negatives for the country. However, many of the negative
issues were already present before China’s entry into Nigeria’s oil sector:
rebel attacks on oil installations were problems to Western firms before
the advent of Chinese participation, and the same can be argued for
inflation and unemployment. It is unfair to place the full blame for these
problems on China’s foray into Nigeria for oil.
Furthermore, there are solutions for the aforementioned problems.
For example, if the government were to provide support to curb violence
in the Niger Delta, redistribute funds more proportionately, implement
monetary policies to curb inflation and equip its citizens with adequate
training so that they can be readily employed, the government could suc-
cessfully uplift the Nigerian’s economy.
Overall, the Sino-Nigerian oil trade is more beneficial for both par-
ties than hurtful. This trade has brought about wealth and infrastructural
development for the Nigerian economy. These two developments would not
even have existed without the oil trade. When leveraged upon prudently,
they can potentially provide an engine for greater growth in a Nigerian
economy that has remained stagnant for decades. However, the blame
falls on Nigerian policy makers for not appropriately using the boom in
revenues that they have gained from the oil trade.

Case Study: Sudan

Sudan’s Oil Industry and Economy
Sudan is one of the largest producers of crude oil in Sub-Saharan Africa,
possessing 5 billion barrels of proven crude oil reserves, an increase from
563 million barrels in 2006 . It produces an average of 414,000 bpd
(2005 estimate), generating $1.9 billion in revenue and forming 70% of
Sudan’s total exports .

Conflict in Sudan
Sudan has an extremely diverse population. Seventy percent of the popu-
lation is Muslim and resides in the Northern two-thirds of the country,
while Christians and Animists form the composition of the Southern ter-
ritories . State command and wealth lies mainly with Muslims from the
North. The political, economic and social disparities have been the pri-
mary reasons for conflict between the ruling Arabian Muslim elite and the
marginalized population in Southern and Western Sudan.
Whilst there was little conflict in the years from 1972 to 1983, that
stability ended when the Central government abolished the Southern Au-
tonomous region and imposed Islamic Law in 1983 . The Sudan People’s
Liberation Army (SPLA) forms the core of the separatist movement. Sudan
is currently engaged in a brutal civil war in which the incumbent govern-
ment engages in armed conflict with separatist rebel movements. The
Sudanese government is accused of committing genocide against its own
minority citizens in Southern Sudan and in Darfur through the state spon-
sored militia, the Janjaweed, in an attempt to weaken the rebel movement.
Freedom House assigned Sudan a ‘7 rating’ on political rights and
civil liberties, on the scale of ‘1’ being the most free and ‘7’ being the
least free . Transparency International ranks Sudan 172 out 179 in its Cor-
ruption Perceptions Index for 2006. The low ratings assigned to the quality
of governance in Sudan are reflections of an autocratic government that is
easily corruptible. Poor governance impedes development in Sudan, espe-
cially when its oil wealth is siphoned off from national development funds
by corruption.
Sino-Sudanese Oil Trade
China has the biggest stake in the Sudanese oil industry; it imports 60%
of Sudan’s oil output . China National Petroleum Company (CNPC) owns
a 40% share of the Greater Nile Petroleum Operating Company (GNPOC),
the joint oil consortium operating the oldest producing oilfields in South-
ern Sudan . Furthermore Sudan is a vital link in China’s oil supply, form-
ing a 10% share in total Chinese oil imports . It is projected that Sudan’s
government could collect a possible total of $30 billion in oil revenue from
China by 2012 .
Negative Implications of the Sino-Sudanese Oil Trade
There is substantial controversy surrounding the Sino-Sudanese oil trade.
The commencement of their relationship in 1999 allowed for greater
revenue collection by the Sudanese government and has also been coupled
with a doubling of military expenditure. Most recent estimates indicate
that the defense budget accounts for 40% of Gross National Product
(GNP) (2004 estimate) . China supplies arms, ammunition, military
trucks, helicopters and fighter planes to the Sudanese military . This
weapons supply ultimately intensifies and perpetuates armed conflict in
Sudan. Revenue from the Sino-Sudanese oil trade contributes to the cof-
fers of an autocratic Sudanese government and has enabled the govern-
ment to retain its grip on power.
Table 1: Sudanese Government Oil Revenue and
Military Expenditure, 1999 – 2002

Source: “Sudan, Oil and Human Rights,”

Human Rights Watch. November 2003
 Because of China’s significant involvement in Sudan, Sudan ben-
efits from China’s self-motivated protection of Sudan from international
action. For example, China has opposed possible United Nations (UN)
economic sanctions against Sudan through its veto position in the UN Se-
curity Council . Much criticism surrounds this decision, but China argues
that sanctions would do little to improve a situation that requires other
focuses, like the establishment of a coordinated peacekeeping force.
A UN contingent of Chinese peacekeepers was the first to be de-
ployed when the UN was granted peacekeeping responsibilities in Western
Sudan in January 2008. This contingent was readily approved by the Su-
danese government even as it objected to non-African Union peacekeeping
forces . Sudan also grants protection to Chinese oil installations that are
under threat of attack from rebel groups. Chinese oil interests in Sudan
are protected through Chinese support of Sudan’s controversial ruling
government, and this politically and economically symbiotic relationship
is taking place at the expense of peace, freedom and democracy, and has
drawn international censure.
Like many countries that rely heavily on natural resources for
growth, Sudan has faced inflation issues over the past decade. Inflationary
pressures in the past five years were moderately high, consistently exceed-
ing 7%. This percentage reflects the monetary pressures on a rapidly ex-
panding Sudanese economy as it adjusts to oil trade with China. However,
this is still a significant improvement over the extreme inflationary rates of
the early 1990s when macroeconomic stability was detrimentally affected
by political instability.

Graph 5: Inflation Rate Changes, 1992 - 2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

Another issue facing Sudan is that wealth generated from its oil
trade is concentrated in Greater Khartoum (in the Arab Triangle between
Dongola, El Obeid and Kasala) and has not trickled down to the other re-
gions of Sudan . This inequity is one of the factors contributing to the dis-
contentment of rebel groups that reside in territories holding oil reserves.
Even though profits are generated in those territories, the locals are not
allocated a fair share of oil revenue.

Positive Implications of the Sino-Sudanese Oil Trade
According to the World Bank, Sudan is one of the poorest nations in the
world, having a Gross National Income of $2,160 per capita and ranking
171 out of 209 countries in wealth in 2006 . Sudanese trade and eco-
nomic statistics have improved since oil production commenced. GDP and
GDP per capita have risen at an increasing rate since oil export started in
1999.
Graph 6: Increasing GDP, 1992-2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

Graph 7: Increasing GDP per capita, 1992 - 2008

Source: “World Economic Outlook Database,”

International Monetary Fund. October 2007

Despite its dire state of affairs, Sudan has one of the fastest
growing economies in Africa and the world . This can be highly attributed
to Chinese involvement in the Sudanese economy as China is Sudan’s
largest trading partner. Trade between China and Sudan increased 124%
in the first half of 2007 to $2.4 billion, most of it oil related . Chinese
opposition against UN economic sanctions has also allowed the Sudanese
economy to participate freely in international trade and economic develop-
ment.
China is Sudan’s largest investor. According to the UN Conference
on Trade and Development (UNCTAD), Sudan received $351.5 million in
Foreign Direct Investment (FDI) from China in 2005. Sudan was China’s
9th largest recipient of FDI . Although Chinese investment is mainly tied to
the oil industry, China is also a prominent developer of Sudan’s infrastruc-
ture. Sudan’s largest oil refinery was jointly built by CNPC and Sudan’s
Energy Ministry. CNPC subsequently invested $300 million to expand and
double production in this refinery . CNPC recently signed an agreement
with the Sudanese government to develop Sudan’s newest offshore oil
block in June 2007 . Additionally, Sudan’s primarily agricultural economy
is entering its foray into manufacturing industries with Chinese assistance.
This is expected to boost Sudan’s industrial income in the long run.
To secure its oil transportation, China has seen a need to strength-
en logistical links within Sudan. Sinopec is linking an oil pipeline from
Sudan’s Melut Basin oilfields to Port Sudan on the Red Sea, where China
Petroleum Engineering Construction Group is constructing an oil export
shipping terminal . In February 2007, China and Sudan penned a $1.15
billion deal to construct a railway link between the capital Khartoum and
Port Sudan . This infrastructural setup introduces geographical accessibil-
ity and paves the way for further economic development.
Even though growth attributed to the Sino-Sudanese oil trade has
brought about the associated macroeconomic challenges of inflation and
inequity, these are issues that can be readily resolved through effective
government policies. For example, with Sudan’s active pursuit of IMF-dic-
tated financial reforms, we can expect a reduction in inflation rates. Peace
results in less disruption to Sudan’s economy and growth. With greater
growth, Sudan’s government has a greater incentive to sustain peace ac-
cords to protect its increased economic interests.
Chinese involvement in Sudan’s oil trade has reaped benefits for
both itself and Sudan. Sudan’s economy is flourishing at levels unseen
prior to the expansion of Sino-Sudanese oil trade. There are positive
economic and infrastructural developments that can be ascribed to Chi-
nese involvement. Standards of living can be raised in Sudan when its rich
endowment of natural and energy resources are appropriately utilized and
leveraged upon.

Conclusions and Recommendations

The increase in Sino-African oil trade provides ample opportunities for
growth and development. China’s insatiable thirst for energy is pacified
by the vast oil resources of Africa. Africa, a region that has been veiled in
economic underdevelopment for far too long, is finally making inroads in
international economic integration with the rest of the world; and one part
of that is its establishment of increased trade with China.
China represents a huge market for African exports. With a popu-
lation of 1.3 billion people, China can serve as a significant source of
foreign income derived from Chinese consumption of African goods and
services. This foreign income can potentially boost GDP and growth of
African nations to a large extent. Oil-related FDI from China represents a
considerable cash injection with the potential for multiplying and creat-
ing greater growth in Africa. This investment also goes towards improving
infrastructure of African countries and improves their capacity for trans-
portation and logistics of goods and services.
Nevertheless, there are also negative ramifications associated with
the Sino-African oil trade. These form the basis of the call for the with-
drawal of Chinese involvement in African oil markets. Nigeria and Sudan
are two cases that bring out many of these negative ramifications. Eco-
nomic issues pertaining to this relationship are that of inflation, inequality
and over-dependence of domestic crude oil production. However, these
problems could be addressed through an implementation of pertinent
policies like far-sighted planning and good governance, which would serve
to reduce the negative macroeconomic ramifications.
One way that Nigeria could deal with inflation is by following in
the footsteps of Angola. The Angolan government, another major African
oil exporter, has successfully dealt with hyperinflation with the use of a
currency stabilization policy to reduce money supply. This involved ac-
tive foreign currency sales to reduce the supply of Kwanzas (the Angolan
currency) in the world markets. To consolidate its position, Angola unified
its official and informal foreign exchange markets. The minimum reserve
requirements of banks were also raised to further curb the money supply.
As an alternative, foreign financing of loans was encouraged instead. The
Angolan government also controlled liquidity by using increased sales of
very short-term instruments at higher nominal interest rates and bonds
with higher maturities. As a result, inflation has declined from 300% to
100% between 1999 and April 2002. More recently, inflation rates have
been as low as 31%. As demonstrated, the application of monetary policy
can be effectively used to curb inflation.
Fiscal policy can also be employed in controlling inflation rates;
the fiscal deficits of government expenditure can be reduced to manage
the rate of spending in an economy. Unnecessary subsidies, especially
fuel subsidies in oil producing nations, should be curtailed. The appropri-
ate subsidy level should be set at a rate that spurs development in manu-
facturing but does not encourage overconsumption. Unfortunately, fuel
subsidies, once implemented, are politically hard to remove.
A more challenging issue is that of economic inequality; African
society will not benefit as a whole if wealth is concentrated in a hands of
a few individuals. Because of the high level of corruption in these nations,
and the Sudanese government’s considerable military expenditures, the
benefits of the Sino-African oil trade are not equally channeled to all strata
of society. Importantly, corruption steers away potential investment and,
besides violating human rights, is not good economic policy.
But it should be noted that corruption within the Sudanese and
Nigerian governments cannot be solved with the reduction of Chinese
involvement in African oil trade. Corruption and inequality will only be per-
petuated if a country is devoid of opportunities for growth and cronyism
and nepotism are the only avenues for individual success. To rid corrup-
tion, there must be increased disciplinary measures reserved for perpetra-
tors. China, which has long suffered from corruption itself, has introduced
punitive punishments to deal with corruption within the government bu-
reaucracy. The fear of punishment, at times as harsh as the death penalty,
is a significant deterrent against corruption. After introduction, these laws
must be enforced effectively.
Controversies have always clouded Chinese involvement in Africa.
China’s potent desire to pursue resources to sustain its growing economy
and exploding population often leads to it turning a blind eye to human
rights, economic and political issues, which is one of the many reasons
why the Chinese are so alluring to the African governments. Peter Takiram-
budde, head of the African division for Human Rights Watch, sums up the
sentiment generated towards the Chinese, “They see no evil. They hear no
evil.” For example, the Chinese Administration is seemingly tolerant of the
atrocities the Sudanese government is accused of. China maintains that it
does not interfere with the sovereignty of nations that it trades with. Nev-
ertheless, it cannot turn a blind eye to the atrocities under some of these
regimes because it is in China’s long-term interest to improve political and
social governance in African nations that it trades with. Free trade can only
flourish with incorruptibility, rule of law and political stability. China must
do more than sit on the fence, only because it has the necessary influence
to change the status quo and introduce reforms.
In conclusion, Sino-African oil trade represents a turn in fortune for
African nations and presents a valuable opportunity for African develop-
ment. The call for China to steer away from African trade because of as-
sociated economic and political challenges might hinder African develop-
ment because it robs the continent of the opportunities it so desperately
needs for progress. While Chinese involvement in African oil economies
has negative implications, these implications essentially arise from a rapid
growth that is not supported by the necessary economic policies. China
should therefore take on a balanced approach to Sino-African oil trade and
promote economic development together with social reforms.

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 The Competition for Africa:
China’s Increased Investment on
the Continent and the Implications
for the United States
John Dixon - University of Georgia

The underlying catalyst for the recent surge in China’s interest in Africa is
China’s enormous demand for natural resources, primarily crude oil. Dur-
ing Chairman Mao Zedong’s rule, China showed significant interest in the
African continent. At the time, however, the relationship was mainly based
on ideology and political support between countries oppressed by West-
ern powers. China’s investment in Africa resulted in a railroad system in
Tanzania, hundreds of doctors working throughout the continent, and the
provision of other technical expertise; the main feature of this investment
was the construction of numerous elaborate sports stadiums. China’s
interest diminished in the 1980’s but is now making a strong comeback.
Currently, investment is much heavier, and its purported guiding principles
are “sincerity, equality and mutual benefit, solidarity, and common devel-
opment”.
China needs ever-increasing stocks of petroleum to fuel its grow-
ing economy. Once an oil exporter, by 1993 China was a net oil importer. It
is projected that by 2045 China will rely on oil for 45% of its total energy
needs. Between 2000 and 2004, China was responsible for a full 40% of
the worldwide increase in demand for oil. While the Middle East is pres-
ently China’s main source for oil, China is increasingly looking to Africa
for additional supplies. Angola and Sudan alone account for a quarter of
China’s oil imports and are by far China’s largest African trading partners.
China’s rapid growth also demands other natural resources such
as timber, copper, iron ore, platinum, and numerous other minerals.
This increased demand has raised the prices of these resources, benefit-
ing industries in Africa. However, many Chinese projects to extract these
resources employ Chinese citizens instead of locals, so the economic im-
pact can be limited. In Chinese-financed mining operations where Africans
are employed, conditions are often dangerous. For example, 51 Zambian
workers were killed in a mine blast in 2005. The subsequent outrage over
this incident and others went largely ignored by Chinese firms that are not
used to dealing with protests from labor groups back home.
Overall, Sino-African trade has increased in value from $3 billion in
1995 to over $50 billion last year. Of the $15 billion invested in Africa in
2004, China invested $900 million, mostly in oil-related projects. China
also sees in Africa a potential new market for its manufactured goods. This
is an example of one of the potentially negative aspects of Sino-African
relations. As African countries struggle to develop, mature Chinese firms
have saturated the markets in many of these countries with cheap manu-
factured goods. As a result, indigenous African industries have difficulty
competing. In Lesotho, ten clothing factories closed in 2005 and elimi-
nated 10,000 jobs because of the influx of cheap Chinese goods. Further-
more, cheaper Chinese exports to the United States are replacing similarly
priced African imports.
Apart from economic interests, China’s investment in Africa pro-
vides a political advantage as well. One of the fundamentals of friendship
with China is the recognition of the One-China policy, meaning that Taiwan
is not a sovereign government and is still a part of the People’s Republic
of China. Forty-eight African states have so far signed on to support this
policy, and in return China has been more than willing to spend money
for investment in these countries. China’s image as a developing country
also gives it special credibility as an equal partner with similar goals of
economic development. In addition to garnering support for its One-China
policy, China is amassing a broader reserve of political support on the
African continent.
African states see in China a partner willing to treat them equally.
Chinese investment
does not carry the
China’s rising influence in Africa may conflict
same stigma as aid with American economic, humanitarian, and
and investment from political interests. The United States may
many Western coun- find itself wondering how China has secured
tries, often former numerous natural resources and how so many
colonial powers that African states are no longer fully dependent
impose restrictions on the West’s conditional aid.
on aid. According
to Chinese Deputy
Foreign Minister Zhou Wenzhong, “Business is business. We try to sepa-
rate politics from business.” Such an attitude brings comfort to African
leaders who lack international support, such as Robert Mugabe of Zim-
babwe and Omar al-Bashir of Sudan. Buttressed by capital from China,
such leaders are now better able to defy Western demands and sanctions.
China also supports these countries militarily, even selling Sudan the Chi-
nese helicopter gunships that it has employed to wage genocide in Darfur.
China’s investment has already shown the potential for strong negative
consequences. Undermining the World Bank and the International Mon-
etary Fund’s attempts to improve transparency in Angola, China lent $2
billion to the country, virtually freeing it from Western financial assistance.
This loan secured China’s access to oil in the country. On the other hand,
this money will be crucial in helping Angola rebuild after years of civil war.
China’s rising influence in Africa may conflict with American eco-
nomic, humanitarian, and political interests. The United States may find
itself wondering how China has secured numerous natural resources and
how so many African states are no longer fully dependent on the West’s
conditional aid. The United States must develop a policy to stay com-
petitive in Africa, and can learn some lessons from China’s success. For
example, much of China’s investment is in infrastructure (roads, bridges,
railroads, agriculture, pipelines, and factories), whereas U.S. investment
tends to focus on health or education. It appears that establishing a basic
infrastructure through “bricks and mortar” investment may be able to
spark improvement in other areas and lead to greater economic develop-
ment. The United States must not waste time in shaping the position it
will take in conjunction with Africa’s new role in the 21st century.
President Clinton took a first step by signing the African Growth
and Opportunity Act (AGOA) into law in May 2000, providing preferential
trade incentives to eligible Sub-Saharan African countries. Overall trade
between AGOA countries and the United States has increased since 2000,
but AGOA has endured heavy criticism for favoring U.S. interests. Indeed,
the Act provides little room for Africa’s agricultural exports to grow, a nec-
essary step to enable further economic growth on the agrarian continent.
Petroleum still dominates the terms of U.S.-African trade and favors select
oil-producing countries, namely Gabon and Nigeria. It is unclear whether
AGOA is responsible for the overall increase in trade or if the rising de-
mand for petroleum would have led to an increase anyway.
Another potential problem is that it may prove difficult for Ameri-
can firms to compete with Chinese state-owned enterprises (SOEs),
because these SOEs are often willing to bid low on contracts in order to
secure long-term benefits – not only for the firms but for China as a whole.
Private American firms may not be able to incur such initial costs with a
focus on such long-term profit. Thus it will be crucial to focus on develop-
ing fair and transparent competition in Africa.
To avoid losing its strategic foothold in Africa, America must adopt
a policy of humble engagement focused on long-term goals. This includes
strengthening AGOA, reforming unfair trade policies that disadvantage
African economies, aggressively engaging African countries diplomatically,
and pressuring China to promote human rights and good governance.

A Long-Term Vision for Success

China’s African policy presents several key challenges to United States
interests. The nature of state-owned Chinese firms versus private West-
ern firms provides a significant hindrance to competitive, balanced, and
fair development in Africa. Many of China’s practices may undermine
advances in good governance, human rights, and transparency by support-
ing corrupt or oppressive regimes. The United States can moderate these
challenges if it enacts several key policies.
The first step in aligning American economic interests with African
interests should be to reevaluate and strengthen AGOA, which has now
been extended through 2015. The United States should focus more on the
agricultural sector in Africa by providing more direct aid to agricultural de-
velopment, which would benefit more Africans than the development of oil
fields or mineral mines. Indeed, focusing direct aid on long-term invest-
ment, including infrastructure, will greatly enhance the effectiveness of
American aid dollars and publicizing these projects will improve goodwill
towards the United States.
Finally, the United States should eliminate the heavy subsidies on
American agricultural products that are a frequent source of diplomatic
friction with African countries. Opening the U.S. market to African agricul-
tural products is one of the single most important actions it could take.
High tariffs on U.S. imports have discouraged African agriculture from
gaining traction and developing. Removing these tariffs, as President Bush
has indicated he is willing to do, will strongly influence the E.U., Brazil,
and India to do the same.
Improving the U.S. image along with diplomatic relations will
greatly enhance U.S. economic prospects in Africa. The United States
should aggressively engage in diplomacy with states all over Africa. This
can be accomplished in several ways. The creation of a position for a full
ambassador to the African Union in the fall of 2006 is an excellent way to
ensure that U.S. interests are being promoted. This improves America’s
image in African states, especially as the U.S. was the first non-African
country to establish such high-level diplomatic representation at the A.U.
Additionally, the U.S. military recently established the U.S. Africa
Command, bringing the U.S. military in Africa under a single command in-
stead of three separate ones as it was organized previously. These actions
indicate the U.S. government recognizes Africa’s growing importance, but
additional diplomatic efforts are necessary to successfully counter China’s
influence. High-ranking U.S. officials should take a page from the Chinese
playbook and make high-profile visits to support U.S. policies. American
officials will see how such visits attract a great deal of local media atten-
tion. Chinese officials have visited the continent numerous times over the
past few years, showing Africans their interest and willingness to work in
partnership with African governments and firms.
The China-Africa Cooperation Forum has been very effective in
bringing governments and businesses together. The United States must
now catch up. There is a provision in AGOA for a yearly forum between
high-level U.S. and African officials. The U.S. must broaden the scope of
this forum and bring in not only governmental representatives, but busi-
nesses from Africa and the United States to highlight alternative investors.
Such a setting will provide a suitable environment for dialogue and deal-
making. The conference should address issues of trade policy, China’s
new role in Africa, and the U.S. role as an investor concerned with develop-
ing better governments and a better environment for human rights.
AGOA-eligible countries are the only ones involved in these talks,
but the United States should use this forum as a launching pad for ad-
ditional talks with other countries and organizations in the region to move
towards free trade agreements, including trade blocks like the Economic
Community of West African States, East African Community, and the
Southern African Customs Union. In contrast with AGOA, the United States
will not unilaterally determine the provisions for free trade agreements.
Multilateral talks toward free trade will ensure a stronger African voice in
the world’s economic future.
These more serious steps will not only open Africa up to business
alternatives to China, but will encourage U.S. businesses to make more
long term investments, which China’s SOEs are already doing. Strengthen-
ing AGOA and negotiating permanent free trade agreements will provide
more stability for firms to invest in Africa. The U.S. government should
provide an additional incentive for firms willing to invest in African infra-
structure, including the agricultural, transportation, and communication
sectors, in the form of tax breaks. This could help American businesses
compete more fairly with China’s SOEs.
China’s disinterest in human rights must not be overlooked. The
U.S. should not let China’s rising power status come without responsibly
for promoting human rights. It is commendable that China has been
so willing to engage with so many parties, but it should hesitate before
engaging and supporting regimes with horrific human rights records, such
as Sudan and Zimbabwe. China has repeatedly threatened to use its veto
power on the United Nations Security Council to block action against Su-
dan.
The United States’ first actions should be made personally, one-on-
one with other African states and pan-African organizations. The United
States can accomplish some of the most fundamental moves, such as in-
creasing diplomacy or reforming trade practices, relatively independently
and quickly. Later, the United States and other countries can participate
in the further liberalization of trade through the WTO, including eliminat-
ing more agricultural tariffs.
International organizations such as the International Monetary
Fund or the World Bank should not be the first channel through which the
United States attempts to improve its African relations. The IMF and World
Bank have bred resentment in African countries for allegedly catering to
Western countries and doing little to move Africans away from poverty. In
a time when Africa finds Chinese investment attractive largely because
of its refusal to meddle in internal affairs, the U.S. should do everything
possible to avoid appearing as a neocolonial power disinterested in equal
discourse. Therefore, the most fundamental progress towards balanc-
ing China’s power in the region must come directly and quickly from the
United States.

Conclusions
These steps, taken as quickly as possible, will help maintain U.S. influence
in Africa, which is crucial for promoting the development of governments,
human rights, and strong economies. China’s entry into Africa will chal-
lenge American interests, but it will also provide an unusual catalyst for
the world to recognize Africa’s undeniable importance. Chinese investment
is a good development, as long as the United States realizes it must do
its part to balance and shape the changing dynamics of Africa’s relations
with the rest of the world.

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 Dutch Disease in Africa:
A Case Study of Nigeria and Chad
Jason Gould and Katen N. Kapadia - University of
Michigan

Originally coined in 1977 by The Economist, the

term Dutch disease refers to the decline in the
manufacturing sector of the Netherlands due to
the discovery and exploitation of natural gas deposits in the 1960s. Now
it is often used to refer to the detrimental effects of the discovery of any
valuable natural resource that causes declines in other sectors of a na-
tion’s economy. Generally, Dutch disease affects the economy of a country
in two ways: first by causing a resource movement effect from one sector
of the economy to another, and second, by inducing a spending effect that
appreciates the real exchange rate of the country’s currency.
In Africa, there is a looming threat of Dutch disease due to the
substantial natural resource wealth of many of its regions. Nigeria be-
gan extracting oil in the late 1950s and since then the oil industry has
dominated the economy and given it much needed boosts. However, price
shocks in oil and recessions have severely damaged its economy, leaving it
at the mercy of the market. Now Chad has begun the extraction of oil as
well, and needs to take careful measures to prevent against Dutch disease
due to poor planning for the use of its oil revenues. Policies must be made
in both Nigeria and Chad to successfully support the exploitation of their
oil while simultaneously boosting other sectors of their economies as well.
Throughout this paper we will analyze the factors that can lead to or have
led to Dutch disease in Nigeria and Chad. This will be accomplished in
three parts: the first part will explore and explain the theory behind Dutch
disease; the second and third parts will look at the impact of economic
policies regarding oil in Nigeria and Chad, respectively.

An Introduction to Dutch Disease

The resource movement effect is a shift of factors of production from
non-booming sectors to booming sectors. This tends to include capital,
as investments in the booming sector are immediately lucrative, as well
as labor, which is better compensated in the booming sector as a result
of higher demand. The transfer of capital and labor can have profound
effects on the sectors that lost these resources, causing them to decline,
and in many cases, fail outright. As the cost of production factors esca-
lates due to the effect of resource movement, those sectors competing for
affected resources, especially the manufacturing sector, tend to lose their
competitive edge.
The second and ultimately more potentially hazardous effect is
the spending effect. The spending effect causes an increase in spending
in non-tradable goods, usually construction. The increased demand then
serves to increase the price. However, the price for these goods is often
set internationally, preventing such an increase. This results in an increase
in the country’s real exchange rate, and renders the lagging, non-boom
sectors even less competitive. Often in poorer countries, these non-boom
sectors include agriculture.
The combination of these two effects poses dire consequences for
the countries faced with Dutch disease. When the source of the exploited
natural resource depletes or the value declines internationally, the country
is left without a booming sector and with its remaining economy weak-
ened. Since most of the investments over the course of the booming sec-
tor’s duration have been in non-tradable goods, these investments become
essentially worthless. In poorer countries, this can often mean a severe
decline in agriculture, which may comprise the employment opportunities.
The afflicted country has now become worse off than before the resource
had been discovered.
However, several countries have successfully combated Dutch
disease. The most common approach to protecting against it has been to
save the windfalls from resource exploitation to generate a steady source
of revenue over time, and reinvest into things such as infrastructure,
education, and the manufacturing sector, as well as in the rural sector for
poorer countries. By investing in this way, countries are investing in their
own future competitiveness. Countries such as Norway, with its Petroleum
Fund, and Chile, with its stabilization policies, have demonstrated success
in countering Dutch disease. It is important for all countries faced with the
looming threat of Dutch disease to take similar steps in protecting against
it.
In addition to the threat of Dutch disease are the more common
risks of corruption and policies that are overly protective of lagging sec-
tors. These occurrences tend to fall under the broader spectrum of the
resource curse. It is important for countries abundant in natural resources
to be aware of these equally dangerous problems, as they can cripple al-
ready unstable economies. Hence, the need for groups who invest in these
countries to ensure the intelligent use of government revenues through
contracts and for independent watchdog groups to pay close attention to
them.

The Case of Nigeria:

Economic Mismanagement from the 70s, an Overview
As the economic situation in Nigeria is analyzed it is important to recog-
nize the political and historical context. Until recently, Nigeria’s govern-
ment consisted of several successive military juntas dating back to the
1970s. During that time, Nigeria was plagued with violence and civil wars.
The turbulence of this era led to a mismanagement of oil revenues that
can be characterized as a severe form of Dutch disease. Although many
were optimistic about the discovery of oil, it ultimately fueled ethnic ten-
sions that peaked in the mid to late 60’s, culminating in civil war.
Upon the end of the war, military rule was solidified and oil be-
came the most important factor in the country’s recovery. By the 1970’s,
Nigeria was a world leader in oil production with a “centralized, state
dominated economy.” Government control of the oil industry only became
stronger as the world experienced an oil shock that caused a steep rise
in oil prices, starting in 1973. High oil revenues led the government to
ignore traditionally strong sectors in favor of the oil industry.
The end results was that Nigeria’s traditionally strong agricultural
sector shrank from 62.9% of GDP in 1960 to a low of 20.6% in 1980,
while the oil sector grew from .2% to 29.1% in the same years (see figure
1). The growth from the oil industry, however, was short-lived (see figure
2), as the oil boom subsided in the 1980s.
Figure 1: Sectoral Share of Economy

Source: Fidel Ezeala-Harrison, 1993

Figure 2: Real GDP Growth Rates: Nigeria 1966-1986

Source: Penn World Tables, 2006

With a decline in oil prices and revenue, debt rose sharply through-
out the 80s (see figure 3). Unable to deal with its fiscal and economic
problems, the government, with the help of the International Monetary
Fund, instituted a Structural Adjustment Program (SAP) in 1986. The
SAP began liberalizing the economy through measures such as tariff re-
ductions, de-regulation of agricultural prices, and the liquidation and sale
of state-owned companies. As a result, fuel prices and exports began to
rise. However, by 1992 all IMF agreements had ended, and Nigeria revert-
ed back to a downward spiral.
Figure 3: Total External Debt (US$ Billions)

Source: World Development Indicators, The World Bank, 2007

During the political chaos of 1993, General Sani Abacha assumed

control of Nigeria. Under his rule most democratic institutions were
dismantled and the regime became increasingly brutal, relying on arrests,
detentions, and executions to exert control. At the same time, corruption
and mismanagement of the economy were rampant. Some scholars attri-
bute Abacha and a “…narrow circle of cronies…” as the “…central source
of economic deterioration…” The deterioration of industry coupled with
the rise of an “illicit” economy marked the end of economic reforms.

Dutch Disease in Recent Years

In 1999, military rule in Nigeria formally ended, and a democratic,
civilian rule of the country began. Since then, Nigeria has faced a num-
ber of challenges, including a heavy reliance upon the oil industry at the
expense of other sectors, an aging infrastructure, and regional conflict.
These factors threaten to undermine the potential growth of the Nigerian
economy and could fuel a second outbreak of Dutch disease.
As discussed earlier, the oil boom of the 70s led the country to
neglect its other industries. The dominance of the oil industry still holds
in more recent times with oil exports accounting for 90% of total exports
and 70-80% of government revenue. While there has been a renewed
focus on non-oil sectors since 1999, Nigeria still hopes to expand its oil
reserves by an additional 40 billion barrels by 2010. If oil exports dis-
proportionately continue to account for economic growth, it could cause
the Naira, Nigeria’s currency, to appreciate which would lead to a higher
demand for non-tradable goods and the reduced competitiveness of other
domestic industries.
On the other hand, Nigeria’s agricultural sector has strong poten-
tial. However, growth in this sector remains constrained as oil continues to
dominant the economy and agricultural productivity continues to be low.
Several programs have been implemented to attempt to improve Nigeria’s
agricultural sector, and in 2006 agriculture accounted for about 40% of
GDP. This renewed focus on agriculture is important to resisting a typical
destruction of non-oil sectors by Dutch disease.
In order to boost the effectiveness of non-oil sectors and for that
matter the oil sector, Nigeria’s infrastructure must be improved. According
to a World Bank report, over two-thirds of Nigeria’s population reside in
rural areas where infrastructural services such as water, energy, and tele-
com come at a relatively high cost compared to more urbanized locations.
Over 100 million people do not have access to electricity and only 40%
of the population has access to safe drinking water. Telecom services are
more available in urban areas, but are virtually non-existent in poor and
rural areas. Another significant infrastructure dilemma is the nation’s
transportation system. The reduced federal oil revenues in the 80s led to a
lack of maintenance and capacity building, which left roads and railroads
in a state of disrepair. These infrastructural problems represent a signifi-
cant barrier to investment, as they increase the cost of doing business, as
well as slowing productivity. Nigeria’s infrastructure must be modernized
to allow for growth in non-oil and oil sectors alike.
As previously mentioned, regional and ethnic conflict have played
a large role in stifling development in Nigeria’s economy. Violence still per-
sists in the region and the government has had to use the military often
“…to quell the unrest.” In fact, approximately 50,000 people have been
killed in regional conflicts since the return to civilian rule. Regional con-
flicts and violence threaten to push prices, particularly oil prices, higher.
The political chaos in the 90s during General Abacha’s autocratic regime
was particularly damaging to the Nigerian economy. If the violence per-
sists, Nigeria’s risks a similar era of corruption and economic turmoil.
Since the return to civilian rule in 1999, Nigeria has been at a
crossroads in terms of development. Currently, the government has
pledged to make several improvements, including the development of
energy infrastructure, improvement of agricultural performance, im-
provement of transportation infrastructure, and improvement of security
throughout the country. If these goals are met, Nigeria faces new pros-
pects for stable growth prospects. But if the government fails to imple-
ment these goals, Nigeria could enter the next decade with a turbulent
economy reminiscent of the 80s and 90s. To protect against this possibili-
ty, independent international organizations should monitor and collaborate
with Nigeria. By preventing further corruption, Nigeria can use its resource
wealth to maintain positive economic gains for years to come.

The Case of Chad: Potential for Dutch Disease

Chad now finds itself in a situation resembling the beginnings of
Dutch disease in Nigeria. Like Nigeria, Chad is a country that has been
involved in ceaseless fighting and has only showed some political stability
quite recently. It is a subsistent agricultural economy with little manu-
facturing, high poverty rates, and has been ravaged by fighting, not only
internally, but also on its eastern border with Darfur. Yet now, having the
opportunity to exploit its natural resource wealth, Chad is looking to sell
its oil reserves for immense profits. It is a chance for Chad to gain more
political stability, lessen poverty, and kick start a lagging industrial sector.
However, steps must be taken to prevent Chad from falling into the same
trap that Nigeria fell into, like the Netherlands before them.
Chad has long known about its natural resource wealth, but until
recently has been unable to exploit it. Following three decades of civil
warfare lasting until the 1990s, and constant political uprisings ever since,
Chad is thus far poorly developed, ranking 170th out of 177 developed
countries according to the Human Development Report. The infant mor-
tality rate is at a staggering 12.4% and the real GDP per capita is under
1,500 U.S.-adjusted dollars. With crude oil reaching over $100 per barrel,
there are great incentives to invest in the extraction of its reserves.
The recently-established political stability under President Idriss
Deby has provided Chad with an opportunity to begin exporting its mas-
sive reserves of oil, estimated at around 1.5 billion barrels. In late 2000,
the World Bank began financing a vast and expensive oil project in the
southwestern Doba region of Chad, which included the construction of a
640-mile, $3.7 billion pipeline through neighboring Cameroon. This exten-
sive project is expected to produce over 1 billion barrels of oil over twenty-
five years. With so much at stake, the potential for disaster is that much
greater.
The dangers facing Chad are numerous, and the World Bank is
aware of this. When chartering an agreement to export the oil reserves
from Chad, it took care to arrange a contract that would preserve the
earned windfall revenues. Specifically, 70% of Chad’s annual revenues will
go toward infrastructure, education, health, and rural development. This
agreement reflects some of the more successful policies that countries
like Norway and Chile have followed. By transferring revenue into non-oil
industries and infrastructure, the government can help prevent the dein-
dustrialization of manufacturing sectors in its economy. However, an ap-
preciation in the value of currency could still become a detrimental factor
for exports. Fortunately for Chad, most of their industries produce only
goods sold internally, and are not actually exported to the international
market. Hopefully any moderate decrease in firms’ competitiveness will
not hurt their industries too much.
Another potential concern is that of corruption in Chad. President
Deby won what many consider to have been a questionably fair election.
In 2005, Transparency International’s Corruptions Perceptions Index rated
Chad as the most corrupt country of those surveyed, with a score of 1.7
out of 10 (lower being more corrupt). This begs the question of what
measures are being put in place to prevent corrupt officials from taking
advantage of Chad’s lucrative oil situation. Competing military forces in
the region will most certainly want to claim 2008’s expected $1.5 billion
in profits for themselves.
President Deby has already had to break contracts with the World Bank
to pull funds for defense spending. The World Bank was forced to freeze
accounts held in London in order to prevent the complete draining of
designated funds. At the moment, Deby and the World Bank have reached
an interim agreement, but how long the World Bank will be able to prevent
further access to the funds is subject to debate. Thus, it is important that
all agreements are strictly adhered to and observed by independent watch-
dog groups, particularly because Chad’s economy is already unstable and
susceptible to corruption.
Despite all these threats to Chad’s success, the oil project may be
its best shot at escaping a systematically low grossing domestic prod-
uct (GDP). As shown in figure 4, Chad’s GDP remained relatively low and
stable at around $1 billion U.S. until 2000 when investment in the Chad-
Cameroon oil pipeline began.
Figure 4: Gross Domestic Product of Chad

Source: World Development Indicators, The World Bank, 2007

Over 80% of Chad’s population consistently remains below the
poverty line. Although massive inflows of money can often lead to Dutch
disease, many such as Rodenstein-Rodan or Murphy, Shleifer, and Vishny
argue that countries in poverty need these large inflows of capital to
escape the constant subsistence levels, similar to those seen in Chad.
Though neither side’s argument is conclusive, Figure 2, which shows GDP
growth over time versus foreign direct investment, suggests an influence
by foreign direct investment on GDP growth.
Figure 5: Dependence of GDP Growth on Foreign Direct Investment

Source: World Development Indicators, The World Bank, 2007

This would seem to make the argument for massive amounts of
capital to escape poverty traps more credible, if the relation holds. In
Chad’s situation, however, this would require more sustained investment
over a lengthier period of time. Hopefully, the 25-year oil extraction project
will provide just such an opportunity.
Chad has been presented with a golden opportunity. It has the
potential to be boosted out of a state of continuous poverty through tacti-
cal investment of revenues received from selling its oil reserves. In order
to combat the menace of instability, Chad must invest these revenues in
infrastructure, education, health, and the other industrial sectors as well
as agriculture. By forcing Chad to invest 70% of its revenues in these
areas in order to reduce poverty, the World Bank has made it possible to
prevent Dutch disease before it starts. Although some of its effects will be
felt in other sectors due to a loss of competitiveness in world markets, the
benefits gained from the intelligent use of oil revenues will surely outweigh
its negative effects. However, it is of the utmost importance that the World
Bank strictly continues to enforce these conditions on Chad, and that inde-
pendent watchdog groups routinely check for corruption. If Chad reneges
on its promises to the World Bank, the outcome could be similar to that of
Nigeria—an economy that suffered severe losses when oil prices fell. Yet
Chad stands to gain greatly if it follows the tried and true methods of Nor-
way and Chile, two countries that saw massive gains from well-governed
saving and investment policies. It is necessary for Chad to follow suit with
its own policies. With careful control and guidance, Chad should have the
tools and knowledge to prevent another case of Dutch disease.

Conclusion
Sub-Saharan Africa is generally considered the poorest and most
corrupt region in the world. In order to improve the region’s socioeco-
nomic conditions, economists must take a look at the policies that fueled
success as well as those that have led to disaster. By comparing Nigeria
and Chad, the former being afflicted with Dutch disease, and the latter
a country that has recently begun exploiting oil; one can see some steps
that must be taken to prevent further Dutch disease in Africa. By failing to
invest properly, these countries tend to turn resource boons into curses.
Often in the case of Africa, issues include security, poor infrastructure,
sensitivity to the market, corruption, and deleterious effects on their
agricultural sectors, and it is important that revenues gained from oil be
reinvested into reversing these trends.
First of all, global investors such as the World Bank and International
Monetary Fund must force these countries to invest revenues in infrastruc-
ture, agriculture, health, and education. Secondly, steps must be taken
to ensure that these contracts are strictly adhered to, including allowing
independent watchdog groups that would help to weed out corruption.
Finally, much of the windfall from oil sales must be saved in case of eco-
nomic downturns or decreases in commodity prices. These conditions, if
followed appropriately, could help prevent further Dutch disease in Sub-
Saharan Africa.

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 Structural Adjustment Policies
and Stability in Sub-Saharan
Africa: Moving Forward
Valerie Bieberich - University of Michigan
Special thanks to the Tokyo team headed by
Masuimi Kawade

Since their implementation in the 1980s and 1990s, Washington Consen-

sus Policies employed by the International Monetary Fund (IMF) and the
World Bank (WB) have been the subject of much debate. The majority of
academies and policy makers seem to agree on one thing: that the strict
implementation of structural adjustment programs (SAPs), such as trade
liberalization, privatization, labor deregulation, and austerity policies,
in Sub-Saharan Africa have not led to promised economic growth. Even
prominent former World Bank employees Joseph Stiglitz and William East-
erly, have taken a stand agaaainst the inflexibility and culturally insensitive
implementation of SAPs. In Africa, SAPs have been particularly ineffective
and, in some cases, have negatively impacted the region today.
Sub-Saharan Africa remains one of the least developed regions of
the world with a life expectancy of 47 years, the highest prevalence rates
of HIV, and, in 2004, over 40 percent of the population living on less than
$1 a day. However, the news is not all bad. The region does surpass other
developing areas in some economic indicators, and in 2007, real GDP
growth across Africa improved to about 6.5 percent, which is much better
than in recent years. On average, inflation has also been held down, and
“income volatility has fallen to near-30-year lows.” SAPs have not im-
proved the state of most African nations and greater compliance will not
yield better results. One potential solution is to invest in human capital,
infrastructure, and a creation of business-friendly conditions to increase
economic growth and hopefully, quality of life.

The Instability of SAPs

Not only have the overly rigid and expansive reforms urged by the IMF and
WB failed to produce the expected growth and stability, in many areas,
widespread anger over the economic downturn and resulting hardships
necessarily associated with these policies in the short-term caused rioting
and general unrest. In January of 2005, the IMF increased the value of
added tax in Niger; which taxes the seller at each stage of production. In
March of that year, many people impoverished by the tax organized a mas-
sive social mobilization.
This forced the government to halt the tax increase on milk, flour, and
water and electricity for the majority of the public. IMF urgings for the
implementation of SAPs in Nigeria, provoked riots in 2000 against these
policies and the then newly-elected president who continued them. Many
people were hurt economically by privatization, subsequent price hikes
and austerity policies. These actions diverted money from social services
to the repayment of the country’s debt and often amassed from IMF and
WB loans.
Prior to the start of reforms, Mali’s government owned 60 percent
of the cotton industry, which was one of the country’s highest grossing
exports and a provider of many public services. However, in 1999 and
2000, peasants, unhappy with questionable management and extremely
low prices received for harvesting of the cotton, revolted. In 2001, under
some pressure from the World Bank, privatization of cotton and other
large industries took place faster than previously planned. The way in
which this privatization was managed, especially in its speed, disregarded
the important role that the cotton industry played in many people’s daily
lives. This lead to considerable unrest and the disruption of transportation
of aid, fertilizer, and water and electricity services.

Compliance and Conflict

A important relationship exists between compliance and stability. Noor-
bakhsh and Paloni have put together a grouping of African countries by
their level of compliance:

Figure 1: Country typology by the level of compliance

Note: For further explanation see appendix.

The number of countries with serious conflicts increases with

lower levels of compliance , as it is obviously harder to comply with these
regulations in a state of warfare or other disruptive violence. These con-
flicts often involve disturbance of governmental control, and turnover of
administrations, which may or may not be friendly to the IMF or WB and
their chosen policies. This paper will focus on Mali, Mozambique, and
Sierra Leone as examples of good compliers, Cote d’Ivoire, Niger, and
Senegal as examples of weak compliers, and Nigeria, Rwanda, and Soma-
lia as examples of poor compliers. With the exception of Somalia, these
countries were chosen because all have had substantial conflicts that have
been more or less resolved. Somalia is still embroiled in internal conflict,
making it a slightly different case. Other countries in the chosen group
had shorter struggles that may not have been considered full-blown wars,
but are in the group because their conflicts were caused by economic
instability or poverty.
When a few key economic indicators for the different compliances are
compared, there does not seem to be any sizeable benefit to following the
SAPs for countries that have experienced recent upheaval:

Figure 2: GDP per capita, current prices,

US dollars, across compliance levels.

Source: "Facts and Figures from World Development Indicators 2007."

World Development Indicators. 2007.
Note: Much of the success of poor complier GDP is attributable to Somalia

Figure 3: Inflation rate (annual % change),

average consumer prices, across compliance levels.

Source: "Facts and Figures from World Development Indicators 2007."

World Development Indicators. 2007.
Note: The poor compliers average does not include Somalia,
for which sufficient information was not available.

These graphs illustrate the 15 years since SAP implementation in

various countries. The data for each country was then averaged by level
of compliance. Good compliers appear to have the lowest average GDP
per capita, with weak compliers faring the best and poor compliers in the
middle. Weak compliers have the lowest and most stable inflation rates.
Each of these countries was affected by considerable internal conflict.
Even if these policies did have some positive effect on the countries
that followed them, the question remains if the affected areas could with-
stand the slow-down or even reverse in economic growth that necessarily
accompanies these policies. These already impoverished and unstable
regions are those least able to recover from a setback, especially when
in competition with more attractive and profitable markets. The struc-
tural adjustment programs have
not brought any large measure
The structural adjustment pro-
of prosperity to the compliant
countries with some measure of grams have not brought any large
conflict, as seen when compared measure of prosperity to the
to similar countries of weak and compliant countries with some
poor compliance. These reforms measure of conflict.
should not have been expected
to achieve the remarkable results
predicted by their supporters, including the WB and IMF, when the most
basic elements of a stable economic foundation were missing: education,
infrastructure, in terms of water and electricity, good business conditions,
a strong legal system, a stabilized exchange rate, and the careful imple-
mentation of Export Processing Zones (EPZs), which will be explained
later.

Human Capital
Education and basic health are two major components needed for a coun-
try to In order for people to work and add to a country’s GDP, they must be
fed, hthy, and have a sufficient educational background to prepare them
to make a living. These elements are so essential to any sort of growth
that a government is obliged, in the interest of future prosperity, to ensure
they are provided at a scale and quality sufficient to the people’s needs.
Healthier workers have increased productivity and higher levels of educa-
tion, because they are more able to regularly attend school, and invest
more due to their own greater longevity and subsequent ability to reap
the benefits of their long-term investments. All of these factors establish
health as a necessity for stable economic growth, because it increases life
expectancy, lowers mortality, and birth rates. This allows more resources
to be shifted to economic growth. However, more than just a healthy
population is necessary to build a thriving economy for the long term. The
people of a nation must also be educated to the extent that they are com-
petitive and valuable workers upon which to build a viable economy.
When looking at the rates of gross enrollment in primary and sec-
ondary schools for the chosen countries that have experienced recent
conflict, there are a few that stand out. As of 2005, Mozambique, Sierra
Leone, and Rwanda have primary school enrollment rates over 100 per-
cent; meaning that students older than the expected age group for these
grades are going back to school. In each of these nations, the govern-
ment, aided by non-governmental organizations, has made a concerted
effort to improve the educational situation.
Mozambique has greatly expanded its educational facilities, both in
their quantity and geographic dispersion. Although in many places more
formally trained teachers are needed. Yet, there remains a large dispar-
ity in access to education, especially by gender, residence, and poverty. A
large amount of children and their families cannot afford the many costs
of school, such as uniforms and books. As a result of these inequali-
ties and overcrowding, many children do not complete even their primary
school education, and the gross enrollment rate in secondary school is
only 13 percent.
The education infrastructure of Sierra Leone was ravaged by the
civil war, when 70 percent of schools were destroyed or occupied by the
Revolutionary United Front (RUF). However, there has been a substantial
rebuilding effort to allow children to get at least a free primary school
education. After the conflict, many children handicapped during the wide-
spread violence were sent to special schools. These schools are full of
students of all ages and serve those who were unable to get an education
during the war. However, this means that the class sizes are larger due to
these returning students. Education must be made more inclusive, espe-
cially taking into account the disabled. The teachers also need to receive
more training and are currently not paid enough to make a living.
Rwanda has the most developed, if not the best, system of the three
countries. The system’s end goal is to have nine free years of basic edu-
cation, after which students may go on to a technical or higher education
facility. There is a special effort to provide the resources necessary for
future success, to combat illiteracy and ignorance, and to be more inclu-
sive of all, regardless of gender, geographic location, disability, or place
in society. To make progress on these and other education goals, the
Rwandan system must reduce the cost of secondary schools, expand the
number of facilities and trained teachers, and reduce the currently high
rate of grade repetition.
Other countries may learn from these examples by first making
education a priority, and then expanding the raw number of facilities and
supplying them with quality learning tools. Although they do show prog-
ress, each of these countries still has a long way to go. They should es-
pecially focus on the quality of education provided, which must be able to
compete in a globalized economy, and provide the resources necessary to
diversify and continue long-term growth. It is also important to remember
that children must be able to attend school, which they cannot do in times
of social or economic instability.

Infrastructure
Secure infrastructure for the provision of basic utilities, especially electric-
ity, telecommunications, and water, is necessary for the welfare of busi-
ness and well-being of the people. This needs to be done in a way that
will ensure permanence, with a guarantee of continued service, universal-
ity of access, and a shifting of the costs away from the private sector,
where the expenses are often so high as to be prohibitive. In some African
nations, the private sector has provided telephone and communication
services because of ease of start up and cost effectiveness.
Water and electricity providers, however, have not seen the same suc-
cess. A recent United Nations Development Programme Policy Research
Brief focusing on the policy of privatization of basic utilities in Sub-Saha-
ran Africa concluded that the attempt was a failure. Water and electricity
were not provided, because no reliable investors were found to fully and
consistently finance the project. In order for the development of infra-
structure to succeed with private sector involvement, there must be more
regulation and a stronger public sector provision of utilities, as well as real
competition between government and private business. If this coopera-
tion between the public and private arena does not happen, the increased
cost of operation will drive up prices. Consumers will then have to give
up more of their income for these basic services, leaving them unable to
spend or invest in other areas of the economy. The availability of electric-
ity and water should not be subject to fluctuation and must become more
dependable in order for the building of a sustainable economy.
The government must prioritize infrastructure and, if necessary, help
with its provision, especially aiding those business that play an intrin-
sic role in this sector. One possibility is that the government could offer
a guarantee of last resort, to ensure the debt repayment of domestic
companies in case of default, as a safety net. One example of this is the
World Bank partial-risk guarantee, which helps to mitigate private risk by
working like a loan that must only be repaid by the government if it cannot
fulfill its contract. This program has been successfully used by the Cote
d’Ivoire and Uganda to find outside financing for the privatization of their
infrastructure. The government must put into place accounting measures
to hold the private sector responsible for money given for these projects.
The infrastructure of certain African nations needs to be enhanced,
especially in countries affected by war, which have an extra set of ob-
stacles to overcome. At the same time, it is true that too much political
intrusion may have a negative outcome if the government is ineffectual,
unstable, or unwisely interferes, helping the wrong people in the wrong
way, and not paying attention to market conditions. The biggest problem,
however, is that most of these governments do not have the money and
are not making enough revenue from within their own country to steadily
finance these projects. This is where outside investment must enter to fill
in the financing difference. This paragraph is still awkward.

Improved Business Conditions

Business development and capital investment are the basis of economic
growth. If firms cannot start and potential financers choose not to in-
vest in a “unattractive” region, there will not be much economic develop-
ment. This generally means that local institutions cannot expand. Making
an area more “attractive” for doing business is essential for drawing in
outside investors. Three important ways this can be done, in addition to
improving human resources and infrastructure, are enforcing legal rights,
stabilizing the exchange rate, and the formation of export processing
zones (EPZs). The idea of full or partial risk guarantees discussed in rela-
tion to infrastructure could, also potentially be applied to the concept of
initial investments as another incentive to attract business.
The ability to enforce contracts is critical for the formation of busi-
ness in a country, because it indicates the willingness of the government
to implement reform and create a climate more conducive to profitable
economic performance. If an investor’s money or property may be taken
at any time and the terms of an agreement violated without recompense,
the investor is not likely to enter into this situation in the first place and
certainly will not put his or her capital at risk a second time. A sound
legal system is necessary for commerce exchange to occur, for its profits
to reach the people, and for earnings to be re-invested into the area and
promote growth.
This connection between the ability to enforce contracts and a coun-
try’s foreign direct investment as a percentage of its gross domestic prod-
uct is hard to prove in many Africa countries, because there are so many
other factors that come into play. A more appropriate example of this
connection would be Hong Kong, Singapore, Thailand, and Malaysia from
the East Asian & Pacific area; Chile, Mexico, Panama, Peru, and Colombia
from Latin America & the Caribbean, and Hungary and Estonia from East-
ern Europe and Central Asia. The results are in Figure 4, below:

Figure 4: The ability of enforcing contracts to draw

in Foreign Direct Investment (FDI).

Sources: "Facts and Figures from World Development Indicators 2007."

World Development Indicators. 2007., DoingBusiness.org
Note: Rankings are within region

On this graph within the East Asia region, countries attract more
foreign direct investment (FDI) as a percentage of GDP when they have a
greater ability to enforce contracts, as measured by the Doingbusiness.
org rankings. Estonia draws in a high amount of FDI for its middling
ranking, but the country is ranked first in overall ease of doing business
for its area, so these other factors that make it easier to do business may
make up for its lackluster performance in contract enforcement. Without
Estonia, there is a distinct trend following the direction one might expect;
countries are more likely to receive foreign investment if they are more
able to enforce the legality of contracts. However, the relationship is not
perfect and due to instability in the region Panama and Colombia are not
the perfect example.
Another factor likely to discourage business is a volatile exchange
rate. This is because outside backers cannot be confident in the worth of
their money, and subsequently, in the certainty of their gains or losses.
These rate fluctuations may also reflect the greater economic instabil-
ity that puts their investment, and potential profit, at risk. This situation
is especially problematic for the sort of business that these countries
want to attract. On the other hand, if a government has stabilized their
country’s exchange rate, investors will have a greater faith in the worth of
their earnings, especially for long-term investment. A flexible, but secure
exchange rate shows a willingness on the part of the central authority to
work with investors to mitigate their risk by protecting against arbitrary
outside interference with the exchange rate, and instead leaving it more
relative to real market conditions. This can make it more likely that inves-
tors receive a profit, which
may then be passed on to It is necessary to address the specific
the host country and its situation and economic, social, and
inhabitants. political conditions of each country.
Export processing There are no blanket solutions.
zones (EPZs) create areas
with lowered regulations
on business, tax holidays, and other incentives to entice investors into the
region. These have failed to work in many parts of Africa because they
were not outward-looking, lacked the proper incentives and trade policy
reforms, included an inefficient bureaucracy, and did not have sufficient
infrastructure. Other problems with these zones include mixed effects on
the state of welfare and the possibility of the creation of a “race to the
bottom.” This happens when many adjacent regions create other EPZs and
in the course of their competition, end up with an outcome worse for all
involved, especially the workers.
However, with the correct incentives and regulation, these zones
may increase exports and bring new business to the area. Some neces-
sary precursors for functioning and beneficial EPZs are overall stability
and trade reforms, an “attractive” location, governmental support for the
promotion of business, and appropriate investment incentives, such as
tax-free importation of production inputs, the ability to reap profit, and
the existence of supporting infrastructure. One successful example of an
EPZ lies in Mauritius, where turning the whole island into an EPZ provided
the catalyst necessary to spark economic reform and broad-based devel-
opment. The Mauritian government offered investors many incentives,
including low or no taxes, priority in capital allotment and shipping, and
more ease in labor practices. This last should not, however, be advocated
for general application. Relaxed labor laws are not a practice that can be
safely and ethically applied everywhere. Other advantages in Mauritius
were a stable political background, good sea and air connections, estab-
lished infrastructure, a healthy, trained labor force, effective bureaucracy,
and institutional support. Mauritius undertook other economic reforms
as well, such as diversification.
All of these policies require some government intervention and
regulation in order to correct market failures and maintain a true capitalist
market, with fair and plentiful competition. They also require a base set
by some central authority, which provides the precursors to the establish-
ment of businesses. Only after these initial conditions are met may the
private sector work to bring about economic prosperity.

Conclusion
The SAPs advocated by the World Bank and International Monetary Fund
have not brought about any lasting stability or exceptional growth to
countries with a history of conflict. However, private investment brought
about by government-sponsored reforms leading to improved business
conditions, as well as private and public investment in human capital and
infrastructure, have the potential to lead to growth. Greater availability
of basic utilities improves health and access to markets and increases hu-
man capital.
It is necessary to address the specific situation and economic,
social, and political conditions of each country. There are no blanket
solutions. Voices must be heard from within the regions being affected,
not only to learn more about the problems, but to lead to more effective
solutions. Even more important than this is to build up the capacity of
each region to help themselves, by giving them the information and tools
necessary to make their own reforms and reduce their dependence on
outside forces which are, after all, outside of their control. Strengthening
and empowering local institutions is one of the ways to lead to long-term
sustainability.
Of course, none of these efforts will have much effect if there is not
a basic stability at a nation- and region- wide level. During a civil war or
other violent conflict, many basic rights and safeties disappear. Without
these, children cannot regularly attend school, businesses cannot function,
and much infrastructure is destroyed. But, if the people have gained the
ability and the knowledge to act for themselves, they may begin to rebuild
in a much shorter time, if only given the resources to do so.

Appendix
Explanation of the compliance levels:
“The first group, Macroeconomic Stabilisation, included measures such
as fiscal deficit reduction, control of public expenditure level, increase in
fiscal revenues, and exchange rate adjustment. The second group, Public
Sector Management, concerned measures such as civil service reforms,
public expenditure reforms, public enterprise restructuring and privatisa-
tion. The third group, Private Sector Development, included measures
such as financial sector reforms, trade policy reforms, pricing policies and
incentive and improvements in regulatory environment. Countries were
subsequently rated according to their level of compliance with each of
these measures from 1 (the highest) to 4 (the lowest); the country’s overall
index for compliance was then the average of the scores for these three
dimensions. The final result is the classification of countries into groups
of good, weak and poor compliers according to their compliance score.”

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 Corruption in Africa
Rhea Acuña, Sae Wha Hong, and Deepti Iyer -
University of Michigan

Corruption is an ongoing problem plaguing post-

independence Africa, and the solution is not yet
within reach. Wraith and Simpkins describe
Africa as “a ‘jungle of nepotism and temptation’,
a ‘dangerous and tragic situation’ in which the enthusiasm of the young
African civil servant turns to cynicism and where there are ‘not the atti-
tudes of progress and development’.” The problem of corruption in Africa
was unavoidable, as modernization tends to result in corruption when
traditional values clash with the imported norms accompanying develop-
ment. After independence, some African countries chose not to follow the
market-oriented economic system of their European colonizers because
they felt that it would only impede development. However, many research-
ers argue that the economic systems established after independence have
greatly contributed to the rise of corruption and underdevelopment.
Corruption is difficult to define and various members of academia
have formulated their own definitions. Corruption can be referred to as:

• The misuse of public resources.

• The abuse of power due to the attractiveness of personal rewards at
the expense of the total welfare of the citizens.
• A problem that includes the “outright theft, embezzlement of funds or
other appropriation of state property, nepotism and the granting of
favors to personal acquaintances, and the abuse of public authority
and position to exact payments and privileges.
• A function that measures the ability and opportunity for public officials
to create personal gains and the accountability that these public of-
ficials face for his or her decisions.

Corruption is a hindrance to development for many reasons. Pri-

marily, corruption hurts innovative investments. Innovators that are credit-
constrained find themselves limited, because they cannot participate in
the bribery game. Mauro found that “a one standard deviation improve-
ment in the corruption index (Business international indices on corrup-
tion) causes investment to rise by five percent of GDP and the annual rate
growth of GDP per capita to rise by half a percentage point.”
Corruption can also render aid ineffective by diverting aid flows away from
intended projects. Easterly gives the example of Zambia, which has con-
tinuously received aid in order to promote economic development. If the
aid were used for productive investments, incomes in Zambia should have
been greater than $20,000 per head. However, the per capita income is
still less than $500. It is presumable that the misuse of aid due to cor-
ruption is at least part of the reason that aid in Zambia did not effectively
stimulate growth.
This paper will examine corruption, defined as “the misuse of
public power for private benefit” by Transparency International, within the
least corrupt countries of sub-Saharan Africa. The “misuse of public pow-
er for private benefit” can be characterized by “bribing officials, kickbacks
in public procurement, or embezzlement of public funds.” Specifically,
we will study the relationship between three aspects of good governance-
-political stability, rule of law, and voice and accountability - and corrup-
tion.
As discussed above, corruption is an impediment to economic
growth, and a viable solution is needed for Africa to successfully develop
and escape poverty. To formulate a sound proposal, we decided to frame
our observations within the countries that have experienced success in
combating corruption, so the other countries can follow their lead in their
own battle. We hypothesize that political stability, rule of law, and voice
and accountability will have a positive relationship with corruption – as
corruption decreases the strength of political stability, rule of law, and
voice and accountability increases.

Corruption in Africa
Many African countries developed dictatorships or one-party systems after
independence because they believed that it would be the best system to
bring economic growth and improve welfare. African countries felt a multi-
party system would exacerbate existing ethnic fragmentation. Further-
more, they felt the one party system would accumulate wealth for develop-
ment in the shortest time frame. However, the one-party systems ended
up being dominated by urban
elites who were not knowl- Many government systems in Africa
edgeable about the issues
have become a medium for the ur-
plaguing rural society and
ban elite to gain personal wealth and
various ethnic groups. There-
fore, the one-party systems distribute benefits for members of
appeared to have the oppo- their group; this has worsened ethnic
site of its intended effects division in Africa and widened social
because it fostered corrup- inequality.
tion and “allowed political-
dominant groups to amass
enormous wealth.” Many government systems in Africa have become a
medium for the urban elite to gain personal wealth and distribute benefits
for members of their group; this has worsened ethnic division in Africa
and widened social inequality.

Specific examples of corruption in Africa include:

• The use of power by white minorities in South Africa to redistribute

wealth amongst their group while the black majority was repressed.
• The 1963 petrol station site awarded to a Council’s majority party in
the City Council of Kampala, Uganda.
• The misuse of power by the prime minister of Ghana, Kwame Nkru-
mah, over the illegal issuance of import licenses.
 Table 1: Corruption in Africa

Source: 2007 TI Corruption Perception Index; Governance Matter 2007

World Bank Governance Indicator 2007
Notes: Only countries in sub-Saharan Africa that used
more than 4 surveys in the CPI were included in our sample

Table 1 shows the ten most corrupt and ten least corrupt countries
in Africa and their CPI scores. The Corruption Perception Index (CPI) is
“compiled from a number of other indices produced from surveys under-
taken by a number of polling organizations and business risk consultan-
cies. . . . [T]he business codes the responses of businessmen, diplomats,
and journalist who travel and work in various parts of the world.” The
2007 CPI uses 14 sources, 12 of which are independent institutions.
Since the CPI measures perception, it holds certain biases depend-
ing on the sample groups. The rankings are not an absolutely precise
measure of a country’s performance with an absolute precision. “Coun-
tries which were assessed by three or four sources can have the same
minimum and maximum values, but in the latter case we can feel much
more confident about the country’s score.” Countries with three or fewer
sources do not fully capture corruption possibilities, so they have less
statistical accuracy. Therefore, we excluded the countries that used four
or less surveys in our country selections. Despite these problems, the CPI
is still a reliable source as seen by its high level of correlation with other
corruption indices.

The Importance of Good Governance

Kaufmann, Kraay, and Mastruzzi define governance as, “the traditions and
institutions by which authority in a country is exercised for the common
good.” The Africa Commission said that “Good governance is the key. . .
Unless there are improvements in capacity, accountability, and reducing
corruption . . . other reforms will have only limited impact.” Kaufmann,
Kraay, and Mastruzzi organized six indicators of governance for The World
Bank: voice and accountability, political stability, government effective-
ness, regulatory quality, rule of law, and control of corruption. We chose
to study in detail the three indicators political stability , rule of law, and
voice and accountability because we felt they would have the strongest
effect on corruption. It was illogical to study the effects of the indicator
“control of corruption” because our study was based on the effects of
good governance on corruption. We also excluded the regulatory quality
and government effectiveness indicators from our study because we felt
that these indicators resulted from corruption rather than contributed
towards corruption.
The governance indicators include measurements for 199 coun-
tries during the years of 1996, 1998, 2000 and 2002. They are compiled
from several hundred variables measuring the perception of governance
from 25 sources and 18 organizations.

Political Stability and Corruption
Political stability of a state can be measured by “the likelihood that the
government in power will be destabilized or overthrown by possibly un-
constitutional and/or violent means.” Political stability is necessary if
a government is committed to improving the economic conditions of its
country. Political instability increases the negative impact of corruption
as it “dissipate[s] the economic opportunity to raise the quality of life.”
In a politically unstable environment, governments behave in a myopic
manner. This implies that individuals in the government are unlikely to
propose long-term policies if they feel the benefits of their proposals will
not rightly be accredited to them. Thus, political instability leads to unmo-
tivated government officials with a tendency to under-invest.
According to calculations reported by Mo, “political instability ac-
counts for about 64% of the effect of corruption on the rate of productiv-
ity growth.” Corruption may lead to an increase in inequality and reduces
the productivity of economic activities, therefore encouraging rent-seeking
behavior.
The politically unstable environment in Africa is revealed by the fre-
quent regime shifts between “more or less authoritarian civil rule and mili-
tary government.” Continuance of civil wars, resulting from the frequent
regime changes, hinders the governments’ capabilities in improving the
welfare of the society. There must be political stability in order to enforce
the transfer from one political regime to another.
Table 2 shows the political stability scores of the ten most corrupt
countries and ten least corrupt countries in Africa. The corrupt countries
tend to have negative political stability scores; whereas, the political stabil-
ity scores for the ten least corrupt countries vary from -.26 to 1.23. From
the table, it appears that being relatively less corrupt does not guarantee
political stability. However, corrupt countries appear to be relatively more
politically unstable.

Rule of Law, Voice and Accountability, and Corruption

The rule of law consists of rules that “govern the enforceability of con-
tracts, disputes settlements, criminal behavior, procedures for the judi-
ciary, the protection of property rights (including intellectual property
rights), the extent of tax evasion, and the extent of black market activity
as an impediment to business development.” A strong rule of law is need-
ed to foster economic development. Society runs smoothly when citizens
have faith in the laws and know that the justice system is fair.
Table 2: Corruption in Africa

Source: 2007 TI Corruption Perception Index; Governance Matter 2007

World Bank Governance Indicator 2007
Notes: Only countries in sub-Saharan Africa that used
more than 4 surveys in the CPI were included in our sample

Arvind Jain effectively describes the complex relations of rule and
law. An external shock can lead to an increase of corruption in a country
characterized by a poor legal system. This environment provides elites
heightened opportunities to accrue income through corruption. In order to
easily continue their corrupt behavior, corrupt elites will weaken the
enforcement of the legal system by inefficiently allocating resources and
delegating unmerited appointments for important positions. Thus, the
weakened legal system will be unable to effectively fight against corrup-
tion. Ultimately, “a weak judicial system becomes a cause as well as a
consequence of corruption.”
Table 3 shows the rule of law scores of the ten most and ten least
corrupt countries in Africa. The most corrupt countries tend to have rela-
tively weaker rule of law. However, there is no such trend within the least
corrupt countries.

Table 3: Rule of Law in Africa

Source: 2007 TI Corruption Perception Index; Governance Matter 2007

World Bank Governance Indicator 2007
Notes: Only countries in sub-Saharan Africa that used
more than 4 surveys in the CPI were included in our sample

It has been shown that without established rule of law, access
to information, and accountability to public actions, improved voice and
accountability has little effect on corruption. Voice and accountability
measures the ability of citizens of a country to select the government. It
also measures media independence; freedom in media monitors and holds
authority figures accountable for their actions. Public accountability also
ensures that public money is spent economically. Corruption is a problem
when public officials have little accountability. Table 4 shows the current
levels of voice and accountability in Africa. The average level of voice and
accountability amongst the ten least corrupt countries is .067, and the av-
erage level of voice accountability amongst the ten most corrupt countries
is -1.171.
Table 4: Voice and Accountability

Source: 2007 TI Corruption Perception Index; Governance Matter 2007

World Bank Governance Indicator 2007
Notes: Only countries in sub-Saharan Africa that used
more than 4 surveys in the CPI were included in our sample

Regressions
We used regression models to examine the relationship between three
governance indicators – political stability, rule of law, voice and account-
ability – and corruption. Table 4 shows all the regressions that we created
for the purpose of our study. In order to examine the separate relation-
ship between each governance indicator and corruption, we used linear
regressions. Linear regressions are used to describe the linear relationship
between one response variable and one explanatory variable. However, an
observed relationship does not prove that the explanatory variable causes
a change in the response variable.
Column one in Table 4 shows the results of a single regression
between the explanatory variable, political stability, and the response
variable, corruption. The coefficient for political stability is 1.126, which
means that a one-point increase in the CPI results in a 1.126-point in-
crease in the political stability index. This relationship is very statistically
significant; the p-value for the regression is .02, meaning that there is a
two percent chance that the observed relationship between political stabil-
ity and corruption will occur if there is no relationship.
 Column two shows the results of a single regression between rule
of law and corruption. The coefficient for rule of law is 1.465, meaning
that a one point increase in the CPI results in a 1.465 point increase in
the rule of law index. This relationship is very statistically significant; the
p-value for the regression is .0005.
Column three shows the results of a single regression between
voice and accountability and corruption. The coefficient for the voice
and accountability is .924, meaning that a one-point increase in the CPI
results in a .924 point increase in the voice and accountability index. This
relationship is statistically significant; the p-value for the regression is
.016.
In order to examine the combined effects of political stability, rule
of law, and voice and accountability on corruption, we used a multiple
regression. Multiple regressions use one or more explanatory variable to
examine the value of the response variable. Column four in Table 4 shows
the results of a multiple regression between rule of law, political stability,
voice and account-
ability, and cor- It has been shown that without established rule
ruption. The co-
of law, access to information, and accountabil-
efficient between
political stability
ity to public actions, improved voice and ac-
and corruption is countability has little effect on corruption.
-.312 when rule of
law and voice and
accountability are held constant. However, this coefficient is not statisti-
cally significant as the p-value is .577. Therefore, there is no significant
relationship between political stability and corruption when taking rule of
law and voice and accountability into account. Interestingly, the coefficient
between rule of law and corruption is 2.217 when political stability and
voice and accountability are held constant. This indicates that there is
a positive relationship between rule of law and corruption when political
stability and voice and accountability are taken into account. This coeffi-
cient is statistically significant because the p-value is .053. The coefficient
between voice and accountability and corruption is -.432, when political
stability and rule of law are held constant. The p-value is .43; therefore,
there is no significant relationship between voice and accountability and
corruption when taking political stability and rule of law into account.
In accordance with our hypothesis, separately, political stability,
rule of law, and voice and accountability each have a positive relationship
with corruption. However, the multiple regression analysis does not sup-
port our hypothesis that there is a positive relationship between political
stability, rule of law, voice and accountability and corruption. According
to the multiple regression analysis, only rule of law and corruption have
a statistically significant relationship. The lack of statistically significant
relationship between political stability, voice and accountability and cor-
ruption may suggest that there are non-linear relationships between those
variables. The small sample set may have caused the lack of significant re-
lationship in the multiple regressions between political stability, voice and
accountability and corruption: A sample set of 10 countries might be too
small to show a significant relationship between the three variables.
In the future, an analysis using larger sample sets may lead to
different results. To keep in accordance with analyzing the least corrupt
countries, we propose dividing all of the countries in sub-Saharan Africa
into two categories: most corrupt and least corrupt, then examining the
relationship between the variables amongst the least corrupt countries.
This will provide a larger sample set for the least corrupt countries, which
may result in a more statistically significant correlation.

Table 5: Relationship Between Corruption and

Good Governance (Political Stability and Rule of Law)

[ ] indicates p-value
* coefficient statitistically significant at the 10% level
** coefficient statistically significant at the 5% level
*** coefficient statistically significant at the 1% level

Policy Proposal
Since there is no significant relationship between political stability, voice
and accountability, and corruption we propose that in order to reduce cor-
ruption a larger share of official development aid (ODA) should be focused
on strengthening the rule of law in society.
Currently, the social sector is the largest recipient of foreign aid,
accounting for 36% of ODA in Africa. Figure 1 shows the distribution
within the social sector. The social sector is divided into several catego-
ries including: education, health, population and reproductive health,
water supply and sanitation, government and civil society, and other social
infrastructure and services. The government and civil sector account for
the largest donor commitment with 10.9%. This sector consists of aspects
such as: legal and judicial development, strengthening of civil society, gov-
ernment administration, and other aspects that relate to the rule of law.
Since aid that is given to government and civil society will also be
used towards aspects that are independent to rule of law, we propose that
10.9% of the 38.6% of aid committed to the social sector is not enough.
If more aid were distributed towards government and civil society, then
ODA would be more effective. Aid can be used to strengthen rule of law
and a strong rule of law is necessary to combat corruption. A multiplier
effects also takes place because a decrease in corruption will also lead to
a more efficient use of aid.
The ultimate goal of ODA directed towards rule of law is improved
justice. In order to eventually create better justice ODA must first be used
to improve: political leadership that is supportive of rule of law, existing
legal structures, social and economic equity, and judicial capacity.
Political leadership can be improved through constitution and
coalition building; aid should be used to support the media and create
responsible lawyers communities. Structural reforms such as new judicial
processes and autonomous judicial budgets will improve existing legal
structures. In order to improve social and economic equity, the practice
of excluding non-elites must be terminated. NGO advocacy and media
monitoring programs should be established in order to evenly disperse the
access to public goods throughout the population. Increased court bud-
gets, court modernization, and supervision of lower courts are targeted
aid programs that will improve judicial capacity. Aid directed towards rule
of law will be most successful if these specific strategies are implement-
ed. However, a base level of political stability and voice and accountability
is necessary for the success of these rule of law strategies. The impor-
tance of political stability and voice and accountability is emphasized in
the significant coefficients of the single regression between each variable
and corruption.

Figure 1: ODA to Africa Within the Social Sector

as a Percentage of Total Donor Commitments

Source: 2007 OECD Development Aid at a Glance

Statistics by Region, Africa

Before donors initiate aid programs, they look to efficiency as

a main criterion for sending aid. Donors want to be assured that their
money will be used for increasing growth in African countries and that the
poor are recipients of benefits. Burnside and Dollar found through regres-
sion analysis that overall foreign aid has done very little to help growth in
African countries. This lack of development in African countries discour-
ages donors from providing aid because donors feel that their aid money
does very little, if anything, to alleviate the problems it is intended to fix.
Many economists such as Patrick McAuslan and William Easterly have be-
come skeptical of the benefits of aid, and their skepticism has negatively
affected the outlook of donors.
Burnside and Dollar found that the reason aid has little affect on
growth is because the growth of developing economies depends largely
on their own economic policies. Burnside and Dollar formed an index
consisting of budget surplus, inflation rate, and an openness dummy
variable to interact with foreign aid. They found that this policy index had
a positive effect on growth in good policy environments - countries with
good policies and significant aid performed well. On the other hand, it
was discovered that countries with poor policies used the aid to increase
government spending in all areas, not just in the specific sectors for
which donors were targeting. Aid in these countries increased govern-
ment consumption and had no positive effect on growth. Furthermore,
Burnside and Dollar measured aid recipients and found that there were no
more tendencies to allocate aid to countries with good policies. McAuslan
argues that most aid is not only wasted, it is misused in that it is stolen
and squandered by government officials. Burnside and Dollar feel that aid
should be directed towards countries with good policy. However, many of
the countries that suffer from poor policies need aid to better their rules
of law to ultimately combat corruption.
The cyclical problem between aid and policy can be partially
solved through a systematic provision and monitoring of all aid that is pro-
vided. MacAuslan suggests that auditors made up of internal and external
personnel can provide a full process of governance in countries, which
would be published in the state where the audit took place and in the
donor community. He suggests that major donors to particular countries
and international NGOs can monitor these audits collectively. We propose
that the World Bank act as the leading organization to conduct audits of
provided aids because the organization already provides monetary assis-
tance to developing countries and represents almost two hundred coun-
tries. Before this system is established, donors can still insist that their
personnel monitor the recipient country and trace the details of how their
aid money is spent. If a donor country detects misuse of aid funds, the
donor can cease aid.
Targeted and monitored aid that is distributed to countries with
poor rule of law should effectively alleviate corruption. After the corruption
in these countries has been improved, the aid provided to them can be
used more efficiently to further decrease corruption. Overall, the proposed
aid distribution plan combined with the multiplier effect should very suc-
cessfully cure corruption.
Conclusion
In the past 50 years, many countries have made significant improvements
in economic development, but according to the United Nations Develop-
ment Program (UNDP), Africa remains the poorest region in the world. It
is apparent that corruption continues to hinder economic development
and growth. In Africa corruption is an especially problematic issue due
to the country’s predisposed position created by its past government
structure. Corruption decreases innovative investments, and the invest-
ment in Africa has especially been affected by its corruption. There have
been many attempts to decrease corruption; however, few have succeeded
in their goals. The negative results from attempted programs to allevi-
ate corruption have discouraged future donors, and there has been no
consensus regarding the best strategy to ease corruption. One of the key
determinants of corruption is known to be governance. We found through
regression analysis that the rule of law segment of governance has a
very significant relationship with corruption. Therefore, we propose that
the best strategy to ease corruption is to focus monitored aid towards
strengthening rule of law. A strong rule of law should result in a decrease
in the level of corruption.

Appendix A
For data sources to construct the Governance Indicators, surveys on how
respondents in each country recognize the level of the governance are
used. The respondents include individuals, corporate, development agen-
cies, or NGOs who are familiar with the state of the governance by hav-
ing actual experience residing or working in the country. According to the
World Bank, 311 variables from 33 sources and 30 different organizations
were used for 2007.
An Unobserved Component Model processes the responses collected.
The UCM assumes the following: “The “true” level of governance is unob-
served and noisy “signals” of the level of governance are constructed from
the available sources.” The model calculates “a weighted average of the
sources” as the best estimate, by weighting less to the sources that are
less reliable with “larger noise” or “larger measurement errors.” All scores
stretch out in the range of -2.5 and 2.5, with “an expected value of zero”
and “a standard deviation of one” across countries. Higher scores indicate
better outcomes.
 Appendix B: Political Stability, Rule of Law,
Voice and Accountability and Corruption - 2007

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 Microfinance In Africa: A Look at
the Effect of Policies on Women’s
Financial Empowerment
Kelly Goodman, Uday Vadula - University of Michigan

Microfinance is a term used to refer to financial services given to the poor.

This encompasses small loans to start businesses and means to save their
earnings and invest. Both formal and informal sectors are addressed by
microfinance policies initiated by both governments and private compa-
nies. The informal sector is the sector of the economy consisting of off
the books small loans between neighbors, products made and consumed
in villages where no records are kept, and many other unofficial economic
activities.
Access to microfinance in Africa is limited, as lending to the poor
is expensive due to high screening, monitoring and enforcement costs.
Less than 10 percent of those who need microfinance services receive aid
“although sub-Saharan Africa has the highest proportion of people living
in extreme poverty, with more than 40 percent living on less than $1 per
day.”

Microfinance and Women

Microfinance often targets women, who represent the poorest of the poor.
Women are more willing to divert resources to children’s health and educa-
tion than men and to their development. Women are less mobile than
men and more likely to work in or near the home. These factors facilitate
the monitoring of these women by bank managers and by peers. Follow-
ing from this relative immobility and fear of social sanctions, women “tend
to be more risk-averse than men and more conservative in their choice
of investment projects,” and are less likely to default on loan repayments
than men. Policies designed to enhance women’s empowerment would
increase the capacity of women to make choices and transform those
choices into desired actions and outcomes. Empowering policies also fo-
cus on enhancing the social, economic, political, and spiritual strenght of
women and their communities.

Kenya, Ghana, Burkina Faso

Not all microfinance policies are effective, programs in some African na-
tions are plagued by problems such as defaulting on loan repayments,
social and economic instability, and corruption. Here the microfinance
policies of Kenya, Ghana, and Burkina Faso are examined to see which
policies appear to have a causal relationship with the economic empow-
erment of women. These countries were chosen with regard to several
indicators. GDP was chosen to gauge the overall size of the economy. The
level of conflict was also considered as some countries are heavily bur-
dened with ongoing violence and conflict. This is a disincentive for people
to set up shops and start their own businesses, save, and invest, because
their economic situation, as well as their safety, are uncertain. Corruption
was also considered because the government can play a large role to help
and create microfinance policies.
Studying similarly stable countries will largely eliminate conflict
as a confounding variable. Ghana and Burkina Faso, which are adjacent,
have high levels of corruption while Kenya has extreme levels corruption.
Stability is then used to indicate an absence of conflict within the coun-
try. Although Burkina Faso is susceptible to the destabilization of of it’s
neighbor Cote d’Ivoire. Kenya has large microfinance operations and until
recently, has had no internal conflict. Ghana is similarly stable and grow-
ing its economy through political and economic reforms.

Comparative Models of African Microfinance

Microfinance in Kenya
Kenya has many microfinance programs ranging from non-governmen-
tal organizations (NGOs), to Informal Sector Programs (ISPs) loans to
bank loans for the poor through Rotating Saving and Credit Associations
(ROSCAs). The overarching NGO that supervises smaller organizations is
called the Kenyan Rural Enterprise Programme (KREP), and was set up by
USAID. KREP has shown signs of dynamism by taking input on their prac-
tices in order to streamline and improve them.
KREP manages two lending programs- the Juhudi and the Chikola.
The Juhudi program organizes entrepreneurs into groups, called watanos,
to disperse loans. These groups have had great success and a low default
rate, due in part to the mechanism of group lending. After a Juhudi group
has existed for a few years, it can become a Chikola program, which can
sell loans to members. Group lending, while providing a support system
for borrowers, also enforces a social pressure to continue payments. A
group lending microfinance program in Kenya found that default rates
were high when women deposited their installments in a bank account,
and lower when women switched to a form of public repayment, such as
face-to-face meeting with collectors.
Arrears and defaults on loans have generally been maintained at a
low level, until recently. In the Juhudi program, arrears and defaults stood
at about Ksh 4.4 million in 1993 and at Ksh 23.6 million in 1995. The
Juhudi program has recorded an average repayment rate between 96 per-
cent to 99 percent during 1991-1993. In 1995, the Juhudi repayment rate
was reported to be 97 percent. The Chikola program experienced a repay-
ment rate of 99 percent in 1991. During 1994 and 1995, the repayment
rate for Chikola loans fell to about 90 percent. This was due primarily to
problems at one branch. Since the rate of defaults stayed constant while
the total defaults in Ksh increased substantially it can be concluded that
the amount disbursed also increased substantially.
The Juhudi program operates in two areas, Eldoret, one of the fast-
est growing cities in Africa, and Kibera, the second largest slum in Africa.
Although the Kibera branch faces many challenges, it has positive sustain-
ability indicators. However, “KREP found that richer members were not
repaying and making poorer members cover their loans.” KREP is increas-
ingly effective as it has begun talking with clients, doing internal research,
and evaluation to improve its methods.
The Informal Sector Programme (ISP) is another provider of
micro-loans aimed at informal businesses with growth potential. Financed
heavily by German GTZ funds, ISP requires a license for loans, but will
lend to women without their husband’s consent. The ISP is controlled by
the Government of Kenya and is not operationally independent. The ISP
has a lower repayment rate, which is generally in the 70 percent to 90 per-
cent range. Only 18 percent of borrowers are female, as compared to 54
percent female borrowers under the Juhudi scheme. This is because loans
are targeted at the manufacturing sector, which men dominate.
A third source of microfinance comes in the form of Rotating
Savings and Credit Associations (ROSCA), which are formed as groups by
friends and neighbors who pool their savings and make loans from the
common pot to each member in turn. “The typical ROSCA cycle lasts for
about one year” during which the pot is roughly one quarter of average
monthly household expenditures.
The main ingredient to Kenya’s However, the order of who gets a
system of microfinance is group loan is contested. Random assign-
lending, which adds pressure to ment seems fairer and provides an
borrowers to repay, yet at the incentive for even the last person
same time creates a support sys- to get a loan to cooperate. Ander-
tem for people who are having a son, Baland, and Moene find that
Kenyan women solve the problem
hard time repaying or saving.
by settling on a fixed order that
gives loans to the most untrust-
worthy last, which requires extensive screening of members who may need
a recommendation or time to build their reputation. In a survey of 308
Kenyan ROSCA members, Gugerty found that 37 percent of women joined
ROSCAs primarily because it was “difficult to save at home because mon-
ey got used up in small household needs”, 22 percent reported that it was
“difficult to save alone, that they ‘got the strength to save’ by sitting with
others,” while just 10 percent reported that they joined “as a response
to household conflict, fear of theft, or demands by kin.” Membership in
ROSCAs is less common in rural areas, as distance between borrowers
dilutes the pressure of enforcing repayment. ROSCAs are a good way of
mobilizing savings instead of keeping the money at home, and spending it
or having it stolen.
The main ingredient to Kenya’s system of microfinance is group
lending, which adds pressure to borrowers to repay, yet at the same time
creates a support system for people who are having a hard time repay-
ing or saving. The formal lending program is very careful about defaults,
extensive screening is performed on applicants, and training is provided to
recipients of loans.

Ghana susu
In Ghana, susu money collectors are overwhelmingly male, however, the
informality of their approach, based on relationships, makes saving
comfortable for women. Susu meet with villagers to collect about $0.73
a day per client. “At the end of each month, the savings are returned to
the depositors; the collectors keep one day’s deposit, or 3.3 percent of the
monthly savings, as commission” which accumulates to an average profit
of $600 a month, six times the average income in Ghana. The informality
of the system, however, doesn’t prevent calculation of repayment rates. In
1990-1991, 70 to 80 percent of these informal lenders had perfect loan
recovery rates.
Susu could expand as intermediaries between the banks that can-
not afford micro lending and the 60 percent of clients who request loans.
Accumulated funds, protected from the appeals of family and friends,
act as self-loans taken out monthly to restock supplies. Surveyed collec-
tors could only fill 13 percent of these requests, and largely in smaller
amounts. Daily collection visits could also be used to monitor loan repay-
ment with little marginal cost, about 3 percent of the loan cost. Since
susu deposit their client’s money in the formal financial sector, they could
access credit to ensure continued liquidity while expanding lending. How-
ever, the banks face the problem of ensuring that collectors carry out the
bank’s policy. Susu, whose rates are 50 percent higher than the formal
sector, may not want to participate if their banking partners demanded
lower interest rates be charged. Singh argues that the high interest rates
are mainly due to high opportunity costs, not to monopoly profits, sug-
gesting that decreasing screening costs should lower interest rates.
The informal susu collectors are an interesting concept and should
be studied further. Intuitively, it seems like such collectors in poor coun-
tries would have plenty of incentive to steal people’s savings. The reason
for the success of this kind of policy may be the fact that the susu has
been around for a long time and is well known and familiar, and susu
collectors may have built up trust with the community. Such a policy may
not work in a country that has not had informal collectors like this. It may
also not work in countries with high levels of violence and conflict, as the
safety of the collectors may be uncertain and their mobility may be ham-
pered.

Burkina Faso
In 1994, the West African Economic and Monetary Union, of which Burki-
na Faso is a member, imposed legal and regulatory frameworks aimed at
creating sustainable microfinance initiatives (MFIs). In Burkina Faso, the
poor seem constrained by lack of access to credit, rather than high inter-
est rates. Women in particular had limited access to credit. “In 2000, the
total number of MFIs clients stood at 497,000, representing 8.3 per cent
of the target populations. Despite the rapid growth of MFIs clientele, their
outreach remains small compared with the potential demand.” However,
MFIs are young- on average, 9 years old- and in high coverage pockets of
the expanding network coverage ranges from 30 percent to 60 percent.
The Project de Promotion du Petit Credit Rural (PPPCR) is a
nonprofit credit program targeting the poor in various regions of Burkina
Faso. This project is loosely modeled after the group-lending model of
the famous Grameen Bank in Bangladesh, funded by a Nobel Peace Prize
winner Mohammed Yunus. In the PPPCR’s adaptation of the Grameen
model in Burkina Faso, loans are recorded individually. Group penalties
are used as a repayment incentive: “if any member of the group defaults,
the entire group is blocked from future credit, thus encouraging the use
of peer pressure and solidarity.” The PPPCR extends the reach of group
liability, denying loans to the entire urban sector or rural village if an
individual defaults. Group leadership development is necessary to prevent
the domino effect that causes an increasing number of defaults after the
first group defects and diminishing peer pressure during loan the cycle. In
their survey of 140 PPPCR lending groups, Paxton, Graham and Thraen
found a statistically significant relationship between leadership and train-
ing; “Groups that had been trained well by bank workers had been taught
contingency plans for when problems occurred, and groups with a trust-
worthy, strong leader were more likely to repay their loans.” The domino
effect is felt less in urban areas, as opposed to rural areas, where diversity
of economic activity fosters “healthier portfolio diversification and some
protection from the economic impact of droughts.”
Group credit institutions, such as PRODIA and FAARF, have high
repayment rates, which “appear to be closely linked to group loans and
to the use of group-based liability. These mechanisms are particularly
adapted to small borrowers, especially women who generally lack tra-
ditional collateral-suitable assets.” Among PPPCR groups, urban loan
repayment was found to be higher because rural loans were invested in
agriculture, which entails a higher degree of income variation, risk, and
covariant incomes. ROSCAs had failed in the past in rural areas largely
because of the lack of monetization in the barter economy. The modified
group-lending program also failed in such an environment where “self-
sufficiency prevails over product diversification and specialization.” In
the urban market, women were familiar with financial tools and monetary
transactions through proximity and previous participation in tontines or
other lending groups. The hierarchical rural social system and group
homogeneity limit criticism and the effectiveness of peer pressure. The
individual loans here are reinforced by group collection, the same mecha-
nism that has been shown to be effective in Kenya.

Effects on Women

Theoretical Bounds
The debate over what indicators and measurements are important for
program evaluation, and thus recommendations of program policy planks,
is structured by ideological views of what the outcome of microfinance
should be financial sustainability, integrated community development, and
women’s empowerment. Different approaches have varying internal logic,
leading to different policy emphases. The financial sustainability approach
is interested in control over increased incomes. The integrated community
development approach recognizes women’s empowerment and community
self-reliance as compatible and aimed at alleviating poverty. The women’s
empowerment approach aims to use micro-finance primarily to increase
the status of women in the community.
Financial sustainability is measured by “institutionalists” who are
interested, not in subjective indicators but rather, “in market variables,
such as the repayment rate, transaction costs, the degree of financial
self-reliance, etc.” Integrated community development and women’s em-
powerment are measured by the performance criteria of the “welfarists”
concerned with household studies and living conditions. These criteria are
“the number of savings accounts or the number of loans, the improve-
ments in productivity, incomes, capital accumulation, food expenditures,
and social services, such as education, health, housing, etc.”
There is still a lot of work to be done to improve microfinance,
especially in the context of empowering women. Microfinance is still evolv-
ing and being refined, but there are some policies that may have a causal
relationship to women’s empowerment that should be studied further.
Group lending is a mechanism works well in some places. In addition to
helping creditors secure their loan, it also helps women organize and have
a support group to secure their independent financial position. This is
especially true in the case of the Kenyan Women’s Finance Trust; which is
an all women MFI in Kenya that has one of the lowest default rates in the
country.
The susu of Ghana is another model that may provide useful tech-
niques. Susu collectors that go door-to-door to collect savings and debts
may be more comfortable for women to interact with. There are definite
problems with this kind of savings and loan mechanism, especially in
countries with high levels of conflict or countries without a long history of
informal financial tools, which deserve further study.
There are many new innovations in the field as well, including,
“geographic targeting of programs to reach high-risk areas; active pro-
gram in disadvantaged communities, including poverty targeting; ensur-
ing MFI staff are committed to work with the poorest; and innovations
to credit products that are adapted to the needs of the very poor.” Cell
phone banking is an example of an innovation that adapts to the needs of
the people. Cell phone usage has been on the rise in Africa, and being able
to monitor one’s finances instantly will be very useful in helping people
save and plan for their future.
Each African nation is economically and socially unique, therefore
it may not be necessary to have one standard application of microfinance
policies. As is seen in Ghana, the informal susu collectors have been pro-
viding microfinancial services for a long time, making some of the policies
practiced by such collectors more easily adapted.

Further Research
The year 2005 was the international year of microcredit, followed in 2006
by the Nobel Prize being awarded to Muhammed Yunus, founder of the
Grameen Bank. This generated a lot of interest in microcredit, but a lot of
work must still be done for the continued success and permeation of such
policies, and specifically what effect these policies will have on the empow-
erment of women. In order to infer some causal nature of each policy it
will be useful to collect large amounts of data on economic indicators.
First, the size of the informal sector should be properly estimated. How
many informal transactions happen and where? Who participates in these
actions, mostly men or mostly women? What industries are women under-
represented in and if possible, why? The lack of capital, or access to their
own savings makes it difficult for women to start their own businesses
especially the industrial sector where large amounts of capital are needed.
An interesting statistic would be to track divorce rates over time as
more loans are given out. There are obviously confounding social variables,
but it would be interesting to see if financial empowerment for women
leads to higher divorce rates and social empowerment as well.
Savings rates between genders could also help to clarify how mi-
crofinance affects savings and specifically if there is a difference between
the savings rates of men and women.

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 Realities of the African Stock
Exchanges
Madison Iannone - American University

Mention investment in one of the African stock

markets to a seasoned investor and expect doors
to close. Options for portfolio diversification have
expanded in our increasingly interconnected world
with the success of emerging markets in Asia; however, Africa has gener-
ally been left out of consideration. The characterization of Sub-Saharan
Africa as an incubator of famine, war, genocide, and starving orphans is
primarily to blame. These characterizations have coalesced into a general
perception of high risk for investment that is greatly overstated. People
are comfortable sending their money to Africa for aid and relief causes,
but sending their investment funds is not even considered an option.
Seemingly forgotten is the fact that many of the African Stock Exchanges
find themselves annually
on the top ten perform- Mention investment in one of the
ing markets list worldwide. African stock markets to a seasoned
Africa now has a neighbor- investor and expect doors to close.
hood for investment where
high returns are abundant.
Kenya’s Nairobi Stock Exchange saw returns of about 400 percent from
2003 to 2007, far outdistancing China and India, the primary destinations
for emerging market investment. Of course, investment in any develop-
ing country has its risks, but the reason behind the lack of investment in
Sub-Saharan African markets is the difference between real risk versus
perceived risk.

Changing Africa
Many people refer to Africa in a united sense, rather than as an enormous
continent with many different nations, cultures, and types of government.
Much of Africa is impoverished, and has problems with corruption, but
times are changing. Since 2000, more than two-thirds of the continent has
had multiparty elections and most of the countries are at peace, leading
to an improving investment neighborhood. African governments are be-
ginning to realize that it is not the state that is going to create jobs, but
rather private sector investment leading to many more pro-small business
policies than seen previously. However, the global media consistently
shows negative images of Africa. “The image of the starving child as sort
of an iconic image of Africa is so entrenched in people’s minds, and I
know that these things are done to show people what is happening…to
support aid to the continent, but there is a benefit and a cost.” We need
to open our minds to Africa’s potential and consider why the continent is
only perceived in one way.
While no other continent in the world boasts the enormity of natu-
ral resources that Africa offers, this fact has become a limiting classifica-
tion rooted in colonial thought of Africa as a simple source of raw ma-
terials for the global “north,” rather than seeing natural resource wealth
as a stable jumping off point leading to eventual economic expansion. In
fact, the business and investment opportunities are immense. There is
development potential in multiple sectors of different nations economies
beyond natural resources. Much of Africa is positioned to take on light
manufacturing. There is tremendous demand for construction and real
estate development, as well as roads and other infrastructure. In addition,
as many African countries have instituted privatization measures, many
have opened up their electricity sectors to private enterprises. Significant
returns have already been seen in telecommunications, information tech-
nology, tourism, agriculture, and infrastructure projects. Like the already
highly pursued emerging markets, Africa’s potential consumer base of
900 million people can also be considered an immense resource. For
companies experiencing fairly saturated markets and needing to expand,
investment in Africa could be a potential asset.

Returns in African Markets

African markets have the potential to deliver much more than their
competitors mostly in the form of high returns. As a result of the per-
ceived high risk, they cannot attract capital unless they give a high rate of
return. As soon as more people embrace the opportunities in the African
markets, the rate of return will decrease and begin to level off to rates
similar with the rest of the world. This would accompany a level of de-
velopment in Africa attained by other middle-income countries. A high
level of economic growth and overall increased income is the overarching
goal of international development and poverty alleviation efforts. Govern-
ments that have the ability to ensure such economic growth would trickle
down to the rest of the economy helping even the poorest of the poor. For
example, Botswana, as a result of good leadership, has used the proceeds
from diamond exports for the development of the country: to build roads,
hospitals, and provide free education from kindergarten through advanced
graduate degrees. Unfortunately, there have also been instances of govern-
ments utilizing natural resources to enrich their personal accounts.
African countries still have some barriers to investment, but the
important point is that countries are recognizing such barriers themselves
and are one by one changing policies to be more accommodating to trade
and investment. One of the effects of a company becoming involved in
stock exchanges is that the participation becomes a source of pressure to
conduct business using best practices. Companies endure external pres-
sures to keep their accounts in order and self-audit, as they are account-
able to a group of shareholders. Africa often has the highest returns on
direct investment in the world, the fastest growing stock exchange rates,
some of the fastest growing economies, and total exports rivaling the Mid-
dle East. On average they have outperformed every market in the world.
Many investors taking advantage of the many benefits of the African mar-
kets have admitted to losing more on the New York Stock Exchange than
on the African Stock Exchanges. More private equity funds have created
Africa dedicated funds, and also for the first time Africa dedicated hedge
funds are emerging, particularly in the United States, certainly a sign that
Africa is beginning to be taken seriously by the international markets. All
of the major emerging market funds take positions in Ghana, from the
Morgan Stanley Fund, to the emerging market funds, to the Scott Stevens,
Bleakley, Soros Group, and Quantum Fund.

Case Studies: Botswana, Ghana, Nigeria and South Africa

According to the Governor of the Bank of Botswana, Botswana “[doesn’t]
expect to be Wall Street overnight, we don’t expect to be the city of Lon-
don overnight, but we should be able to compete with the likes of Malaysia
and Ireland.” African markets are booming. Many medium enterprises
in Ghana are looking at the
Africa often has the highest returns stock exchange as a viable
on direct investment in the world, alternative for financing, and
Ghana is about 92.5 percent
the fastest growing stock exchange
small to medium enterprises.
rates, some of the fastest growing
If Ghana is able to galvanize
economies, and total exports rivaling such enterprises to enlist, they
the Middle East. will see an incredible growing
market ahead of them. Nigeria
is another such country where
investors see high returns on their investments. Nigeria has moved on to a
new platform, with comprehensive reform programs, which are becoming
more favorable to business than ever before. While opportunities are im-
mense and returns on investment are about 35 percent, there is no claim
that the scenario is perfect. The risks of developing markets are the same
worldwide. Small markets tend to have less liquidity, leading to market
conditions that could potentially make finding buyers more difficult.
Botswana and South Africa remain the safest places in Africa to
invest. Not only is Botswana’s sovereign credit rating the highest in Africa,
it is rated higher than many developed countries, ranking higher than
Japan. However, another factor that should be considered when invest-
ing internationally is the country’s currency. Most African countries have
somewhat volatile currencies and this must be taken into consideration
when choosing investment locations.
At this time, Botswana’s currency is stable and as a result its bonds
are nearly as good as gold. As a former World Bank vice president said,
“The currency that is being devalued now is the dollar, so actually we’re
making money every day we sit with our money invested in African curren-
cies.” Most people do not think of African countries as potential service
economies, an idea reserved for the most developed countries, but Bo-
tswana is well-suited for services in financial and telecommunications
sectors. The country is trying to position itself as a hub in the Information
technology sector.
Meanwhile, South Africa is the twenty-second largest economy in
the world, and the Johannesburg Stock Exchange is the seventeenth larg-
est in the world. As a result, South Africa is already a significant player in
the global context and has already acquired a voice in the world economy.
South Africa has tremendous financial resources, which can benefit other
Sub-Saharan nations. As the development of South Africa is intrinsically
linked to its neighbors, the region as a whole will need to grow as a unit.
The Ghana Stock Exchange has also gained attention, especially after
the successes of the Databank Index founded by Ken Ofori-Atta and his
partner Kekeli Gadzekpo in 1990. Initially, the index began with eleven
companies and an index level of 100. Today, the index is over 4000. The
Databank Group also formed the first mutual fund in the country. The
initial capital was about fifty US dollars (250,000 cedis) with five staff
members. The fund is now over 230 billion cedis, over twenty-five million
US dollars. In order to diversify the portfolio, it has been expanded to Nai-
robi, Lagos, and the Botswana stock market. For two years the return was
seventy percent. In 2006, it was 137 percent return. In U.S. dollar terms,
over a seven year period, that is about a 60 percent real return.

Conclusion
Smart investors can see risk elevate over a period of time. To mitigate
risk, investors can diversify a portfolio across many different countries in
Africa, being aware that the perception is not always the reality, making
flexibility and nimbleness assets in avoiding problems before they begin.
Investing in Africa requires doing research. While many African countries
are stable and have healthy, growing stock exchanges, many could be
more risky for an investor.
In the twenty-first century and beyond, Africa’s involvement in the
global economy will be essential for future sustainability and development.
The misperception of the African investment climate is mostly the result
of an information asymmetry; a gap in knowledge between the investor
and the potential destination. As Ken Ofori-Attq has observed firsthand,
“On Wall Street, comfort level goes a long way to making decisions.” The
challenge for Africa is how to share the right information to prospective
investors to make them feel comfortable about the realities; positive and
potentially negative alike. This information dissemination of the African
investment dynamic holds value for both individual and institutional inves-
tors, who should re-evaluate their policies towards investing in emerging
markets.

Sources

“Biography: Joseph Huggins.” U.S. Dept of State. 2003. United States Department of State.
17 Feb. 2008 <http://www.state.gov/r/pa/ei/biog/17862.htm>.
Director’s Page.” Africa Open For Business. 2006. 17 Feb. 2008 <http://www.africaopenfor-
business.com/director.htm>.
“Edward V.K. Jaycox Biography.” Emerging Capital Partners Team: Directors. Emerg-
ing Capital Partners. 17 Feb. 2008 <http://www.ecpinvestments.com/team_details.
xml?id=1015&p=1044&d=1042>.
Fulthrup, Dan. Interview. “The Good News from Africa: Carol Pineau.” IdeaStream. NPR:
WCPN 90.3. 2007. 5 Dec. 2007 <http://www.wcpn.org/index.php/WCPN/Player/7690/>.
Pineau, Carol. “Africa Investment Horizons.” Forthcoming Documentary. Unpublished Tran-
script, 22 May 2007.
 The Dilemma of the African
Patriot: South Africa and Regional
Peacekeeping Efforts
Amy K. Frame - American University

“To end these (African) conflicts and find lasting solutions to their causes is some-
thing must seize the collective mind of Africans, and participating in a practical pro-
gramme of their resolutions the joint responsibility of each and every African patriot.”

Overview
Through all of the upheaval on the African continent since the end of the
Cold War, there has been no nation whose role has changed as much as
South Africa. Once a pariah state, both on the continent and internation-
ally, South Africa was a textbook example of a rouge state. However, their
peaceful transition to democracy relieved South Africans and astounded
the world. During apartheid the country was the worst kind of regional
neighbor, spreading terror and instability not only within its own borders
but to neighboring countries as well.
Now, more than a decade after the institution of majority rule,
the country’s regional role is almost the diametric opposite of what it
was during the apartheid years. Not only is the twenty-first century South
Africa not a pariah, it is fast becoming a continental leader on peace and
security issues. Since the transition, the ANC led government has be-
come a major actor in sorting out some of Africa’s most brutal conflicts.
Its participation in both the Southern African Development Community’s
Organ for Politics, Defense and Security, and the African Union’s security
arrangements illustrate the radical change the nation has made in re-
gional relations. Far from being the omnipresent outsider, the country has
become an enthusiastic participant in the continent’s regional security
arrangements. Because of its economic resources and historical experi-
ences South Africa has a lot to offer the region in terms of peace efforts.
Nowhere is this more true than in the area of peacekeeping.
South Africa has enormous resources compared to most other
countries on the continent. It has well-developed, diversified industries,
numerous natural resources, and its economy attracts wide foreign invest-
ment. Additionally, the country has a professional, well-equipped, civilian
controlled army. Finally, South Africa has the recent historical experience
of a peaceful transition to democracy after a protracted internal struggle
that can inform its efforts to help settle other conflicts. Because of these
strengths, South Africa can and should play a leadership role in regional
peacekeeping on the African continent.

A History of Regional Non-Cooperation

It is impossible to fully appreciate South Africa’s current position without
first taking a look at the country’s military relations in a historical context.
During apartheid the nation was moving on a politically opposite path
from the rest of Africa (or for that matter, the world). While colonized
countries around the globe were freeing themselves from minority rule, the
small Afrikaner population was consolidating power. While Americans were
dismantling separate facilities during the civil rights era, the apartheid
government was trying to push black Africans into literally separate coun-
tries. While other African countries were birthing liberation governments,
the apartheid regime was stifling dissent and imprisoning dissenters. This
push against the tide of freedom created conflict between South Africa
and her neighbors. Africans were ready to control their own countries and
were willing to take up arms for their causes. The existence of apartheid
and its codified repression of the African majority was an affront to the
newly liberated Africans and their consciousness of white oppression.
Military conflict was almost guaranteed by the situation.
After the National Party took power in the post WWII era, South
Africa still had many other white-controlled nations to ally itself with on
the continent. However, as the attraction of colonialism faded, European
powers began to leave their possessions in the hands of indigenous popu-
lations and retreat back to Europe. By the mid 1960’s most of the former
colonies held by Britain, France, and Belgium had been returned to local
control. This left only the Portuguese colonies of Angola and Mozambique
and the settler controlled Rhodesia as South Africa’s white allied govern-
ments. In this period South Africa tried to assert its own “Monroe Doc-
trine” with a “natural sphere of influence” in southern and central Africa.
This policy attempted to keep other nations from interfering with South
Africa’s policies on the continent by claiming that the country’s relative
power afforded it special status in African affairs. Additionally, South
Africa created informal, supportive relationships with the governments
of Rhodesia (who had pulled out of the British Commonwealth to avoid
majority rule), and Portugal. This alliance was non-codified; no treaties
or written pacts were drafted. Rather, it was designed as regional support
system of weapons and training assistance that required no formality.
However, in the 1970’s a coup in Portugal caused the nation to pull out of
its African colonies. Furthermore, the government of Rhodesia was facing
a losing battle with its own independence movement and could contribute
little to the alliance with South Africa. This increasing regional isolation led
to P.W. Botha’s Total Strategy, a utilization of any economic and military
means necessary to crush opposition to apartheid both internally and
externally.
The Total Strategy had devastating effects for South Africa’s neigh-
bors. The country was a regional giant with enormous military and eco-
nomic resources, and it used all of these to quash any regional resistance
to apartheid. The country illegally occupied Namibia (then South West
Africa) in order to create a buffer zone between South Africa and opposing
states in defiance of United Nations demands that it be granted inde-
pendence It participated in the bloody and protracted civil war in Angola,
supporting the National Union for the Independence of Angola (UNITA)
in a conflict that ultimately cost 1.5 million lives and create anger and re-
sentment with potential conscripts at home. It also supported the Mozam-
bique National Resistance (RENAMO) in its efforts to terrorize the citizens
of that country. By 1983 South Africa had invaded or carried out raids in
every country that bordered it. These often-covert actions created wide
regional instability. Even when the apartheid government signed treaties
(as it did in regards to Angola and Mozambique) the raids continued. So
defiant was South Africa that when a group of Commonwealth diplomats
visited the country in 1986 to open a dialog with the government, the
country carried out attacks in Botswana, Zambia, and Zimbabwe who were
all members of the Commonwealth. No amount of international protest or
UN condemnation could stop South Africa’s military aggression against its
neighbors.
Additionally, South Africa used its economic power to intimidate
and force cooperation from neighboring countries. The country was not
only rich and natural resources, but it also attracted substantial Western
investment, which enabled it to develop a more sophisticated economy
than neighboring states. Because of this, apartheid South Africa was not
only a large regional exporter of supplies like electricity and coal, but it
was also often the sole significant importer of goods from its neighbors.
The country also had control over most of the regional ports and railways,
which made it difficult for other nations to transport imports and exports
without the apartheid regime’s cooperation. The economic situation was
further complicated by the fact that South Africa employed more than a
quarter of a million foreign workers in its industries, which provided sub-
stantial income to families back home. The economic dominance enabled
the apartheid regime to bully its neighbors, and to create severe economic
disruption should they not cooperate in frustrating the efforts of the ANC
and other groups battling the regime.
For their part, the newly emerging liberation governments of
Southern Africa sought to create their own regional security structures to
counterbalance the South Africa Goliath. Initially, other African countries
sought compromise with the apartheid government. Some countries,
for example, Zambia tried to seek out a negotiated detentes in the mid
1960’s, but were frustrated by Pretoria’s refusal to make compromises.
In 1969 the organization of African Unity endorsed the Lusaka Manifesto,
which suggested noninterference in South Africa in exchange for a gradual
transition to majority rule. Unfortunately, these overtures were ignored
and South Africa continued its aggressive activities in the southern part
of the continent. This led to the organization of the Front Line States
(Angola, Botswana, Mozambique, Tanzania, Zambia, Zimbabwe, and later
Swaziland, and Lesotho), a semi-formal, regional group united against
South Africa on economic and military matters. The FLS supported the
South West African People’s Organization (SWAPO), the Popular Move-
ment for the Liberation of Angola (MPLA), and the ANC. The FLS created
two subgroups organized to oppose the apartheid regime. The Interstate
Committee for Defense and Security (ISCDS) which was concerned with
military coordination, and the Southern African Development Coordination
Conference (SADCC), which attempted to allow for economic cooperation
without the interference of South Africa. Though both of these groups won
few victories against the apartheid government, they created the ground
work for today’s South African Development Community (SADC) which has
evolved into the regional structure that South Africa itself has become a
leader in.

A New Regional Leader Emerges

After the 1994 transition to majority rule, the new republic’s military pri-
orities and policies shifted dramatically. The ascent of the ANC to the rul-
ing party meant that former adversaries became allies. It also meant that
a massive program to integrate and restructure the military was under-
taken. During this process, the regional role of the newly reformed South
African National Defense Force (SANDF) was necessarily decreased as the
military looked inward to redefine its role for the new republic. By 1998
the Department of Foreign Affairs was ready to articulate its new vision
for the SANDF. In a Defense White Paper from that year, the department
outlined the nation’s future objectives for regional peacekeeping missions.
The White Paper noted that both domestic and international actors were
expecting the newly democratic nation to play a leading role in interna-
tional peace missions, and that alleviating the suffering of other peoples
would be a high priority for the SANDF. It also noted that South Africa’s
recent history would be a valuable experience in helping to resolve con-
flicts. Furthermore, it noted that the nation had both substantial military
and civilian resources to offer the international community for peacekeep-
ing operations.
The White Paper laid out specific ground work and parameters for
peace missions. It set guidelines for relationships with UN peacekeeping
forces and cooperation with regional security structures like the AU and
the SADC. But what makes the White Paper extraordinary is that it defines
regional peace and human security as a vital interest for the nation. It
notes:

“In short, it is in the South African National Interest (their bold) to assist peoples who suffer
from famine, political repression, natural disasters, and the scourge of violent conflict.
South Africa may provide civilian assistance and armed forces in common internation-
al efforts when properly authorized by international authorities to help in such efforts”.

Apparently this sentiment is shared by the South African public, as the

report goes on to point out, A nationwide opinion survey showed that more
than two-thirds of respondents indicated their support for the nations
involvement in peacekeeping missions.
Since the publication of the White Paper, South Africa’s involve-
ment in peacekeeping operations has grown steadily. The country’s
involvement has been primarily under the auspices of two regional or-
ganizations, the Southern African Development Community (SADC) the
African Union (AU). Both organizations have security and peacekeeping
structures, as well as economic and political components. South Africa
has become a leader in both groups, committing money, troops, and
expertise. It is within these two organizations that South Africa will find its
future leadership role as a regional military force.
The SADC evolved from the regional cooperation structures cre-
ated by the Front Line States, and after the transition to democracy South
Africa immediately joined the federation. The new ANC government was
instrumental in helping form the Organ for Politics, Defense, and Security
in 1998. The SADC Organ is a wide reaching project that seeks to address
a myriad of security issues. These include conflict prevention, early warn-
ing systems, arms control monitoring, cease fire monitoring, humanitarian
assistance, peacekeeping, and peace enforcement initiatives. The goals
of the SADC organ are ambitious, and while not all of its operations have
been completely successful, the SADC Organ has increasingly relied on
South Africa in its operations.
In 1998 the SANDF sent six hundred troops into Lesotho to pre-
vent a military coup after an election dispute. The SADC had been involved
in the situation in Lesotho
Because of its recent historical experi- since the election, when
ence South Africa can offer much needed the Lesotho Congress of
support to countries such as the DRC Democrats won a split
that face difficult security situations. election to take almost all
of the nations parliament
seats. The opposition
party, which included most of the members of the military, effectively shut
down the government in protest, and fear of an impending coup was wide-
spread. As a preemptive move South Africa sent troops over the border
under the auspices of the SADC. Unfortunately, the force deployed was not
sufficient, and the capital of Maseru was plagued by arson and looting.
Fifty-eight members of Lesotho’s army were killed, as were eight SANDF
members. Additionally, the legality of the intervention was questioned, as
that the Article that covered such operations had not been ratified into the
SADC Organ’s constitution at that time. The operation gave South Africa a
black eye internationally, as Garth Shelton notes,
“...the badly managed intervention raised doubts internationally
about South Africa’s military competence. It raised the concern that if
South African could not handle a relatively small problem, like Lesotho,
it could not serve as the sub-region’s policeman. The Lesotho operation
suggested that the SANDF was not adequately trained and equipped for
a peacekeeping operation which rapidly changed to a peace enforcement
mission. Lack of focus on peacekeeping training along with a preoccupa-
tion with conventional war-fighting probably lay at the root of the prob-
lem”.
In an effort to avoid such problems, the SADC, with South Africa’s
lead, began a concentrated effort to prepare its forces for international
peacekeeping. In 1999 the country participated in a massive peacekeep-
ing rehearsal called Operation Blue Crane with eleven other SADC nations
in an effort to practice the integration of military command structures.
The exercise was the largest ever held on the African continent and was
given substantial financial backing by several Western powers. Though the
operation hit a few snags, particularly a lack of Standard Operating Pro-
cedures (SOPs), the exercise showed a commitment by both South Africa
and the SADC countries to create to create a viable regional peacekeeping
structure.
The additional training would prove useful as the SADC became
increasingly involved in the volatile situation in the Democratic Republic of
the Congo (DRC). In 1998, under the mandate of SADC, Angola and Zim-
babwe sent troops to the DRC to protect the government of Laurent Kabila
from being toppled by Ugandan and Rwandan forces. South African and
United Nations forces followed by the end of 1999. Though South Africa
supplied troops, it contributed more to the effort than just military might.
First, the ANC government opened the Inter-Congolese Dialogue, a process
of reconciliation and negotiation that continues to this day. The Dialogue
has been instrumental in keeping the various DRC factions talking to one
and other, and though there is still significant instability in the country, it
has helped keep an all out war from resuming.
Additionally, South Africa applied specialized military experience
to the situation with Operation Teutonic, a military integration program
aimed at merging the various warring factions into a single, viable army.
Operation Teutonic allowed South Africa to share its own historical experi-
ence with other regional players. As Brigadier General J. Liebner, Senior
Liason Officer for the SANDF explains:

“We must prepare ourselves because we will be more and more involved
in countries in African due to the fact that we have experience in post-con-
flict restructuring and also the integration process we went through. Basi-
cally, all of the countries we are are involved in must go through this process.
I think our role will have to expand more in terms of military assistance, but I
think now is the time the military can play a restructuring and a building role.”

Because of its recent historical experience South Africa can offer much
needed support to countries such as the DRC that face difficult security
situations.
While South Africa has been heavily involved in the security initia-
tives of SADC, it has also been part of the broader continental security
structure of the AU. The AU, which has evolved out of the OAU, has broad
goals for a united Africa that solves her own problems and creates her own
opportunities. As the AU has worked toward continental integration it has
begun to develop its own structures for peacekeeping activities. The most
significant AU operation that South Africa has been involved in thus far
was the African Mission to Burundi (AMIB). Initially, in 2001, the SANDF
was sent to the ethnically divided nation to protect opposition politicians
from harassment and retribution during the peace process. However, as
the situation became less stable, a broader contingent of AU troops was
brought in to keep order while Nelson Mandela helped negotiate a settle-
ment. Burundi was a largely successful operation for the AU, though disor-
der in the DRC creates challenges for the country the peace has generally
held, and the AU mission certainly has helped to keep casualties down.
Another AU operation South Africa has become involved in is the
African Union mission to Sudan (AMIS). The operation, aimed at keep-
ing order while a settlement is negotiated in the chaotic Darfur region,
has faced enormous difficulty in obtaining both funding and international
logistical support. Though South Africa thus far has only dispatched 97
Special Forces troops, it has agreed this week to consider sending more to
augment the overwhelmed AU force (Reuters). However, President Mbeki
has been a strong advocate for the people of Darfur, advocating for as-
sistance from Western powers, and appealing directly to President Bush
for diplomatic support. Recently, the UN Security Council finally agreed to
dispatch a better-funded and larger peacekeeping force to Darfur, which
will take over from the AU by December of this year. Hopefully, UN involve-
ment will give some protection to the people of Darfur while a settlement
is worked out at talks in Arusha. This kind of operation illustrates how the
AU can work to augment the UN security structure. These kinds of stabili-
zation missions can utilize regional security structures as first responders
during conflicts, while the international community as a whole orches-
trates a coordinated response. Additionally, because of South Africa’s
history it can provide a voice of legitimate moral leadership on human
rights issues. The struggle against apartheid gave the ANC government a
credibility that can be used to aid people facing repression of their own
governments.
Though these operations have been a significant contribution to
the AU peacekeeping effort, it is perhaps South Africa’s future involvement
in the African Standby Force (ASF) that will ultimately be its greatest con-
tribution to the organization. The ASF, which is hoped to be fully operation-
al by 2010, is a continental military force that the AU began assembling
in 2002. It is an enormous undertaking aimed at providing the continent
with a flexible, multinational force made up of five regional brigades and
a central AU unit that will have a total of 15,000 to 20,000 peacekeeping
troops. The force aims to be able to deploy within thirty days of a crisis,
unless there is a situation involving genocide, in which it will deploy within
fifteen days. The ASF will work closely with UN peacekeeping structures to
provide rapid response to crises that the UN cannot quickly intervene in.
South Africa is a key player in the ASF, its resources and military experi-
ence put it in the leadership role for the southern region, and its strong
economy makes its monetary contribution essential to the success of the
endeavor. Though the goals of the ASF may be very difficult to achieve, the
organization provides another opportunity for South Africa to take the lead
on increasing human security on the continent.

Recommendations for A Future Peacekeeping Role

It is important to note in any discussion of South Africa’s future role in
peacekeeping that the nature of armed conflict in Africa is changing.
With the departure of the Cold War powers and their ideologically based
battles, new motives and strategies have emerged in the continent’s
conflicts. As Allister Sparks points out, wars are often merely a pretext for
plundering the resources of a nation. The conflict in the DRC is an excel-
lent example of this, meaning that the warring parties often have little
incentive to end their activities. Additionally, ethnic conflicts have become
prominent, and they are often difficult situations to solve because they
are centered on identity and not politics, which makes political solutions
difficult. The changing face of war on the continent means that the re-
gional peacekeeping structures in Africa will constantly have to design
new strategies if they wish to be effective. However, the regional nature of
groups like the AU and SADC means that they will have a deeper histori-
cal and cultural understanding of these conflicts, which can aid in finding
lasting solutions. South Africa in particular has negotiated its way out of
a racial disaster, and its experiences can be valuable to other states facing
the same challenges. South Africa also is in the position of having its own
wealth and resources, which may make it less tempting for them to view
conflicts as an excuse to loot the countries where it is involved.
Not only is the nature of conflict changing, but so is the nature of
peacekeeping operations themselves. Because of the new realities of war,
peacekeeping is a much broader effort that involves many more actors
than just the soldiers on the ground. As Cedric de Coning notes: “Con-
sequently, peacekeeping is no longer exclusively a military affair where a
neutral force is deployed between two warring parties to monitor a cease-
fire. Today, peacekeeping missions are complex. multi-dimensional cam-
paigns, where the military is just one player in a multidisciplinary team
that includes diplomats, conflict resolution experts, humanitarian relief
agencies, human rights workers, and civilian police”.
South Africa seems to be prepared to deal with this complexity,
sending negotiators like Mandela to talk to the combatants while using its
troops to stabilize the situation as it did in Burundi. Its White Paper on
peacekeeping also discusses the importance of civilian contributions to
these efforts. These factors will help the nation to be an innovative actor in
these missions, which is important as it takes on a larger leadership role.
There are a number of other reasons that South Africa is an appro-
priate leader for the African security community. To begin with, as Keith
Gottshalk noted in a recent lecture, South Africa has some key strengths
that are lacking in other African nations. She has high political participa-
tion by her citizens, the military is well under the control of the civilian
government, and the culture is less militaristic that many African nations.
This means that South Africa is less inclined to abuse its neighbors mili-
tarily (as the apartheid regime did), which means it is a trustworthy actor
in peacekeeping. Because of civilian control the military, the SANDF is
not in the habit of abusing its own citizens like many African nations, so
it will not export those bad habits. Additionally, South Africa does have
the legitimacy created by its own peaceful transition to democracy. This
is especially important considering the past abuses of outside actors in
Africa such as US support of dictators like Mobutu, or recent abuses by
UN peacekeepers in the DRC. South Africa’s legitimacy can help build
confidence among the warring parties that they will be treated fairly in
intervention activities.
Another key strength South Africa has in this area is its economic
resources. The wealth of the nation can go a long way in funding always-
expensive peace operations. SADC has already benefited greatly from
South African funding. As Lt. General L.G. Fisher and Dr. N. Ngoma noted
in an occasional paper for the Institute for Security Studies: “What augurs
so well for the SADC region is the willingness by South Africa to place its
massive resource capability at the service of the region in a manner that
has not reflected the much written about ‘hegemony’ thesis. With this sup-
port and the region’s strong capacity to project unanimity of purpose, the
task of meeting the challenges of the new millennium has not only been
made lighter but a reality.
Of course, there are numerous obstacles to fully developing effec-
tive regional peacekeeping structures in Africa. The major difficulty has
and will continue to be acquiring the funding necessary to successfully
carry out missions. The AU and SADC are largely funded on the whim of
outside donors, and though South Africa is relatively wealthy, it cannot
support peace initiatives on its own. As Theo Neethling notes in the Afri-
can Security Review, “Yet it should be clear that the SANDF does not have
an unlimited capacity-given the current financial constraints within the
South African budgetary framework. In fact, some defence analysts argue
that the SANDF would be able to handle its immediate commitments for
some time, but that it would not be able to sustain those deployments for
any length of time or take on any other extended large-scale missions. It
has even been suggested that South Africa’s military is letting its enthusi-
asm outrun its military capacity.” However Neethling continues on to note
that South Africa could afford to increase its military spending .4% even
with its burdensome social spending and still be expending less of its bud-
get on military affairs than most other nations in the world.
In addition, a more peaceful Africa will make for a more prosper-
ous Africa, which will increase the ability of other nations to share in the
peacekeeping burden. Ultimately, if Western donors wish to delegate
peacekeeping activities to regional groups they will have to invest substan-
tial seed money to support those efforts. Deputy Prime Minister Sue Van
De Merwe of the Department Foreign Affairs recently said that the DFA
was optimistic about the creation of the African Standby Force, particu-
larly because it was receiving a lot of funding pledges from G8 nations,
which will enable it to be operational by the 2010 deadline. This is obvi-
ously a welcome sign for the AU, since without the proper funding the
Standby Force is just another source of meetings and paperwork.
Another key obstacle for these peacekeeping arrangements is
potential turf wars over leadership roles. This is illustrated in the conflict
between Robert Mugabe and Nelson Mandela over the initial decision to
send troops to the DRC. Mugabe, who feels he is the preeminent states-
man in African politics, came into conflict with Mandela because he felt he
should be the permanent chair of the SADC Organ, rather than having the
position rotate. When he was rebuffed, Mugabe asserted his independence
as security chair by joining Angola and Namibia in sending troops to the
DRC. The SADC and South Africa were forced to authorize the move retro-
actively, which not only created a division in the group, but also reduced
the credibility of SADC. These kind of issues will need to be addressed
if SADC and the AU are to present the united front they need in delicate
peace operations where the strength of coalition is the key to success.
The incident with Mugabe also brings up another key issue for
these regional partnerships. If these efforts are to be successful then
Africa must work harder to create good governance oversight. It is difficult
for outside donors to take peacekeeping structures seriously if they are
made up of countries that are corrupt or abuse human rights. This is par-
ticularly true with Zim-
babwe. As MP Tony Leon South Africa’s knowledge and expertise
(DA) recently noted, the is a welcome contribution to the military
Zimbabwe issue is mak- culture on the continent. South Africa’s
ing it difficult for SADC knowledge, discipline, and civilian control
to obtain funding from needs to be replicated by other militariz-
the West. In fact, the US es, and interaction during peacekeeping
has pulled $20 mil in missions is an excellent opportunity to
funding from SADC be-
make that transfer.
cause it continued to let
Mugabe participate. This
creates an obvious problem. Both SADC and the AU have set up good gov-
ernance initiatives as a NEPAD, but these must actually have teeth in them
if they are to solve these issues. Countries must trade a bit of sovereignty
for regional cooperation in this regard. However, there has certainly been
progress in this area. The reality is that more African states are becoming
democratic and more transparent. The fact that Africa is even having this
discussion is a remarkable sign of improvement, and African leaders are
well aware of the fact that continued aid money will rely more and more
on democratic reform. This expectation of reform may be one of the few
things the West is doing right in regard to African peace and security.
For all the difficulties it may entail, on balance a larger role in
regional peacekeeping is in South Africa’s interests. The country certainly
seems to be moving in that direction, and further funding and involvement
is a wise move, not just for other countries, but South Africa herself. To
begin with, South Africa’s knowledge and expertise is a welcome contri-
bution to the military culture on the continent. South Africa’s knowledge,
discipline, and civilian control needs to be replicated by other militarizes,
and interaction during peacekeeping missions is an excellent opportu-
nity to make that transfer. Additionally, regional peace will go a long way
towards regional development. As Bentley and Southall note “the attain-
ment of peace is necessary for economic development”. If countries such
as the DRC have the stability needed to develop their economies the entire
continent will benefit, and wider regional peace gives South Africa stable
trading partners, and places to invest their money. It is also impossible
to ignore the fact of South Africa’s own history of bitter struggle to attain
human rights. This struggle gives the nation an obligation to help secure
rights for others on the continent. The people of many African nations
rallied around apartheid’s resisters, and it is natural that South Africa
returns some of that effort and expenditure. Finally, South Africa’s his-
tory gives it a special leadership role that the world desperately needs.
As Michael Clough and Loubna Freih state in an article for Human Rights
Watch: “If South Africa gives up its leading role in the worldwide struggle
for justice, it will be a great loss for the world, for Africa and for South
Africa. The world will lose a voice that is able to speak out credibly against
the governments of great powers such as the United States and the United
Kingdom when they fail to live up to the principles they espouse. Africa
will lose the leader it so desperately needs if it is to realize its hopes of a
political and economic rebirth. And South Africa stands to lose its special
international status in the world, and the influence that it gained from that
status”.
Africa desperately needs leaders on these issues, and after de-
cades of regional aggression it is time South Africa used it’s strengths to
improve human security in Africa and to make the African Renaissance a
reality.
Sources

Bentley, Kristina, and Roger Southall. An African Peace Process: Mandela, South Africa, and
Burundi. Cape Town: Human Sciences Research Council, 2005.
Clough, Michael and Loubna Freih. “Will South Africa Speak out on Darfur Today?.” Human
Rights Watch 08/02/2007
de Coning, Cedric, and Kwezi Mngqibisa. Peacekeeping in the new Millennium: Lessons
Learned from Exercise Blue Crane. Durban: ACCORD, 2000.
Fisher, L.M., and N. Ngoma. “The SADC Organ:Challenges in the New Millennium.” Institute
for Security Studies Occasional Paper(2005):
Neethling, Theo . “Shaping the African Standby Force: Developments, Challenges, and Pros-
pects.” Military Review May/June(2005 ): 68-71.
Neethling, Theo. “Military Spending, Socio-Economic Challenges and Foreign Policy De-
mands: Appraising South Africa’s Predicament.” African Security Review 15(4)(2007):
Ngoma, Naison. Prospects for the Security Community in Southern Africa: An Analysis of
Regional Security in the Southern African Development community. Pretoria: Institute for
Security Studies, 2005.
“President Bush Meets with President Mbeki of South Africa .” whitehouse.gov. 12/08/2006.
2 Aug 2007 <http://www.whitehouse.gov/news/releases/2006/12/20061208-6.html>.
Shelton, Garth. “The South African National Defence Force (SANDF) and President Mbe-
ki’s Peace and Security Agenda: New Roles and Missions.” Institute for Global Studies
March(2004):
South African Department of Foreign Affairs, “White Paper on South Africa in International
Peace Missions.” (1998):
Southall , Roger. “Lesotho: Democracy at Gunpoint. South Africa Invades.” Southern African
Report 14(1)(1998):
Sparks, Allister. Beyond the Miracle: Inside the New South Africa. Cape Town: Jonathan Ball
Publishers, 2003.
Thompson, Leonard. A History of South Africa. New Haven: Yale University Press, 2001.
 Africom: An Introduction
Erin Stubbs - University of North Carolina

In February 2007, President Bush an-

nounced that ten years of planning by the Depart-
ment of Defense had culminated in the creation of
the United States African Command, or AfriCom.
The creation of the new command was to consoli-
date oversight of all US operations in Africa into the jurisdiction of one
centralized organization, replacing the current disjointed administration
of US-African affairs. The creation of AfriCom has been highly controver-
sial, with both critics and advocates being extremely vocal on the probable
outcomes of the venture. The creation of AfriCom has signaled an increase
in the relative strategic importance of Africa to US interests. The structure
of AfriCom indicates that the new regional command is intended to be a
long-term investment in the future of Africa.

What is AfriCom?
The Africa Command represents a new phase of American regional policy
because it is constructed to be a “hybrid of military and civilian govern-
ment know-how.” Other regional commands, such as the European Com-
mand (EuCom), the Central Command (CentCom), or the Pacific Com-
mand (PaCom) all of which had jurisdiction in parts of Africa before the
creation of AfriCom, were primarily focused on military operations, and
lacked a consistent connection with humanitarian or diplomatic programs
working within their
jurisdictions. In AfriCom will not replace the functions of the
contrast, AfriCom Department of Defense or of the US embas-
was created to sies in Africa. Instead, the program is intend-
encompass both ed to facilitate the missions of those organiza-
military and civil- tions by coordinating resources and expertise
ian operations on toward a common goal.
the continent. The
command includes
officers with expertise in civilian affairs, whose primary responsibilities are
to coordinate AfriCom efforts with those of other US government agencies
that run humanitarian operations in Africa.
As is traditional with global military commands, one commander
oversees the entire operation. On September 28, 2007, the Senate con-
firmed the appointment of Army General William E. “Kip” Ward as com-
mander of the Africa Command. His jurisdiction encompasses 53 coun-
tries– the entire African continent, with the exception of Egypt, which will
remain a part of CentCom because of its strategic importance in Middle
Eastern affairs. According to the Air Force Times, AfriCom is intended
to “tackle diplomatic initiatives, humanitarian aid, and counter-terrorism
operations in all of Africa.” As such, General Ward has two deputies, one
to direct military operations and one to direct civilian-humanitarian opera-
tions. Vice Admiral Robert T. Moeller has been appointed as Deputy to the
Commander for Military Operations, and Ambassador Mary Carlin Yates
has been appointed as the Deputy to the Commander for Civil-Military
Operations. In addition to military personnel, the staff also includes
“officers from the State Department and the US Agency for International
Development (USAID).”
The vast array of concerns on the African continent has been ad-
dressed in a plan from the US Department of Defense to create a regional-
ized program within AfriCom, in which five regional offices report to the
AfriCom commander. The plan creates these offices based on the regional
divisions created by the African Union, with each of the five regional com-
mands (East, South, West, North, Central) tailoring programs to target
issues unique to each region. Oversight for the regional offices, as well as
programs that pertain to the entire continent or that transcend regional
jurisdiction, would still be addressed by the main AfriCom office. The Pen-
tagon’s outline for the regionalization plans argues that it “would facilitate
appropriate interaction with existing African political-military organiza-
tions” and would form links with existing African Union and USAID pro-
grams that are specifically targeted at individual regions. Each regional
team is intended to contain “planners, ‘area experts’, health capabilities,
and command and control systems,” although the details of personnel
and operating procedures are still being determined.
According to the original plans for AfriCom, the base of opera-
tions would be located within a partner country on the African continent.
However, the increasing concern of African nations as to the real purpose
of AfriCom has prevented the creation of an African home base. For the
foreseeable future, the headquarters will remain in Stuttgart, Germany.
The initial working operations of AfriCom began on October 1, 2007, as a
sub-unified command under EuCom; the Africa Command is anticipated
to reach full working capacity and to become an independently functioning
command on October 1, 2008. Like the commands which will be replaced
by AfriCom, the new command will “continue to support medical- and
disaster-preparedness exercises and communications interoperability
efforts” and “will help nations [in Africa] to confront poverty, disease,
terrorism and other challenges that affect regional security and stability.”
The veritable laundry list of concerns for AfriCom will be addressed with a
mere $50 million budget for fiscal year 2008.

What is AfriCom not?

The discussion of what Africom is not has proved more controversial than
the discussion of what it is. Perhaps most importantly, AfriCom will not
replace the functions of the Department of Defense or of the US embas-
sies in Africa. Instead, the program is intended to facilitate the missions
of those organizations by coordinating resources and expertise toward a
common goal. According to both the Department of Defense and the of-
ficials of the new command, AfriCom “will primarily work on diplomatic,
developmental, economic, and security projects” despite the military
presence necessitated by instability in the region. In response to concerns
voiced by many African leaders, Christopher R. Henry, the principal Deputy
Undersecretary of Defense for Policy, stated that AfriCom is absolutely not
intended to supplant the current leadership in Africa, but rather to assist
in the stabilization of current governments.

Critics say…
The Southern African Development Community (SADC), a regional organi-
zation with 14 African member nations, rejected a proposal by US officials
to place the Africa Command headquarters on African soil in 2008. South
African Defense Minister Lekota stated that the African Union, of which
all 53 African countries under the jurisdiction of AfriCom are members,
would likely support the SADC decision. According to critics, the fact that
African nations
are blocking the
The fact that African nations are blocking the
plans for Afri-
plans for AfriCom’s development is significant Com’s develop-
evidence that the new regional command is in- ment is signifi-
tended only to further American interests while cant evidence
ignoring the needs and desires of the African that the new re-
governments it claims to help. gional command
is intended only
to further Ameri-
can interests while ignoring the needs and desires of the African govern-
ments it claims to help. Among the most vocal opponents of AfriCom have
been South Africa, Libya, and Nigeria, all of whom argue that AfriCom
is indicative of an “unwanted expansion of American military influence”
and that Africa will be merely another theater for the War on Terror. Given
the history of American intervention in Africa during the Cold War, the
fear that purported aid to Africa will simply serve as an excuse for fight-
ing proxy wars on African soil is not entirely unfounded. Algeria, Morocco,
Egypt, and Djibouti have also vocally opposed hosting the headquarters,
which is particularly interesting considering the fact that an American mili-
tary base is already operating in Djibouti. Some experts have suggested
that, while certain countries might welcome the headquarters of AfriCom
and the additional jobs it would bring, African governments are hesitant to
appear too friendly with the US government.
Similar to the charges leveled against the US government for its in-
vasion of Iraq, many critics have suggested that AfriCom will serve primar-
ily to protect US oil interests as Africa becomes an increasingly important
supplier of petroleum for US consumption. The majority of the oil export-
ed to the US currently passes through the Gulf of Guinea, and experts es-
timate that as much as 24% of current American oil consumption comes
from Africa. In addition to concerns over US oil interests, important US
allies have expressed apprehension that “AfriCom will only strengthen
America’s ties with unsavory regimes.” The history of American support
of the so-called “banana republics” and African dictators during the Cold
War suggest that this too is not an unfounded allegation. The economic
interests of the US are becoming more intricately tied to those of Africa
both as oil production and Chinese influence increase on African soil. The
United States currently has fewer embassies and consulates in Africa than
China does, a fact which many critics of the program argue has precipitat-
ed the need for a US goodwill campaign in Africa, in the form of AfriCom.
For many African leaders, the primary fear of AfriCom is that
American counter-terrorism efforts will increase instability in Africa (as
they have in the Middle East), an area that is already prone to civil wars
and ethnic conflict. One such fear is that an increased presence of Ameri-
can personnel and military bases increases targets for potential terrorist
activity on African soil, which would add increased violence to an area
already plagued by problems.

Advocates say…
According to military experts, the integration of American programs deal-
ing with Africa (including the African Center for Strategic Studies, Africa
Clearinghouse, the Trans-Sahara Counter-Terrorism Partnership, and the
International Military Education & Training Program, among others) will
enable better coordination and will reduce bureaucratic overlap, as former-
ly three commanders had to work with all of these organizations, despite
the fact that their primary interests lay in other regions of the world.
Despite many of the criticisms that AfriCom represents a militarization of
US-African policy, advocates argue that a significant American presence
already exists on African soil; the creation of AfriCom will only allow the
current presence to function better. According to Robert Rotberg, a profes-
sor at Harvard who specializes in African affairs, the consolidation of Afri-
can programs into one centralized command could actually increase the
capacity of the US to provide “more training, more peacekeeping, more
conflict resolution alongside African armies.”
Terrorism remains a major concern of US policy, and many US
experts agree that to win the war on terror, the US must ensure the stabil-
ity and security of areas which might foster terrorist cells; thus, Theresa
Whelan acknowledges that “AfriCom is about helping Africans build greater
capacity to assure their own security.”

Conclusion
The future of Africom is hazy. The Department of Defense has indicated
no plans to delay the October 1 deadline of AfriCom’s functionality, de-
spite opposition from the African continent. Whether African interests will
be blanaced with US interests is debatable, but with proper oversight and
increased support from the African continent, consolidation of humani-
tarian, diplomatic, and military efforts on the continent could perhaps
improve the situation dramatically.

Sources

Agency Group 09. “AFRICOM HELPS PARTNERS CONFRONT STABILITY CHALLENGES.”

(2007) FDCH Regulatory Intelligence Database. 3/6/2008.
Bennett, John T. “DoD Plans Five Regional Teams Under AfriCom.” Air Force Times 2007.
3/6/2008.
Ford, Neil. “Doubts Over Africom.” African Business 2008Business Source Premier.
3/6/2008.
Johnson, Scott, et al. “The Next Battlefront.” Newsweek (Atlantic Edition) 2007MasterFILE
Premier. 3/6/2008.
McMichael, William H. “AfriCom Opens its Doors.” Air Force Times2007 3/6/2008.
Pitman, Todd. “AfriCom HQ in Germany for Forseeable Future.” Air Force Times2008 EBSCO
Host 3/6/2008.
Shabazz, Saeed. “Africa Rejects Bush U.S. Command in Africa Known as AFRICOM.” Amster-
dam News2007, sec. 98: Academic Search Premier 3/6/2008.
Volman, Daniel. “US to Create New Regional Military Command for Africa: AFRICOM.” Brief-
ings - Review of African Political Economy 34.114 (2007): 737-44. . 3/6/2008.
 Book Review: Stepping Out of the
Silence
Kendal Nystedt - University of Arizona

Starved for Science: How Biotechnology is

Being Kept out of Africa
By Robert Paarlberg, 235 pages. Harvard
University Press. $24.95.

Robert Paarlberg is quick to acknowledge that his ideas are unpopular. In

the opening pages of Starved for Science he states, “Many of my colleagues
and students would recoil if they knew I wanted to replace traditional
African farming practices with an increased use of high-yielding crop vari-
eties, or even worse, genetically engineered crops. In polite company the
best social strategy for me has usually been not to talk about these ideas
at all, but in this book I have decided to step out of that silence.” Paarl-
berg steps out of the silence with an argument so powerful that even the
skeptics may be persuaded to support his cause.

With remorse, Paarlberg asserts that “rich countries,” in particular the

states of the European Union, have inappropriately projected their opposi-
tion to agricultural science onto poor, rural Africa. In doing so, rich coun-
tries have handed Africa a death sentence.

Paarlberg breaks down his argument into bite-sized portions. Given that
his target audience resides within rich countries, he begins by analyzing
(1) why consumers in rich countries have developed an aversion to ge-
netically modified agricultural products and (2) why rich countries have
subsequently abandoned research and development in the field. Paarlberg
challenges individuals to consider whether or not a universal opposition to
agricultural science is justified. Rich countries can afford to dislike geneti-
cally modified organisms (GMOs) because domestic agricultural yields are
sufficient to ensure survival.

Due to strong “psychological” ties between African states and Europe,

Africa’s dependence on foreign aid for development projects, and the
prevalence of NGOs like Greenpeace and Friends of the Earth in Africa,
rich countries’ dislike of GMOs traveled through the pipeline and into
Africa with ease. Instead of embracing increased agricultural productiv-
ity in order to alleviate poverty, African leaders adopted Europe’s strict
regulatory policies and refused to approve GM crops for commercial use.
“Europeans,” Paarlberg asserts, have imposed “the richest of tastes on
the poorest of people.”

Paarlberg concludes by detailing why agricultural science is a perfect fit

for Africa. Given that 40 percent of farmers in Africa farm in arid or semi-
arid regions, Paarlberg has specifically isolated one window of opportu-
nity: drought resistant crops.

Paarlberg’s argument falls slightly short when he neglects to adequately

address the “how.” Given that we accept that Africa’s rejection of biotech-
nology is really a reflection of a wealthy country’s agenda and given that
we recognize the need for increased productivity and yield stability in or-
der to end poverty in Africa, where do international development agencies
go from here? How should the technology be implemented in an equitable
and just manner? How do we address problems with infrastructure, dis-
ease, violence, and corruption, all factors that have the potential to under-
mine the effectiveness of any technological advances? I’m holding out for
volume two.

For skeptics and supporters alike, this book is worth a thorough read.
Paarlberg provides fresh and concrete ideas that challenge perceptions
regarding biotechnology and force the international community to look at
agricultural development in a new light.