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February 20, 2019

Will economics prevail against politics in Africa?

Financial analyst Aly-Khan Satchu
Financial analyst Aly-Khan Satchu

Pascal Lamy, the director-general of the World Trade Organisation until 1 September 2013, was quoted as follows by the @Mo_IbrahimFdn at their #Ardebates:

Will economics prevail against politics in #Africa?

And I could not help thinking to myself that along with job creation that this is the biggest challenge facing Africa. The dimensions of the political economy differ across the continent, but wherever we care to turn, we can see that the political economy is exacting a very heavy price.

Take South Africa where Fitch Ratings followed S&P by downgrading it to junk status.

Fitch Ratings said: “The Cabinet reshuffle, which involved the replacement of the finance minister, Pravin Gordhan, and the deputy finance minister, Mcebisi Jonas, is likely to result in a change in the direction of economic policy. The reshuffle partly reflected efforts by the out-going finance minister to improve the governance of state-owned enterprises (SOEs). The reshuffle is likely to undermine, if not reverse, progress in SOE governance, raising the risk that SOE debt could migrate on to the government’s balance sheet.”

The cost to South Africa Inc after the latest reshuffle at the Treasury is measurable [South African banks are now rated at ‘’Junk’’] and it’s egregious. Why? Politics.

I remember the cries of ‘’South Sudan Oyee!’’ as Juba got its independence. There was so much momentum, but look at what has happened. Everything became binary [Dinka versus Nuer] and the economy has crashed and burned. The River Nile flows through Juba, it could have been the ‘’bread-basket’’ of East Africa, but today a biblical famine stalks the land. Why? Politics.

North of our border, Ethiopia [the poster child for Sub-Saharan gross domestic product growth] has extended the State of Emergency for another four months. A State of Emergency represents a situation that is in disequilibrium. A lot of folks have invested in Ethiopia’s future but returning to equilibrium looks problematic.

This past week the president of DR Congo Joseph Kabila [sporting a virtuoso moustache] appointed Bruno Tshibala prime minister, but the political uncertainty has sent DR Congo’s GDP into a tail-spin. Congo should be an economy the size of Brazil!

Here in Kenya we are set to embark on an election. I have seen some seriously credible research that puts the estimated cost of our elections at anywhere between $2 billion-$4 billion(about Sh206.88 billion-Sh413.76 billion). That includes the presidential, gubernatorial and all other elections put together. You have to ask if Kenya Inc can afford to bear such a heavy burden.

In Greek mythology Sisyphus was the king of Ephyra. He was punished for his self-aggrandising craftiness and deceitfulness by being forced to roll an immense boulder up a hill, only to watch it come back to hit him, repeating this action for eternity. The political economy is like that boulder.

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