eskinder.tsegaye's blog

Maritime Safety, Security and Development in Africa

eskinder.tsegaye — Mon, 10 Oct 2016 12:33:15 +0000

10 October 2016

Africa boasts of an abundance of natural resources, in particular aquatic and marine resources, with a potential that has not yet been fully tapped in the context of economic growth and sustainable development. The African Great Lakes constitute the largest proportion of surface freshwater in the world (27%). This becomes therefore a globally important strategic resource as reserves of freshwater are dwindling in most parts of the world. In fact, Lake Victoria is the third largest fresh water lake in the world by area, and Lake Tanganyika is the second largest in volume and depth in the world. Freshwater and ocean fish make a vital contribution to the food and nutritional security of over 200 million Africans and provide income for over 10 million annually.

From the 54 African States, 38 are coastal States. Maritime zones under Africa’s jurisdiction total about 13 million square kilometres including territorial seas and approximately 6.5 million square kilometres of the continental shelf. We have two thirds of the equivalent area of Africa's landmass under the sea. This is huge! One of our Oceans, the Indian Ocean, is the third largest in the world carrying a large part of the world’s trade by sea. The significant dependence of African countries on international trade makes maritime transport crucial for the continent’s economic development. Indeed more than 90% of Africa's imports and exports are conducted by sea and some of the most strategic gateways for international trade are in Africa.

The African Union rightly calls Africa’s Blue Economy "a new frontier for the continent's renaissance" in its 2050 Africa’s Integrated Maritime Strategy (AIM).We have a hidden treasure under and within our seas, which needs to be revealed, protected and built upon to contribute to the structural transformation process of our continent. The potential is significant. Africa’s maritime economy currently is linked to about 70% of the continent’s GDP, generating about three quarters of government’s fiscal revenues. With Africa’s expanding economies coupled with rapid population growth and urbanization, we can expect increased pressure on coasts and marine resources. Port throughput on the continent is expected to rise from 265 million tons in 2009 to more than 2 billion tons in 2040. Safer and more efficient ports could strengthen regional integration in the continent and could also play a crucial role in the implementation of the Continental Free Trade Area (CFTA). It would also bolster the emerging African manufacturing industry and also generate significant revenues for governments as well as employment opportunities for many Africans. Ensuring maritime security and safety is paramount for Africa’s development.

It is known that the threats which jeopardise Africa’s maritime area include transnational organised crime such as illegal arms and drug trafficking, piracy and armed robbery at sea, illegal oil bunkering, crude oil theft along African coasts, maritime terrorism, human trafficking, people smuggling and asylum seekers travelling by sea. Illegal, unreported and unregulated (IUU) fishing and overfishing, as well as environmental crimes such as deliberate shipwrecking and oil spillage, and the dumping of toxic wastes are also of significant concern. Another major challenge is container traffic, as more than seven million large and small containers are moving around the world every day, the ability of port and customs official to check their contents is limited. Recent experience has indicated that these containers can be used to smuggle everything from terrorists to illegal substances.

Existing vulnerable legal frameworks combined with the lack of and/or poorly maintained aids to navigation, the absence of modern hydrographic surveys, up-to-date nautical charts as well as maritime safety information in a number of African States are inexistent or insufficiently developed which is detrimental to maritime security and safety. Even where they are developed ocean governance is extremely difficult in the high seas and on a regional scale, the patchwork of regulations can be very complex with even less ability for enforcement.

Most of these threats are geopolitical in nature and are particularly complex as they are multifaceted and interconnected. Their consequences are also dire. The increasing piracy acts have become a major impediment to the competiveness of African ports over the past decades. Piracy attacks increase not only shipping costs to Africa but also affect directly port traffic flows with ships avoiding risky routes. The attacks have been particularly detrimental, reducing traffic flow to, and from African ports located between the Red Sea and Indian Ocean, near the Somalia coast, and in the Gulf of Guinea. Even though the piracy in the Strait of Malacca, next to Malaysia and Singapore, is significantly higher than Somalia, the perception is not that. Besides loss of lives, assets and opportunity costs foregone, the wider implications of maritime terrorism are that any political instability in a coastal African state is capable of generating threats to global traffic and freedom of navigation and could trigger a contagion effect inland. This could lead to a vicious circle where the threats and impacts are exacerbated by and/or lead to political instability, corruption, lack of state control, among others.

The strategic importance of securing our maritime zones cannot be taken lightly. A holistic and integrated approach based on combined metrics of growth and progress in which economic success is linked with environmental and material stewardship is necessary to address existing threats and vulnerabilities and realize the full potential of Africa’s Blue Economy requires, social responsibility and the highest governance and transparency standards.

There are some key ideas we must keep in mind while crafting this approach. Firstly, we need to take stock of our “blue” endowment in order to protect these important assets and optimize their use and management to achieve structural transformation and inclusive sustainable development. The Economic Commission for Africa recently launched its publication on the Blue Economy, which offers a comprehensive step‐by‐step guide to help African countries and regional bodies to better understand the vast potential of the Blue Economy. It provides policy makers, regional organisations, development practitioners and other stakeholders on the continent and beyond, with an operational framework, case studies, comparative experiences and examples of policy formulation processes as further guidance material to better mainstream the Blue Economy into their national development plans, strategies, policies and laws, aiming to foster structural transformation.

Secondly, regional cooperation must be at the forefront to effectively confront the threats to maritime security. Harmonized transnational co-ordination and regulation must be strengthened to address illegal activities over the coastal areas and across borders taking into consideration different jurisdictions relating to territorial waters, exclusive economic zones (EEZs), or high seas in a context of poor border demarcation. This will require strengthening monitoring, control and surveillance in these different spaces. The role of regional and sub-regional bodies, such as the African Union and the RECs, would be crucial, as would that of other regional cooperation mechanisms.

Thirdly, the connections and interdependence of different economic sectors, and enhancing responsiveness to emerging sectors is a must. It is equally fundamental to recognize climate change imperatives through the prioritizing of resource efficiency and low carbon footprint models with equity and social inclusion, and job creation.

African countries must squarely address these challenges, take full stock and realize their transformative potential in the Blue Economy context. If properly secured and harnessed, our Blue Economy can be a major contributor to continental transformation and growth, advancing knowledge on marine and aquatic biotechnology, the growth of an Africa-wide shipping industry, the development of sea, river and lake transport and fishing; and exploitation and beneficiation of deep sea mineral and other resources.

*Based on my speech at the opening of the side events of the African Union Extraordinary Summit on Maritime Security and Safety and Development in Africa, held in Lomé on 10 October 2016

Giving Wings to Africa’s Regional Integration

eskinder.tsegaye — Wed, 14 Sep 2016 07:39:16 +0000

14 September 2016

As the world gets used to new forms of interconnectedness, Africa is not left aside. Today, more than 700 million Africans are subscribed to mobile services with many wealthy Africans proudly displaying more than one cell, a symbol of a newly acquired social status. The proliferation of mobile networks has transformed communications, businesses or banking, enabling a jump unimaginable just a few years ago. Thanks to technology we are witnessing new forms of integration.

Is aviation going to be the next big integration magnet?

Unfortunately, even though Africa is home to 15% of the world’s population it only accounts for a relatively small proportion of air traffic, in fact less than 3% of the world’s total. Small as this may be, the African aviation market is growing fast.

International air passenger numbers have grown consistently year on year since 2004 except in 2011 where the numbers dipped as a result of political instability in parts of North Africa. From less than 40 million passengers carried in 2004 by African airlines, passenger numbers increased to 73.8 million in 2013. Domestic passenger numbers within the region also increased significantly reaching 28 million in 2013[1] . This growth is projected to continue. Boeing’s long term forecast for 2014-2033 indicates that, driven by a positive economic outlook, increasing trade links, and the growing middle class, traffic to, from, and within Africa is projected to grow by about 6 percent per year for the next two decades. This demand will translate into a demand for an additional 1,170 new airplanes, valued at USD 160 billion[2]. But as with all good things the proof of the pudding is in the eating.

According to the Air Transport Action Group[3], in 2014 the aviation industry in Africa supported 6.8 million jobs and contributed USD 72.5 billion to Africa’s GDP. This accounted for 11% of the jobs and 3% of the GDP supported by the air transport industry worldwide.

These encouraging developments however do not reveal some of the major obstacles still faced by the aviation industry in the continent. It remains one of the most unsafe regions to fly, it has lagged behind others on skies liberalization, its airport infrastructure continues to require massive investments and the training of skilled personnel is not being properly planned.

African airlines consolidation is another challenge. During the 1970s and 1980s there were about 36 African airlines of which 26 had intercontinental flight services. Today there are only about 12 African airlines with intercontinental operations. Over the last two decades a total of 37 new airlines were launched in Africa but almost all of them failed. Most countries continues to act solo and motivated by choices other than economic. We continue to see attempts to create or sustain national carriers, opposing international trends. It is true that Middle East carriers and the good performance of Ethiopian Airlines contradict the doomsayers of state-owned airlines, but these are exceptions that need to be understood in their plenitude. 80% of the continent’s long haul traffic is dominated by non-African carriers.

The average cost of a flight in Africa is higher than anywhere else in the world. High landing fees, exorbitant taxes levied on airfares as well as above average aviation fuel prices, almost 30% higher than in Europe, do not help.

Funding access for the aviation industry is uneven. Dubai, Abu Dhabi and Qatar-based airlines have reportedly enjoyed a host of benefits valued at more than USD 42 billion over the past decade. That includes subsidized access to capital and sponsored first class infrastructure. American commercial aviation has also benefited from its government’s support valued at USD 155 billion, since 1918. Obviously African airlines are not in the same league and have been left to fend for themselves. Without the same easy access to capital markets, export credit financing (which can cover up to 85% of the actual aircraft price), or insurance subsidies, African airlines either have to finance the difference from their own funds or opt for junior loans with punitive rates from commercial banks; or lease aircrafts at an even heavier cost. The financing options open to African carriers dwarf their chances for expansion. It is therefore hardly surprising mega carriers are doing so well, including in their operations in Africa. They have the advantage to expand quickly, with space to build a market from scratch, increase market shares and continue investing heavily in service and marketing.

Intra –African connectivity is so mediocre that any passengers have to travel thousands of miles out of the continent just to be able to make a connection to another African destination. A quarter of the intra-African routes are actually served by just one airline. Despite African states signing up for a full liberalization of the regional market at Yamoussoukro in 1999, restrictions and protectionism instead of being eliminated are becoming rather rampant.

What could constitute a good base for a turnaround? With regards to safety accidents 2014 marked a significant change. Despite aviation disasters dominating headlines that year, African airlines actually stood out for zero jet hull losses (write-offs) per 1-million flights compared to 2.22 in 2013 and 4.63 in 2012[4]. This is encouraging news, suggesting regional measures to improve safety records are working. Ethiopian Airlines is already leading the way amongst its continental competitors in terms of establishing ambitious targets meet them and turn a profit. With 93 destinations across 5 continents, including 53 in Africa its future looks promising. Having experienced a phenomenal 700% growth in its revenue since 2005, Ethiopian Airlines has demonstrated the strength to face difficult competition. However, as long as Africa fails to establish a single aviation market and countries continue to restrict African carriers while welcoming the European and Middle East competitors, the performance of Ethiopian Airlines may remain an exception.

Africa must move towards embracing a conducive and smart regulatory framework that liberalises its skies in order to realise a profitable and globally competent airline industry. A truly competitive sector will need to be innovative and prioritise the continent’s interests over national flags. An open skies policy would drive the cost of tickets down and increase substantially the number of flyers. According to IATA by just deregulating and liberating African air services in 12 key markets, an extra 155,000 jobs and USD 1.3 billion could be generated[5].

Evidence shows that open skies agreements have worked in other regions. For example in Europe, it increased exponentially the number of routes and provoked a 34% decline in ticket fares. Indeed where African nations have liberalised their air markets, either within Africa or with the rest of the world, positive benefits have resulted. For example the agreement of a more liberal air market between South Africa and Kenya in the early 2000s led to a 69% rise in passenger traffic. The 2006 Morocco-EU open skies agreement led to 160% rise in traffic with the number of routes operating between the two multiplying four fold[6]. Just allowing the operation of a low cost carrier service between South Africa and Zambia (Johannesburg-Lusaka) resulted in a 38% reduction in fares and 38% increase in passenger traffic. The continent has to create more space for low cost flying. As of 2013 the penetration of low-cost airlines in Africa was the lowest in the world, representing less than 10% of the continent’s total.

In an interconnected world, air travel is no longer a luxury, it is a necessity for a prosperous continent.

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Published as an op-ed in the East African on 12 September 2016

[1] Chingosho, E. (2014). 46th AFRAA Annual General Assembly. Report of the Secretary General. 10 November 2014, Algiers, Algeria

[2] Boeing Commercial Airplanes (2015). Current market outlook

[3] Air Transport Action Group (2016), Aviation: Benefits Beyond Borders report

[4] http://mg.co.za/article/2015-03-11-think-african-jets-are-flying-coffins-these-numbers-will-prove-you-wrong

[5] IATA (2014), Press release on the Significant Benefits of Liberalized African Air Markets http://www.iata.org/pressroom/pr/Pages/2014-07-07-01.aspx

[6] InterVISTAS Consulting ltd (2014).Transforming Intra-African Air Connectivity: The Economic Benefits of Implementing the Yamoussoukro Decision. Prepared for IATA in partnership with AFCAC and AFRAA

Addressing corruption in Africa with the right focus*

eskinder.tsegaye — Tue, 26 Apr 2016 08:15:04 +0000

26 April 2016

Governance and corruption are controversial issues of great significance for sustainable development. Fostering structural transformation requires more than a national policy and strategy in order to operate effectively in an increasingly globalized world. Globalization continues to alter countries’ growth trajectories, with grave implications for the poor by affecting their access to assets and markets. African countries need to translate opportunities offered by globalization into inclusive growth, increased poverty reduction and sustainable development. However, integration into global markets has some risks as countries become more susceptible to global trends, including corrupt practices by multinational corporations and other vested external interests.

A number of indicators have been developed to assess levels of corruption in Africa. Some of these measurements, such as the Corruption Perceptions Index, World Governance Indicators, Ibrahim Index of African Governance and Afrobarometer, are influential because they have shaped foreign policy, investment decisions and aid allocation, as well as country risk analysis on the continent. African countries are being “named and shamed”. However, given the limitations of the measurement methodologies no single indicator of corruption should be used. There is a need to address the corruption problem in Africa in its totality, including asset repatriation and money laundering. Indeed, it should be made clear that those who steal funds and assets and the receivers of such goods are equally guilty of fuelling corruption on the continent.

The current tendency in measuring corruption on the continent is to focus on individuals’ perception of the extent of corruption. Although addressing individual and heterogeneous experiences is important, a focus on individuals alone overlooks a fundamental cause of corruption for many people: the deliberate exclusion, current or historical, of particular social groups from effective participation in society. It is thus important to address these power-related features of deprivation by empowering the poorest members of society, including women, as a means of combating corruption and weak economic governance. There is unanimous agreement that this process is better achieved through democratization and civic engagement.

Delivering social equity as a means of combating corruption demands governance reforms that empower poor and marginalized groups and give them a voice, and that enhance accountability to increase service providers’ incentives to respond to the needs of the poor. Responsible and accountable service provision, in turn, enhances government revenue thus expanding fiscal space, as this spurs citizens’ willingness to pay taxes. Investing in the social capital of the most vulnerable is also paramount. Another core pillar of the inclusion effort is guaranteeing access to and protection of property rights. However, providing property rights is a complex issue given that they are derived from many sources (Government, customs and religious laws), and the history of access-rights is usually context-specific. Strategies for legal and other reforms need to take these complexities into account to help provide for marginalized groups, combat corruption and expand access to essential services.

It is important for Africa to focus on the importance of measuring corruption and understating its international dimensions. We need to challenge the traditionally narrow notion of corruption as the “abuse of public office for private gain”. This definition places too much emphasis on public office and on the ostensible legality of the act, neglecting the corrupt tendencies prevalent in the private and non-State sectors. Policymakers must understand the importance and implications of viewing corruption as a broader phenomenon where private agents share significant responsibility, and where many unethical acts, which can be regarded as corrupt, may not necessarily be illegal or located within the public sector. For example, many powerful domestic and foreign private firms engage in undue influence to shape State policies, laws and regulations for their own benefit. Sometimes, these private entities make election campaign contributions, which may be legal but unduly undermine democracy. Moreover, favouritism of particular firms in the awarding of public procurement bids and contracts is widespread in Africa. Equally, many corrupt practices taking place on the continent are generated and abetted by non-African players.

It is arguable that the greatest challenge to Africa’s structural transformation agenda is not corruption of the sort that has come to light in corporate and public sector scandals - issues of fraud and bribes can be effectively tackled with improved supervision and more stringent enforcement of governance rules. In general, fundamental economic governance problems are to be found on an entirely different level – the inability of management in both the public and private sectors to act effectively and enhance programme delivery and optimize results. Furthermore, effective regulatory frameworks should strike a balance between fostering private sector development and enhancing social transformation anchored on better service delivery. In this regard, a wider approach to the structural transformation agenda needs to be adopted by focusing on actions that not only tackle corruption but also enhance wider economic governance.

In this context, the fourth edition of the African Governance Report published by ECA implores all stakeholders to rethink corruption measurements in general, and in the African context in particular. As the report shows, there is a strong need for such a rethink. For example, current approaches for measuring corruption completely ignore the international dimension of corruption in Africa. There is ample evidence that the operations of foreign players on the continent are causing significant illicit financial outflows. Such omissions present serious gaps in current measurements.

In my view, African countries and partners should move away from pure perception-based measures of corruption and focus on alternative approaches, which are fact-based and built on more objective quantitative criteria and include the international dimensions of corruption. The present report makes the case for such a shift. In the interim, while possible quantitative criteria continue to be explored, it is necessary to ensure that perception-based methods are better anchored on more transparent and representative surveys. These measurements should also be complemented, where possible, with quantitative country/case-specific indicators to produce more sophisticated and useful assessments. Instead of “naming and shaming” the culprits on the basis of some perceived levels, it is necessary to deeply reflect on the problems of measuring corruption in Africa, with special attention to the roles of international players. It is also vital that African policymakers and partners focus on the big economic governance issues critical for the continent’s structural transformation and sustainable development in order to effectively address the problems of corruption.

*Preface for the new Economic Commission for Africa Report dedicated to Corruption (http://www.uneca.org/sites/default/files/PublicationFiles/agr4_eng_fin_web_11april.pdf )