macroafricaintel | Climate change & conflict in West Africa (1)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Climate change is the long-term modification of the Earth’s climate resulting from atmospheric changes and interactions among the atmosphere and other geological, chemical, biological, and spatial factors within the Earth’s powerful energy system. Climate scientists who collect and analyze information about our planet and climate on a global scale report an accelerating global rise in average temperature from the late 19th century to the present, nearing one degree Celsius. Leading scientists view this temperature change, accompanied by sea ice losses, sea level rises, longer, more intense heat waves and other increases in extreme weather events, as robust evidence of climate change.

West Africa is particularly vulnerable due to its high climate variability, heavy reliance on rain-fed agriculture and limited economic and institutional capacity to offset the consequent scarcity and conflict effects. This paper identifies evidence linking climate change and conflict, traces the impact on the population of the West African region, and describes a case, set in West Africa, of conflicts arising from climate change. Finally, the author proposes a model to guide stakeholder interventions intended to minimize the extent of such conflicts.

Evidence linking climate change and conflict
Formal evidence of causal links between climate change and violent conflict is mixed. The dominant view is that climate change potentially contributes to political instability and resource insecurity across the world, and thus poses a threat to peace (see Figure 1). However, critics argue there is no evidence of a direct relationship between climate change and violent conflict. They acknowledge that in some circumstances, and in association with other factors, climate change can induce or worsen conflict – for example among pastoralists and farmers competing for land and water. The circumstances cited by researchers include deteriorating livelihoods, increased migration, changes in the movement patterns of pastoralists, and opportunism by merchants of violence and the political and business elites.

Figure 1: Schematic representation of relationships between climate change & conflict [Adapted from Brown, et al (2007). Climate change as the ‘new’ security threat: implications for Africa. International Affairs 83: 6 (2007) 1141–1154]

The arrows in Figure 1 trace the path from climate change to conflict, while the letters mark potential opportunities for intervention. Reducing the impact of climate change on resource scarcity (A) is a task well beyond the scope of even a large individual nation. At best, nations within a region may be able to cooperate to minimize the impact of resource competition (B) on market prices, thus reducing resource and political conflicts. Examples of institutional interventions at the resource scarcity stage include water rationing, more efficient irrigation methods; pasture management, and natural resource rejuvenation and protection. Interventions in markets, such as resource rationing (C) or price controls are often unpopular, and the resulting conflict may result in political intervention (D).

The consequences of climate change vary with the context. As climate change impacts the world’s physical landscape, it alters our geopolitical structure. For example, drought will increase competition for a diminishing amount of fertile land. Combined with other market forces, scarcity leads to price rises that generate conflict among supply and demand resources, which may result in resource and political conflict (E), especially when prices rise faster than incomes. Rising sea levels will inevitably force coastal dwellers to migrate inland (F), further adding pressure to what are likely to be increasingly scarce land and water resources. When social and political institutions are strong, they can address these conflicts through community leaders, ombudsmen, and other dispute resolution mechanisms. When they are weak, institutional breakdown opens the door to violent conflict (G).

One 2018 Stockholm International Peace Research Institute report finds “there is context-specific evidence that climate change can have an effect on the causes and dynamics of violent conflict in the region when: (a) it leads to a deterioration in people’s livelihoods; (b) it influences the tactical considerations of armed groups; (c) elites use it to exploit social vulnerabilities and resources; and (d) it displaces people and increases levels of migration.”

Several studies find evidence of strong links between climate shocks and conflict. One reports that the risk of armed conflict increases when water is scarce. Another researcher finds that a standard deviation increase in temperature raises the risk of interpersonal conflict by 2.4% and intergroup conflict by 11.3%. Severe drought and water variability owing to climate change are found to cause conflict among farmers and pastoralists in several African countries. Across Africa, researchers report a strong linear relationship between temperature and civil war, with a 1 degree Celsius increase raising the risk of civil war by 4.5% within a one year span.

Hsiang et al. contend that El Niño events bring hotter and drier weather and therefore serve as a model of future climate change. Examining the tropics between 1950 and 2001, they found that civil conflicts were twice as likely to commence in El Niño years as in cooler, wetter La Niña years. They estimate that El Niño may have contributed to 21% of civil conflicts during this period. Other research links the recent conflict in Darfur to climate change, exacerbating pre-existing tensions between farming villagers and pastoralists as rainfall and vegetation declined, and suggests that the government exploited these tensions to foment conflict and bolster its support among specific ethnic groups it favoured. This conflict was marked by violence directed at civilians, with reports of poisoned wells.

A recent study, authoritative in light of the pedigree of its unprecedented number of authors for a scholarly article, concludes that “climate has affected organized armed conflict within countries” and “intensifying climate change is estimated to increase future risks of conflict.” Consistent with other findings, the authors also conclude that low socioeconomic development, intergroup inequality, and weak states worsen already difficult situations.

The research cited above links the environmental impacts of climate change to their impacts on people, identifies the knock-on effects of climate change on the population, and identifies the propensity for these effects to act as sources of stress that may lead to conflict, especially where institutional weaknesses come into play.

Article was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References are in the original article.

macroafricaintel | Prosper Africa – America’s renewed outreach

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

In June 2019, America’s deputy commerce secretary Karen Dunn Kelley launched the President Donald Trump-led American government’s “Prosper Africa” initiative at the biennial Corporate Council on Africa’s US-Africa Business Summit, which was held this year in Maputo, Mozambique. This was the first cabinet-level engagement by the Trump administration on the continent.

Kelley echoed commerce secretary Wilbur Ross’ views two years earlier, at the same summit held in Washington DC then, about Africa’s relatively high economic growth, increasing urbanization and expanding consumer class.

And even as Prosper Africa is by far the most significant African policy initiative of the Trump administration thus far, it could be objectively inferred the continent may still not be a major priority for it by the fact that it was a junior commerce secretary that presented the signature programme on the continent.

Still, and as mentioned by Kelley, America remains the largest donor of aid to Africa. American trade with Africa has been declining, however. US exports to Africa are down 32 percent from a 2014 high, for instance. While not mentioning China directly, Kelley suggests the decline can be attributed to the “increasingly sophisticated but too often opaque business practices of foreign competitors.”

Still, Kelley notes other reasons for the decline in American trade with Africa. Many US businesses seem ignorant of their government’s “export, investment and risk-mitigation tools”, for instance. Another reason, Kelley says, is that American officials working on the continent do not cooperate well enough with one another. In her words, they “too often worked in silos”.

US companies also face significant constraints when doing business in Africa. Poor infrastructure, scanty data, shallow capital markets, hard currency shortages, exchange rate volatility, complicated regulatory regimes, cumbersome customs practices and local content requirements are some examples.

Trump’s Africa initiatives thus far are as follows. The Better Utilization of Investments Leading to Development (BUILD) Act signed into law in October 2018 enabled the establishment of a new frontier markets-focused International Development Finance Corporation.

Months earlier, in April 2018, Trump also signed legislation to increase the number of African countries utilizing preferences under the African Growth and Opportunity Act (AGOA) and increase the flexibility of the Millenium Challenge Corporation. In the same year, the Trump administration also launched “Power Africa 2.0” to help facilitate solutions for the continent’s power shortages.

The American government is also looking to negotiate bilateral free trade agreements (FTAs) with interested African countries. In this regard, it has already signed memoranda of understanding with Cote d’Ivoire, Ethiopia, Ghana, Kenya and Mozambique. But how would these potential bilateral FTAs fit with the recently operationalised African Continental Free Trade Agreement (AfCFTA)?

Judd Devermont, director of the Africa program at the Centre for Strategic and International Studies (CSIS) in Washington DC and former US national intelligence officer for Africa is unequivocal about the answer when I asked him in mid-July. Devermont argues they would not. While acknowledging the significance of the AfCFTA, he asserts “the US government has been disappointingly absent as a voice in support of continental integration.”

Simply put, Prosper Africa is largely a coordination framework. The American government will be providing a one-stop shop that synchronizes the resources of more than a dozen US government agencies to provide technical assistance, capacity-building and so on for the facilitation of transactions. It also aims to ease the trade barriers that constrain American businesses, and indeed African ones as well, on the continent.

Is countering China the key motivation?
There are doubts about whether Prosper Africa is really intended to help African countries. Some believe the motivation is largely China’s currently dominant position on the continent. Such suggestions are not unfounded.

Trump’s national security advisor John Bolton did not mince words about his country’s geopolitical goals on the continent in his mid-December 2018 speech at the Heritage Foundation in Washington DC.

“Under our new approach, every decision we make, every policy we pursue, and every dollar of aid we spend will further US priorities in the region,” Bolton said in what he described as “the Trump administration’s new Africa strategy”.

Bolton also identified China and Russia as key competitors on the continent, arguing China and Russia use corruption and indebtedness to hold African countries “captive”.

CSIS’ Devermont says “Prosper Africa is more than merely an effort to compete with China”, however. He argues it is about increasing American trade and investment in Africa. To buttress his point, he asserts Africa “has been a consistent priority for the United States, and successive US administrations have developed signature initiatives to advance this goal – even before China’s dramatic rise in Africa.”

“Prosper Africa is really about addressing longstanding challenges within the US government that have impeded support for the US private sector”, Devermont adds. However, he acknowledges China’s expansion may have added a new urgency and focus, but considers it inaccurate to interpret the US effort solely in terms of “great power competition.”

Ways to maximize benefits for both sides
In a recent publication by the Brookings Institution, a public policy thinktank in Washington DC, Landry Signe, Rubenstein Fellow at the Africa Growth Initiative of the Brookings Institution and Shanghai-based Eric Olander, managing editor of the China Africa Project (CAP), a multimedia platform on China’s engagement with Africa, suggest US policymakers and business leaders should focus on manufacturing and intra-African trade instead of commodities.

Brookings’ Signe and CAP’s Olander also suggest the US embrace the AfCFTA, which is expected to boost consumer and business spending on the continent to $6.7 trillion by 2030 and annual manufacturing output to $1 trillion by 2025 and create over 14 million jobs.

“For Prosper Africa to benefit both the US and Africa, both sides need to…consider each other as friends”, add Signe and Olander. That is, “Prosper Africa should focus on winning the hearts of African leaders and citizens, as well as addressing Americans’ lack of trust in African countries as reliable business partners.”

An important point raised by Signe and Olander is the need for post-AGOA certainty. Thus far, the Trump administration has not made known whether AGOA would subsist beyond 2025. That Prosper Africa does not clarify the American government’s position on this or announce an alternative is a major shortcoming.

CSIS’ Devermont disagrees. “The U.S. initiative is neither about AGOA nor trade preferences for quota and duty-free entry of certain goods into the United States. I would not interpret that as a weakness or an indication of its sustainability. Prosper Africa is about improving US government coordination to support trade and investment whereas AGOA is focused on access to US markets for African products. AGOA’s future most likely will be addressed in a different venue and in conjunction with the US Congress.”

macroafricaintel | #Nigeria #Banks – Emefiele 2.0

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

In late June, Godwin Emefiele, governor of Nigeria’s central bank, unveiled a five-year policy roadmap to guide his second 5-year term. Mr Emefiele desires faster economic growth, slower inflation, more non-oil sector output, greater financial inclusion, ample jobs, stronger banks and more private sector credit extension. To these ends, he announced a raft of new regulatory measures in early July.

Nigerian banks would be required to maintain a minimum loan-to-deposit ratio (LDR) of 60% by end-September. The LDRs would be reviewed quarterly afterwards. In the computation of the LDR, a greater weighting of 150% would also now be assigned to lending to small and medium-sized firms, and that for retail, mortgage and consumption purposes. Should a bank not meet these new criteria, half of the shortfall would be parked at the central bank by way of an additional cash reserve requirement.

The central bank also announced modalities for a single-digit long-term financing initiative for the information technology, movie, and fashion sectors. To engender greater financial inclusion and meet its 80% target by 2020, banks are also now not required to seek prior regulatory approval to offer mobile money services.

Of much interest is the CBN’s recapitalisation drive for banks. While the new minimum capital threshold is yet to be announced, Mr Emefiele’s ambition of having Nigerian banks amongst the top 500 global banks suggests it might be high indeed. What do analysts and portfolio investors think? I asked Malte Liewerscheidt of Teneo, a consultancy in London and Wale Okunrinboye, head of investment research at Sigma Pensions in Lagos.

Malte Liewerscheidt, vice president at Teneo
By advancing new measures, pushing banks to extend their lending activities, the CBN is filling the policy void in the prolonged absence of a new cabinet. Unfortunately, neither the new minimum loan-to-deposit ratio nor the reduced maximum amount for which banks will receive interest on their deposits with the CBN change the underlying conditions that make it unattractive for banks to lend in the first place. In fact, the CBN’s obsession with the exchange rate has led the apex bank to sell more and more OMO securities that offer a high-yield, risk-free alternative for banks, effectively preventing them from handing out more loans to the real economy.

Wale Okunrinboye, CFA, head of investment research at Sigma Pensions
I found the substance of the plan a little unchanged from his inaugural statement in 2014: bold and ambitious about his desires but without the recommended dose of realism that Nigeria’s increased vulnerability to external shocks require. The plan seeks to pursue single digit inflation, high growth and increased banking sector involvement with the economy but makes little mention as to likely trajectory of the key policy anchor (the exchange rate). In line with historical trends, the exchange rate is the eternal obsession of the CBN and one which assumed a larger than life status under his first term.

At the heart of the present FX strategy is a play on offering a high interest rate differential on OMO bills to foreign portfolio investors to shore up the NGN at its increasingly over-valued level. This tactic, which is not a radical departure from policy under Sanusi, is essentially an enlarged bet that external conditions remain benign (dovish Fed + above $60/bbl oil price) over the medium term. That said, the quantum of these FPI inflows into short dated CBN T-bills (>$16b) have become significant relative to FX reserve levels ($45b) which means that any adverse change on the external front would easily derail the plan.

On growth and inflation, to drive a large expansion in the former, we need to see some sizable fiscal policy adjustments which may be potentially inflationary ( flexibility around fuel and electricity prices) and will work to limit the scale of any dovish monetary policy aspirations. Not doing them means economic growth remains at this ‘ijebu’ 2 percent level.

Lastly, just as we are now used to multiple exchange rates, I think we are likely to increasingly see multiple interest rates (one based on CBN intervention funds and another based on market conditions). In all my thoughts are we are likely to see greater unorthodoxy in the event of an unfriendly external environment: not that orthodox solutions offer much hope when fiscal policy makers are not sincere about reforms but an orthodox approach assures on the credibility of CBN forward guidance which markets require.

macroafricaintel | Mobile phones, internet and jobs in Africa (4)

By Rafiq Raji, PhD
Twitter: DrRafiqRaji

On-the-ground AI research to bridge knowledge gap & incorporate African factors
Artificial intelligence (AI) is the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings. AI research falls into one of three categories: Strong AI, applied AI or cognitive simulation. Strong AI aims to produce machines with human-like thinking abilities. Applied AI or “advanced information processing” seeks to build “smart” systems for lucrative or life-saving vocations like medical diagnosis or stock-trading. Cognitive simulation involves using computers to test human cognition theories.

Global tech firms IBM and Google have established AI research labs in Africa; the former in Nairobi, Kenya and Johannesburg, South Africa and the latter in Accra, Ghana. They are largely applied AI research ventures. These AI initiatives mitigate fears about the likelihood of Western-designed AI systems excluding African preferences and cultures. They also help ensure African researchers participate in global AI efforts; which were hitherto all based outside Africa. Some African AI researchers abroad are seizing the opportunity to return to their homeland. And a next generation of African AI researchers would also now be able to avail themselves of the knowledge and experience without having to venture afar. African governments should be mindful of the ethical motivations of these AI research ventures by global tech firms, however.

Challenges and constraints
Infrastructure remains inadequate, data costs are high, and internet penetration of below 40 percent remains relatively low, logistics can be nightmarish, many Africans remain relatively digitally illiterate, and the regulatory environment is uncertain or even antagonistic. Online marketplaces have been filling the digital skills gap with foreign labour. To manage regulatory and financial risk, major online marketplaces are not only registered outside of Africa but are also tapping foreign capital markets for funding. Both online suppliers and consumers have genuine cause for concern. For example, African governments have been shutting down the internet during elections and protests. The ease with which governments are able to do so exposes the fragility of the internet on the continent. Part of the appeal of the internet is its supposedly “borderless” nature. However, if governments can stop the usage of the internet on a whim, its infrastructural utility diminishes.

Perhaps the only distinction is that such behaviour is not limited to African countries; Russia is building a sovereign internet wall, for instance. Besides, even when the shutdowns are not motivated by government action, the fact that most Africans use the internet via their mobile phones, through networks that are relatively fragile, means that they easily lose access to the internet from time to time due to fault-induced shutdowns. External private actors have also been able to shutdown at least one African country’s internet infrastructure; in Liberia, for instance. Still, many are able to defeat these shutdowns. And legal institutions have surprisingly proven to be resilient in keeping government overreach in check in some African countries.

In any case, calls are being made for some form of global regulation of internet activities. And despite the obvious drawbacks of overregulation and censorship, some African governments are undaunted. They are increasingly looking to tax online activity or have some form of regulatory oversight over the internet in their jurisdictions. For example, Uganda has imposed a social media tax. More recently, Uganda announced plans to nationalise its internet data exchange service, raising fears of inefficiency and likely regulatory overreach in the aftermath.

The internet is a net job creator. Cheaper smartphones and mobile data, a mobile money boom, and burgeoning e-commerce on the African continent are spurring incremental economic growth and creating jobs. Digital IDs, smart and balanced regulation, and certainly much cheaper smartphones and internet would be key elements to achieving these goals on scale. African governments should ensure all their citizens have digital IDs, can make payments digitally, and in collaboration with global tech giants, are able to acquire low-cost smartphones and use the internet cheaply. In the aftermath, they would all be able to participate in online marketplaces as suppliers or consumers.

There is already an example of how private enterprise and governments can accelerate the process. In India, a largely cash-based society, an entrepreneur is already leveraging on the country’s now well-established digital identity system to include all Indians in the digital economy. Recognising high data costs are a constraint for poor people, the entrepreneur is offering data services on his mobile telecommunication network almost for free and almost certainly at a loss in the interim. His strategy is clearly to formalise all Indians, irrespective of class, in a digital ecosystem that enables them conduct almost all their daily activities, from socialising to buying groceries, online. While his ambition is not an ideal scenario, in light of obvious antitrust issues, it exemplifies the potential of the internet and how the digital ecosystem it creates would spur incremental economic activities and create jobs.

African governments have a good example in this Indian case on how the internet opportunity can be operationalised on the one hand, and the potential monopolistic drawbacks on the other. In tandem, government policies should prioritise human capital and infrastructural development. Entrepreneurs should also be able to secure financing easily. These would only be possible if African governments create a conducive business environment in their respective jurisdictions. The job creation thesis of the internet rests on these foundations.

Article was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References are in the original article.

#Africa #Markets | 5 Aug

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asia stocks hit 6-mth lows, bonds boom amid market shakeout
  • MSCI ex-Japan skids for a 7th day in a row
  • Flight to safety boosts yen, bonds and gold
  • Currency wars feared as China’s yuan breaks past 7 per dlr
  • Markets wager on even sharper US monetary easing

Oil Markets

  • Oil prices drop as US-China trade war fuels growth concerns
  • Brent down 0.8% at $61.39 a barrel (0029GMT)
  • WTI down 0.4% at $55.42 a barrel

Precious metals

  • Gold gains on weaker dollar, US-China trade tension
  • Spot gold up 0.2% at $1,443.56 per ounce (0107GMT)
  • US gold futures down 0.1% at $1,455.40


  • Soybeans extend gains despite US-China trade war concerns
  • Most active CBOT wheat futures down 1.2% at $4.84-3/4 per bushel (0034GMT)
  • Most active corn futures down 0.3% at $4.08-1/4 per bushel
  • Most active soy futures down 0.4% at $8.72-1/4 per bushel
  • Most active rice futures down 0.3% at $11.67 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • 6th biennial general assembly of ECOWAS network of electoral commissions in Abuja; Buhari to open
  • 2019 AGOA forum in Abidjan, Ivory Coast; 3-6 Aug
  • South Africa PIC inquiry resumes
  • South Africa Standard Bank PMI Jul-19 [prev. 49.7]
  • Nigeria Stanbic IBTC Nigeria PMI Jul-19 [prev. 54.8]

Key African events or data releases over the weekend & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • Egypt – 17 dead in car explosion in central Cairo – health ministry
  • Nigeria security agents arrest activist for calling for revolution
  • Sudan factions initial pact ushering in transitional govt
  • Zimbabwe increases fuel price again amid shortages
  • Sudan’s factions initial a constitutional declaration
  • Sudan factions will sign constitutional declaration on Aug 17 – sources
  • 2 South Africans killed in Tanzania plane crash – officials
  • Libya’s Mitiga airport reopens to air traffic after shelling
  • IMF sees Zambia GDP growth declining to 2% this year
  • Sudan’s RSF to report to Armed Forces’ General commander – Constitutional Declaration Draft
  • Sudan detains 9 soldiers after protesters killed
  • Sierra Leone cancels or suspends major mining licenses – FT
  • Congo races to contain ebola after gold miner contaminates several in Goma
  • South Africa defence firm Denel expects state aid in 3rd quarter
  • Tunisia’s interim president extends state of emergency for 1 mth
  • South African stocks dragged to near 2-mth low by trade war woes
  • Nigeria oil union suspends industrial action planned over Chevron dispute
  • 2nd ebola case in Congo’s Goma infected several people – govt
  • Zambia will delay sales tax until January, finmin says
  • MTN Nigeria asks tribunal to rule on tax treatment of $1 bln fine
  • Uganda academic jailed for 18 months for criticising Museveni on Facebook
  • Africa Oil – Libya outage may ease Nigerian oversupply
  • South Africa defence firm Denel expects state aid in Q3
  • African nations, Western partners strive to combat IED threat
  • South Africa sugar producer Tongaat to delist from LSE
  • Rights activists criticise Uganda for academic’s conviction
  • South Africa’s Gold Fields flags lower H1 earnings
  • Zimbabwe t-bill auction oversubscribed after 7-yr hiatus
  • Dried-up pastures push Kenya’s Maasai to mix cattle with crops
  • Kenya shilling strengthens against the dollar

N.B. Full stories of above headlines are available on Reuters

macroafricaintel | Mobile phones, internet and jobs in Africa (3)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

E-Commerce to boost growth in retail, transport, & hospitality industries
Online marketplaces are digital platforms that match suppliers of goods and services with customers. They are generally classified into four types: business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B). Jumia, an Africa-focused online retail marketplace is an example of a B2C and B2B platform. Uber, an online ride-hailing, ride-sharing and food delivery marketplace, and Airbnb, an online hospitality brokerage marketplace, are C2C platforms. Thundafund, a South African online crowdfunding marketplace for entrepreneurs is an example of a C2B platform. These few examples of online marketplaces and others are disrupting the retail, transportation and banking industries on the continent. And they are doing so for the better. Not only are they rendering legacy services in these sectors more efficiently, there are also tapping hitherto sub-optimal opportunities in profitable ways and creating new jobs in the process. Some are peculiarly African. In Angola, there is a service for the online purchase and delivery of goats, for instance.

Table 5: New e-Commerce jobs by 2025  
Sectors Jobs (millions)
Consumer goods 1.7
Mobility 0.5
Travel & hospitality 0.3
Other categories 0.4

Source: BCG

Commerce on these digital platforms, generally termed “electronic commerce” or “e-commerce”, could create as much as 3 million jobs by 2025. That is one new job opportunity for every 15 unemployed African youth. Only 100,000 Africans would be directly employed by these online marketplaces, though. So, the real effect would be in the increased economic activities and efficiencies they instigate in other sectors. These are the creation of new products, reduction or elimination of supply chain bottlenecks, and the expansion of customer bases. As shown in Table 5, 1.7 million (60 percent) of these new jobs would be in the consumer goods sector, 500,000 in mobility services, and 300,000 in the travel & hospitality industry. As some jobs would also be lost in the process, these are clearly net estimates.

The African opportunity is underpinned by the still early lifecycle stages of its economic sectors. In retail, for instance, there are 15 formal stores for every 1 million Africans. (Compare with 930 per million Americans, 568 per million Europeans and 136 per 1 million Latin Americans.) Online retail marketplaces could easily increase the coverage at less cost and without the need for as much brick-and-mortar. Additionally, because almost 40 percent of sub-Saharan African economy is informal, there is an ample portion of the labour force that is not unionised or organised. So they are more amenable to new employment norms. Of course, this varies by country and industry. For example, established taxi services are unionised and well-organised in most African countries. So naturally, there has been resistance to digital taxi services, resulting in bans or partial bans, in at least seven African countries. The forms of this resistance in the various African countries are noteworthy. It is mild and increasingly collaborative in Nigeria. In South Africa, however, the resistance is strong and sometimes violent. In other words, the expected jobs boost from e-Commerce would likely vary from country to country. Thus, culture and attitudes in each country are huge factors.

Prospects of gig economy are huge but mixed
Online gig work is short-term paid labour via online or digital employment platforms. The resultant ecosystem is referred to variously as the “on-demand economy”, “gig economy”, “sharing economy”, or “platform economy”. Online gig work is enabling Africans participate in the global economy, with the resultant effects of increased incomes and poverty alleviation. Still, there are reservations. Wages are relatively lower, working hours are longer, and labour protections are weak or non-existent. Because of the enormity of the unemployment problem in most African countries, these are not likely to be much of a concern for their eager labour force. The gig economy would be crucial to creating the more than 18 million new jobs Africa needs per year for its expected 1.3 billion working population by 2050.

Digital labour takes various forms. One example is online freelance contracting work like web development, book editing, and reporting. Crowdsourcing is another example, whereby firms get external personnel to do certain jobs for them via the internet. Freelance contracting and crowdsourcing differ in the number of contractors involved. A firm could hire just one freelance contractor. But it would only be deemed to be crowdsourcing if the contractors are more than one. Both are outsourcing in any case. Crowdsourcing can be classified into the following forms: “intelligence, crowd content creation, crowd voting, funding and microwork.” Major crowdsourcing platforms are Amazon Mechanical Turk, CrowdFlower and Microworkers. Crowdsourcing tasks include online customer service, data processing, content review and tagging.

Table 6: 10 highest paying gig economy jobs of 2018
Job Rate per hour
Artificial intelligence/Deep learning $115.1
Blockchain architecture $87.1
Robotics $77.5
Ethical hacking $66.3
Cryptocurrency $65.3
Amazon web services Lambda coding $51.0
Virtual reality $50.0
React.JS developers $40.8
Final Cut pro editors $37.1
Instagram marketing $31.2

Source: Investec

There are 10-12 million new African workers every year. Only about 30-40 percent would get a job. That 77 percent of African workers in non-agricultural employment is informal lends itself to the burgeoning African digital on-demand or gig economy. And even though gig economy jobs are still considered vulnerable employment, being as they lack labour protections, they are relatively better organised and formalised. In any case, there are increasing calls for a fit-for-purpose “social contract” to address some of the current shortcomings of digital employment.

As more jobs become on-demand, a lot is also increasingly technology-based in tandem. Consequently, job profiles are constantly changing. Unsurprisingly, many new vacancies go unfilled for lack of skills. While the disruption is global, it is happening in African countries as well. The extent to which African jobs rely on internet technologies is rising but varies from country to country. For instance, 18 percent of formal jobs in Kenya have high ICT intensity, while only 7 percent do in Ghana. While much of the current ICT intensive jobs in Africa are low-skilled, research shows greater benefits are to be garnered from advanced ones in digital design and engineering. African countries have to start positioning their labour forces for these opportunities. In this regard, curricula would have to be revamped. And greater emphasis would need to be placed on science, technology, engineering and mathematics (STEM) education.

Article was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References are in the original article.

macroafricaintel | Mobile phones, internet and jobs in Africa (2)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Digital IDs would be key
It is not a certainty that Africans, when availed of low cost internet, would use it for productive economic activities, to earn income, say. According to a recent study, most Africans use the internet for social online activities. However, this is not unique to African countries. Most of the world’s poor use the internet for leisure. That is not as bad as it seems. With about half a billion Africans without official identification, online social activity could become a credible source of information for personal identification, address, and credit scoring. This is not a pie-in-the-sky idea: visa applicants to the United States are now required to submit their social media account details. Banks could easily do the same for know-your-customer (KYC) documentation for opening of bank accounts and lending.

In any case, African countries are beginning to establish digital identification systems. With digital IDs, Africans would be better positioned to participate in the estimated $300 billion continental digital economy by 2025. As is already the case in India, there is evidence of economic benefits in the aftermath of digital ID schemes. In Ghana, physical addresses have been digitalized. Kenyans began registering for digital identification numbers in April 2019. In Nigeria, all mobile phone subscribers undergo biometric registration and all bank account holders have a so-called “bank verification number”. So, there is a positive trend towards some form of national digital identification system in a host of African countries. Progress is slow, however. There are ongoing multilateral efforts to help African countries pick up the pace in a sustainable way.

Africa is leading global mobile money adoption
79 percent of the growth in global e-commerce transactions in 2018 was via mobile money. As shown in Table 4, 66 percent of the $40.8 billion mobile money transactions in 2018 were in sub-Saharan Africa. Africa’s lead in mobile money makes it well-placed for an e-commerce boom. There is a rising trend towards cashless transactions on the continent. Banking via mobile phones or mobile banking, is now ubiquitous and normalised. And with the unbanked able to use digital payment systems like mobile money, they are also increasingly financially included. In other words, both formal and supposedly informal economic agents in African countries are increasingly able to participate in the digital economy.

Table 4: 2018 mobile money statistics
  Registered accounts (mln) Active

90-day accounts (mln)

Transaction volume (bln) Value (US$bln)
Global 866.2 298.7 2.4 40.8
Sub-Saharan Africa 395.7 145.8 1.7 26.8
South Asia 287.6 89.3 0.6 8.8
East Asia & Pacific 94.6 29.8 0.1 3.7
Latin America & The Caribbean 27.0 13.1 0.1 1.0
Middle East & North Africa 48.9 18.6 0.0 0.5

Source: GSMA18

If the trend continues, as it seems likely, much of the informal economy would become formalised in due course. The ubiquity and increasing affordability of mobile phones make the potential of mobile money to formalise the over 300 million adult Africans currently financially excluded (without any account) great indeed.

Of the more than 866 million registered mobile money accounts in 90 countries around the world, 46 percent are owned by Africans. 54 percent of the adult population in Ghana, Cote D’ivoire, Benin and Senegal use their mobile money accounts regularly. The same cannot be said of the three most populous African countries, Nigeria, Ethiopia, and Egypt, where only 30-40 percent of their combined 242 million adult population have mobile money accounts. That may be about to change. It is expected that more than 110 million mobile money accounts could be created in the three continental behemoths over the next five years. There is good reason for this expectation. In October 2018, for instance, Nigeria’s central bank issued guidelines for the licensing and regulation of non-bank firms (including telecommunication firms) as “payment service banks.”

Still, there are constraints. Taxation, KYC requirements, cross-border remittances and data regulation are some of them. Almost all African mobile money service providers pay three layers of taxes: value-added tax, general tax, and mobile sector-specific tax. Uganda, Kenya, Zimbabwe, and Gabon tax mobile money transactions specifically, for instance. Digital IDs allow for electronic KYC (e-KYC). But not all African countries have digital ID systems. Although it is still expensive to remit funds across borders, the cost is reducing. For instance, while a mobile money customer is currently charged 1.7 percent on average to send $200 across borders, it is still 40 percent less than the rate in 2016. More internationally compatible operating models would almost certainly push the cost down even further. New data regulation frameworks, while welcome, add to costs. Still, objective collaboration between regulators and other stakeholders could allow for just the right balance between strong regulation and unbridled innovation.

Article was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References are in the original article.