Loomnie

The Executive Summary:

African countries south of the Sahara are poised to enjoy a surge in growth in their banking systems during this decade. The three main drivers of this development will be generally very high rates of economic growth, financial deepening to fulfil huge unmet needs for basic financial services and new technologies to provide them—particularly over mobile phones.

In this report we trace out two scenarios for the growth of the sector. In the conservative scenario, driven exclusively by economic expansion, we project that the industry in 16 key African economies will boost its financial assets by 178% to US$980bn by 2020. In the more likely scenario, driven by both economic growth and financial deepening, we foresee assets expanding by 248% to US$1.37trn at the end of the decade (see chart).
The boom will vary markedly across the continent, however. Banking is likely to enjoy its most rapid expansion in Angola, increasing assets at least fivefold by 2020, as that country experiences a surge in petroleum production and builds up an industry long hampered by civil war and economic malaise. Banks in a number of other economies—including Ghana, Tanzania and Uganda—will expand assets at least threefold over the same period.
Slower-growing markets will include South Africa, which is the financial powerhouse of the continent but will expand its own banking sector only modestly by 2020. Botswana and Namibia, two other economies with well-developed banking systems, are also slated to expand banking assets at rates below the regional average.

In most regards the region is trailing the rest of the world in developing the banking systems that are vital for stronger economic development and growth. However, in some key aspects Sub-Saharan Africa is leading other regions in ways that will allow it to rapidly catch up, or even leapfrog forward, in the next decade and beyond. The continent’s industry is a leader in mobile banking and other innovative approaches to reaching new customers. Most of its markets are also unusually open among emerging markets to foreign banks and microfinance firms. More than anything else, it offers huge unmet financial needs in a world largely marked by excessive debt and leverage.

You can register here to download a summary of the full report.

Sometime last week I attended a podium discussion at the Berlin Humboldt University. The topic was Africa as the laboratory of globalisation. The idea was to discuss different ways in which Africa serves as a laboratory for ideas that then travel to other parts of the world.

Some of those on the podium are STS people who study medical practices in Africa, so the topic of clinical trials in Africa was discussed. For example, it is sometimes much more difficult to get permission to test new drugs in Europe and North Africa than in many African countries. Plus, in many cases, many people would never have access to the treatment if they did not partake in the tests. Of course, there are discussions on what happens to the test subjects when the test phase is ended. From what I gathered in the discussion, it seems that some steps are being taken, in some cases, to make sure that some of them continue having access to the medication. In this case, it is pretty obvious that the test results form part of the decision to introduce drugs in European and North American markets.

Even the idea of no-consent testing is being introduced in some European countries. This is a case in which your Dr does not have to seek your consent before sending samples off to test for HIV. This was first introduced in certain African countries, and if I understood the speaker correctly, it is currently being practiced in France.

With regards to constitution making, someone from South Africa was part of the committee that ‘made’ the new Kenyan constitution, because the SA constitution is thought to be one of the most progressive in the world. Plus the process of constitution drafting in many African countries is influencing the way people think about the nature of constitution around the world etc., etc.

There was also a discussion of cultural forms that have travelled out of the continent. Nollywood is an example; kente is another one.

I am sure you can think of some economic issues.

After the discussion, my friend asked me a question that totally stumped me: if Africa is a laboratory of globalisation, then some people are the lab scientists. Apart from the obvious medical examples, most of those scientists are social scientists. How come, of all the social science disciplines, one never gets to hear about psychologists working in or doing research in Africa?

I was stumped because I couldn’t think of anyone I know who is a psychologist doing research in Africa; and I haven’t heard of the participation of psychologists qua psychologist in development programmes, not even in post-conflict situations. I am ready to accept that it is possible that I am the one who is totally ignorant, which is why I am throwing this out at readers who are much more experienced in development practice than I am, and who have experiences in parts of Africa where I have never worked.

So, to recapitulate, the bleg is: why do my friend and I never get to hear of psychologists doing research in Africa? Any thoughts are most welcome.

The Economist talks to China Europe Business School’s Africa Programme Director, Kwaku Atuahene-Gima, about the reason the Chinese business school decided to establish a branch in Ghana:

CEIBS has been instrumental in developing the business talent that has helped China develop,…. The Europeans and Americans were the colonisers of Africa, but there was not much development, or improvement in standards of living. China has over the past 30 years transformed a very poor economy into a very vibrant one….We decided to bring our model to Africa to help Africa develop.

He also talks about his plans to design a  programme for traditional chiefs and their administrative staff.

Read about the school here. The audio file is here.

… is the title of a recently published book by Kate Meagher of LSE’s Department of International Development, my friend and fellow student of African trade networks and informal economy.

Nicolas van de Walle writes in Foreign Policy about the book:

Within development circles, conventional wisdom has it that successful manufacturing sectors often develop in low-income countries thanks to identity-based social networks made up of producers working together. These networks are said to generate the social capital that can be used to overcome many of the shortcomings of underdevelopment. Meagher’s careful study of two such networks in southwestern Nigeria — of small, undercapitalized garment and shoe manufacturers — suggests that the advantages for producers within the networks are being undermined by an increasingly dysfunctional state. Meagher shows that these networks, whose roots go back to the colonial era, bring in hundreds of millions of dollars in revenue and export their goods to states throughout West Africa. But in recent years, they have proved vulnerable to Asian imports and have largely failed to develop economies of scale, invest in new machinery, or generate new lines of production; these networks, it turns out, stifle innovation and consolidation, even as they protect their members. Informed by theory as well as sustained fieldwork, Meagher’s study is a useful antidote to the purveyors of magic-bullet solutions for African development. It should be read by anyone interested in Africa’s industrialization.

Amazon page.

If we need anything now, it is more nuanced views of African political economy. That is what the book provides, in a very methodical way.

Off to Basel tomorrow for an African Borderlands Research Network conference. As part of a panel on a comparative study of cross-border trade networks in Africa, I will be presenting a paper titled “Benin-Nigeria secondhand clothing cross-border trade in historical perspective”. The abstract:

Today, Benin Republic is the main supplier of secondhand clothing to Nigeria, a country in which the importation of secondhand clothing is banned. Igbo traders, who form a transnational trade network that spans the eastern part of the West African coast and that extends to Europe and North America, dominate the import and retail trade in the commodity in Benin Republic. This is a network that could be described – depending on the side from which one chooses to look at it – either as an agent of development or as a predator on the state’s resources. The exercise here is to move beyond those arguments and to show the current configurations of the trade network as it has responded to a changing global political and economic landscape, and as it has been modified by the changes in the political economy of the West African countries that it spans.

For more on the conference [pdf].

A new book by Milford Bateman, who is described as “a freelance consultant specialising in local economic development policy, particularly in relation to the Western Balkans,” is described in the following terms on the publisher’s website:

Over the last thirty years or so, microfinance has risen to become one of the most high-profile policies to address poverty and under-development in developing and transition countries. It is beloved of rock stars, royalty, movie stars, high-profile politicians and ‘trouble-shooting’ economists. Its most famous pioneer, Muhammad Yunus, was awarded the Nobel Peace Prize in 2006.

In this provocative and controversial analysis, Milford Bateman reveals that microfinance doesn’t actually work. That, in fact, the case for it has largely been built on a desire to advance a particular free market ideology, on hype and egregious half-truths, and – latterly – on the Wall Street-style greed, deception and individual self-interest of those promoting and working in microfinance. Using a multitude of case studies from across the globe – from India to Cambodia, Bolivia to Uganda, Serbia to Mexico amongst many others – he exposes why many of its most fundamental building blocks are largely myths. In doing so, he demonstrates that microfinance actually constitutes a major barrier to sustainable economic and social development, and thus also to sustainable poverty reduction.

As developing and transition countries attempt to repair the devastation wrought by the global financial crisis, Bateman argues forcefully that the role of microfinance in development policy needs to be urgently and fundamentally reconsidered.

H/T Blacklooks

Stephen Smith writes in the BBC Focus on Africa Magazine about the relationship between France and its former colonies in Africa. One of the things he looks at is what has changed after the fall of the Berlin Wall and what has not. There is a little about the economic relations, but I miss a discussion of stuffs like the control of the CFA Franc by France – which basically means the control of the monetary policies of Francophone Africa.

It is ‘the study of how to get rich without knowing how’.

What must we do to end world poverty? At last, an answer: OK, that’s too good to be true. There has been a search for sixty years for the right answer. Now most economists confess ignorance how to raise the rate of economic growth — how to progress more rapidly towards development and the end of poverty.

To get out of this dead end, I would respond to this question with more questions.

First, who is “we”? It seems like whoever “we” are, “we” must have unconstrained power to implement “the answer”, so “we” sounds like authoritarian leaders (national autocrats or World Bank officials dictating conditions).

Second, are “we” going to allow poor people to choose their own paths? Of course not, because “we” already know the “right answer” for them.

So this question only makes sense in approach to development that is authoritarian and paternalistic, using Top Down Planning, which in fact has been the prevailing – but unsuccessful – approach to development for six decades.

The paradox of development economics is that Development does NOT require any one person (Expert, Leader, or Aid Official) to have a comprehensive understanding of how to achieve Development (sort of like how evolution managed to happen on its own before Darwin).

(I am drawing on a lecture I gave here at NYU.)

Why is it so hard to figure out how to raise growth? Nobel Laureate Friedrich Hayek once suggested a possible answer:

The growth of reason is based on existence of differences. . . . {between} individuals, possessing different knowledge and different views. [I]ts results cannot be predicted . . . . [W]e cannot know which views will assist this growth and which will not.

Growth is innovation, and you can’t know in advance how to do the innovative thing, or else it wouldn’t be an innovation. Development is BOTTOM-UP outcome of lots of unpredictable individual successes and failures.

But this is not a counsel of hopelessness; in fact, it means economists can still say lots of useful things. You want an environment that is favorable for “searchers:” the private and social entrepreneurs who figure out these innovations. You want to create as many opportunities as possible through comparative advantage, gains from trade, and gains from specialization. This means individual rights, property rights, and not too much interference with markets or free trade. Public goods like infrastructure, health, and education are necessary, but arise best in response to demand, not determined by bureaucratic supply. This means a democratically accountable government. Individual freedom and democracy also allows social entrepreneurs to flourish.

Institutions are necessary to make markets work, but institutions also evolve from the Bottom Up, with pro-market institutions arising from values like individualism, trust, and respect for others.

So the paradox of development economics is that it’s the study of how to get rich without knowing how. As Hayek put it:

It is because every individual knows so little and… because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.

The bottom billion blog says Africa is open for business. Didn’t know it was ever closed, but….

Paul Krugman: China is in a dollar trap.

The IMF is still busy cleaning up its image. Dominique Strauss-Kahn writes about a lending overhaul.

On Obama’s Special Olympics gaffe .

And, Nigeria records first all-female crew flight.