Posted by: beninmwangi | April 5, 2007

Africa In the News Again..Two Stories, Two Realities, & One Continent

Two stories from two different and internationally renowned media houses, both about African economies, one bleak and one bright. One story by Thomas L. Friedman, acclaimed author of “The World Is Flat” talks about why Kenya could soon become an African tiger (economically speaking). The second story written by William R. Easterly, economist and the author of “The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good” wrote about the economics of poverty in Africa.

Once again we are critiquing news stories from the West (the next story, I hope, will come from media in one of Africa’s 53 countries), which focus in some way on business and the economies on the African continent. But instead of looking at just one story, we will be looking at two. The reasoning is that these two stories really seem like they may be intertwined. One starts in Ghana and the other in Kenya. And as we know, these two African nations are on opposite coasts and are opposite in many other ways, as well. However, there are a few similarities that the nations share. For instance, their independence came within very close time spans. Then their founding presidents, Kwame Nkrumah and Jomo Kenyatta were both very visionary leaders and they shared the idea that African nations should be freed from colonial authorities. Both nations have also had their shares of economic struggle, but one was from statism and while in Kenya it was from corruption. That may be where the comparisons will end. After independence however, the two nations took different paths at the proverbial fork in the road,which we shall call economic ideology. Ghana chose the route of a state directed economy, while Kenya treaded the path of a more open market economy. Now fast forward this picture to the current and the two nations seem to be once again on the path of convergence.

Now please note that these two articles are not making any comparisons, Thomas Friedman focuses on Kenya, while William Easterly starts in Ghana and attempts to aggregate this discussion to the whole of the continent. It is just for the purpose of discussing contrasts and parallels that we are mentioning the two within the same post. Here’s an excerpt which summarizes Kenya’s recent economic growth, as told by Thomas L. Friedman:

“…Kenya also now has a democratically elected government that is learning to get out of the way of Kenya ‘s entrepreneurs and to get them the bandwidth they need to compete globally. It’s way too early to declare Kenya an economic ”African Tiger,” but something is stirring here that bears watching…”

courtesy of: April 4, 2007 edition NY Times

Now here’s an excerpt from William Easterly’s article:

“…There is a sad law I have noticed in my economics career: the poorer the country, the poorer the economic analysis applied to it. Sub- Saharan Africa, which this month marks the 50th anniversary of its first nation to gain independence, Ghana, bears this out…”

Courtesy of: March 23, 2007 Oped column of The Wall Street Journal

So first, let us start with Mr. Friedman, his article was describing how with the help of one of it’s newest industries-Business Process Outsourcing (BPO), Kenya’s economy is becoming more robust. He takes the story of homegrown Kencall, an outsourcing firm in Kenya, which started out as a sourced provider of telesales for America’s late night infomercial inustry. He navigates the reader through the government regulatory hurdles that the company had to overcome to in order to set the stage for a competitive playing field. And look at Kencall now, they have gone from $0 to $ 3.5 m, in three years. In taking this single story and extrapolating it onto Kenya’s broader political and economic scenery, he is essentially saying that with enough Kencall’s or similar stories Kenya can become an economic tiger (I only wish that he would have used the cat that is native to Kenya and said lion, but hey guess you can’t have your way all the time…). But he concludes that it could not have happened without a government that wasn’t afraid to get out of the way and let the country’s entrepreneurs takeover.

I am very inspired by this particular story. One of the main reasons that I was drawn to this story is how the writer was able to move past the same topics that every third or fourth journalist hammers at readers about African nations and their economic policies. Something that Mr. Friedman alluded to which resonates with my thoughts is that Africa’s entrepreneurs can be both the continent’s growth engine, as well as the chief drivers of economic prosperity. That’s not to say that good policy is not important, but it says that one does not need to wait for perfect conditions before setting out to improve a given situation.

Now contrast that story against William Easterly’s, who opens his column first by chiding the foreign economic advisors to who go to African countries and condone statist practices and then with reference to Ghana’s 50 year jubilee. Somehow, he was able to use Ghana’s 50year anniversary as an analogy to the continent’s economic woes. This was somewhat shocking to me, given the success that the country has seen since the 1990’s. So, it was difficult for me to continue reading the story at this point, but yet I persisted. And on the one hand something inside of me wanted to be able to refute all that he was saying as untrue, but sadly there was some truth to some of the statements that he made.

Namely, he mentioned that at independence Ghana’s output today is almost the same as it was 50 years ago, largely due to the socialist leaning policies that the country adopted during the Nkrumah era. This is something that I can agree with him on. Then he advances the discussion into the subject of UN, IMF, and World Bank economic advisors who write papers and make speech’s which show very tolerant attitudes towards the state controlled economic policy. This to me was the highlight of the article. Placing some of the blame on the continents foreign economic advisors was something new to me. Yet the article still began to lose my attention at this point, because of the writers attempts to use India and China as examples of the free market successes that African nations could follow. But, hmmm…I thought China was, with the exception of one major city, a state run economy. And both China and India until the last century had experienced at least one millennium of economic stagnation.

Fortunately, the conclusion was strong enough to wake me up. His opening statement about free market economies being tough roads that over time carry nations into prosperity, was sage advice. He even devoted the last couple of sentences to Africa’s blossoming entrepreneurs, who he says are learning to make economics work to their advantage instead of to their detriment.

Although Mr. Easterly’s article, at times resembled a roller coaster ride, I was able to pick up the crux of what Mr. Easterly was saying. He was trying to say that the people and the entrepreneurs of Africa want and deserve so much more than weak politicians and poor economic policy advisors. Another theme that his column gives credence to is that Africa experiences the low levels of output that we see because of this intersection of mis-governance and moribund economic practices. Again, I believe that he makes a good point here. However, it seemed like he was speaking in very general terms when he was speaking about the continent. If I didn’t know better perhaps my idea walking away from reading this story could have been that Africa was a country and Ghana was it’s capital. Furthermore, when he mentions the success of some of Africa’s entrepreneurs, the idea came across that outside of their financial success no one else would benefit.

Even with all of these differences that I found with this article, it still has it’s place and makes some strong points. And again the unfortunate truth is that there are some countries in Africa and other parts of the developing world that do fit Mr. Easterly’s description. My question about this type of “shock value” writing is who or how does it empower? At the moment, it seems like the continent’s greatest hopes lie within its private leaders, the entrepreneurs and the NGO founders. Under the right circumstances these groups can move more quickly than the bureaucrats or economic policy makers who are employed by these bureaucrats who are bound by tons of red tape. So why not write articles where 85 % of the content addresses them? And many of Africa’s entrepreneurs have already found ways to make profit, while simultaneously speaking to the greater good of the societies in which they serve, so maybe more that should be written to encourage them that they are on the right path.

In conclusion, two stories have been told, and although I don’t think that today’s economic realities in Kenya and Ghana are far apart, there are some vast economic differences on the continent between Africa’s haves and have-nots. And as both writers have illustrated policy and entrepreneurship or the lack thereof play vital roles in the two differnt realities that we see on the African continent.

Of course, I love your comments. But, if you can’t comment at this particular time- but would like to let us know that you were here; please sign and View my guestbook

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Responses

  1. Thank you for the review of this article, i naver would have read it, Thomas Freidman outlook on Kenya should be more compelling.I love your writing and conviction.

  2. James:

    Thanks, glad to be of service to you my friend!

    Yes, I agree Mr. Friedmans article is one of the most compelling and authoritative pieces of evidence that I’ve been able to get my hands on that folks should not sleep on the opportunities in Kenya or in other parts of Africa.

    I appreciate you coming by James, I admire how no matter how big you get you always manage to find time for the lil’ folk 🙂

  3. Your analysis is always insightful. I always pause a bit when I see “free market” because so often it portends having the wool pulled over my eyes. Economic is much messier than economists seem to admit.

    In the paper today was an article
    (I read it in my local paper, but they don’t put NY Times stories on their Web site) about a Bush administration push to make changes in foreign aid. What is at stake is to decouple food aid from U.S. maritime and agribusiness interests. The proposal would allow up to a quarter of the budget of the main food aid program to buy food in developing countries during food emergencies.

    Congressional criticism is that to allow that would undermine the political support for food aid programs drying up their budgets in the future.

    Politically I’m not sure where I stand: whether to support the administration moves or to support the opposition to them? But at minimum it seems easy to acknowledge that an important purpose of food aid is rather an subsidy for domestic interests project.

    The trouble with me is that I don’t always have the perseverance you demonstrate with articles like Friedman’s and Easterly’s. In a general way I’m rather predisposed to Easterly’s prescription of piecemeal reform. What gets to me is that in his criticism of Jefferey Sachs, et al. his vision for reform is always directed towards the countries on the receiving end of aid. He’s critical of how aid is provided, but it seems to me doesn’t apply his model of piecemeal reform to the donor countries at all.

    Rather he uses “free markets” as if that describes what actually happens–where isn’t really clear.

    Many Americans I think would see the benefits of aid which strengthens and enables the development of institutions and markets in areas targeted for aid. Indeed NGO’s often try to leverage their investmensts, and so for example Oxfam is clearly alligned with the changes the Bush administration is proposing.

    But the problem that the politics of foreign aid rests on the support of large and organized constituencies cannot be easily dismissed.

    In our conversations it seems you’ve pegged me as coming to the issue of African business from an opposite direction. I hope you know that I do support business, just don’t see aid as antithetical to business development.

    As an American I have a sense that I can have some influence in the policies my government pursues. Politics is a messy. I can’t help but think the sort of skepticism Easterly brings to the politics of emerging economies would well be applied to American politics.

  4. Kaunda:

    Hey, there. Thanks for stopping by. I can tell that you have been a very busy blogger as of late!

    I have not checked out the article that you referenced yet, but when I do I hope to have a deeper dialogue with you then…

    As far as food aid, you are totally right, I never thought about that. Thats a very profound statement, which the reality of it must have many folks thinkingdeeply about the subject as you have indicated.

    Thanks again Kaunda, you always add such wonderful depth to the conversation!

  5. […] Which factors do you think have contributed the most towards your investment success in Africa-your economics and mathematics background, the extensive travels, your wide cultural knowledge, your business […]


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