West Africa: stuck in a food / fuel pincer movement

I had a long chat with Pascal Fletcher at Reuters on Friday while he was writing this article on the effect of price rises for food and fuel in west Africa, where he’s based.  He clearly knows the region back to front, and as his piece makes clear, the outlook isn’t good:

Africa’s cocoa makes the world’s chocolate, its fish, fruit and vegetables reach tables around the globe and its oil powers vehicles and factories from China to the United States. Yet far from benefiting from soaring commodity prices, African states are being squeezed as hard as any by the costs of fuel and food imports. Their desperate moves to cushion the impact for potentially restive populations threaten to wreck already stretched budgets, slashing receipts and swelling state spending.

As far as I can tell from the rough tally I’ve been keeping over the last few months, west Africa’s been one of the regions hardest hit by civil unrest related to food and fuel inflation, and Pascal’s article seems to confirm this.  As a result, many governments have been under pressure to subsidise prices for both.  Problem is, that doesn’t do their exchequers any good at all – quite apart from the inflationary impact of such measures.

The unplanned contingency measures, on top of global food and oil prices far above what most imagined a year ago, are wreaking havoc with governments’ finances. “This trend is throwing the budget out of gear,” Ghana’s President John Kufuor lamented last month when he unveiled a package of actions to mitigate the price rises …

As I argue in Pascal’s piece, the expense of subsiding goods across the whole economy, coupled with the inflationary impact, are two of the reasons for the current enthusiasm for social protection systems – be they food aid, vouchers or straightforward cash transfers – that are targeted at the poorest people.  Expect to hear a lot about such ‘social protection systems’ at this week’s UN food summit. 

But there’s a catch, too: in many places, the infrastructure for administering these systems just isn’t in place.  Helping countries to get it set up has to be a top priority for donors – starting right now.

On collision course: scarcity and African patronage systems

“If you see people throwing stones, it means if they had guns, they would have been shooting”, observes Frederick, an economics grad who drives a motorcycle taxi in Douala, Cameroon. 

The FT’s Matthew Green explains:

Only a few crumbs were left on the counter at the Boulangerie du Rail delicatessen in Douala after looters swept the shelves of cake, croissants and champagne… “People are hungry, they have nothing to eat,” said Felix Djoyo, the manager, who had locked himself behind a metal door while shanty dwellers ransacked his bottles of Bordeaux.

The crisis in Cameroon might have generated few headlines abroad, but the violence shows how soaring oil and food prices on global markets are threatening the patronage systems propping up some of Africa’s longest-serving leaders.  Protests linked to surging inflation have broken out in Guinea and Burkina Faso in recent months, where presidents have ruled for more than two decades. Niger, Ghana and Senegal have also seen demonstrations …

The government has agreed to a small reduction in fuel prices to placate protesters, saying it cannot afford the kinds of subsidies needed to shield the economy from global market forces. But many residents blame Mr Biya for the hardship, saying years of venal rule have skewed the economy to favour a tiny elite.

So, another point to add to the growing list of what rising food and energy prices mean for Africa: patronage systems come under increasing stress in conditions of scarcity.  Look at Kenya.  People at the tops of agencies are acutely aware of the problem – DFID’s Douglas Alexander and the World Bank’s Bob Zoellick both returned from Davos fired up about the political impacts of scarcity issues, for instance.  Some people in country offices get it, too. 

But the underlying problem is still that many donor agencies’ culture is all about disbursing cash – rather than having a really sophisticated analysis of endogenous drivers of change and a theory of influence to go with it.  Neither the old problem of patronage nor the newer problem of scarcity issues is really that well understood in donor agency cultures.  We’d better hope they get up to speed pretty fast…

Festive cheer from the IEA

No ho-ho-hos from the International Energy Agency this Christmas. They chose December 27th, of all days, to announce that, er, their reserves data is – how to put it? – rather Enronesque. 

As the FT says, the Agency “has been paying insufficient attention to supply bottlenecks as evidence mounts that oil is being discovered more slowly than once expected”.  The article continues: “To make amends, the International Energy Agency has started work on a new study to be published next year that will rework its long-term projections for global oil reserves”.

Alongside a plan to build a new set of data for the decline in production rates in the world’s top 250 oilfields, the IEA is also ready to reassess its own forecasts for projected oil discoveries, which it based on estimates by the US Geological Survey.

Any downward revisions in oil discoveries or upward revisions to decline rates will in theory increase the probability that global oil reserves will be smaller than expected and that global oil supply will peak much sooner than expected.

Natural decline rates for discovered fields are a closely guarded secret in the oil industry, and the IEA is concerned that the data it currently holds is not accurate.

Doubts are also surfacing about the original estimates for new oil discoveries around the world that were calculated by the USGS in 2000. A USGS re-assessment of these statistics in 2005 showed that actual new oil discoveries averaged only 9bn barrels a year between 1996-2003, 60 per cent less than the average annual estimates for the forecast period of 1995-2025. Just a few months ago, the USGS also downgraded its estimates of future new discoveries around Greenland by 38bn barrels.

“Insufficient attention to supply bottlenecks”?  Call me lacking in seasonal goodwill, but wasn’t the whole point of creating an International Energy Agency to have organisation whose job it was to pay attention to supply bottlenecks? 

What’s all the more alarming about the IEA’s Yuletide admission is that the Agency was already sounding alarm bells and pointing to flashing red lights on the dashboard even before this announcement.  Regular GD readers will recall that November 16 saw the publication of the latest World Energy Outlook, when the Agency said that over the next 25 years some $22,000 billion – just under half 2006 world gross product – would need to be invested in supply infrastructure.  If even that astronomical figure was based on an over-optimistic assessment of reserves data, then – ?

Nor was this even the end of the IEA’s Christmas message to the world.  The following day, it announced its finding that the rising cost of oil has already wiped out the benefits of increased aid and debt relief to non-oil producing African countries, according to an IEA survey of 13 countries including South Africa, Ghana, Tanzania, Ethiopia and Senegal.  According to the IEA, the increased cost of oil bought by these countries since 2004 was 3 per cent of their combined GDP: “more than the sum of debt relief and aid received over the past three years by the countries, which have a combined population of 270m, of whom 104m live on less than $1 a day”.  One implication:

The situation is raising fears that, in spite of the strong growth many African countries have seen in recent years, there could be a repeat of the 1980s’ debt crisis in the developing world that was caused in part by the oil shocks of the 1970s.

Rational voters

Research into voting patterns in Ghana:

This article explores voting behavior in one of Africa’s new democracies. Recognizing that much of the literature assumes African political behavior to be subsumed in ethnic ties and clientelism, we ask if individual voting behavior in Africa is driven by evaluative rationales based on retrospective or prospective judgments of the performance of parties or representatives, or by non-evaluative rationales characterized by clientelism and proxy voting. Based on a survey of voters in two recent elections in Ghana, one of the most surprising findings is that an overwhelming majority of the respondents do not vote based on clientelism, or due to ethnic or family ties but cast their ballots after evaluation of candidates and parties. Despite the significance of ethnicity among elites in Africa, voters are seemingly not influenced primarily by it.

UN not joined up but still being asked to do difficult things

Noah Pollak’s National Review article, posted on Michael Totten’s blog today, reminds me of our internal debates during the Lebanon war last summer (when I was working for the UN) about peacekeeping options for south Lebanon.

Pollak’s article, subtitled “The UN organisation is ineffective as it is unaccountable” is a standard piece of UN-bashing. Pollak argues that unlike the Israeli government, which is being thrashed by the Winograd Commission and its fallout, the UN has “quite remarkably escaped any opprobrium for its own important contribution to the outbreak of war last summer”.

Pollak recalls that since 1978, when UNIFIL was established, “a concatenation of nearly identical UNIFIL-related resolutions has been issued by the Security Council, always with one thing in common: Events on the ground are never permitted to affect UNIFIL’s mandate. Through a combination of diplomatic foolishness and bureaucratic inertia, UNIFIL has remained impervious to any evaluation of its actual utility in bringing peace and security to southern Lebanon.” Pollak recounts a “long history of terrorist provocation in southern Lebanon”, from the PLO to Hezbollah, throughout which “the world’s diplomatic corps has maintained the self-congratulatory fantasy that more extensions of UNIFIL’s mandate will help the region”. Continue reading