It’s the economy, N°4

Yes, this is a weekly series. Barclays Bank dominates this week’s missive. Oh, what is 16 plus 6? Don’t tell us yet. Hold that till the end.

(1) This past week, the British bank Barclays announced plans to exit the African market after a formal presence of about a 100 years. The bank currently employs about 40,000 people across the continent.

(2) The initial reaction for many was to think that Barclays was passing a vote of no confidence on the continent’s future. But closer inspection reveals that the African business is being sacrificed (surprise, surprise) to save the mothership. Barclays needs extra capital and some of that will come from selling its Africa business. “It’s not an Africa problem; rather it’s a Barclays problem”.

(3) One cannot even begin to imagine how many of the 40,000 workers feel right now. They’ve worked hard for the bank. Delivered impressive results. And now the future seems uncertain. What will happen next? Will the bank be broken up into smaller bits? Will someone buy the business as a whole? Will the new owners maintain current levels of employment or maintain employee benefits? So much uncertainty.

Africa, foreign capital is not your long-term friend.

(4) Bob Diamond is in talks to buy parts of Barclays’ Africa business. Who is Bob Diamond, we hear you ask? Well, he was in-charge of Barclays during the time that the Libor manipulation scandal was unearthed (Libor is a crucial interest rate that ultimately determines interest rates on mortgages, credit card debt and so on). As a result, he was forced to resign his position as Barclays CEO in July of 2012.

Diamond has been busy buying up banks in Africa since leaving Barclays. Ah, capitalism. Heads I win, tails you lose.  

(5) In Zambia, the Ministry of Finance confirmed that a team from the IMF will be visiting the country this coming week to discuss, among other things, the possibility of an IMF Program. “IMF Program” is IMF lingo for a bailout package with strings attached.

Zambia has in the recent past borrowed heavily on international debt markets and is now experiencing the beginnings of what appears to be a sovereign debt crisis.

(6) Buoyed by high commodity prices and plain-old irrational exuberance, many African countries (like Ghana and Zambia) borrowed on international debt markets beginning in the last decade. Commodity prices are now falling making it difficult for countries to service their debt.  Some analysts think that debt traps typical of the 1980s and 1990s might be on the horizon. Back to the future, anyone?

(7) Still sticking with the issue of international debt: there is growing debate about corrupt practices associated with either the contraction of debt (see the case of Standard Bank in Tanzania) or with how the proceeds of debt are spent (for example in Kenya and Zambia).  

(8) Some more on debt: Carlos Lopes, the head of the UN’s Economic Commission for Africa in Addis, had an insightful op-ed in the Daily Maverick this past week. In the piece, Mr. Lopes tackles some of the myths surrounding Africa’s past indebtedness. For instance, Cold War geopolitics were just as responsible for the debt build up as were domestic factors. Lopes concludes the piece by suggesting ways of managing current levels of debt stress on the continent.

(9) We were shocked to learn this week that only 60% of “economics studies published in the field’s most reputable journals are replicable”. And it appears that authors are exaggerating, by quite a bit, the magnitudes of their results. (And yes, the replication exercise only looked at 18 studies from laboratory experiments published in two journals. Even then, we still think this is cause to worry).  

(10) Happily, the movement to reform how economics is taught in Western universities seems to be gaining ground. We would also like to see a similar movement to reform how economics is taught to students in many parts of Africa. The discipline is currently taught through a Western lens and hardly reflects nor sufficiently exposes students to African development realities. The dominant textbooks are chockfull of examples on the market for lattes and cappuccinos. As an undergraduate economics major at the University of Zambia, our resident economist had no clue what a latte or cappuccino was. But he sure as hell knew what the market for munkoyo looked like.  

(11) Finally, should we be worried that Nigeria’s Minister of Finance, Kemi Adeosun, cannot correctly add N6 billion to N16 billion?    

Grieve Chelwa

Grieve Chelwa is a Contributing Editor at Africa is a Country and currently a postdoctoral fellow at Harvard University.

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