US General Says Negotiating with Terrorists is Best Policy

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Directly a result of the improper-planned mission in Libya, half of Mali is under control of Libyan armed extremists and the many foreign fighters that took part in the former Libyan regime. Only part of the NATO alliance that took action in bombing Libya is ready to support action in Mali. Namely, the French Government now led by President Hollande, is taking a very active stance in Mali similar to President Sarkozy in Libya. The key absent parties are the United States and the United Kingdom. The question is, why? Why would the United States, who recently experienced the impact of the North African terror network in Benghazi, be so slow and obstructionist to an intervention in Mali? Especially given that their own troops would not be called to participate. If the US had doubts about the capacity of African troops, then the supportive stance would be to help enhance them with material and financial contributions. Delaying a response only allows for the adversary, the same one responsible for the killings of Americans in Benghazi, to grow stronger, train more cells, generate more revenue from criminal activity, and begin to project throughout the region and the world. United States General Carter Ham noted that the groups occupying Northern Mali, especially AQIM and their affiliates, was growing stronger by the day. Thus he and his colleagues know that delaying makes the task more difficult. He also said that “negotiation is the best way”. In the same speech he noted that AQIM was supplying bombs to Boko Haram in Northern Nigeria as well as financial support and training. Both groups have been officially labeled by the United States government as terrorist organizations. Yet, one of the top Generals said that negotiations with AQIM in Mali was the best way to end the conflict there. Thus he endorsed a policy of negotiating with terrorists.

The hypocrisy of the United States with respect to its response to the crisis in Mali is glaring. Given that it was the US led bombing campaign in Libya that led to fighters based there fleeing into northern Mali with weapons taken out of Libya to do battle in Mali that caused the entire situation in the first place. It is in part the US and its failure in Libya that is responsible for Mali yet they have been delaying, allowing a group that is linked to the killing of officials at their consulate to grow stronger. This is making the work of the African-led efforts resolve it more complex and difficult. It is not clear how far the US has gone to delay intervention. The UN Special Envoy Prodi had talks with key US figures before he was appointed by the UN Secretary General. It is unlikely that they would have approved his nomination had he not supported their now clear agenda to delay intervention and block it by claims of improper planning. The mission in Mali is far better planned, conceived, and organized than the US-led NATO bombing campaign in Libya. Hence why that mission failed to contain the hostile groups or the large supply of weapons that eventually poured into Mali. Given that the US has willing countries to shoulder providing ground support in the form of trained troops that answer to recognized and respected governments, something that was not at all the case in Libya, it is not clear why the US would not also jump on with France and join in to support the effort to clean up their mess. On top of this, a top United States General, Carter Ham, is breaking ranks with decades of US policy and advocating that the best policy is to negotiate with terrorists!

There are a host of questions with respect to the response of the United States in Mali. I for one do not believe that Army General Carter Ham really thinks that the best policy is to negotiate with terrorists. He, like myself is fully aware that even rebels do not negotiate unless there is a credible threat of force. There is clear evidence as that now that the threat of an imminent African-led intervention grows that rebels in Mali are now beginning to concede ground in talks. Even Ansar Dine, an ally of AQIM, recently agreed in principle to respect religious freedom. Ham also knows that negotiating with terrorists serves to encourage them, something that the US has sought to avoid. So why the blatant hypocrisy? What is the US trying to achieve by all this? They too have felt the effect of AQIM leveling attacks on their own officials in the region. Just like France, the US also has every reason to want the threat now posed in northern Mali eliminated. What could the US possibly gain in Africa that would be worth allowing the threat in Mali to grow and strengthen for another year as they have suggested? How could West African instability serve US interests?

There are a few possible answers to this question. One possible outcome of a delay to act decisively in Mali is that regional forces may not be able to fully retake northern Mali with their current resources even with support from France, if they give AQIM a year to build-up as the US, and the UN is now suggesting. Thus they may require substantial resources from the world’s pre-eminent military power. The US has for long been trying to get African countries to agree to host AFRICOM, the US military central command post for Africa which is actually led by General Carter Ham, which today is based in Germany. The fear of sovereignty and a neo-colonial force has led to African leaders resisting US requests to host a large central base. However, since the fiasco in Mali the US has secured the temporary use of bases in Burkina Faso and perhaps other countries in the region. Greater instability in West Africa could go a long way to helping the US military secure its permanent base it has long been seeking. Thus while it is not in the short-term interest of the US to allow AQIM to grow in West Africa, it may indeed support their long-term goal of securing a permanent base for AFRICOM. This would explain the hypocritical stance by US General Ham, in asserting that negotiating with terrorists was the best policy. While he knows that it would not yield any resolution to the crisis, which is why his own government has never engaged in or supported such a strategy, it may indeed serve to enhance the foothold of the US in the region.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Political Risk in Mali and West and North Africa: Update…

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

There is great concern over the security situation in Mali. At present both ECOWAS and the AU have agreed to send up to 5000 troops from African countries to help regain Mali’s territory. The plan enjoys wide support throughout Africa and as it appears even among some parties in Europe who are not keen on seeing an extremist haven involved in criminal activity develop and train equip and spread through North Africa. According to decision-makers that I have spoken to, a lot of the responsibility for what is happening in Mali falls squarely on NATO due to its hastily planned intervention in Libya which was not supported by the AU at the time. Shortly after the NATO led bombing campaign in Libya fighters and weapons caches traveled to Mali to establish a foothold in the North of the country. Had it not been for the failure of the NATO led campaign in Libya to contain post regime fighters from leaving the country with large supplies of weapons the situation in Mali would not be.

Now regional decision-makers are poised to begin to clean-up that mess starting in Mali. They have pledged material resources as well as armed troops to commence the task. It was the view of some African decision-makers that financial support from Western allies responsible for the Libya fiasco, would be forthcoming. Primarily for this reason, they forwarded plans to the UN Security Council to get an international resolution endorsing the steps they had taken and opening up the mission for international support. However, based on the statements made by UN Special Envoy Prodi, and the UN Secretary General himself, ECOWAS and AU decision-makers are now realizing that same UN Security Council that endorsed the intervention in Libya which directly lead to the problem in Mali is not willing to support their efforts to clean things up. The UN Secretary General noted that the UN did not have the resources to support an African-led mission and it was not clear how they intended to finance the operation. The Secretary General and his Envoy have called for more negotiations, even though one of the largest groups occupying northern Mali has never participated in any negotiations and has no intention of doing so. Further its membership appears to be almost entirely foreign, with more and more recruits coming in from territories as far as Pakistan.

African decision-makers in ECOWAS and the AU are sending representatives to the UN to convey the need to act urgently. It was the UN Security Council that requested they provide a clear plan for retaking the territory during the UN General Assembly, something that was never done for Libya. Even after presenting this plan, the prevailing disposition is to wait and allow the groups that refuse to negotiate more time to recruit train and equip fighters making dislodging them that more difficult. However, it is not likely that ECOWAS and AU will entertain more stalling from the international “partners”. Intervention in Mali by a regional force will occur in a matter of weeks. The measure has already been authorized by ECOWAS and the AU. It does not require any UN Security Council approval or authorization and it is fully within the UN Charter for states within the region to act. Indeed, a United States General, said in a statement that groups in Mali were funding and supporting Boko Haram in northern Nigeria, giving that country the full right of self-defense to remove them. In addition the regional arrangements for both ECOWAS and the AU allow for intervention in member states for reasons such as this. Indeed ECOWAS has already intervened in Guinea-Bissau with troops to stabilize that country. The only reason why there has been a delay in Mali was the expectation that countries outside the Africa region would support and take part once the UN Security Council endorsed the ECOWAS and AU authorized mission. The right of regional organizations to intervene in member-states is also part of the UN Charter in Chapter 8 (Article 52) on regional arrangements, thus it is fully within the authority of ECOWAS and the AU to intervene in Mali without any UN Security Council action.

The signaling by the international community that it will not act on Mali will not be accepted by African decision-makers. Regardless of what happens in New York, African troops will be in Mali in a matter of weeks. ECOWAS has already planned on holding a donors conference to raise resources needed to support an intervention, originally it had been planned to hold it after the UN Security Council resolution, but it could be held before even if the UN choses to do nothing. It is not possible to negotiate with parties that do not wish to negotiate. Further armed rebellions are not ended by negotiation unless there is a credible threat of force that would compel a fruitful negotiation, something that has not occurred thus far.

There will be an armed operation in Mali, both the regional countries and Mali itself will be shouldered with the cost of executing it if international partners do not provide support and if they are not effective in raising revenue through their planned donors conference. As this happens, investors in the region should understand that the government in Mali will need resources, thus increase in taxes and fees as happened recently with the Mali gold tax is entirely possible. Further, neighboring countries, Mauritania, Niger, Nigeria, Algeria, Burkina Faso, and Libya could see instability spill over into their territory. Likely many of the fighters will flee north to Mauritania, Algeria, and Libya, as they will blend in better with those populations than they would if they chose to venture south. While regional forces will work to contain and neutralize them, they are fully aware that many of them will flee the fighting as they are dislodged.

As this happens one country to be very watchful of is Mauritania. The president of that country is still suffering from a gunshot wound he sustained from one of his officers in October. As he spends most of his time in France receiving treatment, it is not clear he will be able to hold on to power. He has refused to support any armed role in the conflict in Mali, however should armed fighters enter into his countries territory his army will undoubtedly be drawn in. Should this happen, his government will have to divert more resources to securing their border with Mali and the tenure of his presidency could be cut short. Investors should be mindful that there are substantial political risks in Mauritania moving forward, just as much as Mali if not more. It is entirely possible that there will be a regime change there and the transitional government may tap mining and energy investors there for more revenue as aid flow may be cut in response to a military take-over.

The best case scenario would be for the NATO alliance; that bares full responsibility of the residual effect of their handy work in Libya, to support the African-led mission in Mali. If this happens it will shorten the length of conflict, and potentially enhance the ability of regional countries to round-up weapons caches and the surge of foreign fighters that moved into Mali. Despite this, the regional body is ready to act and will within weeks. This will eventually lead to stability in Mali, perhaps within a year. There may however be some spill-over into neighboring countries. For the time being, Mauritania appears to be at the most risk, followed by Algeria which may see another authoritarian leader in North Africa fall if instability reignites social unrest there. The other reason why Mauritania is at greater risk than Niger and Burkina Faso is because Mauritania is no longer a member of ECOWAS. Had it been, ECOWAS leaders would have sent envoys there to mediate with the military, opposition, and political stakeholders as soon as the president was shot in October, limiting the possibility that he would be overthrown. The details of the process behind regional diplomacy in Africa is detailed in my book, The Power of Interdependence with Palgrave Macmillan Press.

***For the full report contact me by email.***

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/

http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

The Launch Party

 

David O. Kuranga, Ph.D.

 

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

The Launch Party for the release of The Power of Interdependence featured a fun filled evening with Talib Kweli & Jerry Lavigne Jr. The book is available in stores now as well as by ordering from any major book seller. Be sure to get your copy!!!

 

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Spains Borrowing Cost Skyrocket

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

In the absence of a Greek default, intermediate borrowing costs in Spain have reached its highest levels in the history of the Eurozone. In a recent sale of Spanish government bonds, Spain had to pay more than double what it would have paid just a month ago. While the sale of bonds demonstrates that Spain could still raise billions from investors, the cost it had to pay to do so is clearly unsustainable. Most analysts estimate that Spain will recquire over 50 billion USD in additional financing to provide capital to its trouble banks. Spain is expected to formally reach out to the EU for assistance.

What is perhaps most pronounced about the situation in Spain, is the multilateral nature by which decision-makers are seeking to address the issue. The world order has shifted substantially since the end of WWII. The new faultlines of security and economic policy are within multilateral foundations of supranational regional organizations. Most of the major decisions in the coming decade will be made in this way. The fact that so many of the pressing issues are now resolved by regional organizations is another key indication of the power and influence they wield in modern global affairs.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Mali: ECOWAS Strips Former Junta Leader of “Head of State” Status

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

The former junta leader that removed the out-going president of Mali before his term was set to expire in just a few weeks is no longer recognized by ECOWAS as a former “Head of State”. The agreement to recognize the junta leader was done in order to pave the way for a quick return to civilian governance. However, shortly after the parliamentary speaker assumed the presidency, military guards aided an attack on him at the presidential palace and refused to prevent protestors from occupying the usually heavily guarded residence. After the incident the regional body promised to investigate and punish all those that were responsible for the attack on the interim-President and parliamentary speaker. As it appears that investigation has led to reversal of the fortunes of the former junta leader. Those who speculated that the military in Mali had any leverage over ECOWAS to prevent the return of constitutional order, or to block a multilateral ECOWAS force from helping to retake the north of the country are mistaken.

The regional body utilizes methods of “sticks” and “carrots” in order to coerce or enties key domestic stakeholders to comply with their decisions. Once this occurs the domestic parties usually do not have many real options at their disposal. They can either benefit from cooperating or can face the consequences of failing to comply. As it appears, the former junta leader in Mali tried to do both. He stepped down and recieved the status as a “former head of state” a position that grants a $9,000 USD monthly salary. After he handed power to the civilian authorities, he then through the military refused to protect the new civilian leader and an help orchestrate an attack on his residence conducted by plain-cloths civilians.

An ECOWAS force on the ground in Mali is imminent. Likely France and potentially a few other western countries will provide further assistance once a UN resolution is passed. Once this happens, military leaders in Mali will have lost most of their bargaining power, if not already. Further rebels to the north who refuse to comply with regional mediators will also come under threat of military action. They are likely to be repelled from key central cities and towns shortly after the mulitalateral intervention. They also retreat to neighboring countries or sparsely populated regions of Mali.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Threat of ECOWAS Military Action Brings Mali Rebels to the Table

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

In armed rebellion negotiation only occurs when the rebels feel as though their security is in jeopardy and that they can perhaps secure themselves through dialogue. Given the ease at which the two major rebel groups in Mali were able to capture the North after the military junta took power in Bamako there is no reason to believe they were at all threatened or that their security was placed in jeopardy by Mali’s military. In fact, the military junta leader in Bamako sought to hold talks with the rebels but was ignored completely.

As the Economic Community of West African States (ECOWAS) intervened pledging to boost Mali’s military efforts the rebels have reevaluated their initial decision not to negotiate. Those who believe that ECOWAS military forces are not up to the task of routing the two rebel groups in northern Mali need to take a closer look at the rebels themselves who certainly disagree. If the ECOWAS threat was not significant then both groups would have ignored them the same way they did the military junta leader in Mali. However both groups have not ignored ECOWAS. Instead they have sent delegates to neighboring Burkina Faso to hold negotiations with President Blaise Compaoré, the official ECOWAS mediator in the crisis. Perhaps even more significant, one of the groups have dropped their calls for an independent state a clear sign that they are heeding the ECOWAS stance that the territorial integrity of Mali is non-negotiable.

I was recently contacted by a high-ranking Western diplomat who questioned the capacity of ECOWAS to follow-through on their threat to conduct military operations to restore the territorial integrity of Mali. Anyone with this view has only to look at the response of rebel leaders themselves. First look at the way both rebel groups responded to the military junta in Bamako when they completely ignored the military leader who briefly took over the government. Then look at the way they are now sending entire delegations to the capital of Burkina Faso to negotiate with the ECOWAS mediator after the block pledged to send thousands of troops. Both groups are threatened and they know that if they do not change course their days are numbered. As I said to the Western official who contacted me, it is not advisable to underestimate the capacity of the sophisticated multilateral instruments in place in the African region. When put into action, they are yet to fail to yield positive results. The impact of multilateral action throughout the world is the topic of my new book The Power of Interdependence.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

ANALYSIS: The Power of Interdependence and the Euro Debt Crisis

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

The Greek election this past weekend underscores key elements of the emerging global order that differs substantially from the system that was created after WWII. Many in Europe and around the world were closely watching an election this past weekend in a country of just around 10 million. The situation in Greece impacts institutions and people well beyond the borders of this relatively small country. Europe and certainly the entire world has become interdependent and thus highly integrated with each other to the point that nothing really happens in isolation. Given this situation do the Greek people really have a choice as far as policy moving forward? What power an influence do those that are impacted by the situation in Greece hold? How do those that are closely tied with Greece affect their desired policies in the domestic affairs of that country? The answer to all these questions and many others are the focus of my new book, The Power of Interdependence with Palgrave Macmillan Press.

Everything from the “Arab Spring” discussed in a previous article, to the Euro Debt crisis I wrote about in a recent piece demonstrates how what happens in one country can impact the entire region and possibly the world. These prominent events demonstrates the condition of interdependence that exists in our world today. The level of interdependence today far exceeds what existed after WWII when the current global system was formed. Since the conditions have changed over the last 60 years, the institutions have also changed and evolved. Today all major regions of the world have at least one regional organization that was established to address interdependence among members of a region. These organizations have become borderless in many areas where visas are no longer required for nationals and goods and services flow freely.

What has not been done in global affairs and international relations is to measure the impact these new interdependent arrangements have on the countries and their people that are party to them. The Power of Interdependence is a comprehensive study that looks into this issue and seeks to provide answers to the pressing questions and issues that are currently in our world today. The Power of Interdependence lays out a formula to measure the impact of interdependance within a region or an international system and thus predict the outcome of events such as the Greek election or the intervention in Mali I discussed in a piece recently. For decision-makers and policy-makers this is very beneficial becuase rather that sitting, biting your nails, and watching the news, you can actually take simple steps to analyze and acurately predict the outcome of a given situation even better than many of the supposed experts and correspondents that dominate mainstream print and televised media.

In a situation such as Greece, it is highly unlikely that decision-makers will be able to deviate from a policy framework that is not supported by the majority of other countries that are also impacted by these decisions especially those within the region. They serve as a constituency that did not necessarily vote in the election, but are still most likely to win every vote and major decision depending on the issue and how closely dependent the countries are to one another in that area. This variable is too often overlooked, which is why so many supposed experts and mainstream media outlets this weekend wasted so much time over-hyping the vote and pandering over the election outcome in Greece, and not the real issues which is the capacity to address the core problems. In any major issue ask yourself, who else outside this country is directly impacted by this? How are they linked to the country in focus? What is the level of interdependence between them? Once you answer these questions, you will know the outcome long before it takes place, and can turn of the ill-informed mainstream media correpondents, pundits, and analysts, and focus on what you need to do to address the real issues that will remain once the actually predictable outcome occurs.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

What does the Euro Debt Crisis Mean for Africa?

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Reports of a possibly uncontrollable tidal wave of defaults in the Euro Zone of countries, first with Greece, then Spain, and finally Italy (possibly Portugal) has sent ripples throughout global financial markets. Exchanges across Europe, North America and Asia have seen a great deal of volatility depending on the outlook of debt rescues underway in Europe. As Greece is set to vote this Sunday between a far-left party that pledges to cancel the multilateral Euro debt agreement or a right of center party that pledges to uphold it despite its unpopularity in Greece. There is a very real possibility that Greece will exit the Euro-zone since there is not much room to renegotiate the unpopular austerity measures that came with the bailout package Greece received. If that were to happen, Greece will soon default on its sovereign debt, further Greek businesses that took loans in the Euro would also default due to the fact that they would be forced to repay double what they borrowed due to currency devaluation. Inflation will also climb to over 30% in the net-importing country.

A default in Greece will trigger great concerns that Spain and Italy will also default. Similar to the way the collapse of the Thai Baht in 1997 triggered the Asian Financial Crisis that rippled across Asia in a contagion and subsequently was felt throughout global financial markets. A collapse in Greece will make banks, creditors, and financial institutions that hold European debt to become concerned of the prospect of a default by another Euro-zone country, notably Spain, Portugal, and Italy. If Euro-zone leaders are not able to provide suitable lines of credit to those countries the cost of credit in those countries will skyrocket, making growth and fiscal recovery virtually impossible. Spanish banks have already been pledged 125 Billion by European countries, the need there will be much greater than this if Greece defaults as the government will also need additional lines of credit. In a self-fulfilling prophesy, both Spain and Italy, and likely Portugal will also default on their sovereign debt. In the case of Italy, sovereign debt totals a massive sum of over 1 trillion USD. In the meantime, given that many banks in Europe hold sovereign debt from these same European governments, average depositors in Europe will make a run on banks. Liquid capital in many financial institutions across Europe will dry-up quickly, banks could easily fail.

While much has been said on how this potential collapse in Europe will impact North America or Asia, not much has been written on what impact this will have on Africa. The country in Africa that is most exposed to European financial woes is South Africa. during the 2008 Global Financial Crisis (GFC) South Africa actually experienced negative growth. Trouble in Europe will undoubtedly spell immediate trouble in South Africa. Other countries directly linked to South Africa through trade and investment will also feel the impact of the crisis. The rest of Africa has limited exposure to the global financial system thus the impact of crisis in Europe will not be as severe. However, commodity prices on raw materials will plummet as global demand for such goods declines. This will inevitably have an adverse impact on many African economies that rely heavily on the export of these unprocessed commodities.

African governments that have been borrowing will find it difficult to access credit and a wave of austerity measures will hit even some of the basic rudimentary social services available in Africa. Controversial petroleum subsides in Nigeria will be scrapped, in other countries other programs in healthcare and education are also likely to suffer. The degree of cuts in Africa will depend on how long it takes European decision-makers to wrestle the debt crisis. Talks of a collective Euro-bond have increased as a way of issuing sovereign debt backed by all members. There is also the possibility that the IMF could step in an offer emergency credit to the block if global leaders can agree.

The rapid growth, now seen in many countries in Africa will slow, and some countries in Southern Africa, particularly South Africa could see economic declines as was the case in 2008. While the effects of a European crisis will be greater in Africa than the 2008 GFC, with the exception of South Africa the impact will not be as great in the region as other regions that are more exposed to default risk in European financial markets. Still, African leaders cannot afford to ignore the developments of Greece this weekend. If indeed Greece does default, governments in Africa will need to immediately begin to reduce spending and look for ways to diversify trading partners within the region and with other nations in the developing world.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga, Ph.D.
Managing Director

Kuranga & Associates Global Consultancy
Office: 212.363.0936
New York, NY
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

#OccupyNigeria: What Now?

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Attempts to fully deregulate the subsidized petroleum industry failed in January as a result of mass nationwide protests, with demonstrations, marchers, and strikes under the hash tag #OccupyNigeria, which begun over the hike in the price of fuel and the removal of the state subsidy at the beginning of January 2012. Protesters took issue with the subsidy removal that more than doubled the price of petroleum and caused the cost of basic goods to skyrocket, yet was promoted as a necessary austerity measure for the country. The government produced estimates that 8 billion USD would be saved in the budget by removing the subsidy. All the while high ranking state officials continued their exorbitant expenditures, including the presidency, members of the national assembly, and cabinet. The expenditures were for salaries, allowances, and other budgeted items that were clearly not in the spirit of saving given that the state indicated in needed to save and cut costs. The prevailing view was that the president was out of touch and did not care about the plight of average Nigerians.

To defend the programme the administration released statements that the 8 billion would be used to invest in health care, infrastructure, education, improving the downstream refining capacity to reduce oil imports that would all help ordinary Nigerians. Members of the cabinet came forward to defend the administration and support the programme. The minister of Finance also reiterated the administrations claims that the 8 billion would be used to improve the standard of living for average Nigerians in various programmes but offered no specifics or itemized figures or estimates as to where the money would go. No official provided any detailed account as to precisely where the money saved from ending the subsidy would go. Protesters were not convinced by these vague statements, neither were they moved by the administrations attempts to pacify criticism by announcing a slight reduction in salaries of those in the executive. Strikes and protests continued until the government agreed to restore the subsidy at a higher level of NGN 97 per litre. The standoff undermined the administration and caused many in the cabinet to lose credibility including the President, the information minister, the petroleum minister, and the minister of finance.

Decades of corruption in government and a lack of transparency was a major concern of protestors who used the Occupy name to identify with other protests movements throughout the world. The administration did not understand the distrust that people understandably have for government in Nigeria. The fact that they tried to sell the programme without providing any specific account, even from the ministry of finance, as to where the money was going was a tactic that was rejected by the masses. Going forward the lack of transparency surrounding the subsidy removal is not likely to work in the future. Nigeria is no stranger to nationwide strikes and protests. Long before the Occupy movements all over the world and the mass protests that occurred in Tunisia and Egypt, Nigerians have held nationwide strikes that have brought the country to a standstill and forced the government to back down on removing the oil subsidy. The administration has stated that it intends to phase-out the subsidy and has not given up completely on deregulating petroleum prices. If the administration moves again to completely remove the subsidy on petroleum it is likely that more civil action will take place. Labour remains adamantly against any increases in fuel and the masses, which started the protest without ever being prompted by labour unions appear to be in full support.

Since the protests, an investigation by the legislature has unveiled a 7 billion USD fraud in the subsidy program between 2009-2011, calling the program “fraught with endemic corruption and entrenched inefficiency.” Implicated are bureaucrats in the Nigerian National Petroleum Corporation (NNPC) and ministry of petroleum resources. The still ongoing problems of mismanagement in the NNPC regarding the subsidy program has led to a long awaited probe by the Economic and Financial Crimes Commission (EFCC) into the NNPC. A number of groups behind the #OccupyNigeria protests have indicated that if those responsible are not brought to book they will once again resume protests. The issue with the subsidy program is the single greatest issue that has undermined the administration of President Goodluck Jonathan and many of his key reformers in his cabinet. If it cannot be resolved in the coming months in a way that pacifies the growing outrage over the outright theft by business and government officials associated with the subsidy program, the administration will not be able to regain the credibility it lost in the January #OccupyNigeria protests. What is clear is that if not for the protests, the legislature and the Federal Executive Council (FEC) would not have taken the rampant corruption seriously and would not have taken steps to redress it. The threat and perhaps execution of further civic action may indeed be necessary to ensure a higher standard of governance including greater accountability and transparency.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/          http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

Is the PDP Era Coming to an End?

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates Global Consultancy, a political and economic risk management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

In Nigeria, the ruling party, the Peoples Democratic Party (PDP) remains in control of the apparatus of the state. They are expected to continue an agenda of deregulation and privatization. Politically there are few challenges to the PDP’s hold on power over the next few years. However the gains made by the opposition in the 2011 election should still be considered troubling. If they are able to consolidate these gains in yet another electoral cycle they may be able to unseat the PDP from power for the first time since 1999. While the national flag bearer and presidential candidate for the main opposition coalition the Action Congress of Nigeria (ACN), Mallam Nuhu Ribadu, did not fear well in the 2011 presidential election their prospects for 2015 are much brighter. It is expected that the popular ACN Governor of Lagos State, Babatunde Fashola, will make a run for the presidency. Lagos is the largest city and the most populous state in Nigera. In addition to Fashola, former labour union leader and current ACN Governor of Edo State, Adams Oshiomhole, may also run or perhaps team with Fashola to defeat the PDP in 2015.

Fashola is credited with revitalizing Lagos State with infrastructure, security, investment, sanitation facilities, and urban renewal projects not seen throughout much of the country. He is one the few political bright spots, running a state that is seen largely as accountable and progressive with lower levels of corruption than in much of the country. Oshiomhole won his first term as governor after contesting his initial loss due to rigging by the ruling party in his state. In a judicial review of the election he was declared winner and hailed nationally as an opposition leader ready to stand firm in the face of corruption from the ruling party. Oshiomhole already had national recognition as head of the umbrella National Labour Congress (NLC) of Nigeria. As head, he led several successful national strikes to prevent hikes in the price of fuel that crippled the economy and brought the country to a standstill forcing political leaders to cave. A union of these two nationally recognized and widely popular opposition leaders will be the biggest test of the strength and ability of the ruling party to hold on to the presidency.

With Fashola currently in is second and final term as governor of Lagos it is very possible, if not likely that this faceoff between the ruling party and the most popular leaders in the opposition is on the horizon. While it is unlikely that the PDP will be dislodged from power at the local levels or within the national assembly as a whole, it is a strong possibility that the party will lose the presidency in 2015. Currently there are no PDP leaders with the same stature and popularity as these two main opposition governors. It is not clear if President Jonathan will run again. With the debate over zoning in the ruling party that surrounded his selection as the party’s candidate in 2011, based on an unwritten agreement among party leaders was that the presidency would rotate between the north and the south. With the selection of Jonathan, a former governor from the south, sources within the party reveal that it was decided that a northern candidate will be selected in 2015 to contest the presidency for the ruling party. Internal fighting within the party and leaders jostling to become the chosen candidate of the ruling party, may further work to undermine whoever is eventually selected. Given this reality, it is not advisable to assume that PDP will continue to rule in Nigeria beyond 2015. Depending on the performance of the current administration, the long era of PDP rule in Nigeria may be in its final days.

Kuranga and Associates Global Consultancy is a political and economic risk management firm with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2012 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Global Consultancy
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com/            http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga