FAO Quotables

"But being right, even morally right, isn't everything. It is also important to be competent, to be consistent, and to be knowledgeable. It's important for your soldiers and diplomats to speak the language of the people you want to influence. It's important to understand the ethnic and tribal divisions of the place you hope to assist."
-Anne Applebaum

Friday, August 6, 2010

Article of the Week-Barron's Africa the Final Frontier

This is a HUGE article for Africa but I say that with MAJOR reservations.  I begin by saying before you invest a dollar there that you first read "Dead Aid" by Dambisa Moyo.  In her book she highlights the GROSS misuse of aid in Africa (almost an across the board misuse by the countries there on the continent) which leads me to think that if they can't manage "free money" why should I trust them with my money as an investment?!  Of course this question easily serves as a lead-in for one of the points of her book which is that it's easy for corrupt regimes to misue aid because there's so little oversight or repercussions, but you can only ripoff an investor once (hopefully).
   A couple of specific issues I had with the article:

1.  "The image of lawlessness, corruption, unstable governments, an inadequate infrastructure, uneducated or untrained people and an unwelcoming government attitude toward business serve as major deterrents.  That depiction is increasely mistaken" 

This is true for a select few countries (just look where our major defense contractors are investing), but by and large this still holds true.

2.  "People... are amazed to learn [that Africa] has transformed itself into one of the fastest-growing regions in the world, where banks haven't needed bailing out, no large companies have folded, with no accounting scandals and where the biggest problem businessman have is getting capital to finance growth."

Hahahahahah for so many of those naive 'jingoist' statements. 

If you don't have reliable stable banks (as we know them here) to begin with-of course they don't need bailing out. 

If you don't have large companies to begin with-of course they can't fold.

There may not have been any accounting scandals (an assertion I find hard to believe)- just civil wars and political scandals and coups.

3.  The article trumpets Nigeria as the next Brazil, which it has the 'opportunity' to become to be sure, HOWEVER there is still plenty of corruption to overcome before that happens.

4.  The author's assertion that China is "helping to raise income levels on the continent" is an very oversimplified view of China's involvement in Africa!  Then the author continues to laud China's efforts at building infrastructure on the continent which is well and good, but completely ignores the detrimental effects of building infrastructure without also building the capacity to sustain and maintain that infrastructure!  (See Howard French's The Next Empire from the May issue of The Atlantic Monthly for more on China in Africa)

5.  "The consumer growth potential is huge...While many are very poor, incomes generally are rising, thanks to globalization and China's hefty appetite from commodities."

Are you serious?!  'Very poor' is a gross understatement and is also very lazy!  Please tell us Vito 'how poor' they are because most Americans can't even begin to fathom just how poor they are. 

Furthermore, what does 'generally are rising' mean?!  More sloppy journalism!  How long have they been rising?  In what countries or regions? From what $365 a year to $367?  Give us a scale to work with! 

Finally, it would be more accurate to say 'thanks to China's pillaging of their natural resources.'

To get a sense on China's involvement in Africa, go to Professor Brautigam's thoughtful blog:

    Now none  of this is to say that there isn't infinite potential for Africa, but our financial investment there needs to be done thoughtfully and in a manner that is globally responsible.
     Most of these countries are in their infancy and have been taken advantage of for far too long.  The people of Africa deserve to engaged in the process and not merely looked at as pawns in a game of corporate investment chess!

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