Econ. 375, First Exam, Fall 1998

Copyright 1998 Times Mirror Company

Los Angeles Times

September 8, 1998, Tuesday, Home Edition

SECTION: Part A; Page 1; Foreign Desk

HEADLINE: COLUMN ONE; THE PANGS OF AFRICA'S NEW BIRTH; LESS THAN SIX MONTHS AFTER PRESIDENT CLINTON TOUTED A 'RENAISSANCE' ON THE CONTINENT, WIDESPREAD FIGHTING HAS MANY DESPAIRING ABOUT THE FUTURE. EVEN OPTIMISTS FEAR THE EFFECTS OF A TARNISHED IMAGE.

BYLINE: DEAN E. MURPHY, TIMES STAFF WRITER

DATELINE: NAIROBI, Kenya

BODY: Africans have been dying this summer on the battlefields of Congo. They have been dying at the border between Ethiopia and Eritrea, in South Africa's KwaZulu-Natal province and in simmering conflicts in Angola, Burundi, Guinea-Bissau, Rwanda, Sierra Leone, Somalia, Sudan and Uganda.

It took South African President Nelson Mandela, the continent's premier statesman, two weeks just to get Africa's leaders to sit at the same table to talk peace in Congo. In the meantime, neighboring countries took sides--and injected guns and soldiers--in the brutal civil war there.

Less than six months after President Clinton's historic tour of Africa touting "the beginning of a new African renaissance," many Africans worry that their continent's vaunted rebirth may be stillborn, or at the least, precariously premature.

These Africans now speak of an age of lost--rather than new--opportunities. Others, still upbeat about Africa's prospects, fear that the litany of recent setbacks is nonetheless exacting a costly public relations toll that could slow the momentum for change. The bad news, they complain, comes just as the world appeared ready to give Africa the benefit of the doubt for the first time since the continent's wave of independence in the 1960s.

The promise of the new era was born in this decade, which has been marked by unprecedented progress toward democracy and economic reform. But now, age-old scourges--wars and bloody political divisions, economic crisis and disease--are once again dominating discourse from the Red Sea to the Cape of Good Hope.

"The children of Africa, from north to south, from east to west and at the very center of our continent, continue to be consumed by death dealt out by those who have proclaimed a sentence of death on dialogue and reason," Thabo Mbeki, South Africa's deputy president, scolded in a speech last month.

"The call for Africa's renewal, for an African renaissance, is a call to rebellion," Mbeki said. "We must rebel against the tyrants and the dictators, those who seek to corrupt our societies and steal the wealth that belongs to the people."

The consternation and hand-wringing extends to policymakers at the U.S. State Department. U.S. officials say Washington remains bullish on Africa, but the mood is noticeably subdued as the notion of a bona fide renaissance--crucial to the remaking of American perceptions of Africa--becomes a harder sell from Capitol Hill to Wall Street.

"There is this debate outside Africa about Afro-pessimism and Afro-optimism," said Ugandan scholar Mahmood Mamdani, director of the Center for African Studies at the University of Cape Town in South Africa. "Once on the continent, you can't afford to be either. In the worst situation, you have to see a way out, and in the best situation, you have to be aware of the dark spots."

In a stunning indication of how the situation has worsened, Mandela has found it easier to encourage the new military dictator of Nigeria, which until a few months ago was a pariah state, to commit to democratic, economic and social reforms than to sway his democratically elected neighbors in Namibia and Zimbabwe to refrain from warmongering in Congo.

When the South African president and U.N. Secretary-General Kofi Annan finally convened peace talks on Congo last week, Namibian President Sam Nujoma--whose troops are defending the government of Congolese President Laurent Kabila--didn't even show up. At the end of the breakfast meeting, it was Mandela who capitulated, suddenly endorsing the military intervention in support of Kabila.

"There was some confusion before," Mandela told reporters.

The regional talks resumed over the weekend without Mandela, and there were reports Monday that a tentative peace deal had been reached.

Embassy Blasts' Effect

Even last month's terrorist attacks at the U.S. embassies here and in neighboring Tanzania, in which Africans were innocent bystanders, fueled an image of a continent once again not in control of its destiny.

"The consequence of the bombings is that Africa could again become the battleground for ideological conflicts that originate outside the continent and where the majority of victims are in fact Africans," said Salih Booker, chief Africa specialist at the Washington-based Council on Foreign Relations. "It heightens the negative aspects of current perceptions of Africa."

Even with success stories in places like Uganda, AIDS is exacting a toll on the continent that health officials predict will grow far worse in the next few years; already, according to the United Nations, one in four adults in some parts of Africa is infected with the virus that causes the deadly disease.

Meanwhile, the continent's much-heralded economic and political turnaround, which followed the end of the Cold War in the early 1990s, is beginning to sputter in many countries. There are still shining lights in Africa--Mozambique, for example, after years of civil war now ranks No. 1 on an African "optimism index" compiled by the World Economic Forum--but the continent taken as a whole is struggling to maintain the momentum, economists say.

Estimated economic growth across Africa last year was 3.25%, well below the 4.5% rate posted the year before, according to the International Monetary Fund. Moreover, the World Bank warns, the statistics should be viewed in the sobering context of an annual population growth rate of nearly 3% and the daunting task ahead: About 40% of Africans, the bank says, live on less than $ 1 a day; without sustained economic growth of at least 6%, it predicts, poverty will remain intractable.

Old-Style Leadership

And in scenes reminiscent of days gone by, some old-style leaders--from Nujoma in Namibia to Daniel Arap Moi in Kenya to Robert Mugabe in Zimbabwe--are clinging to their offices despite much-talked-about democratic reforms and celebrated examples of democratic succession elsewhere. Most notably, former Botswanan President Ketumile Masire stepped down in April after 18 years, and Mandela has announced that he will retire next year.

In another flash from the past, opposition protesters in the mountain kingdom of Lesotho last month took Prime Minister Pakalitha Mosisili hostage in Parliament before they were dispersed by police with rubber bullets and water cannons. It appears that the ruling party, unwilling to give up power, may have tampered with recent election results after winning only a fraction of the vote. In another incident, last week outside the Royal Palace, one person was killed and more than a dozen wounded when gunmen opened fire on several hundred protesters.

"The major weakness of the African renaissance is that democracy does not figure too high up on the list for most African leaders," said John Githongo of the African Strategic Research Institute here in the Kenyan capital. "The biggest problem Africans face is, a majority of our populations still live in fear--not of external powers, but of their own governments."

The creeping sense of pessimism couldn't have come at a worse time for Africa's economic rebirth, which politicians and independent analysts agree is essential for the continent to make a clean break with the past.

With the world economy in turmoil because of crises in Asia, Latin America and Russia, Africa was poised to benefit from the phalanx of international investors scouring the globe for safer emerging markets. According to the World Bank, sub-Saharan Africa receives just $ 12 billion of the $ 300 billion in annual foreign private capital flows to the developing world, and less than a quarter of that comes in the form of direct investment.

During his visit in March, Clinton talked up new trade partnerships with the continent, and an entourage of U.S. Commerce Department officials and businesspeople traced his steps--spinning a web of hope and optimism wherever they ventured.

"Too often in my country, there is an unfair gap between the actual opportunities and problems and the perceived opportunities and problems in many African nations, to the detriment of investment and trade for those African nations," U.S. Treasury Secretary Robert E. Rubin said during a visit here in July. "This gap is a consequence of not recognizing the differences among nations, and the tendency to see all nations through the prism created by the most troubled."

For example, Luanda, the Angolan capital, and Kinshasa, the Congolese capital, may be far from Johannesburg, South Africa, on the map, but in the minds of many Western businesspeople, they might as well be nearby suburbs.

One business organization in Johannesburg recently received an inquiry from a U.S. investor requesting information about Nigeria, a country nearly as distant from Johannesburg as New York is from Los Angeles. Such ignorance of geography, say officials in South Africa, is not uncommon--but more important, they say, it reflects a general mind-set among many foreign investors.

U.S. Investors' Myopia

Luanne Grant, executive director of the American Chamber of Commerce in South Africa, said U.S. investors in particular tend to view Africa as a continent, not as individual countries. About 90% of chamber members use South Africa mainly as a base for operations elsewhere in Africa, meaning events in places such as Angola and Congo can be crucial to their investment decisions, she said.

"People can get around such things as bad roads by making other arrangements," Grant said. "But it is very difficult to make other arrangements to establish political stability."

Officials say there is no evidence of a mass exodus of investment from Africa, but some government and business leaders here and abroad admit to holding their breath.

"It is too early to really tell what will happen," a U.S. official said. "We all have our fingers crossed."

The stakes in the still-hoped-for renaissance are huge, particularly in South Africa, where Mandela's government has spent much of the past four years trying to change negative perceptions of his country and the continent as a whole.

"The call for an African renaissance is really a claim to political leadership on the part of South Africa," said Mamdani, the Ugandan scholar. "South Africa claims to be the dynamic impulse in terms of African development but also claims to be more than that. . . . It is making a claim to define new horizons for Africa."

Democracy, foreign investment and export growth have become the mainstays of South Africa's vision for the continent, with democratic South Africa and a peaceful and oil-rich Angola serving as cornerstones in the south, and a stable and mineral-rich Congo anchoring the center.

But with the peace accord in Angola in shambles, rebellion afoot in Congo and crime and political violence plaguing South Africa, the foundations of "Africa's second independence"--as the Ford Foundation characterized the encouraging developments in the continent--have been profoundly shaken.

"You cannot have growth in Africa if people are killing one another; you cannot have growth in Africa if societies are crumbling; you cannot have growth in Africa if people are living frightened, fragile lives," James D. Wolfensohn, president of the World Bank, said in a speech to African leaders earlier this year in Ethiopia. "What we have got to do is stop the fighting. And when the fighting stops, we must replace it with economic development, with opportunity, with hope, so that it does not start again."

Copyright 1998 Times Mirror Company

Los Angeles Times

View Related Topics

September 16, 1998, Wednesday, Home Edition

SECTION: Part A; Page 4; Foreign Desk

HEADLINE: COMMERCE RISES FROM ASHES IN SOMALIA; AFRICA: LAISSEZ FAIRE HAS REPLACED RIGID SOCIALISM IN RESURGENT NORTHWEST REGION. STILL, CRITICS CITE CORRUPTION AND LACK OF DEMOCRACY.

BYLINE: ANN M. SIMMONS, TIMES STAFF WRITER

DATELINE: BERBERA, Somalia

BODY: It was not so long ago that Somali entrepreneurs needing permits to conduct business had to travel hundreds of miles to the capital, Mogadishu, and then spend at least a month begging and bribing government officials to procure the proper stamps and signatures.

Even making a business call sometimes required crossing into another country, as Somalia's state-controlled utility left broad swaths of territory without service.

This enterprise-stifling socialist system collapsed in 1991, leading to warfare among rival clans, the destruction of an already deteriorating infrastructure and a vast governmental void. But in an ironic twist, the political disorder has also been good for business.

Commerce is flourishing in parts of Somalia, where an extreme dose of laissez faire has replaced the tight controls on business imposed during the regime of dictator Mohamed Siad Barre. Even the war-torn south, in particular Mogadishu, has benefited, but the change is most notable here in the country's northwest region.

Since the region hurriedly declared itself the independent Republic of Somaliland after Barre's fall, its de facto government has let private enterprise run largely undisturbed. The conditions have drawn many Somaliland expatriates back from all corners of the globe to take a lead in rebuilding their homeland.

Ali Omar Gulaid built the first kindergarten in Hargeysa, the Somaliland capital, in 1997 as a way of convincing his wife and two children to return to the region from their adopted home in Los Angeles. Gulaid, 42, came home in 1994 after selling his Beverly Hills janitorial and building renovation company.

"It's up to people like me to help build my country," said Gulaid, who studied process engineering at the University of Houston in the 1980s and now owns a restaurant, three guest house villas, car and video rental services, and a public relations firm. "It's easier to do business today--more freedom. I don't have a bank in town , I don't have a recognized government. I pay a little tax, but I can do what I want."

The news is not all good. The international community does not recognize Somaliland's independence. Critics say the region's leaders are corrupt and undemocratic. And a recent ban on Somali livestock by Saudi Arabia--once the country's main livestock trade partner--is threatening the region's prosperity.

What's more, the lingering stigma of a failed 1992 U.N. humanitarian mission in Somalia has left few countries willing to deal with Africa's easternmost state.

"We are not Somalia," Somaliland President Mohammed Ibrahim Egal said in a recent interview. But "we are held to blame for what happens in Somalia. We are still suffering this image problem."

Foreign donors and U.N. agencies contribute about $ 60 million annually to Somalia, a fraction of what was spent during the U.N. operation, according to Dominik Langenbacher of the U.N. Development Program.

No Longer a Crisis

"Somalia is no longer in a state of humanitarian crisis, which means the flow of humanitarian funds is drying up, and rightly so," Langenbacher said. "However, due to the political circumstances and the negative image that Somalia has, that has created a fatigue among donors. No one is willing to invest in longer-term development; there is no return. So the private sector is crucial."

Somaliland's new breed of entrepreneurs knows this and has tried to keep the country's peace by bolstering its economy.

Ignoring teasing from friends who said he would probably become a warlord, Moustapha Osman returned to Somaliland in 1995 with a degree in political economy from Reading and Oxford universities in England to run his family's imported food business.

"It's a new country," said Osman, 26. "There are a lot of opportunities to do a lot of different things without someone saying you can't."

His company imports and wholesales Brazilian sugar, Italian pasta, French wheat flour and Malaysian vegetable oil and ships the products to southern Somalia and parts of Ethiopia. About a dozen jobs have been created since Osman's return.

Every little bit counts in a region with close to 100% unemployment and a history of being neglected.

During the Barre era, the northwest was in shambles. Of the few roads that were paved, most had not been repaired since the 1930s, longtime residents of Hargeysa say. Only a handful of citizens had access to potable water and electricity. And the spotty service provided by the lone telephone exchange that served the whole of Somalia forced businesspeople here to travel to neighboring Djibouti or Ethiopia just to make a call, recalls businessman Mohammed Hawadle Madar.

Though much remains to be done, Somaliland has made remarkable progress in rehabilitating its infrastructure. More than half the houses in this town now have access to piped water; private vendors supply the rest of the homes. The private sector also provides electricity and telephone service.

The private ventures have been profitable.

Abdulkader Hasni Elmi returned from Kuwait a few years ago to build the 24-room Maan-Soor Hotel, which is considered to offer Hargeysa's most luxurious guest accommodations at $ 40 a night.

He recalls with irritation his efforts to open a guest house in Mogadishu when Somalia had a central government. His license was denied, he said, because the venture was not part of a business cooperative that had Barre loyalists as its partners. Elmi then tried to make his living in the fishing industry; he won a license to catch fish but not to sell them.

Today, says Elmi: "It's up to you to run as fast as possible. Government has nothing to do with any kind of business. It's free now, and we want to keep it that way."

The Somaliland government has imposed only minimal taxes and light import duties and has even given some business owners a two-year tax break to help them get on their feet.

Commerce is so healthy that some are even willing to give up more of the profits. "We are ready to pay more taxes," Madar said, "so that the government can use the money to keep security."

Peace Among Clans

Indeed, the business boom is likely to prevail largely because Somaliland has maintained peace among rival clans. Former militias integrated into the region's army and police force are given monthly pay and food rations. Every clan is represented in the region's 82-member Senate and 32-member parliament, and while tribal-based political favors still exist, they are far less frequent than under Barre.

"No one expected us to be this far today," said Abdalla Ali Ahmed, the mayor of Berbera, an alumnus of UC Berkeley and a former partner in a gas station venture in Seattle. "Everybody expected us to fall back into anarchy."

The security and stability of the land is evident on the dusty streets of Berbera, where money-changers sit with bundles of Somaliland shillings, tied with rubber bands in stacks worth $ 700. None of the vendors has a guard.

"You don't need one," said money-changer Abdul Hakim, 29. "There is good peace here now. Before the war, there were murderers on the streets, bandits."

But the cash flow into Somaliland could be put into serious jeopardy if Saudi Arabia upholds its livestock export ban--also imposed on Ethiopia, Eritrea, Sudan and Kenya--over fears that an outbreak of Rift Valley fever in Kenya could spread.

Somaliland, which reportedly has not detected any cases of the fever, used to export about 3 million livestock to Saudi Arabia annually, generating about $ 12 million from the selling price of the beasts, export duties and connected commerce activities at the port.

"Our resources are beginning to dry up," said President Egal, predicting that anarchy will return if funding for the militias disappears. "People are going to be hungry. These young boys will go back to the roads with their guns. They will begin fighting among themselves. There will be a retrogression, and something similar to the situation in the south will come back here."

Political opponents say that if the country falls back into mayhem, it will be the fault of Egal's own corruption, mismanagement and dictatorial tendencies.

But many in Somaliland's upstart business community are confident this will never happen.

"I think that if we can build on our strength--that is, basically, peace--we can achieve a lot," said Osman, the food importer. "I think a lot of people are sick of fighting. . . . People just want to get on with their lives and make the most of it."