Dr. Phil Clark is Reader in Comparative and International Politics at SOAS University of London, where he is also the co-director of the Centre on Conflict, Rights and Justice. His latest book is Distant Justice: The Impact of the International Criminal Court on African Politics (Cambridge University Press, 2018), which is available in paperback through the CUP website.

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The post Why international justice must go local: the ICC in Africa – Phil Clark appeared first on Africa Research Institute.

ON CAPACITY AND LEGACY

Did working on the Ebola response make you more or less optimistic about the future of Sierra Leone?

Working at NERC made me more hopeful for the country. The advent of the virus revealed the worst in some Sierra Leoneans, showing us that there were people who were willing to enrich themselves while their fellow citizens died for lack of resources and to shun others in need. It highlighted our lack of leadership, accountability and social responsibility in some areas. At the same time, it revealed things that I had never before seen in my country. I have never seen people come together in the way they did. I have never seen young people take such control in solving a major problem facing their country. I have never seen the level of convergence to excellence that I saw at NERC, because Ebola did not allow people to take shortcuts.

The fact that predominantly young Sierra Leoneans demonstrated they could work collaboratively to such high standards, and generate their own best practice ideas without everything being handed to them on a plate by some foreign “expert”, gives me a huge amount of hope for the future

When I arrived at the Situation Room, my staff included junior Sierra Leonean civil servants, highly trained and professional Sierra Leonean and British military officers, and staff from the UN and a number of NGOs. The most important of these was the African Governance Initiative, which supported us with several highly capable analysts and advisers at no cost to the government. I partnered up all my Sierra Leonean staff with their more experienced international colleagues and started a training programme in the Situation Room – in the middle of the crisis! This programme developed into the Situation Room Academy.

By the time we closed NERC in January 2016, the Academy had trained – at NERC and in the field – over 1,000 people in data analysis and software tools. We established a Situation Room Mapping Service, which produced maps for everyone – including the UN and British military, who had been making maps for us. We supported a mapping course at Njala University. In the beginning, I had relied on foreign staff to do most of the high-level analysis. By the end, we had only one foreign staff member in the Situation Room. We achieved these things because I was lucky to have a group of highly dedicated and hardworking Sierra Leonean staff who were committed to doing their best, and international colleagues who were committed to passing on their skills as they helped us fight. This was not just at NERC. It happened everywhere in the field. Nurses, doctors, disease surveillance officers, social mobilisers, lab technicians, blood sample collectors and others working with NGOs, learned lessons from their own experiences and demonstrated their ability to match the exacting standards required to fight Ebola.

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Figure 1: The National Ebola Response Centre, 2015

We are grateful to Chatham House, the Royal Institute of International Affairs, for permission to reproduce ‘Figure 1: The National Ebola Response Centre, 2015’ from the Chatham House research paper ‘Sierra Leone’s Response to the Ebola Outbreak: Management Strategies and Key Responder Experience(2017), Emma Ross, Gita Honwana Welch and Philip Angelides’.

The post Omaru Badara Sisay on Ownership, Trust and Decentralisation in responding to Ebola in Sierra Leone appeared first on Africa Research Institute.

Framed as an “emergency” supplier to address an energy crisis in 1994-95, Independent Power Tanzania Ltd (IPTL) did not serve the national grid until 2002. It then became a permanent feature of the energy sector for the next 15 years. In the process, the facility burdened the Tanzania Electric Supply Company (TANESCO) with overpriced, diesel-fuelled power that was not part of the country’s “least cost” strategy, while seriously undermining the development of gas-fuelled power that was. To make matters worse, a second “emergency” project known as Richmond – later Dowans and finally Symbion – failed to address another energy crisis in 2006, and remained idle for two years after its eventual completion, while still collecting capacity charges of US$4m a month. Finally, an escrow account, set up in the central bank to hold monies owed by TANESCO to IPTL while a dispute between the two parties underwent arbitration, was paid to the new “owner” of the facility in suspicious circumstances. This led to further litigation and, in July 2017, the arrest of the principals involved on charges of fraud and criminal conspiracy.

This Briefing Note chronicles how politics and rent-seeking have subverted the development of Tanzania’s power sector during the past quarter of a century and offers tentative estimates regarding the extent of the irreparable damage caused.  

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• South-South cooperation trumps the World Bank
• The Richmond Scandal
• Enter “Escrow”
• The damage to Tanzania
• No way to do business
• Power, politics and profit
• Postscript
• Notes
• Appendix

South-South cooperation trumps the World Bank

The IPTL saga began during the presidency of Ali Hassan Mwinyi (1985-95). In 1992, the Government of Tanzania published a national energy policy [1] favouring the development of power generation using natural gas from the Songo Songo offshore field (see Appendix). Reducing dependence on unreliable hydropower and imported diesel was a key objective of this least cost expansion plan. But while the government engaged in discussions with Canadian company Ocelot to develop the natural gas project (“Songas”), it received an unsolicited proposal from Mechmar Corporation (Malaysia) to finance and build an emergency diesel-fuelled power plant to help mitigate the power-rationing crisis in 1994-95.

Like many other companies, Mechmar rode on the diplomatic coattails of Malaysian Prime Minister Mahathir Mohamed (1981-2003), who spearheaded national investments in utilities, telecoms and real estate across Africa during the 1990s, under the banner of “South–South cooperation”.[2] Despite not being in line with the government’s official least cost power strategy, Mechmar and the government signed a 20-year power purchase agreement (PPA) in May 1995. By then, the power crisis had come and gone. Meanwhile, Songas was to encounter one bureaucratic hurdle after another.

IPTL’s local partner and 30% shareholder, VIP Engineering and Marketing, a Dar es Salaam-based concern owned by Tanzanians of Asian descent, secured official endorsement for the deal. VIP director (and later owner) James Rugemalira fended off strong opposition to IPTL from within the Ministry of Water, Energy and Mineral Resources by playing the South–South card and, crucially, bribing senior officials and politicians.[3] The contract breached the government’s covenant under the World Bank-funded Power VI Project that it would not procure major power generation projects without consent. In July 1997, the Bank – the main financier of Songas[4] – suspended further support until the government dealt with the potential threat IPTL posed to the financial viability of TANESCO.

Among other things, TANESCO accused IPTL’s owners of significantly overpricing the plant and substituting cheaper medium-speed generators for slow-speed generators specified in the PPA.[5] In 1999, the dispute was taken to the International Centre for Settlement of Investment Disputes (ICSID) for arbitration. More than three years later, during which Tanzania endured further shortages of power due to the continued dependence on hydropower, ICSID finally assessed the real cost of IPTL at US$127.2m, compared to the original US$150.7m.[6] Without the tenacity of the permanent secretary at the Ministry of Water, Energy and Mineral Resources, Patrick Rutabanzibwa,[7] Mechmar would also have saddled TANESCO with substantially higher monthly capacity charges. ICSID reduced these from US$4.5m to US$2.6m a month.[8]

From 2002, instead of having a short-term emergency facility in IPTL, Tanzania was shackled for the next 15 years by an overpriced power plant running virtually full-time on imported (and overpriced) diesel fuel. The planned generating capacity of Songas was downsized and its commissioning further delayed to 2004. Even so, commissioning IPTL and Songas within two years of each other added about 40% to existing installed capacity, giving Tanzania considerably more power than it needed.[9] A further round of arbitration initiated by TANESCO on the grounds that IPTL was still overcharging, another emergency power scandal and the contested acquisition of the IPTL plant ensued. The creation of IPTL presaged what was in effect the takeover of energy planning and project development in Tanzania by private interests.

The Richmond Scandal

In 2006, just four years after IPTL began commercial operations, Richmond Development Company won a tender to generate 120 megawatts (MW) of gas-fired electricity for an investment of US$123.2m. This second emergency power supplier resembled IPTL in its excessive cost and the methods its sponsors used to subvert the project evaluation, selection and negotiation process.[10] In November 2006, the government prevented TANESCO from terminating the Richmond PPA for non-performance. By the time the Richmond plant in Ubungo was commissioned in 2007, the power shortage it had been supposed to address had passed as a result of above average rainfall. Tanzania was nevertheless legally committed to buy its power or incur penalties.

A parliamentary select committee set up in 2008 to investigate growing suspicions of malfeasance expressed in the media and the National Assembly revealed that Richmond was a shell company with no power generation experience; that the tender was fixed; and that the delays in commissioning were in large part the result of the company’s inability to finance the procurement and transport of the generators, and technical hitches with their installation. It was further revealed that Richmond had been taken over in late 2006 by Dowans Holdings, an entity based in the United Arab Emirates.[11] After the plant was commissioned, it remained idle for two years but continued to earn its owners capacity charges of about US$4m per month.

These revelations prompted the resignations in February 2008 of Prime Minister Edward Lowassa and Minister of Energy and Minerals Nazir Karamagi. But that was not the end of the fiasco. Dowans took TANESCO to arbitration at the International Chamber of Commerce and, in 2010, was awarded US$65.8m (plus interest) for breach of contract for non-payment of capacity charges. In March 2017, Symbion Power, the current owner of the plant, went to the same arbitration body to claim US$561m from TANESCO for breach of contract, power supplied and not paid for, and other monies owed.

Enter “Escrow”

Part two of the IPTL saga came to be known as “Escrow”. In 2007, TANESCO requested arbitration from ICSID for a second time, again maintaining that IPTL was overcharging for electricity. The claim was based on the failure of VIP to pay up its 30% equity stake in the company.[12] It took the best part of seven years for ICSID to reach a decision. In the meantime, capacity charges payable by TANESCO to IPTL were held in escrow at the Bank of Tanzania, in the so-called Tegeta Escrow Account (TEA). Finally, in February 2014 ICSID upheld TANESCO’s claim and instructed Standard Chartered Hong Kong – the owner of IPTL’s debt since the company had gone into receivership in 2005 – and TANESCO to agree on how much the utility had been overcharged. However, by the time the ruling was made IPTL was under new ownership and more than half of the money held in escrow had already been paid out to IPTL’s new owner, Pan African Power Solutions (PAP), owned by Harbinder Singh Sethi.[13]

Revelations of the extent of foul play involved in the transfer of ownership of IPTL to PAP and the withdrawal of funds held in the TEA filled the Tanzanian media during most of 2014. The scandal was revealed by the Parliamentary Public Accounts Committee (PAC), chaired by opposition MP Zitto Kabwe,[14] and a series of investigative articles in The Citizen newspaper. Kabwe instructed the Prevention and Combating of Corruption Bureau and the Controller and Auditor General’s Office, Tanzania’s supreme auditor, to investigate.[15]

Among other things, the public learned much about Sethi, a Tanzanian-born “tycoon” in his sixties who made his fortune in Kenya as a building contractor during the presidency of Daniel arap Moi (1978-2001).[16] He had acquired Mechmar’s notional 70% shareholding in IPTL[17] through an elaborate scheme that involved a Mechmar director, an intermediary based in the British Virgin Islands, and payment of the astounding sum of US$75m to Rugemalira for his 30% shareholding, using part of the first tranche of the TEA funds released to him.[18] To do this necessitated bribing senior politicians and government officials, regulators, judges, lawyers and bankers. Rugemalira was subsequently shown to have made payments of up to US$1m each to a long list of senior officials, including former Attorney General Andrew Chenge, a key facilitator of IPTL since its inception.[19] In late 2014, despite overwhelming evidence in the public domain of malfeasance on the part of Sethi and Rugemalira, President Jakaya Kikwete (2005–2015) in effect endorsed the looting of the TEA by settling for a few symbolic resignations and minor prosecutions.[20]

The damage to Tanzania

While IPTL has benefitted individuals connected to Mechmar, VIP and PAP, and a few senior Tanzanian politicians and government officials, the direct and indirect costs of the scam have been borne by all power consumers, actual and potential, and Tanzanians at large. Its consequences have included overpriced electricity, avoidable power crises, the subversion of planning for timely and appropriate expansion of the energy sector, and TANESCO’s insolvency. Not all are precisely quantifiable.

The box (“Direct costs of “emergency” power projects in Tanzania”) shows the direct costs to Tanzania incurred as a result of IPTL and other “emergency” power projects.

The sum of the direct costs of emergency power projects, though substantial, is almost incidental when compared to the indirect costs to Tanzania. These are harder to quantify precisely, but the order of magnitude starts to become apparent when collating relevant sources and occurrences. For example:

• According to a World Bank estimate, the cost of power outages to the Tanzanian economy in 2005 – a single year – was 4% of GDP, or nearly US$2 billion.[21]
• The price of the delay in pursuing and expanding the least cost strategy is discernible from the claim made by PanAfrican Energy Tanzania (PAET, not to be confused with PAP), the owner of Songas, that the partial use of natural gas instead of imported diesel has saved Tanzania more than US$6.2 billion since 2004.[22]
• In 2014, international donors withheld budget support worth over US$500m in protest at the Escrow scandal. Negotiations for a second US government Milennium Challenge Account grant worth US$450m, largely earmarked for power generation, were suspended. The grant was eventually cancelled over the annulled Zanzibar elections in 2015.[23]

It is even more difficult to be precise about the most significant cost of all, that of economic growth, employment and opportunities to improve welfare foregone. A more efficient, least cost power supply in Tanzania would have generated income from power sales, which could have been used to extend the grid for the benefit of commercial and domestic users alike and leverage private investment in new power plants. Instead, while big companies could install costly standby generators that mostly ran on imported diesel, countless small manufacturers and service providers were simply forced to close down.

No way to do business

A 2016 World Bank study of IPPs in five countries in sub-Saharan Africa concluded, “the lessons from Tanzania’s experience with IPTL could not be more explicit: when power is not planned and procured transparently and consistently, the implications are potentially grave, far-reaching and on-going”.[31]

Numerous surveys have reported availability and cost of electricity as major constraints on “doing business”, investor confidence and competitiveness in Tanzania. In 2006, 88% of Tanzanian firms cited inadequate electricity as a key hindrance to their operations, placing Tanzania 122nd out of 139 countries surveyed.[32] According to a report published by the government and the United States Agency for Development in 2011, “Tanzania’s well documented electricity problems [are] by far the most important infrastructure constraint to investment and economic output”.[33] A 2013 World Bank Enterprise Survey estimated power outages in Tanzania cost businesses about 15% of annual sales. In 2016, a report by CDC Group and the Overseas Development Institute found that in Tanzania and other African countries, “both GDP and formal private sector employment were closely and positively correlated with increased supply and consumption of electricity”.[34] As a result of poor planning and regulation, vested interests and the other factors described in this note, only 20% of Tanzanians have access to electricity compared to a median of 34% for sub-Saharan Africa.[35]

The World Bank and international development agencies have promoted IPPs as a means of mobilising private capital to build and manage power plants. Such arrangements have had positive results in a number of countries, including Kenya, whose power utility KenGen makes profits and distributes dividends, despite numerous cases of corruption.[36] While Kenya started developing geothermal power within a decade of its discovery, Tanzania took two decades to begin exploiting its natural gas deposits – and increasing the supply of gas to keep up with the growing demand for power is by no means guaranteed.[37]

In 2011, the government negotiated an expansion of Songas with owner PAET to meet the ever-growing demand for power. But the launch of the National Natural Gas Infrastructure Project (NNGIP) drew the policy focus away from the short-term development of Songas to long-term development of the gas sector. Not for the first time, the privately funded Songas expansion was put on hold. NNGIP included the construction of a 532km pipeline from Mtwara to Dar es Salaam, at a cost of US$1.2 billion, financed by China’s Exim Bank.[38] Completed in early 2015 the new pipeline has been functioning at a maximum 4% of capacity. The use of emergency power providers continues.

Between 2010 and 2014 new offshore deposits of natural gas were discovered, vastly increasing the extent of Tanzania’s known offshore reserves to 57 trillion cubic feet. While leading politicians and planners are pinning their hopes for economic development on the construction of a liquefaction plant, which will cost up to US$30 billion, the country’s poor regulatory record and trends in global fuel prices make it unlikely that these hopes will be realised any time soon.[39] Meanwhile, chronic gas shortages undermine the rationale for the massive planned expansion of gas-fuelled power plants.[40]

Power, politics and profit

A modest 100MW power plant should not have the potential to derail a nation’s energy policy, render its electricity utility insolvent, and trigger repeated power crises with massive knock-on effects on industrial, commercial and domestic electricity consumers. Yet that is what IPTL has managed to achieve in Tanzania since 1994. While IPTL cannot be held responsible for all the woes of Tanzania’s energy sector, it is by far the largest single cause.

The absence of robust regulatory and oversight institutions in Tanzania allowed corrupt politicians and officials to ride roughshod over formal energy planning and project management procedures. Most of the critical commentary on IPTL and subsequent Richmond and Escrow scandals have highlighted the corruption dimension. This misses the main point. Corrupt rent-seeking in public procurement and contracting is widespread in countries much more developed than Tanzania, but not all rent-seeking has equally devastating economic and financial consequences.

If one small power plant can undermine the entire energy sector and cost percentage points of GDP, then such rent-seeking has the potential to permanently compromise the entire economy, limit growth and impede employment creation. While “smart” corruption might involve taking a one-off cut on a justifiable project that is required by official policy, generates employment, is productive and contributes to government revenue, “dumb” corruption derails key national policies and imposes huge additional recurrent costs on end users, taxpayers and international donors.[41]

Postscript

On 19 June 2017, Harbinder Singh Sethi and James Rugemalira were arrested and charged with economic sabotage, criminal conspiracy, money laundering and numerous other offences. If convicted, they could face long jail terms. Their arrest was a dramatic and unexpected development, since both men had enjoyed a privileged relationship with powerful and influential figures in government, in Rugemalira’s case for almost 25 years. The charges relate specifically to Sethi’s controversial acquisition of the IPTL plant in 2013 and consequent looting of the TEA, not to the origins and negative impact of IPTL over the years.[42] Cynical observers had been arguing that President John Magufuli’s aggressive anti-corruption policy was selective in that he avoided “sensitive” issues such as IPTL and Escrow, in which his predecessors were implicated.[43] The arrest of Sethi and Rugemalira may prove the cynics wrong.

For more than three years since the Escrow scandal broke, IPTL has been able to continue reaping the spoils. It may not survive much longer. In August 2017, Magufuli ordered the Energy and Water Utilities Regulatory Authority to stop negotiations over an extension to IPTL’s contract with TANESCO.[44] Any satisfaction at this news needs to be tempered by the fundamental lesson of the IPTL saga, emergency power provision and deficient energy policy formulation in Tanzania. Namely, that the costs to the Tanzanian public far exceed the sums made by a few opportunistic rent-seekers.

Brian Cooksey is an independent consultant based in Tanzania. He has been monitoring IPTL since 1997

Notes

[1] United Republic of Tanzania (1992), The Energy Policy of Tanzania, Ministry of Water, Energy and Minerals.

[2] As chairman of the South Commission, former Tanzanian president Julius Nyerere was sympathetic to the “delinking” of Africa from Western economic domination (see South Commission (1990) The Challenge of the South, Oxford: Oxford University Press). When apprised of the nature of IPTL, however, he declared that colonialism was preferable to such “South–South cooperation.” The promoters of IPTL used anti-World Bank rhetoric to counter their critics. See Cooksey, Brian (2002) “The Power and the Vainglory: A $100 million Malaysian IPP in Tanzania” in Jomo, KS (ed.) Ugly Malaysians? South-South Investments Abused, Institute for Black Research, Durban.

[3] Evidence of bribery by Rugemalira was contained in affidavits by three government officials presented to ICSID in 1999. For details see: Cooksey (2002); and Kabwe, Zitto (2014) “How PAP acquired IPTL for almost nothing and looted US$124m from the BoT”, https://escrowscandaltz.wordpress.com/

[4] The US$266m Songas project included a 225km pipeline to Dar es Salaam, fuelling a 115MW power plant, and other engineering components. The World Bank provided US$100m, Swedish International Development Cooperation Agency (SIDA) and the European Investment Bank a further US$106m of concessional finance, and private equity investors US$60m (Gratwick, Katharine; Ghanadan, Rebecca; and Eberhard, Anton (2007) “Generating Power and Controversy: Understanding Tanzania’s Independent Power Projects”, Management Programme in Infrastructure Reform and Regulation Working Paper, Graduate School of Business, University of Cape Town). Concessional lenders and private investors changed substantially before Songas was commissioned.6

[5] Overcharging included infrastructure and staff houses that had not been constructed. There is substantial evidence that Wärtsilä, the Finnish company that built and later ran the plant, was complicit in the overcharging. See Cooksey (2002) for details.

[6] US$163m if the price of conversion from diesel to gas-firing (which was envisaged in the PPA) is included (Eberhard, Anton; Gratwick, Katharine; Morella, Elvira and Antmann, Pedro (2016:208) Independent Power Projects in Sub-Saharan Africa, Lessons from Five Key Countries, World Bank, Washington DC.

[7] Cooksey (2002) relates how Rutabanzibwa fought a losing battle against politicians over the relative merits of Songas and IPTL. During one Cabinet meeting, he unsuccessfully challenged the attorney-general’s support for IPTL. Without Rutabanzibwa’s insistence, there would probably have been no arbitration over the inflated cost of the plant.

[8] Capacity charges were calculated on the basis of the actual cost of building the plant. The PPA required the plant to be ready to provide power at short notice, failing which penalties would be incurred. The main running cost was fuel to power the generators. Both capacity charges and the cost of fuel proved contentious.

[9] Eberhard et al. (2016:208-9) “As a result, Tanzania found itself overcommitted in terms of capacity; the country needed at the most one plant, but certainly not two”. The literature is unclear on why, if IPTL plus Songas constituted excess capacity, there was another power crisis only two years after the commissioning of Songas.

[10] Richmond turned out to be a “special purpose vehicle” with no experience of power generation. The report of the Parliamentary select committee chaired by Dr Harrison Mwakyembe MP asserted that: “The proprietors of Richmond are Prime Minister Lowassa and his close friend (Igunga MP) Rostam Aziz.” Lowassa denied the claim, although he resigned. Aziz subsequently withdrew from what he termed “dirty” politics. See Tanzanian Affairs (2008) “Report on Richmond Scandal”, April.

[11] Although of unclear ownership, Dowans was shown by the committee to be represented in its Tanzanian subsidiary by Rostam Aziz, a wealthy Tanzanian businessman and ruling Chama Cha Mapinduzi party MP (1993-2011), central committee member (2006-2011) and national treasurer (2005-2007).

[12] ICSID determined in the first round of arbitration that the actual cost of the IPTL plant was US$127.2m. This was divided 70:30 between Mechmar and VIP. Mechmar’s investment consisted entirely of debt, valued at US$89.04m. VIP’s investment was the remaining US$38.16m, which the company claimed was contributed “in kind”, rather than as equity (Eberhard et al. 2016:219). TANESCO therefore argued that the monthly capital (“capacity”) charge should be revised downwards since the actual construction cost of the plant was 30% lower than the ICSID estimate. For comparison, Songas was also financed 70:30 through debt and equity, but the 30% equity was fully paid up by the private investors.

[13] See Kabwe (2014) and Policy Forum (2015 and 2017) Tanzania Governance Review 2014 and 2015-2016 for details of the controversial acquisition of IPTL and the looting of the TEA.

[14] Tanzania follows the British system of appointing opposition MPs to head the PAC. At the time a member of opposition party Chama cha Demokrasia (CHADEMA), Zitto Kabwe later resigned and founded his own party, the Alliance for Change and Transparency.

[15] The Bureau’s report was never published, probably because it implicated State House officials and relatives of Kikwete.

[16] According to the leaked Kroll Report, Sethi co-owned controversial IPP Westmont Power (Kenya) Ltd with Nicholas Biwott, a close associate of President Daniel arap Moi. Sethi was also said to manage a large property portfolio in South Africa on behalf of Moi’s son, Gideon.

[17] “Notional” since Mechmar was in receivership when Sethi acquired the shares and Standard Chartered Hong Kong purchased the debt incurred in building IPTL, as described above; see Africa Confidential (2014), “Power fraud unravels”, Vol. 55 no.19, 26 September.

[18] This payment theoretically valued IPTL at US$250m. Sethi’s total outlay to acquire Mechmar’s 70% shareholding was not more than a few million US dollars. See Kabwe (2014).

[19] See Cooksey (2002), inclduing for evidence of Chenge’s role in facilitating the official endorsement of IPTL in 1994. See also Policy Forum (2017) Tanzania Governance Review 2015–16: From Kikwete to Magufuli: Break with the past or more of the same? for evidence of Chenge’s continued collaboration with Rugemalira at the time of “Escrow”.

[20] See Table 1, Policy Forum (2016) Tanzania Governance Review 2014: The year of ‘Escrow’. In a long and convoluted speech to Dar es Salaam elders and others, Kikwete repeated the rather lame argument that the TEA money was “private” rather than “public”. The next day’s headline news was the sacking of Minister of Lands Anna Tibaijuka, a relatively minor player in the Escrow drama, although she received the equivalent of US$1m (TShs1.6 billion) from Rugemalira.

[21] Eberhard, Anton; Rosnes, Orvika; Shkaratan, Maria and Vennemo, Haakon (2011:11) Africa’s Power Infrastructure: Investment, Integration, Efficiency, World Bank, Washington DC.

[22] The Citizen (2017) “Relief as Tanzania saves Sh14tr by extracting Songo Songo gas”, 10 August; The Guardian (2017) “Songo Songo gas project prevails over operational hitches to deliver innumerable benefits and savings”, 15 August.

[23] In 2008, the Millennium Challenge Corporation and the Government of Tanzania signed a five-year US$698m compact to finance roads, power and water supply.“

[24] Eberhard et al. (2016:202-210).

[25] BBC News (2011) “Power firm Aggreko wins £23m Tanzania contract”, 22 June.

[26] Eberhard et al. (2016: 217).

[27] Tanzania Invest (2017) “Symbion power claim US$561m to Tanzania Electric Power Company”, 29 March.

[28] Law360 (2017) “ICSID pauses enforcement of US$148m award against Tanesco”, 13 April.

[29] Bloomberg (2016) “Tanzania power issues casts shadow on $12 billion debt plan”, 16 February.

[30] Eberhard et al. (2016:202).

[31] Eberhard et al. (2016:91).

[32] World Economic Forum survey, cited in World Bank (2013:102) Enterprise Survey: Tanzania.

[33] Governments of the United Republic of Tanzania and the United States of America (2011:102) Tanzania Growth Diagnostic: Partnership for Growth. CDC and Overseas Development Institute (January 2016:1) “What are the links between power, economic growth and job creation?”, Development Impact Evaluation Evidence Review: “in Tanzania and other African countries both GDP and formal private sector employment were closely and positively correlated with increased supply and consumption of electricity”.

[34] CDC/ODI op.cit.

[35] Kojima, Masami and Trimble, Chris (2016) Making Power Affordable for Africa and viable for its utilities, World Bank, Washinton DC; Eberhard et al. (2016) claims that Tanzanian access to power is about average for sub-Saharan Africa.

[36] For a comparison between TANESCO and KenGen, see Policy Forum (2016: Chapter 4); also Daily Nation (2015) “Increased power sales sees KenGen post Sh11.5bn net profit”, 14 October.

[37] Daily News (2015) “Kenya’s geothermal overtakes hydro before completion of plant”, 22 October.

[38] Opposition MP Zitto Kabwe claimed there was massive corruption involved in the pricing of the pipeline.

[39] “Tanzanian LNG, which has already suffered delays relating to land acquisition and regulatory uncertainty, may slip further down the lengthy waiting list of… LNG project(s).” See The East African (2017) “Uncertainty clouds Tanzania gas investment as low prices persist”, 23–29 September. See also Policy Forum (2015:54-56) Tanzania Governance Review 2013: Who will benefit from the gas economy, if it happens”.

[40] Eberhard et al. (2016:213) lists planned state-owned and public-private partnership gas-powered projects costing over US$1.4bn to generate 1,240MW of electricity.

[41] This is an important distinction that helps explain why some countries – China, for example – develop rapidly despite widespread corruption.

[42] Cooksey, Brian (2017) “Focus should now turn to IPTL, they created Escrow”, The East African, 24 June

[43] IPTL was conceived during the “second phase” government of President Ali Hassan Mwinyi, commissioned during President Benjamin Mkapa’s decade in power (1995–2005) and survived intact, including Escrow, under President Jakaya Kikwete (2005–2015).

[44] Daily News (2017) “IPTL’s licence extension flops”, 31 August.

Appendix

The post IPTL, Richmond and “Escrow”: The price of private power procurement in Tanzania appeared first on Africa Research Institute.

The post Professor Attahiru Jega on election management and democracy in Nigeria appeared first on Africa Research Institute.

In 2009, there were 10.7 million jobs, a number that increased by 42% to 15.2 million in 2015. On the face of it, the number of new jobs might look impressive, outstripping gross domestic product (GDP) growth averaging about 5% a year during the period. However, as can be seen, most new jobs were in the informal sector. While those in salaried formal employment increased by 28% from 2.0 million in 2009 to 2.6 million in 2015, the number of workers with informal jobs increased by 44% from 8.7 million to 12.6 million. By 2015, 83% of eligible workers were employed in the informal sector, an increase of two percentage points since 2009.

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1. African Development Bank, “The Middle of the Pyramid: Dynamics of the Middle Class in Africa”, 2011

2. The average exchange rate for 2015 was US$1:KSh98.2 (Central Bank of Kenya statistics). A rounded rate of US$1:KSh100 has been used throughout for guidance

3. Kenya National Bureau of Statistics Economic Survey 2016 p.76

4. CPI figures as at fiscal year end (March)

5. World Bank, “Kenya – Jobs for Youth”, Report No. 101685-KE, February 2016, p.8

Kwame Owino is chief executive officer of the Institute of Economic Affairs – Kenya; Ivory Ndekei is programme officer (regulation and competition) and Noah Wamalwa is assistant programme officer (public finance management) at the same institution.

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The post How Kenya is Failing to Create Decent Jobs – Kwame Owino appeared first on Africa Research Institute.

1. According to the Lagos State Government’s Digest of Statistics, between 2010 and 2012 a total of 96,994 civil cases were filed in the various high courts of Lagos State

2. The LMDC and ADR practitioners in Nigeria recognise early neutral evaluation and other hybrid processes

3. Elias, T.O., The Nature of African Customary Law, Manchester: University Press, 1956, p.247

4. Ibid., p.272

5. Green, M.M., Ibo Village Affairs, Sidgwick & Jackson, 1948, p.110, cited in Elias, The Nature of African Customary Law, p.269

6. Okereafoezeke, Nonso, Law and Justice in Post-British Nigeria: Conflicts and Interactions Between Native and Foreign Systems of Social Control in Igbo, Westport, CT: Greenwood Press, 2002, p.14

7. Elias, T.O., The Nigerian Legal System, London: Routledge & Kegan Paul, 1963, p.44

8. Ewelukwa, D.I.O., “Administration of Justice”, in Okonkwo C.O. (ed.), Introduction to Nigerian Law, London: Sweet & Maxwell, 1980, p.59

9. Onyema, Emilia, “The Multi-door Court House (MDC) Scheme in Nigeria: A case study of the Lagos MDC”, Apogee Journal of Business, Property & Constitutional Law, (Vol. 2; No. 7), 2013, pp.96–130

10. Arnot, Bob, “How Lagos judges are now resolving disputes more quickly”, British Council Voices Magazine, 20 February 2015

11. Logan, Carolyn, “Ambitious SDG goal confronts challenging realities: Access to justice is still elusive for many Africans”, Afrobarometer, March 2017, pp.21–22

12. While providing a non-adversarial alternative to litigation, mediation in Nigeria has yet to be afforded the same statutory backing as arbitration

13. Logan, op. cit., p.21

14. “Access to Mediation and Legal Assistance Services”, Justice for All Nigeria, CIP 2.3, Impact Report 6, 6 October 2015, p.4

15. Sander, F.E.A., “Varieties of Dispute Processing”, The Pound Conference 1976: perspectives on justice in the future Minnesota: West Publishing Co., 1979, pp.65–87

16. Ibid., p.84

17. Ani, Comfort Chinyere, “Alternative Dispute Resolution (ADR) in Nigeria: A Study of the Lagos Multi-Door Courthouse (LMDC)”, in Ernest Uwazie (ed.), Alternative Dispute Resolution and Peace-building in Africa, Cambridge Scholars Publishing, 2014, p.48

18. Odibo, Monalisa, “Access to Justice Through Court Annexed Alternative Dispute Resolution Programmes: A Critical Assessment of the Multi-Door Courthouse System in Nigeria”, Paper presented to the Society of Legal Scholars, Oxford, 8 September 2016, p.3

19. Ibid., p.9

20. Lukman, Ayinla, “Enhancing Sustainable Development By Entrenching Mediation Culture In Nigeria”, Journal of Law, Policy and Globalization (Vol. 21), 2014

21. Genn, Hazel, Riahi, Shiva and Pleming, Katherine, “Regulation of Dispute Resolution in England and Wales: a Sceptical Analysis of Government and Judicial Promotion of Private Mediation”, Regulating dispute resolution: ADR and access to justice at the crossroads, Bloomsbury Publishing, 2014, p.139

22. Dawson, Michael, “Non-Consensual Alternative Dispute Resolution: Pros and Cons”, Australian Dispute Resolution Journal (Vol. 4), 1993

23. Bernstein, Lisa, “Understanding the Limits of Court-connected ADR: A Critique of Federal Court-Annexed Arbitration programs”, University of Pennsylvania Law Review (Vol. 141, Issue 6), 1993, p.2169

24. Hensler, Deborah R., “ADR Research at the Crossroads”, RAND Corporation, 2001

25. Ojelabi, Lola Akin, “Improving Access to Justice through Alternative Dispute Resolution: The Role of Community Legal Centres in Victoria, Australia”, La Trobe University, September 2010

26. Lagos Multi Door Court House Law (2007), S20

27. Van Zeijl, Femke, “A new type of justice for Nigeria”, Al Jazeera, 8 October 2016

28. Settlement agreements signed by parties attending mediation are regarded as a legal agreement between the parties, enforceable under Section 19 of the Lagos Multi Door Court House Law (2007). Once an ADR judge has validated the agreement, it shall be deemed to be enforceable under Section 11 of the Sheriffs and Civil Process Act (1990). Arbitration awards are enforced under the Arbitration and Conciliation Act (1988). Terms of Settlement or Memoranda of Understanding reached at other institutions can be processed by the LMDC and endorsed by an ADR judge, enforceable as a consent judgment of the Lagos State High Court

29. Rooke, John, “The Multi-Door Courthouse is Open in Alberta: Judicial Dispute Resolution is Institutionalized in the Court of Queen’s Bench”, University of Alberta, 2010

30. These are: Kano, Akwa Ibom, Kaduna, Abia, Ondo, Cross River, Katsina, Delta, Bornu, Bayelsa, Ogun, Kwara, Edo and Enugu States

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Dr Emilia Onyema is senior lecturer in international commercial law at the School of Oriental and African Studies (SOAS), University of London, where she convenes postgraduate courses in dispute and conflict resolution and teaches international trade law, and law and development in Africa. Dr Onyema is a member of the editorial board of the Journal of African Law.

Dr Monalisa Ofure Odibo completed her PhD at Bangor University where her thesis was a critical assessment of the LMDC scheme. She obtained an LLM International Commercial Law at the University of Aberdeen, and LLB (Hons) at the University of Wolverhampton. Dr Odibo is a qualified mediator, barrister and solicitor and a member of the Nigerian Bar Association.

The post How alternative dispute resolution made a comeback in Nigeria’s courts – Onyema and Odibo appeared first on Africa Research Institute.

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Dr. Beacon Mbiba is Senior Lecturer in Urban Development Policy at Oxford Brookes University. His current research focuses on urban land, infrastructure planning, urban finance and rural-urban linkages.

This article references some findings from a study conducted by the Infrastructure and Cities for Economic Development (ICED) Facility, funded by the UK Department for International Development (DFID). The views and opinions expressed in this article are solely those of the author and do not reflect the position of DFID. ICED is a facility set up to accelerate DFID’s infrastructure and cities initiatives across the world; for more information on ICED, please contact: iced.programming@uk.pwc.com.

The post On the periphery: Missing urbanisation in Zimbabwe – Beacon Mbiba appeared first on Africa Research Institute.

Less than two decades after it was granted debt relief, the Government of Mozambique again finds itself unable to honour obligations to international creditors. Pending the publication of an audit of US$2 billion of borrowing by Mozambican companies afforded questionable sovereign guarantees, Africa Research Institute and Zitamar News convened a webinar with four expert panellists: Roberto Tibana, principal consultant at Analitica-RJT; Anne Frühauf, senior vice president with Teneo Intelligence; Tariq Hamoodi, partner at Bybrook Capital; and Dr Joseph Hanlon, visiting senior fellow at the London School of Economics.

This Briefing Note sets out the known details of the controversial loans to Mozambican companies and their ramifications for the government, the banking sector and international financial institutions. It then summarises panellists’ perspectives on the debt, and how Mozambique and its creditors might extricate themselves from the crisis.  

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• Fishy business
• Loan sharks
• Mayday! Mayday! Mayday!
• Navigating choppy waters
• Getting off the hook?

Fishy business

Between February 2013 and May 2014, three Mozambican companies contracted Middle Eastern shipbuilding group Privinvest and other suppliers to provide a tuna fishing fleet and maritime security. The project eventually involved borrowing US$2 billion, roughly equivalent to a third of the national budget. This sum exceeded the total amount of external debt raised directly by the government between 2010 and 2012, and breached commitments made to the International Monetary Fund (IMF) in July 2013.[i]

At the time, President Armando Guebuza was preparing to depart from office and intent on ensuring that his chosen successor secured a victory for Frente de Libertação de Moçambique (Frelimo) in the October 2014 general elections. The Guebuza family is said to have initiated the discussions with Privinvest through connections to the holding company’s co-founder and director, Iskandar Safa.[ii] The national security services, Serviço de Informação e Segurança do Estado (SISE), which report directly to the president, were tasked with establishing three companies: Empresa Moçambicana de Atum (Ematum), ProIndicus and Mozambique Asset Management (MAM). A SISE officer, António Carlos do Rosário, was appointed CEO of all three corporations.[iii]
[quote]Fishing boats were not the only item on an undisclosed shopping list; Rosário later admitted that the tuna concept had been a pretext for defence expenditure[/quote]
During September 2013, the London offices of investment banks Credit Suisse and VTB Capital arranged US$850 million in “loan participation notes”, akin to an unlisted bond, for Ematum.[iv] According to a three-page prospectus, this was intended to fund a tuna fishing fleet capable of landing 20,000 tonnes of tuna per annum.[v] Only a year earlier, a South African company, Oceanfresh, had been granted exclusive rights to fish tuna off the Mozambican coast, with a quota of 12,000 tonnes per annum.[vi] Fishing boats were not the only item on an undisclosed shopping list; Rosário later admitted that the tuna concept had been a pretext for defence expenditure.[vii]

Despite having not built a fishing vessel since the 1980s, Privinvest shipbuilder Constructions Mécaniques de Normandie (CMN) was contracted to supply 24 trawlers, in addition to three patrollers and three interceptors (each designed to be armed with a 20mm cannon and 12.7mm machine gun).[viii] The company had unveiled designs for a new 23.5-metre trawler, alongside plans for a new 43-metre trimaran patroller, only six months earlier. Mock-ups of the 32-metre high-speed interceptors were disclosed on the day the deal was announced.[ix] Guebuza and Safa visited the CMN shipyard on 30 September 2013. Within a month, Ematum had transferred US$836.3 million directly to Abu Dhabi Mar, CMN’s holding company, which is part-owned by Privinvest. The balance of the money raised by Credit Suisse and VTB – US$13.7 million – was spent on banking and transaction fees. Ematum itself was left with no working capital for its operating costs or funds for future debt repayments.[x]

Loan sharks
[quote]The lending package was signed in June 2013, but not disclosed to investors who purchased the Ematum debt just months later. Credit Suisse reportedly purchased insurance against the risk of Mozambique defaulting at Lloyd’s of London[/quote]
Concurrently, Credit Suisse and VTB Capital arranged further loans totalling US$1.16 billion for ProIndicus and MAM, apparently disregarding the considerable implications for investors in the Ematum debt. Credit Suisse raised US$622 million for ProIndicus, a corporation established to provide security for firms involved in offshore gas exploration and shipping in Mozambican waters, despite an absence of demand for these services.[xi] This followed a feasibility study undertaken by the bank in February 2013, initially assuming a US$372 million loan.[xii] The lending package was signed in June 2013, but not disclosed to investors who purchased the Ematum debt just months later. Credit Suisse reportedly purchased insurance against the risk of Mozambique defaulting at Lloyd’s of London.[xiii]

Within months of the loans to Ematum and ProIndicus, VTB Capital privately arranged US$535 million of borrowing for MAM.[xiv] This entity was hastily incorporated in April 2014, ostensibly to provide services to ProIndicus and others.[xv] In May 2014, MAM contracted Privinvest to build two shipyards (in Maputo and Pemba), where it would could construct, under license, Privinvest security vessels. The deal included the provision of spare parts and maintenance for the fleet, and the establishment of a naval training school.[xvi] VTB Capital charged an up-front arrangement fee of US$35 million, equivalent to 7% of the amount raised.[xvii] The co-arranger of the deal was Palomar Capital Advisors, a subsidiary of Privinvest led by Andrew Pearse, who had worked on the fundraising for ProIndicus while at Credit Suisse.[xviii]

In each instance, Manuel Chang, Mozambique’s then finance minister, signed paperwork confirming that the government would guarantee the debts. A parliamentary inquiry later found Chang acted in contravention of Article 179 of the Mozambique Constitution, which requires that the legislature be consulted on sovereign guarantees.[xix] The sums borrowed also exceeded the limit set by the legislature for that year, thus violating the budget laws.[xx] A further irregularity was that the contracts exist only in English, while Mozambican law requires such documentation to be translated into Portuguese and authenticated.[xxi]
[quote]The Office of the Attorney General subsequently characterised the granting of unauthorised sovereign guarantees as a “criminal offence” in the form of “abuse of office”[/quote]
The Office of the Attorney General subsequently characterised the granting of unauthorised sovereign guarantees as a “criminal offence” in the form of “abuse of office”.[xxii] Irregularities surrounding the guarantees may explain why neither the Government of Mozambique, nor the banks arranging the loans, took steps to inform the IMF and World Bank, despite a clause in the loan agreements which stipulated that the guarantor would comply with its obligations to those bodies.[xxiii]

President Nyusi, who took office in January 2015, sought to rectify remaining irregularities. The Government of Mozambique formally assumed responsibility for US$500 million of the US$850 million Ematum debt, including it in the defence budget for that year, and obtaining retrospective parliamentary endorsement for the borrowing. Mozambique honoured the first scheduled repayment, despite a budget shortfall amid declining commodity prices, substantial currency depreciation and delays to the development of liquid natural gas (LNG) reserves. Officially, at this juncture, Mozambique’s external debt stood at some US$6 billion, exceeding the sum at which the country had been granted debt relief under the Heavily Indebted Poor Countries Programme in 2001.

Mayday! Mayday! Mayday!

In March 2016, struggling to meet its obligations, the government was forced to restructure the balance of the Ematum debt. Mozambique asked international investors to exchange US$697 million in Ematum notes for new sovereign bonds with a later repayment date.[xxiv] To assuage its creditors, the government offered a higher interest rate and other incentives, thus increasing its total obligation to US$726.5 million.[xxv] Credit Suisse and VTB Capital arranged the restructuring; however, negotiations with bondholders were rushed. Charles Blitzer, a former IMF assistant director advising investors, asserts that the process failed to comply with recognised principles for fair debt restructuring.[xxvi]
[quote]Only after investors had accepted the restructuring terms did details emerge of the US$622 million loan raised for ProIndicus[/quote]
Only after investors had accepted the restructuring terms did details emerge of the US$622 million loan raised for ProIndicus.[xxvii] The UK Financial Conduct Authority has initiated an inquiry into whether Credit Suisse violated regulations by failing to disclose the existence of the ProIndicus debt to Ematum creditors during the restructuring.[xxviii] The bank’s hand was forced when, on 15 March 2016, Standard and Poor’s downgraded Mozambique’s credit rating, which entitled investors in ProIndicus to exercise their right to immediate repayment.[xxix] This situation prompted Credit Suisse to reveal the US$622 million in additional borrowing.[xxx] The Government of Mozambique then disclosed that a further US$535 million had been borrowed by MAM.

Alarmed by the fiscal mismanagement and fearing a vast corruption scandal, the IMF halted its programme in Mozambique, including payment of the second instalment of a US$283 million loan from its Standby Credit Facility.[xxxi] The World Bank also suspended disbursements, while bilateral donors terminated general budget support. The metical, the national currency, depreciated sharply, losing 40% of its value in two months.[xxxii]

Despite the sovereign guarantee, MAM missed its first payment of US$178 million due on 23 May 2016. In October 2016, the government conceded that it did not have sufficient capital to service any of the three loans, including the restructured Ematum debt. On 18 January 2017, Mozambique missed the first US$60 million coupon payment on its sovereign bond.[xxxiii]

Navigating choppy waters

The government and its creditors are at an reached an impasse. Mozambique wishes to restructure the three debts; however, holders of the sovereign bond have refused to negotiate until an independent audit has been completed, and the IMF resumes its programme.[xxxiv] Webinar panellists acknowledged the challenges faced by Kroll, the firm appointed to audit the accounts of Ematum, ProIndicus and MAM, especially as substantial sums appear to have been transferred directly to Privinvest and associated entities.[xxxv] It is unlikely that Mozambicans will ever know precisely how the money borrowed was spent, or what assets remain unaccounted for, given the veil of secrecy surrounding the transactions.
[quote]It is unlikely that Mozambicans will ever know precisely how the money borrowed was spent, or what assets remain unaccounted for, given the veil of secrecy surrounding the transactions[/quote]
ProIndicus is due to make a capital repayment of US$119 million on 21 March 2017, but is not expected to pay. As the loan was reportedly syndicated by Credit Suisse to numerous Mozambican banks, the country’s financial sector could be severely tested if the government defaults on its obligations as guarantor.[xxxvi] Local bondholders include Millennium BIM and Moza Banco (which is already in administration).[xxxvii] A related risk is that the capital raised by ProIndicus was used as collateral for commercial loans, or for down-payments on contracts for military equipment, thus increasing the risk of yet more undisclosed debt.[xxxviii] When addressing the parliamentary inquiry in late 2016, do Rosário spoke of an entire maritime protection system (Sistema Integrado de Monitoria e de Protecção) supported by 16 radars, 6 patrol aircraft, drones and satellite imagery.[xxxix]

Anne Frühauf, senior vice president at Teneo Intelligence, who advises investors in Mozambique, anticipates a “significant restructuring deal” during 2017. She questions how such a negotiation cannot result in a “haircut” for creditors, despite some having already participated in one restructuring. With the government’s repayment capacity practically non-existent, Frühauf anticipates discussion regarding the possibility of postponing debt repayments until the 2020s – the point at which revenue from vast offshore gasfields should become available, assuming final investment decisions on LNG extraction are taken soon. A major challenge is that holders of the original Ematum debt, which has since been repackaged as a sovereign bond, will resent being treated identically to holders of ProIndicus and MAM debt: in 2016, Ematum bondholders agreed to a longer amortisation period in return for a higher coupon rate. Having been restructured into a bullet payment, the annual interest burden related to the sovereign bond is already much lower than the debt-servicing costs associated with ProIndicus and MAM.
[quote]Frelimo, is reluctant to acknowledge that the guarantees were issued illegally. The Nyusi government would rather assume the liabilities inherited from the Guebuza administration than risk the political fall-out[/quote]
Tariq Hamoodi, a partner at Bybrook Capital in London, anticipates Mozambique honouring its obligations – eventually. Panellists noted that the ruling party, Frelimo, is reluctant to acknowledge that the guarantees were issued illegally. The Nyusi government would rather assume the liabilities inherited from the Guebuza administration than risk the political fall-out. Hamoodi points to the recent restructuring of the Ematum bond as having precluded any admission of wrongdoing. He views all three debts as equally binding and regards any calls for differential treatment as unrealistic. Hamoodi anticipates the three being bundled into a single loan, despite sovereign bondholders holding out for a better deal. One way to alleviate the haircut on international investors might involve Mozambique issuing gas warrants, granting creditors a certain share of future revenues from Empresa Nacional de Hidrocarbonetos (ENH), the state oil and gas company.

Getting off the hook?

Dr Joseph Hanlon, visiting senior fellow at the London School of Economics, pointed out there is an argument against bundling the three loans. ProIndicus and MAM debts were issued by Credit Suisse and VTB Capital as syndicated loans, thus establishing a fiduciary duty on behalf of the banks. By contrast, the Ematum debt is now packaged as a sovereign bond. All three debts were issued in London under contracts governed by English law. Hanlon believes that a legal process in the UK could prove advantageous for Mozambique. He notes that, historically, governments that default on their debts do better than those which attempt to pay from a position of debt distress.
[quote]Hanlon believes that Credit Suisse and VTB misled investors by claiming that the debts were repayable when this manifestly was not the case[/quote]
Hanlon contends that Credit Suisse and VTB face widespread criticism for their failure to either undertake sufficient investigations, or to report their findings to investors. Competent due diligence should have brought to light three facts. First, that in the absence of parliamentary approval, the sovereign guarantees were unconstitutional and illegal. Second, that the Credit Suisse feasibility study was “totally ridiculous”, and founded on assumptions that Mozambique could sell its tuna for three times as much as the Seychelles. Third, that collectively the three loans would make Mozambique’s debt burden unsustainable. Hanlon believes that Credit Suisse and VTB misled investors by claiming that the debts were repayable when this manifestly was not the case.

Hanlon argues that Mozambique should repudiate the “secret” and “illegal” debts issued to ProIndicus and MAM. It would then fall to a bondholder or one of the banks to appeal to the UK courts. The banks might prefer to proceed to arbitration, since the process is private. Hanlon believes that “Credit Suisse do not want to go into open court”, where they would be asked to present due diligence reports. While details of any settlement reached through arbitration would be public, documentation would not need to be disclosed.
[quote]Hanlon believes that a government refusal to honour its sovereign guarantees would be accepted, and possibly even welcomed, by the international financial institutions and donors[/quote]
As for Ematum, Hanlon concedes that the repackaging of the debt as a sovereign bond complicates further negotiations with creditors. In practice, the government has accepted, however reluctantly, its obligation as a guarantor. That distinction aside, he believes that “the original notes were sold on the same false prospectus”, which – unwittingly or intentionally – misled investors. Even if an agreement cannot be reached immediately with holders of the Ematum bond, renouncing the sovereign guarantee on the ProIndicus and MAM loans would bring Mozambique closer to debt sustainability. Such a scenario could enable the IMF to re-engage with the government, providing it with room for manoeuvre. Although bilateral donors will not want to run the risk of aid money being, in effect, used to service the debt, all parties want Mozambique to return to debt sustainability. Hanlon believes that a government refusal to honour its sovereign guarantees would be accepted, and possibly even welcomed, by the international financial institutions and donors.

Frühauf challenges this scenario on the grounds that the government has displayed no political will to repudiate the debts. Investigations have been limited, and politicians have displayed no sign of wanting to issue a declaration of “odious debt” or “illegitimate debt”, which might provoke further scrutiny. Frühauf argues that Mozambique will remain saddled with a heavy debt burden primarily because of political dynamics within Frelimo. The political cost of implicating allies of former President Guebuza or the security services could divide the party and jeopardise the leadership transition. Nyusi’s recent appointment of a new SISE director could, however, indicate willingness to subject the security services to greater scrutiny.[xl] Frühauf posited that internal opposition to Nyusi and his handling of the debt crisis might grow ahead of the crucial party congress in September 2017, and pressure to renounce part of the debt could gain traction.
[quote]Tibana predicted a tricky year ahead for President Nyusi and Frelimo grandees. In September, the party will have to decide whether the incumbent will remain its candidate for the next elections, or if Frelimo needs to replace Nyusi to turn the page on the debt scandal[/quote]
Roberto Tibana, principal consultant at Analitica-RJT, noted that any legal process brought against former finance minister Manuel Chang would inevitably open a can of worms. It remains unclear whether Frelimo elites are ready to “sacrifice” Chang, or indeed to countenance any course of action that might lead to court cases – and revelations. Tibana stressed that government ministers, past and present, would be implicated in any findings. Nyusi was the minister of defence when the debts were issued, making it “difficult to shrug off responsibility”. Tibana believes that all of Mozambique’s creditors will need to take a haircut. He questioned whether Credit Suisse and VTB Capital failed to conduct adequate due diligence or if the loans were issued with their full connivance. Tibana predicted a tricky year ahead for President Nyusi and Frelimo grandees. In September, the party will have to decide whether the incumbent will remain its candidate for the next elections, or if Frelimo needs to replace Nyusi to turn the page on the debt scandal.

External actors could yet intervene to Mozambique’s advantage. The US Securities and Exchange Commission (SEC) has requested copies of the documents provided to purchasers of the Ematum bond. Swiss regulators are also known to be taking a keen interest. If further financial transgressions are disclosed, a declaration of “odious debt” or “illegitimate debt” might become more expedient.  Not all outsiders sympathise with Mozambique’s plight, however.

The government will struggle to extricate itself from its current predicament without presenting the country, and the region, as a far riskier investment destination than had previously been projected. Trust with the international financial institutions and bilateral donors will also need to be restored if Mozambique is to diversify its sources of concessional borrowing, and this is unlikely to be a smooth process. Perhaps most importantly, as Tibana pointed out, the crisis has come as “a big shock” to hard-pressed Mozambicans, a fact that Frelimo elites have been slow to acknowledge, let alone react to. The party’s 2014 campaign song, Moçambique confia em Filipe Nyusi, stressed the trust placed in the presidential aspirant. With Frelimo’s egregious fiscal indiscipline now common knowledge, such confidence will be hard to recover.

For a two-week free trial of Zitamar News, please email subscriptions@zitamar.comreferencing ARI in the subject line.

An edited recording of the webinar is available here

Notes

[i] “Alarm over new debts”, Africa Confidential, 15 November 2013

[ii] “How far to push Guebuza”, Africa Confidential, 12 June 2015

[iii] Gestão de Investimentos, Participações e Serviços (GIPS), the social security arm of SISE, owns 98% of MAM, 50% of ProIndicus and 33% of Ematum. The other shareholders of Ematum are the national fishing company, Empresa Moçambicana de Pesca (Emopesca), and the parastatal fund manager, Instituto de Gestão das Participações do Estado (IGPE). ProIndicus is 50% owned by Monte Binga, which is managed by the Ministry of Defence but owned by IGPE. Ematum and ProIndicus each hold 1% of shares MAM. See “Secret debts devastate economy”, Africa Confidential, 13 May 2016

[iv] A fundraising by Credit Suisse for US$500 million was oversubscribed, leading VTB Capital to issue a further US$350 million. See “Secret security debts devastate economy”, Africa Confidential, 13 May 2016

[v] “MDM calls for measures against those responsible for ‘hidden debts’ – Mozambique”, AIM/Club of Mozambique, 12 December 2016

[vi] “Oceanfresh awarded tuna quota in Mozambique”, Undercurrent News, 16 September 2012

[vii] “Mozambique tuna company was front for security spending, CEO admits”, Zitamar News, 9 December 2016

[viii] Contrary to the CMN announcement, a spokesman for Credit Suisse insisted that “there are no weapons or combat systems of any kind on any of the vessels being built under the EMATUM contract.” See: Boris Korby, Paul Burkhardt and Lyubov Pronina, “Mozambique Tuna Bonds Fund Anti-Pirate Fleet in Surprise”, Bloomberg, 13 November 2013

[ix] “CMN décroche une commande historique de 30 navires”, Mer et Marine, 6 September 2013

[x] “Revealed: Ex-Credit Suisse banker in business with EMATUM ship-builder”, Zitamar News, 11 May 2016

[xi] For ProIndicus, the principal sum borrowed was US$622 million, with a final maturity date of 21 March 2021. The first repayment of US$24.88 million was due on 21 March 2016, with subsequent repayments of US$119.424 million in March 2017, 2018, 2019, 2020 and 2021. Interest Rate: LIBOR + 3.20% until 21 March 2014 and then 3.75% thereafter (payable annually). According to Quinn Emanuel Urquhart & Sullivan LLP, Credit Suisse raised US$522 million, with VTB arranging and underwriting the balance. This assertion is not reflected in the “Summary of Key Terms of Certain Commercial External Indebtedness” issued by the Ministry of Finance in November 2016

[xii] “Leaked Credit Suisse doc puts complete Mozambique coastal security contract at only $372m”, Zitamar News, 21 June 2016

[xiii] Matt Wirz, Julie Wernau and Matina Stevis, “Behind Credit Suisse’s Soured Mozambique Deals”, The Wall Street Journal, 11 August 2016

[xiv] For MAM, the principal sum borrowed was US$535 million, with a final maturity date of 23 May 2019. Four repayments of US$133.75 million agreed for May 2016, 2017, 2018 and 2019. Interest Rate: LIBOR + 7% (payable annually). Arranged by Palomar Capital Advisors and VTB Capital

[xv] “Mozambique: Prosecutors Investigating Ematum, Proindicus and MAM”, Agencia de Informacao de Moçambique, 1 May 2016

[xvi] “Mozambique’s defaulting MAM denied access to Maputo shipyard site”, Zitamar News, 14 June 2016

[xvii] Ed Cropley, “Exclusive: Mozambique paid $35 million for VTB shipyard loan – documents”, Reuters, 11 June 2016

[xviii] “Palomar named as joint arranger on $535m Mozambique shipyards loan”, Zitamar News, 25 November 2016

[xix] The inquiry was held during November 2016, with a confidential report delivered to MPs during December 2016. Article 179(2)(p) of Mozambique’s constitution grants the Assembly of the Republic “exclusive power” over the authorisation of government borrowing for a period of a year or more, and defines parliament’s role in determining the upper limits for any state guarantees

[xx] For 2013, the limit had stood at 183.5 million MZN (approximately US$5 million). In December 2013, parliament amended the budget law and increased the ceiling on government guarantees to 15.8 billion MZN, enabling Frelimo to accommodate US$350 million of Ematum’s “non-commercial activities” in the Ministry of Defence budget for 2014

[xxi] “Relatório e Parecer sobre a Conta Geral do Estado, Capítulo X – Dívida Pública”, Tribunal Administrativo de Moçambique, (February 2015) pp.X-20-21

[xxii] Procuradora-Geral da República spokesman Taibo Mucobora quoted by Voice of America: William Mapote, “Procuradoria de Moçambique admite indiciar membros do Governo Guebuza”, VOA Portgues, 14 July 2016

[xxiii] “Former Finance Minister signed loan guarantees”, A Verdade, 11 October 2016

[xxiv] Elaine Moore and Andrew England, “Mozambique proposes ‘tuna’ bond restructuring”, The Financial Times, 10 March 2016

[xxv] Once restructured, Ematum notes were issued for US$726.524 million on 6 April 2016. These have a maturity date of 18 January 2023 with a single repayment due then. Interest Rate: 10.5% per annum (payable semi-annually) with repayments due on 18 January and 18 July of each year until maturity (commencing on 18 January 2017)

[xxvi] Specifically, Principles for Stable Capital Flows and Fair Debt Restructuring issued by the Institute of International Finance. See Joseph Cotterill, “So long, and thanks for all the tuna bonds”, The Financial Times Alphaville, 11 March 2016

[xxvii] Matt Wirz and Julie Wernau, “Tuna and Gunships: How $850 Million in Bonds Went Bad in Mozambique”, The Wall Street Journal, 3 April 2016

[xxviii] Matina Stevis, “U.K. Regulator Scrutinizes Credit Suisse, VTB Over Mozambique Debt”, The Wall Street Journal, 3 June 2016

[xxix] “IMF cut-off follows secret debt shock”, Africa Confidential, 15 April 2016

[xxx] “Secret security debts devastate economy”, Africa Confidential, 13 May 2016

[xxxi] “Key Facts on Fund’s Engagement with Mozambique”, International Monetary Fund, 27 May 2016

[xxxii] The Mozambican metical had remained steady at 30 meticais to the USD during 2013 and much of 2014. Short on hard currency, the government was no longer able to support the currency during 2015, causing it depreciate to 50 meticais to the USD by March 2016. The value plummeted to 78 meticais to the USD in September/October 2016. During February 2017, the exchange rate has stabilised at approximately 70 meticais to the USD

[xxxiii] “Mozambique bondholders condemn ‘strategic’ default”, Zitamar News, 23 January 2017

[xxxiv] “Mozambique says it will default on debut sovereign bond”, Zitamar News, 16 January 2017

[xxxv] “Sovereign default looms”, Africa Confidential, 23 May 2016

[xxxvi] “Mozambique must restructure debt by March deadline to avoid banking ‘chaos’”, Zitamar News, 20 January 2017

[xxxvii] “Frelimo’s ostrich plan”, Africa Confidential, 8 July 2016

[xxxviii] “The burden of war and debt”, Africa Confidential, 18 November 2016

[xxxix] Joseph Hanlon, “Mozambique News Reports & Clippings”, The Open University, 13 February 2017

[xl] “Nyusi names new head of Mozambique’s security services”, Zitamar News, 30 January 2017

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On 30 October 2016, Ivorians will vote on adopting a new draft constitution unveiled only 25 days earlier. Very few citizens have read the text, which a committee of experts drew up and parliament rapidly endorsed. The government maintains that its priority has been to ensure that the new constitution is “consensual” and “impersonal”.[1] This would be novel in a country where the basic law has been shaped by the personal interests of one Frenchman and three Ivorians.

Constitution-making in Côte d’Ivoire has been characterised by subjective notions of national priorities and eligibility for leadership. It has shown a fixation with power and authority. There has never been a meaningful attempt to consult citizens, let alone reach a consensus. In the absence of a coherent or credible opposition, and despite the evident need for national dialogue and reconciliation, Ivorians have been deprived of a serious debate. This is a missed opportunity, but it should not come as a surprise. This Briefing Note situates the 2016 constitutional review in its historical context; and highlights contested features of a new basic law that, although dispensing with exclusionary language, is an elite project.
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• Le général français
• Papa Houphouët
• Le dauphin
• Le général ivoirien
• Succession in Côte d’Ivoire’s Third Republic
• Article 35, the Senate, the diaspora and the chiefs
• My constitution

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Le général français

Côte d’Ivoire’s first constitution bears the imprint of a French military officer born some 5,000km away. On 13 May 1958, an attempted putsch in Algiers led to a cabinet crisis in Paris. General Charles de Gaulle agreed to lead a government of national unity on condition that he be granted emergency powers and a new constitution be drawn up. This, he insisted, must establish a powerful presidency, to bring an end to the instability which had characterised the Fourth Republic (1946–58) in France.

De Gaulle’s new basic law was approved by popular referendum on 28 September 1958. In France’s African colonies this was coupled with provisions for gradual decolonisation. In advance of the plebiscite, de Gaulle travelled to Abidjan, convincing Ivorians to vote “yes” and join the Communauté française in preparation for independence.[2] On 26 March 1959, the territorial assembly transformed itself into a constituent assembly and adopted an interim constitution modelled on the Gaullist statute. The first parliament was elected on 12 April 1959, its members (députés) assuming greater responsibilities than the conseillers territoriaux who preceded them. The Parti démocratique de Côte d’Ivoire (PDCI) won all the seats in the new legislature and PDCI leader Félix Houphouët-Boigny became prime minister.
[quote]Houphouët-Boigny was steeped in the legal and political turmoil of the Fourth Republic and the Gaullist authoritarianism that followed. [/quote]
Although not a Gaullist, Houphouët-Boigny had strong ties to metropolitan France. For 13 years, he represented Côte d’Ivoire in the National Assembly in Paris and served as a minister in five French governments. Houphouët-Boigny contributed to drafting the 1946 basic law as a member of two constituent assemblies; and he served on the inter-ministerial committee de Gaulle consulted on the 1958 constitution.[3] Houphouët-Boigny was steeped in the legal and political turmoil of the Fourth Republic and the Gaullist authoritarianism that followed. Following Côte d’Ivoire’s independence on 7 August 1960, he swiftly moved to emulate the Gaullist model and centralise power in the Ivorian presidency. Houphouët-Boigny would occupy this position for 33 years, 30 of them without a prime minister.

Papa Houphouët

Côte d’Ivoire’s 1960 constitution repeated verbatim much of France’s 1958 document.[4] Regardless of the grand principles articulated in the preamble, in practice citizens who wished to take part in politics had to join the PDCI – which provided all the members of the first four parliaments. Together with the party’s political bureau, Houphouët-Boigny handpicked candidates for the legislature, seeking to reward loyalty and minimise opposition. The president adroitly managed political competition, co-opting opponents and recycling elites through party, government and parliamentary offices.
[quote] Houphouët-Boigny remained wary of allowing any individual to emerge as his heir apparent, making constitutional succession a highly contentious issue. [/quote]
While firmly controlling the political space, Houphouët-Boigny liberalised the economy and promoted agricultural production, leading to a sustained period of growth. Much of this was driven by an influx of migrant labour from Upper Volta (now Burkina Faso) and Mali to the north. Workers were attracted to Côte d’Ivoire by a policy that in effect determined that anyone who would put it to productive use could occupy fertile land. As in the colonial era, land laws overrode customary tenure, inadvertently sowing the seeds of conflict between “indigenous” Ivorians and “northern” migrants (who, although not citizens, were entitled to vote). Houphouët-Boigny’s decision to retain French nationals in the civil service and state-owned enterprises, and to permit Lebanese businesses to flourish, added to growing xenophobia.

Houphouët-Boigny remained wary of allowing any individual to emerge as his heir apparent, making constitutional succession a highly contentious issue. In 1967, Houphouët-Boigny announced his intention to appoint a vice-president, but the plan was never realised. For two decades, he entrusted control of the legislature to Philippe Yacé. Serving concurrently as president of the National Assembly and PDCI secretary-general, Yacé was viewed as a likely heir. In 1975, the cabinet declared that the head of the parliament would assume the presidency should the incumbent die in office. However, five years later Houphouët-Boigny again announced his intention to name a vice-president, without disclosing who he intended to appoint.

Le dauphin

At the PDCI’s seventh congress in October 1980, the president abolished Yacé’s position of party secretary-general and replaced it with an executive committee. In November that year, Yacé was also removed as head of the National Assembly. His successor was former finance minister Henri Konan Bédié. That November 1990, Houphouët-Boigny confirmed that Bédié, as president of the National Assembly, would assume the duties of head of state ad interim if the role became vacant. However, to check Bédié’s power the president amended the constitution to appoint the first prime minister since independence, Alassane Dramane Ouattara. A former Africa director at the International Monetary Fund (IMF) with roots in the north of the country, Ouattara was tasked with implementing major structural reforms.

For ten months during 1992–93, Houphouët-Boigny was hospitalised in Europe and many of the duties of head of state fell to Ouattara. Bédié’s National Assembly condemned the prime minister’s attempts to privatise state-owned enterprises, inflaming antipathy between “sons of the soil” and “northerners”. In line with the constitution, however, the Supreme Court named Bédié interim president following Houphouët-Boigny’s death on 7 December 1993. Ouattara resigned as prime minister and returned to the IMF in Washington, DC.

Bédié took advantage of his incumbency to amend the electoral law, aware that Ouattara might defeat him if he returned to contest an election, given the latter’s support among the large voting bloc of “northerners”. Henceforth, candidates for the presidency had to be resident in the country and provide evidence that all four of their grandparents had been born in Côte d’Ivoire. Ouattara’s family was scattered across both sides of the border and he had completed his secondary education in Upper Volta. The legal emphasis that Bédié ensured was placed on ivoirité – an exclusionary concept of national identity which stressed the primacy of ethnic indigeneity – in effect eliminated his main competitor from the presidential election on 22 October 1995. It also fomented ethnic hatred and precipitated xenophobic attacks on northerners, dividing the country that Houphouët-Boigny had endeavoured to build.

Le général ivoirien

A bloodless military coup on 24 December 1999 initially provided hope for those suffering the damaging effects of ivoirité. Junta leader Gen. Robert Guéï promised to “sweep the house clean”, declared a state of emergency and tasked a commission with organising elections and drafting a new basic law. 27 experts synthesised the recommendations of several hundred civil society representatives. However, personal ambition again trumped the national interest. Faced with the same electoral predicament as his predecessor, Guéï resorted to incorporating the principle of ivoirité in the proposed constitution, further formalising the exclusion of “northerners” and entrenching animosity.

The new basic law was adopted by popular referendum and promulgated on 1 August 2000. Article 35 stated that candidates for the presidency must be “of Ivorian origin, born of a father and a mother of Ivorian origin”. The president of the National Assembly remained the constitutional successor if the incumbent died in office, while the prime minister was responsible for forming a government.

On 6 October, a newly appointed Supreme Court disqualified 14 of the 19 candidates for the presidency, including Ouattara and Bédié. When initial results from the polls went against Guéï, he dissolved the electoral commission and declared himself the winner. Supporters of his main adversary, Laurent Gbagbo, a university lecturer-cum-trade unionist and leader of the Front populaire ivoirien (FPI), took to the streets. When the army deserted him, Guéï fled the country, enabling Gbagbo to take power. Ouattara and his supporters called for a new ballot that would include all the candidates excluded by Guéï’s “kangaroo court”. Gbagbo refused.

Opposition from Ouattara’s party, Rassemblement des Républicains (RDR), initially made it impossible to hold legislative elections in the north of the country. With the RDR boycotting the polls, Gbagbo’s FPI took 96 of the 225 parliamentary seats and Bédié’s PDCI 94. When the RDR agreed to contest subsequent municipal elections, the party won 63 councils, ahead of the PDCI on 60 and the FPI on 33. Amid such divisions, a military rebellion in September 2002 instigated a protracted civil war between “northerners” resentful of their exclusion from power and forces loyal to the FPI-led government.
[quote] Faced with the same electoral predicament as his predecessor, Guéï resorted to incorporating the principle of ivoirité in the proposed constitution, further formalising the exclusion of “northerners” and entrenching animosity. [/quote]
In January 2003, the signing of the Linas-Marcoussis Accord provided for the removal of divisive and exclusionary ivoirité provisions from Article 35. However, Gbagbo delayed elections until October 2010, perhaps conscious that he faced a formidable opponent. Ouattara’s RDR and Bédié’s PDCI had united under the banner of the Rassemblement des houphouëtistes pour la démocratie et la paix (RHDP). Like Guéï before him, Gbagbo refused to accept electoral defeat in a run-off election held on 28 November. A dubious ruling from the politicised Conseil constitutionnel provided a pretext to disregard results in Ouattara’s strongholds.[5]

More than 3,000 Ivorians were killed before Gbagbo was forcibly removed from the presidential palace on 11 April 2011. It was captured by “northern” rebels with support from the French army. Ouattara was inaugurated as president on 6 May and invited Guillaume Soro, a former rebel leader and prime minister under Gbagbo, to form a government. Following legislative elections on 11 December, Soro was appointed president of the National Assembly and thus became the heir apparent. While Soro continues to serve at the pinnacle of the Ivorian state, Gbagbo is being tried for crimes against humanity at the International Criminal Court in The Hague. This has led to accusations of victor’s justice.

Succession in Côte d’Ivoire’s Third Republic

Ouattara is eager to stress his commitment to peace and reconciliation. In March 2015, he promised that if he was re-elected that October, he would revise the basic law to clarify succession and formalise the electoral calendar. The push for constitutional reform has been framed as delivering on the Linas-Marcoussis Accord – a document endorsed by the United Nations Security Council.[6] In this regard, Ouattara is on shaky ground: the agreement commits its signatories to revise rather than replace the statute.

The distinction has not escaped the attention of either the FPI or the PDCI. The former has split into two factions in Gbagbo’s absence, while the latter is visibly divided over Bédié’s willingness to serve as a junior partner to Ouattara. Conscious of the predominance of subjectivity or “personal preferences” in the history of constitution-making in Côte d’Ivoire, civil society representatives have  also urged Ouattara to revise controversial parts of the existing text – such as Article 35 – rather than become embroiled in writing a new document.[7] Nevertheless, the president has shown his intention to emulate the Gaullist model, which treats constitutional reform as an elite project rather than an opportunity for dialogue and consensus.

In May 2016, Ouattara appointed a committee of experts led by Prof. Boniface Ouraga Obou. A former dean of the law faculty at the University Félix Houphouët-Boigny in Cocody, Abidjan, and ex-member of the Conseil constitutionnel, Ouraga Obou is a founding member of the FPI who presided over the body responsible for the 2000 basic law. Ouattara’s proxy in the process has been Dr Cissé Bacongo, a special adviser who was also involved in the 2000 constitutional review. The whole process is supported by Minister of Justice Sansan Kambilé, a former judge and government secretary-general. Following consultation with 40 stakeholder groups, the committee delivered a draft constitution to the president on 24 September. The text was put before the cabinet on 28 September and parliament on 5 October.
[quote] Regardless of the imperfections of the new dispensation, the current succession provision is far from perfect either. [/quote]
Not everyone in the government has welcomed the review process. Soro initially continued to refer to “reforms to the constitution” rather than a new constitution. The introduction of a vice-president, who would be able to complete the term of the incumbent in the event of his death – and thus “guarantee the continuity and stability of the executive and ensure that the electoral calendar is respected”[8] – could be seen as diminishing the status and authority of the president of the National Assembly.

The vice-president is to be elected on a joint ticket with the head of state from 2020, but under an interim dispensation Ouattara is entitled to appoint a deputy when he promulgates the new basic law. That Ouattara has already expressed a desire to stand down before 2020 has led to criticism that he is attempting to install a successor by the back door.[9] The appointment of a vice-president would have greater legitimacy if parliament were involved, a point stressed by the Plateforme de la société civile pour l’observation des élections en Côte d’Ivoire (POECI)[10] and members of parliament.[11]

Regardless of the imperfections of the new dispensation, the current succession provision is far from perfect either. While the president of the National Assembly is able to fill a power vacuum temporarily, the requirement to organise elections within 45 to 90 days is ambitious. Given the history of incumbents amending electoral laws and manipulating institutions, it is by no means certain that Soro, a former rebel leader, would respect the constitution. Having so far been insulated from any legal repercussions for his role in the civil war, he might prefer to benefit from the immunity afforded to a sitting head of state.

Article 35, the Senate, the diaspora and the chiefs

Those intent on contrasting the 2000 basic law with the 2016 document point to evidence of the subjectivity that is typical of constitution-making in Côte d’Ivoire. They argue, for example, that Bédié (aged 82) and Ouattara (aged 74) have good reason to support a reduction in the number of conditions dictating eligibility for the presidency from 12 to four. They cite the removal of a maximum age limit of 75, and the lowering of the minimum age threshold from 40 to 35 years. Yet this was precisely the wording agreed at Linas-Marcoussis in 2003, when Soro was only 30.[12] A less frequently heard criticism concerns the omission of a requirement for medical reports on presidential aspirants. These were an integral part of Article 35 of the 2000 constitution, whereas the Linas-Marcoussis Accord only required the incumbent to make details of his annual medical checks public.

Appropriating wording from the peace agreement, presidential candidates will no longer be required to prove that both their parents were Ivorian, and that they had never renounced Ivorian citizenship or assumed another nationality. Nor will they have to have been resident in Côte d’Ivoire for five consecutive years before the election. This could be regarded as advantageous to Gbagbo, who has been held in The Hague since November 2011. Curiously, the FPI has fixated on a clause from the 2000 constitution, which required that any changes to the presidential mandate be put to a single-issue popular referendum, seemingly oblivious to the fact that these provisions entrenched the exclusionary tactics first implemented by Bédié, expanded by Guéï, and maintained by Gbagbo.
[quote] Attempts to engage the diaspora in domestic politics may help to heal old wounds and promote a diversity of views. [/quote]
FPI politicians inside and outside the country may also fail to appreciate the steps being taken to provide them with a means to influence legislation. The absence of the party from the National Assembly following their boycott of the 2011 elections has been addressed in Ouattara’s plans to create a new Senate (upper house). Two-thirds of the new body will be indirectly elected by Côte d’Ivoire’s collectivités territoriales (14 districts and 31 regions), which should provide those in less densely populated areas with a greater voice than in the National Assembly. The remaining 33 senators are to be appointed by the president, who may pick from among “Ivorians outside the country and members of the political opposition”.

Attempts to engage the diaspora in domestic politics may help to heal old wounds and promote a diversity of views. Issiaka Konaté, director-general for Ivorians outside the country, told ARI that “Article 30 entitles the diaspora to participate in national affairs. Under the Third Republic, I hope that Ivorians abroad will be considered the 32nd region”. On paper, bicameral parliaments also provide opportunities to promote a greater role for under-represented groups, such as women, youth and the disabled, to influence legislation. This would be constructive in a country where 77% of the population is under 35 years old and where women play a limited role in political life.

However, Ouattara may resort to using the Senate as Houphouët-Boigny did the National Assembly. Plans for Bédié’s PDCI and Ouattara’s RDR to merge, formalising the RHDP alliance under a new party, are supposed to be realised before legislative elections, due by December 2016. With competition for selection on an RHDP ticket expected to be fierce, those who lose out in primary elections are likely to seek a consolation prize in the upper house, either by popular ballot or presidential appointment. Ouattara has an incentive to maintain a friendly parliament. Under new rules, the head of state would be able to suggest amendments to any part of the basic law, subject to a two-thirds majority in a plenary session of the National Assembly and Senate.

The additional parliamentarians will not be the only new “big men”. Ouattara plans to enshrine in the constitution a “National House of Traditional Chiefs and Kings”, emulating Ghana. Both Ouattara and Houphouët-Boigny were born into royal households and have used tribal leaders for political advantage. Mamadou Koulibaly, a former president of the National Assembly, argues that institutionalising chiefs would lead to jurisdictional disputes with municipal government.[13] In contrast, Gilles Yabi of West African think tank WATHI believes that a house of traditional leaders “could play an important part in promoting national unity, provided that its role, function and composition is clearly specified.”[14]

Had Ivorians been consulted on the drafting of a new basic law, chiefs could have convened debates in rural communities. The RHDP coalition may yet enlist traditional leaders in a belated attempt to educate villagers on the proposed constitution and cajole them into voting in the plebiscite. Turn-out is unlikely to be strong. POECI argues that rural folk do not view changes to the statute as pressing; more urgent priorities are national reconciliation, the rising cost of living, unemployment and security.”[15]

My constitution

Marie-Joelle Kei, co-ordinator of the West African Network for Peacebuilding–Côte d’Ivoire has called for the constitutional referendum to be delayed until early 2017, to allow time for greater popular participation.[16] Even RDR activists have expressed a lack of preparedness for the campaign.[17] By any standards the timetable is rushed and does not attest to profound deliberation. Many Ivorians will undoubtedly regard the new basic law as another presidential project.

Ouattara remains determined to get the vote out of the way and loath to provide a disparate opposition with a political cause behind which to unite. Initial calls for a constituent assembly made good sense, and might have offered the opportunity for inclusive deliberations over the text. But the opposition’s willingness to engage in rational debate became questionable when 23 parties resolved to reject the constitution before the text was released.
[quote] By any standards the timetable is rushed and does not attest to profound deliberation. Many Ivorians will undoubtedly regard the new basic law as another presidential project. [/quote]
Many of those who have spoken out against the new basic law have done so because they remain loyal to Gbagbo and refuse to acknowledge the legitimacy of the Ouattara regime. Opposition politicians have described the proposed constitution as “treacherous”,[18] and “undemocratic, illegal and illegitimate.”^[19] Despite its ethos of exclusion, they maintain that the 2000 document is “progressive, modern and avant-garde”;[20] and that the government’s attempt to overhaul it risks provoking “a new socio-political crisis” and poses a “threat to peace and stability.”^[21] One group has even vowed to “block Ouattara’s path.”[22]

Such hyperbole and reactionary behaviour does nothing to promote reconciliation or dialogue over issues of national importance. Ouattara’s decision not to open up the process may be a result of the recalcitrant nature of the opposition, but he has also displayed a preference for the Gaullist model. Anyone familiar with the history of constitutional reform in Côte d’Ivoire should not be surprised that the most recent version of the basic law has been fashioned by the incumbent in the absence of popular consultation.

NOTES

[1] “Remise de l’avant-projet de constitution: allocution de SEM Alassane Ouattara, Président de la République de Côte d’Ivoire”, Government of Côte d’Ivoire, 24 September 2016,

[2] Established in 1958 as the successor to the Union française, the Communauté française comprised France and her overseas departments and territories, as well as a number of former colonies.

[3] “L’élaboration de la Constitution de 1958: entretien avec Michel Debré”, France TV, 15 October 2012

[4] Robert E. Handloff (ed.), Côte d’Ivoire: A Country Study, Library of Congress, Third Edition, 1991, p.145

[5] The Conseil constitutionnel is a replica of that in France’s 1958 constitution. It should be completely autonomous from the legislative and executive branches, and play a role in regulating them; however, in practice the institution has been politicised, employing legal arguments to endorse exclusionary policies.

[6] Resolution 1464 (2003) adopted by the Security Council at its 4,700th meeting on 4 February 2003

[7] “Côte d’Ivoire/La convention de la société civile ivoirienne pour une révision constitutionnelle et non une réforme”, Agence Ivoirienne de Presse, 30 September 2016

[8] “Cérémonie d’ouverture de la deuxième session ordinaire de l’Assemblée nationale: allocution de SEM Alassane Ouattara, Président de la République de Côte d’Ivoire”, Government of Côte d’Ivoire, 5 October 2016

[9] Cyril Bensimon, “Côte d’Ivoire: le président Ouattara promet une nouvelle Constitution s’il est réélu”, Le Monde.fr, 23 October 2015

[10] “Avant-projet de Constitution, des avancées notables mais des clarifications sur certaines dispositions”, POECI, 8 October 2016, pp.8–9

[11] Vincent Duhem, “Côte d’Ivoire: que faut-il retenir des débats sur la Constitution?”, Jeune Afrique, 8 October 2016

[12] “Texte de l’Accord Linas-Marcoussis”, France Diplomatie, 24 January 2003

[13] S. Debailly, “Côte-d’Ivoire ‘Constitution Ouattara’: Koulibaly critique Ouattara et annonce sa participation au sit-in au Parlement”, Connection Ivoirienne, 3 October 2016

[14] Gilles Olakounlé Yabi, “Côte d’Ivoire: la nouvelle constitution proposée par le président Ouattara est une occasion manquée”, WATHI, 10 October 2016,

[15] Tié Traoré, “Référendum 2016/Une enquête révèle: 2 Ivoiriens sur 3 rejettent l’adoption d’une nouvelle Constitution”, L’inter, 16 August 2016

[16] Armelle Nga, “Un groupe d’ONG appelle à un report du référendum en Côte d’Ivoire”, AfricaNews.com, 17 September 2016

[17] David Yala, “Un cadre du RDR prévient Ouattara: ‘Des militants du RDR ne sont pas prêts à aller voter Oui au référendum”, Linfodrome.com, 13 October 2016,

[18] “Côte d’Ivoire: Marche contre la constitution, Affi N’guessan promet de combattre jusqu’au bout ‘la dictature Ouattara”, Koaci, 8 October 2016

[19] “Côte d’Ivoire: 23 partis d’opposition contre le projet de nouvelle Constitution”, RFI, 30 June 2016

[20] David Gone, “Côte d’Ivoire/nouvelle constitution: Aboudrahamane Sangaré et le FPI décident enfin”, Afrique Sur 7, 10 October 2016

[21] “Côte d’Ivoire: 23 partis politiques rejettent le projet de révision de la constitution ivoirienne”, Abidjan.net,  30 June 2016

[22] “Le parti de Blé Goudé ‘opposé’ au projet de la nouvelle Constitution ivoirienne”, Abidjan.net, 25 September 2016

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Municipal elections have had a brief and unremarkable history in post-apartheid South Africa. However, the polls on 3 August are expected to be the most fiercely contested of any to date. South Africa’s demography is changing rapidly and with it the political landscape. The eight largest city councils – known as metropolitan municipalities, or “metros” – are home to some 40% of the population, where the share of the vote held by the ruling African National Congress (ANC) is in decline.

Amid the clamour for votes, ANC infighting and heated rhetoric, little attention has been paid to the state of the country’s municipalities. Local governments are responsible for R250 billion of expenditure a year, equivalent to 8% of GDP.[1] Their impact on the daily lives of most citizens is far greater than that of the national administration. The ANC may well lose control of one or more of the seven metros it holds. In the absence of a clear winner, coalitions may be required to govern four of them. Yet, in pursuit of radically different electoral constituencies, the country’s three main political parties have adopted seemingly incompatible approaches to governance. This Briefing Note examines the backdrop to an election that is likely to be a watershed in South Africa’s democratic development.

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• The struggle (to be heard)
• Comrades for the council
• Shifting constituencies
• Technocrats in the town hall
• Left out
• Revolutionary councillors
• Crossing the Rubicon
• Sources

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The struggle (to be heard)
On 3 August, 26.3 million citizens will be eligible to vote – 42.5% more than registered for municipal elections in 2000. However, participation in electoral politics has declined: 18.7 million South Africans cast ballots in the 2014 national and provincial polls, equivalent to 57% of the voting age population, down from 72% in 1999.[2]

A remarkable 48.6% of the electorate have come of age since the end of apartheid in 1994, but young people remain disproportionately under-represented. While 93% of South Africans over 40 are registered to vote in local elections, this figure falls to 79% among those aged 30–39, and to 55% for those aged 20–29.

The diminishing appeal of electoral politics can in part be explained by the dominance of the ANC, seemingly invincible with more than 60% of the vote in 2014. Flagging support for the party’s leader, Jacob Zuma, is another factor. The president has been embroiled in a succession of corruption scandals, and the compatibility of his style of leadership with the tenets of a constitutional democracy is widely – and volubly – questioned. Justice Malala, a prominent political commentator, recently cast Zuma as “a sexist, homophobic, crass, incapable and shameless man who has handed over important and prominent cabinet posts to his friends… With him have come patronage and mediocrity.”[3]

Lack of accountability has also caused disillusionment and apathy. South Africans do not directly elect the head of state, who is appointed by parliamentary ballot. The legislature is elected by proportional representation (PR), with the result that members of parliament (MPs) serve at the behest of powerful parties, owing their position to a ranking on a PR list. In the case of municipal government, voters cast ballots for both a ward councillor and a party; yet parties can recall councillors in both categories. In a 2015 survey, two-thirds of voters stated that they had no access to ward councillors or knew how to reach them.[4] Radical activism is eclipsing electoral politics.

In 2014, 218 “service delivery protests” were recorded in South African municipalities, ranging from the blockading of roads to destruction of government buildings.[5] Received wisdom has it that such protests tend to peak in non-election years, and dissipate when MPs and councillors attempt to resolve community grievances in return for support at the ballot box. However, violent protest linked to political battles within the ANC have marked June and July 2016. Electoral competition is becoming ever fiercer.

Comrades for the council
With over one-quarter of South Africans unemployed, and many more having given up looking for work, election to municipal office is a prized opportunity. Such roles “can mean the difference between being middle class and being unemployed”, asserts Steven Friedman, director of the Centre for the Study of Democracy at the University of Johannesburg.[6] They are also lucrative. A part-time representative in the smallest municipality (grade 1) can be paid as much as R207,455 a year. A full-time committee chair in a grade 1 municipality could earn R482,357, while in a grade 6 council, this could rise to R877,968. The mayors of the eight metros are entitled to up to R1,242,409 – more than the starting salary of an MP.[7]

Councillors are entrusted with access to resources, power and influence. They are responsible for determining how contracts are awarded. “Tenderpreneurs” use political connections to obtain contracts, often in return for a kickback to the party or individuals. Paul Graham, southern Africa director at Freedom House, a democracy and rights watchdog, told ARI that “using public office for personal gain has become normalised under the Zuma administration”. The practice of “cadre deployment” – providing the politically connected with salaried positions in government – is commonplace.

ANC Secretary-General Gwede Mantashe has admitted that the battle for patronage and competition between “tender beneficiaries” contributed to pre-election violence in Tshwane, a Gauteng province metro which encompasses the administrative capital Pretoria.[8] A factional conflict between supporters of incumbent mayor Kgosientso “Sputla” Ramokgopa and ANC Deputy Chair for Tshwane Mapiti Matsena could not be resolved and risked derailing the party’s campaign in the metro. The ANC’s decision to parachute in Thoko Didiza – a figure disconnected from local politics – exposed the priority afforded to internal dispute resolution.[9]

Tshwane also highlighted the shortcomings of ANC “slates”. This form of block voting has been standard practice since the party’s Polokwane conference in December 2007, which hastened the recall of Thabo Mbeki as president of South Africa. The zero-sum nature of factional battles has precipitated an increase in the use of violence. In KwaZulu-Natal (KZN) and Mpumalanga provinces individuals overlooked in candidate selection have orchestrated political assassinations, with the intention of forcing a by-election or moving up a PR list.

An estimated 450 political assassinations occurred in KZN between 1994 and 2014.[10] During the past two years, 64 people have been killed at Glebelands Hostel in Durban, in what “started as a fight over the allocation of beds but has escalated into an intra-ANC strife”.[11] Twelve ruling party cadres were executed in KZN in June-July 2016.[12] The alarming statistics for Zuma’s home province raise questions about the ANC’s ability – and desire – to maintain law and order there.

In Mpumalanga, violence has also become a feature of politics. An ANC deputy chairman, Michael “Zane” Phelembe, was shot dead outside his home in May. He had opposed plans regarding the award of lucrative local infrastructure deals. As violent contestation has escalated, ideological divides within the ruling party have seemingly disappeared. Raymond Suttner, a former anti-apartheid activist who now lectures at Rhodes University, contends that there has been “a broader depoliticisation of the ANC as the drive for spoils displaces political ideas.”[13]

Shifting constituencies
Policy debates may be a thing of the past, but the ANC knows how to put on a show for voters. The party enlists prominent musicians to play at “car washes” where election candidates dispense T-shirts, posters and alcohol before touring local shebeens and hairdressers. In economically marginalised areas, the opportunity to receive handouts is attractive. While nationally only one in four South Africans say they attended an election campaign rally in 2014, in Mpumalanga the figure was 48%. The ANC received 78.8% of the provincial vote.

This type of electioneering comes at a cost. South Africans have come to expect an increase in corruption ahead of elections as state coffers are looted by those charged with fundraising. During a May 2016 visit to London, Dr Zweli Mkhize,  ANC national treasurer and KZN “kingmaker”, joked that he was looking for donations as “the cost per vote keeps going up!”. In a 2015 Afrobarometer survey, the majority of respondents agreed with the statement that “voters are bribed”, with 27% feeling this occurred invariably and 28% occasionally.[14]

Besides its access to resources, the ANC has a trump card: identity politics. In April 2016, Zuma told a rally in Melmouth, KZN, “We have a problem as black people. Some people don’t even go out there and vote. Every elderly white person goes out there to vote because they know how important voting is.”[15] Ebrahim Fakir, manager of governance institutions and processes at the Electoral Institute for the Sustainable of Democracy in Africa, told ARI that “playing the race card may provide the ANC with a quick win, but this tactic is not sustainable in the long term.”
 
In the meantime, ANC figures at all levels routinely refer to its major opponent, the Democratic Alliance (DA), as a “white party”. The threat posed by the DA has increased since it began targeting the black middle class. The party’s share of the vote in urban areas increased from 17.9% in 2004 to 30.2% in 2014, largely thanks to support from young professionals. StatsSA estimates that the proportion of South Africans living in towns and cities is 62% and rising. While rural turnout decreased from 77.6% in 2004 to 69.9% in 2014, in urban areas it marginally increased.[16]

Urban workers played an instrumental role in bringing the ANC to power, through the United Democratic Front. This incorporated the labour movement, churches, civil society and student activists, and adopted the ANC’s Freedom Charter, co-operating with the Congress of South African Trade Unions (COSATU) and the underground South African Communist Party (SACP). However, the ANC’s share of the urban vote has declined significantly, from 66.8% in 2004 to 55.8% in 2014. In a 2015 opinion poll, only 42% of city dwellers said they would vote for the ruling party.[17]

Conscious of its declining national support, the ANC moved to capture a political constituency held by the Inkatha Freedom Party in KZN.[18] In 1999, only 11% of the ANC’s national vote came from the province, compared to 24% from Gauteng. In 2014, KZN and Gauteng both accounted for 22% of the party’s national vote. The ANC also controls every municipality in the predominantly rural provinces of Free State, Limpopo and Mpumalanga. Prof. Ivor Chipkin, executive director of the Public Affairs Research Institute has observed that, “The ANC is becoming a regional, ethnic party.”[19]
 
To that charge, can be added one of systemic corruption. Irregular expenditure by South Africa’s municipalities more than doubled between 2010-11 and 2014-15, when it reached R14.75 billion. During the same period, fruitless and wasteful expenditure increased from R273 million to R1.34 billion.^[20] The auditor general only has the power to report on the worsening situation, not to remedy it. That responsibility falls to elected officials, but even where the political will exists, municipalities often suffer a skills shortage. In 2014, the Department of Cooperative Governance and Traditional Affairs reported that 170 of 278 municipal chief financial officers did not hold qualifications appropriate for their role.[21]
 

Technocrats in the town hall

Exploiting these failings, the DA has promised “honest government”. Its campaign has stressed the party’s record in Western Cape, where it runs the province and the City of Cape Town, and governs two-thirds of the municipalities. In 2014-15, 73% of Western Cape municipalities were awarded clean audits. The DA cultivates a reputation for “doing things by the book”. The party runs, either alone or in coalition, nine of the 10 top-ranked municipalities in the Government Performance Index.[22]

Through “Blue the Network”, the DA has appealed to “young professionals wanting to bring about meaningful change in South Africa”. This has enabled it to recruit new members and a pool of prospective candidates with experience of business and finance. Applicants are interviewed and tested prior to selection, then provided with relevant training. This focus on skills contrasts with the fierce – and sometimes physically violent – competition that characterises ANC primaries.

However, the DA remains hamstrung by its perceived lack of diversity. Although technically the most representative of South Africa’s political parties, the shortage of older black males in the party leadership is notable. The party’s Young Leaders Programme promotes diversity across the DA, and has introduced under-35s from all racial backgrounds into party structures, local and provincial government, and parliament – but it will take time to change entrenched perceptions.

The DA has put up candidates for the 2016 municipal elections in every single ward in the country, a feat unmatched by the ANC. However, 45% of its representatives are standing for multiple positions, despite election to one office alone being permissible by law. The DA is also accused of an urban bias. Nkanyiso Gumede of the Institute for Poverty, Land and Agrarian Studies (PLAAS) has observed that the party’s manifesto contains “absolutely nothing on agriculture, rural development, land reform or farm workers, raising the question of whether or not the DA recognises that there is a large rural constituency.”[23]

Mmusi Maimane, the DA’s 36-year-old leader, is a gifted orator and “media savvy”. His decision to refer government maladministration to the public protector (an ombudsman) and the courts has proved effective. But sustained attempts to call a vote of no confidence in Zuma, despite the ANC’s huge parliamentary majority, attest to an interest in seeking headlines. Appeals to the government to raise social grants – a range of welfare payments that the ANC initiated – at a time when the national budget is under intense pressure, displays a degree of political opportunism. The enthusiasm for the social grant system and the party’s endorsement of the National Development Plan has prompted debate about whether the DA is merely “ANC Lite”. Winning a metro in Gauteng, or Nelson Mandela Bay in Eastern Cape, would put this suggestion to the test.

Left out
The ANC, COSATU and the SACP maintain a “Tripartite Alliance”, but this is fracturing amid controversy over Zuma’s clientelism. The Communist Party has talked up “state capture” and promised a “mass action” campaign against members of the Gupta family, who have allegedly profited from personal ties to Zuma, but has stopped short of directly criticising the head of state. Ranjeni Munusamy, associate editor at the Daily Maverick, told ARI that the Young Communist League wants the SACP to field its own candidates in future elections.

In public, COSATU endorses the ANC but its credibility is diminished. “COSATU has lost muscle”, Munusamy told ARI, stressing its declining membership amid a shift away from the shop floor and towards public sector jobs. The mining sector used to constitute the labour federation’s largest affiliate until more urgent, radical voices eclipsed ANC-linked unions. Wildcat strikes in August 2012, and the massacre of striking workers at the Lonmin mine in Marikana, saw the rise of the independent Association of Mineworkers and Construction Union at the expense of the National Union of Mineworkers.

In November 2014, in another significant development, COSATU expelled the National Union of Metalworkers of South Africa (NUMSA). When Zwelinzima Vavi, then COSATU’s general secretary, spoke out against the expulsion, he too was dismissed. Vavi and NUMSA’s general secretary, Irvin Jim, plan to form a new labour federation, unionising hitherto marginalised workers and appealing to those in the informal sector.

That Vavi and Jim have not yet made their move is testament to the growing presence of the Economic Freedom Fighters (EFF) since the party’s formation in July 2013. Although the EFF achieved only 6.4% of the national vote in April 2014, it won representation in all nine provinces and became the official opposition in two provincial legislatures, Limpopo and North West. The party is untested at local level, but its widely anticipated success could be the headline of the 2016 municipal elections.
 

Revolutionary councillors
The rise of the EFF can be attributed to the personality of its leader and the appeal of his populist narrative and dress code. Julius Malema, the party’s “commander-in-chief”, is a former ANC Youth League leader who once pledged to die for Zuma. Malema has since become a thorn in Zuma’s side, describing him as “an illegitimate president”, “morally and politically compromised”, and calling for his “immediate removal” in response to the 2016 state of the nation address. [24]

Malema has branded the EFF as a party of the working class, the neglected and the marginalised. It has gained a foothold in constituencies disaffected with the ANC, including the “unhitched” labourers whose precarious existence has not changed since the apartheid era. The party’s powerful, racially charged discourse on land appeals to those living in townships and backyard shacks. Its uniform – red overalls and hardhats, interchanged with military fatigues and red berets, or pinafores – is distinctive, and its conduct calculated to attract attention. Numerous EFF MPs have been forcibly removed from the parliamentary chamber for rambunctious behaviour. The EFF has also tapped into the spirit of rebellion among black students at South Africa’s universities. Party activists buttressed the #RhodesMustFall movement, and subsequently #FeesMustFall, wrong-footing the ANC Youth League.

Casual labourers are unlikely foot soldiers for an election campaign, but the party has actively sought to represent their interests nevertheless. The EFF manifesto demands that all companies listed on the Johannesburg Stock Exchange pay a minimum wage of R4,500. Those employed in specific manual roles would be entitled to additional salaries. Mineworkers would receive R12,500 per month; private security guards, R7,500; builders, R7,000; factory workers, R6,500; and petrol attendants, cashiers and farm labourers, R5,000.[25] The manifesto also promises to “expropriate and allocate land equitably to all residents of the municipality”. Africa Check found this proposal to be unworkable in the absence of ministerial approval and funds for compensation.[26] Similarly impractical is a pledge that half of all goods sold in the municipality would be produced locally.

The EFF finds itself at a critical juncture. It must now decide whether it is to be an entertaining  protest movement or a party willing and able to govern. If it has sufficient councillors to hold the balance of power in a municipality, it will be presented with an opportunity to access paid positions and influence resource distribution. Should it refuse to join a coalition, it could lose support and be portrayed as politically irrelevant. If it accepts, the EFF will be expected to dispense more than populist bombast.

Malema has done all he can to distance himself from the party that spawned him. In June, he told a crowd in Bushbuckridge, Mpumalanga, “You are in an abusive relationship with the ANC. It beats you up and you go back and say you love it.”[27] Despite his claims that the EFF “will never work with the ANC”, some suspect Malema of planning a return to the  fold once he has shown his ability to garner more than 10% of the vote.

Crossing the Rubicon
South Africa’s political landscape is increasingly pluralistic. Each election now brings a more concerted challenge to the unrivalled supremacy that the ANC has enjoyed since 1994. The 2016 municipal elections will confirm as much. Fewer than one in three South Africans of voting age are likely to turn out to support the ANC on 3 August. Traditional supporters may engage in tactical voting – splitting their votes across ballots for ward and PR councillors – in the hope of electing a candidate with the inclination to fix dilapidated local infrastructure and the nous to improve municipal finances.

Should the ANC lose control of one – or more – of its seven metros, there will be immediate and intense speculation about the party’s ability to dominate the April 2019 national and provincial elections. There is already conjecture that, faced with the prospect of losing Gauteng province in 2019, the ANC may “self-correct”, recalling the president at the next national conference in December 2017. But Zuma’s grip on power is entrenched. All the provincial premiers remain loyal to him, and many others depend on his patronage. Against the backdrop of rapidly changing demography, some regard his close ties with rural constituencies as an electoral bulwark rather than an existential threat to the ANC.

Political pluralism, at least in South Africa’s cities, is synonymous with increasing divergence. The character and approach of the parties being watched most closely – the ANC, DA and EFF – could not be more different. Where coalitions become necessary after 3 August, they will have to be negotiated and fashioned by those advancing disparate and incompatible policy prescriptions to local and national issues. This process will produce important insights into the near-term development of democracy in South Africa.

At the 2011 municipal elections, when 57.6% of registered voters turned out, the DA was the major beneficiary of a heightened interest in local politics.[28] In 2016, the EFF may profit from widespread frustration at the state of government. It remains to be seen whether technocrats and revolutionaries can collaborate in government, but the opportunity to revitalise South Africa’s maligned municipalities is theirs for the taking.

Interviews were conducted in April 2016. Africa Research Institute and Nick Branson would like to express their gratitude to those who contributed.

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[1] At the time of publication, 100 South African Rand was equivalent to US$7

[2] Collette Schulz-Herzenberg, “Trends in electoral participation and party support: 1994-2014”, Institute for Strategic Studies, www.issafrica.org/uploads/Electoral-Trends-Collette-Schulz-Herzenberg.pdf

[3] Justice Malala, “The Big Read: Lousy Hlaudi, get off TV”, The Times, 4 July 2016, www.timeslive.co.za/thetimes/2016/07/04/The-Big-Read-Lousy-Hlaudi-get-off-TV

[4] “‘We will see them when it is election time’”, Africa in Fact (Issue 36; March–April 2016), p.110

[5] Derek Powell, Michael O’Donovan and Jaap de Visser, “Civic Protests Barometer 2007-2014”, Multi-Level Government Initiative, University of the Western Cape, February 2015, http://dullahomarinstitute.org.za/multilevel-govt/mlgi/civic-protests-barometer-2007-2014/view

[6] Troye Lund, “Local government reform: Pravin’s big challenge”, Financial Mail, 11 December 2014, www.financialmail.co.za/coverstory/2014/12/11/local-government-reform-pravins-big-challenge

[7] “Determinations of upper limits of salaries, allowances and benefits of Members of Municipal Councils”, Independent Commission for the Remuneration of Public Office-Bearers, 21 December 2015, www.remcommission.gov.za/pebble.asp?relid=4381

[8] Krista Mahr, “Violent South Africa protests expose ANC internal rifts”, Financial Times, 22 June 2016, www.ft.com/cms/s/0/ce8382f6-388c-11e6-9a05-82a9b15a8ee7.html#ixzz4CQW5s3EG

[9] Natasha Marrian, “How the ANC is balancing factions and competence”, Business Day, 21 June 2016, www.bdlive.co.za/national/2016/06/21/news-analysis-civic-choices-show-anc-balancing-factions-and-competence

[10] David Bruce, “Political killings in South Africa”, Policy Brief 64, October 2014, Institute for Security Studies, https://www.issafrica.org/uploads/PolBrief64.pdf

[11] Nce Mkhize, “The hostel where locals feel like refugees”, Business Day, 30 June 2016, www.bdlive.co.za/national/2016/06/30/the-hostel-where-locals-feel-like-refugees

[12] Genevieve Quintal, “Another ANC KwaZulu-Natal leader killed, bringing death toll to 12”, Rand Daily Mail, 19 July 2016, www.rdm.co.za/politics/2016/07/19/another-anc-kwazulu-natal-leader-killed-bringing-death-toll-to-12

[13]  Raymond Suttner, “Op-Ed: Tshwane’s flames and disintegration of ANC’s authority”, Daily Maverick, 29 June 2016, www.dailymaverick.co.za/article/2016-06-29-op-ed-tshwanes-flames-and-disintegration-of-ancs-authority

[14] Sibusiso Nkomo and Jamy Felton, “As South Africa’s local elections approach, public confidence underpins system in turmoil”, Afrobarometer, 17 May 2016, http://afrobarometer.org/publications/ad89-south-africas-local-elections-approach-public-confidence-underpins-system-turmoil

[15] “I am your president and shepherd, let me lead you – Zuma”, News 24, 3 April 2016, www.news24.com/SouthAfrica/News/i-am-your-president-and-shepherd-let-me-lead-you-zuma-20160403

[16] Jonathan Faull, “Slicing and Dicing the 2014 Election Data: What are the implications for the ANC, DA and EFF?”, Institute for Security Studies, 29 May 2014, www.issafrica.org/uploads/2014-Election-Data-Judith-Februrary.pdf

[17] Sibusiso Nkomo and Jamy Felton, “As South Africa’s local elections approach, public confidence underpins system in turmoil”, Afrobarometer, 17 May 2016, http://afrobarometer.org/publications/ad89-south-africas-local-elections-approach-public-confidence-underpins-system-turmoil

[18] Nick Branson, “Land, Law and Traditional Leadership in South Africa”, Briefing Note, Africa Research Institute, 17 June 2016, http://bit.ly/SALandLaw

[19] Ivor Chipkin, “Once-invincible ANC takes on regional, ethnic colours”, Sunday Times, 15 May 2016, www.timeslive.co.za/sundaytimes/opinion/2016/05/15/Once-invincible-ANC-takes-on-regional-ethnic-colours

[20] Paul Berkowitz, “Local government audits 2013-14: how well are we doing with Clean Audit 2014?”, 3 June 2015, http://paulberkowitz.co.za/local-government-audits-2013-14-how-well-are-we-doing-with-clean-audit-2014/

[21] Lukhona Mnguni, “Grassroots grievances”, Africa in Fact (Issue 36; March-April 2016), p.67

[22] “GGA Government Performance Index 2016”, ibid., p.91

[23] Nkanyiso Gumede, “Scramble for votes: Are rural votes vital in the upcoming local government elections?” PLAAS, 12 May 2016, http://www.plaas.org.za/blog/scramble-votes-are-rural-votes-vital-upcoming-local-government-elections

[24] “SONA: Transcript of Julius Malema’s speech”, PoliticsWeb, 24 February 2016, www.politicsweb.co.za/documents/sona-transcript-of-julius-malemas-speech

[25] Economic Freedom Fighters, “EFF memorandum to Johannesburg Stock Exchange”, 27 October 2015, http://effighters.org.za/eff-memorandum-to-johannesburg-stock-exchange-27-october-2015/

[26] Kate Wilkinson and Masutane Modjadji, “Is the EFF your ‘last hope for service delivery’? We evaluate their manifesto”, Africa Check, 26 May 2016, https://africacheck.org/reports/is-the-eff-your-last-hope-for-service-delivery-we-evaluate-their-manifesto/

[27] Sam Mkokeli, “Exclusive: Inside the mind of Julius Malema”, Financial Mail, 15 June 2016, www.financialmail.co.za/coverstory/2016/06/15/exclusive-inside-the-mind-of-julius-malema

[28] Ebrahim Fakir and Waseem Holland, “Changing voting patterns?” Journal of Public Administration (Volume 46, Number 3.1), September 2011

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