Out of Africa

When I began my journey through Africa nine months ago, I was incredibly optimistic. On my last trip through Africa in 1990-1991, I discovered a continent poised for change. The people were beginning to acknowledge that the old ways no longer worked. Leaders understood that excessive government controls stymied growth. Africa was beginning to turn the heads of foreign investors. Ten years later, I returned hoping to find new and revitalized countries on the track towards prosperity.

Unfortunately, I’ve been disappointed. The Africa I’ve discovered on this latest leg of the journey still has a long way to go. Certain of the 32 countries we visited, like Tanzania, Ethiopia, and Mauritania, are making the right moves, privatizing industry, loosening the bureaucracy, and getting rid of the crooks that ran their economies into the ground. Many others countries, though, have taken steps backward in their development. I expected to be seduced by investment opportunities in places like Kenya, Uganda and Mozambique. There I found only corruption and petty, but violent disputes raging over greed and power. I had hoped to find the conflicts winding down, but they are worse and more senseless these days in places like Western Sahara, Nigeria, both Congos, Angola, Zimbabwe, Uganda, Ethiopia, Eritrea, Sudan, Rwanda, etc. The new generation of leaders in which I had placed such hopes may be as ludicrous as the old.

They are all absurd naked grabs for power. The first couple of decades of war in Angola at least had some ideology supposedly. There were the communists against the democratic capitalists. Now the former communists are capitalists who hold elections. The democratic capitalists lost the election so they decided to return to war. They control the diamonds while the government controls the oil. The war now is just a bunch of thugs killing everyone in sight to control the oil and diamonds and anything else they can get. Unfortunately the same sort of things applies to all these hopeless wars. All wars have economic origins, but frequently are cloaked in ideology. Now its just about greed and power.

The last country on my tour of Africa was Egypt. Situated on the Northeastern corner of the continent and bridging both the Africa and Middle East, Egypt is an incredibly ancient culture, rich in history that dates back over 5,000 years. Driving through, I have seen the extraordinary monuments and temples built thousands of years ago. One of the things I’ve learned over the course of this trip is how far “advanced” other cultures like the Chinese or Africans were centuries ago. Nowhere is that more true than in Egypt. The ancient Egyptians developed arithmetic, astronomy, the world’s first national government as well as a 365-day calendar. When the Americans didn’t even exist, when the English were still painting themselves blue, the Egyptians were making strides in technology and culture.

Of course, Egypt is a fairly large country, covering roughly 386,000 square miles in Northeastern Africa. A small portion of the country, the Sinai Peninsula actually bridges Africa to the Middle East, giving the country a political importance as well. It’s also one of the wealthier countries on the giant continent. With a population of about 62 million people (the second largest in Africa), its gross domestic product grew 5 percent a year in 1999 with per capita GDP of roughly $1,500. It is one of the world’s leading producers of textiles, and is famous for its high-quality, long-staple cotton. Textile production, in fact, accounts for roughly 16 percent of the country’s GDP while petroleum sales and tourism, account for another third of the economy.

While the government was highly centralized for years, a slow but concerted effort began in the mid-1990’s to deregulate state-run enterprises and privatize industry, earning it the title “Tiger of the Nile” among foreign investors. I figured I would finally find some more investment opportunities on African soil.

No such luck. Egypt, like many countries I visited in Africa, has one foot still stuck in the past. Hosni Mubarak, the president of Egypt, has run the country for the past 19 years. He succeeded Anwar Sadat who was president from 1970 to 1981. In fact, Mubarak was Sadat’s vice-president. In effect, the country has been run by the same people for over 30 years — more actually considering Sadat was one of Nasser’s cronies.

When one way of thinking dictates the way a country grows, things often get corroded from the inside. There’s one thing you can say about democracy: the frequent winds of change bring a newness and vibrancy to the culture. With little change over the past three decades I believe Egypt is rotting at the core. It’s important to remember that the Egyptians learned bureaucracy from the Turks, who gave us the word byzantine. They later learned their management skills from the English. That is a recipe for bureaucratic disaster.

My wife Paige and I witnessed the problems just as we arrived in Wadi Halfa, a town on the border of Sudan and Egypt. The border between the two countries has been closed for five years, since the Egyptians accused the Sudanese of trying to assassinate their president. The Sudanese vehemently denied it but the Egyptians nonetheless shut their borders.

For us, that meant crossing the border by water over the Nile. Here, of course, was our first hint of a byzantine bureaucratic system, marred by an inefficient Customs system. It was like a bad riddle: What border can you cross by water and not by land? Egypt’s border, of course. But this was just one of those Customs rules that an Egyptian bureaucrat had decided years ago, a rule that no one had gotten around to changing yet.

Crossing via the Nile, though, meant waiting to find a barge willing to take us in. Ultimately, we spent 11 days in the desert town waiting for a barge that would take us down to Aswan. Surrounded by desert, Wadi Halfa is truly a dry place. There is little running water, no liquor or beer, and little to do except stare off into the 100 degree plus sky every day. When we did finally get a barge to take us and our cars, it took three days to make the 225 mile trip to Aswan. Our troubles with Customs, though, didn’t end when we left Wadi Halfa .

We arrived in Aswan in the late afternoon and the Customs office was closed. That’s because the Customs people work only 5 days a week, 9 am to 2 pm. We were told we would have to wait until the next morning. I’ve been in countless other countries around the world and I promise you Customs offices are open more than 30 hours a week; trade is too important to most nations. Plus you nearly always find that if you are willing to pay extra fees you can always get through. Not in Egypt. We had to spend another night on the barge and wait until morning to deal with Customs. Even then, we were told, we might not be able to get through the next day because the cashier’s office was only open from 9 am to noon. Unless we finished all the paper work by noon the next day, we would have to wait another day before we could pay the fees to drive our cars off the barge and on to land.

Our problems just got worse the next day when the Customs officials told me I didn’t have one of the stamps needed to bring our cars into the country. In order to get in, I needed to fly to Cairo, get the proper stamp and then fly back to Aswan. Up until then, we had used the same documentation in 78 countries. But in Egypt, the Customs people wrote their own rules. All this just to spend a few days driving through. I guess I should have been prepared for such madness. The “Car Office” at Aswan Customs is manned by 2 people although only 2-3 cars a month come through. These guys have to dream up things to do besides nap and read the papers.

When we got off the barge and drove onto to dry land, we discovered such Customs problems extend, not just to people entering and exiting the country via the Nile, but to businesses as well. I talked to many Egyptian businessmen who often needed to bring in spare parts and raw materials for their operations, only to have Customs officials tie up their products for days, weeks, and even months at a time. One chemical manufacturer told me that in order to bring raw materials through Customs, he needs to provide a certified breakdown of each chemical he is using. If the Egyptian Customs people disagree with his analysis, they often hold his materials until they can run their own tests, which often takes days. Meanwhile, they charge him for storage.

Tourists have the same problems. We met one American man who needed prescription drugs sent to him in Egypt via DHL. In order to get these through Customs, though, he needed his American pharmacist to provide a chemical analysis of the drug. The American pharmacist obliged, but the Customs office did not. In the end, the pills were sent back to the U.S. and never returned.

Many foreign investors I talked to cited problems such as high-tariff rates, taxation, and endless permits as some of the reasons foreign investment hasn’t soared in Egypt. The Egyptian government has long held the stance that they are trying to protect their local manufacturers and farmers from a flood of imported products, theoretically easing competition, but in my mind such strict rules only hinder the development of a true free-market economy.

There are larger economic problems that concern me as well. After a massacre of dozens of tourists at the Luxor temple in 1997, tourism revenues have dropped substantially. The Asian crisis caused foreign investment into the country to slow. The Egyptian government has been stalling on signing an agreement which would establish a trade pact with the European Union. And the Egyptian stock exchange is highly illiquid. In fact most of the trading that occurs is only in two companies: a mobile telephone operator and a film studio. We also found that our own mobile phone would not work in Egypt despite an agreement between the Egyptians and our US company. Many phone calls and visits to offices never produced any results. We finally had to buy a new SIM card from the Egyptian company — which is probably why ours mysteriously would never work.

A bigger concern for me is the currency, the Egyptian pound. Over the past few years, the Egyptian government has been holding the pound pegged to the U.S.dollar. The central bank has been artificially keeping the pound at a high level and buying back its own currency with foreign reserves. Such a practice, though, has caused imports to grow while draining the country of needed foreign reserves.

Recently, the government has started to let the currency float, assuming it will move towards a fair market value. Indeed it has fallen: In the three months ending October 31, the pound fell 10 percent. I think it may fall even more in the future. Considering the high amount of foreign debt that Egypt carries — 33 percent of its GDP. The results of a severe devaluation could be devastating. That’s certainly not a particularly amicable environment for investors.

One of Egypt’s primary sources of income is foreign aid from the United States. From 1975 to 1999, total assistance in the form of cash, food aid, and other projects, totaled $24 billion. Egypt, in fact, is second only to Israel in the world in terms of how much aid it receives from the U.S. (As part of 1979 Camp David peace agreement, Egypt would get $2 of economic and military aid for every $3 received by Israel.) Whether stated or not, much of this aid is given to Egypt in order to stay on their good side. The Egyptians, after all, have the largest army in Africa and represent a formidable force in the Middle East. But the current unstable climate in the Middle East may create a scenario that even money can’t fix. Reverberations from Clinton’s flawed policy are having unintended consequences all over the region. Plus, the U.S. is starting to cut back the amount of aid it gives, letting the Egyptians fend for themselves.

Larger environmental problems with the Nile may soon have an enormous impact as well. Prior to the building of the Aswan Dam in the 1960s, the Nile would flood the river banks each year, depositing nutrient rich silt that was ideal for farming, and then recede during dry season. The Aswan Dam was built to control the floods by creating a lake behind the dam, Lake Nasser, whose waters could be used to irrigate the land year round. The results were promising: the dam allowed Egypt to double its agricultural production and became a source of hydroelectric power.

As a result, though, many farmers must now enrich their soil with expensive chemical fertilizers to supplement the Nile’s irrigation and these fertilizers are beginning to show their adverse effects. In addition, water-borne diseases, which typically died off when the canals dried up, now survive year round and have spread rapidly. Much of the silt is building up behind the Aswan Dam which will cause more problems in the foreseeable future.

It’s equally important to remember how much Egypt depends on the Nile for its prosperity. 95 percent of the country is uninhabitable desert. Not surprisingly, 99 percent of the population lives in the narrow Nile Valley and fertile Nile delta. If it were not for the Nile, Egypt might not even exist at all.

In terms of usage, Egypt demands the greatest share of the Nile’s waters, using roughly 85 percent of the water taken from the river. And yet none of its waters originate in Egypt. South of Egypt, the Nile is actually two rivers: the Blue Nile, which is formed as a result of the rain which falls over the Ethiopian highlands, and the White Nile, which streams out of Central Africa. The two join in Khartoum, the capital of Sudan, and flows North through Egypt and into the Mediterranean Sea. By the way, the confluence of the two Niles is breathtaking as you can actually see the different colored water from each flowing side by side until they mix completely.

Up until now, most of the countries below Egypt haven’t used the Nile water for irrigation or even running water. But as these countries, particularly Ethiopia, begin to exploit their resources, they will make greater and greater demands on the Nile’s water. As we sat in Wadi Halfa on the banks of the Nile for days we noticed young boys delivering water by donkey to various parts of the town just as happens throughout other countries in the region. I kept wondering how long it would be before someone brought in a few pumps and some pipes and provided running water from the river for everyone? How long would it be before the Sudanese used the Nile to irrigate their desert for agriculture just as the Egyptians are doing? There was not a lot of variety in our diet in Sudan, but there could be if and when irrigation begins.

In November, water resource ministers from Sudan, Egypt and Ethiopia met to approve a strategy for cooperation. But allocation of water resources is still a major issue and in the end the next great war in Africa may not be over money, but a water war waged on the banks of the Nile. Most countries down south do not have much sympathy for Egypt. The Egyptians did not even consult them when they built the Aswan Damn and increased their water consumption. The Sudanese were particularly outraged while they watched helplessly as many towns and centuries old sites disappeared completely as the waters rose.

Ultimately I found nothing to invest in Egypt. There were just too many problems, too many reasons to believe this country is corroding from the inside waiting to implode inward on itself. It has been a sober ending to my journey through Africa. Overall, I found more corruption and bureaucracy than any hidden investing jewels.

That said, I believe Africa could still end up on the right track. Here’s my solution.

Forgive all the debt. Right now, African countries combined owe about $300 billion in foreign debt, according to the International Monetary Fund. While no one really expects these countries to pay that debt back, they are still required to finance those debts, making annual payments on the loans. If we assume the interest on the loan is eight percent, that means African countries must collectively pay $24 billion a year in interest. That’s not even including principal payments. If we assume principal payments represent another two to three percent, annual payments to finance the debt total close $30 billion. Once that debt is forgiven, Africa’s leaders will have an additional $30 billion or more annually, normally used to finance the debt, which can be put to productive use.

However, part of my deal would be no more foreign aid. $300 billion is a big gift and a $30 billion improvement in annual cash flow is significant enough.

The effects would undoubtedly be profound. Left to survive on their own, Africans would need to stop relying on handouts and fend for themselves. The Ethiopian teenagers I met who had never learned how to farm because they were so used to getting their food from the distribution centers would finally have to take up the plow. The madmen fighting in the Horn of Africa would stop receiving arms from around the world. The leaders in Nigeria wouldn’t be able to simply walk into banks and make withdrawals of hundreds of thousands of dollars. The leaders in Mozambique wouldn’t be able to use stories about floods to line their coffers with foreign aid. The IMF and World Bank would go bankrupt and local NGOs would be forced out of business.

Now all that aid goes to [1] outside consultants who advise on how to obtain more aid [2] locals who learn to work within the corrupt system rather than being productive and [3] Mercedes dealers. There is a Mercedes dealer in every country yet there are often not even roads.

Obviously some will suffer if the aid spigot is shut off. Many Africans would be dislocated from their land, forced to move where they can work and live properly. Many others would thrive as their energies would be directed toward productive ventures rather than corruption.

That’s why I believe the Africans should organize a new continent-wide congress as the second leg of my proposal. Let’s call it the Congress of Kinshasa, for the city in the Democratic Republic of Congo. These would be representatives of the countries themselves and not vestiges of the colonial powers, many of which still pull the strings in African politics. The new Congress could correct the mistakes of the Congress of Berlin in 1885 which divided Africa among the European powers. Then in 1963 when the Organization of African Unity was founded, the nations agreed to abide by the existing absurd borders in an attempt to maintain stability.

This congress should redraw the borders of the various African nations, getting rid of the straight lines which never accounted for religious, linguistic, historic, or ethnic differences. The result might be many more countries than exist right now. There might be hundreds of small countries. Still, hundreds of nations filled with people working together towards making their country a prosperous place is certainly better than what they have now. There is a tremendous amount of brainpower, energy, and drive among Africans just waiting to be harnessed for productive uses. Freeing up Africa from the mistakes of the past and directing the future toward building new societies rather than stealing all one can will lead to the real African Renaissance. There are fortunes to be made by and for Africans and anyone else who will seize the opportunities there.