This Week in Africa : July 2024 Week 1

Kenya Protests Highlight the cost of Africa's debt crisis. 

In East Africa, the government of Kenyan President Willaim Ruto remains locked in a tense standoff with a popular grassroots protest movement, which has now begun to call for his resignation after clashes between demonstrators and state security forces have left over 39 killed. 

The source of the mayhem dates back to last month when the Kenyan government announced wide ranging tax increases as part of the unveiling of its 2024/25 finance bill. The bill would see the state raise $2,7Bn in additional revenues in an IMF advised effort to reduce its budget deficit and runaway borrowing, the servicing of which already accounts for 60% of state revenues. 

The news provoked a hostile reaction from the general populace,largely because it would involve  levies on bread, vegetable oil ,sugar, mobile-money transfers and other key staples. The scale of the blowback has forced the state to ditch the bill altogether, raising doubts around how Kenya will make good with its international creditors. Kenya will likely miss the IMF’s fiscal targets for both this year and next and now has limited options beyond spending cuts and borrowing on the domestic market.

Kenya is not the only country in the region with such headaches. The combined impacts of Covid & the Ukraine conflict have pushed many states in the region close to or off the fiscal cliff entirely. With governments across Africa , from Angola & Egypt to Ghana & Nigeria all carefully weighing up options around balancing their budgets, Kenya will stand out as a stark reminder that authorities will only be able to push their populations so far. 

Sahel Juntas Drop the Gauntlet. 

Meanwhile, on the other side of the continent, long held hopes that the Sahelian “Coup Belt” would divert from its current path and seek rapprochement with the wider West African region have been dashed this week as  Burkina Faso, Niger & Mali formally signed their long awaited Confederation treaty on Saturday the 6th of July. 

This move has formally underlined the intention of the three governments, all of whom came to power in military coups between 2020 & 2023, to renounce their previous membership of the ECOWAS regional bloc and maintain their new course.Whereas the previously ousted democratic governments were close regional allies of France & the United States, the coup plotters have instead cut those ties and drawn closer to Russia, which has worked to position itself as a “gloves off” alternative to handling local islamist insurgencies.  

Failure to compel the coup leaders to hand their governments back to democratic rule has caused somewhat of a legitimacy crisis within the wider ECOWAS block, who have publicly raised concerns that the continued intransigence of the Sahel states might lead to a regional breakup if deeper security issues are not addressed. Local leaders have promised to pursue diplomacy “more vigorously” but if the attitude of the coup belt leaders is any indication, that ship may well have already sailed. 

Nigeria nominated to host African Energy Bank. 

However, things are not all bad for West Africa This week Nigeria, the local political and economic heavyweight, managed to beat out a host of rivals. Including Algeria,Benin,& Ghana for the right to host the Headquarters of the African Energy Bank. 

Established by the  African Petroleum Producers Organization (APPO) & African Export-Import Bank (Afreximbank), the bank aims to utilise local capital to drive African self-sufficiency in oil & gas project financing, and can already draw on US$5Bn thanks to the contributions of national governments, their respective national oil companies and other investors. 

The need that the AEB seeks to serve is an acute one - Between 2016 and 2021, over 88% of the general financing of the 24 largest fossil fuel companies in Africa was foreign funded. This makes for quite a pain point in the current economic environment, where high interest rates are causing companies the world over to reign in expenditure on new projects and thus noticeably stymying the natural resource economies of developing markets.  By harnessing its own financing, African countries will now benefit from more legroom in driving their own developmnetal agendas.