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Week Five Notes: Elites and Hegemony
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Reading Notes
Reading One: Money and Land
SOURCE: Stephen Ellis, Season of Rains (Hurst, 2012), chapter 3 “Money and Land”, pages 67-88
SUMMARY: Summarized 21 (short) pages to ~4 pages.
Money and land
● Greatest capital investment in its history
○ Despite turmoil on world financial markets, FDI inflows in 2008 rose to a record level of
$88 billion resulting in an increase of FDI stock in the region to $511 billion.
● This wave of foreign money comes after years of high economic growth in many African
countries, which dipped only slightly during the years of financial crisis and is now expected to
continue at an average of around 5 percent.
○ Much of this FDI goes to SA or counties rich in oil, gas deposits
● New houses are financed with remittances from people living abroad, reckoned by the World
Bank at $21 billion in 2009
● Economic growth has been high in many countries not only thanks to high commodity prices but
also because of the improved quality of macroeconomic management.
● The spectacle of diplomats, officials and business executives studying maps of Africa and
soaking up information from their representatives on the spot suggests to many journalists the
image of a new scramble for Africa
○ Now, by contrast, African elites are key players in the agreements being made in regard
to exploitation of their raw materials, and they are often in a strong bargaining position.
● The lingering image of African leaders being bullied and bamboozled by mighty oil companies,
which contained some truth four decades ago, has long ceased to correspond to reality.
A New Financial Elite
● The image of the vastly wealthy African president with a foreign bank account is a familiar one,
to the extent that it can be considered another of the tired clichés that abound in discussion of
Africa.
● ln 2008 alone, the illicit outflow of money from all of Africa was estimated at close to $100
billion, although most of this came from big business rather than being deposited by individuals
● In the last decade, however, a number of African countries have seen the emergence of a
substantial number of wealthy people whose money is associated with the private sector rather
than being derived directly from the political process.
● Increasing numbers of people feel a need for banks to transfer or save money. There is a huge
demand for banks...across the continent
● Today, Africa’s top forty companies range in value from $350 million to $80 billion.
● Crucial in the rise of the middle class is the spread of financial institutions
○ A new generation of financial institutions has been made possible by the economic and
financial reforms enacted by many governments after the old one-party regimes were
swept away in the early 1990s.
○ Some financiers argue that the opening of political systems in most countries has led to
greater security of property rights and greater possibilities for business operators to
make their views known in government circles.
○ The return to Africa of people with experience of working in leading banks and finance
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houses in New York, London or elsewhere, who bring home with them practical
experience and global connections.
● Ecobank, with its headquarters in Togo, describes itself as the leading Pan-African bank,
providing a range of wholesale and retail banking services.
○ Established in 1988, it has over 500 branches with offices in twenty-five countries.
○ In mid-2008 it succeeded in raising some $554 million on stock exchanges in Accra,
Abidjan and Lagos in the form of a rights issue and a subscription for new shares.
○ This was an impressive achievement at a time of acute credit difficulties worldwide.
● There are now several African capital cities where substantial domestic funds can be mobilised
for investment by making use of local institutions, local expertise, and local capital markets.
● Importantly, Africa’s emerging middle class is now showing signs of wanting to invest at least
some of its money at home rather than to deposit it in bank accounts overseas.
● Prior to the crisis that began in 2007, the international financial press was increasingly inclined
to see Africa as a promising ‘frontier’ market.
○ These expressions are applied to developing countries with stock markets that are
beginning to demonstrate the features of mature stock markets, offering investors the
opportunity to participate through financial instruments in economies offering high rates
of growth and high potential profits.
● According to a senior advisor in the IMF's African Department, there are eight sub-Saharan
African countries that qualify as frontier markets, as defined by indices managed by Standard
and Poor’s.
○ They include Botswana, Ghana, Kenya, Mozambique, Nigeria, Tanzania andZambia,
which together account for about 40 percent of the sub-Saharan population outside South
Africa, and half of its GDP.
● Crucial to the future shape of African business will be the strategies of Asian investors,
especially from China.
○ Where local financial institutions are less sound than in South Africa, Chinese firms are
developing other techniques to access the raw materials that their national economy
craves.
○ In the Democratic Republic of Congo, the Socomin company has been created as a joint
venture between Congolese and Chinese state-owned enterprises. An initial Chinese
investment of $3 billion in mining will be repaid from profits generated as minerals are
exported to China. Part of the eventual profits will be used to fund major infrastructure
projects that will be necessary to export minerals but that will also serve Congo’s
people.
■ International financial institutions and Western donors, however, have been
mightily upset by China’s blunt intervention in the DRC and by its offer of new
money at a time when some sort of order was at last being imposed on the DRC's
chaotic public debt.
■ Some African commentators consider these quarrels as the reflection of a
strategic game whereby Western countries, using lending and debt relief as an
instrument of policy, aim to wrest control
● The quality and durability of Africa’s new financial institutions.
○ 2008, Nigeria's United Bank of Africa, one of the most prestigious new names, was fined
$15 million in New York for banking violations it was said to have laundered money on
behalf of some corrupt state governors who played a prominent role in successive
administrations led by President Obasanjo.
