The Africa PreBrief Blog

What’s Next For African Economic Development and Investment? Q & A With Cedric Muhammad, Founder, AfricaPreBrief

Apr 30 2010
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Question - What is Africa PreBrief?

Cedric Muhammad: An information service that comes in two offerings: 1) a weekly economic newsletter that covers the institutions, personalities, ideas, policies, and events impacting economic activity in African countries and 2) a premium 'Company Watch and Capital Markets' service that focuses on publicly-traded companies listed on African stock exchanges; leading Small and Medium-sized Enterprises (SMEs); and the businesspersons and entrepreneurs allocating capital  and attracting investments. You can enjoy samples here:

The 'Company Watch and Capital Markets' is unique because our experts provide in depth reports and real-time briefs on activity as things happen on the ground in these countries.


Question - What does your newsletter cover?

Cedric Muhammad: Things like whether an African nation, say Botswana or Angola is likely to receive a favorable credit rating from an agency.  We will compare and contrast income, corporate, and capital gains tax rates of countries.  We like to make calls on elections and handicap the future prospects of young political leaders like Gamal Mubarak of Egypt or Julius Malema of South Africa.  And of course we'll be assessing different scenarios for the upcoming elections in Rwanda and Uganda, for example.  We like to identify influential leaders at the federal, state and local level that may have the power to green light projects or prevent them from moving forward.  We follow migration patterns -and whether capital is following talent.  And we always keep our eye on foreign companies from the United States, the Americas, Asia, and Europe that are positioning themselves well relative to investment opportunities.  Another key area that we consider are the likelihood that sanctions will or will not be removed in places like Sudan and Zimbabwe.  And we absolutely stay on top of the efforts toward economic integration or more specifically tax harmonization among neighboring nations such as Uganda, Tanzania, and Kenya in a region like East Africa. But we aren't a newspaper or magazine, our objective is to provide a perspective that gives clear indications, as well as clues, hints and nods as to where money will be made, power will change hands, and development will take place.  We want to serve the mindset of subscribers and clients who already have something at stake in Africa or who are seriously considering putting something on the line.

Question - Why did you launch Africa PreBrief?

Cedric Muhammad: Because so many people have inquired with me about what is happening in Africa. From hedge fund mangers and stock brokers to first-time entrepreneurs I get essentially the same questions: What are the latest political and economic developments? Where will things be in 5 to 10 years from now? What are the best opportunities? This has been going on for 10 years. I was receiving so many articles from newspapers all over the world about African current events with the same question, ‘Cedric, what do you think?’ that I thought it would be much more efficient and entrepreneurial (smile) to answer these questions in a standardized way. More importantly, I am truly blessed with a network of all kinds of experts in Africa, Europe, and the United States who have a professional involvement, cultural connection, or business interest on the continent who are a source of wisdom to me and who unlock certain keys of knowledge. So I decided to form an inner circle and team who would be dedicated to identifying what is driving current economic events in Africa; how capital markets are evolving; and where the opportunities and change are likely to occur. The Africa PreBrief newsletter each week is simple and easy to grasp, yet focused and concentrated. It highlights publicly-traded companies; assesses news about Africa from indigenous, Western and financial sources; and explores a stimulating big theme topic – some phenomenon or trend that is moving people and shaping markets. We hope to influence people away from viewing Africa from the narrow lens of partisanship or ideology or even charity and philanthropy and give them a menu of information that is more fact, principled, or evidence based, and which they can make use of in a pragmatic and self-enlightened way.

Quite honestly, partisans and ideologues make poor business decisions anyway so I’m not focused on them as much as I am those who are interested in Africa but finding it hard to avoid the propaganda and repetitive talking points.

Africa PreBrief is for the open-minded looking for a reference of economic clarity and those who have money on the line.

Question - What makes Africa PreBrief different from other resources which look at what is happening in Africa economically?

Cedric Muhammad: The perspective for starters. We are based in the West so we know the mindset of a frontier and diaspora-based investor in particular, and the experience of those from the Western Hemisphere who do business in African countries. However, much of our intelligence and information-gathering comes from African entrepreneurs, civilians, journalists, economists, translators, researchers and individuals who professionally follow African economies and capital markets. But perhaps most importantly, we look at African economies from a five –dimensional perspective: the subsistence level, entrepreneurial, Small and Mid-sized enterprises (SMEs), foreign multi-national corporations and the governmental level. In addition we know that capital is allocated in business in four ways: individual entrepreneurs; kinship systems and voluntary associations; the marketplace; and lastly government. All of this means that in our eyes a tribal chieftain is potentially more important than a tax cut in determining what businesses thrive and which don’t; and a particular foreign corporation may be more influential than a state government in building infrastructure like roads, utilities and bridges in an isolated area. Africa PreBrief has a different perspective but unlike other resources whose economic models may lean a certain way we are not interested in promoting our point of view over a gathering of actual facts and the making of proper interpretations. If a part of Central Africa does not utilize money, has a weak central government and the informal sector dominates, we aren’t going to focus on changes made to fiscal policy. And we’ll explain that to our subscribers – making Africa fit a particular Western economic analytical model is a mistake. And we’ll learn from anecdotal and empirical feedback on the ground. We recently made an assessment regarding a proposed reduction to the Value Added Tax (VAT) in Tanzania and received an excellent counter-opinion from a very brilliant expert on the ground who felt we overestimated its impact. Her argument – full of insight into the tax regime in Tanzania and Zanzibar was compelling - and added value to ours. That kind of evolving dialogue, and our willingness to let facts speak for themselves will benefit how our subscribers think through reality and opportunity. We are not here to convert anyone to our viewpoint as much as we are trying to convert our own viewpoint to the truth, and share it conveniently.

Question – What do you make of the spectacular growth Africa is experiencing?

Cedric Muhammad: It is very exciting on one level but potentially misleading in another. This is a regular theme of Africa PreBrief – one should have healthy skepticism for macroeconomic measurement of ‘growth’ and ‘development’ as well as the ability of accountants and financial analysts to measure ‘value.’ I’ll give an example of something positive – the manner in which some regions of Africa went from not even having land lines to the very common sight today of people walking around with cell phones. Clearly this is a great opportunity and in our newsletter and forthcoming premium service we highlight several leading telecommunication companies. But on the other hand consider the scenario of a rural African tribal society that may have been operating at the level of subsistence but which was stable for decades, even centuries. Now, say, due to government policies that have been detrimental to them or out of a fascination and attraction to Western material culture a disproportionate number of men or women are forcibly moved or migrate to a city in order to earn wages. Economists would measure this as ‘development’, ‘growth’ or ‘increased ‘output’ and greater employment, and it would be recorded as an increase in per capita GDP. But when one considers the impact these kind of migrations have on a matrilineal society or one where duties are very specialized around gender identities, there is a trade-off that macroeconomists don’t care to measure. Increased wage income may have resulted in instability or a disruption in a centuries-old male-female ratio in a community where kinship relations are paramount, and where marriage is a profoundly economic and political act uniting families, clans and tribes. That instability may result in increased violence among tribes that may have been at peace previously. So is the trade-off worth it? Perhaps. Maybe such disruptions result in greater freedom for women, or the ability of the poor to enjoy a higher quality of life, but sometimes a scenario develops whereby when money is introduced into certain cultures, without supportive government policies, unintended consequences can result. I know of African tribes who lost cohesion because they were forced or baited into leaving their land for urban opportunities and lifestyle, only to end up back on the land (and less of it) because their culture was not able to adapt to an economy where saving money rather than engaging an agrarian economy was the form of insurance for ‘a rainy day.’ Without any form of social security provided by government or a pension from their employer, when these individuals who had come to the city and left their tribe lost employment or became too old to work, they had to return to a plot of land in order to eat and survive. They were and are stuck in between two worlds, having lost tribal cohesion, and not fully enjoying the rights of full citizenship.

The word 'economics' comes from a root word, oikonomia, which means 'household management.'  I think we would be better served if we thought of that unit - a household- when evaluating whether we have development and growth.  If a family of four became wealthier in terms of its cash holdings, yet a child died and the husband and wife were planning to divorce we would not call this family developing or growing.  So, apply that analogy to a country like Sudan, which may be growing according to GDP measurement but may be headed for separation in January 2011 when the Southern portion of the country votes on whether to secede from the country.

There are more things to consider than an income measurement of an individual.  Nobel economist Amartya Sen put it well when he wrote in Development As Freedom, "Even in terms of the connection between mortality and is remarkable that the extent of deprivation for particular groups in very rich countries can be comparable to that in the so-called third world.  For example, in the United States, African Americans as a group have no higher - indeed have a lower - chance of reaching advanced ages than do people born in the immensely poorer countries of China or the Indian state of Kerala (or in Sri Lanka, Jamaica or Costa Rica).

And Reuven Brenner frames the paradox quite well in History - The Human Gamble when he writes, "In one country donating blood is a custom, in another there is a market for it.  In one country grandparents still live with their children and grandchildren, providing (with love) a wide range of services; in another similar services are purchased from maids and babysitters or provided by dishwashers and television.  In one place grandparents still sit by the bedside of their grandchildren and tell them stories; in another books on fairy tales are brought and read by the babysitter.  Which countries are the richer?...this conclusion can be very misleading."

One has to be very careful about measuring 'growth' and 'wealth' in societies like many in Africa which are moving from economic cooperation which revolves around agrarian, oral, barter, and custom to one with industrial, literate, monetary, and formal legal attributes.  Becoming more formal does not necessarily guarantee that one is richer, or better off.

So at Africa Prebrief we are not looking only at rosy numbers and statistics to determine what constitutes development or growth. Sometimes well-intended investments can produce good numbers in the short-term but even worse ones on the long horizon, and the fall-out is in the political and cultural realm.  If per capita income increases while infant mortality and crime rates rise, not only is this not real economic development or growth in my view, but a focus on the numbers is even dangerous, as it obscures the fact that a country has the potential for instability and even revolution.  A typical macroeconomist may not care about this but an investor and entrepreneur with interests in such a nation would.

Our job is not to be a publicist for Africa's impressive 'growth.'  It is to accurately assess risk and identify opportunities and where change is likely to occur. 

Therefore we must provide our subscribers with a holistic picture.

Question - What is your opinion of the debate over corruption in African governments?  What did you think of Zambian economist Dambisa Moyo's book, Dead Aid and its success?

Cedric Muhammad: I think the corruption discussion in many ways is sincerely motivated and important but too often is skewed or tainted by interest groups who raise it or defend it in order to secure some limited benefit or objective.  Again, my perspective is not an ideological one and I know that corruption is universal and been going on since there have been human beings.  There is definitely a wobble in human nature that enables it, and it always takes two to tango.  But what perhaps makes my perspective different is that I believe that much of the 'corruption' problem today stems from 1) post-independent leaders falsely advertising or believing that their political or military liberation equated to economic sovereignty and 2) the embrace of the Least Development Country (LDC) model of development which necessitates inequitable and unhealthy dependencies in aid, trade, investment, and debt.  I believe the emphasis that Ms. Moyo places on ending aid, while encourage African nations to become more aggressive about borrowing on international capital markets is a bit contradictory, especially when one considers the role that ratings agencies played in the current sub-prime, toxic asset and shadow banking crisis.  So according to Dead Aid government-to-government aid and multi-lateral assistance is bad but being forced to agree to conditions by a questionable if not at times corrupt ratings agency is good?  There is no clear divide between public and private as Dead Aid implies.  So I can appreciate her elevation of part of the problem but her recommendations do not produce what is needed - greater accountability on all sides and from all of the counter-parties of the business arrangement.  Her view is a bit selective, I think.  The 'private' and 'public' players and shot-callers are one in the same, and often play a shell game by moving in and out of government, then to a multi-lateral institution,and over to the financial and corporate sector, and back again.  It is a very elaborate international financing structure that fools people by all of the different faces and looks it can give.  Identifying forces as 'public' or 'private' is to get caught up at times, in the smoke and mirrors.  All one has to do is understand the World Bank's creation and how Wall Street has manipulated its financing of projects to understand that the same people who are behind government-to-government aid and multi-lateral assistance are also the driving force behind helping a nation borrow money on international capital markets.  The UN also plays a largely hidden role in this regard.  This is just facts and reality, not ideology.  Then, when one takes it a step higher and considers how the intelligence agencies of Britain, China, Israel, the United States, France, for instance have used Africa as a playground it is obvious that leaders have been and are corrupted in all four areas not just aid, and for a variety of reasons.  The sudden decision to stop accepting aid will not have a lasting impact on ending corruption in my view, nor will it result in economic prosperity.  The other arrangements and conditions would remain.  No where in her book does she forthrightly frame the obvious problem: no single African nation-state or even regional bloc has the economic scale, currency markets and autonomy over trade policy that would reduce corruption and end dependency.  And no single African country has had currency and monetary stability since the end of Bretton Woods.  As long as your currency is so weak and its markets so thin, you will always be manipulated by domestic political and foreign forces.   This is a form of corruption too, even worse than that which is caused by aid dependency.   Isn't it ironic and even paradoxical that arguably the most defiant living figure of the liberation movement, President Robert Mugabe of Zimbabwe had to effectively dump his own currency and allow dollars and euros to replace them?   He has focused on land reclamation more than currency stability.  None of the independence-era leaders properly identified the nature of the economic problem or ever articulated it any better than Tanzania's first president Julius Kabarage Nyere when he said in 1974, "We are neither poor, nor are we kept poor because we are black.  We remain poor because of the world trading and monetary systems and these - whatever their other disadvantages, are color-blind."

My position is that this has more to do with the two problems I mention than corruption as it is generally defined and discussed in the abstract of 'greedy leaders.' 

I believe Ms. Moyo knows all of this but her goal was focused to raise a critical issue in a succinct and provocative way and that she did! 

I think she is brilliant and I wish her continued success.

To me, the issue is an uncomplicated one: how does a government properly unwind its basic business monopoly - the right to control borders and customs and award or grant franchise and license, in the area of import/export - and trust its citizens to create wealth?  By dominating the business monopoly that every state has when it is born - due to the fact that militaries and a police force form first to fight battles and keep basic order - and getting comfortable with that kind of power an economy never devolves into a civil society yielding the kind of trade and financial innovation that leads to development.  By inaccurately styling themselves as economically 'independent' when they were not, while accepting underdevelopment in the LDC construct, as development, these nations did not put in place the basic fundamentals of a commercial society (stable currency, low taxes, a vibrant judiciary and rules governing relations between debts and creditors and investors and entrepreneurs).  And when they invested in human capital in some very important ways - healthcare and education - they did not do that which would enable kinship-oriented systems to play the role they could as the first source of capital to those best suited to allocate capital - entrepreneurs.  In many cases individual creativity and risk-taking has been viewed as sedition and kinship systems (tribal, ethnic, racial, and religious groups) have been minimized and marginalized.  And that is one of the real interesting things we see in history and today in Africa, far too often kinship systems are seen as the enemy of both individual rights and state authority.

The result is that African nations lack a level of skilled labor in key areas (because it has been driven away or not developed) and African governments believe they actually benefit when they export their 'surplus labor' and when those who become immigrants in other countries send back remittances.  Yes I am outright saying that this LDC model actually promotes the strategy executed by Yugoslavia's Marshal Tito and which is used throughout the world - send those whom you can't employ out of your country so that they may become the cheap labor force of another nation, earning cash that they send back home to relatives which you can tax, because you have a business monopoly.  This is the relationship between the United States and Mexico and the relationship between Mexico and Guatemala.  One man's cheap labor supplier is another man's remittance sender. No leader (foreign government, nor multinational corporation that benefits) is going to admit this quite this bluntly, but this is the harsh reality.

So to me it goes well beyond 'corruption,' as a simple moral argument.

The corruption debate has become currency in many think tank and political circles and unfortunately is now a cottage industry where people receive grant money, book deals, and tenured professorships for isolating it out of context.

Africa PreBrief knows that when the business monopoly is properly unwound, and African nations abandon the conditionality, dependency, and inequitable nature of life as tiny and weak nation states and realize their unity and proper economic integration is the key to economy sovereignty; and then implement policies that facilitate entrepreneurship and support and reward the transition of informal kinship systems into formal market activity, we will see the end of such horrible statistics like the fact that there are more Ethiopian doctors living in Chicago than working in all of Ethiopia.

Africans are voting with their feet when they emigrate to other countries seeking what they can't enjoy at home. 

But you can't change that or end corruption until it is admitted that African nations have never been economically 'liberated.'  When the LDC model is abandoned for a bottom-up approach that places the basic building blocks of a commercial society over controlling a narrow business monopoly then this pre-determined trade-debt-aid-investment quadrangle which limits policy options can be broken and corruption alleviated.

Maybe Dambisa will build on her great starting point in a future book.  If she doesn't I certainly will (smile).

Question - What developments stand out on the continent in your mind?

Cedric Muhammad: Three in particular: the development of stock exchanges across the continent; the possibility of direct distribution of oil revenue sharing in places like the Niger Delta region of Nigeria; and the next stage of the Black Economic Empowerment (BEE) movement in South Africa. The growth of stock exchanges on the continent is an important stage because the emergence of deep, liquid financial markets, with mass participation, will speed up the availability of capital to the mass of SMEs that are the lifeblood of almost every major economy. From Algeria to the United States the story is the same – small businesses are the largest employers of a nation. The ability of African SMEs to obtain equity investments from domestic and foreign investors in a stock exchange is very important to improving their scale and it – along with good policy will create an Angel and Venture class from among those who own and manage publicly-traded firms. These African angel investors and VCs are the key to providing seed and start-up capital to traders, farmers, and the self-employed. We can see this in the story of many of the continent’s successful businesspersons who decide to diversify their earnings and profits and invest them in new industries and opportunities. In addition, stock markets in growing economies like in Africa attract small investors who may not be able to simply deposit their cash in a commercial bank. This brings risks for sure, but it also provides a forum to match capital with talent. But certain fundamentals have to be in place first. Nigeria’s recent stock market collapse is the result of certain basics not being in place, not just the behavior of brokers and uneducated investors, who are being blamed. The response of the government is to bring in American regulators from the SEC to advise them on how to make capital markets appeal more to institutional investors than small individual investors. This is not the best advice, I think, and we explain why to our subscribers. Capital markets do need the kind of liquidity that large institutional investors provide but a country benefits on a whole when the average citizen can be an owner of their country’s businesses and their earnings. There are many ways to view a stock market. In some ways it is like a casino, but it is also one of the best ways one can share in the earnings of the productive activity of their nation’s private sector. The most efficient way to own the businesses of your country is through a stock exchange and policies that favor one class of investors over another create wealth inequalities.

On oil wealth distribution, it is only a matter of time before some African nation experiments with Alaskan or Norwegian style-wealth distribution whereby rather than feeding an inefficient government bureaucracy, the divinely given riches that a nation enjoys are re-distributed directly to the masses and electorate in the form of cash payments. When it happens you will see a boom in entrepreneurial activity and the financial intermediation as those who are involved in the informal sector and rotating savings and credit associations or indigenous investment clubs like stokvels in South Africa su su in Nigeria, or chamas in Kenya will invest in new ventures and be more open to the outreach of commercial banks or deposit-taking institutions, even stock exchanges. In the case of Kenya it is estimated that an amount as large as 5% of all current deposits parked in commercial banks, are moving through these kind of investment clubs and savings groups. So we are keeping our eye on places like Uganda, Ghana, Angola, and Nigeria where debates over the proper relationship between oil and the wealth distribution are taking place and where direct distribution may be on the horizon.

On the BEE movement, we’ve been informing our subscribers about the significance of African National Congress (ANC) Youth League leader Julius Malema and what it means for the country’s electoral future. I believe it is highly likely that racial tensions will increase in South Africa and issues that were tabled a bit or received patience or a ‘pass’ during the reign of President Mandela, and Thabo Mbeki for instance, will not receive the same under President Zuma. Does that mean that one should not be exposed to South Africa today? No, the combination of the BEE which nurtured or created a cadre of Black businesspersons after apartheid and the strong rand (which the unions and exporters hate) are making the Johannesburg stock exchange a throne for pan-African investing, with South African firms looking to gobble up businesses based in other parts of the continent. In some ways, BEE-success story investors through what I describe for our subscribers as ‘conglomerate-investing’ are naturally filling a void in providing capital that neither governments or supposedly free markets could.

Yet, while all of this is happening dissatisfaction among the youth is extremely high with many wanting to leave the country. At 29-years old and a base of support among the youth and business class, Julius Malema could not be a more important figure to watch as the political and financial marketplaces determine how the nation’s wealth should be distributed and allocated.

We weigh all of these factors relative to the debate raging in South Africa over whether or not its central bank, the South Africa Reserve Bank (SARB) should end its inflation-target regime.

Question - You make reference to a phrase and concept - 'economic anthropology' and often allude to how important religion and traditional culture can be in determining business opportunities. Please explain.

Cedric Muhammad: I'll give you a real-life example in Africa. Take one of Ghana's greatest entrepreneurs, Kwabena Adjei who actually named his company, Kasapreko, after the chief of his home area - the Wassa Amenfi traditional area. He even named this traditional leader Nana Kasapreko Kwama Bassanyin II to a non-executive board of directors position. Dynamics like this can be the difference between getting a deal done or not in certain parts of Africa where kinship systems are more powerful than central governments or formal markets. At Africa Prebrief we are looking for reality and who the shot callers are, and it does not matter to us whether they come from politics, religion, a tribe or ethnic group. I think that is what will make our viewpoint valuable.  It is what it is, not necessarily what we want it to be.

We are not interested in whether someone is liked or disliked by any particular interest group. If they have influence we want to accurately assess it for the benefit of our subscribers and clients.

This part of our value system is one of the reasons why it was so impressive to learn, as reported in National Geographic that Libya's Muammar Gadhafi, for example, was studying corporate merger history and theory in order to inform his efforts toward uniting Africa. Most people in the West think of him as a crazy socialist or radical Muslim, and that would prevent them from appreciating the inquisitive nature of his mind which allows him to seek insights from a variety of sources outside of his political ideological worldview. A person who is more interested in painting Muammar Gadhafi with a negative tint would not have respected this tidbit of information about him and they would have been 'shocked' to learn that he and his son Saif, reached out to Harvard Business Professor Michael Porter in 2007 to help bring more of a professional, management-oriented, and business culture to the governmental bureaucracy, which Mr. Gadhafi admits is inefficient. Reacting to a caricature of him disallows one from understanding the root of his motivation to openly discuss firing government employees and propose distributing $30 billion in oil revenues directly to his people, which of course, would have tremendous implications for business in that nation.

We don't suffer from that delusion at Africa PreBrief. We respect his influence and try to assess it accurately.

Another example is my personal belief that the person who has the greatest insight into how Africa's conflicts around racial, religious, ethnic, and tribal identity can be transcended peacefully is Minister Louis Farrakhan. The extent of his travel in and the depth of his contact with Africa over the last 30-plus years is almost unbelievable. He has relationships with so many of the most influential tribal and religious leaders and is welcome and trusted in places that many so-called Africanist experts could never set foot. I know something of his unreported efforts in peace initiatives on the continent and the fact that he uniquely among leaders from the Diaspora has been present to participate in or observe high-level African Union Head-Of-State meetings. His perspective is invaluable and unlocks many keys of understanding. Yet, many people who say they are genuinely concerned about Africa (and its relationship with the Diaspora) out of fear for what a disapproving benefactor or special interest group may think, would not even want to be seen with him.

Yet he is a tangible factor of power on the continent - so much so that during the Clinton administration, leaders like Ghana's Jerry Rawlings were told that if they received Minister Farrakhan into their nations, President Clinton would not make a state visit to them.  This is normal activity in the real world of geopolitical chess-playing that I and Africa PreBrief knows exists as an unseen force to the masses.  If you are waiting for CNN or Fox to report this, you may be waiting for 20 years, after the fact. (Another example is President Clinton and his Special Envoy Walter Mondale threatening and trying to dissuade Indonesian President Suharto from implementing a currency board that would have saved his nation's currency, the rupiah, from collapsing.  Why would this happen?  Even before the days of President Clinton then U.S. Ambassador to Indonesia Mr. Paul Wolfowitz wanted Suharto out of power).

I do not have that dilemma. There is no benefactor, sponsor, interest group or foundation grant that dictates who I or Africa PreBrief can talk to in order to gain understanding into reality.

For my forthcoming book, Minister Farrakhan granted me an interview on the subject of economic integration in Africa and the problem of conflict resolution across kinship systems which prevent the attainment of a larger national loyalty or even pan-African identity. I was honored and his spiritual insights were so profound that they deepened my more economic and cultural understanding of the problem. The Minister uses and harmonizes the Holy Qur'an, Bible, parables, natural law, the laws that govern human behavior and even universal order to make his points. And he expresses them more plainly and clearly than any sophisticated econometric model would. To think that one must be lettered in economics, political science, or credentialed as a financial analyst in order to understand such relevant factors like the level of dissatisfaction that human beings must reach before they demand or force change; or how to unite people across identity and belief systems is the height of arrogance. It is that kind of arrogance which results in blind spots when formulating policies and performing analyses of Africa.

And we all saw it to some extent in how the United States invaded Iraq and assumed that by simply offering lucrative contracts it could persuade Iraqi professionals and entrepreneurs to construct roads and re-build destroyed infrastructure, not realizing that in that culture, many businesspersons - no matter how incentivized by cash - would first take the contract to a Sheikh, clan or tribal leader to have it approved. If that traditional leader did not give the OK, nothing moved forward.

In that respect I believe that economists and political scientists have much that they can learn from many anthropologists whom I believe have more respect for their subject matter - the human being.

So, experience has taught me to never elevate a Think Tank talking point on Africa over the wisdom of a Zulu, Ashanti, or Lugbara proverb.

Question - Would you say Africa is moving out of a socialist era and toward free-market capitalism?

Cedric Muhammad: I would prefer to say it is transitioning from an informal stage of economic development toward a more formal stage. I think some serious policy errors have been made by forces with a political agenda to make Africa 'socialist' or 'capitalist.' You can see this in the argument among some who say individual property rights are foreign to African indigenous communal societies. This is the wrong way to frame the discussion, I think. Many traditional African societies are dynamic and incredibly flexible. As I advise our Africa PreBrief subscribers and clients a solution to the land problem in Africa lies in policy-makers and leaders recognizing something that colonial administrators, post-independence socialist leaders, and those currently championing 'capitalism' for Africa have failed to understand or respect. The mistake (or error) is in not recognizing the natural capacity of traditional societies to move with flexibility in and out of property rights systems that could be considered 'individual' and 'communal.' Indeed, tribal Africa has responded rationally to economic parameters. When population size increases and individuals and communities experience a decrease in wealth they are likely to search for ideas, institutions, or mechanisms that can restore balance or gain in the wealth distribution. A mistake and error made by both European colonizers and post-independence African governments was to deny, ignore or prevent this process of adjustment in African kinship systems. These systems already had the dynamic ability to choose property rights as an institution, as an adaptation to population increases which decreased the relative wealth distribution of the community, revealing under that circumstance, the inefficiencies of the prevailing approach to land tenure. It was land becoming scarce that persuaded the gamble on a 'new' economic system. When land transaction costs exceed the price of land, there is no incentive to exercise individual rights. This does not mean that individual rights in African culture don't exist. Historically when land has become scarce Africans - without the aid of Western economists, multilateral institutions or governments - have exercised individual rights when private benefits exceed transaction costs. The process is dynamic - customs that previously restricted the exercise of individual rights may continue in name but are not enforced by the tribal authority. To the degree that places like Botswana and Ethiopia apparently recognize this capacity in their land tenure reforms, they will continue to be progressive, relative to other nations. What makes Rwanda's land reforms so potentially powerful is that they are accompanied by a traditional court system - gacaca - which has aided in formalizing claims of land ownership. The countries that can manage these kind of economic transitions - from communal to private ownership; from bartering to using money; from oral culture to written ones; and from custom and tradition to central governments - by respecting the dynamism of indigenous culture are the places on the continent we believe will prosper relatively free of instability this decade.

But to answer the question a different way, I do believe that of the four primary means by which talent, capital and resources are allocated and coordinated 1) individuals and 'families' as part of kinship systems 2) entrepreneurs within the business firms 3) exchange transactions directed by the price mechanism of the marketplace and 4) governments through State-Owned Enterprises (SOEs), that the third and fourth methods in the form of privatization and SOEs have not delivered sufficient economic development. What I believe the current debate and next decade will revolve around is the transition from kinship-oriented trade and exchange to the entrepreneurial activity of organizing and allocating capital within the business firm, which is really nothing more than a voluntary association.

Question – How does Africa PreBrief weigh important factors external to Africa like U.S. foreign policy?

Cedric Muhammad: Since we are based in Washington, D.C. with a great political network we have great insight into what is moving through the Senate Foreign Relations Subcommittee on African Affairs and the U.S. House of Representatives Subcommittee on Africa and Global Health, or what the State Department is doing relative to African nations. And this is very important to business and investing in Africa because quite often it is the rumblings and decrees that come from capitols outside of Africa which determine what happens in Africa, economically. One only has to consider the effect of the debate over sanctions, corruption, and human rights in Africa taking place in Washington, D.C. to appreciate that.

For example, this dynamic was very important in offering my opinion regarding what would take place during Sudan’s elections. I was very confident they would not be violent as some were predicting. I learned well in advance, despite harsh comments being made toward the Sudanese government that the very elections of that country (which everyone knew would be won by the current Sudanese regime) were in fact being planned logistically by the United States government. We knew this from our DC network and from closely parsing State Department briefings and the words and movements of the Special Envoy To Sudan, Scott Gration. I gave my analysis of this publicly months before the election, without setting foot on the ground in Sudan. The only question for me was whether or not the international community would call the elections ‘free and fair’ enough to justify the next step in ‘cleaning up’ Sudan’s image in order to exploit petroleum interests. Or, would the Western interpretation of the election in Sudan be used to deny the National Congress Party (NCP) a sense of legitimacy? While all of the human rights interest groups and anti-Sudanese activists were focusing on President Omar al-Bashir, attempting to make him a litmus test for President Obama’s administration, we knew that in the eyes of the United States and the West that he was a non-factor because the highest levels of the US government were having a dialogue with the highest levels of the NCP, even offering them enormous carrots involving the removal of sanctions. The United States has been played out of position in Sudan and in several other nations, relative to China, Japan and the nations of Southeast Asia. Should Southern Sudan vote to secede from Sudan (which I am convinced the Obama administration does not wish to happen because it can’t predict or control the instability it would cost) it is not guaranteed that U.S. oil companies will automatically become the favored ‘friend’ of that new country’s government. We have studied all of the oil blocs of the country and have an idea on where the Chinese, Indians and Malaysians are vulnerable to penetration from U.S. companies. We’ve told our subscribers that Chevron stands a great chance to benefit should sanctions be lifted in a united Sudan or under a new government in the South.

Another angle that we give attention to in Africa PreBrief is the tremendous role that lobbyists play in influencing U.S. foreign and investment policies in Africa. Who African nations have hired to represent their interests in this country can be a great indicator of what political and economic opportunities and changes are on the way – for better or worse.

We highlight one very important relationship in our debut issue, for example.

Question - What stock markets in particular will you focus on and what companies impress you?

Cedric Muhammad: We’ll keep our eye on all of them, and each week in the Africa PreBrief newsletter we highlight a particular publicly-traded company on one of the exchanges. In June we are unveiling our own index of 20 stocks in Africa and will offer a ‘Capital Markets and Company Watch’ premium service that is exclusively devoted to covering the companies listed on 5 different exchanges. Our initial coverage will focus on The Egyptian Exchange. As for companies, there are just too many to mention, in so many great sectors and businesses, and of course I want people to subscribe and become clients but for now I will mention two very intriguing companies that we will continue to look at – Orascom Telecom of Egypt ( and United Bank For Africa ( Orascom is a take-over candidate, likely to be sold soon, and is receiving attention from other African telecom companies - looking to become the dominant pan-African company - and suitors outside of the continent looking for a strategic presence in Africa. It is a prize in the eyes of those seeking to penetrate Africa’s lucrative telecom/mobile phone sector. United Bank of Africa is a resilient company, weathering the storm of Nigeria’s current massive commercial banking regulatory restructuring with an exciting business model poised to capture some nice market share in West Africa.

Question - What is your long-term vision for Africa PreBrief?

Cedric Muhammad: I often tell my friends in Africa and in the United States that I am just one person among many who are working on the biggest marriage ceremony ever – the economic integration of Africa and the Diaspora!  If for instance, diaspora investors poured capital into the SMEs and publicly-traded companies of Africa you would see something even greater than what China has experienced in terms of this dynamic.  The Wall Street Journal once reported in the early 1990s that 75% of the mainland's near 30,000 enterprise which had foreign investment, received it from ethnic Chinese living outside of China.  Those nations with large diaspora populations who can attract that talent and capital to development, trade and finance always prosper.  And the converse is true.  If Africans - perhaps through Sovereign Wealth Funds - invested in inner-city and rural economic development in the United States, you would see the same enormous and mutually beneficial wealth creation.  But this can't happen until there is an efficient exchange of knowledge and information about opportunities, policies and markets between both sides of the Atlantic and between the homeland and the entire community of the scattered - in Europe, Asia, and the Americas.   Of course there are some spiritual and cultural dynamics that the service will touch upon, which have to be considered in this mass marriage of talent and capital and which I intend to elaborate in more detail on in a forthcoming book, but I hope that what we will be able to do with Africa PreBrief is to provide valuable information, in a timely and efficient manner to our subscribers and clients and bring more economic reality to the understanding of this unique and matchless continent and how it can be developed through trade and commerce to ultimately surpass the glory days of even its ancient kingdoms – both Nile and Niger Valley. The effort to establish a ‘United States of Africa’ which I support, and hope to live to see, can only be achieved if the best and brightest minds – the greatest form of capital there is – remain and return to Africa in some way or another, as a result of good government policy; rich, deep and liquid capital markets that will reward and back such talent; indigenous entrepreneurship that moves communities beyond a subsistence existence; and conflict resolution that transcends race, religion, ethnicity, and tribal identity. I one day foresee Africa as a throne of peace and prosperity once again, with people of all hues, colors, languages and tribes enjoying her riches on mutually beneficial and equitable terms. We are not there now but hopefully the information that we provide will personally benefit our subscribers and provide insights on how to bring people together in both currently available and previously un-thought of forms of economic cooperation. We want to contribute to a new paradigm where considering doing business in Africa is not only seen as rational but essential and what the time demands.

Cedric Muhammad is a business consultant, political strategist, and monetary economist. He’s a former GM of Wu-Tang Management and currently a Member of the African Union’s First Congress of African Economists. Cedric’s the Founder of the economic information service Africa PreBrief ( and author of ‘The Entrepreneurial Secret’ ( He can be contacted via e-mail at: cedric(at)

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Last changed: Jul 20 2010 at 8:50 AM