Thanksgiving stuff(ing)...

 I suppose this is a kind of Junkbox, but specifically targeted to today.

First, if you're struggling for things to list when your turn at the table to be thankful comes around remember these 5 economic trends. Dibs in this one:

5) Debt burdens keep on falling. The ratio of Americans' income going to meet debt obligations has plummeted in recent years, as consumers have both reduced debt burdens (by paying them down and in some cases defaulting) and benefited from lower interest rates. The debt service ratio was only 9.89 percent in the second quarter, hovering near an all-time low of 9.84 percent from late 2012 (the data go back to 1980). That ratio was 13.5 percent in the third quarter of 2007, before the crisis. Congratulations, America! You're making progress in getting your household debts to a more manageable level.

Even though I have been following economic numbers, this reminder was a pick-me-up. Maybe it's because they can't pack enough doom-mongering in farm publications right now.

To be fair, I am convinced one thing about this ag downturn that will be unique for my lifetime at least is remarkably low odds for a massive government bailout, like the infamous extra AMTA payment.

This conviction is certainly coloring my plans for the next few years, which have proven to be a little trickier to map out with dual goals of enough retirement income and a manageable debt for Aaron. Looking at the spreadsheets, I really needed just one more year of $5+ corn to arrange the numbers in a smooth, trouble-free path. 

But since when has my ability to plan been that accurate? Like many of my generation, working past 66 probably won't kill me. 

I do think that high costs will force down rents faster than experts think. In short, DuPont and Monsanto will eat landowners lunch as well as operators. Rents are, in the end, residual, and with lenders poised to say "no" much earlier, 2014 rents could show a significant drop.

*****

I filled up for $3.09 recently (see above).  I could get used to this. But I wasn't aware of one of the factors in the price drop.

Many Gulf Coast refiners are taking advantage of the boom in shale-oil drilling in the Midwest and producing ever more diesel for export to Europe and Asia. That's a lucrative business. And that refining process also produces more gasoline for domestic consumption. So, as The Wall Street Journal reports, refiners can still make a profit from exporting diesel abroad even if they're creating a glut of gasoline here at home. [More]

I also think it might be part of refiner and oil producer plans to do what they can to keep prices low if the EPA goes through with the mandate revision. Nothing would cement the idea of ethanol making gas prices higher than gas selling with a "2" in front of it right after the mandate was eased, IMHO.

Nonetheless, thanks Europe!

*****

I could do this if I wanted to...

*****

Meanwhile, back in Africa, the lack of industrialization to provide jobs is threatened by an emerging pattern of premature deindustrialization. 

The economic, social, and political consequences of premature deindustrialization have yet to be analyzed in full. On the economic front, it is clear that early deindustrialization impedes growth and delays convergence with the advanced economies. Manufacturing industries are what I have called “escalator industries”: labor productivity in manufacturing has a tendency to converge to the frontier, even in economies where policies, institutions, and geography conspire to retard progress in other sectors of the economy.That is why rapid growth historically has always been associated with industrialization (except for a handful of small countries with large natural-resource endowments). Less room for industrialization will almost certainly mean fewer growth miracles in the future. [More]

There simply will not be as many "factory jobs" anywhere in the world, let alone Africa. This reinforces my belief that forcing industrial agriculture into sub-Saharan Africa would be devastating to local economies even as they make money for investors, since  our type of ag is very labor-light (and getting more so).

*****

Go watch the game. Or The Wrath of Khan.

The problems of Africa...

 One of the development hurdles for the giant continent is to find ways to exploit natural resources and actually help their own citizens. Stuff like this shows that is hard to do:

In Kinshasa, Presidents Zuma and Kabila signed a treaty to jointly develop the $80 billion Grand Inga hydropower project. When complete, the dam will generate 40,000 Megawatts which is more than twice the amount of power produced by China’s Three Gorges Dam.DR Congo currently has an installed capacity of 2,400MW but only produces about half of that due to ageing and poorly maintained infrastructure; only about one in 10 of the 70 million people of Congo has access to electricity.Most of the power produced out of Inga will, however, be exported — to South Africa, other countries in the region, and possibly as far north as Europe. [More]

So this new electricity source will benefit SA and Europe - color me surprised. Undoubtedly as well, in the process of contracting and construction more than a little of the enormous sum will find its way into Swiss bank accounts or simply be squandered by anyone involved - it is the single most persistent attribute of African projects. 

But my objection is there seems to be no effort to find ways to promote economic development of a black middle class, only redistribution by governments to a permanent underclass of some portion of the profits of public investment. Not that I have any brilliant ideas myself, but efforts like this will not bring many positive results in ordinary citizen lives. 

And yes, that goes for every big ag development project I have seen too.

The Resource Curse is substantiated once again.

Tell me again...  

How industrial agriculture is going to work in Sub-Saharan Africa. I think it is an ill-advised repeat of the same condescending colonialism, however well-intentioned, that delayed African development for a century of more. 

I saw Maasai herders in Tanzania, but had failed to learn more about their lives. This article was a revelation.

And day by day, I saw more of the world of the Maasai of Maji Moto. There was the bustling weekly livestock market in the nearby town of Ewaso Nero where Maasai herders filled a dusty corral half as large as a football field with sheep, goats and cows, selling them mostly to meat merchants from Nairobi. I bathed in the Maji Moto hot springs with the locals and was led on guided hikes into the easily climbed Loita Hills, where it seemed as if everything that grew had some medicinal, nutritional or spiritual significance. The leaves of the sagelike compa bushes, for instance, are rubbed under the armpits like deodorant; twigs from the leafy olkisikongu tree are used as natural toothbrushes; and the sacred oreteti trees, under which the Maasai pray to their god, Enkai, are said to have the power to dispel bad energy and instill peace.

A couple of hundred yards behind the Cultural Camp is the “widows’ village.” In Maasai communities, women often outlive their husbands but are forbidden from remarrying. Some of these widows, and their children, are left destitute, with no livestock (the traditionally favored currency of the Maasai). Urged by his mother to address this problem, Salaton built a manyatta where poor widows live together like a family, earning money by working at the camp and selling beautifully beaded jewelry to tourists; the camp also pays for their and their children’s medical expenses. When I first went to their manyatta, the widows performed traditional welcoming songs and dances, but subsequent visits were less formal; they were happy to show me how they lived and were comfortable being photographed in their homes.

Meanwhile, I got to know the Maasai who were working and volunteering at Salaton’s camp, especially those who spoke English. There was Rose, a teenage seamstress with a hair-trigger smile, who teaches the widows how to sew when she isn’t working with tourists; Joyce, a college graduate in her early 20s recently hired to help Salaton with the business side of the camp; and Meeri, who was in her last year of high school in Maji Moto after fleeing her own village a few years earlier to escape a marriage her parents were arranging for her. “I’d heard that the leader here helped girls like me,” she said, and described her three-day walk alone across the bush, sleeping in the branches of trees at night.

Our rapport was easy as we asked and answered questions about our cultures. Among our many conversations, we compared differences between Maasai and American marriages; when I explained that we don’t have dowries, don’t practice polygamy and get to choose our spouses, they liked the way all of that sounded. But they didn’t immediately embrace the idea that a wife might be older than her husband. “That would never happen here,” Joyce said, laughing at the thought. [More of a short travel story]

 I have become more firmly convinced that applying our brand of agriculture to Africa will not help many Africans, even if it makes foreign investors rich. It is simply another form of an extractive industry, and absent any industrial development that provides jobs to displaced subsistence farmers will worsen the plight of the vast majority of locals.

Instead we need ways to promote better small farms to increase their productivity and allow them access to markets, which will allow them to develop economically on a path similar, but not identical the the US.

The African ag problem (I)...  

I've been trying to assemble my thoughts and conclusions from my Africa trip and I think there is one consistent theme emerging: we still have not found a truly workable solution to improve agriculture there as well as advance the lives of the overwhelmingly rural poor.

First of all, food aid is a flat out bad idea. I cannot understand how farmers of all people cannot appreciate what surplus grain being dumped onto local markets would do to local farmers. By dampening price rises, consumers may briefly benefit, but the economic incentives to produce more are depressed.

Scandalous barely covers it. Since America began donating surplus wheat, corn meal, vegetable oil and other farm commodities to the world’s hungry six decades ago, the programme has been captured by an “iron triangle” of farm interests, shippers and voluntary organisations, with plenty of help from Congress. Rules state that most food aid must be bought from American farmers and processed in America. At least half must then be carried on American-flag ships. With competition severely curbed, ocean shipping eats up 16% of the budget for the largest food-aid programme, Food for Peace.
In a related scandal called “monetisation”, involving non-emergency aid (which represents about 30% of Food for Peace), charities and non-governmental outfits receive American produce, sell it on local markets abroad and then use the proceeds for good works. Compared to directly funding projects, “inherently inefficient” monetisation on average wastes 25% of the money sent, according to the Government Accountability Office. And the food supplied often floods fragile markets, hurting local farmers. [More]

Our food aid program is a pretty blatant form of export subsidy intended to help American farmers under the guise of humanitarian concern. If the government did not pay for the grain farmers wouldn't be donating it, that's for sure. Even the modest reforms urged almost unanimously by economists have hit strong political headwinds in Congress.

This is the first thing that we know doesn't work, and while I don't blame the original efforts years ago, or the times when food is needed NOW! it is time to stop ignoring the harmful and wasteful aspects of such programs.

SA farmers still struggling...  

One of my worries from my Africa trip was for the future of South African agriculture. Given the abundance of very cheap labor and even more abundant unemployment of the unskilled, most of their farms have been built around employing large numbers as opposed to capital intensive big machinery. Much of their sector is necessarily high-labor products as well - tobacco, fruits, vegetables, grapes, etc.

But I just now found out the farm labor problem threatening the SA ag future is at least partly a political power play.

The agricultural trade association - AgriSA - argues the strike was politically-driven and the farming sector is suffering because of a political battle between the ruling ANC and the main opposition party, the Democratic Alliance.

The Western Cape region is the only province in South Africa ruled by the DA.

Carl Opperman, AgriSA’s Western Cape chairman, says the strikes were pushed there by ANC officials to destabilize the DA.

Opperman argues the national wage increase is not a solution to empower farm workers or reduce poverty. Rather, he says, the government should focus on helping the farms to be more productive by protecting them against international competition.

"The South African farmer is the only framer basically in the world that has a 100 percent free market economy," he said. "We don't get any support from our government. We have got to fight our way in a world market and in our own country. We will need support, we don't need financial support, we need policy support. We need protectionism, we can justify it, not like at the moment where it is a free fall.”

The commercial farmers’ trade union, TAU SA, says that more than 1,500 workers were laid-off in the weeks following the wage increase, in Limpopo Province alone. Whereas in the Western Cape Province, many farmers say they will not be able to hire casual farmer workers again for the winter harvest season just weeks away. [More]

It is almost refreshing to hear a clear, blatant call for protectionism instead of some euphemistic language that promotes trade barriers without seeming to. Due to the odd, pervasive spin of SA government information and data, it isn't east to pinpoint their ag imports, but appears two contentious commodities are chicken from Brazil and olive oil from the EU.  

The need for a second viable political party is IMHO absolute. The level of corruption and incompetence of the ANC can only be improved by a presence of the real possibility of loss of power by a split black African vote. 

The continued decline of SA agriculture would cripple efforts to anchor the rise of sub-Saharan economies. But the Catch-22 here is one of the most logical solutions for individual farmers is to switch to capital-intensive (machinery) methods and lose their dependence on increasingly unreliable labor. This is really bad news for nation with far too few jobs already.

Africa: On the ground - #6 Mozambique...  

This post will finish my dilatory reporting of what I discovered on my trip to Africa. The final stop was the working farm at Ruace, MZ (not on any map I could find) somewhere westish of Gurue.

(The dotted line is how we might have driven there - some uncertainty on the route.)

Here, unlike the farm in TZ, were crops actually underway. More than 3000 acres of soybeans had been planted and were in the pod-filling stage (2/28). Slightly alarming to me, the combine for the farm was still on the ocean somewhere. I found out after I got home, it had arrived (3/27) in Maputo (over 1200 miles to the south). The platform head was in container in Duban, SA - even father from the farm.

This is the land before clearing.

While I find this worrisome, it could be the upcoming dry season means you can just leave the beans standing for weeks after they ripen with few worries. (For example, in SA, the farmer told me he field dries corn to 12.5%).  I hope so.

This farm is in an area much more densely settled then TZ - at least with humans. Surrounded by subsistence farms that is the way of life for ~85% of Mozambicans, they employ a relatively (by our standards) large number of people at ReidoAgro.

In addition, as I talked about on the show, the farm has an active and successful "extension" program to help select local farmers boost their productivity by sharing equipment (4-row planter), advice, some tillage, harvesting (if the combine arrives) and a sales outlet. That humanitarian aspect of the business plan is the most attractive part of the whole enterprise IMHO.

(The free clinic below.)

Certainly the plight of the locals is compelling. We heard stories from the resident Peace Corps volunteer, Sarah Fairchild, of efforts to do minimal family planning to prevent babies from being born while mothers are still nursing a sibling, as it usually threatens the life of the older child and mother due to simple lack of nutrition. This year the previous rains meant the people were is pretty good shape food-wise, but we were just entering the "time of hunger" (just before sweet-corn stage) when  supplies are lowest.

I must admit as well to a certain uneasiness with plans at ReidoAgro for irrigation when the largest health threat to the local population is lack of clean water. It's not their job, of course, but the juxtaposition of the two situations is certainly morally unsettling.

Fuel is hauled from Gurue (about 50 awful miles away) in a ~300 gallon plastic tank almost daily. This ad hoc arrangement is one of the many obstacles to efficient operations. Working capital is limited, which also constrains possible solutions.

My impression of the farm is perhaps all frontier efforts are this challenging, but the number of clearly urgent problems (like the combine) is deeply concerning. Acquisition of land is one thing - making it produce income is another.

I am also beginning to understand why Chinese officials have been in no hurry to modernize their farms. What would they do with the hundreds of millions of small farmers who would undoubtedly be replaced by more efficient large operations? While ReidoAgro is not moving small farmers out wholesale, like a neighboring Brazilian operation, the farm will not employ as many as it displaces, I think. Even with the boost to the local economy, the bulk of the profits will flow back to outside investors. The change in local lives is unclear.

I don't have any better idea about how to develop agriculture in incredibly poor countries, but I am beginning to believe it must be done simultaneously, if not after, industrial development offers an escape from subsistence farming. Otherwise it despite the best intentions simply deepens the plight of the rural poor, although likely with some improved infrastructure (roads, etc.)

Modern agriculture is moving away from labor to technology everywhere. Expecting it to lift masses of rural poor may be unrealistic, without an enormous expansion of the extension farmer program for which funding is problematic.

In MZ, the exploitation of mineral and energy resources could at least add a government revenues, but recent history suggests much of that will be embezzled and wasted, with the remainder supporting a permanent welfare class. Again, I've got nothing to offer instead, but the Resource Curse is real, I think.

Efforts like Aslan Global may provide an example of a better way to develop agriculture in the poorest parts of the world. It may also provide some clear data on what doesn't work particularly well. Both are valuable contributions.

More and more...  

Africa looks ready to take off to...somewhere. Obscure items that caught my eye.

IT HAS been an astonishing past year for gas discoveries in east Africa. Large finds off the coasts of Mozambique and Tanzania have turned those countries into major players in the world gas market. A more modest discovery off Kenya has led to optimism that richer finds are on the way. The flow of dollars into the region should help finance essential development and lead to a decline in expensive fuel imports. But with the benefits comes the threat of damaging side effects if the countries do not manage their buried treasure carefully.
One of the risks these countries now face is “Dutch disease”, a term coined by The Economist. If a large influx of foreign money pushes up the value of local currencies, traditional exporters might struggle to remain competitive, despite their access to cheap and reliable gas. Mozambique’s government plans to raise $6-8 billion a year in gas exports, which would treble the country’s export volume and could put pressure on its traditional exports.
According to Antonio Franco, a Maputo-based representative of USAID, agriculture is the most likely sector to lose out. “Niche markets, such as shrimps, will be less affected as they have high profit margins. But producers of basic commodities such as corn, cotton and cashew nuts could face big problems because they compete on price.” This is particularly problematic because three quarters of the population works in agriculture. [More]

I'm not sure this presents a huge problem for ag developers like Aslan (from my former posts) since they are looking at the domestic market (mostly feed supply). A strengthening currency would not pressure interior prices as it would those operations aiming at exports.

Meanwhile, the Chinese have found their lack-of-charm offensive isn't working all that well.

But in recent weeks, two prominent Africans have wondered aloud about their own expectations. “We have had some bad experiences with Chinese companies in this country,” Botswana’s president Ian Khama said in a recent interview with the Johannesburg-based Business Day newspaper.

In the future, “we are going to be looking very carefully at any company that originates from China in providing construction services of any nature,” he added, saying other African leaders shared his views. 

Mr. Khama blames the electricity cuts in his country on a Chinese firm’s slow work to build a power plant. The governor of Nigeria’s Central Bank, Lamido Sanusi, has a broader worry.

“China takes our primary goods,” such as oil and minerals, to fuel its economic boom “and sells us manufactured ones. This was also the essence of colonialism,” Mr. Sanusi wrote in a recent opinion article published in the Financial Times. “Africa is now willingly opening itself up to a new form of imperialism.” 

Even some Chinese scholars are nervous that the behavior of Chinese companies in Africa – often accused of poor environmental and labor relations standards – will sour China’s relationships.

“China’s main challenge is to demonstrate that it is not repeating the old practices of the European powers,” warns Pang Zhongying, an Africa specialist at Renmin University in Beijing. “China has to match its deeds to its words … or Sino-African relations may have no future.” 

Oil and coal accounted for 50 percent of Chinese imports from Africa last year. Minerals and other raw materials made up the bulk of the balance. In return, China exported mainly electronics, machinery, spare parts, and consumer goods. 

Though the pattern of China’s trade with Africa does indeed replicate colonial patterns, says Professor Brautigam, “China is just reacting like everyone else to what they find in Africa – raw material exporters,” because African countries themselves have failed to industrialize. [More]

When I was in SA, the stereotype of Chinese immigrants was the convenience store owner. The bigger problem is the addition of yet another hard-to-assimilate ethnic population into a roiling multicultural society.

All of these reports - good and bad, however suggest to me one optimistic development: money is being made in various ways and increasing amounts. When this happens, natives take notice and learn. It won't be pretty or particularly honest, but it is a step up from a conviction that subsistence living is all there is.

Africa: On the ground #5...  

Tanzania.

This is the deal: Wallie' Hardie's investment group, Aslan Global Asia (AGA), stumbled into this property of 100,000 acres of largely untouched savannah west of Morogoro, TZ. I think they spent about $6M for 80% of the land, since the government requires a local owner of at least 20%.The farm will be split into both cattle and crop production.

It is located on the main road going west from Morogoro, next to a huge game preserve. I think this (below) is the location, judging from how long we traveled west from the city.

Wallie said Morogoro was about 1M population, but like some other numbers he rattled off, that doesn't match with facts I could find. The population of urban Morogoro is about 200K.

A good series of photos from the city here. Suffice it to say, like every Africa city we visited it was full of people and traffic.

The road to the property was surprisingly good,  especially in retrospect compared to waht we were to endure in MZ. This is a major plus for the farm future. The city lies in the Morogoro mountains, which are quite lovely.

The "farm" is little more than a camp with bulldozers equipment brought in from Dubai where they were on sale due to the recession. Good looking machines, but idle as they waited on final ownership paperwork. The "ownership" is good for 99 years, and Wallie didn't know what happened after that.  Given the country has mediocre corruption and governance scores from Transparency.org and the Economist Intelligence Unit, there are several government related risks.

  This is the son of the former owner, who will be involved in developing the farm.

 One charming aspect for farm boys like me from the Midwest was the presence of real African wildlife. We were told (and I found it credible) that elephants had passed through the day before (footprints at the river below), and lions were heard in the night. Since a huge national park/preserve is adjacent to the property, I could swallow this, but more reflection made me ask how such wildlife would be managed.

It seemed not to be problem they had worried much about, but here's my logic. If you have serious carnivores like lions on site, doesn't that imply a large population of grazing herbivores? Why wouldn't they be attracted to this green postage stamp of irrigated plants? Won't a herd of domestic cattle look a big-cat buffet table? I realize elephants don't eat soy or maize, but they could do some damage wandering through.

These concerns were met with vague assurances of fences which seems like a considerable expense and effort to maintain. Similarly Masai herdsmen have wandered though this 15 square miles for millenia. (The gentleman was passing through when we were there). Will "no trespassing" signs work for them?

 A small portion of the property had been cleared a few years before, so the fields could be huge and flat.

 Also the property would be studded with these (below) - baobab trees. These enormous specimens are symbolic of Africa, and as I wandered up to one to check it out closely, I was told casually to watch out for a black mamba. The subsequent photos/video were shot with zoom from much farther away.

One curious aspect of most of the subsistence farmers is the difficulty understanding the population density of the arable land. Along the road, there appeared to be a hut about every 500' of so with maize plots around it. The immediate and obvious conclusion was that once the road was built natives moved to homes along it for ease of transportation - there were people of all ages walking along virtually every mile all the time - day or night.

Only if you looked closely out past the roadside, you could pick out huts just as densely situated all over the rolling hills. In other words, I think you could have built the road anywhere and ended up with a hut every 500'.

The development of the TZ property is to occur concurrently with the MZ farm. Production will be hauled to Morogoro, where feed mills are anxious to buy the oilseeds and maize. Th first crop is planned to be sunflowers, since combining high is probably a good idea immediately after clearing the land.

Africa: On the ground #4...  

We stopped again in Johannesburg on our way home, and during a 26 hr. layover, took a 4 hr. tour of Joburg and Soweto. The guide, Johan van Biljon was fantastic and the information he shared useful and pretty fairly delivered, IMHO.

So further stuff about SA and the Johannesburg area (my usual random organization scheme):

• Joburg/Pretoria suffer from a severe electricity shortage. As much as 34% is "stolen". There are PSA ads everywhere to report electricity theft. As you might guess electrocution deaths are common. The problem is exacerbated by the deep mines. (Stay with me)

The mine is one of the three Western Deep Levels mines of the West Wits gold field west of Johannesburg. The mine is near the town of Carletonville. TauTona neighbours the Mponeng and Savuka mines, and TauTona and Savuka share processing facilities. All three are owned by AngloGold Ashanti. The mine was originally built by the Anglo American Corporation with its 2 km (1.2 mi) deep main shaft being sunk in 1957. The name TauTona means "great lion" in the Setswana language. The mine began operation in 1962. It is one of the most efficient mines in South Africa and remains in continuous operation even during periods when the price of gold is low. Since its construction two secondary shafts have been added bringing the mine to its current depth. The mine today has some 800 km (500 mi) of tunnels and employs some 5,600 miners. The mine is a dangerous place to work and an average of five miners die in accidents each year. The mine is so deep that temperatures in the mine can rise to life threatening levels. Air conditioning equipment is used to cool the mine from 55 °C (131 °F) down to a more tolerable 28 °C (82 °F). The rock face temperature currently reaches 60 °C (140 °F). [More]

You can imagine the A/C units needed for that problem. Now add in the consequences of the "open borders"policy instituted by the ANC in the last few years has added to the demand for electricity as immigrants of all categories have flooded south for jobs.

SA was not ready to grow electricity production to meet these demand growth drivers. The result is chronic blackouts/brownouts/conservation measures.

New plants are coming on line in the next few years. They will be coal-fired by default as SA has lots of coal and little else for electricity. Unfortunately much of it is located in shallow veins under pretty good farmland. Hence you see scenes like this:

As with urban sprawl, "coal sprawl" distorts land prices, but offers a possible escape route for farmers looking for a new start. Law requires the mine to buy whole farms - not just areas with coal veins. And they bid it up. (See this week's show)

 
One interesting anecdote was how Joburg coped with the power problem during the 2010 World Cup - a really big deal on the par with getting the Olympics. To keep the stadium lights on (above), trains running and hotels lit, residents were exhorted to turn off all but one light and their TV (to watch the match, of course).

Suffice it to say, backup power systems are a big industry, similar to security.

• I don't mean to harp on the security/crime issue but it was hard for me to get my head around it, considering I rarely lock my car. Still, I don't think I'm overreacting. I was there during one of the high (low?) points of the Oscar Pistorius drama, and it was all over the news.

But while Cape Town's center accounts for half its footprint, it is home to only a fraction of its population. About 2 million of Cape Town's 3.5 million people live to the east in tin and wood shacks and social housing built on the collection of estuary dunes and baking sand flats called the Cape Flats. Most of those Capetonians are black. Class in Cape Town is demarcated by altitude: the farther you are from the mountain, the lower, poorer and blacker you are. Cape Town's beautiful, affluent center is merely the salubrious end of the wide spectrum that describes South Africa's culture and its defining national trait: aside from the Seychelles, the Comoros Islands and Namibia, South Africa is the most inequitable country on earth.
This stark gradation helps explain South Africa's raging violent crime (and why, contrary to legend, Cape Town actually has a higher murder rate than Johannesburg). In 2011 the U.N. Office for Drugs and Crime found that South Africa had the 10th highest murder rate in the world. Rape is endemic. Two separate surveys of the rural Eastern Cape found that 27.6% of men admitted to being rapists and 46.3% of victims were under 16, 22.9% under 11 and 9.4% under 6--figures that accorded with the high proportion of attacks that occurred within families.
But what really distinguishes South Africa from its peers in this league of violence is not how the violence rises with inequality nor its sexual nature--both typical of places with high crime--but its pervasiveness and persistence. With the exception of Venezuela, all the other top 10 violent countries are small African, Central American or Caribbean states whose populations tend to be bound together in close physical proximity, creating tight knots of violence. South Africa, on the other hand, knows crime as a vast stretch of lawlessness covering an area twice the size of France or Texas. And it has been that way almost as long as anyone can remember. [More]

While I don't want to be overly negative, the residents have obviously become somewhat hardened to a situation that stuns outsiders. The most hopeful observation was if the black middle class could continue to grow, and the crime problem becomes more of an economic assault rather than racial, efforts to bring it more under control might bear fruit. Key to this will be the rise of a viable second party and decreasing corruption in government.

• Johannesburg was bare ground before 1886. Due to its altitude (5751 ft.) there were no trees. Within ten years it was a functioning metropolis with streetcars and multistory buildings. So many trees were planted it is considered the world's largest man-made forest.
• It is the largest city NOT located by a river, bay, or lake and water supply and distribution remains a huge Achilles heel for the area.
• Currently the downtown is ~50% empty, as businesses and residents have fled to suburbs like Sandton.
• The area taxi system defies comprehension by an outsider.

Minibus taxis

Like many African cities, Johannesburg has a chaotic informal public transport system in the form of minibus "taxis". These are not taxis in the typical Western sense of the term – they won't give you a lift to your doorstep. Rather, they are small-scale bus services, often unmarked, operating with neither timetables nor formal stops.
Taxis are the cheapest form of transport in Johannesburg, and are the daily transport lifeline of the bulk of the working population.
More adventurous travellers will find them an interesting African experience – the closest you may get to mixing with ordinary people. They are also the only form of public transport that penetrates every last sector of the city, including the poorest shack settlements.
But there are three reasons why a tourist should exercise caution. Firstly, use of the taxi system for anything other than a short drive requires an expert knowledge of the unwritten lore of hand signs indicating which taxi is travelling where, and an understanding of the various routes and how they intersect.
Second, despite frequent clampdowns by the traffic authorities, minibus taxis tend to be old and in poor condition. Third, minibus taxi drivers, rushing their fares to their destinations as quickly as possible in order to maximise returns, are the city's most notorious drivers, ducking wildly from lane to lane and stopping without warning whenever a passenger wishes to climb on or off.
However, during the Fifa Confederations Cup in 2009 and the 2010 Fifa World Cup, an approved fleet of minibus taxis has been put together to ferry football fans to venues free of charge.

Metered taxis

There are conventional metered taxis, but unlike in many other countries these do not cruise the streets in search of passengers, and must generally be summonsed by telephone. Major hotels do often reserve bays for taxi companies, however, and in those that don't, reception staff can quickly make arrangements for visitors. [More]

You have to see it in operation to appreciate the complexity.

• Funerals are a huge industry, as black Africans desire to be buried in their birthplace, and with a big and expensive funeral - including what amounts to a banquet. This considerable expense is similar to Indian marriages, in that families often bankrupt themselves to do it up right. My friend Jim - who is in the business - was envious.
• SA has the highest rates of HIV due to the migratory nature of mine work and rampant misinformation. The SA government is, however, accomplishing near-miracles in combating this epidemic.
• Traffic signals appear to be merely advisory, which is surprising considering the relatively good road system around Joburg.

Visitors to the coasts (i.e. Capetown, Durbin, etc.) are treated to remarkable scenery and weather. In this aspect SA reminds me of California with a huge diversity in climate and topography.

It's hard not to like both the people and place, and fervently wish them well. They will be tested severely in the next few years. [Good summary here]

On to Tanzania.

Africa: On the ground #3...  

We began in SA talking with a large farmer (Shoeman Farms) and the head of a gigantic agribusiness, Afgri, as well as our hosts from Kongskilde (with whom I am affiliated).

Observations from my notes, in no particular order:

• SA  is growing relatively well by SSA standards, but still slowing:

The GDP figure for the (4th quarter 2012  2,1% q/q )
The seasonally adjusted real GDP at market prices for the fourth quarter of 2012 increased at an annualised rate of 2,1 per cent compared with an increase of 1,2 per cent during the third quarter of 2012.
The main contributors to the increase in economic activity in the fourth quarter of 2012 were the manufacturing industry (0,8 of a percentage point), finance, real estate and business services (0,6 of a percentage point) and general government services (contributing 0,4 of a percentage point).  The mining and quarrying industry recorded a negative contribution of 0,5 of a percentage point, and the contributions by the electricity, gas and water industry and the construction industry  were insignificant.
The seasonally adjusted real annualised value added by the primary, secondary and tertiary sectors recorded a decrease of 3,7 per cent, an increase of 3,6 per cent and an increase of 2,4 per cent respectively during the fourth quarter of 2012.
The unadjusted real GDP at market prices for the fourth quarter of 2012 increased by 2,5 per cent compared with the fourth quarter of 2011.
Real annual GDP increased by 2,5 per cent in 2012
First preliminary annual estimates of gross domestic product (GDP) are derived as the sum of the GDP for the four quarters of the specific year. These estimates indicate that the real annual GDP at market prices for 2012 increased by 2,5 per cent compared with 2011, when the real annual economic growth rate was 3,5 per cent. [More, remember the commas are decimal points]

• South Africans, not unlike Americans, seem to have a distorted picture of where national wealth is created. While they are convinced mining is their largest industry, it doesn't seem that way to me.

 [Click to enlarge]

We thought the result was pretty revealing. It shows how mining and manufacturing have declined in their contribution to the economy, as has agriculture. And while we like to think that government profligacy has increased, in fact over the past 20 years government spending has declined. The growth areas are also instructive: financial services, communication and trade, and personal services. We are morphing into a services economy. Unfortunately that means the demand for skilled labour has only increased. Those segments of the economy in decline are exactly the ones most able to absorb unskilled labour. It makes even more of a tragedy of our education malaise. [More]

• Part of this skewed assumption may be perceptions of employment, especially of black Africans. The data too contradicts popular beliefs.

• The government is the major part of the problem. Strategies to unwind apartheid worked very inefficiently if at all since 1994. For example, requirements labor force composition must match national the population mix, means in order to hire one white engineer, a company must hire 8 black engineers - and as one engineer told us, there probably aren't that many in the whole country. Those educated black professionals who do exist, called black diamonds, are understandably hard to motivate, and have enormous leverage in the workplace. Until more black Africans can be educated to fill professional slots, the economy will be crippled.
• Land reform will continue to plague SA farmers. The fiasco of Zimbabwe looms in their thoughts, but there seem to be few work-arounds or fixes for the usually disastrous consequences of forcing white farmers out. Stories like the Zebediela Orange Farm are cautionary:

From 1918 to 1926, more than 565 000 citrus trees were planted on 2 260 ha of this estate’s land. For the twenty five years before the estate was sold to the South African government in 1974, it showed a profit of millions of rands every year. After the sale, Zebediela grew to become “the diamond of agricultural projects”. It was of such great national pride that the Reader’s Digest Illustrated Guide to Southern Africa wrote in 1978 that “nearly 400 million oranges are harvested each year from the groves of Zebediela, the world’s biggest citrus estate. The output is sufficient to provide one orange for every eight people on earth.

“At the height of the season, about 15 000 cases of oranges leave Zebediela every day. The fruit comes from more than 565 000 trees irrigated by enough water to supply a city. The whole estate is highly mechanized and many of the most advanced handling techniques in world citrus production have originated from Zebediela. “The first fruit was picked in 1926 after W.H. Gilfillan and Isidore Schlesinger divided the two original farms into 1 200 plots of 2 hectares. A handsome brochure was produced at the time offering the plots at 67 pounds each, to be farmed as a profit-sharing operation.

“The scheme proved particularly attractive to retired army officers and by 1921 most plots had been sold. In 1928, a branch railway to Naboomspruit was opened to carry the ever-growing harvest on the first stage of its journey to all parts of the world. In 1974, the South African government bought the Zebediela Estate.” After the ANC government came to power in 1994, the administration of Zebediela came under the control of the newly-formed Agricultural and Rural Development Corporation (ARDC), a government parastatal whose administration eventually ruined not only Zebediela but scores of other agricultural projects in the area. Before this takeover, Zebediela’s harvest was worth R30 million a year.

It didn’t take long for the corruption, theft and maladministration to set in. By 2001, the estate was in ruins. The original 2 260 hectares planted had been reduced to 800 hectares. Because no fertilizers and pesticides were used, more than half the trees died as a result of the Department of Agriculture’s failure to grant funds for the survival of the project. Only ten per cent of yields could be marketed.

A loss of R35 million in 2001 followed a loss of R30 million in 2000. According to press reports, the estate was “beyond recovery”.(1) Hundreds of thousands of cartons of oranges and lemons were not harvested, and workers were not paid. A lemon yield worth R8 million was left to rot because there was no money to pay staff. The fruit was in any event of inferior quality because it had not been properly looked after. Many of the fleet of 50 tractors collapsed into disrepair. Hundreds of employees were then retrenched.

Managers with in some cases forty years experience were replaced with people who had no experience of farming. One new “manager” was previously a sewing instructor while another was until the previous year a student. The press was informed that not one of the new directors appointed to the Zebediela and its sister Lisbon estate could read a financial statement.(2)

The death throes of the estate peaked at the end of March 2001 when ABSA bank stopped all credit and bounced a pension cheque of R56 million. Other estates in the area met with the same fate. [More from what strikes me as a very biased source, but the best summary I could find]

• A standard story is told of an black African family being awarded a farm and given a tractor and 50 cows by the government. The first year many other family members move to the farm. No production is attempted, the cattle are sold off for cash. Sometimes the tractor is kept for transportation, sometimes sold or broken or abandoned. The family reapplies for more government aid. I have no idea how typical this story is, but I heard a version of it at least three times from reasonable people. I assume there are some success stories, but not many.
• Government intervention has investors profoundly worried, especially about the mining sector.

What it’s about: Most obvious are new interventions in the mineral and exploration sectors (including new taxes, price setting, beneficiation requirements, export restrictions, uncertainty about licence conditions and significantly increased ministerial discretion via the Mineral and Petroleum Resources Amendment Bill), but there are comparable interventions across the economy, as indicated in the ANC’s Mangaung Resolution and in a range of proposed regulatory and legislative changes, including those relating to telecommunications, liquid fuels,  the labour market, employment equity and Black Economic Empowerment (to name just a few).
My view: Since 1994, it has generally been the case that markets consistently overestimate the risk that the ANC and its government will take significantly populist policy measures. The best example of this was in July 2002, when exaggerated targets for black equity participation in the mining sector where leaked and R52b left the JSE resources sector in 72 hours – a buying opportunity of note. However, the traction Julius Malema was able to achieve with disaffected youth post-2009 and the implicit defection from the ANC and its allies in the platinum strikes last year have catapulted the ANC into something of a policy scrabble. While nationalisation is off the agenda, it has been replaced by a policy push that hopes to deploy private companies, through regulation and other forms of pressure, to achieve government (and party) targets of employment, revenue generation, service delivery to local communities and infrastructure build. Increases in the tax take look likely – it’s purely a question of ‘how much the market can bear’.
Government intervention, per se, is less the issue here but rather the confused, generalised and uncertain nature and intent of the interventions. If the interventions do not have the desired results (growth, employment and equality), the risk is that government does not reassess the wisdom of the intervention, but instead uses a heavier hand.
Financial markets: Policy uncertainty puts downward pressure on investment, employment and output in all sectors. In South Africa, these negative impacts will be felt most keenly by companies most exposed to government licencing and regulatory power, or most exposed to government’s political prioritisation. Resources, telecommunications and agriculture all fall into one, or both, of these categories. [More]

•  An official at Afgri, a very large ag coop now privately owned, pointed to other countries as their focus for growth: Zambia, Ghana, and surprisingly, Zimbabwe ("Mugabe can't live forever"). They were trying to support SA and other immigrants by developing a support chain of supply and machinery dealers in those countries.
• I keep trying to make comparisons to how we could have evolved the plantation system of the South without the Civil War. While there are major differences, I know, the immensity of the problem of maintaining productivity while changing ownership seems nearly insurmountable. In short, while I do not like what is happening in SA to good farmers, I cannot escape the conclusion there may be no painless way to unwind what was an unsustainable apartheid system.
• SA makes you more accepting of the "Resource Curse" theory. In this case, the labor demand for mines has drawn blacks from all over southern Africa for migratory, and very strenuous work. The "open borders" policy enacted soon after 1994 allowed a flood of illegal immigrants primarily drawn to work the mines, but adding immensely to the government welfare costs. South Africans have coped remarkably well, adding enormous amounts of housing and building as much infrastructure as possible as fast as possible. But mine employment is dropping and the influx shows not sign of ending. It is a testament to the ingenuity and industry of SA citizens that their economy has continued to grow nonetheless.
• SA farm output is pretty variable depending on rains. Adding land redistribution to this challenge does not bode well, IMHO for future production stability.

[Source]

• According the the Afgri official, the life expectancy for a white SA farmer is worse than a soldier in Afghanistan. They have lost about 10% of their farmers to violence since 1994. Hence the electrified/razor wire around all farms. To their credit, SA farmers downplay the problem or at least treat it very matter-of-factly. "We're not all carrying guns, or anything like that", one told me. To be fair, my grandson is now locked in his classroom in our tiny country school.

Enough for now.

Africa: On the ground #2...  

It is a mark of my travel naivete that imagined I would be posting  frequently during the trip.  In reality during the trip, you're busy taking the dang trip and in this case, coping with wildly unexpected situations. Plus given my sad history, I've been trying to not lose critical stuff like passports, money, computer.

I have a new appreciation for my grandkids and their backpacks. We are slowly turning into beasts of burden, with all humanity leaning forward to balance our loads. Even relatively light camera equipment became a noticeable load over time.

Then you look at a slender African woman carrying 5 gallons of water on her head for miles...

We are back in SA after Tanzania and Mozambiqu, but I'm going to try to keep the posts in rough chronological order. Besides the time digesting what we saw last time here has added some admittedly shallow insights.

I spoke about the extraordinary security (by our standards) everywhere. More disturbing, we have heard absolutely horrible first-hand accounts of attacks, carjacking, fighting off armed thieves, even children threatened at gunpoint as parents watched. It was incomprehensible to Jim and me.

But here is the more difficult thing to try to grasp: the police are responding with apparent equivalent brutality, and the press strikes me as relentless in their criticism of both their methods and results.

It may strike many of you as hard to believe, but I was actually moderately diplomatic given the easy-to-sense discomfort South Africans have trying to explain these problems. But one remark struck me a helpful.

I asked our host, whose judgment I have come to value highly, how he viewed the future. He replied he was optimistic, and not just because things couldn't get worse. Perversely enough as more Black Africans rise to the middle class, and become targets of the same violence as the small white minority, there is the possibility - even a likelihood - of actual political improvement. The ANC is simply running out of racial loyalty as their base of power.

We could compare this with the black support of Democrats or the Southern white support of Republicans, by asking what would have to happen for black Americans to vote against Obama, or older, white male Americans to kiss the GOP goodbye. That sort of trigger may be closer than we think in SA.

The other factor he mentioned was the rise of younger political and bureaucratic professionals who are better educated and prepared for leadership. This was not the case when majority rule began in '94 and the results clearly showed. In fact, this pattern was sadly repeated all across SSA (Sub-Saharan Africa).

I am revising my own guesses as to how fast these changes can be made. More on that in the next post, which will likely be from home.

Africa: On the Ground #1...  

We've been in Africa for several days, but really busy. Most of my computer time has been trying to get my mail and downloading video from cameras.

South Africa was eye-opening. While I was prepared for the security measures, the reality of the fences is overwhelming. (Rats uploading photos doesn't work).

There is a semi-Gold rush sense when talking to ag industries and farmers here, as they all talk about "going north".  The hot spot is Zambia - the former Northern Rhodesia.  Good soils and some of the best infrastructure due to not having a civil war, but other countries are definitely in play. SA farmers are discreetly researching "escape plans" in case of government redistribution of their farms.

Now we're in Tanzania. One big hurdle is getting past customs without being fleeced according to warnings from our hosts in SA. The other challenge is to you kidneys on the roads. If you imagine the worst sections of your worst roads, then narrow it to one lane, you get the idea of our trip to Morogor, although there is a section of good two-highway, albeit extremely heavily traveled.

You have to be here, I think to grasp the intractability of the poverty problem. There other reality is running into Chinese everywhere. FWIW, don't get in their way at the airport, bus, etc.

Amazingly cell phones sort worked, but gmail won't here. Not sure why.

More from Nampula.

Africa 8:...  

I believe it was Confucius who said, "A journey of a thousand miles begins with airport security".  Wise man.

Anyhoo, Jim and I got launched from ORD in a timely manner for the first leg of our trip. Random observations:

• Due to a massive scheduling blunder, I booked our outbound flight for 0845, thinking it was an evening flight. Duh. Nonetheless, it was the first time in a long time I was on a half-full plane. I may due the day flight again just for the hassle decrease.
• Our 18-hour layover was eased greatly by checking into the Yotel in LHR terminal 4. The airport was virtually empty when we arrived (2300 local) and 5 minutes of train got us from T3 to T4. 
• I'm going to try to post a video of the accommodations - no promises.
• Only partially successful with my electrical adapters. Luckily most of the electronics can be slowly recharged through the laptop USB and I did have a UK adapter for that power supply.

We used this morning to do the tourist thing at Hampton Court Palace. It was really good, and with light winter crowds the guides in the rooms were happy to chat (at length) with us.  The gardens must be spectacular in season. 

With it only about 15 min. from LHR, I highly recommend it if you find yourself with time to kill around the airport.

The "Bladerunner" trial is BIG news over here - everybody is following it and has an opinion. Seems like OJ all over again. Only in super-speed. Didn't it just happen last week?

How are the lawyers gonna come up with billable hours?

Africa 7:...  

Background geography

[Click to enlarge any of them] Best views IMHO are on Google Maps.

First the global view. Some things to note:

• All of the area I will be visiting is above the Tropic of Capricorn
• Compare the latitude with the US production areas
• Tanzania is extremely close the the equator
• Check out the proximity to India and China
• Although this is still size distorted note the immense area still available for farm development

 For South Africa:

• I will be in the area around Johannesburg - grain & livestock
• Most of the area is grazing ground
• Wine in the Cape area is huge industry
• Sugar cane around Durban is an important crop

For Mozambique:

• The old description of Sub-Saharan Africa (SSA) is an "inverted soup bowl" with a narrow lowland rim escalating to high plateaus is apt
• No glaciers means very little topography like prairies or Midwestern wet savannahs
• I will be west of Nampula near Gurue
• Note the relationship to Zimbabwe - I think it will play an important role for better or worse in all these countries, but especially Mozambique

Finally, Tanzania

• The Rift Valley in the north is the birthplace of humanity
• The big lakes are big tourist draws, along with game parks
• I will be in the Morogoro area

I'm hoping to give lat/long coordinates to mark my progress and allow you to zoom in from the Google Earth satellite maps. Should have gotten a GPS thingy.