How to make the system work

Billionaire philanthropist George Soros made his fortune on the markets and is giving a lot of it to Africa. Last week he hosted an Africa Forum in Dakar on whether the continent is moving closer to his open society ideal. Ferial Haffajee asked him about the global economy, African governance and the role of China in Africa

You have spoken at the World Economic Forum in Davos about the need for better global financial governance following the mortgage crisis in the United States and its knock-on effects.
What form might this take?

It’s not so much a question of a new entity or reforming the IMF or a global stability pact, it’s more about understanding financial markets and what should guide them in their thinking. The authorities have become far too dependent on the market correcting its own excesses. It’s the job of the authorities to apply macroeconomic policies that correct [the excesses].

What impact might a global recession have on a continent just beginning to find its economic muscle?

Africa may find itself relatively immune because of the competition for natural resources and, in particular, the race by China and India to acquire reliable resources. And, now, even Russia has indicated it wants to join the chase. On the other hand, Africa will be heavily hit by global warming and will be the continent most affected.

There is a view that Africa could be a China or India if our resources are harnessed well and we take advantage of sectors such as tourism and telecoms to enhance export earnings and bring down the cost of doing business. Do you agree?

No. There are problems of culture and governance. [Many believe that African growth will piggyback on Chinese investment] but one of the problems with Chinese interests in Africa is they bring their own workers instead of employing local workers. And there are still serious deficiencies in governance, as we see in Kenya, Zimbabwe … you can have a situation like Côte d’Ivoire … without proper mechanisms to arrest [the slide of democracy].

Countries that have made good progress over decades can be destroyed in weeks and months. Unless something is done rather urgently, you start a process that could end up like Zimbabwe. Given the colonial past, intervention by colonial powers would be counter-productive.

The African Union has to be strengthened so that it is better able to cope with crises. The AU is an advance over the [predecessor] Organisation of African Unity, but I think that civil society needs to exert better pressure to keep governments honest. You need better international supervision of elections because that’s where things go wrong.

What should happen in Zimbabwe?

The deterioration has gone much further and lasted much longer [than expected]. The pressure from neighbouring countries, particularly South Africa, has not been effective and we now face elections there.

The neighbouring countries need to become more engaged. The other countries leave it to South Africa, which has been very ineffective. Being such a powerful country, it doesn’t want to interfere. Zimbabwe casts a shadow over the whole region, including over South Africa.

The lessons of Kenya and Zimbabwe suggest that the ideas of power change and of opposition are not seeded on our continent.

There is a problem with ethnicity and with elections that result in winner-takes-all electoral systems, which carry the seeds of conflict. You need broader power-sharing, less concentration of power in the presidency ...

As President Thabo Mbeki ends his term of office, what do you think will be his greatest legacy?

I think he’s done many things right, but the two big spots on his legacy are the ways he dealt with HIV/Aids and Zimbabwe. He started out being very open and realistic, ready to deal with problems and recognising them, but in the course of time, his entourage has isolated him from reality and he became increasingly detached. This is not unique, [unfortunately it] happens to many rulers.

How do you mitigate such splendid isolation?

It requires a deliberate effort to remain aware.

The extractive industries initiative and budget transparency are two key areas you support. [The initiative is an effort to ensure that African communities benefit from the continent’s resources bonanza and encompasses various civil society exercises including budget transparency.] Why are these important tools for governance in resource-rich African states?

The natural resources belong to the people of a country but it’s the rulers who control the resources. Foreign mining companies will go to great lengths to bribe or influence or put certain people into power.

If you can change this practice, you improve the condition of the people much more easily; it’s a very promising field for intervention.

The initiatives [basically] establish what revenues are received and how they are used.

Give me an example of where the system has worked ...

In the second term of [former Nigerian president Olusegun] Obasanjo, the oil revenues received by government were disclosed publicly and the Open Society Foundation put it into the newspaper so people could see how much was received.

Out of that came impeachment procedures of several governors and the banning of several representatives from standing for elections. The country benefited from better control of how oil companies operate and the macroeconomy of Nigeria improved.

Do you speak to the oil companies to ensure they play ball? The corruptors are as venal as the corruptees.

BP has been in the forefront of supporting this initiative and in the case of Angola they disclosed even though there was pressure [not to] from the government. The US companies have been less forthcoming. China is repeating the mistake the colonial powers have made: it is only concerned with making deals with the government and doesn’t give a damn about people living in the country.

We veer between naked adulation and treating Chinese investment as a yellow peril. Which is it? How can Chinese investment be leveraged for African growth and development?

As usual, the truth lies somewhere in between. Chinese investment is of huge potential benefit to Africa and the fact that they are now competing will have a beneficial effect on the West, which has had the field to itself.

They [the Chinese] are new to this and hopefully they will learn from their mistakes and realise it’s important to build goodwill.

What of the US? Why has Barack Obama captured your imagination and, it seems, that of many Americans? [Soros is a major funder of the Obama campaign]

I think America really went off the rails under President [George W] Bush and it has to reverse course in a very radical way. Obama holds out the prospect [of a change in course] and he is a really charismatic personality who combines the qualities of Martin Luther King and John F Kennedy.

The US president must be concerned not only with narrow interests but with the welfare of the world, because the rest of the world does not have a vote in Congress. The idea that just because you are powerful you can impose your will on the rest of the world is a false one. I think America has lost power and influence and, as a result of the financial crisis, it is losing even more. A new leader must be concerned with global warming, nuclear non-proliferation and provide leadership by dealing with problems in a cooperative way.

Ferial Haffajee was a guest of George Soros’s Africa Forum in Dakar, Senegal, from February 4 to February 7

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