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Slate Money
The Africa Edition
00:51:44
Slate Money on Lagos and Nairobi, China in Africa, and South African corruption
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- [00:00]
A
The following podcast contains explicit language. Hello, and welcome to the Africa edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. I am joined by Anna Shymansky, the world's most interesting emerging markets expert.
- [00:34]
B
Well, hello.
- [00:36]
A
Except for Yinka Adegoke. Welcome. Hi, Yinka. Who are you and why are you here?
- [00:45]
C
I'm asking myself the same question. I'm the Africa editor of quartz qz.com and yeah, we cover Africa business and finance.
- [00:55]
A
Do you think Z or do you say Zed?
- [00:58]
C
It depends on what country I'm in.
- [01:00]
A
So Yinka and I used to work together at Reuters a million years ago, and then I became. I sort of wound up wallowing in podcasting. And you are now living on planes, basically flying around the world between various different African countries and your base in New York, which is not an obvious base.
- [01:20]
C
Yeah, I mean, we looked at it and thought, what's the best way to get this model to work? Because we have the office, obviously in New York, and we were trying to be as effective as possible in taking advantage of the Internet and having an experienced journalist coordinating a team. And the funny thing about Africa coverage is where we are right now in the world and technology is it's actually almost more difficult to run it out of, say, Lagos to cover other African countries. It's probably a bit easier.
- [01:52]
A
We are going to talk about this. We're going to talk about connectivity in Africa. We are going to talk about.
- [01:57]
B
That's quite the segue.
- [01:58]
A
We're going to talk about the whole range of investments that China is making in Africa. We are going to talk about the crazy political scandal in South Africa, which has managed to bring down a relatively large English PR firm and is now threatening to do serious reputational damage to even bigger companies. All of that is to come. But let's start with east versus west, because I feel like a lot of Slate Money listeners know in their mind about North Africa. They have this idea of, like this kind of the extension of the Middle east through. Along. Along the south coast of the Mediterranean. And they know a little bit about South Africa, the country which is unique in a whole bunch of ways. And then there's that large bit in the middle. And, um. And they kind of probably have this idea, well, you've got like, Nigeria on the west and Kenya on the east. But what these are economically and sort of culturally and just in the way that we're looking at the. You look at the continent just like these kind of rival centers and very Very different.
- [03:12]
C
Yeah, they're, they're, they're extremely different. You could say Nairobi's the, the capital of East Africa for now, certainly the leading capital. And Lagos is Africa's biggest city in terms of population and just the sheer numbers of people there. And it's fascinating when you watch how the cities evolve. I mean, I lived in lagos in the 80s and a lot of the problems. Because Lagos, or Nigeria rather, had an oil boom, you know. You know, it's accelerated through many of the problems that other cities now have. I now see the same sort of problems when I go to, you know, Abidjan or Nairobi or wherever it is.
- [04:02]
A
So, so, so I mean, Lagos is on nobody's list of top tourist destinations.
- [04:10]
C
That's fair. But it is, it is, it is a top destination for people who try trying to do business, though.
- [04:16]
A
I'm sure there are many flights between Lagos and Houston and I'm sure there's.
- [04:20]
C
There used to be.
- [04:21]
A
There's no tourists on those flights. Lagos was always famous in, in my world for having the most profitable airline.
- [04:32]
C
Routes in the world economy for British Airways, big business.
- [04:37]
A
Yeah. And those, those seats are not cheap.
- [04:39]
C
Yeah.
- [04:41]
A
Whereas Kenya does actually have a tourist, a pretty healthy tourism business. And you're going to find a lot more expats there. Even though it's a smaller city.
- [04:52]
C
Yeah, it's, it's a smaller city, but they've done a really good job of developing infrastructure there. They've coped with. And this is my point about the acceleration of the. After the oil boom in Nigeria. They've, their growth has been more manageable or better managed. And they've done things like they've got fast Internet there now. They have fairly decent road network. They still have a lot of traffic in Nairobi, but it's an easier city to negotiate, to navigate than Lagos. Lagos is always about knowing the right people. I mean, that's kind of everywhere, but more so in Lagos. And the rewards, obviously, like anything in life, the, the, the risk are higher. The rewards are also higher, you know, so.
- [05:40]
B
And I believe Nairobi is also known as being the capital of NGOs.
- [05:45]
C
Yes.
- [05:46]
B
And lots of expats, as opposed to Lagos, which is a much more kind of entrepreneurial global focus. And I think there's a bit of controversy in Nairobi because of that NGO presence and the fact that a lot of companies tend to employ other Westerners, tend not to employ Kenyans, tend to pay the Westerners more.
- [06:10]
C
Yeah, there is a lot of tension with that. That's been going on for a few Years now, particularly as you say with the NGO sector. But then it kind of spreads into even the startup world because there's kind of the adjacent, there's the social impact kind of startups. So the same sort of culture sort of evolves in that as well where, you know, people employ the people they're familiar with and it's funded by, you know, foundations and grant money. And it creates this culture where, yeah, Kenyans get left out of it sometimes.
- [06:50]
B
And I think also potentially you can have the problem where you have companies that are better at getting grants than they are running companies.
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C
Yes, yes, definitely.
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A
And yeah, so I mean I'm. I have this idea in my head that, you know, Nairobi has, is this kind of expat corn, expat filled corner where people are, you know, where the sort of Africa is a country types hang, hang out and pat themselves on the back for being in Africa. Whereas Lagos is where the real sort of economic engine of the continent is.
- [07:27]
C
Yeah, I think that, I think that's fair. I mean, I don't, I don't want to be. I don't want to just completely dismiss the other 50, 70, you know, significant cities. But. Yes, you know, including Abuja. Yeah. Well, I think the thing, the thing about Lagos is even if you're just serving Lagos, that's 20 million people. Right. If you, if you're a consumer facing business, if you could get it right, how you reach those 20 million people is a whole nother story. Because the point I make about infrastructure weaknesses and the ability to create any kind of meaningful distribution is extremely interesting.
- [08:07]
A
So let's talk about that. Because Kenya is a much, much poorer country than Nigeria. It doesn't have oil.
- [08:14]
C
Do you mean poorer or do you mean the size of the economy? Because the size of the economy is smaller.
- [08:19]
A
Yeah, but it also, but it does seem to have come up to speed in terms of certainly information technology much faster than Nigeria.
- [08:30]
C
Yes.
- [08:31]
A
And everyone pays for everything using their phones. There's pretty good fast Internet across the country. Was that a kind of top down decision by some enlightened government or how did that happen?
- [08:47]
C
Some of this stuff happened accidentally, but you know, the governments will. I think going back to. I think it was President Kibaki. They did sort of have a plan to improve road networks and they actually implemented them. The thing is lots of countries have plans. So it's not like. It's just that they actually carried out some of them.
- [09:15]
A
And so the difference is that if you have a plan in Nigeria, it just winds up getting. And corruption and going nowhere. But every so often plans in Kenya will actually come to fruition.
- [09:27]
C
I think that's almost fair. Yeah, I think that's almost fair. But listen, people make a lot of money in Nigeria, I'm sure. And I don't just mean.
- [09:35]
A
And not just the oil company, I.
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B
Mean the telecom sector people make a.
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C
Lot of money because there's a real companies.
- [09:41]
B
Yeah. And there's a real question. If you're looking at international investors, you're not looking at Kenya. You're looking at the place where there's real entrepreneurial activity. I'm not saying there's not entrepreneurial activity in Kenya, but if you're solely focused on social impact investing and that's the only people who can really get funding, that is going to limit your potential.
- [09:59]
C
I think that's fair.
- [10:00]
A
And then does the same kind of distinction hold true beyond just those two countries? Can you kind of lump Ghana in with Nigeria? Lump Ethiopia in with Kenya?
- [10:13]
C
No, I mean Ethiopia has a completely different dynamic. Ethiopia is, I think, definitely the fastest growing economy in Africa this year and has grown in leaps and bounds in the last few years. But they definitely are following more of the Chinese model, much more top down. Again, you see all these numbers, the macro numbers, they're great for Ethiopia, but there's still a lot of poverty. There's still.
- [10:47]
B
And all the divisions.
- [10:48]
C
Yeah, and the divisions with the sort of people unhappy with the way the country is not just being run but how there's a lot of calls for federalism and all that stuff going on as well politically. But in terms of the economy, in terms of. I don't see my travels in my work and I get a lot of information sent to me every day. I don't get a lot of emails about Ethiopian startups as an example.
- [11:17]
A
Whereas you do get a lot of emails about Kenyan startups all the time.
- [11:22]
C
Well, I think Rwanda, actually Rwanda is a little bit closer to that kind of the Ethiopian issue as well, where the country is really well run from the top. But I've visited a few times and I don't see a lot of local entrepreneurial figure. They talk about it a lot, but I don't see it very often when I'm there.
- [11:46]
B
And that's actually raises a question I'd like to ask in terms of the reality versus the hype of the kind of innovation economy throughout Africa.
- [11:55]
A
Right. Because we do hear this a lot.
- [11:57]
C
Yeah, as do I. I mean, I.
- [11:59]
A
Feel like, you know, that's one of the reasons you have a job. Right. They're like, oh my God, Africa's this amazing innovation economy. We should cover this globally from Quartz. Is, is that, how real is that?
- [12:15]
C
I think Africa should be covered anyway.
- [12:18]
A
Well, exactly.
- [12:19]
C
So that's, that's my starting point. But certainly when we at Quartz thought about this, it really was let's try and cover the new ideas. And when we talked about innovation, we didn't just think about it as tech and startups, we really were thinking about new ideas because we know all about the problems and there are lots of smart people who've either studied in the United States or Europe or wherever you or at home who are trying to fix these things. And there are lots of new ideas and some of those ideas will go both ways. So there's a lot to talk about there in terms of innovation. There is innovation happening. There are some things that are, as you say, are overhyped and people make a bigger deal about it than it is. But for the most part what you have, if you really think about it, is when you don't have the long legacy of big institutions and big companies, it's a blank sheet of paper. So people are experimenting all the time and that's always really interesting and exciting.
- [13:22]
A
So you've been covering this for a while. What's, what's the most like overhyped idea and what's the idea which has actually gained the most traction since you've been like on this beat?
- [13:35]
C
Oh, that's a tough one. Overhyped ideas. Let me, let me. I think the one that sometimes, you know, the one that is obvious and it's not so much that it's gained the most traction but sometimes almost gets overlooked, even though people talk about a lot is M? Pesa mobile money. Because even though I think the thing that impresses me most with it, M? Pesa is for those who don't know, is the mobile money system in Kenya which is spread to Tanzania, Uganda and a couple of other countries in East Africa. And you know, it's accounted for 40 of Kenya's GDP in, well, not accounted for but 40 of Kenya's GDP ran.
- [14:20]
A
Over through, through and pacer, weirdly is, is one of those top down things, right? It was more or less invented by Safaricom and everyone was like, yeah, we trust Safaricom, we'll give them our money and then we'll use it. We'll use that money that we have on our phones for cell service and we'll use it for a million other things as well and becomes like the sort of de facto currency, the way you pay for things. Yeah, yeah, exactly. And that's. And the big question within PESA for many years was always like, can it expand beyond Kenya effectively and does it need to have that monopoly status where you know, it's the only game in town. The only other country where I see, you know, that level of mobile payments is China which is also a very kind of top down place.
- [15:12]
C
Yeah. I think the story with MPIXA is kind of an interesting one in that it was almost one of those ones where the, one of the problems that happens a lot in Africa, especially with technology is you have an issue with regulators. And this was one of those ones where the central bank just kind of got out of the way, went ah, let's not worry about this, a small thing and it just blew up. It became this big thing. It kind of caught them off guard, I mean, because if they had done the usual thing it would have got mired in kyc.
- [15:49]
B
That's actually interesting. That's part of the reason we actually haven't seen the real development in fintech in the United States is because of the regulations around the banking system. And why you have seen more of it.
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C
Yeah.
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B
Throughout Africa, Chinese Said, and even in London. And I'm also interested in the, the ability of. Because when we talk about MPA again you're talking about something that's a bit more top down. If we're looking at smaller, really innovative companies, what happens with the issue of access to financing? Because you think of Silicon Valley companies that can kind of go for a while, not really making any money, they keep accessing financing. Is that really possible in Africa?
- [16:19]
C
That's, that's a, that's like you've just hit on one of the biggest debates in the whole startup ecosystem, particularly in places like Lagos where they're real kind of entrepreneurs trying to do things and there's these small amounts of money and you give up all your company and you get a certain amount of money, get to a point and then where do you get the next amount? Because here's the biggest problem. There are very few opportunities for exit. The market's not liquid enough through ipo, so that's not even on the table at all. So everyone's hope is that they get bought and there's a limit to how many companies are going to buy you or the limit to how many companies are even interested in thinking in this forward thinking way. So it's an exciting space and people are trying new things. And we had a panel the other day at the office where we had a few African entrepreneurs in and they talked about, sorry, VC's in and they talked about, well, you know, for us, we don't fund companies unless they actually have revenue and we feel that they're close to make, you know, going to make profit at some point very soon. You know, as against to what Anna referred to there where, you know, how long did Facebook and the rest of them go on for years.
- [17:42]
B
Uber's still going.
- [17:45]
A
After effect. Yeah, let's segue a little bit to the, to the, you know, 60 pound gorilla in this, in this entire continent really which is, which is China because for all that VCs are coming in with their million dollar checks, China's coming in with like hundreds of billions of dollars. And I used to write about Latin America for a living and I saw how Ecuador became basically a sort of wholly owned subsidiary of China. I'm looking at Venezuela right now and the way that they are owing like enormous amounts of China and China has a huge control over what happens there. For all that there's a bunch of bottom up innovation going on in, across the continent. Is this ultimately going to be a China story as it plays out over the next 10 or 20 years?
- [18:48]
C
Yeah, I think the influence of China is almost understated. I mean there was a bit of hype a couple of years ago and it seemed like oh yeah. And everyone sort of threw the prism of neocolonialism and it was just that that was the sort of way the story was framed. It's far more nuanced and far more interesting than that. And even I was guilty of thinking it was something, was something that will pass in a couple of years. But the relationship between China and Africa is going deeper. It's coming from. The way I lay out is it's coming from, in three different ways. It's coming from the top as we know. That's what we see the macro discussions. How much is China, the country, the government lending to these other governments, how many of their buildings, you know, official buildings have been built being given away as gifts to governments. You have sort of mid sized companies, Chinese mid sized companies and local entrepreneurs coming together, work, you know, coming in and just straight up just doing business and doesn't necessarily involve government just going there entrepreneurially. And then they're Chinese laborers, Chinese workers who sometimes come with the big companies and they just end up staying and just people who just want to just leave China and try their luck because they've heard, you know, there's this gold rush in Africa and they come and try their luck. And they're on the streets of name the city. I read a story about Lesotho, where's Lesotho? And they had protests there because the, these local Chinese women were putting the local woman out of business by selling textiles. You know, so this is that at that low level, not just, not just at the top, not just in the mid size, mid sized companies. It's throughout the system.
- [20:45]
B
And as you're saying, and I think it's a, it's a complicated story because on the one hand you have had a lot of Chinese investment into infrastructure, which has very much been needed. And also again, we were talking about access to cheaper financing, right? But then in exchange for that, they're also getting preferential trade deals. They're also getting access to all of these infrastructure contracts. And they're also. Then the many African countries are now importing the cheap Chinese goods that are then affecting the manufacturing incomes of these countries.
- [21:16]
C
There's a really interesting theory, I was reading about this, reading about just the other day, that Shaw. China or Chinese goods are flooding markets and distorting a ton of businesses, local businesses.
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A
But.
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C
They'Re also thinking about, some of these companies are also thinking about offshoring manufacturing to some African countries. So there's this weird thing going on where it's not so clear whether this will be a wash or whether, you know, it's.
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A
But there's clearly a huge, there are lots of ties, there's lots of trade in both directions. There's trade not just in goods, but increasingly in services and increasingly in individuals. They're like, as you say, there's a rapidly growing Chinese population in China in, I mean, where would you say which African cities have the biggest Chinese population?
- [22:11]
C
I'm not sure which have the biggest, but they're pretty much in every country because it's not. They really are in the smallest of countries, the biggest of countries. I thought, I thought, I thought Lagos, Nigeria was like impenetrable to them. But they're everywhere, Huawei, everybody, you know, so it's the big guys and the.
- [22:29]
A
I saw one, one stat where like Chinese infrastructure investment went up from like a billion dollars a year in 2000 to like 55 billion in 2015 and is not slowing down anytime soon.
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B
But one thing that though has been slowing down slightly is the Chinese economy, which again shows you this connection because many African economies also are extractive economies. And so they're very dependent on commodity prices. And as a, as China shifts to a less resource intensive economy, that's really slowing down economies throughout Africa both because of just like lower Chinese consumption and commodity prices being lower.
- [23:08]
C
Yeah, that, that's, that's been the story since pretty much 2014. Yeah, since the, you know, commodity prices dropped off because Chinese demand dropped.
- [23:19]
A
But so, but tell me about Anna's favorite subject, which is one belt, one road. My friend Simon, I promised I would give him all credit for this. He's like, Africa is basically just like three belt loops. It's just, I mean it's. What is it? It's Kenya and Djibouti and Ethiopia. These little. On the maritime road up through the Suez Canal and, and is one belt, one road. Is this just unimaginably enormous project to tie China into the world basically through both land and sea. Africa's on the sea bit, basically. Is this going to sort of transform the coast of East Africa?
- [24:10]
C
Possibly. I mean, I think, I almost feel like that's going to happen anyway, but this is going to accelerate it if they really throw resources as I imagine they're going to.
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B
And this is interesting though because if you're talking about one belt run road, yes, this is definitely an economic story of China trying to export their excess capacity, steel and such. But it's also very much a political story in terms of China trying to export its influence and have gaining more political friends and control. So then when they go to the U.N. they then have a lot of other countries that are now going to vote with them because they've been investing there and also because China's also promoting a different model that's opposed to or very different from the kind of liberal democratic model that also a lot of other countries are saying. Oh, well, you know, this is, this.
- [24:58]
A
Is another option is the Chinese is the form of Chinese government, the kind of, you know, single party system overseeing a sort of very capitalist economy that, you know, that seems to align itself more comfortably with somewhere like Rwanda than the sort of liberal democracies that we're used to here in U.S. yeah, and.
- [25:28]
C
Tanzania, which is often not talked about in this, in this context, but their presidents who came in 2015, John Magufuli is definitely going down that road. Ethiopia.
- [25:47]
A
So is the influence of China on Africa bad for what you might call the spread of liberal democracy? Is there any hope for liberal democracy in Africa? We're going to talk about this more in the South African countries context, but like, as far as the rest of the continent is concerned, I feel like I've had 20 years of hope that, you know, things are going to change and corruption is going to go away and it never seems to happen.
- [26:15]
C
Right. I think, I think the thinking now it's fascinating because I think what China and anybody else's, their influence on the thinking is, hang on. You know, sure, we want to do this democracy thing, but we want to make our countries better as well. And you know, if it means. Because everyone's looking at Rwanda and they get there and they see the clean streets and the. Everything's kind of working well and it looks.
- [26:41]
A
And if the cost of that is losing up a bunch of opposition politicians.
- [26:46]
B
Freedom of the press.
- [26:48]
C
So. But it's a serious point, right? Because there's serious poverty, there's serious problems. So if you can actually. Because that's the one thing everyone. We talk about corruption like as much as anybody else. But I often say, to talk specifically about Nigeria, I always often say, well, is it just corruption? It just seems there's just huge amounts of incompetence. People just don't seem to know what they're doing. Even the corruption is like schoolboy. It's like if you can actually get something that works and you could do.
- [27:23]
A
It with Rwanda corruption.
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C
And do it without, I don't know, all the other negatives that come with it, I'm sure even western countries will go, okay, you just get on with it.
- [27:37]
A
Well, that's what they did in Indonesia, right under Suharto where you had enormous economic growth and everything was enormously corrupt and it kind of, you know. Well, the country works.
- [27:47]
B
Yeah, it works to a point. I mean I think that's the problem is that corruption. We'll get into this when we start to talk about South Africa, but has a real cost and it tends to trap countries in that kind of low to maybe mid income trap. And you really can't get beyond that because you don't get a lot of international national investment and you don't have civil society. Exactly. It's inefficient allocation of capital. There are lots of reasons.
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C
But like I said, this is just people now rethinking about thinking about this. I don't know, but I guess.
- [28:15]
A
But the question is in terms of China, would it be fair to say that the influence of China on Africa is going to make Africa richer but also less democratic?
- [28:36]
C
So tough to say. It's very possible. I think it's possible, but it really is always going to be on a country by country basis. It's such a difficult thing to just make that broad.
- [28:49]
A
What's the shining beacon hope of democracy in Africa right now?
- [28:54]
C
I'll put it this way, you know, just because China is favorable isn't going to make Nigeria as an example, the largest country on the continent, suddenly go, okay, yeah, I'm not going to have proper democratic elections next time because there'll be war. Right. You know what I mean? It's not quite that easy now with the smaller countries where one person's been running for a while and maybe they're confident, maybe that would be, maybe that could work. But I just think some of the other countries where there's so many different ethnic groups, different people with different vested interests, I think democracy. Is there one way other than military rule that can keep things sort of.
- [29:45]
A
On a scale of 1 to 10, how Democratic would you say that Nigeria is?
- [29:52]
C
I'd say about six. I wouldn't go the full, I wouldn't go much higher than that. And again, it's just almost as a way to prevent chaos in a way. Right. So it's not. Even though there are lots of people who probably would rather they could do things without following proper democratic rule, they will because the price is too high.
- [30:19]
A
So let me ask you the same question about South Africa. We'll segue over there. On a scale of 1 to 10, how democratic is South Africa?
- [30:27]
C
Actually, I think South Africa is surprisingly democratic. I mean, I look at some of the. If we're talking about the crisis that's going on there right now, a lot of it is because they actually have proper rules and regulations and they actually follow them to some extent. The fact that an individual president doesn't follow them is another thing.
- [30:49]
B
I completely agree. I think this is actually very similar to what we're seeing in Brazil. People point to the corruption. They say, oh, this means the country's not democratic. No, no. If this was undemocratic, you would not be seeing these protests.
- [31:00]
C
Exactly. No, it's amazing. I mean the, the, the, the anti corruption. I forgot her job title. Mandr seller. She, she stood up to Zuma and exposed all the, all the corruption that was going on. Did a long report on state capture and you know, you don't see that in a country that's not democratic. And, or at least I agree.
- [31:22]
A
I think, I think South Africa is democratic. I think that's one of the reasons why they are calling in expensive British PR companies to do election campaigns because they want to move public opinion and they want to get people to vote for them. But, yeah, how did that work out?
- [31:42]
C
Not too well. Not too well.
- [31:44]
A
So tell us, give us the TLDR on what happened there.
- [31:48]
C
Long story short, there has been a family called the Guptas Indian immigrant family as against long term South African. They moved there in the 90s, got close to Zuma in his early days in the ANC and when he became president, their company Oak Bay Capital was given a whole bunch of favors. End up at some point a wedding of one of their kids was like on taxpayer, paid by taxpayer and was.
- [32:23]
B
Written off as a business expense.
- [32:25]
C
As a business expense by kpmg. But yeah, and what had happened was that they ended up just completely in control of the comments, at least in control of Zuma in some way. They were effectively appointing ministers and when all this stuff came out, they'd invite a potential would be a minister to their offices and say, well, what do you want? Do you want to be minister of finance?
- [33:00]
A
And we're literally offering suitcases of cash.
- [33:03]
C
Yeah, it was kind of crazy and what that is. And that was all bad enough and that was all terrible and that was straight up corruption. But then to your point about PR companies, Bell Pottinger, they, as the situation got more difficult, they called in PR firm Bell Pottinger from London to help distract people. And the way they went about this was to put out this whole concept of.
- [33:38]
A
The white monopoly capitalism.
- [33:41]
C
White monopoly capitalism, which, you know, in a country where, you know, the black unemployment rate is for young South Africans is around 40% where on the. I can't remember what a huge amount of the wealth of the country is concentrated with about 8% of the population, white population. This is a very sensitive thing. People are extremely sensitive about this.
- [34:11]
A
And so just to be clear, what exactly happened that the Zuma government started brandishing the opposition as instruments of white monopoly capital and basically turning politics into this.
- [34:24]
B
Right. The Gupta family was essentially trying to argue that what the people who criticize them for state capture were really just these white monopoly capitalists.
- [34:33]
C
Exactly.
- [34:34]
A
So basically Zuma is to whites what Trump is to Mexicans.
- [34:41]
C
Yes. Actually this is one of the things that's been interesting about watching Trump is like so many of the sort of, so many of the tropes are very African, these populous things. Because whether the, whether it's very, whether a president is very democratic or just, you know, in charge, they all play the populist game. They all play to the lowest common denominator all the time. So yeah, which is what our guy here does. But yeah, you're seeing, you're gonna, you see this, this has been led to Bell passenger being exposed and everyone turned on them.
- [35:27]
A
They got kicked out of whatever sort of PR union Shop and then all of their clients left them and they no longer exist. And now the scandal is expanding a bit. It's now what? KPMG, McKinsey, how are they involved?
- [35:46]
B
Yes, I mean KP and G both signed off, allowing them to, as we said, write off like weddings as business expenses. Also signed off on reports that were used to actually oust anti Gupta ministers, which is actually almost the more significant.
- [36:02]
C
Issue that's the most.
- [36:03]
B
The McKinsey issue is a little complicated. It has to do with this Gupta connected company, Trillian, who apparently was using their access to state owned companies to get contracts. And then it appears that McKinsey was maybe using them as a subcontractor and getting paid for work that was never actually done. So it's, it's a big deal. I mean this is, this is the kind of thing that not only could significantly hurt the reputation of McKinsey and KPMG, but also really affect international investment and activity in South Africa, which I think is another issue that isn't talked about enough.
- [36:40]
C
But the thing I find most. But the fascinating thing is it will affect everyone. Yeah. Except Zuma. He'll still be president. That's the, that's the fascinating thing about South Africa.
- [36:50]
A
So unlike, unlike Brazil, he's safe.
- [36:52]
C
He's safe.
- [36:53]
B
Right. Because even when the ANC had the.
- [36:55]
C
And anyways, he's going, he's, he's going out 2019 anyway. He's, he's. And the only thing he needs to take care of is to see if his ex wife can be next president so that they don't come after.
- [37:06]
B
She's supposed to be a better figure than him. Right.
- [37:08]
C
Like, yeah, but the one, but the price she pays, she has to pay, or the deal she has to make, the devil's deal or whatever you call it, is that. Yeah. You're not gonna come after me, are you? Okay then. As the mother of my children or whatever that's supposed to be.
- [37:20]
B
But no, I mean, and I think that part of the reason, I'm wondering. To me it seems like there's been so much popular opposition now to these recent scandals with these hashtag campaigns of like KPMG must fall and McKinsey must fall. You know, and really popular opposition. And I'm wondering if it's just about, you know, the Gupta family or whether it's just a larger anger about what's going on and what's happened with the anc and like what we saw in the last elections where the ANC did as poorly as they've ever done.
- [37:45]
C
Yeah.
- [37:46]
B
And because again, this is what we go back to talking about before. Corruption has a cost. And, you know, South Africa would probably be struggling regardless because again, with commodity prices being down, that's going to hurt them. But their economy is also really hurting by the fact that now it's, you know, they're. Their debt was downgraded to junk. It's more expensive for them to borrow. That means it's more expensive for private companies to borrow. That means that you don't have as many, you know, private enterprises coming in. And this affects the average person.
- [38:11]
C
Yeah, I mean, there's a lot of frustration in South Africa. It's a country I find fascinating whenever I visit. Everything in South Africa, for me as an outsider, is like through a prism of race. You know, people are really sensitive about it, which is why this white monopoly capture thing was so capitalist thing was so insensitive. But you have a whole generation of what they call the born frees or free borns. I can't remember what the expression is. People born after 1994 who are just growing up and thinking, I don't understand why I'm living in a shack. Why are we still living in shacks? What's going on? Particularly people in the cities, in the townships. There's a lot of, you know, and you can see that with the xenophobic attacks on other Africans, because other Africans come South Africa, and they go, oh, my God, electricity works and the roads are. Everything's great. You know, I'm just set up a business then. And, you know, they, you know, it's just frustrating to the majority of South Africans.
- [39:25]
A
So basically the Brits can come in, the Nigerians can come in, the Kenyans can come in, the Chinese can come in, the Indians can come in, and they all come in and make lots of money. And the people who were suffering under apartheid and had no money at all are still getting nowhere.
- [39:47]
C
Exactly.
- [39:47]
A
Right.
- [39:48]
C
And that, you know, and it's not, I mean, as with any of these things, it's never that simple. But that's pretty much the sum of it, though.
- [39:58]
A
And the anc, for all its, you know, its founding mythos, has failed to really solve this problem.
- [40:06]
C
Yeah, nothing has really changed that significantly for the majority of people. Yeah, listen, there is a. There is a black middle class, but it's relatively tiny. And, you know, Anna referred to all the hashtags, the fees must fall. With the universities, it was about. That was like, how do we even get into these universities? Because South Africa has three or four of the few universities on the continent that has proper, you know, almost world class universities in the sense that they have proper R and D and research and filed papers and all that kind of normal stuff, but they're not cheap for children of poor people. So there's a whole, there's just a lot of resentment. It feels like whenever I visit or cover the stories, read about it.
- [41:04]
A
So in terms of inequality, which is seemingly, I mean, the inequality problems in South Africa are clearly exacerbated by the racial history of the country. But the racial inequality aside, is the economic inequality worse in South Africa than it is in most of the rest of the continent?
- [41:30]
C
I think it's. Yeah, that's a great question. I've never looked at the numbers, but I think we're all humans, we know how this works. When it's visible, that's what people react to more. So. But you're right again, I will make a reference to the country I know. Well, Nigeria. There is a lot of inequality in Nigeria. A lot. But I guess everyone thinks they have a chance. That's the thing about Nigeria is a bit like America in that sense. Everyone thinks it could be me. I mean, literally, they actually had a lottery campaign. It could be you. So I think with South Africa specifically, I think, you know, it probably doesn't look like it could be you.
- [42:16]
B
Yeah. And this goes back to the problem of corruption again, like we were talking about. Because the problem is when you have these very corrupt governments, you don't have competition. You, you have so much bureaucracy. The only way you can start a business is by aligning yourself with the government.
- [42:27]
A
Yes.
- [42:28]
B
Then keep. You don't create businesses and, you know, the economy really suffers.
- [42:31]
C
Yeah.
- [42:33]
A
On which uplifting note, I think we should just like move off the continent and start doing a numbers round because I feel. I know. Come on. Okay, I'm just going to come back to Yinka and say, listen, we can't end there. We need to end on a, on a high note. Give me, give me a data point. You can have a number separately, but just give me a story. Give me a short little something to get excited about something. Why, you know, a reason to believe in all of the innovation. Africa is the country of the future, you know, hype that we've been hearing for so long. It is the country. Right, Exactly.
- [43:17]
B
They always have that joke about Brazil. It's the country of the future and always will be.
- [43:21]
C
I haven't got a number, but I do feel that smartphone penetration, as simple as that might sound, is only just taken off. And that's really, that's really going to have an impact on everything from remittances, ease of remittances to payments, to access to information. Because that's kind of one of those things that you might underestimate, which is like people are just not aware of.
- [44:03]
A
A lot of things around them and the minute they. Yeah, their first iPhone.
- [44:08]
C
Yeah.
- [44:09]
A
Well, it's not Chinese.
- [44:10]
C
A Chinese made iPhone.
- [44:12]
A
Some kind of Chinese made Android device. It, like that changes.
- [44:15]
C
Yeah, I, and it's, I'm just speaking on a really basic level because I don't want to. I, I have no insight into like an individual startup or what have you. I just feel that as more people, when I look at those numbers and I wish I'd written one down now, but the speed with which people are beginning to take up smartphone devices as the devices get cheaper. Which is why I made the joke about the Chinese made because, because you.
- [44:43]
A
Can get a very good Android phone for what, like 20 bucks now? Yeah, yeah.
- [44:47]
C
So. And you know, Africa is very young. Right. This is the one thing that all demographically.
- [44:55]
A
Yeah.
- [44:55]
C
All these countries have in common is they're all, all very young.
- [44:59]
A
So.
- [45:02]
C
Young people tend to figure out ways of using things and doing positive things. We tend to, we tend to see the negative ones. Right.
- [45:08]
A
And then the other thing we have to mention as well, which everyone always underestimates is the, the development indicators, things like, you know, how many years of education do girls get? How what's the life expectancy at birth, you know, anything you want to look in, sort of health and education, access to clean water, literacy.
- [45:28]
C
All of that is, is all looking.
- [45:30]
A
Really, really, really well. Something like, what is it? 90% of the continent get. Is, is now vaccinated against all major diseases, which is probably better than the USA at this point and especially better.
- [45:43]
B
Than some counties in California.
- [45:46]
A
Exactly. So yeah, there's like you have, and you have this young population which is.
- [45:52]
C
Going to, it ties into my, my number actually.
- [45:55]
A
But so what is your number?
- [45:57]
C
My number is 68 million and 68 million is the projected population of Niger Republic, which is north of Nigeria. And it was number that. I had an interview with the former Nigerian President Obasanjo some weeks ago during the UN General assembly. And he, he talked a lot about demographics and the demographic dividend challenge of Africa. And he highlighted Niger Republic because. He said, he highlighted it because just in 1960, the population of Niger was 3.4 million. SS grew 20 times. So it's just kind of astounding. How quickly. And it actually ties in with a lot of the stuff you mentioned there. All these improving indicators actually also have this kind of weird. I don't call it a downside where the populations are getting out of control and they don't actually have the resources to feed all these people, much less get jobs, you know, so it's just a. It's just a number that's been on my mind because I feel it's another challenge for many countries if you don't, you know, manage populations or figure out ways to serve fast growing populations. You're going to have a lot of.
- [47:42]
A
That's never.
- [47:43]
B
Yeah. A bunch of unemployed young men especially. It's never good.
- [47:46]
C
I mean, these guys are right next door to the, you know, the Maghreb region.
- [47:50]
B
Yeah.
- [47:51]
C
I mean, it's.
- [47:53]
A
Yeah, you see, you're just going to bring us down. No matter how hard I try, it's going to be like, oh, my number.
- [48:00]
B
Is really sad too.
- [48:01]
A
All right, what's your sad number?
- [48:03]
B
I actually have two numbers, but they go together.
- [48:06]
A
Okay.
- [48:06]
B
And I also kind of stole this from Marketplace Place. So my first number is 55,431. And my second is 25,000. So one of those numbers is the number of Starbucks in the entire world. The other one is the number of places you can buy a gun in the United States. So.
- [48:25]
C
Oh, I wonder which is the biggest.
- [48:27]
B
Yes. So again, there is. There are far more places to buy a gun in the United States than there are actually Starbucks in the entire world.
- [48:36]
C
Can you buy a gun in New York City?
- [48:38]
A
It's very hard. There are gun shops, but unless you're like a cop. Yeah, good luck with that. My number is 5 million, which is a dollar amount. It's $5 million. You might recall the fearless girl statue down. Down by the charging bull in Wall Street. And the fearless girl statue was an ad campaign basically by State street, which is this big fund management company trying to talk about women's equality and how.
- [49:19]
B
With a little girl.
- [49:20]
A
With a little girl. And $5 million is how much money State street has agreed to pay because it underpaid 300 women in just 2010 and 2011, much less than the amount of money that they were paying the equivalent men.
- [49:40]
C
That was brilliant.
- [49:42]
B
That's amazing. We are just full of uplifting stats, aren't we?
- [49:49]
A
Thank you, State street, for our daily dose of financial irony with that. I think we're just going to bring this episode to a close. Next week. We will try and be more uplifting, but thank you to Yinka Adegoke for coming on to Slate Money. And like we can. It's good to have a little international flavor on here once in a while.
- [50:14]
C
This has been a lot of fun. Thank you very much.
- [50:16]
A
Thanks to Dan Schrader. And remember guys, that we have a live show on November 15th, 15th at the Bell House in Brooklyn. Go to slate.com live and we will be talking about everything, food, that 7:30pm in Brooklyn. Buy tickets for that. They will sell out pretty quickly. Also, listen to amicus, which is apparently how Americans pronounce amicus.
- [50:45]
B
It's an amicus brief.
- [50:46]
A
It's an amicus brief. I don't know. Maybe. Maybe it's an amicus brief and I've just been pronouncing it wrong all this time. Listen to amicus however you pronounce it@slate.com amicus. That's Dahlia Lithwick's show, which comes out every other Saturday about the law, the Supreme Court and basically everything you need to know about American jurisprudence. With that, it falls to me only to thank Dan Schrader and to thank you all for keeping the emails coming. It's slatemoneylate.com and we will talk to you next week on Sleep Money.