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Sean Michael
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I write on markets from time to time. Bachelor of Science, Master of Science, professional background in front office at leading investment banks.
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  • Book Review: The New Scramble For Africa

    The New Scramble for Africa is a short book about recent economic development and business activity across Africa. Author Pádraig Carmody, senior lecturer at Trinity College Dublin, provides some good descriptions and detail on recent developments on the continent, and generally does a thorough job of referencing claims and figures.

    Unfortunately, the author cannot seem to decide who his audience is. He provides plenty of detail on aid agreements, international relations history and history of aid policy in the United States and Europe. Surely anyone reading a book about such things would have some idea of what the word globalization means. Yet there it is on page 147, a one sentence "reminder" that globalization is a fancy word for "the increased interconnectedness of places around the world." Perhaps it was an editor trying to make the book as widely accessible as possible, making this unfortunate addition without the author's consent. At least I'd like to think that's what happened...

    The book is densely descriptive, but unfortunately the author scarcely takes a normative position on future trends for the economies with which he is supposedly very familiar. The prescriptive and predictive portion of the book barely amounts to a dozen pages at the very end, and the author's opinions are, particularly when juxtaposed with the rest of the book's commendable detail and specificity, maddeningly vague.

    Since this book was not yet available at bookstores when I ordered it, I did not have the luxury of flipping through it to check the level of referencing, statistical evidence, tables and graphs. Had I done so, I wouldn't have picked up this book. I was expecting this work to present an evidence-based assessment of the recent history and future trends of economic development in the 54 countries which make up the continent of Africa. Yet there are a total of 2 tables and 2 graphs in the whole thing, and they aren't even detailed. Furthermore, the figures cited throughout the rest of the book read more like Malcolm Gladwell-esque "sound bite statistics" ("2 dollars a day", "top 500 earn more than the bottom 416 million", etc) than actual cross-sectional or summary statistics which can be of use for an analytical person with an interest in learning rather than edutainment. These types of sound bites are useful for propaganda materials and time-constrained television interviews, but in a serious book about the complexity of modern development economics and African political economy platitudes add little to the reader's understanding. With a title like "The New Scramble for Africa" a treatment shorter of than 200 pages doesn't have room for catchy platitudes.

    The New Scramble for Africa is noticeably lacking any reference to economic realities, growth theory, national accounts, trade data, key macro data and growth statistics. On the few occasions that these things are mentioned it is in passing, in isolation and without context or comparison with other African countries or other years. Figures are too often presented as nominal amounts, without any reference to the percentage of trade, FDI, or GDP a given figure represents in the year or decade in question, or what that amount is equivalent to in either today's or a base year's currency. This makes it difficult for the reader to effectively relate these figures to the broader context of trends in growth and trade.

    The disjointed presentation of each country is also frustrating. Perhaps the real problem is that the topic is simply too broad for a 200 page book. One could easily write 200 pages on the role of any one of Africa's 54 countries in the scramble, and this could be far more effective. Or if it was organized along former colonial relationships this would also be a reasonable organizing principle. In its current form, details seem to be randomly sprinkled throughout the text, with only occasional connectedness with the line of reasoning of a section or chapter.. The author relies heavily on quotes from random politicians, diplomats and business people in Africa, colloquial sayings, and precious few references to active researchers. A handful of academics are repeatedly quoted, referenced, and praised as "renowned" scholars, and their affiliations are repeated over and over again.

    For someone who is already very familiar with the vital statistics of each of the countries involved Carmody's work might serve as an interesting starting point for further reading, a sort narrated list of interesting factoids and writers who discuss topics related to African development.

    Aug 10 4:41 PM | Link | Comment!
  • Ontario renewable energy subsidies under attack, Canadian wind and solar firms threatened

    Tim Hudak, leader of the Progressive Conservative Party of Ontario, announced on Tuesday that if elected his government would scrap the renewable energy subsidy known as the Feed-in Tariff (FIT) program.

    Ontario's Feed-in Tariff program for was meant to dramatically expand green energy capacity in the province. Under the program, renewable energy producers receive prices far above spot for electricity fed into the grid. So long as producers meet the minimum Canadian-origin requirements for labor and material inputs, producers large and small enjoy a government-subsidized price per kilowatt hour as high as 80.2 cents -- about 2400% higher than the typical spot price for electricity in Ontario.

    A credible threat from the leader of the Progressive Conservatives is a very bearish development for Canadian renewable energy producers. Hudak's is the latest voice in a growing chorus of commentators who denounce the FIT program as an unsustainable initiative that is significantly increasing electricity costs for households in the province.

    Could the provincial Conservatives win in October?

    The next provincial election is scheduled for October 6th 2011 and the outcome is anyone's guess. While Dalton McGuinty's Liberal Party won a sizable majority in 2007, there has since been a pronounced rightward shift in the Ontario electorate. Right-leaning populist Rob Ford handily defeated Liberal Party insider George Smitherman to become mayor in Toronto's municipal election of 2010. And Stephen Harper's Conservative Party annihilated the Liberals in the national election earlier this year, handing the once-dominant party its worst defeat in Canadian.  Some of the most surprising and decisive Conservative victories in the federal election were in Ontario ridings.

    Voters are increasingly conscious of Ontario's ballooning budget deficit and spiraling debt levels which, by some measures, outstrip California's fiscal hole on a per-capita basis. They have also grown suspicious of the Liberal government for introducing new stealth taxes, most notably the infamous Harmonized Sales Tax. And combined with the prospect of higher interest rates on the horizon making home mortgage payments even more expensive, Ontario residents may well be inclined to vote for the party with the most realistic plan to relieve some of the pressure on household budgets, especially with respect to tax and energy expenses.

    Adding to the likelihood of change or elimination of the FITprogram is a formal complaint filed at the WTO by Japan in September 2010, alleging the program illegally discriminates against Japanese firms due to the minimum levels of "Canadian content" required to qualify for the subsidy. Soon after Japan's initial filing the United States and European Union formally joined the complaint on September 24 and 27, 2010, respectively. 

    How to play it:

    One company that looks particularly exposed to these developments is Canadian Solar Inc (NASDAQ:CSIQ). CSIQ's revenue sources are uniquely exposed to changes in Ontario government energy policy due to high geographic concentration in the province. Canadian Solar Inc has benefited from the current policy in two ways. First, it has enjoyed inflated revenues from artificially high prices received for clean energy through the FIT program. Additionally, it has benefited from the FIT program's stringent Canadian content requirements on labor and materials which prop up demand for its products and services solely because the company happens to be Canadian. The WTO complaint specifically threatens the Canadian content advantage, while a Conservative victory in October could be toxic for CISQ on all fronts.

    May 11 6:33 PM | Link | 1 Comment
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