̽��ֱ�� of Cambridge - Centre of Development Studies

Why do so many company mergers fail, new book asks

skbf2 — Thu, 21 Jul 2022 13:51:31 +0000

Mergers of firms have boomed over the past four decades, with a 40-fold increase in deals done each year. These mergers and acquisitions (M&A) are sealed by talented, highly skilled executives, lawyers, bankers and advisers, and spending on mergers totalled $5 trillion in 2021. Yet most mergers fail, and don’t achieve the boost in operating profits they were touted to achieve.

Why? And why hasn’t this been fixed?

Those questions lie at the heart of a new book – ̽��ֱ��Merger Mystery: Why Spend Ever More on Mergers When So Many Fail? – authored by Geoff Meeks, Emeritus Professor of Financial Accounting at Cambridge Judge Business School, and J. Gay Meeks, Senior Research Associate in the Centre of Development Studies, ̽��ֱ�� of Cambridge. Digital versions are available for free from Open Books Publishers.

M&A takes increasing share of executives’ time and energy

“As evidence of disappointing outcomes mounted, Western businesses were devoting to M&A a large and rapidly increasing share of their key strategic resources: investment funds and senior executives’ time and energy,” the book says.

̽��ֱ��authors outline key factors that have led to the huge gap between the theory and hope surrounding mergers and their actual outcomes: These include:

̽��ֱ��people taking part in the mergers are often able to enjoy subsidies and privileges at others' expense. This has made some deals attractive to participants despite bringing no operating gains, while taxpayers, creditors, pensioners, customers and suppliers have lost out.
Incentive structures for key players and advisers can induce perverse, inefficient results with rewards for CEOs and other top executives involved in acquiring businesses, in part tied to a correlation between CEO salary and firm size and in part open to “gaming” by participants.
̽��ֱ��glamour of life on the acquisition trail, including being in the media spotlight, boasting rights and the thrill of the chase.

Deal incentive structures enrich bosses, not other stakeholders

Examples cited in the book of deal incentive structures that have enriched bosses at the expense of other stakeholders include the $27 billion acquisition of Refinitiv by London Stock Exchange (LSE) in 2021 that tripled the acquirer’s revenue and resulted in a 25% boost in the CEO’s base salary, yet LSE shares fell by a quarter in the same month. In another case, simply closing Vodafone’s $181 billion acquisition of Mannesmann in 2000 triggered a $10 million bonus for Vodafone’s CEO.

“Over time you would expect managers and their advisers to learn from their mistakes, filter out unpromising mergers, and ensure that a large majority of deals result in operating gains,” the book says. “However, this has not happened.”

̽��ֱ��book is based on a synthesis of the ideas of economists from Adam Smith to recent Nobel Laureates, with more than 100 statistical studies and evidence from 100 businesses involved in mergers, mostly in the particularly active US and UK markets, but with data from other countries too.

What are the solutions?

̽��ֱ��book suggests reforms by government, regulators, non-executives and others that could significantly reduce the number of failed mergers. These include changes in participants’ contracts that would mitigate conflicts of interest; removing tax, legal, and other distortions which encourage mergers that offer no operating gains; and improving both the appraisal of merger proposals and the monitoring of outcomes.

Adapted from an article which first appeared on Cambridge Judge Business School website

Mergers are constructed by talented executives, lawyers, bankers and advisers, yet most deals fail. A new book, ̽��ֱ��Merger Mystery, co-authored by Geoff Meeks of Cambridge Judge Business School, outlines the reasons why.

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Business buildings

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Changing the face of Indian farming

jg533 — Wed, 25 Oct 2017 15:11:03 +0000

̽��ֱ��rains are less reliable. Sudden heat waves create challenging conditions for crops. Poor harvests result not only in debt, but also in malnutrition for smallholder farmers. Farming in India is not an attractive career option.

Many Indian farmers are turning their backs on the life altogether. ̽��ֱ��pull of the city, with the promise of better work and a better income, is drawing huge numbers of rural Indians away from the land.

Women in India have always been involved in farming, typically doing work between the traditionally ‘male jobs’ of sowing and harvesting, such as weeding and applying fertiliser. But they usually work land that belongs to their husbands’ families, and when households become more impoverished they have to work harder yet still earn less than the men.

“It’s becoming difficult to get a reliable income from agriculture in many parts of the Indian subcontinent,” says Dr Shailaja Fennell, from the Centre of Development Studies. “It’s quite common for the majority of younger family members to go to a town to look for work. In the last decade in regions like the Punjab – which benefited from the Green Revolution – even many of the young women are leaving the land, to study at school and college.

“So now the farming is left to the older women – the mothers and sometimes the grandmothers. They’re in the difficult situation of having to make do in households where incomes are falling. In poorer states such as Odisha, this can lead to malnourishment, which has long-term effects on the children.”

̽��ֱ��record grain outputs of India’s ‘Green Revolution’ in the 1970s and 1980s established the country as one of the world’s largest agricultural producers, sustaining its booming population and boosting its economy. But the level of success varied from region to region, and the continued overuse of water, fertilisers and pesticides, together with post-harvest crop losses, has put increasing pressure on natural resources. India’s rapid population growth continues, and the UN estimates it will surpass China by 2022 to become the most populous country in the world. And more people means more mouths to feed.

Fennell is a co-investigator of TIGR²ESS: a new, large-scale, multi-partner project that has just been awarded £6.9m funding from the Global Challenges Research Fund (GCRF) by Research Councils UK to address this complex web of issues. Drawing together a formidable network of partners from research, industry, government and NGOs in the UK and India, the project aims to define the requirements for a second, more sustainable Green Revolution, and to deliver this through a suite of research programmes, training workshops and educational activities.

̽��ֱ��funding forms part of the UK government’s Official Development Assistance commitment, and partners from both countries will work together, with over 22 new researchers funded in both the UK and India.

“India is developing fast. A new approach is urgently needed to ensure a more resilient outcome for the future of the country’s food production,” says plant scientist Professor Howard Griffiths, who leads TIGR²ESS. “To be successful, we need to address the challenges in India today, from equality and sustainability in agriculture, to the problems associated with climate change.”

̽��ֱ��empowerment of women will be a key theme of this multifaceted project. Providing India’s women with the skills and knowledge to contribute to improved food security for their country, and better nutrition for their families, will take various approaches. ̽��ֱ��UK–Indian partnership will set up ‘nutrition kitchens’ in Indian villages alongside existing health centres to run monthly cooking classes and provide nutrition-relevant education. And in the field, workshops will educate female farmers to help them improve their farming practices.

“Some crops, like certain varieties of millet for example, are currently used only for animal feed,” says Griffiths. “But they have a better nutrient balance and are more climate resilient than the preferred staples like wheat, so switching may partly be a question of education.”

“In parallel, our research will be looking for ways to increase the value of these crops, to raise family incomes,” adds Fennell. “These are very specific interventions that have huge potential impact. TIGR²ESS will bring together science and social science to drive interventions that actually work for Indian farmers and their communities.”

TIGR²ESS will include fundamental research addressing crop productivity and water use in India, and will identify appropriate crops and farming practices for different climatic regions. It also includes a capacity-building programme of researcher exchanges between the UK and India to ensure skills development and build expertise for the longterm. And it will draw on expertise at Cambridge’s Centre for Science and Policy with the aim of bringing about policy change in India, to ensure that it is not just the men who receive farming support.

“Recognising that an increasing number of India’s smallholder farmers are women, we need to ensure that state resources and services, and knowledge, are equally accessible to them,” says Dr V. Selvam, Executive Director of the M. S. Swaminathan Research Foundation in Chennai, one of the India-based project partners.

“ ̽��ֱ��ultimate impact of TIGR²ESS will be to deliver sustainable practices and improved food security, whilst promoting equal opportunities and enhancing nutrition and health for rural communities across different regions and climatic zones in India,” says Griffiths. “For Cambridge, this is an opportunity to build on our commitment to international scientific excellence and to translate this into real benefits for society through our partnership with India’s Department of Biotechnology and institutions across India.”

Inset image: A farmer at work weeding in a maize field in the Indian state of Bihar. Credit: M. DeFreese/CIMMYT.

Indian agriculture is expected to feed a growing and increasingly urbanised population. But if everyone wants to move to towns and cities, who is left to farm the land?

̽��ֱ��farming is left to the older women – the mothers and sometimes the grandmothers. They’re in the difficult situation of having to make do in households where incomes are falling.

Shailaja Fennell

M. DeFreese/CIMMYT

Farmer from the Indian state of Bihar

Changing the way we eat, grow and distribute food

While TIGR²ESS focuses on improving India’s food production, a £340m EU Innovation programme involving Cambridge aims to put Europe at the centre of a global revolution in food innovation and production.

Around 795 million people worldwide don’t have access to enough food to meet their minimum daily energy requirements, while at least two billion consume too many calories but don’t get the nutrients they need. Both the hungry and the overweight suffer the health consequences of poor diet.

And while our increasing population is creating a growing demand for food, 25% of what we already produce is going to waste. Add to this the changing climate affecting crop growing conditions, rapid urbanisation and the increasing demand for resource-intensive foods like meat – the net result is a food system that’s increasingly under pressure.

Cambridge is one of several European universities and companies that last year won access to a £340m EU Innovation programme to change the way we eat, grow and distribute food.

̽��ֱ��project, funded by the European Institute of Innovation and Technology (EIT) and called EIT Food, has ambitious aims to halve the amount of food waste in Europe within a decade, and to reduce ill health caused by diet by 2030.

“Sustainability is a top-level agenda which is engaging both global multinational food producers and academics,” says Professor Howard Griffiths, who helped to lead Cambridge’s involvement in EIT Food, a consortium of 55 partners from leading European businesses, research centres and universities across 13 countries.

“Our joint goal is in making the entire food system more resilient in the context of a changing climate, and improving health and nutrition for people across the world.”

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Multiplier effect: the African PhD students who will grow African research

amb206 — Tue, 21 Feb 2017 11:15:37 +0000

“Africa needs a million new PhD researchers over the next decade.” It’s a huge figure. Professor David Dunne uses it to explain the scale of need in Africa for a new generation of scholars who will pioneer sustainable solutions to many of the continent’s challenges.

“There are world-class academics in Africa,” he explains, “but not enough to train and mentor all the young researchers that Africa needs to maintain and accelerate its progress. This is where Cambridge and other leading international universities can help, by making expertise and facilities available to help bridge this mentorship gap.”

Dunne is Director of the Cambridge-Africa Programme, a ̽��ֱ�� initiative that for the past eight years has been building collaborative links between Cambridge and Africa. ̽��ֱ��model is centred on Cambridge researchers helping to mentor young African researchers in their African universities and research Institutions. This contributes to research capacity building in Africa but also benefits Cambridge by widening the experience and opportunities for its researchers and students.

However, that stark fact remains – a great many more new researchers are needed. With this in mind, a new Cambridge-Africa PhD studentship scheme began to enrol PhD students last year from all over Africa – five per year, every year for five years. “It’s at least a beginning,” says Dunne. “We want this programme to grow in Cambridge, and other universities.”

One criterion is that the prospective student must be studying issues that are priorities for Africa. ̽��ֱ��research interests of the current students are broad: from urban growth to poverty, business associations to sustainable industries, infectious disease to post-conflict citizenship.

Taskeen Adam

Taskeen Adam is one of the PhD students. She’d worked as an electrical engineer for two years when she decided that she wanted to use her skills to bring about social change. “What attracted me to engineering was the challenge of solving technical problems. But my real passion is for humanitarian issues and the need to create quality education for all.”

In 2012, the United Nations General Assembly declared access to the internet as a basic human right. But figures from 2014 gathered for Taskeen’s home country of South Africa showed that more than 4,000 schools had no access to electricity and 77% of schools had no computers. Many thousands of children were missing out on the chance to learn the skills needed to make a better life.

Her research is enabling her to look at the educational opportunities afforded by the internet, in particular the potential of decolonised African MOOCs (Massive Online Open Courses) as a means for delivering inclusive educational programmes to the most marginalised learners in South Africa. She’s keen to develop an online educational framework adapted for, and relevant to, communities in developing countries.

Taskeen completed her first degree at the ̽��ֱ�� of Witwatersrand in Johannesburg. On graduating, and while working full time, she pioneered an initiative called ‘Solar Powered Learning’ to give students in rural areas access to technology that was both low cost and environmentally friendly.

̽��ֱ��pilot project won Taskeen accolades. She was listed among South Africa’s Mail & Guardian’s top 200 Young South Africans for 2014. This gave her the confidence to embark on a career that would use her engineering skills in ways that could help to bridge inequalities.

As part of her Master’s research, she spent two weeks in Kigali, capital of Rwanda, where she visited schools benefiting from a national scheme to equip every child with a laptop. It was clear that this commendable programme was failing to enhance learning. Although resources were being provided, there was a lack of focus on maintenance skills, curriculum integration and teacher professional development. In many cases, the children were more comfortable using the laptops than were their teachers.

“My trip demonstrated the mismatch between the deliverables and the outcomes of the scheme. ̽��ֱ��focus was on technology deployment, rather than on improving educational attainment,” she says. “Many African governments seem to be following a similar path, and I hope that, by using the resources, networks and expertise here in Cambridge, I might eventually be able to influence policy changes at the intersection of education and technology back in Africa.”

Richmond Juvenile Ehwi

Richmond Juvenile Ehwi also hopes to take his skills and expertise back to his home country, Ghana. He has just arrived in Cambridge to start his PhD in Cambridge’s Department of Land Economy. After his first degree at Ghana’s Kwame Nkrumah ̽��ֱ�� of Science and Technology, he worked as a research consultant and estate manager.

Moving to Ghana’s capital city, he became interested in the changes he saw in the property market. “Plush Western-designed detached houses, apartments and gated communities are springing up and I wondered what the future would be like for Ghana’s urban landscape. While this development mirrors Accra’s integration into the globalised city concept, accompanying this trend are social, economic, environmental and cultural costs.”

As Western lifestyles become increasingly popular, the older-style family compounds associated with traditional Ghanaian culture are declining, even in rural areas. “With literacy rates and standards of living rising, households are demanding greater privacy and better sanitation which, in most traditional compound houses, are greatly compromised,” he explains.

In the West, gated communities are often seen in a negative light: they are associated with segregation, racial polarisation and social exclusion. While accepting the realities of this criticism, Richmond seeks to facilitate a balanced discussion and inspire evidence-based planning policies.

He suggests that, as new gated residences develop in the suburbs, there can be both material and social benefits for surrounding areas. “In Ghana, the new gated communities tend to be multiracial rather than segregated according to race or nationality. ̽��ֱ��ability to pay for your house is what counts, not what you do or what your ethnicity is. Gated developments offer the security and services that most people aspire to,” he says.

Entire neighbourhoods can benefit from the expectations of the owners of the new properties, he explains: “It’s misleading to think of gated communities as isolated enclaves. People who live in them are not completely cut off from society. They travel to work, to malls and markets, to church services. These public spaces facilitate social interaction. Also, better-off households offer employment for gardeners, drivers and care givers – and help to raise incomes and opportunities.”

His long-term plan is to create an Urban Study Research Centre back in Accra, and to take back a deeper understanding of the interplay of economic factors with social and cultural issues in urban development.

̽��ֱ��multiplier effect

Dunne points to such plans as an indicator of the promise of the Cambridge-Africa PhD studentship scheme. “We are training 25 Cambridge-Africa scholars. It’s a small number compared with the overall need. But these researchers are a starting point. They will train other researchers and the expertise will multiply back in Africa.”

He adds: “It’s not just that Africa needs research and researchers for its own use. ̽��ֱ��world needs African researchers. We can’t have a situation where 14% of the world’s population – living on a continent with unique culture, diversity and environment – contributes less than 1% of published research output. ̽��ֱ��world needs the unique knowledge and perspective that African researchers can provide to solve our shared global challenges.”

̽��ֱ��Cambridge-Africa PhD studentship scheme is funded by the ̽��ֱ�� and the Cambridge Trust.

To keep up to date with the latest stories about Cambridge’s engagement with Africa, follow #CamAfrica on Twitter.

Taskeen Adam and Richmond Juvenile Ehwi are part of a PhD programme that’s enrolling five African students per year for five years, to help train world-class researchers for Africa.

̽��ֱ��world needs African researchers. We can’t have a situation where 14% of the world’s population – living on a continent with unique culture, diversity and environment – contributes less than 1% of published research output.

David Dunne

Nick Saffell

Taskeen Adam and Richmond Juvenile Ehwi

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Opinion: Why Ethiopia is on track to become Africa’s industrial powerhouse

Anonymous — Thu, 23 Jun 2016 09:01:23 +0000

Ethiopia seems to be attracting the attention of economists interested in Africa, and for good reason. Except for Rwanda, Ethiopia is the only African country whose economic growth has been consistently high for more than a decade without relying on a natural resource boom.

Between 2004 and 2014, per capita growth in Ethiopia was 8% per year. This was the highest on the continent during this period, and is impressive by any standard.

̽��ֱ��growth has been attributed mainly to a construction boom and increased agricultural productivity. But manufacturing has also been vital. It has grown at 11% per year and manufacturing exports increased more than elevenfold. This was largely thanks to the increasing export earnings of the footwear and apparel industries. ̽��ֱ��growth represents more than a doubling of manufactured exports’ share in total merchandise exports, which itself more than quintupled during the period.

Nevertheless, manufacturing as a share of gross domestic product in Ethiopia remains 5%, well below the African average of 10%. ̽��ֱ��country also scores below the African average on diversification, export competitiveness, productivity and technological upgrading.

Despite this, it’s not a long-shot to predict that Ethiopia will catch up with countries like China and Vietnam in some low-tech manufacturing industries in the near future. These are industries for which labour costs are very important. And right now you’d be hard pressed to find a country in the world that has cheaper labour than Ethiopia. Even beyond these obvious industries, there are reasons to believe that Ethiopia might be on the right track to catch up with more advanced economies.

̽��ֱ��developmental state

First is the country’s developmental orientation. In many ways it resembles that of successful catch-up experiences in East Asia, such as Korea and Taiwan, with a relatively “authoritarian corporatist” structure and centralised economic planning.

Meles Zenawi, Ethiopia’s recently deceased prime minister who ruled from 1995 to 2012 and whose legacy remains strong in today’s ruling political coalition, repeatedly expressed admiration for the East Asian experience. He stressed that its success was based on a prudent combination of market forces and state intervention. ̽��ֱ��state not only provided basic infrastructure and services but also a conducive environment for the private sector.

̽��ֱ��second reason to be optimistic about Ethiopia’s prospects is the impressive industrial policymaking capability it has accumulated since the Ethiopian People’s Revolutionary Democratic Front government came to power in 1991.

̽��ֱ��quality of this capability becomes clear if you read the Growth and Transformation Plan covering 2010-2015. According to economist Kenichi Ohno the plan is unusual in its brevity, coherence and strategic direction. Priority manufacturing industries were designated based on resource availability, labour intensity, linkages to agriculture, export potential and relatively low technological entry barriers. They include apparel and textiles, agro-processing, meat processing, leather and leather products, and construction.

Supporting institutes have been set up for each industry to coordinate the value chains effectively, for example by ensuring efficient supply of inputs to manufacturers and to assist firms with technological upgrading.

Two state-owned banks, the Commercial Bank of Ethiopia and the Development Bank of Ethiopia, provide most credit to firms in these industries. Foreign banks are simply not allowed to operate in Ethiopia. ̽��ֱ��understanding is that they will be allowed in only when domestic banks have developed the capacity to compete.

Education and infrastructure

While the Ethiopian government is formulating policies to support specific industrial sectors, for most of the past 20 years the federal budget has been devoted to policies that are more “horizontal” in nature, like education and infrastructure. Results so far are impressive.

Enrolment in primary schools has increased from below 20% in the early 1990s to about 94% in 2012. ̽��ֱ��number of universities has increased from one in 1990 to more than 30.

And the government has invested massively in infrastructure development, focusing on transport and power generation. ̽��ֱ��road network expanded from 26,550km to 53,997km between 1997 and 2011. ̽��ֱ��country is set to quadruple its power generation capacity when the Grand Ethiopian Renaissance Dam on the Nile is finished in 2017/18. One of the largest hydroelectric power stations in the world, the dam will generate 6,000MW.

Cement and floriculture

Feeding on the boom in construction, cement production has grown dramatically since 1999. ̽��ֱ��average annual growth of cement production has been more than twice the world average. As a result, Ethiopia is now the third largest cement producer in Africa.

State support has been both direct and indirect. Direct measures include entry incentives for domestic firms, like long-term loans for capital investments, easy access to mining resources and the allocation of foreign currency on a preferential basis.

Additionally, government provision of transport and energy has been crucial.

Like the cement industry, the Ethiopian floriculture sector has made important contributions to overall economic development.

Cut flower exports increased from three tons in 2003/04 to more than 50,000 tons in 2011/12, substantially raising export earnings. From 2007 to 2012, the sector’s employment doubled from 25,000 to 50,484. ̽��ֱ��industry grew from a single firm in 2000 to about 100 in 2014.

̽��ֱ��industry has also created indirect jobs through the expansion of horticulture. Related activities, such as packaging production, cold chain logistics and air transport have all benefited.

While Ethiopian firms initially kicked off the floriculture industry, foreign firms have increased their investment. In 2012 they accounted for 63% of all firms operating in the sector.

This foreign investment has contributed to technological development and improved market access.

Foreign investors say Ethiopia has become an attractive investment location because of natural endowments such as land and altitude, cheap labour and government incentives. These incentives include tax holidays on profits for up to five years, duty free privileges on all capital goods and the provision of construction material.

Subsidised loans have been the prime source of long-term investment financing for firms in the floriculture industry. Almost two-thirds of firms in the industry have relied on loans from the Development Bank of Ethiopia. And private banks, seeing the success of these loans, have also started lending to the industry.

Sectors destined for future success

Both the leather products and the textile and apparel sectors have been designated as top priority manufacturing industries in the recently released five-year development plan (2015 to 2020). One reason for this is because they have strong linkages with the agricultural sector as they use inputs from the livestock and cotton sectors. They are also both labour intensive, thus absorbing labour from the agricultural sector, and have major export potential and low entry barriers.

To become internationally competitive, the Ethiopian government has invited foreign investors to provide much-needed investment capital and technological capabilities. A slew of incentives has been created to induce these firms – as well as domestic ones that can meet international standards – to export. These include:

subsidised land rent in industrial zones;
generous credit schemes;
100% exemption from the payment of duties on imported capital goods and raw materials for the production of exports; and
five-year tax holidays on profits.

Export figures from the past two years indicate positive trends for both industries. But the results are not yet near where they need to be to make a significant contribution to structural change.

However, considering all the positive signs, Ethiopia might very well be on its way to become Africa’s industrial powerhouse.

This article is an edited extract from Transformative Industrial Policy for Africa, a report produced by Ha-Joon Chang, Jostein Løhr Hauge and Muhammad Irfan on behalf of the United Nations Economic Commission for Africa.

Jostein Hauge, PhD candidate, ̽��ֱ�� of Cambridge and Muhammad Irfan, PhD student, A Political Economy of Subsidies and Countervailing Measure in International Trade and Development - Issues of Policy Space and the WTO's SCM Agreement, ̽��ֱ�� of Cambridge

This article was originally published on ̽��ֱ��Conversation. Read the original article.

̽��ֱ��opinions expressed in this article are those of the individual author(s) and do not represent the views of the ̽��ֱ�� of Cambridge.

Jostein Hauge and Muhammad Irfan (Centre of Development Studies) discuss Ethiopia's economics growth over the last decade.

DFID - UK Department for International Development

Cementing Ethiopia's progress

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‘Traditional authority’ linked to rates of deforestation in Africa

fpjl2 — Tue, 24 Nov 2015 11:43:49 +0000

̽��ֱ��first study to link precolonial African leadership and current levels of deforestation has shown a strong correlation between areas with historic leadership structures more susceptible to corruption and higher rates of forest loss today.

̽��ֱ��study suggests that a “legal pluralism” exists across large parts of Africa where many local leaders continue to hold sway over natural resources through precolonial “traditional authority”; old power often not recognised by the state.

By using satellite image data from 2000 to 2012 and analysing it in combination with historical anthropological data, researchers found a relationship between high deforestation and precolonial succession rules of ‘social standing’: village heads appointed through wealth or status rather than for example hereditary lineage or democratic election.

Those areas with ‘social standing’ leaderships in precolonial times have approximately 50% more deforestation than the average rate of forest loss for Africa over this period.

Leaders who draw on traditional authority are often vested with resource control rights by local communities, regardless of whether the state recognises these rights. ̽��ֱ��study’s authors say that those local leaders who can claim power through their own influence – or ‘social standing’ – are more likely to use natural resources to leverage short-term economic gains.

̽��ֱ��research team, from the ̽��ֱ�� of Cambridge’s Department of Land Economy and its Centre for Development Studies, cite cases of loggers providing gifts such as motorcycles and paying traditional leaders to secure ‘logging permits’, despite the leaders having no state authority to grant them.

They say the findings suggest that conservationists need to go beyond state law and engage with local leaders who, despite having no apparent authority, may have a vital influence over Africa’s shrinking forests and biodiversity. ̽��ֱ��study has been published in the Journal of Land Use Policy.

“This work highlights the importance of legal pluralism in relation to deforestation in Africa, and should encourage those who want to conserve Africa’s remaining forests to look below the surface of state law to where resource use decisions are actually made: at the local level by leaders who often have little or no state authority,” said Dr Shaun Larcom who conducted the study with Cambridge colleagues Dr Terry van Gevelt and Dr Aiora Zabala.

“While such a shift in focus undoubtedly increases the complexity of research and of the policy agenda, it may actually be necessary if we want to make meaningful inroads into deforestation in Africa and the rest of the developing world,” he said.

While most of Africa’s remaining forests are protected, owned and managed by the state, rapid deforestation continues, despite ongoing international efforts aimed at state capacity building and reducing official corruption.

Over the period from 2000 to 2012 Africa lost approximately 18 million hectares of its forests. However, when these losses are broken up into ethnic boundaries that existed prior to European colonisation, the rate of deforestation varies considerably in relation to the type of local governance structure formerly in place, says study co-author Dr Zabala.

“African countries are among the ones with fastest acceleration of deforestation worldwide. Complex governance legacies pose a major challenge for the implementation of policies to address forest loss,” Zabala said.

̽��ֱ��most common precolonial leadership structure was hereditary succession. Other structures used as base cases for the analysis were local leaders elected from above and those elected democratically.

But it was the analysis of leadership appointment through social standing that proved most distinctive, with 0.8 percentage points more deforestation compared to base cases. Compared to an average loss of 1.6 percentage points over the same period, this suggests that these regions have around 50% higher than average deforestation rates.

Social standing is “appointment by age, seniority, influence, wealth or social status”, says Dr van Gevelt. “In practice, this means that those with the most power can claim local leadership, and consequently secure further control over local natural resources,” he said. Ethnic groups where these practices occurred in precolonial times include the Kabre people of Benin and the Isoko people of Nigeria.

̽��ֱ��researchers suggest that there are likely to be more ownership disputes in these areas, where the legitimacy of local leaders is weaker and more ‘up for grabs’ than in an hereditary power structure, for example. Leaders from ‘social standing’ areas may grant logging access to forests to raise funds for what Larcom describes as “patrimonial largesse”: the need to give generously to the local community in order to retain social standing, and consequently leadership.

“Acknowledging the reality of legal pluralism – where both the state and non-state authorities, often with different sources of authority, compete in the same regulatory space – and the importance of non-state regulators, both as a force for good and harm in relation to deforestation in Africa, might be the missing link needed for halting large scale deforestation in Africa,” added Larcom.

“In addition to focusing on state corruption, those wishing to halt rapid deforestation also need to focus on non-state corruption.”

New analysis reveals a strong correlation between precolonial institutions in Africa and current levels of deforestation. Researchers suggest that many of these structures still operate at a local level, controlling and exploiting natural resources under the radar of the state, and that such legacies of governance pose a major challenge for implementing conservation policies.

Acknowledging the reality of legal pluralism [...] and the importance of non-state regulators, both as a force for good and harm in relation to deforestation in Africa, might be the missing link needed for halting large scale deforestation in Africa

Shaun Larcom

jbdodane

Rougier Gabon

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