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The Looting of Africa

We are not, currently, "helping" Africa. Africa is rich. Let's stop making it poorer

January 21

23:45
2018

London , United Kingdom of Great Britain & Northern Ireland - 21 Jan 2018 - Ghassan Matar

Time and time again, we are told that Africa is poor, and that we should try to help its people. It's a simple statement, repeated through a thousand images, newspaper stories and near daily emotive charity appeals blurting out sad stories of suffering in Africa, lack of water, sanitation and children dying from treatable diseases.

The subliminal messages reinforce the assumptions and stories about Africa that we've heard throughout our lives. We reconfirm our image of Africa and reinforce our hostility to African migration, in the fake belief that these impoverished people are so poor that they will risk their life to seek a better life in the West. Unfortunately, the truth is the polar opposite of our assumptions. Africa is not poor, in fact, it is one of the richest continents in the world, but put simply, we steal its wealth.

The combination of staggering wealth, rampant violence, and abject poverty is no coincidence, but part of a pattern causing devastation across Africa,

A recent report found that the sub-Saharan Africa is actually a net creditor to the rest of the world to the tune of more than $41bn. Sure, there's money going in: around $161bn a year in the form of loans, remittances and aid. But there's also $203bn leaving the continent. Some of this is direct, such as $68bn in mainly dodged taxes. Essentially multinational corporations "steal" much of this - legally - by pretending they are really generating their wealth in tax havens. These so-called "illicit financial flows" amount to around 6.1 percent of the continent's entire gross domestic product (GDP) - or three times what Africa receives in aid.

Then there's the $30bn that these corporations "repatriate" - profits they make in Africa but send back to their home country, or elsewhere, to enjoy their wealth. The City of London is awash with profits extracted from the land and labour of Africa.

In fact, historically, Britain owes much of its wealth and power to the exploitation of the African continent. In the Channel 4 documentary The Empire Pays Back, Robert Beckford estimates Britain’s debt to Africans in the continent and diaspora to be in the trillions of pounds. Without Africa and its Caribbean plantation extensions, the modern world as we know it would not exist. Britain financed its Industrial Revolution through profits from slavery and it found markets for its commodities in its African colonies.

There are also more indirect means by which we pull wealth out of Africa. At least $29bn a year is being stolen from Africa in illegal logging, fishing and trade in wildlife. A further $36bn is owed to Africa as a result of the damage that climate change will cause to their societies and economies as they are unable to use fossil fuels to develop in the way that Europe did. Our climate crisis was not caused by Africa, but Africans will feel the effect more than most others. Needless to say, the funds are not currently forthcoming.

In fact, even this assessment is enormously generous, because it assumes that all of the wealth flowing into Africa is benefitting the people of that continent. But loans to governments and the private sector (at more than $50bn) can turn into unpayable and odious debt. Ghana is losing 30 per cent of its government revenue to debt repayments, paying loans which were often made speculatively, based on high commodity prices, and carrying whopping rates of interest.

We never hear or read in media outlets about the role being played by Western banking institutions; property development and estate companies; the big corporations; and the western political and business elite in promoting corruption in Africa. When it comes to Africa and the developing world the Western media pretend to be doing a good job only when there is an embarrassing story or a scandal that undermines their credibility as the watchdog of the state.

Bribery as we all know involves a giver and a taker but it is always the taker who is reported in media. In many instances bribes are offered in order to secure contracts, secure official favour or to induce officials in order to influence the outcome of a government decision. In other instances, people become corrupt because of the existence of favouring conditions as can be seen in most western countries with their banking secrecy laws.

Corruption is rife in Africa because there are banking institutions in Europe especially Switzerland, France, Jersey Island, Britain, Luxembourg, Liechtenstein, Austria, US and many others who accept money from African leaders without questioning the source of the money. These very same institutions are quick to question us when we try to deposit or withdraw a few thousand in cash, reminding us of their strict adherence to money laundering regulations also known as “Know your client”.

According to the UN around $148 billion are stolen from the continent by the political leaders, the business elite and civil servants every year with collusion and connivance of banking industries in Europe and North America.

Even though it is a common knowledge western banks are acting as safe havens for looted funds from Africa, very little attention is received from the western media to expose them. The media tend to focus their energies on the corrupt leaders with little or no mention at all as to where the monies they have stolen are being kept. There has not been any concrete effort to expose the banks that collude and connive with these corrupt leaders who are impoverishing the people. When these leaders are deposed or assassinated, their amassed wealth is rarely repatriated back to its origin.

Today, exploitation is still in full swing, albeit through more subtle mechanisms. Europe no longer loots Africa directly, by kidnapping and murdering its people or stealing its gold, diamonds or platinum, but by installing corrupt and compliant regimes or enlisting the support of local elites and locking its people into vicious economic structures which robs the continent of billions every year and Jersey plays a pivotal role in this modern form of piracy.

When Britain was finally forced to give up its African empire in the wake of WW2 and the rise of local resistance movements, it attempted to maintain trading privileges with some of its former colonies, either through the Commonwealth or the so-called Bretton-Woods institutions like the World Bank and the IMF.

Britain’s primary objective was to get its hands on Africa’s riches. In 1968, the Foreign Office writes: ‘(…) we should bend our energies to help produce a world economic climate in which our external trade, our income from invisibles and our balance of payments can prosper.’

A 2014 estimate suggests that rich Africans were holding a massive $500bn in tax havens. Africa's people are effectively robbed of wealth by an economy that enables a tiny minority of Africans to get rich by allowing wealth to flow out of Africa.

No effort has been made by the political elite in Europe and America to force the banks to return these stolen monies to the poorest of the poor because they are often the shareholders and beneficiaries of profits made by these banks. They talk about corruption because it is embarrassing to them but they have no agenda to fight it as that would mean no fat dividends for them and no cheap credits for their citizens.

Take the example of Sani Abacha of Nigeria who within five years of his reign (1993-98) was able to stash between 12 to 16 billion dollars in overseas banks. After his death in 1998, investigators in Nigeria, Europe and America stumbled on over 130 bank accounts in abroad where some of the money stolen was kept. The banks that received the funds are some of the world’s largest and include ANZ,; Bank Len, Bankers Trust, Barring Brothers, Barclays Banque Edouard Constant, BNP, Citibank, Credit Lyonnais, Credit Suisse, Deutsche Morgan Grenfel FIBI Bank (Schweiz), First Bank of Boston, Goldman Sachs, LGT Liechtenstein, Landesbank, Warburg, Natwest, Paribus, Royal Bank of Scotland, UBS, Standard and many others.

Most of the above-named banks have also been implicated for receiving billions of dollars of looted funds from the late Mobutu of Zaire; Lansana Conte of Guinea; Eyadema of Togo; and a number of dictators and tyrants such as Omar Bongo of Gabon; Obiang Nguema of Equatorial Guinea; Dos Santos of Angola; Denis Sassou- Nguesso of Congo; Paul Biya of Cameroon; Arap Moi of Kenya; Jerry Rawlings of Ghana; Ibrahim Babadjinda of Nigeria and a number of sitting and ex-presidents in Africa.

Some examples which highlights the abuse of Africa is an odious aluminium smelter in Mozambique, built with loans and aid money, is currently costing the country £21 for every £1 that the Mozambique government received. British aid, which is used to set up private schools and health centres, has undermined the creation of decent public services, which is why such private schools are being closed down in Uganda and Kenya. Of course, some Africans have benefitted from this economy. There are now around 165,000 very rich Africans, with combined holdings of $860bn. But, given the way the economy works, these people mainly keep their wealth in overseas tax havens.

Modern colonialism

reality is that the wholesale expropriation of resources during colonial times has barely slowed through the post-independence era, albeit with new beneficiaries. Western governments are not supposed to wield commercial and political power at the same time, and certainly not to use one to benefit the other. In colonial states...The British or Portuguese would cultivate a small group of local people who would fuse political and commercial power to control the economy."

When the foreign power leaves, you are left with an elite that has no division between political and commercial power. The only source of wealth is mines or oilfields, and that is a recipe for ultra-corrupt states. Somewhere like Nigeria, an 'extractor elite'...wanted to draw to itself the rent that oil and mining resources generate.

Another colonial hangover in the continued presence and power of oil and mining firms. The multinational companies hold enormous economic and political power and clout in post-independence African countries. In this way, there is a pretty straight line from colonial exploitation to modern exploitation.

The ability of governments to rely on resource revenue leads to corruption and oppression, as they are not accountable to their people through a social contract based on taxation and representation.

Take Angola, which earns almost half of its GDP from oil, as an example of government as "a service for the elite." A 2011 IMF audit revealed that $32 billion disappeared from official accounts between 2007 and 2010, a quarter of the state's income. The Angolan elite rejects accountability and does not tolerate any challenge from the public, recalling the recent case of activists being jailed for a public reading of a pro-democracy book. Governments can only behave that way if they don’t need the consent of their people, and the current mineral & energy exploitative structure in Africa ensures that it remains this way.

While the world speaks about an ‘African Renaissance’ and the G20 congratulates Africa on its economic growth, it fails to mention that most of the wealth generated on the continent does not actually remain there; it is owned by foreign companies registered in tax havens. In fact, 101 companies, most of them British control $305 billion worth of platinum, $276 billion worth of oil and $216 billion worth of coal at current market prices. Furthermore, they own ‘mines or mineral licences in 37 African countries and control vast swathes of Africa’s land: their concessions cover a staggering 1.03 million square kilometres on the continent. This is over four times the size of the UK and nearly one twentieth of sub-Saharan Africa’s total land area.’

Where Africa receives aid or foreign investment, this is usually conditional and tied to a strict regime of liberalising markets, deregulation and attractive taxation practices for foreign corporations. Consequently, Africa annually receives $134 billion in aid and foreign investment, but at the same time, $192 billion flows elsewhere, mostly in the form of profits for multinational corporations, tax evasion and structural adjustment. It is no coincidence that the profits from African ventures end up in the same countries which provide aid and investment to the continent. Africa is thus a ‘developing’ continent in the full and active sense of the world. Its wealth helps ‘develop’ the rich world, currently at $58 billion a year.

Even where African countries do receive foreign direct investment (FDI), this only very rarely benefits the country itself as investment concentrates on mergers and takeovers of existing businesses, benefiting the larger players on the market and in effect pushing out local competitors. Multinational corporations do not integrate themselves into African communities, but remain enclaves, relying on international suppliers and employment, while local employment is often highly exploitative. Additionally, they are often major polluters, destroying far more livelihoods than they create. One only has to look at the havoc Shell has wreaked in the Niger Delta.

Now surely, the activities of multinational corporations could potentially benefit African nations in terms of employment, investment and trade. There are some isolated examples of this, for instance in Nigeria or South Africa. However, World Trade Organisation rules make it impossible for African governments to insist on employing locals or purchasing products locally, as this is considered to be a ‘distortion’ of market economics, in a fine example of how international structures and British profitability intertwine.

Multinational companies have become experts in manipulating the prices and costs of their products to reduce their tax liabilities. A mining company in Ghana for example, will sell its products to its parent company based in a tax haven at a vastly reduced price, virtually eliminating its tax liability in Africa. Its parent company will then sell those same products on the global market, charging market prices, whilst paying virtually no tax in the tax haven they are based. Two governments miss out on tax and the company profits.

So what is the answer?

Western governments would like to be seen as generous beneficiaries, doing what they can to "help those unable to help themselves". But the first task is to stop perpetuating the harm they are doing. Governments need to stop forcing African governments to open up their economy to privatisation, and their markets to unfair competition.

If African countries are to benefit from foreign investment, they must be allowed to - even helped to - legally regulate that investment and the corporations that often bring it. And they might want to think about not putting their faith in the extractives sector.

With few exceptions, countries with abundant mineral wealth experience poorer democracy, weaker economic growth, and worse development. To prevent tax dodging, governments must stop prevaricating on action to address tax havens. No country should tolerate companies with subsidiaries based in tax havens operating in their country.

Aid is tiny, and the very least it can do, if spent well, is to return some of Africa's looted wealth. We should see it both as a form of reparations and redistribution, just as the tax system allows us to redistribute wealth from the richest to the poorest within individual societies. The same should be expected from the global "society". To even begin to embark on such an ambitious programme, we must change the way we talk and think about Africa. It's not about making people feel guilty, but correctly diagnosing a problem in order to provide a solution. We are not, currently, "helping" Africa. Africa is rich. Let's stop making it poorer.