Corruption’s take: $148B

Peter Goodspeed, National Post

July 4, 2005

In the second of a three-part series, Peter Goodspeed examines how corrupt leaders siphon off foreign aid and their countries’ own natural wealth, enriching themselves while their people suffer.

For decades, Africa’s agony has been made worse by plundering politicians who have looted a continent that contains the richest concentration of precious metals and minerals on Earth.

Africa has 90% of the world’s cobalt, 90% of its platinum, 50% of its gold, 98% of its chromium, 64% of its manganese and one-third of its uranium. It is rich in diamonds, has more oil reserves than North America, and has been estimated to hold 40% of the world’s potential hydroelectric power.

Yet it is home to the world’s poorest people and has a reputation for brutality and despair.

The continent has wallowed in conflict and deprivation for decades. But it is corruption that has hurt the poor most, diverting funds from development, undermining governments, fuelling injustice and inequality, discouraging foreign investment, and breeding cynicism and violence.

By the African Union’s own estimate, Africa loses as much as US$148-billion a year to corruption.

From the bottles of whisky businessmen slip customs inspectors on the way through airports, to the informal fines police collect, to “donations” funnelled by presidents into offshore bank accounts, corruption is woven deep in the fabric of African life.

“We all know the big elephant in the room,” says George Ayittey, a native of Ghana and an economics professor at American University in Washington. “The big elephant in the room is African governments.

“Africa has been totally mismanaged and misruled in the past decade. Nobody wants to talk about that because of political correctness. But Africa’s begging bowl leaks, horribly.”

While Britain’s Prime Minister Tony Blair hopes this week to push the Group of Eight leaders to spend an extra US$25-billion a year on foreign aid for Africa, Prof. Ayittey insists African leaders could pick up part of the bill themselves just by curbing their own corruption.

“I mean, it is noble for the rich countries to help Africa,” he says. “But the real question is: What are African leaders themselves doing to help their own people?”

A recent World Bank survey on Africa claims “the amount stolen and now held in foreign banks is equivalent to more than half of the continent’s external debt.”

As a result, demands for accountability, transparency and improved governance lie at the heart of every modern debate over foreign aid to Africa.

“Nobody wants to give money to a country that is corrupt, where leaders take money and put it in their pocket,” George W. Bush, the U.S. President, said last month when he balked at endorsing Mr. Blair’s plans for more African aid.

“Corruption often flourishes where institutions are weak, where the rule of law and formal rules are not rigorously observed, where political patronage is rife, where the independence and professionalism of the public sector have been eroded, and where civil society lacks the means to generate public pressure,” says a World Bank report, Can Africa Claim the 21st Century?

“Once entrenched, corruption hinders economic performance, increases the cost of public investment, lowers the quality of public infrastructure, decreases government revenue and makes it burdensome and costly for citizens – particularly the poor – to access public services. Corruption also undermines the legitimacy of governments and erodes the fabric of society.”

The list of African leaders who have abused their power for personal gain is long, featuring kleptomaniacs and megalomaniacs such as Mobutu Sese Seko of Zaire (now Democratic Republic of Congo), Jean-Bedel Bokassa, the cannibal emperor of the Central African Republic, and Idi Amin, Uganda’s self-proclaimed “Conqueror of the British Empire in Africa.”

General Sani Abacha, the late military dictator of Nigeria, stole an estimated US$6-billion during his five-year rule.

Equatorial Guinea’s President, Teodoro Obiang Nguema, who came to power 24 years ago when he overthrew and executed his uncle, is rumoured to surpass even Gen. Abacha for graft.

His personal offshore bank accounts have practically exploded with activity since his tiny country began selling 300,000 barrels of oil a day in 1995.

Mr. Nguema has declared Equatorial Guinea’s oil revenues a “state secret,” but still manages to shuttle millions of dollars into his secret accounts, while collecting exorbitant “rents” from companies doing business with his government.

The U.S. Treasury Department recently fined the Washington, D.C.-based Riggs Bank US$25-million for “systemic” violations of anti-money-laundering laws in handling large cash transfers from an Equatorial Guinea government account to the personal account of an unnamed “government official,” believed to be Mr. Nguema.

At the same time, the U.S. State Department noted there is little evidence Equatorial Guinea’s US$5-billion-plus a year in oil revenues is being devoted to the public good.

Nearly half of all children under the age of five in Equatorial Guinea are malnourished, and even major cities lack clean water and basic sanitation.

Almost anywhere you look in Africa you find rulers enriching themselves at the public expense.

In Nigeria last week, the Economic & Financial Crimes Commission said a series of military dictators had squandered US$500-billion – equivalent of all Western aid to Africa in the past four decades.

Swaziland’s King Mswati III is spending US$100-million on an airport deep in the bush to take jumbo jets. The King has a penchant for wasting: He blew more than US$1-million on his 37th birthday party in April and another US$14.6-million on palaces for his 11 wives, all of whom get to drive new BMWs.

Zimbabwe’s President Robert Mugabe has brought his country to the edge of economic ruin, recently razing shantytowns that were home to hundreds of thousands of people while simultaneously building himself a lavish retirement home.

Few countries better illustrate what’s gone wrong with Africa than Kenya, which was widely regarded as an “African miracle” during the independence era in the 1960s, when it enjoyed 7.9% annual economic growth rates.

Back then, Kenya was safe, secure and had a solid, functioning, infrastructure. It also boasted a highly capable civil service.

By the mid-1980s, the country was becoming a basket case, riddled with corruption, institutional decay, rising ethnic violence and economic mismanagement.

Some of Kenya’s troubles began with the extravagant socialism of independence leader Jomo Kenyatta, but problems escalated rapidly once Mr. Kenyatta died in 1978 and was succeeded by his vice-president, Daniel arap Moi.

A master manipulator, Mr. Moi and his Kenya African National Union party managed to stay in power until they lost an election in December, 2002, that hinged on public calls for an end to corruption.

During his 24 years in power, Mr. Moi’s government embezzled and stole an estimated US$3-billion to US$4-billion.

The country’s Central Bank was looted, money was stolen by making fictitious payments on foreign debt, kickbacks were collected on all public contracts and when that didn’t supply enough cash, politicians awarded themselves phoney contracts.

Forensic accountants say most of the loot was put into European real estate, big-name banks and shares in international businesses. Some was handled by the world’s top investment counsellors.

A report by Kenya’s recently created Anti-Corruption Commission estimates up to US$3-billion of the missing money is still stashed overseas.

It notes the outstanding loot equals roughly a third of Kenya’s annual economic output or half its foreign debt. If applied to legitimate government expenditures, it would be enough to provide every child in Kenya with a free education for the next decade.

With his flair for patronage and power politics, Mr. Moi managed to rule with an almost dictatorial hand, dividing opponents along ethnic lines, manipulating the news media and pandering to a political culture that has been consistently ranked one of the world’s most corrupt.

When he fell from power, Mr. Moi and his family were among the wealthiest people in Kenya, with seven big homes and connections to at least 30 major business firms.

But he also left behind a nation crippled with foreign debt, failing infrastructure, accusations of widespread human-rights abuses and simmering ethnic tensions.

Unemployment was a staggering 70% and nearly two thirds of Kenya’s population were living beneath the poverty line.

In addition, the International Monetary Fund and states of the European Union were withholding foreign aid. They had also stopped funding major infrastructure projects because Kenyan officials demanded kickbacks.

The current president, Mwai Kibaki, came to power promising to combat corruption and moved to fire venal civil servants and judges, while creating an independent anti-corruption commission.

But barely two years after he was elected, western aid donors complain corruption has crept back into government.

Sir Edward Clay, Britain’s High Commissioner in Nairobi, attacked Kenya’s leaders and their tolerance for theft, saying officials were “behaving like gluttons” and “vomiting on the shoes of donors” who provide foreign aid.

Publicly humiliated, Kenya’s politicians didn’t refute the charges. Instead, they complained about foreigners interfering in Kenya’s internal affairs and said the diplomat’s remarks smacked of paternalistic colonialism.

“The failure of democracy and economic development in Africa are due to a large part to the scramble for wealth by predator elites who have dominated African politics since independence,” says Tunde Obadina, economics editor of Africa Today magazine.

“They see the state as a source of personal wealth accumulation. Africa’s tragedy is not that its nations are poor. That is a condition that is a product of history. The tragedy is that it lacks ruling classes that are committed to overcoming the state of poverty.”

While Western governments increasingly link foreign aid to good governance and efforts to tackle corruption, they’ve also [got to] recognize that banks, businessmen and bribe-paying multinational corporations share some of the blame.

“When one focuses on corruption in Africa, the tendency is to think only in terms of Africa,” says Jeremy Pope, a founding director of Transparency International.

“But the international banks, the Western businessmen who bribe to get the contract, those who are in cahoots with all the millionaires, they are all up to their eyeballs in what is taking place. When it comes to moral standing, everybody belongs in the gutter together.”

Read the first part in this series.

Categories: Africa, Odious Debts

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