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The Plunder of Africa: How Everybody Holds the Continent Back

June 17, 2015

Copyright Foreign Affairs

The Plunder of Africa

How Everybody Holds the Continent Back


Discussions about the fate of Africa have long had a cyclical quality. That is especially the case when it comes to the question of how to explain the region’s persistent underdevelopment. At times, the dominant view has stressed the importance of centuries of exploitation by outsiders, from the distant past all the way to the present. Scholars such as the economist William Easterly, for example, have argued that even now, the effects of the African slave trade can be measured on the continent, with areas that experienced intensive slaving still showing greater instability, a lack of social trust, and lower growth. Others observers have focused on different external factors, such as the support that powerful countries offered corrupt African dictatorships during the Cold War and the structural-adjustment policies imposed by Western-led institutions in the 1980s—which, some argue, favored disinvestment in national education, health care, and other vital services.

At other times, a consensus has formed around arguments that pin the blame on poor African leadership in the decades since most of the continent achieved independence in the 1960s. According to this view, the outside world has been generous to Africa, providing substantial aid in recent decades, leaving no excuse for the continent’s debility. There’s little wrong with African countries that an end to the corruption and thievery of their leaders wouldn’t fix, voices from this camp say. Western media coverage of Africa has tended to provide fodder for that argument, highlighting the shortcomings and excesses of the region’s leaders while saying little about the influence of powerful international institutions and corporations. It’s easy to understand why: Africa’s supply of incompetent or colorful villains has been so plentiful over the years, and reading about them is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.

Reading about African villains is perversely comforting for many Westerners who, like audiences everywhere, would rather not dwell on their own complicity in the world’s problems.

One of the many strengths of Tom Burgis’ The Looting Machine is the way it avoids falling firmly into either camp in this long-running debate. Burgis, who writes about Africa for the Financial Times, brings the tools of an investigative reporter and the sensibility of a foreign correspondent to his story, narrating scenes of graft in the swamps of Nigeria’s oil-producing coastal delta region and in the lush mining country of the eastern Democratic Republic of the Congo, while also sniffing out corruption in the lobbies of Hong Kong skyscrapers, where shell corporations engineer murky deals that earn huge sums of money for a host of shady international players. Although Burgis’ emphasis is ultimately on Africa’s exploitation by outsiders, he never loses sight of local culprits.

GIMME THE LOOT

Sure signs that Burgis is no knee-jerk apologist for African elites arrive early in the book, beginning with his fascinating and lengthy account of “the Futungo,” a shadowy clique of Angolan insiders who he claims control their country’s immense oil wealth, personally profiting from it and also using it to keep a repressive ruling regime in power. The country’s leader, José Eduardo dos Santos, has been president since 1979, and in 2013, Forbes magazine identified his daughter, Isabel, as Africa’s first female billionaire. “When the International Monetary Fund [IMF] examined Angola’s national accounts in 2011,” Burgis writes, it found that between 2007 and 2010, “$32 billion had gone missing, a sum greater than the gross domestic product of each of forty-three African countries and equivalent to one in every four dollars that the Angolan economy generates annually.” Meanwhile, according to Burgis, even though the country is at peace, in 2013 the Angolan government spent 18 percent of its budget on the Futungo-dominated military and police forces that prop up dos Santos’ rule—almost 40 percent more than it spends on health and education combined.

Those who tend to blame Africa’s woes on elite thievery seize on such examples with relish. But Burgis tells a much fuller story. Angola’s leaders may seem more clever and perhaps possess more agency than other African regimes—and indeed, other African states seem to be eagerly adopting the Angolan model. But the regime relies on the complicity of a number of actors in the international system—and the willful ignorance of many others—to facilitate the dispossession of the Angolan people: Western governments, which remain largely mute about governance in Angola; major banks; big oil companies; weapons dealers; and even the IMF. They provide the political cover, the capital, and the technology necessary to extract oil from the country’s rich offshore wells and have facilitated the concealment (and overseas investment) of enormous sums of money on behalf of a small cabal of Angolans and their foreign enablers. Because Angola’s primary resource, oil, is deemed so important to the global economy, and because its production is so lucrative for others, Angola is rarely pressed to account for how it uses its profits, much less over questions of democracy or human rights. Burgis shows how even the IMF, after uncovering the $32 billion theft, docilely reverted to its role as a facilitator of the regime’s dubious economic programs.

 

Angolan President Jose Eduardo dos Santos leaves a meeting at the Elysee Palace in Paris, France, April 2014.

 

For those who insist that foreign aid to Africa compensates for the role that rich countries, big businesses, and international organizations play in plundering the continent’s resource wealth, Burgis has a ready rejoinder. “In 2010,” he writes, “fuel and mineral exports from Africa were worth $333 billion, more than seven times the value of the aid that went in the opposite direction.” And African countries generally receive only a small fraction of the value that their extractive industries produce, at least relative to the sums that states in other parts of the world earn from their resources. As Burgis reveals, that is because multilateral financial institutions, led by the World Bank and its International Finance Corporation (IFC), often put intense pressure on African countries to accept tiny royalties on the sales of their natural resources, warning them that otherwise, they will be labeled as “resource nationalists” and shunned by foreign investors. “The result,” Burgis writes, “is like an inverted auction, in which poor countries compete to sell the family silver at the lowest price.”

Meanwhile, oil, gas, and mining giants employ crafty tax-avoidance strategies, severely understating the value of their assets in African countries and assigning the bulk of their income to subsidiaries in tax havens such as Bermuda, the Cayman Islands, and the Marshall Islands. Some Western governments tolerate and even defend such arrangements, which increase the profits of Western companies and major multinational firms. But these tax dodges further shrink the proceeds that African states earn from their resources. According to Burgis, in Zambia, one of the world’s top copper producers, major mining companies pay lower tax rates than the country’s poor miners themselves. Partly as a result, he reports, in 2011, “only 2.4 percent of the $10 billion of revenues from exports of Zambian copper accrued to the government.” Ghana, a major gold producer, fared slightly better, with foreign mining companies paying seven percent of the revenue they earned in taxes—still a tiny amount, Burgis points out, “compared with the 45 to 65 percent that the IMF estimates to be the global average effective tax rate in mining.”

A RACE TO THE BOTTOM

African countries’ unequal relationships with powerful international financial organizations and large multinational firms help explain the “resource curse” so frequently lamented in discussions of the continent’s economies. Rather than issuing from some mysterious invisible force, the curse is to a large degree the product of greed and the disparities in leverage between rich and poor—and its effects are undeniable. Burgis quotes a 2004 internal IFC review that found that between 1960 and 2000, “poor countries that were rich in natural resources grew two to three times more slowly than those that were not.” Without exception, the IFC found, “every country that borrowed from the World Bank did worse the more it depended on extractive industries.”

A case in point is the arid, Sahelian country of Niger, which for decades has served as a major supplier of uranium to France, its former colonial master. According to Burgis, the French company Areva pays tiny royalties for Niger’s uranium—an estimated 5.5 percent of its market value. And the details of the company’s contracts with Niger’s government are not publicly disclosed. Reflecting on this situation during an interview with Burgis, China’s ambassador to Niger adopts a posture of moral outrage, proclaiming that Niger’s “direct receipts from uranium are more or less equivalent to those from the export of onions.”

Rather than issuing from some mysterious invisible force, the “resource curse” is to a large degree the product of greed and the disparities in leverage between rich and poor.

This is a telling exchange, since many Africans believed that Chinese investment and influence on the continent would offer a way to lift the resource curse. Many greeted the arrival of the Chinese as big economic players in the region, which began in the mid-1990s, with great enthusiasm—especially the leaders of states whose economies depend heavily on minerals. China’s share of the global consumption of refined metals rose from five percent in the early 1990s to 45 percent in 2010; its oil consumption increased fivefold during the same period. In 2002, Chinese trade with Africa was worth $13 billion; a mere decade later, that figure had soared to $180 billion, three times the value of U.S. trade with 
the continent.

The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves. But as Burgis makes painfully clear, what has happened more often is a race to the bottom, in which Chinese firms focus their attention on African countries that face sharp credit restrictions or economic boycotts from the West, owing to coups d’état or human rights abuses. In many such countries, including Angola, the Democratic Republic of the Congo, and Guinea, the Chinese have extended easy financing to governments, crafting secretive deals that reward Chinese investors with even more lopsided terms than Western governments and firms tend to enjoy. “Access to easy Chinese loans might have looked like a chance for African governments to reassert sovereignty after decades of hectoring by the [World] Bank, the IMF, and Western donors,” Burgis writes, but, “like a credit card issued with no credit check, it also removed a source of pressure for sensible economic management.” In addition to this, critics point out that Chinese companies frequently bring in their own workers from China, providing little employment for Africans and few opportunities for Africans to master new skills and technologies.

 

DAVID LEWIS / REUTERSAn open-pit mine outside the southern Democratic Republic of Congo copper town of Lubumbashi, February 2006.

Some of Burgis’ strongest work follows the dealmaking of a shadowy Hong Kong–based outfit called the 88 Queensway Group, which was founded by a man sometimes known as Sam Pa, whose background is reportedly in Chinese intelligence. By tracing a complex web of corporate relations, Burgis shows how Pa’s group has put together lucrative deals in one African country after another, since starting seemingly from scratch in Angola during the early phases of China’s push into Africa.

In Burgis’ telling, one mission of Pa’s 88 Queensway Group and its associated companies, including China Sonangol and the China International Fund, seems to be offering the Chinese government plausible deniability when it comes to major transactions and contracts with some of Africa’s most corrupt and violent regimes. But some African elites at the receiving end of Pa’s entreaties have been left with little doubt that dealing with Queensway would in fact put them in contact with the highest levels of the Chinese state. Mahmoud Thiam served as the minister of mines in Guinea under President Moussa Dadis Camara, a junta leader who faced international outrage after his forces opened fire on a peaceful opposition rally in September 2009, killing at least 150 and gang-raping many who tried to flee the assault. In 2009, Thiam traveled to China at Queensway’s invitation and later told Burgis about being whisked around Beijing by Pa’s associates. “If they were not a government entity, they definitely had strong backing and strong ties,” Thiam recalled. “The level of clearances they had to do things that are difficult in China, the facility they had in getting people to see us [and] the military motorcade gave us the impression that they were strongly connected.” In the case of Guinea and other places, Burgis reports that Queens­way was able to provide tens of millions of dollars to African governments on short notice, with virtually no strings attached, sometimes to help bail out leaders presiding over economic crises and sometimes merely to prove the company’s bona fides.

The hope was that with China directly competing with Africa’s economic partners in the West, African countries would win better terms for themselves. But what has happened more often is a race to the bottom.

In the hands of a less astute observer, Pa could come off as something like a Bond villain. But Burgis rightly reminds readers that it hardly takes a conniving mastermind to profit off the inequities and shortcomings of African political systems. “If it weren’t him, it would be someone else,” as a U.S. congressional researcher puts it to Burgis. The researcher adds that even if Pa’s operation were shut down, “the system is still there: these investors can still form a company without saying who they are, they can still anchor their business in a country that is not concerned about investors’ behavior overseas, and, sadly, there’s no shortage of resource-rich fragile states on which these investors can prey.”

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