The Fortunes of Africa: A 5,000 Year History of Wealth, Greed and Endeavour

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The Fortunes of Africa: A 5,000 Year History of Wealth, Greed and Endeavour Page 68

by Martin Meredith


  71

  PLATINUM LIFE

  A new phenomenon arose in Africa in the twenty-first century: China. While Western interest in the continent flagged, China saw vast opportunities emerging from a region previously regarded as Europe’s backyard. China’s move into Africa was driven primarily by its appetite for raw materials for its burgeoning industries – for oil, copper, aluminium, iron ore, cobalt, diamonds, uranium, timber. But it was also part of a long-term plan to make China the most influential foreign player in Africa.

  Chinese officials worked hard to establish close ties with African leaders. In exchange for deals over oil and other minerals, they undertook to build roads, railways, refineries, schools and football stadiums. Joint ventures were set up in the oil and mining sectors, in power generation, manufacturing and telecommunications. Thousands of Chinese businessmen followed in the slipstream of major projects, building factories, buying property, investing in farms, retail outlets and restaurants. Chinese traders and products became a common feature in many African cities and rural towns. Over the course of a decade, about a million Chinese moved into Africa – entrepreneurs, technical experts, medical staff, prospectors and farmers. Between 2000 and 2010, trade between China and Africa grew tenfold, reaching $115 billion.

  African governments relished the boost that China’s involvement brought. As well as Chinese investment, they gained an added windfall from a steep rise in commodity prices generated by the rising economic might of China. Moreover, China’s pragmatic, business-first approach to Africa fitted well with the patrimonial systems of government that African leaders employed. While Western powers continued to lecture African governments about corruption, transparency, human rights and democracy, China made no such demands. In pursuit of Africa’s riches, it was prepared to set up deals with dictators, despots and unsavoury regimes of every hue, with no strings attached. Among the beneficiaries were al-Bashir’s Sudan and Mugabe’s Zimbabwe.

  China’s increasingly dominant role acquired a variety of critics both in the West and in Africa. Western critics complained that the Chinese undermined efforts to foster good governance and worsened levels of corruption. African critics warned of a new form of imperialism. Chinese businessmen were accused of violating labour laws, damaging the environment and flooding markets with cheap products that ruined local industries. There were numerous disputes over low wages and poor working conditions, prompting Chinese ministers to issue their own rebuke. ‘Making a massive one-off fortune is short-sighted,’ a senior minister, Zhai Jun, warned in 2013. ‘Draining the pond to get all the fish is even more immoral.’ He told Chinese businessmen to improve their self-discipline and wean themselves off ‘one-hammer deals’ – transactions with no thought of a sustained relationship. Companies should treat staff better, obey local laws and customs and give the environment greater respect, he said.

  China also attracted criticism for its involvement in the illegal ivory trade that was decimating Africa’s remaining elephant herds. The Chinese had coveted ivory for centuries but the vast middle class that arose from China’s economic boom created a new demand for ivory that pushed up the price for it on the streets of Beijing by fivefold between 2006 and 2013, prompting a huge increase in trafficking. Chinese businessmen, workers and officials on the ground in Africa all became major players in the trade. As much as 70 per cent of the illegal trade went to China. Bowing to international alarm about the fate of the elephant population, China agreed in 2013 to introduce tougher penalties for trafficking.

  The commodity price boom drew in a horde of other foreign investors in what was termed a new scramble for Africa. As the oil price rose from $20 a barrel to more than $100, foreign companies rushed to expand production from existing fields and to develop new ones. The value of oil exports from Africa’s three largest producers of oil and gas, Nigeria, Angola and Algeria, increased from $300 billion in the 1990s to more than $1 trillion in the 2000s. New fields were opened in Ghana, Uganda, Mozambique, Tanzania and Kenya. Foreign companies also moved swiftly to secure new deals in the mining sector.

  There was a similar surge of interest in the vast areas of uncultivated land in Africa. The principal trigger was a worldwide shortage of food in 2008 that led to soaring prices and riots in a score of countries, from Egypt to Mexico. Food suddenly became a national security issue. Foreign corporations began to scour Africa for arable land to buy or lease. Leading the fray were international agribusinesses, investment banks, hedge funds, commodity traders and sovereign wealth funds. Ethiopia, Sudan, Congo-Kinshasa, Tanzania and Mozambique were among the locations they favoured. Governments there welcomed the influx, ensuring that land was made available at cheap prices and overriding opposition from subsistence farmers.

  A further impetus to Africa’s fortunes came with the arrival of mobile phone technology. It helped stimulate the growth of a consumer society, providing businessmen and traders with a wealth of market information and a fast method of payment. Farmers and fishermen used mobile phones to track prices and keep informed about harvests, catches and weather conditions. The growing use of mobile phones and the internet transformed many local economies. Nigeria in 2000 possessed only 400,000 ancient landline phones for a population of 160 million. By 2012, the number of mobile phone subscribers there had reached 60 million. Across Africa, new groups of entrepreneurs sprang up.

  Thus a combination of factors – higher commodity prices, foreign investment, agricultural development and mobile phone technology – provided Africa in the first part of the twenty-first century with a sustained period of economic growth. An additional boost came from Western debt relief programmes and huge infusions of foreign aid. On average the growth rate reached 5 per cent each year. An estimated 90 million Africans – nearly a tenth of Africa’s population of one billion – earned incomes reaching $5,000 or more, an aspiring consumer class with some degree of purchasing power.

  Despite an improved economic performance, however, Africa remained at the bottom of many of the world’s league tables. It was still the poorest region in the world, with higher levels of poverty and lower levels of life expectancy than anywhere else. It was beset by poor standards of education and by mass unemployment. Though mining, oil and gas sectors contributed large revenues, they created little employment – less than 1 per cent of the workforce. Only about a quarter of African workers had stable, wage-paying jobs. Nearly two-thirds earned a living through subsistence activities or low-wage self-employment. Despite Africa’s agricultural potential, its record on food production was dismal. Many African countries depended on food imports to feed their populations. A 2010 report showed that while food production on a global basis had risen by nearly 150 per cent during the previous forty years, African food production since 1960 had fallen by 10 per cent, and the number of undernourished Africans since 1990 had risen by 100 million to 250 million.

  Africa’s share of the world’s economic output remained but a small fraction: about 2.7 per cent. The gross domestic product of the entire continent amounted to only $1.7 trillion, a figure equivalent to the output of a single country such as Russia. The revenues it generated nevertheless allowed for huge profits to be made. But much of the wealth gained flowed to other parts of the world. Foreign corporations expected high returns in exchange for the risk and hassle of investing in Africa. African governments were only too willing to facilitate their involvement with secret deals, tax breaks and other favours.

  As gatekeepers to economic activity, Africa’s ruling elites became the main beneficiaries of the twenty-first-century boom. They seized every opportunity for self-enrichment, stashing looted funds in foreign bank accounts, buying properties abroad and enjoying a ‘platinum lifestyle’. The most notorious examples came from oil-producing states.

  In the first forty years of Nigeria’s independence, according to an official report published in 2005, Nigeria’s leaders stole £220 billion. In the twenty-first century, elite networks in Nigeria continued to profit from
the same scams and malpractices. Investigators revealed in 2010 that an amount of $22 billion had gone missing from a government fund set up in 2004 to hold extra oil revenues resulting from the price boom. In 2014, Nigeria’s central bank governor, Lamido Sanusi, told a senate committee that between January 2012 and July 2013 a sum of $20 billion was ‘unaccounted for’.

  Oil theft became a major industry carried out with the connivance of ministers, officials, the military, the navy and the police. In 2013, an independent London-based research organisation, Chatham House, reported that Nigeria’s oil was being looted on ‘an industrial scale’. ‘Top Nigerian officials cut their teeth in the oil theft business during military rule,’ the Chatham House report stated. ‘Over time, evidence surfaced that corrupt members of the security forces were actively involved. The country’s return to democracy in 1999 then gave some officials and political “godfathers” more access to stolen oil.’ In return for protection, security officials obtained payments from highly organised gangs who tapped into the network of pipes crisscrossing the Niger Delta’s oilfields and also stole from tank farms, refinery storage tanks, jetties and ports. At least 100,000 barrels were stolen on average each day, worth about $3.5 billion a year or as much as $35 billion over a ten-year period. According to government estimates, the amount was probably nearer to 300,000 to 400,000 barrels a day. Officials disguised oil theft by manipulating meters and forging shipping documents. ‘Proceeds are laundered through world financial centres and used to buy assets in and outside Nigeria,’ reported Chatham House. ‘In Nigeria, politicians, military officers, militants, oil industry personnel, oil traders and communities profit, as do organised criminal gangs.’

  The Niger Delta, meanwhile, remained a neglected region. Its fishing and agricultural potential was blighted by oil spills and the practice of gas flaring. Many of its swamps and wetlands had become dead environments, without even birdsong. The bulk of the population elsewhere in Nigeria fared no better. The unemployment rate for people in urban areas aged between 15 and 24 was nearly 50 per cent.

  In Angola, the oil industry and much of the rest of the economy was controlled from Luanda’s presidential headquarters, Futungo de Belas, by a rich clique who shrouded their activities from any scrutiny. Known as the futungos, the clique consisted mainly of family members, friends and colleagues of Eduardo dos Santos, a Soviet-trained engineer appointed president in 1979. A State Secrecy Act passed in 2002 classified as secret ‘financial, monetary, economic and commercial interests of the State’, authorising terms of imprisonment for anyone caught divulging information. The culture of secrecy that dos Santos enforced enabled the futungos to become one of the wealthiest ruling elites in Africa. In 2003, the Economist Intelligence Unit identified thirty-nine individuals in Angola worth at least $50 million and another twenty worth at least $100 million. Six of the seven people on its list were long-time government officials and the seventh was a recently retired official. The combined wealth of these fifty-nine people was said to be about $4 billion.

  The chief instrument of futungo control was the state-owned oil company Sonangol, an organisation accountable only to the president. By law, any multinational company wanting to do business in Angola was obliged to deal with Sonangol and to set up some form of joint venture or partnership. Sonangol was Angola’s sole concessionaire and the lead negotiator for every oil exploration and production licence. Under ‘confidentiality agreements’, the terms and conditions of each contract were kept hidden from public view, but government officials were often identified as owners or shareholders of Angolan companies awarded oil contracts. Sonangol also collected oil revenues and sold oil on behalf of the state. In theory, the state, as Sonangol’s owner, was entitled to its income, funds for the government to provide the population with education, health and social services. But in practice, oil revenues were used to finance Sonangol’s involvement in a host of subsidiary businesses – banking, telecommunications, housing, transport and manufacturing enterprises – extending the futungos’ stake in the economy and further enriching them. An independent investigation carried out by Maria Lya Ramos in 2011 on behalf of the Open Society Initiative concluded: ‘Billions of dollars in oil rents pass through Sonangol and are reinvested and doled out to feed the vast patronage system that helps the presidency and party maintain political power.’

  The stark contrast between the luxury lifestyles of the rich elite and the mass poverty endured by the rest of the population was nowhere more evident than in Luanda. Its streets were lined with sleek skyscrapers, luxury apartment blocks and air-conditioned shopping malls. But behind the waterfront façade stretched slums and shanty towns for miles in every direction where residents survived on less than $2 dollars a day, many without access to clean water or electricity. Two-thirds of Angola’s population lived either in extreme poverty or below the poverty line.

  Because of its huge oil revenues, the small west coast state of Equatorial Guinea emerged in the twenty-first century with the highest per capita income in Africa. In statistical terms, its 670,000 people enjoyed an average income in 2012 of more than $35,000. However, Equatorial Guinea’s president, Teodoro Obiang, a former army colonel who seized power from his demented uncle in a coup in 1979, regarded the oil industry as his private preserve and kept tight personal control over it. Like dos Santos in Angola, Obiang insisted that the use of oil revenues were a ‘state secret’. So where much of the money went remained hidden.

  A glimpse of the ‘platinum life’ that family members enjoyed was nevertheless afforded by the actions of judicial authorities in the United States and France. In 2012, officials from the US Department of Justice went to court asking for permission to seize assets belonging to Obiang’s playboy son, Teodorin, said to have been acquired through dubious means. In 1998, Obiang had appointed Teodorin as minister of forests on an official salary of $6,000 a month. According to the Department of Justice, between 2004 and 2011, Teodorin spent $315 million on properties and luxury goods in the United States. His purchases included a $30 million mansion in Malibu, California, a $38 million private jet, a fleet of luxury cars and a collection of Michael Jackson’s memorabilia.

  French magistrates uncovered similar extravagance in Paris. Teodorin’s purchases there included a five-storey mansion on Avenue Foch worth as much as $100 million; a treasure trove of jewellery, art, antique furniture and vintage wines; and another fleet of luxury cars. In 2012, the French authorities issued an international arrest warrant for Teodorin, accusing him of misuse of public money and money laundering.

  Back in Equatorial Guinea, three-quarters of the population survived on $1 a day.

  The blight of corruption afflicted many other states in Africa. A report prepared for the African Union in 2003 estimated that corruption cost Africa $148 billion annually – more than a quarter of the continent’s entire gross domestic product. Some countries with limited resources suffered grievously at the hands of their predatory leaders.

  When Kenya’s Daniel arap Moi was eventually obliged to stand down in 2002 after twenty-four years in power, investigators estimated that he and his cronies in the ‘Kalenjin mafia’ had looted as much as $3 billion. Moi’s successor, Mwai Kibaki, spoke of inheriting ‘a country badly ravaged by years of misrule and ineptitude’ and he pledged to root out corruption. But once in power, Kibaki’s ‘Mount Kenya mafia’ of Kikuyu politicians acted swiftly to set up their own deals and take over existing scams. In the run-up to elections in 2007, mass violence broke out between Kikuyu, Luo and Kalenjin, whipped up by politicians in a fight essentially over which group would inherit the spoils of office.

  In Zimbabwe, where the population was beset by food shortages, power cuts, a collapse of health and education services and an inflation rate of 5 hexillion, with prices doubling every day, Robert Mugabe seized the opportunity to shore up his decrepit dictatorship in 2008 by forcibly taking control of diamond fields newly discovered in the eastern highlands. On Mugabe’s orders, military unit
s used violence to oust hundreds of independent diggers and ensure that the diamond riches passed into the hands of his cronies. ‘Zimbabwe is mine,’ Mugabe declared after his election victory in 2008. ‘I will never, never, never, never surrender.’

  In South Africa, once the hope for a new style of democratic probity, ministers and officials from the ruling African National Congress were soon mired in a major corruption scandal over an arms deal. The cancer of high-level corruption had first surfaced during Mandela’s term of office, as he ruefully acknowledged shortly before stepping down. ‘We came to government with the zeal of a group of people who were going to eliminate corruption in government,’ he said in 1999. ‘It was such a sad disappointment to note that our own people who are there to wipe out corruption themselves became corrupt.’

  But the scale of corruption over the arms deal surpassed anything that had previously occurred. In 1999, a cabal within the ANC government pushed through an arms procurement programme costing $5 billion that was designed as much to provide opportunities for kickbacks from foreign defence contractors as to improve South Africa’s defence capability. When suspicions were first raised in public, Mandela’s successor, Thabo Mbeki, attempted to organise a full-scale cover-up. But subsequent investigations carried out in Britain, France and Germany revealed that at least $300 million had been paid out in bribes and ‘commissions’ to politicians, officials, middlemen and the ANC. A former ANC official, Andrew Feinstein, who investigated the deal, wrote: ‘The Arms Deal and its cover-up were the moment at which the ANC and the South African government lost their moral compass, when the country’s political leadership was prepared to undermine the institutions of our democracy – for which they and many others had fought – to protect themselves and the party.’

 

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