Africa’s wealth is being devoured by tyrants and vultures

31 July 2012 by Nick Dearden


Citizens of the Democratic Republic of Congo should be living in one of the world’s richest countries. Plunder and corruption condemns them to poverty


’Repayment’ of loans made to the corrupt Mobuto Sese Seko has proved an important means of draining the DRC’s wealth. Photograph: Remy De La Mauviniere/AP

A surprise judgment was made last week against a vulture fund Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
, FG Hemisphere, striking down its claim for $100m from the Democratic Republic of Congo. Keeping money out of the hands of profiteers is welcome, but wider questions raised by the case lead straight to one of the central problems of the global economy: the right of money to flow wherever, whenever, while millions remain in poverty.

FG Hemisphere has spent many years and a small fortune pursuing Congolese dictator Mobutu Sese Seko for a debt it bought “secondhand” for $3m, but on which it hoped to claim back $100m.

Most recently it has been trying to grab the assets of Congo’s state-owned mining company, Gécamines, through a joint venture in which it is invested on Jersey. It was winning until Tuesday when the privy council, the final court of appeal for Jersey, overturned previous judgments, saying Gécamines assets could not be taken as state assets.

With luck, the case will have cost Hemisphere so much that we won’t hear from it again. But for the people of Congo, it’s not the end of the story. Few of them will know much about the case. Indeed, it raises the question of why wealth derived from mining in the DRC was being fought over in faraway Jersey in the first place.

The DRC has vast mineral wealth including diamonds, copper, oil and gas; one estimate puts the value of these resources at $24 trillion. However, it is pretty much the poorest country in the world. The reason is centuries of plunder, at its worst involving the buying, selling and brutalisation of millions of people. But plunder today continues in different guises – through odious debt and tax avoidance.

The debt bought up by FG Hemisphere was part of a vast pile that fuelled the rule of Mobutu, who pillaged his country for more than 30 years. Mobutu’s lenders knew he was as corrupt as hell; a report by an IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
mission in 1982 reported there was “no, I repeat no, chance on the horizon for Zaire’s [DRC’s] numerous creditors to get their money back”. But lending continued to rise sharply. Mobutu was, on balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. , doing what his paymasters wanted.

“Repayment” of this money, long after Mobutu was ousted, has proved the first important means of draining the DRC of wealth. The country was judged eligible for debt cancellation on the basis of its poverty, but this involved jumping through so many hoops it took eight years to complete. By then, more than $2bn had left the country repaying Mobutu’s debts and numerous new loans were needed.

It seems incredible that so rich a country can end up in serious debt, until you think about the amount of money leaving the DRC through the other crucial factor in its impoverishment: unpaid taxes. Although the DRC has been a poor reporter of data, it has been estimated that, between 1970 and 2008, more than $6bn left the country illicitly. This is equivalent to about 1% of the economy every year – more than enough to cover its total outstanding debts. The figures suggest that an average of $170m has left the DRC every year, almost two-thirds of the average $300m it has to make in debt service Debt service The sum of the interests and the amortization of the capital borrowed. payments. Little wonder that its debt is starting to rise again, and is expected to reach $7.5bn by 2015.

In essence, successive governments have used foreign loans as a means of financing their activities – including building palaces in the jungle and stealing from state coffers. This is useful for governments interested in avoiding accountability to their people. It’s useful for lenders interested in plundering the countries of those governments. For today’s leader, payment is put off for another day; for today’s lender, a web of dependency is created with an income stream potentially reaching into the far future.

This tale is not limited to Congo. Latest estimates put capital flight from sub-Saharan Africa – money lost to the continent and hidden offshore – at $683bn between 1970 and 2010, more than enough to wipe out sub-Saharan Africa’s debts to the rest of the world.

As Africa is celebrated for its growth rates, the amount of taxes lost to the continent accelerates. The funds flowing in, lauded by Tony Blair, Sir Bob Geldof and their ilk, will primarily enrich those already at the top, fuel inequality and expand dependence on a crony form of finance. Vultures will increasingly swoop on these riches. Stopping them, and building a different society, means controlling the flow of money – and taxing it.

Nick Dearden is Director of the Jubilee Debt Campaign

Source: The Guardian



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