The Democratic Republic of Congo is blessed with enormous natural wealth, including vast deposits of precious minerals such as diamonds, gold, and tantalum.
President Laurent-Desire Kabila and then his son Joseph licensed international mining companies to tap its treasures. This arrangement generated riches for the Congolese elite but offered little to the poverty-ravaged population.
From 1999 to 2002, the Kabila regime “transferred ownership of at least $5 billion of assets from the state-mining sector to private companies under its control… with no compensation or benefit for the State treasury,” a United Nations investigation found.
The bonanza coincided with a ruthless crackdown on dissent. In 2004, a small, mostly civilian group took over a mine operated by the Australian firm Anvil Mining in Kilwa village, protesting that the company was making huge profits without rewarding the local workforce. According to a UN report, the Congolese army crushed the uprising and killed around 100 people, many by summary execution.
The combination of staggering wealth, rampant violence, and abject poverty in DR Congo is no isolated exception, but a pattern causing devastation across Africa.
According to Financial Times journalist Tom Burgis in his book The Looting Machine, the “the continent that is at once the world’s poorest and, arguably, its richest.”
Burgis finds a wide variety of kleptocrats and rackets over his travels through dozens of resource-rich countries. But a common thread 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,” says Burgis. “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.”
Burgis cites another colonial hangover in the continued presence and power of oil and mining firms. “The multinational companies hold enormous economic and political power in post-independence African countries,” he says. “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, Burgis argues, as they are not accountable to their people through a social contract based on taxation and representation. He cites 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.
The growth of offshore banking in the late 20th century created new opportunities for resource tycoons to cover their tracks, a practice laid bare in the Panama Papers. Israeli businessman Dan Gertler was an early pioneer. After forging a close friendship with DR Congo President Joseph Kabila, he was granted a near monopoly on exporting the nation’s diamonds, and quickly became a billionaire. Gertler routed the cash through an elaborate network of offshore accounts in tax havens, keeping the details of controversial deals secret. “In the case of African resource deals, offshore funds have been shown to conceal questionable transactions,” says Burgis.
“In the 1980s, bribes were literally cars full of cash and you handed the key to the official you were trying to bribe. Bribery now is much more sophisticated, and has become harder to define as bribery if it’s (through) offshore transactions or people being given equity shares in offshore companies…You have to crack open a lot of offshore secrecy to see the conflict of interest that lies at the heart of them.”
The era of global finance has opened African markets to a new generation of mysterious traders. Burgis spent years on the trail of elusive Chinese businessman Sam Pa, who has cycled through multiple aliases while making deals across the continent from Angolan oil to Zimbabwean diamonds. Pa is believed to lead the secretive Queensway investor group, and Burgis claims he has represented the Chinese state, although the government denies this.
Burgis is skeptical that resource industries can ever be reformed. “There is a troubling possibility that it’s not possible to put natural resources in these countries to work for the common good,” says Burgess. “Almost everywhere that receives a significant share of its income from oil or mining is badly run and often violent — it’s in the nature of these industries to cause these problems.”
He continued, “We have a world trading architecture with strict rules on imposing tariffs. African countries have adopted the market orthodoxy that led them to pare down states and embrace global economic competition — in which they are overwhelmingly the losers.”
Responsibility for the plight of resource-dependent nations goes beyond traders and dictators. The global economy still requires a huge supply of raw materials that originate in Africa, creating an imperative to maintain the existing, destructive model. ” He says, “There has been a tendency to lecture African rulers an tell them to put their house in order but the problems are in the world financial system. That financial secrecy is available is not Africa’s fault,” says Burgis. “Address the part that sits within the global system, which can be regulated from Western capitals.”
President Laurent-Desire Kabila and then his son Joseph licensed international mining companies to tap its treasures. This arrangement generated riches for the Congolese elite but offered little to the poverty-ravaged population.
From 1999 to 2002, the Kabila regime “transferred ownership of at least $5 billion of assets from the state-mining sector to private companies under its control… with no compensation or benefit for the State treasury,” a United Nations investigation found.
The bonanza coincided with a ruthless crackdown on dissent. In 2004, a small, mostly civilian group took over a mine operated by the Australian firm Anvil Mining in Kilwa village, protesting that the company was making huge profits without rewarding the local workforce. According to a UN report, the Congolese army crushed the uprising and killed around 100 people, many by summary execution.
The combination of staggering wealth, rampant violence, and abject poverty in DR Congo is no isolated exception, but a pattern causing devastation across Africa.
According to Financial Times journalist Tom Burgis in his book The Looting Machine, the “the continent that is at once the world’s poorest and, arguably, its richest.”
Burgis finds a wide variety of kleptocrats and rackets over his travels through dozens of resource-rich countries. But a common thread 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,” says Burgis. “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.”
Burgis cites another colonial hangover in the continued presence and power of oil and mining firms. “The multinational companies hold enormous economic and political power in post-independence African countries,” he says. “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, Burgis argues, as they are not accountable to their people through a social contract based on taxation and representation. He cites 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.
The growth of offshore banking in the late 20th century created new opportunities for resource tycoons to cover their tracks, a practice laid bare in the Panama Papers. Israeli businessman Dan Gertler was an early pioneer. After forging a close friendship with DR Congo President Joseph Kabila, he was granted a near monopoly on exporting the nation’s diamonds, and quickly became a billionaire. Gertler routed the cash through an elaborate network of offshore accounts in tax havens, keeping the details of controversial deals secret. “In the case of African resource deals, offshore funds have been shown to conceal questionable transactions,” says Burgis.
“In the 1980s, bribes were literally cars full of cash and you handed the key to the official you were trying to bribe. Bribery now is much more sophisticated, and has become harder to define as bribery if it’s (through) offshore transactions or people being given equity shares in offshore companies…You have to crack open a lot of offshore secrecy to see the conflict of interest that lies at the heart of them.”
The era of global finance has opened African markets to a new generation of mysterious traders. Burgis spent years on the trail of elusive Chinese businessman Sam Pa, who has cycled through multiple aliases while making deals across the continent from Angolan oil to Zimbabwean diamonds. Pa is believed to lead the secretive Queensway investor group, and Burgis claims he has represented the Chinese state, although the government denies this.
Burgis is skeptical that resource industries can ever be reformed. “There is a troubling possibility that it’s not possible to put natural resources in these countries to work for the common good,” says Burgess. “Almost everywhere that receives a significant share of its income from oil or mining is badly run and often violent — it’s in the nature of these industries to cause these problems.”
He continued, “We have a world trading architecture with strict rules on imposing tariffs. African countries have adopted the market orthodoxy that led them to pare down states and embrace global economic competition — in which they are overwhelmingly the losers.”
Responsibility for the plight of resource-dependent nations goes beyond traders and dictators. The global economy still requires a huge supply of raw materials that originate in Africa, creating an imperative to maintain the existing, destructive model. ” He says, “There has been a tendency to lecture African rulers an tell them to put their house in order but the problems are in the world financial system. That financial secrecy is available is not Africa’s fault,” says Burgis. “Address the part that sits within the global system, which can be regulated from Western capitals.”
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