Corporate Thieves of Africa's Wealth and Resources

Abstract:

Capital flights occur in Africa more than any region in the world. This happens through organized schemes between African leaders and western companies. Despite the huge deposits of natural resources, Africans and Africa remained mired in extreme poverty and hardships due to corruption and governance crisis. Corporate corruption and other forms of rent-seeking attitudes have lagged the continent behind other developed regions. With all its endowed natural assets and fertilized landscape, Africa remains to be at the top of the least developed and industrialized regions in the world; and more than twenty-six African countries are among the forty-nine Least Developed Countries (LDCs) in the World (see World Bank Countries Classification, 2011). In Sub-Saharan Africa, the population-weighted average annual income is $271 per person, which is a mere 74 cent a day and the pandemic of public health diseases wreak havoc (Sachs, et al, 2004). It’s pathetic to realize that Africans are slaves on their own soil. How can a person survive on 74 cent per day, but surrounded by huge deposits of natural resources, raw materials, gems, metals, iron ore, rubber, etc.?

To reverse this path, Africa (leaders and citizens) needs self-conscientization, rethinking and adapt a structural change approach where African States can be directly involved in the development process- and not to just allow market forces to drive the development process. This move calls for an import substitution industrialization (ISI) model that I believe will spur industrialization and economic development on the continent. However, this may not be achieved without investing in Africa’s knowledge economy and human resource capacity especially for young people since indeed, the continent is the youngest in the world in terms of percentage of youth population. As the shocks of global economic recession and decline in the prices of primary export commodities of African countries, we should learn our lessons and critically reflect on how corruption continues to be great impediments to economic development and as well pose threat to democracy and technological development in Africa.

This paper focuses on how rent-seeking behavior, poor governance and corporate corruption perpetuated collaboratively by African leaders and foreign companies had held the continent back and substantially undermined its economic growth and development. In the last 60 years of independence, bad governance, political marginalization and economic deprivations have been the hallmark in Africa. It’s not too late to turn the remaining wealth and natural assets of the continent to prosperity, quality education, road networks, sustainable energy and power, African science and technology, adequate healthcare and other basic safety nets.

1. Introduction:

Africa is seriously bleeding from the wounds of corruption and Africa’s corruption map is completely bleak. Even in post-decolonialisation and nonalignment period, the continent is yet to experience modernization and economic development owing to widespread corruption, inter-group socio-political marginalization and lack of human and institutional capacity development (HICD). Considering its natural resource assets, Africa should have been by far developed and thus experiencing the wave of sustainable economic growth and development and competing with other advanced economies. But corruption and self-greed have paralyzed and undermined the continent’s growth process and Africans have to wake up to the call of self-conscientization, adopt strong economic policies for structural change and introduce the import substitution industrialization (ISI) model- where African states will be directly involved in the development and industrialization processes of the continent. There is no more time for the maxim: “I eat first before you eat” but rather, “we all eat together” for the harmonious growth and development of African countries. Creating a middle class in African countries will enhance the harmonious growth process and thereby making Africans get rich together if not equally but one after the other. This may sound similar to Deng Xiaopeng's statement of "crossing the river and touching each stone one at a time (paraphrase).

But there is a huge challenge- varying forms of corruption exist in Africa which are Africa’s predicament. Few of these are corporate corruption, bureaucratic corruption, electoral corruption and many other elements of corruption. In the advanced economies, corrupt officials and citizens are prosecuted and reprimanded but in Africa, it’s the reverse. In fact, African leaders connive with foreign companies to steal the wealth and natural resources of their countries and Western countries have served as safe havens for corrupt and dictatorial African leaders.

What is a bureaucratic corruption- bureaucratic corruption is an opportunistic (rent-seeking) behavior which relates to the scope and extent of government regulation of economic activities (Mbaku, John 1996). This form of corruption is widespread in Africa and sometimes happens when bureaucrats and politicians (lawmakers and executives) attempt to increase their level of compensation through lobbyist strategies and by engaging in other activities to influence the political system and maximize benefits accruing to them (Mbaku, 1996). On the other hand, corporate corruption has to do with acts of corruption committed through organized deals between corrupt government officials and foreign corporate firms and companies (Burgis, 2015). As a result of corporate and bureaucratic corruption and bad governance, Africans have been entrapped into abject poverty, underdevelopment, socio-economic and political deprivations including lack of basic social safety nets.

Nearly two centuries now, Africa has played significant role in developing Western countries. It is the poorest region in the world not because of lack of natural resources, but entrenched corruption, poor governance and knowledge waste. Evidence shows that the West has consistently rely on raw materials and capital outflows from Africa for the sustainability of its economy which process, African leaders aided and abetted. However, as a result of global economic slowdown and recession, it’s important for African leaders to develop self-consciousness and stop the vicious cycle of corruption, social and economic deprivations as to kick-start the wave of industrialization and economic prosperity on the Continent. Africa’s bottom 1.2 billion populations of which over 60 percent are youths has been entrapped in abject for decades and they need immediate economic liberation. But corruption, reconciliation and poverty keep winning in Africa as more and more government officials steal public resources through a corporate and bureaucratic scheme.

In 1998, David S. Landes wrestled with the thought-provoking question about “Why some people or nations are so rich, and while others are so poor? Subsequently, Landes argument was not based on a lack of natural resources in a country, but how in despite of the wealth of a nation or continent- e.g. piercing Africa’s rich natural resources assets, still a significant number of its citizens are trapped in abject poverty. David Landes advances the argument that a ‘wealth of a nation can trap it into ‘poverty or curse’ if more pragmatic actions are not taken by its government to kick-off sustainable development. Moreover, John Maynard Keynes had argued years back that, in charting a path for sustainable growth and development of a country, the state should play a significant role in the development process. Africa carries the largest share of the global poverty rate or poor people in the world- i.e. about 40% of global poverty followed by Asia particularly Southeast Asia (see World Bank Report, 2014 & HDI 2015). It is no secret that African themselves particularly the so-called leaders have aided and abetted the stealing of the wealth and natural endowment of the continent, thus impeding quality education, healthcare, road networks and transportation system as well as access to electricity.

2. How African leaders Aided and Abetted Corruption in Africa

Over the years, the continent has been plagued with massive corporate and bureaucratic corruption jointly organized by African leaders and foreign corporate entities and local business companies to deprive their citizens of quality growth and development. The new found way of corporate corruption is by taking bribes to change local laws in favor of concession companies. In Liberia, in 2010 top government officials including the Speaker of the House of Parliament and Chairperson of the ruling Party took million dollars from Sable Mining Company (a UK-based Company) to change a portion of the Public Procurement and Concession Commission laws (PPCC) to favor the company. This diverted millions into the pockets of corrupt government officers and led to significant lost to the country and up to now, the Liberian government has been unable to prosecute those alleged corrupt officials. While few corporate looters and thieves of the nation’s wealth and revenues live in luxuries, about 85 percent of the population remains surviving on less than $1.25 per day. Further, malnutrition skyrockets at 40 percent, unemployment and food insecurity remain alarming, educational system messy, electricity and pipe borne water remain a complete catastrophic and the healthcare system, a disaster. On a daily, citizens die from diseases that no one should die from in advanced and emerging economies of Europe and some Asian Tigers.

Africa’s bottom 1.2 billion people are ensnared in extreme poverty and yet to experience industrialization, inclusive growth and development and socio-economic freedom. Beginning 1950s, Pan-Africanist movement has focused largely on political freedom and independence of the African states from Western oppression or neo-colonialization, but the so-called non-alignment progressives and Pan-Africanists are yet to redeem and deliver African citizens from economic slavery and bondage, thus providing income utility and tangible social safety nets. David Landes and John Maynard Keynes argue that knowledge (know-how), new innovations (for instance, African Science and Technologies) couples with governments vigorous interventions would drive sustainable development- that is, abandoning the deregulation policies of IMF and World Bank and adopting the “Keynesian economic strategies” that argue that government should not be a mere regulator- sitting back to allow market forces to drive growth- but government should play significant role in the growth and development processes. In other words, government direct roles in expanding investments by opening up factories and domesticating production, purchasing machines for industrial purposes, adding values to raw materials (semi-finished products) for exports will greatly increase revenues.

1.1 Measuring Corruption in Africa?

It is impossible to completely measure corruption, but it also possible to measure the perceptions of corruption in a country or about a continent as Transparency International, individual think-tanks, researchers and other great institutions been doing. Corruption is a great impediment to economic development and threat to democracy in the globe. Hence, measuring corruption in Africa will require comprehensive and detailed study for years, but in this paper, I adopted a discourse/content analysis method and reviewed a number of published articles and academic journals on corruption across the world. The result shows that Africa is the most corrupt continent of the world and six of the 10 most corrupt countries in the world are in Africa (see Transparency International, 2014). Accordingly, approximately 92 percent of African countries score below 50 out of 100 on the corruption scale and are amongst the most corruption countries in the world.

Capital Flights in Africa: In March 2015, Tom Burgis, a Financial Reporter of the Financial Times who has extensively covered and researched economic growth and development in Africa exposes the truth in his great groundbreaking book, titled; “The Looting Machine”, that the monetary value of natural resources that evaporates the African Continent annually is far more than what the Continent receives in foreign aid. In Burgis assertions, more than $333 billion United States Dollars are stolen from Africa annual in natural resources by Western companies abetted by, and in collaboration with African leaders (presidents) which is 7 times more than the US$15 billion Africa receives in development assistance or foreign aid on a yearly basis. Burgis findings confirms, a 2002 African Union study which reveals that corruption cost the continent roughly $150 billion a year. Leadership is not about ceremonially bearing the titles, but being able to fully represent and promote the interests and holistic well-being of the citizens above self-interest and personal aggrandizements.

If the outflows of billion dollars from Africa through corporate corruption and tax avoidance of multi-national firms could be retained to develop the continent, then by now, we have nearly zero poverty, malaria, HIV/AIDs, typhoid, Ebola and other communicable diseases that are perishing the African population. By eradicating and drastically configuring corruption, of course, then we will experience the wave of industrialization, economic and technological development. However and overall, this rests on leadership commitment with the spirit of nationalism or sense of belonging. Meanwhile, Jose Ugaz (2014) states that “bribes and corrupt deals do not only steal resources from the most vulnerable countries and peoples, but undermine social justice, economic and political freedoms and rapidly expand extreme poverty and educational deprivations”. In most African countries, corruption is widespread and openly seen everywhere in all strata of the society, in the streets, parliament, ministries and even the presidents’ offices.

In most African countries, electoral corruption and malpractice normally occur. In 2007 in Kenya, electorates received monies from political aspirants in order to vote for them. This situation is even worst in Liberia, since politicians don’t visit their constituents unless when elections are drawing nigh or fast approaching.

1.2 How Africa Helped Develop the West?

Africa remains to be a contentious ground for developed and emerging economies that continuously rely on raw materials and minerals to fuel their booming economies. The rush for natural resources wreaks havoc onshore in Africa long ago. Western countries over the years have relied on iron ore, oil, rubber, diamond, gems and other metals from the continent to sustain their growing economies and development processes. Currently, China is Africa’s largest trade partner and her grand strategy in the Sino-Africa foreign policy relations focuses on trade, cultural exchanges and economic cooperation. Furthermore, China and Brazil are the largest land grabbers in Africa and they depend on raw materials from the continent to sustain their economies. Dambisa Moyo in 2009 categorically confirmed the scramble for raw materials on the continent amongst the advanced and emerging economies in her book titled “Winner Take All:

However, economic history displays that by 17th Century, the world was nearly even in terms of economic growth and development, but the wave of industrialization in England skewed the growth ladder toward the West following the storming wave of industrialization in Asia. Africa is the only continent that is yet to experience the wave of sustainable economic growth and development. And this has been largely due to corruption and governance crisis.

African countries have served as the economic fueling engine of Western countries for two centuries now. In order to convince African leaders of their good intends for the continent, the West introduced the aid industry. In fact, the monetary worth of raw materials that flee the continent is seven times more than what Africa receives in foreign aid- i.e. $15 billion each year (Burgis, 2015). Instead of reducing poverty in Africa, poverty keeps increasing and not disappearing at all. Jason Hickel (2013) and Thomas Pogge of Yale University critically exposed the false accounting that lies behind foreign aid and poverty eradication narration. In Hickel words, foreign aid is not actually designed to reduce poverty, but operates as a tool that the elites of rich countries leverage to extract wealth, resources, and seek political compliance from aid recipients.

Consequently, developing countries lose 10 times the amount they receive in foreign aid per year. According to Hickel, developing countries receive some $136 billion in aid from donor countries, but at the same time, they lose about $1 trillion through offshore capital flight, mostly in the form of tax avoidance by multinational corporations. The aid industry is benefiting more from poor countries and each year, poor countries pay about $600 billion to rich countries in debt service. In reality, poor countries in Africa and East Asia keep disbursing more monies and natural resources to rich countries to sustain their economies than what we receive in development assistance.

In 2015, Tom Burgis disclosed that the monetary value of raw materials that offshore the African continent yearly reaches about $333 billion, while in returns the Continent receives just $15 billion annually. Furthermore, the UN Commission for Africa (UNCA) reported in 2002 that corruption cost Africa some $156 billion each year.

1.3 The Supply and Demand Side of Corruption in Africa

Corruption on the continent has both a demand and supply side. Curing the disease of corruption in Africa will require a strong leadership and institutional framework well monitored and followed. Popularly, the common cause of widespread corruption is due to greed, political marginalization and self-enrichment. In 1998, Vito Tanzi argued that demand side of corruption is advanced by the public to commit acts of corruption and supply side has to deal with public officials’ desires for corrupt acts.

Subsequently, Tanzi argues that some factors that eradicate or promote the demand of corrupt acts in a society stem from the governments’ regulations and authorizations, structure of the tax systems, stringent monetary/expenditure procedures or decisions, punitive actions and provisions of goods and services below the market- price. On the other hand, the supply of acts of corruption would germinate from the bureaucratic tradition, level of public sector wages, institutional controls, and penalty systems, transparency of rules, laws and administrative system followed by precedents set by the leadership.

1.4 Sterilizing Corruption and landing Development in Africa

Sterilizing is not elusive but requires strong political will power, upholding the rule of law, and making corruption a criminal felony. After almost two centuries, there is no time to nurture corruption in Africa and it must be persecuted which will make corruption to seek asylum in other region and not Africa any more. To advance sustainable development, we have to look at what did Latin American countries and Asian tigers (Japan, China, Singapore, etc) do when they got serious for industrialization and inclusive development. It was the Import Substitution Industrialization (ISI) model that help them kick-start their growth process and I have the strong conviction that it can surely work for Africa.

The direct involvement of African countries in their own development processes are pivotal- not relying on free market forces determine the growth paths. The deregulation policies of IMF and World Bank did not help Latin America and the Asia countries- but rather domestication of production, adding value to primary commodities (semi-manufactured) before exporting them. Furthermore, African countries need to invest in their knowledge economies (science and technologies) and the young generation as to benefit from such demographic dividends. I hold the belief that the 'Developmental State' model proposed by John Maynard Keynes can reverse Africa's resource curse and 'Dutch Disease' scenarios.

With the introduction of a developmental state approach, Africans will be relief from economic bondage and health hazards, poor education, inter-group conflict and political marginalization. It's only economic freedom, political participation and empowerment that can adequately sustain peace and stability in any society.