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Africa: Investment for Whom?
August 11, 2014 (140811)
(Reposted from sources cited below)
"While governance remains an issue for many African countries,
structural deficiencies in the U.S. financial system are just as
responsible for driving the outflow of illicit capital. ... The
burden for curtailing these illicit flows must be shared equally by
policymakers in the U.S. and in Africa for this partnership to be
effective." - Global Financial Integrity
As predicted, the principal emphasis of the U.S.-Africa Leaders
Summit held last week in Washington, was on trade and investment,
although a wide range of other issues were mentioned in the official
statement by the chair (there was no joint communique). There were
announcements of more than $10 billion of investments in agriculture,
and more than $26 billion in the Power Africa initiative, as well as
over $14 billion in other new private sector deals. But, as is
customary, there was no consideration of whether any and all
investment is actually beneficial to development.
Although other topics were covered both in official
events and in a number of independently organized events, the outcome
of these conversations is impossible to analyze from the scattered
media coverage available.
The official statement by the chair of the U.S.-Africa Leaders Summit
is available at http://allafrica.com/stories/201408081607.html
For a short article quoting African entrepreneur and philanthropist
Mo Ibrahim on the Summit, see http://tinyurl.com/lhgk4n5 "I'm
uncomfortable, frankly, with the hype about Africa. We went from one
extreme ... to, like, Africa now is the best thing after sliced
Among alternative events, the Washington Post featured coverage of
the Empowered Africa Dialogue, organized by the US-Africa Network and
co-sponsored by AfricaFocus Bulletin, Oxfam, ActionAid USA, and other
organizations. See http://tinyurl.com/nosn75s
On August 9, the Washington Post editorialized:
"Sadly, the summit dealt little with human rights improvements that
would sustain Africa's growth. ... Those who wanted to discuss human
rights, such as Oxfam and the NAACP, had to create their own
alternative Empowered Africa summit a few blocks away."
This AfricaFocus Bulletin contains two short articles relevant to a
deeper evaluation of some aspects of U.S. trade and investment in
Africa: (1) a statement from Global Financial Integrity calling for
the U.S. as well as Africa to take responsibility for curbing illicit
financial flows, and (2) a commentary by the director of Equatorial
Guinea Justice on the glaring abuses by the government of that
country in the exploitation of oil wealth.
For an additional commentary on the case of Equatorial Guinea, see
Lisa Misol, Senior researcher, Human Rights Watch
"The Business of Selling Equatorial Guinea to Investors"
Huffington Post, August 8, 2014
For talking points and previous AfricaFocus Bulletins on the economy
and on illicit financial flows in particular, visit
++++++++++++++++++++++end editor's note+++++++++++++++++
GFI Welcomes New U.S.-Africa Partnership to Combat Illicit Finance
August 6, 2014
http://www.gfintegrity.org / direct URL: http://tinyurl.com/kfjx569
Working Group Must Address Trade Misinvoicing and Role of U.S.
Business and Government in Facilitating Illicit Finance to Be Truly
Effective, Warns GFI
Illicit Financial Flows Drain US$55.6bn Annually from African
Continent, Sapping GDP, Undermining Development, and Fueling Crime,
Corruption, and Tax Evasion
Washington, DC - Global Financial Integrity (GFI) welcomed the
announcement from the White House and African leaders today regarding
the establishment of a bilateral U.S.-Africa Partnership to Combat
Illicit Finance, but the Washington-DC based research and advocacy
organization cautioned that any effective partnership must be sure to
address deficiencies in both the U.S. and in Africa that facilitate
the hemorrhage of illicit capital from Africa.
"We welcome the move by President Obama and certain African leaders
to form this partnership on curbing illicit financial flows from
African economies," said GFI President Raymond Baker, who also serves
on the UN High Level Panel on Illicit Financial Flows from Africa.
"Illicit financial flows are by far the most damaging economic
problem facing Africa. By announcing the creation of the U.S.-Africa
Partnership to Combat Illicit Finance, President Obama and African
leaders have taken the first step towards tackling the most
pernicious global development challenge of our time."
GFI research estimates that illicit financial outflows cost African
(both North and Sub-Saharan African) economies US$55.6 billion per
year from 2002-2011 (the most recent decade for which comprehensive
data is available), fueling crime, corruption, and tax evasion.
Indeed, GFI's latest global analysis found that these illicit
outflows sapped 5.7 percent of GDP from Sub-Saharan Africa over the
last decade, more than any other region in the developing world.
Perhaps most alarmingly, outflows from Sub-Saharan Africa were found
to be growing at an average inflation-adjusted rate of more than 20
percent per year, underscoring the urgency with which policymakers
should address illicit financial flows.
The problem with illicit outflows from Africa is so severe that a May
2013 joint report from GFI and the African Development Bank found
that, after adjusting all recorded flows of money to and from the
continent (e.g. debt, investment, exports, imports, foreign aid,
remittances, etc.) for illicit financial outflows, between 1980 and
2009, Africa was a net creditor to the rest of the world by up to
Trade Misinvoicing at the Heart of Illicit Outflows
According to GFI's research, most of the illicit outflows from
Africa--US$35.4 billion of the US$55.6 billion leaving the continent
each year--occur through the fraudulent over- and under-invoicing of
trade transactions, a trade-based money laundering technique known as
"trade misinvoicing." As GFI noted in a May 2014 study, trade
misinvoicing is undermining billions of dollars of investment and
domestic resource mobilization in at least a number of African
countries. The organization emphasized the importance of ensuring
that the new U.S.-Africa partnership prioritizes the curtailment of
"The misinvoicing of ordinary trade transactions is the most widely
used method for transferring dirty money across international
borders, and it accounts for the vast majority of illicit financial
flows from Africa," said Heather Lowe, GFI's legal counsel and
director of government affairs. "While it is easy to place the blame
for this on corrupt officials or transnational crime networks, the
truth of the matter is that the bulk of these fraudulent trade
transactions are conducted by normal companies, many of them major
U.S. and European companies."
Ms. Lowe continued: "Just yesterday, President Obama announced the
Doing Business in Africa Campaign, a U.S. government initiative
focused on boosting trade between U.S. and African companies, without
a signal mention of the elephant in the room: trade misinvoicing.
Increasing trade is important to boosting economic growth across
Africa, but only if the trade is done honestly and at fair market
values. The single most important step that wealthy nations like the
U.S. can take to help African economies curtail illicit flows is to
trade legitimately and honestly with Africa. While this topic was not
addressed at the U.S.-Africa Business Forum yesterday, it must be on
the table as the U.S.-Africa Partnership to Combat Illicit Finance
commences its work."
U.S. Must Clean Up Its Own Backyard
GFI further emphasized the need to address the role of the U.S.
financial system as a major facilitator of such outflows.
"For every country losing money illicitly, there is another country
absorbing it. Illicit financial outflows are facilitated by financial
opacity in tax havens and in major economies like the United States,"
said GFI Policy Counsel Joshua Simmons. "Indeed, the United States is
the second easiest country in the world--after Kenya--for a criminal,
kleptocrat, or terrorist to incorporate an anonymous company to
launder their ill-gotten-gains with impunity."
"While governance remains an issue for many African countries,
structural deficiencies in the U.S. financial system are just as
responsible for driving the outflow of illicit capital. This
initiative cannot place the onus entirely on the shoulders of African
governments. The burden for curtailing these illicit flows must be
shared equally by policymakers in the U.S. and in Africa for this
partnership to be effective," added Mr. Simmons.
Equatorial Guinea: Oiling the Wheels of Justice
By Tutu Alicante, Executive Director, EG Justice
Institute for Security Studies (ISS; http://www.issafrica.org/)
August 6, 2014
When the president of Equatorial Guinea arrived in Washington on
Monday, he would have been celebrating more than the chance to join
some 50 other African heads of state for President Barack Obama's
United States (US)-Africa Leaders Summit. This week also marks his
35th anniversary in power, and reinforces his status as the world's
longest-serving non-royal head of state.
On 3 August 1979, Teodoro Obiang Nguema Mbasogo seized power from his
uncle and mentor, Francisco MacÃas Nguema, who used to hang
dissidents from the capital's few street lamps, and who was executed
by firing squad.
As graphic accounts of ongoing torture published by Human Rights
Watch demonstrate, Obiang has followed in his uncle's footsteps in
more ways than one.
How does such a figure manage to stay in power for such a long time -
and manage to win every election with more than 95% of the vote? And
why is he included among the leaders selected as being 'in good
standing' with the US government, rather than being excluded like the
heads of Zimbabwe, Eritrea and Sudan?
In the mid-1990s, oil was discovered off the coast of the capital
city, Malabo, by an American company: so much that the central
African country is now the third-largest producer of oil and gas in
sub-Saharan Africa, with US oil firms playing a major role.
Conservative estimates put the country's oil production at close to
318 000 barrels per day, which translates into billions of dollars a
Such great wealth has allowed for lavish purchases by the Obiang
family, including mansions in the US and many other countries, a
collection of Ferraris, Rolls-Royces and Lamborghinis, multiple
private jets and a cadre of elite Moroccan and Israeli militia who
serve as a private presidential security force.
In addition, Obiang's eldest son and presumptive heir to the
presidential office, Teodoro Nguema Obiang Mangue, has amassed one of
the world's finest collections of Michael Jackson memorabilia,
including the original red-and-black 'Thriller jacket,' as well as
his crystal-studded 'Bad Tour' glove.
Despite a per capita gross domestic product on par with Italy, twothirds
of the population in Equatorial Guinea lives below the poverty
line. Average life expectancy is 53 years. Clean drinking water and
adequate plumbing are scarce and child-mortality rates remain
Whereas Obiang has repeatedly stated that corruption is impossible
under his leadership, Equatorial Guinea ranked 45 out of 52 countries
in the 2013 Ibrahim Index of African Governance, and 163 out of 177
on Transparency International's Corruption Perceptions Index.
Even more tellingly, corruption and money laundering investigations
by the US Justice Department and French police have provided a trove
of details on the unexplainable wealth and ostentatious lifestyle of
Obiang's eldest son. The son claims to have immunity from prosecution
because his father placed him in senior posts, most recently as
second vice-president of the country.
This cannot be what Obama had in mind when he themed the summit
'Investing in the Next Generation.'
While in Washington, Obiang and his fellow African heads of state
will court closer ties with the US government and private sector
representatives who are interested in participating in Africa's
current 'economic boom.
'The Corporate Council on Africa offered its members an invitationonly
dinner with Obiang, and joined law firm Greenberg Traurig LLP in
co-sponsoring a day-long forum to highlight investment opportunities
in Equatorial Guinea.
Interested investors had best hurry: experts believe Equatorial
Guinea's oil reserves will run dry within the next two decades. The
same applies to anyone who would like to see average Equatoguineans
have an opportunity to benefit from their country's natural wealth.
Businesspeople who might not hesitate to invest in countries with
serious human rights problems should be forewarned: they don't want
to wind up like the Italian construction company executive Roberto
Berardi, who has been locked up in a prison in Bata for 18 months and
tortured to prevent him from testifying to the US Justice Department
about alleged corruption in the ruling family.
The US government can do a lot to promote greater transparency and
justice in Equatorial Guinea. To begin with, it should press for the
rule of law by denouncing torture and pushing for a total overhaul of
the country's judicial system, which is currently under presidential
control. It should also insist on concrete steps from the government
of Equatorial Guinea before it reapplies for candidacy to the
Extractive Industries Transparency Initiative (EITI), to ensure
protection and support for independent civil society organisations to
carry out accountability work without reprisal.
It also should build on the Justice Department's deep investigation
into high-level corruption, money-laundering and bank fraud by the
Obiang family and seize all their US-based assets - not only the
Malibu mansion that it has pursued since 2011. It should also expand
the Magnitsky Act to prevent all global autocrats, not just Russians,
from using US banking and business institutions to hide ill-gotten
Equatorial Guinea's next presidential elections are currently
scheduled for 2016, but there is little hope that they will provide
an opportunity for citizens to exercise their rights freely.
The international community, starting with leaders at this week's
summit, should commit to supporting transparent and credible
elections in Equatorial Guinea. They should do this by brokering
negotiations between the Obiang regime and the opposition, insisting
that it create an election monitoring body not controlled by the
ruling party, and supporting credible and independent electionmonitoring
It might also be suggested to Obiang - as US State Secretary John
Kerry recently did to the Democratic Republic of Congo's President
Joseph Kabila - that he not seek re-election. Finally, leaders - both
in government and civil society - should support the creation and
protection of free and independent media in the country.
On his first presidential visit to Africa in 2008, President Obama
declared that, 'Africa doesn't need strongmen; it needs strong
institutions.' With this historic summit, dedicated to forging new
economic ties and finding solutions for the continent's burgeoning
youth demographic, the Obama administration owes it to the people of
Equatorial Guinea to take steps to build strong institutions and
ensure the next generation doesn't arrive to bare coffers.
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