NEWS 2005

 

DISPOSSESSING AFRICA'S WEALTH

Patrick Bond
Oct. 2005

Exactly how much wealth does Africa lose every year? Third World  repayments of $340 billion each year flow northwards to service a  $2.2 trillion debt, more than five times the G8's development aid  budget, notes Patrick Bond. In addition Africa’s citizens experience  depletion of assets like forests and mineral resources, and suffer  the impact of pollution as a result of mining. In this context, Bond  argues that those who claim international integration can enrich  Africa are wrong.


There is a timeless line of argument from Walter Rodney's 1973 book  'How Europe Underdeveloped Africa': 'The question as to who and what  is responsible for African underdevelopment can be answered at two  levels. Firstly, the answer is that the operation of the imperialist  system bears major responsibility for African economic retardation by  draining African wealth and by making it impossible to develop more  rapidly the resources of the continent.'

'Secondly, one has to deal with those who manipulate the system and  those who are either agents or unwitting accomplices of the said  system.'

Sub-Saharan Africa today still suffers the dispossession of wealth,  along two trajectories: South-North resource flows, and adverse  internal class formation. In the former case, the central processes  are associated with exploitative debt and finance, phantom aid,  capital flight, unfair trade, distorted investment, ecological  exploitation and the 'brain drain'.

In the latter case, instead of accumulation and class formation via  an organic middle class and productive capitalist class, Africa has  seen an excessively powerful 'comprador'-oriented ruling elite whose  income is based upon financial-parasitical accumulation and political- bureaucratic patronage power, which in turn is then subject to vast  capital flight.

Although remittances from the Diaspora now fund development and even  a limited amount of capital accumulation, capital flight is far  greater. At more than $10 billion/year since the early 1970s,  collectively, the citizens of Nigeria, the Ivory Coast, the DRC,  Angola and Zambia have been especially vulnerable to the overseas  drain of their national wealth. A major factor during the late 1990s  was the relisting of the primary share-issuing residence of the  largest South African firms, from Johannesburg to London.

In Washington, perhaps the most highly regarded of African elites is  South African finance minister Trevor Manuel, who until late last  month served as chair of the World Bank/IMF Development Committee.  Having failed for four years to get even partial democratisation of  the Bretton Woods Institutions onto the committee's agenda, Manuel  gloried in the return of attention to Africa: 'Right now, the  macroeconomic conditions in Africa have never been better. You have  growth across the continent at 4.7%. You have inflation in single  digits. The bulk of countries have very strong fiscal balances as well.'

These statements are true only if we take misleadingly narrow  economic statistics seriously. Fortunately we don't need to because  even the Bank is occasionally compelled to confess how Africa is  drained of 'genuine savings' through depletion of minerals and  forests, and other eco-social factors which ostrich-like economists  invariably ignore.

Manuel's riff sounds impressive. Indeed, because of structural  adjustment austerity, African states reduced their early-1990s  deficit rates of around 6% of annual output, to just under 4% today.  However, the fastest growing economies actually increased their  deficits by a full percentage point over the last decade, suggesting  that Keynesianism still works as well for African elites as it does  for George Bush.

Meanwhile, monetary policy was tightened, interest rates soared and  African central banks - typically run by IMF or ex-IMF staff - were  discouraged from printing money (which sometimes fuels inflation).  Price increases were reduced from double-digit rates prior to 2004 to  an average of 9% this year. However, that level is far too low for a  developmental trajectory, former Bank chief economist Joseph Stiglitz  argued in his 'Post-Washington' critique of economic orthodoxy.

Bank president Paul Wolfowitz - architect of the Iraq War - was in a  sporting mood at Manuel's Development Committee press conference on  September 25: 'The path has been cleared to complete debt relief, and  at the risk of a dangerous metaphor, I think Trevor has given us the  ball right in front of the goal, and the goalie has tripped, and all  we have to do now is kick it in.'

A dangerous move indeed, for Manuel warned of at least one more  hurdle: 'a legal challenge because countries may feel that some have  been favoured against others. My understanding is that both Rodrigo  [Rato, IMF managing director] and Paul will go before their boards,  sort out what the equality of treatment principle would be in each of  the instances, and ensure that there is equality of treatment.'

It seems the InterAmerican Development Bank and Asian Development  Bank won't participate in the debt relief pantomime. So 14 African  countries favoured by the G8 - and four others in Asia and Latin  America - will get a few crumbs of relief, costing the G8 less than  $2 billion per year to service (on $40 billion in outstanding debt).

But because their leaders have ceased putting up a fuss, the debt of  these 18 is reduced: not to nothing, but to levels where the Bank and  IMF retain macroeconomic control, so that capital flight and ultra- cheap commodities can continue their outward flow.

None of the trade reforms proposed for the Hong Kong WTO meeting in  December will alter the basic calculus of long-term decline for their  (non-oil) primary commodity prices. Christian Aid recently estimated  the damage done to African countries by trade liberalisation at $272  billion since 1980.

Even in the face of those 'internal contradictions and conflicts' -  including vast overcapacity, wars, real estate bubbles, hurricane  repairs, debt crises and balance of payments problems - men like  Wolfowitz can afford to make small concessions. After all, Third  World repayments of $340 billion each year flow northwards to service  the $2.2 trillion debt. This is more than five times the G8's  development aid budget (and ten times the level of Northern donations  once we subtract the 'phantom aid' which never reaches the masses).

As Brussels-based debt campaigner Eric Toussaint concludes, 'Since  1980, over 50 Marshall Plans worth over $4.6 trillion have been sent  by the peoples of the Periphery to their creditors in the Centre'.

Consider, as well, the South as ecological creditor. According to  ecologist Joan Martinez-Alier, 'The notion of an ecological debt is  not particularly radical. Think of the environmental liabilities  incurred by firms under the United States Superfund legislation.  Although it is not possible to make an exact accounting, it is  necessary to establish orders of magnitude in order to stimulate  discussion.'

Martinez-Alier and Jyoti Parikh of the UN International Panel on  Climate Change argue that based upon the Third World's role as a  carbon sink, an estimated annual subsidy of $75 billion flows South  to North. Africans are most exploited because non-industrialised  economies have not begun to utilise more than a small fraction of  what should be due under any fair framework of global resource  allocation such as carbon emissions.

The amounts involved would easily cover financial debt repayments.  Instead, the G8 Gleneagles scam keeps poor countries down in several  ways. According to Jubilee South: 'The multilateral debt cancellation  being proposed is still clearly tied to compliance with  conditionalities which exacerbate poverty, open our countries further  for exploitation and plunder, and perpetuate the domination of the  South. Even if the debt cancellation were without conditionalities,  the proposal falls far too short in terms of coverage and amounts to  demonstrate a bold step towards justice by any standard.'

However, almost by accident another Bank document began to do the  rounds just prior to the Bank/IMF Annual Meetings: 'Where is the  Wealth of Nations?' Here at least, World Bank environmental staff  recognise that foreign investors may diminish overall wealth and  savings, once resource depletion and pollution are factored in.

(To be sure, the Bank adopts a minimalist definition based upon  current pricing - not potential future values when scarcity becomes a  more crucial factor, especially in the oil sector. Nor do Bank  economists yet deign to calculate the damage done to local  environments, to workers' health/safety, and especially to women and  vulnerable people in communities around mines. And unpaid household  and community work is still left out of national statistical  accounts, reducing women's labour to a nil value.)

What investments are most important, then? Dating to the mid-1990s,  foreign direct investment has flowed mainly into oil rigs in the West  African Gulf of Guinea and Angola's offshore Cabinda field, aside  from an ill-fated South African privatisation spree in 1997.

Meanwhile, corrupt host regimes waged war against their people, not  only in Angola (where formal conflict ended after a rightwing Unita  guerrilla movement faded following Jonas Savimbi's death). In  addition, as Amnesty International pointed out last month, the Bank  was meant to finance the multi-billion dollar Chad-Cameroon pipeline  to add human rights sensitivity, but deepening repression is the  actual result.

Other Africans suffering oil depletion under dictatorial or  militarised conditions include citizens of the Republic of the Congo,  Equatorial Guinea, Gabon, Nigeria and Sudan.

South Africans are also implicated in a kind of subimperial looting  of oil. At the country's annual Political Science Association  conference in KwaZulu-Natal last month, senior government researcher  John Daniel shifted from claiming in 2003 that 'non-hegemonic co- operation has in fact, been the option embraced by the post-apartheid  South African state.'

After reviewing the record of the African National Congress (ANC) in  the continent's energy sector, especially Sudan and Equatorial  Guinea, he conceded, 'The ANC government has abandoned any regard to  those ethical and human rights principles which it once proclaimed  would form the basis of its foreign policy.'

Big Oil celebrated this state of power relations at the World  Petroleum Congress in Johannesburg last month. Opponents also came  together, invited by the excellent NGO groundWork. The Ogoni people,  for example, demanded reparations not only for the thorough  destruction of their Delta habitat, but also for the depletion of  what economists call 'natural capital'.

How much natural capital value is removed from Africa? In South  Africa, the value of minerals in the soil fell from $112 billion in  1960 to $55 billion in 2000, according to the UN, while Africa as a  whole suffers negative net annual savings.

Adding not just oil-related depletion but other subsoil assets,  timber resources, nontimber forest resources, protected areas,  cropland and pastureland, the Bank calculates that Gabon's citizens  lost $2,241 each in 2000, followed by people in the Republic of the  Congo (-$727), Nigeria (-$210), Cameroon (-$152), Mauritania (-$147)  and Cote d'Ivoire (-$100).

In addition to mineral depletion worth 1% of national income each  year, the Bank acknowledges that South Africans lose forests worth  0.3%; suffer pollution ('particulate matter') damage of 0.2%; and  emit C02 that causes another 1.6% of damage. In total, adding a few  other factors, the actual 'genuine savings' of South Africa is  reduced from the official 15.7% to just 6.9% of national income.

These analyses, documents and calculations are new and fresh, and  should shame those who claim international integration can enrich  Africa. The opposite is more true.

Unlike Trevor Manuel, African justice activists like those who met at  groundWork's conference know it. They wrote to officials of the World  Petroleum Congress: 'At every point in the fossil fuel production  chain where your members "add value" and make profit, ordinary  people, workers and their environments are assaulted and  impoverished. Where oil is drilled, pumped, processed and used, in  Africa as elsewhere, ecological systems have been trashed, peoples'  livelihoods have been destroyed and their democratic aspirations and  their rights and cultures trampled.'

The letter concluded, 'Your energy future is modeled on the interests  of over-consuming, energy-intensive, fossil-fuel-burning wealthy  classes whose reckless and selfish lifestyles not only impoverish  others but threaten the global environment, imposing on all of us the  chaos and uncertainty of climate change and the violence and  destruction of war. Another energy future is necessary: yours has  failed!'

Indeed the Southern African Social Forum in Harare earlier this month  generalised this sentiment to the entire set of economic relations  that dispossess Africa of all kinds of wealth.

* The author is based at the University of KwaZulu-Natal Centre for  Civil Society. This work is part of a larger study carried out in  collaboration with the Johannesburg-based Southern African Centre for  Economic Justice and Harare-based Equinet, and participants at their  10-12 October workshop in Harare are thanked for feedback. Comments  are welcomed, at pbond@mail.ngo.za